Q4 2021 Vista Gold Corp Earnings Call
Yeah.
Good day, ladies and gentlemen, welcome to Vista golds, 2021 financial results and corporate update conference call.
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Following the presentation, we will conduct a question and answer session.
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Today is Monday February 'twenty 2022 .
It's now my pleasure to introduce Pamela Solly, Vice President of Investor Relations.
Please go ahead.
Thank you, Chris and good day, everyone. Thank you for joining the Vista Gold 2021 financial results and corporate update conference call I'm, Pamela Solly, Vice President of Investor Relations on the call today is Fred earnest, President and Chief Executive Officer, and Doug Tobler, Chief Financial Officer.
During the course of this call we will be making forward looking statements. These statements involve known and unknown risks uncertainties and other factors that made me cause actual results performance or achievements of vista to be materially different from results performance or achievements expressed or implied by such statements.
Please refer to our most recently filed Form 10-K for details of risks and other important factors that could cause actual results to differ materially from those in our forward looking statements I will now turn the call over to Fred earnest.
Thank you Pam.
And thank you everyone for joining us on the call today.
Two of our most significant achievements during 2021 included the approval of the mining management plan and the work to complete a feasibility study for Mt, Todd, which culminated with the announcement of results earlier. This month. We also received key authorizations related to average lands and land use advanced our exploration drilling program.
Our strengthened our balance sheet with reported total cash of $13 $1 million at the end of the year.
I will discuss these topics in greater detail later in the call, but I'll now turn the time over to Doug Tobler for a review of our financial results for the year ended December 31 2021.
Thanks, Fred and thanks for listening in today.
I'd like to focus today's discussion on our cash position and our sources and uses of cash during 2021.
Cash is the first measure of balance sheet strength strength that we considered and we ended 2021 with cash on hand totaling $13 $1 million. This included bank deposits and government treasuries.
In a minute I'll discuss our cash flows, but it's worth noting a secondary measure of our balance sheet strength, which was our $12 $2 million of working capital.
By either standard our balance sheet was in good shape at year end and we've already benefited in January of this year by receiving $2 5 million for the final payment related to the our Mas project in Indonesia.
Turning now to cash flows we started 2021 with $8 $2 million of cash and again. This included bank deposits and government securities. So overall, we realized a net increase in cash of nearly $5 million during the year.
We saw inflows of $2 8 million for sales of non core assets and $13 $4 million through equity issuances.
Non core proceeds were mostly from receipt of the final payments for the Los Reyes project in Mexico, and they also included inflows related to our mass.
Equity issuances included the $12 $3 million from our July offering.
Plus about $1 million earlier last year from our at the market program.
Now from an expenditure perspective, our net operating cash flows were $10 $6 million, that's a cash outflow.
Our recurring fixed costs, which include our corporate G&A and the ongoing site management at Mt. Todd remained in line with prior fixed cost levels, and we're about $6 5 million of that $10 6 million.
The balance of the expenditures related to programs to advance Mt, Todd and position it as a highly attractive development project for prospective partners and investors.
This included a few things first essentially dewatering the Batman pit.
Advancing the feasibility study and demonstrating Mt Todd's upside potential through our drilling program.
Of course, we received approval of the Mt. Todd mining management plan.
Costs for this work in 2021 were largely internal and were included in our fixed costs now.
Now for each of the 2021 programs that Ive mentioned, there is a demonstrated benefit to the project to focus on just one the feasibility study cost will be about $3 million when all the invoices were settled.
Among the favorable outcomes of the study was a 1 million ounce increase in our gold reserves, which now stand at 7 million ounces. So setting aside everything else. The study does for us that works out to just $3 an ounce to generate these incremental reserves.
To close please look at our Form 10-K for additional details about our 2021 results.
It's on our website.
SEC's Edgar website and also through SEDAR.
The financial statements and MD&A include details of our 2021 results of operations and also include a comparative analysis to 2020 and you can see a view of our outlook for 2022.
That concludes the financial review I'll turn the call back over to Fred Thank you.
Thank you Doug.
I'll begin with a review of our 2021 achievements and then provide an outlook for the remainder of the year.
First of all financial.
As part of our 2021 objectives, we focused on strengthening our balance sheet through the successful monetization of noncore assets.
Disciplined approach to managing our costs and the completion of the July capital raise as Doug stated earlier, we ended the year with $13 $1 million of cash and continue to have no debt. We believe our strong balance sheet will be very important as we evaluate a broad range of development alternatives with the goal of completing a transaction.
That will maximize shareholder value.
Moving on to opportunities to advance and bring greater value to Mt. Todd.
We remain focused on advancing the Mt. Todd Gold project and seeing a greater portion of the project value reflected in our share price and market cap with.
With this in mind, we have achieved several significant milestones in 2021.
In June of 2021, we received the approval of the mining management plan, which is similar to a mine operating permit in North America.
This approval was a tremendous derisking achievement for Vista, and Mt, Todd and with the mining management plan in hand Vista now has all major operating and environmental permits required to proceed with the construction and development of Mt. Todd.
Also in June we received the authorization of our Aboriginal areas protection of 30 certificate and our surface water extraction license the.
The Aboriginal areas Protection Authority certificate is required as a legal means to identify and protect sacred sites from damage by setting out the conditions for use are carrying out works on an area of land.
It is a legal document issued under the northern territory Aboriginal Sacred site checks.
I am pleased to report that the Aboriginal areas Protection Authority certificate on the expertly exploration licenses complements the existing certificate for the areas within the mining licenses and affirms our long standing practice of working closely with the Johnson people to ensure constant.
Occasion, and coordination and identifying and protecting sacred and culturally significant sites.
Moving on to surface.
Thinking about the surface water extraction license, a little bit more detail the Mt. Todd surface water extraction license.
There was also approved in June provides vista with the right to harvest three four giga leaders of surface runoff each year to facilitate processing and mining activities associated with Mt. Todd.
This is expected to adequately supply all of the projects water requirements as presently design.
Also in 2021, we continued the exploration drilling that was started in 2020.
In 2021, a total of 13 additional exploration holes for a total of 5327 meters were drilled on the mining licenses.
We are continuing to demonstrate district scale mineralization and structural continuity between the Batman and quickly as deposits where future infill drilling may be undertaken to define additional gold resources.
Our exploration program is expected to continue through the first quarter of 2022 with the results to be reported through the second quarter.
Our water management has been a top priority for us at Mt. Todd and as part of these efforts we made great progress in essentially dewatering the Batman pit prior to the end of 2021.
At the end of December the pit contained approximately half of Giga leader of water down from the high of nearly 11 and a half giga liters of water five years ago.
The present volume of water in the pit, we will not present any major issues when resuming operations in the Batman pit and represents 14% to 16 days of pumping capacity with the presently installed infrastructure.
As I mentioned in my introductory comments this month, we announced the results of the Mt. Todd 2020 to feasibility study.
The 2022 feasibility study highlights a 19% increase in gold reserves.
From $5 eight 5 million ounces as reported in our amended 2019 pre feasibility study two 7 million ounces today supporting an operation with average annual production of 479000 ounces of gold per year. During the first seven years of commercial operations and.
Low up and a low operating cost profile that delivers significant cash flows.
The study reflects the inflationary pressures being face currently by all operators and developers in the mining history.
While we believe this inflationary trend as transitory, we believe the resilience of Mt. Todd as demonstrated by the project economics reflected in the 2020 to feasibility study.
Mt Todd's economic returns benefit from the increase in gold reserve estimate favorable results of the power plant tradeoff study and slightly lower energy costs and the northern territory of Australia. The.
The increase in gold reserves.
Resulted from increase in the gold price used in the reserve estimate from $1000 to a very conservative 11 25.
And modestly changing the cutoff grade from 0.4 grams of gold per tonne to 0.35 grams of gold per ton.
Our decision to use a third party power provider resulted in an important positive impacts to our capital costs and Insulates the project from certain construction and operating risk.
While maintaining what we believe to be attractive operating costs.
While our operating costs have increased as a result of higher labor reagent grinding media and over the fence power costs, our core energy costs yield some offsetting savings.
With economics based on fourth quarter, 2021 costs and equipment quotes Mount Todd is projected to deliver compelling cash flows over a 16 year mine life.
The after tax NPV at a 5% discount rate.
Of just shy of $1 billion and an IRR of 26% at the official price of the study being $600 per ounce gold and a 71 foreign exchange rate.
At todays gold price of.
Our gold price less than todays gold price of $800.
And the same foreign exchange rates. The after tax NPV is estimated to be $1 5 billion with an IRR of 26, 7%.
After tax cash flow at an 1800 dollar gold price.
Is estimated to totaled $2 $1 billion for the first seven years of commercial operations.
For more study details please refer to our February 9th news release, and feasibility study webcast or download a copy of either the SK <unk> hundred or National instrument 43, 101 compliant report all of which can be found on our website at www Dot <unk> Dot com.
Looking ahead.
We believe the results of the 2022 feasibility study will appeal to potential partners investors and lenders and allow the company to evaluate a broad range of development alternatives as we continue to focus on maximizing shareholder value.
We believe the size location permitting status.
And recently completed feasibility study position Mt. Todd is one of the most attractive development ready gold projects in the world.
In addition, with total cash of $13 $1 million at year end, our balance sheet is strong and our prospects for unlocking shareholder value has never been greater.
Australia has recently lifted restrictions on international travel to and from the country for fully vaccinated individuals.
As a result, this is senior management plan to resume travel to Australia, beginning mid March with open borders management believes due diligence activities will also be more easily undertaken by potential partners with.
We continue to engage with potential partners and are evaluating a broad range of alternatives to identify strategic opportunities to advance the development of the project.
We remain focused on completing the REIT transaction.
One that achieves a structure that provides appropriate opportunity for value creation by recognizing the intrinsic value of Mt. Todd.
And minimizing the potential for future dilution.
Our objective is to achieve a valuation for Mt. Todd that is reflective of the gold production profile.
Long operating life excellent gold recovery, the project's location in Australia's low risk northern territory.
Favorable low operating costs robust project economics as demonstrated by the recently completed feasibility study and the fact that we hold all major approvals in all major permits.
We believe these factors coupled with the excellent infrastructure will present opportunities for us to evaluate brodry, a broad range of development partners structures and alternatives.
As we continue to focus on maximizing shareholder value.
We continue to believe that Vista gold represents an exceptional investment opportunity for the investor looking for value.
Growth potential low geopolitical risk exposure and strong leverage to the gold price.
Today's gold price and foreign exchange rate of approximately $1900 72.
Exchange rate the Mt. Todd project economics demonstrate an after tax NPV at a 5% discount rate of approximately $1 6 billion and an IRR of almost 29%.
Vista continues to advance and Derisk Mt, Todd and is well positioned to evaluate.
Our broad range of development alternatives as we continue to focus on maximizing shareholder value.
In conclusion.
We find ourselves in a market with strong although somewhat volatile gold prices.
Recent hostile activities in Ukraine and higher inflation.
Our creating greater uncertainty in the markets. We believe this supports a view for sustained strong gold prices in the coming 12 months to 24 months.
The work we have completed over the last several years along with the recently completed feasibility study has positioned the Mt. Todd Gold project is the largest undeveloped gold project in Australia.
With 7 million ounces of proven and probable reserves Vista controls the third largest reserve package in Australia.
Mt. Todd is ideally located in the northern territory of Australia, and extremely mining friendly jurisdiction.
Todd has favored with paved roads to the site and other existing infrastructure, including power lines, a natural gas pipeline freshwater storage reservoir and tailings impoundment facility.
Our ongoing technical programs and focus on designs that are capital efficient with low operating costs have created the foundation for the leverage to gold price and improved shareholder value.
We have earned the trust of the local stakeholders and believe that our social license is firmly in hand.
We've worked hard to secure the authorization of all of the major permits we believe Mt. Todd is a superior asset located in a politically stable and mining friendly jurisdiction and one of the most attractive development stage gold projects not just in Australia, but in the world.
We believe the completion of the feasibility study and our ongoing drilling further demonstrate the significant upside potential of the project and strengthen our position as we evaluate a broad range of potential partners structures and alternatives for the construction and development of Mt. Todd.
I reiterate.
Our commitment to focus more intensely on maximizing shareholder value and realizing the intrinsic value of Mt. Todd.
For a comprehensive assessment of the value accorded to Vista and the Mt. Todd Gold project I refer you to our corporate presentation, which can be found on our website.
Again that is www Dot Vista gold Dot Com, we believe that Vista gold represents an exceptional investment opportunity for investors looking for value growth potential low geopolitical risk exposure and strong leverage to the gold price and that current prices represent a tremendous opportunity to establish a position of or increase ones holding.
In Vista gold.
That concludes our prepared remarks.
We will now respond to any questions from participants on this call.
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While we compile the Q&A roster.
Your first question comes from the line of Heiko yearly of H C. Wainwright. Your line is open.
Fred Thanks for taking my question, So where are you Barry.
Very well thank you.
Wonderful.
Your study I mean.
60000 tons per day, MTBE, five 1 billion in 'twenty.
26% IRR.
Obviously, that's using much lower metals prices just thinking out loud here clearly is pretty impressive and I think youre, just not really getting a full credit in the market quite yet.
You've hinted at some of your opportunities and benefits in the closing remarks Youre just a.
A minute ago on this call, but probably just a bit more is there anything in particular that you think might currently be missed by the market or by the analyst community as a whole.
Heiko. Thank you for the question and certainly we're very pleased with the.
The economics is as reported in the feasibility study.
They demonstrate the significant leverage that the project enjoys relative to a rising gold price.
I think that the market is still holding judgment on how the project will be financed and it's our belief that as we're able to execute on our strategy as I mentioned, we're considering a broad range of opportunities and alternatives with regards to.
Two potential partners and other types of structures I believe that as we are able to announce that we have concluded a process and that we have reached a trends at the point of a transaction and are able to answer that question about how the project will be financed that.
Dan.
The concern will be alleviated in there that will constitute a very significant catalyst for the creation of value for Vista shareholders.
I think I think that's a fair answer.
And then just a little clarification there.
And then the second one is a couple of questions in one so apologies in advance.
Would you be so kind and breaking down what exactly is still included in your equipment package. I mean, you wrote down the equipment a little bit I mean, what are you doing with it it seems like it's still for sale. What do you think its warrants I mean, I'd assume it's several million dollars.
Clearly given recent geopolitical risks that span the globe and again you hinted at some of those earlier on the call and a gold price of over $1900 as opposed to date, there's gotta be meaningful value that's right.
This said the mill equipment that we own.
That has a nominal capacity to process crush and grind 10000 tonnes per day.
It's a complete mill package.
Primary gyratory Crusher Sag mill, two ball mills Goldman recovery equipment.
It's.
It's been good condition is most of it is stored indoors in Canada.
The challenge.
And maybe Doug can comment here. Additionally, in just a moment is that.
You're selling used equipment, especially when you have a package deal like this is a very niche market.
And it really it really comes down to finding the.
Buyer with a project.
Yes.
Specifically need this size of equipment that they are targeting that kind of throughput and so it's looking at a project thats in the.
Mid sized project.
That has or that has characteristics that will match the.
The parameters of the Sag mill, and the ball mill and and as you indicated the equipment continues to be for sale.
It's just that it's been for sale for a long time, and there's no certainty as to when it might be sold Doug any other comments you might add yes, I was just going to say much of the same thing you've got an asset that has a specific used in the right environment.
And with the write down that we took was really based on accounting literature doesn't have anything to do with the prospective value of the equipment to the right buyer. So.
We're very active with the group that has it listed.
And we continue to look at prospects as they come up with.
We continue to have.
The phones ringing I guess it would be the way to say it but when you measure it from an accounting standpoint. It is simply a function of what can be audited what can be demonstrated in.
That's got really nothing to do with the underlying value that we think we can ultimately receive.
I should have the answer to this but I don't have it in my model for some reason what would you say I would pay if I bought this thing.
Hey.
If you were to buy the complete mill the mill package and that includes.
You know the.
The gyratory crusher the.
The grinding mills are the Sag mill two ball mills.
The gold recovery equipment.
There is a number of pumps, there's agitators for leach tanks.
<unk>.
I would guess that new prices.
Depending on the source of manufacturer in and where the project is located that might drive some of those decisions you are probably looking at something in the range of $8 million to $12 million for all of that equipment on a new equipment basis.
Pretty meaningful figure perfect ill stop hogging. The question queue. Thanks for taking my my questions there.
Absolutely. Thank you Heiko.
Ladies and gentlemen, if you have a question at this time. Please press the star and then the number one key on your attach Tallinn telephone.
Hi, I'm showing no further questions at this time I would now like to turn the conference back to you.
You May proceed.
Very well thank you Chris.
We would like to think.
All of you who have joined the call.
Today I know there is.
Theres a big unspoken question.
That everybody would like to like to ask and Unfortunately, we're not in a position to answer and I know that everybody would like to know who are going to do a deal with and when it's going to be announced.
As a matter of practice, we do not disclose.
Who we've signed confidentiality agreements with.
But.
I think suffice it to say that we.
We have executed confidentiality agreements, we have companies that are completing due diligence and some sometimes that process can be lengthy.
And depending on the requirements of the third party may involve time consuming activities, such as additional drilling or metallurgical testing undertaken at their expense.
But we expect that.
There will be announcements with regards to the work that's ongoing and disclosure with with regards to what we can disclose to the market over the course of the coming months, we invite you to be alert to be attentive.
When it comes to the point that a transaction is announced I believe that there will be significant value created as it.
We're overnight and.
We would hate to see someone get left behind if you require additional information you'd like to know more about Mt. Todd and we'd like to have a conversation please reach out to Pamela solly.
Our vice President of Investor Relations, if need be we will get she will get other people on the call. We appreciate the interest that was shown in our in our.
By those of you who have participated in the call today.
We look forward to being able to report additional news as we execute on our strategy and.
And I want to assure you that with the feasibility study completed that our focus has now turned to 100% to.
To maximizing value for shareholders into the realization of the value that's more in line with the intrinsic value of the project.
An exciting time for us I think it is an exciting time to be a vista shareholder I don't think theres been a time when we've been better positioned to create value.
So I invite you to consider.
Consider your investment with Invista gold and then make the decision whether it's time to start.
Startup position or increase the position, but certainly we look forward to the coming months in and we thank you for your time this afternoon and wish all of you a very.
Pleasant day, thank you.
This concludes today's conference call. Thank you for your participation and have a wonderful day.
You may now disconnect.
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Yes.
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