Q3 2022 Vista Gold Corp Earnings Call
Good day, ladies and gentlemen, welcome to restart Gold's third quarter, two financial results and corporate update conference call.
At this time, all participants are in listen only mode.
When the presentation, we will conduct a question and answer session at that time participants are asked to press star One to register for a question.
During the call to disburse starts you or your thoughts on salt.
As a reminder, this conference call is being recorded today Eastern October .
October 27 2022.
Now my pleasure to introduce bell it I'm sorry.
Sorry, sorry, Vice President of Investor Relations. Please go ahead.
Thank you Sergio and good day, everyone. Thank you for joining the Vista Gold Corp, third quarter 2022 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 call 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 may cause actual results performance or achievements of vista to be materially different from results performance or achievements expressed or.
Slide 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 to everyone who is joining us on the call today.
During the quarter, we advanced our work with CIBC to maximize shareholder value.
In September we participated in three industry conferences and hosted more than 41 on one investor meetings with.
With the completion of the feasibility study and exploration programs and.
In management's ongoing efforts to control costs, we achieved a significant reduction in expenditures quarter over quarter. We ended the third quarter with a cash position of $9 6 million U S and continue to have no debt.
I'll discuss these topics in greater detail later in the call, but I will now turn the time over to Doug Tobler for a review of our financial results for the quarter ended September 32022.
Thank you Brad.
Today I'll provide a brief recap of our financial position and results of operations for the quarter ended September 32022.
<unk> Gold's full financial statements.
And our MD&A are included in our Form 10-Q that was filed yesterday and is available at either SEC dot Gov or SEDAR dot com.
As Fred mentioned, we ended the third quarter with the cash on hand position of seven $6 million.
Alright, and then $6 million.
Which reflects a net decrease of $1 $5 million during the quarter.
Year to date, our net cash position has decreased $3 6 million.
Overall this is expenditures have tracked well below plan and for the nine months ended September for the for the full quarter.
This is largely due to cost reduction measures implemented by management in response to current economic and capital market conditions.
Our 2022 fixed cost spending which is most significant portion of our total spending is budgeted at approximately $7 million this year.
Through September 30, these costs were running nearly 15% under budget. We've also done well in controlling our discretionary spending which is highlighted by having come in about $600000 under budget.
For the feasibility study work in regard to cash inflows, we benefited during the first quarter from net proceeds of $2 $5 million for cancellation of the remaining royalty interests at the Outwork Mas project in Indonesia.
With the feasibility study and drilling programs complete our overall expenditures continued to trend downward this quarter and we are evaluating additional opportunities to reduce expenditures going forward.
Yes.
Vista Gold's results of operations continued to be in line with management's expectations and reflect the efforts to reduce spending.
We reported a net loss of $1 $7 million for the third quarter of 2022 compared to a net loss of $3 1 million for the third quarter of last year.
This decrease resulted largely from lower exploration and holding costs for Mt, Todd, which were down from $2 $3 million in.
In 2021 to $900000 this quarter.
This $1 $4 million reduction resulted from having completed the drilling and feasibility study work prior to the start of Q3 2022, while both programs were in progress last year.
For the nine months ended September 32022, and 2021.
Net losses were $3 4 million and $6 9 million respectively.
The $3 $5 million decrease between these periods reflects the $2 $3 million decrease of exploration and holding costs because of the drilling and feasibility study work were active during much of 2021 and both programs were completed earlier this year.
The balance of the decrease in net loss was largely due to higher gains associated with disposition of noncore assets and the reversal of a previously accrued contingent reclamation liability.
As we look forward to 2023, we're planning to continue to manage our treasury in the context of current economic and capital market conditions.
Preliminary basis, we expect to reduce budgeted annual fixed expenditures by approximately 20% below this year's budget. We also expect to have significant less exploration costs at Mt. Todd.
In summary, our financial position and results of operations continued to track as planned and we continue to seek opportunities to monetize this is remaining non core assets.
And further manage down spending.
We believe we are in a good overall position with our cash on hand of $9 6 million.
And no debt.
That concludes my remarks for today. Thank you for your interest and I'll turn the call back over to you right now.
Thank you Doug.
I'll now move on to discuss several of our third quarter achievements in more detail.
Beginning with the strategic process.
In March of this year, we appointed CIBC capital markets.
As our strategic advisor to assist in evaluating a broad range of alternatives to unlock the value of the Mt. Todd Gold project.
Cibc's mandate includes leading a process to complete an accretive transaction with the objective of maximizing shareholder value.
During the quarter, we continued to advance our work with CIBC to seek a partner or other form of transaction to greater to achieve greater value recognition.
Todd.
Volatility in the economy and equity markets, including inflationary pressures higher interest rates and lower gold prices have resulted in a number of interested parties adopting a more cautious near term business strategy as they manage the impacts of these conditions.
We believe the completion of an acceptable transaction may be may be dependent.
On sustained improvement and stability in the economy and capital markets.
We remain focused on completing the REIT transaction.
And that creates value by recognizing a greater portion of the present value of Mt. Todd and provides ample opportunity for future additional value recognition.
Our primary 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, as a low risk northern territory favorable operating cost robust project economics.
As demonstrated by the recently completed feasibility study and the fact that we hold all major approvals and permits for the project.
Moving on to cost reductions.
We are very pleased with the results of the cost reduction measures that we have implemented during 2022.
As Doug has just reported.
Year to date, we have achieved nearly a 15% reduction in fixed cost spending and expect this trend to continue through the remainder of the year.
I am pleased to note that additional spending reductions are being planned for 2023.
Moving on to Mt. Todd.
Across the globe regional and local economies are struggling with the impacts of inflation currency valuations.
And supply chain issues not to mentioned political instability in certain regions and the armed conflict in Ukraine.
We continue to monitor the impacts of inflationary pressures on Mount Todd Project Economics.
The strength of the U S dollar relative to other currencies, especially the Australian dollar has provided some distinct advantages for the Mt. Todd Gold project for.
For example.
At current exchange at the current exchange rate.
This morning of $64.09 U S per Aussie dollar.
The estimated capital cost of the Mt Todd project.
As U S dollars $823 million.
This is compared to the feasibility study estimate of $892 million.
Which should be noted as having captured a significant part of the inflation experience prior to the start of 2022.
Assuming 8% inflation for this year.
Indicates that on a U S dollar basis, the current estimated capital cost for the Mt. Todd project.
Are materially unchanged from the feasibility study.
Operating costs enjoy some similar benefits from the foreign exchange rate.
But the drop in gold price, which was down a little over 10% for the year.
<unk> has had a predictable impact on project economics.
Based on the feasibility study economic model adjusted for inflation.
And current foreign exchange rate and gold price.
We estimate the NPV of the project at a 5% discount rate to be $1 1 billion with a 21, 5% IRR.
This confirms our belief that Mt. Todd continues to be a robust gold project in today's economic environment.
If I could I'd like to turn to the balance sheet for just a moment as Doug mentioned, we ended the third quarter with a cash position of $9 6 million and.
And we continue to have no debt.
We believe our strong balance sheet will be very important as we advance towards the goal of completing a transaction that will maximize shareholder value.
I will conclude with some comments with regards to the investor opportunity.
For the Investor looking for value growth potential low geopolitical risk exposure and strong leverage to the gold price Vista gold represents and.
An exceptional.
Investment opportunity.
We find ourselves in a market with weaker gold prices and lower equity values across the sector.
The ongoing hostile activities in Ukraine, higher inflation rising interest rate fears of recession are creating greater uncertainty in the markets.
Gently these factors have a negative impact on the price of gold, but we believe that the gold price will rebound in the coming year.
Furthermore, these factors have had a significant impact on the operational costs of gold producers across the globe.
The work we have completed over the last several years.
Along with the recently completed feasibility study has positioned the Mt. Todd Gold project project is one of the largest and most advanced undeveloped gold projects in Australia.
With nearly 7 million ounces of proven and probable reserves Vista controls the third largest reserve package in Australia.
Mount Todd is ideally located in the northern territory of Australia.
An extremely stable and mining friendly jurisdiction.
Existing basic infrastructure at Mt, Todd, including paved roads power lines and natural gas pipeline to the site.
Combined with the operational infrastructure composed of the freshwater storage reservoir.
And tailings impoundment facility provide very distinct construction timeline and risk mitigation advantages.
Our technical programs and focus on designs that are capital efficient with low operating costs have created the foundation for.
For the leverage to gold price that we enjoy as well as improved shareholder value.
We've worked hard to secure the authorization of all of the major permits for the development of the project.
Of equal importance, we have earned the trust of the local stakeholders and are confident that our social license is firmly in hand.
We believe Mt. Todd is a superior asset and one of the most attractive development stage gold projects not just in Australia, but in the world.
With our goal with our share price, where it is today, so a tremendous investment opportunity.
For a more comprehensive assessment of the value accorded divest and the Mt. Todd project.
I refer you to our corporate presentation, which can be found on our website at 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.
<unk>.
And that current prices represent a tremendous opportunity to establish a position and increase one's holdings in Vista gold.
This concludes our prepared remarks, we will now respond to any questions from participants on this call.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one our yards brookstone.
You will hear from acknowledging your request and your questions. We will be bold in there they are received.
You wish to retire from the Boeing please.
Britney starts blow away the numbers.
Using a speaker please lift the handset before pressing any keys.
One moment. Please for your first question.
Your first question comes from.
From H C. Wainwright. Please go ahead.
Friday.
Good morning Heiko.
Okay.
Let's talk a little bit about inflationary impacts you alluded to some of this earlier on the call.
And our view of Mt. Todd is able to cope with inflation quite a bit, especially in the environment like we're having right now Ross ramp.
Some of the other lines as we work with are already getting hit with these headwinds.
It really hurts to ops.
I assume your cost to build out stuff.
Same thing, but the important thing to note here is that the Aussie dollar was at 77, five a year ago.
Slides today, you mentioned something similar to this earlier on the call.
Can you just quantified expenses that you expect that.
Recall that given the threat Australia dollars.
And maybe some some of the big line items that you see getting hit by that.
Well certainly heiko.
And thanks for this question.
And are.
The capital cost estimates that have been prepared for the project approximately 65% of the capital cost of the project.
In Australian dollars.
Certainly.
All of the labor concrete part of the steel many of the many of the other components outside of major equipment items are directly affected by.
The Australian dollar foreign exchange rate.
When we look at the impacts of inflation.
The impacts that they have on the project.
Certainly major equipment items are we're seeing some inflationary pressures effect.
The cost for.
Major equipment items, like mills, and crushers and mining equipment.
The.
Additionally.
We've seen.
Early on in a big part of these inflationary adjustments were captured in the feasibility study but that.
Steel and concrete cost rose very quickly.
Little over a year ago, and then it seemed to have tapered off a bit but we continue to monitor those.
Wages in Australia.
On another area, where we're seeing over the last six months or so.
An increase in wages in Australia, we monitor these factors on a on a regular basis.
Got out in the market actively recording major equipment items, but we do touch base with manufacturers.
Tend to adopt a more general approach to the inflation on those on those big dollar equipment items, but some of the other things we monitor very closely.
As you noted we are not immune.
Nor are the major producers we are all very very much subject to these inflationary pressures.
As we as I noted in our prepared comments one of the distinct advantages as that.
As I mentioned about 65% of our of our capital costs are denominated in Australian dollars and with the changes in foreign exchange rate.
Yeah.
And our inflation adjusted estimate of the capital cost.
Within $3 million of what our feasibility study predicted at the start of this year. So while we're subject to the impacts of inflation, we received tremendous benefit from the strength of the U S dollar relative to the Australian dollar and exchange rate and Thats been the offsetting factor for US which is obviously a very.
Distinct advantage for us with our project.
Very good and detailed answer I appreciate that.
Next one I think it's all but easier can you pull.
Some color on the spending reductions I mean, I always thought that you guys ran a pretty.
Pretty lean operations.
A bit of color of how sustainable is it.
Anything else that you expect to get.
In the next call it whatever six to nine months.
I'm going to turn.
This over to Doug Tobler, our CFO to answer that question.
Hey, Heiko how are you doing.
Okay.
Yes, So let me let me set the stage just so it puts it in context, when we talk about the spending reductions we're talking about a total under budget on our fixed cost through September 30th pushing up towards $700000. So.
Real and meaningful number for us as far as the reduction and.
You can't do that without giving things up and incurring some pain.
One of the one of the big areas in fact, the biggest area because it's the biggest area of our budget is personnel cost.
And we've had some reduction in staff and we've had.
Some adjustments in terms of what total compensation for others will be expected for the year. So that's about 40% 45% of our reduction right. There is just personnel related activities.
The largest second budget is in outside services and that would include <unk>.
For example at corporate mostly.
Reducing our legal reducing our tax fees, we're not taking undue risks, but we're we're dialing down where we can and we're asking our service providers to scale back as best they can and controls controls or charges to us on site that includes some outside services some things that we have contracts.
At four in the past, we've been able to move to our internal staff.
And then everything else becomes a little bit.
There's a bunch of little pieces basically every line item has a reduction but if you looked at a couple of areas that would be in our back office admin costs.
And in travel costs, we're taking the people that need to go and no extra people are going.
As you know, we don't travel and business glass, we sit in the back of the bus.
And we don't see in fancy hotels retail and restaurants so.
Almost every line item has contributed to the balance of the change and then of course, we've had to deal with inflation.
At least for the Australian piece, that's been largely offset by the FX benefits that we see so that's really ethical and yes. We do think we can carry it in going forward on a sustained basis. In fact, we think we will see.
Some minor additional reductions as I said next year's budget on a preliminary basis looks like will be about 20% lower than this year's budget.
Alright Thats helpful. I appreciate the comprehensive answer I'll get back in queue.
Thanks Tycho.
Thank you.
Ladies and gentlemen, I'm, Sorry reminder, show you have a question. Please press star followed by the number one.
Your next question comes from Bruce Bruce very much from him.
Please go ahead.
Good morning, Bruce.
Bruce I don't know if youre on mute, we can't hear you.
Okay Im sorry.
Yes.
My company we have.
Facilities worldwide at London has announced the climate is.
Impacting Mount Todd how is the water situation there too or are you, having any difficulties or are you planning for any kind of.
Possible difficulties. Thank you.
Hi, Thank you thanks for the question.
As you may be aware the Mt. Todd project is located in the very northern part of the northern territory.
We enjoy two distinct seasons per year at the project.
Affectionately known by the Australians as the wet and the dry.
During the dry season, which runs from roughly the middle two middle of April to first of May all the way till <unk>.
The first of December Middle of December we received almost no precipitation.
And then during the wet season, which is the balance of the year, we will receive on average about one three meters of rainfall most of that coming in the form of three or four major events.
We don't really believe that the project is being affected by by climate change in any real way, we have over the course of our involvement in the project from 2006 to present.
<unk> seen a variety of seasonal weather patterns and precipitation totals.
But.
We continue to see.
Our experience over that 16 year period, the average is pretty close to the average over the last hundred years. So.
As far as water goes.
We we manage water, it's a big part of our site.
Management responsibilities.
And we manage water in accordance with approvals and permits from the.
Northern territory, EPA and the department of mines.
Looking forward.
In contemplating what that what the water situation will be at Mt. Todd.
For an operating project that we have secured the permits and we've designed the project to be a water harvest or in other words during the wet season, we will capture water during large precipitation events and store it for use during the rest of the year.
The present freshwater storage reservoir.
We will be the dam will be raised about two meters and with that we will have storage capacity for approximately two years' worth of water requirements for the project.
We included in the design and have implemented a lot of water recycling and reuse strategies. The design and construction of the project will include a water treatment plant and any water.
Discharge from the site will be.
Drinking water standards.
Water and we're very pleased with that proactive proactive approach.
The overall I think that water management has been one of our very strong suits at the project and has been instrumental in helping us gain.
The social license the trust of the local community.
At the Mount Todd site, when we acquired the project there were some some concerns with regards to management of the water on site as it had been conducted by the northern territory government before us.
Change the water management strategy and as a result.
Our actions in the transparent approach with which we manage the water we have.
<unk> a great deal of respect in the local community for being a company, who is proactive and very concerned about its environmental stewardship and we share the communities regard for and places a high degree of importance on water management. So I hope that answers your question Bruce.
Yes, it does.
To your web site.
<unk> put a lot of effort. The group there has put a lot of effort in.
In the.
The water certainly.
I just worried because you and I are places, we have places in Italy, and opposed load Orion slow end.
In China, we have some water issues there Mississippi here in the states.
I didn't know if we were having some type of exchange impact in Australia, I know, it's very seasonal up there, but thank you guys are doing a great job.
I highly recommend the stock Hasnt been investment thank you and have a great day.
Thank you Bruce.
Thank you.
There are no further questions at this time I will turn the call over to Brett Fair next for closing statements. Please go ahead.
Thank you.
Joe.
Yes.
I'd like to just reemphasize a couple of points from our discussion today.
First of all.
We continue to seek cost effective means.
To optimize the Mt, Todd project and operations there.
This will this has been a focus I think we've been very successful in achieving some very very important.
<unk> results, we continued to evaluate in a very very cost effective manner additional opportunities.
We believe the.
Maybe I can just say this first we remain focused on completing.
The right transaction for Mt, Todd and by that I mean, one that creates value by recognizing a greater portion of the present value of Mt. Todd and provides ample opportunity for future additional value recognition, we believe that completion of such an acceptable transaction may.
Be dependent on sustained improvement and stability in the economy and capital markets and we like many other people are watching very closely the actions of decision makers with regards to the economy.
We're very pleased with the results of the cost cutting measures that we implemented during 2022.
And I reiterate what Doug Tobler as said additional spending reductions are being planned.
Both at the operation in Australia, and here in our corporate office in Denver.
And we continue to operate in a very.
Cost conscious and in some ways, an austere manner, we're very sensitive to the cost of maintaining the tremendous asset that we have at Mt. Todd and aimed to do so in a very very efficient manner.
We continue to believe that.
Mt. Todd is an exceptional asset.
Given its location stage of development permits being approved and all of the other factors we've discussed.
We as a management team as an executive team are not happy with the valuation that were recorded today, we feel that Mt. Todd is deserving of a much higher valuation and our focus is on creating and realizing that value for our shareholders. We believe that.
At today's prices that mountain that Vista gold represents an exceptional value opportunity for new and existing shareholders and we invite you to consider whether this is the time to initiate a position or increase your position and holding and Mt. Todd as always if any of you on the call today have additional.
<unk> would like to speak to a member of the management team. Please reach out to Pamela Solly.
Vice President of Investor Relations and she will be happy to connect you with the appropriate person in our team and make sure that youre at your questions are answered.
With that I conclude my remarks I. Thank each of you for taking time to join the call today and we wish all of you a very pleasant remainder of your day.
Thank you ladies and gentlemen, this concludes your conference call for today.
Thank you for participating and ask that you. Please disconnect your lines.
Okay.
Yes.