Q1 2023 Vista Gold Corp Earnings Call
Good day, ladies and gentlemen.
Welcome to Vista golds first quarter 2023 financial results and corporate update conference call at this time.
Participants are in a listen only mode.
Following the presentation, we will conduct a question and answer session.
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Hey, It's Monday May one 2023.
It's now my pleasure to introduce analysts Solly Vice President of Investor Relations. Please go ahead.
Thank you Jenny and good day, everyone. Thank you for joining the Vista Gold Corp, first quarter 2023 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.
Sure.
During the course of this call, we will 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 the results performance or achievements expressed or implied by such statements.
Please refer to our most recently filed Form 10-Q 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.
Thank you everyone for joining us on the call today.
During the first quarter, we completed an internal scoping study to evaluate the technical and economic merits.
The smaller scale.
Of smaller scale development alternatives from Mt. Todd will.
While preserving the opportunity for subsequent expansion or stage development.
The work completed in the study Leverages off of the 2022 feasibility study and gives us confidence that are smaller and easier to build initial phase of the project is viable and economically attractive.
We recently announced results of the Mt. Todd surface exploration program. The retirement of two of our directors and positive recommendations from the northern territory's mineral development task force regarding the northern territory's royalty structure.
The strategic process with CIBC.
Capital markets is ongoing and we continue to take actions to implement cost reductions, which have had a positive impact on our quarter end financial position.
Vista continues to have no debt, we remain committed to the health and safety of our employees and to environmental stewardship at Mt. Todd.
Ben No lost time is this this year and the site has now achieved 523 consecutive accident free days.
I will discuss these topics in greater detail later in the call, but we'll now turn the time over to Doug Tobler, Our CFO for a review of our financial results for the quarter ended March 31 2023.
Thank you Fred.
Today I'll provide a brief recap of our results of operations for the first quarter of 2023 and discuss our financial position as of March 31.
Vista Gold's full financial statements and MD&A are included in our Form 10-Q that was filed last Friday and is available at either SEC dot Gov or SEDAR dot com.
I'm pleased to report that our results were in line with management's expectations for the quarter and recurring costs are tracking toward our objective of achieving a 7% reduction compared to our 2022 results.
From an overall perspective, we reported consolidated net losses for the three months ended March 31, 23% and 22 of $2 million and $300000 respectively.
The higher loss for the current quarter resulted from a few main components.
First we had a onetime gain of $2 9 million.
During the first quarter of 2022, which was realized as we closed out the sale of our interest in the <unk> Mas Gold project in Indonesia.
No similar items this year.
Offsetting this change in realized gain we saw substantially lower expenses during Q1 of 2023, notably Mount Todd exploration and holding cost decreased by $1 million from $1 8 million reported for Q1 of 'twenty two down to $800000 for Q1 of 'twenty three.
Yeah.
This related largely to having completed the drilling program and the Mt. Todd feasibility study last year, plus overall reductions in our recurring costs in Australia.
Our administrative expenses were also down by one to $1 $2 million for the current quarter compared to $1 4 million for Q1 of 2022.
Turning to our financial position our balance sheet remains in good condition at March 31, 2023, we ended with cash of $6 $6 million and maintained our position of having no debt.
That concludes my remarks for today I'll turn the call back to Fred now.
Thank you Doug.
I'll begin with a review of our ESG initiatives and performance then review our first quarter 2023 achievements.
And conclude with an outlook for the remainder of this year.
We have established a record of environmental leadership and the northern territory.
We continue to maintain this leadership position through the execution of our site management plans.
With the wet season recently concluded.
Im pleased to report that even with significantly higher than normal total rainfall, we had no unplanned discharge of water from the site and we're in complete compliance with our environmental obligations.
As noted previously our team in Australia has now completed 523 consecutive days with no lost time accidents.
We are very pleased with our safety oriented culture and the accomplishments of the team.
We continue to maintain a strong working relationship with the traditional owners at Mt. Todd.
As many will know we have agreements in place with the <unk> people and work very closely with them and the leaders of the jaw want Association Aboriginal Corporation presently we are collaborating with the board of the Javelin Association to finalize a cross cultural training program for employers employees and.
Contractors at Mt Todd.
We also work very closely with leaders and stakeholders in the Katherine area and more broadly in the northern territory.
I am pleased that our social license is firmly in place and strongly supported.
We continue to aggressively pursue best governance practices across our organization.
And are pleased with the inclusive atmosphere that is part of our culture.
I note that during the quarter, we announced the retirement of two long serving directors and the resizing of our board.
More on that in a moment.
Moving on to some of our accomplishments during this quarter in March we announced the completion of an internal scoping study in which we evaluated the development of the Mt. Todd project had a smaller initial scale.
The results were very promising and contemplated significantly lower initial capital cost while preserving the opportunity for subsequent expansion or stage development.
Work to date indicates that a nominal 5 million ton per year project.
<unk> 15000 tonnes per day.
Could be designed and constructed with an initial capital expenditure of less than $350 million for scenarios that include contract mining.
And would achieve annual production in the range of 150 to 200000 ounces of gold per year.
Operating cost analysis suggest that all in sustaining costs.
It would be higher than those estimated in the company's 2022 feasibility study on Mt. Todd.
Largely as a result of the higher unit operating costs, resulting from contract mining.
The loss of certain economies of scale.
And.
Adjustments for inflation.
But.
The all in sustaining costs would still remain very competitive in today's environment.
The results of the scoping study have been made available to potential strategic partners and other parties, who have signed confidentiality agreements.
We also announced the results of the most recent surface exploration program on two specific areas within the exploration licenses at Mt. Todd.
Both targets returned excellent anomalous gold assays from surface soil sampling, including up to four grams of gold per ton at the <unk> target.
The exploration licenses at Mt. Todd encompass 1650 square kilometers and are largely under explored as part of our annual exploration program for the exploration licenses, we collected more than 600 rock chips and soil samples from targets on the colon australis.
And Batman drip held structural corridors.
The results demonstrate strong geologic similarities to the area and the mining licenses, where we previously delineated for highly prospective exploration targets potentially representing up to an additional $1 eight to $3 5 million ounces of gold.
Our 2021 22 drilling program.
Obviously, we are very encouraged by the tenor of these results, which reinforce our belief that the Mount Todd land package is tremendous discovery potential.
So as I indicated after more than 25 years of serving Vista gold and its shareholders micro <unk>.
Chair and Nonexecutive director and.
In Tamil <unk> low nonexecutive director retired upon the completion of their terms.
<unk> 2023 annual general and spread.
<unk> that was held last week on April 27th.
The board of directors approved a reduction in the size of the board of the directors of the company from 7% to now five members.
On behalf of the board and management team I'd like to thank Mike and Tom for their leadership and commitment to the company their.
Their contributions have played a significant role in the execution of a number of transformational transactions.
And advancing Mt. Todd into one of the largest and develop ready gold projects in Australia.
I can time have served with the highest degree of professionalism enacted with the shareholders' best interest at heart.
We have all learned a great deal from each of them and it's been a privilege to work with him and we wish them well.
One bit of news there was very exciting to us is that subsequent to the end of the quarter.
We reported that the northern territory government released the final report of the mineral development Task Force.
Which outlined a series of recommendations and actions to increase and enhance the competitiveness of the northern territory.
As a mining investment destination.
As these recommendations are implemented we expect the Mt. Todd Gold project to benefit in several ways.
Most notably.
The report emphasizes the importance of updating the current royalty regime to make it more competitive and highlighted the importance of developing local skills to support the mining industry.
This potentially means moving to a simpler.
AD valorem royalty structure and aligning the royalty rate more closely with other tier one mining jurisdictions, where rates typically range from 2.5% to 5%.
This represents a very meaningful opportunity for improved project economics and earlier shareholder returns at Mt. Todd.
Where our 2022 feasibility study included northern territory royalties equivalent to a 7% to 9% AD valorem rate, depending on the gold price and other assumptions.
Skills development will also be an important benefit given that we support the use of a local workforce at Mt. Todd over the more traditional fly in fly out approaches that are common elsewhere in Australia.
As a next step the northern territory government plans to engage with stakeholders in the mining industry to obtain feedback on the best approach to.
To implement the key recommendations and specific actions proposed in the report.
The strategic process with CIBC capital markets continues to generate interest and positive feedback on the technical merits of Mt. Todd.
Since announcing the completion of the scoping study there has been both new.
And renewed interest in the Optionality Mt. Todd offers under different development strategies.
But interested parties continue to maintain a cautious approach to new large scale development projects.
We remain focused on recognizing value for shareholders through the completion of the REIT transaction.
One that realizes a greater portion of the present value of Mt. Todd and provides ample opportunity for future additional value recognition.
Reducing costs and maximizing cost effectiveness are high priorities for 2023.
We have taken actions to further reduce recurring costs by approximately 7%.
And continue to evaluate and implement opportunities for additional cost reductions.
At current project expenditure levels, our annualized cost for preserving the value of Mt. Todd.
Our less than 80 per ounce of proven and probable reserves.
We believe this is a very respectable holding cost.
Looking ahead.
Our priority is maximizing shareholder value.
We continue to execute our plans for improved cost effectiveness and efficiency.
Our internal evaluations of Mt. Todd continue and include the assessment of value, creating development options.
And the grinding area of study that would lead to additional improvements and planned operational efficiencies.
With the wet season behind us at Mt. Todd, We will have a small field exploration program planned for the exploration licenses to meet our anvil annual expenditure commitments.
This program will consist of additional field mapping and soil sampling.
We will be participating in the industry consultation process with the NT government.
As they embark on the path of implementing the recommendations found in the mineral development Task Force report.
And finally, we continue to work with CIBC capital markets to realize the full value of the Mt. Todd Gold project.
In conclusion.
We have completed over the last several years. The work we have completed over the last several years, including the feasibility study and the internal scoping level study has positioned Mt. Todd.
One of the largest and most advanced undeveloped gold projects in Australia, with 7 million ounces of proven and probable reserves.
Vista controls the third largest reserve package in Australia.
In addition to its size Mount Todd provides a number of other advantages for those interested in a potential transaction.
Todd is ideally located in the northern territory and.
An extremely stable and mining friendly jurisdiction.
The existing basic infrastructure at Mt, Todd, including paved roads power lines and a natural gas pipeline to the site combined with the operational infrastructure comprised of the freshwater storage reservoir and.
And tailings impoundment facility provide a very distinct construction timeline and risk mitigation advantages.
All the major permits for the development of Mt. Todd has been approved.
Of equal importance.
We have earned the trust local stakeholders.
And are confident that our social license is firmly in hand.
Our technical programs focus on designs that are capital efficient with low operating costs. We believe the proposed changes in the N T royalty regime will help improve project economics enhance the projects leverage to gold price and provide a stronger foundation for improved shareholder value.
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.
Our primary objective is to achieve a valuation for Mt. Todd that is reflective of the gold production profile.
A long operating life excellent gold recovery favorable operating cost robust project economics that are demonstrated by the completed feasibility study.
And the fact that we hold all approvals for the major permits.
For a more comprehensive review of the work completed by <unk> on 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 in that current prices represent a tremendous opportunity to establish a position.
Our increased ones holdings in Vista gold.
Jenny This concludes our.
Prepared remarks, and we'll now be happy to respond to any questions from participants on the 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 one on your Touchtone phone.
<unk> Telecom technology and your request questions will be taken in the order received.
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We're using a speaker phone please click the handset before pressing any keys one moment. Please for your first question.
Yes.
Your first question is from Heiko Mueller from H C. Wainwright. Please ask your question.
Hey, Fred how are you.
We are very well thank you heiko.
Excellent alright, a few weeks ago, you pulled some release about surface exploration for additional gold targets at Mt. Todd.
In particular at one point, you mentioned four grams per tonne gold.
<unk> can you just sort of walk me and the other participants in this call for your performance there for the rest of the year.
So I guess with.
Operations.
Absolutely Heiko.
The work that we've done that.
At the on the exploration licenses.
Has.
<unk> has started with.
So very very broad ranging.
Surface geology mapping.
We have followed that up with.
With magnetic surveys some high level geophysical work to identify.
Those are areas, where we see a magnetic anomalies, which are typically associated with intrusive and hence the the heat engine for gold deposits in the.
In the district.
And then we followed that up with.
Surface soil surface soil sampling on a grid pattern.
And the initial work that is completed as that is done on a very broad spacing and then as we have.
Interesting results.
The results we are we close in the spacing of.
The grid.
We began to undertake some of that work of closing the spacing in last year.
And you know these are these are our soil samples collected on 25 meter centers and 100 by hundred grids sometimes.
The bottom line is that.
The results that we achieved while while anomalous were very encouraging.
Typically as you're aware, we often see soil sample results in the in the parts per billion range and that's very very interesting when we see those those results in the very surface soils to have to have a soil samples enough in the four parts per million or four grams per tonne.
Range is particularly interesting and we'll be doing some more work in the areas of some of these higher grade samples as well as continuing to to reach out and and close in spacing, where we've had other other results in the in the past our team last year also did some.
Some mapping of outcrops and collecting rock chips in and we will be undertaking more work in those areas as well.
Again as I indicated this year the.
Our target will be to two.
To spend the amount of money required to meet our our exploration commitments to maintain the exploration licenses in good standing we believed that this work continues to demonstrate to two.
Potential partners and others, who would be interested in an attraction at Mt. Todd that are.
That theres tremendous exploration upside and we continue to be very very bullish about the work that's going on again, we this will be a grassroots level of exploration, we have not yet progressed any of these targets to the point of bringing in a drill rig.
Hopeful.
Helpful. Okay.
Goals of just under 2000 right now at some point a trend becomes maybe the new normal.
Walk us through the potential and what you see implications wise given the potential for a smaller scale development that you released about two months ago for the site.
The way I look at it for 260 million Bucks I can build a 150 to 200000 ounces in production.
Somebody is missing something.
And maybe can you go through some color what you think the market is missing or misunderstanding or not giving you enough credit for it.
Yes, absolutely Heiko the feasibility study that we completed for Mt. Todd evaluated the Mt. Todd project at a $17 5 million ton per year rate.
50000 tons per day.
And all of the engineering and the designs associated with the feasibility study.
We're we're targeted and undertaken with the idea of designing a project that would be very attractive to a a.
A senior gold producer.
The capital.
The expense of building that initial project.
While a large number for us at the almost $900 million.
It was actually a very capital efficient number.
Actually in the lowest quartile on a per ounce of gold produced over the life of the project basis compared to our peers.
However, the fact remains that it was a very large number and so.
With that.
With the feedback that we received from the process that was initiated.
By CIBC capital markets a year ago.
We undertook.
And internal level scoping study.
To evaluate what our project, it's built at a smaller scale and and and more to a I think the best term would be fit for purpose design level.
Might look like.
I and Oh.
Several members of the team visited.
Some smaller scale Australian operations.
The middle of the year last year.
And and formulated some ideas about what the standards might look like and what a typical.
Mid tier or smaller Australia company would use as design criteria. We then brought in a new.
Engineering firm, who.
<unk> had not been.
Extensively involved in the design of the feasibility study plan to redesign the process plant area.
Using concepts that we've gleaned from visiting other operations.
This has allowed us to design and operation.
While smaller.
Could be built more quickly.
And more efficiently and as we indicated at this smaller scale. The capital cost is estimated to be less than $350 million now and doing this work.
We have not.
Have not tried to estimate the economics for a life of mine project at 15000 tonnes a day I.
I mean simply stated that would have a mine life in excess of 40 years.
But we carried the life out far enough to get a good idea of what the economics were and.
And we've been very careful to not.
Condemn.
Any part of the existing reserve we've maintained the optionality.
Specifically in some of the work that's ongoing at the present time is looking at at a simple 50% expansion of the plant that we design we've also.
Looked at and are looking at and evaluating.
What a project would look like the used the principle of staged development I E building. The first 15000 ton per day train.
And then adding another 15000 ton per day train and possibly a third to ultimately reach something very close to the 50000 tons per day that we had originally proposed.
We've incorporated contract mining as a way to further reduce the initial capital expense all of these things have been done to demonstrate to partners.
The optionality of developing Mt. Todd that Mt. Todd does not have to be developed at 50000 tons per day and while we've done an extensive amount of work at that scale, we've been able to leverage off of that feasibility study level design work in the evaluation of a smaller project.
The smaller project concept has resonated with.
A number of of companies and there have been additional confidentiality agreement signed.
As we.
And the period of time following the announcement of the completion of the study.
It is also.
Put the news out there and we've had.
Interest from those who are not necessarily interested in a smaller scale project and so it's been a it's been a way to once again.
Draw drive serious and genuine interest too to Mount Todd and two the development opportunities potential that exists there.
That's helpful. I appreciate it.
Get back in queue, those very extensive answer I'm grateful Walt on getting all this AD hoc here. Thank you.
Thank you Heiko.
Thank you once again as a reminder, should you wish to have a question. Please press the star followed by the one.
Your next question is from Adrian day from Adrian Day asset management. Please ask your question.
Yes, good afternoon, I've actually got two questions to follow on from from Heico's. The first one is can you quantify the.
Cost of the exploration that you intend to do this year.
Okay.
Yeah, Hey, it's Doug Tobler here it'll be in the range of about $200000. It's part of our planned spend.
Oh, Okay, that's not a lot yeah.
Yes, well its surface work you know there's no drove rigs so yes.
Similar size and scale.
You can get a lot of surface soil sampling done for $200000 Adrian.
Okay. Okay. Good.
And just tied to that and then.
The second question.
Ill.
So.
So it's always been a little over a year since it's dependent.
The utility study.
And I'm wondering if you can reflect let us know.
The reaction as you've had from companies. So reaction you've had I should say.
Both to the to the DFS and also to the scoping study.
All of the things in my reaction that.
Pleased you I don't want to put words in your mouth, but the number of companies, but a variety of companies.
And all of the things about the reaction that frustrates a little disappointed yet.
Okay.
Hello.
That's a very interesting question Adrian.
From day one.
From day, one we have.
We have dealt with a headwind of people, who remember Mt. Todd from 1990 697.
When it was operated.
And in a golden gold price environment that the gold price was in the range of $300 and the operation shutdown in the company owned it went into bankruptcy.
We've made a very significant investment we've very systematically and methodically completed test work.
And drilling and engineering, we've we've obtained all of the permits we've worked hard on our social license.
And I think that the gratifying thing for everyone here and the Vista team has that.
As we've gone through.
The due diligence process with a number of companies.
The work that has been completed has been validated.
The technical designs.
Process flow sheet.
The work that we've done to address how we how we crush and grind the hard rock that Mt. Todd is so widely known for.
Have all received very strong endorsement from companies who have taken the time to look at the data.
And review the test work.
We've had companies come in and drill at their own expense to obtain fresh rock for their own metallurgical testing programs.
And they have essentially confirmed.
That with our proposed flow sheet that the numbers the recoveries that we're proposing are quite reasonable and achievable.
That the process flow sheet.
Good function as we expect it to.
Companies with much greater larger resources more people.
Have been have been very complementary of the work that we've done in the local community to garner support for the project and to earn our social license.
They are very respectful of the work that we've done with the.
Joan Aboriginal people.
And so.
The process that we've gone through has been has been.
The confirmation that has happened.
Over and over and over again has been has been very pleasing.
You asked if there was a disappointment well obviously the disappointment would be that we.
We've done this and the market has been such that.
We have not we've not to date reached that conclusion of being able to.
Announce a transaction that would recognize the value the full value of the project and appropriately reward shareholders, who have been patient with the work that we've done over over so many years.
We started the process with CIBC capital markets, a year ago and within weeks of.
Kicking that off.
All we read in the headlines was news about interest rates going up in inflation.
And all of a sudden companies, who we thought would be ideal partners and candidates for a transaction announcing that they were.
That they were.
Putting.
Evaluations of our development stage projects on the back burner some of them for as long as four to six quarters.
So that the failure of the of things to move to the completion of a transaction today is the disappointment.
But the other side of it is that the confirmation of the technical merits of the project and the confirmation of the extensive amount of work that Vista has completed.
On a budget that's far less than what other companies would've spent is has been very satisfying and confirms that.
Our patience is justified.
That there's no reason for us to be in a hurry to complete a transaction that we do have genuinely a world class asset and that ultimately gives us confidence that we will be able to complete it.
Transaction at the right time that will reward our shareholders.
Okay. That's very helpful. Thank you.
Thank you for the question.
Thank you once again, ladies and gentlemen, please press star one should you wish to ask a question.
So any it appears that we have no other questions Tonight.
Yes, Sir there are no further questions at this time.
Please go ahead.
Alright, well.
Thank you everyone for taking time to join us for this update.
In our discussion of our first quarter results.
We're very excited.
About the implications of.
The recommendations of the northern territory's mineral development Task force.
The potential impact of reducing the effective AD valorem rate from.
From 7% to 9% that we saw in the feasibility study at or a different royalty regime to something more competitive with other jurisdictions has has tremendous impact for the project as we've discussed in response to questions.
The field exploration programs will be kicking off soon with the with the onset of the dry season.
We're very pleased with the progress that's being made at Mt. Todd in those regards we're very pleased with our our track record for environmental compliance health and safety of our employees.
We look forward to moving forward with the newly configured board of directors as we seek to and focus on maximizing shareholder value again.
Again, we reiterate that our work with CIBC capital markets is focused on generating.
The realization of the maximum value full value for the Mt. Todd project.
And that will continue to hold the line on that well.
While there were questions about developing Mt. Todd to the smaller scale I wish to reiterate that we have no intentions at this time to develop Mt. Todd on our own.
We see that there's better ways to generate value for shareholders through.
Being patient and waiting for the right transaction with that ill conclude our remarks, we thank you for your time and interest we invite you to seriously consider either increasing your position in Mt.
Mr Gold or initiating a holding.
And we look forward to to seeing all of you and meeting you and having you as shareholders and with that we wish you all Pleasant day.
Thank you ladies and gentlemen, the conference has now ended thank you all for participating you may all disconnect.
Yeah.