Vista Gold Corp. (VGZ) Q3 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Welcome to the Vista Gold's Third Quarter 2015 Financial Results and Update on Recent Activities Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today, Monday, November 9, 2015. It is now my pleasure to introduce Vista's President and CEO, and your host, Mr. Fred Earnest. Please go ahead, Mr. Earnest.

Thank you, Elea [ph]. Good afternoon, ladies and gentlemen. Thank you for joining Vista Gold Corp's third quarter 2015 financial results and corporate update conference call. I'm pleased to be joined on this call by Jack Engele, our Senior Vice President and CFO; and Connie Martinez, our Director of Investor Relations. As reported in our last conference call, we have benefited significantly from efforts that started more than a year ago. Approximately USD10.2 million has been added to treasury as a result of funds received in the second and third quarters of this year from the Australian government under a research and development incentive program. We believe we are able to fund our currently planned activities into 2018, and are now able to shift our team's focus from basic survival to value creation strategies. We remain focused on the Mt Todd gold project in Australia, and are working to obtain the authorization required under the Environmental Protection and Biodiversity Conservation Act of 1999 from the federal government, as it relates to the Gouldian Finch. The process of completing the studies required to file the request for authorization has take a little longer than anticipated, and we now expect that this authorization will be granted in early 2016. We continue to closely monitor the ongoing weakness in many macroeconomic factors, foreign exchange rates, soft demand for mining and processing equipment, et cetera, and continue to observe positive offsets for the Mt Todd project, compared to the lower gold price affecting the sector generally. We have completed some proof-of-concept drilling to test a couple of exploration targets, and are currently evaluating the geologic significance of the results. In the course of this call, we will be making forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of Vista to be materially different from any future results, performance or achievements expressed or implied by such statements. Please refer to our Form 10-Q for a detailed discussion 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 time over to Jack Engele, and following his discussion of the financial results, I will review our activities at the Mt Todd gold project.

Thank you, Fred, good afternoon everyone. I'll start with our balance sheet and liquidity. Our working capital totaled approximately $16 million at September 30, 2015. This includes cash and short term investments of $14.7 million. Our short term investments are currently comprised of U.S. T-bills. Our cash in T-bill position has increased by about $11 million since December 31, 2014, mainly because of the $10.2 million net in Australian R&D rebates that we received this year, and about $6.3 million in net proceeds from the sale of non-core assets during the first quarter of this year. We continue to be debt free. Turning to our statement of income and loss for September 30, 2015, for the quarter we reported net income of about $500,000 or about $0.01 a share. The income arises from the$4.4 million net R&D tax rebate received in July related to qualifying expenditures we made in fiscal 2013. Under U.S. GAAP, this rebate is accounted for as a grant as opposed to an income tax recovery. Expenses in the period included operating expenses of about $2.9 million, an unrealized mark-to-market loss of about $0.6 million on our remaining 7.8 million Midas shares, and about $0.3 million foreign exchange loss related to the weak Australian dollar. The $2.9 million of operating expenses for the second quarter included $0.9 million for site management costs at our Mt Todd gold project, $0.4 million mainly related to the proof-of-concept drug programs that Fred mentioned, and a non-cash $0.6 million value added tax receivable write down associated with our Mexican subsidiary, which has been denied by the Mexican tax authorities, and corporate G&A costs of about $0.8 million. Looking ahead at Mt Todd, our fixed costs, that is, those expenditures necessary to preserve our property rights, and to meet all of our safety, regulatory, and environmental responsibilities are expected to continue to average approximately $750,000 to $850,000 per quarter with some seasonal fluctuations. In addition, we expect to complete some discretionary programs at a cost of about $500,000 through the remainder of 2015. Future discretionary programs may be considered depending on the potential to add value, and the availability of funding. Our 2015 corporate G&A costs are expected to continue to average approximately $750,000 to $850,000 per quarter for the foreseeable future. In addition, we plan to relocate our used mill equipment to a lower cost warehouse, and clean the equipment to improve its marketability. This program is expected to cost about $500,000 over the next three months. We continue to hold this mill equipment for sale. As commented in the past, we are optimistic that we will receive the $1.5 million Guadalupe de los Reyes option payment from Great Panther Sliver, formerly Cangold, in January 2016. The lockup agreement on the remaining 7.8 million shares of Midas stock expired in September. This asset represents another potential source of non-dilutive financing. Although, with our improved treasury, we have no current plans to sell. That concludes my comments. Fred will now give you an update on Mt Todd.

Thank you, Jack. This has been an exceptional year at Mt Todd for water management. Coming out of the dry season, pond levels are at the lowest levels in year. The El Nino weather patterns prevailing across the Pacific and Southeast Asia point toward a wet season with less-than-normal precipitation. During the dry season, our team has experimented with low cost enhanced evaporation methods, and we are recommending to the NT government that in future years this becomes part of our dry season operating practice. As indicated in my introductory remarks, our request for an authorization under the Environmental Protection and Biodiversity Conservation Act 1999 with respect to the Gouldian Finch is a little behind schedule. The delays are related to additional field studies, request for data over a broader coverage area, and our attempt to use digital mapping techniques to gain the required data. We are working closely with SLR Consulting to satisfy all of the requirements for the federal environmental protection authority, and now expect to file our request for authorization before the end of the year. Due to traditional holidays in Australia, at the end of the year we now expect the authorization to be granted in early 2016. Successful achievement of this authorization will mark the receipt of all critical environmental permits for the Mt Todd project. You may recall that we control over 1100 square kilometers of explorations licenses contiguous to the Mt Todd mining license area. We have completed proof-of-concept drilling programs at our Wandi [ph] and Snowdrop targets on the exploration licenses, a total of six core holes were drilled, three on each target, 280 meters at Wandi [ph], and 750 meters at Snowdrop to test the targets, identified based on geophysical and soil sampling anomalies. One of the challenges of exploration in many parts of our exploration licenses is lack of outcropping rock. While we did not intersect any significant sustained gold mineralization, we have learned more about the geologic setting of these two distinct targets, which will form the basis for future programs. The Wandi [ph] target represents a different style of mineralization for the district, and has indications of being an iron oxide copper gold system. We may consider additional drilling to better understand the system, and the distribution of the respective components of the system. In addition, we drilled a deep hole to the south of the Batman deposit to test a geologic hypothesis related to the plunging higher grade zone at the core of the deposit. This hole encountered the intrusive contact several hundred meters higher than expected, which has caused us to revaluate our interpretation of the intrusive contact, and the potential for a deep high grade extension of the deposit. Because this drilling was undertaken approximately 200 meters to the south of the proposed pit limit, and almost 600 meters deeper that the proposed pit, it has no impact on our current geologic interpretation of the Batman deposit. We plan to undertake additional drilling to get more information about the location of the intrusive contact, and to test the potential for higher grade material well below the pit. We continue to closely monitor macroeconomic factors that affect the project. The foreign exchange rate has stabilized in the range of AUD0.71 to AUD0.72 per Australia dollar, which has significant favorable impacts on the operating costs of the Mt Todd project, and on certain aspects of the capital cost, as estimated in our 2013 preliminary feasibility study, in which we assumed an exchange rate of one to one. To help you understand the significant impact this has on project economics, I would remind that 60% to 70% of the project capital expenditures, and 65% of the operating expenditures are denominated in Australian dollars. As a result of these economic considerations, the work being done to obtain the final project environmental authorizations, and other evaluations designed to optimize and improve projects economics, we believe that we're in a much better position than many of our peers to move forward in an improving gold price environment. Recently, we have taken steps to take advantage of the depressed market conditions resulting from the dropping global oil prices. Our 10,000 ton per day mill has been stored outdoors in Calgary and Edmonton. The depressed market for industrial space has allowed us to secure warehouse space with overhead cranes were approximately 50% of what we've been paying for outdoor storage. We're presently in the process of aggregating all of the equipment to the warehouse in Calgary, and over the course of the next of months we'll clean and paint the equipment to improve its marketability and preserve the value of our investment in this equipment. In conclusion, I'd like to make -- I'd like to use the same statement that I made in previous conference calls, but this time I make the statement, it seems even more relevant, week ago prices, gold price volatility, general apathy in the gold equity and the need to raise capital to ensure corporate survival continue to be defining factors for our sector, but our current cash position relative to our plant expenses allows us to look beyond the present market conditions and provides confidence that we'll be able to fund our corporate obligations and programs without the need to raise capital in the equity market like share price conditions. This is a distinguishing factor between Vista and many of our peers. We believe that Vista continues to provide its shareholders with exceptional leverage to improving gold prices, and our stronger balance sheet minimizes shareholder risk on a downside. We're taking the appropriate steps in this market to position the Mt Todd gold project, which is Australia's largest known undeveloped gold resource for development when economic conditions permit, and we believe that we're in a lead member of a small subset of developers with credible gold projects positioned for actual development. We remain focused on the efficient use of financial resources, and expect to continue to maintain a solid balance sheet without further dilution to the Vista shareholder in the foreseeable future. We believe that this is a compelling investment opportunity, especially at current prices. This concludes our remarks, and we'll now respond to any questions from the participants in this call.

Very well, Elea [ph]. If there are no questions, we'll now pause for just a moment, but if there are no questions on the call today, now we'd like to thank those who have joined the call, and once again reiterate that without our improved balance sheet and our discipline with regards to expenditures, we believe that we're in a position to fund our plant activities into 2018, and we look forward to providing an update on the activities from the fourth quarter early next year. With that, with there being no questions, we wish everyone a very good afternoon, and thank everyone for joining the call.

Ladies and gentlemen, this concludes the conference call for today. Thank you for your participation. You may now disconnect your line, and have a great day.