Vista Gold Corp. (VGZ) Q4 2022 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Welcome to Vista Gold's 2022 Financial Results and Corporate Update 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 is Monday, February 27, 2023. It's now my pleasure to introduce Pamela Solly, Vice President of Investor Relations. Please go ahead.

Thank you, Julie, and good day, everyone. Thank you for joining the Vista Gold Corp. 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 or 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 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. During 2022, we successfully completed a feasibility study for the Mt Todd gold project, retained CIBC Capital Markets as a strategic advisor, concluded an 18-month drilling program, significantly reduced costs and ended the year with reported cash of US$8.1 million and zero debt. We believe these accomplishments advanced Mt Todd's reserve size, resource growth potential, economic returns and attractiveness to interested parties. We remain committed to the health and safety of our employees who completed 2022 with no lost time accidents and to our environmental stewardship at Mt Todd. As previously reported, we are completing the evaluation of a smaller scale project at Mt Todd and believe that demonstrating a viable development strategy with lower initial costs will attract new interested parties and appeal to those who have previously expressed interest in the optionality of Mt Todd under different development strategies. I will 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 year ended December 31, 2022.

Thank you, Fred, and to those of you on the call today, thank you for joining us and your interest in Vista Gold. I'll start today with a recap of our year-over-year results of operations. Vista reported a net loss of $4.9 million for 2022 as compared to a net loss of $15.2 million in 2021. This represents a $10.3 million reduction, which can be explained by just a few items. First, we had a larger gain during 2022 from the sale of non-core assets than we did in 2021. In early 2022, we booked income of $2.9 million as we closed out our sale of the Awak Mas project in Indonesia. By comparison, we had a gain of $2.1 million in 2021 related to the final payments received by Vista for the Los Reyes project in Mexico. Now, from an expense side, we saw an overall reduction in site-related recurring expenses at Mt Todd. These costs were down $3.4 million from $7.9 million in 2021, down to $4.5 million in 2022. Several factors played into this reduction. First, we reduced the staffing costs at Mt Todd by about 13%. This came about through attrition and then decisions not to replace certain positions. We had also achieved a milestone in 2021 by substantially dewatering the Batman pit, which resulted in reduced pumping costs in 2022. Our exploration and evaluation costs from Mt Todd were also lower in 2022. These costs are largely at our discretion and reflect programs that we believe add value to Mt Todd. In 2021, we incurred $4.1 million for these costs compared to $1.4 million in 2022. The decrease in 2022 resulted mostly from Vista completing two major programs. First, the drilling program that ran throughout 2021 wrapped up during the first quarter of 2022. This program outlined four highly prospective targets just north of the Batman deposit and demonstrated the resource growth potential on the Mt Todd Mining licenses. Cost for this program came in on plan. And secondly, we completed the feasibility study for Mt Todd in early 2022. This work was delivered for about $600,000 less than we had originally planned. The final item that accounted for the decrease in 2022's net loss was a non-cash write-down of Vista's used mill equipment in 2021. This was a $5.5 million expense that was booked for accounting purposes. We still own the mill and continue to market it through an equipment dealer. Now moving on to our financial position. As Fred said, we ended 2022 with cash on hand of $8.1 million and we continued to have no debt. I'd now like to spend a couple of minutes talking about the spending reductions we achieved during 2022 and our plans as we move forward into 2023. At the outset of 2022, our plan for recurring costs was about $7 million. As we completed the drilling and feasibility study, and as the extent of cost escalation within the mining sector became more apparent, we were successful in dialing back our spending. This included the staff cost reductions mentioned at Mt Todd, but also included other reductions in Australia for third-party services, administrative activities and maintenance costs. Corporate expenses also came down significantly. Spending was reduced for outside services, along with travel, insurance and many other back office costs. By the end of the year, we had realized a 15% reduction to about $6 million for our 2022 recurring costs. Now moving into 2023, our objective is to continue this trend by reducing recurring costs to about $5.5 million. Some of this will be possible from changes that we implemented in the latter months of 2022 that will continue into 2023, but we are also committed to realizing additional reductions while still meeting our social and environmental responsibilities at Mt Todd. Through these fiscal controls, we've positioned ourselves to maintain mount Todd's gold reserves and resources at a very low cost per ounce. On a gold reserve basis, our plan for 2023 will drop our recurring cost to less than $0.80 per ounce, and if we measure ourselves on a total gold resources basis, we expect to be down around $0.60 cents. That concludes my remarks for today. I'll turn the call back to Fred.

Thank you, Doug for that excellent review. I'll begin with a review of our 2022 achievements and then provide an outlook for the remainder of the year. In February of last year, we completed a significant milestone with the completion of the feasibility study for our 100% owned Mt Todd Gold Project, which increased gold reserves by 19% to 6.98 million ounces and extended the mine life to 16 years with an estimated average annual production of 479,000 ounces of gold during the first seven years of commercial operations of that 16-year mine life. We believe the feasibility study affirms the strength of Mt Todd's production capacity, ability to deliver robust economics with significant cash flows and resilience to inflation. For more details about the feasibility study and its results, please refer to our February 9, 2022 news release and feasibility study webcast or download a copy of either the SK 1300 or National Instrument 43-101 compliant report, both of which can be found on our website @www.vistagold.com. In March of last year, we appointed CIBC Capital Markets as our strategic advisor to assist in evaluating a broad range of alternatives to unlock value at the Mt Todd Gold Project. CIBC's mandate includes leading a process to complete an accretive transaction with the objective of maximizing shareholder value. The strategic process with CIBC, which is ongoing and remains a top priority, continues to generate interest and positive feedback on the technical merits of Mt Todd. We've recently seen an uptick in M&A activity in our sector, but interested parties continue to maintain a cautious approach to new large-scale development projects. We remain focused on completing the right transaction, one that creates value by recognizing a greater portion of the present value of Mt Todd and provides ample opportunity for future value recognition. Now with regards to our cost reduction efforts, I am personally very pleased with the results of the cost reduction measures that we implemented in 2022. As Doug reported earlier, we significantly reduced our 2022 recurring costs, which were approximately 15% below plan. For 2023, we have taken actions to further reduce our recurring costs by approximately 7% and continue to evaluate and implement opportunities for additional cost reductions. At current project expenditure levels, our annualized costs for preserving the value of Mt Todd are less than $0.80 per ounce of proven and probable reserves. While we continue to work on reducing costs and being more efficient, I agree with the observation of one industry leader who commented that this is a very respectable holding cost. Last year, we also concluded an 18-month drilling program within a 5.4 kilometer trend extending immediately north from the Batman pit. Results of this program and historical resources demonstrate excellent resource growth potential, including delineation of four highly prospective exploration targets, potentially representing up to an additional $1.8 million to $3.5 million ounces of gold. Vista has no immediate plans to complete additional drilling, but continues to advance grassroots exploration on the exploration licenses which are contiguous with the mining license and cover an area of approximately 1,650 square kilometers. Now looking ahead, we continue to prioritize our goals of improving cost effectiveness and efficiency, enhancing the long-term value of Mt Todd and seeking a partner or other form of transaction for Mt Todd to maximize shareholder value. But what is really exciting is the work that we're doing to evaluate a smaller scale project. As we announced earlier this year, the company is evaluating a smaller scale and easier to construct project with the objective of achieving significantly lower initial capital costs, updating the operating costs, and preserving the potential for subsequent expansion or stage development. We believe that demonstrating a viable development strategy with lower initial costs will attract new interested parties and appeal to those who have previously expressed interest in the optionality of Mt Todd under different development strategies. As this is an internal scoping level study at this point, our disclosure will be limited, but I encourage you to be attentive to upcoming announcements. Now in conclusion, the work we have completed over the last several years, along with the recently completed feasibility study, has positioned the Mt Todd Gold Project as 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. Mt Todd is ideally located in the northern territory of Australia, 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 operational infrastructure consisting of 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 the leverage to gold price that the project benefits from and improved shareholder value. We have worked hard to secure the authorization of all of the major permits. 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. Our primary objective is to achieve evaluation from 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 operating costs, robust project economics as demonstrated by the completed feasibility study and the fact that we hold approvals for all major permits. For a more comprehensive review of the work completed by Vista on the Mt Todd Project, I refer you to our corporate presentation, which can be found on our website @www.vistagold.com. We believe that Vista Gold represents an exceptional investment opportunity and that current prices represent a tremendous opportunity to establish a position or increase one's holdings in Vista Gold. Julie, that concludes our prepared remarks. We'll now be happy to respond to any questions from participants on the call.

Thank you. [Operator Instructions] Fred, there are no questions at this time.

All right, Julie. Well, perhaps we covered everything in sufficient detail that there are no questions, but I would just like to take a moment to thank everyone for their time this afternoon. As I indicated in our prepared remarks, we're very excited about the work that's being done to evaluate a smaller scale initial project for Mt Todd with the potential to see an easier to build project with significantly lower initial capital costs. I, again, encourage everybody to be attentive to announcements that are made. We will be attending the PDAC Conference in Toronto, Canada next week. We look forward to a number of face-to-face, one-on-one meetings with both present shareholders, potential shareholders, as well as those who we have met with previously with regards to potential transactions. We thank you for your time. We encourage you to seriously consider if this would be an appropriate time for you to make an investment in Vista Gold, and we look forward to the news that will come in the coming weeks and months. With that, I wish all of you a very pleasant afternoon and good day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for joining and you may now disconnect your lines.