Vista Gold Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 3, 2023

There are 6 speakers on the call.

Operator

Good day, ladies and gentlemen. Welcome to Vista Gold's Second Quarter 2023 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. At that time, participants are asked to press star 1 to register for a question.

Operator

As a reminder, this conference is being recorded. Today is Thursday, August 3, 2023. It's now my pleasure to introduce Pamela Saleh, Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you, Lara, and good morning, everyone. Thank you for joining the Vista Gold Second Quarter 2023 Financial Results and Corporate Update Conference I'm Pamela Solly, Vice President of Investor Relations. On the call today is Fred Earnest, President and Chief Executive Officer and Doug Toebler, 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 may cause actual results, performance or achievements of Vista to be materially different from results, performance or achievements expressed or implied by such statements.

Speaker 1

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.

Speaker 2

Thank you, Pam, And thank you everyone for joining us on the call today. This morning, I'm pleased to highlight the extension of Vista's agreement with the Northern And actions taken by the Northern Territory to make the territory more competitive and attractive for mining investment. The extension of our agreement with the NT government was a very important achievement as we continue our activities to derisk Mt. Todd and demonstrates our strong relationship With the NT government and local stakeholders, recent recommendations from the Northern Territory's Mineral Development Task Force reflect the territory's commitment to enhance and increase mining investment in the territory. As these recommendations are implemented, we believe Vista and the Mt.

Speaker 2

Todd Gold Project will benefit in several ways. I will discuss both of these topics in greater detail later in the call. Following Vista's Annual General Meeting of Shareholders in late April, we resized our Board of Directors from 7 members And named Tracy Stevenson as the company's new Chair. The strategic process with CIBC Capital Markets is ongoing and we continue to take actions to implement cost reductions, which we have had a positive impact on Vista's financial position for a 2nd consecutive quarter. Vista continues to have no debt.

Speaker 2

We remain committed to the health and safety of our employees and to environmental stewardship At Mt. Todd, there have been no lost time accidents this year and the site has now achieved 6 21 consecutive accident I'll now turn the time over to Doug Tober for a review of our financial results for the quarter ended June 30, 2023.

Speaker 3

Thank you, Fred. Today, I'll provide a brief recap of our results of operations for the quarter ended June 30, 2023 and our financial position as of June 30, 2023. Vista Gold's full financial statements and MD and A are included in our Form 10 Q that was filed yesterday and is available at either sec.govorsedarplus. Ca. Vista reported a consolidated net loss of $1,500,000 or $0.01 per common share for the quarter ended June 30, 2023, compared to a consolidated net loss of $1,400,000 or $0.01 per common share for the quarter ended June 30, 2022.

Speaker 3

The loss for the current quarter was in line with management's expectations and reflects a 16% reduction of operating expenses compared to the same period in the prior year. This is offset by lower non recurring other income. This reduction reflects our objective of A 7% reduction in recurring costs, which is on track and other reductions for Mt. Todd exploration and site maintenance programs. The comparative second quarter net losses for 20232022 were similar, but there were offsetting variances that weren't discussion.

Speaker 3

First, we reported $300,000 Lower operating expenses, which is the 16% reduction previously mentioned. We also received $60,000 more interest income during Q2 of 2023. These amounts were offset by lower other income And the current quarter, because the prior year's quarter reflected a $200,000 other income amount for a value added tax refund and $240,000 for reversal of a previously recorded reclamation accrual. For the 6 months ended June 30, 2023, 2022, our net loss was $3,500,000 and $1,700,000 respectively. The loss in 2023 was greater than 2022 Because the 2022 period included a $2,900,000 gain on the disposal of our Awak Mas property and other income of $420,000 as I discussed previously.

Speaker 3

Offsetting the effects of the 2022 gain and other income items, Vista reported $1,400,000 lower operating expenses for the 6 month period into June 30, Consistent with the results for Q2 of 2023, this decrease for the year to date period reflects our overall reduction of recurring costs and other reductions for Mt. Todd exploration, completion of technical reports and site maintenance programs. Turning to our financial position, our balance sheet remained in good condition at June 30, 2023. We ended with cash of $6,000,000 and maintained our position of having no debt. That concludes my remarks for today.

Speaker 3

I'll now turn the call back over to Fred. Thank you.

Speaker 2

Thank you, Doug. I will begin with a review of our ESG initiatives and performance and then review our Q2 We have established a record of environmental leadership in the Northern Territory. We continue to maintain this leadership position through the execution of our site management plans. With the wet season recently concluded, I'm pleased to report That even with significantly higher than normal total rainfall, we had no unplanned discharges of water from the site and we're in complete compliance with our environmental obligations. As previously noted, our team in Australia has now completed 6 21 consecutive days With no lost time accidents, we are very pleased with our safety RNA and its culture and the accomplishments of the team.

Speaker 2

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 Jawan people and work closely with them and the leaders of the Jawan Association Aboriginal Corporation. This quarter, we have worked very closely with the Jawaharlon Rangers in the design and execution of prescribed burns in a way that has allowed us to achieve joint land management objectives, preservation of Goldie and Finch Habitat and the protection of assets at the Mt. Todd project.

Speaker 2

Presently, we are also collaborating with the Board of the Gentleman's Association to finalize and implement A cross cultural training program for employees and contractors at Mt. Todd. We continue to work 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 2 long serving directors And the resizing of our Board.

Speaker 2

More on that in a moment. Let me now turn to and talk a little bit more about Our agreement with the Northern Territory. On May 25th this year, we signed an amendment to our agreement with the Northern Territory of Australia, which was set to expire at the end of this year. This extends the term of the agreement to December 31, 2029 and gives us the option for an additional 3 year extension. This is a significant achievement as we continue to derisk Mt.

Speaker 2

Todd. It not only The clear commitment by the Northern Territory Government, but also the strong relationship that has developed over years of working together with the NT government, The John Owen people and other project stakeholders, we believe the amended agreement also demonstrates Pursuant to the agreement, Vista will continue to manage the Mt. Todd site and fulfill its environmental, cultural and social stewardship commitments. The company continues to have no environmental liability for the condition of the site prior to its involvement in 2006. Vistad, its sole option, May elect to proceed with the development of Mt.

Speaker 2

Todd by giving notice to the NT government, which will then result in the transfer of the NT government owned assets at Mt. Todd and all pre existing historical rehabilitation liabilities for the project from the NT government to the company. We remain committed to the responsible environmental management of the site, Protecting the sacred and culturally significant sites and developing Mt. Todd in a way and at a time that maximizes the benefit for our shareholders and for stakeholders in the Northern Territory. I'll now discuss the recommendations of the Northern During the quarter, we announced the release of a report prepared by The Northern Territory Mineral Development Task Force has outlined positive recommendations to enhance the importance of the mining industry and increased mining investment in the territory.

Speaker 2

As these recommendations are implemented, we expect Vista and Mt. Todd to benefit in several ways. Most notably, the report emphasizes the importance of updating the current royalty regime to make it more competitive with other leading mining jurisdictions and developing local skills to support a growing mining industry. This potentially means moving from a moving to a simpler ad valorem royalty structure and aligning the royalty rate more closely with other 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.

Speaker 2

Todd. Our 2022 feasibility study included MT 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 strongly support the use of the local workforce at Mt. Todd over the more traditional fly in fly out staffing practices common elsewhere in Australia. The NT government is presently undertaking a consultation process with stakeholders and members of the mining industry to obtain feedback on the best approach To implement the key recommendations and specific actions proposed in the report, Vista has submitted recommendations as part of this process.

Speaker 2

Touching briefly on the retirement of 2 directors, as indicated at the company's 2023 Annual General Meeting of Shareholders, 2 of Vista's long standing Board members retired including the Chair of the Board. As a result, we reduced the size of the Board of Directors, The company from 7 members to 5 and appointed Tracy Stevenson as the new Chair. Tracy has served on Vista's Board since November of of November 6, 2007 and has contributed greatly to the company's many Including advancing Mt. Todd into one of the largest and most advanced gold projects in Australia. Tracy is the Chair of the Audit Committee and a member of the Compensation Committee and the Corporate Governance Nominating Committee.

Speaker 2

As we turn a new page, we look forward to continued success under his Board leadership. I'll next talk briefly about the work that CIBC Capital Markets continues to do. The strategic process with CIBC continues to generate interest and positive feedback on the technical merits of Mt. Todd. Since announcing the completion of the scoping study earlier this year, there has been both new and renewed interest in the optionality Mt.

Speaker 2

Across our industry, producers continue to maintain a cautious approach to new large scale development projects. That said, we are pleased with the ongoing development activity or ongoing evaluation activities of interested parties and confirm that the optionality represented by Mt. Todd continues to be an important factor. We remain focused on recognizing value for shareholders through the completion of the right transaction, one that realizes a greater portion of the present value of Mt. Todd and provides ample opportunity for future additional recognition.

Speaker 2

With regards to cost reductions, 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. Some of you will have noticed that we have moved the location of our corporate offices as part of cost savings activities. At current project expenditure levels, our annualized costs for preserving the value of Mt. Todd Or less than $0.80 per ounce of proven and probable reserves, which is a very respectable holding cost.

Speaker 2

In conclusion, the Mt. Todd project is one of the largest and most advanced undeveloped gold projects in Australia with 7,000,000 ounces of Proven and probable reserves, Vista controls the 3rd largest reserve package in Australia. In addition to its size, The Mt. Todd provides a number of other advantages for those interested in a potential transaction. Mt.

Speaker 2

Todd is ideally located in the Northern Territory of Australia, an extremely stable and mining friendly jurisdiction. The existing basic infrastructure at Mt. Todd includes paved roads, power lines and natural gas pipeline to the site, Combined with the operational infrastructure comprised of the freshwater storage reservoir and tailings found facility provide very distinct construction timeline and risk mitigation advantages. All the major permits for the development of Mt. Todd have been approved.

Speaker 2

Of equal importance, we have earned the trust of the local stakeholders and are confident that our social license is firmly in hand. Our technical programs focus on derisking the project and incorporating designs that are capital efficient with low operating costs. We believe the proposed changes to the NT royalty regime will help improve project economics, enhance the project's leverage to gold price and provide a stronger foundation for improved shareholder value. We believe Mt Todd is a superior asset with one of the most attractive development reflective of the gold production profile, long operating life, excellent gold recovery, favorable operating costs, robust For a more comprehensive review of the work completed by Vista on the Mt. Todd project, I refer you to our corporate website, which can be found at www.vistagold.com.

Speaker 2

We believe that Vista Gold represents an exceptional investment opportunity and that

Operator

Your first question comes from the line of Tycho Ihle from H. C. Wainwright. Please go ahead.

Speaker 4

Hello, Fred and team. Can you hear me okay?

Speaker 2

We can. Good morning, Heiko.

Speaker 4

Excellent. Good morning. I'm in Europe, so it's already afternoon. But yes, well, good morning to you guys nonetheless. A sentence in your release really piqued my interest and you Sort of hinted at it earlier on this call, but maybe just a little bit more clarification.

Speaker 4

I mean, this whole that the NT government is moving towards So, you know, implementing some recommendations with the royalty regime to make it more competitive when looking at their peers. Can you provide some color on their undertakings, what you expect to see, some ideas for time lines, Maybe some investment goals and if you want to really go out there, maybe some sorts of like subsidies you might be able to see or get Other sweeteners for people investing in the areas, like that kind of stuff, I think would be very helpful to listeners on this call and myself.

Speaker 2

That's a great question Heiko. The Mineral Development Task Force report Identified a number of areas where the territory needs to make some significant strides Being competitive as we indicated the royalty regime is 1. They In May embarked on a public consultation process. That consultation process closes tomorrow. And the next steps will be obviously analysis of public comment And then the start of a legislative project to craft the legislation to formally Revise the royalty regulations for the territory.

Speaker 2

I know that this has been expressed by the Minister of Mines, the Deputy Chief Minister as a very high priority item For government, originally they thought that they could complete this legislative Project by the end of this year, I think realistically it will be sometime towards the end of the first Quarter of next year, possibly even into the Q2 before there is legislation that is set For approval. Nonetheless, we view this as very, very positive. Right now, the royalty rates and It's almost more like a severance tax is in the Northern Territory is easily double what many of The other leading mining jurisdictions charge. And so the territory Through this task force and

Speaker 3

I'm very pleased

Speaker 2

to see this. This is a conversation that's been ongoing between Vista And the Department of Mines and Treasury for a number of years, we've been raising this issue. But I'm pleased that they're taking the steps To finally address what is a very significant issue for the mining industry and now they recognize that it's an important issue The objective Overall, the territory has a goal of growing the economy of the Northern Territory to a level of $40,000,000,000 by 2,030. And in their view, mining investment and new mining projects It will be an important part of that effort. It appears Based on the recommendations of the task force that they are going to they are seeking not only to incentivize The development of new mines, but also value adding upgrade to mineral products Within the territory as well.

Speaker 2

With regards to subsidies and other things, Really not included in the recommendations of the task force. However, I think it's fair to say and inform everyone that The Australian government has created something called the Northern Australia Infrastructure Fund that has been is now on its second fund and Has more amply originally that was aimed at increasing investments in infrastructure. We in meetings with people at the fund, the second part of the fund It is including mining as part of the development of key activities across Northern Australia. And so there will be money that will be available at very competitive rates compared to conventional financing and we believe that Mt. Todd will qualify for that at the appropriate time.

Speaker 2

Doug, I don't know if there's anything else that you might add to in response to Heiko's question.

Speaker 3

Yes. Heiko, just to frame the Discussions around the NT royalty, obviously, we don't know where they'll land. They've been very straightforward saying they want to become more competitive. But in terms of the opportunity for Vista and Mt. Todd, if you go back and look at our 2022 feasibility study, which we ran at a $1600 gold price, so that would be considered very conservative for other studies coming out today.

Speaker 3

The NT royalty That we modeled into that was almost $700,000,000 So if you start to factor in any type of meaningful reductions In the royalty rate by the government, there is a very substantial impact available for Vista If they get into that competitive range. So that's just a framework for it. There are some other smaller funds available with ENT also for Employment, number of jobs that you create and those types of things, I would assume that some of those would Stay intact or possibly be enhanced through the recommendations of the task force, but those are relatively minor compared to the pool of dollars that we have Had opportunity with respect to the royalty.

Speaker 4

Fair enough. And then just One more. I did a bit of math today and I went through your last couple of annual financials. 2021, you Spend an average of $986,000 per quarter in corporate administration. 2022 In an inflationary environment that went down to $9.42 per quarter last quarter and yet again another inflationary period, You actually managed to decrease that to $8.78 Now if one assumes call it 10% inflation per year, which is probably a fairly More real number than what the government gives you.

Speaker 4

You're essentially cutting by 20% every year or close to it in real terms. Walk me through how exactly you're doing that and how much more meat is still on the bone, so to speak?

Speaker 3

Well, frankly, Heiko, it's been across the board in every aspect. Labor costs are obviously the biggest pot within the organization. And we were able to trim some Guys are working a little bit harder, but a lot smarter at Mt. Todd. And we had a little bit of turnover through retirements down there.

Speaker 3

And the rest of the team was able to shuffle their rotation schedule and pick up the load. So that was a big part of it. We've reduced some of our overhead costs, things like just basic office costs. We moved the Vista office here in Denver that had been a 20 plus year office, we downscaled and downsized and it's working out just fine for us. There's pockets of $25,000 to $50,000 kind of through our entire G and A structure that have come down.

Speaker 3

Can we continue that? We think there's a few other pockets, but there's always a point where you're basically starting to become Penny wise and pound foolish. So, we see a few more opportunities, but I think the trend that you've described We'll level off. What we'd like to do is at least be able to maintain our cost structure now, even though we would expect to still see some inflation Kind of in that 4% to 6% range over the next 12 to 18 months. So It's been very positive.

Speaker 3

It's been exceptionally helpful in us managing our treasury. Does that help?

Speaker 4

Very much so. No, I appreciate the insight. Okay. That's all for me. I'll get back in queue.

Speaker 2

Thank you, Heiko.

Speaker 4

Take care, Fred.

Operator

Thank you. Your next question comes from the line of Michael Baschera. Please go ahead. Hi.

Speaker 5

Can you hear me?

Speaker 2

Hello, Michael. Yes, we can.

Speaker 5

Hi. My question is quite simple. I have a question regarding the company value and the share price. There seems to be a huge disconnect between the two. And I just wanted to see if I can get your comments on this, especially considering with the gold prices And considering the projects in the safe jurisdiction with permits in hand?

Speaker 5

Thank you.

Speaker 2

That's a question that we ask ourselves on a regular basis, Michael. We are not the only ones that are experiencing this Severe disconnect in this market. It's particularly prevalent amongst developers. We think that one of the big factors has to do With the market's perception around financing and where that money will come from, Specifically in our case, we've completed a feasibility study for a very large project. We've announced a scoping study for a smaller project, which is much more capital efficient.

Speaker 2

But presently, I think the biggest Source of the disconnect between the real value of the project and the market cap of the company centers on Our plans to find a partner rather than develop it ourselves and the market's belief We will ultimately try and develop it ourselves and that will result in significant And until we can complete the transaction and definitively answer this question, put this issue of whether we will build it

Speaker 5

Thank you so much.

Speaker 2

You're welcome.

Operator

Thank you. There seems to be no further question at this time. I'd now like to turn the call back over to Mr. Ernest for any closing remarks.

Speaker 2

Thank you, Lara. And thanks to all of you who have taken time this morning to join us for This corporate update and conference call, we're very pleased with the achievements of the past quarter, both with regards to cost cutting, the extension of our agreement with the Northern Territory of Australia and other work that is ongoing. We look forward to the activity, the results of the work that's Currently underway and we invite you to stay tuned to stay involved. As I always do, I conclude with an invitation. If you are looking for an Opportunity to have exposure to large gold deposit in a safe jurisdiction This well advanced Mt.

Speaker 2

Todd ticks all of those boxes. And I think that there's a tremendous investment opportunity here that will ultimately reward shareholders very handsomely. We invite you to consider

Operator

Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day.

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Key Takeaways

  • Vista extended its agreement with the Northern Territory Government to December 31, 2029, with an option for a further three-year extension, de-risking the Mt. Todd project and strengthening stakeholder relations.
  • The Northern Territory’s Mineral Development Task Force recommends shifting to a simpler ad valorem royalty of 2.5–5% versus the 7–9% previously assumed, potentially materially improving project economics and returns.
  • Vista achieved a 16% reduction in Q2 operating expenses year-over-year and is on track for a 7% annual cost cut, while maintaining a debt-free balance sheet with $6 million in cash, translating to holding costs under $0.80/oz of reserves.
  • Mt. Todd remains one of the largest undeveloped gold projects in Australia with 7 million ounces of proven & probable reserves, all major permits approved, existing infrastructure in a stable jurisdiction, and strong ESG metrics with 621 consecutive accident-free days.
  • Vista reported a consolidated net loss of $1.5 million ($0.01/share) in Q2 2023, compared to a loss of $1.4 million in Q2 2022, with the year-to-date net loss rising to $3.5 million due to lower non-recurring income items.
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Earnings Conference Call
Vista Gold Q2 2023
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