Vista Gold Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 30, 2024

There are 5 speakers on the call.

Operator

Good day, ladies and gentlemen. Welcome to Vistagold's Second Quarter 2024 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. As a reminder, this conference call is being recorded.

Operator

Today is Tuesday, July 30, 2024. It is now my pleasure to introduce Pamela Sully, Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you, Jenny, and good afternoon, everyone. Thank you for joining the Vista Gold Corp. 2nd quarter 2024 Financial Results and Corporate Update Conference Call. I'm Pamela Solly, Vice President of Investor Relations. On the call today is Fred Ernst, President and Chief Executive Officer and Doug Toebler, Chief Financial Officer.

Speaker 1

At the close of business yesterday, Vista reported its Q2 2024 operating and financial results. Copies of the news release and quarterly report on Form 10 Q are available on our website at www.vistagold.com. During the course of this call and the question and answer session, 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 Q for details of risks and other important factors that could cause actual results to differ materially from those in our forward looking statements and the cautionary note regarding estimates of Mineral Resources and Mineral Reserves.

Speaker 1

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. Vista controls one of the most attractive gold one of the most attractive large gold deposits in one of the most attractive mining jurisdictions in the world. Vista is committed to seeing its development and keeping with the highest mining and ESG standards when the time is right and we'll work diligently toward that goal. Our success is important to the Northern Territory, the people and families of the project area and ultimately to Vista shareholders. On the call today, we will help you understand current activities that are designed to help us create greater value in the rising in the current rising gold price environment.

Speaker 2

But first, let me share with you a few of our achievements during the Q2 of this year. We received the final installment payment under the royalty transaction with Wheaton Precious Metals, finished Phase 1 of our 2024 drilling program and commenced Phase 2 and enhanced our management team with the addition of Maria Vallejo Garcia as our new Director of Projects and Technical Services. We also announced that the Northern Territory Government of Australia passed legislation to enact the Mineral Royalties Act of 2024, which became effective on July 1, 2024. The new Mineral Royalties Act replaced the prior net profits royalty regime with an ad valorem royalty regime for new mines and is expected to positively impact project economics for Vista's Mt Todd Gold project. For the remainder of this year, we will focus on maintaining a strong balance sheet, advancing evaluations of an initially smaller scale Mt.

Speaker 2

Todd project, continuing our work to maximize shareholder value and successfully execute our health, safety and environmental initiatives. I'm pleased to report that we have had no lost time accidents year to date and the Mt. Todd site has now reached 991 consecutive accident free days. I will discuss some of these topics in greater detail later in the call. But I will now turn the time over to Doug Toeler, our CFO, for a review of our financial results for the quarter ended June 30, 2024.

Speaker 3

Thank you, Fred. I'd like to start today's financial presentation with a recap of our balance sheet. In June, we received the final $10,000,000 installment under the Wheaton royalty agreement. With this final installment, we've now received the full $20,000,000 and are using these funds on our ongoing drilling program and upcoming evaluations of an initially smaller scale project at Mt. Todd.

Speaker 3

We ended the 2nd quarter with cash totaling $20,200,000 and we continued to have no debt. I'll now provide a review of our results of operations for the 3 6 month periods ended June 30, 2024, compared to the same periods in 2023. First, I'll address the 3 months period ended June 30, 2024 and 'twenty 3. Vista reported consolidated net income of $15,600,000 during the most recent quarter of 2024 compared to a consolidated net loss of $1,500,000 for 2023. Net income for the 'twenty four period resulted mostly from a gain of $16,900,000 on the grant of a royalty interest in Mineral Titles to Wheaton.

Speaker 3

This gain included the previously deferred gain on installment payments totaling $10,000,000 plus the $10,000,000 received in June 2024 for the final installment, all of this being net of the associated mineral property carrying costs of $3,100,000 as of the date the final installment was received. Partially offsetting this gain were Mt. Todd site costs and corporate administrative expenses of $645,000 $763,000 for the 'twenty four and 'twenty three periods respectively. Each of these expense categories were slightly lower than those of 2023. The net loss of $1,500,000 for 2020 for the 2023 3 month period was largely comprised again of Mt.

Speaker 3

Todd site and corporate administrative expenses of $682,000 $878,000 respectively. Of note, costs associated with our ongoing development drilling program totaled $524,000 during the 3 month period into June 30, 2024, and these costs were capitalized. The majority of these costs were for were part of the mineral property carrying value that was then offset against the $20,000,000 from the proceeds received from Wheaton. And by comparison, there was no drilling that occurred during the same period in 2023. Now I'll talk briefly about the 6 month periods ended June 30, 2024 and 'twenty 3.

Speaker 3

Vista reported consolidated net income of $14,600,000 during the 6 months ended June 30, 'twenty four compared to consolidated net loss of $3,500,000 for the comparable period in 2023. As with the most recent 2024 quarter, the 6 month period in 'twenty four included the $16,900,000 gain. Vista also recognized a gain of $802,000 during the 2024 6 month period from the sale of a portion of its used mill equipment. Partially offsetting these gains were Mt. Todd site and corporate administrative expenses of $1,400,000 $2,000,000 respectively.

Speaker 3

And again, each of these expense categories were slightly lower than those for the 2023 period. The net loss of $3,500,000 for 2023 6 month period was largely comprised of Mt. Todd site and corporate administrative expenses of $1,500,000 $2,000,000 respectively. As with the 3 month period in 2024, we capitalized development costs. This included $1,000,000 for the 6 month period ended June 30, 2024 with all but 80 $3,000 being part of the mineral property carrying value that was then offset against the $20,000,000 of proceeds received from Wheaton.

Speaker 3

In summary, we're very pleased with the improvements made to our balance sheet during the 1st 6 months of 2024 and the results of our ongoing focus on controlling our expenditures. That concludes my remarks. So, Fred, back over to you.

Speaker 2

Thank you, Doug. I'll begin with our Q2 achievements followed by our outlook for the remainder of the year. As many of you know, in December of 2023, we completed a $20,000,000 royalty transaction with Wheaton Precious Metals. And as Doug has reported, in June, we received the final $10,000,000 installment payment under that royalty agreement. All payments have now been received, which has significantly strengthened our balance sheet.

Speaker 2

With regards to the drilling program, in June of this year, we completed Phase 1 of our 2024 drill program, which consisted of 11 holes and totaled almost 3,000 meters. These holes are part of the 6,000 to 7,000 meters of drilling planned for this year. Detailed results from Phase 1 are expected to be announced in August. Phase 2 of the drilling program commenced in July and is expected to be completed by year end. Phase 1 focused on defining the limits of mineralization at the north end of the Batman deposit and confirming the grade in this area.

Speaker 2

We are evaluating the last assays at this time. Phase 2 is concentrating on defining the south Crossload Structure. This structure trends from the center of the Batman deposit to the Northeast and was intersected in a couple of holes in the 20202022 drill programs. Historic drilling on the South Crossloads suggest a narrow mineralized structure with potentially higher grades than those typically observed in the Batman deposit. The 2024 drilling program is expected to have an all in cost of approximately $2,000,000 with regards to the Northern Territory Minerals Royalty Act.

Speaker 2

In June, we announced that the Northern Territory Government had passed legislation to enact the Mineral Royalties Act of 2024 with an effective date of July 1, 2024. This replaced the prior net profits royalty regime with an ad valorem royalty regime for new mines. The New Mineral Royalties Act is aimed at encouraging present and future exploration and development of mining projects by simplifying the Northern Territory's royalty system and making it more competitive with other Tier 1 jurisdictions. The new royalty rate applicable to Gold Do Re from the Mt. Todd project will be 3.5% of the value of gold produced.

Speaker 2

This represents a meaningful opportunity for improved project economics at Mt. Todd and earlier shareholder returns compared to our 2024 updated feasibility study, which included Northern Territory royalties equivalent to nearly a 7% ad valorem rate. Under the previous net profits royalty regime our base case economic analysis at an $1800 gold price estimated the payment of approximately $765,000,000 in Northern Territory royalties over the life of the mine. The new royalty rate represents a nearly 50% reduction in payable royalty and underscores the Northern Territory's commitment to growing a viable mining sector through new development. I'd like to comment briefly on the appointment of Maria Vallejo as our Director of Projects and Technical Services.

Speaker 2

In June of this year, Maria joined the company as our Director of Projects and Technical Services. Maria is a registered professional engineer and fellow of the Australian Institute of Mining and Metallurgy. She is also a qualified person defined by Item 1300 of Regulation SK under the Securities Exchange Act of 1934 as amended and Canadian National Instrument 40three-1 101 standards for disclosure of mineral projects. She brings 15 years of experience screening, evaluating, optimizing and developing gold and copper mining assets in the Americas and Asia Pacific. Her technical background and expertise will be invaluable as we advance our evaluation of smaller scales and stage development opportunities at Mt.

Speaker 2

Todd. Also as we consider possible potential strategic transactions and position Vista for long term success. Now looking ahead, in addition to maintaining a strong balance sheet, we are advancing evaluations of an initially smaller scale Mt Todd project with the option for subsequent stage expansion and continuing our work to maximize shareholder value. As part of our work to improve the value of Mt. Todd, we plan to leverage the results of previous technical studies as we evaluate a smaller scale initial project.

Speaker 2

Previous studies demonstrated opportunities to significantly lower the initial CapEx, while maintaining high margins and deliver attractive economic returns associated with an initially smaller scale project. At the same time, this allows us to preserve the flexibility for subsequent stage development. With the gold price continuing to rise, margins are increasing. Our analysis suggests that higher margins combined with lower initial capital provide an avenue to greater value recognition. We believe that alternative development strategies offer valuable optionality as we focus on creating shareholder value and attracting investor interest in Mt.

Speaker 2

Todd. At this time, we anticipate completing a feasibility study on a smaller scale initial project next year. In conclusion, Vista controls one of the most attractive large gold deposits in one of the most attractive mining jurisdictions in the world. We are committed to seeing its development in keeping with the highest mining and ESG standards when the time is right and we will work diligently toward achieving that goal. Our success is important to the Northern Territory, the people and families of the project area and ultimately to Vista shareholders.

Speaker 2

In the current rising gold price environment, we believe that thoughtful evaluations and a focus on minimizing shareholder risk will help us create and realize greater value for all shareholders. The Mt Todd Gold Project is one of the largest and most advanced undeveloped gold projects in Australia with 7,000,000 ounces of proven and probable reserves. In addition to its size, Mt. Todd offers a number of other strategic advantages. Mt.

Speaker 2

Todd is ideally located in the Northern Territory, an extremely stable and mining friendly jurisdiction. The existing project infrastructure at Mt. Todd provides construction timeline and risk mitigation advantages. All of the major permits to initiate development at 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 current technical programs aim to derisk the project by incorporating designs that significantly reduce the initial capital costs while maintaining competitive operating costs and preserving the option for future project expansion. We believe Mt. Todd is a superior asset and one of the most attractive development stage projects not in just in Australia but in the world. Our primary objective is to achieve a valuation for Mt.

Speaker 2

Todd that is reflective of the favorable operating costs and robust project economics as demonstrated by the updated feasibility study, coupled with the fact that we hold all of the approvals for all major permits needed to initiate development. 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 at www.vistagold.com. We believe that Vista Gold represents an exceptional investment opportunity and that current gold prices represent a tremendous opportunity to establish a position or increase one's holding in Vista Gold. This concludes my formal remarks.

Speaker 2

We will now respond to any questions from

Operator

Your first question is from Heiko Ihle from H. C. Wainwright. Please ask your question.

Speaker 4

Hello, Fred and team. How are you? Thanks for taking my questions.

Speaker 2

Heiko, good afternoon. Thank you for being on the call.

Speaker 4

Always and gladly. Okay. So you just got the final $10,000,000 from Wheaton, gets you $20,000,000 in the bank. Can you maybe just walk people through what you plan to do with some of this extra cash now that the royalty deal is done? I mean, is there any specific things that you plan on doing?

Speaker 4

Any spends that are going to happen at a higher rate in order to more money is in the bank?

Speaker 3

Yes. Heiko, it's Doug here. I'll try to answer that. So, split it into a couple of different buckets. The first is our recurring costs, which is basically the core of our holding costs for Mt.

Speaker 3

Todd and our corporate G and A. And those costs have been running at on the order of $6,000,000 a year for about 2.5 years now, including not going up through all the inflation. So we don't see a big change in what's happening with the core of the organization. As to other spending, of course, we'll have the spending on the drilling, which Fred said will be ballpark $2,000,000 this year. And I don't have anything today that would tell me it would go over that.

Speaker 3

We seem to be tracking right on plan. And secondly, of course later in the year as we come close to the end of the drilling program, we'll pick up on doing some the start of the studies. First, it will be some trade off studies, then we'll move into the technical report itself. So the balance of this calendar year in addition to the $2,500,000 of sorry, dollars 2,000,000 of drilling will probably be another somewhere between $500,000 $1,000,000 this year. Then we'll wrap up the feasibility study in the first half of next year.

Speaker 3

So that's probably another $1,000,000 to $1,500,000 total. So outside of our normal burn rate and what we're doing to put this smaller scale initial plan together, there's really no significant spending changes expected.

Speaker 2

Heiko, I would just add to that just because we've got money in the door mean that mean that we feel a great need to spend it. We'll continue our capital preservation practice and seek to maximize value from the money that we spend.

Speaker 4

Fred, you know, I respect the way you spent money quite a bit. Okay. So you got the 3.5% royalty, the revised one on Mt. Todd. I mean, your numbers have it as nearly 50% reduction in payable royalties overall.

Speaker 4

Can you maybe walk us through the timing of when money then gets sent to the government once this thing is actually in production? Is it more front loaded, more back loaded? Can you maybe just give some color for the listeners on this call on what you expect to see?

Speaker 3

Yes. Heiko, I'll take that again. In simple terms, it's 3.5 percent ad valorem. So take your gross revenue number times 3.5%, that will be flat lined across the entire life of mine. So basically you can see the 765,000,000 that's in the current study that just gets completely replaced by something that's down in the $350,000,000 to $400,000,000 range.

Speaker 3

So roughly a $350,000,000 reduction over the life of mine. But it's there's no holiday or payback period at all involved in this given the cut that they made, they just keep it nice and flat.

Speaker 2

The other thing that this new royalty structure does is that it remove some of the complexities of that were involved in the net profits calculation and puts most mines on an even footing where you'll be paying a royalty that's based on the value of your production across all sectors. And that's something that the NT the previous NT royalty regime did not provide was that transparency, nor was it competitive compared to other jurisdictions. So we believe that this is a tremendous step forward towards simplification and competitiveness. And certainly, we believe that there will be some incentives that accrue from this for the development of mining projects and subsequently rewards for the Northern Territory. Okay.

Speaker 2

Thank you, Heiko.

Operator

Thank you. There are no further questions at this time. I will now hand the call back to Fred Earnest for the closing remarks.

Speaker 2

Thank you, Jenny. And thank you to all of you who have joined the call today. I would just like to reiterate a core part of the message that we would like you to take away. And that is that Vista Gold controls 1 of the most attractive large gold deposits in one of the most stable and mining friendly jurisdictions in the world. We are committed to seeing its development in keeping with the highest mining and ESG standards, but we'll do so when the time is right and we will work diligently toward that goal in the interim.

Speaker 2

Our success is important not only to the Northern Territory and the people and families of the project area, but ultimately to Vista shareholders. In the current rising gold price environment, we believe that thoughtful evaluations and a focus on minimizing shareholder risk will ultimately help us create and realize greater value for all stakeholders. Our primary objective is to achieve a valuation for Mt. Todd that is reflective of the intrinsic value of the project that recognizes the favorable operating cost and the robust project economics as demonstrated by the updated feasibility study and those studies which we'll be undertaking in the coming months and concluding as Doug indicated the 1st part of next year. We would like to thank all of you for joining the call.

Speaker 2

We invite you to learn more about Vista Gold and the Mt. Todd project. If you need further information, please feel free to reach out to Pamela Lasully, our Vice President of Investor Relations. I invite you all to give serious consideration to how an investment in Vista Gold or increasing your holding in Vista Gold might be an opportunity for greater value creation in the future. With that, I thank all of you and wish you all a very pleasant afternoon.

Operator

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.

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Key Takeaways

  • Vista received the final $10 million installment from the royalty transaction with Wheaton Precious Metals, leaving the company with cash of $20.2 million and no debt.
  • For Q2 2024, Vista reported net income of $15.6 million compared to a loss of $1.5 million in Q2 2023, driven primarily by a $16.9 million gain from the royalty grant to Wheaton.
  • The Northern Territory’s new Mineral Royalties Act effective July 1, 2024, replaces the prior net profits regime with a 3.5% ad valorem royalty for new mines, reducing expected royalty payments by nearly 50% over the life of the Mt Todd project.
  • Vista completed Phase 1 of its 2024 drilling program (11 holes, ~3,000 m) and commenced Phase 2 (targeting the South Crossload Structure), with 6,000–7,000 m total planned and detailed results due in August.
  • The company is evaluating a smaller-scale initial development for Mt Todd to lower upfront capital costs, preserve expansion optionality and aims to complete a feasibility study on this approach in the first half of next year.
AI Generated. May Contain Errors.
Earnings Conference Call
Vista Gold Q2 2024
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