Vista Gold Corp (VGZ) 2008 Q4 法說會逐字稿

The conference is now being recorded. Welcome to the Vista Gold Corporation's year-end 2008 results conference call. The conference will be led by Mike Richings, CEO and Executive Chairman. Also on today's call will be Fred Earnest, President and COO, and Greg Marlier, CFO.

I will turn the call over to Mike Richings, please go ahead sir.

Welcome everybody to our conference call. Before I start, I would just like to draw everybody's attention to the fact we will be making forward-looking statements and that the forward-looking statements disclaimer and disclosures that we can put on the bottom of our press releases and also on our Web site, apply to these statements.

And- from the outset the way we're going to hold the call is I am going to make a brief introduction and maybe summary of last year's activities and then, Greg will discuss the details of the financial results. And then Fred will discuss our activities with the various operations. And then we will throw it open for questions.

Last year was both a good year in many ways, but also a challenging year for us. As you know, we started out the year fully expecting to be building the Paredones plant and putting the mine into operation pretty quickly. And as such, we went ahead and purchased the mill, which we still -- is still located in Edmonton and we're planning to move it down to sites in Arizona for refurbishment later in the year, this year. But then in the springtime we found out that we had, in the opinion of one agency, a permit was no longer valid. And so that -- following that information, it was a very frustrating period for us. But we are now as we enter the first part of 2008 -- 2009 season, real significant progress. And we anticipate that we will have the permits fully in place by the middle of the year. In which case we would be commencing construction at the very end of the year or the beginning of next year, and hope to be in production by 2011.

The Paredones is still a very good looking project with low cash costs and a well studied operation with large amounts of engineering work being done in the past. We also enjoyed some success at Mt. Todd and added significantly to the resources, and we are enjoying some success with the metallurgical test work. Fred will go into the details of that.

What I would like to do now is pass it to Greg to discuss the financial results. And I guess one thing I would like to leave you with, though, that we anticipate this year will be a much better year for us. Our share performance, even though we seem to be suffering from a lot of volatility at the moment as our whole sector is. But I believe once that permit information and -- once the permits are obtained and that information gets out in the marketplace, I hope that this year will be a mirror image on the positive side of last year. And Greg, would you like to discuss the financial results, please?

Thanks, Mike. Good morning to everyone. In our press release on March 13, we announced the year-end financial results, and Mike also discussed in that press release the project activities for the year. With the emphasis on Paredones and Mt. Todd projects. I would like to address key financial information for Vista Gold for the year ending December 31, 2008. I will discuss in summary the statement of loss, statement of cash flows, and the consolidated balance sheet comparing 2008 vs. 2007.

Our 2008 consolidated net loss was US $10 million or $0.29 per share loss, compared to the 2007 consolidated net loss of $13.2 million or $0.41 per share loss. For a decrease of US $3.2 million. This decrease of US $3.2 million in 2008 is primarily the result of the impairment of the Amayapampa project of $5.5 million and costs related to the completion of the arrangement transaction involving Allied Nevada Gold Corps of $2.9 million, both of which occurred during the 2007 period.

These amounts were offset by decreased interest income of $700,000, an increase in interest expense of $2 million relating to the convertible note interest payments, an increase in income tax expense of $1.4 million, an increase in the impairment loss of $600,000, with respect to certain marketable securities, cost to dispose of the Amayapampa project of $132,000, and an increase in loss on currency translation of $343,000. Net cash used in operating activities in 2008 was $7.6 million compared to $4.3 million in 2007. The increase of $3.3 million in 2008 as compared to 2007 is mostly the result of aggregate interest payments of $2.3 million, made on June 15, 2008 and December 15, 28 relating to the senior secured note, issued in March of 2008, and an increase in the loss and continuing operations of $2.8 million, which has been partially offset by an increase in noncash items of $2.1 million.

Net cash used in investing activities in 2008, was $26.9 million, compared to $31.3 million in 2007. The decrease of $4.4 million is principally related to a decrease of $24.5 million as a result of the cash transferred to Allied Nevada Gold Corps in conjunction with the completion of the arrangement transaction in May of 2007. Which has been offset by an increase in additions to plant and equipment of US $17.5 million in 2008. We used US $16 million on the proceeds of the note towards the purchase of gold processing equipment to be used at our Paredones Amarillos project. An increase in the acquisition of mineral properties of $452,000, this resulted on January 24, 2008, from the completion of the acquisition of interest in various mineral properties, adjacent to our Guadalupe de los Reyes project in Mexico.

We also had an increase in the addition to mineral properties of $2.2 million over the 2007 additions of $6.4 million. This increase primarily reflects the costs associated with the feasibility study for the Paredones Amarillos project and a drilling program at the Mt. Todd project.

Net cash provided by financing activities was $31.4 million for the 12-month period ending December 31, as compared to $4.3 million for the same period in 2007. This increase is primarily a result of the completion of the brokered private placement of the notes of $30 million. Proceeds to Vista after payment of legal and other fees were $28.3 million.

The consolidated balance sheet -- at December 31, 2008, our total assets were $75.8 million compared to $51.3 million in 2007. Long-term liabilities totaled $23.7 million at December 31, 2008. We had no long term liabilities at December 31, 2007. At the same date in 2008, we had working capital of US $21.2 million, compared to $27.2 million in 2007. Our working capital of $21.2 million as of December 31, 2008 decreased from 2007 by $6 million. The principal component of working capital for both 2008 and 2007 is cash and cash equivalents of $13.3 million at 2008, and $16.7 million at the end of 2007. Other components include marketable securities, which were $8.2 million at the end of 2008, and $10.9 million at the end of 2007.

That summarizes the financial information and if you have any questions, I will answer them during the question-and-answer period. I will now turn it over to Fred Earnest.

Thanks Greg. Good morning, everyone. I am going to start and talk first about the Paredones Amarillos project in Baja California sur Mexico and I will conclude with the Mt. Todd project. As Mike, indicated 2008 was a frustrating period of time for us in regards to permitting. However, I am pleased to report that through the fourth quarter of 2008 and, more importantly, in the first months of 2009, we feel we have made significant progress on the permits.

Since January I have had the opportunity to have several very significant meetings with high-ranking government officials, and we now see the permits moving forward and expect to receive the drilling permit in the coming weeks. We know that the temporary occupation permit is in the final phase of comment from agencies that are entitled to comment on that permit. And we're expecting to receive favorable response from both SEMARNATand [PNOW]. The application for the change of land use permit is dependent upon receiving the temporary occupation permit. And aside from the receipt of that permit, permit application is ready to submit.

In December, we completed two land purchases, as part of our plan to advance the project while we're waiting for these permits. We purchased the land necessary for the construction of the desalination plant near the Pacific Ocean and we also acquired the private land in the project area, which will be used for the process plant facilities and also other infrastructure items.

You will recall that the feasibility study was completed in September of last year. All of the costs estimations and quotes were completed in June, July, and August. As we look back on history, that was a period of time when commodity prices were at their highest. And it is also important to note that the exchange rate for the study was fixed at 10.5 pesos to the dollar. Presently, we see an exchange rate of 10 -- I'm sorry 15 pesos to the dollar or higher. And we know that many of the commodity prices have come down, specifically steel, crude oil, copper and other raw materials that will be used in the fabrication of equipment and materials for the project.

As a result of the decreases in these commodities, we have undertaken two separate studies. One is a slight change of scope in which we feel that we can improve the design of the process area. And we are getting ready to start a re-estimation of the capital and operating costs.

Due to the exchange rate differences and the changes in raw materials that will be used for the construction of the project, we are expecting a significant decrease in the capital and operating costs, and we expect to republish the capital and operating costs, or update the capital and operating cost numbers for the feasibility study late May, early June of this year.

Moving over to Mt. Todd. As Mike indicated, we completed the drilling program in 2008, the results of which were very pleasing to us. In January of this year, we announced a new resource estimate for the Mt.Todd property with $4.5 million ounces of measured and indicated mineral resources. This represents a 57% increase over our previously reported measured indicated mineral resource total.

The pre-feasibility study that was announced in November is in progress. Phase one is expected to be completed within the next month. The metallurgical testing is nearly completed and we're very satisfied with the results of the metallurgical testing.

We believe our testing completed over the last year-and-a-half has answered nearly all of our questions in regards to the issues surrounding the metallurgical process that was used by Pegasus when they were the previous operators. We recognize there are legacy issues related to the mineral processing flow sheet. We believe we have developed a flow sheet that satisfactorily responds to all of those issues and we expect to publish the results of the metallurgical test program in the next six to eight weeks. That concludes my part of the report. I will now open the floor to any questions that our listeners may have.

(Operator Instructions) And the first question on the line comes from Adrian Day with Adrian Day Asset Management. Please go ahead.

Good morning, Mike and the others. Listen, could you just sort of walk us through a little bit. You gave us a good review of where you were currently on the balance sheet. Can you give us a walk-through of what you see in the next 12 months, your expenditures and so on, and the need for stats or equity?

Adrian, this is Greg, I will answer that question. In our budget for next year, we're showing administrative costs in the Denver office of about $3.3 million. Field administration about $1.6 million. And interest payments of $3 million on the note. So that comes out to about almost $8 million in cash operating costs during the period.

We're also looking at additions to mineral properties both at Mt. Todd and at Paredones of about $2.4 million. As you might recall that comes out to approximately $10.5 million for the year. Our balance at the beginning of the year was $13.2 million in cash. You might recall that in our marketable securities, we have 1.6 million shares of Allied Nevada. Currently that is in excess of $4 a share.

Adrian, it is important to consider the working capital position, the cash, plus the equity that the company owns in looking at or evaluating our position going forward.

Our working capital is $21.2 million at year-end.

Right, right. Okay.

And I think, if I might add a little bit Adrian, we have made our plans -- we have made two sets of plans. One set of plans is assuming sort of nothing happens. That we have to devise, that there is no permit in place and we have to make it as long as we can on the cash resources that we have. And our estimates would show us going through the end of2010 without any need for further financing.

Obviously if we make advances with the permitting, and we move ahead to the construction of the project, we would need then to arrange both debt and equity finances for the development of Paredones sometime later this year.

Okay, okay. How much would that be roughly?

Well, the original estimate on the project was $197 million. We raised $30 million. So it leaves a balance of about $167 million. I think both Fred and I feel the new estimate will be somewhat lower,but I don't think we're in a position to say how much that will be right now.

Okay. And just a follow-up if I may, the Allied Nevada shares that are obviously a significant part of your working capital, would I be right in -- I don't want to put words in your mouth -- but would I be right in saying you would be using that for ongoing expenses, rather than raising money for ongoing G&A?

Yes, I don't want to say when or how or where, but obviously we probably will need to liquidate those shares at some point in the next year.

Okay. Okay. Thank you.

Thank you, and there currently are no further questions. Please continue.

Well, if there are no further questions, thank you everybody for joining us. I would like to just say one other thing. We don't discuss it very much but we sold last year the Amayapampa project. The people who are developing Amayapampa, Republic Gold, although located in challenging Bolivia, they are making advances with the project. We fully expect them to complete a feasibility this year and commence construction probably sometime this year. Just to remind everybody, over a period of time after they commence construction, we receive $3 million in cash, and then I think it is a 3.5% royalty at current prices.

And they have been successful and adding quite significantly to the resource base, and we would expect to be paid on a total of about 720,000 ounces which is the maximum under the royalty agreement. So, that is a fairly hidden but not often discussed asset in the company. And at current gold prices and with the way Republic is proceeding, we would expect to start seeing returns on that in the next couple of years.

If there are no further questions, we will declare the meeting closed. If there are any other further statements from Greg or Fred. If there is nothing more to be said, we will close the meeting. Thank you very much, everybody for attending.

Thank you. Ladies and gentlemen, this does conclude the conference call for today. We would like to thank you for your participation. You may now disconnect your lines and have a great rest of the day