Vista Gold Corp (VGZ) 2009 Q1 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Vista Gold first-quarter results 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, Wednesday, May 13, 2009.

It is now my pleasure to introduce Mike Richings, CEO and Executive Chairman of Vista Gold Corporation. Please go ahead, sir.

Thank you, Michelle. Good morning, everyone. I have in attendance with me Fred Earnest, President and Chief Operating Officer, and also Greg Marlier, our CFO. Fred and Greg will be making more detailed presentations and then we'll have a period of questions afterwards.

Just before we get into their presentation, I would like to mention a couple of more general. After the quarter finished on April 3 (technical difficulty) about 1.5 million shares and this was something that we felt was a prudent thing to do to prepare our cash for the activities that we have to undertake this year. We still believe that Allied is an excellent investment opportunity, but from our cash management point of view, it was something that we thought was appropriate to do at this time.

Also in a similar vein on April 17, we made the preliminary -- the filings for a preliminary short form shelf prospectus in Canada and a corresponding shelf registration statement in the United States. These became effective on April -- hold on.

April 30.

On April 30. Again, I would emphasize that this is not necessarily about just us selling shares. At this time it was a prudent thing -- planning tool for us to undertake in preparation for financing Paredones Amarillos or any other financing activity the Company may undertake to affect growth in the future.

I would now like to introduce Greg Marlier, our CFO, who will discuss the first quarter's financial results.

Thanks, Mike. Good morning to everyone. In our recent press release on May 6, we announced the financial results for the first quarter ending March 31, 2009. I am going to review the consolidated financial statements as they are represented on the Form 10-Q. The following dollar amounts that I will discuss will be in US dollars.

Our consolidated net loss for the three-month period ended March 31, 2009 was $1.9 million or $0.05 a share (technical difficulty) loss, compared to a consolidated net loss of $2.1 million or $0.06 per share for the same period in 2008. The decrease in the consolidated net loss of $200,000 from the respective prior period is primarily due to a decrease in the loss from discontinued operations of $200,000 as there were no disposals during the 2009 period and a decrease in corporate administration and investor relations expense of $300,000.

Net cash used in operating activities was $1.1 million for the three-month period ended March 31, 2009, compared to $1.2 million for the same period in 2008. The decrease of $100,000 is the result of a decrease of non-cash items of the same amount and a decrease in cash used for accounts payable, accrued liabilities, and other of $100,000, which is partially offset by a decrease in the consolidated net loss of $20,000.

Net cash used in investment activities decreased to $1.1 million for the three-month period ended March 31, 2009 from $18.1 million for the same period in 2008. The decrease of $17 million is mostly due to a decrease in the addition of property, plant and equipment of US$16.1 million for the -- in the prior period for the Paredones Amarillos process equipment was purchased in the same period of 2008 for that amount.

There was no cash provided by or used in financing activities for the three-month period ended March 31, 2009. Net cash provided by financing activities was $31.5 million for the three-month period ended March 31, 2008. During that period, we completed a brokered private placement in which we offered and sold $30 million principal amount of the notes. Proceeds to Vista after legal and other fees were $28.5 million. The balance for the three-month period March 31, 2008 was made up of warrants and exercise of options.

At March 31, 2009, our total assets were $76.6 million compared to $75.8 million at December 31, 2008, representing an increase of $800,000. At March 31, 2009, we had working capital of $19.4 million compared to $21.2 million at December 31, 2008, representing a decrease of US$1.8 million. This decrease relates primarily to a reduction in cash balances from year-end, which is offset by an increase in our marketable security balances due to better market conditions.

The principal component of working capital at both -- at March 31, 2009 was $11 million compared to December 31, 2008 at $13.3 million. Our marketable securities at the end of the first quarter of 2009 was $9.4 million compared to year-end $8.2 million. And our other liquid assets were at the end of the quarter $600,000 compared to the same amount at year-end.

As Mike has discussed earlier, on April 3, we announced that we had sold 1,529,848 shares of Allied Nevada Gold Corporation at $5.90 a share to give to Vista approximately US$9 million. These shares at the time had a book value of $2.2 million and when sold resulted in a realized gain of $6.8 million. The proceeds from this transaction increased the Company's unaudited cash balance to approximately $20.5 million.

Once again as Mike had stated earlier, on April 17, we announced that we had filed a preliminary short form based shelf prospectus with the Securities Commission in each province and territory of Canada other than Quebec and a corresponding shelf registration statement on Form S3 with the SEC. The Form S3 was declared effective by the SEC on April 30. The offering documents will allow Vista to make offerings of common shares, debt securities, warrants, subscription receipts or units for initial aggregate proceeds of up to $200 million during the next 25 months to potential purchasers in each province and territory of Canada once again other than Quebec and the United States.

The annual general meeting of Vista shareholders was held on May 4 in Vancouver. The Board of Directors as presented in the information circular were reelected to a one-year term. PricewaterhouseCoopers was reappointed independent auditors and the amendments to the Corporation stock option plan were approved.

I will now turn it back over to Mike Richings.

And I will turn it over to Fred Earnest, our President and COO, to review our operating activities for the quarter.

Think you, Mike. Good morning, everyone. I will review progress at two specific operations, the Paredones Amarillos project in Baja California Sur Mexico and also the Mt. Todd project in the Northern Territory of Australia.

At the Paredones Amarillos project, we have continued to undertake studies to advance the development of the project. In the press release, we briefly made reference to the fact that we have completed an optimization study in that particular evaluation we asked Roberts & Schaefer to look at the plant site layout, the crushing, grinding, and stacking or stockpile areas to see if there were ways that we could further reduce our capital costs for the project.

We believe that there is an opportunity to save a couple million dollars in the area of the crushing circuit and also the stockpile area, and there will be a further savings by some changes in the layout of the process area itself. Following the completion of that optimization study, we retained Roberts & Schaefer to undertake a reevaluation of the capital and operating costs for the Paredones Amarillos project.

Those who have looked at the feasibility study will recall that it was published, the results were announced September of 2008. Much of the costing and quoting that was part of the feasibility study was conducted in June, July, and August of last year. And you will recall that that was a period of time when commodity prices were at record levels and as were fuel and energy prices.

We believe that there will be a significant reduction in operating costs and also a reduction in capital costs as a result of changes in commodity prices and also as a result of the foreign exchange rate. When we undertook the feasibility study in late 2007 and as we reviewed this during the course of 2008, we selected a foreign exchange rate of MXN10.5 to the dollar as the fixed exchange rate for all of the conversion of Mexican peso to cost to US dollars for the feasibility study.

In the last nine months, we have seen a significant change in the foreign exchange rate. Recently we have seen the Mexican peso exchange rate as high as MXN15.5 to the dollar. Currently it is at MXN13.3. Internal discussions -- in internal discussions, we have been discussing using a foreign exchange rate of somewhere between MXN12.5 and MXN12.8 to the dollar for this reevaluation. Part of the reevaluation will also include a sensitivity to foreign exchange rates, which was not included in the feasibility study. We believe that this reevaluation of capital and operating costs will be completed sometime in June and we will announce those results as soon as they are available.

On the permitting side, we are very optimistic that we will shortly be receiving news in regards to the permits for the drilling program. Those who watch the -- follow the international news will realize that Mexico City has -- many of the government activities have come to a virtual standstill over the last couple of weeks as a result of precautions they've taken surrounding the swine flu pandemic. Government offices were closed to two weeks ago. Last week they opened on a very reduced scale. This week the offices of the government are open but they are not holding any meetings with the private sector.

We have been informed by our advisors and counsel in Mexico City who are in constant contact with government authorities that the permit for the drilling permit is moving forward and we should expect to hear news in the next couple of weeks.

On the temporary occupation permit, we are expecting news in about the same time period. However, as indicated in the press release, we are not certain whether that news will be to inform us that the temporary occupation permit has been approved or whether it would be to inform us that the temporary occupation permit will process will pass for another round and which will be by law the final round of administrative review. If it passes for this second round of review, it will involve a site visit in preparation for a technical report by a technical inspector appointed by the general direction of mines followed by a period of time for the general direction of mines to review that report.

Our communications with the general direction of mines at this point in time indicate to us that they do not see that there will be a problem in the approval of the temporary occupation permit. That leads us to believe that it's not a matter of if we will receive the permit but rather when. At worst case, we believe we will have the temporary occupation permit in August or early September of this year.

Moving over to Mt. Todd, earlier this year, we announced the new resource estimate for the Mt. Todd property based on the results of the 2008 drilling program. We also discussed that we had undertaken the first phase of the preliminary feasibility study. We are coming to the close of that first phase of the feasibility study, and the only part of that work that is outstanding is a round of high-pressure grinding roll test work that is in progress at this time and will be completed in June.

Progress has been made on Mt. Todd and our evaluation of that property includes significant advancement in the process, flow sheet, and processing area which I will discuss here in just a moment. Also we have a much better understanding of the mineralogy of the orebody now than we had certainly two years ago when we first acquired the property.

One of the things that we have learned when we first acquired the property, we had proposed a flow sheet which would grind the ore to 200 mesh and process the ground ore in a flotation circuit to produce a copper concentrate, which would we estimated recover about 51% of the gold. The tails would then be leached to recover the balance of the recoverable gold.

The drilling and then the subsequent modeling that has been completed and metallurgical testing has indicated to us that the flotation circuit is not a viable circuit for the deposit. In fact, the remaining mineralogy and the evaluation of the mineralogy indicates to us that the sulfide transition sequence, which starts at the top of the deposit with chalcocite and chalcopyrite transitions into pyrite, and then at the deeper parts of the deposit, which is the more -- volume wise a more significant part of the deposit -- transitions into [pyritite].

The chalcocite, pyrite portion of the orebody that is left that has not been mined is -- accounts for only about 5% of the remaining ore. Due to the transition to the pyritite and the way that the ore separates a flotation circuit, it would not be viable with this mineral assemblage. Consequently, we have looked at other processing alternatives and have determined that a hole or a leach would be the most effective way to treat the ore. Because of the transition out of the chalcocite chalcopyrite, we do not expect to see the high cyanide consumptions that were encountered by previous operators on the site.

It is a widely known fact that the Mt. Todd orebody is very hard. The Bond Ball Mill Work Index is in the range of 26 to 29. That is based on our testing and some of the test work that was completed as a result of the failure of Pegasus Gold as the previous operator.

Our metallurgical testing program has evaluated among other things a method for treating the hard ore. We are satisfied that high-pressure grinding roll technology is the appropriate technology for the treatment of the Mt. Todd orebody. Test work tat has been completed to date indicates to us that at using high-pressure grinding roll technology, we will be able to reduce our power consumption for grinding at just in power consumption in the crushing and grinding circuit by 30% compared to a conventional crushing SAG mill grinding circuit.

If we look at the power savings compared to our first evaluation of the project in which we contemplated grinding the ore to 200 mesh, we -- and using a flotation circuit, we now see an 85% reduction in the crushing and grinding circuit compared to previous process flow sheet.

The high-pressure grinding roll test work that is in progress right now is a test program to evaluate the variability of the orebody. Previous test work was limited to a confined area and we are conducting a series of tests to evaluate and confirm that over the strike length of the orebody and also throughout the vertical sequence that the ore continues to behave in an acceptable manner.

With these findings from our -- the test that's been completed, we determined to undertake a preliminary economic assessment to reevaluate the economic viability of Mt. Todd deposit with the new resource estimate and also with the new process flow sheet. We expect to have the results of that preliminary economic assessment before the end of this month. We will make those results available at that point in time.

I would I guess like to point out or announce one other matter in regards to the Mt. Todd property. We have recently hired a new exploration manager for the project. The gentleman's name is Peter Harris. Peter previously was the Chief Geologist with GBS Gold, who many will know has since filed for bankruptcy. Peter has extensive gold exploration experience in the Northern Territory and specifically has considerable experience in the Pine Creek Geosyncline in the area of our Mt. Todd project, and we are very pleased to have Peter join us and look forward to his contributions as we continue to explore the Mt. Todd area and seek to increase the resource base there.

I believe that's all I have. I will turn it back over to you, Mike.

Just to add a little bit to what Fred said about Mt. Todd, I think it's pretty clear to us now that the preliminary (technical difficulty) so a large project that is in the first preliminary economic assessment we did, we were looking at a production rate of somewhere around about 260,000 ounces a year of gold. And an in pit mineable resource I think that it's about a similar size production rate with a larger mineable resource in this current preliminary economic assessment.

And also, we believe that we will address many of the concerns (technical difficulty) with the development of the pit. So [saying] concerning the hardness of the ore, concerning the metallurgical recovery and most importantly concerning the operating costs. So it's a pretty exciting development for us, Mt. Todd, and we hope that in this quarter we will have some fairly significant announcements about the project.

So if there is -- I've got (technical difficulty) the activities of the Company, (technical difficulty) for questions.

Are you ready for questions?

Yes, I am. Thank you.

(Operator Instructions)

Well, Michelle, it appears that there are no questions this morning.

There are no questions at this time.

In that case, we will thank everybody for joining us on the conference and we are looking forward to an exciting second quarter. Thank you, everybody, for joining us.

Ladies and gentlemen, this does conclude the conference call for today. You may now disconnect your line and have a great day.