Vista Gold Corp (VGZ) 2009 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Vista Gold second 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). This conference call is being recorded. Today is Tuesday August 11th, 2009, and it is now my pleasure to hand the call over to Mike Richings, CEO. Please go ahead, sir.

Thank you. Good afternoon, everyone. Welcome to our conference call, I have on the line with me Fred Earnest, who is President and COO and Greg Marlier, who is our CFO. I will tell you that all three of us are at different locations, two of us on cell phones, so if there is any loss of transmission the call will be continued by air while we continue to rejoin the conference. Greg will present the financial results for the second quarter, followed by Fred who will update you on the Company's activities. (technical difficulties) last quarter, and we will have questions and answers after that. So, Greg if you would like to go ahead and summarize the financial results I would appreciate it.

Thanks Mike. Good afternoon to everyone. In Vista's August 7th press release, we discussed the financial results for the fiscal second quarter and year to date through June 30th, 2009. I would now like to discuss the key financial information for the three and six months ending as of that period. Everything that I will discuss from here on out as far as dollar wise will be in US dollars.

Our consolidated net earnings for the three month period ended June 30th, 2009 was $3.9 million, or $0.11 per share compared to a consolidated net loss of $2 million or $0.06 per share for the same period in 2008. Our consolidated net earnings for the six-month period ended June 30th, 2009, was $2 million, or $0.06 per share compared to a consolidated net loss of $4.2 million or $0.12 per share for the same period in 2008. For both the three and six month periods ended June 30th, 2009 the increases in consolidated net earnings of $5.9 million and $6.2 million, from the respective prior periods are primarily due to a gain on disposal of marketable securities of $6.8 million.

The gain was a result of the sale of our Allied Nevada gold shares which we retained in connection with the transaction that resulted in the formation of Allied and the transfer of Vista's Nevada properties to Allied. As you might recall this transaction resulted in an exchange where the corporation shareholders received one new Vista common share and 0.794 Allied common share for each old Vista share held. Our exploration, property evaluation and holding costs were $268,000 for the three month period ended June 30th, 2009, and $601,000 for the 6 month period ended June 30th 2009 as compared with $252,000 and $497,000 for the same periods in 2008. For both the 3 month and 6 month periods ended June 30th, 2009, there were no significant variances as we continue to move our projects toward development decisions.

Corporate administration and investor relation costs decreased to $2 million for the six month period ended June 30th, 2009, compared with $2.5 million for the same period in 2008. The decrease of a $0.5 million from the respective prior period is primarily due to stock based compensation expense decreased by $364,000, security and compliance fees decreased by $120,000, audit tax and Sarbanes Oxley compliance fees decreased by $53,000, and legal cost decreased by approximately $75,000 for the six month period ended June 30th, 2009.

Net cash used in operating activities was $4.2 million for the six month period ended June 30th, 2009, compared to $3.3 million for the same period in 2008. Similar to the three month period ended June 30th the increase of $946,000, is mostly the result of the increase in interest paid, of $658,000 on the convertible debt, increasing cash on accounts payable, accrued liabilities and other of $349,000, which has been offset by an increase in cash provided by accounts receivable of $130,000. There was no cash provided by or used in financing activities for the six month period ended June 30th, 2009. Net cash provided by financing activities was $31.4 million, for the six month period ended June 30th, 2008. During the six month period ended June 30th, 2008, 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 was $28.4 million.

Net cash provided by investing activities increased to $8.4 million for the 3 month period ended June 30th, 2009, as compared to net cash used in investing activities of $3.2 million for the same period in 2008. The increase in cash provided by investment activities of $11.6 million is due to the following. An increase in the proceeds from the sale of marketable securities of $9 million. On April 3rd, we sold all 1,529,848 common shares of Allied Nevada Gold Corp, which we held for $9 million. An increase in the proceeds received upon the disposal of mineral properties in Colorado of $188,000. A decrease in cash used for additions to mineral properties of $1.8 million. During the 2008 period we undertook a drilling program at the Mount Todd project gold mine and we are in the process of completing a feasibility study for the Paredones Amarillos gold project. These projects were completed during 2008.

At June 30th, 2009, our total assets were $74.6 million compared to $75.8 million at December 31st, 2008, representing a decrease of $1.2 million. At June 30th, 2009, we had working capital of $17.1 million, compared to $21.2 million at December 31st, 2008, representing a decrease of $4.1 million. This decrease relates primarily to a reduction in marketable securities balances due to the sale of the Allied Nevada Gold Corp. shares in April 2009, which is offset by an increase in our cash balance from year end.

The principal component of working capital of both June 30th, 2009 and December 31st 2008 is cash and cash equivalents of $16.3 million, and $13.3 million respectively. On April 17th, 2009, we announced that we filed a preliminary short-term base shelf prospectus in Canada with the securities regulatory authorities in each province and territory other than Quebec, and a corresponding shelf registration statement in the United States with the Securities and Exchange Commission. On April 27th, 2009, we announced that we filed a final short form base shelf perspective in each province and territory in Canada other than Quebec, and an amended form S3 with the SEC. The Form S3 was declared affective on April 30th, 2009.

With that I will pass it back to Mike Richings. I will take questions and answers at the end.

Greg, thank you. Fred would you like to update us on the operations?

Yes. Thanks Mike. Good morning everyone. I'm going to review progress at the Paredones Amarillos project and also at our Mount Todd project here in Australia.

At the Paredones Amarillos project, on July 31st, we received the final authorization to proceed with the drilling program that we have been working on for sometime. We are currently mobilizing the drilling contractor, their advance team will been sight this week, and we expect to have the drill rigs on site on August 18th. We think this is a significant advance as it demonstrates that we are making progress with authorities on permitting issues at Mount Todd. Both Mike Richings and I were in Mexico city a week and a half ago and met with various government officials and feel that there has -- we have reached an agreement with several different government agencies for a road map forward on the temporary occupation permit. It is hard to say yet what will be the exact timing for the issuance of that permit but I believe that it's fair to say that we are making significant progress on advancing that project or that permit acquisition.

As we discussed before, the change of land use permit application is conditional on receiving the temporary occupation permit. We have the change of land use permit application ready to go, and as a precaution on our part have asked for another third party review of that application, make sure we have all of the necessary requirements satisfied to facilitate expedite the approval of that final permit, once we received the temporary occupation permit. As has been announced and discussed previously, we are working on a capital and operating cost update for the project. The feasibility study was announced last September, and much of the cost information was gathered when commodity prices were at their highest point, certainly energy costs were at a peak. We have seen some reductions; we have optimized part of the circuit and we hope shortly to be able to announce a revised economic evaluation for the Paredones project on a feasibility level.

At Mount Todd, in June of this year we completed a preliminary economic assessment and reported that we believe that the Mount Todd project now has the capability of supporting a mine with 4.5 million ounces mined over 15.2 years with average production of almost 300,000 ounces per year for the first three years, and life of mine production of 245,000 ounces on an average basis. Cash costs were estimated in this study to be $344 an ounce for the first three years, with life of mine production costs averaging $457 per ounce. Initial capital cost was estimated to be $323 million. The operating costs were estimated to be $9.48 per ton of material processed for the first three years, and $10.44 per ton processed on a life of mine basis.

Internal rate of return at a $750 gold price, which is approximately the 3 year trailing gold price or average gold price was 21.6% on a pretax basis. Using a gold price similar to today's price, at $950, the internal rate of return was estimated to be 37.7%. The net present value of the project at an 8% discount rate, at $750 was $233 million, and at today's gold price of $950 was $602 million. Preliminary assessment gave us a clear indication that we have advanced the project to the point it is now time to continue forward with the preliminary feasibility study.

That study has been initiated. Tetra Tech out of Golden, Colorado, will be the primary author of the study, they are undertaking the mining work, the reserves capital and operating cost estimates, tailings facility or tailings management design, environmental review and also the economic evaluation of Ausenco, which is a process engineering firm here in Australia, has been contracted to perform the process design and complete the capital and cost estimates for the process site. It's important to note that Ausenco is a company that has considerable experience in process engineering work and most importantly, to us, they're one of the Australian companies that has experience with high pressure grinding rules, which is the technology that we've selected as part of the grinding circuit and having further economic assessment, millerage testing that has been completed, indicates this technology will help us reduce our energy requirements from approximately 33-kilowatts per ton down to 18-kilowatts per ton, kilowatt hours. RDI in Arvada will continue to provide metallurgical consulting and test work assistance as we go forward with the preliminary feasibility study.

One other thing I would like to discuss this morning is that we have recently hired a new Senior Vice President of Project Development. His time is Tom [Deval], he will be joining us on September 10. Tom comes to us with considerable experience in project management and project development, he is a metallurgist by education and training and has for a considerable number of years been part of Newmont's project operations and project development team. He specifically has experience in Peru and Chile, Australia where he performed some of the early optimization work on the Boddington project, which is a project Newmont has here in Australia, that's using the same technology we plan to use, i.e. high pressure grinding rules, and he's also worked in Indonesia. We look forward to having Tom join our team and I think he will be a real asset as we move forward with the development of the Paredones Amarillos project and also the Mount Todd project.

I'll turn the time back to Mike and we will be happy to answer questions at the end of the conference call.

Ladies and gentlemen, I don't have much to say. I think Fred was justifiably cautious (inaudible), we are advancing the projects in the expectation that we should be in a position to commence construction on Paredones early in the first quarter of next year, and of course there is always some degree of uncertainty associated with the permitting. I think when those permits come into play the temporary occupation permit followed by the change of venues permit, I think the Company will receive a significant revaluation and maybe at that time the market will take a closer look at what's happening in Mount Todd which I think is a much more significant story for us the future. That's our presentation today. We would be pleased now (technical difficulty us or all of us to take questions. Thank you. Could we have questions, now, moderator?

(Operator Instructions). Our first question comes from Adrian Day of Adrian Day Asset Management. Please go ahead.

Can you walk us through a little bit on the uses of cash of your cash over the next 6, 9 months assuming that you don't raise new money for Paredones?

Adrian, assuming we don't raise money for Paredones, it's the same assumption; the other assumption that goes along with is that we won't be building Paredones and we probably will not be spending substantial amounts on engineering. On that basis, have a cash forecast which shows us managing our cash and ending up with cash reserves at least until 2011, and by the end of the first quarter 2011, is the time when we have to look closely at our cash needs because the convertible debt at that time is due. But there's no problems in maintaining adequate level of working capital during the next year and a half to 21 months.

Maybe I should rephrase my question. On the basis that you are going ahead with Paredones but you don't yet have the permit, how much will you be spending down there?

Fred or Greg, would you like to give some specifics on that?

What we are looking at through the end of the year on Paredones is approximately $1.6 million. That's from January through the 12 months. So that's six months actual plus six months estimate. We have to spend the remaining portion as close to about $900,000.

And the majority of that of course is spent on the drilling program that we are just about to initiate.

That's approximately $577,000 of it.

That's the drilling and the metallurgical testing that goes with it.

How much are you spending at Mount Todd then?

We are in a situation where we are continuing to the care and maintenance activities at the site. On the physical site itself, we are going to be incurring some slightly higher costs that were budgeted as we have just commissioned a line treatment plant for handling the water we normally pump here. The prefeasibility study is in progress. The approximate cost of that is $1 million to finish that work.

Okay.

Question maybe you are leading up to is if we were to accelerate activities at Mount Todd leading to a final feasibility to be complete sometime next year, that would almost certainly necessitate a separate financing.

Okay.

We would see that as very -- I mean the way we have seen our (inaudible) Company Allied Nevada create value by adding additional resources and to bring value to the Highcroft mine -- I think we would have the same kind of expectations feasibility study and additional resource drilling at the Mount Todd mine.

What would that be about $4 million or $5 million?

We have a range of estimates. Fred what's the -- what would you -- Adrian, we've burnt through a fairly substantial amount and or rather -- we reviewed a number of estimates that include fairly substantial amounts up to $12 million to $15 million range, Fred, would that be right?

Yes. But that also includes accelerating the exploration program around the (multiple speakers).

No, that's what I was going to continue with, Adrian, the point is we would be looking to bring the total resource picture at Mount Todd up to the 8 million to 10 million-ounce range. Plus also do some regional exploration work which we hope to bring more of that information so the market over the next few months we think -- we've done some additional reconnaissance work on the exploration leases we have, and there is really a lot of potential on 1,000 square kilometers of expiration leases we hold there at Mount Todd.

I forgot I was on a conference call. I thought it was a private conversation. I'm sorry.

I hope we answered your question.

You did, thank you.

There are no further questions at this time. Please continue.

If there are no further questions or Adrian, if there's nothing more that you would like us to address we will terminate the conference call. Thank everybody for their attendance. Okay. Josh, if you could terminate the conference that would be fine.

Thank you. Ladies and gentlemen, this now concludes your conference call for today. We thank you for your participation; you may now disconnect your lines and have a great rest of the day.