Vista Gold Corp (VGZ) 2010 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Vista Gold Corporation's second-quarter 2010 financial results and project activity 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. (Operator Instructions). As a reminder, this call is being recorded today, Thursday, August 12, 2010.

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

Thank you, Andrew. Good afternoon, everyone, and welcome to our second-quarter conference call. I have with me Greg Marlier, our CFO, and Fred Earnest, our President and Chief Operating Officer. Greg will give us a presentation on the financial results, followed by an update on our activities by Fred Earnest. And following that, we'll have a question period where we'll all participate.

Greg, would you like to present the financial results, please?

Yes, thanks, Mike. Good afternoon, everyone. Before I review the second-quarter financial results, I'd like to review just some key numbers for the period ending June 30.

Our outstanding shares are 46.6 million shares, fully diluted, 49.6 million, and if the noteholders would convert, it would be a dilution of 54.4 million shares. Our market cap as of 6/30 was $80 million. All these numbers that I will be discussing are in US dollars. As of yesterday, the 52-week high and low was $1.30 low to $3.38 high.

I would now like to briefly discuss the second-quarter and year-to-date financial results for the period ending June 30, 2010. These dollar amounts, once again, are stated in US dollars.

Our consolidated net loss for the three-month period ended June 30, 2010 was $4.2 million or $0.09 per share compared to consolidated net earnings of $3.9 million or $0.11 per share for the same period in 2009. Our consolidated net loss for the six-month period ended June 30, 2010 was $5.9 million or $0.13 per share compared to consolidated net earnings of $2 million or $0.06 per share for the same period in 2009.

For the quarter and year-to-date variances from 2009, the variance was roughly the same, approximately $8 million. This variance was primarily due to the gain in 2009 of the sale of Allied shares, which was in excess of $6 million, and a transaction in the second quarter of 2010 to repurchase $5.7 million of convertible debt, which resulted in a non-cash loss of $2 million.

This $2 million loss was based on the accounting treatment as outlined in the Canadian Emerging Issues Committee abstract number 96, which discussed the early repurchase of convertible notes. Since the repurchase of the notes involved the use of common shares being issued to the noteholder, this resulted in additional consideration to the noteholder, thus resulting in the recognition by Vista of a $2 million loss. Although management was not in agreement with this accounting standard as stated, this non-cash loss, in our opinion, and which is shared by our Board and Audit Committee, does not represent an economic loss to our shareholders.

Getting back -- now discussing some of the other financial position, liquidity, and capital resources, our net cash used in the operating activities was $2.7 million for the three-month period ending June 30, 2010 compared to $3 million for the same period in 2009. The decrease of $300,000 is mostly the result of a decrease of $300,000, the amount of interest paid to the notes due to the repurchase of the notes.

Our net cash used in investing activities was $3.5 million for the three-month period ended June 30, 2010 as compared to net cash provided by investing activities of $8.4 million for the same period in 2009. The increase in cash used by investing activities of $11.9 million was due to the following -- a decrease in the proceeds from the sales of Allied securities of $9 million, which we sold in 2009; also an increase in cash used for additions to mineral properties of $2.7 million during the 2010 period, which was predominately a drilling program at the Mt. Todd gold project. And lastly, a decrease in the proceeds received upon the disposal of a Colorado mineral property of $200,000 in 2009.

Our net cash used in financing activities was $2.2 million for the three-month period ended June 30, 2010. This was a result of the cash consideration paid for the repurchase of $5.7 million in principal amount of notes on May 20, 2010. At June 30, 2010, our total assets were $88.7 million compared to [$92.6 million] at the end of the year, representing a decrease of $3.9 million.

At June 30, 2010, we had a negative working capital of $3.7 million as compared with a positive working capital of $29.4 million at December 31, 2009, representing a decrease of $33 million. This decrease relates primarily to a reclassification of the notes to a short-term debt obligation from a long-term obligation of $21.2 million as of June 30, 2010. Also contributing to the decrease is a decrease in cash balances of $11.7 million from the end of the year.

On March 4, 2011, the $23 million principal balance of the notes will come due. We are currently examining potential alternatives for raising this additional capital, which could include public offerings, other equity financing, or the project financing if and when the permit is obtained for the Paredones Amarillos gold project. We may also consider potential renegotiation of the terms of the original notes.

Mike, that's all I have to say right now on the financials. I'm going to pass it over to Fred Earnest, who is our President and Chief Operating Officer.

Thanks, Greg. Good afternoon, everybody. I would just add one comment to Greg's report, and that is that I'd remind you that the convertible debt is secured by the assets which were purchased with a portion of those funds, which we believe is the -- well, not we believe, but -- which is the milling equipment, which was purchased for the Paredones project. We believe that the current value of those assets is approximately $16 million. So I'd just append that to Greg's report.

Moving on with an update on two of our core projects or core assets, that being the Paredones Amarillos project in Baha, California, and also the Mt. Todd project in the Northern Territory of Australia.

At the Paredones Amarillos project, we are preparing for the presentation of the new change of land use permit application. This preparation includes work that is being completed by our political consultants, which is showing very favorable results. One indication of that is that we now have regular contact with the local officials at SEMARNAT and CONANP, two of the agencies that will be involved in the approval of that permit.

We have an expanded community outreach program in progress and have several important initiatives planned for the coming months. We have succeeded in gaining the involvement of three of the local academic institutions in the preparation of studies that will be incorporated into the change of land use permit application. This is important because the academic community has an important voice in the approval process of the change of land use permit.

We are working with the Agrarian Reform Agency and other agencies to achieve a favorable resolution or a validation of the Temporary Occupation permits. Also, we are working with our environmental counsel in the preparation of the change of land use permit application documents.

All of this is leading to the presentation of a new change of land use permit application in early October. We believe that that will be submitted under much more favorable conditions than the last permit application. As such, we, right now, contemplate or expect that we would receive the change of land use permit some time after the first of the year in 2011.

Moving to Mt. Todd, our consultants are, at this time, finalizing their review of the cash flow models for the preliminary feasibility study. There will be two cases. One is a base case of a 6.8 million tons per year, which will be reported at a base price of $950 per ounce, which is very close to the three-year trailing average gold price. We will also be including a sensitivity case and a much larger throughput of 10.5 million tons per year at a higher gold price of $1200 per ounce. We expect to announce the results of the preliminary feasibility study next week.

Additionally, we have notified the Northern Territory government of our intent to extend the agreement for the Mt. Todd project for another five years. That agreement, the existing agreement, is set up to expire the end of this year. We have no reason to expect that that agreement will not be extended. We are in the process of obtaining the permits for a drilling program to be able to drill test the MSTS-4 target, which was announced in our press release on the 29th of June.

Also, I would clarify or add a further comment to one other item. Those of you who were part of our last quarterly conference update call, you'll recall that there were a couple of questions in regards to what was at the time being called the supertax levied against mining operations or mining companies in Australia. That issue has since been resolved and gold producers will not be affected by that new tax. So there's no impact of that tax to the Mt. Todd project or its proposed financials.

I believe that provides a summary of where we're at on these two core projects. With that, I will turn it back to Mike for any closing comments and we'll begin questions and answers.

Yes, Fred, I really -- I don't have any closing comments. We're all looking forward to getting the Mt. Todd results out. I think this is going to be a substantial project and it should result in a substantial increase in our reserves. And as Fred said, we should have it available sometime next week.

With that, we like to open the conference to questions.

(Operator Instructions). Adrian Day, Adrian Day Asset Management.

Two questions, if I may. First of all, I caught in Greg's presentation the working capital, negative working capital. I missed it if he said what the actual cash balance right now is.

It's $16.7 million.

Okay. Thank you. Yes, you told me more or less everything else. No, I'm sorry.

I'm just wondering, a lot of your properties, not only Mt. Todd, but several of the properties you have are fairly sensitive to higher gold prices. I'm just wondering what the current global resource estimate is for the entire Company?

Adrian, can I -- I'll start and if I need some help from Fred, he can help me.

Our current estimate is -- global resource estimate is 17.4 million ounces of measured indicated and inferred resources. And in particular, I draw people's attention to our Yellow Pine project in Idaho, which is a substantial resource, I think, close to 3 million ounces of total resources, with, I think, [2.1 million] in the measured and indicated category.

This project -- the last time we looked at it, which was three or four years ago, it showed fairly attractive economics as a result of a preliminary economic assessment that we carried out at that time, and a $600 gold price. We think this project now would have very much improved economics. And as we haven't, I believe, made a written release of this, but we've certainly made no secret of it, that we have been looking for avenues to consolidate our property with another property in the area, which has a -- not as large a defined resource, but has an excellent exploration potential.

So we are moving forward on some of the other properties; one isn't necessarily, unfortunately, resulting in a lot of news. Also, I'd bring everybody's attention to the fact that we do own a royalty on a project in Bolivia, the Amayapampa project. This project has been advanced by the company that now owns it, Republic Gold. It's our understanding reviewing their information that they are very close to announcing a bankable feasibility study and they have obtained all of the major permits necessary to move this project forward.

It's a fairly substantial royalty. It involves some payments, non-related -- non-production payments of $3 million, which commenced after the operation commences production, followed by a 3.5% NSR. The project, I believe, has something like 800,000 or 900,000 ounces of resource on it. So, it -- and our royalty covers about -- it covers the first 720,000 ounces mined. So this is a fairly substantial value-added item at these higher gold prices.

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

Well, if there are no further questions, we will move to close this --

Pardon the interruption, we do have a question, again from Adrian Day with Adrian Day Asset Management. Please go ahead.

I'm sorry to come in again, but I was just wondering -- maybe you don't want to talk about it, I don't know -- but on Mt. Todd, I realize you haven't put the pre-feasibility out yet, but are there Australian companies -- or other companies, for that matter -- are there any companies that you think are looking at this property as a possible acquisition?

Adrian, we have been contacted by a couple of companies, and we've said to them, let's wait until we've got the feasibility study results out. I mean, I think that -- we believe this project has substantial potential reserves. Our base case will have about 2 million ounces of reserves, but the sensitivity case that Fred has referred to would have substantially more than that.

And in addition, the Mt. Todd property as a whole has substantial exploration upside. So we believe that the magnitude of the project is probably going to attract some major companies. And, indeed, we have had one large company express an interest in the project.

Well, good. Good. Thank you.

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

Yes. As I was saying, if there are no further questions, we will close the conference shortly. But it is our intention that after we release the Mt. Todd information, that we will hold another conference call, because there will be a lot of information released, and we anticipate that there may be some questions resulting from that.

So if there are no more questions, we'll move to close the conference -- unless Fred or Greg has anything to add.

No.

No, Mike. I appreciate everybody who's taken the time to dial in and listen to the update, and we'll look forward to the update after we publish the Mt. Todd preliminary feasibility study results. Thanks, everybody.

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