Vista Gold Corp (VGZ) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Vista Gold's year-end financial results conference call. At this time all participants are in a listen-only mode. Following the discussion we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded. Today is Monday, March 19, 2012.

It is now my pleasure to introduce your host, Mr. Fred Earnest, President and CEO. Please go ahead, Mr. Earnest.

Thank you, Jennifer. Good morning, everybody. Thank you for joining us on our conference call to discuss our results for the year ended December 31, 2011. With me on the call today is Terri Eggert, our Interim Chief Financial Officer. Terri will provide a summary of our operating results for 2011, and then I will give you a brief update on our project activities. We will then open it up for questions. Terri?

Thank you, Fred, and to all of you participating on our conference call today. Our balance sheet at 12/31/2011 continued to benefit from our investment in Midas, which we recorded at a discounted fair value estimated at $119.9 million, which is an increase of $9.6 million from its fair value on September 30, 2011. This increase was offset by the associated net deferred tax liability of approximately $35.5 million relative to the total unrealized gain of $115.2 million we recognized during 2011 on our investment in Midas.

Our net deferred tax liability was computed using a combined effective tax rate of 38.87%. Our cash and cash equivalents, which totaled $17.9 million at year-end, were primarily impacted by the repayment of $23 million in convertible notes a year ago in March; the approximate $29 million we raised in April in our public offering of 9 million shares of our common stock; the $3.6 million we invested in Midas; and the approximate $25 million of cash used in operating activities, of which about $21.8 million was incurred on exploration, property evaluation, and holding costs on our core projects.

Turning to our income statement, we reported net income of approximately $51.5 million or $0.75 per basic share, which is $0.74 per share on a fully diluted basis, for the year ended December 31, 2011. This is compared to a net loss of $20 million or $0.42 per basic and fully diluted share for the same period in 2010.

Results for 2011 benefited from the unrealized gain of approximately $77.8 million that was recognized upon the completion of the combination of Vista and Midas Gold Inc.'s assets in the Yellow Pine-Stibnite District in Idaho and the increase in the estimated fair value of our investment in Midas of $37.3 million. These increases in our net income were partially offset by the $35.5 million increase in deferred tax expense and the increase in exploration, property evaluation, and holding costs of $8.3 million which were incurred for the feasibility study being undertaken at the Mt. Todd gold project.

Fred will now give you an update of our operating and project activities.

Since the first of the year we have been engaged in many activities built to or designed to provide an increased value for the shareholders of Vista Gold. To quickly run through some of the announcements, on February 7 of this year we announced that we had entered into an earn-in right agreement with Invecture Group with respect to our Concordia gold project in Baja California Sur Mexico. Under the terms of the earn-in right agreement Invecture made a nonrefundable payment of $2 million in exchange for the right to earn a 60% interest, subject to adjustment, in our Mexican holding company called Desarrollos Zapal. This is the company that owns and controls the Concordia gold project.

Invecture has the opportunity to earn this interest in the project by funding and managing the activities of the subsidiary through the process of obtaining the change-of-force land use permit and the environmental permit for the project. Upon exercise of the right they will pay us $20 million.

In addition we granted them the option to purchase the mill equipment which we purchased for this project. And they have 12 months from the date of the agreement to notify us of their intent to exercise that option.

On February 27 we announced more results of the drilling program that is in progress at our Guadalupe de los Reyes gold and silver project in Sinaloa, Mexico. This program is ongoing and we expect that we will be drilling there through the remainder of this year.

The initial program is designed to accomplish three things. First of all, to obtain and confirm information -- or to obtain information and confirm the results of previous drilling, thereby allowing us to go forward with the completion of a Preliminary Economic Assessment.

The second objective is to obtain core for metallurgical testing, which will be completed in support of the same study. The third objective was to test our hypothesis that there is the potential for high-grade gold and bonanza-grade silver concentrations in the low-sulfidation epithermal vein underlying the stockwork which is the host for our currently reported mineral resource.

You have seen some results from that, and I believe that they are encouraging and tend to confirm our hypothesis that we have the potential for something more significant. I would caution everybody and remind you that these are very preliminary results that are meant to test the hypothesis, and that in order to get to the point where we are at some point able to report a resource based on an underground mineable high-grade vein system will require considerable drilling and time.

We will not begin drill-testing the deeper part of the deposit until the latter part of this year, after we have finished the drilling that is first focused on allowing us to advance beyond Preliminary Economic Assessment and to complete a preliminary feasibility study some time in 2013.

On March 12 we announced the initial results from our resource conversion drilling program which is in progress at the Mt. Todd gold project. I would encourage you, if you have not taken the time to visit our website, to do so to look at the drill results. There you will see that our drilling has been targeted or oriented to target the area of the deposit which is both within and just without the boundaries of the feasibility study pit.

The idea has been to concentrate on drilling resources that are presently classified as inferred mineral resources, with the intent of providing enough additional information that we will be able to successfully convert these inferred resources to measured and indicated. While we will not know the results and the final benefit of this drilling program until a new resource estimate has been completed sometime later in the first half, I think that you will see from the cross-sections that have been provided and the assay results that are included that we are very pleased with the results of the drilling program thus far.

I think that many of you are interested in knowing where we stand with regards to the feasibility study for the Mt. Todd gold project. Many of the -- or I perhaps should say nearly all of the individual contractor portions of the feasibility study have been completed. We had a team in Australia last week to review process engineering costs, both capital and operating costs; and we are in the process of reviewing those costs and the results of the work done by that contractor at the present time.

We are still working toward completing the feasibility study in the most expeditious manner. We had originally indicated that we would have this study completed and we would announce results by the end of this quarter. I believe at this point in time that that may be just a little bit optimistic; and we will provide guidance to the market in the coming weeks if we are not able to meet that objective.

To wrap things up, while we are pleased with the year-end results we remain focused on our efforts to communicate with investors and with analysts the quality and potential value of our gold assets. In particular at Mt. Todd, where today we have over 4 million ounces of proven and probable reserves that were calculated as part of a preliminary feasibility study reported over a year ago at gold prices just over $1,000 per ounce. On Friday, gold closed at $1,657.

And we are working to complete the feasibility study with expectations of improved project economics and reserves. We clearly have an opportunity to significantly improve our valuation, and that is one of the focuses of our management team.

We recognize that we do not -- our share price does not reflect the value that we see in the assets that we hold in the Company. We are disappointed by that at the present time, but we see a path forward to change that in the coming six to eight months as we work through the process of completing the feasibility study at Mt. Todd, completing a new resource estimate for Mt. Todd, and undertaking an updated feasibility study for Mt. Todd which will incorporate the results of the new resource estimate.

It will incorporate the results of a redesign of the process facility to evaluate a larger process facility, going from the presently contemplated 30,000 tonnes per day to a larger 40,000 or 45,000 tonne per day operation. Also, metallurgical testing is in progress right now. We in the last four months have come to the conclusion that the heap leach pad which is currently on-site has been viewed as an environmental liability in all studies previous to this. It is now the host of a significant amount of gold and should be treated as an asset.

We are undertaking metallurgical studies to be able to determine the value of the resource and how we might be able to recover it and incorporate it into part of an operation going forward. And this will be the third change that will be reported in the updated feasibility study.

At this time I would like to open it up for questions from those who are participating in the call.

(Operator Instructions) Joseph Wright, Global Hunter Securities.

Hi, guys. Congratulations on your drill results last week. I had some quick questions for you guys on your supplemental EIS permitting and remediation bonding for Mt. Todd. Where are those at right now?

Yes, Joseph, good morning. Thanks for the congratulations on the drill results. The Environmental Impact Study is in its final stages of data preparation. Last November the agencies informed us that we needed to complete a wet season flora and fauna baseline study. That study started the first part of February, and we are expecting it to be completed in the next couple of weeks.

It will then take us another six weeks or so to finalize the EIS permit application and submit it to the agencies for their review and consideration. We expect that we will be making an announcement mid-May to inform the market that the EIS has been filed and that the approval process has been started.

With regards to the bonding calculations, we worked with the Northern Territory Government Department of Resources as part of the feasibility study work to go through the bonding calculation exercise. And we have, based on their detailed and exhaustive spreadsheet analysis that is used to calculate the bond, come up with an estimation of what the bond requirements will be for the project. Those will be included in the feasibility study results when they are announced.

I would just caution everybody and remind everybody that this is a feasibility study level estimate of what the bonding requirements will be. In fact the way this works in Australia is that this is a negotiated number and that, after the calculations are completed as part of the Environmental Impact Study that the parties sit down to come to agreement on the magnitude and timing of the payments that would be required under the bonding conditions.

We obviously have not gone through that yet. So we are doing our very best to estimate the timing and then the quantity of the bond that would be required as part of the feasibility study.

All right, thank you.

(Operator Instructions)

Are there any other questions from those participating in the call this morning?

Andy Schopick, private investor.

Thank you very much. Terri, a few financial questions if I may. It appears that you had about 69 million shares outstanding in terms of the calculation of the net income for 2011. What do you anticipate the basic and/or diluted share count to look like in 2012?

Well, that is very difficult to project. On Friday we filed a preliminary short form base shelf prospectus in Canada and a Form S-3 in the United States.

That was going to be my next question.

We are very excited about our prospects at Mt. Todd, and we are eager to raise some money to continue to advance that project. Exactly how we will do that, we will determine through various sensitivity analysis and only then will we know how many shares we likely will have outstanding at the end of 2012.

Andy, perhaps I could just interject a little bit. I would remind you that we have 17 million warrants outstanding, approximately, and that our objective is to get those to convert. And that is our first preference for raising money and so that's (multiple speakers)

They are up around $5, aren't they, in the exercise price?

$4.

$4?

Yes. We are working to realize a share price that would be attractive to shareholders to begin to exercise those warrants. As Terri indicated there will be financing requirements or funding requirements later in the year that will require some sort of fundraising prior to the completion or the contemplation of project financing for Mt. Todd.

If we are successful in converting the warrants that will eliminate the need to go to the market and raise money. If we are not successful in that, then it is fair to say that there will be a need to raise money sometime in the second or third quarter of this year.

Terri, would it be fair to assume that you are unlikely to do another convertible debt or note offering given that you retired a $25 million convertible note a year ago? Would the forms of financing you might pursue basically be more in line with kind of straight equity?

Yes, we don't anticipate any convertible debt.

Good. Okay, thank you very much.

Thank you, Andy.

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

I think we have a question from Paolo Lostritto, it looks like.

Yes; he just came up. Paolo Lostritto, National Bank Financial.

Hey, Fred, how are you doing?

Very good, Paolo.

You indicated that you are optimistic or that you are trying to get the feasibility out by the end of the quarter, but it may not happen that way. But we are only talking like a four- to six-week delay; we are not talking about anything more material than that, right?

At this point in time that is absolutely right, Paolo. Before we release the results we want to make sure the numbers are right.

No, I understand that.

And that -- it is really a matter of we had a team of people in Perth last week working with the process engineers. They have come back with numbers; we need to review and check those. It may be necessary to sit down with the people in Perth again.

We are very close, but I just wanted to provide a little bit of caution that we might not release the results before the end of the quarter. But if we don't, I think that your four- to six-week window is reasonable at this point in time.

Okay, thank you.

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

Well, very good. It appears that there are no further questions. I would just like to take this opportunity to thank everybody for taking the time to join us on the conference call this morning.

We as the management of Vista Gold remain attentive to matters of running the business, which is focused on creating value for our shareholders. And as those of you who know us and feel the need to reach out and ask further questions, I just want you to know that we are here and we will be happy to take your phone calls in our corporate offices in Littleton, Colorado. So thanks, everybody, for joining the call this morning.

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