Vista Gold Corp (VGZ) 2021 Q4 法說會逐字稿

Good day, ladies and gentlemen. Welcome to Vista Gold's 2021 Financial Results and Corporate Update Conference Call. (Operator Instructions). As a reminder, this conference is being recorded. Today is Monday, February 28, 2022.

It's now my pleasure to introduce Pamela Solly, Vice President of Investor Relations. Please go ahead.

Thank you, Chris, and good day, everyone. Thank you for joining the Vista Gold 2021 Financial Results and Corporate Update Conference Call. I'm Pamela Solly, Vice President of Investor Relations. On the call today is Fred Earnest, President and Chief Executive Officer; and Doug Tobler, Chief Financial Officer.

During the course of this call, we will be making forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Vista to be materially different from results, performance or achievements expressed or implied by such statements. Please refer to our most recently filed Form 10-K for details of risks and other important factors that could cause actual results to differ materially from those in our forward-looking statements.

I will now turn the call over to Fred Earnest.

Thank you, Pam, and thank you, everyone, for joining us on the call today. Two of our most significant achievements during 2021 included the approval of the Mining Management Plan and the work to complete a feasibility study for Mt Todd, which culminated with the announcement of results earlier this month. We also received key authorizations related to aboriginal lands and land use, advance our exploration drilling program to strengthen our balance sheet with reported total cash of $13.1 million at the end of the year.

I'll discuss these topics in greater detail later in the call, but I will now turn the time over to Doug Tobler for a review of our financial results for the year ended December 31, 2021.

Thanks, Fred, and thanks for listening in today. I'd like to focus today's discussion on our cash position and our sources and uses of cash during 2021. Cash is the first major balance sheet strength that we considered, and we ended 2021 with cash on hand totaling $13.1 million. This included bank deposits and government treasuries.

In a minute, I'll discuss our cash flows, but it's worth noting a secondary measure of our balance sheet strength, which was our $12.2 million of working capital. By either standard, our balance sheet was in good shape at year-end, and we've already benefited in January of this year by receiving $2.5 million for the final payment related to the Awak Mas project in Indonesia.

Turning now to cash flows. We started 2021 with $8.2 million of cash. And again, this included bank deposits and government securities. So overall, we realized a net increase in cash of nearly $5 million during the year.

We saw inflows of $2.8 million for sales of noncore assets and $13.4 million through equity issuances. The noncore proceeds were mostly from receipt of the final payments for the Los Reyes project in Mexico, and they also included inflows related to Awak Mas. Equity issuances included the $12.3 million from our July offering, plus about $1 million earlier last year from our at-the-market program.

Now from an expenditure perspective, our net operating cash flows were $10.6 million, and that's a cash outflow.

Our recurring fixed costs, which include our corporate G&A and the ongoing site management at Mt Todd remained in line with prior fixed cost levels and were about $6.5 million of that $10.6 million. The balance of the expenditures related to programs to advance Mt Todd and position it as a highly attractive development project for prospective partners and investors. This included a few things: first, essentially dewatering the Batman pit; advancing the feasibility study; and demonstrating Mt Todd's upside potential through our drilling program. And of course, we've received approval of the Mt Todd Mining Management Plan, but costs for this work in 2021 were largely internal and were included in our fixed costs.

Now for each of the 2021 programs that I've mentioned, there's a demonstrated benefit to the project. To focus on just one, the feasibility study costs will be about $3 million when all the invoices are settled. Among the favorable outcomes of the study was a 1 million-ounce increase in our gold reserves, which now stand at 7 million ounces. So setting aside everything else the study does for us, that works out just $3 an ounce to generate these incremental reserves.

To close, please look at our Form 10-K for additional details about our 2021 results. It's on our website. It's at the SEC's EDGAR website and also through SEDAR. The financial statements and MD&A include details of our 2021 results of operations and also include a comparative analysis to 2020, and you can see a view of our outlook for 2022.

That concludes the financial review. I'll turn the call back over to Fred. Thank you.

Thank you, Doug. I'll begin with a review of our 2021 achievements and then provide an outlook for the remainder of the year.

First of all, financial. As part of our 2021 objectives, we focused on strengthening our balance sheet through the successful monetization of noncore assets, a disciplined approach to managing our costs and the completion of the July capital raise. As Doug stated earlier, we ended the year with $13.1 million of cash and continue to have no debt. We believe our strong balance sheet will be very important as we evaluate a broad range of development alternatives with the goal of completing a transaction that will maximize shareholder value.

Moving on to opportunities to advance and bring greater value to Mt Todd. We remain focused on advancing the Mt Todd Gold Project and seeing a greater portion of the project value reflected in our share price and market cap. With this in mind, we have achieved several significant milestones in 2021. In June of 2021, we received the approval of the Mining Management Plan, which is similar to a mine operating permit in North America. This approval was a tremendous de-risking achievement for Vista and Mt Todd. And with the Mining Management Plan in hand, Vista now has all major operating and environmental permits required to proceed with the construction and development of Mt Todd.

Also in June, we received authorization of our Aboriginal Areas Protection Authority Certificate and our surface water extraction license. The Aboriginal Areas Protection Authority Certificate is required as a legal means to identify and protect sacred sites from damage by setting out the conditions for use or carrying out works on an area of land. It is a legal document issued under the Northern Territory Aboriginal Sacred Sites Act.

I am pleased to report that the Aboriginal Areas Protection Authority Certificate on the exploration licenses complements the existing certificate for the areas within the mining licenses and affirms our long-standing practice of working closely with the Jawoyn people to ensure constant communication and coordination in identifying and protecting sacred and culturally significant sites.

Moving on to surface -- talking about the surface water extraction license in a little bit more detail. The Mt Todd surface water extraction license that was also approved in June provides Vista with the right to harvest 3.4 gigaliters of surface runoff each year to facilitate processing and mining activities associated with Mt Todd. This is expected to adequately supply all of the project's water requirements as presently designed.

Also in 2021, we continued the exploration drilling that was started in 2020. In 2021, a total of 13 additional exploration holes for a total of 5,327 meters were drilled on the mining licenses.

We are continuing to demonstrate district scale mineralization and structural continuity between the Batman and Quigleys deposits, where future infill drilling may be undertaken to define additional gold resources. Our exploration program is expected to continue through the first quarter of 2022 with results to be reported through the second quarter.

Our water management has been a top priority for us at Mt Todd. And as part of these efforts, we made great progress in essentially dewatering the Batman pit prior to the end of 2021. At the end of December, the pit contained approximately 0.5 gigaliter of water, down from the high of nearly 11.5 gigaliters of water 5 years ago. The present volume of water in the pit will not present any major issues when resuming operations in the Batman pit and represents 14 to 16 days of pumping capacity with the presently installed infrastructure.

As I mentioned in my introductory comments this month, we announced the results of the Mt Todd 2022 feasibility study. The 2022 feasibility study highlights a 19% increase in gold reserves from 5.85 million ounces as reported in our amended 2019 prefeasibility study to 7 million ounces today, supporting an operation with average annual production of 479,000 ounces of gold per year during the first 7 years of commercial operations and a low operating cost profile that delivers significant cash flows.

The study reflects the inflationary pressures being faced currently by all operators and developers in the mining industry. While we believe that this inflationary trend is transitory, we believe the resilience of Mt Todd is demonstrated by the project economics reflected in the 2022 feasibility study.

Mt Todd's economic returns benefit from the increase in gold reserve estimate, favorable results of the power plant trade-off study and slightly lower energy costs in the Northern Territory of Australia. The increase in gold reserves resulted from increasing the gold price used in the reserve estimate from $1,000 to a very conservative $1,125, and modestly changing the cutoff grade from 0.4 grams of gold per tonne to 0.35 grams of gold per tonne.

Our decision to use a third-party power provider resulted in an important positive impact to our capital costs and insulates the project from certain construction and operating risk while maintaining what we believe to be attractive operating costs. While our operating costs have increased as a result of higher labor, reagent, grinding media and over-the-fence power costs, our core energy costs yield some offsetting savings.

With economics based on fourth quarter 2021 costs and equipment quotes, Mt Todd is projected to deliver compelling cash flows over a 16-year mine life. The after-tax NPV at a 5% discount rate of just shy of $1 billion and an IRR of 20.6% at the official price of the study being $1,600 per ounce gold and a $0.71 foreign exchange rate. At today's gold price of -- or gold price less than today's gold price of $1,800, then the same foreign exchange rate, the after-tax NPV is estimated to be $1.5 billion with an IRR of 26.7%. After-tax cash flow at an $1,800 gold price is estimated to total $2.1 billion for the first 7 years of commercial operations.

For more study details, please refer to our February 9 news release and feasibility study webcast or download a copy of either the S-K 1300 or NI, National Instrument 43-101, compliant report. All of which can be found on our website at www.vistagold.com.

Looking ahead, we believe the results of the 2022 feasibility study will appeal to potential partners, investors and lenders and allow the company to evaluate a broad range of development alternatives as we continue to focus on maximizing shareholder value. We believe the size, location, permitting status and recently completed feasibility study position Mt Todd as one of the most attractive development-ready gold projects in the world. In addition, with total cash of $13.1 million at year-end, our balance sheet is strong, and our prospects for unlocking shareholder value have never been greater.

Australia has recently lifted restrictions on international travel to and from the country for fully vaccinated individuals. As a result, Vista's senior management plan to resume travel to Australia beginning mid-March. With open borders, management believes due diligence activities will also be more easily undertaken by potential partners.

We continue to engage with potential partners and are evaluating a broad range of alternatives to identify strategic opportunities to advance the development of the project. We remain focused on completing the right transaction, one that achieves a structure that provides appropriate opportunity for value creation by recognizing the intrinsic value of Mt Todd and minimizing the potential for future dilution.

Our objective is to achieve a valuation from Mt Todd that is reflective of the gold production profile, long operating life, excellent gold recovery, the project's location in Australia's low-risk Northern Territory, favorable low operating costs, robust project economics as demonstrated by the recently completed feasibility study and the fact that we hold all major approvals and all major permits. We believe these factors, coupled with the excellent infrastructure, will present opportunities for us to evaluate a broad range of development partners, structures and alternatives as we continue to focus on maximizing shareholder value.

We continue to believe that Vista Gold represents an exceptional investment opportunity for the investor looking for value, growth potential, low geopolitical risk exposure and strong leverage to the gold price.

At today's gold price and foreign exchange rate of approximately $1,900.72 exchange rate, the Mt Todd project economics demonstrate an after-tax NPV at a 5% discount rate of approximately $1.6 billion and an IRR of almost 29%. Vista continues to advance and de-risk Mt Todd and is well positioned to evaluate a broad range of development alternatives as we continue to focus on maximizing shareholder value.

In conclusion, we find ourselves in a market with strong, although somewhat volatile gold prices. Recent hostile activities in Ukraine and higher inflation are creating greater uncertainty in the markets. We believe this supports a view for sustained strong gold prices in the coming 12 to 24 months.

The work we have completed over the last several years, along with the recently completed feasibility study, has positioned the Mt Todd gold project as the largest undeveloped build project in Australia. With 7 million ounces of proven and probable reserves, Vista controls the third largest reserve package in Australia.

Mt Todd is ideally located in the Northern Territory of Australia, an extremely mining-friendly jurisdiction. Mt Todd has favored with paved roads to the site and other existing infrastructure, including power lines, a natural gas pipeline, freshwater storage reservoir and tailings impoundment facility. Our ongoing technical programs and focus on designs that are capital efficient with low operating costs have created the foundation for the leverage to gold price and improved shareholder value.

We have earned the trust of the local stakeholders and believe that our social license is firmly in hand. We've worked hard to secure the authorization of all of the major permits. We believe Mt Todd is a superior asset located in a politically stable and mining-friendly jurisdiction and one of the most attractive development-stage gold projects not just in Australia, but in the world.

We believe the completion of the feasibility study and our ongoing drilling further demonstrate the significant upside potential of the project and strengthen our position as we evaluate a broad range of potential partners, structures and alternatives for the construction and development of Mt Todd. I reiterate our commitment to focus more intensely on maximizing shareholder value and realizing the intrinsic value of Mt Todd.

For a comprehensive assessment of the value accorded to Vista and the Mt Todd Gold Project, I refer you to our corporate presentation, which can be found on our website. Again, that is www.vistagold.com.

We believe that Vista Gold represents an exceptional investment opportunity for investors looking for value, growth potential, low geopolitical risk exposure and strong leverage to the gold price, and that current prices represent a tremendous opportunity to establish a position or increase one's holding in Vista Gold.

That concludes our prepared remarks. We will now respond to any questions from participants on this call.

(Operator Instructions) Your first question comes from the line of Heiko Ihle of H.C. Wainwright.

Your study, I mean, [$1,600] tonnes per day, NPV 5% of $1 billion and 20.6% IRR, obviously, that's using much lower metals prices. Just thinking out loud here. Clearly, it's pretty impressive. And I think you're just not really getting the full credit in the market quite yet. You hinted at some of your opportunities and benefits in the closing remarks here just a minute ago on this call. But prodding just a bit more, is there anything in particular that you think might currently be missed by the market or by the analyst community as a whole?

Heiko, thank you for the question. And certainly, we're very pleased with the economics as reported in the feasibility study. They demonstrate the significant leverage that the project enjoys relative to a rising gold price. I think that the market is still holding judgment on how the project will be financed.

And it's our belief that as we're able to execute on our strategy, and as I mentioned, we're considering a broad range of opportunities and alternatives with regards to potential partners and other types of structures. I believe that as we're able to announce that we have concluded a process and that we have reached the point of a transaction and are able to answer that question about how the project will be financed that there will -- that the doubt -- the concern will be alleviated and that will constitute a very significant catalyst for the creation of value for Vista shareholders.

I think that's a fair answer. And then just a little clarification there. And I know the second one is a couple of questions in one, so apologies in advance. Would you be so kind in breaking down what exactly is still included in your equipment package? I mean you wrote down the equipment a little bit. I mean what are you doing with it? It seems like it's still for sale. What do you think it's worth? I mean I assume it's for several dollars million. Clearly, given the recent geopolitical risks that span the globe and, again, you hinted the results earlier on the call and a gold price of over $1,900 as of close today, there's going to be meaningful value to this, right?

This -- the mill equipment that we own is -- has a nominal capacity to process crush and grind 10,000 tonnes per day. It's a complete mill package, primary gyratory crusher, SAG mill, 2 ball mills, gold recovery equipment. It's in good condition. It's -- most of it is stored indoors in Canada. The challenge, Heiko, and maybe Doug can comment here additionally in just a moment, is that selling used equipment, especially when you have a package deal like this is a very niche market. And it really comes down to finding a buyer with a project that specifically needs this size of equipment that they're targeting that kind of throughput.

And so it's looking at a project that's in the mid-sized project that has the characteristics that will match the parameters of the SAG mill and the ball mill. And as you indicated, the equipment continues to be for sale. It's just that it's been for sale for a long time, and there's no certainty as to when it might be sold. Doug, any other comments that you might add?

Yes. I was just going to say much of the same thing. You've got an asset that has a specific use in the right environment. And with the -- the write-down that we took was really based on accounting literature, it doesn't have anything to do with the prospective value of the equipment to the right buyer. So we're very active with the group that has it listed, and we continue to look at prospects as they come up. We continue to have -- the phones are ringing, I guess, would be the way to say it. But when you measure it from an accounting standpoint, it's simply a function of what can be audited, what can be demonstrated. And that's got really nothing to do with the underlying value that we think we can ultimately receive.

I should have the answer to this, but I don't have it in my model for some reason. What would you say I would pay if I bought this thing today?

If you were to buy the complete mill -- the mill package and that includes the gyratory crusher, the grinding mills or the SAG mill, the 2 ball mills the gold recovery equipment, there's a number of pumps, there's agitators for leach tanks, Heiko, I would guess that new prices, obviously, depending on source of manufacturer and where the project is located that might drive some of those decisions, you're probably looking at something in the range of $8 million to $12 million for all of that equipment on a new equipment basis.

(Operator Instructions) I am showing no further questions at this time. I would now like to turn the conference back to Fred. You may proceed.

Very well. Thank you, Chris. I would like to thank all of you who have joined the call today. I know there's a big unspoken question that everybody would like to ask. And unfortunately, we're not in a position to answer it. I know that everybody would like to know who we're going to do a deal with and when it's going to be announced. As a matter of practice, we do not disclose who we've signed confidentiality agreements with. But I think suffice it to say that we have executed confidentiality agreements. We have companies that are completing due diligence and sometimes that process can be lengthy. And depending on the requirements of the third party may involve tightened consuming activities such as additional drilling or metallurgical testing undertaken at their expense. But we expect that there will be announcements with regards to the work that's ongoing and the disclosure with regards to what we can disclose to the market.

Over the course of the coming months, we invite you to be alert, to be attentive. But when it comes to the point that a transaction is announced, I believe that there will be significant value created as it were overnight, and we would hate to see someone get left behind. If you require additional information and you'd like to know more about Mt Todd and would like to have a conversation, please reach out to Pamela Solly, our Vice President of Investor Relations. If need be, we will get -- she will get other people on the call.

We appreciate the interest that we've shown in our -- in -- by those of you who have participated in the call today. We look forward to being able to report additional news as we execute on our strategy. And I want to assure you that with the feasibility study completed that our focus has now turned to 100% to maximizing value for shareholders into the realization of the value that's more in line with the intrinsic value of the project.

It's an exciting time for us. I think it's an exciting time to be a Vista shareholder. I don't think there's been a time when we've been better positioned to create value. So I invite you to consider your investment in Vista Gold and make the decision whether it's the time to start a position or increase the position, but certainly, we look forward to the coming months, and we thank you for your time this afternoon, and wish all of you a very pleasant day. Thank you.

This concludes today's conference call. Thank you for your participation and have a wonderful day. You may now disconnect.