VISTA GOLD CORP - Quarter Report: 2018 March (Form 10-Q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 

FORM 10-Q

 

 

For the transition period from              to

          

Commission file number: 001-9025

 

   

 

VISTA GOLD CORP.

 (Exact Name of Registrant as Specified in its Charter)

 

 

(720) 981-1185

(Registrant’s Telephone Number, including Area Code)

 

Indicate by checkmark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒No □

 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☒No □

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

      Large Accelerated Filer □   Accelerated Filer ☒  Non-Accelerated Filer □

Smaller Reporting Company  □  Emerging Growth Company  □



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes □ No ☒    

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date:  99,539,949 common shares, without par value, outstanding as of April 23, 2018.

 

 

VISTA GOLD CORP. 

(An Exploration Stage Enterprise) 

FORM 10-Q 

For the Quarter Ended March 31, 2018

INDEX  

 

 

 

 

 

 

PART I

 

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

VISTA GOLD CORP.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollar amounts in U.S. dollars and in thousands, except shares)

 

 

Approved by the Board of Directors

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

VISTA GOLD CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(Dollar amounts in U.S. dollars and in thousands, except share and per share data)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

VISTA GOLD CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollar amounts in U.S. dollars and in thousands)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

VISTA GOLD CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in U.S. dollars and in thousands)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

1. Nature of Operations and Basis of Presentation

 

Vista Gold Corp. and its subsidiaries (collectively, “Vista,” the “Company,” “we,” “our,” or “us”) operate in the gold mining industry. We are focused on the evaluation, acquisition, exploration and advancement of gold exploration, and potential development projects, which may lead to gold production or value adding strategic transactions such as earn-in right agreements, option agreements, leases to third parties, joint venture arrangements with other mining companies, or outright sales of assets for cash and/or other consideration.  We look for opportunities to improve the value of our gold projects through exploration drilling and/or technical studies focused on optimizing previous engineering work. 

 

The Company’s flagship asset is its 100% owned Mt Todd gold project (“Mt Todd”) in the Northern Territory (“NT”) Australia.  Mt Todd is the largest undeveloped gold project in Australia.  The Company recently received authorization for the last major environmental permit and completed an updated Preliminary Feasibility Study for Mt Todd, which confirms the project’s robust economics at today’s gold price. With these important milestones complete, Vista is in a position to actively pursue strategic alternatives that provide the best opportunity to maximize value for the Company. We also hold 4.2% of the outstanding common shares in the capital of Midas Gold Corp. (“Midas Gold Shares”), a non-core project in Mexico and royalty interests in the United States and Indonesia. 

 

The interim Condensed Consolidated Financial Statements (“interim statements”) of the Company are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with the Company’s Consolidated Financial Statements for the year ended December 31, 2017 as filed with the United States Securities and Exchange Commission and Canadian securities regulatory authorities on March 6, 2018 on Form 10-K. The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by United States generally accepted accounting principles have been condensed or omitted. 

 

References A$ to Australian currency and $ to United States currency.

 

2.  Significant Accounting Policies

 

Revenue Recognition

 

The FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU No. 2014-09, as subsequently amended, supersedes the revenue recognition requirements in Revenue Recognition (Topic 605), and most industry-specific guidance throughout the Industry Topics of the Codification. Additionally, ASU No. 2014-09 supersedes some cost guidance included in Revenue Recognition-Construction-Type and Production-Type Contracts (Subtopic 605-35). Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. This includes significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  Additionally, from time to time, the Company may enter into transactions whereby it sells or options certain mineral properties, plant and equipment.  In these instances, certain principles of ASC 610, Other Income, may apply when de-recognizing a nonfinancial asset when the Company has determined the sale and/or option agreement does not qualify as a contract with a customer.  Certain principles of ASC 606 may apply when recognizing a gain or loss on the transaction even though the transaction is not considered to be in the normal course of business.  ASU No. 2014-09 states that entities should apply guidance related to transfer of control and measurement of the transaction price when evaluating the timing and amount of the gain or loss to be recognized. The new guidance is effective for interim and annual periods beginning after December 15, 2017.

 

The Company adopted the new guidance effective January 1, 2018. The guidance may be applied retrospectively for all periods presented or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application. The Company adopted the guidance retrospectively with the cumulative effect of initially applying the amended guidance recognized at January 1, 2018. Based on the contracts outstanding as of December 31, 2017, there was no cumulative effect adjustment required to be recognized at January 1, 2018.  Under the Company’s adoption approach, results for reporting periods beginning after January 1, 2018, will be presented in the Consolidated Financial Statements under the new guidance, while prior period amounts will not be adjusted and continue to be reported under the guidance in effect for those periods.

 

The Company has performed an assessment of the revised guidance and the impacts on the Company’s Consolidated Financial Statements and disclosures. The Company has completed the review of all contracts with the potential for variable consideration and determined that the adoption of this guidance will primarily impact the timing of revenue recognition on certain option agreements based on the Company’s determination of when control is transferred for accounting purposes. Currently, proceeds received from option agreements are considered recovery of the carrying value of the related project until the carrying value reaches zero.  After that, any additional proceeds received will be recognized as a contract liability until control has transferred to the buyer or the related contract has terminated.  

   

The Company has completed its evaluation of the potential for future variable consideration from net smelter return royalties (“NSR”), and other production related payments, and determined that there is no impact to the Company’s current accounting.    None of the projects which could provide the Company with NSRs or other production related payments are currently in production, and in all cases, we believe there is low probability of future production from these projects. Accordingly, the Company believes its NSRs and other production related payments are fully constrained, and the Company does not record a receivable for them.  When it becomes probable that a project which could provide the Company with an NSR or other production related payments could begin production, the Company will evaluate the accounting treatment at that time.    

 

3. Short-term and Other Investments

 

Short-term investments

 

As of March 31, 2018 and December 31, 2017, the amortized cost basis of our short-term investments was $12,918 and $15,144, respectively. The amortized cost basis approximates fair value at March 31, 2018 and December 31, 2017. Short-term investments at March 31, 2018 and December 31, 2017 are comprised of U.S. government treasury bills and/or notes, all of which have maturity dates greater than 90 days but less than one year. 

 

Other investments - Midas Gold Shares 

 

Upon initial recognition of our investment in the Midas Gold Shares, we elected to apply the fair value option, and as such, the investment in Midas Gold Shares is recorded at fair value in the Condensed Consolidated Balance Sheets. Subsequent changes in fair value are recorded in the Condensed Consolidated Statements of Comprehensive Income/(Loss) in the period in which they occur. 

 

The following table summarizes our investment in Midas Gold Shares as of March 31, 2018 and December 31, 2017.  

 

 

 

 

4.  Mineral Properties

 

During October 2017, we entered into an agreement (the “Option Agreement”) to option our interest in the Guadalupe de los Reyes gold and silver project in Sinaloa, Mexico (the “GdlR Project”) to Minera Alamos Inc. and its subsidiary Minera Alamos de Sonora S.A. de C.V. (“Minera Alamos”).

 

Pursuant to the terms of the Option Agreement, we granted Minera Alamos an exclusive right and option right to earn a 100% interest in the GdlR Project by:

 

 

 

 

 

 

The Option Agreement provides that all cash payments are non-refundable and optional to Minera Alamos, and in the event Minera Alamos fails to pay any of the required amounts as set out in the Option Agreement, or fails to comply with its other obligations, the Option Agreement will terminate and Minera Alamos will have no interest in the GdlR Project. Provided it is not in breach of the Option Agreement, Minera Alamos may at its discretion advance the above payment schedule. 

 

Subject to Minera Alamos timely making all the option payments, and fulfilling its other obligations with respect to the Option Agreement, we will transfer 100% of the shares of the Company’s 100% owned subsidiary Minera Gold Stake

S.A. de C.V., the entity which owns the GdlR Project, to Minera Alamos and the Open-Pit NSR and Underground NSR will be granted to us.

 

If Minera Alamos discovers, and decides to develop, an underground mine at the GdlR Project and we exercise the Back-in Right, we and Minera Alamos have agreed to form a joint venture to develop and operate the underground mine.  If the joint venture is formed, the Underground NSR will terminate.

 

The Company has determined that control of GdlR has not been transferred for accounting purposes. The first option payment of $1,500 received in October 2017 has been accounted for as reduction to carrying value. Subsequent option payments received, if any, will be accounted for as further reductions to carrying value. After the carrying value has been reduced to zero, remaining option payment proceeds, if any, will be recognized as a contract liability until title to the GdlR Project has transferred to the buyer or the Option Agreement has been terminated. In addition, in accordance with our policy, potential royalty revenue has been fully constrained.

 

Long Valley Claims

 

During the three months ended March 31, 2017, we sold our Long Valley unpatented mining claims located in California for consideration, net of transaction costs, of $358 which was paid at closing; a future payment of $500 one month after the start of commercial production; a future payment of $500 on or prior to the first anniversary of the start of commercial production; and a NSR on any future production from said claims at a variable rate between 0.5% and 2.0% depending on the average gold price realized. This sale resulted in a realized gain of $358.    

 

5.  Plant and Equipment

 

 

 

6.  Common Shares

 

Warrants

 

Warrant activity is summarized in the following table:

 

 

Stock-Based Compensation

 

Under our Stock Option Plan (the “Plan”) and our Long-Term Equity Incentive Plan (the “LTIP”), we may grant options and/or restricted stock units (“RSUs”) or restricted stock awards to our directors, officers, employees and consultants.  The combined maximum number of our common shares (“Common Shares”) that may be reserved for issuance under the Plan and the LTIP is a variable number equal to 10% of the issued and outstanding Common Shares on a non-diluted basis at any one time.  Options and RSUs under the Plan and LTIP, respectively, are granted from time

to time at the discretion of the Board of Directors of the Company (“Board”), with vesting periods and other terms as determined by the Board. 

 

Stock-based compensation expense for the three months ended March 31, 2018 and 2017 is as follows: 

 

 

As of March 31, 2018, stock options and RSUs had unrecognized compensation expense of $258 and $667, respectively, which is expected to be recognized over a weighted average period of 1.4 and 1.2 years, respectively.   

 

Stock Options

 

A summary of options under the Plan as of March 31, 2018 is set forth in the following table:

 

 

A summary of our unvested stock options as of March 31, 2018 is set forth in the following table:

 

 

No stock options were granted for the three months ended March 31, 2017.  The fair value of stock options granted during the three months ended March 31, 2018 to employees, directors and consultants was estimated at the grant date using the Black-Scholes option pricing model using the following assumptions:

 

 

Restricted Stock Units

 

The following table summarizes the RSUs outstanding under the LTIP as of March 31, 2018:

 

 

A portion of the RSU awards vest on a fixed future date provided the recipient continues to be affiliated with Vista on that date.  Other RSU awards vest subject to certain performance and market criteria, including the accomplishment of certain corporate objectives and the Company’s share price performance.  The minimum vesting period for RSUs is one year.  

 

During the three months ended March 31, 2018, the Company withheld shares with an equivalent value to the employee withholding tax obligation which resulted from RSUs that vested in the period.  Shares withheld are considered cancelled/forfeited. 

 

7.  Commitments and Contingencies

 

Our exploration and development activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. As such, the future expenditures that may be required for compliance with these laws and regulations cannot be predicted. We conduct our operations in an effort to minimize effects on the environment and believe our operations are in compliance with applicable laws and regulations in all material respects.

 

Under our agreement with the Jawoyn Association Aboriginal Corporation (the  “JAAC”), we must offer the JAAC the opportunity to establish a joint venture with Vista holding a 90% participating interest and the JAAC holding a 10% participating interest in Mt Todd. In addition, the JAAC will be entitled to an annual cash payment, or payment in kind, equal to 1% of the value of the annual gold production from the current mining licenses, and a 1% NSR on other metals, subject to a minimum payment of A$50 per year.

 

8.  Fair Value Accounting

The following table sets forth the Company’s assets measured at fair value by level within the fair value hierarchy. As required by accounting guidance, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 

 

 

 

Our marketable securities and investment in Midas Gold Shares are classified as Level 1 of the fair value hierarchy as they are valued at quoted market prices in an active market.  Marketable securities are included in other current assets on the Condensed Consolidated Balance Sheets for each period presented.

 

The used mill equipment is classified as Level 3 of the fair value hierarchy as its value at December 31, 2017 was based on an independent third-party valuation. As of March 31, 2018, an independent third-party evaluation was not deemed necessary.  The mill equipment is included in plant and equipment on the Condensed Consolidated Balance Sheets for each period presented.

 

There have been no transfers between levels in 2018, nor have there been any changes in valuation techniques.

 

9.  Geographic and Segment Information

 

The Company has one reportable operating segment.  We evaluate, acquire, explore and advance gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions.  These activities are currently focused principally in Australia. We reported no revenues during the three months ended March 31, 2018 and 2017.  Geographic location of mineral properties and plant and equipment is provided in Notes 4 and 5, respectively.

 

 

 

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements for the three months ended March 31, 2018, and the related notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States. This discussion and analysis contains forward-looking statements and forward-looking information that involve risks, uncertainties and assumptions.  Our actual results may differ materially from those anticipated in these forward-looking statements and information as a result of many factors.  See section heading “Note Regarding Forward-Looking Statements” below.

 

All dollar amounts stated herein are in U.S. dollars in thousands, except per share and per ounce amounts and currency exchange rates unless specified otherwise. References to A$ to Australian currency and $ to United States currency.

 

Overview

 

Vista Gold Corp. and its subsidiaries (collectively, “Vista,” the “Company,” “we,” “our,” or “us”) operate in the gold mining industry. We are focused on the evaluation, acquisition, exploration and advancement of gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions such as earn-in right agreements, option agreements, leases to third parties, joint venture arrangements with other mining companies, or outright sales of assets for cash and/or other consideration.  We look for opportunities to improve the value of our gold projects through exploration drilling and/or technical studies focused on optimizing previous engineering work. We do not currently generate cash flows from mining operations.

 

The Company’s flagship asset is its 100% owned Mt Todd gold project (“Mt Todd” or the “Project”) in the Northern Territory (“NT”) Australia.  Mt Todd is the largest undeveloped gold project in Australia.  The Company recently received authorization for the last major environmental permit and completed an updated Preliminary Feasibility Study for Mt Todd, which confirms the project’s robust economics at today’s gold price. With these important milestones complete, Vista is in a position to actively pursue strategic alternatives that provide the best opportunity to maximize value for the Company.

 

Results from Operations

 

Summary

 

Consolidated net loss for the three months ended March 31, 2018 and 2017 was $948 and $2,847 or $0.01 and $0.03 per share, respectively.    The principal components of these year-over-year changes are discussed below.

 

Exploration, property evaluation and holding costs

 

Exploration, property evaluation and holding costs were $1,545 and $1,752 during the three months ended March 31, 2018 and 2017, respectively. These costs are predominantly associated with Mt Todd and are comprised of fixed costs and discretionary costs. For the three months ended March 31, 2018 and 2017, our fixed costs (which include cash expenditures necessary to ensure that we preserve our property rights and meet all of our safety, regulatory and environmental responsibilities) trended approximately 20% higher in 2018 compared to the same period in 2017 as baseline monitoring activities have been introduced in compliance with the terms of the EPBC permit, which was granted in January 2018.  In addition, we have added site employees to complement site environmental, maintenance and exploration activities.  We expect 2018 fixed costs, in Australian dollar terms, to continue to trend 20% to 25% higher than 2017 fixed costs.

 

The magnitude of discretionary program spending during the three months ended March 31, 2018 was lower than the discretionary program spending during the three months ended March 31, 2017.  The principle 2018 program was the drilling of four additional PQ core holes designed to extract approximately 5 tonnes of higher grade material from the Batman pit, for the completion of two additional approximately 2.5 tonne high pressure grinding roll (“HPGR”) crushing, X-ray transmission (“XRT”) and laser sorting tests. These tests are being conducted to confirm gold loss in the

rejected material for higher grade ores. The material 2017 discretionary programs included: the completion of the drilling program to generate the 20 tonne sample used in the ore sorting testing program; the ore sorting testing program and subsequent metallurgical studies including grinding studies to confirm the potential for improved gold recoveries and preparation of the draft mine management plan.  Based on these studies, the Company completed a pre-feasibility study, the results of which were announced during the first quarter of 2018. See “Project Updates” below for a summary of the pre-feasibility study results. 

 

Corporate administration

 

Corporate administration costs were $1,423 and $1,021 during the three months ended March 31, 2018 and 2017, respectively.  Higher 2018 fixed costs were incurred principally as a result of the completion of the MT Todd PFS update, which affected investor relations, regulatory and compensation costs. We expect 2018 fixed costs to trend approximately 15% - 20% higher than 2017 fixed costs, as we expect to continue our increased emphasis on investor relations programs through the remainder of the year.    

 

Gain on disposal of mineral property

 

Long Valley claims

 

During the three months ended March 31, 2017, we sold our Long Valley unpatented mining claims located in California for consideration, net of transaction costs, of $358 which was paid at closing; a future payment of $500 one month after the start of commercial production; a future payment of $500 on or prior to the first anniversary of the start of commercial production; and a net smelter return royalty (“NSR”) on any future production from said claims at a variable rate between 0.5% and 2.0% depending on the average gold price realized. This sale resulted in a realized gain of $358.

 

Non-operating income and expenses  

 

Gain/(loss) on other investments

 

Gain/(loss) on other investments was $2,028 and $(312) for the three months ended March 31, 2018 and 2017, respectively.  These amounts are the result of changes in fair value of the common shares we hold in Midas Gold Corp. (“Midas Gold Shares”).  

 

Financial Position, Liquidity and Capital Resources

 

Operating activities

 

Net cash used in operating activities was $3,203 and $2,393 for the three months ended March 31, 2018 and 2017, respectively.  The increased use of cash was driven by the reduction in accounts payable and accrued liabilities during the quarter. Relatively high discretionary program activity and completion of the Mt Todd pre-feasibility study, in particular, resulted in higher than normal payables at the end of 2017. 

 

Investing activities

 

Net cash of $2,226 and $1,849 for the three months ended March 31, 2018 and 2017, respectively, was provided primarily by the disposition of short-term investments, net of acquisitions.

 

Financing activities

 

Net cash of $39 for the three months ended March 31, 2018 was used for the payment of certain employee withholding tax obligations, related to the vesting of RSUs, in lieu of the issuance of common shares.

 

There were no cash transactions from financing activities during the three months ended March 31, 2017.

 

 

Liquidity and capital resources

 

Our cash and short-term investments as of March 31, 2018 decreased to $13,333 from $16,575 at December 31, 2017 due mainly to expenditures for operating activities and the drawdown of payables. Our net working capital decreased to $18,636 as at March 31, 2018 from $19,057 at December 31, 2017 due mainly to the decrease in cash and short-term investments to fund operating activities, partially offset by an increase in the market value of our Midas Gold Shares.  

 

We believe that our existing working capital, together with potential future sources of non-dilutive financing, will be sufficient to fully fund our currently planned fixed costs and discretionary programs well into 2019. 

 

Potential future sources of non-dilutive financing include the sale of non-core assets such as our used mill equipment and future option payments for the Guadalupe de los Reyes gold/silver project; and, depending on market conditions, the sale of some or all of our remaining Midas Gold Shares. 

 

The continuing long-term viability of the Company is dependent upon our ability to secure sufficient funding and ultimately to generate future profits from operations or sales of assets. The underlying value and recoverability of the amounts shown as mineral properties and plant and equipment in our Condensed Consolidated Balance Sheets are dependent on our ability to fund exploration and development activities that could lead to profitable production or proceeds from the disposition of these assets.

 

Fair Value Accounting

The following table sets forth the Company’s assets measured at fair value by level within the fair value hierarchy. As required by accounting guidance, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 

 

 

 

 

Our marketable securities and investment in Midas Gold Shares are classified as Level 1 of the fair value hierarchy as they are valued at quoted market prices in an active market.  Marketable securities are included in other current assets on the Condensed Consolidated Balance Sheets for each period presented.

 

The used mill equipment is classified as Level 3 of the fair value hierarchy as its value at December 31, 2017 was based on an independent third-party valuation. As of March 31, 2018, an independent third-party evaluation was not deemed necessary.  The used mill equipment is included in plant and equipment on the Condensed Consolidated Balance Sheets for each period presented.

 

There have been no transfers between levels in 2018, nor have there been any changes in valuation techniques.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Contractual Obligations

 

We have no material contractual obligations as of March 31, 2018. 

 

Project Updates

 

Mt Todd Gold Project, Northern Territory, Australia

The following scientific and technical information about Mt Todd have been reviewed and approved by Mr. John Rozelle, Senior Vice President of Vista.  Mr. Rozelle is a qualified person as defined by Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects.

In January 2018, we announced the positive results of an updated preliminary feasibility study (the “PFS”) for Mt Todd.  The PFS is based on the results of a comprehensive review of the Project and the re-design of elements of the process flow sheet, incorporating automated sorting and grinding circuit design changes. The process improvement efforts have resulted in reduced operating costs, increased gold recovery and higher gold production at Mt Todd. Management of Vista believes that the design changes have allowed Vista to achieve a significant improvement in the Project’s economics at the current gold price.

 

The PFS evaluates two development scenarios: a 50,000 tpd project that develops more of the Mt Todd resource and generates a larger Net Present Value (“NPV”) (the “Base Case”); and a smaller and higher-grade 33,000 tpd project (the “Alternate Case”). 

 

Highlights of the PFS Base Case are presented in the table below: 

 

 

Note: Economics presented using $1,300/oz gold and a flat $0.80 USD : $1.00 AUD exchange rate and assumes deferral of certain Northern Territory tax obligations as well as realization of equipment salvage values at the end of the mine life.  

Highlights of the PFS Alternate Case are presented in the table below:

 

Note: Economics presented using $1,300/oz gold and a flat $0.80 USD : $1.00 AUD exchange rate and assumes deferral of certain Northern Territory tax obligations as well as realization of equipment salvage values at the end of the mine life.

For additional information on Mt Todd, see our technical report entitled “NI 43-101 Technical Report Mt Todd Gold Project 50,00 tpd Preliminary Feasibility Study Northern Territory, Australia” with an effective date of January 24, 2018 and an issue date of March 2, 2018.  See Cautionary Note to Investors regarding Estimates of Mineral Reserves and Resource below.

Also in January 2018, we announced that the “authorization of a controlled activity” at Mt Todd, as required under the Australian Environmental Protection and Biodiversity Conservation Act of 1999 (“EPBC”), as it relates to the Gouldian Finch, has been approved by the Australian Commonwealth Department of Environment and Energy.  With this authorization, Vista has all the major environmental approvals necessary to allow development of Mt Todd.

During the three months ended March 31, 2018, we completed four additional PQ core holes designed to extract approximately 5 tonnes of higher grade material from the Batman pit, for the completion of two additional bulk HPGR crushing, XRT and laser sorting tests. These tests are being conducted to confirm gold loss in the rejected material from higher grade ores. We are completing additional grinding tests with the manufacturers of the secondary grinding mills in order to obtain specific data for future application.  These tests are conducted with Glencore, who manufacture the ISAMill referenced in the PFS, and with FLSmidth, who produce a competing mill known as a vertimill. We are also completing additional testing with our impeller manufacturers in order to determine the design which results in minimal motor horse power and electrical power consumption. 

 

We anticipate completing additional definition drilling at Quigleys, intended to investigate the possibility of providing the mill with future supplemental higher grade Quigleys ore.  We also anticipate exploration programs on the ELs, designed to continue investigating some of the known geophysical and geochemical anomalies.

Guadalupe de los Reyes Gold/Silver Project, Sinaloa, Mexico

During October 2017, we entered into an agreement (the “Option Agreement”) to option our interest in the Guadalupe de los Reyes gold and silver project in Sinaloa, Mexico (the “GdlR Project”) to Minera Alamos Inc. and its subsidiary Minera Alamos de Sonora S.A. de C.V. (“Minera Alamos”).

 

Pursuant to the terms of the Option Agreement, we have granted Alamos an exclusive right and option right to earn a 100% interest in the GdlR Project by: