Vista Gold Corp. (AMEX:VGZ) Q2 2024 Earnings Call Transcript

Vista Gold Corp. (AMEX:VGZ) Q2 2024 Earnings Call Transcript July 30, 2024

Operator: Good day, ladies and gentlemen. Welcome to Vista Gold’s Second Quarter 2024 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen only mode.[Operator Instructions] As a reminder, this conference call is being recorded. Today is Tuesday, July 30, 2024. It is now my pleasure to introduce Pamela Solly, Vice President of Investor Relations. Please go ahead.

Pamela Solly: Thank you, Jenny, and good afternoon, everyone. Thank you for joining the Vista Gold Corp. second quarter 2024 and 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. At the close of business yesterday, Vista reported its second quarter 2024 operating and financial results. Copies of the news release and quarterly report on Form 10-Q are available on our website at www.vistagold.com. During the course of this call and the question-and-answer session, 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-Q for details of risks and other important factors that could cause actual results to differ materially from those in our forward-looking statements and the cautionary note regarding estimates of mineral resources and mineral reserves. I will now turn the call over to Fred Earnest.

Fred Earnest: Thank you, Pam, and thank you, everyone, for joining us on the call today. Vista controls one of the most attractive goal — one of the most attractive large gold deposits in one of the most attractive mining jurisdictions in the world. This is committed to seeing its development in keeping with the highest mining and ESG standards when the time is right, and we’ll work diligently toward that goal. Our success is important to the Northern Territory, the people and families of the project area, and ultimately, to Vista shareholders. On the call today, we will help you understand current activities that are designed to help us create greater value in the rising — in the current rising gold price environment. But first, let me share with you a few of our achievements during the second quarter of this year.

We received the final installment payment under the royalty transaction with Wheaton Precious Metals, finished Phase 1 of our 2024 drilling program and commenced Phase 2 and enhanced our management team with the addition of Maria Vallejo Garcia as our new Director of Projects and Technical Services. We also announced that the Northern Territory Government of Australia passed legislation to enact the Mineral Royalties Act of 2024, which became effective on July 1st, 2024. The new Mineral Royalties Act replaced the prior net profits royalty regime with an ad valorem royalty regime for new mines and is expected to positively impact project economics for Vista’s Mt Todd gold project. For the remainder of this year, we will focus on maintaining a strong balance sheet, advancing evaluations of an initially smaller scale Mt Todd project, continuing our work to maximize shareholder value and successfully execute our health, safety, and environmental initiatives.

I’m pleased to report that we have had no lost time accidents year-to-date, and the Mt. Todd site has now reached 991 consecutive accident-free days. I will discuss some of these topics in greater detail later in the call, but I will now turn the time over to Doug Tobler, our CFO, for a review of our financial results for the quarter ended June 30th, 2024.

Doug Tobler: Thank you, Fred. I’d like to start today’s financial presentation, with a recap of our balance sheet. In June, we received the final $10 million installment under the Wheaton royalty agreement. With this final installment, we’ve now received the full $20 million and are using these funds on our ongoing drilling program and upcoming evaluations of an initially smaller scale project at Mt Todd. We ended the second quarter with cash totaling $20.2 million, and we continue to have no debt. I’ll now provide a review of our results of operations for the three and six-month periods ended June 30, 2024, compared to the same periods in 2023. First, I’ll address the three months period ended June 30, 2024 and 2023. Vista reported consolidated net income of $15.6 million during the most recent quarter of 2024, compared to a consolidated net loss of $1.5 million for 2023.

Net income for the 2024 period resulted mostly from a gain of $16.9 million on the grant of a royalty interest in mineral titles to Wheaton. This gain included the previously deferred gain on installment payments totaling $10 million plus the $10 million received in June 2024 for the final installment, all of this being net of the — of the associated mineral property carrying costs of $3.1 million as of the date the final installment was received. Partially offsetting this gain were Mt Todd site costs and corporate administrative expenses of $645,000 and $763,000 for the 2024 and 2023 periods, respectively. Each of these expense categories, were slightly lower than those of 2023. The net loss of $1.5 million for 2020 — for the 2023 three-month period was largely comprised again of Mt Todd site and corporate administrative expenses, of $682,000 $878,000, respectively.

Of note, costs associated with our ongoing development drilling program, totaled $524,000 during the three-month period ended June 30, 2024, and these costs were capitalized. The majority of these costs were part of the mineral property carrying value that was then offset against the $20 million from the proceeds received from Wheaton. And by comparison, there was no drilling that occurred during the same period in 2023. Now I’ll talk briefly about the six-month periods ended June 30, 2024 and 2023. Vista reported consolidated net income of $14.6 million during the six months ended June 30, 2024 compared to a consolidated net loss of $3.5 million for the comparable period in 2023. As with the most recent 2024 quarter, the six-month period in 2024 included the $16.9 million gain.

Vista also recognized a gain of $802,000, during the 2024 six-month period from the sale of a portion of its used mill equipment. Partially offsetting these gains were Mt Todd outside and corporate administrative expenses of $1.4 million and $2 million, respectively. And again, each of these expense categories were slightly lower than those for the 2023 period. The net loss of $3.5 million for 2023 six-month period was largely comprised of Mt Todd site and corporate administrative expenses of $1.5 million and $2 million, respectively. As with the three-month period in 2024, we capitalized development costs. This included $1 million for the six-month period ended June 30, 2024, with all but $83,000 being part of the mineral property carrying value that was then offset against the $20 million of proceeds received from Wheaton.

In summary, we’re very pleased with the improvements made to our balance sheet during the first six months of 2024 and the results of our ongoing focus on controlling our expenditures. That concludes my remarks. So Fred, back over to you.

Fred Earnest: Thank you, Doug. I’ll begin with our second quarter achievements, followed by our outlook for the remainder of year. As many of you know, in December of 2023, we completed a $20 million royalty transaction with Wheaton Precious Metals. And as Doug has reported, in June, we received the final $10 million installment payment under that royalty agreement. All payments have now been received, which has significantly strengthened our balance sheet. With regards to the drilling program, in June of this year, we completed Phase 1 of our 2024 drill program, which consists of 11 holes and totaled almost 3,000 meters. These holes are part of the 6,000 to 7,000 meters of drilling planned for this year. Detailed results from Phase 1 are expected to be announced in August.

Phase 2 of the drilling program commenced in July and is expected to be completed by year-end. Phase 1 focused on defining the limits of mineralization at the north end of the Batman deposit and confirming the grade in this area. We are evaluating the last assays at this time. Phase 2 is concentrating on defining the south cross-load structure. This structure trends from the center of the Batman deposit to the Northeast and was intersected in a couple of holes in the 2020 and 2022 drill programs. Historic drilling on the South cross loads suggests a narrow, mineralized structure with potentially higher grades than those typically observed in the Batman deposit. The 2024 drilling program is expected to have an all-in cost of approximately $2 million with regards to the Northern Territory Minerals Royalty Act.

In June, we announced that the Northern Territory government had passed legislation to enact the Mineral Royalties Act of 2024 with an effective date of July 1, 2024. This replaced the prior net profits royalty regime with an ad valorem royalty regime for new mines. The new Mineral Royalties Act is aimed at encouraging present and future exploration and development of mining projects by simplifying the Northern Territories royalty system and making it more competitive with other Tier 1 jurisdictions. The new royalty rate applicable to gold doré from the Mt Todd project will be 3.5% of the value of gold produced. This represents a meaningful opportunity for improved project economics at Mt Todd and earlier shareholder returns compared to our 2024 updated feasibility study, which included Northern Territory royalties equivalent to nearly a 7% ad valorem rate.

Under the previous net profits royalty regime, our base case economic analysis, at an $1,800 gold price, estimated the payment of approximately $765 million in Northern Territory royalties over the life of the mine. The new royalty rate represents a nearly 50% reduction in payable royalty and underscores the Northern Territory’s commitment to growing a viable mining sector through new development. I’d like to comment briefly on the appointment of Maria Vallejo as our Director of Projects and Technical Services. In June of this year, Maria joined the company as our Director of Projects and Technical Services. Maria is a registered professional engineer and fellow of the Australian Institute of Mining and Metallurgy. She is also a qualified person as defined by Item 1,300 of Regulation S-K under the Securities Exchange Act of 1934, as amended; and Canadian National Instrument 43-101, standards for disclosure of mineral projects.

She brings 15 years of experience screening, evaluating, optimizing and developing gold and copper mining assets in the Americas and Asia Pacific. Her technical background and expertise will be invaluable as we advance our evaluation of smaller scale and stage development opportunities at Mt Todd as also as we consider potential strategic transactions and position Vista for long-term success. Now, looking ahead. In addition to maintaining a strong balance sheet, we are advancing evaluations of an initially smaller scale Mt Todd project with the option for subsequent stage expansion and continuing our work to maximize shareholder value. As part of our work to improve the value of Mt Todd, we plan to leverage the results of previous technical studies, as we evaluate a smaller scale initial project.

Previous studies demonstrated opportunities to significantly lower the initial CapEx, while maintaining high margins and deliver attractive economic returns associated with an initially smaller scale project. At the same time, this allows us to preserve the flexibility for subsequent stage development. With the gold price continuing to rise, margins are increasing. Our analysis suggests that higher margins, combined with lower initial capital, provide an avenue to greater value recognition. We believe that alternative development strategies offer valuable optionality, as we focus on creating shareholder value and attracting investor interest in Mt Todd. At this time, we anticipate completing a feasibility study on a smaller scale initial project next year.

In conclusion, Vista controls one of the most attractive large gold deposits in one of the most attractive mining jurisdictions in the world. We are committed to seeing its development in keeping with the highest mining and ESG standards when the time is right, and we’ll work diligently toward achieving that goal. Our success is important to the Northern Territory, the people and families of the project area and ultimately, to Vista shareholders. In the current rising gold price environment, we believe that thoughtful evaluations and a focus on minimizing shareholder risk will help us create and realize greater value for all shareholders. The Mt Todd gold project is one of the largest and most advanced undeveloped gold projects in Australia with 7 million ounces of proven and probable reserves.

In addition to its size, Mt Todd offers a number of other strategic advantages. Mt Todd is ideally located in the Northern Territory, an extremely stable and mining-friendly jurisdiction. The existing project infrastructure at Mt Todd provides construction time line and risk mitigation advantages, all of the major permits to initiate development of Mt Todd had been approved. Of equal importance, we have earned the trust of the local stakeholders and are confident that our social license is firmly in hand. Our current technical programs aim to derisk the project by incorporating designs that significantly reduce the initial capital cost while maintaining competitive operating costs and preserving the option for future project expansion. We believe Mt Todd is a superior asset and one of the most attractive development-stage projects not just in in Australia but the world.

Our primary objective is to achieve a valuation for Mt Todd that is reflective of the favorable operating costs and robust project economics as demonstrated by the updated feasibility study, coupled with the fact that we hold all of the approvals for all major permits needed to initiate development. For a more comprehensive review of the work completed by Vista on the Mt Todd project, I refer you to our corporate presentation, which can be found on our website at www.vistagold.com. We believe that Vista Gold represents an exceptional investment opportunity in the current gold prices, represent a tremendous opportunity to establish a position or increase ones holding in Vista Gold. This concludes my formal remarks. We will now respond to any questions from participants on this call.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question is from Heiko Ihle from H.C. Wainwright. Please ask your question.

Q&A Session

Heiko Ihle: Hello, Fred and team. How are you? Thanks for taking my questions.

Fred Earnest: Hi. Heiko. Good afternoon. Thank you for being on the call.

Heiko Ihle: Always. Okay. So you just got the final $10 million from Wheaton gets you $20 million in the bank. Can you maybe just walk people through what you plan to do with some of this extra cash now that the royalty deal is done? I mean, is there any specific things that you plan on doing? Any spends that are going to happen at a higher rate now that more money is in the bank?

Doug Tobler: Yeah, Heiko, it’s Doug here. I’ll try to answer that. So split it into a couple of different buckets. The first is our recurring costs. which is basically the core of our holding costs for Mt Todd and our corporate G&A. And those costs have been running at on the order of $6 million a year for about 2.5 years now, including not going up through all the inflation. So we don’t see a big change in what’s happening with core of the organization. As to other spending, of course, we’ll have the spending on drilling, which Fred said, will be ballpark $2 million this year. And I don’t have anything today that would tell me it would go over that. We seem to be tracking right on plan. And secondly, of course, later in the year, as we come close to the end of the drilling program, we’ll pick up on doing some — the start of the studies.

First, there will be some trade-off studies, then we’ll move into the technical report itself. So the balance of this calendar year in addition to the $2.5 million of — sorry, $2 million of drilling will probably be another somewhere between $500,000 and $1 million this year, then we’ll wrap up the feasibility study in the first half of next year. So that’s probably another $1 million to $1.5 million total. So outside of our normal burn rate and what we’re doing to put this smaller scale initial plan together, there’s really no significant spending changes expected.

Fred Earnest: Heiko, I would just add to that just because we’ve got money in the door doesn’t mean that we feel a great need to spend it. We’ll continue our capital preservation practice and seek to maximize value from the money that we spend.

Heiko Ihle: Fred, you know, I respect the way you spend money quite a bit. Okay. So you got the 3.5% royalty of revised one on Mt Todd. I mean, your numbers have it as a nearly 50% reduction in payable royalties overall. Can you maybe walk us through the timing of when money then gets sent to the government once this thing is actually in production? Is it more front loaded, more back loaded? Can you maybe just give some color to the listeners on this call and what you expect to see?

Doug Tobler: Yeah, Heiko, I’ll take that again. In simple terms, it’s 3.5% ad valorem. So take your gross revenue number times 3.5%. That will be flat-lined across the entire life of mine. So basically, you can see the $765 million that’s in the current study. That just gets completely replaced by something that’s down in the $350 million to $400 million range. So roughly a $350 million reduction over life of mine. But it’s — there’s no holiday or payback period at all involved in this given the cut that they made, they just keep it nice and flat.

Fred Earnest: Heiko, the other thing that this new royalty structure does is that it is removed some of the complexities of — that were involved in the net profits calculation and puts most mines on an even footing where you’ll be paying a royalty that’s based on the value of reproduction across all sectors. And that’s something that the previous NT royalty regime did not provide was that transparency, nor was it competitive compared to other jurisdictions. So we believe that this is a tremendous step forward towards simplification and competitiveness. And certainly, we believe that there will be some incentives that accrue from this for the development of mining projects and subsequently rewards for the Northern Territory.

Heiko Ihle: Thanks so much. I will get back in queue.

Doug Tobler: Okay. Thank you, Heiko.

Operator: Thank you. [Operator Instructions] There are no further questions at this time. I will now hand the call back to Fred Earnest for the closing remarks.

Fred Earnest: Thank you, Jenny, and thank you to all of you who have joined the call today. I would just like to reiterate a core part of the message that we would like you to take away. And that is that Vista Gold controls one of the most attractive large gold deposits in one of the most stable and mining-friendly jurisdictions in the world. We are committed to seeing its development in keeping with the highest mining and ESG standards. But we’ll do so when the time is right and we will work diligently toward that goal in the interim. Our success is important not only to the Northern Territory and the people and families of the project area, but ultimately to Vista shareholders. In the current rising gold price environment, we believe that thoughtful evaluations and a focus on minimizing shareholder risk will ultimately help us create and realize greater value for all stakeholders.

Our primary objective is to achieve a valuation for Mt Todd that is reflective of the intrinsic value of the project that recognizes the favorable operating cost and the robust project economics is demonstrated by the updated feasibility study. And those studies, which we’ll be undertaking in the coming months and concluding, as Doug indicated, the first part of next year. We would like to thank all of you for joining the call. We invite you to learn more about Vista Gold and the Mt Todd project. If you need further information, please feel free to reach out to Pamela Solly, our Vice President of Investor Relations. I invite you all to give serious consideration to how an investment in Vista Gold are increasing your holding in Vista Gold might be opportunity for greater value creation in the future.

With that, I thank all of you and wish you all a very pleasant afternoon.

Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.