Vista Gold Corp Q4 FY2023 Earnings Call

Good day, ladies and gentlemen. Welcome to Vista Gold's 2023 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. As a reminder, this conference is being recorded. Today is Monday, March 18, 2024. It is now my pleasure to introduce Pamela Solly, Vice President of Investor Relations. Thank you. Please go ahead.

Thank you, Ina, and good day, everyone. Thank you for joining the Vista Gold 2023 Financial Results and Corporate Update Conference Call. I'm Pamela Solly, Vice President of Investor Relations. On the call today are 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 and the cautionary note regarding estimates of mineral resources and mineral reserves. I'll now turn the call over to Fred Earnest.

Thank you, Pam, and thank you, everyone, for joining us on the call today. Before I begin with our 2023 achievements, I would like to take this opportunity to acknowledge the contributions of Mr. Randy Eppler, who recently passed away. Randy served as a Director of our company since 2004 and chaired several Board committees during his tenure. Randy was a gentleman, a friend, and a consummate professional who brought a wealth of knowledge and experience to Vista's Board of Directors. Randy and his passion for Vista Gold will be remembered and missed. As we turn to our 2023 results, I'm pleased to report that, during 2023, we succeeded in efficiently managing our cash and strengthened our balance sheet by completing a $20 million royalty transaction with Wheaton Precious Metals. Today, we have received the first two installment payments totaling $10 million and expect to receive the final $10 million installment prior to the end of the second quarter. In addition to completing the royalty, we carried out an internal scoping study to evaluate smaller scale stage development alternatives at Mt. Todd, continued the process to refresh our Board of Directors, and extended our agreement with the Northern Territory Government pertaining to Mt. Todd through December 31, 2029, with the option for a three-year extension. We continued to work with CIBC Capital Markets to identify and advance interest in Mt. Todd and are focused on achieving a transaction that maximizes shareholder value. We saw increased interest in Mt. Todd during the latter part of 2023, including new interest in our plans to advance an alternative development strategy. We are committed to the health and safety of our employees and to environmental stewardship at Mt. Todd. We achieved zero lost time incidents in 2023, and the site has now reached 860 consecutive accident-free days. We've had a very good start to 2024 with the commencement of a drilling program, ongoing evaluations of stage development strategies for Mt. Todd, and the completion of an updated feasibility study. The feasibility in this case is that at a gold price of $2,100 and a $0.66 foreign exchange rate, which are reflective of current market conditions, the after-tax NPV at a 5% discount rate for the project is $1.88 billion, and the IRR is 29.6%. I will discuss these topics along with our other 2023 results 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 quarter ended December 31, 2023.

Thank you, Fred. And for those on the call today, thank you for joining us and your interest. As you may know, we filed our most recent Form 10-K last week. I would encourage you to review this document for additional information on the topics presented today. I'll start today with a recap of our year-over-year results of operations. Vista reported a net loss of $6.6 million for 2023, compared to a net loss of $4.9 million for 2022. This year's net loss increased by $1.7 million because of a $2.9 million gain on the final disposition of our interest in the Awak Mas Project located in Indonesia, and we had no similar gain during 2023. Otherwise, our 2023 operating expenses decreased by $1.5 million to $6.8 million. Of this $1.5 million decrease in operating expenses, about $1.3 million related to Mt. Todd. This decrease from Mt. Todd resulted from us completing many of the work programs internally during 2023 compared to 2022, when we had several outside consultants and contractors working on the 2022 feasibility study and wrapping up the drilling campaign. We also reduced our recurring holding costs for Mt. Todd by about $250,000 or 8%. The balance of the reduction in operating expenses related to corporate and administration costs. Here, we saw a $300,000 decrease during 2023 compared to 2022, which was also an 8% reduction year-over-year. To wrap up my comments regarding our results of operations, I'd like to summarize our efforts over the past two years to reduce our recurring spending. For 2022, we reported a 15% reduction in our recurring expenses compared to our original 2022 plan. Then in 2023, we realized an additional 8%, both for Mt. Todd holding costs and corporate administration costs. In the context of a 10% increase in the U.S. CPI over this two-year period, we are extremely pleased with this result. Maintaining a low expenditure profile will continue to be an important part of our funding strategy as we move forward. Now moving on to our financial position. We ended 2023 with cash of $6.1 million, and we continued to have no debt. During 2023, we took steps to strengthen our balance sheet as part of our objective to maintain adequate liquidity and minimize dilution as we advance our primary objective to maximize returns to our shareholders. In December 2023, we entered into a royalty agreement with Wheaton Precious Metals Cayman Co, which is an affiliate of Wheaton Precious Metals Corp. Vista granted Wheaton a 1% gross revenue royalty on Mt. Todd in exchange for $20 million. We received the first installment of $3 million in December 2023, and the next $7 million in February of this year. The remaining royalty proceeds of $10 million are expected to be received by the end of the second quarter of 2024. By completing this royalty, Vista now has the financial resources in place to complete the drilling program that started earlier this year and then follow on with studies of an initially smaller scale project at Mt. Todd. These studies will target a significantly lower capital cost and operating costs close to those estimated in the Mt. Todd feasibility study that we announced last week. Fred will talk more about this opportunity later in today's call. That concludes my remarks for today. I'll now turn the call back to Fred.

Thank you, Doug. I'll now discuss our 2023 achievements and then provide an update on 2024. First, the completion of the $20 million royalty with Wheaton not only strengthens our balance sheet but confirms the strength, credibility, and value of our world-class Mt. Todd asset. We look forward to working with Wheaton as we continue to de-risk and advance Mt. Todd. In March of 2023, we announced the completion of an internal scoping study which evaluated the technical and economic merits of smaller scale development alternatives for Mt. Todd. The results were very encouraging and demonstrated the potential for significantly lower initial capital costs while preserving the opportunity for subsequent expansion or stage development. The scoping study indicates that a nominal 5 million tonne per year project or 15,000 tonnes per day could be designed and constructed with an initial capital expenditure of less than $350 million, including contract mining and annual production in the range of 150,000 to 200,000 ounces of gold per year. Operating cost analyses, which account for contract mining, the loss of certain economies of scale, and adjustments for inflation suggest that all-in sustaining costs would remain very competitive in today's environment. On May 25th, 2023, we signed an amendment to our agreement with the Northern Territory of Australia, which was set to expire at the end of the year, which extended the term of the agreement to December 31, 2029, and gives us the option for an additional three-year extension. We believe the amended agreement demonstrates the clear commitment by the NT Government and their desire to achieve shared goals and objectives. As you may be aware, last year, the Northern Territory Mineral Development Task Force presented its report outlining recommendations to enhance the importance of the mining industry and increase mining investment in the territory. Most notably, the report emphasized the importance of a simpler ad valorem royalty structure and aligning the royalty rate more closely with other mining jurisdictions, where rates typically range from 2.5% to 5%. We have been part of the public consultation and review process for new legislation and expect the NT Government to announce the new royalty regime in the coming months. As the new royalty regime is implemented, we expect Vista and Mt. Todd to benefit in several ways. Turning to the present year, in March, earlier this month, we published our inaugural Environmental, Social and Governance Report. This report provides transparency and outlines progress on our ESG performance in 2023 and goals and key objectives for the coming year. We have recognized the importance of conducting our business in a responsible and sustainable manner and we are fully committed to aligning our business practices with current and evolving ESG principles to ensure the long-term success and positive impact of our operations. We continue to maintain strong working relationships with the people and leaders of the Jawoyn Association Aboriginal Corporation. We also continue to work with leaders and stakeholders in the Katherine area and more broadly in the Northern Territory, as well as the NT government. I'm pleased that our social license is firmly in place and strongly supported. We remain committed to responsible environmental management, protecting heritage sites, and developing Mt. Todd in a way and at a time that maximizes the benefit for our shareholders and stakeholders in the Northern Territory. Last week, we announced the results from an updated feasibility study for the Mt. Todd project. The updated feasibility study reflects changes in project economics that have occurred since the previous feasibility study was filed in February of 2022. Material capital and operating cost components have been updated with new quotes obtained in the first quarter of 2024. The updated study also reflects the current outlook for the long-term gold price and foreign exchange rates and the recently announced royalty. Mt. Todd mineral resources and mineral reserves, mine plans, gold recoveries, and gold production schedules remain unchanged. Project economics are approximately the same or slightly better than reported two years ago, inclusive of cost increases that affected the entire gold mining sector. We are pleased that Mt. Todd's value is confirmed at the given foreign exchange rates and conservative gold price selected. A few highlights of the updated feasibility study include: at an $1800 gold price and a $0.69 foreign exchange rate, the after-tax net present value at a 5% discount rate is estimated to be $1.13 billion, up $131.5 million from the previous study, and the IRR is estimated to be 20.4%, down 0.2% from the previous study. Average cash costs are estimated to be $913 per ounce, which is up $96 per ounce from the previous study. Average all-in sustaining costs are estimated to be $10.34 per ounce, up $104 from the previous study, and that's on a life of mine basis. Using a gold price of $2,100, slightly below today's gold price, and a $0.66 foreign exchange rate, slightly above today's foreign exchange rate, we believe that these numbers are more reflective of current market conditions. The after-tax net present value at a 5% discount rate of the project is estimated to be $1.88 billion, and the IRR is estimated at 29.6%. Initial capital requirements of the project are now estimated to be $1.03 billion, which is up $138 million from the previous study. We continue to utilize and these numbers reflect the use of a third-party owner-operator of the power plant. Moving on, earlier this year, we also appointed Mike Sylvester as Director of Vista Gold and a member of our Health, Safety, Environment and Social Responsibility Committee. Mr. Sylvester is a successful mining executive with over 45 years of international and domestic industry experience with major, mid-tier, and junior companies. He retired in November 2022 from his position as Senior Vice President, Americas at Kinross Goldcorp. Mike's well-rounded technical expertise, corporate leadership roles, and international experience will be valuable as we pursue strategic opportunities for Vista and its Mt. Todd Gold Project. We continue to work with CIBC Capital Markets to identify and advance interest in Mt. Todd and are focused on achieving a transaction that maximizes shareholder value. Management expects to continue to host side business and respond to inquiries from engaged parties. Our evaluation of a smaller-scale stage development strategy for Mt. Todd complements the work we are doing with CIBC and increases optionality. We remain focused on recognizing value for shareholders through the completion of the right transaction, one that realizes a greater portion of the intrinsic value of Mt. Todd and provides ample opportunity for future additional value recognition. In January, we commenced a drill program expected to total 6,000 to 7,000 meters with the focus to add shallow resources at the north end of the deposit. We believe that if we can convert gold resources to gold reserves in this area, it would add value to Mt. Todd by improving cash flow as a result of a more constant production profile, reduced stripping, and an increased mine life for all development scenarios. We expect to report initial results of the program in the coming weeks. The drilling is expected to have an all-in cost of approximately $2 million and to be completed by the end of the year. As part of our evaluation of our stage development strategy for Mt. Todd, we plan to leverage the results of the drilling program and all of our prior technical studies by advancing evaluations of smaller-scale stage development scenarios. Previous studies demonstrated the opportunity to significantly lower the initial capital expenditure, maintain high margins, and deliver attractive economic returns. We believe that alternative development strategies offer valuable optionality as we focus on creating shareholder value and attracting investor interest in Mt. Todd. The scope of technical studies will be defined after the initial drilling results are evaluated. Now, in conclusion, 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. Mt. Todd controls or Vista controls the Mt. Todd project, the second largest reserve package in Australia. In addition to its size, Mt. Todd provides a number of other advantages for investors and for those interested in a potential transaction. Mt. Todd is ideally located in the Northern Territory of Australia, an extremely stable and mining-friendly jurisdiction. The existing project infrastructure in Mt. Todd provides very distinct construction timelines and risk mitigation advantages. All the major permits for the development of Mt. Todd have 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 technical programs focus on de-risking the project and incorporating designs that are capital efficient with low operating costs. We believe the proposed changes to the NT royalty regime will help to improve project economics, enhance the project's leverage to the gold price, and provide a stronger foundation for improved shareholder value. We believe Mt. Todd is a superior asset and one of the most attractive development-stage projects not just in Australia, but in the world. Our primary objective is to achieve a valuation for Mt. Todd that is reflective of the gold production profile, long operating life, excellent gold recovery, favorable operating costs, robust project economics as demonstrated by the feasibility study, and the fact that we hold all approvals for all major permits. 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. We believe that Vista Gold represents an exceptional investment opportunity and that current prices represent a tremendous opportunity to establish a position or increase one's holdings in Vista Gold. We'll now respond to any questions from participants on this call.

Thank you. This concludes today's call. Thank you for participating. You may all disconnect.