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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from - to -
Commission File Number 1-9025
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VISTA GOLD CORP.
(Exact Name of Registrant as Specified in its Charter)
Continued under the laws of the Yukon Territory None
(State or other Jurisdiction of Incorporation or (IRS Employer
Organization) Identification Number)
Suite 3000
370 Seventeenth Street
Denver, Colorado 80202
(Address of Principal Executive Offices) (Zip Code)
(303) 629-2450
(Registrant's Telephone Number, Including Area Code)
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common shares without par value American Stock Exchange
The Toronto Stock Exchange
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS 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 THE
FILING REQUIREMENTS FOR THE PAST 90 DAYS: Yes /X/ No / /
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K: /X/
AGGREGATE MARKET VALUE OF OUTSTANDING COMMON SHARES HELD BY NON-AFFILIATES:
As of March 20, 2000, the aggregate market value of outstanding Common Shares of
the registrant held by non-affiliates was approximately $11,339,380.
OUTSTANDING COMMON SHARES:
As of March 20, 2000, 90,715,040 Common Shares of the registrant were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
To the extent herein specifically referenced in Parts III and IV, the Management
Information and Proxy Circular for the registrant's 2000 Annual General Meeting.
See Parts III and IV.
TABLE OF CONTENTS
GLOSSARY .................................................................................... 1
CURRENCY .................................................................................... 3
METRIC CONVERSION TABLE ..................................................................... 3
UNCERTAINTY OF FORWARD-LOOKING STATEMENTS ................................................... 3
PART I
ITEM 1. BUSINESS ............................................................................ 4
Overview .............................................................................. 4
Segmented Financial Information ....................................................... 5
Corporate Organization Chart .......................................................... 5
Significant Developments in 1999 ...................................................... 6
Refining and Marketing ................................................................ 7
Exploration and Business Development .................................................. 8
Property Interests and Mining Claims .................................................. 9
Reclamation ........................................................................... 9
Government Regulation ................................................................. 10
Environmental Regulation .............................................................. 10
Competition ........................................................................... 10
Employees ............................................................................. 10
Risk Factors .......................................................................... 11
ITEM 2. PROPERTIES .......................................................................... 13
Operations ............................................................................ 13
Hycroft Mine .......................................................................... 13
Mineral Ridge Mine .................................................................... 17
Amayapampa and Capa Circa Properties .................................................. 20
Exploration Properties ................................................................ 27
1999 Exploration Expenditures ......................................................... 29
2000 Exploration Plan ................................................................. 29
ITEM 3. LEGAL PROCEEDINGS ................................................................... 29
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS ................................... 29
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ............... 30
Price Range of Common Shares .......................................................... 30
Dividends ............................................................................. 30
Exchange Controls ..................................................................... 30
Certain Canadian Income Tax Considerations for Non-Residents of Canada ................ 30
ITEM 6. SELECTED FINANCIAL DATA ............................................................. 31
Selected Financial Data ............................................................... 31
United States$/Canadian$ Exchange Rates ............................................... 33
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ............................................................... 33
Introduction .......................................................................... 33
Results of Operations ................................................................. 33
Outlook ............................................................................... 40
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ......................... 41
Commodity Price Risk .................................................................. 41
Interest Rate Risk .................................................................... 42
Foreign Currency Exchange Rate Risk ................................................... 42
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ............................ 43
Management's Responsibility for Financial Information ................................. 43
Report of Independent Accountants ..................................................... 44
Consolidated Financial Statements ..................................................... 45
Notes to Consolidated Financial Statements ............................................ 49
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ................................................................ 65
PART III
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT ............................................... 65
Directors ............................................................................. 65
Executive Officers .................................................................... 67
Executive and Audit Committees ........................................................ 67
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS ............................................. 67
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ..................... 68
ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS ...................................... 68
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K .................... 69
Documents Filed as Part of Report ..................................................... 69
Reports on Form 8-K ................................................................... 73
SUPPLEMENTAL INFORMATION .................................................................... 73
SIGNATURES .................................................................................. 74
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GLOSSARY
"ADIT" means a horizontal or nearly horizontal passage driven from the
surface for the working or unwatering of a mine.
"AMALGAMATION" means the amalgamation of Granges and Da Capo effective on
November 1, 1996.
"ASSAY" means to test ores or minerals by chemical or other methods for the
purpose of determining the amount of valuable metals contained.
"BRECCIA" means rock consisting of fragments, more or less angular, in a
matrix of finer-grained material or of cementing material.
"CLAIM" means a mining title giving its holder the right to prospect, explore
for and exploit minerals within a defined area.
"COMMON SHARES" means common shares without par value of Vista Gold.
"CORPORATION" means the consolidated group consisting of Vista Gold Corp. and
its subsidiaries Hycroft Resources & Development, Inc., Hycroft Lewis Mine,
Inc., Vista Gold Holdings Inc., Vista Gold U.S. Inc., Granges Inc., Vista
Gold (Antigua) Corp., Sociedad Industrial Yamin Limitada, Compania Inversora
Vista S.A., Minera Nueva Vista S.A., Compania Exploradora Vistex S.A., and
Mineral Ridge Resources Inc.
"CUT-OFF GRADE" means the minimum grade of ore used to establish reserves.
"DA CAPO" means Da Capo Resources Ltd., a predecessor of Vista Gold.
"DEPOSIT" means an informal term for an accumulation of mineral ores.
"DIAMOND DRILL" means a rotary type of rock drill that cuts a core of rock
and is recovered in long cylindrical sections, two centimeters or more in
diameter.
"DORE" means unrefined gold and silver bullion consisting of approximately
90% precious metals which will be further refined to almost pure metal.
"FLOTATION" means a process whereby value minerals are separated from waste
by attaching them to air bubbles in a pulp by the use of small amounts of
chemicals.
"GRANGES" means Granges Inc., a predecessor of Vista Gold.
"HEAP LEACH" means a gold extraction method that percolates a cyanide
solution through ore heaped on an impervious pad or base.
"HYCROFT INC." means Hycroft Resources & Development, Inc., an indirect
wholly-owned subsidiary of Vista Gold.
"HYCROFT LEWIS" means Hycroft Lewis Mine, Inc., an indirect wholly-owned
subsidiary of Vista Gold.
"MERRILL-CROWE" means a process for recovering gold from solution by
precipitation with zinc dust.
"MINERALIZATION" means material containing valuable minerals.
"MINERAL RIDGE INC." means Mineral Ridge Resources Inc., an indirect
wholly-owned subsidiary of Vista Gold.
"MONTREAL TRUST" means Vista Gold's registrar and transfer agent, Montreal
Trust Company of Canada.
"ORE" means material containing valuable minerals that can be economically
extracted.
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"OXIDE RESERVE" or "OXIDE RESOURCE" means mineralized rock in which some of
the original minerals have been oxidized. Oxidation tends to make the ore
more porous and permits a more complete permeation of cyanide solutions so
that minute particles of gold in the interior of the minerals will be more
readily dissolved.
"PROBABLE RESERVES" means reserves for which quantity and grade and/or
quality are computed from information similar to that used for proven
reserves, but the sites for inspection, sampling and measurement are farther
apart or are otherwise less adequately spaced. The degree of assurance,
although lower than that for proven reserves, is high enough to assume
continuity between points of observation.
"PROVEN RESERVES" means reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade
and/or quality are computed from the results of detailed sampling and (b) the
sites for inspection, sampling and measurement are spaced so closely and the
geologic character is so well defined that size, shape, depth, and mineral
content of reserves are well-established.
"RECOVERY" means that portion of the metal contained in the ore that is
successfully extracted by processing, expressed as a percentage.
"RESERVES" or "ORE RESERVES" mean that part of a mineral deposit which could
be economically and legally extracted or produced at the time of the reserve
determination.
"RESOURCE" or "MINERAL RESOURCE" means a deposit or concentration of minerals
for which there is sampling information and geologic understanding for an
estimate to be made of the contained minerals.
"RUN-OF-MINE" refers to mined ore of a size that can be processed without
further crushing.
"SAMPLING" means selecting a fractional, but representative, part of a
mineral deposit for analysis.
"STOPE" means an underground excavation that is made by removing ore from the
surrounding rock.
"STRIKE", when used as a noun, means the direction, course or bearing of a
vein or rock formation measured on a level surface and, when used as a verb,
means to take such direction, course or bearing.
"STRIKE LENGTH" means the longest horizontal dimension of an orebody or zone
of mineralization.
"STRIPPING RATIO" means the ratio between waste and ore in an open pit mine.
"SULFIDE" means a compound of sulfur and some other element.
"TAILINGS" means material rejected from a mill after most of the valuable
minerals have been extracted.
"TRENCHING" means prospecting in which subsurface strata are exposed by
digging pits across the strike of a lode.
"VEIN" means a fissure, fault or crack in a rock filled by minerals that have
traveled upwards from some deep source.
"VISTA GOLD" means Vista Gold Corp.
"VOLCANICLASTIC" means derived by ejection of volcanic material from a
volcanic vent.
"WASTE" means rock lacking sufficient grade and/or other characteristics of
ore.
"YAMIN" means Sociedad Industrial Yamin Limitada, until February 7, 2000, a
direct wholly-owned subsidiary of Vista Gold.
"ZAMORA" means Zamora Gold Corp.
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CURRENCY
Unless otherwise specified, all dollar amounts in this report are expressed in
United States dollars.
The exchange rate at the end of each of the five years to December 31, 1999,
and the average, the high and the low rates of exchange for each year in that
five year period, are set forth in "Item 6. Selected Financial Data United
States $/Canadian $ Exchange Rates". These exchange rates are expressed as
the amount of United States funds equivalent to one Canadian dollar, being
the noon buying rates in New York City for cable transfers in Canadian
dollars, as certified for customs purposes by the Federal Reserve Bank of New
York. On March 20, 2000, this noon buying rate was $1.4703 (Cdn.$1.00 equals
U.S.$0.6801).
METRIC CONVERSION TABLE
TO CONVERT IMPERIAL MEASUREMENT UNITS TO METRIC MEASUREMENT UNITS MULTIPLY BY
Acres............................................. Hectares............................... 0.4047
Feet.............................................. Meters................................. 0.3048
Miles............................................. Kilometers............................. 1.6093
Tons (short)...................................... Tonnes................................. 0.9071
Gallons........................................... Liters................................. 3.7850
Ounces (troy)..................................... Grams.................................. 31.103
Ounces (troy) per ton (short)..................... Grams per tonne........................ 34.286
UNCERTAINTY OF FORWARD-LOOKING STATEMENTS
This document, including any documents that are incorporated by reference as
set forth on the face page under "Documents incorporated by reference",
contains forwarding-looking statements concerning, among other things,
projected annual gold production, mineral resources, proven or probable
reserves and cash operating costs. Such statements are typically punctuated
by words or phrases such as "anticipates", "estimates", "projects",
"foresees", "management believes", "believes" and words or phrases of similar
import. Such statements are subject to certain risks, uncertainties or
assumptions. If one or more of these risks or uncertainties materialize, or
if underlying assumptions prove incorrect, actual results may vary materially
from those anticipated, estimated or projected. Important factors that could
cause actual results to differ materially from those in such forward-looking
statements are identified in this document under "Item 1. Business - Risk
Factors". Vista Gold assumes no obligation to update these forward-looking
statements to reflect actual results, changes in assumptions, or changes in
other factors affecting such statements.
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PART I
ITEM 1. BUSINESS.
OVERVIEW
The Corporation is engaged, directly and through joint ventures, in the
exploration for and the acquisition, development and operation of mineral
properties in North and South America. Since 1971, the Corporation and its
predecessor companies have held participating interests in seven mines, four
of which were discovered by the Corporation. The Corporation has also
operated five of the seven mines.
During 1999, the Corporation's primary mining operation and principal source
of earnings was the Hycroft mine (formerly known as the Crofoot/Lewis mine)
in Nevada, USA which produces gold and by-product silver. See "Item 2.
Properties -Hycroft Mine". In 1998, the Corporation acquired the Mineral
Ridge mine, a gold property also located in Nevada. During 1999, the Mineral
Ridge mine applied for protection under the U.S. Bankruptcy Code in order to
begin the process of a permanent cessation of all mining activities. See
"Item 2. Properties - Mineral Ridge Mine" and "Item 3. Legal Proceedings".
The Corporation owns the Amayapampa gold property in Bolivia for which a
feasibility study was completed in 1997 and a revised feasibility study was
completed in the first quarter of 2000. The Corporation's Capa Circa gold
property in Bolivia was sold on February 7, 2000. See "Item 2. Properties -
Amayapampa and Capa Circa Properties". The Corporation has approximately 12
additional mineral properties in North and South America covering
approximately 123,500 acres (50,000 hectares) in various stages of
evaluation. Vista Gold owns a 26% equity interest in Zamora, a Canadian
mineral exploration company with interests in mineral concessions in southern
Ecuador. See "Item 2. Properties - Exploration Properties - Ecuador". The
Corporation has approximately 325 full-time permanent employees.
The Corporation derives all of its current revenues from the sale of gold
extracted from the Hycroft mine. In fiscal 1997, 1998 and 1999, revenues from
sales of gold were $40 million, $37 million and $19 million, respectively.
Vista Gold was originally incorporated on November 28, 1983 under the name
"Granges Exploration Ltd.". In November 1983, Granges Exploration Ltd.
acquired all the mining interests of Granges AB in Canada. On June 28, 1985,
Granges Exploration Ltd. and Pecos Resources Ltd. amalgamated under the name
"Granges Exploration Ltd." and on June 9, 1989, Granges Exploration Ltd.
changed its name to "Granges Inc.". On May 1, 1995, Granges and Hycroft
Resources & Development Corporation were amalgamated under the name "Granges
Inc.". Effective November 1, 1996, Granges and Da Capo amalgamated under the
name "Vista Gold Corp.". Effective December 19, 1997, Vista Gold was
continued from British Columbia to the Yukon Territory, Canada under the
BUSINESS CORPORATIONS ACT (Yukon Territory).
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The current addresses, telephone and facsimile numbers of the offices of Vista
Gold are:
EXECUTIVE OFFICE REGISTERED AND RECORDS OFFICE
Suite 3000 - 370 Seventeenth Street 200 - 204 Lambert Street
Denver, Colorado, USA Whitehorse, Yukon Territory, Canada
80202 Y1A 3T2
Telephone: (303) 629-2450 Telephone: (867) 667-7600
Facsimile: (303) 629-2499 Facsimile: (867) 667-7885
SEGMENTED FINANCIAL INFORMATION
The Corporation operates in the mining industry in Canada, the United States
and Latin America. For information on the Corporation's sales, earnings from
operations and identifiable assets by geographic area see note 11 to the
consolidated financial statements for the year ended December 31, 1999 under
"Item 8. Consolidated Financial Statements and Supplementary Data - Notes to
Consolidated Financial Statements".
CORPORATE ORGANIZATION CHART
The name, place of incorporation, continuance or organization, and percent of
voting securities owned or controlled by Vista Gold as of December 31, 1999
for each subsidiary of Vista Gold is set out below.
[FLOWCHART DEPICTING ORGANIZATIONAL STRUCTURE OF VISTA GOLD CORP.]
(1) Sociedad Industrial Yamin Ltda., which owns the Capa Circa property, was
sold on February 7, 2000. See "Item 2. Operations - Capa Circa Property".
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SIGNIFICANT DEVELOPMENTS IN 1999
HYCROFT MINE
In 1999, the Hycroft mine produced 40,075 ounces of gold and 183,170 ounces
of silver. The Corporation suspended mining activities in December 1998 as a
result of low gold prices. Production of gold from ore stockpiled on the heap
leach pads during previous years is expected to continue in 2000. Gold
production for 2000 is estimated to be in excess of 12,000 ounces. During
1999, Hycroft mine gold production consistently exceeded expectations and as
a result, the Corporation conducted a $0.6 million exploration program to
determine the extent of the remaining Brimstone gold resource. The reserve
re-estimation process is being independently reviewed by Mineral Resources
Development, Inc. ("MRDI"). An initial reserve evaluation prepared by the
Corporation at a gold price of $275 per ounce resulted in proven and probable
reserves estimated at 24.0 million tons (21.8 million tonnes) of ore grading
0.021 gold ounces per ton (0.72 grams per tonne), and containing 495,000
ounces of gold and 4.1 million ounces of silver. These reserve calculations
have not been subject to independent verification; however, verification by a
qualified person within the Corporation has been performed. These reserves
have been estimated following the guidelines of Canadian National Instrument
43-101 under the direction of Qualified Person Warren Bates, International
Exploration Manager.
MINERAL RIDGE MINE
On December 10, 1999, Mineral Ridge Inc., a wholly-owned subsidiary of the
Corporation, voluntarily filed for protection under the U.S. Bankruptcy Code.
See "Item 2. Properties - Mineral Ridge Mine". Gold production at the Mineral
Ridge mine failed to meet expectations. Initially, mechanical difficulties
inhibited production efforts. But as mining operations continued in the
latter half of the year, the ore mined was less than that estimated in the
ore reserve calculations. After reviewing the reserves with Independent
Mining Consultants, Inc., an independent consultant, it was concluded that
significant ore deficiencies in the future, compared with the original
reserve estimates, were probable. The reduced gold production and ore
reserves caused by the ore deficiencies and low gold prices resulted in the
mine failing to meet its required cash-flow targets under Mineral Ridge
Inc.'s loan agreement with Dresdner Bank AG. Various alternatives were then
considered, although none were considered to be viable, and a protective
bankruptcy filing was made.
EXPLORATION
In 1999, exploration was limited due to the lack of sufficient funds to
operate a program. Nevertheless, Vista Gold was able to compile data from
ongoing projects to further some of its exploration goals. The 1999
exploration activities were focused on the Corporation's two mine site
properties in Nevada, the Hycroft mine and the Mineral Ridge mine. A limited
amount of exploration was carried out and a small amount of gold was produced
by Zamora in Ecuador. The Corporation also conducted numerous exploration
reviews and reserve audits for acquisition and development opportunities.
At the Hycroft mine in Nevada, nine diamond drill holes for 4,870 feet (1,485
meters) and 11 reverse-circulation drill holes for 5,540 feet (1,690 meters)
were completed in the un-mined southern portion of the Brimstone deposit.
Seventeen of the 20 holes were twin holes, which were used to establish an
upgrade factor for the remaining Brimstone resource. The upgrade program was
necessary in light of the fact that historical gold production from the
Brimstone deposit was 26% greater than predicted from the 1995 ore reserves.
Over 525 reverse-circulation drill holes were re-logged in the Albert and
Brimstone area, a new geologic model was built, and the current assay and
geologic files were audited and re-entered into a new database. In conjunction
with MRDI, a gold grade enhancement of 25% was
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calculated. The improved gold grades were used by the Corporation to conduct
an initial mining reserve evaluation.
At the Mineral Ridge mine, the Corporation drilled 49 reverse-circulation
drill holes. The program consisted of 9,640 feet (2,940 meters) of drilling.
Mineralization was encountered at the Blue Lite zone, extending known
mineralization 250 feet (76 meters) to the south. Eight of 15 drill holes cut
notable intercepts above cut-off grades in this area. In the Mary Pit area,
17 of 38 holes intersected mineralization above the cut-off grade. These
holes were drilled around the margins of the Mary Pit to increase reserves
and to extend areas of known resources within 1,000 feet (305 meters) of the
current planned Mary Pit. Six holes drilled to intercept downstrike
extensions of the Drinkwater mineralization were unsuccessful in locating
potentially mineable mineralization.
In 1999, exploration by Zamora was focused on developing gold reserves at the
formerly producing Campanillas mine. Also, reconnaissance exploration was
carried out near the Campanillas mine and on the Nambija I concessions.
REFINING AND MARKETING
The Hycroft mine produces dore, which is processed by Metalor USA Refining
Corporation in North Attleboro, Massachusetts. Gold and silver can be sold on
numerous markets throughout the world, and the market price is readily
ascertainable. Alternate refiners for silver and gold produced from the
Hycroft mine are available if necessary. As a result of the large number of
available gold and silver purchasers, the Corporation is not dependent upon
the sale to any one customer of either its gold or silver.
GOLD AND SILVER SALES
The profitability of gold and silver mining is directly related to the market
price of the metal compared with the cost of production. The following is a
brief description of factors affecting, and historical trends in, the market
prices of gold and silver, which account for most of the Corporation's
revenue. A description of the Corporation's hedging and forward sales
commitments also follows.
Gold prices fluctuate widely and are affected by numerous factors, including
expectations with respect to the rate of inflation, the market value of
various currencies (specifically, the United States dollar relative to other
currencies), interest rates, central bank holdings, market speculation,
global and regional political and economic circumstances and governmental
policies, including those with respect to gold holdings by a nation or its
citizens.
The demand for and supply of gold affect gold prices but not necessarily in
the same manner as supply and demand affect the prices of other commodities.
The supply of gold consists of a combination of new mine production and
existing stocks of bullion and fabricated gold held by governments, public
and private financial institutions, industrial organizations and private
individuals.
The price of silver, while related somewhat to the price of and affected to
some extent by the same factors as gold, is more subject to normal supply and
demand factors than the price of gold. Silver has a wide range of industrial
uses on the demand side and is subject to both mine production and
substantial secondary supply from scrap and dishoarding on the supply side.
Silver inventories held by metal exchanges remained high during the 1980s and
1990s and lower industrial and consumer demand and relatively high interest
rates continued to depress the price of silver during much of that period.
- 7 -
The following table sets out the annual high and low gold prices per troy
ounce in the London bullion market in United States dollars for the years
indicated:
HIGH LOW
---- ----
1999 $326 $253
1998 313 273
1997 367 283
1996 415 367
1995 396 372
On December 30, 1999, the afternoon fixing price of gold on the London bullion
market was $290.25 per ounce.
The following table sets out the annual high and low silver price per ounce
(Handy & Harman New York Prices) in United States dollars for the years
indicated:
HIGH LOW
----- -----
1999 $5.77 $4.91
1998 7.31 4.72
1997 6.21 4.18
1996 5.79 4.67
1995 6.01 4.36
On December 30, 1999, the Handy & Harman price for silver was $5.395 per ounce.
HEDGING AND METAL SALES COMMITMENTS
The Corporation may from time to time protect against falling gold prices
through forward sales of future production. Under this hedging process, the
sale price of gold to be delivered at a future date is fixed at the time the
forward sale is made, thus eliminating the effect of any future gold price
fluctuations. Revenue from these forward sales is recognized when the gold is
due to be delivered. At December 31, 1999, the Corporation had no forward
sales commitments. Vista Gold's Board of Directors regularly reviews the
Corporation's forward sales arrangements. The level of future forward sales
will depend in part upon the Corporation's assessment of gold market
conditions at the relevant time.
EXPLORATION AND BUSINESS DEVELOPMENT
The Corporation's exploration and business development activities are focused
on gold. In the United States, the Corporation has an exploration project at
the Hycroft mine located in Nevada. In Bolivia, the Amayapampa properties
represent both development and exploration projects. The Copacabana and Irpa
Irpa properties in Bolivia represent exploration targets. In Ecuador, the
exploration program in the Nambija gold district primarily on the Mina Real
and Comcumay properties will be continued by Zamora, which is 26% owned by
Vista Gold.
The Corporation's exploration activities headquarters are in Denver,
Colorado, with one district exploration office in La Paz, Bolivia. The
exploration department has a permanent staff of two geologists. Consultants
and contract personnel are used for specific projects and tasks.
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The 1999 exploration program was focused on the Brimstone upgrade project at
the Hycroft mine, with limited exploration at the Mineral Ridge mine and at
Zamora's properties.
During 2000, the Corporation expects to spend $0.3 million on exploration.
The majority of the exploration expenditures will be made in Nevada at the
Hycroft mine.
PROPERTY INTERESTS AND MINING CLAIMS
In the United States, most of the Corporation's exploration activities are
conducted in the state of Nevada. Mineral interests may be owned in Nevada by
(i) the United States, (ii) the state of Nevada, or (iii) private parties.
Where prospective mineral properties are owned by private parties or by the
state, some type of property acquisition agreement is necessary in order for
the Corporation to explore or develop such property. Generally, these
agreements take the form of long term mineral leases under which the
Corporation acquires the right to explore and develop the property in
exchange for periodic cash payments during the exploration and development
phase and a royalty, usually expressed as a percentage of gross production or
net profits derived from the leased properties if and when mines on the
properties are brought into production. Other forms of acquisition agreements
are exploration agreements coupled with options to purchase and joint venture
agreements. Where prospective mineral properties are held by the United
States, mineral rights may be acquired through the location of unpatented
mineral claims upon unappropriated federal land. If the statutes and
regulations for the location of a mining claim are complied with, the locator
obtains a valid possessory right to develop and produce minerals from the
claim. The right can be freely transferred and, provided that the locator is
able to prove the discovery of locatable minerals on the claims, is protected
against appropriation by the government without just compensation. The claim
locator also acquires the right to obtain a patent or fee title to his claim
from the federal government upon compliance with certain additional
procedures.
Mining claims are subject to the same risk of defective title that is common
to all real property interests. Additionally, mining claims are
self-initiated and self-maintained and therefore, possess some unique
vulnerabilities not associated with other types of property interests. It is
impossible to ascertain the validity of unpatented mining claims solely from
an examination of the public real estate records and, therefore, it can be
difficult or impossible to confirm that all of the requisite steps have been
followed for location and maintenance of a claim. If the validity of a
patented mining claim is challenged by the Bureau of Land Management or
Forest Service on the grounds that mineralization has not been demonstrated,
the claimant has the burden of proving the present economic feasibility of
mining minerals located thereon. Such a challenge might be raised when a
patent application is submitted or when the government seeks to include the
land in an area to be dedicated to another use.
RECLAMATION
Although reclamation is conducted concurrently with mining whenever feasible,
the Corporation generally is required to mitigate long-term environmental
impacts by stabilizing, contouring, resloping, and revegetating various
portions of a site once mining and mineral processing operations are
completed. These reclamation efforts are conducted in accordance with
detailed plans, which have been reviewed and approved by the appropriate
regulatory agencies.
Management estimates the reclamation and closure costs for the Hycroft mine
to be $4.4 million. These costs are charged to earnings over the life of the
mine and the provision to date is $4.4 million. As reported in the
Corporation's annual report on Form 20-F for 1994, an amended Crofoot/Lewis
Mine Reclamation Plan that included the new Brimstone deposit was submitted
to the Nevada Bureau of Land
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Management (the "BLM") in March 1994. In April 1995, the BLM approved the
plan and a surety bond in the amount of $5.1 million was posted to secure
reclamation obligations under the plan.
GOVERNMENT REGULATION
Mining operations and exploration activities are subject to various national,
state, provincial and local laws and regulations in the United States,
Bolivia, Canada and other jurisdictions, which govern prospecting,
development, mining, production, exports, taxes, labor standards,
occupational health, waste disposal, protection of the environment, mine
safety, hazardous substances and other matters. The Corporation has obtained
or has pending applications for those licenses, permits or other
authorizations currently required to conduct its operations. The Corporation
believes that it is complying in all material respects with applicable
mining, health, safety and environmental statutes and the regulations passed
thereunder in the United States, Canada, Bolivia and the other jurisdictions
in which the Corporation operates. There are no current orders or directions
with respect to the foregoing laws and regulations.
ENVIRONMENTAL REGULATION
The Corporation's mining operations and exploration activities are subject to
various federal, state and local laws and regulations governing protection of
the environment. These laws are continually changing and, as a general
matter, are becoming more restrictive. The Corporation's policy is to conduct
business in a way that safeguards public health and the environment. The
Corporation believes that its operations are conducted in material compliance
with applicable laws and regulations.
Changes to current local, state or federal laws and regulations in the
jurisdictions where the Corporation operates could require additional capital
expenditures and increase operating and/or reclamation costs. Although the
Corporation is unable to predict what additional legislation, if any, might
be proposed or enacted, additional regulatory requirements could render
certain mining operations uneconomic.
During 1999, there were no material environmental incidents or non-compliance
with any applicable environmental regulations.
COMPETITION
The Corporation competes with other mining companies in connection with the
acquisition of gold and other precious metals properties. There is noteworthy
and increasing competition for the limited number of gold acquisition
opportunities, some of which is with other companies having substantially
greater financial resources than the Corporation. As a result, the
Corporation may eventually be unable to acquire attractive gold mining
properties. The Corporation believes no single company has sufficient market
power to affect the price or supply of gold in the world market.
EMPLOYEES
As at December 31, 1999, the Corporation had approximately 325 permanent
full-time employees, of which 25 were employed at the Hycroft mine site, 12
were employed at the Mineral Ridge mine site, 278 were employed at the
Amayapampa properties, two were employed in exploration activities in Denver,
Colorado and Vancouver, British Columbia, and eight were employed at Vista
Gold's executive office (other than in exploration activities). 263 of the
Corporation's employees are represented by a labor union in Bolivia. The
Hycroft mine has never experienced a loss of production due to a work
stoppage. The Corporation considers its relations with its employees to be
satisfactory.
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RISK FACTORS
FLUCTUATING PRICES
The Corporation's revenues are expected to be, in large part, derived from
the mining and sale of gold and other precious metals or interests related
thereto. The price of those commodities has fluctuated widely, particularly
in recent years, and is affected by numerous factors beyond the control of
the Corporation, including international, economic and political trends,
expectations of inflation, currency exchange fluctuations, central bank
activities, interest rates, global or regional consumption patterns (such as
the development of gold coin programs), speculative activities and increased
production due to new mine developments and improved mining and production
methods. The effect of these factors on the price of precious metals, and
therefore the economic viability of any of the Corporation's projects, cannot
accurately be predicted.
EXPLORATION AND DEVELOPMENT
All of the mineral properties, which the Corporation owns, other than the
Hycroft mine, are in the exploration and development stages. Mineral
exploration and development involves a high degree of risk and few
properties, which are explored, are ultimately developed into producing
mines. There is no assurance that the Corporation's mineral exploration and
development activities will result in any discoveries of commercial bodies of
ore. The long-term profitability of the Corporation's operations will be in
part directly related to the cost and success of its exploration programs,
which may be affected by a number of factors beyond the control of the
Corporation.
Substantial expenditures are required to establish ore reserves through
drilling and analysis, to develop metallurgical processes to extract metal
from the ore and, in the case of new properties, to develop the mining and
processing facilities and infrastructure at any site chosen for mining.
Although substantial benefits may be derived from the discovery of a major
mineralized deposit, no assurance can be given that minerals will be
discovered in sufficient quantities to justify commercial operations or that
the funds required for development can be obtained on a timely basis.
OPERATING HAZARDS AND RISKS
Mineral exploration involves many risks that even a combination of
experience, knowledge and careful evaluation may not be able to overcome.
Operations in which the Corporation has direct or indirect interests will be
subject to all the hazards and risks normally incidental to exploration,
development and production of gold and other metals, any of which could
result in work stoppages, damage to property and possible environmental
damage. Although the Corporation has obtained liability insurance in an
amount that they consider adequate, the nature of these risks is such that
liabilities might exceed policy limits, the liabilities and hazards might not
be insurable, or the Corporation might elect not to insure itself against
such liabilities due to high premium costs or other reasons, in which event,
the Corporation could incur significant costs that could have a materially
adverse effect upon its financial condition.
MINORITY INTEREST IN PROPERTIES
Third parties hold minority interests in certain of the Corporation's
properties. Under Bolivian law, a minority interest in a mining concession is
an undivided interest in that concession and the holder of such a minority
interest may take action to restrict all exploration and development of the
mining concessions by the holder of the majority interest if such exploration
and development is conducted without the minority owner's permission.
Furthermore, if the majority and minority parties wish to separate their
- 11 -
interests, but are unable to agree as to the method of division or purchase
of the property, the parties must file a request for division before a
Bolivian civil court.
CALCULATION OF RESERVES AND GOLD RECOVERY
There is a degree of uncertainty attributable to the calculation of reserves
and corresponding grades being mined or dedicated to future production. Until
reserves are actually mined and processed, the quantity of ore and grades
must be considered as an estimate only. In addition, the quantity of reserves
and ore may vary depending on metal prices. Any material change in the
quantity of reserves, mineralization, grade or stripping ratio may affect the
economic viability of the Corporation's properties. In addition, there can be
no assurance that gold recoveries or other metal recoveries in small-scale
laboratory tests will be duplicated in larger scale tests under on-site
conditions or during production.
ENVIRONMENTAL FACTORS
All phases of the Corporation's operations are subject to environmental
regulation. Environmental legislation is evolving in a manner which will
require stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects
and a heightened degree of responsibility for companies and their officers,
directors and employees. There is no assurance that future changes in
environmental regulation, if any, will not adversely affect the Corporation's
operations.
COMPETITION AND AGREEMENTS WITH OTHER PARTIES
The mining industry is intensely competitive in all of its phases, and the
Corporation competes with many companies possessing greater financial
resources and technical facilities than themselves. Competition in the mining
business could adversely affect the Corporation's ability to acquire suitable
producing properties or prospects for mineral exploration in the future.
CONFLICTS OF INTEREST
Certain directors of the Corporation are officers and/or directors of, or are
associated with other natural resource companies that acquire interests in
mineral properties. Such associations may give rise to conflicts of interest
from time to time. In the event that any such conflict of interest arises, a
director who has such a conflict will disclose the conflict to a meeting of
the directors of the company in question and will abstain from voting for or
against approval of any matter in which such director may have a conflict. In
appropriate cases, the company in question will establish a special committee
of independent directors to review a matter in which several directors, or
management, may have a conflict. In accordance with the laws of the Yukon
Territory, the directors of all companies are required to act honestly, in
good faith and in the best interests of a company for which they serve as a
director.
TITLE TO ASSETS
Although the Corporation has reviewed and is satisfied with the title for all
mineral properties in which it has a material interest, there is no guarantee
that title to such concessions will not be challenged or impugned.
- 12 -
POLITICAL AND ECONOMIC INSTABILITY IN SOUTH AMERICA
Certain of the Corporation's exploration and development activities occur in
Bolivia and Ecuador. As a result, the Corporation may be affected by risks
associated with political or economic instability in those countries. The
risks include, but are not limited to: military repression, extreme
fluctuations in currency exchange rates, labor instability or militancy,
mineral title irregularities and high rates of inflation. Changes in mining
or investment policies or shifts in political attitude in the aforementioned
countries may adversely affect the Corporation's business. Operations may be
affected in varying degrees by government regulation with respect to
restrictions on production, price controls, export controls, income taxes,
expropriation of property, maintenance of claims, environmental legislation,
land use, land claims of local people, water use and mine safety. The effect
of these factors cannot be accurately predicted.
FOREIGN CURRENCY
The Corporation's operations throughout North and South America render the
Corporation subject to foreign currency fluctuations, which may materially
affect financial position and results. The Corporation does not engage in
currency hedging to offset any risk of currency fluctuations.
CASH RESOURCES AND LIQUIDITY
The Corporation believes that it has sufficient financial resources to
continue producing gold from previously mined and inventoried ore at the
Hycroft mine. However, the Corporation will have to raise additional funds
from external sources in order to restart mining activities at the Hycroft
mine or begin construction and development activities at the Amayapampa
project in Bolivia.
There can be no assurance that additional financing will be available at all
or on acceptable terms and, if additional financing is not available, the
Corporation may have to substantially reduce or cease its operations. The
Corporation is actively investigating various alternatives, including debt
financing, the issuance of equity, mergers with other companies and the sale
of property interests.
ITEM 2. PROPERTIES.
OPERATIONS
Detailed information is contained herein with respect to the Hycroft mine
(formerly known as the Crofoot/Lewis mine), the Mineral Ridge mine and the
Amayapampa properties. Vista Gold holds the Hycroft mine through its
wholly-owned subsidiaries, Vista Gold Holdings Inc., Hycroft Inc. and Hycroft
Lewis. Vista Gold holds the Mineral Ridge mine through its wholly-owned
subsidiaries, Vista Gold Holdings Inc. and Mineral Ridge Inc. Vista Gold
holds the Amayapampa properties through its wholly-owned subsidiaries, Vista
Gold (Antigua) Corp., Compania Inversora Vista S.A., Minera Nueva Vista S.A.,
and Compania Exploradora Vistex S.A. Estimates of reserves and production
herein are subject to the effect of changes in metal prices and to the risks
inherent in mining and processing operations.
HYCROFT MINE
The Hycroft mine and related facilities are located 54 miles (86 kilometers)
west of Winnemucca, Nevada. The mine is an open-pit, heap leaching operation
that produces gold and by-product silver. The Lewis mine was originally a
sulfur mine. In 1983, it commenced operation as a small heap-leach gold mine.
The Corporation acquired the Lewis mine in early 1987 and completed
construction of the
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adjacent Crofoot mine project in April 1988. In early 1989, the two mines
were consolidated into a single operation under an ore purchase agreement,
with ore from both properties processed through the larger and more efficient
Crofoot plant. Hycroft Inc. began stripping at the new Brimstone pit, located
one mile to the east of the existing Central Fault pit, in April 1996 and
commenced construction of a new 3 million-square-foot (280,000 square meter)
leach pad and a 2,800 gallon-per-minute (10,598 liter-per-minute) leach
solution processing plant in the summer of the same year. Ore from the
Brimstone pit was hauled to the new leach pad beginning in September 1996 and
the Brimstone plant commenced operation in February 1997. Mining operations
at the Hycroft mine were suspended in December 1998.
Gold production continued in 1999, and is expected to continue in 2000, from
gold contained in the heap leach pads. In 1999, the Hycroft mine produced
40,075 ounces of gold and 183,170 ounces of silver. Hycroft mine gold
production for 2000 is estimated to be in excess of 12,000 ounces. The
Corporation will continue to review the economic situation and gold resources
to determine whether operations can be restarted. Reclamation will proceed in
areas that will not be disturbed by future operations.
DESCRIPTION OF PROPERTIES
The Crofoot and Lewis properties together comprise approximately 9,600 acres
(3,885 hectares). The Crofoot property, originally held under two leases,
covers approximately 3,600 acres (1,460 hectares). The Lewis property, which
virtually surrounds the Crofoot property, is held through a lease that covers
approximately 6,000 acres (2,430 hectares). The mine is accessible by road
and has access to adequate supplies of water and power. The major mining
facilities consist of mobile mining equipment, four leach pads, two
Merrill-Crowe gold-silver recovery plants and associated maintenance and
support facilities.
GEOLOGY AND HISTORY
The Hycroft mine is located on the western flank of the Kamma Mountains. The
deposit is hosted in a volcanic eruptive breccia and conglomerates associated
with the Tertiary Kamma Mountain volcanics. The volcanics are mainly acidic
to intermediate tuffs, flows and coarse volcaniclastic rocks. Fragments of
these units dominate the clasts in the eruptive breccia. Volcanic rocks have
been block-faulted by dominant north-trending structures, which have affected
the distribution of alteration and mineralization. The Central Fault and East
Fault control the distribution of mineralization and subsequent oxidation. A
post-mineral range-front fault separates the orebody from the adjacent
Pleistocene Lahontan Lake sediments in the Black Rock Desert. The geological
events have created a physical setting ideally suited to the open-pit,
heap-leach mining operation at the Hycroft mine. The heap leach method is
widely used in the southwestern United States and allows the economical
treatment of oxidized low-grade ore deposits in large volumes.
The known gold mineralization within the Crofoot and Lewis properties extends
for a distance of three miles (4.8 kilometers) in a north-south direction by
1.5 miles (2.5 kilometers) in an east-west direction. Mineralization extends
to a depth of less than 330 feet (100 meters) in the outcropping to
near-outcropping portion of the deposit on the northwest side to over 990
feet (300 meters) in the Brimstone deposit in the east. Not all the
mineralization is oxidized and the depth of oxide ore varies considerably
over the area of mineralization. The determination of whether mineralization
can be mined economically is dependent on the grade of mineralization, the
depth of overburden and the degree of oxidation.
In 1992, Hycroft Inc. exercised its options to convert its leasehold
interests in the Crofoot property into a 100% ownership interest in the
patented mining claims, a 100% possessory interest in the unpatented claims
and a 100% interest in the incidental rights thereto, all subject to 4% net
profits royalties and
- 14 -
excluding rights to sulfur. No royalty payments were made in 1995, 1994 and
1993 because minimum royalty payments made prior to 1993 aggregating $2.8
million were available for credit against the royalty obligations. The
Crofoot lease/purchase agreement was amended in 1996 to provide for minimum
advance royalty payments of $120,000 on January 1 of each year in which
mining occurs. An additional $120,000 payment is due if ore production
exceeds 5.0 million tons from the Crofoot property in any calendar year. All
advance royalty payments are available as credit against the 4% net profits
royalty. The aggregate acquisition cost to Hycroft Inc. was $6,881,481 and
was financed by the issuance of Common Shares and the assumption of certain
debts associated with the Lewis mine. The leasehold interest in the Lewis
property extends until January 1, 2013 or for so long thereafter as Hycroft
Lewis continues to conduct commercial mining operations on the property.
The Lewis lease provides for the payment to the lessor of a 5% net smelter
return royalty on gold production. The royalty increases for ore grades above
0.05 ounce per ton and is offset by annual advance minimum royalties. The
Corporation has the right to commingle the ore from the Lewis property with
ore from the adjoining Crofoot property under an agreement with the lessor of
the Lewis property.
The ore reserves mined in 1998 in the Brimstone deposit, which lies partially
on the Crofoot property and partially on the Lewis property, were processed
on both the Brimstone leach pad and the Crofoot leach pad. The allocation of
metal produced from the commingled Crofoot and Lewis ores is calculated using
methods consistent with industry standards. The same method will be employed
during 2000 if gold mining is restarted.
MINING AND PROCESSING
During 1999, no ore was excavated at the Hycroft mine. Waste stripping was
suspended in January 1998 and ore mining was suspended in December 1998.
Until November 1996, higher-grade ore was crushed prior to treatment on the
leach pads. From November 1996 to December 1998, all ore was hauled directly
to the leach pads without crushing. Dilute alkaline cyanide solution is
pumped from a pond to the heap surface and distributed evenly over the
crushed and run-of-mine ore through a network of pipes and irrigation
sprinklers or drip emitters. The solution percolates down through the layers
of ore, preferentially leaching gold and silver from the rock. This pregnant
solution, containing dissolved gold and silver, flows along the surface of
the impervious leach pad to a collection ditch from which it drains into one
of two pregnant solution ponds. The low-grade solutions are recirculated to
the heaps to increase the amount of gold in the solution, and the high-grade
solution is pumped directly to the recovery plant where the gold and silver
are extracted. The process is a zero-discharge closed circuit.
The Crofoot recovery plant can process up to 3,000 gallons-per-minute (11,355
liters-per-minute) of solution from leach pads 1, 2, 3 and 5 (18,000 tons of
solution per day) and the Brimstone recovery plant can process up to 2,800
gallons-per-minute (10,600 liters-per-minute) of solution from the Brimstone
leach pad (also referred to as pad 4). This process includes filtering to
remove particulates, de-aeration to remove dissolved oxygen and introduction
of small quantities of zinc dust. The dissolved gold and silver precipitate
out of the solution onto the zinc particles which are then removed by a
second stage of filtration. The barren solution is returned to the leaching
circuit. The precipitate is treated to remove mercury, then mixed with fluxes
and smelted to yield a dore bar. Dore bars are shipped offsite for refining
and sale. Metalor USA Refining Corporation refines gold and silver production
from the Hycroft mine. Alternate refiners are available if necessary.
- 15 -
ORE RESERVES
Gold production from the Brimstone deposit at the Hycroft mine consistently
exceeded projections, and during 1999, the Corporation conducted a $0.6
million exploration program to determine the reasons for the excess gold
production, and to re-estimate the grade and tons of the remaining reserves
left in the Brimstone deposit after mining was suspended in December 1998.
MRDI, an independent consultant was retained to assist with the evaluation
and to provide an independent review of the recalculated mineable reserves.
During the period 1996 through 1998, gold production from the north end of
the Brimstone deposit exceeded planned production by 47,090 ounces, or 26%.
The excess gold production was a result of mining 13% more ore tons at a 12%
higher average grade than predicted in the exploration reserve model.
To evaluate the potential of a similar upgrading effect in the remaining
Brimstone resource, nine diamond drill holes for a total of 4,870 feet (1,484
meters) and 11 reverse-circulation drill holes for a total of 5,540 feet
(1,689 meters) were completed in the unmined southern portion of the
Brimstone deposit. Seventeen of the 20 holes were twin holes, which were used
to establish an upgrade factor for the remaining Brimstone resource. Working
with MRDI engineers, a gold-grade enhancement of 25% was estimated.
An initial reserve evaluation prepared by the Corporation at a gold price of
$275 per ounce resulted in proven and probable reserves estimated at 24.0
million tons (21.8 million tonnes) of ore grading 0.021 gold ounces per ton
(0.72 grams per tonne), and containing 495,000 ounces of gold and 4.1 million
ounces of silver. These reserve calculations have not been subject to
independent verification; however, verification by a qualified person within
the Corporation has been performed. These reserves have been estimated
following the guidelines of Canadian National Instrument 43-101 under the
direction of Qualified Person Warren Bates, International Exploration
Manager.
OPERATING STATISTICS
Operating statistics for the Hycroft mine for the period 1995 to 1999 were as
follows:
YEARS ENDED DECEMBER 31
------------------------------------------------------
1999 1998 1997 1996 1995
------ ------- ------- ------ -------
Ore and waste material mined (000's of tons)............... Nil 10,127 37,531 36,882 37,279
Strip ratio................................................ Nil 0.42 2.53 1.8 2.7
Ore processed (000's of tons)(1)........................... Nil 7,117 10,629 13,060 9,931
Ore grade (oz. gold/ton)................................... N/A 0.018 0.020 0.018 0.019
Ounces of gold produced.................................... 40,075 112,685 117,378 89,381 101,128
Cash operating costs ($/oz. of gold)(2).................... $277 $229 $261 $359 $333
- ----------
(1) Ore processed means ore placed on pads but not necessarily leached
during the year.
(2) Cash operating costs is composed of all direct mining expenses
including inventory changes, refining and transportation costs, less
by-product silver credits.
Gold production for 1999 was significantly down from 1998. The decreased gold
production was due to the suspension of mining activities at the Hycroft mine
in December 1998. All 1999 gold production was from ore that had been mined
and inventoried in previous years.
- 16 -
MINE SITE EXPLORATION
At the Hycroft mine in Nevada, nine diamond drill holes for 4,870 feet (1,485
meters) and 11 reverse-circulation drill holes for 5,540 feet (1,690 meters)
were completed in the unmined southern portion of the Brimstone deposit.
Seventeen of the 20 holes were twin holes, which were used to establish an
upgrade factor for the remaining Brimstone resource. The upgrade program was
necessary in light of the fact that historical gold production from the
Brimstone deposit was 26% greater than predicted from the 1995 ore reserves.
Over 525 reverse-circulation drill holes were re-logged in the Albert and
Brimstone area, a new geologic model was built, and the current assay and
geologic files were audited and re-entered into a new database.
In conjunction with MRDI, a gold grade enhancement of 25% was calculated. The
new gold grades will be used to establish new mining reserves at current gold
prices.
There is significant potential to extend the oxide mineralization to the
south, along strike, at both the Central Fault and Brimstone deposits, but
the greatest upside lies in the largely unexplored sulfide mineralization
below the Brimstone deposit, as well as higher grade intercepts along the
Central Fault.
Current resources at Brimstone are limited to the oxide cap of an apparently
large but previously unexplored gold-bearing sulfide system. Two diamond
drill holes, drilled in 1996 and earlier, have intercepted mineralized
sulfides averaging 0.023 ounces per ton gold and 0.5 ounces per ton silver
over intervals exceeding 500 feet (153 meters) in thickness. In 1996, the
Corporation also intercepted 30 feet (nine meters) of gold mineralization in
drill hole 95-2728. This intercept assayed 0.155 ounces per ton gold at a
true depth of 310 feet (94 meters) below surface. The hole terminated in this
mineralization, so the true width of the mineralization is unknown. Vista
Gold intends to investigate these targets when market conditions improve.
MINERAL RIDGE MINE
SUMMARY
On October 21, 1998, the Corporation acquired the Mineral Ridge mine through
the purchase of all of the shares of Mineral Ridge Inc. from Cornucopia
Resources Ltd. ("Cornucopia") in consideration for 1,562,000 Common Shares of
Vista Gold with an aggregate value of $250,000 and Vista Gold having
subscribed on a private placement basis for 2,777,777 common shares of
Cornucopia with an aggregate value of $250,000. As part of the transaction,
Mineral Ridge Inc. amended an existing loan agreement with Dresdner Bank AG
("Dresdner Bank"). The amended agreement revised the terms of repayment of
the previously outstanding loan and accrued interest totaling approximately
$13.5 million and provided additional loans to Mineral Ridge Inc. totaling
$1.6 million which were used to pay amounts owed to other creditors of
Mineral Ridge Inc. Under the terms of the revised agreement, $5.0 million of
mining equipment was contributed to the project by Vista Gold. Net cash flow
from the project was to be distributed on the basis of 70% to Dresdner and
30% to Vista Gold after deduction of $800,000 of management fees payable to
Vista Gold and rescheduled principal payments on the additional loans used to
repay other creditors. The interest rate on the loans was LIBOR plus 2% and
the loans, which are not guaranteed by Vista Gold, are collateralized by the
assets of Mineral Ridge Inc. and the $5 million of mining equipment
contributed by Vista Gold. As part of the agreement with Dresdner, Mineral
Ridge Inc. liquidated forward gold hedges to provide $3.5 million, which was
used as working capital and to pay for capital improvements on the project.
- 17 -
Prior to the acquisition of the Mineral Ridge mine by the Corporation, the
mine had been shut down since December 1997. The mining operation was
restarted in late 1998 and the processing plant was commissioned and
restarted in early 1999. The plant commissioning activities included a number
of modifications, which were identified prior to the acquisition. In
addition, a critical ore feeding arrangement, which was identified as
inadequate during start-up, was replaced during the month of February 1999.
On December 10, 1999, Mineral Ridge Inc., a wholly owned subsidiary of Vista
Gold, voluntarily filed for protection under the U.S. Bankruptcy Code. Gold
production at the Mineral Ridge mine had failed to meet expectations.
Initially, mechanical difficulties and recovery shortfalls inhibited
production efforts. But as mining operations continued in the latter half of
the year, the ore mined was less than that estimated in the ore reserve
calculations. After reviewing the reserves with Independent Mining
Consultants, Inc., an independent consultant, it was concluded that
significant deficiencies in the ore reserves in the future, compared with the
original ore reserve estimates, were probable. The reduced gold production
and ore reserves caused by the ore deficiencies and low gold prices resulted
in the mine failing to meet its required cash-flow targets under Mineral
Ridge Inc.'s loan agreement with Dresdner Bank AG. Various alternatives were
then considered, although none were considered to be viable, and a protective
bankruptcy filing was made.
DESCRIPTION OF PROPERTY
The Mineral Ridge property is located near the town of Silver Peak,
approximately 35 miles (56 kilometers) southwest of Tonopah, Nevada and
covers approximately 3,130 acres (1,267 hectares). The Mineral Ridge mine is
an open-pit, heap-leach mining operation owned by Mineral Ridge Inc., an
indirect wholly-owned subsidiary of Vista Gold. The mine achieved mechanical
completion on May 29, 1997 and poured its first gold on June 24, 1997.
Operations at the Mineral Ridge mine consisted of open-pit mining, four-stage
crushing, agglomeration and heap-leach extraction of gold using conventional
cyanide and carbon adsorption methods. The processing facilities were
designed to handle a minimum of 2,700 tons (2,449 tonnes) of ore per day over
a 350 day operating year. Nine separate mineable gold deposits were defined
on the property with several additional areas of inferred mineralization
identified. Operations at the Mineral Ridge mine ceased in December 1999.
HISTORY
The Mineral Ridge mine was constructed by Cornucopia for a cost of
approximately $17 million. The project was completed on May 17, 1997 and the
first gold was poured on June 20, 1997. However, the project failed to meet
commercial production loan tests and was shutdown in December 1997. Vista
Gold completed an in-depth technical review and undertook a number of
modifications to the facility prior to the restart of operations intended to
eliminate the problems experienced by Cornucopia. The modifications included
changes to the crushing and agglomeration circuits, the addition of surge
capacity to the crushing plant, the employment of a coarser crusher product
size and the introduction of strong leach solutions during the agglomeration
process.
MINING AND PROCESSING
Vista Gold moved a portion of its mining fleet, including four 150-ton
(136-tonne) trucks and a 23 cubic-yard (17.6 cubic-meter) hydraulic shovel,
from the Hycroft mine to the Mineral Ridge property. The open-pit operations
required the mining of approximately 4,000 tons (3,628 tonnes) of ore and
16,000 tons (14,514 tonnes) of waste rock each day. The plant, which uses
four-stage crushing and heap
- 18 -
leaching, was estimated to be able to achieve a metallurgical recovery of 75%
on ore at an average grade of 0.06 ounces per ton (2.1 grams per tonne).
The mine was in production for just one month in 1998 and continued to
operate until December 1999. During 1999, Mineral Ridge mined 6.4 million
tons (5.8 million tonnes) of material including 1.1 million tons (1.0 tonnes)
of ore. There were 5.033 tons (4.565 tonnes) of waste for every ton of ore
mined. The process plant consisted of a four-stage crushing plant, which
reduced the rock size to -1/4 inch (-0.6 centimeter) prior to agglomeration
with cyanide solution. The agglomerated ore was then placed in approximately
25 feet (7.6 meters) lifts on a heap leach pad. Leaching was carried out
using a dilute alkali cyanide solution, which was distributed over the
surface of the ore through a network of pipes and drip emitters. The solution
percolated down through the layers of ore preferentially leaching gold from
the rock. This pregnant solution containing dissolved gold then flowed along
the surface of the impervious synthetic liner of the leach pad into the
pregnant solution pond. From the pond the solution was pumped through a gold
recovery plant at a rate of up to 1000 gallons-per-minute (3,785
litres-per-minute). The gold recovery plant consisted of five carbon columns
where activated coconut-shell charcoal (carbon) adsorbed the dissolved gold
from the pregnant solution. Solution exiting the carbon plant flowed into a
barren pond, pH and cyanide levels were adjusted and the solution was pumped
back to the heaps for reuse. This was a closed-circuit process with zero
discharge.
Periodically carbon loaded with gold was removed from the columns and the
gold was stripped off into a more concentrated solution using a strong,
caustic cyanide solution at elevated temperature and pressure. The stripped
carbon was reconditioned and returned to the carbon column. The gold-rich
strip solution was pumped through electrowinning cells and the gold in
solution plated out as metal on stainless steel wool. At regular intervals
the wool was removed from the electrowinning cells and the gold was washed
off as sludge. The gold sludge was then filtered, dried and melted into dore
bars. The dore bars were shipped off site for refining and sale. Gold from
the Mineral Ridge mine was refined at Metalor USA Refining Corporation but
alternate refineries were available if necessary.
ORE RESERVES
As at December 31, 1998, the Corporation estimated the proven and probable
reserves to be 4 million tons (3.6 million tonnes) at a grade of 0.06 ounces
per ton (2.1 grams per tonne) containing 241,000 ounces of gold. The average
estimated life-of-mine cash production cost was estimated to be $226 per
ounce and production was planned to be between 40,000 to 45,000 ounces in
1999. Following the shut down of mining operations in December 1999, the
Corporation had no estimated ore reserves at the Mineral Ridge mine.
- 19 -
OPERATING STATISTICS
Start-up activities at the Mineral Ridge mine were commenced in November
1998. Operating statistics for the Mineral Ridge mine during the two months
ended December 31, 1998 and the year ended December 31, 1999 are set out
below.
TWO MONTHS ENDED
1999 DECEMBER 31, 1998
---------------- ------------------------
Ore and waste material mined (000's of tons)............. 6,354 310
Strip ratio.............................................. 5.03 3.44
Ore mined (000's of tons)................................ 1,054 70
Ore processed (000's of tons)(1)......................... 1,032 39
Ore grade (oz. gold/ton)................................. 0.050 0.052
Ounces of gold produced.................................. 25,393 153
Cash operating costs ($/oz. of gold)(2).................. $358 -(3)
- -------------------------
(1) Ore processed means ore placed on the pads but not necessarily leached
during the year.
(2) Cash operating costs is composed of all direct mining expenses including
inventory changes, refining and transportation costs, less by-product
silver credits.
(3) The cash operating costs for the two months ended December 31, 1998 have
been omitted because the mine was in the initial start-up phase and
accordingly, it is not possible to accurately determine the true cash
operating costs.
MINE SITE EXPLORATION
In 1999, exploration activity at the Mineral Ridge mine was limited due to
depressed gold prices. However, the Corporation drilled 49
reverse-circulation drill holes. The program consisted of 9,640 feet (2,940
meters) of drilling. Mineralization was encountered at the Blue Lite zone,
extending known mineralization 250 feet (76 meters) to the south. Eight of 15
drill holes cut intercepts above cut-off grades. In the Mary Pit area, 17 of
38 holes intersected mineralization above the cut-off grade. These holes were
drilled around the margins of the Mary Pit to increase reserves and to extend
areas of known resources within 1,000 feet (305 meters) of the current
planned Mary Pit. Six holes drilled to intercept downstrike extensions of the
Drinkwater mineralization were unsuccessful in locating potentially mineable
mineralization.
AMAYAPAMPA AND CAPA CIRCA PROPERTIES
AMAYAPAMPA PROPERTY
SUMMARY
The Amayapampa property consists of 24 mining concessions covering 805
hectares (1,989 acres) plus an additional 6,800 hectares (16,803 acres) in
regional exploration and exploitation concessions. The Corporation is in the
process of refiling the concessions as required by the new mining law. The
deposit is approximately 600 meters (1,970 feet) in strike length, 30 to 70
meters (98 to 230 feet) in width, and extends to over 200 meters (656 feet)
in depth. Gold occurs free and associated with sulfides in a structural zone
in which quartz veins were emplaced then sheared prior to introduction of
sulfides and
- 20 -
gold mineralizing solutions. Prior to the Amalgamation, CEM (as defined below
under "Ownership") mined the Amayapampa deposit using primarily open-stope
methods at a rate of approximately 220 tons (200 tonnes) of ore per day, and
processed the ore in two mills on site. See "Ownership" and "History" below.
Approval of the permit to construct and operate, called the DECLATORIA DE
IMPACTO AMBIENTAL, under Article 24 of the Environmental Law was received on
May 6, 1998. This permit was based on a 3,300-tonne-per-day
(3,638-ton-per-day) ore processing project, and once financing arrangements
are in place, the Corporation will request a modification of the permit to
allow operation at the lower production rate.
In the fall of 1999, with gold prices rising above $300 per ounce, an update
and additional optimization of the feasibility study was begun. It was
completed in the first quarter of 2000. Based on a gold price of $300 per
ounce, the proven and probable reserves at Amayapampa were calculated by Mine
Reserve Associates, Inc., an independent consultant, to be 9.3 million tonnes
(10.2 million tons) grading 1.76 grams per tonne (0.051 ounces per ton)
including dilution, containing 526,000 ounces of gold. Gold production during
the first five years of operations will average approximately 47,400 ounces
per year. The initial capital costs are estimated to be about $25 million,
including contingency and necessary working capital. Average operating costs
are estimated to be $7.99 per tonne ($7.25 per ton) of ore for a total cash
cost of $168 per gold ounce. The Corporation is examining various development
and production scenarios, and believes that a gold price of $325 per ounce
will be required for construction and development to commence. At a gold
price of $325 per ounce, the project is expected to generate an after-tax
internal rate of return of 20%.
In February 2000, the Corporation signed an agreement with the government of
Bolivia, which provides for the immediate refund of value-added taxes and
customs duties that would be paid by the Corporation during the construction
period. These refunds will be used to pay for certain improvements to
infrastructure that are required by the project and will also benefit the
inhabitants of the area. The Corporation would be entitled to a refund of
these taxes and duties over time anyway, but the agreement accelerates the
refund. The acceleration of these refunds will help the project's cash flows
during construction. The refunds are expected to total approximately $2.0
million.
LOCATION AND ACCESS
The Amayapampa property is located 300 kilometers (186 miles) southeast of La
Paz in the Chayanta Municipality, Bustillos Province, Department of Potosi,
in southwestern Bolivia (Latitude: 18 DEG. 34.5"S, Longitude: 66 DEG.
22.4"W). Access is via 268 kilometers (167 miles) of paved road from La Paz
to Machacamarca near Oruro, followed by 100 kilometers (62 miles) of gravel
road to Lagunillas, then 14 kilometers (nine miles) of dirt road to
Amayapampa. Total driving time is about six hours. Charter air service is
available to Uncia, 35 kilometers (22 miles) from the project.
The Amayapampa property is situated within the moderately rugged Eastern
Cordilleran region of Bolivia with elevations at the property varying from
3,750 meters to 4,100 meters (12,300 to 13,450 feet) above sea level. The
area is generally arid with a defined rainy season during the summer months
of November through April. There is little or no precipitation during the
rest of the year.
OWNERSHIP
On April 28, 1994, Da Capo entered into an agreement with Mr. David Anthony
O'Connor of Casilla 11314, La Paz, Bolivia and La Compania Minera Altoro
S.R.L. ("Altoro") of Casilla 11314, La Paz,
- 21 -
Bolivia, both parties at arm's length to Da Capo, which was amended by
agreements dated June 10, 1994 and July 15, 1994 (the "Altoro/O'Connor
Agreement"), pursuant to which Mr. O'Connor and Altoro assigned to Da Capo:
(a) Altoro's exclusive right and option to acquire a 51% interest in eight
mining concessions that constitute a part of the Amayapampa property
(and a further option to acquire an additional 19% interest in such
concessions), pursuant to an option agreement dated March 22, 1994 (the
"Amayapampa Option") between Altoro and Raul Garafulic Gutierrez ("R.
Garafulic") of Ave. Argentina No. 2057, Casilla 9285, La Paz, Bolivia
and Compania Exploradora de Minas S.A. ("CEM", and collectively with R.
Garafulic, the "Amayapampa Vendors") of Calle San Salvador 1421, Casilla
4962, La Paz, Bolivia. The Amayapampa Vendors are both parties at arm's
length to Da Capo;
(b) Mr. O'Connor's exclusive right and option to acquire the Capa Circa
property pursuant to an option agreement dated January 12, 1994 (the
"Yamin Option Agreement") between Mr. O'Connor and Yamin. See "Capa
Circa Property - Ownership"; and
(c) a 100% interest in the Santa Isabel Property, for which an exploration
concession application had been made on behalf of Altoro.
As consideration for the assignment of the above interests, Da Capo issued a
total of 1,000,000 Da Capo common shares to Mr. O'Connor between June 30,
1994 and April 16, 1996.
On February 5, 1996, Da Capo exercised the Amayapampa Option and acquired a
51% interest in the eight mining concessions that constitute a part of the
Amayapampa property in consideration for: (i) the cancellation of a loan in
the amount of $2,425,000 which had been previously made by Da Capo to R.
Garafulic on December 22, 1994; and (ii) payment of $75,000 by Da Capo to R.
Garafulic between March 22, 1994 and September 22, 1994.
On March 8, 1996, Da Capo entered into an agreement (the "Amayapampa
Acquisition Agreement") with the Amayapampa Vendors to acquire the following
interests in the Amayapampa property:
(a) R. Garafulic's remaining 24% interest in two mining concessions (the
Gran Porvenir and Chayentena concessions) that are part of the
Amayapampa property;
(b) R. Garafulic's 49% interest in six mining concessions that are part of
the Amayapampa property; and
(c) CEM's 100% interest in 16 mining concessions that are part of the
Amayapampa property.
In consideration for these interests, Da Capo:
(a) issued 1,000,000 special warrants (the "Amayapampa Special Warrants"),
each exercisable to acquire one Da Capo Common Share without further
payment, to a nominee of the Amayapampa Vendors on April 11, 1996; and
(b) made a non-recourse, interest-free loan of $3.24 million (the
"Amayapampa Loan") to a nominee of the Amayapampa Vendors on April 11,
1996.
- 22 -
The Amayapampa Loan was secured by an assignment of all proceeds from the
sale of any of 1,000,000 Da Capo common shares held by such nominee. The
Amayapampa Loan was canceled on April 29, 1996 upon the sale of such Da Capo
common shares and Cdn.$4,355,000 received from the proceeds of such sale on
or before May 7, 1996.
After being acquired by the Amayapampa Vendors, the Amayapampa Special
Warrants were transferred to third parties at arm's length to Da Capo in
transactions exempt from prospectus requirements under the relevant
securities legislation.
On August 14, 1996, Da Capo issued 1,000,000 Da Capo common shares without
payment of any additional consideration upon the deemed exercise of the
Amayapampa Special Warrants.
All of Da Capo's interests in the Amayapampa property were transferred into
the name of its subsidiary, Yamin, on April 11, 1996. During 1999 and
subsequent to December 31, 1999 these interests were transferred by Yamin to
Minera Nueva Vista.
Ms. Elizabeth Mirabel, a resident of Bolivia at arm's length to Vista Gold,
holds the remaining 25% interest in the Gran Porvenir and Chayentena mining
concessions, which constitute 604 hectares (1,492 acres) of the Amayapampa
property. On June 28, 1996, Da Capo and Ms. Mirabel entered into a lease
agreement (the "Lease") under which Ms. Mirabel granted a lease for her 25%
interest in the two mining concessions in favor of Da Capo for a term of ten
years commencing July 10, 1996 and renewable for an additional ten year term.
During the first two years of the Lease, Da Capo will pay Ms. Mirabel $7,000
per month, and $10,000 per month for the subsequent eight years.
As a result of the Amalgamation with Da Capo, Vista Gold acquired the
Amayapampa property.
A legal dispute in Bolivia, in which a Mr. Estanislao Radic brought legal
proceedings in the lower penal court in Bolivia against Raul Garafulic,
resulted in comments in the Bolivian press questioning the validity of the
Corporation's ownership of the Amayapampa property. In May 1998, a judge in
the Bolivian penal court found that there was no justifiable case. In June
1998, a judge of the Superior Court of the District of Potosi dismissed the
appeal of the case and indicated that there could be no further appeals on
the matter in the Bolivian penal courts. In 1999, Radic filed a lawsuit
against Garafulic in civil court, but the Corporation does not anticipate
that the outcome will have any impact on its title to the Amayapampa
property. See "Item 3. Legal Proceedings".
HISTORY
The Amayapampa district was initially mined on a very small scale by
indigenous peoples prior to the arrival of the Spanish conquistadors and
small-scale mining continued during the Spanish colonial period into modern
times. Prior to the Amalgamation, CEM mined the Amayapampa deposit using
primarily open-stope methods at a rate of about 220 tons (200 tonnes) of ore
per day and processed the ore in two mills on site. At that time, the
Amayapampa mine was one of the largest producing underground gold mines in
Bolivia and consisted of 32 levels of underground development. Upper level,
generally oxidized ore was removed via the upper Virtus Adit (4,100
meters/13,450 feet elevation) and trucked to the Porvenir mill, while lower
sulfide ore was dropped by ore passes to the 850-meter- (2,790-foot-) long
Virquicocha Adit (3,970 meters/13,025 feet elevation) and taken out by
electric locomotives to the Virquicocha mill. At both mills, gold was
recovered via amalgam plates and gravity tables. The lower mill included a
flotation circuit to upgrade the pyrite concentrate. Approximately 150 people
worked at the mine and lived locally at the village of Amayapampa and at
other small camps near the mine.
- 23 -
Since the Amalgamation, mining has ceased and the old mills removed as per an
agreement with the previous owner. The Corporation kept the miners employed
in exploration, development and socio-economic projects during the period
when the original feasibility study was being prepared. During 1999, the
workforce was inactive, but was paid a subsistence allowance to promote good
will and maintain social stability in the region.
GEOLOGY
The Amayapampa property is located along the east flank of a north-south
trending regional anticline near the top of the Ordovician sequence. The
Amayapampa deposit underlies a north-northwest trending ridge approximately
0.5 kilometers (0.3 miles) east of the town of Amayapampa. The deposit is
defined by about 48 diamond drill holes; 96 reverse-circulation drill holes;
and 315 underground channel samples totaling 5,360 meters (17,585 feet) from
more than 200 accessible cross-cuts in 43 different levels and sub-levels
extending over a vertical distance of 208 meters (682 feet). The deposit is
approximately 600 meters (1,969 feet) in strike length, 30 to 70 meters (98
to 230 feet) in width and has an overall dip of the mineralized envelope of
80 to 90 degrees west. The depth extent of continuous mineralization is in
excess of 200 meters (656 feet) to about the 3,900-meter (12,795-foot)
elevation, although some mineralization is present below this depth.
Da Capo channel, core drill and reverse-circulation drill hole samples were
analyzed at Bondar-Clegg Laboratories in Oruro, Bolivia, with check samples
analyzed at Chemex Laboratories in Vancouver, British Columbia. Because of the
coarse gold particles and concerns about nugget effect, all samples were
processed using the Hammer Mill Process (similar to a metallic screen assay). In
addition to check assaying, Vista Gold has continued to use Bondar-Clegg and the
Hammer Mill Process to analyze its samples, and in addition, has had an on-going
check assay program in place for samples generated by Vista Gold's exploration
and development program. Approximately 225 random assay pulps were check-assayed
by three laboratories (American Assay Laboratory in Reno, Nevada, Cone
Geochemical Inc. in Lakewood, Colorado, and Rocky Mountain Geochemical in Salt
Lake City, Utah) and compared to original pulp assays with generally good
agreement. Approximately 600 reverse-circulation drill hole sample splits from
the Da Capo program were assayed and used to verify assays obtained from the
original reverse-circulation sample splits. Sample splits are duplicate samples
taken at the drill rig at the time of drilling. Sample splits show good
correlation with original samples with some dispersion expected for this type of
deposit. Check assays show that assaying precision meets industry standards.
The host rocks are composed of black shales, sandstones, and siltstones,
which were weakly metamorphosed to argillites, quartzites, and siltites,
respectively. Bedding dips are steep at 60 to 80 degrees west, with the east
limb of the anticline being overturned and thus, also dipping steeply west.
The mineralized envelope is best described as a structural zone, within which
were emplaced quartz vein sets along a preferential pre-quartz-vein fracture
direction and post-quartz-vein faults and shears which were probably the
conduits for gold-bearing fluids.
Most faults, shears and fractures are north-northeast to north-northwest
trending and steeply dipping, both east and west, at 60 to 90 degrees. Quartz
veins predominantly dip east. Locally, within the zone of mineralization, are
relatively flat, thrust-like faults which have offset quartz veins to a minor
extent. These flat faults, commonly west-dipping at 40 to 45 degrees, are not
generally mappable outside of the main structural zone, which hosts the gold
mineralization. A west dipping, 45-degree fault projects into the pit on the
northeast side of the deposit and was intersected by two vertical,
geotechnical core holes. The base of mineralization may also be slightly
offset by a similar west-dipping, 45-degree fault.
- 24 -
Oxidation effects are pervasive from the surface to depths of 20 to 30 meters
(66 to 98 feet), with only partial oxidization below those depths.
Hydrothermal alteration effects evident in fresh rock are minor, and occur as
coarse sericite (muscovite) in thin (2 to 5 millimeter/0.08 to 0.20 inch)
selvages along some quartz veins. In addition, chlorite is present in and
adjacent to some quartz veins, but this presence may be a product of
low-grade metamorphism. Alteration effects are minimal overall, except for
surface oxidization.
Mineralization is composed of quartz veins and sulfides and both constitute a
visual guide to ore. Quartz veins, actually pre-gold, are a locus for later
gold mineralization. Quartz veins are typically a few centimeters to 0.5
meters (two feet) in width and commonly occur as sub-parallel vein sets. The
strike extent can be 50 to 75 meters (164 to 246 feet) or more for any one
vein or vein set, but the dip extent is not as well established and probably
ranges up to 20 to 30 meters (66 to 98 feet). Multiple vein sets are present
in the overall mineralized envelope and veins commonly pinch and swell along
strike and down dip.
Sulfide mineralization entered the multiple fractures to deposit
predominantly pyrite within and adjacent to quartz veins, as sulfide veinlets
in the host rocks and as clots of coarse sulfides and disseminations of
sulfide grains along fractures in the black argillites. Locally, sulfide
disseminations are more prevalent in the quartzite/siltite interbeds than in
the argillites. The total sulfide concentration for the overall mineralized
zone is estimated at 3 to 5%.
Petrographic examination of the sulfide mineralization shows pyrite to
dominate at plus 95% of the total sulfides; arsenopyrite is also present, as
are minor amounts of chalcopyrite, galena, sphalerite, stibnite and
tetrahedrite. Gold is present as free gold in association with pyrite, on
fractures within pyrite and attached to the surface of pyrite and is often
visible as discrete grains on fractures in quartz and argillite. Gold grains
exhibit a large size-range, with much of the gold being relatively coarse at
40 to 180 microns. All gold grains display irregular shapes with large
surface areas. No gold was noted to be encapsulated in either quartz or
sulfide. The content of gold grains was verified as over 97% gold by
scanning-electron-microprobe analysis.
EXPLORATION
In 1999, no exploration was undertaken at Amayapampa.
District-scale exploration potential exists for defining styles of gold
mineralization similar to Amayapampa, which could be developed as satellite
ore bodies. Specific targets on the Corporation's properties include an
untested surface geochemical target at Irpa Irpa, and raw exploration targets
elsewhere within a 10-kilometre (six-mile) radius of Amayapampa.
UPDATED FEASIBILITY STUDY
The Corporation began updating and optimizing the feasibility study on the
Amayapampa property in the fall of 1999 and completed this work during the
first quarter of 2000. Based on a gold price of $300 per ounce, the proven
and probable reserves at Amayapampa were calculated by Mine Reserve
Associates, Inc., an independent consultant, to be 9.3 million tonnes (10.2
million tons) grading 1.76 grams per tonne (0.051 ounces per ton) including
dilution, containing 526,000 ounces of gold. Within this reserve, an optimized
plan at a gold price of $325 per ounce will generate an after-tax internal
rate of return of 20%. The optimized study includes the same flow sheet
consisting of a gravity and carbon-in-leach circuit with a projected
metallurgical recovery of 84% and operating at a rate of 2,330 tonnes (2,563
tons) of ore per day.
- 25 -
Gold production the first five years of operations will average approximately
47,400 ounces per year. The initial capital costs are estimated to be about
$25 million, including contingency and necessary working capital. Average
operating costs are estimated to be $7.99 per tonne ($7.25 per ton) of ore
for a total cash cost of $168 per gold ounce.
The Corporation is investigating means of obtaining financing in order to
move the project into design and construction. Approval of the permit to
construct and operate, called the DECLATORIA DE IMPACTO AMBIENTAL, under
Article 24 of the Environmental Law was received on May 6, 1998. This permit
was based on a 3,300-tonne- (3,638-ton-) per-day ore processing project, and
once financing arrangements are in place, the corporation will request a
modification of the permit to allow operation at the lower production rate.
CAPA CIRCA PROPERTY
SUMMARY
The Capa Circa property, which was owned by the Corporation's wholly-owned
subsidiary Yamin, consists of four partly overlapping mining concessions
covering 117 hectares (289 acres). Until the Amalgamation became effective,
the Capa Circa property was mined primarily by open-stoping methods at a rate
of approximately 20 tonnes (22 tons) per day. Mineralization on the Capa
Circa property is similar to that of the Amayapampa deposit, but consists of
discrete veins within a mineralized zone approximately 150 meters (490 feet)
wide that can be traced for about 600 meters (1,970 feet) along strike.
In 1998, the Corporation completed a development plan to reopen the Capa
Circa underground mine approximately ten kilometers (six miles) from the
Amayapampa site and supply ore to a processing plant which would be built at
Amayapampa to treat ores from both properties. The Corporation also began
optimizing the feasibility study on the Amayapampa property in late 1998 and
completed this work during the first quarter of 1999. Financing efforts were
initiated but were put on hold in June due to gold prices were consistently
below $300 per ounce. Further studies, however, showed that mineralization is
limited to narrow veins more suited for small-scale underground mining, and
the decision was made to sell Capa Circa to a miners' cooperative. The sale
was completed, and on February 7, 2000, the Corporation sold Yamin to the
miner's cooperative. No significant gain or loss was realized on the
transaction.
LOCATION AND ACCESS
The four overlapping mining concessions that constitute the Capa Circa
property cover a total area of 117 hectares (289 acres). The Corporation was
in the process of refiling the concessions to conform to provisions of the
new mining law.
The Capa Circa property is located 300 kilometers (186 miles) southeast of La
Paz in Bustillo Province, Department of Potosi, in south-central Bolivia
(Latitude: 18 DEG. 34.5" S; Longitude: 66 DEG. 22.4" W). The Capa Circa
property is accessible via gravel road from Oruro to Llallagua/Uncia (110
kilometers/68 miles or approximately 2 1/2 hours) and a dirt road southeast
from Uncia to the villages of Lagunillas and Chuqui Uta (approximately 1/2
hour). A short two kilometer (1.2 mile) spur road leads east to the Capa
Circa property from a point approximately seven kilometers (4.3 miles) south
of Lagunillas. A local power line runs along the east side of the Capa Circa
property and supplies power to the present Capa Circa mine.
- 26 -
The property is situated within the moderately rugged Eastern Cordilleran
region of Bolivia with elevations varying from 3,750 to 4,100 meters (12,300
to 13,450 feet) above sea level. The area is arid with rain falling minimally
as thundershowers during the summer months of January to March. Occasional
snow is reported during the drier winter months of May to August.
EXPLORATION PROPERTIES
UNITED STATES
The only exploration performed by the Corporation in the United States was at
the Hycroft and Mineral Ridge mines. See "Item 2. Properties - Hycroft Mine
- - Mine Site Exploration" and "Item 2. Properties - Mineral Ridge Mine - Mine
Site Exploration".
BOLIVIA
The Corporation's Bolivian properties include the Amayapampa, Copacabana and
Irpa Irpa gold properties. The Amayapampa property is discussed above. See
"Item 2. Properties - Amayapampa and Capa Circa Properties - Amayapampa
Property".
COPACABANA PROPERTY
This project located in south-central Bolivia shows a similarity to the
Amayapampa property. An initial geochemical survey indicated the possibility
of a large deposit. The survey showed a 150-meter (500-foot) by
600-meter- (2,000-foot) long soil geochemical anomaly.
After an initial mapping program was completed, a reverse-circulation drill
program was conducted. Of the seven holes completed, six had gold intercepts
of interest. The drilling indicated that the possibility of both bulk tonnage
and high-grade vein mineralization exists on this property. The best results
from drill hole RC3 had 14.0 grams per tonne (0.41 ounces per ton) over 12
meters (39 feet).
A trenching and mapping program is planned for this property, followed by
further diamond and reverse-circulation drilling programs. This project is an
excellent early-stage exploration target with the potential to be another
Amayapampa-type deposit.
The Copacabana project was explored with diamond drilling and trenching in
1997. The drilling and trenching were performed along a 700-meter
(2,297-foot) strike length of mineralized Ordovician shales. Wide zones of
anomalous gold values were intersected in core drilling and trenching, and
the property requires more exploration to define its potential. No
exploration was performed in 1999.
IRPA IRPA PROPERTY
The Irpa Irpa property is situated 4.8 kilometers (three miles) south of Capa
Circa, with similarities to Amayapampa.
ECUADOR
Vista Gold currently owns 26% of Zamora. Compania Minera Gribipe S.A.
("Gribipe"), an Ecuadorian mineral exploration company controls and currently
owns 58.2% of Zamora. Gribipe is one of the largest mineral exploration
companies in Ecuador and has been involved in a number of important
- 27 -
exploration projects in Ecuador. Gribipe completed studies to determine the
feasibility of a limited mining and processing operation at the Campanillas
mine. At Campanillas, Zamora exercised an option to purchase a modern
150-tonne (165-ton) per day cyanide mill and commenced start-up activities at
the facility in January of 1999. A new floatation circuit was installed in
September of 1999 to improve metallurgical recovery and different adjustments
have been made to the flotation plant in order to optimize the yield. During
1999, approximately 2,000 ounces of gold were produced at the Campanillas
mill.
Underground exploration continued inside the mine and in the surrounding
area. Two new mineralized structures were found. The first structure, located
towards the southeast of the mine (El Nino) area, was detected with the
development of exploration cross cuts. As at November 24, 1999, 12 meters (39
feet) have been intersected with an average grade of 6.76 grams per tonne
(0.20 ounces per ton) of gold without having yet reached the end of the
structure.
The second structure was detected on the surface of the northern part of the
mine with trenching development. Twenty-five meters (82 feet) of mineralized
intrusive rock were intercepted, including five meters (16 feet) at 7.3 grams
per tonne (0.21 ounces per ton) of gold and eight meters (26 feet) at 4.5
grams per tonne (0.14 ounces per ton). Zamora expects to increase the ore
reserves considerably with more activity in those areas.
Zamora continued to work on its longer-range exploration program to evaluate
the extensive mineral concessions it controls in the Nambija area of southern
Ecuador. The two principal areas are the 75% owned Nambija 1 concession and
the 96% owned Mina Real concession. Earlier work carried out by Zamora at
Mina Real indicates the possibility of a gold resource and porphyry copper
targets within the concession area. Most of the fieldwork in the Mina Real
concession was confined to the Breccia area. Three adits and five drill holes
were driven into the Breccia prospect. The portion of the altered zone
containing gold values of over 0.5 grams per tonne (0.02 ounces per ton), is
north-striking, steeply dipping, and approximately 50 meters (164 feet) wide.
Although the strike length of the gold-anomalous mineralization has not been
determined, it is expected to be at least 300 meters (984 feet) long. A
higher-grade section with gold grades in the 1.0 to 8.0 grams per tonne (0.03
to 0.23 ounces per ton) range occurs within this gold-anomalous envelope,
indicating the potential for a gold resource at this target.
One other style of mineralization found in the Mina Real concession is
porphyry copper stockwork mineralization. To date, two large areas, David and
Southwest, and one small area, Tumi, of stockwork mineralization have been
found. They represent large aerial extents of quartz-pyrite-chalcopyrite
stockwork mineralization and associated hydrothermal alteration up to two
miles (three kilometers) in size. During road building and trenching in Tumi,
an exposure measuring 20 by 40 meters (66 by 131 feet) was discovered with
gold mineralization. This zone appears to have been a small, but very
high-grade, pocket of hypogene enrichment.
- 28 -
CANADA
The Corporation holds interests in two properties in Canada, which continue
to be explored by joint venture partners. They are the Manville project in
Ontario and the Isle project in Manitoba. Falconbridge Limited performed
initial drill testing on the Manville project and Phelps Dodge Corp.
performed initial drill testing on the Isle project.
1999 EXPLORATION EXPENDITURES
In the last two completed financial years, the Corporation incurred
expenditures of the following approximate dollar amounts on exploration:
DESCRIPTION 1999 1998
----------- ---- ----
(In millions)
Mineral exploration, property evaluation and holding cost $2.0 $2.3
Hycroft (mine-site) 0.6 -
Mineral Ridge 0.2 0.1
Exploration of Venezuelan properties - 0.2
---- ----
Totals $2.8 $2.6
==== ====
2000 EXPLORATION PLAN
The 2000 exploration program will be limited by the amount of funds that the
Corporation can obtain and make available for this purpose, which in turn
will be a function of gold price and market conditions.
The Corporation's exploration focus in 2000 will be at the Hycroft mine. At
Hycroft, the Corporation will expend approximately $0.3 million to finalize
the upgrade to the current oxide reserves at the Brimstone deposit. The
program may involve additional drilling.
ITEM 3. LEGAL PROCEEDINGS.
Except as described below, the Corporation is not aware of any material
pending or threatened litigation or of any proceedings known to be
contemplated by governmental authorities which is, or would be, likely to
have a material adverse effect upon the Corporation or its operations, taken
as a whole.
On December 10, 1999, Mineral Ridge Inc., a wholly owned subsidiary of Vista
Gold, voluntarily filed for protection under the U.S. Bankruptcy Code. See
"Item 2. Properties - Mineral Ridge Mine".
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, by Vista Gold during the quarter ended
December 31, 1999.
- 29 -
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
PRICE RANGE OF COMMON SHARES
The Common Shares of Vista Gold are listed on the American Stock Exchange and
The Toronto Stock Exchange under the symbol VGZ. The following table sets out
the reported high and low sale prices on the American Stock Exchange and on
The Toronto Stock Exchange for the periods indicated as reported by the
exchanges:
AMERICAN STOCK EXCHANGE THE TORONTO STOCK EXCHANGE
-------------------------- --------------------------
HIGH LOW HIGH LOW
------- ------ --------- ---------
1998 1st quarter........................ $ 0.31 $ 0.19 Cdn$ 0.43 Cdn$ 0.27
2nd quarter........................ 0.31 0.14 0.41 0.22
3rd quarter......................... 0.22 0.13 0.29 0.18
4th quarter......................... 0.22 0.13 0.34 0.20
1999 1st quarter........................ 0.19 0.13 0.25 0.20
2nd quarter........................ 0.22 0.13 0.28 0.21
3rd quarter......................... 0.22 0.13 0.25 0.18
4th quarter......................... 0.22 0.09 0.30 0.13
On March 20, 2000, the last reported sale price of the Common Shares of Vista
Gold on the American Stock Exchange was $0.125 and on The Toronto Stock
Exchange was Cdn$0.17. As at March 20, 2000, there were 90,715,040 Common
Shares issued and outstanding, and Vista Gold had 901 shareholders of record.
DIVIDENDS
Vista Gold has never paid dividends. While any future dividends will be
determined by the directors of Vista Gold after consideration of the earnings
and financial condition of Vista Gold and other relevant factors, it is
currently expected that available cash resources will be utilized in
connection with the ongoing exploration and development programs of the
Corporation.
EXCHANGE CONTROLS
There are no governmental laws, decrees or regulations in Canada that
restrict the export or import of capital, including foreign exchange
controls, or that affect the remittance of dividends, interest or other
payments to non-resident holders of the securities of Vista Gold, other than
a Canadian withholding tax. See "Item 5. Certain Canadian Income Tax
Considerations for Non-Residents of Canada".
CERTAIN CANADIAN INCOME TAX CONSIDERATIONS FOR NON-RESIDENTS OF CANADA
Canadian withholding tax at a rate of 25% (subject to reduction under the
provisions of any relevant tax treaty) will be payable on dividends paid to a
holder of Common Shares who is not resident in Canada. The rate of
withholding tax applicable to dividends paid on the Common Shares to a
resident of the United States who beneficially holds such Common Shares would
generally be reduced to 15% or, if the
- 30 -
non-resident holder is a corporation that owns at least 10% of the Common
Shares, to 5%. It is the Canada Customs and Revenue Agency's present
published policy that entities (including certain limited liability
companies) that are treated as being fiscally transparent for United States
federal income tax purposes will not qualify as residents of the United
States under the provisions of the Canada-United States Income Tax Convention.
Upon a disposition or deemed disposition of Common Shares, a capital gain (or
loss) will generally be realized by a non-resident holder to the extent that
the proceeds of disposition are greater (or less) than the aggregate of the
adjusted cost base of the Common Shares to the non-resident holder thereof
immediately before the disposition and any reasonable costs of disposition.
Capital gains realized on a disposition of Common Shares by a non-resident
shareholder will not be subject to Canadian tax unless the non-resident
holder and/or persons with whom the non-resident holder did not deal at arm's
length, at any time within the five-year period before the disposition, owned
or had an option to acquire 25% or more of the issued Common Shares of any
class or series of Common Shares of Vista Gold. Under the Canada-United
States Income Tax Convention, a resident of the United States who does not
carry on a business from a permanent establishment or fixed base in Canada
and who realizes a capital gain on the disposition of Common Shares that is
otherwise subject to tax in Canada, will be exempt from Canadian income tax.
It is the Canada Customs and Revenue Agency's present published policy that
entities (including certain limited liability companies) that are treated as
being fiscally transparent for United States federal income tax purposes will
not qualify as residents of the United States under the provisions of the
Canada-United States Income Tax Convention.
ITEM 6. SELECTED FINANCIAL DATA.
SELECTED FINANCIAL DATA
The selected financial data in Table I have been derived from the
consolidated financial statements of the Corporation, which have been
prepared in accordance with accounting principles generally accepted in
Canada. The selected financial data should be read in conjunction with those
financial statements and the notes thereto. See "Item 8. Consolidated
Financial Statements and Supplementary Data".
TABLE I
YEARS ENDED DECEMBER 31
-------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands, except per share data)
RESULTS OF OPERATIONS
Gold sales $ 19,496 $37,083 $ 40,123 $ 34,847 $39,659
Net earnings (loss) before write-downs (11,481) (1,640) (5,292) (11,826) 2,159
Net earnings (loss) (27,700) (1,640) (54,019) (11,826) 2,159
Net earnings (loss) per share before (0.13) (0.02) (0.06) (0.21) 0.05
write-downs
Net earnings (loss) per share (0.31) (0.02) (0.61) (0.21) 0.05
- 31 -
AT DECEMBER 31
--------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands)
FINANCIAL POSITION
Working capital(1) $ 2,972 $10,282 $ (237) $ 18,702 $21,672
Total assets 33,429 80,878 79,028 123,316 64,285
Long-term debt and other 5,229 19,629 4,568 3,929 3,409
non-current liabilities
Shareholders' equity 25,889 53,530 55,075 109,173 54,637
- -----------------------
(1) Including current portion of long-term debt of $481 - 1999; $2,372
- 1998; and $13,000 - 1997.
Had the consolidated financial statements of the Corporation been prepared in
accordance with accounting principles generally accepted in the United
States, certain selected financial data would have been reported as shown in
Table II.
TABLE II
YEARS ENDED DECEMBER 31
-------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands, except per share data)
RESULTS OF OPERATIONS
Net earnings (loss) $(13,695) $ 1,693 $(71,643) $(35,187) $ (708)
Basic and diluted earnings (loss) (0.15) 0.02 (0.80) (0.62) (0.02)
1998 1998 1997 1996 1995
---- ---- ---- ---- ----
(In thousands)
FINANCIAL POSITION
Total assets $ 33,086 $66,551 $ 61,500 $123,316 $87,504
Shareholders' equity 25,546 39,203 37,546 109,172 77,855
See note 12 to the consolidated financial statements for the year ended
December 31, 1999 under "Item 8. Consolidated Financial Statements and
Supplementary Data - Notes to Consolidated Financial Statements".
- 32 -
UNITED STATES$/CANADIAN$ EXCHANGE RATES(1)(3)
AT DECEMBER 31
--------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
As at December 31 $0.6925 $0.6504 $0.6999 $0.7301 $0.7325
Average(2) 0.6730 0.6740 0.7220 0.7331 0.7283
High 0.6925 0.7105 0.7487 0.7515 0.7529
Low 0.6535 0.6341 0.6945 0.7215 0.7025
- -------------------------------
(1) Exchange rates are expressed as the amount of United States funds
equivalent to one Canadian dollar, being the noon buying rates in New
York City for cable transfers in Canadian dollars, as certified for
customs purposes by the Federal Reserve Bank of New York.
(2) The yearly average rate means the average of the exchange rates on the
last day of each month during a year.
(3) On March 20, 2000, the noon buying rate as quoted by the Federal Reserve
Bank of New York was $1.4703 (Cdn.$1.00 equals U.S.$0.6801).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
INTRODUCTION
This discussion should be read in conjunction with the consolidated financial
statements of the Corporation for the three years ended December 31, 1999 and
the related notes thereto, which have been prepared in accordance with
generally accepted accounting principles ("GAAP") in Canada. Differences from
United States GAAP are described in note 13 to the consolidated financial
statements.
During 1999, 1998 and 1997, the Corporation's primary mining operation and
principal source of earnings was the Hycroft mine (formerly known as the
Crofoot/Lewis mine) in Nevada, which began gold production in 1987. In
December 1998, mining activities were suspended at the Hycroft mine. Gold
processing and recovery continued from previously mined and inventoried ore
in 1999 and is expected to continue in 2000, with gold production for 2000
estimated to be in excess of 12,000 ounces.
On December 10, 1999, Mineral Ridge Inc., a wholly-owned subsidiary of the
Corporation, voluntarily filed for protection under the U.S. Bankruptcy Code
after the Mineral Ridge mine failed to meet minimum cash flow levels required
under Mineral Ridge Inc.'s loan with Dresdner Bank due to ore reserve
deficiencies and low gold prices. See "Item 2. Properties - Mineral Ridge
Mine". The loan was not guaranteed by, and the lender has no recourse to, the
Corporation.
RESULTS OF OPERATIONS
1999 COMPARED WITH 1998
The 1999 net loss was $27.7 million as compared to the 1998 net loss of $1.6
million. The 1999 net loss included a $16.2 million write-down of mineral
properties. There was no similar write-down in 1998. The 1998 net loss
included a one-time gain on the liquidation of gold futures of $3.2 million
and a $0.8 million gain from the disposal of assets, while there were no
similar gains in 1999. Excluding the write-down of mineral properties and the
gains from the liquidation of gold futures and disposal of assets, the 1999
net loss of $11.4 million increased $5.8 million from the 1998 loss of $5.6
million. The
- 33 -
$5.8 million increase in net losses in 1999 was due to substantially lower
gold revenues partially offset by lower operating costs, both of which
reflect the Corporation's lower gold production and operating levels in 1999
as compared to 1998.
The Corporation's average gross realized price continued to decline in 1999
reflecting the lower average spot price of gold for 1999. Gold sales of $19.5
million in 1999 decreased $17.6 million, or 48%, from $37.1 million in 1998.
The decrease in gold sales was primarily because of lower gold production
combined with the lower average gold prices realized by the Corporation.
1999 1998
---- ----
Average gross realized price $ 298 $ 329
Average spot price $ 279 $ 294
Gold sales (000s) $19,496 $ 37,083
Gold production (ounces) 65,468 112,838
Gold production decreased 47,370 ounces from 112,838 in 1998 to 65,468 ounces
in 1999. The decrease in gold production was attributable to the suspension
of mining activities at the Hycroft mine in 1998, which was partially offset
by the start up of mining activities at the Mineral Ridge mine in 1999. Gold
production from the two mines was as follows.
1999 1998
---- ----
(Ounces)
Hycroft mine 40,075 112,685
Mineral Ridge mine 25,393 153
------- ----------
Total gold production 65,468 112,838
There was no ore mined at the Hycroft mine in 1999. All gold production from
the Hycroft mine was from previously mined and inventoried ore. At the
Mineral Ridge mine, 1.1 million tons of ore were mined in 1999, as compared
to 0.1 million tons of ore in 1998. The average grade of the ore mined in
1999 was 0.05 ounces of gold per ton. During the initial mining and
processing start up activities at Mineral Ridge, various mechanical problems
were encountered. These problems, primarily in the crushing plant, inhibited
the mine's ability to place ore onto the heaps for leaching and gold
extraction. As the mine continued to operate in 1999, the mechanical problems
were addressed and crusher production improved in the third quarter of 1999
to an average of 100,000 tons per month, which was in line with Corporation's
projections. However, the mine then began to experience ore deficiencies
during mining operations, as compared to original ore reserve estimates, and
gold production failed to meet expectations.
Operating costs from mining operations decreased $6.4 million from $27.0
million in 1998 to $20.6 million in 1999. Mining, processing and other costs
accounted for $5.2 million, $1.1 million and $0.1 million of the decrease in
operating costs, respectfully. The decrease was primarily due to the
elimination of mining activities at the Hycroft mine, which was partially
offset by the commencement of mining activities at the Mineral Ridge mine.
- 34 -
Operating costs at the two mines were as follows.
1999 1998
---- ----
(In thousands)
Hycroft mine $11,307 $26,257
Mineral Ridge mine 9,271 752
------- -------
Total operating costs $20,578 $27,009
The cash operating cost per ounce at the two mines was as follows.
1999 1998
---- ----
(Per Ounce)
Hycroft mine $277 $229
Mineral Ridge mine 358 - (1)
---- ----
Total operating costs $309 $235
(1) The cash operating costs at the Mineral Ridge mine for the two months
ended December 31, 1998 have been omitted because the mine was in the
initial start-up phase and accordingly, it is not possible to
accurately determine the true cash operating costs.
Mining costs in 1999 decreased $5.2 million as a result of mining fewer tons
at a lower average cost per ton. Total tons mined, including waste tons,
decreased to 6.4 million tons in 1999 from 10.4 million tons in 1998. The
average cost per ton mined decreased to $0.70 in 1999, as compared to $0.80
in 1998. In 1998, inefficiencies associated with the reduction in mining
activities at the Hycroft mine resulted in a higher average mining cost per
ton. In 1999, there was no mining at the Hycroft mine and all mining
activities occurred at the Mineral Ridge mine.
Processing costs, including changes in inventory, decreased $1.1 million in
1999 as a result of treating fewer tons of ore as compared to 1998. Ore tons
processed decreased to 1.0 million tons in 1999 from 7.2 million tons in
1998. At the Hycroft mine, while no additional ore was placed on the heaps in
1999, processing activities still continued throughout the year as previously
mined and inventoried ore was treated for gold extraction. Processing
activities at the Mineral Ridge mine included placing and treating 1.0
million tons of ore in 1999.
Other operating costs including mine administration, refining and freight
costs, and silver credits decreased $0.1 million in 1999. Excluding silver
credits, other operating costs decreased $0.5 million reflecting the
efficiencies of combining the administrative functions of the two mines and
the Corporation's efforts to minimize costs. However, lower silver production
and sales offset $0.4 million of the $0.5 million decrease.
Depreciation, depletion and amortization ("DD&A") in 1999 of $4.4 million
decreased $1.9 million from $6.3 million in 1998. At the Hycroft mine, DD&A
decreased $3.8 million and was directly related to the suspension of mining
activities in 1998. DD&A at the Mineral Ridge mine increased $1.9 million
reflecting the start up of mining activities in 1999.
The provision for reclamation and closure costs of $0.2 million in 1999
decreased dramatically from $2.4 million in 1998. In 1998, the higher
provision compensated for the revised Hycroft mine plan,
- 35 -
which called for the reduction and subsequent suspension of mining activities
in December 1998. In 1999, the provision of $0.2 million was solely from the
Mineral Ridge mine.
Operating lease costs in 1999 decreased to $44,000 as compared to $1.1
million in 1998. During 1998, the leases on several large pieces of mobile
mining equipment terminated and the equipment was purchased at the end of the
leases. During 1999, the Corporation did not have any major equipment leases.
Mineral exploration, property evaluation and holding costs were $2.8 million
in 1999 as compared to $2.6 million in 1998. The 1999 costs included $1.7
million in holding costs for the Corporation's Bolivian properties as
compared to $2.0 million in 1998. The Corporation incurred these holding
costs while maintaining and protecting its property interests in Bolivia.
Also included in the 1999 costs were $0.6 million for exploration and
evaluation work at the Hycroft mine, $0.2 million for exploration at the
Mineral Ridge mine, and $0.3 million of other exploration and evaluation
expenditures.
At the Hycroft mine, gold production from the Brimstone deposit consistently
exceeded the Corporation's projections. As a result, the Corporation
conducted preliminary studies in 1999 to determine the source and quantity of
the excess gold production. The studies indicated that during the period of
1996 through 1998, gold production from the north end of the Brimstone
deposit exceeded planned production by 47,090 ounces, or 26%. The excess gold
production was a result of mining 13% more ore tons at a 12% higher average
grade than predicted in the exploration reserve model. The Brimstone deposit
was not completely mined when mining activities were suspended in December
1998 and the Corporation is investigating the possibility of restarting
mining operations at the Hycroft mine.
Corporate administration and investor relations decreased $0.3 million in
1999 to $1.2 million as the Corporation continued to reduce its overhead and
administrative costs.
Interest expense in 1999 was $1.1 million as compared to $0.7 million in
1998, reflecting the Corporation's higher average debt balance during the
year. The increase in the average debt balance was directly related to the
additional debt of Mineral Ridge Inc.
In 1998, the gain on the disposal of assets was $0.8 million and primarily
consisted of the sales of surplus mining equipment from the Hycroft mine and
the sale of the Corporation's non-producing Tartan mine in Canada. There was
no similar gain or loss from the disposal of assets in 1999.
Management regularly reviews the carrying values of its long-lived assets and
investments. These evaluations indicated that the carrying values of certain
properties and investments were overstated and, accordingly, were written
down. Based upon management's evaluation, $16.2 million was written down in
1999, including Bolivian mineral properties - $13.2 million; Mineral Ridge
mine net assets - $2.9 million; and Zamora accounts receivable - $0.1
million. Additionally, the Corporation wrote off its remaining investment of
$0.6 million in Zamora, reflecting its decreased levels of ownership and
control. There were no similar write-downs in 1998.
Income tax expense in 1999 was nil as compared to $0.2 million in 1998. The
1998 income tax expense was primarily the result of U.S. alternative minimum
taxes, which limited the Corporation's ability to utilize existing loss carry
forwards.
- 36 -
1998 COMPARED WITH 1997
The net loss for 1998 was $1.6 million compared to a net loss of $54.0
million in 1997. The 1998 net loss included gains of $0.8 million from the
disposal of assets, while the 1997 net loss included gains of $1.0 million
from the disposal of assets. The 1998 net loss also included a one-time gain
on the liquidation of gold futures of $3.2 million, while there was no
similar gain in 1997. The 1997 net loss included a $48.7 million write down
of mineral properties and investments. There were no similar write-downs in
1998. Excluding gains from the liquidation of gold futures and the disposal
of assets, and write-downs of mineral properties and investments, the 1998
net loss of $5.6 was slightly less than the 1997 loss of $6.3 million.
Average gross realized prices declined in 1998 as the gold spot price
continued to drop. Gold revenues of $37.1 million in 1998 decreased $3.0
million, or 8% from 1997, primarily because of the lower average gross
realized price combined with a decrease in gold production.
1998 1997
---- ----
Gold (ounces) 112,838 117,378
Average gross realized price $329 $342
Gold production decreased 4,540 ounces from 117,378 in 1997 to 112,838 ounces
in 1998. The decrease in gold production was attributable to the reduction in
mining activities at the Hycroft mine. In 1998, 7.2 million ore tons were
mined as compared to 10.6 million ore tons in 1997. While ore tons mined
decreased 32% in 1998, gold production only decreased 4%. The positive
variance was largely due to measures taken in 1997 to improve solution flow
rates and gold production, combined with higher than expected ore grades in
1998.
Lower average cash balances led to lower interest income for the year.
Interest income in 1998 was $0.1 million as compared to $0.2 million in 1997.
Total revenues of $40.4 million were unchanged from 1997.
Operating costs from mining operations decreased $3.9 million from 1997 to
$27.0 million in 1998. The decrease was due to the reduction in mining
activities at the Hycroft mine. Total tons mined, including waste tons,
decreased to 10.4 million tons in 1998 from 37.5 million tons in 1997. The
average cost per ton mined increased to $0.80 in 1998, as compared to $0.57
in 1997, as a result of inefficiencies associated with the reduction in
mining activities.
Depreciation, depletion and amortization in 1998 of $6.3 million was
relatively unchanged from 1997. However, the provision for reclamation and
closure costs of $2.4 million in 1998 increased dramatically from $0.8
million in 1997. The increase compensated for the new Hycroft mine plan,
which called for the reduction and subsequent suspension of mining activities
in 1998. The new mine plan optimized the mine's ore reserve in light of
reduced gold prices and concentrated on lower production cost ounces.
Amortization and accrual rates increased because of the reduction in total
tons and ounces called for in the new mine plan.
Operating lease costs in 1998 decreased to $1.1 million as compared to $2.2
million in 1997. During 1998, the leases on several large pieces of mobile
mining equipment terminated and the equipment was purchased at the end of the
leases. The Corporation does not have any other outstanding major equipment
leases.
- 37 -
Mineral exploration, property evaluation and holding costs were $2.6 million
in 1998. Holding costs for the Corporation's Bolivian properties were $2.0
million in 1998. The Corporation incurred these holding costs while
maintaining and protecting its property interests in Bolivia, operating its
administrative office in La Paz, and sustaining its development and social
operations at the Amayapampa and Capa Circa properties. There were no similar
costs in 1997. Excluding the Bolivian holding costs, 1998 mineral exploration
and property evaluation expenses were $0.6 million as compared to $2.3
million in 1997. The $1.7 million decrease reflects the Corporation's efforts
to control costs and conserve cash in 1998. During 1998, the Corporation's
exploration efforts were focused on Latin America and the Mineral Ridge mine
in Nevada.
Corporate administration and investor relations decreased $1.2 million in
1998 to $1.5 million as the Corporation continued to reduce its overhead and
administrative costs. Interest expense in 1998 was $0.7 million as compared
to $0.8 million in 1997, reflecting the Corporation's lower average debt
balance during the year.
In 1998, the gain on the disposal of assets was $0.8 million and primarily
consisted of the sales of surplus mining equipment from the Hycroft mine and
the sale of the Corporation's non-producing Tartan mine in Canada.
As discussed above, the Corporation liquidated its forward position in the
gold futures market in January 1998. As a result, net hedging gains of $9.3
million were realized, of which $3.2 million was recognized immediately as
other revenue with the balance deferred to subsequent periods. No such gain
was recorded in 1997.
Income tax expense increased $0.1 million in 1998 to $0.2 million, primarily
as a result of U.S. alternative minimum taxes, which limit the Corporation's
ability to utilize existing loss carry forwards.
Management regularly reviews the carrying values of its long-lived assets and
investments. In 1997, the carrying values of certain properties and
investments were written down by $48.7 million. No similar write-down was
required in 1998.
YEAR 2000
As the year 2000 approached, there were uncertainties concerning whether
computer systems would properly recognize date-sensitive information when the
year changed to 2000. Systems that did not properly recognize such
information could have generated erroneous data or failed.
The Corporation's computer systems and software were configured to
accommodate dates beyond the year 2000 prior to the year changing to 2000.
The year 2000 did not pose any major operational problems for the
Corporation's computer systems. The Corporation's computer systems are
functioning properly and the Corporation has not experienced any internal
difficulties due to the year 2000 issue, nor has it experienced any
difficulties due to a third party's inability to adequately address year 2000
issues. There were no material effects on the Corporation's financial results
as a result of year 2000 issues.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's consolidated cash balance at December 31, 1999 was $2.3
million, a decrease of $2.5 million from the end of the previous year. During
1999, operating activities consumed $1.8 million, investing activities
consumed $1.7 million, and financing activities generated $1.0 million for a
net decrease to cash of $2.5 million.
- 38 -
Operating activities consumed $1.8 million in 1999 and were as follows.
1999
----
(In thousands)
Hycroft mine $ 4,449
Mineral Ridge mine (2,596)
Bolivian properties (1,968)
Corporate activities (1,632)
-------
Net operating costs $(1,747)
The Hycroft mine generated $4.5 million of cash from operating activities,
net of $1.6 million in reclamation and closure costs. Before reclamation and
closure costs, the mine generated $6.1 million of cash. Mining activities at
the Hycroft mine were suspended in December 1998. In 1999, the mine continued
to produce gold from previously mined and inventoried ore without the burden
of mining costs and with the benefit of reduced operating levels. As a
result, the mine produced 40,075 ounces of gold at a cash cost of $277 per
ounce. However, excluding changes in inventory, the true cash operating cost
was $146 per ounce.
The Mineral Ridge mine encountered various mechanical difficulties as well as
ore shortfalls during 1999 and, although operating costs were at or below
plan, gold production was well below plan. As a result, the operating cash
flow at the mine was seriously impaired and $2.6 million of cash was consumed.
Bolivian and corporate activities required $2.0 million and $1.6 million in
cash, respectively. During 1999, the Corporation held and maintained its
Bolivian properties, and at the same time steps were undertaken to minimize
future property holding costs. Past efforts to reduce the cash required for
corporate activities have continued to be effective and the Corporation will
investigate other alternatives to reduce its corporate overhead.
Investing activities consumed $1.7 million in 1999 and primarily consisted of
capital expenditures at the Mineral Ridge mine. At the Mineral Ridge mine,
capital expenditures in 1999 included $1.4 million for the leach pad
expansion and $0.2 million for the replacement of a critical ore-feeding
component in the crushing plant. At the Hycroft mine, $0.2 million was spent
on two processing modifications designed to improve recoveries from the
remaining gold inventory. Partially offsetting the capital expenditures were
$0.1 million in proceeds from the disposal of assets.
In 1999, financing activities generated $1.0 million. During the year, the
Corporation borrowed $1.5 million and repaid $0.3 million under the terms of
a $1.5 million term loan, which was collateralized by certain mobile assets
of the Hycroft mine. At the Mineral Ridge mine, the net repayment under the
terms of its loans was $0.2 million.
- 39 -
RECLAMATION AND ENVIRONMENTAL COSTS
Management estimates the reclamation and closure costs for the Corporation's
Hycroft mine to be $4.4 million. These costs are charged to earnings over the
life of the mine and the provision to date is $4.4 million. In April 1995,
the Nevada Bureau of Land Management ("BLM") approved an amended Hycroft mine
reclamation plan that included the Brimstone deposit, and an uncollateralized
surety bond in the amount of $5.1 million was posted to secure reclamation
obligations under the plan.
REGULATORY COMPLIANCE AND OTHER MATTERS
During 1999, there were no material environmental incidents or non-compliance
with any applicable environmental regulations.
GOING CONCERN
The Corporation's consolidated cash balance was $2.3 million as of December
31, 1999. Management estimates consolidated total cash expenditures of $2.0
million for 2000. If the current depressed market for gold prices continues
into 2000, it may be necessary for the Corporation to modify its 2000 budget
to achieve further reductions in operating and general and administrative
expenses. The Corporation may require additional funding to maintain its
properties in good standing and continue its operations throughout the next
fiscal year.
The Corporation relies on the Hycroft mine as its only current source of
operating cash flows. Mining activities at Hycroft were suspended in 1998.
During 1999, Hycroft produced gold from previously mined and inventoried ore
on the leach pads, a process that will continue through 2000. However,
Hycroft's remaining gold inventory is decreasing and, therefore, gold
production will continue to decrease throughout the year 2000. The
Corporation is also researching the economic feasibility of restarting the
Hycroft mine and developing the Amayapampa project. The Corporation's ability
to restart the Hycroft mine and develop the Amayapampa project is dependent
upon its ability to raise additional capital.
The Corporation's ability to continue as a going concern is dependent upon
obtaining additional capital. Management is actively pursuing additional
sources of capital, including debt financing, the issuance of equity, mergers
with other companies, and the sale of property interests. In the event that
management is unable to obtain additional capital, there is substantial doubt
about the ability of the Corporation to continue as a going concern.
OUTLOOK
Average gold prices continued to decline in 1999. And while there has been
some recent price improvement, the Corporation is making its plans on the
assumption that low gold prices will persist in 2000.
At the Hycroft mine, gold processing and recovery continued from inventoried ore
in 1999 and is expected to continue in the year 2000, with gold production for
2000 estimated to be in excess of 12,000 ounces. During 1999, Hycroft mine gold
production consistently exceeded expectations and as a result, the Corporation
conducted a $0.6 million exploration program to determine the extent of the
remaining Brimstone gold resource. The Corporation received advice during the
reserve re-estimation process from Mineral Resources Development, Inc. ("MRDI"),
an independent consultant that was retained to endorse the recalculated mineable
reserves. The studies indicated that during the period of 1996 through 1998,
- 40 -
gold production from the north end of the Brimstone deposit exceeded planned
production by 47,090 ounces, or 26%. The excess gold production was a result
of mining 13% more ore tons at a 12% higher average grade than predicted in
the exploration reserve model. The results of the program to date indicate
that a mineable reserve in the Brimstone orebody could be established.
The Brimstone orebody was not completely mined out when mining activities
were suspended in December 1998. A positive result from the program could
reestablish a mineable reserve in the unmined portion of the Brimstone
deposit and allow the Hycroft mine to resume mining operations and gold
production. Currently, the Corporation plans to maintain the plant and
facilities on a standby basis until production can be restarted. In the
short-term, the Corporation will continue reclamation activities in areas
that would not be affected by future operations.
In Bolivia, the Corporation recently completed a feasibility study on the
Amayapampa project. Based on a gold price of $300 per ounce, the proven and
probable reserves at Amayapampa are calculated to be 9.3 million tonnes (10.2
million tons) grading 1.76 grams per tonne (0.051 ounces per ton) including
dilution, containing 526,000 ounces of gold. Within this reserve, an
optimized plan at a gold price of $325 per ounce will generate an after-tax
internal rate of return of 20%. The initial capital costs are estimated to be
$25.0 million, including working capital and a 20% contingency. The
Corporation has been in discussions with various lenders regarding the debt
financing component for the project and is exploring alternatives to complete
the total financing package.
Management is attempting to further reduce its corporate overhead costs and
minimize discretionary expenditures in an effort to preserve capital. The
Corporation believes that its current cash on hand is sufficient to continue
producing gold from previously mined and inventoried ore at the Hycroft mine.
However, the Corporation will have to raise additional funds from external
sources in order to restart mining activities at the Hycroft mine or begin
construction and development activities at the Amayapampa project in Bolivia.
Accordingly, the Corporation is actively investigating various alternatives,
including debt financing, the issuance of equity, mergers with other
companies, and the sale of property interests. During 2000, the Corporation's
activities will focus on the advancement of its two development projects and
the preservation of its working capital resources.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
COMMODITY PRICE RISK
The Corporation is engaged in gold mining and related activities, including
exploration, extraction, processing, and refining and reclamation. Gold
bullion is the Corporation's principal product. Changes in the price of gold
could affect the Corporation's profitability and cash flows. Gold prices may
fluctuate widely from time to time. For a description of factors that affect
gold prices, see note 1(a) to the consolidated financial statements for the
year ended December 31, 1999 under "Item 8. Consolidated Financial Statements
and Supplementary Data - Notes to Consolidated Financial Statements".
Using current 2000 estimates of production at an estimated average gold price
of $300 per ounce, including the effects of the Corporation's hedging
position, if any, and management's estimate of expected operating expenses, a
$10 change in the gold price would result in an increase or decrease of
approximately $0.1 million in net income and cash flows.
- 41 -
The Corporation occasionally utilizes derivative commodity instruments for
purposes other than trading purposes to manage the Corporation's exposure to
the risks associated with fluctuations in the price of gold by protecting the
selling price of a portion of its production. The market risk of these
commodity instruments to the Corporation's cash flow is related to the
possible failure of all counterparties to honor their contractual
obligations. Also, precious metals contracts between the Corporation and
various counterparties involve the requirement that the Corporation deliver
gold to the counterparty at agreed-upon prices. If the counterparty is unable
to fulfill its purchase obligations, there is no guarantee that the
Corporation will be able to receive the agreed-upon sales price in the open
market. If the Corporation is unable to produce sufficient gold to meet its
hedging contract obligations, it may be obligated to purchase such gold at
the then market price. For further information regarding the Corporation's
hedging program, see note 7(a) to the consolidated financial statements for
the year ended December 31, 1999 under "Item 8. Consolidated Financial
Statements and Supplementary Data - Notes to Consolidated Financial
Statements".
At December 31, 1999, the Corporation's had no outstanding forward sales
contracts.
INTEREST RATE RISK
At December 31, 1999, the interest rate on the Corporation's long-term debt
was 10.61%. The interest rate on this debt is fixed. Management does not
believe that the Corporation is exposed to major interest rate risk and the
Corporation does not utilize market risk sensitive instruments to manage its
exposure to this risk.
FOREIGN CURRENCY EXCHANGE RATE RISK
The price of gold is denominated in U.S. dollars, and all of the
Corporation's revenues and a majority of its expenses are incurred in U.S.
dollars. As a result, management does not believe that the Corporation is
exposed to any noteworthy foreign currency exchange rate risk and the
Corporation does not utilize market risk sensitive instruments to manage its
exposure to this risk.
- 42 -
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL INFORMATION
To the Shareholders of Vista Gold Corp.
The consolidated financial statements are the responsibility of the Board of
Directors and management. The consolidated financial statements have been
prepared by management based on information available to March 14, 2000, and
are in accordance with accounting principles generally accepted in Canada.
A system of internal accounting and administrative controls is maintained by
management in order to provide reasonable assurance that financial
information is accurate and reliable, and that the Corporation's assets are
safeguarded. Limitations exist in all cost-effective systems of internal
controls. The Corporation's systems have been designed to provide reasonable
but not absolute assurance that financial records are adequate to allow for
the completion of reliable financial information and the safeguarding of its
assets.
The Corporation believes that the systems are adequate to achieve the stated
objectives. Regular testing of these systems is employed to ensure continued
effectiveness of the controls, and actions are taken when necessary to
correct deficiencies when they are identified.
The Audit Committees of the Board of Directors is comprised of four outside
directors, and meets regularly with management and the independent auditors
to ensure that management is maintaining adequate internal controls and
systems and to approve the annual and quarterly consolidated financial
statements of the Corporation. The committee also reviews the audit plan of
the independent auditors and discusses the results of their audit and their
report prior to submitting the consolidated financial statements to the Board
of Directors for approval.
The consolidated financial statements have been audited by
PricewaterhouseCoopers LLP, Chartered Accountants, who were appointed by the
shareholders. The auditors' report outlines the scope of their examination
and their opinion on the consolidated financial statements.
/s/ DAVID R. SINCLAIR /s/ ROGER L. SMITH
- -------------------------- --------------------------
David R. Sinclair Roger L. Smith
Chairman of the Board Vice President Finance
- 43 -
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Vista Gold Corp.
We have audited the consolidated balance sheets of Vista Gold Corp. as of
December 31, 1999 and 1998 and the consolidated statements of loss, deficit
and cash flows for each of the three years in the period ended December 31,
1999. These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the consolidated financial position of the Corporation
as of December 31, 1999 and 1998, and the consolidated results of its
operations and cash flows for each of the three years in the period ended
December 31, 1999, in accordance with Canadian generally accepted accounting
principles.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Vancouver, British Columbia, Canada
March 14, 2000
Comments by the Auditors for U.S. Readers on Canada-U.S. Reporting Difference
In the United States, reporting standards for auditors require the addition
of an explanatory paragraph (following the opinion paragraph) when the
financial statements are affected by conditions and events that cast
substantial doubt on the Corporation's ability to continue as a going concern
such as those described in Note 1 of the consolidated financial statements.
Our report to the shareholders dated March 14, 2000, is expressed in
accordance with Canadian reporting standards, which do not permit a reference
to such conditions and events in the auditor's report when these are
adequately disclosed in the financial statements.
/s/ PricewaterhouseCoopers LLP
Chartered Accountants
Vancouver, British Columbia, Canada
March 14, 2000
- 44 -
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31
--------------------------------
1999 1998
---- ----
(U.S. DOLLARS IN THOUSANDS)
ASSETS:
Cash and cash equivalents $ 2,331 $ 4,786
Marketable securities 77 90
Accounts receivable 1,571 3,958
Gold inventory in process 117 7,318
Supplies and other 1,187 1,849
--------------------------------
Current assets 5,283 18,001
--------------------------------
Property, plant and equipment, net - Note 3 28,124 61,093
Investment in and advances to Zamora Gold Corp. - Note 4 - 571
Other assets 22 1,213
--------------------------------
Long-term assets 28,146 62,877
--------------------------------
Total assets $ 33,429 $ 80,878
================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 744 $ 2,425
Accrued liabilities and other 1,086 1,772
Deferred hedging gains - 1,150
Current portion of long-term debt - Note 5 481 2,372
--------------------------------
Current liabilities 2,311 7,719
--------------------------------
Long-term debt - Note 5 801 13,217
Accrued reclamation and closure costs 4,411 6,384
Other liabilities 17 28
--------------------------------
Long-term liabilities 5,229 19,629
--------------------------------
Total liabilities 7,540 27,348
--------------------------------
Capital stock, no par value per share - Note 6:
Preferred - unlimited shares authorized; no shares outstanding
Common - unlimited shares authorized; shares outstanding:
1999 and 1998 - 90,715,040 121,146 121,146
Deficit (93,776) (66,076)
Currency translation adjustment (1,481) (1,540)
--------------------------------
Total shareholders' equity 25,889 53,530
--------------------------------
Total liabilities and shareholders' equity $ 33,429 $ 80,878
================================
Nature of operations and going concern - Note 1
Commitments and contingencies - Note 7
Approved by the Board of Directors
/s/ David R. Sinclair /s/ Peter Walton
- --------------------- ----------------
David R. Sinclair Peter Walton
Chairman Director
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
- 45 -
CONSOLIDATED STATEMENTS OF LOSS
YEARS ENDED DECEMBER 31
------------------------------------------
1999 1998 1997
---- ---- ----
(U.S. DOLLARS IN THOUSANDS, EXCEPT
SHARE DATA)
REVENUES:
Gold sales $ 19,496 $37,083 $ 40,123
Other revenues - Note 2 (m) 109 3,350 248
------------------------------------------
Total revenues 19,605 40,433 40,371
------------------------------------------
COSTS AND EXPENSES:
Mining operations 20,578 27,009 30,917
Depreciation, depletion and amortization 4,421 6,270 6,223
Provision for reclamation and closure costs 232 2,442 826
Operating leases 44 1,094 2,228
Mineral exploration, property evaluation and holding costs 2,802 2,596 2,294
Corporate administration 926 1,278 2,328
Investor relations 257 209 407
Interest expense 1,146 660 817
Loss (gain) on disposal of assets 5 (775) (1,022)
Equity in loss and impairment of Zamora Gold Corp. 601 427 3,501
Other expense (income) 74 692 (189)
Write-down of mineral properties - Note 8 16,219 - 46,015
------------------------------------------
Total costs and expenses 47,305 41,902 94,345
------------------------------------------
Loss before taxes (27,700) (1,469) (53,974)
Income taxes - Note 9 - 171 45
------------------------------------------
Net loss $(27,700) $(1,640) $(54,019)
==========================================
Weighted average shares outstanding 90,715,040 89,456,478 89,101,056
- ----------------------------------------------------------------------------------------------------------------
Loss per share $(0.31) $(0.02) $(0.61)
- ----------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
- 46 -
CONSOLIDATED STATEMENTS OF DEFICIT
YEARS ENDED DECEMBER 31
--------------------------------------------
1999 1998 1997
---- ---- ----
(U.S. DOLLARS IN THOUSANDS)
Deficit, beginning of period $(66,076) $(64,436) $(10,417)
Net loss (27,700) (1,640) (54,019)
--------------------------------------------
Deficit, end of period $(93,776) $(66,076) $(64,436)
============================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
- 47 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31
--------------------------------------------
1999 1998 1997
---- ---- ----
(U.S. DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(27,700) $ (1,640) $(54,019)
ADJUSTMENTS TO RECONCILE NET EARNINGS (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATIONS:
Depreciation, depletion and amortization 4,421 6,270 6,223
Amortization of deferred stripping - 1,169 985
Amortization of debt issue costs - - 143
Deferral (amortization) of hedging gains (1,150) 1,150 (430)
Amortization of deferred hedging costs - 276 -
Provision for reclamation and closure costs 232 2,442 826
Reclamation and closure costs (1,800) (592) (189)
Loss (gain) on sale of assets 5 (775) (1,022)
Equity in loss and impairment of Zamora Gold Corp. 601 427 3,501
Loss (gain) on currency translation 59 (181) (205)
Write-down of mineral properties 16,219 - 46,015
Other non-cash items (11) (5) 1
-----------------------------------------------
Cash provided by (used in) operating activities (9,124) 8,541 1,829
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Marketable securities 13 42 82
Accounts receivable 1,723 (1,759) (167)
Gold inventory 3,397 5,399 1,597
Realization of hedging gains acquired 3,041 - -
Supplies and other (133) 452 1,457
Accounts payable (294) (2,047) (3,741)
Accrued liabilities and other (370) (141) 343
-----------------------------------------------
Net cash provided by (used in) operating activities (1,747) 10,487 1,400
-----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,917) (4,552) (14,669)
Acquisition of Mineral Ridge Inc. - 4,639 -
Additions to deferred stripping - - (6,034)
Proceeds from disposal of assets 86 5,758 1,168
Investment in and advances to Zamora Gold Corp. (30) (141) (1,376)
Other assets 173 (204) (383)
-----------------------------------------------
Net cash provided by (used in) investing activities (1,688) 5,500 (21,324)
-----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (520) (13,000) (1,700)
Proceeds from debt 1,500 - 14,700
Proceeds from issuance of common stock - - 125
-----------------------------------------------
Net cash provided by (used in) financing activities 980 (13,000) 13,125
-----------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,455) 2,987 (6,799)
Cash and cash equivalents, beginning of year 4,786 1,799 8,598
-----------------------------------------------
Cash and cash equivalents, end of year $ 2,331 $ 4,786 $ 1,799
===============================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
- 48 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tabular information set out below is in thousands of United States
dollars, except share data.
1. NATURE OF OPERATIONS AND GOING CONCERN
(a) VISTA GOLD CORP.
Vista Gold is engaged in gold mining and related activities in the United
States, Canada, and Latin America, including exploration, extraction,
processing, refining and reclamation. Gold bullion is the Corporation's
principal product, which is a commodity produced throughout the world.
The Corporation's results are impacted by the price of gold. Gold prices
fluctuate and are affected by numerous factors, including, but not limited
to, expectations with respect to the rate of inflation, exchange rates
(specifically, the U.S. dollar relative to other currencies), interest rates,
global and regional political and economic circumstances and governmental
policies, including those with respect to gold holdings by central banks. The
demand for and supply of gold affect gold prices, but not necessarily in the
same manner as demand and supply affect the prices of other commodities. The
supply of gold consists of a combination of new mine production and existing
stocks of bullion and fabricated gold held by governments, public and private
financial institutions, industrial organizations and private individuals. The
demand for gold primarily consists of jewelry and investments. Additionally,
hedging activities by producers, consumers, financial institutions and
individuals can affect gold supply and demand. Gold can be readily sold on
numerous markets throughout the world and its market value can be ascertained
at any particular time. As a result, the Corporation is not dependent upon
any one customer for the sale of its product.
(b) CLOSURE OF MINERAL RIDGE RESOURCES INC.
On October 21, 1998, the Corporation completed the acquisition of Mineral
Ridge Inc. from Cornucopia Resources Ltd. Vista Gold acquired all of the
shares of Mineral Ridge Inc. in consideration for 1,562,000 Common Shares of
Vista Gold with an aggregate value of $250,000. The fair value of the
consideration under purchase accounting was $276,000. Vista Gold concurrently
subscribed on a private placement basis for 2,777,777 common shares of
Cornucopia valued at $250,000.
On December 10, 1999, Mineral Ridge Inc., a wholly owned subsidiary of the
Corporation, voluntarily filed for protection under the U.S. Bankruptcy Code.
Gold production at the Mineral Ridge mine failed to meet expectations.
Initially, mechanical difficulties inhibited production efforts, but as
mining operations continued in the latter half of the year, significant and
persistent ore deficiencies occurred as compared to original ore reserve
estimations. After reviewing the reserves with an independent consultant, it
was concluded that significant deficiencies in the ore reserves in the
future, compared with the original ore reserve estimates, were probable. The
reduced gold production and ore reserves caused by the ore deficiencies and
low gold prices resulted in the mine failing to meet its required cash-flow
targets under Mineral Ridge Inc.'s loan agreement with Dresdner Bank, which
is not guaranteed by the Corporation. Various alternatives were then
considered, although none were considered to be viable, and a protective
bankruptcy filing was made. Accordingly, effective 1999, the Corporation
ceased consolidating its investment in Mineral Ridge Inc., which resulted in
a loss of $2.9 million (note 8).
(c) GOING CONCERN
These consolidated financial statements have been prepared on the basis of
accounting principles applicable to a going concern that assumes the
realization of assets and the discharge of liabilities in the
- 49 -
normal course of business. The Corporation's consolidated cash balance was
$2.3 million as of December 31, 1999. Management estimates consolidated total
cash expenditures of $2.0 million for 2000. If the current depressed market
for gold prices continues into 2000, it may be necessary for the Corporation
to modify its 2000 budget to achieve further reductions in operating and
general and administrative expenses. The Corporation may require additional
funding to maintain its properties in good standing and continue its
operations throughout the next fiscal year.
The Corporation relies on the Hycroft mine as its only current source of
operating cash flows. Mining activities at Hycroft were suspended in 1998.
During 1999, Hycroft produced gold from previously mined and inventoried ore
on the leach pads, a process that will continue through 2000. However,
Hycroft's remaining gold inventory is decreasing and, therefore, gold
production will continue to decrease throughout the year 2000. The
Corporation is investigating the economic feasibility of restarting the
Hycroft mine and developing the Amayapampa project in Bolivia. The
Corporation's ability to restart the Hycroft mine and develop the Amayapampa
project is dependent upon its ability to raise additional capital.
The Corporation's ability to continue as a going concern is dependent upon
obtaining additional capital. Management is actively pursuing additional
sources of capital, including debt financing, the issuance of equity, mergers
with other companies, and the sale of property interests. In the event that
management is unable to obtain additional capital, there is substantial doubt
about the ability of the Corporation to continue as a going concern. These
financial statements do not give effect to any adjustments, which may be
necessary should the Corporation be unable to continue as a going concern.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements of the Corporation and its subsidiaries
have been prepared in accordance with accounting principles generally
accepted in Canada. These principles differ in certain material respects from
those accounting principles generally accepted in the United States. The
differences are described in note 12.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Vista Gold and
its subsidiaries. Vista Gold's subsidiaries and its percentage ownership in
these entities as of December 31, 1999 are:
- 50 -
OWNERSHIP
- ---------------------------------------------------------------------------------------------------
Vista Gold Holdings Inc. and its wholly-owned subsidiaries 100%
Hycroft Resources & Development, Inc. and its wholly-owned subsidiary
Hycroft Lewis Mine, Inc.
Mineral Ridge Resources Inc. (1)
Vista Gold U.S. Inc.
Granges Inc. (previously called Granges (Canada) Inc.) 100%
Vista Gold (Antigua) Corp. and its wholly-owned subsidiary 100%
Compania Inversora Vista S.A. and its wholly-owned subsidiaries
Minera Nueva Vista S.A.
Compania Exploradora Vistex S.A.
Sociedad Industrial Yamin Limitada (2) 100%
(1) In 1999, Mineral Ridge Resources Inc. voluntarily filed for protection
under the U.S. Bankruptcy Code (note 1). Accordingly, effective 1999 the
Corporation ceased consolidating the investment in Mineral Ridge
Resources Inc. resulting in a loss of $2.9 million (note 8).
(2) Subsequent to December 31, 1999, the Corporation sold Sociedad
Industrial Yamin Limitada (note 13).
(c) USE OF ESTIMATES
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
consolidated financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from those
reported.
(d) FOREIGN CURRENCY TRANSLATION
Sales revenues and a significant portion of the Corporation's expenses are
denominated in U.S. dollars. The focus of the Corporation is increasingly on
international operating activities and the Corporation's executive office is
located in Denver, Colorado. The U.S. dollar is the principal currency of the
Corporation's business. Accordingly, the consolidated financial statements of
the Corporation are expressed in U.S. dollars.
The accounts of self-sustaining foreign operations are translated using the
current rate method. Under this method, assets and liabilities are translated
at the rate of exchange on the balance sheet date, and revenue and expenses
at the average rate of exchange during the period. Exchange gains and losses
are deferred and shown as a currency translation adjustment in shareholders'
equity until transferred to earnings when the net investment in the foreign
operation is reduced or settled.
- 51 -
Foreign currency denominated monetary items of the Corporation, excluding its
foreign operations, are translated at the year-end exchange rate. Exchange
gains and losses on these items are recognized in earnings in the year they
arise.
(e) REVENUE RECOGNITION
Sales are recorded as soon as the product is considered available for sale.
Gains and losses on forward sales and option contracts are deferred until the
related production is sold.
(f) MINERAL EXPLORATION
Acquisition and exploration expenditures on mineral properties are expensed
when incurred until such time as the property indicates the potential of
being developed into a mine, and thereafter the expenditures are capitalized.
Holding costs to maintain a property on a stand-by basis are charged to
expense as incurred. Previously capitalized expenditures are expensed if the
project is determined to be uneconomical.
(g) CASH EQUIVALENTS AND CASH FLOWS
Cash equivalents are represented by investments in short-term investment
funds consisting of highly liquid debt instruments such as certificates of
deposit, commercial paper, and money market accounts purchased with an
original maturity date of less than three months. The Corporation's policy is
to invest cash in conservative, highly rated instruments and limit the amount
of credit exposure to any one institution.
The Corporation has adopted the requirements of the revised CICA 1540 - "Cash
Flow Statements" in the current year and has restated the prior year amounts
to reflect this new requirement.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
1999 1998 1997
- ------------------------------------------------------------------------------------------------
Cash paid during the year for:
Interest $1,146 $451 $674
Income taxes 196 - 91
(h) MARKETABLE SECURITIES
Marketable securities are carried at the lower of cost or market value, which
approximates fair value. The market value at December 31, 1999 was $0.3
million.
(i) INVENTORIES
Gold inventory is valued at the lower of average cost or net realizable
value. The direct cash costs associated with ore placed in stockpiles and on
leach pads are inventoried and charged to operations as the contained gold is
recovered. Based upon actual metal recoveries, ore grades and operating
plans, management continuously evaluates and refines estimates in determining
the carrying values of costs associated with gold inventories. It is possible
that in the near term, estimates of recoverable ore, grade, and gold price
could change causing the Corporation to revise the value of its gold
inventories.
- 52 -
Supply inventories are valued at the lower of average cost or net replacement
value.
(j) PROPERTY, PLANT AND EQUIPMENT
(i) Developed Mineral Properties
Property acquisition and development costs are carried at cost less
accumulated amortization and write-downs. Amortization is provided on
the units-of-production method based on proven and probable reserves.
Holding costs to maintain a property on a stand-by basis are charged to
expense as incurred. Management reviews the carrying value of the
Corporation's interest in each property quarterly and, where necessary,
these properties are written down to their estimated recoverable amount
determined on an undiscounted basis. Management's estimate of gold
price, recoverable proven and probable reserves, operating, capital and
reclamation costs are subject to risks and uncertainties affecting the
recoverability of the Corporation's investment in property, plant and
equipment. Although management has made its best estimate of these
factors based on current conditions, it is possible that changes could
occur in the near term that could adversely affect management's estimate
of net cash flows expected to be generated from its operating properties
and the need for possible asset impairment write-downs.
(ii) Plant and Equipment
Plant and equipment are recorded at cost and depreciated using the
units-of-production method or the straight-line method over their
estimated useful lives. The cost of normal maintenance and repairs is
charged to expense as incurred. Significant expenditures, which increase
the life of an asset, are capitalized and depreciated over the remaining
estimated useful life of the asset. Upon sale or retirement of assets,
the costs and related accumulated depreciation or amortization are
eliminated from the respective accounts and any resulting gains or
losses are reflected in operations.
(iii) Deferred Stripping
During production, mining costs associated with waste rock removal in
excess of the average life-of-mine stripping ratios are deferred and
charged to operations over the life of the mine.
(k) PROVISION FOR FUTURE RECLAMATION AND CLOSURE COSTS
All of the Corporation's operations are subject to reclamation, site
restoration and closure requirements. Costs related to ongoing site
restoration programs are expensed when incurred. A provision for mine closure
and site restoration costs is charged to earnings over the lives of the mines
on a units-of-production basis. The Corporation calculates its estimates of
the ultimate reclamation liability based on current laws and regulations and
the expected future costs to be incurred in reclaiming, restoring and closing
its operating mine sites. It is possible that the Corporation's estimate of
its ultimate reclamation, site restoration and closure liability could change
in the near term due to possible changes in laws and regulations and changes
in cost estimates.
(l) ESTIMATES OF PROVEN AND PROBABLE RESERVES
Management's calculation of proven and probable reserves is based upon
engineering and geological estimates and financial estimates including gold
prices and operating costs. The Corporation depreciates some of its assets
and accrues for reclamation on a units-of-production basis over proven and
probable
- 53 -
reserves. Changes in geological interpretations of the Corporation's ore
bodies and changes in gold prices and operating costs may change the
Corporation's estimate of proven and probable reserves. It is possible that
the Corporation's estimate of proven and probable reserves could change in
the near term and could result in revised charges for depreciation and
reclamation in future reporting periods.
(m) HEDGING
The Corporation enters into derivative financial transactions to hedge its
exposure to the effects of fluctuations in the price of gold. The Corporation
does not enter into derivative transactions for speculative purposes. The
resulting gains or losses, measured by quoted market prices, are recognized
when the hedged transactions are completed and the related production is
sold. In January 1998, the Corporation liquidated its forward position in the
gold futures market. As a result, net gains of $9.3 million were realized, of
which $3.2 million was recognized immediately as other revenue with the
balance of hedging gains deferred to subsequent periods. Deferred hedging
gains are amortized to gold sales, as the original hedged transactions would
have occurred.
(n) EARNINGS PER SHARE
Net loss per share is calculated by dividing the net loss by the weighted
average number of common shares outstanding during the year. Fully diluted
loss per share is not disclosed as the inclusion of common share equivalents
would be anti-dilutive.
(o) FAIR VALUE
The recorded value of the Corporation's financial assets and liabilities
approximates the fair value.
(p) STOCK BASED COMPENSATION
The Corporation has a stock-based compensation plan, which is described in
note 6. No compensation expense is recognized for the plan when stock or
stock options are issued to employees. Any consideration paid by employees on
the exercise of stock options or the purchase of stock is credited to share
capital.
- 54 -
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following:
1999 1998
- --------------------------------- -------------------------------------------- ----------------------------------------------
ACCUMULATED ACCUMULATED
DEPRECIATION, DEPRECIATION,
DEPLETION, DEPLETION,
AMORTIZATION AMORTIZATION
AND AND
COST WRITE-DOWNS NET COST WRITE-DOWNS NET
- ----------------------------------- ------------- ---------------- ------------- ------------- ----------------- ------------
PRODUCING MINES:
Hycroft mine (a) $ 63,083 $56,418 $ 6,665 $ 72,045 $63,392 $ 8,653
Mineral Ridge mine (a) and (b) - - - 17,993 277 17,716
OTHER:
Bolivian mineral properties 60,561 39,307 21,254 60,866 26,401 34,465
Corporate assets 482 277 205 481 222 259
-------- ------- ------- -------- ------- -------
$124,126 $96,002 $28,124 $151,385 $90,292 $61,093
======== ======= ======= ======== ======= =======
- -----------------------------------
(a) ROYALTIES
The Crofoot property at the Hycroft mine is subject to a 4% net profit
royalty. During 1999, there was no mining activity and as a result the
Corporation did not pay a minimum payment. In 1998 and 1997, the Corporation
paid minimum royalty payments of $240,000 per year.
The Lewis property at the Hycroft mine is subject to a 5% net smelter
royalty. During 1999, 1998 and 1997, only nominal minimum royalties were
required in relation to this property.
The Mary Mining Corporation property at the Mineral Ridge mine is subject to
a net smelter returns royalty. The royalty percentage, which is dependent on
gold prices, graduates progressively from 2 1/2% to 5%. During 1999 and 1998,
the Corporation paid minimum advance royalty payments totaling $60,000 and
$84,000, respectively.
(b) MINERAL RIDGE MINE
As a result of the acquisition of Mineral Ridge Inc. in 1998, the Corporation
acquired mineral properties in Nevada which were recorded using the purchase
method of accounting and the results of operations were consolidated from
October 22, 1998.
- 55 -
The Corporation's interests in the net assets acquired at assigned values
were as follows:
Cash $ 3,576
Other current assets 1,428
Property, plant and equipment 10,325
Other long-term assets 901
Current liabilities (476)
Debt and accrued reclamation (15,478)
---------
Shares issued for purchase of Mineral Ridge Inc. $ 276
=========
In 1999, Mineral Ridge Inc. voluntarily filed for protection under U.S.
Bankruptcy Code (note 1). Accordingly, effective 1999 the Corporation ceased
consolidating the investment in Mineral Ridge Inc. resulting in a loss of
$2.9 million (note 8).
4. INVESTMENT IN ZAMORA GOLD CORP.
In October 1995, the Corporation completed a private placement with Zamora
for the issuance of 8,000,000 units at Cdn.$0.60 per unit. Each unit
consisted of one common share of Zamora and one common share purchase warrant
which entitled the Corporation to purchase one common share for Cdn.$0.75
until October 4, 1997. The purchase warrants were not exercised and expired
in October 1997. In May 1997, the Corporation completed an additional private
placement with Zamora for the issuance of 3,000,000 common shares at
Cdn.$0.24 per share. In July 1998, Zamora acquired various property interests
in Ecuador from a major Ecuadorian mineral exploration company. As a
condition of the transaction, Zamora issued 40,016,650 common shares to the
Ecuadorian company for the acquisition of the property interests and an
additional 7,575,944 common shares to Vista Gold in settlement of debts owed
by Zamora to Vista Gold. Reflecting the Corporation's decreased levels of
ownership and control, the remaining investment in Zamora was written off in
1999. Vista Gold's combined 18,575,944 shares represent 26% of the issued and
outstanding common shares of Zamora and the investment is accounted for using
the equity method.
The Corporation's interest in Zamora is as follows.
Total initial investment including expenses $ 4,839
Equity loss in 1995 (516)
--------
Balance at December 31, 1995 4,323
Equity loss in 1996 (1,342)
-------
Balance at December 31, 1996 2,981
Private placement in 1997 520
Advances in 1997 857
Equity loss and impairment in 1997 (3,501)
-------
Balance at December 31, 1997 857
Advances in 1998 141
Equity loss in 1998 (427)
-------
Balance at December 31,1998 571
Advances in 1999 30
Equity loss and impairment in 1999 (601)
-------
Balance at December 31, 1999 $ -
=======
- 56 -
5. DEBT
During 1999, the Corporation borrowed $1.5 million and repaid $0.3 million
under the terms of a $1.5 million term loan, which was collateralized by
certain mobile assets of the Hycroft mine. The loan bears 10.61 percent
interest with 36 equal month installments of $49,000 commencing May 1999 and
terminating April 2002.
In 1998, the Corporation acquired Mineral Ridge Inc. As part of the
transaction, Mineral Ridge Inc. amended its loan agreement with Dresdner
Bank. The amended agreement revised the terms of repayment of the previously
outstanding loan and accrued interest totaling approximately $13.5 million
and provided additional loans to Mineral Ridge Inc. totaling $1.6 million,
which was used to pay amounts owed to other creditors of Mineral Ridge Inc.
Under the terms of the revised agreement, $5.0 million of mining equipment
was contributed to the project by Vista Gold. Net cash flow from the project
was to be distributed on the basis of 70% to Dresdner and 30% to Vista Gold
after deduction of $800,000 of management fees payable to Vista Gold and
rescheduled principal payments on the additional loans used to repay other
creditors. The interest rate on the loans was LIBOR plus 2% and the loans,
which are not guaranteed by Vista Gold, are collateralized by the assets of
Mineral Ridge Inc. and the $5 million of mining equipment contributed by
Vista Gold. As part of the agreement with Dresdner, Mineral Ridge Inc.
liquidated forward gold hedges to provide $3.5 million, which was used as
working capital and to pay for capital improvements on the project. During
1999, the net repayment under the terms of the loans was $0.2 million.
In December 1999, the Mineral Ridge mine was closed and Mineral Ridge Inc.
voluntarily filed for protection under the U.S. Bankruptcy Code. The loans,
which were not guaranteed by Vista Gold, were written off as a result of the
Corporation ceasing to consolidate Mineral Ridge Inc. (note 1).
6. SHARE CAPITAL
The Common Shares issued and outstanding are comprised of the following:
NUMBER OF SHARES AMOUNT
- ----------------------------------------------------------------------------- --------------------- ----------------
At December 31, 1997 89,152,540 $120,870
Issued upon acquisition of Mineral Ridge Inc. (Notes 1 and 3) 1,562,500 276
---------- --------
At December 31, 1999 and 1998 90,715,040 $121,146
========== ========
COMMON SHARE OPTIONS
Under the Vista Gold's Stock Option Plan (the "Plan"), Vista Gold may grant
options to directors, officers and employees of the Corporation or its
subsidiaries for up to 4,500,000 Common Shares. Under the Plan, the exercise
price of each option shall not be less than the market price of the
Corporation's stock on the date of grant, and an option's maximum term is 10
years or such other shorter term as stipulated in a stock option agreement
between the Corporation and the optionee. Options under the Plan are granted
from time to time at the discretion of the Board of Directors. Options
granted under the Plan vest over a three-year period with 25% vesting on the
grant date and 25% thereafter on each anniversary of the grant date.
- 57 -
At December 31, 1999, 2,308,333 Common Shares were reserved for issuance
under options granted to directors, officers and management employees. These
options expire as follows: 2001 - 10,000; 2004 - 5,715; 2005 - 530,718; 2006
- - 516,587; 2007 - 594,757; 2008 - 325,556; and 2009 - 325,000.
The following tables summarize information about stock options under the Plan:
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
(000) (CDN.$) (000) (CDN.$) (000) (CDN.$)
- -------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year,
as previously reported 2,270 $1.630 2,937 $1.61 2,540 $1.94
Cancellation of options (a) (2,270) 1.630 - - - -
Grant of options (b) 2,175 0.235 - - - -
- -------------------------------------------------------------------------------------------------------------------------
Outstanding at beginning of year,
as restated 2,175 0.235 2,937 1.61 2,540 1.94
Granted 325 0.250 125 0.20 1,402 0.92
Exercised - - - - (100) 1.20
Forfeited (192) 0.235 (792) 1.43 (905) 1.51
- -------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 2,308 0.237 2,270 1.63 2,937 1.61
Options exercisable at year-end 1,851 - 1,616 - 1,409 -
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------------------------------------------------------------
NUMBER NUMBER
RANGE OF OUTSTANDING AT WEIGHTED-AVERAGE WEIGHTED-AVERAGE EXERCISABLE AT WEIGHTED-AVERAGE
EXERCISE PRICES DEC. 31, 1999 REMAINING EXERCISE PRICE DEC. 31, 1999 EXERCISE PRICE
(CDN.$) (000) CONTRACTUAL LIFE (CDN.$) (000) (CDN.$)
- ----------------------------------------------------------------------------------------------------------------------
$0.235 - $0.250 2,308 7.3 years $ 0.237 1,851 $ 0.236
- ----------------------------------------------------------------------------------------------------------------------
2,308 1,851
On November 19, 1998, the Board of Directors of the Corporation approved,
subject to the consent of each optionee and the approval by all applicable
regulatory authorities and the shareholders of the Corporation:
(a) the termination and cancellation of all options to purchase common
shares outstanding held by optionees on November 18, 1998 (2,270,000
options); and
(b) the grant of options to purchase a total of 2,175,000 Common Shares with
an exercise price equal to the closing price of Cdn.$0.235.
The necessary approvals were affirmed during 1999 and the cancellations and
grants of stock options became effective as of November 18, 1998.
- 58 -
7. COMMITMENTS AND CONTINGENCIES
(a) As part of its gold hedging program, the Corporation enters into
agreements with major financial institutions to deliver gold.
Realization under these agreements is dependent upon the ability of
those financial institutions to perform in accordance with the terms of
the agreements. As of December 31, 1999, the Corporation had no forward
sales contract commitments.
(b) The Corporation is subject to contingent liabilities for legal
proceedings occurring in the ordinary course of business. On the basis
of information furnished by counsel and others, management believes
that these contingencies will not materially affect the Corporation.
8. WRITE-DOWN OF MINERAL PROPERTIES
Management regularly performs property evaluations to assess the
recoverability of the carrying value of its mining properties and investments
and other long-lived assets. The Corporation determined that based upon
estimates of proven and probable reserves, gold prices and operating costs at
certain locations, stock prices, trading histories, and the general
depression in gold company stocks, it would not fully recover its carrying
value in certain properties and investments.
These reviews indicated that the carrying values of these properties were in
excess of their estimated net recoverable amounts and accordingly were
written down $16.2 million in 1999 and $46.0 million in 1997 as follows:
1999 1998 1997
-----------------------------------------------------------------------------
Mineral Ridge mine net assets $ 2,860 $ - $ -
Hycroft mine - - 17,500
Tartan Lake mine - - 300
Zamora accounts receivable 111 - -
Venezuelan mineral properties - - 2,307
Bolivian mineral properties 13,248 - 25,908
------- ------- -------
$16,219 $ - $46,015
======= ======= =======
9. INCOME TAXES
A reconciliation of the combined Canadian federal and provincial income taxes
at statutory rates and the Corporation's effective income tax expenses is as
follows:
- 59 -
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
Income taxes at statutory rates $(12,440) $ (661) $(19,987)
Increase (decrease) in taxes from:
Permanent differences (84) (125) (212)
U.S. Alternative Minimum Tax - 141 -
Differences in foreign tax rates 1,592 (77) 2,410
Prior year's losses of a subsidiary applied for tax purposes - (1,685) -
Benefit of losses not recognized 10,932 2,548 17,789
Large Corporations Tax 30 45
-------- ------- --------
Income taxes per statements of loss $ - $ 171 $ 45
======== ======= ========
The Corporation has incurred income tax losses in prior periods of $33.2
million, which may be carried forward and applied against future taxable
income when earned. No benefit in respect of these losses has been recorded
in these accounts.
The losses expire as follows:
CANADA UNITED STATES TOTAL
- ----------------------------------------------------------------
2000 $ 660 $ - $ 660
2001 771 - 771
2002 472 - 472
2003 445 4,521 4,966
2004 1,832 1,373 3,205
2005 8,292 - 8,292
2008 - 388 388
2009 - 11 11
2010 - 5,106 5,106
2011 - 9,415 9,415
------- ------- ----------
$12,472 $20,814 $33,286
======= ======= =======
10. RETIREMENT PLANS
The Corporation sponsors a qualified tax-deferred savings plan in accordance
with the provisions of Section 401(k) of the U.S. Internal Revenue Service
code, which is available to permanent U.S. employees. The Corporation makes
contributions of up to 4% of eligible employees' salaries. The Corporation's
contributions were as follows: 1999 - $126,000; 1998 - $179,000; and 1997
- - $275,000.
11. GEOGRAPHIC AND SEGMENT INFORMATION
The Corporation operates in the gold mining industry in the United States,
and has exploration and development properties in Latin America. Its major
product and only identifiable segment is gold, and all gold revenues and
operating costs are derived in the United States.
- 60 -
1999 1998 1997
- -------------------------------------------------------------------------------
Gold revenues
U.S. $19,496 $37,083 $40,123
Operating (loss) profit(1)
U.S. $(5,779) $ 268 $ (71)
- ----------
(1) Includes gold revenues less mining operations, depreciation, depletion
and amortization, provision for reclamation and closure costs, and
operating leases.
1999 1998
- -------------------------------------------------------------------------------
Assets by geographic region
Canada $ 406 $ 973
U.S. 11,329 44,594
Latin America 21,694 35,311
------- -------
$33,429 $80,878
======= =======
12. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The significant differences between generally accepted accounting principles
("GAAP") in Canada and in the United States are as follows:
(a) Under Canadian corporate law, the Corporation underwent a capital
reduction in connection with the amalgamation of Granges and Hycroft
whereby share capital and contributed surplus were reduced to eliminate
the consolidated accumulated deficit of Granges as of December 31,
1994, after giving effect to the estimated costs of the amalgamation.
Under U.S. corporate law, no such transaction is available and
accordingly is not allowed under U.S. GAAP.
(b) Under Canadian GAAP, the amalgamation of Granges and Hycroft was
treated in a manner similar to a pooling of interests. Under U.S. GAAP,
the amalgamation did not meet the conditions for a pooling of interest.
Accordingly, the transaction is treated as a purchase under U.S. GAAP,
with the excess of purchase price over the net book value of Hycroft's
net assets allocated to mineral properties.
(c) In 1995, the United States Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standard ("SFAS") No.
121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", effective for fiscal years
beginning after December 15, 1995. SFAS No. 121 requires that
long-lived assets and associated intangibles be written down to their
fair values whenever an impairment review indicates that the carrying
value cannot be recovered on an undiscounted cash flow basis. In 1996,
under U.S. GAAP, the carrying value of the Hycroft mine, including the
excess of proceeds over the net book value from (b) above, exceeded the
undiscounted cash flow. Accordingly, the Hycroft mine carrying value
was written down to fair value using the discounted cash flow method
following U.S. GAAP.
(d) In 1997 and 1999, the carrying values of certain long-lived assets
discussed in note 8 exceeded their respective undiscounted cash flows.
Following Canadian GAAP, the carrying values were
- 61 -
written down using the undiscounted cash flow method. Under U.S. GAAP,
as discussed in (c) above, the carrying values were written down to
their fair values using the discounted cash flow method, giving rise to
a difference in the amounts written down.
Amortization of the remaining carrying values in subsequent periods
following Canadian GAAP must be reduced to reflect the difference in
the amounts written down following U.S. GAAP.
(e) Under U.S. GAAP, items such as foreign exchange gains and losses and
unrealized gains and losses on marketable securities are required to be
shown separately in the derivation of comprehensive income.
The significant differences in the consolidated statements of loss and deficit
relative to U.S. GAAP were as follows:
YEAR ENDED DECEMBER 31
-------------------------------------------------
1999 1998 1997
---- ---- ----
Net loss - Canadian GAAP $(27,700) $(1,640) $(54,019)
Depletion and impairment of mineral properties (b, c, d) 13,248 - (18,492)
Amortization reduction (d) 736 3,201 964
Other comprehensive income (e) 21 132 (87)
-------- ------ --------
Net earnings (loss) - U.S. GAAP (13,695) 1,693 (71,634)
Other comprehensive income (loss) (e) (21) (132) 87
-------- ------ --------
Comprehensive income (loss) - U.S. GAAP $(13,716) $1,561 $(71,547)
======== ====== ========
Basic earnings (loss) per share - U.S. GAAP $ (0.15) $ 0.02 $ (0.80)
======== ====== ========
The significant differences in the balance sheet as at December 31, 1999 and
1998 relative to U.S. GAAP were:
1999 1998
-------------------------------- -------------------------------
PER CDN CDN/U.S. PER U.S. PER CDN. CDN/U.S. PER U.S.
GAAP ADJ. GAAP GAAP ADJ. GAAP
--------- -------- --------- --------- -------- --------
Current assets $ 5,283 $ - $ 5,283 $ 18,001 $ - $ 18,001
Property, plant and equipment (d) 28,146 (343) 27,803 62,877 (14,327) 48,550
--------- -------- --------- --------- -------- --------
$ 33,429 $ (343) $ 33,086 $ 80,878 $(14,327) $ 66,551
======== ======== ========= ======== ======== ========
Current liabilities $ 2,311 $ - $ 2,311 $ 7,719 $ - $ 7,719
Long-term debt 801 - 801 13,217 - 13,217
Provision for reclamation
and future closure costs 4,428 - 4,428 6,412 - 6,412
--------- -------- --------- -------- -------- --------
7,540 - 7,540 27,348 - 27,348
Common shares (a, b) 121,146 76,754 197,900 121,146 76,754 197,900
Contributed surplus (a) - 2,786 2,786 - 2,786 2,786
Retained deficit (a, b, c, d) (93,776) (79,739) (173,515) (66,076) (93,744) (159,820)
Other comprehensive income - (144) (144) - (123) (123)
Currency translation adjustment (1,481) - (1,481) (1,540) - (1,540)
-------- -------- --------- -------- -------- --------
$ 33,429 $ (343) $ 33,086 $ 80,878 $(14,327) $ 66,551
======== ======== ========= ======== ======== ========
- 62 -
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY UNDER U.S. GAAP
NUMBER CUMULATIVE OTHER
OF COMMON SHARE CONTRIBUTED TRANSLATION COMPREHENSIVE
SHARES CAPITAL SURPLUS ADJUSTMENT DEFICIT INCOME
--------- ------- ----------- ----------- ------- -------------
Balance at December 31, 1996 89,020,405 $197,499 $2,786 $(1,155) $ (89,879) $ (78)
Shares issued under options 100,000 88 - - - -
Shares issued pursuant to executive
bonus compensation agreements 32,135 37 - - - -
Currency translation adjustment - - - (205) - -
Comprehensive income (e) - - - - - 87
Net Loss (b) (c) (d) - - - - (71,634) -
---------- -------- ------ ------- --------- -----
Balance at December 31, 1997 89,152,540 197,624 2,786 (1,360) (161,513) 9
Shares issued on acquisition of Mineral
Ridge Inc. (Notes 1 and 3) 1,562,500 276 - - - -
Currency translation adjustment - - - (180) - -
Comprehensive income (e) - - - - - (132)
Net Loss (b) (c) (d) - - - 1,693 -
---------- ------- ------ ------- --------- -----
Balance at December 31, 1998 90,715,040 197,900 2,786 (1,540) (159,820) (123)
Currency translation adjustment - - - 59 - -
Comprehensive income (e) - - - - - (21)
Net Loss (b) (c) (d) - - - - (13,695) -
---------- -------- ------ ------- --------- -----
Balance at December 31, 1999 90,715,040 $197,900 $2,786 $(1,481) $(173,515) $(144)
========== ======== ====== ======= ========= =====
STOCK BASED COMPENSATION PLANS
The Corporation applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its plans in its U.S. GAAP
presentations. If compensation cost for the Corporation's stock-based
compensation plans had been determined based on the fair value at the grant
dates for awards under the plans consistent with the method described in SFAS
No. 123, the Corporation's consolidated net loss and loss per share under
U.S. GAAP would have been increased to the pro forma amounts indicated below:
1999 1998 1997
---- ---- ----
Net earnings (loss) under U.S. GAAP As reported $(13,695) $1,693 $(71,634)
Pro forma (14,326) 1,361 (72,025)
Loss per share under U.S. GAAP As reported (0.15) 0.02 (0.80)
Pro forma (0.16) 0.02 (0.81)
- 63 -
The fair value of each option grant is estimated on the date of grant for all
plans using the Black-Scholes option-pricing model with the following
weighted average assumptions used for grants in 1999, 1998 and 1997:
--------------------------------------------------------
1999 1998 1997
--------------------------------------------------------
Expected volatility 61.9% 61.9% 61.9%
Risk-free interest rate 4.81% 5.46% 5.97% to 6.40%
Expected lives 4.5 years 4.5 years 7 years
Dividend yield 0% 0% 0%
U.S. GAAP TAX CONSIDERATIONS
U.S. GAAP changes the Corporation's method of accounting for income taxes
from the deferred method, as recorded under Canadian GAAP, to an asset and
liability approach. Under the asset and liability method, deferred tax assets
and liabilities are recognized for the future tax consequences attributed to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Use of the asset and
liability method has no effect on the U.S. GAAP financial statements as the
Corporation has concluded that a full valuation allowance must be applied to
the deferred tax asset resulting from the Corporation's net operating loss
carryforwards (note 9). For the years ended December 31, 1999 and 1998, the
Corporation has recorded no material current tax expense under Canadian or
U.S. GAAP due to the cumulative net losses incurred by the Corporation. Under
U.S. GAAP, the Corporation would not record any deferred tax expense based on
the same rationale.
Summarized below are the components of deferred taxes:
AS OF DECEMBER 31
--------------------------
1999 1998
---- ----
Temporary differences relating to net assets:
Other current assets $ (80) $ 29
Property, plant and equipment 12,519 2,895
Accrued reclamation and other reserves 4,559 2,690
Tax loss and credit carryforwards 12,689 12,390
-------- --------
Gross deferred tax asset 29,687 18,004
Valuation allowance (29,687) (18,004)
-------- --------
Net deferred tax assets $ - $ -
======== ========
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". Initially, the statement was intended to
be effective in fiscal years beginning after June 15, 1999. However, in June
1999, the FASB issued SFAS No. 137, which deferred the effective date of SFAS
No. 133 for fiscal quarters for all fiscal years beginning after June 15,
2000. SFAS No. 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction. The
Corporation is currently assessing the impact the standard will have on the
financial statements of the Corporation.
- 64 -
13. SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the Corporation sold its 277,777 shares of
Stockscape.com Technologies Inc. (formerly 2,777,777 shares of Cornucopia
Resources Ltd.), acquired in the acquisition of Mineral Ridge Inc. (note 1
(b)), for net proceeds of $0.3 million and realized a gain of $0.2 million.
Subsequent to December 31, 1999, the Corporation sold its wholly-owned
subsidiary Yamin, acquired in the acquisition of Da Capo Resources Ltd. in
1996, for $0.2 million. No significant gain or loss was realized on the
transaction.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
DIRECTORS
The directors of Vista Gold are elected each year at the annual general
meeting of shareholders and hold office until their successors are elected or
appointed.
The present directors of Vista Gold, together with the location of their
residences, age, length of service and business experience, are described
below.
NAME, RESIDENT,
POSITION AND AGE DIRECTOR SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- -------------------------------- -------------------- ---------------------------------------------------------
DAVID R. SINCLAIR May 1, 1995 Chartered accountant; Corporate Director; Director,
Nanoose Bay, Cominco Ltd., a mining company.
British Columbia
DIRECTOR AND CHAIRMAN
Age - 70
ROSS J. BEATY November 12, 1996 Geologist; Chairman of Pan American Silver Corp., a
Vancouver, British Columbia mining company, 1994 to present; formerly, President
DIRECTOR AND VICE CHAIRMAN of Equinox Resources Ltd., a mining company.
Age - 48
- 65 -
NAME, RESIDENT,
POSITION AND AGE DIRECTOR SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- -------------------------------- -------------------- ---------------------------------------------------------
MICHAEL B. RICHINGS May 1, 1995 Mining engineer; President and Chief Executive
Littleton, Colorado Officer of Vista Gold since June 1, 1995; President
DIRECTOR of Atlas Corporation, a mining company, from
Age - 55 January 1995 to May 1995; Group Executive and President
of Lac Minerals Ltd. South America, a mining company,
from 1993 to 1995; Vice President of Operations of
Atlas Corporation from 1990 to 1992.
WILLIAM M. CALHOUN May 1, 1995 Mining engineer and geologist; Chief Executive
Silverton, Idaho Officer of William Calhoun, Inc., mining consultants.
DIRECTOR
Age - 67
C. THOMAS OGRYZLO March 8, 1996 Mechanical engineer; President and Chief Executive
Toronto, Ontario Officer of Black Hawk Mining Inc., a mining company,
DIRECTOR from May 1998 to December 1999; President and Chief
Age - 60 Executive Officer of Triton Mining Corporation, a
mining company, from August 1997 to May 1998; formerly,
Chairman of Kilborn SNC-Lavalin Inc., an engineering
group; formerly, President of Kilborn Group of
Companies.
KEITH E. STEEVES September 29, 1995 Chartered accountant; consultant; Director of Teck
Richmond, British Columbia Corporation and Cross Lake Minerals Ltd., mining
DIRECTOR companies; formerly, Senior Vice-President,
Age - 67 Commercial of Teck Corporation, a mining company.
ALAN G. THOMPSON December 1, 1989 Businessman; President and Chief Executive Officer
West Vancouver, of A.G.T. Financial Corporation, an investment
British Columbia company.
DIRECTOR
Age - 72
PETER WALTON May 24, 1989 Self-employed business consultant.
West Vancouver,
British Columbia
DIRECTOR
Age - 70
None of the above directors has entered into any arrangement or understanding
with any other person pursuant to which he was or is to be elected as a director
of Vista Gold or a nominee of any other person, except as disclosed herein.
- 66 -
EXECUTIVE OFFICERS
The executive officers of Vista Gold are appointed by and hold office at the
pleasure of the Board of Directors of Vista Gold. The present executive
officers of Vista Gold, together with their age, length of service and
business experience, are described below.
NAME, POSITION AND AGE HELD OFFICE SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
- ---------------------------------- ----------------- -----------------------------------------------------
MICHAEL B. RICHINGS June 1, 1995 Mining engineer; President and Chief Executive
PRESIDENT, CHIEF EXECUTIVE OFFICER Officer since June 1995; President of Atlas
AND DIRECTOR Corporation, a mining company, from January 1995 to
Age - 55 May 1995; Group Executive and President of Lac
Minerals Ltd. South America, a mining company, from
1993 to 1995; Vice President of Operations of Atlas
Corporation from 1990 to 1992.
ROGER L. SMITH March 6, 1998 Corporate Controller of Vista Gold from December
VICE PRESIDENT FINANCE 1995 to March 1998; Vice President Finance of Ramrod
Age - 42 Gold (U.S.A.) Inc., a mining company, from May 1994
to December 1995; Vice President Finance of Westmont
Gold Inc., a mining company from July 1991 to May 1994.
RONALD J. MCGREGOR July 1, 1996 Vice President Project Development, Cambior USA
VICE PRESIDENT DEVELOPMENT AND Inc., a mining company.
OPERATIONS
Age - 52
WILLIAM F. SIRETT January 1, 1996 Lawyer; Partner, Borden Ladner Gervais LLP, a law
SECRETARY firm.
Age - 49
None of the above executive officers has entered into any arrangement or
understanding with any other person pursuant to which he was or is to be elected
as an executive officer of Vista Gold or a nominee of any other person.
EXECUTIVE AND AUDIT COMMITTEES
Vista Gold does not have an executive committee. Vista Gold is required to have
an audit committee under section 173 of the BUSINESS CORPORATIONS ACT (Yukon
Territory). Vista Gold's audit committee consists of the following directors:
David R. Sinclair, Keith E. Steeves, Peter Walton and Alan G. Thompson.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
During the financial year ended December 31, 1999, the aggregate cash
compensation paid by the Corporation to all directors and officers of Vista
Gold, as a group was $489,920. This sum includes
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compensation paid to executive officers pursuant to the cash incentive plan
and retirement savings plan described below.
Information specified in this Item for individually named directors and
officers is incorporated by reference from pages 6 to 14 of the Management
Information and Proxy Circular prepared in connection with Vista Gold's
Annual General Meeting to be held on May 19, 2000, filed with the Securities
and Exchange Commission concurrently with the filing of this report.
Pursuant to the terms of the Corporation's incentive policy adopted by the
Corporation in 1989 or certain employment contracts, executive officers and
senior employees of the Corporation are eligible to receive incentive
payments. The Corporation did not make any incentive payments to executive
officers or senior employees under this plan in 1999. Any incentive payments
are awarded at the discretion of the Board of Directors based on
recommendations from the compensation committee. There is no established
formula utilized in determining these incentive payments. The award of
incentive payments is motivated by the Corporation's desire to reward past
services rendered to the Corporation and to provide an incentive for
continued service to the Corporation. Incentive payments to be made during
2000, which may include amounts related to performance during a portion of
1999, have not yet been determined. The Corporation has not made any
restricted stock awards during the last three fiscal years.
During the fiscal year ended December 31, 1999, the Corporation set aside or
accrued a total of $13,437 to provide pension, retirement or similar benefits
for directors or officers of Vista Gold pursuant to plans provided or
contributed to by the Corporation. As a part of the aggregate cash
compensation disclosed above, the Corporation sponsors a qualified
tax-deferred savings plan in accordance with the provisions of section 401(k)
of the United States Internal Revenue Service Code which is available to
permanent United States-based employees. Under the terms of this plan, the
Corporation makes contributions of up to 4% of eligible employees' salaries.
In addition, the Corporation contributes between 2% and 4% of permanent
Canadian-based employees' salaries, including executive officers, depending
on length of service and to a maximum of Cdn.$3,500 per year, to the
individual's registered retirement savings plan. There are no other such
plans to which the Corporation made any contribution in relation to its
directors or officers in 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information specified in this Item for individually named directors and
officers is incorporated by reference from pages 3 to 5 and 12 to 13 of the
Management Information and Proxy Circular prepared in connection with Vista
Gold's Annual General Meeting to be held on May 19, 2000, filed with the
Securities and Exchange Commission concurrently with the filing of this
report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During 1999, there have been no transactions, or series of similar
transactions, or any currently proposed transactions or series of similar
transactions, to which Vista Gold or any of its subsidiaries was or is a
party in which the amount involved exceeds $60,000 and in which any director
or executive officer, any nominee for election as a director, any security
holder known to the Corporation to own of record or beneficially more than 5%
of the Corporation's Common Shares, any member of the immediate family of any
of the foregoing persons, had or will have a direct or indirect material
interest.
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During 1999, there were and are no relationships regarding directors or
nominees for director as stipulated by this item and no director or executive
officer, nominee for election as a director, any member of their immediate
family or any corporation or organization in which any of them, directly or
indirectly, beneficially owns 10% or more of any class of equity securities
was indebted to Vista Gold.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
DOCUMENTS FILED AS PART OF REPORT
FINANCIAL STATEMENTS
The following consolidated financial statements of the Corporation are filed
as part of this report:
1. Report of Independent Accountants dated March 14, 2000.
2. Consolidated Balance Sheets - At December 31, 1999 and 1998.
3. Consolidated Statements of Earnings (Loss) - Years ended December 31,
1999, 1998 and 1997.
4. Consolidated Statements of Retained Earnings (Deficit) - Years ended
December 31, 1999, 1998 and 1997.
5. Consolidated Statements of Cash Flows - Years ended December 31, 1999,
1998 and 1997.
6. Notes to Consolidated Financial Statements.
See "Item 8. Consolidated Financial Statements and Supplementary Data".
FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are filed as part of this report because
such schedules are not applicable or the required information is shown in the
consolidated financial statements or notes thereto. See "Item 8. Consolidated
Financial Statements and Supplementary Data".
EXHIBITS
The following exhibits are filed as part of this report:
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================================================================================
EXHIBIT NUMBER DESCRIPTION
- --------------------------------------------------------------------------------
3.01 Articles of Continuation filed as Exhibit 2.01
to the Form 20-F for the period ended December
31, 1997 and incorporated herein by reference
(File No. 1-9025)
- --------------------------------------------------------------------------------
3.02 By-Law No. 1 of Vista Gold filed as Exhibit
2.01 to the Form 20-F for the period ended
December 31, 1997 and incorporated herein by
reference (File No. 1-9025)
- --------------------------------------------------------------------------------
3.03 Share Certificate of Vista Gold (File No.
1-9025)
- --------------------------------------------------------------------------------
3.04 Amended By-Law No. 1 of Vista Gold (File
No.1-9025)
================================================================================
================================================================================
10.01 Lease and Option dated July 1, 1985 between
Henry C. Crofoot, trustee, and Hycroft
Resources - Development Inc. (Crofoot Patented
Claims), as amended, filed as Exhibit 10.8 to
Granges' Registration Statement on Form S-1,
as amended, and incorporated herein by
reference (File No. 33-17974)
- --------------------------------------------------------------------------------
10.02 Lease and Option dated July 1, 1985, between
Henry C. Crofoot, trustee, and Hycroft
Resources - Development Inc. (Crofoot
Unpatented Claims), as amended, filed as
Exhibit 10.9 to Granges' Registration
Statement on Form S-1, as amended, and
incorporated herein by reference (File No.
33-17974)
- --------------------------------------------------------------------------------
10.03 Lewis Mine Lease and Assignment Agreement
included in the Assignment of Mining Lease
dated January 23, 1987 among Standard Slag
Company, Hycroft Lewis, Hycroft Resources
Corporation and Granges, filed as Exhibit 10.7
to Granges' Registration Statement on Form
S-1, as amended, and incorporated herein by
reference (File No. 33-17974)
- --------------------------------------------------------------------------------
10.04 Amendment Agreement dated January 14, 1988,
among Henry C. Crofoot et al and Hycroft
Resources - Development Inc. filed as Exhibit
10.13 to Granges' Annual Report on Form 10-K
for the fiscal year ended December 31, 1988,
as amended, and incorporated herein by
reference (File No. 1-9025)
- --------------------------------------------------------------------------------
10.05 Lewis Hycroft Agreement dated January 10,
1989, among Frank W. Lewis, Hycroft Lewis and
Hycroft Resources - Development Inc. filed as
Exhibit 10.16 to Granges' Annual Report on
Form 10-K for the fiscal year ended December
31, 1988, as amended, and incorporated herein
by reference (File No. 1-9025)
- --------------------------------------------------------------------------------
10.06 Second Amendment Agreement dated March 3,
1989, among Henry C. Crofoot et al and Hycroft
Resources - Development Inc. filed as Exhibit
10.24 to the Form 20-F/A for the year ended
December 31, 1994 and incorporated herein by
reference (File No. 1-9025)
- --------------------------------------------------------------------------------
10.07 Second Lewis-Hycroft Agreement dated March 15,
1991 among Frank W. Lewis, Granges, Hycroft
Resources - Development Inc. and Hycroft Lewis
filed as Exhibit 10.20 to the Form 20-F/A for
the year ended December 31, 1994 and
incorporated herein by reference (File No.
1-9025)
- --------------------------------------------------------------------------------
- 70 -
- --------------------------------------------------------------------------------
10.08 Third Amendment Agreement dated August 16,
1991 among Henry C. Crofoot et al, Hycroft
Resources & Development Inc. and Blackrock
Properties, Inc. filed as Exhibit 10.25 to the
Form 20-F/A for the year ended December 31,
1994 and incorporated herein by reference
(File No. 1-9025)
- --------------------------------------------------------------------------------
10.09 Agreement dated May 13, 1994 between Granges
and Atlas Corporation filed as Exhibit 2.01 to
the Form 20-F for the period ended December
31, 1994 and incorporated herein by reference
(File No.1-9025)
- --------------------------------------------------------------------------------
10.10 Purchase and Sale Agreement dated June 24,
1994 between Granges and Hudson Bay Mining and
Smelting Co., Limited filed as Exhibit 10.10
to the Form 20-F/A for the year ended December
31, 1994 and incorporated herein by reference
(File No. 1-9025)
- --------------------------------------------------------------------------------
10.11 Amalgamation Agreement dated February 24, 1995
between Granges and Hycroft Inc. included in
the Joint Management Information Circular of
Granges and Hycroft Inc. filed as Exhibit 20.1
to the Form 8-K dated May 1, 1995 and
incorporated herein by reference (File No.
1-9025)
- --------------------------------------------------------------------------------
10.12 Agreement dated February 24, 1995 between
Granges and Atlas Corporation filed as Exhibit
2.03 to the Form 20-F for the period ended
December 31, 1994 and incorporated herein by
reference (File No. 1-9025)
- --------------------------------------------------------------------------------
10.13 Employment Agreement dated June 1, 1995
between Granges and Michael B. Richings filed
as Exhibit 10(i) to the Form 10-Q for the
quarterly period ended June 30, 1995 and
incorporated herein by reference (File No.
1-9025)
- --------------------------------------------------------------------------------
10.14 Private Placement Subscription Agreement dated
August 25, 1995 between Granges and Zamora
filed as Exhibit 10.10 to the Form 20-F/A for
the year ended December 31, 1994 and
incorporated herein by reference (File No.
1-9025)
- --------------------------------------------------------------------------------
10.15 Letter of Intent between Granges and Atlas
Corporation dated as of October 4, 1995 to
enter into an Exploration Joint Venture
Agreement filed as Exhibit 10.14 to the Form
20-F/A for the year ended December 31, 1994
and incorporated herein by reference (File No.
1-9025)
- --------------------------------------------------------------------------------
10.16 Registration Agreement between Granges and
Atlas Corporation dated as of November 10,
1995 filed as Exhibit 10.12 to the Form 20-F/A
for the year ended December 31, 1994 and
incorporated herein by reference (File No.
1-9025)
- --------------------------------------------------------------------------------
10.17 Indemnification Agreement between Granges and
Atlas Corporation dated as of November 10,
1995 filed as Exhibit 10.13 to the Form 20-F/A
for the year ended December 31, 1994 and
incorporated herein by reference (File No.
1-9025)
- --------------------------------------------------------------------------------
10.18 Commitment letter dated November 14, 1995
between Granges and Deutsche Bank AG filed as
Exhibit 10.09 to the Form 20-F/A for the year
ended December 31, 1994 and incorporated
herein by reference (File No. 1-9025)
- --------------------------------------------------------------------------------
10.19 Exploration and Purchase Option Agreement
effective June 7, 1996 between Granges and
L.B. Mining filed as Exhibit 2.01 to the Form
20-F for the year ended December 31, 1997 and
incorporated herein by reference (File No.
1-9025)
- --------------------------------------------------------------------------------
10.20 Special Warrant Indenture dated June 7, 1996
between Granges and Montreal Trust filed as
Exhibit 2.02 to the Form 20-F for the year
ended December 31, 1997 and incorporated
herein by reference (File No. 1-9025)
- --------------------------------------------------------------------------------
- 71 -
- --------------------------------------------------------------------------------
10.21 Warrant Indenture dated June 7, 1996 between
Granges and Montreal Trust filed as Exhibit
2.03 to the Form 20-F for the year ended
December 31, 1997 and incorporated herein by
reference (File No. 1-9025)
- --------------------------------------------------------------------------------
10.22 Stock Option Plan of Vista Gold dated November
1996
- --------------------------------------------------------------------------------
10.23 Supplemental Warrant Indenture made as of
November 1, 1996 between Vista Gold and
Montreal Trust with respect to the Warrant
Indenture dated April 25, 1996 between Granges
and Montreal Trust filed as Exhibit 1.01 to
the Form 20-F for the year ended December 31,
1997 and incorporated herein by reference
(File No. 1-9025)
- --------------------------------------------------------------------------------
10.24 Supplemental Warrant Indenture made as of
November 1, 1996 between Vista Gold and
Montreal Trust with respect to the Warrant
Indenture dated June 7, 1996 between Granges
and Montreal Trust filed as Exhibit 1.02 to
the Form 20-F for the year ended December 31,
1997 and incorporated herein by reference
(File No. 1-9025)
- --------------------------------------------------------------------------------
10.25 Establishment of Operating Credit Facility
dated November 22, 1996 from The Bank of Nova
Scotia to Vista Gold and accepted by Vista
Gold on November 26, 1996 filed as Exhibit
2.05 to the Form 20-F for the year ended
December 31, 1997 and incorporated herein by
reference (File No. 1-9025)
- --------------------------------------------------------------------------------
10.26 Termination Agreement dated January 10, 1997
between Granges (U.S.) Inc. and Atlas filed as
Exhibit 1.03 to the Form 20-F for the year
ended December 31, 1997 and incorporated
herein by reference (File No. 1-9025)
- --------------------------------------------------------------------------------
10.27 Credit Agreement dated as of February 20, 1997
between The Bank of Nova Scotia and Hycroft
Inc. filed as Exhibit 2.06 to the Form 20-F
for the year ended December 31, 1997 and
incorporated herein by reference (File No.
1-9025)
- --------------------------------------------------------------------------------
10.28 Guaranty dated as of February 20, 1997 by
Vista Gold in favor of The Bank of Nova Scotia
filed as Exhibit 2.07 to the Form 20-F for the
year ended December 31, 1997 and incorporated
herein by reference (File No. 1-9025)
- --------------------------------------------------------------------------------
10.29 Amendment No. 1 dated as of September 30, 1997
between The Bank of Nova Scotia and Hycroft
Inc. Credit Agreement dated as of February 20,
1997 between The Bank of Nova Scotia and
Hycroft Inc. filed as Exhibit 1.01 to the Form
20-F for the year ended December 31, 1998 and
incorporated herein by reference (File No.
1-9025)
- --------------------------------------------------------------------------------
10.30 Letter Agreement of Private Placement dated
April 24, 1998 between Zamora and Gribipe and
Amendment dated June 1, 1998 to Letter
Agreement of Private Placement Agreement dated
April 24, 1998 (File No. 1-9025)
- --------------------------------------------------------------------------------
10.31 Share Purchase Agreement dated October 21,
1998 among Cornucopia Resources Ltd.,
Cornucopia Resources Inc., Vista Gold Holdings
Inc. and Vista Gold (File No. 1-9025)
- --------------------------------------------------------------------------------
10.32 Restated and Amended Loan Agreement dated as
of October 21, 1998 between Mineral Ridge Inc.
and Dresdner Bank AG, New York and Grand
Cayman Branches (File No. 1-9025)
- --------------------------------------------------------------------------------
10.33 Stock Option Plan of Vista Gold dated November
1996 as amended in November 1998 (File No.
1-9025)
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
10.34 Loan and Security Agreement dated as of April
12, 1999 between Hycroft Resources &
Development, Inc. and Finova Capital
Corporation. (File No. 1-9025)
- --------------------------------------------------------------------------------
10.35 Voluntary Petition under Chapter 11 of the
U.S. Bankruptcy Code dated December 10, 1999
filed by Mineral Ridge Resources Inc.
================================================================================
11.01 Statement of Computation of Per Share Earnings
of Vista Gold
================================================================================
24.01 Powers of Attorney
================================================================================
27.01 Financial Data Schedule
================================================================================
REPORTS ON FORM 8-K
The following reports were filed under cover of Form 8-K during the quarter
ended December 31, 1999:
1. Report dated October 14, 1999 regarding third quarter production.
2. Report dated November 12, 1999 regarding the Corporation's results for
the quarter ended September 30, 1999.
3. Report dated December 10, 1999 regarding the closure of the Mineral
Ridge mine.
SUPPLEMENTAL INFORMATION
Additional information, including directors' and officers' remuneration and
indebtedness, principal holders of the Corporation's securities, options to
purchase securities and interests of insiders in material transactions, where
applicable, is contained in the Management Proxy and Information Circular for
the annual general meeting of shareholders held on May 19, 2000.
- 73 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
VISTA GOLD CORP.
Dated: March 20, 2000 By: /s/ Michael B. Richings
-------------------------------------
Michael B. Richings,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated:
Dated: March 20, 2000 By: /s/ Michael B. Richings
-------------------------------------
Michael B. Richings,
President and Chief Executive Officer
Dated: March 20, 2000 By: /s/ Roger L. Smith
-------------------------------------
Roger L. Smith,
Vice President Finance
- 74 -
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
====================================================================================================================
SIGNATURE CAPACITY DATE
====================================================================================================================
* Chairman of the Board and March 20, 2000
- ------------------------------------- Director
David R. Sinclair
- --------------------------------------------------------------------------------------------------------------------
* Vice-Chairman of the Board and March 20, 2000
- ------------------------------------- Director
Ross J. Beaty
- --------------------------------------------------------------------------------------------------------------------
/s/ Michael B. Richings President and Chief Executive March 20, 2000
- ------------------------------------- Officer and Director
Michael B. Richings
- --------------------------------------------------------------------------------------------------------------------
* Director March 20, 2000
- -------------------------------------
William Calhoun
- --------------------------------------------------------------------------------------------------------------------
* Director March 20, 2000
- -------------------------------------
C. Thomas Ogryzlo
- --------------------------------------------------------------------------------------------------------------------
* Director March 20, 2000
- -------------------------------------
Alan G. Thompson
- --------------------------------------------------------------------------------------------------------------------
* Director March 20, 2000
- -------------------------------------
Peter Walton
- --------------------------------------------------------------------------------------------------------------------
* Director March 20, 2000
- -------------------------------------
Keith Steeves
====================================================================================================================
* On his own behalf and pursuant to a Power of Attorney dated March 20, 2000,
the undersigned by signing his name hereby signs this report in the name and
on behalf of the foregoing directors.
/s/ Michael B. Richings
- ---------------------------------------
Michael B. Richings
- 75 -