UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

(Mark One)

 

ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2005
		OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		Commission File Number 1-9025

 

VISTA GOLD CORP.

(Exact name of registrant as specified in its charter)

 

Continued under the laws of the Yukon Territory, Canada		None
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
7961 Shaffer Parkway Suite 5 Littleton, Colorado		80127
(Address of principal executive offices)		(Zip Code)

 

(720) 981-1185

(Registrant’s telephone number, including area code)

 

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 such filing requirements for the past 90 days.

 

Yes  ý    No  o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

 

Yes  o    No  ý

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

18,218,022

 

Common Shares, without par value, outstanding at May 13, 2005

 

 

VISTA GOLD CORP.

(An Exploration Stage Enterprise)

FORM 10-Q

For the Quarter Ended March 31, 2005

 

INDEX

 

PART I - FINANCIAL INFORMATION
		Page
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	15
ITEM 4.	CONTROLS AND PROCEDURES	15
PART II - OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	16
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	16
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	16
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	16
ITEM 5.	OTHER INFORMATION	16
ITEM 6.	EXHIBITS	16
	SIGNATURES	17

 

In this Report, unless otherwise indicated, all dollar amounts are expressed in United States dollars.

 

2

 

PART I – FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

 

VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED BALANCE SHEETS- UNAUDITED

 

(U.S. dollars in thousands)		March 31, 2005			December 31, 2004
Assets:
Cash and cash equivalents		$	5,358		$	5,916
Marketable securities		136			140
Accounts receivable - Note 12		58			345
Supplies inventory, prepaids and other		517			425
Current assets		6,069			6,826
Restricted cash - Note 3		4,991			4,961
Mineral properties - Note 4		18,360			18,109
Plant and equipment - Note 5		1,303			1,351
Hycroft reclamation premium costs		1,511			1,541
		21,174			21,001
Total assets		$	32,234		$	32,788
Liabilities and Shareholders’ Equity:
Accounts payable		$	32		$	130
Accrued liabilities and other		146			126
Current liabilities		178			256
Accrued reclamation and closure costs - Note 9		4,190			4,188
Total liabilities		4,368			4,444
Capital stock, no par value: - Note 6
Preferred - unlimited shares authorized; no shares outstanding
Common - unlimited shares authorized; shares outstanding: 2005 - 18,218,022 and 2004 - 17,961,590		150,145			149,747
Warrants - Note 7		111			111
Options - Note 8		1,613			1,538
Contributed surplus		115			108
Deficit		(124,118		)	(123,160		)
Total shareholders’ equity		27,866			28,344
Total liabilities and shareholders’ equity		$	32,234		$	32,788

 

Nature of operations - Note 2

Commitments and contingencies - Note 9

Subsequent events - Note 13

 

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

 

3

 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

CONSOLIDATED STATEMENTS OF LOSS - UNAUDITED

 

								Cumulative
								during
		Three Months Ended March 31,						Exploration
(U.S. dollars in thousands, except share data)		2005			2004			Stage
Costs and expenses:
Exploration, property evaluation and holding costs		$	458		$	484		$	3,797
Corporate administration and investor relations		440			522			5,414
Depreciation, depletion and amortization		52			52			545
Provision for reclamation and closure costs		—			—			1,048
Cost recoveries related to USF&G lawsuit		—			—			(240		)
Interest (income)/expense		(57		)	(17		)	(163		)
Gain on disposal of assets		(6		)	(8		)	(97		)
Other (income)/expense		(1		)	(43		)	(65		)
Stock-based compensation		82			156			1,155
Loss on currency translation		—			—			44
Gain on disposal of marketable securities		(11		)	—			(155		)
Write-down of marketable securities		—			—			118
Total costs and expenses		958			1,146			11,402
Net loss		$	(958	)	$	(1,146	)	$	(11,402	)
Weighted average number of shares outstanding		18,122,816			14,728,665
Basic and diluted loss per share		$	(0.05	)	$	(0.08	)

 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

CONSOLIDATED STATEMENTS OF DEFICIT - UNAUDITED

 

		Three Months Ended March 31,
(U.S. dollars in thousands)		2005			2004
Deficit, beginning of period, as previously reported		$	(123,160	)	$	(117,265	)
Stock-based compensation		—			(971		)
Deficit, beginning of period, as restated		(123,160		)	(118,236		)
Net loss		(958		)	(1,146		)
Deficit, end of period		$	(124,118	)	$	(119,382	)

 

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

 

4

 

VISTA GOLD CORP. (An Exploration Stage Enterprise)

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

 

								Cumulative
								during
		Three Months Ended March 31,						Exploration
(U.S. dollars in thousands)		2005			2004			Stage
Cash flows from operating activities:
Loss for the period		$	(958	)	$	(1,146	)	$	(11,402	)
Adjustments to reconcile loss for the period to cash  provided by / (used in) operations:
Depreciation, depletion and amortization		52			52			545
Amortization of reclmatation costs		30			—			149
Provision for reclamation and closure costs		—			—			1,048
Reclamation and closure costs accrued/(paid), net		2			2			8
Stock based compensation		82			156			1,155
Gain on disposal of assets		(6		)	(8		)	(97		)
Cost recoveries related to USF&G lawsuit		—			—			(240		)
Write-down of marketable securities		—			—			118
Gain on sale of marketable securities		(11		)	—			(155		)
Loss on currency translation		—			—			44
Other non-cash items		—			—			120
Change in operating assets and liabilities:
Accounts receivable		287			456			122
Supplies inventory and prepaid expenses		(92		)	9			(216		)
Accounts payable and accrued liabilities		(78		)	31			(1,097		)
Net cash used in operating activities		(692		)	(448		)	(9,898		)
Cash flows from investing activities:
Restricted cash - Note 3		(30		)	(2,287		)	(4,991		)
Acquisition of marketable securities		—			(15		)	(93		)
Proceeds from sale of marketable securities		15			—			283
Additions to mineral properties, net		(251		)	(113		)	(4,266		)
Additions/Subtractions to plant and equipment		(4		)	(30		)	(1,770		)
Proceeds on disposal of fixed assets and supplies		6			8			260
Net cash used in investing activities		(264		)	(2,437		)	(10,577		)
Cash flows from financing activities:
Net proceeds from private placements		—			—			14,679
Proceeds from exercise of warrants - Note 6		373			2,186			9,348
Proceeds from exercise of stock options - Note 6		25			17			1,132
Net cash provided by financing activities		398			2,203			25,159
Net increase/(decrease) in cash and cash equivalents		(558		)	(682		)	4,684
Cash and cash equivalents, beginning of period		5,916			5,520			674
Cash and cash equivalents, end of period		$	5,358		4,838			$	5,358

 

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

 

5

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(U.S. dollars unless specified otherwise)

 

1.             General

 

The consolidated interim financial statements of Vista Gold Corp. (an Exploration Stage Enterprise) (the “Corporation”), as of March 31, 2005, and for the three month period ended March 31, 2005, have been prepared by the Corporation without audit and do not include all of the disclosures required by generally accepted accounting principles in Canada for annual financial statements. As described in Note 11, generally accepted accounting principles in Canada differ in certain material respects from generally accepted accounting principles in the United States.  In the opinion of management, all of the adjustments necessary to fairly present the interim financial information set forth herein have been made.  These adjustments are of a normal and recurring nature. The results of operations for interim periods are not necessarily indicative of the operating results of a full year or of future years.  These interim financial statements should be read in conjunction with the financial statements and related footnotes included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2004.

 

2.             Nature of operations

 

The Corporation evaluates, acquires and explores gold exploration and potential development projects. As such, the Corporation is considered an Exploration Stage Enterprise. The Corporation’s approach to acquisitions of gold projects has generally been to seek projects within political jurisdictions with well established mining, land ownership and tax laws, which have adequate drilling and geological data to support the completion of a third-party review of the geological data and to complete an estimate of the gold mineralization. In addition, the Corporation looks for opportunities to improve the value of its gold projects through exploration drilling, and/or reengineering the operating assumptions underlying previous engineering work.

 

Gold production has gradually declined since mining activities were suspended at the Hycroft mine in 1998. Effective January 1, 2002, gold production is considered incidental and the Corporation stopped reporting the associated sales proceeds as revenue.

 

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.

 

3.             Restricted cash

 

The Corporation has pledged cash as collateral totaling $5.0 million to the U.S. Bureau of Land Management, Nevada State Office, to cover increased reclamation cost estimates at the Hycroft mine (Note 9).

 

6

 

4.             Mineral properties

 

		2004				2005
																								March 31,
		December 31,				Acquisition				Option				Exploration &							Year to date			Ending
($ 000’s)		net balance				costs				payments				land costs			Cost recovery				activity			Balance
Maverick Springs, United States		$		1,143		$	—			$	—			$	10		$	(10		)	$	—		$		1,143
Mountain View, United States		751				—				—				9			—				9			760
Long Valley, United States		305				100				—				—			—				100			405
Wildcat, United States		981				—				—				—			—				—			981
Hasbrouck and Three Hills, United States		364				—				—				—			—				—			364
Yellow Pine, United States		293				—				—				—			—				—			293
Paredones Amarillos, Mexico		2,576				—				—				142			—				142			2,718
Guadalupe de los Reyes, Mexico		1,021				—				—				5			—				5			1,026
Amayapampa, Bolivia		10,561				—				—				—			—				—			10,561
Other		114				—				—				(5		)	—				(5		)	109
		$	18,109			$		100		$		—		$	161		$		(10	)	$	251		$	18,360

 

The recoverability of the carrying values of the Corporation’s mineral properties is dependent upon the successful start-up and commercial production from, or sale, or lease, of these properties and upon economic reserves being discovered or developed on the properties.  Development and/or start-up of any of these projects will depend, among other things, on management’s ability to raise additional capital for these purposes.  Although the Corporation has been successful in raising such capital in the past, there can be no assurance that it will be able to do so in the future.

 

5.             Plant and equipment

 

		March 31, 2005									December 31, 2004
					Accumulated									Accumulated
					Depreciation and									Depreciation and
($ 000’s)		Cost			Write-downs			Net			Cost			Write-downs			Net
Hycroft mine, United States		$	11,914		$	10,653		$	1,261		$	12,031		$	10,720		$	1,311
Corporate, United States		394			352			42			388			348			40
		$	12,308		$	11,005		$	1,303		$	12,419		$	11,068		$	1,351

 

6.             Capital stock

 

Common Shares issued and outstanding

 

		Number of		Capital stock
		shares issued		($ 000’s)
As of December 31, 2004		17,961,590		$	149,747
Warrants exercised, for cash - Note 7		248,574		373
Stock options exercised, for cash - Note 8		7,858		25
Issued during the three months ended March 31, 2005		256,432		398
As of March 31, 2005		18,218,022		$	150,145

 

7

 

7.             Warrants

 

Warrants granted, exercised and outstanding during the period are summarized in the following table:

 

													Weighted					Weighted
													average					average
		Warrants		Valuation			Warrants		Warrants		Warrants		exercise					remaining
		granted(1)		(000’s)			exercised		expired		outstanding		prices (U.S. $)			Expiry date		life (yrs)
As of December 31, 2004		8,990,135		$	111		(3,775,919	)	(197,740	)	5,016,477		$	3.28				—
Private placement February-March 2002		—		—			(248,574	)	—		(248,574	)	1.50			Feb - Mar 07		2.0
As of March 31, 2005		8,990,135		$	111		(4,024,493	)	(197,740	)	4,767,903		$	3.37

 

(1) Each warrant entitles the holder to purchase one common share.

 

8.             Options to purchase Common Shares

 

The total number of options outstanding at the end of the quarter is 875,625 with exercise prices ranging from approximately $3.86 to $4.76 and remaining lives of 0.9 to 6.1 years.  The total number of options outstanding represents 5.0% of issued capital.

 

There were no stock options issued by the Corporation during the quarter ended March 31, 2005.  Compensation expense of $82,357 was recognized during the three months ended March 31, 2005, for options previously granted and vesting over time.

 

		Number of
		Shares		Value
Outstanding - December 31, 2004		883,483		$	1,538
Granted		—		—
Exercised		(7,858	)	—
Vested, Fair Value		—		75
Outstanding - March 31, 2005		875,625		$	1,613

 

The fair value of stock options granted to employees and directors was estimated at the grant date based on the Black-Scholes option pricing model, using the following weighted average assumptions:

 

		March 2005		March 2004
Expected volatility		N/A		80.0	%
Risk-free interest rate		N/A		2.74	%
Expected lives (years)		N/A		5
Dividend yield		N/A		0	%

 

Option pricing models require the input of highly subjective assumptions including the expected price volatility.  Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore, the existing models do not necessarily provide a reliable measure of the fair value of the Corporation’s stock options.

 

9.             Commitments and contingencies

 

The U. S. Bureau of Land Management, Nevada State Office (“BLM”) has required the Corporation to provide a total surety amount of $6.8 million for the approved Hycroft mine reclamation plan.  The Corporation has pledged cash as collateral totaling $5.0 million to the BLM (Note 3).

 

8

 

The Corporation estimates that the related asset retirement expenditures will commence approximately five years after the start-up of the Hycroft mine (an event not scheduled) and continue for several years after that time.  Using a credit-adjusted rate of 7.75%, the fair value of the estimated $6.8 million obligation is $4.2 million, as accrued in these financial statements.

 

10.          Geographic and segment information

 

The Corporation evaluates, acquires and explores gold exploration and potential development projects.  These activities are focused principally in North America and South America. On April 15, 2005 the Corporation’s Board of Directors approved the Corporation’s exercise of its purchase option for the Awak Mas gold deposit located in Sulawesi, Indonesia (Note 13).  Substantially all related costs are incurred in the United States. The Corporation reported no revenues in the three-month period ended March 31, 2005, or for the same period in 2004.  Geographic segmentation of capital assets is provided in Notes 4 and 5.

 

11.          Differences between Canadian and United States generally accepted accounting principles

 

The Corporation prepares its financial statements in accordance with accounting principles generally accepted in Canada, which differ in some respects from those in the United States.  The significant differences between generally accepted accounting principles (“GAAP”) in Canada and in the United States, as they relate to these financial statements, are as follows:

 

(a)          In accordance with U.S. GAAP, exploration, mineral property evaluation, holding costs, option payments and related acquisition costs for mineral properties acquired under an option agreement are expensed as incurred.  When proven and probable reserves are determined for a property and a bankable feasibility study is completed, then subsequent exploration and development costs on the property would be capitalized.  Total capitalized cost of such properties is measured periodically for recoverability of carrying value under SFAS No. 144.

 

(b)          In accordance with U.S. GAAP, items such as marketable securities are to be measured at fair value at the balance sheet date and related unrealized gains and losses are required to be shown separately in the derivation of comprehensive income.

 

(c)           Under Canadian corporate law, the Corporation underwent a capital reduction in connection with the amalgamation of Granges, Inc. (“Granges”) and Hycroft Resources & Development, Inc. 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 amalgamation. Under U.S. corporate law, no such transaction is available and accordingly is not allowed under U.S. GAAP.

 

(d)          In accordance with U.S. GAAP, only those options granted to non-employees of the Corporation are recorded for financial statement purposes using the fair value on the date of grant.

 

9

 

The significant differences in the consolidated statements of loss relative to U.S. GAAP were:

 

CONSOLIDATED STATEMENTS OF LOSS - UNAUDITED

 

								Cumulative
								during
		Three Months Ended March 31,						Exploration
(U.S. dollars in thousands, except share data)		2005			2004			Stage
Net loss – Canadian GAAP		$	(958	)	$	(1,146	)	$	(11,402	)
Realized loss on marketable securities		—			—			(85		)
Unrealized gain/(loss) on marketable securities		—			—			85
Exploration, property evaluation and holding costs (a)		(251		)	(133		)	(2,551		)
Financing costs		—			—			(222		)
Stock-based compensation expense (d)		82			—			772
Beneficial conversion feature		—			—			(2,774		)
Net loss – U.S. GAAP		(1,127		)	(1,279		)	(16,177		)
Unrealized gain/(loss) on marketable securities (b)		(9		)	(52		)	65
Comprehensive loss – U.S. GAAP		$	(1,136	)	$	(1,331	)	$	(16,112	)
Basic and diluted loss per share – U.S. GAAP		$	(0.06	)	$	(0.09	)

 

The significant differences in the consolidated statements of cash flows relative to U.S. GAAP were:

 

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

 

								Cumulative
								during
		Three Months Ended March 31,						Exploration
(U.S. dollars in thousands)		2005			2004			Stage
Cash flows from operating activities:
Loss for the period		$	(958	)	$	(1,146	)	$	(11,402	)
Adjustments to reconcile loss for the period to cash used in operations:
Non-cash items		149			203			2,695
Additions to mineral properties, net (a)		(251		)	(133		)	(2,551		)
Change in operating assets and liabilities:		117			496			(1,190		)
Net cash used in operating activities		(943		)	(581		)	(12,449		)
Cash flows from investing activities:		(264		)	(2,437		)	(10,577		)
Additions to mineral properties, net (a)		251			133			2,551
Net cash used in investing activities		(13		)	(2,304		)	(8,026		)
Cash flows from financing activities:		398			2,203			25,159
Net cash provided by financing activities		398			2,203			25,159
Net increase/(decrease) in cash and cash equivalents		(558		)	(682		)	4,684
Cash and cash equivalents, beginning of period		5,916			5,520			674
Cash and cash equivalents, end of period		$	5,358		$	4,838		$	5,358

 

10

 

 

The significant differences in the consolidated balance sheets as at March 31, 2005, and December 31, 2004, relative to U.S. GAAP were:

 

CONSOLIDATED BALANCE SHEETS - UNAUDITED

 

		March 31, 2005									December 31, 2004
		Per Cdn.			Cdn./U.S.			Per U.S.			Per Cdn.			Cdn./U.S.			Per U.S.
(U.S. $ 000’s)		GAAP			Adj.			GAAP			GAAP			Adj.			GAAP
Current assets (b)		$	6,069		65			$	6,134		$	6,826		$	74		$	6,900
Restricted cash		4,991			—			4,991			4,961			—			4,961
Property, plant and equipment (a)		21,174			(10,338		)	10,836			21,001			(10,087		)	10,914
Total assets		$	32,234		$	(10,273	)	$	21,961		$	32,788		$	(10,013	)	$	22,775
Current liabilities		178			—			178			256			—			256
Long term liabilities		4,190			—			4,190			4,188			—			4,188
Total liabilities		4,368			—			4,368			4,444			—			4,444
Capital stock		150,145			76,262			226,407			149,747			76,262			226,009
Special warrants		—			222			222			—			222			222
Warrants and options (d)		1,724			(1,244		)	480			1,649			(1,169		)	480
Contributed surplus		115			5,553			5,668			108			5,560			5,668
Other comprehensive income (loss) (b)		—			65			65			—			74			74
Deficit (a), (b), (c), (d)		(124,118		)	(91,131		)	(215,249		)	(123,160		)	(90,962		)	(214,122		)
Total shareholders’ equity		27,866			(10,273		)	17,593			28,344			(10,013		)	18,331
Total liabilities & shareholders’ equity		$	32,234		$	(10,273	)	$	21,961		$	32,788		$	(10,013	)	$	22,775

 

12.          Related party transactions

 

Maverick Springs

 

In June 2003, the Corporation formalized an agreement to grant to Silver Standard Resources Inc. (“SSRI”) an option to acquire the Corporation’s interest in the silver mineralized material hosted in the Maverick Springs project in Nevada. The Corporation and SSRI have a common director.  Under the terms of the agreement, the Corporation will retain its 100% interest in the gold mineralized material, and SSRI would pay the Corporation $1.5 million over four years including a cash payment of $300,000 which was paid at closing.  The remaining $1.2 million would be used to fund exploration programs, land holding costs and option payments on the Maverick Springs project.  As of March 31, 2005, the Corporation has received payments from SSRI aggregating $1,378,305 and included in current assets is a receivable amount due from SSRI in the amount of $10,470 to reimburse the Corporation for exploration expenditures incurred on the Maverick Springs project.

 

13.          Subsequent events

 

On April 18, 2005 the Corporation announced that its Board of Directors had approved the Corporation’s exercise of its purchase option for the Awak Mas gold deposit located in Sulawesi, Indonesia. As previously reported, in November 2004 the Corporation entered into an option agreement to acquire the Awak Mas deposit for a purchase price of $1.5 million.  Under the terms of the agreement, the Corporation had a six-month option period in which to conduct due diligence while paying the owners $15,000 per month.  The monthly option payments, as well as costs up to $150,000 expended to correct any deficiencies in asset standing, will be credited towards the purchase price.  On May 12, 2005, the Corporation transferred $1.2 million to an escrow account to be placed in trust and released to Weston Investments Pty Ltd. and Organic Resources Technology Ltd., the Vendors of the Awak Mas deposit, upon completion of the final transaction documents.  The amount of $1.2 million represents the $1.5 million purchase price less:  the $150,000 deposit previously paid by the Corporation (which included $75,000 in aggregate option payments made by the Corporation); and $150,000 expended by the Corporation; to correct deficiencies in asset standing.

 

11