NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -
UNAUDITED
(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 September 30,
2007, and
for
the three-month and nine-month periods ended September 30, 2007, 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 Corporations
Annual Report on Form 10-K for the year ended December 31, 2006.
These interim financial
statements follow the same accounting policies and methods of their application
as the most recent annual financial statements, with the exception that on January 1,
2007, the Corporation adopted CICA Handbook Sections 1530, Comprehensive
Income, 3855, Financial Instruments Recognition and Measurement. and 3861,
Financial Instruments Disclosure and Presentation.
The adoption of these new
sections had no impact on the Corporations financial statements on or before December 31,
2006. The sections require adjustments to the carrying value of
available-for-sale securities to be recorded within accumulated other
comprehensive income on transition. Accordingly, upon adoption of these
sections, the Corporation made a one-time adjustment to the opening balance of
accumulated other comprehensive income in the amount of $531,743.
All available-for-sale
securities are measured at fair value. Gains and losses associated with these
available-for-sale securities will be separately recorded as unrealized within
other comprehensive income until such time the security is disposed of or
becomes impaired, at which time any gains or losses will then be realized and
reclassified to the statement of loss.
Upon adoption of these new
standards, all regular-way purchases of financial assets are accounted for at
the trade date. Transaction costs on financial assets are treated as part of
the investment cost.
As a result of the completion of
the Arrangement Agreement (as defined in Note 3), the Corporation transferred
its Nevada-based mining properties to Allied Nevada Gold Corp. (Note 3). The
Corporations financial statements reflect these Nevada-based mining properties
as discontinued operations with the assets and liabilities associated with
these properties classified under the captions Assets related to Arrangement
and Liabilities related to Arrangement on the Consolidated Balance Sheets. The
results of operations are treated as losses from discontinued operations and
separately stated on the Consolidated Statements of Loss after losses from
continuing operations and the related operating, financing and investing cash
flows are shown separately on the consolidated statement of cash flows.
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 Corporations 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.
4
Beginning in 2007, the Board of Directors and management have decided
to take on a new direction regarding the Corporations more advanced projects. The
more advanced projects will move forward through advanced and pre-feasibility
studies, so production decisions can be made on those projects.
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.
Completion
of the Arrangement involving Vista Gold Corp., Allied Nevada Gold Corp. and the
Pescios
The previously announced Arrangement involving the Corporation, Allied
Nevada Gold Corp. (Allied Nevada), Carl Pescio and Janet Pescio (the Pescios)
pursuant to the Arrangement and Merger Agreement between the parties dated as
of September 22, 2006 as amended (the Arrangement Agreement), closed on May 10,
2007. The transaction resulted in the acquisition by Allied Nevada of the
Corporations Nevada-based properties and the Nevada mineral assets of Carl and
Janet Pescio. Of the 38,933,055 shares of Allied Nevada common stock (the Allied
Nevada Shares) issued as part of the transaction, 12,000,000 were issued
to Carl and Janet Pescio as partial consideration for the acquisition of their
Nevada mineral assets and 26,933,055 were issued to the Corporation in
accordance with the Arrangement. As part of the transaction, the
Corporations shareholders exchanged each of their Vista Gold common shares and
received: (i) one new Vista Gold
common share and (ii) a pro rata portion of (A) the number of Allied
Nevada Shares received by the Corporation as part of the Arrangement less (B) the
number of Allied Nevada Shares retained by Vista Gold to facilitate payment of
any taxes payable in respect of the Arrangement. Accordingly, of the 26,933,055
Allied Nevada Shares issued to the Corporation, 25,403,207 shares were
distributed to shareholders of the Corporation by way of an in-kind dividend
and the Corporation retained 1,529,848 shares to facilitate the payment of any
taxes payable by the Corporation in respect of the Arrangement. The new common
shares of the Corporation and the Allied Nevada Shares began trading on May 10,
2007, on the Toronto Stock Exchange and the American Stock Exchange. Also,
under the Arrangement Agreement, the Corporation transferred $25.0 million less
the outstanding receivable of $0.5 million to Allied Nevada.
The 1,529,848 Allied Nevada Shares that the
Corporation retained have a book value of $2.17 million, which is the
difference between the net assets transferred to Allied Nevada and the
dividend-in-kind distributed to the Corporations shareholders. These
available-for-sale securities have been fair-valued as of September 30,
2007 and have a fair market value of $7.6 million based on the Allied Nevada
share price at that date. The fair market value of these shares is included in
marketable securities on the Corporations Consolidated Balance Sheets and the
unrealized gain recorded within other comprehensive income.
5
The aggregate carrying amount of the net assets
transferred from the Corporation to Allied Nevada is as follows:
|
|
May 10,
|
|
December 31,
|
|
(U.S. dollars in thousands)
|
|
2007
|
|
2006
|
|
Assets:
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
25,001
|
|
$
|
7
|
|
Accounts
receivable
|
|
7
|
|
102
|
|
Supplies,
inventory, prepaids and other
|
|
102
|
|
104
|
|
Current
assets
|
|
$
|
25,110
|
|
$
|
213
|
|
|
|
|
|
|
|
Restricted
cash
|
|
5,385
|
|
5,320
|
|
Mineral
properties - Note 5
|
|
9,867
|
|
10,196
|
|
Plant and
equipment - Note 6
|
|
929
|
|
996
|
|
Reclamation
premium costs and other assets
|
|
1,839
|
|
1,882
|
|
|
|
18,020
|
|
18,394
|
|
|
|
|
|
|
|
Total assets
related to Arrangement
|
|
$
|
43,130
|
|
$
|
18,607
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
|
|
$
|
9
|
|
Accrued
liabilities and other
|
|
120
|
|
152
|
|
Current
liabilities
|
|
$
|
120
|
|
161
|
|
|
|
|
|
|
|
Capital
lease obligation
|
|
20
|
|
23
|
|
Asset
retirement obligation and closure costs
|
|
4,663
|
|
4,663
|
|
|
|
|
|
|
|
Total
liabilities related to Arrangement
|
|
$
|
4,803
|
|
$
|
4,847
|
|
|
|
|
|
|
|
Net
assets related to Arrangement
|
|
$
|
38,327
|
|
$
|
13,760
|
|
The Corporation has allocated corporate overhead
expenses to Allied Nevada based on the ratio of mineral properties transferred
to Allied Nevada. These allocations, along with the actual expenses of the
Corporations subsidiaries that held the assets transferred are listed on the
statements of loss as losses from discontinued operations.
Also, upon completion of the transaction, $2.4 million
in costs associated with the Arrangement previously held as prepaid items were
expensed. Theses costs included legal fees, tax and audit fees, regulatory
fees, consultant fees and other items related to the completion of the
Arrangement that were not reimbursable by Allied Nevada.
6
4. Marketable
Securities
|
|
At September 30, 2007
|
|
At December 31, 2006
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
(U.S. dollars in thousands)
|
|
Cost
|
|
gain/(loss)
|
|
Fair value
|
|
Cost
|
|
gain/(loss)
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allied
Nevada Gold Corp.
|
|
$
|
2,178
|
|
$
|
5,471
|
|
$
|
7,649
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Esperanza
Silver Corp.
|
|
10
|
|
199
|
|
209
|
|
16
|
|
404
|
|
420
|
|
Luzon
Minerals LTD
|
|
462
|
|
(180
|
)
|
282
|
|
462
|
|
(102
|
)
|
360
|
|
Nevgold
Resources Corp.
|
|
83
|
|
30
|
|
113
|
|
33
|
|
14
|
|
47
|
|
Other
|
|
475
|
|
261
|
|
736
|
|
280
|
|
216
|
|
496
|
|
|
|
$
|
3,208
|
|
$
|
5,781
|
|
$
|
8,989
|
|
$
|
791
|
|
$
|
532
|
|
$
|
1,323
|
|
Prior to January 1,
2007, the Corporation did not recognize unrealized gains or losses on
available-for-sale securities within the financial statements. On January 1,
2007, the Corporation adopted CICA Handbook Sections 1530, Comprehensive
Income and 3855, Financial Instruments Recognition and Measurement which
resulted in a one-time adjustment to the opening balance of accumulated other
comprehensive income of $531,743.
5. Mineral
properties
|
|
2006
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained by
|
|
Transferred to
|
|
|
|
|
|
|
|
December 31,
|
|
Acquisition
|
|
Option
|
|
Exploration &
|
|
Cost
|
|
Vista Gold
|
|
Allied Nevada
|
|
Year to date
|
|
September 30,
|
|
(U.S. dollars in thousands)
|
|
net balance
|
|
costs
|
|
payments
|
|
land costs
|
|
recovery
|
|
Corp.
|
|
Gold Corp.
|
|
activity
|
|
Ending Balance
|
|
Maverick Springs, United States
|
|
$
|
1,471
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
(1,471
|
)
|
$
|
(1,471
|
)
|
$
|
|
|
Mountain View, United States
|
|
854
|
|
|
|
|
|
1
|
|
|
|
|
|
(855
|
)
|
(854
|
)
|
|
|
Wildcat, United States
|
|
1,017
|
|
|
|
|
|
|
|
|
|
|
|
(1,017
|
)
|
(1,017
|
)
|
|
|
Hasbrouck and Three Hills, United States
|
|
386
|
|
|
|
|
|
|
|
|
|
|
|
(386
|
)
|
(386
|
)
|
|
|
F.W. Lewis, Inc. Properties, United States
|
|
2,968
|
|
|
|
|
|
3
|
|
(24
|
)
|
(309
|
)
|
(2,638
|
)
|
(2,968
|
)
|
|
|
Hycroft Royalty, United States
|
|
3,500
|
|
|
|
|
|
|
|
|
|
|
|
(3,500
|
)
|
(3,500
|
)
|
|
|
Mineral properties transferred to Allied Nevada Gold
Corp.
|
|
$
|
10,196
|
|
|
|
|
|
4
|
|
(24
|
)
|
(309
|
)
|
(9,867
|
)
|
(10,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Valley, United States
|
|
641
|
|
|
|
250
|
|
32
|
|
|
|
|
|
|
|
282
|
|
923
|
|
Yellow Pine, United States
|
|
593
|
|
|
|
|
|
41
|
|
|
|
|
|
|
|
41
|
|
634
|
|
Paredones Amarillos, Mexico
|
|
3,218
|
|
|
|
|
|
282
|
|
|
|
|
|
|
|
282
|
|
3,500
|
|
Guadalupe de los Reyes, Mexico
|
|
1,249
|
|
|
|
100
|
|
21
|
|
|
|
|
|
|
|
121
|
|
1,370
|
|
Amayapampa, Bolivia
|
|
10,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,326
|
|
Awak Mas, Indonesia
|
|
2,590
|
|
|
|
|
|
385
|
|
|
|
|
|
|
|
385
|
|
2,975
|
|
Mt. Todd, Australia
|
|
2,875
|
|
|
|
|
|
3,705
|
|
|
|
|
|
|
|
3,705
|
|
6,580
|
|
Other
|
|
61
|
|
|
|
|
|
20
|
|
|
|
309
|
|
|
|
329
|
|
390
|
|
Mineral properties retained by the Corporation
|
|
$
|
21,553
|
|
$
|
|
|
$
|
350
|
|
$
|
4,486
|
|
$
|
|
|
$
|
309
|
|
$
|
|
|
$
|
5,145
|
|
$
|
26,698
|
|
Prior to the completion of
the Arrangement, the F.W. Lewis, Inc. properties included three properties
in Colorado. These three properties were retained by the Corporation and are
now owned by Vista Gold U.S. Inc. The carrying value of these three properties
was $309,000.
The recoverability of the
carrying values of the Corporations 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 managements 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.
7
Measurement Uncertainty
The
carrying value of the Amayapampa gold project was $10.3 million as at September 30,
2007. The valuation of this asset is highly dependent on the Corporation's
ability to sell this project and on assumptions regarding the price of gold in
the future. As at September 30, 2007, the impairment analysis was
performed on a stand-alone project basis and incorporated the following key
assumptions:
Gold
price of $515 per ounce
Expected
reserves of 440,000 ounces to be mined from the property commencing in
2009 based on a feasibility study carried out in February, 2000.
Using
these assumptions, the Amayapampa project was not considered to be impaired
based on the projected undiscounted cash flows.
The Corporation believes
that the fair value of its other mineral properties exceeds the carrying value;
however, a write-down in the carrying values of the Corporations properties may be
required in the future as a result of events and circumstances resulting in an
evaluation of gold resources and the application of an impairment test which is
based on estimates of gold resources and gold prices.
6. Plant and
equipment
|
|
September 30, 2007
|
|
December 31, 2006
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Depreciation and
|
|
|
|
|
|
Depreciation and
|
|
|
|
(U.S. dollars in thousands)
|
|
Cost
|
|
Write-downs
|
|
Net
|
|
Cost
|
|
Write-downs
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hycroft
mine, United States
|
|
$
|
11,949
|
|
$
|
11,036
|
|
$
|
913
|
|
$
|
11,949
|
|
$
|
10,969
|
|
$
|
980
|
|
F.W. Lewis, Inc.
Properties, United States
|
|
31
|
|
15
|
|
16
|
|
31
|
|
15
|
|
16
|
|
PP&E
transferred to Allied Nevada Gold Corp.
|
|
11,980
|
|
11,051
|
|
929
|
|
11,980
|
|
10,984
|
|
996
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awak Mas,
Indonesia
|
|
101
|
|
43
|
|
58
|
|
96
|
|
24
|
|
72
|
|
Mt. Todd,
Australia
|
|
397
|
|
54
|
|
343
|
|
30
|
|
2
|
|
28
|
|
Paredones
Amarillos, Mexico
|
|
33
|
|
|
|
33
|
|
|
|
|
|
|
|
Corporate,
United States
|
|
452
|
|
410
|
|
42
|
|
429
|
|
395
|
|
34
|
|
PP&E
retained by the Corporation
|
|
$
|
983
|
|
$
|
507
|
|
$
|
476
|
|
$
|
555
|
|
$
|
421
|
|
$
|
134
|
|
8
7. Capital stock
Common Shares issued and outstanding
|
|
Number of
|
|
Capital stock
|
|
|
|
shares issued
|
|
($ 000s)
|
|
As of December 31, 2006
|
|
31,674,623
|
|
$
|
215,618
|
|
|
|
|
|
|
|
Warrants exercised from February -
March 2002 private placement - Note 8
|
|
97,465
|
|
146
|
|
Warrants exercised from September 2005
private placement, cash - Note 8
|
|
216,881
|
|
889
|
|
Warrants exercised from September 2005
private placement, fair value - Note 8
|
|
|
|
401
|
|
Warrants exercised from February 2006
private placement - Note 8
|
|
35,000
|
|
210
|
|
Exercise of stock options, cash - Note 9
|
|
4,000
|
|
17
|
|
Exercise of stock options, fair value -
Note 9
|
|
|
|
11
|
|
|
|
|
|
|
|
Issued during the three months ended
March 31, 2007
|
|
353,346
|
|
1,674
|
|
|
|
|
|
|
|
As of March 31, 2007
|
|
32,027,969
|
|
$
|
217,292
|
|
|
|
|
|
|
|
Warrants exercised from September 2005
private placement - Note 8
|
|
116,144
|
|
250
|
|
|
|
|
|
|
|
Issued during the three months ended
June 30, 2007
|
|
116,144
|
|
250
|
|
|
|
|
|
|
|
As of June 30, 2007
|
|
32,144,113
|
|
$
|
217,542
|
|
|
|
|
|
|
|
Warrants exercised from September 2005
private placement - Note 8
|
|
647,360
|
|
1,394
|
|
Exercise of stock options, cash - Note 9
|
|
175,470
|
|
508
|
|
Exercise of stock options, fair value -
Note 9
|
|
|
|
252
|
|
|
|
|
|
|
|
Issued during the three months ended
September 30, 2007
|
|
822,830
|
|
2,154
|
|
|
|
|
|
|
|
As of September 30, 2007
|
|
32,966,943
|
|
$
|
219,696
|
|
8. 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 prices
|
|
|
|
remaining
|
|
|
|
granted(1)(2)
|
|
($ 000s)
|
|
exercised
|
|
expired
|
|
outstanding
|
|
(U.S. $ )
|
|
Expiry date
|
|
life (yrs)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
December 31, 2006
|
|
12,208,917
|
|
932
|
|
(10,323,320
|
)
|
(333,163
|
)
|
1,552,434
|
|
$
|
4.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placement
February - March 2002
|
|
|
|
|
|
(97,465
|
)
|
|
|
(97,465
|
)
|
1.50
|
|
Feb - Mar-07
|
|
|
|
Private placement
September 2005
|
|
|
|
(401
|
)
|
(216,881
|
)
|
|
|
(216,881
|
)
|
4.10
|
|
Sep-07
|
|
0.5
|
|
Private placement
February 2006
|
|
|
|
|
|
(35,000
|
)
|
|
|
(35,000
|
)
|
6.00
|
|
Feb-08
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
March 31, 2007
|
|
12,208,917
|
|
531
|
|
(10,672,666
|
)
|
(333,163
|
)
|
1,203,088
|
|
$
|
5.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placement
September 2005
|
|
|
|
|
|
(61,000
|
)
|
|
|
(61,000
|
)
|
4.10
|
|
Sep-07
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
June 30, 2007
|
|
12,208,917
|
|
531
|
|
(10,733,666
|
)
|
(333,163
|
)
|
1,142,088
|
|
$
|
5.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placement
September 2005
|
|
|
|
|
|
(340,000
|
)
|
(4,000
|
)
|
(344,000
|
)
|
$
|
4.10
|
|
Sep-07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
September 30, 2007
|
|
12,208,917
|
|
531
|
|
(11,073,666
|
)
|
(337,163
|
)
|
798,088
|
|
$
|
6.57
|
|
|
|
|
|
(1) Each warrant entitles the holder to purchase common shares as
adjusted in accordance with the warrant terms pursuant to the Plan of
Arrangement.
(2)
The value
of
all warrants
issued in conjunction with private placements is allocated to common stock upon
exercise.
Immediately prior to the completion of the Arrangement on May 10,
2007 (see Note 3), there were 1,203,088 outstanding warrants entitling holders
to purchase one common share per warrant. Of the aforementioned
9
outstanding warrants, 405,000 were issued as part of the September 2005
private placement, 614,684 were issued as part of the February 2006
private placement and an aggregate 183,405 were issued as payment to two agents
in connection with the Corporations November 2006 public equity financing.
Upon completion of the Arrangement, the number of shares to be issued in
connection with the outstanding warrants was adjusted so that each warrant will
entitle the holder thereof to receive the following number of shares per
warrant: 1.904 common shares per warrant
for the September 2005 private placement warrants, 1.894 common shares per
warrant for the February 2006 private placement warrants, 1.925 common
shares per warrant for 119,213 of the broker warrants and 1.928 common shares
per warrant for the remaining 64,192 broker warrants.
On September 23,
2007, the warrants issued in conjunction with the September 2005 private
placement expired. There were 4,000 warrants that were not exercised prior to September 23,
2007 that expired; all other warrants were exercised
.
9.
Options to purchase Common Shares
Under the Corporations
Stock Option Plan (the Plan), the Corporation may grant options to
directors, officers, employees and consultants of the Corporation. The maximum
number of common shares of the Corporation that may be reserved for
issuance under the Plan is a variable number equal to 10% of the issued and
outstanding common shares on a non-diluted basis. Under the Plan, the exercise
price of each option shall not be less than the market price of the Corporations
stock on the date preceding the date of grant, and an options 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, with vesting
periods and other terms as determined by the Board.
The
fair value of stock options granted to employees and directors was estimated at
the grant date using a lattice option pricing model, using the following
weighted average assumptions:
|
|
September 2007
|
|
September 2006
|
|
Expected volatility
|
|
60
|
%
|
60
|
%
|
Risk-free interest rate
|
|
4.60
|
%
|
4.55 - 4.91
|
%
|
Expected lives (years)
|
|
5
|
|
5
|
|
Dividend yield
|
|
N/A
|
|
N/A
|
|
Option pricing models
require the input of highly subjective assumptions including the expected price
volatility. Expected price volatility is based on the historical volatility of
the Corporations stock. 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
Corporations stock options. The expected term of the options granted is
derived from the output of the option pricing model and represents the period
of time that the options granted are expected to be outstanding. The risk-free
rate of interest for the periods within the contractual term of the option is
based on the U.S. Treasury yield curve in effect at the date of grant.
10
A summary of other option
activity under the Plan as of September 30, 2007, and changes during the
quarter then ended is set forth in the following table:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted-
|
|
Average
|
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
Number of
|
|
Exercise Price
|
|
Contractual
|
|
Intrinsic Value
|
|
|
|
Shares
|
|
($ USD)
|
|
Term
|
|
($ 000)
|
|
Outstanding - December 31, 2006
|
|
944,000
|
|
$
|
5.13
|
|
2.57
|
|
$
|
3,500
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
(4,000
|
)
|
4.19
|
|
|
|
|
|
Expired
|
|
(2,857
|
)
|
3.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - March 31, 2007
|
|
937,143
|
|
$
|
5.14
|
|
2.35
|
|
$
|
2,649
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - March 31, 2007
|
|
817,143
|
|
$
|
4.50
|
|
2.05
|
|
$
|
2,649
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
(10,000
|
)
|
4.40
|
|
|
|
|
|
Modification
|
|
(47,777
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - June 30, 2007
|
|
879,366
|
|
$
|
3.89
|
|
2.11
|
|
$
|
877
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - June 30, 2007
|
|
765,550
|
|
$
|
3.46
|
|
1.80
|
|
$
|
877
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
(175,470
|
)
|
2.90
|
|
|
|
|
|
Granted
|
|
625,000
|
|
4.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - September 30, 2007
|
|
1,328,896
|
|
$
|
4.35
|
|
3.51
|
|
$
|
788
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - September 30, 2007
|
|
997,428
|
|
$
|
4.22
|
|
2.63
|
|
$
|
782
|
|
A summary of the
fair-value changes included in options within Shareholders Equity as of
September 30, 2007, and the period then ended is set forth in the following
table:
|
|
Options
|
|
|
|
($ 000s)
|
|
As of December 31, 2006
|
|
$
|
2,239
|
|
|
|
|
|
Exercised
|
|
(11
|
)
|
Expensed
|
|
134
|
|
|
|
|
|
As of March 31, 2007
|
|
$
|
2,362
|
|
|
|
|
|
Expensed
|
|
$
|
179
|
|
|
|
|
|
As of June 30, 2007
|
|
$
|
2,541
|
|
|
|
|
|
Exercised
|
|
(252
|
)
|
Expensed
|
|
228
|
|
Granted
|
|
672
|
|
|
|
|
|
As of September 30, 2007
|
|
$
|
3,189
|
|
In conjunction with the
closing of the Arrangement, under an anti-dilution provision contained within
the Plan, the Corporation modified all outstanding option agreements. The
anti-dilution provision allows for the Corporation to equalize options in the
event of an equity restructuring. As part of the Arrangement, option holders
exchanged their Vista options held immediately prior to the closing for new
options of both Vista and Allied Nevada. The number and price of the new
options was based on, among other things, the intrinsic value
11
of the options immediately
preceding the closing of the Arrangement. Therefore, an option holders
intrinsic value of the combined options was the same before and following the
closing of the Arrangement. Since the options were modified under the
anti-dilution provision, the Corporation is not required to record any
incremental expense associated with the new Vista options.
The total number of
options outstanding as of September 30, 2007, is 1,328,896 with exercise prices
ranging from approximately $1.99 to $7.31 and remaining lives of 0.11 to 4.83
years. The total number of options outstanding represents 4.0% of issued
capital.
Under the Plan, 625,000
stock options, of which 312,500 will vest immediately and 312,500 will vest
upon the first anniversary of the grant date, were granted to employees,
directors and consultants of the Corporation during the three-month period
ended September 30, 2007. The fair value of the 312,500 options immediately
vested has been recorded as a non-cash compensation expense of $671,774. The
weighted-average grant date fair-value of the 625,000 options granted during
the three months ended September 30, 2007 was $2.15.
During the respective
three- and nine-month periods ended September 30, 2007, 175,470 and 179,470
options were exercised with an aggregate intrinsic value of $298,726 and
$300,366. During the same periods in 2006, 93,000 and 216,625 options were
exercised with aggregate intrinsic values of $622,480 and $1,394,589.
A summary of the status of
the Corporations unvested stock options as of September 30, 2007, and changes
during the period then ended, is set forth below:
|
|
|
|
Weighted-
|
|
|
|
|
|
Average Grant
|
|
|
|
Number of
|
|
Date Fair
|
|
|
|
Shares
|
|
Value ($ USD)
|
|
Unvested - December 31, 2006
|
|
$
|
125,000
|
|
$
|
5.22
|
|
|
|
|
|
|
|
Vested
|
|
(5,000
|
)
|
5.05
|
|
|
|
|
|
|
|
Unvested - March 31, 2007
|
|
120,000
|
|
$
|
5.32
|
|
|
|
|
|
|
|
Modification
|
|
(6,184
|
)
|
|
|
|
|
|
|
|
|
Unvested - June 30, 2007
|
|
113,816
|
|
$
|
5.32
|
|
|
|
|
|
|
|
Vested
|
|
(94,848
|
)
|
6.84
|
|
Granted
|
|
312,500
|
|
4.58
|
|
|
|
|
|
|
|
Unvested - September 30, 2007
|
|
331,468
|
|
$
|
4.63
|
|
|
|
|
|
|
|
|
|
As of September 30, 2007,
there was $667,929 of unrecognized compensation expense related to the unvested
portion of options outstanding. This expense is expected to be recognized over
a weighted-average period of 0.8 years.
12
10. Accumulated other comprehensive income
A reconciliation of the amounts contained in
accumulated other comprehensive income is as follows:
|
|
Accumulated other
|
|
|
|
comprehensive income
|
|
|
|
($ 000s)
|
|
As of December 31, 2006
|
|
$
|
|
|
|
|
|
|
Adjustment for CICA 3855 adoption
|
|
532
|
|
Increases to fair market value during
period
|
|
66
|
|
Decreases due to realization of gain
|
|
(215
|
)
|
|
|
|
|
As of March 31, 2007
|
|
383
|
|
|
|
|
|
Increases to fair market value during
period
|
|
4,296
|
|
|
|
|
|
As of June 30, 2007
|
|
4,679
|
|
|
|
|
|
Increases to fair market value during
period
|
|
1,115
|
|
Decreases due to realization of gain
|
|
(13
|
)
|
|
|
|
|
As of September 30, 2007
|
|
$
|
5,781
|
|
11. Geographic and segment information
The
Corporation evaluates, acquires and explores gold exploration and potential development
projects. These activities are focused principally in North America, South
America, Indonesia and Australia. The Corporation reported no revenues in the
three-month and nine-month periods ended September 30, 2007, or for the same
periods in 2006. Geographic segmentation of mineral properties and plant and
equipment is provided in Notes 5 and 6.
12. 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 and holding
costs 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. Under Canadian GAAP,
all such costs are permitted to be capitalized.
(b)
In
accordance with U.S. GAAP (SFAS No. 115), marketable securities considered to
be available- for-sale 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 comprehensive income. On January 1, 2007, the Corporation adopted
CICA 3855 Financial Instruments Recognition and Measurement. This standard essentially aligns Canadian
GAAP with U.S. GAAP for accounting for marketable securities considered to be
available-for-sale.
13
(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 (SFAS No. 123R),
the fair value of all options granted after January 1, 2006 is calculated at
the date of grant and expensed over the expected vesting period. On transition
to this new standard, the unvested portion of options granted to employees
before January 1, 2006 is expensed over the remaining vesting period using the
fair value on the date of grant. Prior to January 1, 2006, the Corporation
accounted for its stock options under APB Opinion 25 for U.S. GAAP purposes,
which did not require stock-based compensation expense to be recorded. SFAS No.
123R essentially aligns U.S. GAAP with Canadian GAAP for accounting for stock
based compensation.
The
significant differences in the consolidated statements of loss relative to U.S.
GAAP were:
CONSOLIDATED
STATEMENTS OF LOSS - UNAUDITED
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
Three Months Ended
|
|
Nine Months Ended September
|
|
during
|
|
|
|
September 30,
|
|
30,
|
|
Exploration
|
|
(U.S. dollars in thousands, except share data)
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Stage
|
|
Net loss Canadian GAAP
|
|
$
|
(2,200
|
)
|
$
|
(1,361
|
)
|
$
|
(6,204
|
)
|
$
|
(3,395
|
)
|
$
|
(25,403
|
)
|
Exploration, property evaluation and
holding costs
|
|
|
|
|
|
|
|
|
|
|
|
continuing operations
(a)
|
|
(1,113
|
)
|
(720
|
)
|
(4,795
|
)
|
(1,420
|
)
|
(9,421
|
)
|
Exploration, property evaluation and
holding costs
|
|
|
|
|
|
|
|
|
|
|
|
discontinued operations
(a)
|
|
|
|
(162
|
)
|
(4
|
)
|
(260
|
)
|
(1,497
|
)
|
Financing costs
|
|
|
|
|
|
|
|
|
|
(222
|
)
|
Stock-based compensation expense
(d)
|
|
|
|
|
|
|
|
(4
|
)
|
1,142
|
|
Beneficial conversion feature
|
|
|
|
|
|
|
|
|
|
(2,774
|
)
|
Net loss U.S. GAAP
|
|
(3,313
|
)
|
(2,243
|
)
|
(11,003
|
)
|
(5,079
|
)
|
(38,175
|
)
|
Unrealized gain/(loss) on marketable
securities
(b)
|
|
1,102
|
|
211
|
|
5,249
|
|
371
|
|
5,781
|
|
Comprehensive loss U.S. GAAP
|
|
$
|
(2,211
|
)
|
$
|
(2,032
|
)
|
$
|
(5,754
|
)
|
$
|
(4,708
|
)
|
$
|
(32,394
|
)
|
Basic and diluted loss per share U.S.
GAAP
|
|
$
|
(0.07
|
)
|
$
|
(0.07
|
)
|
$
|
(0.18
|
)
|
$
|
(0.19
|
)
|
|
|
The
significant differences in the consolidated statements of cash flows relative
to U.S. GAAP were:
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
Three Months Ended September
|
|
Nine Months Ended September
|
|
during
|
|
|
|
30,
|
|
30,
|
|
Exploration
|
|
(U.S. dollars in thousands)
|
|
2007
|
|
2006
|
|
2007
|
|
2006
|
|
Stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities,
Canadian GAAP
|
|
$
|
(956
|
)
|
$
|
(1,113
|
)
|
$
|
(3,922
|
)
|
$
|
(3,259
|
)
|
$
|
(19,938
|
)
|
Additions to mineral properties, net
(a)
|
|
(578
|
)
|
(882
|
)
|
(4,264
|
)
|
(1,680
|
)
|
(10,383
|
)
|
Cash flows from operating activities, U.S.
GAAP
|
|
(1,534
|
)
|
(1,995
|
)
|
(8,186
|
)
|
(4,939
|
)
|
(30,321
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities,
Canadian GAAP
|
|
(1,301
|
)
|
(960
|
)
|
(29,588
|
)
|
(3,239
|
)
|
(52,526
|
)
|
Additions to mineral properties, net
(a)
|
|
578
|
|
882
|
|
4,264
|
|
1,680
|
|
10,383
|
|
Cash flows from investing activities, U.S.
GAAP
|
|
(723
|
)
|
(78
|
)
|
(25,324
|
)
|
(1,559
|
)
|
(42,143
|
)
|
Cash flows from financing activities,
Canadian GAAP
|
|
1,902
|
|
1,082
|
|
3,414
|
|
26,372
|
|
90,392
|
|
Cash flows from financing activities, U.S.
GAAP
|
|
1,902
|
|
1,082
|
|
3,414
|
|
26,372
|
|
90,392
|
|
Net increase/(decrease) in cash and cash
equivalents
|
|
(355
|
)
|
(991
|
)
|
(30,096
|
)
|
19,874
|
|
17,928
|
|
Cash and cash equivalents, beginning of
period
|
|
18,957
|
|
22,892
|
|
48,698
|
|
2,027
|
|
674
|
|
Cash and cash equivalents, end of period
|
|
$
|
18,602
|
|
$
|
21,901
|
|
$
|
18,602
|
|
$
|
21,901
|
|
$
|
18,602
|
|
14
The
significant differences in the consolidated balance sheets as at September 30,
2007, and December 31, 2006, relative to U.S. GAAP were:
CONSOLIDATED
BALANCE SHEETS - UNAUDITED
|
|
September 30, 2007
|
|
December 31, 2006
|
|
|
|
Per Cdn.
|
|
Cdn./U.S.
|
|
Per U.S.
|
|
Per Cdn.
|
|
Cdn./U.S.
|
|
Per U.S.
|
|
(U.S. $000s)
|
|
GAAP
|
|
Adj.
|
|
GAAP
|
|
GAAP
|
|
Adj.
|
|
GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
(b)
|
|
$
|
28,456
|
|
|
|
$
|
28,456
|
|
$
|
50,430
|
|
$
|
541
|
|
$
|
50,971
|
|
Property, plant and equipment
(a)
|
|
27,174
|
|
(17,396
|
)
|
9,778
|
|
21,687
|
|
(12,601
|
)
|
9,086
|
|
Other assets
|
|
116
|
|
|
|
116
|
|
2,007
|
|
|
|
2,007
|
|
Assets related to Arrangement
(a)
|
|
|
|
|
|
|
|
18,607
|
|
(1,304
|
)
|
17,303
|
|
Total assets
|
|
$
|
55,746
|
|
$
|
(17,396
|
)
|
$
|
38,350
|
|
$
|
92,731
|
|
$
|
(13,364
|
)
|
$
|
79,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
549
|
|
|
|
549
|
|
732
|
|
|
|
732
|
|
Long term liabilities
|
|
25
|
|
|
|
25
|
|
25
|
|
|
|
25
|
|
Liabilities related to Arrangement
|
|
|
|
|
|
|
|
4,847
|
|
|
|
4,847
|
|
Total liabilities
|
|
574
|
|
|
|
574
|
|
5,604
|
|
|
|
5,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock
(c,d)
|
|
219,696
|
|
75,530
|
|
295,226
|
|
215,618
|
|
75,793
|
|
291,411
|
|
Special warrants
|
|
|
|
222
|
|
222
|
|
|
|
222
|
|
222
|
|
Warrants and options
(d)
|
|
3,720
|
|
(813
|
)
|
2,907
|
|
3,171
|
|
(1,076
|
)
|
2,095
|
|
Contributed surplus
(c,d)
|
|
253
|
|
5,526
|
|
5,779
|
|
253
|
|
5,526
|
|
5,779
|
|
Other comprehensive income
(b)
|
|
5,781
|
|
|
|
5,781
|
|
|
|
541
|
|
541
|
|
Deficit
(a,b,c,d)
|
|
(174,278
|
)
|
(97,861
|
)
|
(272,139
|
)
|
(131,915
|
)
|
(94,370
|
)
|
(226,285
|
)
|
Total shareholders equity
|
|
55,172
|
|
(17,396
|
)
|
37,776
|
|
87,127
|
|
(13,364
|
)
|
73,763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities & shareholders
equity
|
|
$
|
55,746
|
|
$
|
(17,396
|
)
|
$
|
38,350
|
|
$
|
92,731
|
|
$
|
(13,364
|
)
|
$
|
79,367
|
|
13. Related party transactions
Completion of the Arrangement
As previously reported (Note 3), on September 22,
2006, the Corporation entered into an Arrangement and Merger Agreement
(the Arrangement Agreement) with Carl Pescio, Janet Pescio and Allied
Nevada pursuant to which the parties agreed to undertake a transaction that
would result in the transfer of the Corporations Nevada-based mining
properties and related assets to Allied Nevada and the Pescios transfer to
Allied Nevada of their interests in certain Nevada-based mining properties and
related assets, all to be carried out pursuant to an arrangement under the
provisions of the
Business Corporations Act
(Yukon Territory) (the Arrangement). Completion of the transaction
occurred on May 10, 2007.
Prior to the completion of
the Arrangement, the immediate cash needs of Allied Nevada were met by loans
from the Corporation pursuant to the Arrangement Agreement, which provided
that, prior to the date of completion, the Corporation could loan money to its
wholly-owned subsidiary that would hold the Corporations Nevada assets prior
to the closing, namely Vista Gold Holdings Inc., in amounts sufficient to
undertake certain activities for the benefit of the business that Allied Nevada
would operate after the completion of the transaction and to enable Allied
Nevada to commence operations immediately after the completion of the
transaction. These loans bore interest at the rate of 6% per annum and all
principal and interest owing by Vista Gold Holdings Inc. to the Corporation
in respect of such loans were paid in full at the time of completion of the
Arrangement.
Since
the completion of the Arrangement, the Corporation no longer has any related
party transactions with Allied Nevada.
15
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(U.S. dollars in thousands, unless specified
otherwise)
This
Managements Discussion and Analysis (MD&A) of the consolidated operating
results and financial condition of Vista Gold Corp. for the three and nine
months ended September 30, 2007, has been prepared based on information
available to us as of November 7, 2007. This MD&A should be read in
conjunction with the consolidated financial statements of the Corporation for
the three years ended December 31, 2006 and the related notes thereto, which
have been prepared in accordance with generally accepted accounting principles
(GAAP) in Canada. Reference to Note 17 to the consolidated annual financial
statements should be made for a discussion of differences between Canadian and
United States GAAP and their effect on the financial statements. All amounts
stated herein are in U.S. dollars, unless otherwise noted.
Results from Operations
Our
consolidated net loss for the three-month period ended September 30, 2007, was
$2,200 or $0.07 per share compared to a consolidated net loss of $1,361 or
$0.05 per share for the same period in 2006. Our consolidated net loss for the
nine-month period ended September 30, 2007, was $6,204 or $0.19 per share
compared to a consolidated net loss of $3,395 or $0.14 per share for the same
period in 2006. For both the three and nine-month periods, the increases in the
consolidated losses of $839 and $2,809 from the respective prior periods are
primarily the result of costs related to the completion of the Arrangement of
$528 and $2,880. The remaining variances for the three and nine-month periods
include increases in exploration, property evaluation and holding costs of $97
and $337 from the respective prior periods and increases in corporate
administration and investor relations costs of $854 and $1,580 from the
respective prior periods, which are partially offset by increases in interest
income of $42 and $655 from the respective prior periods and decreases in
losses from discontinued operations of $630 and $1,252 from the same respective
periods.
Exploration, property evaluation
and holding costs
Exploration, property
evaluation and holding costs increased to $204 during the three-month period
ended September 30, 2007, as compared with $107 for the same period in 2006. Exploration,
property evaluation and holding costs increased to $682 during the nine-month
period ended September 30, 2007, as compared with $345 for the same period in
2006. For both the three and nine-month periods our exploration, property
evaluation and holding costs increased for all properties held by Vista. These
increases reflect our movement towards the development of these projects. See Subsequent
Events Commencement of Bankable Feasibility Study for Paredones Amarillos
Project.
Corporate administration and
investor relations
Corporate administration and
investor relations costs increased to $1,688 during the three-month period
ended September 30, 2007, compared to $834 for the same period in 2006. The increase of $854 from the prior period is
primarily due to the following:
A decrease of
$392 in the allocation of certain corporate expenses to Allied Nevada as part
of the Arrangement (see Consolidated Financial Statements - Note 3) compared to
the prior period; and
An increase in
stock-based compensation expense of $500 compared to the prior period. This
increase is due to a decrease in the allocation of stock-based compensation
expense to Allied Nevada during the 2007 period.
Corporate administration and
investor relations costs increased to $3,323 for the nine-month period ended
September 30, 2007, compared to $1,743 for the same period in 2006. The increase of $1,580 from the prior period
is primarily due to the following:
A decrease of
$437 in the allocation of certain corporate expenses to Allied Nevada as part
of the Arrangement (see Consolidated
Financial Statements Note 3) compared to the prior period;
An increase in
stock-based compensation expense of $706 compared to the prior period. This increase is due to a decrease in the
allocation of stock-based compensation expense to Allied Nevada during the 2007
period;
An increase in
labor and benefit costs of $198 compared to the prior period. This increase is due to the addition of
employees as we head towards anticipated development of certain projects; and
An increase in
investor relations costs of $99 compared to the prior period. This increase is due to our participation in
additional gold conferences during the 2007 period.
Costs associated with the
Arrangement
On
May 10, 2007, the Plan of Arrangement was completed resulting in, among other
things, the transfer of our Nevada related assets to Allied Nevada Gold Corp. (Allied
Nevada). See Financial Position, Liquidity
16
and
Capital Resources Liquidity and Capital Resources Completion of the
Arrangement below. When the transaction was completed there was $2,352 in
prepaid transaction costs which were expensed upon completion of the
Arrangement. These costs had previously been deferred on the balance sheet
under the heading of Prepaid transaction costs. During the three-month period
ended September 30, 2007, we incurred an additional $528 in expenses related to
the Arrangement that were immediately expensed as costs associated with the
Arrangement.
Depreciation and amortization
Depreciation and
amortization expense increased to $27 during the three-month period ended
September 30, 2007, compared to $24 for the same period in 2006. Depreciation
and amortization expense increased to $80 for the nine-month period ended
September 30, 2007, compared to $32 for the same period in 2006. The increase
of $3 for the three-month period and the increase of $48 for the nine-month
period are mostly due to capital expenditures at the Mt. Todd gold mine during
the first and second quarter of 2007 that have begun to be depreciated.
Other income and expense
Gain on disposal of
marketable securities
For the three-month period
ended September 30, 2007, we realized a gain on the disposal of marketable
securities of $18, compared to $5 for the same period in 2006. For the
nine-month period ended September 30, 2007, we realized a gain on the disposal
of marketable securities of $158 compared to $42 for the same period in 2006.
At
September 30, 2007, we held marketable securities available for sale with a
quoted market value of $8,989. With the exception of our shares of Allied Nevada
common stock, as discussed herein, we purchased the securities for investing
purposes with the intent to hold the securities until such time that it would
be advantageous to sell the securities at a gain. Although there can be no
reasonable assurance that a gain will be realized from the sale of the
securities, we monitor the market status of the securities consistently in
order to mitigate the risk of loss on the investment. At September 30, 2007,
also included in marketable securities were 1,529,848 shares of Allied Nevada
at a quoted market value of $7,649. We continue to hold these shares of Allied
Nevada, which we retained as part of the closing of the Arrangement to
facilitate payment of any taxes payable by Vista as a result of the Arrangement.
These shares are restricted securities as defined in Rule 144 under the
Securities Act of 1933 (the Securities Act) and cannot be resold by us in the
absence of registration under the Securities Act unless an exemption from
registration is available. We cannot be certain of whether or when the shares
would be registered under the Securities Act. The most commonly available
exemption for resales, Rule 144 under the Securities Act, would require us to
hold these shares for one year before commencing the resales. If there are no
taxes to be paid as part of the Arrangement, then we will hold these shares
until such time that it would be advantageous to sell the securities at a gain.
Interest income
During the three months
ended September 30, 2007 we realized $239 in interest income as compared to
$197 for the same period in 2006. The increase of $42 is primarily attributable
to an increase in interest earned on our liquid savings account. During the
nine-month period ended September 30, 2007, we realized $997 compared to $342
for the same period in 2006. The increase of $655 for the nine-month period in
interest earned on our liquid savings account is attributable to higher cash
balances available to be invested resulting from equity financings and stock
option and warrant exercises that occurred during the fourth quarter of 2006.
Financial Position,
Liquidity and Capital Resources
Cash used in operations
Cash used in operations was
$956 for the three-month period ended September 30, 2007, compared to $1,113 for
the same period in 2006. The decrease of $157 is the result of an increase in accounts receivable of $173, an increase in supplies inventory,
prepaids and other of $812 and an aggregate increase of non-cash items of
17
$309, partially offset by a
decrease in accounts payable, accrued liabilities and other of $302 and an
increase in the consolidated net loss of $839.
Cash used in operations was
$3,922 for the nine-month period ended September 30, 2007, compared to $3,259
for the same period in 2006. The increase of $663 is mostly the result of an
increase in our net loss for from the 2006 period of $2,809, which is partially
offset by an aggregate increase of non-cash items of $2,301.
Investing activities
Net cash used for investing
activities increased to $1.3 million for the three-month period ended September
30, 2007, from $1.0 million for the same period in 2006. The increase of $0.3
million mostly reflects an increase of $359 for additions to mineral
properties.
Net cash used for investing
activities increased to $29.6 million for the nine-month period ended September
30, 2007, from $3.2 million for the same period in 2006. The increase of $26.4
million mostly reflects the $24.5 million cash transferred to Allied Nevada in
conjunction with the Arrangement Agreement representing our payment of $25
million less $0.5 million in loans repaid to us by Allied Nevada pursuant to
the terms of the Arrangement Agreement.
Financing activities
Net cash provided by
financing activities increased to $1.9 million for the three-month period ended
September 30, 2007, from $1.1 million for the same period in 2006. Net cash
provided by financing activities decreased to $3.4 million for the nine-month
period ended September 30, 2007, from $26.4 million for the same period in 2006.
Warrants exercised during the three-month period ended September 30, 2007
produced cash proceeds of $1.4 million as compared to $0.8 million for the same
period in 2006. Warrants exercised during the nine-month period ended September
30, 2007 produced cash proceeds of $2.9 million as compared to $25.6 million
for the same period in 2006. For the three-month period, the increase relates
to warrant exercises pertaining to the September 2005 private placement
warrants that expired on September 23, 2007. For the nine-month period, the
decrease relates to the acceleration of the February 2003 warrants and the
September 2004 warrants in May 2006.
Stock option exercised
produced cash of $508 during the three-month period ended September 30, 2007 as
compared to $319 for the same period in 2006. Stock option exercises produced
cash of $525 during the nine-month period ended September 30, 2007 as compared
to $798 for the same period in 2006.
Liquidity and Capital Resources
At
September 30, 2007, our total assets were $55.7 million compared to $92.7
million at December 31, 2006, representing a decrease of $37.0 million. At
September 30, 2007, we had working capital of $27.9 million compared to $49.7
million at December 31, 2006, representing a decrease of $21.8 million. This
decrease relates to a decrease in cash balances from year end due to the
transfer of $25 million to Allied Nevada net of $0.5 million in loans repaid to
us by Allied Nevada in connection with the closing of the Arrangement.
The
principal component of working capital at both September 30, 2007 and December
31, 2006, is cash and cash equivalents of $18.6 million and $48.7 million,
respectively. Other components include supplies inventory, prepaids and other
(September 30, 2007 - $452; December 31, 2006 - $303), marketable securities
(September 30, 2007 $8,989; December 31, 2006 $791) and accounts receivable
(September 30, 2007 - $413; December 31, 2006 - $645). At September 30, 2007,
we had no outstanding debt to banks or financial institutions.
Commencement of Bankable Feasibility
Study for Paredones Amarillos Project
On August 13, 2007, we
announced that we had engaged SRK Consulting (US), Inc. to manage the
preparation of a bankable feasibility study for our Paredones Amarillos Project
in Baja California, Mexico. SRK is engaged to define the scope of work for the
various consultants studies, review and audit their work, undertake an
economic analysis of the project, and compile and edit the final report. SRK
will also be responsible for the pit slope stability determinations and has
been retained to determine the optimum source of water for the project
including the use of municipal waste water and desalinized or partially desalinized
sea water.
We also announced that we
retained Corporación Ambiental de Mexico, S.A. de C.V. (CAM) to manage the
environmental permitting activities for the Paredones Amarillos Project. CAM is
a full-service environmental firm headquartered in Mexico City with experience
in mining project permitting in Baja California. As we reported in our press
release of October 17, 2007, CAM recently informed us that the environmental
and change of land use permits issued to Echo Bay Mines when it held the project
are still valid. We have presented all of the studies and permitting documents
for our proposed metallurgical core drilling program and anticipate that we
will receive the required permits. When the permits are received, we plan to
expedite the start of drilling and the related confirmatory metallurgical test
program, which is expected to be completed in the first quarter of 2008.
We also announced our
selection of the following additional consulting firms to assist in preparation
of the bankable feasibility study:
Research Development Inc. of Lakewood, Colorado, is to complete the
confirmatory metallurgical testing program and define the process flow sheet.
Mine Development Associates of Reno, Nevada, is to update the mineral resource
estimate, determine proven and probable reserves, prepare the mine plan and
estimate the mine capital and operating costs. KD Engineering of Tucson,
Arizona, will be responsible for processing engineering/design, infrastructure
engineering/design and estimating the processing capital and operating costs.
Golder Associates, Inc. of Tucson, Arizona, is to manage geotechnical
investigations and test work, provide guidance for the design of structural
foundations, determine the most suitable method for disposal of the barren mill
flotation tailings with the mine waste rock and design the tailings storage
facility including preparing the associated capital and operating cost
estimates. We plan to commence construction on the project in the second half
of 2008.
Mt. Todd Project Update
In September 2007, we
announced that we had received four exploration licenses (ELs) covering about
110,633 hectares primarily to the north-northeast of our Mt. Todd gold mine in
the Northern Territory, Australia. The ELs had been held in reserve status by
the Northern Territory government prior to our acquiring the project. We
believe exploration potential for gold and other minerals on these licenses to
be good, and a
18
program to systematically evaluate
the mineral potential of this land is underway. The objectives of the program
are to obtain information that supports the conversion of inferred gold
resources to measured and indicated resources, to explore for additional
resources on strike and down dip, to aid in the determination of the copper
content of the deposit and to obtain samples for metallurgical testing. Results
for our drilling program conducted on this property from February to June 2007
have been reported in our press releases of May 30, 2007 and September 4, 2007.
We plan to use the results of this drill program together with other historic
information we have obtained to prepare a new resource estimate later in 2007.
Subsequent Events
Resignation of Robert A. Quartermain from Board of
Directors; Appointment of Tracy A. Stevenson and Frederick H. Earnest to Board
of Directors; Appointment of Michael B. Richings as Executive Chairman of Board
of Directors
On
November 6, 2007 we announced changes to our Board of Directors as follows:
Effective
as of November 6, 2007, Robert A. Quartermain resigned from our Board of
Directors. Mr. Quartermain cited pressing business requirements at Silver
Standard Resources, Inc., where he is President and a director, as his reason
for resigning; but announced that he will continue to assist Vista Gold over
the next twelve months as Special Advisor to the Board of Directors.
As
a new independent director, the Board approved the appointment of Tracy A.
Stevenson to the Board of Directors. Mr. Stevenson is a senior mining executive
who worked for Rio Tinto plc and related companies for 26 years where he
served in senior positions in information technology, finance, planning and
business development and has been involved with many major exploration, development,
and financing projects. Mr. Stevenson has served as Global Head of Information
and Technology and Global Head of Business Process
19
Improvement for Rio Tinto plc, Senior Vice
President Finance and Control at Kennecott Corporation, and Executive Vice
President Financial Services and Strategy at Comalco Limited. Mr. Stevenson
holds a B.Sc. Accounting from the University of Utah, is a CPA and spent four
years with a predecessor to the firm PricewaterhouseCoopers LLP.
In addition, the Board appointed Frederick H.
Earnest, President and Chief Operating Officer of Vista Gold, to the Board of
Directors. Messrs. Stevenson and Earnest will hold office until the close of
next annual general meeting of shareholders or until their successors are duly
elected or appointed, unless their office is earlier vacated in accordance with
the Business Corporations Act (Yukon).
The Board also approved the
appointment of Michael B. Richings (Chief Executive Officer) to the additional
position of Executive Chairman of the Board of Directors.
Changes in Accounting Policies
On January 1, 2007, we adopted CICA Handbook
Sections 1530, Comprehensive Income, 3855, Financial Instruments
Recognition and Measurement 3861, Financial Instruments Disclosure and
Presentation and 1506, Accounting Changes.
The adoption of these new sections had no impact on our financial
statements on or before December 31, 2006 as the sections require adjustments
to the carrying value of available-for-sale securities to be recorded within
accumulated other comprehensive income on transition. Upon adoption of these
sections, we made a one-time adjustment to the opening balance of accumulated
other comprehensive income in the amount of $532.
All available-for-sale
securities are measured at fair-value. Gains and losses associated with these
available-for-sale securities will be separately recorded as unrealized within
other comprehensive income until such time the security is disposed of or becomes
impaired, at which time any gains or losses will then be realized and
reclassified to the statement of loss.
Upon adoption of the new Financial Instruments
standard, all regular-way purchases of financial assets are accounted for at
the trade date. Transaction costs on financial assets are treated as part of
the investment cost.
20
Certain U.S. Federal Income Tax Considerations
NOTICE PURSUANT TO IRS CIRCULAR 230: NOTHING CONTAINED
IN THIS SUMMARY CONCERNING ANY U.S. FEDERAL TAX ISSUE IS INTENDED OR WRITTEN TO
BE USED, AND IT CANNOT BE USED, BY A U.S. HOLDER (AS DEFINED BELOW), FOR THE
PURPOSE OF AVOIDING U.S. FEDERAL TAX PENALTIES UNDER THE CODE. THIS SUMMARY WAS
WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS
ADDRESSED BY THIS DOCUMENT. EACH U.S. HOLDER SHOULD SEEK U.S. FEDERAL TAX
ADVICE, BASED ON SUCH U.S. HOLDERS PARTICULAR CIRCUMSTANCES, FROM AN
INDEPENDENT TAX ADVISOR.
The
following is a discussion of the material U.S. federal income tax consequences
to U.S. Holders, as defined below for purposes of this discussion of Certain
U.S. Federal Income Tax Considerations, of the holding and disposition of our
common shares. The discussion is based on the U.S. Internal Revenue Code of
1986, as amended (the Code), U.S. Treasury regulations, judicial authorities,
published positions of the Internal Revenue Service (the IRS) and other
applicable authorities, all as in effect on the date hereof and all of which
are subject to change, possibly with retroactive effect.
A
U.S. Holder is a beneficial owner of our common shares that is for U.S.
federal income tax purposes (a) an individual U.S. citizen or resident
alien; (b) a corporation, or other entity taxable as a corporation for
U.S. federal income tax purposes, created or organized under the laws of the
United States, the District of Columbia or any state in the United States;
(c) an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or (d) a trust, if its administration
is subject to the primary supervision of a U.S. court and one or more U.S.
persons have the authority to control all substantial decisions of the trust,
or if it has made a valid election under applicable U.S. Treasury regulations
to be treated as a U.S. person.
This
discussion only addresses U.S. Holders who hold our common shares as capital
assets within the meaning of section 1221 of the Code. This discussion does
not address all the tax consequences that might be relevant to U.S. Holders in
light of their particular circumstances or the U.S. federal income tax
consequences to U.S. Holders subject to special treatment under U.S. federal
income tax laws, including but not limited to banks and other financial
institutions, insurance companies, dealers in securities or foreign currency,
traders that have elected mark-to-market accounting, tax-exempt organizations,
certain former citizens or residents of the United States, persons that hold
our common shares as part of a straddle, hedge, conversion transaction or
other integrated investment, U.S. Holders who own, directly or indirectly, 10%
or more of Vista Golds common shares, or U.S. Holders that have a functional
currency other than the U.S. dollar, all of whom may be subject to tax rules
that differ significantly from those summarized below.
If
a partnership, or other entity taxed as a partnership for U.S. federal income
tax purposes, holds our common shares, the U.S. federal income tax treatment of
a partner in the partnership will depend on the status of the partner and the
activities of the partnership. Partnerships that hold our common shares, and
partners in such partnerships, are urged to consult their own tax advisors
regarding the U.S. federal income tax consequences of holding our common
shares.
Prospective
investors are urged to consult their own tax advisors regarding the U.S.
federal income tax consequences of the holding and disposition of our common
shares in their particular circumstances.
Passive Foreign Investment Company Rules
For
U.S. federal income tax purposes, we were classified as a PFIC under section
1297 of the Code for our taxable year ended December 31, 2006, and likely
will be a PFIC in subsequent taxable years until we have significant operating
income. A non-U.S. corporation generally is classified as a PFIC for U.S.
federal income tax purposes in any taxable year if, either (a) at least
75% of its gross income is passive income (the income test), or (b) on
average at least 50% of the gross value of its assets is attributable to assets
that produce passive income or are held for the production of passive income
(the asset test). For purposes of the income test and the asset test, if a
non-U.S. corporation owns directly or indirectly at least 25% (by value) of the
stock of another corporation, the non-U.S. corporation will be treated as if it
held its proportionate share of the assets of the latter corporation and
received directly its proportionate share of the income of that latter
corporation. Passive income generally includes dividends, interest, royalties
and rents (other than rents and royalties derived in the active conduct of a
trade or business and not derived from a related person).
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For
any taxable year in which we are a PFIC, U.S. Holders will be subject to U.S.
federal income tax in respect of our common shares in accordance with the
special rules applicable to investments in PFICs. Under the PFIC rules, as
discussed further below in this section Passive Foreign Investment Company
Rules, the U.S. federal income tax consequences of the ownership of our common
shares will be governed by the so-called non-qualified fund regime, unless
either (a) a U.S. Holder elects to treat Vista Gold as a qualifying
electing fund (QEF), and we annually supply our U.S. Holders with the
information necessary for compliance with the QEF election, or (b) our
common shares constitute marketable stock, within the meaning of section 1296
of the Code, and the U.S. Holder elects to mark our common shares to market as
of the end of each taxable year. U.S. Holders of shares of stock of a PFIC are
subject to special annual tax reporting requirements.
U.S.
HOLDERS ARE STRONGLY ADVISED TO CONSULT THEIR OWN TAX ADVISORS ABOUT THE
POSSIBLE CHARACTERIZATION OF VISTA GOLD AS A PFIC AS WELL AS THE ADVISABILITY
OF MAKING A QEF ELECTION OR A MARK-TO-MARKET ELECTION.
Non-Qualifying Fund
In
general, if a QEF election or a mark-to-market election is not made by a U.S.
Holder, any gain on a sale or other disposition of our common shares by such a
U.S. Holder would be treated as ordinary income and would be subject to special
tax rules. Under these special tax rules, (a) the amount of any such gain
would be allocated ratably over the U.S. Holders holding period for our common
shares, (b) the amount of ordinary income allocated to years prior to the
year of sale or other disposition would be subject to tax at the highest
statutory rate applicable to such U.S. Holder for each such year (determined
without regard to other income, losses or deductions of the U.S. Holder for
such years), and (c) the tax for such prior years would be subject to an
interest charge, computed at the rate applicable to underpayments of tax. Under
proposed U.S. Treasury regulations, a disposition may include, under
certain circumstances, transfers at death, gifts, pledges of shares and other
transactions with respect to which gain is not ordinarily recognized. In
addition, the adjustment ordinarily made to the tax basis of stock owned by a
decedent may not be available with respect to our common shares.
Rules similar to those applicable to dispositions will generally apply to
distributions in respect of our common shares that exceed 125% of the average
amount of distributions in respect of such shares during the preceding three
years, or, if shorter, during the preceding years in the U.S. Holders holding
period (excess distributions).
QEF Election
If
a U.S. Holder makes a valid and timely-filed QEF election in connection with a
purchase of our common shares, and provided that we annually supply the
information necessary to comply with such election, then the electing U.S.
Holder will be required each taxable year to recognize, as ordinary income, a
pro rata share of our earnings, and to recognize, as capital gain, a pro rata
share of our net capital gain, in each case without regard to whether
distributions are received with respect to our common shares for such year. The
QEF election, once made, applies to all subsequent taxable years of the U.S.
Holder in which it holds our common shares until we cease to be a PFIC. If we
are again a PFIC in any taxable year following a year in which we were not
treated as a PFIC, the original QEF election continues to be effective. For any
taxable year in which we are a PFIC and do not have any net income or net
capital gain, a U.S. Holder would not have any income or gain as a result of
the QEF election. We will provide the information necessary for complying with
the QEF election. Amounts included in a U.S. Holders taxable income under the
QEF regime would increase such U.S. Holders tax basis in our common shares,
and subsequent distributions by us would not be taxable to the U.S. Holder, and
instead would reduce the U.S. Holders tax basis in our common shares to the
extent that the U.S. Holder could demonstrate that the distributions were
attributable to previously-taxed income. A U.S. Holder generally would
recognize capital gain or loss upon a disposition of our common shares that
were subject to a QEF election at all times during such U.S. Holders holding
period. Special rules would apply if a U.S. Holder makes a QEF election later
than the first taxable year in which our common shares are owned (which could
result in the U.S. Holder remaining subject to the non-qualifying fund regime
described above).
Mark-to-Market Election
If
a U.S. Holder makes a valid and timely-filed mark-to-market election, and
provided that our common shares constitute marketable stock within the
meaning of Section 1296 of the Code, then in any year in which we are a
PFIC the U.S. Holder annually would be required to report any unrealized gain
with respect to its common shares as an item of ordinary income, and would be
permitted to deduct any unrealized loss, as an ordinary loss,
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to
the extent of previous inclusions of ordinary income. Any gain subsequently
realized by such electing U.S. Holder upon a disposition of our common shares
also would be treated as ordinary income, rather than capital gain, but such
U.S. Holder would not be subject to an interest charge on the resulting tax
liability as under the non-qualifying fund regime. A U.S. Holder who makes a
mark-to-market election would still be taxed on distributions from us when
received, as described under Dividends.
For
purposes of the mark-to-market election, marketable stock generally includes
stock that is regularly traded on certain established securities markets within
the United States, or on any exchange or other market that the IRS determines
has trading, listing, financial disclosure, and other rules adequate to carry
out the purposes of the mark-to-market election. The American Stock Exchange
and the Toronto Stock Exchange may qualify as such an exchange. Each U.S.
Holder should consult its own advisor as to whether the mark-to-market election
is available with respect to our common shares. Special rules would apply to a
U.S. Holder that held our common shares prior to the first taxable year for
which the mark-to-market election was effective, which could result in an
interest charge for such first taxable year, as under the non-qualifying fund
regime described above.
Once
made, a mark-to-market election would be effective for all subsequent taxable
years of such U.S. Holder unless revoked with the consent of the Secretary of
the Treasury or unless our common shares cease to be marketable.
Dividends
For
purposes of this section Dividends, it is assumed that we are a PFIC. To the
extent that distributions paid on our common shares are not treated as excess
distributions received by a non-electing U.S. Holder, and to the extent the
distribution exceeds the previously-taxed income of a U.S. Holder that makes a
QEF election, such distributions (before reduction for Canadian withholding
taxes) will be taxable as dividends to the extent of our current or accumulated
earnings and profits, as determined for U.S. federal income tax purposes, and
will be includable in a U.S. Holders ordinary income when received. Dividends
on our common shares will not be eligible for the dividends-received deduction
generally allowed to U.S. corporations.
The
amount of any dividend paid in Canadian dollars will equal the U.S. dollar
value of the Canadian dollars received calculated by reference to the exchange
rate in effect on the date the dividend is received by a U.S. Holder regardless
of whether the Canadian dollars are converted into U.S. dollars. If the
Canadian dollars received as a dividend are not converted into U.S. dollars at
the date of receipt, a U.S. Holder will have a basis in the Canadian dollars
equal to the U.S. dollar value on the date of receipt. Any gain or loss
realized on a subsequent conversion or other disposition of the Canadian
dollars will be treated as ordinary income or loss, and generally will be
income or loss from sources within the United States for U.S. foreign tax
credit purposes.
A
U.S. Holder may be entitled to deduct, or claim a U.S. foreign tax credit for,
Canadian taxes that are withheld on dividends received by a U.S. Holder,
subject to applicable limitations in the Code. Dividends will be income from
sources outside the United States and for tax years beginning before
January 1, 2007, generally will be passive income or financial services
income, and for tax years beginning after December 31, 2006, generally
will be passive category income or general category income for purposes of
computing the U.S. foreign tax credit allowable to a U.S. Holder. The rules
governing the U.S. foreign tax credit are complex, and investors are urged to
consult their tax advisors regarding the availability of the U.S. foreign tax
credit under their particular circumstances.
To
the extent that the amount of any distribution exceeds our current and
accumulated earnings and profits for a taxable year, the distribution will
first be treated as a tax-free return of capital to the extent of a U.S. Holders
basis, and any excess will be treated as capital gain. Such capital gain would
not give rise to income from sources outside the United States, and accordingly
a U.S. Holder may need other non-U.S. source income in order to claim a tax
credit for Canadian withholding taxes imposed on such distribution.
Disposition of Securities
For purposes of this section Disposition of Securities, it is assumed
that we are a PFIC. A U.S. Holder will recognize taxable gain or loss on any
sale or other disposition of our common shares in an amount equal to the
difference between the amounts received (in cash or other property, valued at
fair market value) for our common shares and the U.S. Holders tax basis in our
common shares. For U.S. Holders that use the cash method of accounting, and for
U.S. Holders that use the accrual method of accounting and so elect,the
U.S.
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dollar
value of the cash received in Canadian dollars on the sale or other disposition
of our common shares will be the U.S. dollar value determined on the basis of
the spot rate on the settlement date of the sale. Subject to U.S. Holders that
make a QEF election as described above, a U.S. Holders tax basis in our common
shares generally equals the U.S. dollar value of the price paid in Canadian
dollars determined on the basis of the spot rate on the settlement date of the
purchase. Such gain or loss will be income or loss from sources within the
United States for U.S. foreign tax credit limitation purposes. For U.S. Holders
that make a QEF election, such gain or loss will be a capital gain or loss.
Capital gains of non-corporate taxpayers, including individuals, derived with
respect to capital assets held for more than one year are eligible for reduced
rates of U.S. federal income tax. The deductibility of capital losses is
subject to limitations.
Information Reporting and Backup Withholding
In
general, information reporting will apply to dividends on our common shares and
the proceeds of the sale or other disposition of our common shares unless a
U.S. Holder is an exempt recipient, such as a corporation. Backup withholding
will apply to those payments if a U.S. Holder fails to provide a taxpayer
identification number and comply with certain certification procedures or
otherwise fails to establish an exemption from backup withholding. If backup
withholding applies, the relevant intermediary must withhold U.S. federal
income tax on those payments at a current rate of 28%. Any amount withheld
under the backup withholding rules will be allowed as a refund or credit
against a U.S. Holders U.S. federal income tax liability, provided the
required information is furnished to the IRS in a timely manner.
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Note Regarding Forward-Looking Statements
This
document contains forward-looking statements within the meaning of Section
27A of the U.S. Securities Act of 1933, as amended, and 21E of the U.S.
Securities Exchange Act of 1934, as amended, and forward-looking information
under Canadian Securities laws, that are intended to be covered by the safe
harbor created by such legislation.
All statements, other than statements of historical facts, included in
this document, our other filings with the SEC and Canadian Securities Commissions
and in press releases and public statements by our officers or representatives,
that address activities, events or developments that we expect or anticipate
will or may occur in the future, including such things as financial and
operating results and estimates, results of drilling programs and prospects for
exploration and conversion of resources at the Mt. Todd Project, the
performance and results of feasibility studies including the ongoing bankable
feasibility study for the Paredones Amarillos Project, receipt of required
environmental and other permits for the Paredones Amarillos Project and timing
for starting and completion of drilling and testing programs at the Project,
anticipated timing of commencement of construction at the Project, future
business strategy, competitive strengths, goals, expansion and growth of our
business, legal proceedings, Vistas potential status as a producer, plans,
potential project development, estimated completion dates, estimated
exploration expenditures, operations, proven or probable reserves, mineralized
material, current working capital, cash operating costs, and other such
matters, as well as statements made concerning anticipated effects of the
transfer of our Nevada-based mining properties and related assets to Allied
Nevada and the Pescios transfer to Allied Nevada of their interests in certain
Nevada-based mining properties and related assets (see Consolidated Financial
Statements Note 3 and Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations in Part I above) are
forward-looking statements. The words estimate, plan, anticipate, expect,
intend, believe and similar expressions are intended to identify
forward-looking statements. These statements involve known and unknown risks,
uncertainties, assumptions and other factors which may cause our actual
results, performance or achievements, including anticipated consequences of the
Arrangement, to be materially different from any results, performance or
achievements expressed or implied by such forward-looking statements. These
factors include, among others, risks related to the Arrangement, including the
risk that we may be subject to U.S. federal corporate income tax and Canadian
income taxes in connection with our distribution of Allied Nevada shares to our
shareholders. These also include other risks such as our likely status as a passive
foreign investment company for U.S. federal tax purposes, and business risks
including risks relating to delays and incurrence of additional costs in
connection with the feasibility study underway at our Paredones Amarillos
Project, uncertainty of feasibility study results and estimates on which such
results are based; risks relating to delays in commencement and completion of
construction at the Paredones Amarillos Project; risks of shortages of
equipment or supplies; risks of inability to achieve anticipated production
volume or manage cost increases; the risk that our acquisition, exploration and
property advancement efforts will not be successful; risks relating to
fluctuations in the price of gold; the inherently hazardous nature of
mining-related activities; uncertainties concerning reserve and resource
estimates; potential effects on our operations of environmental regulations in
the countries in which we operate; intense competition in the mining industry;
risks due to legal proceedings; uncertainty of being able to raise capital on
favorable terms or at all; risks that some of our directors may have conflicts
of interest as a result of involvement with other natural resource companies;
possible challenges to title to our properties; and risks from political and
economic instability in the countries in which we operate, as well as those
factors discussed in our latest Annual Report on Form 10-K and other filings
with the SEC and Canadian Securities Commissions. For a more detailed
discussion of such risks and other important factors that could cause actual
results to differ materially from those in such forward-looking statements
please see Part II Item 1A. Risk Factors. Although we have attempted
to identify important factors that could cause actual results to differ
materially from those described in forward-looking statements, there may be
other factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that these statements will prove to be
accurate as actual results and future events could differ materially from those
anticipated in the statements. We assume no obligation to publicly update any
forward-looking statements, whether as a result of new information, future
events or otherwise.
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