UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
|
QUARTERLY REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the quarterly period ended March 31, 2008
|
|
|
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
|
(Registrants
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 the filing requirements
for the past 90 days:
Yes
x
No
o
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of large accelerated filer, accelerated filer, and
smaller reporting company in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer
o
|
|
Accelerated
filer
x
|
|
|
|
Non-accelerated
filer
o
|
|
Smaller
reporting company
o
|
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act):
Yes
o
No
x
Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of the latest
practicable date: 34,414,799
Common Shares,
without par value, outstanding at May 12, 2008
VISTA GOLD CORP.
(An Exploration Stage Enterprise)
FORM 10-Q
For the Quarter Ended March 31, 2008
INDEX
In this Report, unless otherwise indicated,
all dollar amounts are expressed in United States dollars.
PART I FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
VISTA GOLD
CORP. (An Exploration Stage Enterprise)
CONSOLIDATED
BALANCE SHEETS - UNAUDITED
|
|
March 31,
|
|
December 31,
|
|
(U.S. dollars in thousands)
|
|
2008
|
|
2007
|
|
Assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
28,689
|
|
$
|
16,686
|
|
Marketable securities - Note 4
|
|
9,057
|
|
10,882
|
|
Accounts receivable
|
|
96
|
|
91
|
|
Prepaids and other
|
|
245
|
|
289
|
|
Current assets
|
|
38,087
|
|
27,948
|
|
|
|
|
|
|
|
Mineral properties - Note 5
|
|
21,234
|
|
18,052
|
|
Plant and equipment - Note 6
|
|
16,736
|
|
467
|
|
Other long-term receivables
|
|
66
|
|
66
|
|
Assets held for sale - Note 3
|
|
4,813
|
|
4,813
|
|
|
|
42,849
|
|
23,398
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
80,936
|
|
$
|
51,346
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity:
|
|
|
|
|
|
Accounts payable
|
|
$
|
260
|
|
$
|
102
|
|
Accrued liabilities and other
|
|
749
|
|
562
|
|
Current liabilities
|
|
1,009
|
|
664
|
|
|
|
|
|
|
|
Convertible notes - Note 7
|
|
17,489
|
|
|
|
Liabilities held for sale - Note 3
|
|
30
|
|
30
|
|
Total liabilities
|
|
18,528
|
|
694
|
|
|
|
|
|
|
|
Capital stock, no par value: - Note 8
|
|
|
|
|
|
Common - unlimited shares authorized;
shares outstanding:
2008 - 34,414,799 and 2007 - 33,257,906
|
|
224,814
|
|
220,772
|
|
Warrants - Note 9
|
|
867
|
|
531
|
|
Options - Note 10
|
|
4,087
|
|
3,824
|
|
Contributed surplus
|
|
253
|
|
253
|
|
Equity component of convertible notes -
Note 7
|
|
10,779
|
|
|
|
Accumulated other comprehensive income -
Note 11
|
|
5,734
|
|
7,547
|
|
Deficit
|
|
(184,126
|
)
|
(182,275
|
)
|
Total shareholders equity
|
|
62,408
|
|
50,652
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
80,936
|
|
$
|
51,346
|
|
|
|
|
|
|
|
Subsequent events - Note 16
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
1
VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS-
UNAUDITED
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
during
|
|
|
|
Three Months Ended March 31,
|
|
Exploration
|
|
(U.S. dollars in thousands, except share data)
|
|
2008
|
|
2007
|
|
Stage
|
|
|
|
|
|
|
|
|
|
Income:
|
|
|
|
|
|
|
|
Interest income
|
|
109
|
|
416
|
|
2,128
|
|
Other income
|
|
24
|
|
142
|
|
1,015
|
|
Total other income
|
|
133
|
|
558
|
|
3,143
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
Exploration, property evaluation and
holding costs
|
|
$
|
(246
|
)
|
$
|
(226
|
)
|
$
|
(2,041
|
)
|
Corporate administration and investor
relations
|
|
(1,287
|
)
|
(718
|
)
|
(15,756
|
)
|
Costs of Arrangement
|
|
|
|
|
|
(2,901
|
)
|
Depreciation and amortization
|
|
(39
|
)
|
(26
|
)
|
(239
|
)
|
Loss on currency translation
|
|
(7
|
)
|
(4
|
)
|
(49
|
)
|
Interest expense
|
|
(184
|
)
|
|
|
(184
|
)
|
Other expense
|
|
|
|
|
|
(418
|
)
|
Total costs and expenses
|
|
(1,763
|
)
|
(974
|
)
|
(21,588
|
)
|
Loss from continuing operations
|
|
$
|
(1,630
|
)
|
$
|
(416
|
)
|
$
|
(18,445
|
)
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
$
|
(221
|
)
|
$
|
(360
|
)
|
$
|
(16,806
|
)
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
$
|
(1,851
|
)
|
$
|
(776
|
)
|
$
|
(35,251
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
Unrealized fair-value increase/(decrease)
of available-for-sale securities
|
|
(1,792
|
)
|
66
|
|
|
|
Realized gain on sale of available-for-sale
securities
|
|
(21
|
)
|
(215
|
)
|
|
|
|
|
(1,813
|
)
|
(149
|
)
|
|
|
Comprehensive loss
|
|
$
|
(3,664
|
)
|
$
|
(925
|
)
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
34,002,312
|
|
31,928,687
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share from
continuing operations
|
|
$
|
(0.05
|
)
|
$
|
(0.01
|
)
|
|
|
Basic and diluted loss per share
|
|
(0.05
|
)
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED STATEMENTS OF DEFICIT - UNAUDITED
|
|
Three Months Ended March 31,
|
|
(U.S. dollars in thousands)
|
|
2008
|
|
2007
|
|
Deficit, beginning of period
|
|
$
|
(182,275
|
)
|
$
|
(131,915
|
)
|
Net loss
|
|
(1,851
|
)
|
(776
|
)
|
Deficit, end of period
|
|
$
|
(184,126
|
)
|
$
|
(132,691
|
)
|
The accompanying notes are an integral part
of these consolidated financial statements.
2
VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
|
|
Three Months Ended March 31,
|
|
Cumulative
during
Exploration
|
|
(U.S. dollars in thousands)
|
|
2008
|
|
2007
|
|
Stage
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Loss for the period - continuing operations
|
|
$
|
(1,630
|
)
|
$
|
(416
|
)
|
$
|
(18,445
|
)
|
Adjustments to reconcile loss for the
period to cash used in operations:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
39
|
|
28
|
|
262
|
|
Stock-based compensation
|
|
296
|
|
134
|
|
4,589
|
|
Gain on disposal of marketable securities
|
|
(21
|
)
|
(202
|
)
|
(614
|
)
|
Accretion of convertible notes
|
|
81
|
|
|
|
81
|
|
Accrued interest
|
|
104
|
|
|
|
104
|
|
Other non-cash items
|
|
|
|
|
|
1,671
|
|
|
|
|
|
|
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(5
|
)
|
(347
|
)
|
(460
|
)
|
Prepaids and other
|
|
43
|
|
(142
|
)
|
(66
|
)
|
Accounts payable and accrued liabilities
and other
|
|
(114
|
)
|
306
|
|
(790
|
)
|
Net cash used in operating activities
|
|
(1,207
|
)
|
(639
|
)
|
(13,668
|
)
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Acquisition of marketable securities
|
|
(26
|
)
|
(84
|
)
|
(960
|
)
|
Proceeds from sale of marketable securities
|
|
58
|
|
218
|
|
1,042
|
|
Additions to mineral properties, net of
cost recoveries - Note 5
|
|
(1,385
|
)
|
(1,803
|
)
|
(13,272
|
)
|
Acquisition of mineral property
|
|
(452
|
)
|
|
|
(3,332
|
)
|
Additions to plant and equipment - Note 6
|
|
(16,308
|
)
|
(267
|
)
|
(16,979
|
)
|
Proceeds on disposal of plant and equipment
|
|
|
|
|
|
52
|
|
Cash transferred to Allied Nevada Gold
Corp., net of receivable
|
|
|
|
|
|
(24,517
|
)
|
Net cash used in investing activities
|
|
(18,113
|
)
|
(1,936
|
)
|
(57,966
|
)
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Net proceeds from equity financings - Note
8
|
|
|
|
|
|
54,409
|
|
Proceeds from exercise of warrants - Note 8
|
|
2,941
|
|
1,245
|
|
39,020
|
|
Proceeds from exercise of stock options -
Note 8
|
|
69
|
|
17
|
|
2,724
|
|
Issuance of convertible notes, net of
issuance costs - Note 7
|
|
28,534
|
|
|
|
28,534
|
|
Prepaid transaction costs
|
|
|
|
(278
|
)
|
(1,841
|
)
|
Net cash provided by financing activities
|
|
31,544
|
|
984
|
|
122,846
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash
equivalents - continuing operations
|
|
12,224
|
|
(1,591
|
)
|
51,212
|
|
Net decrease in cash and cash equivalents -
discontinued operations - Note 3
|
|
(221
|
)
|
(342
|
)
|
(23,197
|
)
|
Net increase/(decrease) in cash and cash
equivalents
|
|
12,003
|
|
(1,933
|
)
|
28,015
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of
period - continuing operations
|
|
16,686
|
|
48,698
|
|
674
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
28,689
|
|
$
|
46,765
|
|
$
|
28,689
|
|
Supplemental cash flow information - Note
13
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
3
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 March 31, 2008,
and
for
the three-month period ended March 31, 2008, 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 15, 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, 2007.
2.
Nature of operations and
changes in accounting policies
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.
In 2007, the Board of Directors and management decided to take on a new
direction regarding the Corporations more advanced projects. The Corporation plans to move forward our
more advanced projects 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.
Changes in accounting policies
Effective January 1, 2008, the Corporation adopted the following
standards updates by the Canadian Institute of Chartered Accountants (CICA). These new standards have been adopted on a
prospective basis with no restatement to prior period financial statements.
CICA Section 1535, Capital Disclosures requires the disclosure
of an entitys objectives, policies and processes for managing capital,
quantitative data about what the entity regards as capital and whether the
entity has complied with any capital requirements and, if it has not complied,
the consequences of such noncompliance.
The Corporations objective is to ensure the Corporations ability to
continue as a going concern, so that it can continue to provide returns for
shareholders.
The Corporation considers items included in its shareholders equity
and its convertible debt as capital. The
Corporation manages the capital structure and makes adjustments to it in the
light of changes in economic conditions and the risk characteristics of the
underlying assets. In order to maintain
or adjust the capital structure, the Corporation may issue new shares through
equity financings to reduce debt. The
Corporation is not subject to externally imposed capital requirements. See Notes 7, 8, 9 and 10.
CICA Section 1400, General Standards of Financial Statement
Presentation, was amended to include requirements to assess and disclose an
entitys ability to continue as a going concern. The new requirements are
4
effective for interim and annual financial statements relating to
fiscal years beginning on or after January 1, 2008. The adoption of this statement did not have
an impact on the consolidated financial statements.
CICA
Section 3862, Financial Instruments-Disclosures and Section 3863, Financial
Instruments-Presentations. These two standards replace Section 3861, Financial
Instruments-Disclosure and Presentation, revising disclosures related to
financial instruments and carry forward unchanged presentation
requirements. These standards increase
the disclosures currently required, which will enable users to evaluate the
significance of financial instruments for an entitys financial position and
performance, including disclosures about fair value. In addition, disclosure is required of
qualitative and quantitative information about exposure to risks arising from
financial instruments, including specified minimum disclosure about credit
risk, liquidity and market risk. The
quantitative disclosures must provide information about the extent to which the
entity is exposed to risk, based on information provided internally to the
entitys key management personnel.
Recent
accounting pronouncement not yet adopted
In
February 2008, the CICA issued Section 3064, Goodwill
and Intangible Assets, which replaces Section 3062, Goodwill
and Intangible Assets, and results in a withdrawal of CICA Section 3450,
Research and Development Costs, and amendments to Accounting Guideline
(AcG) 11, Enterprises in the Development Stage, and CICA Section 1000, Financial
Statement Concepts. The standard intends to reduce the differences with
International Financial Reporting Standards (IFRS) in the accounting for
intangible assets and results in closer alignment with U.S. GAAP. Under
current Canadian standards, more items are recognized as assets than under IFRS
or U.S. GAAP. The objectives of CICA Section 3064 are to reinforce
the principle-based approach to the recognition of assets only in accordance
with the definition of an asset and the criteria for asset recognition; and
clarify the application of the concept of matching revenues and expenses such
that the current practice of recognizing assets that do not meet the definition
and recognition criteria are eliminated. The standard will also provide
guidance for the recognition of internally developed intangible assets
(including research and development activities), ensuring consistent treatment
of all intangible assets, whether separately acquired or internally developed.
This standard will be effective for fiscal years beginning on or after October 1,
2008. The Corporation is currently evaluating the impact of adopting this
standard in 2009.
3.
Assets held for sale
On November 20,
2007, the Corporation announced that Luzon Minerals Ltd. (Luzon) had decided
not to exercise its option to acquire its interest in the Amayapampa project,
citing Luzons inability to advance the project with its current financial and
personnel resources. Upon termination of
this agreement, the Corporation became actively engaged in locating another
buyer for this project and accepted proposals from other interested companies. The Corporation has classified the Amayapampa
project as held for sale as a result of the above. Subsequent to March 31, 2008, the
Corporation announced that it had disposed of the Amayapampa project (see Note
16).
As of March 31,
2008, the Corporation held the following assets and liabilities relating to the
Amayapampa project for sale:
5
|
|
March 31,
|
|
December 31,
|
|
(U.S. dollars in thousands)
|
|
2008
|
|
2007
|
|
Assets:
|
|
|
|
|
|
Mineral properties
|
|
4,813
|
|
4,813
|
|
|
|
4,813
|
|
4,813
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
5
|
|
$
|
5
|
|
Current liabilities
|
|
$
|
5
|
|
$
|
5
|
|
|
|
|
|
|
|
Other long term liabilities
|
|
25
|
|
25
|
|
Total liabilities held for sale
|
|
$
|
30
|
|
$
|
30
|
|
|
|
|
|
|
|
Net assets held for sale
|
|
$
|
4,783
|
|
$
|
4,783
|
|
|
|
|
|
|
|
|
|
|
Since the
Amayapampa project is held for sale, the losses and cash flows associated with
the project have been classified separately as loss from discontinued
operations on the Consolidated Statement of Loss and as net decrease in cash
and cash equivalents on the Consolidated Statement of Cash Flows. Losses and cash flows from Amayapampa,
included in discontinued operations are as follows:
|
|
Three
Months Ended
|
|
|
|
March 31,
|
|
March 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
Exploration, property evaluation and
holding costs
|
|
$
|
(221
|
)
|
$
|
(50
|
)
|
|
|
|
|
|
|
Net loss from discontinued operations
|
|
$
|
(221
|
)
|
$
|
(50
|
)
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
March
31,
|
|
|
|
2008
|
|
2007
|
|
Operating activities
|
|
$
|
(221
|
)
|
$
|
(50
|
)
|
Net decrease in cash and cash equivalents
|
|
$
|
(221
|
)
|
$
|
(50
|
)
|
4.
Marketable securities
|
|
At March 31, 2008
|
|
At December 31, 2007
|
|
|
|
|
|
Unrealized
|
|
|
|
|
|
Unrealized
|
|
|
|
(U.S. dollars in thousands)
|
|
Cost
|
|
gain/(loss)
|
|
Fair value
|
|
Cost
|
|
gain/(loss)
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allied Nevada Gold Corp.
|
|
$
|
2,194
|
|
$
|
5,685
|
|
$
|
7,879
|
|
$
|
2,194
|
|
$
|
7,322
|
|
$
|
9,516
|
|
Esperanza Silver Corp.
|
|
10
|
|
113
|
|
123
|
|
10
|
|
134
|
|
144
|
|
Luzon Minerals
|
|
462
|
|
(322
|
)
|
140
|
|
462
|
|
(322
|
)
|
140
|
|
Nevgold Resources Corp.
|
|
164
|
|
(9
|
)
|
155
|
|
177
|
|
(4
|
)
|
173
|
|
Other
|
|
493
|
|
267
|
|
760
|
|
492
|
|
417
|
|
909
|
|
|
|
$
|
3,323
|
|
$
|
5,734
|
|
$
|
9,057
|
|
$
|
3,335
|
|
$
|
7,547
|
|
$
|
10,882
|
|
6
5.
Mineral properties
|
|
2007
|
|
2008
|
|
|
|
December 31,
|
|
Acquisition
|
|
Option
|
|
Exploration &
|
|
Capitalized
|
|
Year to date
|
|
March 31,
|
|
(U.S. dollars in thousands)
|
|
net balance
|
|
costs
|
|
payments
|
|
land costs
|
|
interest
|
|
activity
|
|
ending balance
|
|
Long Valley, United States
|
|
948
|
|
|
|
|
|
2
|
|
|
|
2
|
|
950
|
|
Yellow Pine, United States
|
|
739
|
|
|
|
|
|
4
|
|
|
|
4
|
|
743
|
|
Paredones Amarillos, Mexico
|
|
3,987
|
|
|
|
|
|
796
|
|
208
|
|
1,004
|
|
4,991
|
|
Guadalupe de los Reyes, Mexico
|
|
1,389
|
|
1,452
|
|
|
|
12
|
|
|
|
1,464
|
|
2,853
|
|
Awak Mas, Indonesia
|
|
3,269
|
|
|
|
|
|
98
|
|
|
|
98
|
|
3,367
|
|
Mt. Todd, Australia
|
|
7,330
|
|
|
|
|
|
569
|
|
|
|
569
|
|
7,899
|
|
Other
|
|
390
|
|
|
|
40
|
|
1
|
|
|
|
41
|
|
431
|
|
|
|
$
|
18,052
|
|
$
|
1,452
|
|
$
|
40
|
|
$
|
1,482
|
|
$
|
208
|
|
$
|
3,182
|
|
$
|
21,234
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On January 24, 2008, the Corporation completed
the acquisition of interests in various mineral properties adjacent to the
Corporations Guadalupe de los Reyes project in Mexico. The consideration paid by the Corporation for
the acquisition of these interests included cash payments totalling $452,000
and the issuance of a total of 213,503 Common Shares of the Corporation (with
an aggregate fair value of $1,000,000), to various parties.
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.
The Corporation believes that the fair value of its
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, such as the Corporations inability to
obtain all the necessary permits, 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
|
|
March 31, 2008
|
|
December 31, 2007
|
|
|
|
|
|
Depreciation and
|
|
|
|
|
|
Depreciation and
|
|
|
|
(U.S. dollars in thousands)
|
|
Cost
|
|
Write-downs
|
|
Net
|
|
Cost
|
|
Write-downs
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paredones Amarillos, Mexico
|
|
16,336
|
|
2
|
|
16,334
|
|
33
|
|
2
|
|
31
|
|
Awak Mas, Indonesia
|
|
98
|
|
49
|
|
49
|
|
98
|
|
43
|
|
55
|
|
Mt. Todd, Australia
|
|
420
|
|
102
|
|
318
|
|
397
|
|
54
|
|
343
|
|
Corporate, United States
|
|
176
|
|
141
|
|
35
|
|
455
|
|
417
|
|
38
|
|
|
|
$
|
17,030
|
|
$
|
294
|
|
$
|
16,736
|
|
$
|
983
|
|
$
|
516
|
|
$
|
467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On January
7, 2008, the Corporation entered into an agreement with A.M. King
Industries, Inc. (A.M. King) and Del Norte Company Ltd., a wholly owned
subsidiary of A.M. King, to purchase gold processing equipment to be used
at the Corporations Paredones Amarillos project. The aggregate purchase price was
approximately $16.0 million. The
purchase price includes the cost of relocating the equipment to Edmonton, Alberta,
Canada. From this point, the Corporation
is responsible for the reconditioning and transportation of the equipment to
Paredones Amarillos. The equipment
includes a 10,000 tonne per day semi-autogenous grinding mill, two ball mills,
gyratory crusher and a shorthead cone crusher, along with other related
components, spare parts and other process plant equipment. On April 17, 2008, the Corporation
announced that it had finalized the purchase of the gold processing equipment,
with the conclusion on that date of the transportation of the major equipment
items to the Corporations lay-down yard in Edmonton.
7
7.
Brokered
Private Placement of Convertible Notes
On
March 4, 2008, the Corporation completed a private placement in which the
Corporation issued and sold $30 million in aggregate principal amount of senior
secured convertible notes (the Notes)
The Notes were issued on March 4, 2008 and mature at face value on March 4,
2011 (the Maturity Date). The Notes
pay interest of 10% per annum. Interest is payable each year in two
installments on June 15 and December 15 and the principal is payable
on the Maturity Date.
The
Notes are convertible at the holders or issuers discretion in accordance with
the terms of the Notes. The holder can
convert all or part of the debt at any time prior to the maturity date or the
business day immediately preceding the Redemption Date at a price of $6.00 per
common share, subject to adjustment in certain circumstances. The Redemption Date represents the date that
the Notes will be redeemed in the event that the Corporation redeems the Notes.
The
Corporation can convert all, but not part, of the Notes after March 4,
2009 if the weighted-average price of the Corporations common shares as quoted
on the American Stock Exchange (AMEX) has been equal to or greater than $9.00
per share for 15 consecutive trading days.
The notice of conversion must occur within 10 days of any such 15-day
period and the share price must be equal to or greater than $9.00 on the date
the notice is delivered. The conversion
price is $6.00 per common share subject to adjustments in certain
circumstances.
The
conversion price will be adjusted on March 4, 2009, being the first
anniversary of the issuance of the Notes, to the lesser of the current
conversion price or 120% of the 20-day weighted average share price of the
common shares as quoted on AMEX. The
conversion price can also be adjusted in certain circumstances such as issuance
of warrants, additional common shares or distribution of assets. The conversion price shall not be adjusted
below $4.80 per share.
Simultaneous
with the issuance of the Notes, the Corporation issued to Casimir Capital LP 200,000
common share purchase warrants with an exercise price of $6.00 per warrant and
expiration date of March 4, 2011, as partial consideration for serving as
agent for the transaction (Note 9). The
Corporation also paid to Casimir Capital a cash fee of $1.2 million, being 4%
of the gross proceeds of the offering of the Notes. The warrants provide for cashless exercise if
the market price is above the exercise price.
In addition, the exercise price is subject to standard anti-dilution
adjustment provisions.
The Notes have been accounted for in accordance with EIC 164,
Convertible and other Debt Instruments with Embedded Derivatives. Under this statement, the fair value of the
conversion feature is recorded as equity.
The issuance date fair value of the conversion feature was estimated to
be $11.5 million and was classified as the equity component of convertible
notes. The residual balance of $18.5
million was recorded as the fair-value of the Corporations obligation to make
principal and interest payments and was classified as long-term debt. The issuance date fair value of the warrants
of $336,000 and legal fees and other expenses of $1.9 million related to the
issuance of these Notes have been allocated pro-rata between debt issuance
costs of $1,172,000 and equity issuance costs of $731,000. The transaction costs are added to the cost
of the convertible debt and presented as a reduction of the related debt and
equity portions. The issuance costs related
to the debt portion will be amortized over the term of the notes using the
effective interest rate method. The
Corporation will capitalize interest and accretion based on expenditures on
qualifying assets. As of March 31,
2008, the Corporation had qualifying expenditures of approximately $16.0
million related to the equipment purchase for the Paredones Amarillos project.
8
8.
Capital
stock
|
|
Number of
|
|
Capital stock
|
|
|
|
shares issued
|
|
($ 000's)
|
|
As of December 31, 2007
|
|
33,257,906
|
|
$
|
220,772
|
|
|
|
|
|
|
|
Warrants exercised from February 2006
private placement - Note 9
|
|
928,390
|
|
2,941
|
|
Shares issued for acquisition of gold
properties
|
|
213,503
|
|
1,000
|
|
Exercise of stock options, cash - Note 10
|
|
15,000
|
|
69
|
|
Exercise of stock options, fair value -
Note 10
|
|
|
|
32
|
|
|
|
|
|
|
|
Issued during the three months ended March
31, 2008
|
|
1,156,893
|
|
4,042
|
|
|
|
|
|
|
|
As of March 31, 2008
|
|
34,414,799
|
|
$
|
224,814
|
|
9.
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(3)
|
|
($000s)
|
|
exercised
|
|
expired
|
|
outstanding
|
|
(U.S. $ )
|
|
Expiry date
|
|
life (yrs)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2007
(1)
|
|
12,208,917
|
|
531
|
|
(11,193,666
|
)
|
(337,163
|
)
|
678,088
|
|
$6.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private placement February 2006
(1)
|
|
|
|
|
|
(494,683
|
)
|
|
|
(494,683
|
)
|
6.00
|
|
Feb-08
|
|
|
|
Convertible notes broker warrants
(2)
|
|
200,000
|
|
336
|
|
|
|
|
|
200,000
|
|
6.00
|
|
Mar-11
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2008
|
|
12,408,917
|
|
867
|
|
(11,688,349
|
)
|
(337,163
|
)
|
383,405
|
|
$5.74
|
|
|
|
|
|
(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) Each warrant entitles the
holder to purchase one common share.
(3) The value of all warrants issued in
conjunction with private placements is allocated to common stock upon exercise.
During the quarter ended March 31,
2008, all remaining warrants issued in conjunction with the February 2006
private placement were exercised prior to their expiry date of February 1,
2008. Upon exercise of these warrants,
holders received 1.894 Common Shares per warrant as adjusted in accordance with
the warrant terms pursuant to the Plan of Arrangement.
10.
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
Common Shares 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 is estimated at
the grant date using the Hull-White trinomial lattice option pricing
model. There were no options granted
during the period ended March 31, 2008.
A summary of option
activity under the Plan as of March 31, 2008, and changes during the
quarter then ended is set forth in the following table:
9
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Weighted-
|
|
Average
|
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
Number of
|
|
Exercise Price
|
|
Contractual
|
|
Intrinsic Value
|
|
|
|
Shares
|
|
($ USD)
|
|
Term
|
|
($000)
|
|
Outstanding - December 31, 2007
|
|
1,630,213
|
|
$
|
4.99
|
|
3.44
|
|
$
|
1,112
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
(15,000
|
)
|
4.58
|
|
|
|
|
|
Forfeited
|
|
(25,000
|
)
|
4.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - March 31, 2008
|
|
1,590,213
|
|
$
|
4.99
|
|
3.05
|
|
$
|
1,106
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable - March 31, 2008
|
|
1,096,241
|
|
$
|
4.74
|
|
3.44
|
|
$
|
978
|
|
A summary of the fair-value
changes included in options within Shareholders Equity as of March 31,
2008, and the quarter then ended is set forth in the following table:
|
|
Options
|
|
|
|
($000s)
|
|
As of December 31, 2007
|
|
$
|
3,824
|
|
|
|
|
|
Expensed
|
|
332
|
|
Exercised
|
|
(32
|
)
|
Forfeited
|
|
(37
|
)
|
|
|
|
|
As of March 31, 2008
|
|
$
|
4,087
|
|
The total number of
options outstanding at the end of the quarter is 1,590,213 with exercise prices
ranging from approximately $2.06 to $7.45 and remaining lives of 0.5 to 4.7
years. The total number of options
outstanding represents 4.6% of issued capital.
During the period ended March 31, 2008, 15,000 options were exercised
with an intrinsic value of $6,600.
During the same period in 2007,
4,000 options were exercised with an aggregate intrinsic value of $13,200.
A summary of the status of
the Corporations unvested stock options as of March 31, 2008, and changes
during the quarter then ended, is set forth below:
|
|
|
|
Weighted-
|
|
|
|
|
|
Average Grant
|
|
|
|
Number of
|
|
Date Fair
|
|
|
|
Shares
|
|
Value ($ USD)
|
|
Unvested - December 31, 2007
|
|
513,972
|
|
$
|
2.64
|
|
|
|
|
|
|
|
Forfeited
|
|
(20,000
|
)
|
2.13
|
|
|
|
|
|
|
|
Unvested - March 31, 2008
|
|
493,972
|
|
$
|
2.53
|
|
As of March 31, 2008,
there was $528,729 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 0.4
years.
10
11.
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, 2007
|
|
$
|
7,547
|
|
|
|
|
|
Decreases to fair market value during
period
|
|
(1,792
|
)
|
Decreases due to realization of gain
|
|
(21
|
)
|
|
|
|
|
As of March 31, 2008
|
|
$
|
5,734
|
|
12.
Financial
instruments
|
Financial assets and
financial liabilities are classified into one of five categories: held-to-maturity, available-for-sale,
held-for-trading, loans and receivables and other financial liabilities.
All financial instruments
classified as available-for-sale or held-for-trading are subsequently measured
at fair value. Changes in the fair value
of financial instruments designated as held-for-trading are charged or credited
to the statement of loss for the relevant period, while changes in the fair
value of financial instruments designated as available-for-sale, excluding
impairments, are charged or credited to other comprehensive income until the
instrument is realized. All other
financial assets and liabilities are accounted for at cost or at amortized cost
depending upon the nature of the instrument.
After their initial fair value measurement, they are measured at
amortized cost using the effective interest rate method.
Financial Assets
The carrying amounts and
fair values of financial assets are as follows:
|
|
|
|
March 31, 2008
|
|
December 31, 2007
|
|
|
|
Category
|
|
Estimated
Fair Value
|
|
Carrying
Value
|
|
Estimated
Fair Value
|
|
Carrying
Value
|
|
Cash and
cash equivalents (1)
|
|
Held-for-trading
|
|
$
|
28,689
|
|
$
|
28,689
|
|
$
|
16,686
|
|
$
|
16,686
|
|
Accounts
receivable (1)
|
|
Loans and receivables
|
|
96
|
|
96
|
|
91
|
|
91
|
|
Marketable
securities (2)
|
|
Available-for-sale
|
|
9,057
|
|
9,057
|
|
10,882
|
|
10,882
|
|
Total
financial assets
|
|
|
|
$
|
37,842
|
|
$
|
37,842
|
|
$
|
27,659
|
|
$
|
27,659
|
|
(1)
|
Carrying amount is a reasonable
approximation of fair value.
|
|
|
(2)
|
The fair value represents quoted market
prices in an active market.
|
11
Financial liabilities
The carrying amounts and
fair values of financial liabilities are as follows:
|
|
|
|
March 31, 2008
|
|
December 31, 2007
|
|
|
|
Category
|
|
Estimated
Fair Value
|
|
Carrying
Value
|
|
Estimated
Fair Value
|
|
Carrying
Value
|
|
Accounts payable and
accrued liabilities (1)
|
|
Other financial liabilities
|
|
$
|
1,009
|
|
$
|
1,009
|
|
$
|
664
|
|
$
|
664
|
|
Convertible
notes (2)
|
|
Other financial liabilities
|
|
30,000
|
|
17,489
|
|
|
|
|
|
Total
financial assets
|
|
|
|
$
|
31,009
|
|
$
|
18,498
|
|
$
|
664
|
|
$
|
664
|
|
(1)
Carrying amount is a reasonable approximation
of fair value.
(2)
The carrying value
of the convertible note is being accreted to its maturity value over its
expected life using the effective interest rate method.
Financial instrument risk exposure
and risk management
The Corporation is exposed
in varying degrees to a variety of financial instrument related risks. Management approves and monitors the risk
management processes. The types of risk
exposure and the way in which such exposure is managed is provided as follows:
Credit risk
The Corporations credit
risk is primarily attributable to its cash and cash equivalents. The Corporation maintains its cash and cash
equivalents in order to limit its exposure to credit risk. The Corporation does not have any financial
assets that are invested in asset-backed commercial paper.
Liquidity risk
The Corporation ensures
that there is sufficient capital in order to meet short term business
requirements, after taking into account the Corporations holdings of cash and
cash equivalents and cash flows from financing activities. The Corporation believes that these sources
will be sufficient to cover the likely short and long term cash requirements. The Corporations cash and cash equivalents
are held in interest bearing liquid savings accounts.
Market risk
The significant market risk
exposure to which the Corporation is exposed is interest rate risk. The Corporations policy is to invest cash at
floating rates of interest in highly liquid cash savings accounts in order to
maintain liquidity. Fluctuations in
interest therefore impact on the value of cash equivalents and short term
investments. With respect to financial
liabilities, the convertible notes are not subject to interest rate risk
because they bear interest at a fixed rate and are not subject to fluctuations
in interest.
12
13.
Supplemental cash
flow information
Significant non-cash transactions during the three
months ended March 31, 2008 included the Corporations issuance of 213,503
common shares as partial compensation for the acquisition of interests in
various mineral properties adjacent to the Corporations Guadalupe de los Reyes
project in Mexico (Note 5) as well as the issuance of 200,000 common share
purchase warrants to Casimir Capital LP as partial compensation for serving as
agent for the Corporations private placement of convertible notes (Note
7). There were no significant non-cash
transactions during the same period in 2007.
14.
Geographic and
segment information
The
Corporation evaluates, acquires and explores gold exploration and potential
development projects. These activities
are focused principally in South America, Australia, North America and
Indonesia. The Corporation reported no revenues in the three-month period ended
March 31, 2008, or for the same period in 2007. Geographic segmentation of mineral properties
and plant and equipment is provided in Notes 5 and 6.
15.
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 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 a 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 did not record any compensation cost on the granting of stock
options to employees and directors as the exercise price was equal to or
greater than the market price at the date of grants for U.S. GAAP purposes
under APB Opinion No. 25. SFAS No. 123R
essentially aligns U.S. GAAP with Canadian GAAP for accounting for stock-based
compensation.
(e)
In accordance with U.S. GAAP, the entire
amount of convertible debt is classified as a liability and recorded at fair
value on the date of issuance. Under
Canadian GAAP, the fair value of the conversion feature of convertible debt is
classified as equity and the residual balance is classified as a
liability. The liability portion is
accreted each period in amounts which will increase the liability to its full
face amount of the convertible instrument as of the maturity date. In accordance with SFAS No. 34,
the Corporation capitalizes interest based on the pro rata amount of qualifying
expenditures, with the remaining amount recorded as interest expense.
The
significant differences in the consolidated statements of loss relative to U.S.
GAAP were:
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
during
|
|
|
|
Three Months Ended March 31,
|
|
Exploration
|
|
(U.S. dollars in thousands, except share data)
|
|
2008
|
|
2007
|
|
Stage
|
|
Net loss Canadian GAAP
|
|
$
|
(1,851
|
)
|
$
|
(776
|
)
|
$
|
(35,251
|
)
|
Exploration, property evaluation and
holding costs - continuing
|
|
|
|
|
|
|
|
operations
(a)
|
|
(1,482
|
)
|
(1,553
|
)
|
(6,262
|
)
|
Exploration, property evaluation and
holding costs - discontinued
|
|
|
|
|
|
|
|
operations (a)
|
|
|
|
(4
|
)
|
4,016
|
|
Financing costs
|
|
|
|
|
|
(222
|
)
|
Stock-based compensation expense
(d)
|
|
|
|
|
|
2,251
|
|
Beneficial conversion feature
|
|
|
|
|
|
(2,774
|
)
|
Net loss U.S. GAAP
|
|
(3,333
|
)
|
(2,333
|
)
|
(38,242
|
)
|
Unrealized gain/(loss) on marketable
securities
(b)
|
|
(1,813
|
)
|
(149
|
)
|
(1,851
|
)
|
Comprehensive loss U.S. GAAP
|
|
$
|
(5,146
|
)
|
$
|
(2,482
|
)
|
$
|
(40,093
|
)
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share U.S.
GAAP
|
|
$
|
(0.10
|
)
|
$
|
(0.07
|
)
|
|
|
14
The
significant differences in the consolidated statements of cash flows relative
to U.S. GAAP were:
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
|
|
Three Months Ended March 31,
|
|
Cumulative
during
Exploration
|
|
(U.S. dollars in thousands)
|
|
2008
|
|
2007
|
|
Stage
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities,
Canadian GAAP
|
|
$
|
(1,207
|
)
|
$
|
(639
|
)
|
$
|
(13,668
|
)
|
Additions to mineral properties, net (a)
|
|
(1,347
|
)
|
(1,557
|
)
|
(7,860
|
)
|
Cash flows from operating activities, U.S.
GAAP
|
|
(2,554
|
)
|
(2,196
|
)
|
(21,528
|
)
|
|
|
|
|
|
|
|
|
Cash flows from investing activities,
Canadian GAAP
|
|
(18,113
|
)
|
(1,936
|
)
|
(57,966
|
)
|
Additions to mineral properties, net (a)
|
|
1,347
|
|
1,557
|
|
7,860
|
|
Cash flows from investing activities, U.S.
GAAP
|
|
(16,766
|
)
|
(379
|
)
|
(50,106
|
)
|
|
|
|
|
|
|
|
|
Cash flows from financing activities,
Canadian GAAP
|
|
31,544
|
|
984
|
|
122,846
|
|
Cash flows from financing activities, U.S.
GAAP
|
|
31,544
|
|
984
|
|
122,846
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash
equivalents - continuing operations
|
|
12,224
|
|
(1,591
|
)
|
51,212
|
|
Net increase/(decrease) in cash and cash
equivalents - discontinued operations
|
|
(221
|
)
|
(342
|
)
|
(23,197
|
)
|
Net increase/(decrease) in cash and cash
equivalents
|
|
12,003
|
|
(1,933
|
)
|
28,015
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of
period
|
|
16,686
|
|
48,698
|
|
674
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
28,689
|
|
$
|
46,765
|
|
$
|
28,689
|
|
15
The significant differences in the consolidated balance sheets as at March 31,
2008, and December 31, 2007, relative to U.S. GAAP were:
CONSOLIDATED BALANCE SHEETS - UNAUDITED
|
|
March 31, 2008
|
|
December 31, 2007
|
|
(U.S. $ 000s)
|
|
Per Cdn.
GAAP
|
|
Cdn./U.S.
Adj.
|
|
Per U.S.
GAAP
|
|
Per Cdn.
GAAP
|
|
Cdn./U.S.
Adj.
|
|
Per U.S.
GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets (b)
|
|
$
|
38,087
|
|
|
|
$
|
38,087
|
|
$
|
27,948
|
|
$
|
|
|
$
|
27,948
|
|
Property, plant and equipment (a)
|
|
37,970
|
|
(12,821
|
)
|
25,149
|
|
18,519
|
|
(11,339
|
)
|
7,180
|
|
Other assets
|
|
66
|
|
|
|
66
|
|
66
|
|
|
|
66
|
|
Assets held for sale
|
|
4,813
|
|
(2,124
|
)
|
2,689
|
|
4,813
|
|
(2,124
|
)
|
2,689
|
|
Total assets
|
|
$
|
80,936
|
|
$
|
(14,945
|
)
|
$
|
65,991
|
|
$
|
51,346
|
|
$
|
(13,463
|
)
|
$
|
37,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
1,009
|
|
|
|
1,009
|
|
664
|
|
|
|
664
|
|
Convertible notes (e)
|
|
17,489
|
|
10,779
|
|
28,268
|
|
|
|
|
|
|
|
Liabilities held for sale
|
|
30
|
|
|
|
30
|
|
30
|
|
|
|
30
|
|
Total liabilities
|
|
18,528
|
|
10,779
|
|
29,307
|
|
694
|
|
|
|
694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock (c,d)
|
|
224,814
|
|
75,364
|
|
300,178
|
|
220,772
|
|
75,364
|
|
296,136
|
|
Special warrants
|
|
|
|
222
|
|
222
|
|
|
|
222
|
|
222
|
|
Warrants and options (d)
|
|
4,954
|
|
(647
|
)
|
4,307
|
|
4,355
|
|
(647
|
)
|
3,708
|
|
Contributed surplus (c,d)
|
|
253
|
|
5,526
|
|
5,779
|
|
253
|
|
5,526
|
|
5,779
|
|
Equity component of convertible notes (e)
|
|
10,779
|
|
(10,779
|
)
|
|
|
|
|
|
|
|
|
Other comprehensive income (b)
|
|
5,734
|
|
90
|
|
5,824
|
|
7,547
|
|
90
|
|
7,637
|
|
Deficit (a,b,c,d)
|
|
(184,126
|
)
|
(95,500
|
)
|
(279,626
|
)
|
(182,275
|
)
|
(94,018
|
)
|
(276,293
|
)
|
Total shareholders' equity
|
|
62,408
|
|
(25,724
|
)
|
36,684
|
|
50,652
|
|
(13,463
|
)
|
37,189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities & shareholders'
equity
|
|
$
|
80,936
|
|
$
|
(14,945
|
)
|
$
|
65,991
|
|
$
|
51,346
|
|
$
|
(13,463
|
)
|
$
|
37,883
|
|
In March 2008, the
Financial Accounting Standards Board (FASB) issued Statement No. 161, Disclosures about Derivative Instruments and
Hedging Activities
.
The
new standard is intended to improve financial reporting about derivative
instruments and hedging activities by requiring enhanced disclosures to enable
investors to better understand their effects on an entitys financial position,
financial performance, and cash flows. It is effective for financial statements
issued for fiscal years and interim periods beginning after November 15,
2008, with early application encouraged. The Corporation is currently
evaluating the impact of this standard on the financial statements.
In February 2007, the
FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities - Including an Amendment of FASB Statement No. 115.
SFAS No. 159 provides companies with an option to measure, at specified
election dates, financial instruments and certain other items at fair value
that are not currently measured at fair value.
For those items for which the fair value option is elected, unrealized
gains and losses will be recognized in earnings for each subsequent reporting
period. SFAS No. 159 also establishes presentation and disclosure
requirements designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and liabilities.
This Statement is effective for years beginning after November 15, 2007. The
adoption of this statement did not have an impact on the consolidated financial
statements.
In December 2007, the
FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141(R)).
SFAS No. 141(R) establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any non-controlling interest in the
acquiree and the goodwill acquired. SFAS No. 141(R) also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. SFAS No. 141(R) is effective for
fiscal years beginning after December 15, 2008. The Corporation is
currently evaluating the potential impact, if any, of the adoption of SFAS No. 141(R) on
its consolidated statements of loss and financial condition.
16
In December 2007, the
FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statementsan amendment of Accounting Research Bulletin No. 51.
SFAS No. 160 establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parents ownership interest, and the valuation of
retained noncontrolling equity investments when a subsidiary is deconsolidated.
SFAS No. 160 also establishes disclosure requirements that clearly
identify and distinguish between the interests of the parent and the interests
of the noncontrolling owners. SFAS No. 160 is effective for fiscal years beginning
after December 15, 2008. The
Corporation is currently evaluating the potential impact, if any, of the
adoption of SFAS No. 160 on its consolidated statements of loss and
financial condition.
16.
Subsequent events
Disposal
of
Amayapampa project
On April 7, 2008, the Corporation announced an
agreement to dispose of its wholly-owned subsidiary Vista Gold (Antigua) Corp.
(Vista Gold Antigua) to Republic Gold Limited (Republic). Vista Gold
Antigua indirectly held the Corporations interest in the Amayapampa gold
project in Bolivia. Under the terms of the transaction, Republic has agreed to
pay the Corporation $3.0 million in three payments of $1.0 million. The first
of these payments is due and payable upon the start of commercial production (as
defined in the purchase and sale agreement) at Amayapampa followed by $1.0
million payments on each of the first and second anniversaries of the start of
commercial production. In addition,
Republic has agreed to pay the Corporation a net smelter return royalty (NSR)
on the gold produced by or on behalf of Republic from the Amayapampa project in
varying percentages depending on the price of gold per ounce. When gold is
between $500.01 and $650.00 per ounce, a 2% NSR is payable, when the price of
gold is between $650.01 and $750.00 per ounce, a 3% NSR is payable, and when
the price of gold is $750.01 per ounce and above, the NSR will be 3.5%. The NSR
is capped at 720,000 gold equivalent ounces and no NSR payments are due to the
Corporation if the gold price is below $500 per ounce. The Corporation will
retain a first right of refusal in the event Republic decides to sell the
property and will also retain a right to re-acquire the property if Republic or
Vista Gold Antigua have not moved to close a financing under a project
financing facility within five years.
Under the terms of the transaction, the Corporation agreed to lend
$350,000 to Republic for ongoing expenses on the Amayapampa gold project. The loan was completed on April 7,
2008. Interest on the loan accrues and
is payable at the rate of 10% per annum, payable monthly. The principal is due on or before the earlier
of (a) September 30, 2008, (b) the date that a bankable
feasibility study is completed with respect to the Amayapampa gold project or (c) such
earlier date in the event the Corporation makes demand for full payment upon
occurrence of an event of default.
Prime Corporate Finance Pty Limited of West Perth,
Australia (PCF) served as corporate advisor to the Corporation in connection
with the above agreement. In
compensation for the advisory services provided by PCF, the Corporation had
agreed to pay PCF a success fee of 5% of the face value of any transaction
completed with a party introduced by PCF.
Republic was introduced to the Corporation by PCF. On April 8, 2008, the Corporation and
PCF agreed that the success fee payable to PCF was $165,000, such amount being
equal to Cdn. $166,815. In addition, on April 8,
2008, PCF and the Corporation agreed that the success fee would be payable in
Shares of the Corporation. Based on the
market price of the Corporations Shares at the close of business on April 7,
2008 of Cdn. $4.47, 37,318 Shares of the Corporation are issuable to PCF. Completion of this issuance is subject to
receipt of regulatory approvals and is anticipated to occur in May 2008.
Permit status for the
Paredones Amarillos project
On
April 30, 2008, the Corporation announced that it had received correspondence
from the local La Paz office of the Mexican Environmental and Natural Resource
Service (SEMARNAT) which indicates that staff in that office are of the opinion
that the Change of Land Use Permit approved by SEMARNAT in 1997 in relation to
the Paredones Amarillos project is no longer valid. This permit is necessary for the development
of the Paredones Amarillos project to proceed. The Corporation has been advised
by its advisors that the permit remains valid and is investigating the basis
for the staffs position, and intends to take immediate steps to confirm the
validity of the permit and if necessary, to address any issues identified by
SEMARNAT. The Corporations management believes that any related issues will be
resolved without any significant delay to the expected timing for completion of
the definitive (bankable) feasibility study or the proposed timetable for
development of the Paredones Amarillos project but will provide further
information as soon as it is in a position to do so.
Updated
status of permit for the Paredones Amarillos project
On May 8, 2008, the
Corporation announced that its advisors and counsel in Mexico have confirmed
their view that the Change of Land Use Permit for the Paredones Amarillos
Project remains valid. The Corporation
is currently evaluating the options for validation of the permit, which include
initiating legal or administrative action seeking the annulment of the opinion
rendered by the La Paz office of the Mexican Environmental and Natural Resource
Service (SEMARNAT). Management has held
meetings with senior government officials in Baja California Sur and will be
meeting with senior government officials in Mexico City in the coming weeks to
confirm the status of the permit. The
Corporations management believes that any related issues will be resolved
without any significant delay to the expected timing for completion of the
definitive (bankable) feasibility study or the proposed timetable for the
development of the Paredones Amarillos Project, but will provide further
information as soon as the Corporation is in a position to do so.
17
ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. dollars in thousands, unless specified
otherwise)
Managements
Discussion and Analysis (MD&A) of the consolidated operating results and
financial condition of Vista Gold Corp. for the three months ended March 31,
2008 has been prepared based on information available to us as of May 12,
2008. MD&A should be read in
conjunction with the consolidated financial statements of the Corporation for
the three years ended December 31, 2007 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 in thousands, except loss per share,
unless otherwise noted.
Results from Operations
Our
consolidated net loss for the three-month period ended March 31, 2008, was
$1,851 or $0.05 per share compared to a consolidated net loss of $776 or $0.02
per share for the same period in 2007. The
increase in the consolidated net loss of $1,075 from the prior year is largely
due to an increase in corporate administration and investor relations costs of
$569, an increase in interest expense of $184 and a decrease in interest income
of $307.
Exploration, property and holding
costs
Exploration,
property and holding costs were $246 for the three-month period ended March 31,
2008, approximately level with $226 for the same period in 2007. There were no significant variances during
the three month period as Vista continues to move our projects towards
development decisions.
Corporate administration and
investor relations
Corporate administration and
investor relations costs increased to $1,287 during the three-month period
ended March 31, 2008, compared to $718 for the same period in 2007. The increase of $569 is primarily due to an
increase in stock-based compensation expense of $203 compared to the prior
period. This is due to an increase in
the number of options granted during the prior year and vesting over time as
compared to the prior period. Also
contributing to the increase was the elimination of $270 in the allocation of
certain corporate overhead expenses to Allied Nevada Gold Corp. (Allied Nevada)
following completion of the Plan of Arrangement. Until May 10,
2007, Allied Nevada had been a wholly-owned subsidiary of Vista. Since the completion on that date of the Plan
of Arrangement that resulted in, among other things, the formation of Allied
Nevada as a newly independent entity, Vista no longer allocated overhead
expenses to Allied Nevada.
Depreciation and amortization
Depreciation and
amortization expense increased to $39 during the three-month period ended March 31,
2008, compared to $26 for the same period in 2007. The increase of $13 is mostly due to capital
expenditures at the Mt. Todd gold project during 2007 that have begun to be
depreciated.
Other income and expense
Gain on disposal of
marketable securities
For the three-month period
ended March 31, 2008, we realized a gain of $21 on the disposal of
marketable securities, compared to $140 ($202 prior to the allocation to Allied
Nevada) for the same period in 2007. The
gain resulted from the sale of securities that had a book value of $37 for the
period ended March 31, 2008 and $16 for the same period in 2007.
18
At
March 31, 2008, we held marketable securities available for sale with a
quoted market value of $9,057. 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 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 March 31, 2008,
also included in marketable securities were 1,529,848 shares of Allied
Nevada at a quoted market value of $7,879. We continue to hold these shares of
Allied Nevada, which we retained as part of the closing of the Plan of Arrangement
to facilitate payment of any taxes payable by Vista as a result of the Plan of
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.
On
November 15, 2007, the SEC adopted proposed revisions to Rule 144,
the most commonly available exemption for resales. Among other things, these revisions shortened
the one-year holding period under Rule 144 to six months as to
restricted securities issued by companies that are subject to the reporting
requirements of the Exchange Act, such as Allied Nevada. The revisions to Rule 144
became effective on February 15, 2008. Since we acquired our Allied Nevada
shares in May 2007, we have met the required six-month holding period and
can commence resales in reliance on the Rule 144 exemption. 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 March 31, 2008 we realized $109 in interest income as compared to
$416 for the same period in 2007. The
decrease of $307 is primarily attributable to a decrease in interest earned on
our liquid savings accounts as compared to the same period in 2007. This decrease is the result of a decrease in
our cash balances in these accounts as compared to the prior period. This decrease in cash balance is mostly the
result of the transfer of $25,000 to Allied Nevada upon completion of the Plan
of Arrangement less $483 in loans repaid to us by Allied
Nevada
.
Interest
expense
During the three months ended March 31, 2008, interest expense was
$184. Of this amount, $80 is
attributable to the accretion of the debt discount and $104 is attributable to
interest accrued at March 31, 2008 to be paid on June 15, 2008. These amounts are approximately 47% of the
full interest expense associated with the issuance of the Notes (as defined
below). We are able to capitalize the
remaining 53% as additions to mineral properties in accordance with SFAS No. 34.
Financial Position,
Liquidity and Capital Resources
Cash used in operations
Net cash used in operating
activities was $1,207 for the three-month period ended March 31, 2008, compared
to $639 for the same period in 2007. The
increase of $568 is the result of an increase in our net loss of $1,214, which
is offset by a decrease in cash used for accounts receivable of $342 and a
decrease in cash used for prepaids and other of $185.
Investing activities
Net cash used in investing activities increased to
$18,113 for the three-month period ended March 31, 2008, from $1,936 for
the same period in 2007. The increase of
$16,177 is mostly the result of an increase in the additions to plant and
equipment of $16,041. On March 4,
2008, with the completion of a brokered private placement of $30,000 principal
amount of convertible notes (see Financing activities below) we used $16,000
of the proceeds towards the purchase of gold processing equipment to be used at
our Paredones Amarillos project. The
aggregate purchase price was approximately $16,000, which included the costs of
relocating the equipment to Edmonton, Alberta, Canada. The purchase was finalized in April 2008
with the completion of the relocation of the major equipment components to
Edmonton. There were no similar
purchases during the 2007 period.
Financing activities
Net cash provided by
financing activities increased to $31,544 for the three-month period ended March 31,
2008, from $984 for the same period in 2007.
This increase is primarily the result of the completion of a brokered
private placement on March 4, 2008 in which we offered and sold $30,000 in
aggregate principal
19
amount of senior secured
convertible notes (see Consolidated Financial Statements Note 7). Proceeds to Vista after legal and other fees
were $28,534. There were no similar
transactions during the 2007 period.
Warrants exercised during
the period ended March 31, 2008 produced cash proceeds of $2,941 as
compared to $1,245 for the same period in 2007.
Stock option exercises
produced cash of $69 during the period ended March 31, 2008 as compared to
$17 for the same period in 2007.
Liquidity and Capital Resources
At
March 31, 2008, our total assets were $80,936 compared to $51,346 at December 31,
2007, representing an increase of $29,590.
At March 31, 2008, we had working capital of $37,078 compared to
$27,284 at December 31, 2007, representing an increase of $9,794. This increase relates to below an increase in
cash balances from year end as a result of the completion of the brokered private
placement as discussed below.
The
principal component of working capital at both March 31, 2008 and December 31,
2007, is cash and cash equivalents of $28,689 and $16,686, respectively. Other components include marketable
securities (March 31, 2008 $9,057; December 31, 2007 $10,882) and
other liquid assets (March 31, 2008 - $341; December 31, 2007 - $380).
On
March 4, 2008, we completed a private placement in which we issued and
sold $30 million in aggregate principal amount of senior secured convertible
notes (the Notes) The Notes mature at
face value on March 4, 2011 (the Maturity Date). The Notes pay interest of 10% per annum.
Interest is payable each year in two installments on June 15 and December 15
and the principal is payable on the Maturity Date.
The
Notes are convertible at the holders or issuers discretion in accordance with
the terms of the Notes. The holder can
convert all or part of the debt at any time prior to the Maturity Date or the
business day immediately preceding the Redemption Date at a price of $6.00 per
common share, subject to adjustment in certain circumstances. The Redemption Date represents the date that
the Notes will be redeemed in the event that we redeem the Notes.
We
can convert all, but not part, of the Notes after March 4, 2009 if the
weighted-average price of our shares as quoted on the American Stock Exchange
(AMEX) has been equal to or greater than $9.00 per share for 15 consecutive
trading days. The notice of conversion
must occur within 10 days of any such 15-day period and the share price must be
equal to or greater than $9.00 on the date the notice is delivered. The conversion price is $6.00 per common
share subject to adjustment in certain circumstances.
The
conversion price will be adjusted on March 4, 2009, being the first
anniversary of the issuance of the Notes, to the lesser of the current conversion
price or 120% of the 20-day weighted average price of the common shares as
quoted on AMEX. The conversion price
will also be adjusted in certain circumstances such as issuance of warrants,
additional common shares or distribution of assets. The conversion price shall not be adjusted
below $4.80 per share.
We
used approximately $16,000 of the proceeds
for advance payments towards
the purchase of gold processing equipment to be used at our Paredones Amarillos
project. The remaining balance of the
funds raised from the private placement must be used for costs associated with
the Paredones Amarillos project.
Off-Balance Sheet Arrangements
We
have no off-balance sheet arrangements required to be disclosed in this
Quarterly Report on Form 10-Q.
Other
Updated capital and operating cost
estimates for the Paredones Amarillos project
On
February 13, 2008, we announced updated capital and operating cost
estimates for the Paredones Amarillos project. The updated estimates assume an
open pit mine and whole-ore leach processing with estimated metallurgical
recovery of 91.5% to produce an average annual gold production of
117,000 ounces of gold per year over its 12.4-year life. The preproduction
capital and preproduction development costs for the project using
20
the
whole-ore leach process are estimated to be approximately $169.1 million
and the operating costs are estimated to be approximately $12.53 per tonne of
ore processed, which represents an increase in the amounts previously disclosed
in our press release dated June 21, 2007. Work on the project is still
ongoing and as a result, the estimated preproduction and estimated operating
costs may change as further work is conducted.
Updated gold resource estimate for
the Mt. Todd gold project
On
February 27, 2008, we announced that an updated gold resource estimate for
the Batman deposit at the Mt. Todd Gold Project in Northern Territory,
Australia had been completed on February 26, 2008, by Tetra Tech, Inc.
of Golden, Colorado. This updated estimate was completed under the direction of
Mr. John Rozelle, P.G., an independent Qualified Person, as defined in
Canadian National Instrument 43-101 (43-101), utilizing standard
industry software and estimation methodology. Results of prior drilling plus
the additional drilling we completed in 2007 were included in the estimate.
Pursuant
to 43-101, this new resource estimate, reported at a cutoff grade of 0.015 gold
ounces per ton, includes measured and indicated resources of 98.4 million tons
of gold, at an average grade of 0.029 ounces per ton, which represents an
increase of 65% over the prior amount.
Gold Resource Estimate
Resource
Classification(1)
|
|
Short Tons
|
|
Average Grade
|
|
|
|
(x1000)
|
|
(ounces/ton)
|
|
Measured(2)
|
|
47,987
|
|
0.028
|
|
Indicated(2)
|
|
50,425
|
|
0.031
|
|
Measured and Indicated(2)
|
|
98,413
|
|
0.029
|
|
Resource
Classification(1)
|
|
Short Tons
|
|
Average Grade
|
|
|
|
(x1000)
|
|
(ounces/ton)
|
|
Inferred(3)
|
|
64,832
|
|
0.024
|
|
See
footnotes appearing on page 22.
Additional
core drilling is planned for 2008 to continue to upgrade estimates of resources
and to expand the resources, if possible.
For further information on this updated resource estimate, see our press
release dated February 27, 2008.
Subsequent Events
Disposal of Amayapampa project
On April 7, 2008, we announced an agreement to
dispose of our wholly-owned subsidiary Vista Gold (Antigua) Corp. (Vista Gold
Antigua) to Republic Gold Limited (Republic). Vista Gold Antigua indirectly
held our interest in the Amayapampa gold project in Bolivia. Under the terms of
the transaction, Republic has agreed to pay Vista $3.0 million in three
payments of $1.0 million. The first of these payments is due and payable upon
the start of commercial production (as defined in the purchase and sale
agreement) at Amayapampa followed by $1.0 million payments on each of the first
and second anniversaries of the start of commercial production. In addition, Republic has agreed to pay Vista
a net smelter return royalty (NSR) on the gold produced by or on behalf of
Republic from the Amayapampa project in varying percentages depending on the
price of gold per ounce. When gold is between $500.01 and $650.00 per ounce, a
2% NSR is payable, when the price of gold is between $650.01 and $750.00 per
ounce, a 3% NSR is payable, and when the price of gold is $750.01 per ounce and
above, the NSR will be 3.5%. The NSR is capped at 720,000 gold equivalent
ounces and no NSR payments are due to Vista if the gold price is below $500 per
ounce. Vista will retain a first right of refusal in the event Republic decides
to sell the property and will also retain a right to re-acquire the property if
Republic or Vista Gold Antigua have not moved to close a financing under a
project financing facility within five years.
Under the terms of the transaction, Vista agreed to lend $350 to
Republic for ongoing expenses on the Amayapampa gold project. The loan was completed on April 7,
2008. Interest on the loan accrues and
is payable at the rate of 10% per annum, payable monthly. The principal is due on or before the earlier
of (a) September 30, 2008, (b) the date that a bankable
feasibility study is completed with respect to the Amayapampa gold project or (c) such
earlier date in the event Vista makes demand for full payment upon the
occurrence of an event of default.
Prime Corporate Finance Pty Limited of West Perth,
Australia (PCF) served as corporate advisor to Vista in connection with the above
agreement. In compensation for the
advisory services provided by PCF, Vista had agreed to pay PCF a success fee of
5% of the face value of any transaction completed with a party introduced by
PCF. Republic was introduced to Vista by
PCF. On April 8, 2008, Vista and
PCF agreed that the success fee payable to PCF was $165, such amount being
equal to Cdn. $166.8. In addition, on April 8,
2008, PCF and Vista agreed that the success fee would be payable in Common
Shares of Vista. Based on the market
price of Vistas Shares at the close of business on April 7, 2008 of Cdn.
$4.47, 37,318 Vista Shares are issuable to PCF.
Completion of this issuance is subject to receipt of regulatory
approvals and is anticipated to occur in May 2008.
21
Mt. Todd Gold Project resource update
On April 24, 2008, we announced that 43-101 silver and copper
resource estimates for the Batman deposit at the Mt. Todd Gold Project in
Northern Territory, Australia have been completed by Tetra Tech, Inc. of
Golden, Colorado. These silver and
copper resource estimates were completed under the direction of Mr. John
Rozelle, P.G., an independent Qualified Person as defined in 43-101, utilizing
standard industry software and resource estimation methodology. Pursuant to 43-101, new silver resource
estimates and new copper resource estimates, reported at a cutoff grade of
0.015 gold ounces per ton, are set forth below. The gold resource remained the
same as discussed above in Other - Updated gold resource estimate for the Mt.
Todd gold project. For further
information on the updated gold resource estimate, see our press release dated April 24,
2008.
Silver Resource Estimate
Resource
Classification(1)
|
|
Short Tons
|
|
Average Grade
|
|
|
|
(x1000)
|
|
(ounces/ton)
|
|
Measured(2)
|
|
47,987
|
|
0.042
|
|
Indicated(2)
|
|
50,425
|
|
0.045
|
|
Measured and Indicated(2)
|
|
98,413
|
|
0.043
|
|
Resource
Classification(1)
|
|
Short Tons
|
|
Average Grade
|
|
|
|
(x1000)
|
|
(ounces/ton)
|
|
Inferred(3)
|
|
64,832
|
|
0.050
|
|
Copper Resource Estimate
Resource
Classification(1)
|
|
Short Tons
|
|
Average Grade
|
|
|
|
(x1000)
|
|
(% Cu)
|
|
Measured(2)
|
|
47,987
|
|
0.05
|
|
Indicated(2)
|
|
50,425
|
|
0.05
|
|
Measured and Indicated(2)
|
|
98,413
|
|
0.05
|
|
Resource
Classification(1)
|
|
Short Tons
|
|
Average Grade
|
|
|
|
(x1000)
|
|
(% Cu)
|
|
Inferred(3)
|
|
64,832
|
|
0.05
|
|
Cautionary Notes Concerning Resource Estimates
(1)
We report mineralized
material under two separate standards to meet the requirements for reporting in
both the U.S. and Canada. U.S. reporting
requirements for disclosure of mineral properties are governed by the United
States Securities and Exchange Commission (SEC) Industry Guide 7. Canadian reporting requirements for
disclosure of mineral properties are governed by 43-101. Canadian and United States standards are
substantially different. In particular,
the term resource does not equate to the term reserves. In the United States, an issuer is not
generally permitted to disclose mineralization unless such mineralization
satisfies the definitional requirements of proven or probable mineral reserve
in accordance with SEC Industry Guide 7, which defines mineral reserve as a
part of a mineral deposit, which could be economically and legally extracted or
produced at the time the reserve determination is made. Accordingly, information contained in this Form 10-Q
containing descriptions of our mineral deposits in accordance with 43-101 may
not be comparable to similar information made public by other U.S. companies
under the United States federal securities laws and the rules and
regulations thereunder.
(2)
Cautionary Note to U.S. Investors concerning estimates
of Measured and Indicated Resources:
This document uses the terms measured resources and indicated
resources. We advise investors that
while these terms are recognized and required by Canadian regulations, the SEC
does not recognize them.
Investors are cautioned not to assume that any part or
all of the mineral deposits in these categories will ever be converted into
mineral reserves.
(3)
Cautionary Note to U.S. Investors concerning estimates
of Inferred Resources:
This
document uses the term inferred resources.
We advise investors that while this term is recognized and required by
Canadian regulations, the SEC does not recognize it. Inferred mineral resources have a great
amount of uncertainty as to their existence, and great uncertainty as to their
economic and legal feasibility.
22
It
cannot be assumed that all or any part of an inferred mineral resource will
ever be upgraded to a higher category.
In accordance with Canadian rules, estimates of inferred mineral
resources cannot form the basis of feasibility or other economic studies.
Investors
are cautioned not to assume that any part or all of the inferred mineral
resource exists or is economically or legally mineable.
Permit status for the
Paredones Amarillos project
On
April 30, 2008, we announced that we received correspondence from the
local La Paz office of the Mexican Environmental and Natural Resource Service
(SEMARNAT) which indicates that staff in that office are of the opinion that
the Change of Land Use Permit approved by SEMARNAT in 1997 in relation to the
Paredones Amarillos project is no longer valid. This permit is necessary for the development
of the Paredones Amarillos project to proceed. Vista has been advised by its
advisors that the permit remains valid and is investigating the basis for the
staffs position, and intends to take immediate steps to confirm the validity
of the permit and if necessary, to address any issues identified by SEMARNAT.
Our management believes that any related issues will be resolved without any
significant delay to the expected timing for completion of the definitive
(bankable) feasibility study or the proposed timetable for development of the
Paredones Amarillos project but will provide further information as soon as it
is in a position to do so.
Updated
status of permit for the Paredones Amarillos project
On
May 8, 2008, we announced that our advisors and counsel in Mexico have
confirmed their view that the Change of Land Use Permit for the Paredones
Amarillos Project remains valid. We are
currently evaluating the options for validation of the permit, which include
initiating legal or administrative action seeking the annulment of the opinion
rendered by the La Paz office of the Mexican Environmental and Natural Resource
Service (SEMARNAT). Management has held
meetings with senior government officials in Baja California Sur and will be
meeting with senior government officials in Mexico City in the coming weeks to
confirm the status of the permit. Our
management believes that any related issues will be resolved without any
significant delay to the expected timing for completion of the definitive (bankable)
feasibility study or the proposed timetable for the development of the
Paredones Amarillos Project, but will provide further information as soon as we
are in a position to do so.
Changes in Accounting Policies
and Recent Accounting
Pronouncements
Changes in accounting policies
Effective January 1, 2008, we adopted the following standards
updates by the Canadian Institute of Chartered Accountants (CICA). These new standards have been adopted on a
prospective basis with no restatement to prior period financial statements.
CICA Section 1535, Capital Disclosures requires the disclosure
of an entitys objectives, policies and processes for managing capital,
quantitative data about what the entity regards as capital and whether the
entity has complied with any capital requirements and, if it has not complied,
the consequences of such noncompliance.
Our objective is to ensure our ability to continue as a going concern,
so that we can continue to provide returns for our shareholders.
We consider items included in its shareholders equity and its
convertible debt as capital. We manage
our capital structure and makes adjustments to it in the light of changes in
economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, we may issue new shares through equity financings to reduce
debt. We are not subject to externally
imposed capital requirements. See Notes
7, 8, 9 and 10.
23
CICA Section 1400, General Standards of Financial Statement
Presentation, was amended to include requirements to assess and disclose an
entitys ability to continue as a going concern. The new requirements are effective for
interim and annual financial statements relating to fiscal years beginning on
or after January 1, 2008. The
adoption of this statement did not have an impact on the consolidated financial
statements.
CICA
Section 3862, Financial InstrumentsDisclosures and Section 3863,
Financial InstrumentsPresentations are two standards that replace Section 3861,
Financial InstrumentsDisclosure and Presentation, revising disclosures
related to financial instruments and carry forward unchanged presentation
requirements. These standards increase
the disclosures currently required, which will enable users to evaluate the
significance of financial instruments for an entitys financial position and
performance, including disclosures about fair value. In addition, disclosure is required of
qualitative and quantitative information about exposure to risks arising from
financial instruments, including specified minimum disclosure about credit
risk, liquidity and market risk. The
quantitative disclosures must provide information about the extent to which the
entity is exposed to risk, based on information provided internally to the
entitys key management personnel.
Recent
accounting pronouncement not yet adopted
In
February 2008, the CICA issued Section 3064, Goodwill
and Intangible Assets, which replaces Section 3062, Goodwill
and Intangible Assets, and results in a withdrawal of CICA Section 3450,
Research and Development Costs, and amendments to Accounting Guideline
(AcG) 11, Enterprises in the Development Stage, and CICA Section 1000,
Financial Statement Concepts. The standard intends to reduce the differences
with International Financial Reporting Standards (IFRS) in the accounting for
intangible assets and results in closer alignment with U.S. GAAP. Under
current Canadian standards, more items are recognized as assets than under IFRS
or U.S. GAAP. The objectives of CICA Section 3064 are to reinforce
the principle-based approach to the recognition of assets only in accordance
with the definition of an asset and the criteria for asset recognition; and
clarify the application of the concept of matching revenues and expenses such
that the current practice of recognizing assets that do not meet the definition
and recognition criteria are eliminated. The standard will also provide
guidance for the recognition of internally developed intangible assets
(including research and development activities), ensuring consistent treatment
of all intangible assets, whether separately acquired or internally developed.
This standard will be effective for fiscal years beginning on or after October 1,
2008. We are currently evaluating the
impact of adopting this standard in 2009.
24
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,
2007, 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
25
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).
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).
26
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, 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.
27
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 amount 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. 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.
28
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; potential funding requirements and sources of
capital; the timing, performance and results of feasibility studies including
the ongoing bankable feasibility study for the Paredones Amarillos project;
timing and receipt of required land use, environmental and other permits for
the Paredones Amarillos Project and timing for starting and completion of
drilling and testing programs at the Paredones Amarillos Project; plans to
confirm the validity of the Change of Land Use Permit for the Paredones
Amarillos Project and timing for confirmation of the status of this permit;
capital and operating cost estimates for the Paredones Amarillos Project,
anticipated timing of commencement of construction at the Paredones Amarillos
Project; plans for evaluation of the Mt. Todd Project including estimates of
silver, copper and gold resources; preliminary assessment results; results of
drilling programs and prospects for exploration and conversion of resources at
the Mt. Todd Project; potential for gold production at the Amayapampa gold
project and timing for commencement of production and timing and receipt of
future payments in connection with the disposal of the Amayapampa gold project;
ongoing debt service requirements for our outstanding convertible notes and
potential redemption or conversion of the notes; 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; estimates of proven or probable reserves; estimates of mineralized
material and mineral resources; current working capital; cash operating costs;
future share price and valuation for Vista and for marketable securities held
by Vista; future gold prices; and other such matters 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 to be materially different from any results, performance or
achievements expressed or implied by such forward-looking statements. These
factors include, among others, 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 as part of
the Arrangement. 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 including uncertainty relating to timing and receipt for
required governmental permits; uncertainty relating to timing and receipt for
confirmation of the validity of the Change of Land Use Permit for the Paredones
Amarillos Project; uncertainty of feasibility study results and preliminary
assessments and of estimates on which such results are based; risks relating to
delays in commencement and completion of construction at the Paredones
Amarillos Project and Mt. Todd Project; risks of significant cost increases;
uncertainties concerning availability of equipment or supplies; 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
estimates of reserves, mineral resources or mineralized material; potential
effects on our operations of environmental regulations in the countries in
which we operate; risks related to repayment of debts; risks related to
increased leverage; intense competition in the mining industry; risks due to
legal proceedings; uncertainty of being able to raise capital on favourable
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. 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 our Annual Report on Form 10-K for the year ended December 31,
2007, under Part IItem 1A. Risk Factors. The foregoing section of
our 2007 Form 10-K is incorporated in this filing and investors should
refer to it. 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. Except as required by law, we assume no
obligation to publicly update any forward-looking statements, whether as a
result of new information, future events or otherwise.
29
ITEM
3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We
are engaged in the acquisition of gold projects and related activities
including exploration engineering, permitting and the preparation of
feasibility studies. The value of our
properties is related to gold price and changes in the price of gold could
affect our ability to generate revenue from our portfolio of gold projects.
Gold
prices may fluctuate widely from time to time and are affected by numerous
factors, including the following: expectations with respect to the rate of
inflation, exchange rates, interest rates, global and regional political and
economic circumstances and governmental policies, including those with respect
to gold holdings by central banks. The
gold price fell to a 20-year low of $253 in July 1999 and has risen
significantly since that time to reach a level of $837 by December 31,
2007 and was $934 at March 31, 2008 and $918 at April 22, 2008. The demand for, and supply of, gold affect
gold prices, but not necessarily in the same manner as demand and supply affect
the prices of other commodities. The
supply of gold consists of a combination of new mine production and existing
stocks of bullion and fabricated gold held by governments, public and private
financial institutions, industrial organizations and private individuals. The demand for gold primarily consists of
jewelry and investments. Additionally,
hedging activities by producers, consumers, financial institutions and individuals
can affect gold supply and demand. While
gold can be readily sold on numerous markets throughout the world, its market
value cannot be predicted for any particular time.
Because
we have exploration operations in North America, South America, Indonesia and
Australia we are subject to foreign currency fluctuations. We do not engage in currency hedging to
offset any risk of currency fluctuations as insignificant monetary amounts are
held in foreign currencies for land holding costs related to the properties
owned.
On
March 7, 2008, we announced the closing of a private placement in which we
offered and sold $30 million in aggregate principal amount of secured
senior convertible notes (see Consolidated Financial Statements Note 7). The
notes bear interest at a rate of 10% per annum (calculated and payable
semi-annually in arrears) and will mature on March 4, 2011. We do not
consider our interest rate risk exposure to be significant at this time.
ITEM 4.
CONTROLS
AND PROCEDURES
The
principal executive officer and principal financial officer have evaluated the
effectiveness of the Corporations disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the Exchange Act) as of March 31,
2008. Based on the evaluation, the principal executive officer and principal
financial officer concluded that the disclosure controls and procedures in
place are effective to ensure that information required to be disclosed by the
Corporation, including consolidated subsidiaries, in reports that the
Corporation files or submits under the Exchange Act, is recorded, processed,
summarized and reported on a timely basis in accordance with applicable time
periods specified by the Securities and Exchange Commission rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Corporation in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Corporations management, including its
principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure. There has been no change in the Corporations internal control over
financial reporting during the quarter ended March 31, 2008, that has
materially affected, or is reasonably likely to materially affect, the
Corporations internal control over financial reporting.
30
PART II -
OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
Please see Part I Item 3. Legal
Proceedings as included in our Annual Report on Form 10-K for the
year ended December 31, 2007.
ITEM 1A.
RISK FACTORS
There have been no material changes from the risk factors disclosed in
the Risk Factors section of the Corporations Annual Report on Form 10-K
for the year ended December 31, 2007.
ITEM 2.
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Our unregistered sales of equity
securities during the quarter ended March 31, 2008, have previously been
reported in reports filed with the Commission.
In connection with our agreement
with Republic Gold Limited involving the disposal to Republic of our
wholly-owned subsidiary Vista Gold (Antigua) Corp., which indirectly held our
interest in the Amayapampa gold project in Bolivia, we agreed to pay an
advisory fee to Prime Corporate Finance Pty Limited of West Perth, Australia (PCF)
for serving as corporate advisor to Vista in connection with the disposal by
Vista of its interest in the Amayapampa gold project. See Item 2.
Managements Discussion and Analysis of Financial Condition and Results
of Operations Subsequent Events Disposal of Amayapampa project. On April 8, 2008, Vista and PCF agreed
that the success fee payable to PCF was $165, such amount being equal to Cdn.
$166.8. In addition, on April 8,
2008, PCF and Vista agreed that the success fee would be payable in Common
Shares of Vista. Based on the market
price of Vistas Shares at the close of business on April 7, 2008 of Cdn.
$4.47, 37,318 Vista Shares are issuable to PCF.
Completion of the issuance is subject to receipt of regulatory approvals
and is anticipated to occur in May 2008.
The issuance is being made in reliance on the exemption from
registration requirements under the Securities Act of 1933 pursuant to Section 4(2) thereof
as a transaction by an issuer not involving a public offering.
ITEM 3.
DEFAULTS UPON SENIOR
SECURITIES
None.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
None.
ITEM 5.
OTHER INFORMATION
None.
31
ITEM 6.
EXHIBITS
(a)
|
|
Exhibits
|
|
|
|
10.1
|
|
Asset Sale Agreement dated January 4, 2008, among Vista Gold
Corp., Minera Paredones Amarillos, S.A. de C.V., Del Norte Company, Ltd.
and A.M. King Industries, Inc. filed as Exhibit 10.1 to the
Corporations Current Report on Form 8-K, dated January 2, 2008,
and incorporated herein by reference (File No. 1-9025)
|
|
|
|
10.2
|
|
Agency Agreement, dated March 4, 2008, between Vista Gold Corp.
and Casimir Capital L.P. filed as Exhibit 10.1 to the Corporations
Current Report on Form 8-K dated March 3, 2008 and incorporated
herein by reference (File No. 1-9025)
|
|
|
|
10.3
|
|
Form of Subscription Agreement dated March 4, 2008, between
Vista Gold Corp. and each Subscriber as defined therein filed as
Exhibit 10.2 to the Corporations Current Report on Form 8-K dated
March 3, 2008 and incorporated herein by reference (File
No. 1-9025)
|
|
|
|
10.4
|
|
Purchase and Sale Agreement dated April 4, 2008 among Vista Gold
Corp., Vista Gold (Antigua) Corp. and Republic Gold Limited filed as
Exhibit 10.1 to the Corporations Current Report on Form 8-K dated
April 4, 2008 and incorporated herein by reference (File
No. 1-9025)
|
|
|
|
23.1
|
|
Consent of Tetra Tech, Inc.
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a) under the
Securities Exchange Act
of 1934
, as amended
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a) under the
Securities Exchange Act
of 1934
, as amended
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
32
SIGNATURES
Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
VISTA GOLD CORP.
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
Date: May 12,
2008
|
|
By:
|
/s/
Michael B. Richings
|
|
|
|
Michael B. Richings
|
|
|
|
Executive Chairman and Chief Executive
Officer
|
|
|
|
|
|
|
|
|
Date: May 12,
2008
|
|
By:
|
/s/
Gregory G. Marlier
|
|
|
|
Gregory G. Marlier
|
|
|
|
Chief Financial Officer
|
33
Vista Gold (AMEX:VGZ)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Vista Gold (AMEX:VGZ)
Historical Stock Chart
Von Jul 2023 bis Jul 2024