Table of
Contents
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 June 30, 2009
OR
o
TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission
File Number 1-09025
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 has
submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post
such files
).
o
Yes
o
No
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: 34,475,829 Common Shares, without par value, outstanding
at August 6, 2009
Table
of Contents
VISTA
GOLD CORP.
(An
Exploration Stage Enterprise)
FORM 10-Q
For
the Quarter Ended June 30, 2009
INDEX
In
this Report, unless otherwise indicated, all dollar amounts are expressed in
United States dollars.
Table of
Contents
PART I FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
VISTA GOLD CORP. (An Exploration
Stage Enterprise)
CONSOLIDATED BALANCE SHEETS -
UNAUDITED
(U.S. dollars in thousands)
|
|
June 30,
2009
|
|
December 31,
2008
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
Cash and cash equivalents - Note 7
|
|
$
|
16,300
|
|
$
|
13,266
|
|
Marketable securities - Note 4
|
|
628
|
|
8,153
|
|
Accounts receivable
|
|
47
|
|
127
|
|
Prepaids and other
|
|
676
|
|
466
|
|
Current assets
|
|
17,651
|
|
22,012
|
|
|
|
|
|
|
|
Mineral properties - Note 5
|
|
33,381
|
|
30,407
|
|
Amayapampa disposal consideration - Note 3
|
|
4,813
|
|
4,813
|
|
Property, plant and equipment - Note 6
|
|
18,744
|
|
18,533
|
|
|
|
56,938
|
|
53,753
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
74,589
|
|
$
|
75,765
|
|
|
|
|
|
|
|
Liabilities and Shareholders
Equity:
|
|
|
|
|
|
Accounts payable
|
|
$
|
65
|
|
$
|
|
|
Accrued liabilities and other
|
|
449
|
|
803
|
|
Current liabilities
|
|
514
|
|
803
|
|
|
|
|
|
|
|
Convertible notes Note 7
|
|
24,718
|
|
23,496
|
|
Other long-term liabilities
|
|
228
|
|
228
|
|
Total liabilities
|
|
25,460
|
|
24,527
|
|
|
|
|
|
|
|
Capital stock, no par value:
|
|
|
|
|
|
Common - unlimited shares authorized; shares
outstanding: 2009 - 34,475,829 and 2008 34,475,829
|
|
225,098
|
|
225,098
|
|
Warrants
|
|
336
|
|
336
|
|
Options - Note 8
|
|
4,833
|
|
4,634
|
|
Contributed surplus Note 9
|
|
1,488
|
|
1,387
|
|
Equity component of convertible notes - Note 7
|
|
6,298
|
|
6,298
|
|
Accumulated other comprehensive income - Note 10
|
|
183
|
|
4,602
|
|
Deficit Note 2
|
|
(189,107
|
)
|
(191,117
|
)
|
Total shareholders equity
|
|
49,129
|
|
51,238
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
74,589
|
|
$
|
75,765
|
|
Subsequent
events Note 15
The
accompanying notes are an integral part of these consolidated financial
statements.
1
Table of Contents
VISTA GOLD CORP. (An Exploration
Stage Enterprise)
CONSOLIDATED
STATEMENTS OF EARNINGS AND (LOSS) AND COMPREHENSIVE LOSS - UNAUDITED
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
Cumulative
during
Exploration
|
|
(U.S. dollars in thousands, except share data)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Stage
|
|
|
|
|
|
(restated
note 2)
|
|
|
|
(restated
note 2)
|
|
|
|
Income:
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(loss) on disposal of marketable securities
|
|
$
|
6,822
|
|
$
|
(88
|
)
|
$
|
6,815
|
|
$
|
(67
|
)
|
$
|
7,048
|
|
Interest income
|
|
21
|
|
171
|
|
49
|
|
280
|
|
2,577
|
|
Gain on currency translation
|
|
68
|
|
13
|
|
45
|
|
6
|
|
(348
|
)
|
Total other income
|
|
$
|
6,911
|
|
$
|
96
|
|
$
|
6,909
|
|
$
|
219
|
|
$
|
9,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Exploration, property evaluation and holding costs
|
|
$
|
(268
|
)
|
$
|
(252
|
)
|
$
|
(601
|
)
|
$
|
(497
|
)
|
$
|
(3,439
|
)
|
Corporate administration and investor relations
|
|
(974
|
)
|
(1,253
|
)
|
(1,986
|
)
|
(2,540
|
)
|
(21,931
|
)
|
Costs of Arrangement
|
|
|
|
|
|
|
|
|
|
(2,901
|
)
|
Depreciation and amortization
|
|
(62
|
)
|
(40
|
)
|
(114
|
)
|
(79
|
)
|
(484
|
)
|
Interest expense
|
|
(584
|
)
|
(585
|
)
|
(1,163
|
)
|
(769
|
)
|
(3,167
|
)
|
Costs of Amayapampa disposal
|
|
|
|
(132
|
)
|
|
|
(132
|
)
|
(132
|
)
|
Write-down of marketable securities
|
|
(11
|
)
|
|
|
(123
|
)
|
|
|
(849
|
)
|
Loss on sale of mineral property Note 5
|
|
(131
|
)
|
|
|
(131
|
)
|
|
|
(131
|
)
|
Other income/(expense)
|
|
(2
|
)
|
11
|
|
|
|
14
|
|
374
|
|
Total costs and expenses
|
|
(2,032
|
)
|
(2,251
|
)
|
(4,118
|
)
|
(4,003
|
)
|
(32,660
|
)
|
Earnings/(loss) from continuing operations before
income taxes
|
|
$
|
4,879
|
|
$
|
(2,155
|
)
|
$
|
2,791
|
|
$
|
(3,784
|
)
|
$
|
(23,383
|
)
|
Future income tax benefit/(expense)
|
|
$
|
(989
|
)
|
$
|
179
|
|
$
|
(781
|
)
|
$
|
(93
|
)
|
$
|
31
|
|
Earnings/(loss) from continuing operations after
income taxes
|
|
$
|
3,890
|
|
$
|
(1,976
|
)
|
$
|
2,010
|
|
$
|
(3,877
|
)
|
$
|
(23,352
|
)
|
Earnings/(loss) from discontinued operations
|
|
$
|
|
|
$
|
(72
|
)
|
$
|
|
|
$
|
(294
|
)
|
$
|
(16,879
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings/(loss)
|
|
$
|
3,890
|
|
$
|
(2,048
|
)
|
$
|
2,010
|
|
$
|
(4,171
|
)
|
$
|
(40,231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income/(loss):
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized fair-value increase/(decrease) of
available-for-sale securities
|
|
198
|
|
936
|
|
1,373
|
|
(588
|
)
|
|
|
Realized (gain)/loss on available-for-sale
securities
|
|
(5,798
|
)
|
75
|
|
(5,793
|
)
|
57
|
|
|
|
|
|
(5,600
|
)
|
1,011
|
|
(4,420
|
)
|
(531
|
)
|
|
|
Comprehensive loss
|
|
$
|
(1,710
|
)
|
$
|
(1,037
|
)
|
$
|
(2,410
|
)
|
$
|
(4,702
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
34,475,829
|
|
34,420,130
|
|
34,475,829
|
|
34,211,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings/(loss) per share from
continuing operations
|
|
$
|
0.11
|
|
$
|
(0.06
|
)
|
$
|
0.06
|
|
$
|
(0.11
|
)
|
|
|
Basic and diluted earnings/(loss) per share
|
|
$
|
0.11
|
|
$
|
(0.06
|
)
|
$
|
0.06
|
|
$
|
(0.12
|
)
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
2
Table of Contents
VISTA
GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED
STATEMENTS OF DEFICIT UNAUDITED
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
(U.S. dollars in thousands)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
(restated
Note 2)
|
|
|
|
(restated
Note 2)
|
|
Deficit, beginning of period
|
|
$
|
(192,997
|
)
|
$
|
(183,267
|
)
|
$
|
(191,117
|
)
|
$
|
(181,144
|
)
|
Net earnings/(loss)
|
|
3,890
|
|
(2,048
|
)
|
2,010
|
|
(4,171
|
)
|
Deficit, end of period
|
|
$
|
(189,107
|
)
|
$
|
(185,315
|
)
|
$
|
(189,107
|
)
|
$
|
(185,315
|
)
|
The accompanying notes are an integral part of these consolidated
financial statements.
3
Table of Contents
VISTA
GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED
STATEMENTS OF CASH FLOWS UNAUDITED
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
Cumulative
during
Exploration
|
|
(U.S. dollars in thousands)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Stage
|
|
|
|
|
|
(restated)
|
|
|
|
(restated)
|
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss) from continuing operations after
income taxes
|
|
$
|
3,890
|
|
$
|
(1,976
|
)
|
$
|
2,010
|
|
$
|
(3,877
|
)
|
$
|
(23,352
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile loss
for the period to net cash used in operations:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
62
|
|
40
|
|
114
|
|
79
|
|
507
|
|
Stock-based compensation
|
|
115
|
|
309
|
|
240
|
|
605
|
|
6,059
|
|
(Gain)/loss on disposal of marketable securities
|
|
(6,822
|
)
|
88
|
|
(6,815
|
)
|
67
|
|
(7,310
|
)
|
Future income tax (benefit)/expense
|
|
989
|
|
(179
|
)
|
781
|
|
93
|
|
(31
|
)
|
Accretion of convertible notes
|
|
265
|
|
233
|
|
525
|
|
314
|
|
1,363
|
|
Accrued interest
|
|
322
|
|
352
|
|
641
|
|
456
|
|
1,809
|
|
Cost of disposal of Amayapampa
|
|
|
|
132
|
|
|
|
132
|
|
132
|
|
Loss on disposal of mineral property
|
|
131
|
|
|
|
131
|
|
|
|
131
|
|
Write-down of marketable securities
|
|
11
|
|
|
|
123
|
|
|
|
849
|
|
Prepaid transaction costs
|
|
|
|
|
|
|
|
|
|
1,841
|
|
Other non-cash items
|
|
|
|
|
|
|
|
|
|
(313
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
57
|
|
(61
|
)
|
64
|
|
(66
|
)
|
(461
|
)
|
Interest paid
|
|
(1,500
|
)
|
(842
|
)
|
(1,500
|
)
|
(842
|
)
|
(3,842
|
)
|
Prepaids and other
|
|
(245
|
)
|
(304
|
)
|
(210
|
)
|
(261
|
)
|
(496
|
)
|
Accounts payable, accrued liabilities and other
|
|
(318
|
)
|
136
|
|
(329
|
)
|
21
|
|
(1,210
|
)
|
Net cash used in operating
activities
|
|
(3,043
|
)
|
(2,072
|
)
|
(4,225
|
)
|
(3,279
|
)
|
(24,324
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of marketable securities
|
|
|
|
(51
|
)
|
|
|
(77
|
)
|
(1,026
|
)
|
Proceeds from sale of marketable securities
|
|
9,016
|
|
31
|
|
9,034
|
|
89
|
|
10,123
|
|
Additions to mineral properties, net of cost
recoveries
|
|
(728
|
)
|
(2,498
|
)
|
(1,639
|
)
|
(3,883
|
)
|
(22,029
|
)
|
Acquisition of mineral property
|
|
|
|
|
|
|
|
(452
|
)
|
(3,332
|
)
|
Additions to plant and equipment
|
|
(115
|
)
|
(327
|
)
|
(324
|
)
|
(16,635
|
)
|
(18,966
|
)
|
Proceeds on disposal of mineral property
|
|
188
|
|
|
|
188
|
|
|
|
188
|
|
Proceeds on disposal of plant and equipment
|
|
|
|
|
|
|
|
|
|
52
|
|
Short-term loan receivable
|
|
|
|
(350
|
)
|
|
|
(350
|
)
|
|
|
Cash transferred to Allied Nevada Gold Corp., net
of receivable
|
|
|
|
|
|
|
|
|
|
(24,517
|
)
|
Net cash provided by/(used in)
investing activities
|
|
8,361
|
|
(3,195
|
)
|
7,259
|
|
(21,308
|
)
|
(59,507
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from equity financings
|
|
|
|
|
|
|
|
|
|
54,409
|
|
Proceeds from exercise of warrants
|
|
|
|
|
|
|
|
2,941
|
|
39,020
|
|
Proceeds from exercise of stock options
|
|
|
|
|
|
|
|
69
|
|
2,794
|
|
Issuance of convertible notes, net of issuance
costs
|
|
|
|
(144
|
)
|
|
|
28,390
|
|
28,345
|
|
Prepaid transaction costs
|
|
|
|
|
|
|
|
|
|
(1,841
|
)
|
Net cash provided by financing
activities
|
|
|
|
(144
|
)
|
|
|
31,400
|
|
122,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash
equivalents - continuing operations
|
|
5,318
|
|
(5,411
|
)
|
3,034
|
|
6,813
|
|
38,896
|
|
Net decrease in cash and cash equivalents -
discontinued operations
|
|
|
|
(73
|
)
|
|
|
(294
|
)
|
(23,270
|
)
|
Net increase/(decrease) in cash
and cash equivalents
|
|
5,318
|
|
(5,484
|
)
|
3,034
|
|
6,519
|
|
15,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
10,982
|
|
28,689
|
|
13,266
|
|
16,686
|
|
674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end
of period
|
|
$
|
16,300
|
|
$
|
23,205
|
|
$
|
16,300
|
|
$
|
23,205
|
|
$
|
16,300
|
|
Supplemental cash flow information - Note 12
The
accompanying notes are an integral part of these consolidated financial
statements.
4
Table of
Contents
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
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 June 30, 2009
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 14, 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, 2008, as amended.
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 re-engineering the operating
assumptions underlying previous engineering work.
In
2007, the Board of Directors and management reevaluated the corporate strategy
regarding the development of the Corporations more advanced projects. As a result of this reevaluation, the
Corporation has begun moving its more advanced projects through preliminary and
advanced feasibility studies in preparation for mine development so that
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
September 30, 2008, the Corporation adopted the Emerging Issues Committee
Abstract 172 (EIC 172), Income Statement Presentation of a Tax Loss
Carryforward Recognized Following an Unrealized Gain in Other Comprehensive
Income. EIC 172 provides guidance on
whether the tax benefit from the recognition of previously unrecognized tax
loss carryforwards consequent to the recording of unrealized gains in other
comprehensive income, such as unrealized gains on available-for-sale financial
assets, should be recognized in net income or in other comprehensive
income. EIC 172 should be applied
retrospectively, with restatement of prior periods from January 1, 2007,
the date of adoption of the Canadian Institute of Chartered Accountants (CICA) Section 3855, Financial Instruments
Recognition and Measurement.
The
adoption of EIC 172 resulted in a reclassification of $1,132,000 of income tax
recovery from the accumulated other comprehensive income balance to the
accumulated deficit as of December 31, 2007. It also decreased the Corporations
three-month loss for the period ended June 30, 2008 by $179,000 and
increased the Corporations six-month loss for the period ended June 30,
2008 by $93,000.
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. This standard is effective for the
Corporation commencing January 1, 2009. The Corporation has determined
there is no impact on its current financial statements.
5
Table of Contents
3.
Amayapampa disposal consideration
On April 7, 2008, the Corporation entered into 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 agreed to pay to the Corporation,
$3.0 million in three payments of $1.0 million. The first of these payments
will be 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 agreed
to pay to 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, an NSR of 3.5% is payable. 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 fair value of the consideration received
upon the disposal of the Amayapampa project has been calculated as of June 30,
2009 using probability weighted cash flow scenarios and assumptions including
future gold prices, estimated gold production and the timing of commencement of
commercial production. These inputs in
the income approach valuation model used by the Corporation are considered to
be level three unobservable inputs as defined by SFAS No. 157, Fair Value
Measurements. These are the Corporations
own assumptions based on managements best estimates and the best information
available at the time.
4.
Marketable securities
|
|
At June 30, 2009
|
|
At December 31, 2008
|
|
(U.S. dollars in thousands)
|
|
Cost
|
|
Unrealized
gain/(loss)
|
|
Fair value
|
|
Cost
|
|
Unrealized
gain/(loss)
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allied Nevada Gold Corp.
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
2,194
|
|
$
|
5,547
|
|
$
|
7,741
|
|
Esperanza Silver Corp.
|
|
10
|
|
52
|
|
62
|
|
10
|
|
35
|
|
45
|
|
Luzon Minerals Ltd.
|
|
12
|
|
1
|
|
13
|
|
12
|
|
|
|
12
|
|
Nevgold Resources Corp.
|
|
59
|
|
36
|
|
95
|
|
44
|
|
|
|
44
|
|
Other marketable securities
|
|
333
|
|
125
|
|
458
|
|
480
|
|
(169
|
)
|
311
|
|
|
|
$
|
414
|
|
$
|
214
|
|
$
|
628
|
|
$
|
2,740
|
|
$
|
5,413
|
|
$
|
8,153
|
|
On April 3, 2009 the Corporation announced
that it had sold all of its 1,529,848 shares of Allied Nevada Gold Corp. (Allied)
for $9,016,088. These shares had an
original cost of $2,194,397 and when sold, resulted in a realized gain of
$6,821,691. In May 2007, the
Corporation completed a transaction that resulted in the formation of Allied
and the transfer of the Corporations Nevada properties to Allied. The Allied
shares sold by the Corporation were retained in connection with this
transaction to facilitate the payment of any taxes payable by the Corporation
in respect of the transaction. The
Corporation has determined that there are no other taxes payable by it in
respect of the transaction and made the decision to sell the Allied shares at
the appropriate time and use the cash for project development requirements.
At June 30, 2009, the Corporation determined that
certain of its securities had become impaired.
The write-down of $11,000, less a tax benefit of $2,000, has been
included on our Statement of Consolidated Earnings and Loss. The Corporation evaluated the remaining
securities for impairment, but concluded that any decline in value was
temporary due to the short amount of time that the securitys fair market value
was under cost.
5.
Mineral properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
|
|
|
|
December 31,
|
|
|
|
Option
|
|
Exploration &
|
|
Capitalized
|
|
Year to date
|
|
30, ending
|
|
(U.S. dollars in thousands)
|
|
balance
|
|
Disposition
|
|
payments
|
|
land costs
|
|
interest
|
|
activity
|
|
balance
|
|
Long Valley, United States
|
|
960
|
|
|
|
|
|
13
|
|
|
|
13
|
|
973
|
|
Yellow Pine, United States
|
|
878
|
|
|
|
|
|
1
|
|
|
|
1
|
|
879
|
|
Paredones Amarillos, Mexico
|
|
9,237
|
|
|
|
|
|
797
|
|
1,547
|
|
2,344
|
|
11,581
|
|
Guadalupe de los
Reyes, Mexico
|
|
3,136
|
|
|
|
|
|
6
|
|
|
|
6
|
|
3,142
|
|
Awak Mas, Indonesia
|
|
3,757
|
|
|
|
|
|
90
|
|
|
|
90
|
|
3,847
|
|
Mt. Todd, Australia
|
|
11,967
|
|
|
|
|
|
776
|
|
|
|
776
|
|
12,743
|
|
Other
|
|
472
|
|
(321
|
)
|
50
|
|
15
|
|
|
|
(256
|
)
|
216
|
|
|
|
$
|
30,407
|
|
$
|
(321
|
)
|
$
|
50
|
|
$
|
1,698
|
|
$
|
1,547
|
|
$
|
2,974
|
|
$
|
33,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
Table of Contents
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 has determined that no impairment
provision is required. A write-down in
the carrying values of one or more of the Corporations mineral 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.
As of June 30, 2009, the Corporation had not
yet received the necessary permits needed to begin development and construction
of the Paredones Amarillos gold project (see Note 15 Subsequent events). The Corporation is currently awaiting
approval of the Temporary Occupation Permit (TOP), which is a necessary
prerequisite for the Change of Land Use permit (CUSF). The Corporation has the necessary environmental
permit and has completed the other prerequisite studies for the submittal of
the CUSF permit application and will file that permit application as soon as
the TOP is received.
On June 2, 2009, the Corporation sold most of
its remaining patented mining claims in Colorado for cash proceeds of
$188,000. These claims had a book value
of $321,000 and upon disposition the Corporation recognized a loss of $133,000.
6.
Property, plant and equipment
|
|
June 30, 2009
|
|
December 31, 2008
|
|
(U.S. dollars in thousands)
|
|
Cost
|
|
Accumulated
Depreciation
and
Write-downs
|
|
Net
|
|
Cost
|
|
Accumulated
Depreciation and
Write-downs
|
|
Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paredones Amarillos, Mexico
|
|
18,162
|
|
21
|
|
18,141
|
|
18,006
|
|
12
|
|
17,994
|
|
Awak Mas, Indonesia
|
|
119
|
|
79
|
|
40
|
|
116
|
|
70
|
|
46
|
|
Mt. Todd, Australia
|
|
743
|
|
232
|
|
511
|
|
584
|
|
170
|
|
414
|
|
Corporate, United States
|
|
259
|
|
207
|
|
52
|
|
252
|
|
173
|
|
79
|
|
|
|
$
|
19,283
|
|
$
|
539
|
|
$
|
18,744
|
|
$
|
18,958
|
|
$
|
425
|
|
$
|
18,533
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 are secured only by the assets at the Paredones Amarillos gold
project. 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. See Note
15 Subsequent events.
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 NYSE
AMEX (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 was
originally $6.00 per common share and is subject to adjustments in certain
circumstances.
Pursuant to the terms of
the Notes, on March 4, 2009, the conversion price of the Notes was
automatically adjusted from $6.00 per share to $4.80 per share. As a result of the adjustment, 6.25 million
Common Shares are issuable upon conversion of the Notes. Prior to the adjustment, 5 million Common
Shares were issuable upon the conversion of the Notes.
7
Table of
Contents
The
Notes have been accounted for in accordance with EIC 164, Convertible and
other Debt Instruments with Embedded Derivatives. Under EIC 164, the fair value of the
conversion feature is recorded as equity.
The issuance date fair value of the conversion feature was estimated to
be $6.8 million and was classified as the equity component of convertible notes
with the residual balance of $23.2 million being recorded as the fair value of
the Corporations obligation to make principal and interest payments and has
been classified as long-term debt. The
fees totaling $1,988,000 related to the issuance of the Notes have been
allocated pro-rata between debt issuance costs of $1,531,000 and equity
issuance costs of $457,000.
The
Corporation capitalizes interest and accretion based on expenditures on
qualifying assets. As of June 30,
2009, the Corporation had qualifying expenditures of approximately $17.2
million related to the equipment purchase for the Paredones Amarillos project.
The Corporation has used approximately
$24.5 million for ongoing operations at the Paredones Amarillos project. This includes approximately $17.2 million
towards
the purchase of gold processing equipment to be used at the Paredones
Amarillos project. The remaining $3.5
million raised from the private placement, is restricted for, and will be used
for ongoing development at the Paredones Amarillos project.
A reconciliation of the
carrying value of the long-term liability portion of the Notes is as follows:
U.S. dollars in thousands
|
|
|
|
Principal amount of the Notes
|
|
$
|
30,000
|
|
Issuance costs allocated to long-term liabilities
|
|
(1,531
|
)
|
Conversion feature allocated to equity
|
|
(6,755
|
)
|
Carrying value of the Notes upon issuance
|
|
21,714
|
|
Accretion expense
|
|
3,004
|
|
Carrying value of the Notes at June 30, 2009
|
|
$
|
24,718
|
|
8.
Options to
purchase Common Shares
A summary of option activity under the
Corporations Stock Option Plan as of June 30, 2009, and changes during
the six-month period then ended is set forth in the following table:
|
|
Number of
Shares Issuable
upon Option
Exercise
|
|
Weighted-
Average
Exercise Price
($ USD)
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic Value
(
U.S. dollars in thousands)
|
|
Outstanding - December 31, 2008
|
|
2,184,747
|
|
$
|
4.39
|
|
3.55
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
50,000
|
|
2.15
|
|
|
|
|
|
Expired
|
|
(18,968
|
)
|
3.35
|
|
|
|
|
|
Cancelled
|
|
(7,500
|
)
|
4.13
|
|
|
|
|
|
Forfeited
|
|
(2,500
|
)
|
3.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - March 31, 2009
|
|
2,205,779
|
|
$
|
4.35
|
|
3.37
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable March 31, 2009
|
|
1,768,279
|
|
$
|
4.63
|
|
3.11
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
(9,484
|
)
|
$
|
2.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding June 30,
2009
|
|
2,196,295
|
|
$
|
4.36
|
|
3.13
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable June 30,
2009
|
|
1,763,795
|
|
$
|
4.65
|
|
2.88
|
|
$
|
|
|
8
Table of Contents
A summary of the fair-value changes
included in options within Shareholders Equity as of June 30, 2009 is set
forth in the following table:
U.S. dollars in thousands
|
|
Fair Value
|
|
As of December 31, 2008
|
|
$
|
4,634
|
|
|
|
|
|
Expensed
|
|
100
|
|
Capitalized as mineral properties
|
|
34
|
|
Granted
|
|
27
|
|
Expired
|
|
(62
|
)
|
Cancelled
|
|
(14
|
)
|
Forfeited
|
|
(2
|
)
|
|
|
|
|
As of March 31, 2009
|
|
$
|
4,717
|
|
|
|
|
|
Expensed
|
|
115
|
|
Capitalized as mineral properties
|
|
26
|
|
Expired
|
|
(25
|
)
|
|
|
|
|
As of June 30, 2009
|
|
$
|
4,833
|
|
The total number of options outstanding at
the end of the quarter is 2,196,295 with exercise prices ranging from
approximately $1.83 to $7.45 and remaining lives of 0.11 to 4.74 years. The total number of options outstanding
represents 6.4% of issued capital.
A summary of the status of the Corporations
unvested stock options as of June 30, 2009, is set forth below:
|
|
Number of
Shares Issuable
upon Option
Exercise
|
|
Weighted-
Average Grant
Date Fair
Value ($ USD)
|
|
Unvested - December 31, 2008
|
|
415,000
|
|
$
|
1.49
|
|
|
|
|
|
|
|
Granted
|
|
25,000
|
|
1.06
|
|
Forfeited
|
|
(2,500
|
)
|
1.30
|
|
|
|
|
|
|
|
Unvested - March 31, 2009
|
|
437,500
|
|
$
|
1.30
|
|
|
|
|
|
|
|
Vested
|
|
(5,000
|
)
|
$
|
1.35
|
|
|
|
|
|
|
|
Unvested June 30, 2009
|
|
432,500
|
|
$
|
1.30
|
|
As of June 30, 2009, there was
$85,667 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 0.26 years.
9.
Contributed surplus
|
|
June 30,
|
|
December 31,
|
|
U.S. dollars in thousands
|
|
2009
|
|
2008
|
|
Balance, beginning of year
|
|
$
|
1,387
|
|
$
|
253
|
|
Cancelled optionsNote 8
|
|
14
|
|
341
|
|
Expired optionsNote 8
|
|
87
|
|
262
|
|
Expired warrants
|
|
|
|
531
|
|
Balance, end of year
|
|
$
|
1,488
|
|
$
|
1,387
|
|
9
Table of Contents
10.
Accumulated
other comprehensive income
A reconciliation of the amounts
contained in accumulated other comprehensive income is as follows:
U.S. dollars in thousands
|
|
Accumulated other
comprehensive income,
before tax ($000s)
|
|
Accumulated other
comprehensive income,
net of tax ($000s)
|
|
|
|
|
|
|
|
As of December 31, 2008
|
|
$
|
5,413
|
|
$
|
4,602
|
|
Increases to fair market value during the period
|
|
1,383
|
|
1,176
|
|
Increases due to realization of loss
|
|
7
|
|
5
|
|
|
|
|
|
|
|
As of March 31, 2009
|
|
$
|
6,803
|
|
$
|
5,783
|
|
|
|
|
|
|
|
Increases to fair market value during the period
|
|
233
|
|
198
|
|
Decreases due to realization of gain
|
|
(6,822
|
)
|
(5,798
|
)
|
|
|
|
|
|
|
As of June 30, 2009
|
|
$
|
214
|
|
$
|
183
|
|
11.
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:
|
|
|
|
June 30, 2009
|
|
December 31, 2008
|
|
U.S. dollars in thousands
|
|
Category
|
|
Estimated
Fair Value
|
|
Carrying
Value
|
|
Estimated
Fair Value
|
|
Carrying
Value
|
|
Cash and cash
equivalents
|
|
Held-for-trading
|
|
$
|
16,300
|
|
$
|
16,300
|
|
$
|
13,266
|
|
$
|
13,266
|
|
Accounts receivable
(1)
|
|
Loans and receivables
|
|
47
|
|
47
|
|
127
|
|
127
|
|
Amayapampa disposal
consideration
|
|
Held-for-trading
|
|
4,813
|
|
4,813
|
|
4,813
|
|
4,813
|
|
Marketable
securities (2)
|
|
Available-for-sale
|
|
628
|
|
628
|
|
8,153
|
|
8,153
|
|
Total
financial assets
|
|
|
|
$
|
21,788
|
|
$
|
21,788
|
|
$
|
26,359
|
|
$
|
26,359
|
|
(1)
Carrying amount is a reasonable approximation
of fair value.
(2)
The fair value represents quoted market
prices in an active market.
Financial
liabilities
The
carrying amounts and fair values of financial liabilities are as follows:
|
|
|
|
June 30, 2009
|
|
December 31, 2008
|
|
U.S. dollars in thousands
|
|
Category
|
|
Estimated
Fair Value
|
|
Carrying
Value
|
|
Estimated
Fair Value
|
|
Carrying
Value
|
|
Accounts payable
and accrued liabilities (1)
|
|
Other financial liabilities
|
|
$
|
514
|
|
$
|
514
|
|
$
|
803
|
|
$
|
803
|
|
Other long-term
liabilities
|
|
Other financial liabilities
|
|
228
|
|
228
|
|
225
|
|
228
|
|
Convertible notes
(2)
|
|
Other financial liabilities
|
|
26,370
|
|
24,718
|
|
25,896
|
|
23,496
|
|
Total
financial assets
|
|
|
|
$
|
27,112
|
|
$
|
25,460
|
|
$
|
26,924
|
|
$
|
24,527
|
|
10
Table of
Contents
(1)
Carrying amount is a reasonable approximation
of fair value.
(2)
The carrying value of the convertible notes
is being accreted to their maturity value over their 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 monitors
its cash and cash equivalents in order to limit its exposure to credit
risk. The Corporation has invested in
certificates of deposits in some of its savings accounts. However, these investments are backed by the
Federal Deposit Insurance Corporation.
Liquidity risk
The
Corporations objective is to maintain sufficient capital 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 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 short-term highly
liquid cash savings accounts in order to maintain liquidity. Fluctuations in interest therefore have
little 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.
Supplemental cash flow information
There were no significant non-cash
transactions during the six-month period ended June 30, 2009.
Significant non-cash transactions
during the six months ended June 30, 2008 included: (a) the Corporations issuance of 37,318
common shares as a success fee payment to Prime Corporate Finance Pty Limited
as compensation for advisory services provided to the Corporation in connection
with the Corporations disposition of the Amayapampa project to Republic Gold
Limited (Note 3); (b) 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; and (c) the Corporations 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 senior secured convertible
notes (Note 7).
13.
Geographic and segment information
The Corporation
evaluates, acquires and explores gold exploration and potential development
projects. These activities are focused
principally in Mexico, Australia, North America and Indonesia. The Corporation
reported no revenues in the six-month period ended June 30, 2009, or for
the same period in 2008. Geographic
segmentation of mineral properties and plant and equipment is provided in Notes
5 and 6.
11
Table
of Contents
14.
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)
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.
(c)
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.
(d)
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 the convertible debt is
classified as equity and the residual balance is classified as a liability.
Under Canadian GAAP a portion of the debt issuance costs were allocated to
equity. Under U.S. GAAP all issuance costs were allocated to debt. 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.
(e)
In accordance
with U.S. GAAP (SFAS No. 109), the reversal of a valuation
allowance which is directly related to the gain or loss of available-for-sale
securities, when a Corporation has no expectations of taxable income in future
periods, is recorded in other comprehensive income/(loss). Under Canadian GAAP,
the Corporation adopted EIC 172, effective September 30, 2008. This
standard requires the recognition of the tax benefit or loss of previously
unrecognized tax loss carryforwards associated with the unrealized holding
gains and losses of available-for-sale securities to be recognized in net
income or net loss. This abstract required retrospective restatement of all
prior periods beginning with January 1, 2007. The adoption of EIC
172 resulted in a future income tax expense being recorded as part of the
Corporations Net Loss, whereas under SFAS 109 the future income tax
expense would be recorded as part of the Corporations Comprehensive Loss.
(f)
In 2000, the
carrying values of certain long-lived assets exceeded their respective
undiscounted cash flows. Following Canadian GAAP at that time, the carrying
values were written down using the undiscounted cash flow method. Under
U.S. GAAP, the carrying values were written down to their fair values
using the discounted cash flow method, giving rise to a difference in the
amounts written down. During 2007, the carrying values of certain long-lived
assets exceeded their respective discounted cash flows. Under Canadian GAAP,
the carrying values were written down using the discounted cash flow method.
Under U.S. GAAP, a write-down was not required as the carrying value of
the asset was already written down to the fair-value using the discounted cash
flows during 2000. In 2008, the future consideration on the disposal of
Amayapampa is designated as a financial asset held for trading and is recorded
at fair value.
12
Table of
Contents
The significant
differences in the consolidated statements of loss and comprehensive loss
relative to U.S. GAAP were:
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE
LOSS
-
UNAUDITED
|
|
Three Months Ended June 30,
|
|
Six months Ended June 30,
|
|
Cumulative
during
Exploration
|
|
(U.S. dollars in thousands, except share data)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Stage
|
|
Net earnings/(loss) Canadian GAAP
|
|
$
|
3,890
|
|
$
|
(2,048
|
)
|
$
|
2,010
|
|
$
|
(4,171
|
)
|
$
|
(40,231
|
)
|
Exploration, property evaluation and holding costs continuing
operations
(a)
|
|
(756
|
)
|
(2,900
|
)
|
(1,698
|
)
|
(4,382
|
)
|
(14,881
|
)
|
Exploration, property evaluation and holding costs discontinued
operations
(a)
|
|
|
|
|
|
|
|
|
|
4,016
|
|
Gain on sale of Amayapampa
(f)
|
|
|
|
2,124
|
|
|
|
2,124
|
|
2,124
|
|
Accretion on convertible
notes
(d)
|
|
265
|
|
313
|
|
525
|
|
313
|
|
1,362
|
|
Amortization of debt issuance costs
(d)
|
|
(71
|
)
|
(74
|
)
|
(133
|
)
|
(74
|
)
|
(358
|
)
|
Future income tax (benefit)/expense
(e)
|
|
989
|
|
(179
|
)
|
781
|
|
93
|
|
(31
|
)
|
Financing costs
|
|
|
|
|
|
|
|
|
|
(222
|
)
|
Stock-based compensation expense
(c)
|
|
|
|
|
|
|
|
|
|
2,251
|
|
Beneficial conversion feature
|
|
|
|
|
|
|
|
|
|
(2,774
|
)
|
Net earnings/(loss) U.S. GAAP
|
|
4,317
|
|
(2,764
|
)
|
1,485
|
|
(6,097
|
)
|
(48,744
|
)
|
Unrealized gain/(loss) on marketable securities
|
|
(6,589
|
)
|
1,189
|
|
(5,199
|
)
|
(624
|
)
|
(7,371
|
)
|
Comprehensive loss U.S. GAAP
|
|
$
|
(2,272
|
)
|
$
|
(1,575
|
)
|
$
|
(3,714
|
)
|
$
|
(6,721
|
)
|
$
|
(56,115
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share U.S. GAAP
|
|
$
|
0.13
|
|
$
|
(0.08
|
)
|
$
|
0.04
|
|
$
|
(0.18
|
)
|
|
|
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 June 30,
|
|
Six months Ended June 30,
|
|
Cumulative
during
Exploration
|
|
(U.S. dollars in thousands)
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Stage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities, Canadian
GAAP
|
|
$
|
(3,043
|
)
|
$
|
(2,072
|
)
|
$
|
(4,225
|
)
|
$
|
(3,279
|
)
|
$
|
(24,324
|
)
|
Additions to mineral properties, net
(a)
|
|
(688
|
)
|
(2,631
|
)
|
(1,630
|
)
|
(4,113
|
)
|
(16,406
|
)
|
Cash flows from operating activities, U.S. GAAP
|
|
(3,731
|
)
|
(4,703
|
)
|
(5,855
|
)
|
(7,392
|
)
|
(40,730
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities, Canadian
GAAP
|
|
8,361
|
|
(3,195
|
)
|
7,259
|
|
(21,308
|
)
|
(59,507
|
)
|
Additions to mineral properties, net
(a)
|
|
688
|
|
2,631
|
|
1,630
|
|
4,113
|
|
16,406
|
|
Cash flows from investing activities, U.S. GAAP
|
|
9,049
|
|
(564
|
)
|
8,889
|
|
(17,195
|
)
|
(43,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities, Canadian
GAAP
|
|
|
|
(144
|
)
|
|
|
31,400
|
|
122,727
|
|
Cash flows from financing activities, U.S. GAAP
|
|
|
|
(144
|
)
|
|
|
31,400
|
|
122,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash
equivalents - continuing operations
|
|
5,318
|
|
(5,411
|
)
|
3,034
|
|
6,813
|
|
38,896
|
|
Net increase/(decrease) in cash and cash
equivalents - discontinued operations
|
|
|
|
(73
|
)
|
|
|
(294
|
)
|
(23,270
|
)
|
|
|
5,318
|
|
(5,484
|
)
|
3,034
|
|
6,519
|
|
15,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
10,982
|
|
28,689
|
|
13,266
|
|
16,686
|
|
674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
16,300
|
|
$
|
23,205
|
|
$
|
16,300
|
|
$
|
23,205
|
|
$
|
16,300
|
|
13
Table of
Contents
The significant differences in the consolidated balance sheets as at June 30,
2009, and December 31, 2008, relative to U.S. GAAP were:
CONSOLIDATED BALANCE SHEETS - UNAUDITED
|
|
June 30, 2009
|
|
December 31, 2008
|
|
(U.S. dollars in
thousands)
|
|
Per Cdn.
GAAP
|
|
Cdn./U.S.
Adj.
|
|
Per U.S.
GAAP
|
|
Per Cdn.
GAAP
|
|
Cdn./U.S.
Adj.
|
|
Per U.S.
GAAP
|
|
Current assets
|
|
$
|
17,651
|
|
$
|
|
|
$
|
17,651
|
|
$
|
22,012
|
|
$
|
|
|
$
|
22,012
|
|
Property, plant and equipment
(a)
|
|
52,125
|
|
(22,651
|
)
|
29,474
|
|
48,940
|
|
(20,433
|
)
|
28,507
|
|
Other assets
|
|
4,813
|
|
|
|
4,813
|
|
4,813
|
|
|
|
4,813
|
|
Total assets
|
|
$
|
74,589
|
|
$
|
(22,651
|
)
|
$
|
51,938
|
|
$
|
75,765
|
|
$
|
(20,433
|
)
|
$
|
55,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
514
|
|
|
|
514
|
|
803
|
|
|
|
803
|
|
Convertible notes
(d)
|
|
24,718
|
|
4,083
|
|
28,801
|
|
23,496
|
|
4,995
|
|
28,491
|
|
Other long-term liabilities
|
|
228
|
|
|
|
228
|
|
228
|
|
|
|
228
|
|
Total liabilities
|
|
25,460
|
|
4,083
|
|
29,543
|
|
24,527
|
|
4,995
|
|
29,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock
(b),(c)
|
|
225,098
|
|
75,282
|
|
300,380
|
|
225,098
|
|
75,282
|
|
300,380
|
|
Special warrants
|
|
|
|
222
|
|
222
|
|
|
|
222
|
|
222
|
|
Warrants and options
(c)
|
|
5,169
|
|
(217
|
)
|
4,952
|
|
4,970
|
|
(304
|
)
|
4,666
|
|
Contributed surplus
(b),(c)
|
|
1,488
|
|
5,178
|
|
6,666
|
|
1,387
|
|
5,265
|
|
6,652
|
|
Equity component of convertible notes
(d)
|
|
6,298
|
|
(6,298
|
)
|
|
|
6,298
|
|
(6,298
|
)
|
|
|
Other comprehensive income
(e)
|
|
183
|
|
120
|
|
303
|
|
4,602
|
|
901
|
|
5,503
|
|
Deficit
(a),
(b),(c),(e)
|
|
(189,107
|
)
|
(101,021
|
)
|
(290,128
|
)
|
(191,117
|
)
|
(100,496
|
)
|
(291,613
|
)
|
Total shareholders equity
|
|
49,129
|
|
(26,734
|
)
|
22,395
|
|
51,238
|
|
(25,428
|
)
|
25,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities & shareholders equity
|
|
$
|
74,589
|
|
$
|
(22,651
|
)
|
$
|
51,938
|
|
$
|
75,765
|
|
$
|
(20,433
|
)
|
$
|
55,332
|
|
In
May 2009, the FASB issued Statement No. 165, Subsequent Events. The new statement is intended to establish
general standards of accounting for and disclosure of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. This standard requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for
selecting that date, that is, whether that date represents the date the financial
statements were issued or were available to be issued. This statement became effective for the
Corporation on June 30, 2009. The
Corporation reviewed events for inclusion in the financial statements through August 6,
2009, the date that the accompanying financial statements were issued.
In
April 2009, the FASB issued FASB Staff Position (FSP) FAS 157-4, Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability
Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP provides additional guidance in
determining when observable transaction prices or quoted prices in markets that
have become less active require significant adjustment to estimate fair value. This FSP became effective for the Corporation
on June 30, 2009. The Corporation
has determined this FSP had no impact on its consolidated financial statements.
In
March 2008, the 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 has determined this standard had no impact on its
consolidated financial statements.
In
February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB
Statement No. 157, which amends SFAS No. 157 by delaying its
effective date by one year for non-financial assets and non-financial
liabilities, except for items that are recognized or
14
Table of
Contents
disclosed
at fair value in the financial statements on a recurring basis. Therefore, the
application of SFAS No. 157 relating to our non-financial assets and
non-financial liabilities was adopted prospectively beginning January 1,
2009. See Note 11 Financial Instruments for additional information. The Corporation has determined this FSP had
no impact on its consolidated financial statements.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements. SFAS No. 160
establishes new accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. It
clarifies that a noncontrolling interest in a subsidiary (minority interest) is
an ownership interest in the consolidated entity that should be reported as
equity in the Consolidated Financial Statements and separate from the parent
companys equity. Among other requirements, this standard requires consolidated
net income to be reported at amounts that include the amounts attributable to
both the parent and the noncontrolling interest. It also requires disclosure,
on the face of the Consolidated Statement of Loss, of the amounts of
consolidated net loss attributable to the parent and to the noncontrolling
interest. This statement became effective for the Corporation on January 1,
2009. As of June 30, 2009, the Corporation did not have any minority
interests.
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 had no business
combinations during the quarter ended June 30, 2009, therefore this
standard had no impact on our consolidated financial statements.
15.
Subsequent events
Repurchase of Senior Secured Notes
On July 14, 2009,
the Corporation entered into Note Repurchase Agreements (the Whitebox
Repurchase Agreements) with Whitebox Combined Partners, LP (Whitebox Combined
Partners), Whitebox Convertible Arbitrage Partners, LP (Whitebox Convertible
Arbitrage) and Whitebox Special Opportunities Fund Series B Partners, LP
(Whitebox Special Opportunities) whereby the Corporation agreed to repurchase
its 10% Senior Secured Notes due March 4, 2011 (Notes).
Pursuant to the Whitebox
Repurchase Agreements, the Corporation agreed to repurchase Notes (i) in
the principal amount of $504,000 from Whitebox Combined Partners for an
aggregate purchase price, including interest, of $331,800; (ii) in the
principal amount of $510,000 from Whitebox Convertible Arbitrage for an
aggregate purchase price, including interest, of $335,750; and (iii) in
the principal amount of $319,000 from Whitebox Special Opportunities for an
aggregate purchase price, including interest, of $210,008, based on a
settlement date of July 14, 2009.
The Whitebox Repurchase
Agreements were initiated by Whitebox Advisors LLC and were not the result of
any solicitation by or on behalf of the Corporation. The Corporation has not
initiated any broader effort to repurchase or restructure any of its remaining
Notes and did not act upon the basis of material non-public information in
determining to enter into the Whitebox Repurchase Agreements.
Confirmatory Drilling Program at Paredones Amarillos Gold Project and
Update on Permitting Progress
On
August 4, 2009, the Corporation announced that it would be initiating a
diamond drilling program at the Paredones Amarillos gold project, located in
Baja California Sur, Mexico. The program
of diamond drill holes is designed to obtain samples to confirm process plant
design criteria and provide additional validation of the mineral reserve model
used for the feasibility study completed in September 2008 and announced
in a press release dated September 8, 2008. The Corporation received the final
authorization to proceed with the drilling program on Friday, July 31,
2009, and plans on mobilizing the drilling contractor within two weeks. The
Corporation expects to complete the drilling by mid-October and complete
the evaluation of the results later in the fourth quarter.
The
Corporations advisors and management have been working with Mexican
authorities to expedite the permitting process at the Paredones Amarillos gold
project. The Corporations advisors have informed management that the
Corporations application for the TOP for the use of the federal land which
overlies the Paredones Amarillos deposit is in the final review stages and that
the application process continues to advance favorably. Receipt of the TOP is a pre-requisite for
filing an application for the CUSF which will enable the Corporation to
commence development of the Paredones Amarillos gold project. The Corporation has already prepared the CUSF
application and obtained the environmental permit necessary to submit the
application. The Corporation intends to submit the CUSF application as soon as
the TOP is received.
15
Table of
Contents
ITEM 2. MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Managements Discussion
and Analysis (MD&A) of the consolidated operating results and financial
condition of Vista Gold Corp. (Vista, Vista Gold or the Corporation) for
the three- and six-month periods ended June 30, 2009 have been prepared
based on information available to us as of August 6, 2009. This MD&A should be read in conjunction
with the consolidated financial statements of Vista Gold for the three years
ended December 31, 2008 and the related notes thereto, which have been
prepared in accordance with generally accepted accounting principles (GAAP)
in Canada. Reference to Note 19 to the
consolidated annual financial statements and Note 14 to the consolidated
interim financial statements for the period ended June 30, 2009 (the Consolidated
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 per share, per ounce amounts and
number of shares, unless otherwise noted.
Results from Operations
Our consolidated net
earnings for the three-month period ended June 30, 2009, was $3,890 or
$0.11 per share compared to a consolidated net loss of $2,048 or $0.06 per
share for the same period in 2008. Our
consolidated net earnings for the six-month period ended June 30, 2009,
was $2,010 or $0.06 per share compared to a consolidated net loss of $4,171 or
$0.12 per share for the same period in 2008.
For both the three- and six-month periods, the increases in the
consolidated net earnings of $5,938 and $6,181 from the respective prior
periods are primarily due to a gain on disposal of marketable securities of $6,822. The gain was the result of the sale of our
Allied Nevada Gold Corp. (Allied) shares which we retained in connection with
the transaction that resulted in the formation of Allied and the transfer of
Vistas Nevada properties to Allied. This
transaction resulted in an exchange where the Corporations shareholders
received one new Vista common share and 0.794 Allied common share for each old
Vista share held. This gain has been
partially offset by an increase in the future income tax expense for both the
three- and six-month periods of $1,168 and $688.
Exploration, property evaluation
and holding costs
Exploration, property
evaluation and holding costs were $268 for the three-month period ended June 30,
2009 and $601 for the six-month period ended June 30, 2009, as compared
with $252 and $497 for the same periods in 2008. For both the three-month and
six-month periods, there were no significant variances as we continue to move
our projects towards development decisions.
Corporate administration and
investor relations
Corporate administration and
investor relations costs decreased to $974 during the three-month period ended June 30,
2009, compared with $1,253 for the same period in 2008. The decrease of $279 from the respective
prior period is primarily due to the following:
·
Stock-based
compensation expense decreased by $194 for the three-month period ended June 30,
2009. This decrease is primarily due to
a decrease in the number of options granted during the prior year and vesting
over time as well as an increase in the stock-based compensation amount being
capitalized as mineral properties.
·
Legal costs decreased by $75 for the six-month period
ended June 30, 2009.
Corporate administration and
investor relations costs decreased to $1,986 for the six-month period ended June 30,
2009 compared with $2,540 for the same period in 2008. The decrease of $554 from the respective
prior period is primarily due to the following:
·
Stock-based compensation expense decreased by $364 for
the six-month period ended June 30, 2009.
This decrease is primarily due to a decrease in the number of options
granted during the prior year and vesting over time as well as an increase in
the stock-based compensation amount being capitalized as mineral properties.
·
Securities and compliance fees expense decreased by
$120 for the six-month period ended June 30, 2009.
·
Audit, tax and
Sarbanes-Oxley compliance fees decreased by $53 for the six-month period ended June 30,
2009 as we work with our auditors and outside consultants to reduce these fees.
Depreciation and amortization
Depreciation and
amortization expense increased to $62 during the three-month period ended June 30,
2009 and $114 for the six-month period ended June 30, 2009, compared with
$40 and $79 for the same periods in 2008.
The increases of $22 and $35 from the respective prior periods are
mostly due to an increase in capital equipment at the Mt. Todd gold project and
the Paredones gold project that has begun to be depreciated.
16
Table of Contents
Interest expense
Interest expense of $584
during the three-month period ended June 30, 2009 was approximately equal
to $585 for the same period in 2008. Interest
expense increased to $1,163 for the six-month period ended June 30, 2009,
as compared with $769 for the same period in 2008. This increase is because the senior secured
convertible notes (the Notes) were issued on March 4, 2008 and therefore
only 118 days of interest were recorded for the 2008 period. For the three-month period ended June 30,
2009, $265 is attributable to the accretion of the debt discount and $319 is
attributable to interest expense. For
the six-month period ended June 30, 2009, $524 is attributable to the
accretion of the debt discount and $639 is attributable to interest
expense. These amounts are approximately
43% of the full interest expense associated with the issuance of the
Notes. We capitalized the remaining 57%
as additions to mineral properties in accordance with SFAS No. 34 and our
accounting policy.
Other income and expense
Gain on disposal of
marketable securities
For the three-month period
ended June 30, 2009, we realized a gain of $6,822 on the disposal of
marketable securities compared to a loss on the disposal of marketable
securities of $88 for the same period in 2008. The gain for the three-month
period in 2009 resulted from the sale of securities that had a book value of
$2,194 and the loss for the same period in 2008 resulted from the sale of
securities that had a book value of $120.
For the six-month period
ended June 30, 2009, we realized a gain of $6,815 on the disposal of
marketable securities as compared to a loss on the disposal of marketable
securities of $67 for the same period in 2008.
The gain for the six-month period in 2009 resulted from the sale of
securities that had a book value of $2,218 and the loss for the same period in
2008 resulted from the sale of securities that had a book value of $157.
For
both the three- and six-month periods ended June 30, 2009, the gains were
mostly the result of our sale on April 3, 2009, of all 1,529,848 common
shares of Allied Nevada Gold Corp. for $9,016.
These shares had a book value of $2,194.
At
June 30, 2009, we held marketable securities available for sale with a
quoted market value of $628. 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.
Interest income
Interest income decreased to
$21 for the three-month period ended June 30, 2009 and $49 for the
six-month period ended June 30, 2009 as compared with $171 and $280 for the
same periods in 2008. The decreases of
$150 and $231 from the respective prior periods are due to reduced cash
balances for the 2009 periods as well as falling interest rates in the market.
Future income tax
(benefit)/expense
Effective
September 30, 2008, the Corporation adopted the Emerging Issues Committee
Abstract 172 (EIC 172), Income Statement Presentation of a Tax Loss
Carryforward Recognized Following an Unrealized Gain in Other Comprehensive
Income. EIC 172 provides guidance on
whether the tax benefit from the recognition of previously unrecognized tax
loss carryforwards consequent to the recording of unrealized gains in other
comprehensive income, such as unrealized gains on available-for-sale financial
assets, should be recognized in net income or in other comprehensive
income. EIC 172 was applied
retrospectively, with restatement of prior periods from January 1, 2007,
the date of adoption of CICA 3855.
During the three-month
period ended June 30, 2009, the future income tax expense was $989
compared to a future income tax benefit of $179 for the 2008 period. During the six-month period ended June 30,
2009, the future income tax expense was $781 compared with $93 for the same
period in 2008. For both the three- and
six-month periods ended June 30, 2009, the increase in the future income
tax expense as compared to the prior periods is mostly the result of the sale
of the Allied Nevada Gold Corp. shares on April 3, 2009. In previous periods a future income tax
benefit was recorded in the net loss in respect of previously unrecognized tax
loss carry forwards as these losses were expected to cover any taxable gains
that would arise as a result of the increase in value of the marketable
securities. When these securities were disposed of, the unrealized gains were
transferred from other comprehensive income/(loss) to net earnings. Since no
taxable gain arose on this disposal, an income tax expense was recorded in the
current period to affect the benefit recorded in prior periods. The net impact
is such that no tax is payable on this disposal and accordingly the cumulative
tax expense records in the Consolidated Statement of Earnings and (Loss)
reflects the tax benefit associated with Vistas remaining marketable
securities.
Write-down
of marketable securities
The write-down of marketable
securities was $11 for the three-month period ended June 30, 2009 and $123
for the six-month period
17
Table of Contents
ended June 30,
2009. There were no write-downs reported
during the same period in 2008. At June 30,
2009, Vista Gold evaluated the market value of its available-for-sale
securities and found that certain securities had become impaired. These securities were written down to their
fair market value as of June 30, 2009.
Financial Position,
Liquidity and Capital Resources
Cash used in operations
Net cash used in operating
activities was $3,043 for the three-month period ended June 30, 2009,
compared to $2,072 for the same period in 2008.
The increase of $971 is mostly the result of an increase of $658 in the
amount of interest paid on the Notes.
The Notes were issued on March 4, 2008 and therefore only 72 days
of interest had accrued as of June 15, 2008. Also contributing to the increase was an
increase in cash used for accounts payable, accrued liabilities and other of
$454, which was offset by an increase in cash provided by accounts receivable
of $118.
Net cash used in operating
activities was $4,225 for the six-month period ended June 30, 2009,
compared to $3,279 for the same period in 2008.
Similar to the three-month period, the increase of $946 is mostly the
result of the increase in interest paid of $658, an increase in cash used for
accounts payable, accrued liabilities and other of $349, which has been offset
by an increase in cash provided by accounts receivable of $130.
Investing activities
Net
cash provided by investing activities increased to $8,361 for the three-month
period ended June 30, 2009, as compared to net cash used in investing
activities of $3,195 for the same period in 2008. The increase in cash provided by investing
activities of $11,556 is due to the following:
·
An increase in the proceeds
from the sale of marketable securities of $8,985. On April 3, 2009, we sold all 1,529,848
common shares of Allied Nevada Gold Corp. for we held $9,016.
·
An increase in the proceeds
received upon the disposal of mineral property.
In June 2009, we sold most of the remaining patented mining claims
in Colorado for $188. There were no
similar transactions during the 2008 period.
·
A decrease in cash used for
additions to mineral properties of $1,770.
During the 2008 period we undertook a drilling program at the Mt. Todd
gold mine and were in the process of completing a feasibility study for the
Paredones Amarillos gold project. These
projects were completed during 2008.
·
A decrease in short-term
loans made of $350. In connection with
the sale of our Amayapampa gold project in April 2008 (see Consolidation
Financial Statements Note 3) we loaned to Republic $350 to cover ongoing
expenses at the Amayapampa gold project.
Net
cash provided by investing activities increased to $7,259 for the six-month
period ended June 30, 2009, as compared to net cash used in investing
activities of $21,308 for the same period in 2008. The increase in cash provided by investing
activities of $28,567 is mostly the result of the same items that increased
cash for the three-month period as well as the following:
·
A decrease in the additions
to property, plant and equipment of $16,311. During 2008 we completed a
brokered private placement of $30,000 principal amount of senior secured
convertible notes (the Notes) (see Consolidated Financial Statements Note
7) and we have used $16,000 of the proceeds towards the purchase of gold
processing equipment to be used at our Paredones Amarillos project, which
included the costs of relocating the equipment to Edmonton, Alberta,
Canada. There was no similar purchase
during the six-month period ended June 30, 2009.
·
A decrease in the
acquisition of mineral property of $452.
On January 24, 2008, we completed the acquisition of interests in
various mineral properties adjacent to our Guadalupe de los Reyes project in
Mexico. The consideration paid by Vista
for the acquisition of these interests included cash payments totaling $452 and
the issuance of a total of 213,503 common shares of Vista (with an aggregate
fair value of $1,000), to various parties.
There was no similar purchase during the six-month period ended June 30,
2009.
Financing activities
There was no cash provided
by or used in financing activities for the three-month period ended June 30,
2009. Net cash used by financing
activities was $144 for the three-month period ended June 30, 2008. The cash used in financing activities for the
2008 period was the result of additional fees paid on the issuance of the Notes
(see Consolidated Financial Statements Note 7).
18
Table of Contents
There was no cash
provided by or used in financing activities for the six-month period ended June 30,
2009. Net cash provided by financing
activities was $31,400 for the six-month period ended June 30, 2008. During the six-month period ended June 30,
2008 we completed a brokered private placement, in which we offered and sold
$30,000 principal amount of the Notes (see Consolidated Financial Statements
Note 7). Proceeds to Vista after legal
and other fees were $28,390. Also,
during the six-month period ended June 30, 2008, warrants exercised
produced cash proceeds of $2,941 and stock option exercises produced cash
proceeds of $69.
Liquidity and Capital Resources
At June 30, 2009,
our total assets were $74,589 compared to $75,765 at December 31, 2008,
representing a decrease of $1,176. At June 30,
2009, we had working capital of $17,137 compared to $21,209 at December 31,
2008, representing a decrease of $4,072.
This decrease relates primarily to a reduction in marketable securities
balances due to the sale of the Allied Nevada Gold Corp. shares in April 2009,
which is offset by an increase in our cash balance from year end.
The principal component
of working capital at both June 30, 2009 and December 31, 2008, is
cash and cash equivalents of $16,300 and $13,266, respectively. Other components include marketable
securities (June 30, 2009 $628; December 31, 2008 $8,153) and
other liquid assets (June 30, 2009 - $723; December 31, 2008 - $593).
As
a result of the delay in the issuance of the Change of Land Use Permit at the
Paredones Amarillos project and the current uncertainty in the resource and
financial markets, management has adopted a revised plan and budget for the
year 2009. The plan continues those programs necessary to expedite the
development of the Paredones Amarillos project, while minimizing expenditures
in other areas. We expect that in the event that financing for the Paredones
Amarillos project is not available on acceptable terms in 2009, Vista has
sufficient working capital to fund its planned operations at least through the
end of 2010, without additional financing. We will continue to examine
potential funding alternatives for the project, which may include project
financing, debt financing or equity financing.
On
April 17, 2009, we announced that we filed a preliminary short form base
shelf prospectus in Canada with the securities regulatory authorities in each
province and territory (other than Quebec) and a corresponding shelf
registration statement in the United States with the Securities and Exchange
Commission (SEC). On April 27,
2009, we announced that we filed a final short form base shelf prospectus in
each province and territory in Canada (other than Quebec) and an amended Form S-3 with the
SEC. The Form S-3 was declared
effective on April 30, 2009. See Other
Filing of short form based shelf prospectus and shelf registration statement
on Form S-3, below.
There
has been a severe deterioration in global credit and equity markets. This has resulted in the need for government
intervention in major banks, financial institutions and insurers and has also
resulted in greater volatility, increased credit losses and tighter credit
conditions. These disruptions in the
current credit and financial markets have had a significant material adverse
impact on a number of financial institutions and have limited access to capital
and credit for many companies. These disruptions could, among other things,
make it more difficult for us to obtain, or increase our cost of obtaining,
capital and financing for our operations.
Our access to additional capital may not be available on terms
acceptable to us or at all.
Off-Balance Sheet Arrangements
We have no off-balance
sheet arrangements required to be disclosed in this Quarterly Report on Form 10-Q.
Contractual Obligations
|
|
Payments due by period (in thousands)
|
|
Contractual Obligations
|
|
Total
|
|
Less than
1 year
|
|
1 to 3 years
|
|
3 to 5 years
|
|
More than
5 years
|
|
Long-term debt obligations(1)
|
|
$
|
35,250
|
|
$
|
3,000
|
|
$
|
32,250
|
|
$
|
|
|
$
|
|
|
Purchase obligations(2)
|
|
$
|
400
|
|
$
|
200
|
|
$
|
200
|
|
$
|
|
|
$
|
|
|
Operating lease obligations
|
|
$
|
42
|
|
$
|
42
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Total
|
|
$
|
35,692
|
|
$
|
3,242
|
|
$
|
32,450
|
|
$
|
|
|
$
|
|
|
(1)
Long-term debt obligations including interest
payments related to the Corporations issuance of the Notes, are discussed in
the Consolidated Financial Statements Note 7.
19
Table of
Contents
(2)
Purchase obligations include option payments
totaling $400 on the Guadalupe de los Reyes and Long Valley projects. For the
Guadalupe de los Reyes Project, we still have outstanding $100, which is to be
paid in less than a year. For the Long Valley project, we still have
outstanding $300, of which $100 is to be paid in less than a year and $200 is
to be paid in 1 to 3 years.
20
Table of
Contents
Other
Sale
of Allied Nevada Gold Corp. common shares
On April 3, 2009 Vista announced
that it had sold all of its 1,529,848 shares of Allied Nevada Gold Corp. (Allied)
for $9,016. These shares had a book
value of $2,194 and when sold, resulted in a realized gain of $6,822. In May 2007, Vista completed a
transaction that resulted in the formation of Allied and the transfer of Vistas
Nevada properties to Allied. The Allied shares sold by Vista were retained in
connection with this transaction to facilitate the payment of any taxes payable
by Vista in respect of the transaction.
Vista has determined that there are no other taxes payable by it in
respect of the transaction and made the decision to sell the Allied shares at
the appropriate time and use the cash for project development requirements.
Filing of short form based shelf
prospectus and shelf registration statement on Form S-3
On
April 17, 2009, Vista announced that it filed a preliminary short form
base shelf prospectus with the securities regulatory authorities in each
province and territory of Canada (other than Quebec) and a corresponding shelf
registration statement on Form S-3 with the SEC and on April 27,
2009, Vista announced that it filed a final short form base shelf prospectus
(collectively, the Offering Documents).
The Form S-3 was declared effective by the SEC on April 30,
2009. The Offering Documents will allow
Vista to make offerings of common shares, debt securities, warrants,
subscription receipts or units for initial aggregate proceeds of up to $200
million during the next 25 months to potential purchasers in each province
and territory of Canada (other than Quebec) and the United States. Vista expects that it will need to fund the
initial capital requirements for the construction and development of its
Paredones Amarillos gold project, once necessary permits and approvals have
been received. Although the initial
financings under the Offering Documents are expected to be used for the
construction and development of our existing properties, the proceeds from
financings under the Offering Documents may also be used by Vista to fund
development of its other existing or acquired mineral properties, acquisitions,
working capital requirements, repayment of outstanding indebtedness from
time-to-time or for other general corporate purposes. The Offering Documents provide Vista with a
flexible and efficient approach for completing future financings for corporate
growth and development.
Board
Approval for Preparation of a Pre-Feasibility Study on its Mt. Todd Gold
Project
On June 23, 2009 we
announced
that
following a review of the results of the recently completed Preliminary
Economic Assessment (PEA), the Board has approved the expenditure of funds
for the preparation of a Preliminary Feasibility Study (PFS) on our Mt. Todd
gold project. Vista has awarded a contract to Tetra Tech Inc. of Golden,
Colorado, to manage and prepare the PFS in accordance with Canadian National
Instrument 43-101Standards of Disclosure for Mineral Projects (NI 43-101).
The contract for the process and infrastructure engineering portion of the PFS
has been awarded to Ausenco Limited of Perth, Australia. In addition, Resource Development inc. of
Denver, Colorado, will continue to supervise metallurgical testing and act as
metallurgical consultant.
The PFS will be based on the base
case scenario presented in the PEA, except that in accordance with NI 43-101,
the PFS will not include inferred resources.
The base case final pit, using a break-even gold price of $600 per ounce
was estimated in the PEA to contain 147.6 million tonnes of measured and
indicated resources with an average grade of 0.90 grams gold per tonne, containing
4.25 million ounces of gold. The goal of
the PFS is to refine and optimize these estimates to determine the potential
economics of the proposed operation. The PEA reported an estimated mine life of
15.2 years with total estimated gold production of 3.7 million ounces resulting
in estimated pre-tax net cash flow of $646.7 million at a $750 per ounce gold
price. At the same gold price, the
pre-tax NPV
8
(net present value with an 8%
discount rate) was estimated to be $232.9 million and the internal rate of
return was estimated to be 21.6%.
Pre-production capital was estimated to be $323.1 million. Cash operating costs were estimated to be
$453 per ounce. The PEA included
inferred mineral resources.
Investors
should read the Cautionary Note to All Investors Concerning Economic
Assessments That Include Inferred Mineral Resources.
Cautionary
Note to U.S. Investors
: Mineral resources are not mineral
reserves and there is no assurance that any mineral resources will ultimately
be reclassified as proven or probable reserves. Mineral resources which are not
mineral reserves do not have demonstrated economic viability.
U.S. Investors should read the Cautionary Note to U.S. Investors
Regarding Reserve and Resource Estimates below concerning the difference
between resources and reserves.
Vista is currently
developing plans to undertake development drilling in the Batman Pit area to
convert inferred resources to indicated resources or measured resources and to
undertake exploration drilling on the mining and exploration licenses at Mt.
Todd.
The PEA was prepared
under the direction of Mr. John Rozelle, an independent qualified person
under NI 43-101. The results of the PEA
are outlined in a NI 43-101 technical report entitled Mt. Todd Gold Project Updated
Preliminary Economic Assessment Report, Northern Territory, Australia and is
dated June 11, 2009. The PEA is
available on SEDAR at www.sedar.com.
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Subsequent
events
Repurchase of Senior Secured Notes
On July 14, 2009,
Vista Gold Corp. (the Corporation) entered into Note Repurchase Agreements
(the Whitebox Repurchase Agreements) with Whitebox Combined Partners, LP (Whitebox
Combined Partners), Whitebox Convertible Arbitrage Partners, LP (Whitebox
Convertible Arbitrage) and Whitebox Special Opportunities Fund Series B
Partners, LP (Whitebox Special Opportunities) whereby the Corporation agreed
to repurchase its 10% Senior Secured Notes due March 4, 2011 (Notes).
Pursuant to the Whitebox
Repurchase Agreements, the Corporation agreed to repurchase Notes (i) in
the principal amount of $504,000 from Whitebox Combined Partners for an
aggregate purchase price, including interest, of $331,800; (ii) in the
principal amount of $510,000 from Whitebox Convertible Arbitrage for an
aggregate purchase price, including interest, of $335,750; and (iii) in
the principal amount of $319,000 from Whitebox Special Opportunities for an
aggregate purchase price, including interest, of $210,008, based on a
settlement date of July 14, 2009.
The Whitebox Repurchase
Agreements were initiated by Whitebox Advisors LLC and were not the result of
any solicitation by or on behalf of the Corporation. The Corporation has not
initiated any broader effort to repurchase or restructure any of its remaining
Notes and did not act upon the basis of material non-public information in
determining to enter into the Whitebox Repurchase Agreements.
Confirmatory Drilling Program at Paredones Amarillos Gold Project and
Update on Permitting Progress
On
August 4, 2009, Vista announced that it would be initiating a diamond
drilling program at the Paredones Amarillos gold project, located in Baja California
Sur, Mexico. The program of diamond
drill holes is designed to obtain samples to confirm process plant design
criteria and provide additional validation of the mineral reserve model used
for the feasibility study completed in September 2008 and announced in a
press release dated September 8, 2008.
Vista received the final authorization to proceed with the drilling
program on Friday, July 31, 2009, and plans on mobilizing the drilling
contractor within two weeks. Vista expects to complete the drilling by mid-October and
complete the evaluation of the results later in the fourth quarter.
Vistas
advisors and management have been working with Mexican authorities to expedite
the permitting process at the Paredones Amarillos gold project. Vistas advisors
have informed management that Vistas application for the TOP for the use of
the federal land which overlies the Paredones Amarillos deposit is in the final
review stages and that the application process continues to advance
favorably. Receipt of the TOP is a
pre-requisite for filing an application for the CUSF which will enable Vista to
commence development of the Paredones Amarillos gold project. Vista has already prepared the CUSF
application and obtained the environmental permit necessary to submit the
application. Vista intends to submit the CUSF application as soon as the TOP is
received.
Changes in Accounting Policies
and Recent
Accounting Pronouncements
Changes in accounting policies
Effective
September 30, 2008, we adopted the Emerging Issues Committee Abstract 172
(EIC 172), Income Statement Presentation of a Tax Loss Carryforward
Recognized Following an Unrealized Gain in Other Comprehensive Income. EIC 172 provides guidance on whether the tax
benefit from the recognition of previously unrecognized tax los carryforwards
consequent to the
recording
of unrealized gains in other comprehensive income, such as unrealized gains on
available-for-sale financial assets, should be recognized in net income or in
other comprehensive income. EIC 172
should be applied retrospectively, with restatement of prior periods from January 1,
2007, the date of adoption of CICA (as defined below) Section 3855, Financial
Instruments Recognition and Measurement.
The
adoption of EIC 172 resulted in a reclassification of $1,132 of income tax
recovery from the accumulated other comprehensive income balance to the
accumulated deficit as of December 31, 2007. It also increased the Corporations
three-month loss for the period ended March 31, 2008 by $272.
Effective
January 1, 2009, 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.
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
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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 has determined there is no impact on its current
financial statements.
Cautionary
Note to U.S. Investors Regarding Reserve and Resource Estimates
The terms mineral
reserve, proven mineral reserve and probable mineral reserve are Canadian
mining terms as defined in accordance with NI 43-101 and the Canadian
Institute of Mining, Metallurgy and Petroleum (the CIM)
CIM Definition Standards on Mineral Resources and
Mineral Reserves
, adopted by the CIM Council, as amended. These
definitions differ from the definitions in the United States Securities
and Exchange Commission (SEC) Industry Guide 7 (SEC Industry Guide 7)
under the Securities Act. Under SEC Industry Guide 7 standards, a final
or bankable feasibility study is required to report reserves, the three-year
historical average price is used in any reserve or cash flow analysis to
designate reserves and the primary environmental analysis or report must be
filed with the appropriate governmental authority.
In addition, the terms mineral
resource, measured mineral resource, indicated mineral resource and inferred
mineral resource are defined in and required to be disclosed by
NI 43-101; however, these terms are not defined terms under SEC Industry
Guide 7 and are normally not permitted to be used in reports and registration
statements filed with the SEC. Investors are cautioned not to assume that any
part or all of mineral deposits in these categories will ever be converted into
reserves. Inferred mineral resources have a great amount of uncertainty as to
their existence, and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all, or any part, of an inferred mineral
resource will ever be upgraded to a higher category. Under Canadian rules,
estimates of inferred mineral resources may not form the basis of feasibility
or pre-feasibility studies, except in rare cases. Investors are cautioned not
to assume that all or any part of an inferred mineral resource exists or is
economically or legally mineable. Disclosure of contained ounces in a
resource is permitted disclosure under Canadian regulations; however, the SEC
normally only permits issuers to report mineralization that does not constitute
reserves by SEC standards as in place tonnage and grade without reference to
unit measures.
Accordingly, information
contained in this report and the documents incorporated by reference herein
contain descriptions of our mineral deposits that may not be comparable to similar
information made public by U.S. companies subject to the reporting and
disclosure requirements under the United States federal securities laws
and the rules and regulations thereunder.
Cautionary
Note to All Investors Concerning Economic Assessments That Include Inferred
Resources
Mineral resources that are not mineral reserves have
no demonstrated economic viability. The
preliminary assessment on the Mt. Todd gold project is preliminary in nature
and includes inferred mineral resources that are considered too speculative
geologically to have economic considerations applied to them that would enable
them to be categorized as mineral reserves.
There is no certainty that the preliminary assessment at the Mt. Todd
gold project will ever be realized.
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 IN MATERIAL REFERENCED
BELOW), FOR THE PURPOSE OF AVOIDING U.S. FEDERAL TAX PENALTIES UNDER THE CODE
(AS DEFINED BELOW). 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.
Vista has been
a passive foreign investment company (PFIC) as defined under Section 1297
of the U.S. Internal Revenue Code of 1986, as amended (the Code), in recent
years and expects to continue to be a PFIC in the future. Current and prospective United States
shareholders should consult their tax advisors as to the tax consequences of
PFIC classification and the U.S. federal tax treatment of PFICs. Additional information on this matter is
included in Vistas Annual Report on Form 10-K for the year ended
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Table of Contents
December 31,
2008, as amended, under Part II.
Item 5. Market for Registrants
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities U.S. Federal Income Tax Consequences.
Note
Regarding Forward-Looking Statements
This
document and any document (or portion thereof) incorporated by reference into
this document, contain 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 regulatory authorities
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 are forward-looking statements and
forward-looking information, including, but not limited to, such things as
those listed below:
·
estimates of future
operating and financial performance;
·
potential funding
requirements and sources of capital;
·
the timing, performance and
results of feasibility studies;
·
timing and receipt of
required land use, environmental and other permits for the Paredones Amarillos
gold project and timing for starting and completion of drilling and testing
programs at the Paredones Amarillos gold project;
·
timing and outcome for a new
Change of Land Use Permit for the Paredones Amarillos gold project;
·
timing and outcome for
application for the Temporary Occupation Permit for mining activities at the
Paredones Amarillos gold project;
·
plans to purchase remaining
surface land or obtain rights-of-way required by the Paredones Amarillos gold
project;
·
capital and operating cost
estimates for the Paredones Amarillos gold project, and anticipated timing of
commencement of construction at the Paredones Amarillos gold project;
·
plans for evaluation of the
Mt. Todd gold project, including estimates of silver, copper and
gold resources;
·
preliminary assessment
results and plans for a pre-feasibility study at the Mt. Todd
gold project;
·
results of drilling programs
and prospects for exploration and conversion of resources at the Mt. Todd
gold project;
·
potential for gold
production at the Amayapampa gold project, timing and receipt of future
payments in connection with the disposal of the Amayapampa gold project and
status of legal proceedings in Bolivia;
·
ongoing debt service
requirements for the Notes and potential redemption or conversion of
the Notes;
·
future gold prices;
·
future business strategy,
competitive strengths, goals and expansion and growth of our business;
·
Vistas potential status as
a producer;
·
plans and estimates
concerning potential project development, including matters such as schedules,
estimated completion dates and estimated capital and operating costs;
·
plans and proposed
timetables for exploration programs and estimates of exploration expenditures;
·
estimates of mineral
reserves and mineral resources;
·
potential joint venture and
partnership strategies in relation to our properties; and
·
future share price and
valuation for Vista and for marketable securities held by Vista.
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The
words estimate, plan, anticipate, expect, intend, believe, will, may
and similar expressions are intended to identify forward-looking statements and
forward-looking information. 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 and information. These factors include risks
such as:
·
our likely status as a passive
foreign investment company for U.S. federal tax purposes;
·
feasibility study results
and preliminary assessment results and the estimates on which they
are based;
·
economic viability of a
deposit;
·
delays in commencement of
construction on the Paredones Amarillos gold project;
·
status of our required
governmental permits for the Paredones Amarillos gold project;
·
increased costs that affect
our financial condition;
·
a shortage of equipment and
supplies;
·
whether our acquisition,
exploration and development activities will be commercially successful;
·
fluctuations in the price of
gold;
·
inherent hazards of mining
exploration, development and operating activities;
·
calculation of mineral
reserves, mineral resources and mineralized material and the fluctuations
thereto based on metal prices, inherent vulnerability of the ore and
recoverability of metal in the mining process;
·
environmental regulations to
which our exploration and development operations are subject;
·
our receipt of future
payments in connection with our disposal of the Amayapampa gold project;
·
leverage as a result of our
outstanding Notes;
·
intense competition in the
mining industry;
·
our potential inability to
raise additional capital on favorable terms, if at all;
·
conflicts of interest of
some of our directors as a result of their involvement with other natural
resource companies;
·
potential challenges to our
title to our mineral properties;
·
political and economic
instability in Mexico, Bolivia and Indonesia;
·
fluctuation in foreign
currency values;
·
trading price of our common
shares and our ability to raise funds in new shares offerings due to future
sales of our common shares in the public or private market;
·
difficulty in bringing
actions or enforcing judgments against us and certain of our directors or
officers outside of the United States;
·
acquisitions and integration
issues;
·
potential negative impact of
the issuance of additional common shares on the trading price of Vistas common
shares;
·
fluctuation in the price of
Vistas common shares;
·
the lack of dividend payments
by Vista;
·
future joint venture and
partnerships relating to Vistas properties;
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·
Vistas lack of recent production
and limited experience in producing;
·
reclamation liabilities,
including reclamation requirements at the Mt. Todd gold project;
·
Vistas historical losses
from operations;
·
historical production not
being indicative of potential future production;
·
water supply issues;
·
governmental authorizations
and permits;
·
environmental lawsuits;
·
lack of adequate insurance
to cover potential liabilities;
·
Vistas ability to retain
and hire key personnel;
·
recent market events and
conditions; and
·
general economic conditions.
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 and forward-looking information please see the risk factors
contained in our Annual Report on Form 10-K (as amended) for the year
ended December 31, 2008, under Part IItem 1A. Risk Factors.
The foregoing section of our 2008 Form 10-K (as amended) 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 and forward-looking information,
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 and
forward-looking information, whether as a result of new information, future
events or otherwise.
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 the
price of gold 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 price of gold fell to a
20-year low of $253 in July 1999 and has risen significantly since that
time to reach a level of $865 by December 31, 2008 and was $935 on June 30,
2009 and $961 on August 5. 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, 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 the 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.
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ITEM 4.
CONTROLS
AND PROCEDURES
DISCLOSURE
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 U.S. Securities Exchange Act of 1934, as amended (the Exchange Act) as of
June 30, 2009. 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 U.S. 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.
CHANGES
IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There has been no change
in the Corporations internal control over financial reporting during the
quarter ended June 30, 2009, that has materially affected, or is
reasonably likely to materially affect, the Corporations internal control over
financial reporting.
PART II - OTHER INFORMATION
ITEM
1.
LEGAL PROCEEDINGS
We are
not aware of any material pending or threatened litigation or of any
proceedings known to be contemplated by governmental authorities which are, or
would be, likely to have a material adverse effect upon us or our operations,
taken as a whole.
ITEM 1A.
RISK
FACTORS
Except
for the risk factors as provided below, there have been no material changes
from the risk factors as previously disclosed in our Form 10-K, which was
filed on with the SEC on March 13, 2009 and amended on April 15,
2009.
Acquisitions
and integration issues may expose the Corporation to risks.
The Corporations
business strategy includes making targeted acquisitions. Any acquisition that the Corporation makes
may be of a significant size, may change the scale of the Corporations
business and operations, and may expose the Corporation to new geographic,
political, operating, financial and geological risks. The Corporations success in its acquisition
activities depends on its ability to identify suitable acquisition candidates,
negotiate acceptable terms for any such acquisition and integrate the acquired
operations successfully with those of the Corporation. Any acquisitions would be accompanied by
risks. For example, there may be
significant decreases in commodity prices after the Corporation has committed
to complete the transaction and has established the purchase price or exchange
ratio; a material ore body may prove to be below expectations; the Corporation
may have difficulty integrating and assimilating the operations and personnel
of any acquired companies, realizing anticipated synergies and maximizing the
financial and strategic position of the combined enterprise and maintaining
uniform standards, policies and controls across the organization; the
integration of the acquired business or assets may disrupt the Corporations
ongoing business and its relationships with employees, customers, suppliers and
contractors; and the acquired business or assets may have unknown liabilities
which may be significant. If the
Corporation chooses to use equity securities as consideration for such an
acquisition, existing shareholders may suffer dilution. Alternatively, the Corporation may choose to
finance any such acquisition with its existing resources. There can be no assurance that the
Corporation would be successful in overcoming these risks or any other problems
encountered in connection with such acquisitions.
The issuance of
additional common shares may negatively impact the trading price of the
Corporations common shares.
The Corporation has
issued equity securities in the past and may continue to issue equity
securities to finance its activities in the future, including to finance future
acquisitions, or as consideration for acquisitions of businesses or
assets. In addition, outstanding options
and broker warrants to purchase common shares may be exercised, resulting in
the issuance of additional common shares.
The issuance by the Corporation of additional common shares would result
in dilution to the Corporations shareholders, and even the perception that
such an issuance may occur could have a negative impact on the trading price of
the common shares.
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The price of
the Corporations common shares may fluctuate and may result in losses to
investors.
The trading price of the
Corporations common shares has been and may continue to be subject to large
fluctuations, which may result in losses to investors. The high and low intraday sale prices of its
common shares on the Amex were $13.55 and $4.34 in 2006; $9.45 and $3.80 in
2007; and $5.95 and $0.77 in 2008 and on the TSX were CDN$14.95 and CDN$5.05 in
2006; CDN$10.68 and CDN$4.07 in 2007; and CDN$5.99 and CDN$0.98 in 2008. The trading price of the Corporations common
shares may increase or decrease in response to a number of events and factors,
including:
·
trends in the gold mining industry and the markets in which the
Corporation operates;
·
changes in the price of gold;
·
changes in financial estimates and recommendations by securities
analysts;
·
acquisitions and financings;
·
global and regional political and economic conditions and other
factors;
·
general stock market conditions;
·
the operating and share performance of other companies that investors
may deem comparable to the Corporation; and
·
purchase or sales of blocks of the Corporations common shares.
This volatility may
adversely impact the price of the common shares regardless of the Corporations
operating performance.
The Corporation
has never declared dividends.
The Corporation has never
declared or paid any dividends on its common shares. Currently, the Corporation intends to retain
its earnings, if any, to finance the growth and development of the business and
does not expect to pay dividends or to make any other distributions in the
future, which may limit the way in which investors may realize any returns on
their investment.
Joint ventures
and other partnerships in relation to the Corporations properties may expose
the Corporation to risks.
The Corporation may enter
into joint ventures or other partnership arrangements with other parties in
relation to the exploration, development and production of certain of the
properties in which the Corporation has an interest. Joint ventures can often require unanimous
approval of the parties to the joint venture or their representatives for
certain fundamental decisions such as an increase or reduction of registered
capital, merger, division, dissolution, amendments of constating documents, and
the pledge of joint venture assets, which means that each joint venture party
may have a veto right with respect to such decisions which could lead to a
deadlock in the operations of the joint venture or partnership. Further, the Corporation may be unable to
exert control over strategic decisions made in respect of such properties. Any failure of such other companies to meet
their obligations to the Corporation or to third parties, or any disputes with
respect to the parties respective rights and obligations, could have a
material adverse effect on the joint ventures or their properties and therefore
could have a material adverse effect on the Corporations results of
operations, financial performance, cash flows and the price of common shares.
The Corporation
has no history of producing metals from its current mineral properties and
limited experience with producing mines; there can be no assurance that it will
successfully establish mining operations or profitably produce precious metals.
The Corporation has no
history of producing metals from its current mineral properties. The Corporation does not produce gold and
does not currently generate operating earnings.
While the Corporation seeks to move the Paredones Amarillos and Mt. Todd
gold projects into production, such efforts will be subject to all of the risks
associated with establishing new mining operations and business enterprises
including:
·
the timing and cost, which are
considerable, of the construction of mining and processing facilities;
·
the ability to find sufficient gold
reserves to support a profitable mining operation;
·
the availability and costs of skilled
labor and mining equipment;
·
compliance with environmental and other
governmental approval and permit requirements;
·
the availability of funds to finance
construction and development activities;
·
potential opposition from non-governmental organizations, environmental
groups, local groups or local inhabitants which may delay or prevent
development activities; and
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·
potential increases in construction and operating costs due to changes
in the cost of fuel, power, materials and supplies.
The costs, timing and
complexities of mine construction and development may be increased by the remote
location of the Corporations properties.
It is common in new mining operations to experience unexpected problems
and delays during construction, development and mine start-up. In addition, the Corporations management
will need to be expanded. This could
result in delays in the commencement of mineral production and increased costs
of production. Accordingly, the
Corporation cannot assure you that its activities will result in profitable
mining operations or that it will successfully establish mining operations.
The Corporations
continuing historical reclamation obligations at the Mt. Todd gold project and
its reclamation requirements on other properties could require significant
additional expenditures.
The Corporation could be
responsible for the reclamation obligations related to previous disturbances
located on all of its properties, including the Mt. Todd gold project. The Mt. Todd site was not reclaimed when the
original mine closed and as a result, the dumps and heap leach pad require
ongoing care and maintenance. The
Corporation provides that care and maintenance, but will not be responsible for
the environmental liability resulting from previous operations until the
Corporation makes the decision to re-open the mine and has received the appropriate
permits. The satisfaction of any bonding
requirements and continuing or future reclamation obligations on the
Corporations properties will require a significant amount of capital. There is a risk that the Corporation will be
unable to fund these historical and future reclamation requirements, and
further, that the regulatory authorities may increase reclamation and bonding
requirements to such a degree that it would not be commercially reasonable to
continue exploration or development activities on such properties, including at
the Mt. Todd gold project. Such events
could have a material adverse effect on the Corporations results of
operations, financial performance, cash flows and the price of the common
shares.
The Corporation
has a history of losses and may incur losses in the future.
The Corporation has incurred losses since inception
and may incur net losses in the future.
The Corporation incurred the following losses from operations during
each of the following periods:
·
approximately $10 million for the year
ended December 31, 2008; and
·
approximately $13 million for the year
ended December 31, 2007.
The Corporation had an
accumulated deficit of approximately $189 million as of June 30, 2009, and
an accumulated deficit of approximately $191 million as of December 31,
2008.
The Corporation expects
to continue to incur losses unless and until such time as one of its properties
enters into commercial production and generates sufficient revenues to fund
continuing operations. The Corporation
has committed and plans to continue to commit substantial capital and other
resources to the ongoing development of the Paredones Amarillos and Mt. Todd
gold projects. The amount and timing of
future expenditures will depend on a number of factors, including, but not
limited to, the progress of ongoing development and operations, permitting
matters, the timing of development, the costs of production, the commercial
viability of production and other factors, some of which are beyond the
Corporations control. The Corporation
cannot assure investors that it will ever achieve profitability.
Historical
production of gold at the Corporations Mt. Todd gold project may not be
indicative of the potential for future development or revenue.
The Mt. Todd gold project
was an operating mine in the late 1990s.
Based on a review of project files, the Corporations management
believes that approximately 27.1 million short tons grading 0.031 gold ounces
per ton and containing 826,000 ounces of gold were extracted between 1996 and
the termination of mining in 2000.
Processing was by a combination of heap-leach production from oxide ore
and cyanidation of sulfide ore. The
remaining mineralization consists of sulfide mineralization lying below and
along strike of the existing open pit.
Historical production of gold from the Corporations Mt. Todd gold
project may not be indicative of the potential for future development of the
property. Due to the uncertainties
associated with exploration and development, including variations in geology
and structure, there is no assurance that the Corporations development efforts
will be successful or that prior operating results are reflective of additional
or economically developable deposits.
Investors in the Corporations securities should not rely on historical
operations as an indication that the Corporations mining properties will be
placed into commercial production again or that such properties will produce
revenues or be profitable.
The Corporation
cannot assure you that it will have an adequate supply of water to complete
desired exploration or development of its mining properties.
The Corporation has
obtained permits and water rights that it currently uses to service the
activities on its various properties and the Corporation plans to obtain all
required permits and water rights to serve other properties it may develop or
acquire in the future.
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However, the amount of
water that the Corporation is entitled to use pursuant to its water rights must
be determined by the appropriate regulatory authorities in the jurisdictions in
which it operates. Such regulatory
authorities may amend the regulations regarding such water rights, increase the
cost of maintaining such water rights, or eliminate the Corporations current
water rights and the Corporation may be unable to retain all or a portion of
such water rights. In addition, water at
the Mt. Todd gold project is expected to be provided from a raw water dam and
reservoir. Drought or drought-like
conditions in the area feeding the reservoir could limit or extinguish this
water supply. Accordingly, there is no
assurance that the Corporation will have access to the amount of water needed
to explore or develop its properties or to operate a mine at its properties,
which may prevent the Corporation from generating revenue, and which could
materially adversely affect the Corporations financial condition, cash flows
and the price of the common shares.
The Corporation
requires certain governmental authorizations and permits for its business,
including its development plans and operating activities. The Corporation could incur substantial costs
or disruptions to its business if it cannot obtain, renew or maintain the
necessary authorizations and permits.
A major risk inherent in
the Corporations business is the requirement to obtain authorizations and
permits from governmental authorities.
Delays in obtaining authorizations or permits, failure to obtain an
authorization or permit or receipt of an authorization or permit with
unreasonable conditions or costs could have a material adverse effect on the
Corporations ability to develop one or more of its gold projects, including,
but not limited to, the Paredones Amarillos and Mt. Todd gold projects. The failure to obtain necessary permits could
result in an impairment and write down of the carrying value of its projects.
Vista is awaiting receipt
of permits needed before construction can begin on the Paredones Amarillos gold
project. The Corporation may experience
delays in the commencement of construction on the Paredones Amarillos gold project
due to delays in receiving the required permits. There can be no assurance whether or when
construction at the Paredones Amarillos gold project will commence. If Vista is unable to acquire the required
permits to mine the Paredones Amarillos gold project, then Visa may not have
mineral reserves under SEC Industry Guide 7 or NI 43-101, which could result in
an impairment and write down of the carrying value of the project.
The Corporation
could be subject to environmental lawsuits.
Neighboring landowners
and other third parties could file claims based on environmental statutes and
common law for personal injury and property damage allegedly caused by the
release of hazardous substances or other waste material into the environment on
or around our properties. There can be
no assurance that the Corporations defense of such claims will be
successful. A successful claim against
the Corporation could have a material adverse affect on the Corporations
business prospects, financial condition, results of operation and the price of
the common shares.
The Corporation
does not insure against all risks to which it may be subject in its planned
operations.
The Corporation does not
maintain insurance to cover all of the potential risks associated with its
operations. The Corporation may also be
unable to obtain insurance to cover other risks at economically feasible
premiums or at all. Insurance coverage
may not continue to be available, or may not be adequate to cover all
liabilities. The Corporation might also
become subject to liability for environmental, pollution or other hazards
associated with mineral exploration and production which it may not be insured
against, which may exceed the limits of the Corporations insurance coverage or
which it may elect not to insure against because of premium costs or other
reasons. Losses from these events may
cause the Corporation to incur significant costs that could materially
adversely affect the Corporations financial condition and the Corporations
ability to fund activities on its properties.
A significant loss could force the Corporation to reduce or terminate
its operations on a specific project or altogether.
If the
Corporation fails to hire and retain its key personnel, it may have an adverse
effect on the Corporations operations.
The Corporation depends
on a number of key personnel, including Michael B. Richings, its Executive
Chairman and Chief Executive Officer, Frederick H. Earnest, its President and
Chief Operating Officer, and Gregory G. Marlier, its Chief Financial
Officer. The Corporation relies heavily
on these individuals for the conduct of its business. The Corporations management believes that
the Corporations success depends on the continued service of its key officers
and there can be no assurance that the Corporation will be able to retain any
or all of such officers. The loss of any
one of these personnel could have an adverse effect on the Corporations
operations. The Corporation has
employment contracts with each of these key personnel. The Corporation does not have key man life
insurance.
The Corporations ability
to manage growth effectively will require it to continue to implement and
improve its management systems and to recruit and train new employees. Although the Corporation has done so in the
past and expects to do so in the future, it cannot assure you that it will be
successful in attracting and retraining skilled and experienced personnel.
30
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ITEM 2.
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM
3.
DEFAULTS UPON SENIOR SECURITIES
None.
31
Table of Contents
ITEM
4.
SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
At the Annual General
Shareholders Meeting of the Corporation held on May 4, 2009, the
following matters were submitted to a vote of the shareholders.
(i)
Election of directors to the Corporations
Board of Directors for a one-year term, being:
John M. Clark, W. Durand Eppler, C. Thomas Ogryzlo, Tracy A. Stevenson,
Michael B. Richings and Frederick H. Earnest.
The motions were approved as follows:
John M. Clark with 22,807,423 votes for and 868,899 withheld, W. Durand
Eppler with 22,795,496 votes for and 880,826 withheld, C. Thomas Ogryzlo with
22,807,327 votes for and 868,995 withheld, Tracy A. Stevenson with 22,858,110
votes for and 818,212 withheld, Michael B. Richings with 22,825,897 votes for
and 850,425 withheld and Frederick H. Earnest with 22,858,015 votes for and
818,307 withheld.
(ii)
Appointment of PricewaterhouseCoopers
LLP, Chartered Accountants, as auditor to hold office until the next annual
general meeting. The motion was approved
with 23,236,987 votes for and 439,390 votes withheld.
(iii)
Amendment of Stock Option Plan to provide
for the automatic extension of the expiry dates of options that expire during a
blackout period imposed by the Corporation and to replace references to the American
Stock Exchange with the NYSE Amex.
The motion was approved with 3,458,085 votes for and 1,708,554 votes
against. There were 155,823 beneficial
shares held by insiders whose votes were excluded.
(iv)
Approval of all unallocated options under
the Stock Option Plan. The motion was
approved with 3,111,673 votes for and 2,054,966 votes against. There were 155,823 beneficial shares held by
insiders whose votes were excluded.
ITEM
5.
OTHER INFORMATION
None.
ITEM
6.
EXHIBITS
(a)
Exhibits
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
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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: August 6, 2009
|
By:
|
/s/
Michael B. Richings
|
|
|
Michael B. Richings
|
|
|
Executive Chairman and Chief Executive
Officer
|
|
|
|
|
Date: August 6, 2009
|
By:
|
/s/
Gregory G. Marlier
|
|
|
Gregory G. Marlier
|
|
|
Chief Financial Officer
|
33
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