Vista Gold(VGZ) - 2019 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS This section presents Vista Gold Corp.'s unaudited condensed consolidated financial statements, including the balance sheets, statements of comprehensive income/(loss), statements of shareholders' equity, and statements of cash flows, along with their accompanying notes, for the periods ended September 30, 2019, and December 31, 2018 (balance sheet) or September 30, 2018 (income, equity, cash flow) UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS The balance sheet shows a decrease in total assets and shareholders' equity from December 31, 2018, to September 30, 2019, primarily driven by a reduction in current assets, particularly short-term and other investments, and an increase in accumulated deficit Balance Sheet Summary (in thousands) | Metric | Sep 30, 2019 | Dec 31, 2018 | Change | % Change | | :-------------------- | :----------- | :----------- | :----- | :------- | | Total Assets | $16,110 | $22,126 | $(6,016) | -27.2% | | Total Liabilities | $2,445 | $872 | $1,573 | 180.4% | | Total Shareholders' Equity | $13,665 | $21,254 | $(7,589) | -35.7% | | Cash and cash equivalents | $1,384 | $1,071 | $313 | 29.2% | | Short-term investments | $3,111 | $6,997 | $(3,886) | -55.5% | | Other investments, at fair value | $3,511 | $5,462 | $(1,951) | -35.7% | | Total current assets | $8,216 | $14,070 | $(5,854) | -41.6% | | Deferred option gain | $1,392 | $— | $1,392 | N/A | UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS) Vista Gold Corp. reported an increased net loss for both the three and nine months ended September 30, 2019, compared to the same periods in 2018, primarily due to a significant loss on other investments in 2019, which offset lower operating expenses Consolidated Statements of Comprehensive Income/(Loss) Summary (in thousands, except per share) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total operating expense | $(2,280) | $(1,941) | $(6,413) | $(7,092) | | Gain/(loss) on other investments | $(234) | $(274) | $(1,951) | $1,754 | | Net loss | $(2,498) | $(2,062) | $(8,194) | $(4,933) | | Net loss per share (Basic & Diluted) | $(0.02) | $(0.02) | $(0.08) | $(0.05) | UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Shareholders' equity decreased significantly from December 31, 2018, to September 30, 2019, primarily due to the net loss incurred during the period, partially offset by stock-based compensation and proceeds from stock option exercises Shareholders' Equity Summary (in thousands, except shares) | Metric | Sep 30, 2019 | Dec 31, 2018 | Change | | :----------------------------------- | :----------- | :----------- | :----- | | Common shares outstanding | 100,661,457 | 100,268,161 | 393,296 | | Common shares amount | $457,543 | $456,938 | $605 | | Accumulated deficit | $(443,878) | $(435,684) | $(8,194) | | Total shareholders' equity | $13,665 | $21,254 | $(7,589) | UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 2019, the company experienced a net increase in cash and cash equivalents, driven by cash provided by investing activities, which offset cash used in operating activities and financing activities Cash Flow Summary (in thousands) | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Net cash used in operating activities | $(5,190) | $(6,347) | $1,157 | | Net cash provided by investing activities | $5,513 | $6,185 | $(672) | | Net cash provided by / (used in) financing activities | $(10) | $(106) | $96 | | Net increase in cash and cash equivalents | $313 | $(268) | $581 | | Cash and cash equivalents, end of period | $1,384 | $1,163 | $221 | NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS These notes provide additional detail and context for the unaudited condensed consolidated financial statements, covering the company's operations, significant accounting policies, specific asset and liability breakdowns, equity changes, commitments, fair value measurements, and segment information 1. Nature of Operations and Basis of Presentation Vista Gold Corp. operates in the gold mining industry, focusing on the evaluation, acquisition, exploration, and advancement of gold projects, with its primary asset being the Mt Todd gold project in Australia. The interim financial statements are unaudited and should be read in conjunction with the 2018 annual report - Vista Gold Corp. is focused on gold exploration and potential development projects, aiming for gold production or strategic transactions like earn-in agreements, options, joint ventures, or asset sales[14] - The company's flagship asset is the 100% owned Mt Todd gold project in Northern Territory, Australia, which is the largest undeveloped gold project in Australia[15] - In September 2019, Vista announced positive results from an updated preliminary feasibility study (2019 PFS) for Mt Todd, reflecting improved estimated gold recovery and increased production[15] 2. Significant Accounting Policies The company adopted ASU No. 2016-02, Leases, on January 1, 2019, using the modified retrospective approach, resulting in the recognition of right-of-use (ROU) assets and lease liabilities on the balance sheet for leases longer than 12 months - Vista adopted ASU No. 2016-02, Leases, on January 1, 2019, recognizing $186 thousand in additional liabilities and corresponding ROU assets[19] - As of September 30, 2019, the ROU asset was $113 thousand and the lease liability was $113 thousand, with remaining lease terms ranging from 0.5 to 2.5 years[19] 3. Short-term and Other Investments Short-term investments, primarily U.S. government treasury bills, decreased significantly from December 31, 2018, to September 30, 2019. The company's investment in Midas Gold Shares, recorded at fair value, also saw a substantial unrealized loss during the nine months ended September 30, 2019 Short-term and Other Investments Summary (in thousands) | Investment Type | Sep 30, 2019 | Dec 31, 2018 | Change | % Change | | :----------------------------- | :----------- | :----------- | :----- | :------- | | Short-term investments | $3,111 | $6,997 | $(3,886) | -55.5% | | Other investments (Midas Gold Shares) | $3,511 | $5,462 | $(1,951) | -35.7% | - The company held 7,802,615 Midas Gold Shares, experiencing an unrealized loss of $1,951 thousand for the nine months ended September 30, 2019, compared to an unrealized gain of $1,754 thousand for the same period in 2018[23] 4. Mineral Properties The company's mineral properties primarily consist of the Mt Todd project. The Guadalupe de los Reyes project in Mexico was optioned to Minera Alamos Inc., which subsequently assigned the agreement to Prime Mining Corporation. Payments received under this option agreement have been accounted for as a reduction to carrying value and deferred option gain Mineral Properties Summary (in thousands) | Mineral Property | Sep 30, 2019 | Dec 31, 2018 | Change | | :------------------------------ | :----------- | :----------- | :----- | | Mt Todd, Australia | $2,146 | $2,146 | $0 | | Guadalupe de los Reyes, Mexico | $— | $275 | $(275) | | Total Mineral Properties | $2,146 | $2,421 | $(275) | - The Guadalupe de los Reyes project was optioned to Minera Alamos Inc. in October 2017, with the agreement later assigned to Prime Mining Corporation in June 2019[24] - The option agreement involves payments totaling $6,000 thousand, maintenance of concessions, fulfillment of Ejido obligations, and granting of capped net smelter return royalties (NSRs) on open pit and perpetual NSRs on underground mining[25][33] - Receipt of the second option payment of $1,500 thousand and interest of $67 thousand in April 2019 reduced the carrying value of Los Reyes to zero and resulted in a $1,392 thousand deferred option gain, with the third $1,500 thousand payment received in October 2019[31] 5. Plant and Equipment The net value of plant and equipment remained stable at $5,635 thousand from December 31, 2018, to September 30, 2019, with used mill equipment in Canada representing the largest component Plant and Equipment Net Value (in thousands) | Plant and Equipment | Sep 30, 2019 Net | Dec 31, 2018 Net | Change | | :--------------------------------- | :--------------- | :--------------- | :----- | | Mt Todd, Australia | $135 | $135 | $0 | | Corporate, United States | $— | $— | $0 | | Used mill equipment, Canada | $5,500 | $5,500 | $0 | | Total Net | $5,635 | $5,635 | $0 | 6. Common Shares This section details changes in the company's common shares, including the expiration of all outstanding warrants, and the compensation expense related to stock options, restricted share units (RSUs), deferred share units (DSUs), and phantom units Warrants All 6,514,625 outstanding warrants, with a weighted average exercise price of $1.92, expired unexercised in August 2019 - All 6,514,625 outstanding warrants expired unexercised in August 2019[33][34] Stock-Based Compensation Stock-based compensation expense decreased for both the three and nine months ended September 30, 2019, compared to 2018, with unrecognized compensation expense remaining for stock options, RSUs, and phantom units Stock-Based Compensation Expense (in thousands) | Stock-Based Compensation | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Stock options | $29 | $107 | $160 | $307 | | Restricted stock units | $119 | $164 | $246 | $548 | | Deferred share units | $— | $— | $209 | $— | | Total (excluding phantom units) | $148 | $271 | $615 | $855 | | Phantom units | $28 | $11 | $72 | $11 | - As of September 30, 2019, unrecognized compensation expense was $88 thousand for stock options, $463 thousand for RSUs, and $96 thousand for phantom units, expected to be recognized over 0.8, 1.3, and 1.3 years, respectively[35] Stock Options The number of outstanding stock options increased to 1,507,000 as of September 30, 2019, from 1,319,149 at December 31, 2018, with a weighted average exercise price of $0.73. The fair value of granted options was estimated using the Black-Scholes model Stock Options Activity Summary | Stock Options Activity | Dec 31, 2018 | Sep 30, 2019 | Change | | :--------------------- | :----------- | :----------- | :----- | | Outstanding options | 1,319,149 | 1,507,000 | 187,851 | | Weighted average exercise price | $0.71 | $0.73 | $0.02 | | Exercisable options | N/A | 992,996 | N/A | - The weighted average expected volatility used in the Black-Scholes model decreased from 76.2% in 2018 to 61.1% in 2019, and the expected life decreased from 5.0 years to 2.8 years[37] Restricted Share Units Unvested Restricted Share Units (RSUs) increased to 1,493,301 as of September 30, 2019, from 1,002,670 at December 31, 2018, with new grants and cancellations/vesting impacting the total. A portion of RSUs vest based on performance and market criteria Restricted Share Unit Activity | RSU Activity | Dec 31, 2018 | Sep 30, 2019 | Change | | :------------- | :----------- | :----------- | :----- | | Unvested RSUs | 1,002,670 | 1,493,301 | 490,631 | | Granted | 319,000 | 1,412,500 | 1,093,500 | | Vested, net of shares withheld | (637,554) | (266,296) | 371,258 | - RSU awards vest on fixed future dates or subject to performance and market criteria, including corporate objectives and share price performance, with a minimum vesting period of one year[38] Deferred Share Units The DSU Plan was approved in May 2019, granting 366,000 DSUs to non-employee directors, which vest immediately but are issued as common shares only after the director ceases to be a director - The DSU Plan was approved in May 2019, granting 366,000 DSUs to non-employee directors, resulting in $209 thousand in DSU expense[40][41] - DSUs vest immediately, but common shares are issued only after the non-employee director ceases to be a director[40] Phantom Units The company granted 265,000 phantom units in 2018, payable in cash based on the share price at vesting. As of September 30, 2019, 144,000 unvested phantom units remained, with $14 thousand included in current liabilities - 265,000 phantom units were granted in 2018, with a value equal to the company's share price on the vesting date, payable in cash[42] - As of September 30, 2019, 144,000 phantom units remained unvested, with $14 thousand classified as a current liability[42][43] - Compensation expense for phantom units was $28 thousand for the three months and $72 thousand for the nine months ended September 30, 2019[42] 7. Commitments and Contingencies The company's operations are subject to environmental laws and regulations, which are continually changing. An agreement with the Jawoyn Association Aboriginal Corporation (JAAC) entitles JAAC to an annual cash payment or payment in kind based on gold production from Mt Todd, and a 1% NSR on other metals, with a minimum annual payment - The company's exploration and development activities are subject to evolving and increasingly restrictive environmental laws and regulations[44] - Under an agreement with the Jawoyn Association Aboriginal Corporation (JAAC), JAAC is entitled to an annual payment equal to 1% of annual gold production from Mt Todd, or payment in kind, and a 1% NSR on other metals, with a minimum of A$50 per year[45] - Vista has also agreed to offer JAAC the opportunity to establish a joint venture for Mt Todd, with Vista holding a 90% participating interest and JAAC holding 10%[45] 8. Fair Value Accounting The company measures its Midas Gold Shares at fair value, classified as Level 1 due to quoted market prices. Used mill equipment is classified as Level 3, based on an independent third-party valuation from December 31, 2018, with no significant changes identified to require an update Fair Value Measurements (in thousands) | Asset | Fair Value at Sep 30, 2019 | Level 1 | Level 3 | | :------------------- | :------------------------- | :------ | :------ | | Other investments (Midas Gold Shares) | $3,511 | $3,511 | $— | | Asset | Fair Value at Dec 31, 2018 | Level 1 | Level 3 | | :------------------- | :------------------------- | :------ | :------ | | Other investments (Midas Gold Shares) | $5,462 | $5,462 | $— | | Used mill equipment (non-recurring) | $5,500 | $— | $5,500 | - Midas Gold Shares are classified as Level 1 in the fair value hierarchy due to valuation at quoted market prices in an active market[47] - Used mill equipment is classified as Level 3, based on an independent third-party valuation as of December 31, 2018, with no material changes identified to require an update by September 30, 2019[48] 9. Geographic and Segment Information Vista Gold Corp. operates as a single reportable segment focused on gold exploration and development, primarily in Australia, and reported no revenues for the three and nine months ended September 30, 2019 and 2018 - The company has one reportable operating segment, focused on evaluating, acquiring, exploring, and advancing gold projects, principally in Australia[49] - Vista Gold Corp. reported no revenues during the three and nine months ended September 30, 2019 and 2018[49] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on Vista Gold Corp.'s financial condition and results of operations for the three and nine months ended September 30, 2019, highlighting key financial changes, liquidity, capital resources, and project updates, particularly for the Mt Todd gold project Overview Vista Gold Corp. is a gold mining industry company focused on evaluating, acquiring, exploring, and advancing gold projects, with its flagship Mt Todd project in Australia. The company does not currently generate cash flows from mining operations and has invested significantly in de-risking Mt Todd, including a positive 2019 Preliminary Feasibility Study (PFS) - Vista Gold Corp. operates in the gold mining industry, focusing on evaluation, acquisition, exploration, and advancement of gold projects, but does not currently generate cash flows from mining operations[53] - The Mt Todd gold project in Australia is the company's flagship asset, and significant investments have been made to evaluate, engineer, permit, and de-risk it[54] - The 2019 PFS for Mt Todd confirmed the efficiency of ore sorting, natural gold concentration, economics of fine grinding, improved gold recoveries, and selected FLSmidth's VXP mill as the preferred fine grinding mill[54] Results from Operations Vista Gold Corp. reported an increased net loss for both the three and nine months ended September 30, 2019, compared to the prior year, primarily due to a significant loss on other investments, despite lower operating expenses in some categories Consolidated Net Loss Summary (in thousands, except per share) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Consolidated net loss | $(2,498) | $(2,062) | $(8,194) | $(4,933) | | Net loss per share | $(0.02) | $(0.02) | $(0.08) | $(0.05) | - The company had $7,179 thousand of working capital and no debt as of September 30, 2019[57] Exploration, property evaluation and holding costs Exploration, property evaluation, and holding costs increased for the three months ended September 30, 2019, due to costs for the 2019 PFS, but decreased for the nine-month period due to lower water discharge from the Batman pit and a weaker Australian dollar Exploration, Property Evaluation and Holding Costs (in thousands) | Cost | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Exploration, property evaluation and holding costs | $(1,401) | $(960) | $(3,294) | $(3,560) | - Nine-month costs decreased due to lower water discharge from the Batman pit (less precipitation) and an 8% weaker Australian dollar against the U.S. dollar[58] - Three-month costs increased due to expenses incurred to complete the 2019 PFS[58] Corporate administration Corporate administration costs decreased for both the three and nine months ended September 30, 2019, primarily due to cost savings from bringing investor relations activities in-house Corporate Administration Costs (in thousands) | Cost | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Corporate administration | $(865) | $(969) | $(3,079) | $(3,280) | - Administrative expenses were lower in the three-month period due to cost savings from internalizing investor relations functions[60] Depreciation Depreciation costs significantly decreased for the nine months ended September 30, 2019, compared to 2018, as the majority of the company's fixed assets were fully depreciated by the end of 2018 Depreciation Costs (in thousands) | Cost | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Depreciation | $(14) | $(12) | $(40) | $(252) | - The majority of the Company's fixed assets were fully depreciated by December 31, 2018, leading to lower depreciation costs in 2019[61] Non-operating income and expenses Non-operating income and expenses were significantly impacted by the gain or loss on other investments, which shifted from a gain in 2018 to a substantial loss in 2019 for the nine-month period Gain/(Loss) on other investments The company recorded a significant loss on other investments for the nine months ended September 30, 2019, compared to a gain in the prior year, primarily due to changes in the fair value of Midas Gold Shares Gain/(Loss) on Other Investments (in thousands) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Gain/(Loss) on other investments | $(234) | $(274) | $(1,951) | $1,754 | - These amounts reflect changes in the fair value of the company's Midas Gold Shares[62] Financial Position, Liquidity and Capital Resources The company's net cash used in operating activities decreased, while net cash provided by investing activities also decreased, primarily due to lower dispositions of short-term investments. Liquidity decreased due to operating expenditures and a reduction in Midas Gold Shares' fair value, but the company believes existing working capital and potential non-dilutive financing sources are sufficient for over 12 months Operating activities Net cash used in operating activities decreased for the nine months ended September 30, 2019, primarily due to $1,165 thousand less cash used for working capital items, notably a reduction in accounts payable and accrued liabilities Net Cash Used in Operating Activities (in thousands) | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Net cash used in operating activities | $(5,190) | $(6,347) | $1,157 | - The decreased cash usage in 2019 resulted from $1,165 thousand less cash used for working capital items, mainly a reduction in accounts payable and accrued liabilities[63] Investing activities Net cash provided by investing activities decreased for the nine months ended September 30, 2019, primarily due to a reduction in net dispositions of short-term investments, partially offset by proceeds from the Guadalupe de los Reyes Option Agreement Net Cash Provided by Investing Activities (in thousands) | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Net cash provided by investing activities | $5,513 | $6,185 | $(672) | | Disposition of short-term investments, net of acquisitions | $3,886 | $6,115 | $(2,229) | | Proceeds from option/sale agreements, net | $1,667 | $— | $1,667 | Financing activities Net cash used in financing activities decreased for the nine months ended September 30, 2019, primarily due to lower payments of taxes from withheld shares, partially offset by proceeds from stock option exercises Net Cash Provided by / (Used in) Financing Activities (in thousands) | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :----- | | Net cash provided by / (used in) financing activities | $(10) | $(106) | $96 | | Payment of taxes from withheld shares | $(76) | $(122) | $46 | | Proceeds from exercise of stock options | $66 | $16 | $50 | Liquidity and capital resources The company's cash and short-term investments, as well as net working capital, decreased significantly from December 31, 2018, to September 30, 2019. However, management believes existing working capital, supplemented by potential non-dilutive financing sources and an at-the-market offering agreement, will be sufficient to fund planned corporate and project costs for more than 12 months Liquidity and Capital Resources Summary (in thousands) | Metric | Sep 30, 2019 | Dec 31, 2018 | Change | % Change | | :-------------------- | :----------- | :----------- | :----- | :------- | | Cash and short-term investments | $4,495 | $8,068 | $(3,573) | -44.3% | | Net working capital | $7,179 | $13,198 | $(6,019) | -45.6% | - The decrease in liquidity is mainly due to operating expenditures and the reduction in fair value of Midas Gold Shares, partially offset by receipts from Minera Alamos[67] - Management believes existing working capital, along with potential non-dilutive financing sources (e.g., sale of mill equipment, future option payments, royalty monetization) and an at-the-market offering agreement for up to $10,000 thousand, will be sufficient for over 12 months[68][69][70] Fair Value Accounting The company's Midas Gold Shares are classified as Level 1 in the fair value hierarchy, valued at quoted market prices. Used mill equipment is classified as Level 3, based on a December 31, 2018, independent valuation, with no changes in valuation techniques or transfers between levels in 2019 Fair Value Measurements (in thousands) | Asset | Fair Value at Sep 30, 2019 | Level 1 | Level 3 | | :------------------- | :------------------------- | :------ | :------ | | Other investments (Midas Gold Shares) | $3,511 | $3,511 | $— | | Asset | Fair Value at Dec 31, 2018 | Level 1 | Level 3 | | :------------------- | :------------------------- | :------ | :------ | | Other investments (Midas Gold Shares) | $5,462 | $5,462 | $— | | Used mill equipment (non-recurring) | $5,500 | $— | $5,500 | - Midas Gold Shares are valued at quoted market prices in an active market, classifying them as Level 1[74] - Used mill equipment is classified as Level 3, based on an independent third-party valuation from December 31, 2018, with no sufficient changes identified to require an update by September 30, 2019[75] Off-Balance Sheet Arrangements Vista Gold Corp. reported no off-balance sheet arrangements as of September 30, 2019 - The company has no off-balance sheet arrangements[77] Contractual Obligations Vista Gold Corp. had no material contractual obligations as of September 30, 2019 - The company has no material contractual obligations as of September 30, 2019[78] Project Updates This section provides updates on the Mt Todd Gold Project in Australia, including environmental approvals and metallurgical optimization, and details the results of the 2019 Preliminary Feasibility Study (PFS). It also covers the Guadalupe de los Reyes Gold/Silver Project in Mexico, which is subject to an option agreement Mt Todd Gold Project, Northern Territory, Australia The Mt Todd Gold Project has secured all major environmental approvals. Recent metallurgical optimization programs and the 2019 PFS have confirmed improved gold recovery, efficient fine grinding, and robust economics for the project, evaluating both 50,000 tpd (Base Case) and 33,000 tpd (Alternate Case) development scenarios Environmental Approvals and Metallurgical Optimization Program The Mt Todd project has secured all major environmental approvals. A metallurgical optimization program confirmed improved gold recovery at finer grind sizes and selected FLSmidth VXP mills for fine grinding, leading to lower power consumption and higher recoveries - The 'authorization of a controlled activity' for Mt Todd was approved in January 2018, securing all major environmental approvals for development[80] - A metallurgical optimization program confirmed efficient grinding to a finer product size (80% passing 40 microns) with lower power consumption and reconfirmed higher gold recoveries[81][84] - The program also confirmed the efficiency of ore sorting and the selection of FLSmidth VXP mill as the preferred fine-grinding mill[85] 2019 PFS The 2019 Preliminary Feasibility Study (PFS) for Mt Todd, announced in September 2019, reflects reduced operating costs, increased gold recovery, and higher gold production due to process improvements. The Base Case (50,000 tpd) projects a 13-year mine life with 5.3 million ounces of recovered gold, strong after-tax NPV and IRR, and competitive cash costs - The 2019 PFS, effective September 10, 2019, incorporates higher gold recoveries from finer grind size, a higher gold price, and improved foreign exchange rates, leading to reduced operating costs and increased gold production[86][87] 2019 PFS Base Case Highlights (50,000 tpd) | Metric | Years 1-5 | Life of Mine (13 years) | | :-------------------------- | :-------- | :---------------------- | | Average Milled Grade (g Au/t) | 0.96 | 0.82 | | Payable Gold Annual Average (000's ozs) | 495 | 413 | | Payable Gold Total (000's ozs) | 2,476 | 5,305 | | Gold Recovery | 92.3 % | 91.9 % | | Cash Costs ($/oz) | $575 | $645 | | AISC ($/oz) | $688 | $746 | | Initial Capital ($ millions) | N/A | $826 | | After-tax NPV 5% ($ millions) | N/A | $823 | | IRR (After-tax) | N/A | 23.4 % | | After-tax Payback (Production Years) | N/A | 2.9 | 2019 PFS Base Case Operating Costs | Operating Cost | First 5 Years (Per tonne processed) | First 5 Years (Per ounce) | Life of Mine Cost (Per tonne processed) | Life of Mine Cost (Per ounce) | | :--------------- | :---------------------------------- | :------------------------ | :-------------------------------------- | :---------------------------- | | Mining | $6.51 | $234 | $6.02 | $251 | | Processing | $7.82 | $281 | $7.88 | $328 | | Site General and Administrative | $1.07 | $39 | $1.11 | $46 | | Total Cash Costs | $16.01 | $575 | $15.48 | $645 | - The mine plan contemplates processing 221.0 million tonnes of ore over a 13-year life, yielding an estimated 5.3 million ounces of recovered gold, with average annual production of 413,400 ounces[94] Guadalupe de los Reyes Gold/Silver Project, Sinaloa, Mexico The Guadalupe de los Reyes project is under an option agreement, initially with Minera Alamos Inc. and now assigned to Prime Mining Corporation. The agreement outlines payments totaling $6,000, maintenance obligations, and granting of NSR royalties. The third option payment of $1,500 was received in October 2019, recorded as a deferred option gain - The Guadalupe de los Reyes project is subject to an option agreement, initially with Minera Alamos Inc. and subsequently assigned to Prime Mining Corporation in June 2019[101] - The Optionholder can earn a 100% interest by making payments totaling $6,000 thousand, maintaining concessions, fulfilling Ejido obligations, and granting capped open-pit and perpetual underground NSR royalties[102][105] - The third $1,500 thousand option payment was received from Prime Mining in October 2019, which will be recorded as additional deferred option gain[105][106] Certain U.S. Federal Income Tax Considerations Vista Gold Corp. has been and expects to continue to be classified as a "passive foreign investment company" (PFIC) for U.S. federal income tax purposes, advising U.S. shareholders to consult their tax advisors - Vista has been and expects to continue to be a "passive foreign investment company" (PFIC) for U.S. federal income tax purposes[107] - Current and prospective United States shareholders are advised to consult their tax advisors regarding the tax consequences of PFIC classification[107] Note Regarding Forward-Looking Statements This section outlines various forward-looking statements concerning the company's operations, business, and industry, including expectations for the Mt Todd project, financial performance, funding, and potential strategic transactions. It also highlights known and unknown risks that could cause actual results to differ materially from these statements - Forward-looking statements include beliefs about process improvements at Mt Todd leading to reduced costs and increased gold recovery, the project's robust economics, and plans for further optimization and securing a development partner[110] - Other forward-looking statements cover the sufficiency of working capital, potential non-dilutive financing, the ATM program's flexibility, and the potential monetization of non-core assets[112] - Key risks include the accuracy of feasibility study results, ability to obtain permits, market conditions, reliance on third parties, fluctuations in gold price, and the company's PFIC status[116][117][118] Cautionary Note to Investors Regarding Estimates of Mineral Reserves and Resources This note clarifies that the technical report uses Canadian National Instrument 43-101 (NI 43-101) definitions for mineral reserves and resources, which differ from the U.S. SEC Industry Guide 7 standards. Investors are cautioned about the uncertainties associated with these classifications and the upcoming transition to SEC Modernization Rules - The technical report uses Canadian NI 43-101 definitions for 'mineral reserve,' 'proven mineral reserve,' and 'probable mineral reserve,' which differ from SEC Industry Guide 7 standards[120] - Terms like 'mineral resource,' 'measured mineral resource,' 'indicated mineral resource,' and 'inferred mineral resource' are defined by NI 43-101 but are not defined terms under SEC Industry Guide 7[121] - The SEC Modernization Rules, effective February 25, 2019, will replace SEC Industry Guide 7, with definitions for mineral reserves and resources becoming substantially similar to CIM Definition Standards, though differences may still exist[123] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures, specifically Total Cash Costs, Cash Costs per ounce, and All-in Sustaining Costs (AISC) per ounce, which are used to provide transparency into gold production costs for the Mt Todd project and are not substitutes for U.S. GAAP measures - Non-GAAP measures like Total Cash Costs, Cash Costs per ounce, and All-in Sustaining Costs (AISC) per ounce are presented to help investors understand the economics of the Mt Todd project, but are not U.S. GAAP compliant[124][125][126] - Total Cash Costs include operating costs (net of power sales), refining costs, and non-government royalties, excluding depreciation and corporate G&A[128] - AISC consists of Total Cash Costs plus sustaining capital costs, excluding income taxes, government royalties, financing charges, and certain asset acquisition/disposition costs[129] Mt Todd Total Cash Costs and All-In Sustaining Costs (Non-GAAP) | Metric (US$000s, except per ounce) | Years 1-5 | Life of Mine (13 years) | | :--------------------------------- | :-------- | :---------------------- | | Payable Gold (kozs) | 2,476 | 5,305 | | Operating Costs | 1,381,396 | 3,333,631 | | Refining Cost | 7,910 | 17,075 | | Royalties | 33,420 | 71,615 | | Cash Costs | 1,422,726 | 3,422,321 | | Cash Cost per ounce | $575 | $645 | | Sustaining Capital | 279,569 | 536,176 | | All-In-Sustaining Costs | 1,702,294 | 3,958,497 | | AISC per ounce | $688 | $746 | ITEM 4. CONTROLS AND PROCEDURES Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2019, ensuring timely and accurate reporting. There were no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2019, ensuring timely and accurate reporting of information to the SEC[132] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2019[133] PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Vista Gold Corp. is not aware of any material pending or threatened litigation or governmental proceedings that would likely have a material adverse effect on the company or its operations - The company is not aware of any material pending or threatened litigation or governmental proceedings[135] ITEM 1A. RISK FACTORS There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2018 - No material changes have occurred to the risk factors outlined in the Annual Report on Form 10-K for the year ended December 31, 2018[136] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Vista Gold Corp. reported no unregistered sales of equity securities or use of proceeds during the period - There were no unregistered sales of equity securities or use of proceeds[137] ITEM 3. DEFAULTS UPON SENIOR SECURITIES Vista Gold Corp. reported no defaults upon senior securities during the period - There were no defaults upon senior securities[138] ITEM 4. MINE SAFETY DISCLOSURE The company prioritizes health, safety, and environmental stewardship. During the three months ended September 30, 2019, its U.S. exploration properties were not subject to regulation by the MSHA, thus requiring no disclosure under the Dodd-Frank Act - Health, safety, and environmental stewardship are core values for the company[139] - During the three months ended September 30, 2019, U.S. exploration properties were not subject to MSHA regulation, so no disclosure under Section 1503(a) of the Dodd-Frank Act was required[140] ITEM 5. OTHER INFORMATION Vista Gold Corp. reported no other information for the period - No other information was reported[141] ITEM 6. EXHIBITS This section lists the exhibits filed as part of the report, including corporate documents, consent forms from various professionals, CEO and CFO certifications, and XBRL formatted financial statements - Exhibits include corporate documents (Certificate of Continuation, Notice of Articles, Articles), a Warrant Indenture, and consent forms from various professionals[143] - Certifications from the Chief Executive Officer and Chief Financial Officer are filed pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350[143] - XBRL formatted financial statements (Income, Balance Sheets, Cash Flows, Notes) are submitted electronically as Exhibit 101[143] SIGNATURES The report is duly signed on behalf of Vista Gold Corp. by Frederick H. Earnest, Chief Executive Officer, and Douglas L. Tobler, Chief Financial Officer, on October 23, 2019 - The report was signed by Frederick H. Earnest, Chief Executive Officer, and Douglas L. Tobler, Chief Financial Officer, on October 23, 2019[146]