The following is a transcription of the above video, and The Market Online has edited it for clarity.
The Market Online recently caught up with Vista Gold Corp. (TSXV:VGZ) President & CEO Fred Earnest.
Vista Gold Corp. is a gold project developer with its flagship Mount Todd asset in the mining friendly jurisdiction of Northern Territory, Australia.
TMO: For those who are not all that familiar with Vista Gold quite yet, can you provide a brief overview of the company and your own personal experience in the industry?
Earnest: Vista Gold is a British Columbia corporation. We’re a gold project developer with a track record of value creation through opportunistic transaction success. We have 121 million shares issued outstanding, and $1.9 million in cash at the end of the second quarter. We’ll talk a little bit more about how we think that’s going to increase here in the coming weeks.
We trade on the NYSE American and the TSX stock exchanges under the symbol VGZ. The project itself is one of the largest and most advanced development stage gold projects in Australia. All of the major permits for development of the project are in place.
There’s a significant amount of existing infrastructure including paved roads, power line, natural gas pipeline (which we’ll use to generate power for the project), a tailing storage facility, and a freshwater storage reservoir. The previous operators of the project built all of these components.
The site is easily accessible. It’s one of the most easily accessible gold projects in all of Australia, especially when one considers its size. Local stakeholders, especially the aboriginal people, and the Juan people, strongly support us. They own the surface land in the project area.
As far as my personal experience, I hold a Bachelor of Science in mining engineering from the Colorado School of Mines. I’m a third-generation miner in addition to almost 30 years of gold industry experience.
I’ve worked in industrial minerals, copper base metals, underground shaft and tunnel construction. I also had a short period of time as a mining industry consultant. My gold industry experience includes project evaluation, design, construction, operation and management, including several successful operational turnarounds, and one closure. I’ve been part of the Vista Gold executive team since 2006.
TMO: In February 2022, Vista Gold completed a feasibility study. It delivered a 7-million-ounce gold reserve with very competitive all-in sustaining cost. Vista also completed a feasibility study in March of this year. Can you share with the audience some of the key details of the project and why this makes Vista Gold such an enticing opportunity?
Earnest: Having completed the feasibility study two years ago and then having experienced a period of significant inflation, we made the decision to update the cost estimates and confirm the reserve. We published those results in March of this year.
As you’ve indicated, we reported 7 million ounces of proven and probable reserves. That’s 280 million tons at a grade of 0.77 grams of gold per ton. The 7.8 million ounces of measured and indicated resource includes this.
We designed the project at a 50,000 ton per day size, that’s capable of producing an average of 479,000 ounces of gold per year over the first seven years of the project.
The mine life is estimated to be 16 years and the life of mine cash cost is estimated to be $913. The all-in sustaining cost is estimated to be $1,034 an ounce.
This is a world-class project. When we completed the feasibility study and the update, we used a gold price of $1,800. That generated a net present value of $1.13 billion and an IRR of 20.4 per cent.
If we looked at what the project looks like today with a $2,300 gold price and a 67 cent Australian dollar foreign exchange rate, the NPB of the project at a 5 per cent discount rate is $2.3 billion with an IRR of 33.7 per cent.
Our capital costs are estimated to be just over a billion dollars. That translates to about $163 an ounce over the life of the mine. All of the major permits are approved, and we believe that our social license is also firmly in place.
So why is this or why should this be enticing to other people? With having January 2024 costs, we’ve accounted for inflation. A question mark that hangs over the feasibility study and another estimate of many of our peers, is “how real are the numbers today?” We’re in a position to say that our numbers are actually quite current.
It demonstrates the robust nature of Mount Todd. That it is able to withstand the pressures of inflation. It also demonstrates the significant leverage to the gold price that we enjoy with the project. That it’s one of the few world-class projects in a safe jurisdiction that’s truly shovel ready.
Whether you’re investing or thinking about investing in Vista because you see this as an opportunity to participate in a transaction where we find a partner, or whether you adopt this as a low-cost option on gold in the ground, our costs on an annual basis amount to about a dollar per ounce per year.
Whichever way you choose to look at Mount Todd and Vista Gold, there’s a really interesting opportunity here. This is an opportune time to consider an investment.
TMO: The company is also evaluating smaller scale development opportunities for Mount Todd that would require significantly lower CapEx. Could you just tell us a little bit more about this? Does the company plan to complete a feasibility study for a smaller scale project?
Earnest: We recognize that the billion-dollar CapEx is a big hurdle. It is a big project and that’s an efficient use of capital. But, we’re not going to build a project at that scale. So a year ago we completed an internal scoping study.
We contemplated having contract mining and third-party power generation fit for purpose design. We looked at a project that would be built at a scale of about 15,000 tons per day. About a third of the size of the feasibility study or project, the capital cost for that scale.
The project using some third-party consultants was estimated to be less than $350 million. It is considerably easier to achieve. Production from a project of that scale would be 150,000 to 200,000 ounces of gold per year, over the first 18 years of the project. We didn’t even evaluate a life longer than that.
We have not announced what all the sustaining costs would be compared to the feasibility study that we’ve just updated and announced this year. Contract mining obviously drives all and sustaining costs up a little bit.
We lose a few of the economies of scale having a slightly smaller project. We still need to account for inflation. All of those things said, the average of what we estimate and the sustaining cost for this smaller scale project, would still be lower than the average cost for the largest five gold producers in the world.
This is very attractive. It’s designed to be scalable, provides optionality for looking at a way to expand the project over time. With regards to a feasibility study, we do intend to complete a feasibility study.
We’ve got some drilling going on right now. We hope to start that feasibility study later this year. We will leverage off of the extensive amount of technical work that’s already been completed for the project.
TMO: You completed a $20 million royalty transaction with Wheaton Precious Metals. You have received 10 of the 20 million so far. When do you expect to receive the remaining 10 million? How do you plan to use the proceeds?
Earnest: We’re coming up on the date for that payment. The agreement that we have with Wheaton calls for that last $10 million payment to be made prior to the end of this month. So we expect in the latter weeks of this month that we’ll receive that last payment.
The use of proceeds is to continue to advance design and evaluations of a smaller scale project for Mount Todd. We have a drilling program going on and we’re about 50 per cent of the way through a 6,000-metre program. There will also be some of that money that’s used to fund general corporate purposes.
TMO: Back in March of this year, the company proudly announced the publication of its inaugural ESG (environmental, sustainability and governance) report. Would you expand on this and what it means for the company?
Earnest: These are high priorities for us. ESG reports have become more common in recent years. We consider the health and safety of our workforce and surrounding community to be our No. 1 priority, followed by the protection of the environment and culturally sensitive areas.
Stakeholder engagement, input and internal and external governance are important matters. They are really critical to the way we manage our business. The report itself gave us an opportunity to present the things that we’ve been able to achieve. What our plans are, and where we plan to go from here.
I hope that what people got out of that report is that it’s not what we do but rather, it’s who we are. That this is just part of our DNA. Environmental protection, safety, health, good community relations and governance principles align with our commitment.
TMO: What can investors expect to see in the coming weeks and the rest of 2024?
Earnest: As you’ve indicated by asking the question, we’re going to be getting some money in the door here pretty soon and that will be an important announcement in the coming weeks.
Interestingly, the Northern Territory government has been working on a legislative project over the last six months. Recently the legislature passed a revision of the royalty program for the territory. It will take effect July 1. We’ll be issuing a little bit of news on that and how that will favourably impact the Mount Todd project.
They’ve changed from a net profits-based royalty structure to an ad valorem royalty structure in. There’s going to be some real significant benefits for the mining industry and for the territory as they seek to incentivize investment in the territory.
We’ll also be announcing drilling results. At this point we’ll wait until we finish the first phase of the drill program. We will announce all of those results together. As we then enter into the second phase of the program, we’ll probably release results on a basis of several holes at a time.
The last big piece of news for the year will be the start of the feasibility study sometime close to the end of the third quarter or start of the fourth quarter of this year.
TMO: There is a lot of news that is coming out. Is there anything else we’ve missed that you would like to bring to the attention of the viewers today?
Earnest: One of the things that we’d like to point out is that there’s a tremendous opportunity to acquire Vista Gold at a low cost.
It’s a great time to buy right now with the rising gold price. The focus has been on the producers and they’ve benefited from the rise in the gold price. The developers such as Vista, not so much.
We’re valued at about $8.50 per ounce of reserves. That’s a tremendous entry point. Whether you look at it as value of gold in the ground and ability to pick it up, or whether you look at it as (renowned natural resources investor) Rick Rule would, from a low-cost option on gold in the ground. Or you’re looking for a company that has a strong balance sheet that’s going to get stronger without dilution.
Vista Gold offers something to all shareholders. We welcome the interest in the company and invite people to take a closer look.
You can follow Vista Gold Corp. on the Toronto Stock Exchange under the symbol T.VGZ or head to their website at vistagold.com. For more information.
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