Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT S OF OPERATIONS.
The following discussion and analysis should be read in conjunction with our consolidated financial statements for the two years ended December 31, 2022 and 2021, and the related notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth under the section heading “Item 1A. Risk Factors” above and elsewhere in this annual report on Form 10-K. See section heading “Note Regarding Forward-Looking Statements” in this annual report on Form 10-K.
All dollar amounts stated herein are in U.S. dollars in thousands, unless specified otherwise, except per share-related amounts. References to A$ refer to Australian currency and USD or $ to United States currency. The scientific and technical disclosures about Mt Todd in this discussion and analysis have been reviewed and approved by John W. Rozelle, Senior Vice President of Vista. Mr. Rozelle is a qualified person as defined by subpart 1300 of Regulation S-K (“S-K 1300”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”).
Overview
Vista Gold Corp. and its subsidiaries (collectively, “Vista,” the “Company,” “we,” “our,” or “us”) operate in the gold mining industry. We are focused on evaluation, acquisition, exploration and advancement of gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions such as earn-in right agreements, option agreements, leases to third parties, joint venture arrangements with other mining companies, or outright sales of assets for cash and/or other consideration. We look for opportunities to improve the value of our gold projects through exploration drilling and/or technical studies focused on optimizing previous engineering work. We do not currently generate cash flows from mining operations.
The Company’s flagship asset is its 100% owned Mt Todd gold project (“Mt Todd” or the “Project”) in Northern Territory, Australia (“NT”). With the approval of the Mining Management Plan (“MMP”) in June 2021, all major operating and environmental permits for Mt Todd have been received. Mt Todd is one of the largest and most advanced undeveloped gold projects in Australia.
In 2022, Vista completed a feasibility study for Mt Todd (“Mt Todd FS”), retained CIBC Capital Markets as a strategic advisor to support the Company’s strategic outreach process for Mt Todd, concluded a drilling program to demonstrate district-scale resource growth potential, and significantly reduced costs. These accomplishments advanced Mt Todd’s reserve size, resource growth potential, economic returns, and overall attractiveness as a large, development ready gold project.
The Mt Todd FS demonstrates the potential of a large-scale gold project at Mt Todd. Highlights include:
● estimated proven and probable mineral reserves increased by 19% to 6.98 million ounces of gold (280 Mt at 0.77 g Au/t) using a gold price of $1,125 for the reserve estimate and a cut-off grade of 0.35 g Au/t (1)(2) ;
● average annual production of 395,000 ounces of gold over a 16-year mine life at an average cash cost of $817 per ounce;
● high capital efficiency, with initial capital requirements of $892 million, or $141 per payable ounce of gold;
● after-tax NPV 5% of $999.5 million and internal rate of return (“IRR”) of 20.6% at a gold price of $1,600 per ounce; and
● after-tax NPV 5% of $1.7 billion and IRR of 29.4% at a price of $1,900 per ounce of gold.
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(1) Note to investors: Proven and probable mineral reserves are estimated in accordance with S-K 1300 and CIM Definition Standards (as defined below).
(2) See “Item 2. Properties – Mt Todd Gold Project, Northern Territory, Australia – Mineral Resources and Mineral Reserve Estimates” in this annual report on Form 10-K for additional information.
The Mt Todd FS included reserve estimates pursuant to subpart 1300 of Regulations S-K (“S-K 1300”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Canadian Institute of Mining Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral Reserves (“CIM Definition Standards”) based on mine plans developed using a gold price in line with the current market conditions at the time of the study. The Mt Todd FS addressed recommendations from the 2019 pre-feasibility study, included minor updates of the Project design to be consistent with the MMP, and reflected the completion of engineering and detailed costing in all areas of the Project.
We have invested over $110 million to systematically explore, evaluate, engineer, permit and de-risk Mt Todd since we acquired it in 2006. In recent years, we completed a number of optimization studies, which were incorporated into the Mt Todd FS. This work has added substantial value to the Project and positions Mt Todd for near-term development.
The strategic process with CIBC Capital Markets, which is ongoing and remains a top priority, continues to generate interest and positive feedback on the technical merits of Mt Todd. The Company believes that there are indications that market conditions are improving, but interested parties continue to maintain a cautious approach to new, large-scale development projects. To address this, the Company is evaluating a smaller scale project with significantly lower initial capital costs while maintaining operating costs similar to those in the Mt Todd FS, with potential for subsequent throughput expansion or mine-life extension. We expect to be able to demonstrate this alternate development strategy early in 2023 and believe this should attract the interest of new potential partners and those who have previously expressed interest in different development strategies.
In 2022, the Company completed an exploration drilling program within a 5.4 km trend extending immediately north from the Batman pit. The Company believes that the results from this program and historical sources demonstrate excellent resource growth potential, including delineation of four highly prospective exploration targets. The Company views these targets as positive indicators of future resource growth potential to interested parties, and believes these targets represent the closest and most immediate opportunity for growth with the appropriate investment in additional drilling. Vista has no immediate plans to complete additional drilling but continues to advance exploration on the exploration licenses, which cover 1,650 km 2 .
We significantly reduced our 2022 recurring costs, which were approximately 15% below plan. Reducing costs and maximizing cost effectiveness are also high priorities for 2023. We have already taken steps to further reduce recurring costs by approximately 7% during 2023 and continue to evaluate and implement opportunities for additional cost reductions.
In addition to the technical advancements of the Project in 2022, Vista has all major operating and environmental permits for the development of Mt Todd. We have invested significant resources in water treatment and management, environmental, and social programs. We believe this has benefited our relationships with the traditional landowners, local communities, and Northern Territory, Australia, creating a strong social license.
Mineral Resources and Mineral Reserves Estimates
The following table presents the estimated mineral resources for the Project. The following mineral resources and mineral reserves were prepared in accordance with both S-K 1300 standards and CIM Definition Standards.
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Mt Todd Gold Project – Summary of Gold Mineral Resources based on US$1,300/oz Gold
Batman Deposit
Heap Leach Pad
Quigleys Deposit
Total
Contained
Contained
Contained
Contained
Tonnes
Grade
Ounces
Tonnes
Grade
Ounces
Tonnes
Grade
Ounces
Tonnes
Grade
Ounces
(000s)
(g Au/t)
(000s)
(000s)
(g Au/t)
(000s)
(000s)
(g Au/t)
(000s)
(000s)
(g Au/t)
(000s)
Measured
—
—
—
—
—
—
594
1.15
22
594
1.15
22
Indicated
10,816
1.76
613
—
—
—
7,301
1.11
260
18,117
1.49
873
Measured & Indicated
10,816
1.76
613
—
—
—
7,895
1.11
282
18,711
1.49
895
Inferred
61,323
0.72
1,421
—
—
—
3,981
1.46
187
65,304
0.77
1,608
Notes:
● Measured & indicated resources exclude proven and probable reserves.
● The Point of Reference for the Batman and Quigleys deposits is in situ at the property. The Point of Reference for the Heap Leach is the physical Heap Leach pad at the property.
● Batman and Quigleys resources are quoted at a 0.40g-Au/t cut-off grade. Heap Leach resources are the average grade of the heap, no cut-off applied.
● Batman: Resources constrained within a US$1,300/oz gold Whittle TM pit shell. Pit parameters: Mining Cost US$1.50/tonne, Milling Cost US$7.80/tonne processed, G&A Cost US$0.46/tonne processed, G&A/Year 8,201 K US$, Au Recovery, Sulfide 85%, Transition 80%, Oxide 80%, 0.2g-Au/t minimum for resource shell.
● Quigleys: Resources constrained within a US$1,300/oz gold Whittle TM pit shell. Pit parameters: Mining cost US$1.90/tonne, Processing Cost US$9.779/tonne processed, Royalty 1% GPR, Gold Recovery Sulfide, 82.0% and Ox/Trans 78.0%, water treatment US$0.09/tonne, Tailings US$0.985/tonne.
● Differences in the table due to rounding are not considered material. Differences between Batman and Quigleys mining and metallurgical parameters are due to their individual geologic and engineering characteristics.
● Rex Bryan of Tetra Tech, Inc. is the QP responsible for the Statement of Mineral Resources for the Batman, Heap Leach Pad and Quigleys deposits.
● Thomas Dyer of RESPEC is the QP responsible for developing the resource Whittle TM pit shell for the Batman Deposit.
● The effective date of the Batman Deposit, Heap Leach Pad, and Quigleys Deposit mineral resources estimates under the requirements of SK-1300 is December 31, 2022. There have been no changes in the mineral resource estimates since December 31, 2021 because upon review the Company and the relevant qualified persons determined that the same material assumptions and estimates, including all economic parameters for resource estimation purposes, continued to apply as of December 31, 2022.
● The effective date of the Batman Deposit, Heap Leach Pad, and Quigleys Deposit mineral resource estimates under the requirements of NI 43-101 is December 31, 2021.
● Mineral resources that are not mineral reserves have no demonstrated economic viability and do not meet all relevant modifying factors.
There was no change in resource estimates as of December 31, 2022 compared to December 31, 2021 as the same material assumptions and criteria were determined to continue to apply to the resource estimates and there was no conversion of resources into reserves in the fiscal year ending December 31, 2022.
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Mt Todd Gold Project – Summary of Gold Mineral Reserves based on 50,000 tpd, 0.35 g Au/t cut-off and $1,125 per Ounce Pit Design
Batman Deposit
Heap Leach Pad
Total
Contained
Contained
Contained
Tonnes
Grade
Ounces
Tonnes
Grade
Ounces
Tonnes
Grade
Ounces
(000s)
(g Au/t)
(000s)
(000s)
(g Au/t)
(000s)
(000s)
(g Au/t)
(000s)
Proven
81,277
0.84
2,192
—
—
—
81,277
0.84
2,192
Probable
185,744
0.76
4,555
13,354
0.54
232
199,098
0.75
4,787
Proven & Probable
267,021
0.79
6,747
13,354
0.54
232
280,375
0.77
6,979
Economic analysis conducted only on proven and probable mineral reserves.
Notes:
● Thomas L. Dyer, P.E., is the QP responsible for reporting the Batman Deposit Proven and Probable reserves.
● Batman deposit reserves are reported using a 0.35 g Au/t cutoff grade.
● Deepak Malhotra is the QP responsible for reporting the heap-leach pad reserves.
● Because all the heap-leach pad reserves are to be fed through the mill, these reserves are reported without a cutoff grade applied.
● The reserves point of reference is the point where material is fed into the mill.
● The effective date of the mineral reserve estimates under the requirements of S-K 1300 is December 31, 2022. There have been no changes in the mineral reserve estimates since December 31, 2021 because the Company and the relevant qualified persons determined that the same material assumptions and criteria continued to apply as of December 31, 2022, including that the Company used a cutoff grade higher than the economic cutoff grade such that any intervening changes in the underlying economic assumptions were not material and did not require use of a cutoff grade greater than 0.35 g Au/t for mineral reserve estimation purposes.
● The effective date of the mineral reserve estimates under the requirements of NI 43-101 is December 31, 2021.
There was no change in reserve estimates as of December 31, 2022 compared to December 31, 2021 as the same material assumptions and criteria were determined to continue to apply to the reserve estimates and there was no depletion of reserves in the fiscal year ending December 31, 2022 as the Mt. Todd Gold Project is in the development stage
Cautionary note to investors: Proven and probable mineral reserves are estimated in accordance with each of S-K 1300 and CIM Definition Standards. A number of risk factors may adversely affect estimated mineral reserves and mineral resources, any of which may result in a reduction or elimination of reported mineral reserves and mineral resources. See “Item 1A. Risk Factors.”
Results from Operations
Summary
Consolidated net loss for the year ended December 31, 2022 was $4,931, or $0.04 per common share in the capital of Vista (each, a “Common Share”) on both a basic and diluted basis. Consolidated net loss for the year ended December 31, 2021 was $15,237, or $0.14 per Common Share on both a basic and diluted basis. The principal components of our 2022 net loss and the year-over-year changes are discussed below.
The Company had cash of $8,110, working capital of $7,714, and no debt as of December 31, 2022.
Gain on Disposal of Mineral Property Interests, Net
In January 2022, the Company received $2,500 to cancel the remaining 1% net smelter return royalty at the Awak Mas project in Indonesia. Including recognition of the associated deferred option gain, the Company recognized a gain of $2,883 upon receipt of the payment.
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In January and June 2021, the Company received a total of $2,100 for cancellation of its royalty interests and back-in right in the Guadalupe de los Reyes gold and silver project in Sinaloa, Mexico (“Los Reyes”). The January 2021 payment of $1,100 was initially recorded as deferred option gain, with the full $2,100 being recognized as a gain upon receipt of the second payment of $1,000 in June 2021.
Exploration, Property Evaluation and Holding Costs
Exploration, property evaluation and holding costs, including fixed costs, discretionary programs, and non-cash stock-based compensation, were $4,522 and $7,942 during the years ended December 31, 2022 and 2021, respectively. These costs were predominantly associated with Mt Todd and were comprised of fixed costs and discretionary costs.
For the years ended December 31, 2022 and 2021, our fixed exploration, property evaluation and holding costs totaled $3,095 and $3,855, respectively. These costs included expenditures necessary to preserve our property rights and meet our safety, regulatory and environmental responsibilities. The principal components of the decrease in 2022 included lower personnel costs and reduced power consumption due to minimal water pumping.
Expenses incurred for 2022 Mt Todd discretionary programs totaled $1,427. The discretionary programs include $489 for completing the Mt Todd FS and $413 for exploration drilling, plus additional staffing expenses to support drilling and other activities. Expenses incurred for 2021 Mt Todd discretionary programs totaled $4,087. The discretionary programs include $2,232 for preparing the Mt Todd FS and $1,702 for exploration drilling, plus additional staffing expenses to support drilling and other activities.
Included in the 2022 and 2021 exploration, property evaluation and holding costs were non-cash stock-based compensation of $262 and $354, respectively.
Corporate Administration
Corporate administration costs were $3,767 and $3,945 during the years ended December 31, 2022 and 2021, respectively. The 2022 and 2021 corporate administration costs included non-cash stock-based compensation of $517 and $533, respectively. Costs were generally lower during 2022 due to lower personnel and investor relations expenses, partially offset by higher legal and travel costs.
2021 Write-down of Plant and Equipment
During the year ended December 31, 2021, the Company reduced the carrying value of the used mill equipment to $nil based on management’s estimate of recoverability. This estimate reflects management’s consideration of the duration this equipment has been actively marketed by an independent broker and the current competitive market conditions for used equipment yielding no sales. These inputs used in valuing our used mill equipment involved a high degree of subjectivity and resulted in management not having the ability to estimate recoverable sales proceeds with sufficient certainty. The Company recorded this reduction as an operating loss of $5,500 in our Consolidated Statements of Income/(Loss). The used mill equipment continues to be marketed by the independent broker.
Non-Operating Income and Expenses
Other Income
Other Income was $409 and $50 for the years ended December 31, 2022 and 2021, respectively. In 2022, the Company reviewed and reversed a previously accrued amount of $240 for contingent reclamation costs because the associated costs were neither probable nor could be reasonably estimated. The Company also received cash of $196 in May 2022 as a value-added tax recovery from the previous sale of a non-core asset.
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Financial Position, Liquidity and Capital Resources
Operating Activities
Net cash used in operating activities was $7,413 and $10,620 for the years ended December 31, 2022 and 2021, respectively. The decrease in operating cash outflows in 2022 largely resulted from lower spending for drilling, partially offset by higher payments for the feasibility study.
Investing Activities
Net cash provided by investing activities of $2,879 for the year ended December 31, 2022 resulted primarily from the $2,500 final payment for the Awak Mas royalty cancellation and receipt of $384 upon maturity of short-term investments.
Net cash provided by investing activities of $2,631 for the year ended December 31, 2021 resulted primarily from receipt of $2,100 under the Los Reyes agreement, $339 from the sale of Nusantara Resources shares, and $315 for payments related to Awak Mas, offset by fixed asset purchases of $139.
Financing Activities
Net cash of $113 for the year ended December 31, 2022 was used in financing activities by payments of $357 for employee withholding tax obligations in lieu of issuing Common Shares, partially offset by net proceeds of $244 under the ATM Program (as defined below).
Net cash of $12,984 for the year ended December 31, 2021 was provided by net proceeds of $12,323 from the Company’s July 2021 public offering (“2021 Offering”) (as described below) and $1,062 under the ATM Program (which included $191 relating to sales in 2020 that settled for cash in January 2021), partially offset by payments of $401 for employee withholding tax obligations in lieu of issuing Common Shares.
Liquidity and Capital Resources
The Company considers available cash, cash equivalents and short-term investments to be its primary measure of liquidity. These capital resources totaled $8,110 at December 31, 2022 compared to $13,141 at December 31, 2021, representing a net decrease of $5,031 during 2022.
Current assets net of current liabilities (“Working Capital”) is a secondary measure of liquidity for the Company. As of December 31, 2022 and 2021, working capital was $7,714 and $12,164, respectively. These amounts were net of deferred option gain of $nil and $383, respectively. The deferred option gain was recognized as income during 2022 and did not require any use of current assets. Consequently, the components of working capital affecting Vista’s liquidity and capital resources included:
At December 31, 2022
At December 31, 2021
Current Assets
$
8,647
$
13,952
Offset by accounts payable and accrued liabilities
$
(933)
$
(1,405)
During 2022, the Company benefited from cash inflows of $2,500 for cancellation of the Awak Mas royalty, ATM Program proceeds of $244 as discussed below, and a $196 value-added tax recovery from the previous sale of non-core assets. These sources of cash were offset by operating cash outflows of $7,413 and other expenditures of $362. Recurring costs included in operating cash outflows were planned to be approximately $7,000 for 2022, but the Company implemented cost reduction measures that resulted in actual recurring costs being approximately 15% lower than plan. This represented savings of approximately $1,000. Additional details regarding 2022 financial results are presented in the “Results from Operations” section above and the preceding discussions in this section of operating activities, investing activities and financing activities. For 2023, the Company plans to implement additional measures to reduce annual recurring costs to approximately $5,500. Discretionary programs are also expected to be reduced to approximately $600. The Company is continuing to evaluate opportunities to lower ongoing costs.
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In addition to Vista’s existing capital resources, we are a party to an at-the-market offering agreement (the “ATM Agreement”) with H. C. Wainwright & Co., LLC (“Wainwright”) to provide balance sheet flexibility at a potentially lower cost than other means of equity issuances. Under the ATM Agreement, the Company has the right, but is not obligated, to issue and sell Common Shares through Wainwright for aggregate sales proceeds of up to $10,000 (the “ATM Program”). During 2022, the Company sold 401,884 Common Shares under the ATM Program for net proceeds of $244. As of December 31, 2022, $9,748 remained available under the ATM Program.
Offers or sales of Common Shares under the ATM Program will be made only in the United States in an “at the market offering” as defined in Rule 415 under the United States Securities Act of 1933, as amended, subject to an effective registration statement under the U.S. Securities Act of 1933, as amended, and no offers or sales of Common Shares under the ATM Agreement will be made in Canada. The Common Shares will be distributed at market prices prevailing at the time of sale.
The Company could also undertake a private placement or public offering to raise additional cash. The most recent such financing was in July 2021, when Vista completed the 2021 Offering of 12,272,730 units (the “Units”) for net proceeds of $12,323. Each Unit consisted of one Common Share in the capital of the Company and one-half of one Common Share purchase warrant (each full warrant, a “Warrant”). Each Warrant entitles the holder to purchase one Common Share at a price of $1.25 per Common Share (subject to adjustment in certain circumstances) and is exercisable until July 12, 2024. See footnote 6 to the accompanying financial statements for more details on the 2021 Offering. Net proceeds from the 2021 Offering were used for additional exploration drilling and to complete the Mt Todd FS. The remaining proceeds are being used for working capital requirements and/or for other general corporate purposes, which include ongoing regulatory, legal and accounting expenses, management and administrative expenses, and other corporate initiatives.
Other potential sources of cash inflows may include monetization of Vista’s remaining non-core assets, which include a royalty interest in the U.S. and used mill equipment that is being marketed by a third-party mining equipment dealer. Cash may also be available to Vista through several forms of financial instruments, such as a royalty or stream interest in Mt Todd, convertible instruments, and debt facilities.
Considering current economic conditions and the Company’s ongoing initiatives, we believe our cash, cash equivalents and short-term investments and Working Capital as of December 31, 2022, together with other potential future sources of financing and sales of non-core assets, will be sufficient to fund our currently planned corporate expenses, Mt Todd holding costs, and anticipated discretionary programs for at least one year from the date of issuance of this annual report on Form 10-K.
Vista’s long-term viability depends upon our ability to realize value from our principal asset, Mt Todd. Our primary objective is to maintain adequate liquidity as we seek to preserve, enhance and realize value from Mt Todd in order to achieve positive returns for our shareholders. Our funding strategy is to maintain a low expenditure profile, realize value from our remaining non-core assets and, when necessary, issue additional equity or find other means of financing. The underlying value and recoverability of the amounts shown as mineral properties and plant and equipment as presented in our Condensed Consolidated Balance Sheets depend on market and industry conditions, our ability to attract sufficient capital resources to execute our strategy, and the ultimate success of our programs to enhance and realize value at Mt Todd.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements required to be disclosed in this annual report on Form 10-K.
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Summary of Quarterly Results
4th quarter
3rd quarter
2nd quarter
1st quarter
2022
Revenue
$
—
$
—
$
—
$
—
Net income/(loss)
$
(1,495)
$
(1,692)
$
(1,424)
$
(320)
Basic income/(loss) per share
$
(0.01)
$
(0.02)
$
(0.01)
$
(0.00)
2021
Revenue
$
—
$
—
$
—
$
—
Net income/(loss)
$
(8,316)
$
(3,069)
$
(753)
$
(3,099)
Basic income/(loss) per share
$
(0.08)
$
(0.02)
$
(0.01)
$
(0.03)
Critical Accounting Estimates and Recent Accounting Pronouncements
Critical Accounting Estimates
Critical accounting estimates are accounting estimates that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the Company. Management has identified the following critical accounting estimates. See Note 2 to our consolidated financial statements contained in “Part II. Item 8. Financial Statements and Supplementary Data” for additional accounting policies and estimates.
Impairment Assessment of Long-Lived Assets
Our long-lived assets are evaluated for impairment when information becomes available indicating that the carrying value may not be recoverable. Assumptions and estimates considered in valuing our mineral properties included management’s expectations for the price of gold, foreign exchange rates, costs to build and operate the mine, and projected cash flows. These assumptions are subjective and subject to a range of uncertainties. A feasibility study reduces the uncertainty around some assumptions to an acceptable level and is a primary source of evidence.
Stock-Based Compensation
Our stock plans include awards that vest based on performance criteria. Stock-based compensation expense for these awards is estimated quarterly, including adjustments to previous recognized expense, based on anticipated achievement of performance criteria. The quarterly estimated vesting percentage reflects management’s assessment of progress in accomplishing defined corporate objectives. Upon vesting, current period expense is adjusted based on the actual achievement of performance criteria.
Income Taxes
We have assets, hold interests, and conduct activities in several countries and are subject to their tax regimes. Tax laws are complex and continue to evolve. While we have a history of losses, our assumptions made in tax returns are subject to review and interpretation by taxing authorities and could be modified. Our critical tax estimates include timing of future income, deductibility of expenses, sustainability of tax positions, valuation allowances on deferred tax assets, and allocation of expenses between companies.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements contained in “Part II. Item 8. Financial Statements and Supplementary Data” for recent accounting pronouncements applicable to the Company.
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Non-U.S. GAAP Financial Measures
In this report, we have provided information prepared or calculated according to U.S. GAAP, as well as provided certain non-U.S. GAAP prospective financial performance measures. Because the non-U.S. GAAP performance measures do not have standardized meanings prescribed by U.S. GAAP, they may not be comparable to similar measures presented by other companies. These measures should not be considered in isolation or as substitutes for measures of performance prepared in accordance with U.S. GAAP. There are limitations associated with the use of such non-U.S. GAAP measures. Since these measures do not incorporate revenues, changes in working capital and non-operating cash costs, they are not necessarily indicative of potential operating profit or loss, or cash flow from operations as determined in accordance with U.S. GAAP.
The non-U.S. GAAP measures associated with Cash Costs, All-in Sustaining Costs (“AISC”) and resulting per ounce and per tonne processed metrics are not, and are not intended to be, presentations in accordance with U.S. GAAP. These metrics represent costs and unit-cost measures related to the Project.
We believe that these metrics help investors understand the economics of the Project. We present the non-U.S. GAAP financial measures for our Project in the tables below. Actual U.S. GAAP results may vary from the amounts disclosed in this report. Other companies may calculate these measures differently.
Cash Costs, AISC and Respective Unit Cost Measures
Cash Costs and AISC, and respective unit cost measures, are non-U.S. GAAP metrics developed by the World Gold Council to provide transparency into the costs associated with producing gold and provide a standard for comparison across the industry. The Company reports Cash Costs and AISC on a per ounce and per tonne processed basis because we believe these metrics more appropriately reflect mining costs over specified periods and the life of mine. Similar metrics are widely used in the gold mining industry as comparative benchmarks of performance.
Cash Costs consist of Project operating costs, refining costs, and the Jawoyn Association royalty. The sum of these costs is divided by the corresponding payable gold ounces or tonnes processed to determine Cash Cost per ounce or per tonne processed metrics, respectively.
AISC consists of Cash Costs (as described above), plus sustaining capital costs. The sum of these costs is divided by the corresponding payable gold ounces or tonnes processed to determine AISC per ounce or per tonne processed metrics, respectively.
Other costs excluded from Cash Costs, and AISC include depreciation and amortization, income taxes, government royalties, financing charges, costs related to business combinations, asset acquisitions other than sustaining capital, and asset dispositions.
The following tables demonstrate the calculation of Cash Costs, AISC, and the respective unit-cost metrics for amounts presented in this report.
Units
Years 1-7 (1)
Life of Mine
(16 years)
Payable Gold
koz
3,353
6,313
Operating Costs
US$000s
2,401,667
4,935,717
Refining Cost
US$000s
11,564
21,943
Royalties
US$000s
107,292
202,032
Cash Costs
US$000s
2,520,523
5,159,692
Cash Cost per ounce
US$/oz
$752
$817
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Sustaining Capital
US$000s
363,456
700,205
All-In-Sustaining Costs
US$000s
2,883,980
5,859,897
AISC per ounce
US$/oz
$860
$928
Units
Years 1-7 (1)
Life of Mine
(16 years)
Payable Gold
koz
3,353
6,313
Tonnes processed
kt
124,298
280,375
Mining Costs
US$000s
$ 1,059,410
$ 1,903,807
Processing Costs
US$000s
1,166,536
2,647,563
Site General and Administrative Costs
US$000s
131,411
278,015
Water Treatment
US$000s
32,887
82,692
Tailings Management
US$000s
11,423
23,640
Refining Cost
US$000s
11,564
21,943
Jawoyn Royalty
US$000s
107,292
202,032
Cash Costs
US$000s
$ 2,520,523
$ 5,159,692
Per Payable Ounce:
Mining Cost per ounce
$/oz
$315.97
$301.55
Processing Cost per ounce
$/oz
348.23
419.35
Site General and Administrative Costs per ounce
$/oz
39.19
44.04
Water Treatment per ounce
$/oz
9.81
13.10
Tailings Management per ounce
$/oz
3.10
3.74
Refining Cost per ounce
$/oz
3.45
3.48
Jawoyn Royalty per ounce
$/oz
32.00
32.00
Cash Cost per ounce
$/oz
$751.75
$817.25
Per Tonne Processed:
Mining Cost per tonne processed
$/tonne
$8.52
$6.79
Processing Cost per tonne processed
$/tonne
9.39
9.44
Site General and Administrative Costs per tonne processed
$/tonne
1.06
0.99
Water Treatment per tonne processed
$/tonne
0.26
0.29
Tailings Management per tonne processed
$/tonne
0.08
0.08
Refining Cost per tonne processed
$/tonne
0.09
0.08
Jawoyn Royalty per tonne processed
$/tonne
0.86
0.72
Cash Cost per tonne processed
$/tonne
$20.28
$18.40
(1)Years 1-7 start after the 6-month commissioning and ramp up period.
60
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