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, 2023 and 2022, 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 (PG, member AIPG), a technical consultant. Mr. Rozelle is a qualified person (“QP”) as defined by Item 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 as a development stage company in the gold mining industry. Vista does not currently generate cash flows from mining operations. The Company’s flagship asset is the Mt Todd gold project (“Mt Todd” or the “Project”) in Northern Territory, Australia (the “NT”). Mt Todd is among the largest development stage opportunities in Australia. All major operating and environmental permits necessary to initiate development of the Project are in place. In March 2024, we completed an updated feasibility study for Mt Todd in conjunction with our annual reporting of mineral resources and mineral reserves in this Annual Report on Form 10-K, as required under S-K 1300.
Mt Todd benefits from its location in a leading mining jurisdiction and offers opportunities to add value through growth of mineral reserves, alternative development strategies, and other de-risking activities. The Project offers strategic optionality through development as a large-scale project or as a smaller scale start-up with subsequent staged expansion.
In view of the scale of investment required to develop Mt Todd, we are evaluating alternatives that offer the potential to provide shareholders with greater financial returns and lower exposure to risk. We continue to work with CIBC Capital Markets (“CIBC”) to identify and advance interest in Mt Todd and are focused on a transaction that maximizes shareholder value. Potential strategic investors continue to show interest in Mt Todd and have provided positive feedback on the technical merits of the Project. However, interested parties continue to maintain a cautious approach to new, large-scale development projects and some have expressed interest in alternative development strategies at Mt Todd. Vista also considers possible corporate opportunities as a means to enhance our liquidity. Our funding strategy is to maintain adequate liquidity while minimizing dilution as we seek to preserve, enhance, and realize value from Mt Todd. The Company periodically raises funds in the capital markets and considers alternative strategies to enhance its liquidity and deliver shareholder value.
In December 2023, Vista entered into a royalty agreement (the “Royalty Agreement”) with Wheaton Precious Metals (Cayman) Co., an affiliate of Wheaton Precious Metals Corp. (“Wheaton”), in relation to Mt Todd. Pursuant to the terms of the Royalty Agreement, Vista granted Wheaton a royalty in the amount of 1% of gross revenue from the sale or disposition of minerals from the Project (the “Royalty”), subject to adjustments in certain circumstances. As consideration
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for the Royalty, Wheaton agreed to provide Vista with $20 million to advance Mt Todd and for general corporate purposes, subject to certain conditions set forth in the Royalty Agreement. Wheaton has also been granted a right of first refusal on any royalties, streams or pre-pays pertaining to Mt Todd. Vista received Royalty proceeds of $3 million in December 2023 and $7 million in February 2024. The remaining Royalty proceeds totaling $10 million are expected to be received by the end of the second quarter 2024.
The Batman deposit at Mt Todd hosts proven and probable mineral reserves of 6.98 million ounces as reported in the March 2024 feasibility study (the “Mt Todd FS”). There are opportunities to add gold mineral resources through further drilling. Exploration at Mt Todd has demonstrated additional growth targets immediately outside the Batman deposit along a 5.4 kilometer trend within the Company’s mining licenses and other precious and base metals prospects within the broader footprint of the Company’s exploration licenses.
In January 2024, the Company commenced a 6,000-7,000 meter drill program, with the focus to add shallow gold resources at the north end of the Batman deposit. This drilling program is a condition of the Royalty Agreement. The objective of this program is to convert gold resources to gold reserves that can be included in the mine production schedule and project cash flows. If successful, management believes this will add substantial value to Mt Todd by improving cash flow as a result of a more constant production profile, reduced stripping, and increased mine life for all development scenarios. The proposed drilling is expected to have an all-in cost of approximately $2 million and to be completed by year end.
The Company plans to leverage the results of the drilling program and prior technical studies by advancing evaluations of staged development scenarios for Mt Todd. Vista continues to evaluate the technical and economic merits of staged development scenarios with a focus on lower initial capital, strong gold production and cash flow profiles, while preserving the opportunity for subsequent staged development. In 2023, we completed an internal 5.2 million tonnes per annum (“tpa”), or 15,000 tpd, scoping study. By using contract mining and power generation, and construction practices commonly used in Australia, we believe there is opportunity to maintain high capital efficiency at this smaller initial project scale. Using a higher ore cutoff grade at the start is also expected to help maintain competitive cash costs. The scoping study demonstrated the economic merits of a smaller scale initial project but restricted the mine life to the 80 million tonne capacity of the existing tailings facility. Additional evaluation is needed to incorporate staged development scenarios that improve resource utilization, mine life, and economic returns.
The Company published its inaugural Environmental, Social, and Governance report during the first quarter 2024.
The Company holds the exclusive right to develop Mt Todd through an agreement (the “NT Agreement”) with the Government of the Northern Territory, Australia (the “NT Government”). The NT Agreement was extended during 2023 through December 31, 2029 with the option for an additional three-year extension.
A recent report of the NT Government’s Mineral Development Taskforce recommends simplifying and improving the competitiveness of the NT royalty scheme. The Mineral Development Taskforce estimates that such changes, if enacted through legislation, will have significant positive economic impacts for Mt Todd and other mineral projects in the Northern Territory, and provide incentive for greater mining investment in the territory.
The Mt Todd FS contemplates a plant processing 50,000 tpd and demonstrates the underlying value potential of a large-scale gold project. Highlights include:
● estimated proven and probable mineral reserves of 6.98 million ounces of gold (280 Mt at 0.77 g Au/t) using a gold price of $1,500 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 $913 per ounce (3) ;
● high capital efficiency, with initial capital requirements of $1.03 billion, or $163 per payable ounce of gold (3) ;
● after-tax NPV 5% of $1.31 billion and internal rate of return (“IRR”) of 20.4% at a gold price of $1,800 per ounce and an Fx rate of $0.69 AUD:USD; and
● after-tax NPV 5% of $1.78 billion and IRR of 27.9% at a price of $2,100 per ounce of gold and an Fx rate of $0.69 AUD:USD.
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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.
(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.
(3) Cash costs, cash cost per ounce, and initial capital requirements per payable ounce of gold are non-U.S. GAAP financial measures; see Non-U.S. GAAP Financial Measures for additional disclosure.
The Mt Todd FS included reserve estimates pursuant to S-K 1300 under 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.
In addition to the technical advancements of the Project in 2022 and 2023, Vista has all major operating and environmental permits necessary to initiate development of Mt Todd. We have invested significant resources in water treatment and management, and 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.
Mt Todd Gold Project – Summary of Gold Mineral Resource (Exclusive of Gold Mineral Reserves)
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 mineral 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 mineral resources are the average grade of the heap, no cut-off applied.
● Batman: Mineral 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: Mineral 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, 2023. There have been no changes in the mineral resource estimates since December 31, 2022 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, 2023.
● 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, 2023.
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● 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 mineral resource estimates as of December 31, 2023 compared to December 31, 2022 as the same material assumptions and criteria were determined to continue to apply to the mineral resource estimates and there was no conversion of mineral resources into mineral reserves in the fiscal year ending December 31, 2023.
Mt Todd Gold Project – Summary of Gold Mineral Reserves based on 50,000 tpd, 0.35 g Au/t cut-off and $1,500 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 mineral reserves.
● Batman deposit mineral reserves are reported using a 0.35 g Au/t cutoff grade and $1,800 per ounce gold price. A US$ 1,500/oz-Au pit shell was used.
● Deepak Malhotra is the QP responsible for reporting the heap-leach pad mineral 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 mineral 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, 2023. There have been no changes in the mineral reserve estimates since December 31, 2022 because the Company and the relevant qualified persons determined that the same material assumptions and criteria continued to apply as of December 31, 2023, 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, 2023.
There was no change in mineral reserve estimates as of December 31, 2023 compared to December 31, 2022 as the same material assumptions and criteria were determined to continue to apply to the mineral reserve estimates and there was no depletion of mineral reserves in the fiscal year ending December 31, 2023 as Mt. Todd 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, 2023 was $6,585, or $0.05 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, 2022 was $4,931, or $0.04 per Common Share on both a basic and diluted basis. The principal components of our 2023 net loss and the year-over-year changes are discussed below.
The Company had cash of $6,069, working capital of $5,576, and no debt as of December 31, 2023.
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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.
Exploration, Property Evaluation and Holding Costs
Exploration, property evaluation and holding costs, including fixed costs, discretionary programs, and non-cash stock-based compensation, were $3,262 and $4,522 during the years ended December 31, 2023 and 2022, respectively. These costs were predominantly associated with Mt Todd and were comprised of fixed costs and discretionary costs.
For the years ended December 31, 2023 and 2022, our fixed exploration, property evaluation and holding costs totaled $2,850 and $3,095, 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 2023 included lower personnel costs, partially offset by higher power consumption due to site water pumping.
Expenses incurred for 2023 Mt Todd discretionary programs totaled $412. The discretionary programs included $110 for amendments to the MMP and $110 for costs related to securing a development partner. 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.
Included in the 2023 and 2022 exploration, property evaluation and holding costs were non-cash stock-based compensation of $180 and $262, respectively.
Corporate Administration
Corporate administration costs were $3,462 and $3,767 during the years ended December 31, 2023 and 2022, respectively. The 2023 and 2022 corporate administration costs included non-cash stock-based compensation of $456 and $517, respectively. Costs were generally lower during 2023 due to a decrease in insurance costs of $231 and other recurring administrative expenses being lower by $181. Corporate discretionary costs were higher by $107, largely due to costs related to the Royalty Agreement.
Non-Operating Income and Expenses
Interest Income
Interest income was $263 and $111 during the years ended December 31, 2023 and 2022, respectively. The Company benefited from rising market interest rates for short-term government debt securities.
Other Income
Other Income/(Expense) was ($84) and $409 for the years ended December 31, 2023 and 2022, respectively. Other expense in 2023 was due to legal costs for the Company’s efforts to recover additional value-added tax from the previous sale of a non-core asset. In 2022, the Company reversed a previously accrued amount of $240 for contingent reclamation costs. The Company also received cash of $196 in May 2022 as a partial 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 $5,861 and $7,413 for the years ended December 31, 2023 and 2022, respectively. The decrease in operating cash outflows in 2023 largely resulted from lower spending for drilling and completion of the feasibility study in 2022.
Investing Activities
Net cash provided by investing activities of $2,949 for the year ended December 31, 2023 resulted primarily from the $3,000 initial Royalty payment.
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.
Financing Activities
Net cash of $871 for the year ended December 31, 2023 was provided by financing activities. These activities include receipt of net proceeds of $1,013 under the ATM Program (as defined below) offset by payments of $142 for employee withholding tax obligations in lieu of issuing Common Shares earned from the vesting of restricted share unit awards.
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.
Liquidity and Capital Resources
The Company considers available cash and cash equivalents to be its primary measure of liquidity. These capital resources totaled $6,069 at December 31, 2023 compared to $8,110 at December 31, 2022, representing a net decrease of $2,041 during 2023. Current assets net of current liabilities (“Working Capital”) is a secondary measure of liquidity for the Company. As of December 31, 2023 and 2022, working capital was $5,576 and $7,714, respectively.
During 2023, the Company benefited from cash inflows of $3,000 from its grant of the Royalty on Mt Todd and ATM Program net proceeds of $1,013 as discussed below. These sources of cash were offset by operating cash outflows of $5,861 and other expenditures of $193. Recurring costs for corporate administration and Mt Todd maintenance were most the Company’s operating cash outflows during 2023. As part of its ongoing priority to reduce spending, recurring costs for 2023 were reduced to $5,400. This represents a 9% reduction in recurring costs compared to 2022 and a 23% reduction from the Company’s planned annual expenditures prior to initiating its spending reduction program in early 2022. Other operating cash expenditures during 2023 were approximately $400 for completion of an internal scoping level study and various other non-recurring projects at Mt Todd. Additional details regarding 2023 financial results are presented in the “Results from Operations” section above and the preceding discussions in this section regarding operating activities, investing activities and financing activities.
For 2024, the Company estimates that recurring costs will be approximately $5,800. This represents a slight increase over 2023 and largely results from the effects of general inflation, regulatory costs, and an increase in the size of the Company’s board of directors by one member. Work plans at Mt Todd are expected to increase in 2024 as the Company carries out a 6,000-7,000 meter drilling program in the area immediately north of the Batman pit and undertakes other Mt Todd-related technical programs. Overall, these activities are expected to include spending totaling approximately $3,100.
Management expects to fund its 2024 activities from existing cash and cash equivalents and anticipated additional proceeds from its grant of the Royalty on Mt Todd. The Royalty Agreement is expected to provide total proceeds of $20,000. Of this amount, $3,000 was received in December 2023 and $7,000 was received in February 2024. The final installment of
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$10,000 is to be received six months from the date of the first installment providing Vista Gold Australia has commenced a drilling program at Mt Todd and satisfied other customary conditions, representations, and warranties.
In addition to Vista’s existing capital resources and anticipated proceeds from the Royalty, 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 2023, the Company sold 1,710,068 Common Shares under the ATM Program for net proceeds of $1,013. As of December 31, 2023, $8,702 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.
Other potential sources of cash inflows may include other equity issuances not covered by the ATM Program, 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.
Considering current economic conditions and the Company’s ongoing initiatives, we believe our Working Capital as of December 31, 2023, the $7,000 received in February 2024 under the Royalty Agreement, and remaining proceeds expected from the Royalty, 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. We seek to maintain adequate liquidity and minimize dilution as we advance our primary objective to maximize returns to our shareholders by preserving, enhancing and realizing value from Mt Todd. Our funding strategy is to maintain a low expenditure profile, satisfy the remaining conditions to receive the remaining proceeds from the Royalty Agreement, realize value from our remaining non-core assets and, when considered appropriate, issue additional equity or find other means of financing. Vista also considers possible corporate opportunities as a means to enhance our liquidity. 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.
Summary of Quarterly Results
4 th quarter
3 rd quarter
2 nd quarter
1 st quarter
2023
Revenue
$
—
$
—
$
—
$
—
Net income/(loss)
$
(1,657)
$
(1,454)
$
(1,503)
$
(1,971)
Basic income/(loss) per share
$
(0.01)
$
(0.01)
$
(0.01)
$
(0.02)
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)
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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.
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.
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”), initial capital requirements 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.
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Cash Costs, AISC, Initial Capital Requirements per Payable Ounce of Gold and Respective Unit Cost Measures
Cash Costs and AISC, initial capital requirements per payable ounce of gold 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. The Company reports initial capital cost requirements per payable ounce of gold because this metric provides a standard measurement of initial capital efficiency. 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.
Initial capital requirements per payable ounce of gold consists of total initial capital requirements divided by the corresponding payable gold ounces.
The following tables demonstrate the calculation of Cash Costs, AISC, and the respective unit-cost metrics for amounts presented in this report in respect of Mt Todd.
Units
Years 1-7 (1)
Life of Mine
(16 years)
Payable Gold
koz
3,353
6,313
Operating Costs
US$ millions
2,641
5,420
Refining Cost
US$ millions
12
23
Royalties
US$ millions
181
324
Cash Costs
US$ millions
2,834
5,767
Cash Cost per ounce
US$/oz
$845
$913
Sustaining Capital
US$ millions
388
759
All-In-Sustaining Costs
US$ millions
3,222
6,526
AISC per ounce
US$/oz
$961
$1,034
Initial capital requirements
US$ millions
$1,030
Initial capital requirements per payable ounce of gold
US$/oz
$163
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Units
Years 1-7 (1)
Life of Mine
(16 years)
Payable Gold
koz
3,353
6,313
Tonnes processed
kt
124,299
280,375
Mining Costs
US$ millions
$ 1,194
$ 2,153
Processing Costs
US$ millions
1,264
2,863
Site General and Administrative Costs
US$ millions
138
293
Water Treatment
US$ millions
34
84
Tailings Management
US$ millions
12
27
Refining Cost
US$ millions
12
23
Royalties
US$ millions
181
324
Cash Costs
US$ millions
$ 2,834
$ 5,767
Per Payable Ounce:
Mining Cost per ounce
$/oz
$356.19
$341.05
Processing Cost per ounce
$/oz
376.89
453.41
Site General and Administrative Costs per ounce
$/oz
41.16
46.44
Water Treatment per ounce
$/oz
10.01
13.33
Tailings Management per ounce
$/oz
3.48
4.20
Refining Cost per ounce
$/oz
3.65
3.68
Royalties per ounce
$/oz
54.00
51.32
Cash Cost per ounce
$/oz
$845.39
$913.43
Per Tonne Processed:
Mining Cost per tonne processed
$/tonne
$9.61
$7.68
Processing Cost per tonne processed
$/tonne
10.17
10.21
Site General and Administrative Costs per tonne processed
$/tonne
1.11
1.05
Water Treatment per tonne processed
$/tonne
0.27
0.30
Tailings Management per tonne processed
$/tonne
0.09
0.09
Refining Cost per tonne processed
$/tonne
0.10
0.08
Royalties per tonne processed
$/tonne
1.46
1.16
Cash Cost per tonne processed
$/tonne
$22.80
$20.57
(1)Years 1-7 start after the 6-month commissioning and ramp up period.
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