Vista Gold: A Clear View Down Under?

08/07/2020 5:00 am EST


Adrian Day

Chairman and CEO, Adrian Day Asset Management

Vista Gold (VGZ) continues to raise non-dilutive funds by monetizing non-core assets as it advances its Mt. Todd gold project in the Northern Territories, Australia, asserts commodity sector expert Adrian Day, money manager and editor of Global Analyst.

The company is in a financially strong position and appears poised for negotiations that make it “reasonable to think that by early next year we will have an agreement with a partner”, according to CEO Fred Earnest.

Indeed, the company had a marketing trip to Asia planned for late February, but it was cancelled due to Covid-related travel restrictions throughout the region.

Now, with a higher gold price, the largest undeveloped gold property in Australia and one of the largest in the world, in a safe jurisdiction, must be attractive to many senior mining companies.

Vista is not necessarily looking to sell the project outright but looking for any kind of partnership to maximize value for shareholders, including a financial partner to enable Vista to build the mine. (Vista has made clear it does not intend going it alone to raise the capital and build the mine.)

The company is awaiting its final permit, the mine operating permit, with no apparent major obstacle, and it now expects to receive that in coming months.

At today’s gold and Australian dollar prices, the mine has an NAV of over $2 billion, with a potential 20-year mine life. The stock, even after its recent run, has a market cap of less than $120 million, so there is an enormous gap, sufficient for an incoming partner to pay a hefty premium for a stake and still make money.

Vista is also continuing exploration at Mt. Todd, after identifying two areas of interest adjacent to the central Batman pit. A modest program is planned, to add a small number of ounces which would potentially change the design of the mine; and to test the continuity of the deposit trending northeast.

The drill program is budgeted to cost $430,000. Such a program can be important because potential buyers wants to know that there is exploration upside at the property. Our last “buy” on Vista was in May. With a change in the gold price and partner discussions moving to the next stage, Vista can be bought again.

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