Vista Gold: Low-Priced, Small Cap Bargain?

11/15/2017 5:00 am EST

Focus: COMMODITIES

Adrian Day

Chairman and CEO, Adrian Day Asset Management

For speculative investors who are comfortable investing in a low-priced, small cap mining stock, Adrian Day — a leading resources expert and editor of Global Investing —  reiterates his strong buy rating on Vista Gold (VGZ).

The company is changing, but the market doesn’t recognize it yet. The miner reported progress at its Mt. Todd deposit in Australia, advancing towards an updated pre-feasibility study (PFS), expected in the first quarter.

The updated study should be strong, with CEO Fred Earnest telling investors “to expect improved recovery, sorting, power savings, and an improved currency exchange rate” which will combine to produce “a compelling rate of return at today’s gold price.”

This is significant because Mt. Todd has a reputation as a deposit that requires a higher gold price to be economic. Earnest said Vista is “no longer just a call option on the price of gold, but owners of a large-scale, economically viable gold project.”


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Indeed, Mt Todd is the largest undeveloped gold project in Australia and the third-largest reserve package in that country. It could be among the top five producing mines in Australia, with costs in the lowest quartile.

Separately, Vista optioned its Guadalupe de los Reyes deposit to Minera Alamos for four payments totalling C$6 million, with Vista retaining a royalty and the right to a 49% interest in any future underground mine. It is a very attractive deal for Vista in my mind, and, being Vista’s last significant asset outside of Mt Todd, further focuses the company on that asset.

Vista has C$21 million cash, which can be supplemented by the completion of the Guadalupe sale; and the sale of its mill and Midas shares. In all, it is a very strong balance sheet.

Despite the progress and very optimistic comments about the upcoming revised PFS, the stock hardly moved. For various reasons, it seems to be a “show-me” story.

The updated PFS, however, if it confirms the optimistic assessment, should finally make the stock move, giving us an opportunity now to buy the stock (and Mt Todd) at a bargain level. Once the PFS is out, we suspect the company (or the deposit) will be a most attractive target. Vista is a strong buy.

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