Pivotal Months Ahead for Vista Gold
New fit for purpose feasibility study coming for large Australian gold project
Vista Gold (NYSE/TSX: VGZ) is working on a new feasibility study for its fully permitted Mt Todd gold project in Australia’s Northern Territory, which the company believes will position the project as a leading development opportunity.
Just over a year ago, Vista released an updated feasibility study for Mt Todd, outlining capital costs of US$1.03 billion for a 50,000 tonne per day open pit operation to produce 395,000 ounces per annum at average all-in sustaining costs of US$1034 an ounce.
The study returned a post-tax net present value of US$1.13 billion and internal rate of 20.4%, based on a gold price of just US$1800/oz.
Using a US$3000/oz gold price increases the NPV to US$4 billion and the IRR to 49.5%.
In December, Vista announced it would investigate a 15,000tpd, or 5.2 million tonne per annum, operation at Mt Todd.
The current study is aiming to reduce capex by 60% to US$400 million and increase the reserve grade from 0.84 grams per tonne gold to 1g/t gold.
“We're still targeting 150,000-200,000 ounces of gold production per year, which makes it a very respectable size gold mine in Australia, or, for that matter, in any other jurisdiction,” Vista president and CEO Frederick Earnest said during an interview at the Mining Forum Europe in Zurich last week.
“We believe this feasibility still be a catalyst that will drive an increase in interest in Mount Todd, but also an increase in value.
“We think that what this does is it positions the project so that it could either be advanced and developed as a joint venture – we could and would consider, at the appropriate valuation, a corporate transaction or project level transaction, and certainly with this capex, it becomes something that we could finance and build ourselves.”
Hard work already done
Vista is aiming to release the updated study by mid-year.
“Certainly, one of the things that allows us to get this feasibility study completed in seven months is that we're leveraging the work that's been completed for previous feasibility studies,” Earnest said.
Vista is using predominantly Australian consultants on the study, including GR Engineering Services, Mining Plus, WSP and SLR.
The company has visited multiple gold mines in Western Australia and taken ideas of how to improve the project’s design.
The plan is to use contract mining, use a build, own, operate model for the gas-fired power plant, and use smaller equipment to save costs and improve efficiencies.
Vista already has the benefit of extensive infrastructure at Mt Todd, given it is a brownfields site that operated as a heap leach project in the 1990s.
“The government looks at Mt Todd as an environmental liability. We look at it as a project that somebody else has spent a lot of money on, and we get to take advantage of it,” Earnest said.
“We have paved roads to the site. We have overhead power lines to the site, and they provide power to the site today, and they'll provide the construction power. There's a natural gas pipeline that we plan to use to generate power for 40-50% of what we can buy it from the grid.
“The tailing storage facility has capacity for about 40% of what we expect the new reserve to be, so maybe the first 10 years of the project, we won't have to do anything other than construct operating raises to that tailing storage facility, so there's some really distinct advantages that way.”
Big resource plus upside
Mt Todd has a 9.4 million ounce gold resource, a scale which Earnest pointed out was becoming rarer due to a lack of discovery success.
“At some point, we think that there's got to be a focus on projects like Mt Todd that are large scale and in a great jurisdiction, and in our case, they have all of the major permits already in hand. We think that they will trade at a premium,” he said.
The company has a 1581 square kilometre land package, which Earnest described as underexplored.
“We've always joked that if this land package were in Western Australia, it would be Swiss cheese, but it's not,” Earnest said.
“And so it's been under-drilled, but over the years, we've spent almost all of our exploration money inside the boundaries of the mining licence, growing the resource at Mt Todd to get it to the point that it's at. Presently, we report 9.4 million ounces, but with the new resource estimate, that's going to increase.”
While Mt Todd is large and low-grade, drilling of the South Cross Lode last year hit high-grade gold including 1m at 25.89g/t from 106m; 0.5m at 50.5g/t from 111.7m; and 2.3m at 7.93g/t from 150.7m.
“We've never drilled this kind of mineralisation and to intersect it in a number of holes along strike is exciting and intriguing to us, and obviously it's going to take more drilling to piece this all together, but it's a very interesting outcome of the drilling program from last year,” Earnest said.
Corporate activity
Vista has no debt and had US$16.9 million in cash at the end of December.
The company has a tight capital structure, with just under 125 million shares on issue, something Earnest said it had been mindful of.
Its largest shareholder is Sun Valley Gold Fund with 16%.
“Sun Valley made their first investment in 2010 and have supported us for a long time,” Earnest said.
Vista previously appointed CIBC to run a formal partner process in 2022 but Earnest said there was little interest due to the rampant cost inflation that was impacting new developments.
“We've maintained our relationship with CIBC. We continue to work with them to identify potential partners with their help, and to some degree without,” Earnest said.
“We've signed a number of confidentiality agreements already this year and I expect that there will be a number more signed when we finish the feasibility study.”