Good news from todays 6k filling>>VISTA GOLD CORP.
Despite depressed gold prices, the Company had an excellent first quarter as the
Hycroft mine achieved record gold production. Early this year, measures were
taken to reduce costs and improve the Company's cash position, and as a result
of these successful efforts, the Company realized net earnings of $2.2 million,
or $0.02 per share for the first quarter of 1998, as compared to net losses of
$0.7 million, or $0.01 per share for the first quarter of 1997.
At the Hycroft mine, a record 35,017 ounces of gold were produced during the
current quarter, as compared to 30,135 for the same period in 1997. The
increased gold production resulted in part from higher than expected ore grades
and production volumes from the Brimstone pit. In January 1998, the Company made
plans to control costs and temporarily reduced mining activities at the mine. As
a result, the mine was able to decrease its cash operating cost per ounce. For
the quarter ended March 31, 1998, the cash operating cost per ounce was $207, a
decrease of $66, or 24 percent, from 1997.
Also in January 1998 while gold prices were at 18-year lows, the Company
liquidated its forward position in the gold futures market and generated $9.5
million in cash. The transaction enabled the Company to improve its cash and
working capital position. Proceeds from the liquidation were used to reduce the
Company's current bank debt and accounts payable by $4.5 million and $3.6
million, respectively. Including the cash proceeds from the transaction, the
Company generated $11.3 million in cash from operating activities during the
first quarter of 1998.
As of March 31, 1998, the Company's cash balance was $2.9 million, an increase
of $1.1 million from December 31, 1997. The improved cash position, together
with higher Brimstone ore grades and production volumes, has allowed the Company
to review its mining plans and defer the suspension of ore mining until August
1998 from the previously scheduled May 1998 suspension. As a result, estimated
1998 gold production from the Hycroft mine has been increased from 95,000 to
105,000 ounces.
Presently, gold production from inventoried ore at the Hycroft mine is planned
to continue through 1999 and into 2000. However, bulk sampling of ore from the
Brimstone pit and other technical studies are in progress. Hycroft's engineers
are reviewing the longer term implications of the favorable ore grade and
tonnage variances, including the possibility of further extensions to the mine
plan.
At the Amayapampa and Capa Circa projects in Bolivia, carrying costs to maintain
the projects have been reduced consistent with the Company's plans to start
development when gold prices return to levels above $325 per ounce. The Company
is currently conducting additional work on the underground Capa Circa mine to
identify additional sources of higher grade ore, which could be processed at the
nearby, proposed Amayapampa plant. The combination of the two operations enhance
the project's estimated financial returns, making financing more attractive at
lower gold prices.
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At the Guariche project in Venezuela, the Company terminated the option
agreement with L.B. Mining Co. on May 6, 1998, because the economic terms were
unacceptable in today's gold market. The Company is continuing discussions with
L. B. Mining Co. to reach an agreement more consistent with current gold prices.
Subsequent to March 31, 1998, Zamora Gold corp. ("Zamora") announced it had
signed an agreement to acquire various property interests in Ecuador from a
major Ecuadorian mineral exploration company. Vista presently owns 48.7 percent
of the outstanding common shares of Zamora. As a condition of the transaction,
Zamora will issue 39.5 million common shares to the Ecuadorian company for the
acquisition of the property interests and an additional 6.5 million common
shares to Vista in settlement of debts owed by Zamora to Vista. After completing
the transaction, which is subject to regulatory and shareholder approvals, 25.5
percent of the outstanding common shares of Zamora will be held by Vista.
The acquisition will further consolidate the major properties held by Zamora,
including the Mina Real and Nambija 1 concessions, in the highly prospective
Nambija gold belt in Southern Ecuador. Additional exploration is planned and, at
the same time, joint venture opportunities will be pursued for the porphyry
copper development on the Mina Real properties.
On May 7, 1998, the Company signed an agreement with Claude Resources Inc. to
sell the subsidiary that owns the Tartan Lake gold mine assets near Flin Flon,
Manitoba. The purchase price was payable in approximately 1.0 million shares of
Claude Resources common stock. Through a subsequent arrangement, the Company has
agreed to sell the Claude Resources shares in May 1998 for approximately U.S.
$1.5 million, further improving the Company's cash position.
Vista Gold is well positioned to endure the continuing depression in the gold
markets. The Company's cash position is adequate and should improve even at
today's low gold prices. The steps we have taken have proven to be appropriate
for the current gold price environment, although we are planning for, but not
relying on, more favorable gold prices. Until then, the Company is actively
reviewing its operations, and seeking appropriate acquisitions in light of
today's economics. As we explore additional opportunities to strengthen the
Company and enhance shareholder value, our outlook is positive.
/s/ Michael B. Richings
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Mike B. Richings
President and Chief Executive Officer
May 21, 1998
A good risk/reward at current depressed price???
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