Vista Gold Corp.'s (VGZ:NYSE.MKT; VGZ:TSX) principal asset is the Mt. Todd gold project in Australia's Northern Territory, where the company is undertaking metallurgical testing. At the end of November, Vista Gold announced that its test work has led to improved gold recoveries; automated sorting and a two-stage grinding circuit would "enable the project to achieve a finer grind size, higher gold recoveries/higher gold production, and lower processing costs with no material increase in project capital."
Heiko Ihle, an analyst with H.C. Wainwright & Co., noted in a Nov. 28 update on Vista Gold that his firm expects "a reduction in grinding, leaching, and tailings handling costs due to lower volume of material processed, and reiterate[s] the potential for these changes to reduce the above costs by around 10%."
"We expect the improvement in recoveries to translate to greater production and profitability at Mt Todd," Ihle wrote.
The company is now updating the preliminary feasibility study (PFS), which it plans to release this quarter. "We continue to expect an updated PFS for Mt Todd to be completed in 1Q18 and expect the study to reflect a project that can provide value to shareholders at the current gold price, rather than a potentially higher price in the future," Ihle noted.
Fund manager Adrian Day of Adrian Day Asset Management, wrote in Global Analyst on Nov. 20 that "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," Day noted, "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.' 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."
Adrian Day included Vista Gold in his short list of Best Buys on Dec. 19.
Analyst Ihle also discussed the Vista's valuation: "We view the current share price as a buying opportunity and believe that recent metallurgical testing should meaningfully improve the economics of the project. In our opinion, the Vista Gold share price thus far has not reflected these improvements."
"We continue to expect an updated PFS for Mt Todd to be completed in 1Q18 and expect the study to reflect a project that can provide value to shareholders at the current gold price, rather than a potentially higher price in the future," Ihle concluded.
Adrian Day shared the sentiment in his Nov. 20 report. "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," Day commented.
H.C. Wainwright & Co. has a Buy rating on Vista Gold and a target price of US$2.25. The shares are currently trading at around US$0.72.
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Disclosures from H.C. Wainwright & Co., Vista Gold Corp., Company Update, Nov. 28, 2017
I, Heiko F. Ihle, CFA and Matthew Barry, certify that 1) all of the views expressed in this report accurately reflect my personal views about any and all subject securities or issuers discussed; and 2) no part of my compensation was, is, or will be directly or indirectly related to the specific recommendation or views expressed in this research report; and 3) neither myself nor any members of my household is an officer, director or advisory board member of these companies.
None of the research analysts or the research analyst’s household has a financial interest in the securities of Vista Gold Corp. (including, without limitation, any option, right, warrant, future, long or short position).
As of October 31, 2017, neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Vista Gold Corp.
Neither the research analyst nor the Firm has any material conflict of interest in of which the research analyst knows or has reason to know at the time of publication of this research report.
The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a substantial portion of which is derived from investment banking services.
The Firm or its affiliates did receive compensation from Vista Gold Corp. for investment banking services within twelve months before, and will seek compensation from the companies mentioned in this report for investment banking services within three months following publication of the research report.
H.C. Wainwright & Co., LLC managed or co-managed a public offering of securities for Vista Gold Corp. during the past 12 months.
The Firm does not make a market in Vista Gold Corp. as of the date of this research report.
Disclosures from Global Analyst, Nov. 20, 2017 and Dec. 19, 2017
Disclosures for Vista Gold:
Adrian Day: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. Funds controlled by Adrian Day Asset Management hold shares of the following companies mentioned in this article: Vista Gold.