In a May 29 research note, ROTH Capital Partners analyst Jake Sekelsky reported that recent additional metallurgical test results from Vista Gold Corp.'s (VGZ:NYSE.MKT; VGZ:TSX) Mt. Todd project "indicate the potential to increase recoveries" there.
"Given Mt. Todd's scale, we believe an increase in overall recoveries could have an outsized positive impact on the project's economics," Sekelsky added.
He reviewed the test results. Initial leach tests using a grind size of about 50 microns resulted in average gold recoveries of 92.7%, which compare favorably to those outlined in the 2018 prefeasibility study of 86.4%. They also exceed management's expectation of about 90%.
Vista Gold is now testing samples with a finer grind size of 40 microns, results from which should be out later in Q2/19. Following that, an updated prefeasibility study on Mt. Todd is expected in Q3/19.
That revised study will likely reflect two major changes that would improve the project's economics, Sekelsky noted: recovery rates and foreign exchange rate. "We expect recovery rates to come in above 90%, which we believe could result in an addition of approximately 300,000 ounces of gold production of the life of mine," he wrote. Also, the study will likely use today's exchange rate of about 0.7 instead of the higher rate of 0.8 used in the prior study.
If the prefeasibility study outlines an increased recovery rate and a foreign exchange rate that is closer to today's level, Sekelsky pointed out, "additional upside to our valuation remains." ROTH's Mt. Todd model assumes a recovery rate of 86% and a foreign exchange rate of 0.8.
The investment banking firm has a Buy rating and a US$1.49 per share price target on Vista Gold, whose stock is now trading at around US$0.60 per share.
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Disclosures from ROTH Capital Partners, Vista Gold, Company Note, May 29, 2019
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
ROTH makes a market in shares of Vista Gold and as such, buys and sells from customers on a principal basis.
ROTH and/or its employees, officers, directors and owners own options, rights or warrants to purchase shares of Vista Gold stock.
Shares of Vista Gold may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months.
