Common Stock: Vista Gold (NYSE: VGZ)
Current Market Price: $.90 USD
Market Capitalization: $90.3 million USD
Vista Gold Stock – Summary of the Company
Vista Gold is a gold mining company focused in the acquisition, exploration, and development of gold mining properties. The company’s flagship asset is the 100% owned Mt. Todd property in Northern Territory Australia. They also own 6.9 million shares of Midas Gold Corp. Vista Gold was founded in 1983 and is headquartered in Vancouver, Canada. They have 15 full time employees.
Revenue and Cost Analysis
Vista does not own any properties that are currently producing and therefore does not have any revenue. The company consistently runs a net loss and is likely to continue to do so for the foreseeable future.
In 2019 Vista had a net loss of $9.3 million, on par with 2018’s net loss of $8.7 million. The company’s largest expenses in both years were exploration related. These expenses totaled $4.1 million and $4.8 million in 2019 and 2018 respectively.
Vista Gold – Royalty and Streaming Agreements
The Mt Todd property is subject to a 1% net smelter royalty.
Vista Gold – Mineral Resources
In the company’s feasibility study, they estimate the Mt Todd property has “proven and probable” reserves totaling 5.8 million ounces of gold. They estimate average annual production to be 413 thousand ounces.
Balance Sheet Analysis
Vista Gold has a strong balance sheet with low liability levels and sufficient short term liquidity. Their major assets are mineral properties and equipment. They also have a significant equity position in Midas Gold stock.
Vista Gold – Debt Analysis
As of year-end 2019, the company does not have any debt outstanding.
Vista Gold Stock – Share Dynamics and Capital Structure
As of February 2020, the company had 100.7 million common shares outstanding and 244 shareholders of record. They also have dilutive instruments outstanding such as restricted share units and options. Fully diluted shares outstanding is around 107.3 million shares.
The capital structure does not appear overly dilutive and I believe it is acceptable for common stock holders.
Vista Gold Stock – Dividends
The company has never paid a dividend and is unlikely to do so for the foreseeable future.
Management – Skin in the game
Insiders at Vista Gold have not made any relevant transactions in the recent past, providing no signal for investors.
Vista Gold Stock – 3 Metrics to Consider
Debt to Equity Ratio
Total Liabilities/Total Share Holder Equity
$4 million / $12.6 million = .32
A debt to equity ratio of .32 indicates that Vista does use some debt financing, but relies mostly on equity financing to fund itself.
Price to Book Ratio
Current Share Price/Book Value per Share.
$.90/$.12 = 7.6
Based on fully diluted shares outstanding, Vista has a book value per share of $.12. At the current market price, this implies a price to book ratio of 7.6, meaning the company currently trades at a significant premium to the book value of the company.
Working Capital Ratio
Current Assets/Current Liabilities
$8.8 million/$1 million = 8.2
A working capital ratio of 8.2 indicates a strong liquidity position. Vista should not have a problem meeting its short-term obligations.
Gold Market – Economic Factors and Competitive Landscape
Gold mining is a highly competitive, capital intensive business. The company will need to compete fiercely for both new projects and capital. However, given the current economic environment of global money printing and zero or negative interest rates, it would appear gold companies are poised to benefit from a strong economic tailwind.
Vista Gold Stock – Summary and Conclusions
The Mt. Todd project is a high potential gold mine, potentially the largest undeveloped gold property in Australia. The property has produced gold in the past, but has been in care and maintenance for some time. However, the property likely still holds large deposits.
Vista Gold has a solid balance sheet, with sufficient liquidity and low liabilities. Although they will likely need to raise capital in the medium term, the company appears financially healthy. The capital structure also appears acceptable for common shareholders
My biggest concern is that Vista is a single asset stock, and the Mt Todd property has not seen significant progress. I think an allocation to Vista stock may be acceptable for two reasons: the upside of the property is sufficient to compensate for the level of risk and the company also owns a relevant position in Midas Gold, giving Vista investors a call option on another gold company.
I am not going to buy Vista stock yet, but I will monitor the company closely and reevaluate in the near future.
Disclaimer
This is not investment advice. Nothing in this analysis should be construed as a recommendation to buy, sell, or otherwise take action related to the security discussed. If I own a position in the security discussed, I will clearly state it.
This is not intended to be a comprehensive analysis and you should not make an investment decision based solely on the information in this analysis. I hope this serves as a useful starting point for a more comprehensive analysis, and hopefully draws attention to aspects of the company that were overlooked or merit further investigation. This is by no means intended to be a complete analysis. Again, this is not investment advice, do your own research.
