<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from * to *
Commission File Number 1-9025
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VISTA GOLD CORP.
Continued under the laws of the Yukon Territory
Suite 3000
370 Seventeenth Street
Denver, Colorado
80202
================================================================================
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- ---------------------
Common shares without par value American Stock Exchange
The Toronto Stock Exchange
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(d)
OF THE ACT:
None.
INDICATE THE NUMBER OF OUTSTANDING SHARES OF EACH OF THE ISSUER'S CLASSES OF
CAPITAL OR COMMON STOCK AS OF THE CLOSE OF THE CLOSE OF THE PERIOD COVERED BY
THE ANNUAL REPORT:
As of December 31, 1997, 89,152,540 Common Shares of the registrant were
outstanding.
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO THE FILING
REQUIREMENTS FOR THE PAST 90 DAYS:
Yes [X] No [ ]
INDICATE BY CHECK MARK WHICH FINANCIAL STATEMENT ITEM THE REGISTRANT HAS ELECTED
TO FOLLOW:
Item 17 [X] Item 18 [ ]
DOCUMENTS INCORPORATED BY REFERENCE HEREIN:
To the extent herein specifically referenced in Parts I, III and IV, the
Management Information and Proxy Circular for Vista Gold's 1998 Annual General
Meeting. See Parts I, III and IV.
Document: 3311089; 09
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TABLE OF CONTENTS
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GLOSSARY............................................1
CURRENCY............................................3
METRIC CONVERSION TABLE.............................3
UNCERTAINTY OF FORWARD-LOOKING STATEMENTS...........3
PART I
ITEM 1. DESCRIPTION OF BUSINESS.....................4
Overview......................................4
Segmented Financial Information...............5
Corporate Organization Chart..................5
Significant Developments in 1997..............5
Subsequent Events.............................6
Refining and Marketing........................6
Exploration and Business Development..........8
Property Interests and Mining Claims..........8
Reclamation...................................9
Government Regulation.........................9
Environmental Regulation.....................10
Competition..................................10
Employees....................................10
Risk Factors.................................10
ITEM 2. DESCRIPTION OF PROPERTIES..................12
Operations...................................12
Hycroft Mine.................................13
Amayapampa and Capa Circa Properties.........16
Exploration Properties.......................24
1997 Exploration Expenditures................27
1998 Exploration Plan........................27
ITEM 3. LEGAL PROCEEDINGS..........................27
ITEM 4. CONTROL OF REGISTRANT......................27
ITEM 5. NATURE OF TRADING MARKET...................28
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS
AFFECTING SECURITY-HOLDERS.......................29
ITEM 7. TAXATION...................................29
ITEM 8. SELECTED FINANCIAL DATA....................30
United States$/Canadian $Exchange Rates......31
Dividends....................................32
ITEM 9. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................32
Introduction.................................32
Results of Operations........................32
Outlook......................................36
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT......36
Directors....................................36
Executive Officers...........................37
Executive and Audit Committees...............38
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS....38
ITEM 12. OPTIONS TO PURCHASE
SECURITIES FROM REGISTRANT OR
SUBSIDIARIES.....................................39
ITEM 13. INTEREST OF MANAGEMENT
IN CERTAIN TRANSACTIONS..........................40
PART II
ITEM 14. DESCRIPTION OF SECURITIES REGISTERED......40
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES...........40
ITEM 16. CHANGES IN SECURITIES
AND CHANGES IN SECURITY FOR
REGISTERED SECURITIES............................40
PART IV
ITEM 17. FINANCIAL STATEMENTS......................41
Report of Independent Accountants............41
Consolidated Financial Statements............42
Notes to Consolidated Financial Statements...46
ITEM 18. FINANCIAL STATEMENTS......................58
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.........58
A. CONSOLIDATED FINANCIAL
STATEMENTS OF VISTA GOLD CORP.............58
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<TABLE>
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B. FINANCIAL STATEMENT SCHEDULES.............58
C. EXHIBITS..................................59
OTHER..............................................59
SIGNATURES.........................................60
</TABLE>
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GLOSSARY
"adit" means a horizontal or nearly horizontal passage driven from the surface
for the working or unwatering of a mine.
"Amalgamation" means the amalgamation of Granges and Da Capo effective on
November 1, 1996.
"Amalgamation Agreement" means the amalgamation agreement dated September 16,
1996 between Granges and Da Capo.
"assay" means to test ores or minerals by chemical or other methods for the
purpose of determining the amount of valuable metals contained.
"Atlas" means Atlas Corporation.
"breccia" means rock consisting of fragments, more or less angular, in a matrix
of finer-grained material or of cementing material.
"claim" means a mining title giving its holder the right to prospect, explore
for and exploit minerals within a defined area.
"Common Shares" means common shares without par value of Vista Gold.
"Continuation" means the continuation of Vista Gold effective December 17, 1997
from British Columbia to the Yukon Territory, Canada under the provisions of the
Business Corporations Act (Yukon Territory).
"Corporation" means the consolidated group consisting of Vista Gold Corp. and
its subsidiaries Hycroft Resources & Development, Inc., Hycroft Lewis Mine,
Inc., Vista Gold Holdings Inc., Vista Gold U.S. Inc., Granges Inc., 3377474
Canada Inc., Vista Gold (Antigua) Corp. and Sociedad Industrial Yamin Limitada.
"cut-off grade" means the minimum grade of ore used to establish reserves.
"Da Capo" means Da Capo Resources Ltd., a predecessor of Vista Gold.
"deposit" means an informal term for an accumulation of mineral ores.
"diamond drill" means a rotary type of rock drill that cuts a core of rock and
is recovered in long cylindrical sections, two centimetres or more in diameter.
"dore" means unrefined gold and silver bullion consisting of approximately 90%
precious metals which will be further refined to almost pure metal.
"flotation" means a process whereby value minerals are separated from waste by
attaching them to air bubbles in a pulp by the use of small amounts of
chemicals.
"Granges" means Granges Inc., a predecessor of Vista Gold.
"heap leach" means a gold extraction method that percolates a cyanide solution
through crushed ore heaped on an impervious pad or base.
"Hycroft Inc." means Hycroft Resources & Development, Inc., an indirect
wholly-owned subsidiary of Vista Gold.
"Hycroft Lewis" means Hycroft Lewis Mine, Inc., an indirect wholly-owned
subsidiary of Vista Gold.
"Induced-Polarization" means a survey that measures the time varying resistivity
and conductance of a volume of rock. Measurements can be related to the
percentage of conductive material (e.g., sulfides, graphites) in a volume of
rock.
"Merrill-Crowe" means a process for recovering gold from solution by
precipitation with zinc dust.
"mineralization" means material containing valuable minerals.
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"Montreal Trust" means Vista Gold's registrar and transfer agent, Montreal Trust
Company of Canada.
"ore" means material containing valuable minerals that can be economically
extracted.
"oxide reserve" or "resource" means mineralized rock in which some of the
original minerals have been oxidized. Oxidation tends to make the ore more
porous and permits a more complete permeation of cyanide solutions so that
minute particles of gold in the interior of the minerals will be more readily
dissolved.
"probable reserves" means reserves for which quantity and grade and/or quality
are computed from information similar to that used for proven reserves, but the
sites for inspection, sampling and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance, although lower than
that for proven reserves, is high enough to assume continuity between points of
observation.
"proven reserves" means reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or
quality are computed from the results of detailed sampling and (b) the sites for
inspection, sampling and measurement are spaced so closely and the geologic
character is so well defined that size, shape, depth, and mineral content of
reserves are well-established.
"recovery" means that portion of the metal contained in the ore that is
successfully extracted by processing, expressed as a percentage.
"reserves" or "ore reserves" mean that part of a mineral deposit which could be
economically and legally extracted or produced at the time of the reserve
determination.
"resource" or "mineral resource" means a deposit or concentration of minerals
for which there is sampling information and geologic understanding for an
estimate to be made of the contained minerals.
"run-of-mine" refers to ore of a size that can be mined without further
crushing.
"sampling" means selecting a fractional, but representative part, of a mineral
deposit for analysis.
"stockwork" means a close network of veinlets often associated with an igneous
stock or its wallrocks.
"stope" means an underground excavation that is made by removing ore from the
surrounding rock.
"strike", when used as a noun, means the direction, course or bearing of a vein
or rock formation measured on a level surface and, when used as a verb, means to
take such direction, course or bearing.
"strike length" means the longest horizontal dimension of an ore body or zone of
mineralization.
"stripping ratio" means the ratio between waste and ore in an open pit mine.
"sulfide" means a compound of sulfur and some other element.
"tailings" means material rejected from a mill after most of the valuable
minerals have been extracted.
"trenching" means prospecting in which subsurface strata are exposed by digging
pits across the strike of a lode.
"vein" means a fissure, fault or crack in a rock filled by minerals that have
travelled upwards from some deep source.
"Vista Gold" means Vista Gold Corp.
"volcaniclastic" means derived by ejection of volcanic material from a volcanic
vent.
"waste" means rock lacking sufficient grade and/or other characteristics of ore.
"Zamora" means Zamora Gold Corp.
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CURRENCY
Unless otherwise specified, all dollar amounts in this report are expressed in
United States dollars.
The exchange rate at the end of each of the five years to December 31, 1997, and
the average, the high and the low rates of exchange for each year in that five
year period, are set forth in "Item 8. Selected Financial Data United
States$/Canadian$ Exchange Rates". These exchange rates are expressed as the
amount of United States funds equivalent to one Canadian dollar, being the noon
buying rates in New York City for cable transfers in Canadian dollars, as
certified for customs purposes by the Federal Reserve Bank of New York. On March
30, 1998, this noon buying rate was $1.4225 (Cdn.$1.00 equals U.S.$0.7030).
METRIC CONVERSION TABLE
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TO CONVERT IMPERIAL MEASUREMENT UNITS TO METRIC MEASUREMENT UNITS MULTIPLY BY
Acres............................................. Hectares.............................. 0.4047
Feet.............................................. Metres................................ 0.3048
Miles............................................. Kilometres............................ 1.6093
Tons (short)...................................... Tonnes................................ 0.9071
Gallons........................................... Litres................................ 3.7850
Ounces (troy)..................................... Grams................................. 31.103
Ounces (troy) per ton (short)..................... Grams per tonne....................... 34.286
</TABLE>
UNCERTAINTY OF FORWARD-LOOKING STATEMENTS
This document, including any documents that are incorporated by reference as set
forth on the face page under "Documents incorporated by reference herein",
contains forwarding-looking statements concerning, among other things, projected
annual gold production, mineral resources, proven or probable reserves and cash
operating costs. Such statements are typically punctuated by words or phrases
such as "anticipates", "estimates", "projects", "foresees", "management
believes", "believes" and words or phrases of similar import. Such statements
are subject to certain risks, uncertainties or assumptions. If one or more of
these risks or uncertainties materialize, or if underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or projected. Important factors that could cause actual results to differ
materially from those in the foregoing forward-looking statements are identified
in this document under "Item 1. Description of Business - Risk Factors". Vista
Gold assumes no obligation to update these forward-looking statements to reflect
actual results, changes in assumptions or changes in other factors affecting
such statements.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
OVERVIEW
The Corporation is engaged, directly and through joint ventures, in the
exploration for and the acquisition, development and operation of mineral
properties in North and South America. Since 1971, the Corporation and its
predecessor companies have held participating interests in six mines, four of
which were discovered by the Corporation. The Corporation has also operated four
of the six mines.
During 1997, the Corporation's principal mining operation and source of earnings
was the Hycroft mine (formerly known as the Crofoot/Lewis mine) in Nevada,
U.S.A. which produces gold and by-product silver. See "Item 2. Description of
Properties - Hycroft Mine". The Corporation owns the Amayapampa and Capa Circa
gold properties in Bolivia for which a feasibility study was completed in 1997.
See "Item 2. Description of Properties - Amayapampa and Capa Circa Properties".
The Corporation also is a party to an option agreement with L.B. Mining Co.
under which the Corporation has the right to acquire, and has conducted
exploration work on, concessions on 74,130 acres (30,000 hectares) comprising
the Guariche gold project in southeastern Venezuela. See "Item 2. Description of
Properties - Exploration Properties - Venezuela". The Corporation has
approximately 20 additional mineral properties in North and South America
covering approximately 130,960 acres (53,000 hectares) in various stages of
evaluation. The Corporation owns a 49% equity interest in Zamora Gold Corp., a
Canadian mineral exploration company with interests in mineral concessions in
southern Ecuador. See "Item 2. Description of Properties Exploration Properties
- - Ecuador". The Corporation has approximately 405 full-time permanent employees.
Vista Gold was originally incorporated on November 28, 1983 under the name
"Granges Exploration Ltd.". In November 1983, Granges Exploration Ltd. acquired
all the mining interests of Granges AB in Canada. On June 28, 1985, Granges
Exploration Ltd. and Pecos Resources Ltd. amalgamated under the name "Granges
Exploration Ltd." and on June 9, 1989, Granges Exploration Ltd. changed its name
to "Granges Inc.". On May 1, 1995, Granges and Hycroft Resources & Development
Corporation were amalgamated under the name "Granges Inc.". Effective November
1, 1996, Granges and Da Capo amalgamated under the name "Vista Gold Corp.".
Effective December 19, 1997, Vista Gold was continued from British Columbia to
the Yukon Territory, Canada under the Business Corporations Act (Yukon
Territory).
The current addresses, telephone and facsimile numbers of the offices of Vista
Gold are:
EXECUTIVE OFFICE REGISTERED AND RECORDS OFFICE
Suite 3000 200 - 204 Lambert Street
370 Seventeenth Street Whitehorse, Yukon Territory, Canada
Denver, Colorado 80202 Y1A 3T2
Telephone: (303) 629-2450 Telephone: (867) 667-7600
Facsimile: (303) 629-2499 Facsimile: (867) 667-7885
During 1997, the Corporation had one mine in operation, the Hycroft mine.
Detailed information on the Hycroft mine is contained in "Item 2. Description of
Properties - Hycroft Mine".
The Corporation derives all of its current revenues from the sale of gold
extracted from the Hycroft mine. In fiscal 1995, 1996 and 1997 revenues from
sales of gold were $40 million, $35 million and $40 million, respectively.
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SEGMENTED FINANCIAL INFORMATION
The Corporation operates in the mining industry in Canada, the United States and
Latin America. For information on the Corporation's sales, earnings from
operations and identifiable assets by geographic area, see note 12 to the
consolidated financial statements for the year ended December 31, 1997 under
"Item 17. Financial Statements - Notes to Consolidated Financial Statements".
CORPORATE ORGANIZATION CHART
The name, place of incorporation, continuance or organization, and percent of
voting securities owned or controlled by Vista Gold as of December 31, 1997 for
each subsidiary of Vista Gold is set out below.
[FLOWCHART]
SIGNIFICANT DEVELOPMENTS IN 1997
ATLAS CORPORATION
In June 1997, Atlas Corporation announced that it had exchanged its 8,313,076
Common Shares of Vista Gold with the holders of its outstanding exchangeable
debentures. As a result of this transaction, Atlas ceased to be a major
shareholder of Vista Gold.
AMAYAPAMPA PROJECT
In July 1997, the Corporation completed a feasibility study for the Amayapampa
property in Bolivia, and announced that it was proceeding to seek financing for
the construction of a mine and related processing facilities. In November 1997,
the Corporation revised the feasibility study to reduce the project's size to
reflect the impact on the project's economics caused by the significant drop in
the price of gold in the latter half of 1997 and lower estimates of gold grade
based on the results of additional drilling.
As a result of a further drop in the gold price subsequent to November 1997, the
Corporation placed the Amayapampa project on hold pending an increase in the
price of gold.
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HYCROFT MINE
In response to declining gold prices, the Corporation revised the production
plan for the Hycroft mine in the third quarter of 1997 in order to optimize the
mine's ore reserves while reducing production costs. Under the revised plan, the
mine is expected to produce 380,000 ounces of gold at a direct cash cost of $231
per ounce over the next four year period.
Gold production at the Hycroft mine in 1997 was a record 117,378 ounces. At
December 31, 1997, the estimated proven and probable reserves at the Hycroft
mine were 25.2 million tons of ore at a grade of 0.02 ounces per ton containing
515,000 ounces of gold at an estimated gold price of $375 per ounce.
CONTINUATION
On December 17, 1997, Vista Gold was continued from British Columbia to the
Yukon Territory, Canada under the Business Corporations Act (Yukon Territory)
following approval of a special resolution by the shareholders of Vista Gold at
an extraordinary general meeting held on that date.
EXPLORATION
In 1997, the Corporation closed its district exploration offices in Reno, Nevada
and Lima, Peru in an effort to reduce costs.
SUBSEQUENT EVENTS
In January 1998, the Corporation announced that it had liquidated its forward
position in the gold futures market covering approximately 242,000 ounces for
net cash proceeds of $9.5 million. To ensure a satisfactory cash margin in 1998
in the current gold price environment, the Corporation has hedged 90,000 ounces
of gold at prices between $282 and $286 per ounce.
In January 1998, the Corporation announced plans to temporarily reduce mining
activities at the Hycroft mine. Waste rock stripping was halted immediately and
ore extraction will be suspended in May 1998. Gold recovery and gold processing
will continue from mined and inventoried ore in 1998.
REFINING AND MARKETING
The Hycroft mine produces dore which is processed by Metalor USA Refining
Corporation in North Attleboro, Massachusetts. Gold and silver can be sold on
numerous markets throughout the world, and the market price is readily
ascertainable. Alternate refiners for silver and gold produced from the Hycroft
mine are available if necessary. As a result of the large number of available
gold and silver purchasers, the Corporation is not dependent upon the sale to
any one customer of either its gold or silver.
GOLD AND SILVER SALES
The profitability of gold and silver mining is directly related to the market
price of the metal compared with the cost of production. The following is a
brief description of factors affecting, and historical trends in, the market
prices of gold and silver, which account for most of the Corporation's revenue.
A description of the Corporation's hedging and forward sales commitments also
follows.
Gold prices fluctuate widely and are affected by numerous factors, including
expectations with respect to the rate of inflation, the market value of various
currencies (specifically, the United States dollar relative to other
currencies), interest rates, global and regional political and economic crises
and governmental policies with respect to gold holdings by a nation or its
citizens.
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The demand for and supply of gold affect gold prices but not necessarily in the
same manner as supply and demand affect the prices of other commodities. The
supply of gold consists of a combination of new mine production and existing
stocks of bullion and fabricated gold held by governments, public and private
financial institutions, industrial organizations and private individuals.
The price of silver, while related somewhat to the price of and affected to some
extent by the same factors as gold, is more subject to normal supply and demand
factors. Silver has a wide range of industrial uses on the demand side and is
subject to both mine production and substantial secondary supply from scrap and
dishoarding on the supply side. Silver inventories held by metal exchanges
remained high during the 1980s and 1990s and lower industrial and consumer
demand and relatively high interest rates continued to depress the price of
silver during much of that period.
The following table sets out the annual high and low gold prices per troy ounce
in the London bullion market in United States dollars for the years indicated:
<TABLE>
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HIGH LOW
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1997 $367 $283
1996 415 367
1995 396 372
1994 396 370
1993 406 326
</TABLE>
On December 30, 1997, the afternoon fixing price of gold on the London bullion
market was $290.20 per ounce.
The following table sets out the annual high and low silver price per ounce
(Handy & Harmon New York Prices) in United States dollars for the years
indicated:
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HIGH LOW
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<S> <C> <C>
1997 $6.21 $4.18
1996 5.79 4.67
1995 6.01 4.36
1994 5.80 4.63
1993 5.37 3.55
</TABLE>
On December 31, 1997, the Handy & Harmon price for silver was $5.95 per ounce.
HEDGING AND METAL SALES COMMITMENTS
The Corporation may from time to time protect against falling gold prices
through forward sales of future production. Under this hedging process, the sale
price of gold to be delivered at a future date is fixed at the time the forward
sale is made, thus eliminating the effect of any future gold price fluctuations.
Revenue from these forward sales is recognized when the gold is due to be
delivered. At December 31, 1997, the Corporation had forward sales commitments
covering approximately 242,000 ounces of gold which were liquidated on January
8, 1998 resulting in net proceeds of $9.5 million. The Corporation then hedged
approximately 45,000 ounces through forward sales at a price of $282 per ounce
and 45,000 ounces covered by put options at $282 per ounce which were financed
by selling call options at $286 per ounce. Vista Gold's Board of Directors
regularly reviews its forward sales arrangements. The level of future forward
sales will depend in part upon the Corporation's assessment of gold market
conditions at the relevant time.
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EXPLORATION AND BUSINESS DEVELOPMENT
The Corporation's exploration and business development activities are focused on
gold. In the United States, the Corporation has an exploration project at the
Hycroft mine located in Nevada. In Bolivia, the Amayapampa properties represent
both a development and an exploration project. The Capa Circa, Copacabana and
Iroco properties in Bolivia represent exploration targets. In Venezuela, a drill
program implemented in 1997 established a 694,000 ounce resource on the Guariche
project, which is held under option. In Ecuador, the exploration program in the
Nambija gold district primarily on the Mina Real and Comcumay properties will be
continued by Zamora, which is 49% owned by Vista Gold.
The Corporation's exploration activities are headquartered in Denver, Colorado,
with one district exploration office in La Paz, Bolivia. The exploration
department has a permanent staff of two geologists. Consultants and contract
personnel are used for specific projects and tasks.
The 1997 exploration program was focused on the Amayapampa and Capa Circa
projects in Bolivia, and the Guariche project in Venezuela.
A limited amount of exploration was carried out in Ecuador through Vista Gold's
subsidiary, Zamora. Early-stage exploration expenditures of $350,000 were
carried out by Kennecott Corporation and Phelps Dodge Corp. on the Corporation's
Blackwater-Davidson and Isle Projects in Canada.
Vista Gold's Reno, Nevada and Lima, Peru exploration offices were closed in
September 1997 in an effort to reduce costs.
During 1998, a total of $2.5 million is expected to be spent on exploration. Of
the $2.5 million, it is expected that $200,000 will be spent in Nevada at the
Hycroft mine and $2.3 million will be spent in Latin America, including $300,000
on the Capa Circa, Amayapampa and Copacabana properties in Bolivia. In
Venezuela, an estimated $2.0 million is expected to be spent, primarily on
drilling at the Guariche project. See "Item 2. Description of Properties - 1998
Exploration Plan". Actual expenditures will vary because of the acquisition of
new properties, the results of planned exploration activities and the
availability of funds to complete planned and additional exploration and
development activities. Vista Gold does not presently have sufficient funds to
carry out these planned exploration expenditures. The extent to which the
exploration plan is carried out will depend on Vista Gold's ability to raise the
necessary funds.
PROPERTY INTERESTS AND MINING CLAIMS
In the United States, most of the Corporation's exploration activities are
conducted in the state of Nevada. Mineral interests may be owned in Nevada by
(i) the United States, (ii) the state of Nevada, or (iii) private parties. Where
prospective mineral properties are owned by private parties or by the state,
some type of property acquisition agreement is necessary in order for the
Corporation to explore or develop such property. Generally, these agreements
take the form of long term mineral leases under which the Corporation acquires
the right to explore and develop the property in exchange for periodic cash
payments during the exploration and development phase and a royalty, usually
expressed as a percentage of gross production or net profits derived from the
leased properties if and when mines on the properties are brought into
production. Other forms of acquisition agreements are exploration agreements
coupled with options to purchase and joint venture agreements. Where prospective
mineral properties are held by the United States, mineral rights may be acquired
through the location of unpatented mineral claims upon unappropriated federal
land. If the statutes and regulations for the location of a mining claim are
complied with, the locator obtains a valid possessory right to develop and
produce minerals from the claim. The right can be freely transferred and is
protected against
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<PAGE> 12
appropriation by the government without just compensation. The
claim locator also acquires the right to obtain a patent or fee title to his
claim from the federal government upon compliance with certain additional
procedures.
Mining claims are subject to the same risk of defective title that is common to
all real property interests. Additionally, mining claims are self-initiated and
self-maintained and therefore, possess some unique vulnerabilities not
associated with other types of property interests. It is impossible to ascertain
the validity of unpatented mining claims from public real estate records and,
therefore, it can be difficult or impossible to confirm that all of the
requisite steps have been followed for location and maintenance of a claim. If
the validity of a patented mining claim is challenged by the Bureau of Land
Management or Forest Service on the grounds that mineralization has not been
demonstrated, the claimant has the burden of proving the present economic
feasibility of mining minerals located thereon. Such a challenge might be raised
when a patent application is submitted or when the government seeks to include
the land in an area to be dedicated to another use.
RECLAMATION
Although reclamation is conducted concurrently with mining whenever feasible,
the Corporation generally is required to mitigate long-term environmental
impacts by stabilizing, contouring, resloping, and revegetating various portions
of a site once mining and mineral processing operations are completed. These
reclamation efforts are conducted in accordance with detailed plans which have
been reviewed and approved by the appropriate regulatory agencies.
The reclamation and closure costs for the Corporation's mines are estimated by
management as follows:
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<S> <C>
Hycroft mine(1)......................................... $7.0 million
Tartan Lake mine(2)...................................... 0.7 million
------------
$7.7 million
============
</TABLE>
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(1) As reported in the Corporation's annual report on Form 20-F for 1994, an
amended Crofoot/Lewis Mine Reclamation Plan that included the new Brimstone
deposit was submitted to the Nevada Bureau of Land Management (the "BLM")
in March 1994. In April 1995, the BLM approved the plan and a surety bond
in the amount of $5.1 million was posted to secure reclamation obligations
under the plan.
(2) The Tartan Lake mine has not operated since 1989.
These costs are charged to earnings over the life of the mine and the provision
to date is $4.5 million.
GOVERNMENT REGULATION
Mining operations and exploration activities are subject to various national,
state, provincial and local laws and regulations in the United States, Bolivia,
Venezuela, Canada and other jurisdictions, which govern prospecting,
development, mining, production, exports, taxes, labour standards, occupational
health, waste disposal, protection of the environment, mine safety, hazardous
substances and other matters. The Corporation has obtained or has pending
applications for those licences, permits or other authorizations currently
required to conduct its operations. The Corporation believes that it is
complying in all material respects with applicable mining, health, safety and
environmental statutes and the regulations passed thereunder in the United
States, Canada, Bolivia, Venezuela and the other jurisdictions in which the
Corporation operates. There are no current orders or directions with respect to
the foregoing laws and regulations.
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<PAGE> 13
ENVIRONMENTAL REGULATION
The Corporation's mining operations and exploration activities are subject to
various federal, state and local laws and regulations governing protection of
the environment. These laws are continually changing and, as a general matter,
are becoming more restrictive. The Corporation's policy is to conduct business
in a way that safeguards public health and the environment. The Corporation
believes that its operations are conducted in material compliance with
applicable laws and regulations.
Changes to current local, state or federal laws and regulations in the
jurisdictions where the Corporation operates could require additional capital
expenditures and increase operating and/or reclamation costs. Although the
Corporation is unable to predict what additional legislation, if any, might be
proposed or enacted, additional regulatory requirements could render certain
mining operations uneconomic.
During 1997, there were no material environmental incidents or non-compliance
with any applicable environmental regulations.
COMPETITION
The Corporation competes with other mining companies in connection with the
acquisition of gold and other precious metals properties. There is significant
and increasing competition for the limited number of gold acquisition
opportunities, some of which is with other companies having substantially
greater financial resources than the Corporation. As a result, the Corporation
may eventually be unable to acquire attractive gold mining properties. The
Corporation believes no single company has sufficient market power to affect the
price or supply of gold in the world market.
EMPLOYEES
As at December 31, 1997, the Corporation had approximately 405 permanent
full-time employees, of which 200 were employed at the Hycroft mine site, 190
were employed in Bolivia, four were employed in exploration activities and 11
were employed at Vista Gold's executive office other than in exploration
activities. One hundred and eighty of the Corporation's employees are
represented by a labour union in Bolivia. The Hycroft mine has never experienced
a loss of production due to work stoppages. The Corporation considers its
relations with its employees to be excellent.
RISK FACTORS
Fluctuating Prices
The Corporation's revenues are expected to be, in large part, derived from the
mining and sale of gold and other precious metals or interests related thereto.
The price of those commodities has fluctuated widely, particularly in recent
years, and is affected by numerous factors beyond the control of the
Corporation, including international, economic and political trends,
expectations of inflation, currency exchange fluctuations, central bank
activities, interest rates, global or regional consumption patterns (such as the
development of gold coin programs), speculative activities and increased
production due to new mine developments and improved mining and production
methods. The effect of these factors on the price of precious metals, and
therefore the economic viability of any of the Corporation's projects, cannot
accurately be predicted.
Exploration and Development
All of the mineral properties which Vista Gold owns, other than the Hycroft
mine, are in the exploration and development stages only. Mineral exploration
and development involves a high degree of risk and few properties which are
explored are ultimately developed into producing mines. There is no assurance
that Vista Gold's mineral exploration and development activities will result in
any discoveries of
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<PAGE> 14
commercial bodies of ore. The long-term profitability of the Corporation's
operations will be in part directly related to the cost and success of its
exploration programs, which may be affected by a number of factors beyond the
control of Vista Gold.
Substantial expenditures are required to establish ore reserves through
drilling, to develop metallurgical processes to extract metal from the ore and,
in the case of new properties, to develop the mining and processing facilities
and infrastructure at any site chosen for mining. Although substantial benefits
may be derived from the discovery of a major mineralized deposit, no assurance
can be given that minerals will be discovered in sufficient quantities to
justify commercial operations or that the funds required for development can be
obtained on a timely basis.
Operating Hazards and Risks
Mineral exploration involves many risks, which even a combination of experience,
knowledge and careful evaluation may not be able to overcome. Operations in
which Vista Gold has direct or indirect interests will be subject to all the
hazards and risks normally incidental to exploration, development and production
of gold and other metals, any of which could result in work stoppages, damage to
property and possible environmental damage. Although the Corporation has
obtained liability insurance in an amount which they consider adequate, the
nature of these risks is such that liabilities might exceed policy limits, the
liabilities and hazards might not be insurable, or the Corporation might elect
not to insure itself against such liabilities due to high premium costs or other
reasons, in which event the Corporation could incur significant costs that could
have a materially adverse effect upon their financial condition.
Minority Interest in Properties
Third parties hold minority interests in certain of the Corporation's
properties. Under Bolivian law, a minority interest in a mining concession is an
undivided interest in that concession and the holder of such a minority interest
may take action to restrict all exploration and development of the mining
concessions by the holder of the majority interest if such exploration and
development is conducted without the minority owner's permission. Furthermore,
if the majority and minority parties wish to separate their interests, but are
unable to agree as to the method of division or purchase of the property, the
parties must file a request for division before a Bolivian civil court.
Calculation of Reserves and Gold Recovery
There is a degree of uncertainty attributable to the calculation of reserves and
corresponding grades being mined or dedicated to future production. Until
reserves are actually mined and processed, the quantity of ore and grades must
be considered as an estimate only. In addition, the quantity of reserves and ore
may vary depending on metal prices. Any material change in the quantity of
reserves, mineralization, grade or stripping ratio may affect the economic
viability of the Corporation's properties. In addition, there can be no
assurance that gold recoveries or other metal recoveries in small scale
laboratory tests will be duplicated in larger scale tests under on-site
conditions or during production.
Environmental Factors
All phases of the Corporation's operations are subject to environmental
regulation. Environmental legislation is evolving in a manner which will require
stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects
and a heightened degree of responsibility for companies and their officers,
directors and employees. There is no assurance that future changes in
environmental regulation, if any, will not adversely affect the Corporation's
operations.
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<PAGE> 15
Competition and Agreements with Other Parties
The mining industry is intensely competitive in all of its phases, and the
Corporation competes with many companies possessing greater financial resources
and technical facilities than themselves. Competition in the mining business
could adversely affect the Corporation's ability to acquire suitable producing
properties or prospects for mineral exploration in the future.
Conflicts of Interest
Certain directors of the Corporation are officers and/or directors of, or are
associated with other natural resource companies that acquire interests in
mineral properties. Such associations may give rise to conflicts of interest
from time to time. In the event that any such conflict of interest arises, a
director who has such a conflict will disclose the conflict to a meeting of the
directors of the company in question and will abstain from voting for or against
approval of any matter in which such director may have a conflict. In
appropriate cases, the company in question will establish a special committee of
independent directors to review a matter in which several directors, or
management, may have a conflict. In accordance with the laws of the Yukon
Territory, the directors of all companies are required to act honestly, in good
faith and in the best interests of a company for which they serve as a director.
Title to Assets
Although the Corporation has reviewed and is satisfied with the title for all
mineral properties in which they have a material interest, there is no guarantee
that title to such concessions will not be challenged or impugned.
Political and Economic Instability in South America
Certain of the Corporation's exploration and development activities occur in
Venezuela, Bolivia and Ecuador. As a result, the Corporation may be affected by
risks associated with political or economic instability in those countries. The
risks include, but are not limited to: military repression, extreme fluctuations
in currency exchange rates, labour instability or militancy, mineral title
irregularities and high rates of inflation. Changes in mining or investment
policies or shifts in political attitude in the aforementioned countries may
adversely affect Vista Gold's business. Operations may be affected in varying
degrees by government regulations with respect to restrictions on production,
price controls, export controls, income taxes, expropriation of property,
maintenance of claims, environmental legislation, land use, land claims of local
people, water use and mine safety. The effect of these factors cannot be
accurately predicted.
Foreign Currency
The Corporation's operations throughout North and South America render the
Corporation subject to foreign currency fluctuations which may materially affect
financial position and results. The Corporation does not engage in currency
hedging to offset any risk of currency fluctuations.
ITEM 2. DESCRIPTION OF PROPERTIES.
OPERATIONS
Detailed information is contained herein with respect to the Hycroft mine
(formerly known as the Crofoot/Lewis mine), and the Amayapampa and Capa Circa
properties. Vista Gold holds the Hycroft mine through its wholly-owned
subsidiaries, Hycroft Inc. and Hycroft Lewis. The reserves and average grades
provided herein for the Hycroft mine have been estimated by the Corporation.
Vista Gold holds the Amayapampa and Capa Circa properties through its 100%
interest in Sociedad Industrial Yamin
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<PAGE> 16
Limitada, a Bolivian limited partnership. Estimates of reserves and production
herein are subject to the effect of changes in metal prices and to the risks
inherent in mining and processing operations. See "Item 1. Description of
Business - Risk Factors".
HYCROFT MINE
The Hycroft mine and related facilities are located 54 miles (86 kilometres)
west of Winnemucca, Nevada. The mine is an open-pit, heap leaching operation
which produces gold and by-product silver. The Lewis mine was originally a
sulphur mine. In 1983, it commenced operation as a small heap leach gold mine.
The Corporation acquired the Lewis mine in early 1987 and completed construction
of the adjacent Crofoot mine project in April 1988. In early 1989, the two mines
were consolidated into a single operation under an ore purchase agreement, with
ore from both properties processed through the larger and more efficient Crofoot
plant. Hycroft Inc. began stripping at the new Brimstone pit, located one mile
to the east of the existing Central Fault pit, in April 1996 and commenced
construction of a new 3 million square foot leach pad and a 2,800
gallon-per-minute leach solution processing plant in the summer of the same
year. Ore from the Brimstone pit was hauled to the new leach pad beginning in
September 1996 and the Brimstone plant commenced operation in February 1997. In
1997, the Hycroft mine produced 117,378 ounces of gold and 479,920 ounces of
silver.
DESCRIPTION OF PROPERTIES
The Crofoot and Lewis properties together comprise approximately 9,600 acres
(3,885 hectares). The Crofoot property, originally held under two leases, covers
approximately 3.600 acres (1,460 hectares). The Lewis property, which virtually
surrounds the Crofoot property, is held through a lease which covers
approximately 6,000 acres (2,430 hectares). The mine is accessible by road and
has access to adequate supplies of water and power. The major mining facilities
consist of mobile mining equipment, a three stage crushing and conveying system
(currently idle), four leach pads, two Merrill-Crowe gold-silver recovery plants
and associated maintenance and support facilities.
GEOLOGY AND HISTORY
The Hycroft mine is located on the western flank of the Kamma Mountains. The
deposit is hosted in a volcanic eruptive breccia and conglomerates associated
with the tertiary Kamma Mountain volcanics. The volcanics are mainly acidic to
intermediate tuffs, flows and coarse volcaniclastic rocks. Fragments of these
units dominate the clasts in the eruptive breccia. Volcanic rocks have been
block-faulted by dominant north trending structures which have affected the
distribution of alteration and mineralization. The Central Fault and East Fault
control the distribution of mineralization and subsequent oxidation. A
post-mineral range-front fault separates the ore body from the adjacent
Pleistocene Lahontan Lake sediments in the Black Rock desert. The geological
events have created a physical setting ideally suited to the open-pit, heap
leach mining operation at the Hycroft mine. The heap leach method is widely used
in the southwestern United States and allows the economical treatment of
oxidized low-grade ore deposits in large volumes.
The known gold mineralization within the Crofoot and Lewis properties extends
for a distance of 3 miles (4.8 kilometres) in a north-south direction by 1.5
miles (2.5 kilometres) in an east-west direction. Mineralization extends to a
depth of less than 330 feet (100 metres) in the outcropping to near-outcropping
portion of the deposit on the northwest side to over 990 feet (300 metres) in
the Brimstone deposit in the east. Not all the mineralization is oxidized and
the depth of oxide ore varies considerably over the area of mineralization. The
determination of whether mineralization can be mined economically is dependent
on the grade of mineralization, the depth of overburden and the degree of
oxidation.
In 1992, Hycroft Inc. exercised its options to convert its leasehold interests
in the Crofoot property into a 100% ownership interest in the patented mining
claims, a 100% possessory interest in the unpatented claims and a 100% interest
in the incidental rights thereto, all subject to four percent net profits
royalties
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<PAGE> 17
and excluding rights to sulphur. No royalty payments were made in 1995, 1994 and
1993 because minimum royalty payments made prior to 1993 aggregating $2.8
million were available for credit against the royalty obligations. The Crofoot
lease/purchase agreement was amended in 1996 to provide for minimum advance
royalty payments of $120,000 on January 1 of each year in which mining occurs.
An additional $120,000 payment is due if ore production exceeds 5.0 million tons
from the Crofoot property in any calendar year. All advance royalty payments are
available as credit against the four percent net profits royalty. The aggregate
acquisition cost to Hycroft Inc. was $6,881,481 and was financed by the issuance
of Common Shares to Vista Gold and the assumption of certain debts associated
with the Lewis mine. The leasehold interest in the Lewis property extends until
January 1, 2013 or for so long thereafter as Hycroft Lewis continues to conduct
commercial mining operations on the property.
The Lewis lease provides for the payment to the lessor of a five percent net
smelter return royalty on gold production. The royalty increases for ore grades
above 0.05 ounce per ton and is offset by annual advance minimum royalties. The
Corporation has the right to commingle the ore from the Lewis property with ore
from the adjoining Crofoot property under an agreement with the lessor of the
Lewis property.
The ore reserves in the Brimstone deposit, which lies partially on the Crofoot
property and partially on the Lewis property, are being processed on the newly
constructed Brimstone leach pad. The allocation of metal produced from the
commingled Crofoot and Lewis ores on the Brimstone pad is calculated using
methods consistent with industry standards.
MINING AND PROCESSING
During 1997, Hycroft Inc. excavated 2.53 tons of waste for each ton of ore
mined. The ratio of ore-to-waste mined until May 1998, at which time ore
extraction will be suspended temporarily, is expected to be 0.49 tons of waste
to one ton of ore. Waste stripping was suspended in January 1998.
Until November 1996, higher grade ore was crushed prior to treatment on the
leach pads. Currently, all ore is hauled directly to the leach pads without
crushing. Dilute alkaline cyanide solution is pumped from a pond to the heap
surface and distributed evenly over the crushed and run-of-mine ore through a
network of pipes and irrigation sprinklers or drip emitters. The solution
percolates down through the layers of ore, preferentially leaching gold and
silver from the rock. This pregnant solution, containing dissolved gold and
silver, flows along the surface of the impervious leach pad to a collection
ditch from which it drains into one of two pregnant solution ponds. The
low-grade solutions are recirculated to the heaps to increase the amount of gold
in the solution, and the high-grade solution is pumped directly to the recovery
plant where the gold and silver are extracted. The process is a zero-discharge
closed circuit.
The Crofoot recovery plant can process up to 3,000 gallons of solution per
minute from leach pads 1, 2 and 3 (18,000 tons of solution per day) and the new
Brimstone recovery plant can process up to 2,800 gallons-per-minute of solution
from the Brimstone leach pad (also referred to as pad 4). This process includes
filtering to remove particulates, de-aeration to remove dissolved oxygen and
introduction of small quantities of zinc dust. The dissolved gold and silver
precipitate out of the solution onto the zinc particles which are then removed
by a second stage of filtration. The barren solution is returned to the leaching
circuit. The precipitate is treated to remove mercury, then mixed with fluxes
and smelted to yield a dore bar. Dore bars are shipped offsite for refining and
sale. Gold and silver production from the Hycroft mine is refined by Metalor USA
Refining Corporation. Alternate refiners are available if necessary.
ORE RESERVES
Total mineable ore reserves at the Hycroft mine as at January 1, 1998 were
estimated by the Corporation to be 25.2 million tons grading 0.02 ounces of gold
per ton based on a gold price of $375 per ounce, of which 23.4 million tons are
identified as proven reserves and 1.8 million tons as probable reserves.
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<PAGE> 18
This compares to proven and probable reserves at January 1, 1997 of
approximately 47.2 million tons grading 0.019 ounces of gold per ton, with 43.5
million tons identified as proven reserves and 3.7 million tons as probable
reserves. The reduction in part was due to ore mined during 1997 and in part due
to some mineralization becoming uneconomic to mine due to a lower gold price
($375 per ounce). Estimated contained gold as of December 31, 1997 was 515,000
ounces, compared to 897,000 ounces as of December 1996. Mining and processing of
these reserves is planned with an estimated ultimate average recovery of 75% of
the contained ounces. All of the total reserves are within the Brimstone
deposit. Approximately 81% of the ore reserves are on patented mining claims and
19% are on unpatented claims. See "Item 1. Description of Business - Property
Interests and Mining Claims".
In 1997, no gold reserves were added to the Hycroft mine. Current proven and
probable ore reserves will enable the Corporation, at current operating rates
and metal prices, to produce gold to the year 2000, assuming there is no
resumption of waste stripping and ore extraction.
The Hycroft mine ore reserves consist of the estimated quantities of mineralized
material which, on the basis of geological and engineering data, can be
demonstrated with a reasonably high degree of certainty to be recoverable by
established mining and treatment methods. Only that material estimated to
contain mineral values in excess of current cut-off grades in mining operations
is included.
Ore reserves are adjusted annually by the Corporation by the amount extracted in
the previous year, by the additions and deletions resulting from new geological
information and interpretation and from changes in operating costs and metal
prices. Ore reserves are not revised in response to short-term cyclical price
variations in metal markets.
OPERATING STATISTICS
Operating statistics for the Hycroft mine for the period 1993 to 1997 were as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------------
1997 1996 1995 1994 1993
------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C>
Ore and waste material mined (000's of tons).............. 37,531 36,882 37,279 26,438 23,015
Strip ratio............................................... 2.53 1.8 2.7 2.0 3.0
Ore processed (000's of tons)(1).......................... 10,629 13,060 9,931 9,255 5,720
Ore grade (oz. gold/ton).................................. 0.020 0.018 0.019 0.020 0.023
Ounces of gold produced................................... 117,378 89,381 101,128 94,868 86,516
Direct cash operating costs ($/oz. of gold)(2)............ 246 $274 $272 $294 $281
</TABLE>
- -------------------------------
(1) Ore processed means ore placed on pads but not necessarily leached during
the year.
(2) Direct cash operating costs which is the sum of mining costs (excluding
deferred waste stripping) and processing and mine administration cost, net
of silver credits.
Gold production for 1997 was up 31% from 1996. Increased production was partly
due to expanded pumping facilities at the Crofoot leach pads and start-up of the
Brimstone pad and plant.
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<PAGE> 19
MINE SITE EXPLORATION
In 1997, exploration activity at the Hycroft mine was limited due to depressed
metal prices. There is significant potential to extend oxide mineralization to
the south, along strike, at both the Central Fault and Brimstone deposits, but
the greatest upside lies in the largely unexplored sulfide mineralization below
the Brimstone deposit.
Current reserves at Brimstone are limited to the oxide cap of an apparently
large but previously unexplored gold-bearing sulfide system. Two diamond drill
holes, drilled in 1996 and earlier, have intercepted mineralized sulfides
averaging 0.023 ounces per ton gold and 0.5 ounces per ton silver over intervals
exceeding 500 feet (153 metres) in thickness. Vista Gold intends to investigate
this resource when market conditions improve.
AMAYAPAMPA AND CAPA CIRCA PROPERTIES
AMAYAPAMPA PROPERTY
Summary
The Amayapampa property consists of 24 mining concessions covering 1,989 acres
(805 hectares) plus an additional 16,803 acres (6,800 hectares) in regional
exploration and exploitation concessions. The deposit is approximately 1,970
feet (600 metres) in strike length, 98 to 230 feet (30 to 70 metres) in width,
and extends to over 656 feet (200 metres) in depth. Gold occurs free and
associated with sulfides in a structural zone in which quartz veins were
emplaced then sheared prior to introduction of sulfides and gold mineralizing
solutions. Prior to the Amalgamation, CEM mined the Amayapampa deposit using
primarily open-stope methods at a rate of approximately 220 tons (200 tonnes) of
ore per day, and processed the ore in two mills on site. See "Ownership" and
"History".
In 1997, the Corporation completed drilling to determine the lateral extent of
economic mineralization and to infill areas where adequate drill spacing had not
been achieved. The Corporation also revised its feasibility study on the
Amayapampa property in November 1997. The revised study projected that average
annual gold production from the mine would be approximately 30,000 ounces at an
average direct cash cost of $155 per ounce. At a gold price of $325 per ounce,
the project is expected to generate an after-tax internal rate of return of
approximately 19% (16% at $310 per ounce). The revised plan also contemplates
re-opening the Capa Circa mine approximately six miles from the Amayapampa site
with the ore transported to the Amayapampa mill for processing. Together, the
two mines would have an estimated total production of 35,000 to 40,000 ounces of
gold per year with an estimated average direct cash cost of $154 per ounce.
Location and Access
The Amayapampa property is located 186 miles (300 kilometres) southeast of La
Paz in the Chayanta Municipality, Bustillos Province, Department of Potosi, in
southwestern Bolivia (Latitude: 18(degree)34.5"S, Longitude: 66(degree)22.4"W).
Access is via 167 miles (268 kilometres) of paved road from La Paz to
Machacamarca near Oruro, followed by 62 miles (100 kilometres) of gravel road to
Lagunillas, then nine miles (14 kilometres) of dirt road to Amayapampa. Total
driving time is about six hours. Charter air service is available to Uncia, 22
miles (35 kilometres) from the project.
The Amayapampa property is situated within the moderately rugged Eastern
Cordilleran region of Bolivia with elevations varying from 12,300 to 13,450 feet
(3,750 metres to 4,100 metres) above sea level. The area is generally arid with
a defined rainy season during the summer months of November through April. There
is little or no precipitation during the rest of the year.
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<PAGE> 20
Ownership
On April 28, 1994, Da Capo entered into an agreement with Mr. David Anthony
O'Connor of Casilla 11314, La Paz, Bolivia and La Compania Minera Altoro S.R.L.
("Altoro") of Casilla 11314, La Paz, Bolivia, both parties at arm's length to Da
Capo, which was amended by agreements dated June 10, 1994 and July 15, 1994 (the
"Altoro/O'Connor Agreement"), pursuant to which Mr. O'Connor and Altoro assigned
to Da Capo:
(a) Altoro's exclusive right and option to acquire a 51% interest in eight
mining concessions that constitute a part of the Amayapampa property
(and a further option to acquire an additional 19% interest in such
concessions), pursuant to an option agreement dated March 22, 1994 (the
"Amayapampa Option") between Altoro and Raul Garafulic Gutierrez ("R.
Garafulic") of Ave. Argentina No. 2057, Casilla 9285, La Paz, Bolivia
and Compania Explotadora de Minas S.A. ("CEM", and collectively with R.
Garafulic, the "Amayapampa Vendors") of Calle San Salvador 1421,
Casilla 4962, La Paz, Bolivia. The Amayapampa Vendors are both parties
at arm's length to Da Capo;
(b) Mr. O'Connor's exclusive right and option to acquire the Capa Circa
property pursuant to an option agreement dated January 12, 1994 (the
"Yamin Option Agreement") between Mr. O'Connor and Yamin. See "Capa
Circa Property - Ownership"; and
(c) a 100% interest in the Santa Isabel Property, for which an exploration
concession application had been made on behalf of Altoro.
As consideration for the assignment of the above interests, Da Capo issued a
total of 1,000,000 Da Capo Common Shares to Mr. O'Connor between June 30, 1994
and April 16, 1996.
On February 5, 1996, Da Capo exercised the Amayapampa Option and acquired a 51%
interest in the eight mining concessions that constitute a part of the
Amayapampa property in consideration for: (i) the cancellation of a loan in the
amount of $2,425,000 which had been previously made by Da Capo to R. Garafulic
on December 22, 1994; and (ii) payment of $75,000 by Da Capo to R. Garafulic
between March 22, 1994 and September 22, 1994.
On March 8, 1996, Da Capo entered into an agreement (the "Amayapampa Acquisition
Agreement") with the Amayapampa Vendors to acquire the following interests in
the Amayapampa property:
(a) R. Garafulic's remaining 24% interest in two mining concessions (the
Gran Porvenir and Chayentena concessions) that are part of the
Amayapampa property;
(b) R. Garafulic's 49% interest in six mining concessions that are part of
the Amayapampa property; and
(c) CEM's 100% interest in 16 mining concessions that are part of the
Amayapampa property.
In consideration for these interests, Da Capo:
(a) issued 1,000,000 special warrants (the "Amayapampa Special Warrants"),
each exercisable to acquire one Da Capo Common Share without further
payment, to a nominee of the Amayapampa Vendors on April 11, 1996; and
(b) made a non-recourse, interest-free loan of $3.24 million (the
"Amayapampa Loan") to a nominee of the Amayapampa Vendors on April 11,
1996.
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<PAGE> 21
The Amayapampa Loan was secured by an assignment of all proceeds from the sale
of any of 1,000,000 Da Capo Common Shares held by such nominee. The Amayapampa
Loan was cancelled on April 29, 1996 upon the sale of such Da Capo Common Shares
and Cdn.$4,355,000 received from the proceeds of such sale on or before May 7,
1996.
After being acquired by the Amayapampa Vendors, the Amayapampa Special Warrants
were transferred to third parties at arm's length to Da Capo in transactions
exempt from prospectus requirements under the relevant securities legislation.
On August 14, 1996, Da Capo issued 1,000,000 Da Capo Common Shares without
payment of any additional consideration upon the deemed exercise of the
Amayapampa Special Warrants.
All of Da Capo's interests in the Amayapampa property were transferred into the
name of its subsidiary, Yamin, on April 11, 1996.
Ms. Elizabeth Mirabel, a resident of Bolivia at arm's length to Vista Gold,
holds the remaining 25% interest in the Gran Porvenir and Chayentena mining
concessions, which constitute 604 hectares of the Amayapampa property. On June
28, 1996, Da Capo and Ms. Mirabel entered into a lease agreement (the "Lease")
under which Ms. Mirabel granted a lease for her 25% interest in the two mining
concessions in favour of Da Capo for a term of ten years commencing July 10,
1996 and renewable for an additional ten year term. During the first two years
of the Lease, Da Capo will pay Ms. Mirabel $7,000 per month, and $10,000 per
month for the subsequent eight years.
As a result of the Amalgamation with Da Capo, Vista Gold acquired the Amayapampa
property.
History
The Amayapampa district was initially mined on a very small scale by indigenous
peoples prior to the arrival of the Spanish conquistadors and small-scale mining
continued during the Spanish colonial period into modern times. Prior to the
Amalgamation, CEM mined the Amayapampa deposit using primarily open-stope
methods at a rate of about 220 tons (200 tonnes) of ore per day and processed
the ore in two mills on site. At that time, the Amayapampa mine was one of the
largest producing underground gold mines in Bolivia and consisted of 32 levels
of underground development. Upper level, generally oxidized ore was removed via
the upper Virtus Adit (13,450 feet/4,100 metres) and trucked to the Porvenir
mill, while lower sulfide ore was dropped by ore passes to the 2,790 foot
(850-metre) long Virquicocha Adit (13,025 feet/3,970 metres) and taken out by
electric locomotives to the Virquicocha mill. At both mills, gold was recovered
via amalgam plates and gravity tables. The lower mill included a flotation
circuit to upgrade the pyrite concentrate. Approximately 150 people worked at
the mine and lived locally at the village of Amayapampa and at other small camps
near the mine.
Since the Amalgamation, mining has ceased and the old mills removed as per an
agreement with the previous owner. The Corporation has kept the miners employed
in exploration, development and socio-economic projects during the period when
the feasibility study was being prepared.
Geology
The Amayapampa property is located along the east flank of a north-south
trending regional anticline near the top of the Ordovician sequence. The
Amayapampa deposit underlies a north-northwest trending ridge approximately 0.3
miles (0.5 kilometres) east of the town of Amayapampa. The deposit is defined by
about 48 diamond drill holes; 96 reverse-circulation drill holes; and 315
underground channel samples totalling 17,585 feet (5,360 metres) from more than
200 accessible cross-cuts in 43 different levels and sub-levels extending over a
vertical distance of 682 feet (208 metres). The deposit is approximately 1,969
feet (600 metres) in strike length, 98 to 230 feet (30 to 70 metres) in width
and has an overall dip of the mineralized envelope of 80 to 90 degrees west. The
depth extent of continuous mineralization is in excess of 656 feet (200 metres)
to about the 12,795 foot (3,900 metre) elevation, although some mineralization
is present below this depth.
- 18 -
<PAGE> 22
Da Capo channel, core drill and reverse-circulation drill hole samples were
analyzed at Bondar-Clegg Laboratories in Oruro, Bolivia, with check samples
analyzed at Chemex Laboratories in Vancouver, British Columbia. Because of the
coarse gold particles and concerns about nugget effect, all samples were
processed using the Hammer Mill Process (similar to a metallic screen assay). In
addition to check assaying, Vista Gold has continued to use Bondar-Clegg and the
Hammer Mill Process to analyze its samples, and in addition, has had an on-going
check assay program in place for samples generated by Vista Gold's exploration
and development program. Approximately 225 random assay pulps were check-assayed
by three laboratories (American Assay Laboratory in Reno, Nevada, Cone
Geochemical Inc. in Lakewood, Colorado, and Rocky Mountain Geochemical in Salt
Lake City, Utah) and compared to original pulp assays with generally good
agreement. Approximately 600 reverse-circulation drill hole sample splits from
the Da Capo program were assayed and used to verify assays obtained from the
original reverse-circulation sample splits. Sample splits are duplicate samples
taken at the drill rig at the time of drilling.
Currently, the check assay results are being analyzed and reports being drafted,
but initial indications are that assay results are in generally good agreement,
with the possible exception of some early channel sample assays.
The host rocks are composed of black shales, sandstones, and siltstones which
were weakly metamorphosed to argillites, quartzites, and siltites, respectively.
Bedding dips are steep at 60 to 80 degrees west, with the east limb of the
anticline being overturned and thus, also dipping steeply west.
The mineralized envelope is best described as a structural zone, within which
were emplaced quartz vein sets along a preferential pre-quartz-vein fracture
direction and post-quartz-vein faults and shears which were probably the
conduits for gold-bearing fluids.
Most faults, shears and fractures are north-northeast to north-northwest
trending and steeply dipping, both east and west, at 60 to 90 degrees. Quartz
veins predominantly dip east. Locally within the zone of mineralization, are
relatively flat, thrust-like faults which have offset quartz veins to a minor
extent. These flat faults, commonly west-dipping at 40 to 45 degrees, are not
generally mappable outside of the main structural zone which hosts the gold
mineralization. A west-dipping, 45 degree fault projects into the pit on the
northeast side of the deposit and was intersected by two vertical, geotechnical
core holes. The base of mineralization may also be slightly offset by a similar
west-dipping, 45 degree fault.
Oxidation effects are pervasive from the surface to depths of 66 to 98 feet (20
to 30 metres), with only partial oxidization below those depths. Hydrothermal
alteration effects evident in fresh rock are minor, and occur as coarse sericite
(muscovite) in thin (0.08 to 0.20 inch/2 to 5 millimetre) selvages along some
quartz veins. In addition, chlorite is present in and adjacent to some quartz
veins, but this presence may be a product of low grade metamorphism. Alteration
effects are minimal overall, except for surface oxidization.
Mineralization is composed of quartz veins and sulfides and both constitute a
visual guide to ore. Quartz veins, actually pre-gold, are a locus for later gold
mineralization. Quartz veins are typically a few centimetres to two feet (0.5
metres) in width and commonly occur as sub-parallel vein sets. The strike extent
can be 164 to 246 feet (50 to 75 metres) or more for any one vein or vein set,
but the dip extent is not as well established and probably ranges up to 66 to 98
feet (20 to 30 metres). Multiple vein sets are present in the overall
mineralized envelope and veins commonly pinch and swell along strike and down
dip.
- 19 -
<PAGE> 23
Sulfide mineralization entered the multiple fractures to deposit predominantly
pyrite within and adjacent to quartz veins, as sulfide veinlets in the host
rocks and as clots of coarse sulfides and disseminations of sulfide grains along
fractures in the black argillites. Locally, sulfide disseminations are more
prevalent in the quartzite/siltite interbeds than in the argillites. The total
sulfide concentration for the overall mineralized zone is estimated at 3 to 5%.
Petrographic examination of the sulfide mineralization shows pyrite to dominate
at plus 95% of the total sulfides; arsenopyrite is also present, as are minor
amounts of chalcopyrite, galena, sphalerite, stibnite and tetrahedrite. Gold is
present as free gold in association with pyrite, on fractures within pyrite and
attached to the surface of pyrite and is often visible as discrete grains on
fractures in quartz and argillite. Gold grains exhibit a large size-range, with
much of the gold being relatively coarse at 40 to 180 microns. All gold grains
display irregular shapes with large surface areas. No gold was noted to be
encapsulated in either quartz or sulfide. The content of gold grains was
verified as over 97% gold by scanning-electron-microprobe analysis.
1997 Exploration
From January to April 1997, the Corporation completed 35,433 feet (10,800
metres) of diamond core and reverse-circulation drilling at Amayapampa to define
the limits of economic mineralization in all directions except to depth. Depth
extension beyond that tested to just over 656 feet (200 metres), will be done at
some future date. However, siting of processing and ancillary facilities takes
into account possible pit expansions for deep ore potential.
District-scale exploration potential exists for defining styles of gold
mineralization similar to Amayapampa, which could be developed as satellite ore
bodies. Specific targets on the Corporation's properties include the
drill-inferred, potentially underground mineable, vein mineralization at Capa
Circa, an untested surface geochemical target at Irpa Irpa, and raw exploration
targets elsewhere within a 10 kilometre radius of Amayapampa.
Revised Feasibility Study
The Corporation also revised its feasibility study on the Amayapampa project in
November 1997. The revised study projected that average annual gold production
from the mine would be approximately 30,000 ounces at an average direct cash
cost of $155 per ounce. At a gold price of $325 per ounce, the project is
expected to generate an after-tax internal rate of return of approximately 19%
(16% at $310 per ounce). The revised plan also contemplates re-opening the Capa
Circa mine approximately six miles from the Amayapampa site with the ore
transported to the Amayapampa mill for processing. The two mines would have an
estimated total production of 35,000 to 40,000 ounces of gold per year with an
average direct cash cost of $154 per ounce.
The revised project is smaller than originally contemplated. It would include an
open pit mine at Amayapampa and a plant designed to process 1,650 tons (1,500
tonnes) of ore per day. A simplified flow sheet using gravity and carbon
in-leach circuit is projected at a metallurgical recovery of 85% and produce
approximately 30,000 ounces of gold per year from the Amayapampa mine. The
revised study contemplates, over a two year period, the modernization of the
Capa Circa underground mine to increase production from Capa Circa to 220 tons
(200 tonnes) per day. The Capa Circa ore has similar metallurgical
characteristics to the Amayapampa ore and will be processed in the same plant
producing an additional estimated 10,000 ounces of gold per year.
The Corporation estimates that the total capital cost for the Amayapampa project
will be approximately $20.0 million, including a 20% contingency and necessary
working capital.
Based on a gold price of $325 per ounce, the proven and probable reserves at
Amayapampa are calculated to be 9.8 million tons (8.9 million tonnes) grading
0.054 ounces per ton including dilution, containing 527,000 ounces of gold.
- 20 -
<PAGE> 24
A decision whether to proceed with the project will depend on a number of
factors including improved gold prices and obtaining financing for construction
of the project on terms acceptable to the Corporation.
CAPA CIRCA PROPERTY
Summary
The Capa Circa property consists of four partly overlapping mining concessions
covering 117 hectares. Until the Amalgamation became effective, the Capa Circa
property was mined primarily by open stopping methods at a rate of approximately
20 tonnes per day. Mineralization on the Capa Circa property is similar to that
of the Amayapampa deposit, but consists of discrete veins within a mineralized
zone approximately 490 feet (150 metres) wide that can be traced for about 1,970
feet (600 metres) along strike.
Location and Access
The four overlapping mining concessions that constitute the Capa Circa property
cover a total area of 117 hectares.
The Capa Circa property is located 186 miles (300 kilometres) southeast of La
Paz in Bustillo Province, Department of Potosi, in south-central Bolivia
(Latitude: 18(degree) 34.5" S; Longitude: 66(degree) 22.4" W). The Capa Circa
property is accessible via gravel road from Oruro to Llallagua/Uncia (68
miles/110 kilometres or approximately 2 1/2 hours) and a dirt road southeast
from Uncia to the villages of Lagunillas and Chuqui Uta (approximately 1/2
hour). A short 1.2 mile (two kilometre) spur road leads east to the Capa Circa
property from a point approximately 4.3 miles (seven kilometres) south of
Lagunillas. A local power line runs along the east side of the Capa Circa
property and supplies power to the present Capa Circa mine.
The property is situated within the moderately rugged Eastern Cordilleran region
of Bolivia with elevations varying from 12,300 to 13,450 feet (3,750 to 4,100
metres) above sea level. The area is arid with rain falling minimally as thunder
showers during the summer months of January to March. Occasional snow is
reported during the drier winter months of May to August.
Ownership
On April 28, 1994, Da Capo was assigned an option to acquire the Capa Circa
property pursuant to the Altoro/O'Connor Agreement. See "Amayapampa Property -
Ownership".
Pursuant to the terms of the option agreement (the "Capa Circa Option
Agreement") dated January 12, 1994 between Yamin and David Anthony O'Connor
("O'Connor"), which was assigned to Da Capo, Da Capo had the option to acquire
all of Yamin's interest in three Bolivian mining concessions (the Santa Rosa,
San Mateo and Innocentes concessions) which constitute a part of the Capa Circa
property by making a payment of $4.8 million to Yamin on or before January 12,
1996. During the term of the Capa Circa Option Agreement, Da Capo was also
required to pay to Yamin a total of $200,000, as follows:
(a) $50,000 on April 12, 1994;
(b) $50,000 on July 12, 1994;
(c) $50,000 on January 12, 1995; and
(d) $50,000 on July 12, 1995.
All of the above amounts were paid by Da Capo to Yamin and accepted by Yamin. On
January 12, 1996, the Capa Circa Option Agreement expired.
- 21 -
<PAGE> 25
Under the terms of a letter agreement (the "Yamin Letter Agreement") dated
January 22, 1996 between Da Capo and Boris Yaksic and other members of the
Yaksic family (collectively, the "Capa Circa Vendors") of Santa Rosa de Capa
Circa, Casilla 3544, Cochabamba, Bolivia, who are all parties at arm's length to
Da Capo and who collectively owned a 100% interest in Yamin, Da Capo would
acquire a 100% beneficial interest in Yamin in consideration for payment of
$500,000 and the issuance of 700,000 Common Shares with a guaranteed value of
$1,555,000 to the Capa Circa Vendors on the date of signing a more formal
agreement. The Yamin Letter Agreement was formalized by a purchase and sale
agreement (the "Yamin Acquisition Agreement") dated as of March 1, 1996 among Da
Capo, O'Connor and the Capa Circa Vendors, pursuant to which Da Capo and
O'Connor acquired an 80% and 20% interest, respectively, in the shares of Yamin
in consideration for payment of $500,000 and the issuance of 700,000 special
warrants (the "Capa Circa Special Warrants") with a guaranteed value of
$1,555,000. On August 14, 1996, Da Capo issued 700,000 Common Shares for no
additional consideration upon the deemed exercise of the Capa Circa Special
Warrants. Under the terms of a separate trust agreement (the "Trust Agreement")
dated March 1, 1996 between Da Capo and O'Connor, O'Connor held his shares of
Yamin as trustee for the benefit of Da Capo, with the result that Da Capo was
effectively the beneficial owner of 100% of the shares of Yamin.
Yamin is a Bolivian limited liability company and was, at the time of the Yamin
Acquisition Agreement, the sole owner of: (a) a 100% interest in the four mining
concessions (the Santa Rosa, San Mateo, Innocentes and Santa Benigna
concessions), which comprise the Capa Circa property; (b) the mill, machinery,
tools, equipment and vehicles employed in Yamin's small-scale underground gold
mining operations on the Capa Circa property; and (c) approximately 16,536 tons
(15,000 tonnes) of pyritic tailings located on the Capa Circa property.
The other material terms of the Yamin Acquisition Agreement are as follows:
(a) all machinery, tools, equipment and vehicles owned by Yamin on April 1,
1996 remain the property of Yamin and may be freely used for continuing
small-scale underground mining operations at the Capa Circa mine until
such time as Da Capo terminates the current operations of the mine to
permit the development of a larger mine on the Capa Circa property. At
such time, ownership of the machinery, tools, equipment and vehicles
will revert to the Capa Circa Vendors, who will have 90 days to remove
such machinery, tools, equipment and vehicles from the Capa Circa
property;
(b) title to the pyritic tailings located on the Capa Circa property was
transferred to the Capa Circa Vendors on April 1, 1996. Upon the
termination of current small-scale underground mining operations by
Yamin at the Capa Circa mine, the Capa Circa Vendors will be permitted
to treat such tailings in the existing concentrator at the Capa Circa
Mine until the supply of tailings is exhausted. Treatment of these
tailings will be conducted in such a way that the development of a
larger mine on the Capa Circa property will not be adversely affected;
and
(c) upon termination of the current small-scale underground mining
operations at the Capa Circa mine, the Capa Circa Vendors will pay all
severance benefits and indemnities in excess of $300,000 that are
required under Bolivian law to be paid to mining personnel employed by
Yamin.
As a result of the Amalgamation with Da Capo, Vista Gold acquired the Capa Circa
property.
History
The district in which the Capa Circa property is located was first mined during
the colonial period. Small-scale mining continued on until modern times and
recently the main deposits have been exploited by mechanized means. The Capa
Circa property and mine was purchased in 1938 as an antimony mine by the Yaksic
family. Antimony mining continued at the Capa Circa property until approximately
1981 when declining antimony prices and probably declining reserves resulted in
a conversion to gold mining.
- 22 -
<PAGE> 26
The previous owners mined the Capa Circa deposit using underground methods at an
estimated rate of 20 to 30 tonnes per day until shutdown upon the Amalgamation
becoming effective.
Geology
The Capa Circa geology and mineralization are similar to the Amayapampa
property. The Capa Circa property is hosted by Upper Ordovician shales and
sandstones on the east limb of a regional anticline. The Capa Circa
mineralization is hosted by a series of high angle, east dipping quartz veins in
a 429 foot (150 metre) wide envelope. The mineralization is zoned, with antimony
mineralization more prevalent in the eastern section. The Capa Circa
mineralization is approximately 1,970 feet (600 metres) in length along strike
and 820 feet (250 metres) down near-vertical dip. Further exploration may extend
the strike length and may find down-dip extensions.
Previous Exploration
Exploration by the Corporation consisted of surface trenching, underground
mapping and channel sampling, and core drilling. Thirteen core holes were
drilled in 1995 for a total of 8,022 feet (2,445 metres). The holes were drilled
largely with HQ size core and total recovery averaged 93% overall. Several of
the holes were drilled from underground locations. Sample intervals were
selected geologically, and in some cases were up to 19.7 feet (six metres) in
length.
Channel samples were collected from 8,054 feet (2,455 metres) of underground
workings representing 20 different levels and sublevels, extending over a
vertical distance of 459 feet (140 metres). Channel samples are collected at
five metre intervals, with channels four to six inches (10 to 15 centimetres)
wide and 0.8 to 1.2 inches (two to three centimetres) deep.
All exploration samples in the Capa Circa database were analyzed at Bondar-Clegg
Laboratories in Oruro, Bolivia. Because of the coarse gold particles and
concerns about nugget effect, all samples were processed using the Hammer Mill
Process (similar to a metallic screen assay).
1997 Exploration
During 1997, over 2,000 channel samples were taken on drifts and cross-cuts in
the Capa Circa mine. The results of these assays, taken with earlier drilling
and channel sampling, confirm the presence of high-grade shoots of
mineralization in the lower portions of the mine. The Capa Circa mine has
essentially identical geology to Amayapampa, except that the gold bearing veins
and structures are more widely spaced. The presence of at least six zones of
lower grade mineralization surrounding the veins has been established. These
zones are 328 to 492 feet (100 to 150 metres) in strike extent and are 98 to 164
feet (30 to 50 metres) in width, and may represent bulk mining targets.
Mineral Inventory
Sufficient data is lacking to determine a mineral inventory, but the
Corporation's preliminary investigations indicated that the mineralization
encountered by drilling and underground sampling in Da Capo's explorations
program will require extraction by underground mining methods.
Exploration Potential
At the Capa Circa property, the mineralization is open at depth. Additional
potential also exists along strike in the mineralized zone. Significant
additional drilling is required to determine a Capa Circa mineral inventory and
to test the mineralized zone at depth and along strike.
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<PAGE> 27
EXPLORATION PROPERTIES
UNITED STATES
In 1997, Vista Gold disposed of its interests in all exploration properties,
other than the Hycroft mine, and has temporarily suspended its United States
exploration program.
VENEZUELA
In June 1996, Vista Gold acquired an option to purchase a 100% interest in
mining concessions covering 74,130 acres (30,000 hectares) comprising the
Guariche gold properties in southeastern Venezuela pursuant to an option
agreement (the "Guariche Option Agreement") with L.B. Mining Co.
The Guariche Option Agreement requires a minimum work commitment of $500,000 for
a minimum of 8,200 feet (2,500 metres) of drilling. These commitments were
satisfied by the exploration program undertaken in 1997. The option will become
exercisable during a 150 day period following receipt of evidence of L.B.
Mining's ownership of the necessary exploitation concessions and occupancy
permits for the properties and upon the Corporation being satisfied there are no
remaining overriding interests. Upon satisfaction of those conditions, Vista
Gold is required to make option payments aggregating $275,000, less $85,000
which the Corporation has advanced to L.B.
Mining.
The purchase price for the properties if the option is exercised under the
present terms of the Guariche Option Agreement is $15,000,000 payable as to
$10,000,000 in cash and $5,000,000 in the form of 2,047,938 common shares of
Vista Gold at a deemed issue price of $2.44 per share plus a cash payment to
make up the difference between the deemed price per share and the current market
price at the time of exercise of the option. Following exercise of the option,
Vista Gold will be obligated to incur at least $2,000,000 in exploration
expenditures during the following two years, with a minimum of $1,000,000 to be
incurred during the first year. Vista Gold will also be required to make
additional payments to L.B. Mining at the rate of $30 per ounce for proven and
probable mineable reserves established in excess of 500,000 ounces, of which
L.B. Mining may elect to take $5,000,000 in the form of 2,529,161 common shares
of Vista Gold at a deemed issue price of $1.98 per share if proven and probable
mineable reserves over 1,000,000 total ounces are established. If more than
1,000,000 ounces but less than 1,500,000 ounces are established then, instead of
the $30 per ounce payment, the Corporation will pay L.B. Mining a net smelter
production royalty of 7.5% of net smelter returns from such additional ounces.
Guariche Project
Previous Work
The Guariche project had previous work performed in 1993 and 1994. The 1993 work
carried out by Corporacion Minera Nacional, C.A. ("Cominac") included soil
sampling and trenching. The soil sampling program outlined gold anomalous areas
on the Cerro Oscuro hill. Five trenches were cut into the best of these soil
anomalies, and the four areas designated Zone 2, 7, 10, and 11 were initially
uncovered. The program totalled 300 soil samples and 150 trench samples with
1,000 feet (300 metres) of trenching.
In 1994, Homestake Mining Company ("Homestake") conducted an expanded
geophysical, geochemical, and diamond drill exploration program at Guariche. The
area covered a 175 acre (70 hectare) region surrounding the previously mentioned
zones. The geochemical program encompassed 600 soil samples, an additional 1,300
feet (400 metres) of trenching and 697 auger holes. This data was used to place
20 drill holes on targets 2, 7, 10 and 12. The drill program indicated the
presence of possible economic gold mineralization in all these areas.
- 24 -
<PAGE> 28
Three hundred regional soil samples indicated the presence of at least nine more
targets. In 1996, Vista Gold used results from the combined Homestake and
Cominac programs to estimate a resource of 570,000 ounces contained in five
target areas 2, 7, 10, 11 and 12. The estimated resource, based on 20 diamond
drill holes, trench and auger results was 9.26 million tons at a grade of 0.061
ounces per ton. The resource included 109,000 ounces of measured resources,
60,000 ounces of indicated resources and 401,000 ounces of inferred resources.
1997 Program
In 1997, Vista Gold expanded the area of exploration surrounding the mineralized
zones to 560 acres (225 hectares). Work carried out in 1997 included ground
magnetometer and induced polarization geophysical surveys, the collection of
1,292 soil and rock chip samples, the construction of nine new trenches, and the
drilling of 53 diamond drill holes for 20,000 feet (6,000 metres).
The diamond drill program was successful in finding 694,000 ounces of gold in
measured and indicated resources in the 7, 11 and 12 zones. This is contained in
11.2 million tons (10.2 million tonnes) at a grade of 0.062 ounces per ton (2.12
grams per tonne). Of these resources, 412,000 ounces are contained in the
measured category, with a nominal distance between drill holes of 115 feet (35
metres).
The mineralization at Guariche consists of a stockwork of quartz pyrite veins
surrounded by pyrite dissemination. The thickness of mineralization varies from
66 to 180 feet (20 to 50 metres), and the known strike length of the 7, 11 and
12 zones are 440 feet (135 metres), 330 feet (100 metres) and 740 feet (225
metres), respectively. The mineralization extends from surface to a depth of at
least 660 feet (200 metres).
The mineralization occurs in highly deformed, magnetic diorites of Proterozoic
age at zones 2, 10, 11 and 12. The zone 7 precursor rocks are iron-rich mafic
volcanic rocks, of early Proterozoic age. These rocks make excellent host rocks
for gold mineralization. Exposures and drill core show that the host rocks and
mineralization style are similar to large gold camps in Australia and Canada.
The resources outlined at the 7, 11 and 12 zones are open down strike. The
program also outlined four new surface zones of mineralization in the immediate
area of known mineralization in the Bill, Resbalon, Zone 1 and Rabin Rico areas.
Respectively, new trenches encountered 85 feet at 0.15 ounces per ton (26 metres
at 5.3 grams per tonne), 118 feet at 0.061 ounces per ton (36 metres at 2.10
grams per tonne) and 125 feet at 0.068 ounces per ton (38 metres at 2.33 grams
per tonne). Initial drilling of the Rabin Rico and Bill targets with seven holes
has produced equivocal results; at Rabin Rico drill hole G-071C collared in 39
feet at 0.036 ounces per ton (12 metres at 1.23 grams per tonne).
Geochemical surveys show possible extensions to the 7 and 12 targets.
Geophysical surveys indicate extensions to Rabin Rico, Zone 1 and Zone 12
targets.
1998 Exploration Plan
After compiling all data for the 1993 to 1997 programs, it is expected that
Vista Gold will extend resources in 1998 in at least eight areas; target 2, 7,
10, 11 and 12, and the Rabin Rico, Zone 1 and Resbalon areas. The goal will be
to double the current resource. The 1998 program will consist of further surface
trenching, followed by drilling of the eight areas listed above, as well as
upgrading two regional geochemical targets to drill targets. The program will
involve $2.0 million, and at least 16,500 feet (5,000 metres) of diamond
drilling and is subject to raising the required funds.
Vista Gold and L.B. Mining are currently engaged in negotiations to restructure
the terms of the Guariche Option Agreement in light of current gold prices.
- 25 -
<PAGE> 29
BOLIVIA
The most promising new development in Vista Gold's exploration portfolio was the
acquisition of Da Capo's Bolivian gold properties. The asset package includes
the Amayapampa, Capa Circa, Iroco, Irpa Irpa and Copacabana gold properties.
Copacabana Property
This project, located in south-central Bolivia, shows similarities to the
Amayapampa property. An initial geochemical survey indicated the possibility of
a large deposit. The survey showed a 500 foot (150 metre) by 2,000 foot (600
metre) long soil geochemical anomaly.
After an initial mapping program was completed, a reverse-circulation drill
program was conducted. Of the seven holes completed, six had significant gold
intercepts. The drilling indicated that the possibility of both bulk tonnage and
high grade vein mineralization exists on this property. The best results from
drill hole RC3 had 0.41 ounces per ton (13.97 grams per tonne) over 39 feet (12
metres).
A trenching and mapping program is planned for this property, followed by
further diamond and reverse-circulation drilling programs. This project is an
excellent early stage exploration target with the potential to be another
Amayapampa-type deposit.
The Copacabana project was explored with diamond drilling and trenching in 1997.
The drilling and trenching were performed along a 2,297 foot (700 metre) strike
length of mineralized Ordovician shales. Wide zones of anomalous gold values
were intersected in core drilling and trenching, and the property requires more
exploration to define its potential.
Irpa Irpa Property
The Irpa Irpa property is situated three miles south of Capa Circa, with
similarities to Amayapampa.
Iroco Property
The Iroco project is a gold project adjacent to one of Bolivia's largest silver
mines at Oruro. The Corporation has an option to earn a 100% interest. Although
no resource has been outlined as yet, drill hole results as high as 0.16 ounces
per ton (5.5 grams per tonne) over 180 feet (55 metre) have been obtained.
Currently, the drilling is testing down strike from the producing San Antonio
mine and along trend from Cameco's Huayna Potosi area.
The Iroco project, located three miles (five kilometres) west of Oruro, Bolivia
has been farmed out to BHP Ltd. ("BHP"). BHP has the right to earn a 60% joint
venture interest in the property by performing $1 million in exploration by
November 1999 and by making a cash payment of $500,000 each to Vista Gold and
Compania Minera Altoro by November 2000.
ECUADOR
Through its 49% holding in Zamora, Vista Gold carried out an exploration program
in Ecuador in 1997. The 1997 program concentrated on assessing the gold
potential on Zamora's Campanillas concession.
This concession has had two operating gold mines within its boundaries, the
Campanillas mine and the Cambana mine. In the southern area of the Zamora land
package, a prospecting and sampling program assessed the yet untested potential
area south of Mina Real.
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<PAGE> 30
CANADA
In Canada, three mineral properties are being explored and funded by joint
venture partners. They are the Blackwater-Davidson property in British Columbia
(a copper-gold play), the Manville project in Ontario and the Island Lake gold
project in Manitoba.
1997 EXPLORATION EXPENDITURES
In the last two completed financial years, the Corporation incurred expenditures
of the following approximate dollar amounts on exploration:
<TABLE>
<CAPTION>
FINANCIAL YEAR
DESCRIPTION (MILLIONS)
----------- -----------------
1997 1996
------ ------
<S> <C> <C>
Mineral exploration and property evaluation $ 2.2 $ 3.2
Hycroft (mine-site) 0.1 0.4
Exploration of Venezuelan properties (capitalized) 2.3 --
------ ------
Totals $ 4.6 $ 3.6
====== ======
</TABLE>
1998 EXPLORATION PLAN
The 1998 exploration program will be limited by the amount of funds that the
Corporation can obtain and make available for this purpose, which in turn will
be a function of gold price and market conditions. The planned program involves
programs at the Hycroft mine in Nevada, the Capa Circa project in Bolivia and
the Guariche project in Venezuela.
At Hycroft, a small program of approximately $200,000 is planned to test for
oxide ore extension to both the Brimstone and Central Fault areas. At Capa
Circa, a minimum program of $300,000 is planned to test the existence of
high-grade shoots in the major vein systems. This program will involve some
underground development and drilling.
At Guariche, a program of work estimated to cost approximately $2.0 million is
planned to expand the presently known resources containing 694,000 ounces of
gold. The program will involve drilling, road building and trenching and will
test anomalous zones that are currently defined through soil and rock chip
sampling. The Corporation's ability to finance this program will be dependent on
a variety of factors including its ability to negotiate a new purchase
arrangement for the Guariche project from the owners.
ITEM 3. LEGAL PROCEEDINGS.
The Corporation is not aware of any pending or threatened litigation or of any
proceedings known to be contemplated by governmental authorities which is, or
would be, likely to have a material adverse effect upon the Corporation or its
operations, taken as a whole.
ITEM 4. CONTROL OF REGISTRANT.
As far as is known to the Corporation, Vista Gold is not directly or indirectly
owned or controlled by another corporation or by any foreign government. The
Corporation is not aware of any person that owns more than 10% of the
outstanding Common Shares.
- 27 -
<PAGE> 31
The following table sets forth as of March 30, 1998 certain information
regarding the ownership of Common Shares, which are the registrant's only voting
securities, by all directors and officers of Vista Gold as a group (including
their spouses and children under 18):
<TABLE>
<CAPTION>
TITLE OF CLASS IDENTITY OF PERSON OR GROUP AMOUNT OWNED(1) PERCENT OF CLASS(2)
-------------- --------------------------- --------------- -------------------
<S> <C> <C> <C>
Common Shares(3) All directors and officers as 8,282,583 9.3%
a group (11 persons)
</TABLE>
- -------------------------------
(1) This information was provided to Vista Gold by the individual shareholders.
(2) At March 30, 1998, there were 89,152,540 Common Shares issued and
outstanding.
(3) Includes 1,190,000 Common Shares issuable under options which are currently
exercisable or exercisable within 60 days of March 30, 1998, which are
deemed to be beneficially owned for purposes of this presentation.
ITEM 5. NATURE OF TRADING MARKET.
The Common Shares of Vista Gold are listed on the American Stock Exchange and
The Toronto Stock Exchange under the symbol VGZ. The following table sets out
the reported high and low sale prices on the American Stock Exchange and on The
Toronto Stock Exchange for the periods indicated as reported by the exchanges:
<TABLE>
<CAPTION>
AMERICAN STOCK EXCHANGE THE TORONTO STOCK EXCHANGE
----------------------- --------------------------
HIGH LOW HIGH LOW
----- ----- ---------- ----------
<S> <C> <C> <C> <C>
1996 1st quarter................................ $2.75 $1.63 Cdn.$ 3.75 Cdn.$ 2.25
2nd quarter................................ 2.19 1.44 2.90 1.90
3rd quarter................................ 1.94 1.07 2.60 1.75
4th quarter (October 1 to November 7)(1)... 1.56 1.31 2.05 1.76
4th quarter (November 8 to December 31)(1). 1.56 1.19 1.99 1.55
1997 1st quarter ............................... 1.38 0.75 1.85 1.05
2nd quarter................................ 1.19 0.88 1.55 1.15
3rd quarter................................ 1.00 0.44 1.28 0.60
4th quarter................................ 0.50 0.19 0.69 0.26
</TABLE>
- ---------------------------
(1) The Amalgamation of Granges and Da Capo became effective, for the purposes
of trading on The Toronto Stock Exchange and the American Stock Exchange on
November 8, 1996. Accordingly, the prices shown for the fourth quarter
(October 1 to November 7) reflect trading in the Common Shares of Granges,
while information for the fourth quarter (November 8 to December 31)
reflect prices for trading in Vista Gold.
On March 30, 1998, the last reported sale price of the Common Shares of Vista
Gold on the American Stock Exchange was $0.23 and on The Toronto Stock Exchange
was Cdn.$0.34. As at March 30, 1998, there were 89,152,540 Common Shares issued
and outstanding, and Vista Gold had 843 shareholders of record.
As of March 30, 1998, 692 or approximately 82% of the recorded holders of Common
Shares were in the United States and held 56% of the issued and outstanding
Common Shares. However, as a significant number of the Common Shares are held
through intermediaries, it is not possible to accurately report holdings of
Common Shares in the United States or elsewhere.
- 28 -
<PAGE> 32
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING
SECURITY-HOLDERS.
There are no governmental laws, decrees or regulations in Canada that restrict
the export or import of capital, including foreign exchange controls, or that
affect the remittance of dividends, interest or other payments to non-resident
holders of the securities of Vista Gold, other than the Canadian withholding
tax. See "Item 7.
Taxation".
There are no limitations on the right of non-resident or foreign owners of
Common Shares to hold or vote such securities imposed by Canadian law or by the
Articles or By-laws of the Corporation, other than under the Investment Canada
Act (Canada).
The Investment Canada Act (Canada) generally requires the prior notification
and, in specified circumstances, the review by the Government of Canada of the
acquisition of control of Canadian businesses by non-Canadians. The term
"control" is defined as any one or more non-Canadian persons acquiring all or
substantially all of the assets used in a Canadian business, the voting shares
of a Canadian corporation carrying on the Canadian business or the voting
interests of an entity carrying on the Canadian business or controlling an
entity carrying on the Canadian business. The acquisition of the majority of the
outstanding voting shares, or the acquisition of less than a majority but
one-third or more of the outstanding voting shares, in the absence of proof to
the contrary, is deemed to be "control". Investments requiring notification and
review are all direct and indirect acquisitions of Canadian businesses with
assets of Cdn.$5 million or more except indirect acquisitions of Canadian
businesses with assets which represent less than 50% of the value of the total
international acquisition. However, acquisitions of entities by Americans or
dispositions of entities owned by Americans require notification and review only
if the value of the entity's assets are at least Cdn.$150.0 million, provided
that if an entity's assets represent less than 50% of the value of the total
international acquisition, no review will occur.
If an investment is reviewable, an application for review in the form prescribed
by regulation is normally required to be filed. The Minister (designated under
the Investment Canada Act (Canada)) will then determine whether the investment
is likely to be of net benefit to Canada, taking into account the information
provided and having regard to certain factors of assessment where they are
relevant. Some of the factors to be considered are the effect of the investment
on the level and nature of economic activity in Canada (for example, the effect
on employment and on exports from Canada); the degree and significance of
Canadian participation in the business; the effect of the investment on
productivity and technological development; the effect on competition within
industries in Canada; and the contribution of the investment to Canada's ability
to compete in world markets.
ITEM 7. TAXATION.
The following discussion applies to a holder of Common Shares of Vista Gold who,
at all relevant times, for purposes of the Income Tax Act (Canada) (the "ITA")
and any applicable tax treaty or convention, is a non-resident or is deemed to
be a non-resident of Canada and does not use or hold and is not deemed to use or
hold the Common Shares in carrying on business in Canada. Special rules, which
are not discussed in this discussion, may apply to a non-resident that is a
financial institution or an insurer that carries on business in Canada and
elsewhere.
For purposes of this discussion, "United States Person" means a citizen or
resident of the United States, or a corporation or partnership organized in the
United States or under the laws of the United States or of any state or an
estate or trust, the income of which is subject to United States federal income
tax regardless of its source.
- 29 -
<PAGE> 33
A holder of Common Shares, who is not a resident of Canada, who receives a
dividend will generally be subject to Canadian withholding tax at the rate of
25% on dividends paid or credited or deemed to have been paid or credited to him
or her on a Common Share. Such Canadian withholding tax rate may be subject to a
reduction pursuant to an applicable tax treaty. In the case of a shareholder who
is a United States Person, the income tax treaty between Canada and the United
States provides that the withholding tax rate in respect of such dividends will
generally be 15% unless the shareholder is a corporation that owns at least ten
percent of the voting stock of Vista Gold, in which case the withholding tax
rate would be five percent.
A holder of Common Shares who is a non-resident of Canada will not be subject to
tax under the ITA in respect of any capital gain realized by such shareholder on
a disposition of Common Shares, unless the Common Shares constitute taxable
Canadian property of the shareholder for purposes of the ITA and the shareholder
is not entitled to relief under an applicable tax treaty.
Common Shares will not constitute taxable Canadian property of a shareholder who
is a non-resident of Canada unless such shareholder uses or holds or is deemed
to use or hold the Common Shares in carrying on a business in Canada or unless
at any time during the five year period immediately preceding the disposition of
the Common Shares, the shareholder, persons with whom the shareholder does not
deal at arm's length, or the shareholder together with such persons, own or is
considered to own not less than 25% of the issued shares of any class of the
capital stock of Vista Gold.
The income tax treaty between Canada and the United States exempts a United
States Person from such taxation because the value of the Common Shares is not
derived principally from real property situated in Canada.
ITEM 8. SELECTED FINANCIAL DATA.
The selected financial data in Table I have been derived from the consolidated
financial statements of the Corporation which have been prepared in accordance
with accounting principles generally accepted in Canada. The selected financial
data should be read in conjunction with those financial statements and the notes
thereto.
<TABLE>
<CAPTION>
TABLE I
YEARS ENDED DECEMBER 31
---------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands, except per share data)
RESULTS OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Gold sales $ 40,123 $ 34,847 $ 39,659 $ 37,905 $ 40,352
Net earnings (loss) before write-downs (5,292) (11,826) 2,159 5,116 2,075
Net earnings (loss) (54,019) (11,826) 2,159 5,116 2,075
Net earnings (loss) per share before
write-downs (0.06) (0.21) 0.05 0.15 0.06
Net earnings (loss) per share (0.61) (0.21) 0.05 0.15 0.06
</TABLE>
- 30 -
<PAGE> 34
<TABLE>
<CAPTION>
AT DECEMBER 31
------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION
Working capital $ (238)(1) $ 18,702 $ 21,672 $ 29,645 $ 21,857
Total assets 79,028 123,316 64,285 70,506 62,848
Long-term debt and other
non-current liabilities 4,568 3,929 3,409 2,979 3,148
Shareholders' equity 55,074 109,173 54,637 52,801 50,091
</TABLE>
- -------------------------------
(1) Includes $13 million of debt due within one year.
Had the consolidated financial statements of the Corporation been prepared in
accordance with accounting principles generally accepted in the United States,
certain selected financial data would have been reported as shown in Table II.
TABLE II
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands, except per share data)
RESULTS OF OPERATIONS
<S> <C> <C> <C> <C> <C>
Net earnings (loss) $ (71,547) $ (35,265) $ (708) $ 5,090 $ 2,116
Basic and diluted earnings (loss) per share
after extraordinary item (0.80) (0.62) (0.02) 0.15 0.06
</TABLE>
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
FINANCIAL POSITION
<S> <C> <C> <C> <C> <C>
Total assets $ 61,500 $123,316 $ 87,504 $ 70,453 $ 64,207
Shareholders' equity 37,546 109,172 77,855 52,983 50,024
</TABLE>
UNITED STATES$/CANADIAN$ EXCHANGE RATES(1) (3)
<TABLE>
<CAPTION>
AT DECEMBER 31
---------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
As at December 31 0.6999 0.7301 0.7325 0.7129 0.7553
Average(2) 0.7220 0.7331 0.7283 0.7321 0.7515
High 0.7487 0.7515 0.7529 0.7159 0.8065
Low 0.6945 0.7215 0.7025 0.7097 0.7416
</TABLE>
- -------------------------------
(1) Exchange rates are expressed as the amount of United States funds
equivalent to one Canadian dollar, being the noon buying rates in New York
City for cable transfers in Canadian dollars, as certified for customs
purposes by the Federal Reserve Bank of New York.
(2) The yearly average rate means the average of the exchange rates on each day
during a year.
(3) On March 30, 1998, the noon buying rate as quoted by the Federal Reserve
Bank of New York was $0.7030.
- 31 -
<PAGE> 35
DIVIDENDS
The Corporation has not, during the previous five fiscal years, declared or paid
any dividends on its Common Shares.
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
INTRODUCTION
This discussion should be read in conjunction with the consolidated financial
statements of the Corporation for the three years ended December 31, 1997 and
the related notes thereto, which have been prepared in accordance with generally
accepted accounting principles ("GAAP") in Canada. See "Item 17. Financial
Statements". Differences from U.S. GAAP are described in note 14 to the
consolidated financial statements.
The Corporation had one mine in operation during 1997, 1996 and 1995. The
Hycroft (formerly Crofoot/Lewis) mine in Nevada began gold production in 1987
and is the Corporation's only operating mine at the present time. The
Corporation also owns the Tartan Lake gold mine in Manitoba at which operations
have been suspended since 1989.
The Corporation is presently attempting to sell the Tartan Lake property.
RESULTS OF OPERATIONS
1997 COMPARED WITH 1996
The net loss for 1997 was $54.0 million compared to a net loss of $11.8 million
in 1996. The 1997 net loss included a $48.7 million write down of mineral
properties and investments, while there was no similar write-down in 1996. The
1997 net loss also included gains of $1.0 million from the disposal of assets,
while the 1996 net loss included gains of $0.5 million from the disposal of
assets. Excluding these write-downs and gains, losses decreased $6.0 million
from $12.3 million in 1996 to $6.3 million in 1997. The decrease in losses was
largely attributable to improved gold revenues.
Despite lower average gross realized prices, gold revenues of $40.1 million in
1997 increased $5.3 million, or 15% from 1996 because of increased gold
production as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Gold (ounces)................................................. 117,378 89,381
Average gross realized price.................................. $342 $390
</TABLE>
Gold production in 1997 increased 31%, or 27,997 ounces, from 1996. The increase
in gold production was attributable to increased ore production combined with
increased solution pumping capacity at the mine. Ounces placed on the heap leach
pads increased six percent to 118,506 ounces in 1997. In 1997, the Corporation
obtained the requisite environmental permits and increased the solution pumping
capacity at the mine to improve flow rates and thereby improve production. At
December 31, 1997, gold inventory at the Hycroft mine was 56,000 ounces as
compared to 55,000 ounces in 1996.
Lower average cash balances led to lower interest income for the year. Interest
income in 1997 was $0.2 million as compared to $0.7 million in 1996. Combined
revenues from gold sales and interest income increased $4.8 million to $40.4
million in 1997.
- 32 -
<PAGE> 36
Operating costs from mining operations decreased $1.2 million from 1996 to $30.9
million in 1997. The decrease from 1996 was due to general efficiency increases
in light of lower gold prices. Total tons mined, including waste tons, increased
to 37.5 million tons from 36.9 million tons in 1996. Mining costs decreased to
$21.6 million in 1997 from $23.9 million in 1996. The combined mining cost per
ton decreased to $0.57 in 1997 as compared to $0.65 in 1996.
Depreciation, depletion, amortization, and the provision for reclamation and
closure costs in 1997 was 20% higher than 1996, due to the addition of new
mining and processing equipment in 1996 combined with a mine plan change in
1997. The new mine plan optimized the mine's ore reserve in light of reduced
gold prices and concentrated on lower production cost ounces. Amortization and
accrual rates increased because of the reduction in total tons and ounces called
for in the new mine plan. Operating lease costs in 1997 were approximately the
same as 1996.
Mineral exploration and property evaluation expenses decreased 37% from 1996 to
$2.3 million reflecting the Corporation's efforts to control costs in 1997.
During 1997, the Corporation ceased exploration in the United States and in
December, sold its remaining United States exploration interests. The
Corporation's 1997 exploration program concentrated on Latin America.
Corporate administration, investor relations and other income and expenses
decreased $0.4 million in 1997 to $2.5 million as the Corporation continued to
reduce its overhead costs. Interest expense in 1997 was $0.8 million as a result
of the new debt agreement entered into during the year. In 1996, no similar debt
existed.
In 1997, the gain on the disposal of assets and mineral properties was $1.0
million and was primarily comprised of the divestiture of the Corporation's
United States exploration properties combined with the sales of surplus mining
equipment from the Hycroft mine.
Management regularly reviews the carrying values of its long-lived assets and
investments. These evaluations indicated that the carrying values of certain
properties and investments were overstated and, accordingly, were written down.
Based upon management's evaluations, $48.7 million was written down, including:
Bolivian mineral properties - $25.9 million; Hycroft mine - $17.5 million;
Investment in Zamora - $2.7 million; Venezuelan mineral properties - $2.3
million; and Tartan Lake mine - $0.3 million.
1996 COMPARED WITH 1995
The net loss for 1996 was $11.8 million compared to net earnings of $2.2 million
in 1995. The 1996 earnings include gains of $0.5 million from the sale of
mineral properties, while the 1995 earnings included similar gains of $6.1
million. Excluding these gains, results were losses of $12.3 million for 1996
and $3.9 million for 1995. The loss for 1996 was attributable to lower
production, increased amortization of deferred stripping and an increase in the
recorded equity loss from Zamora.
Gold revenues of $34.8 million for 1996 decreased by 12% from 1995. Gold
production at the Hycroft mine was as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Gold (ounces)................................................. 89,381 101,128
Average gross realized price.................................. $390 $392
</TABLE>
Gold production during 1996 decreased 12%, or 11,747 ounces, from 1995. The
decrease in gold production was attributable to lower-than-normal recovery from
a clay-rich-ore section combined with delayed recovery from a significant volume
of run-of-mine ore where solution application was delayed. Mining in the
clay-rich area was completed in the first quarter of 1996, with subsequent ore
production
- 33 -
<PAGE> 37
levels returning to normal. However, record ore production during the third and
fourth quarters of 1996 exceeded the mine's solution pumping capacity. The
Corporation subsequently increased the solution pumping capacity to alleviate
the problem.
Interest income decreased 53% as a result of the Corporation's lower average
cash balances. Combined revenues from gold sales and interest income decreased
$5.6 million to $35.6 million in 1996.
Operating costs from mining operations for the Corporation increased $2.0
million from 1995. The 1996 amortization of deferred stripping increased $5.5
million from 1995 due to lower-than-average strip ratios. The strip ratio in
1996 was lower than the life-of-mine average strip ratio and resulted in
expensing deferred costs associated with mining this material. Excluding
amortization of deferred stripping, mining costs from mining operations
decreased $3.5 million, or 11%, from 1995. The decrease from 1995 is primarily
due to two factors. First, the total waste and ore mined (excluding capitalized
waste) was 12% less than the comparable tonnage mined in 1995, representing
approximately $2.2 million of the cost reduction. Second, uncrushed run-of-mine
ore was 73% of total ore in 1996 as compared with 55% in 1995.
Depreciation, depletion, amortization and the provision for reclamation and
closure costs was 43% higher than 1995, due to a 30% increase in ore production
as well as the addition of new mining equipment in mid-1996.
Mineral exploration and property evaluation expenses of $3.6 million were
consistent with the Corporation's shift into precious metals and the exploration
programs put in place in 1995 to find additional sources of production. During
1996, the Corporation concentrated its exploration program on the United States
and Latin America.
Corporate administrative, investor relations and other income and expenses
decreased to $3.0 million from $3.7 million in 1995. The primary reason for the
decrease is because 1995 included non-recurring costs related to the exit from
base metals and relocation of corporate office to Denver in 1996.
In 1996, the gain on the disposal of assets and mineral properties was $0.5
million and was primarily comprised of the sale of one of the Corporation's
Canadian mineral properties.
YEAR 2000
As the year 2000 approaches, there are uncertainties concerning whether computer
systems will properly recognize date-sensitive information when the year changes
to 2000. Systems that do not properly recognize such information could generate
erroneous data or fail.
The Corporation's computer systems and software are already configured to
accommodate dates beyond the year 2000. The Corporation believes that the year
2000 will not pose significant operational problems for the Corporation's
computer systems; however, the Corporation has not yet completed its assessment
of all of its systems, or the computer systems of suppliers and other third
parties with which it deals. While it is not possible at this time to assess the
effect of a third party's inability to adequately address year 2000 issues, the
Corporation does not believe the potential problems associated with year 2000
will have a material effect on its financial results.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's consolidated cash balance at December 31, 1997 was $1.8
million, a reduction of $6.8 million from the end of the previous year. During
1997, additions to cash were $16.7 million. Operating activities before changes
in operating assets and liabilities generated $2.4 million, net proceeds from
debt were $13.0 million and cash receipts from the disposal of assets and issue
of shares totalled $1.3 million. These additions to cash were offset by capital
expenditures totalling $21.1 million and an additional
- 34 -
<PAGE> 38
investment in and advances to Zamora of $1.4 million. Capital expenditures
included $9.8 for the feasibility study and evaluation of the Corporation's
Bolivian mineral properties, $6.0 million in additions to deferred stripping and
$3.0 million in capital expenditures at the Hycroft mine, and $2.3 million for
exploration and evaluation work on the Corporation's Venezuelan project. The
remainder of the decrease in the Corporation's cash balance is attributable to
changes in operating assets and liabilities totalling $1.0 million, including
the payment for mining equipment in early 1997 which was purchased in 1996.
The Corporation anticipates approximately $7.0 million in reclamation, closure
and severance costs over the life of the Hycroft mine, primarily in 1998 through
2001, which will be funded by cash flow from operations.
Subsequent to December 31, 1997, the Corporation took steps to improve its cash
flow in 1998 and liquidated its forward position in the gold futures market and
temporarily suspended mining activities at the Hycroft mine. The liquidation of
the Corporation's gold forward position was completed in January 1998 and
generated $9.5 million in cash. Waste-rock mining was then halted and in May ore
mining will be suspended. Gold recovery and processing will continue from
inventoried ore and production for 1998 is estimated to be 90,000 to 95,000
ounces. Essential mining equipment and facilities will be maintained on a
standby basis until gold prices rise sufficiently to resume operations.
The reduction in mining at the Hycroft mine is expected to generate an
additional $7.0 million in cash in 1998.
The expected improvement in cash flow during the year as a result of these
measures will be used to completely retire the Hycroft mine's project debt of
$13.0 million and to provide necessary working capital for the Corporation. The
project debt was reduced by $4.5 million in January and the remaining $8.5
million will be entirely repaid during the remainder of 1998. As required by the
revised terms of this loan, the Corporation in January 1998 hedged approximately
45,000 ounces of 1998 production through forward sales at a price of $282 per
ounce and 45,000 ounces covered by put options at $282 per ounce which were
financed by selling call options at $286 per ounce.
RECLAMATION AND ENVIRONMENTAL COSTS
Management estimates the reclamation and closure costs for the Corporation's
mines as follows:
Hycroft mine........................................ $7.0 million
Tartan Lake mine.................................... 0.7 million
------------
$7.7 million
============
These costs are charged to earnings over the life of the mine and the provision
to date is $4.5 million. The Corporation is currently negotiating the sale of
the Tartan Lake mine to include the assumption of all of the reclamation and
closure liabilities for the property.
An amended Hycroft mine reclamation plan that included the Brimstone deposit was
approved by the Nevada Bureau of Land Management ("BLM"), and a surety bond in
the amount of $5.1 million was posted to secure reclamation obligations under
the plan.
REGULATORY COMPLIANCE AND OTHER MATTERS
During 1997, there were no material environmental incidents or non-compliance
with any applicable environmental regulations.
- 35 -
<PAGE> 39
OUTLOOK
Many gold industry observers believe that low gold prices will be sustained
until the European central bankers make clear their intentions with respect to
gold reserves. The Corporation is making its plans based on the expectation that
low gold prices will prevail through 1998 and possibly into 1999.
At the Hycroft mine, waste rock stripping was halted in January 1998 and ore
extraction will be phased out by May 1998. Gold recovery from the leach pads and
gold processing will continue, with production for 1998 estimated to be
approximately 95,000 ounces at a direct cash cost of $155 per ounce. The
Corporation's intention is to restart full operations as soon as the gold price
rises to an appropriate level. If the suspension of stripping and ore extraction
continues for the remaining life of the mine, however, the mine is expected to
produce at least 112,000 ounces of gold at a direct cash cost of $155 per ounce
including estimated 1998 production. The mining equipment and other physical
facilities at the Hycroft operation are being maintained on a standby basis. If
the price of gold does not improve sufficiently in 1999, the Corporation will
have the option of selling mining equipment and other assets that are not
required for gold production from the leach pads.
The Corporation plans to hold the Amayapampa/Capa Circa properties in Bolivia,
with the required holding costs minimized, until a more favourable gold price
environment exists for continued development. A gold price of $325 per ounce
should enable Vista Gold to proceed with the project. Later in 1998, some
additional work may be undertaken at Capa Circa to firm up resource estimates
and commence mine design studies. Engineering work will continue with the goal
of improving the project's economics.
In Venezuela, the Corporation is endeavouring to negotiate a new option
arrangement with the owners of the Guariche project which more appropriately
reflects current market conditions. If a new arrangement is successfully
negotiated, an aggressive exploration program would be initiated to fully
develop the potential of the Guariche project, subject to raising the necessary
funds.
As a result of these efforts, the Corporation expects that it will have
sufficient cash on hand during 1998 and into 1999 so as to be in a position to
recommence ore extraction at the Hycroft mine and continue with development work
at the Amayapampa and Capa Circa properties if there is an adequate improvement
in the price of gold. The Corporation anticipates it would be able to finance
construction of the Amayapampa/Capa Circa project at a gold price of $325 per
ounce. However, in order to undertake any significant exploration work on any of
its properties, including the Guariche project in Venezuela, the Corporation
will have to raise additional funds from external sources.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
DIRECTORS
The directors of Vista Gold are elected each year at the annual general meeting
of shareholders and hold office until their successors are elected or appointed.
The present directors of Vista Gold, together with the location of their
residences, length of service and business experience, are described below.
- 36 -
<PAGE> 40
<TABLE>
<CAPTION>
NAME DIRECTOR SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
---- -------------- -------------------------------------------------------
<S> <C> <C>
DAVID R. SINCLAIR May 1, 1995 Chartered accountant; corporate director; Director,
Nanoose Bay, British Columbia Cominco Ltd., a mining company.
Director and Chairman
ROSS J. BEATY November 12, 1996 Geologist; Chairman of Pan American Silver Corp., a
Vancouver, British Columbia mining company, 1994 to present; prior thereto,
Director and Vice Chairman President of Equinox Resources Ltd., a mining
company.
MICHAEL B. RICHINGS May 1, 1995 Mining engineer; President and Chief Executive
Littleton, Colorado Officer of Vista Gold since June 1, 1995; President
Director of Atlas Corporation, a mining company, from
January 1995 to May 1995; Group Executive and President
of Lac Minerals Ltd. South America, a mining company,
from 1993 to 1995; Vice President of Operations of
Atlas Corporation from 1990 to 1992.
WILLIAM M. CALHOUN May 1, 1995 Mining engineer and geologist; Chief Executive
Silverton, Idaho Officer of William Calhoun, Inc., mining consultants.
Director
C. THOMAS OGRYZLO March 8, 1996 Mechanical engineer; President and Chief Executive
Toronto, Ontario Officer of Triton Mining Corporation, a mining
Director company, from August 1997 to present; formerly,
Chairman of Kilborn SNC-Lavalin Inc., an engineering
group; formerly, President of Kilborn Group of
Companies.
KEITH E. STEEVES September 29, 1995 Consultant; Director of Teck Corporation and Cross
Richmond, British Columbia Lake Minerals Ltd., mining companies; formerly,
Director Senior Vice-President, Commercial of Teck
Corporation.
ALAN G. THOMPSON December 1, 1989 Businessman; President and Chief Executive Officer
West Vancouver, of A.G.T. Financial Corporation, an investment
British Columbia company.
Director
PETER WALTON May 24, 1989 Self-employed business consultant.
West Vancouver,
British Columbia
Director
</TABLE>
None of the above directors has entered into any arrangement or understanding
with any other person pursuant to which he was or is to be elected as a director
of Vista Gold or a nominee of any other person, except as disclosed herein.
EXECUTIVE OFFICERS
The executive officers of Vista Gold are appointed by and hold office at the
pleasure of the Board of Directors of Vista Gold. The present executive officers
of Vista Gold, together with their length of service and business experience,
are described below.
- 37 -
<PAGE> 41
<TABLE>
NAME HELD OFFICE SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
---- ----------------- ------------------------------------------
<S> <C> <C>
MICHAEL B. RICHINGS June 1, 1995 Mining engineer; President and Chief Executive
President and Chief Executive Officer since June 1995; President of Atlas
Officer and Director Corporation, a mining company, from January 1995 to
May 1995; Group Executive and President of Lac Minerals
Ltd. South America, a mining company, from 1993 to 1995;
Vice President of Operations of Atlas Corporation from
1990 to 1992.
ROGER L. SMITH March 6, 1998 Corporate Controller of Vista Gold from December
Vice President Finance 1995 to March 1998; Vice President Finance of Ramrod
Gold (U.S.A.) Inc., a mining company, from May 1994 to
December 1995; Vice President Finance of Westmont Gold
Inc., a mining company from July 1991 to May 1994.
RONALD J. MCGREGOR July 1, 1996 Vice President Project Development, Cambior USA
Vice President Development and Inc., a mining company.
Operations
WILLIAM F. SIRETT January 1, 1996 Lawyer; Partner, Ladner Downs, a law firm.
Secretary
</TABLE>
None of the above executive officers has entered into any arrangement or
understanding with any other person pursuant to which he was or is to be elected
as an executive officer of Vista Gold or a nominee of any other person.
EXECUTIVE AND AUDIT COMMITTEES
Vista Gold does not have an executive committee. Vista Gold is required to have
an audit committee under section 173 of the Business Corporations Act (Yukon
Territory). Vista Gold's audit committee consists of the following directors:
David R. Sinclair, Keith E. Steeves, Peter Walton and Alan G. Thompson.
ITEM 11..COMPENSATION OF DIRECTORS AND OFFICERS.
During the financial year ended December 31, 1997, the aggregate cash
compensation paid by the Corporation to all directors and officers of Vista Gold
as a group was $158,404. This sum includes compensation paid to executive
officers pursuant to the cash incentive plan and retirement savings plan
described below.
Information specified in this Item for individually named directors and officers
is incorporated by reference from pages 3, 4 and 6 to 13 of the Management
Information and Proxy Circular prepared in connection with Vista Gold's Annual
General Meeting held on May 11, 1998, filed with the Securities and Exchange
Commission under cover of Form 6-K concurrently with the filing of this report.
Pursuant to the terms of the Corporation's incentive policy adopted by the
Corporation in 1989 or certain employment contracts, executive officers and
senior employees of the Corporation are eligible to receive incentive payments.
Incentive payments awarded to executive officers under this plan in 1997
included in the aggregate cash compensation figure provided above were for the
period from January 1, 1997 to
- 38 -
<PAGE> 42
December 31, 1997. These incentive payments are awarded at the discretion of the
Board of Directors based on recommendations from the compensation committee.
There is no established formula utilized in determining these incentive
payments. The award of incentive payments is motivated by the Corporation's
desire to reward past services rendered to the Corporation and to provide an
incentive for continued service to the Corporation. Incentive payments to be
made during 1998 may include amounts related to performance during a portion of
1997 but have not yet been determined.
During the fiscal year ended December 31, 1997, the Corporation set aside or
accrued a total of $14,700 to provide pension, retirement or similar benefits
for directors or officers of Vista Gold pursuant to plans provided or
contributed to by the Corporation. As a part of the aggregate cash compensation
disclosed above, the Corporation sponsors a quantified tax-deferred savings plan
in accordance with the provisions of section 401(k) of the United States
Internal Revenue Service Code which is available to permanent United
States-based employees. Under the terms of this plan, the Corporation makes
contributions of up to four percent of eligible employees salaries. In addition,
the Corporation contributes between two percent and four percent of salaries of
permanent Canadian-based employees, including executive officers, depending on
length of service and to a maximum of Cdn.$3,500 per year, to the individual's
registered retirement savings plan. There are no other such plans to which the
Corporation made any contribution in relation to its directors or officers in
1997.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR
SUBSIDIARIES.
As of March 30, 1998, the following options to purchase Common Shares were
outstanding:
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES EXERCISE EXPIRY
UNDER OPTION PRICE DATE(1)
--------------- ------------ --------------
<S> <C> <C>
100,000 Cdn$1.20 09/13/1999
10,000 1.45 09/30/2001
20000 2.85 10/05/2003
10,000 2.78 04/27/2004
135,000 2.28 01/23/2005
200,000 2.70 05/08/2005
75,000 2.78 09/28/2005
300,000 2.25 12/12/2005
50,000 3.05 03/08/2006
15,000 2.51 05/06/2006
100,000 2.75 06/01/2006
105,000 2.09 07/30/2006
400,000 1.83 11/12/2006
545,000 1.55 02/05/2007
637,500 0.37 11/09/2007
</TABLE>
- -------------------------------
(1) Options will expire on the earlier of the expiry date and the date: (i) the
option holder is dismissed as an officer or employee of the Corporation
with cause; (ii) 30 days from the date the option holder ceases to be a
director, officer or employee of the Corporation, or ceases to provide
consulting or other services to the Corporation for any reason other than
as a result of having been dismissed for cause; or (iii) 90 days from the
date the option holder's death.
As of March 30, 1998, directors and officers of Vista Gold as a group held
options to purchase 2,000,000 Common Shares.
- 39 -
<PAGE> 43
Information specified in this Item for individually named directors and officers
is incorporated by reference from pages 3, 4 and 6 to 13 of the Management
Information and Proxy Circular prepared in connection with Vista Gold's Annual
General Meeting held on May 11, 1998, filed with the Securities and Exchange
Commission under cover of Form 6-K concurrently with the filing of this report.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
During the last three years, there have been no material transactions, nor any
proposed transactions, to which the Corporation was or is to be a party in which
any director or officer of Vista Gold, any relative or spouse of a director or
officer, any relative of such spouse who has the same home as the spouse, or any
director or officer of any parent or subsidiary of Vista Gold had or is to have
a direct or indirect material interest.
No director or officer of Vista Gold or any associate of any such officer or
director has been indebted to the Corporation at any time during the last three
years.
PART II
ITEM 14. DESCRIPTION OF SECURITIES REGISTERED.
Not applicable.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES.
Since January 1, 1997, there has been no material default in the payment of
principal, interest, any sinking or purchase fund instalment, or any other
material default not cured within 30 days, with respect to any indebtedness of
Vista Gold or any of its consolidated subsidiaries.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES.
Since January 1, 1997, the constituent instruments defining the rights of
holders of Common Shares, the only class of registered securities of Vista Gold,
have not been materially modified, nor have such rights been materially limited
or qualified by the issuance of any other class of securities or by the
Continuation. During such period, there were no working capital restrictions, no
limitations upon payment of dividends and no class of registered securities
secured by assets of the Corporation.
- 40 -
<PAGE> 44
PART IV
ITEM 17. FINANCIAL STATEMENTS.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Vista Gold Corp.,
We have audited the consolidated balance sheets of Vista Gold Corp. as at
December 31, 1997 and 1996 and the consolidated statements of earnings (loss),
retained earnings (deficit) and changes in cash flows for each of the three
years in the period ended December 31, 1997. These consolidated financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Corporation as at December 31,
1997 and 1996, and the results of its operations and the changes in its cash
flows for each of the three years in the period ended December 31, 1997 in
accordance with generally accepted accounting principles. As required by the
British Columbia Company Act, we report that, in our opinion, these principles
have been applied on a consistent basis with that of the preceding period.
/s/ Coopers & Lybrand
Coopers & Lybrand
Chartered Accountants
Vancouver, British Columbia, Canada
March 17, 1998
- 41 -
<PAGE> 45
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------------
1997 1996 1995
------------ ------------ ------------
(In thousands, except share data)
Revenues:
<S> <C> <C> <C>
Gold sales $ 40,123 $ 34,847 $ 39,659
Interest income 248 722 1,539
------------ ------------ ------------
40,371 35,569 41,198
------------ ------------ ------------
Costs and expenses:
Mining operations 30,917 32,076 30,125
Depreciation, depletion and amortization 6,223 5,170 3,555
Provision for reclamation and closure costs 826 689 539
Operating leases 2,228 2,137 2,176
Mineral exploration and property evaluation 2,294 3,636 4,139
Corporate administration 2,328 2,554 2,186
Investor relations 407 531 238
Interest expense 817 24 149
Gain on disposal of assets (1,022) (458) (6,075)
Equity in loss and impairment of Zamora 3,501 1,342 516
Other (income) expense (189) (133) 1,298
Write-down of mineral properties - note 3 46,015 -- --
------------ ------------ ------------
94,345 47,568 38,846
------------ ------------ ------------
Earnings (loss) before taxes (53,974) (11,999) 2,352
Income taxes (recovery) - note 4 45 (173) 193
------------ ------------ ------------
Net earnings (loss) $ (54,019) $ (11,826) $ 2,159
============ ============ ============
Weighted average shares outstanding 89,101,056 56,309,941 42,074,356
- ---------------------------------------------------------------------------------------------------------------------
Earnings (loss) per share $ (0.61) $ (0.21) $ 0.05
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 42 -
<PAGE> 46
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------
1997 1996 1995
--------- -------- -----------
(In thousands)
<S> <C> <C> <C>
Retained earnings (deficit), beginning of period $(10,417) $ 1,409 $(55,463)
Amalgamation costs - note 9 -- -- (1,223)
Capital reduction - note 8 -- -- 55,936
-------- -------- --------
(10,417) 1,409 (750)
Net earnings (loss) (54,019) (11,826) 2,159
-------- -------- --------
Retained earnings (deficit), end of period $(64,436) $(10,417) $ 1,409
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 43 -
<PAGE> 47
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1997 1996
---------- ----------
(In thousands)
<S> <C> <C>
Assets:
Cash and cash equivalents $ 1,799 $ 8,598
Marketable securities 132 213
Accounts receivable 2,199 2,033
Gold inventory 12,717 14,314
Supplies and other 2,301 3,758
--------- ---------
Current assets 19,148 28,916
--------- ---------
Property, plant and equipment, net - note 5 58,638 91,417
Investment in and advances to Zamora - note 6 857 2,981
Other assets 385 2
--------- ---------
Long-term assets 59,880 94,400
--------- ---------
Total assets $ 79,028 $ 123,316
========= =========
Liabilities and Shareholders' Equity:
Accounts payable $ 4,414 $ 8,214
Accrued liabilities and other 1,972 2,000
Short-term debt - note 7 13,000 --
--------- ---------
Current liabilities 19,386 10,214
--------- ---------
Accrued reclamation and closure costs 4,534 3,897
Other liabilities 34 32
--------- ---------
Long-term liabilities 4,568 3,929
--------- ---------
Total liabilities 23,954 14,143
--------- ---------
Capital stock, no par value per share - note 8 Preferred - unlimited shares
authorized; no shares outstanding
Common - unlimited shares authorized; shares outstanding: 120,870 120,745
1997 - 89,152,540; 1996 - 89,020,405
Retained deficit (64,436) (10,417)
Currency translation adjustment (1,360) (1,155)
--------- ---------
Total shareholders' equity 55,074 109,173
--------- ---------
Total liabilities and shareholders' equity $ 79,028 $ 123,316
========= =========
</TABLE>
Commitments and contingencies (note 10)
Approved by the Board of Directors
/s/ David R. Sinclair /s/ Keith E. Steeves
- -------------------------- -------------------------
David R. Sinclair Keith E. Steeves
Chairman Director
The accompanying notes are an integral part of these consolidated financial
statements.
- 44 -
<PAGE> 48
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------
1997 1996 1995
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(54,019) $(11,826) $ 2,159
Adjustments to reconcile net earnings (loss) to net cash provided
by (used in) operations:
Depreciation, depletion and amortization 6,223 5,170 3,555
Amortization of deferred stripping 985 5,727 223
Amortization of debt issue costs 143 -- --
Provision for reclamation and closure costs 826 689 539
Gain on sale of assets (1,022) (458) (6,075)
Equity in loss and impairment of Zamora 3,501 1,342 516
Gain on currency translation (205) (193) (441)
Write-down of mineral properties 46,015 -- --
-------- -------- --------
2,447 451 476
-------- -------- --------
Changes in operating assets and liabilities:
Marketable securities 81 (34) 61
Accounts receivable (166) (1,551) (352)
Gold inventory 1,597 (5,649) (407)
Supplies and other 1,457 (383) 542
Accounts payable (3,800) 4,424 (9,593)
Accrued liabilities and other (215) (616) 970
-------- -------- --------
Net cash provided by (used in) operating activities 1,401 (3,358) (8,303)
-------- -------- --------
Cash flows from investing activities:
Acquisition of Da Capo -- (49,682) --
Additions to property, plant and equipment (14,699) (20,084) (4,440)
Additions to deferred stripping (6,034) (512) (5,235)
Proceeds from disposal of assets 1,168 472 11,073
Investment in and advances to Zamora (1,377) -- (4,839)
Other assets (383) (2) (4,852)
-------- -------- --------
Net cash used in investing activities (21,325) (69,808) (8,293)
-------- -------- --------
Cash flows from financing activities:
Proceeds from debt 14,700 -- --
Repayment of debt (1,700) -- (275)
Issue of shares for Da Capo acquisition - note 5 -- 48,730 --
Proceeds from issuance of special warrants -- 17,308 --
Amalgamation costs - note 9 -- -- (1,222)
Proceeds from issuance of common stock 125 517 258
-------- -------- --------
Net cash provided by (used in) financing activities 13,125 66,555 (1,239)
-------- -------- --------
Net decrease in cash and cash equivalents (6,799) (6,611) (17,835)
Cash and cash equivalents, beginning of period 8,598 15,209 33,044
======== ======== ========
Cash and cash equivalents, end of period $ 1,799 $ 8,598 $ 15,209
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
- 45 -
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The tabular information set out below is in thousands of United States dollars,
except share data.
1. NATURE OF OPERATIONS
(a) Vista Gold Corp.
Vista Gold (see note (b) below) is engaged in gold mining and related activities
in the United States, Canada, and Latin America, including exploration,
extraction, processing, refining and reclamation. Gold bullion is the
Corporation's principal product, which is a commodity produced primarily in
South Africa, the United States, Canada, Australia and Latin America.
The Corporation's results are impacted by the price of gold. Gold prices
fluctuate and are affected by numerous factors, including, but not limited to,
expectations with respect to the rate of inflation, exchange rates
(specifically, the United States dollar relative to other currencies), interest
rates, global and regional political and economic crises, and governmental
policies with respect to gold holdings by central banks. The demand for and
supply of gold affect gold prices, but not necessarily in the same manner as
demand and supply affect the prices of other commodities. The supply of gold
consists of a combination of new mine production, and existing stocks of bullion
and fabricated gold held by governments, public and private financial
institutions, industrial organizations and private individuals. The demand for
gold consists of jewelery and investment demand, as well as producer hedging
activities. Gold can be readily sold on numerous markets throughout the world
and its market value can be readily ascertained at any particular time. As a
result, the Corporation is not dependent upon any one customer for the sale of
its product.
(b) Purchase of Da Capo Resources Ltd.
On July 31, 1996, the boards of directors of Granges and Da Capo unanimously
approved the amalgamation of the two companies to form a new gold mining
company. The Supreme Court of British Columbia approved the amalgamation,
effective November 1, 1996 under the name "Vista Gold Corp." Under the terms of
the agreement, each holder of Granges shares received one Vista Gold share for
each Granges share and each holder of Da Capo shares received two Vista Gold
shares for each Da Capo share. After the amalgamation, Vista Gold was owned
66.25% by Granges shareholders and 33.75% by Da Capo shareholders on a fully
diluted basis.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Generally Accepted Accounting Principles
The consolidated financial statements of Vista Gold and its subsidiaries have
been prepared in accordance with accounting principles generally accepted in
Canada. These principles differ in certain material respects from those
accounting principles generally accepted in the United States. The differences
are described in note 14.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Vista Gold and its
subsidiaries. Vista Gold's subsidiaries and its percentage ownership in these
entities as of December 31, 1997 are:
- 46 -
<PAGE> 50
<TABLE>
<CAPTION>
OWNERSHIP
---------
<S> <C>
Vista Gold Holdings Inc. and its wholly-owned subsidiaries 100%
Hycroft Resources & Development, Inc. and its wholly-owned subsidiary
Hycroft Lewis Mine, Inc.
Vista Gold U.S. Inc.
Granges Inc. (previously called Granges (Canada) Inc.) 100%
3377474 Canada Inc. 100%
Vista Gold (Antigua) Corp. 100%
Sociedad Industrial Yamin Limitada ("Yamin") 100%
</TABLE>
(c) Use of Estimates
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the consolidated financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those reported.
(d) Foreign Currency Translation
The consolidated financial statements of the Corporation were historically
expressed in Canadian (Cdn.) dollars. As a result of sales revenues and a
significant portion of expenses being denominated in United States dollars, the
sale of exploration properties in Canada, the increasing international focus of
the Corporation's operating activities, and the relocation of the Corporation's
executive office to Denver, Colorado, the United States dollar became the
principal currency of the Corporation's business. Accordingly, the United States
dollar was adopted as the reporting currency for the consolidated financial
statements of the Corporation effective January 1, 1996. The comparative
information for the 1995 financial statements was translated into United States
dollars at the December 31, 1995 year end at a rate of one United States dollar
to Cdn.$1.3652.
Self-sustaining foreign operations are translated using the current rate method.
Under this method, assets and liabilities are translated at the rate of exchange
on the balance sheet date, and revenue and expenses at the average rate of
exchange during the period. Exchange gains and losses are deferred and shown as
a currency translation adjustment in shareholders' equity until transferred to
earnings when the net investment in the foreign operation is reduced.
Foreign currency denominated monetary items of the Corporation, excluding its
foreign operations, are translated at the year-end exchange rate. Exchange gains
and losses on these items are recognized in earnings in the year they arise.
(e) Revenue Recognition
Sales are recorded as soon as the product is considered available for sale.
Gains and losses on forward sales and option contracts are deferred until the
related production is sold.
(f) Mineral Exploration
Acquisition and exploration expenditures on mineral properties are expensed when
incurred until such time as the property indicates the potential of being
developed into a mine, and thereafter the expenditures are capitalized.
Previously capitalized expenditures are expensed if the project is determined to
be uneconomic.
- 47 -
<PAGE> 51
(g) Cash Equivalents
Cash equivalents are represented by investments in short-term investment funds
consisting of highly liquid debt instruments such as certificates of deposit,
commercial paper, and money market accounts purchased with an original maturity
date of less than three months. The Corporation's policy is to invest cash in
conservative, highly rated instruments and limit the amount of credit exposure
to any one institution
(h) Marketable Securities
Marketable securities are carried at the lower of cost or market value, which
approximates fair value.
(i) Inventories
Gold inventory is valued at the lower of average cost or net realizable value.
The direct cash costs associated with ore on the leach pads are inventoried and
charged to operations as the contained gold is recovered. Based upon actual
metal recoveries, ore grades and operating plans, management continuously
evaluates and refines estimates in determining the carrying values of costs
associated with ore under leach. It is possible that in the near term, estimates
of recoverable ore, grade, and gold price could change causing the Corporation
to revise the value of its heap leach inventory.
Supplies are valued at the lower of average cost or net replacement value.
(j) Property, Plant and Equipment
(i) Developed Mineral Properties
Property acquisition and development costs are carried at cost less
accumulated amortization and write-downs. Amortization is provided on
the unit-of-production method based on proven and probable reserves.
Management reviews quarterly the carrying value of the Corporation's
interest in each property and, where necessary, these properties are
written down to their estimated recoverable amount determined on an
un-discounted basis. Management's estimate of gold price, recoverable
proven and probable reserves, operating, capital and reclamation costs
are subject to risks and uncertainties affecting the recoverability of
the Corporation's investment in property, plant and equipment. Although
management has made its best estimate of these factors based on current
conditions, it is possible that changes could occur in the near term
that could adversely affect management's estimate of net cash flows
expected to be generated from its operating properties and the need for
possible asset impairment write-downs.
(ii) Plant and Equipment
Plant and equipment are recorded at cost and depreciated using the
units-of-production method or the straight-line method over their
estimated useful lives. The cost of normal maintenance and repairs is
charged to expense as incurred. Significant expenditures, which
increase the life of an asset, are capitalized and depreciated over the
remaining estimated useful life of the asset. Upon sale or retirement
of assets, the costs and related accumulated depreciation or
amortization are eliminated from the respective accounts and any
resulting gains or losses are reflected in operations.
(iii) Deferred Stripping
During production, mining costs associated with waste rock removal are
deferred and charged to operations over the life of the mine. Although
management has made its best estimate of these factors based on current
conditions, it is possible that changes could occur in the near term
that
- 48 -
<PAGE> 52
could adversely affect management's estimate of ounces of gold in
proven and probable reserves and the need for a change in the
amortization rate of deferred stripping cost.
(k) Provision for Future Reclamation and Closure Costs
All of the Corporation's operations are subject to reclamation, site restoration
and closure requirements. Costs related to ongoing site restoration programs are
expensed when incurred. A provision for mine closure and site restoration costs
is charged to earnings over the life of the mine. The Corporation calculates its
estimates of the ultimate reclamation liability based on current laws and
regulations and the expected future costs to be incurred in reclaiming,
restoring and closing its operating mine sites. It is possible that the
Corporation's estimate of its ultimate reclamation liability could change in the
near term due to possible changes in laws and regulations and changes in cost
estimates.
(l) Estimates of Proven and Probable Reserves
Management's calculation of proven and probable reserves is based upon
engineering and geological estimates and financial estimates including gold
prices and operating costs. The Corporation depreciates some of its assets and
accrues for reclamation on a unit-of-production basis over proven and probable
reserves. Changes in geological interpretations of the Corporation's ore bodies
and changes in gold prices and operating costs may change the Corporation's
estimate of proven and probable reserves. It is possible that the Corporation's
estimate of proven and probable reserves could change in the near term and could
result in revised charges for depreciation and reclamation in future reporting
periods.
(m) Hedging
The Corporation enters into derivative financial transactions to hedge its
exposure to the effects of fluctuations in the price of gold. The Corporation
does not enter into derivative transactions for speculative purposes. The
resulting gains or losses, measured by quoted market prices, are recognized when
the hedged transactions are completed.
3. Write-Down Of Mineral Properties
Management regularly performs property evaluations to assess the recoverability
of its mining properties and investments and other long-lived assets. The
Corporation determined that based upon estimates of proven and probable
reserves, low gold prices and operating costs at certain locations, stock
prices, trading histories, and the general depression in gold company stocks, it
would not fully recover its carrying value in these properties and investments.
These reviews indicated that the carrying values of certain properties were in
excess of their estimated net recoverable amounts and accordingly were written
down $46.0 million as follows.
<TABLE>
<S> <C>
Bolivian mineral properties $ 25,908
Hycroft mine 17,500
Venezuelan mineral properties 2,307
Tartan Lake mine 300
--------
$ 46,015
========
</TABLE>
- 49 -
<PAGE> 53
4. INCOME TAXES
A reconciliation of the combined Canadian federal and provincial income taxes at
statutory rates and the Corporation's effective income tax expenses is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Income taxes at statutory rates $(19,987) $ (3,524) $ 1,045
Increase (decrease) in taxes from:
Permanent differences (212) (96) (133)
Timing differences 13,143 2,670 (1,204)
Recovery of prior years' taxes -- (25) (66)
United States Alternative Minimum Tax -- (188) 188
Differences in foreign tax rates 2,410 945 314
Deferred income tax debts 4,646 5 --
Large Corporations Tax 45 40 49
-------- -------- --------
Income taxes per statements of earnings (loss) $ 45 $ (173) $ 193
======== ======== ========
</TABLE>
The Corporation has incurred income tax losses in prior periods of $31.6
million, which may be carried forward and applied against future taxable income
when earned. No benefit in respect of these losses has been recorded in these
accounts. The losses expire as follows:
<TABLE>
<CAPTION>
CANADA UNITED STATES TOTAL
--------- ------------- --------
<S> <C> <C> <C>
1999 $ 1,398 $ - $ 1,398
2000 1,618 - 1,618
2001 666 1,295 1,961
2002 779 1,358 2,137
2003 477 5,418 5,895
2004 449 1,373 1,822
2008 - 435 435
2009 - 11 11
2010 - 5,131 5,131
2011 - 11,227 11,227
------- --------- -------
$ 5,387 $ 26,248 $31,635
======= ========= =======
</TABLE>
- 50 -
<PAGE> 54
5. Property, Plant and Equipment
Property, plant and equipment is comprised of the following:
<TABLE>
<CAPTION>
1997 1996
-------------------------------------- ----------------------------------
ACCUMULATED ACCUMULATED
DEPRECIATION, DEPRECIATION,
DEPLETION, DEPLETION,
AMORITIZATION AMORITIZATION
AND AND
COST WRITE-DOWNS NET COST WRITE-DOWNS NET
--------- ------------- -------- --------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Hycroft mine (a) $ 90,217 $ 67,081 $ 23,136 $ 94,225 $ 55,714 $ 38,511
Tartan Lake mine 3,696 2,178 1,518 3,855 1,969 1,886
Bolivian mineral properties (b) 59,705 26,053 33,652 50,475 -- 50,475
Corporate assets 488 156 332 937 392 545
-------- -------- -------- -------- -------- --------
$154,106 $ 95,468 $ 58,638 $149,492 $ 58,075 $ 91,417
======== ======== ======== ======== ======== ========
</TABLE>
(a) Royalties
The Crofoot property at the Hycroft mine is subject to a four-percent net profit
royalty. No royalty payments were made in 1995 because minimum royalty payments
made prior to 1993 aggregating $2.8 million were available for credit towards
the royalty obligations. Effective 1996, the Corporation agreed to apply this
credit to reduce the maximum cumulative royalty payable of $10 million and to
pay minimum royalty payments of $240,000 per year.
The Lewis property at the Hycroft mine is subject to a 5% net smelter royalty.
During 1997, 1996 and 1995, only nominal minimum royalties were required in
relation to this property.
(b) Bolivian Mineral Properties
As a result of the acquisition of Da Capo (note 1), the Corporation acquired
mineral properties in Bolivia which were recorded using the purchase method of
accounting and the results of operations were consolidated from November 1,
1996. The Corporation's interests in the net assets acquired at assigned values
were as follows:
<TABLE>
<S> <C>
Cash $ 1,198
Current assets 131
Property, plant and equipment 218
Mineral properties 48,284
Current liabilities (1,101)
--------
Shares issued for purchase of Da Capo $ 48,730
========
</TABLE>
6. INVESTMENT IN ZAMORA GOLD CORP.
In October 1995, Vista Gold completed a private placement with Zamora for the
issuance of 8,000,000 units at $0.60 per unit. Each unit consisted of one common
share of Zamora and one common share purchase warrant which entitled the
Corporation to purchase one common share for $0.75 until October 4, 1997. The
purchase warrants were not exercised and expired in October 1997. In May 1997,
Vista Gold completed an additional private placement with Zamora for the
issuance of 3,000,000 shares at Cdn.$0.24 per share. Vista Gold's combined
11,000,000 shares represented 49% of the issued and outstanding shares of Zamora
and the investment is accounted for using the equity method.
- 51 -
<PAGE> 55
<TABLE>
<S> <C>
Total initial investment including expenses $ 4,839
Equity loss in 1995 (516)
Balance at December 31, 1995 4,323
Equity loss in 1996 (1,342)
Balance at December 31, 1996 2,981
Private placement in 1997 520
Advances in 1997 857
Equity loss and impairment in 1997 (3,501)
-----------
Balance at December 31, 1997 $ 857
===========
</TABLE>
7. DEBT
During 1997, the Corporation borrowed $14.7 million and repaid $1.7 million
under the terms of a $13 million revolving credit facility which is
collateralized by the assets of the Hycroft mine. In the fourth quarter of 1997,
the Corporation amended this revolving credit facility into a term loan bearing
interest at two percent above LIBOR and with repayment terms requiring twelve
equal monthly instalments commencing January 31, 1999. LIBOR was 5.7% as of
December 31, 1997. The Corporation's subsidiary, Hycroft, is required to
maintain a minimum tangible net worth of $15.3 million. Subsequent to the end of
the year the Corporation further amended the term loan. The amendment is
described in note 13.
8. SHARE CAPITAL
Common shares issued and outstanding is comprised of the following:
<TABLE>
<CAPTION>
Number of Shares Amount
---------------- ----------
<S> <C> <C>
At December 31, 1995 46,042,911 $ 54,190
Issued upon exercise of stock options (a) 468,750 517
Issued upon exercise of special warrants (b) 9,699,800 17,308
Issued pursuant to Da Capo purchase (notes 1 and 5) 32,808,944 48,730
---------- ----------
At December 31, 1996 89,020,405 $ 120,745
Issued upon exercise of stock options (a) 100,000 88
Issued pursuant to executive bonus compensation agreements 32,135 37
---------- ----------
At December 31, 1997 89,152,540 $ 120,870
========== ==========
</TABLE>
(a) Common Share Options
At December 31, 1997, 2,937,500 common shares were reserved for issuance under
options granted to directors, officers and management employees. These options
expire as follows: 1999 - 100,000; 2001 - 10,000; 2003 - 20,000; 2004 - 10,000;
2005 - 725,000; 2006 - 720,000; 2007 - 1,352,500.
- 52 -
<PAGE> 56
<TABLE>
<CAPTION>
CDN $
SHARE OPTIONS OPTION PRICE
------------- ------------
<S> <C> <C>
At December 31, 1995 1,270,000 $ 1.45 to $ 2.78
Granted in 1996 845,000 $ 1.83 to $ 3.05
Exercised in 1996 (468,750) $ 1.05 to $ 2.85
Expired in 1996 (226,250) $ 1.45 to $ 2.70
Granted pursuant to Da Capo acquisition (notes 1 and 6) 1,120,000 $ 1.05 to $ 1.50
---------
At December 31, 1996 2,540,000 $ 1.45 to $ 2.78
Granted in 1997 1,402,500 $ 0.37 to $ 1.55
Exercised in 1997 (100,000) $ 1.20
Expired in 1997 (905,000) $ 1.20 to $ 2.78
---------
At December 31, 1997 2,937,500 $ 0.37 to $ 3.05
=========
</TABLE>
(b) Special Warrants
In 1996, a private placement of 9,699,800 special warrants was completed at a
price of Cdn.$2.60 per unit for gross proceeds of Cdn.$25,219,480 ($18,505,367)
and net proceeds of Cdn.$23,684,564 ($17,308,329). Each special warrant was
exercisable into one common share and one half of one common share purchase
warrant of the Corporation for no additional consideration. In 1996, the
9,699,800 special warrants were exercised and 9,699,800 common shares in the
capital of the Corporation and 4,849,900 common share purchase warrants were
issued to the holders of the special warrants. Each whole common share purchase
warrant was exercisable into one common share of the Corporation at a price of
Cdn.$3.00 per share until October 31, 1997. The purchase warrants expired in
1997.
(c) Capital Reduction
At the March 30, 1995 extraordinary meeting, the shareholders of the Corporation
approved a special resolution to reduce the capital of the Corporation. Under
this resolution the share capital and contributed surplus were reduced by $53.1
million and $2.8 million, respectively, with a corresponding decrease to the
accumulated deficit of approximately $56.0 million. The effect of this capital
reduction was to eliminate the consolidated accumulated deficit of the
Corporation as of December 31, 1994 after giving effect to the estimated costs
of the amalgamation. This deficit was caused primarily by prior write-downs of
mining assets.
9. AMALGAMATION OF GRANGES INC. AND HYCROFT RESOURCES & DEVELOPMENT
CORPORATION.
On March 30, 1995, the shareholders of Granges and its 50.5% owned subsidiary,
Hycroft Resources & Development Corporation ("Hycroft Corporation"), approved
the amalgamation of the two companies, effective May 1, 1995 under the name
"Granges Inc." ("Amalco").
As Granges already controlled Hycroft Corporation, the amalgamation was treated
in a manner similar to a pooling of interest. Accordingly, the 1995 results of
Amalco represent the consolidated results of Granges for the four months ended
April 30, 1995 and the consolidated results of Amalco for the eight months ended
December 31, 1995, with all comparative figures being the consolidated results
of Granges.
- 53 -
<PAGE> 57
Of costs to carry out the amalgamation, $1.2 million has been treated as a
capital transaction and charged directly to the deficit on the date of
amalgamation.
10. COMMITMENTS AND CONTINGENCIES
(a) The Company is committed to U.S. dollar payments under certain
operating leases for mining equipment. Future payments under these
leases in each of the next five years and in the aggregate are $1,054
in 1998, at which time the leases terminate. Letters of credit
totalling $0.6 million (1996 - $0.9 million) have been provided as
collateral under these mine equipment operating leases.
(b) As part of its gold hedging program, the Corporation enters into
agreements with major financial institutions to deliver gold. As of
December 31, 1997, the Corporation's hedging program consisted of:
(i) forward sales contracts totalling 48,000 ounces where the
Corporation is required to deliver gold at an average price of
$360 per ounce;
(ii) put option contracts totalling 194,000 ounces where the
Corporation can require the financial institutions to buy gold
at an average price of $334 per ounce;
(iii) call option contracts totalling 176,000 ounces where the
financial institutions can require the Corporation to sell
gold at an average price of $345 per ounce; and
(iv) call option contracts totalling 44,400 ounces where the
Corporation can require the financial institutions to sell
gold at an average price of $360.
These options have various expiration dates up to December 2001.
Subsequent to December 31, 1997 these hedges were liquidated (note 13).
(c) The Company is subject to contingent liabilities for legal proceedings
occurring in the ordinary course of business. On the basis of
information furnished by counsel and others, management believes that
these contingencies will not materially affect the Corporation.
11. RETIREMENT PLANS
The Corporation sponsors a qualified tax deferred savings plan in accordance
with the provisions of Section 401(k) of the United States Internal Revenue
Service code, which is available to permanent U.S. employees. The Corporation
makes contributions of up to four percent of eligible employees' salaries. The
Corporation's contribution in 1997 was $275,000 (1996 - $323,000; 1995 -
$113,000).
12. GEOGRAPHIC AND SEGMENT INFORMATION
The Corporation operates in the gold mining industry in the United States, and
has exploration and development properties in Latin America. Its major product
is gold, and all gold revenues and operating costs are derived in the United
States.
- 54 -
<PAGE> 58
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Gold revenues
United States $ 40,123 $ 34,847 $ 39,659
Operating (loss) profit (1)
United States $ (71) $ (5,225) $ 3,264
</TABLE>
- ---------------------------
(1) Includes gold revenues less mining operations, depreciation, depletion
and amortization, provision for reclamation and closure costs, and
operating leases.
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Identifiable assets
Canada $ 3,343 $ 12,348
United States 41,555 59,672
Latin America 34,130 51,296
-------- --------
$ 79,028 $123,316
======== ========
</TABLE>
13. SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Corporation took steps to improve its cash
flow in 1998 and liquidated its forward position in the gold futures market and
temporarily reduced mining activities at the Hycroft mine.
The liquidation of the Corporation's gold forward position was completed in
January 1998, and generated $9.5 million in cash. Waste-rock mining was then
halted and in May 1998, the Company plans to suspend ore mining. Gold recovery
and processing will continue from mined and inventoried ore in 1998.
As a result of these measures, the Corporation has amended its debt agreement
(note 7) as follows. The Corporation has hedged 90,000 ounces at a gold price of
no less than $282 per ounce to ensure a satisfactory cash margin. The repayment
terms have been amended and call for the Corporation to completely retire the
debt during 1998. In January, the Corporation paid $4.5 million and reduced the
$13.0 million debt to $8.5 million.
14. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The significant differences between GAAP in Canada and in the United States are
as follows:
(a) Under Canadian corporate law, the Corporation underwent a capital
reduction in connection with the amalgamation of Granges and Hycroft
Corporation whereby share capital and contributed surplus were reduced
to eliminate the consolidated accumulated deficit of Granges as of
December 31, 1994, after giving effect to the estimated costs of the
amalgamation. Under United States corporate law, no such transaction is
available and accordingly is not allowed under U.S. GAAP.
(b) Under Canadian GAAP, the amalgamation of Granges and Hycroft
Corporation was treated in a manner similar to a pooling of interests.
Under U.S. GAAP, the amalgamation does not meet the conditions for
pooling of interests. Accordingly, the transaction is treated as a
purchase under
- 55 -
<PAGE> 59
U.S. GAAP, with the excess of purchase price over the net book value
of Hycroft Corporation's net assets allocated to mineral properties.
(c) In 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," effective for fiscal years beginning after December 15,
1995. SFAS No. 121 requires that long-lived assets and associated
intangibles be written down to their fair values whenever an impairment
review indicates that the carrying value cannot be recovered on an
undiscounted cash flow basis. In 1996, under U.S. GAAP, the carrying
value of the Hycroft mine, including the excess of proceeds over the
net book value from (b) above, did not exceed the undiscounted cash
flow. Accordingly, the Hycroft mine carrying value was written down to
fair value using the discounted cash flow method following U.S. GAAP.
(d) In 1997, the carrying values of certain long-lived assets discussed in
note 3 exceeded their respective undiscounted cash flows. Following
Canadian GAAP, the carrying values were written down using the
undiscounted cash flow method. Under U.S. GAAP, as discussed in (c)
above, the carrying values were written down to their fair values using
the discounted cash flow method, giving rise to a difference in the
amounts written down.
Amortization of the remaining carrying values in subsequent periods
following Canadian GAAP must be reduced to reflect the difference in
the amounts written down following U.S. GAAP.
(e) In 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation," effective for fiscal years beginning after December 15,
1995. This standard established a fair value method for accounting for
stock-based compensation plans either through recognition or
disclosure. Management elected the disclosure option under the standard
and therefore, adoption does not give rise to any U.S./Canadian GAAP
differences in either the balance sheet or income statement.
(f) Under Canadian GAAP, corporate income taxes are accounted for using the
deferral method of income tax allocation. Under U.S. GAAP, corporate
income taxes are accounted for using the liability method of income tax
allocation. The Corporation has recorded no tax expense under either
Canadian or U.S. GAAP due to cumulative net losses incurred by the
Corporation. Additionally, any deferred tax assets resulting from
cumulative net losses under U.S. GAAP would be offset by a valuation
allowance.
With regard to the purchase of Da Capo, under U.S. GAAP, the excess of purchase
price over net book value acquired would be tax affected giving rise to a credit
to deferred income taxes and a debit to mineral properties. This would result in
a corresponding reduction in the valuation allowance with the resulting credit
being allocated against mineral properties.
- 56 -
<PAGE> 60
The significant differences in the consolidated statements of earnings and
deficit relative to U.S. GAAP were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net earnings (loss) - Canadian GAAP $ (54,019) $ (11,826) $ 2,159
Depletion and impairment of mineral properties (b),(c),(d) (18,492) (23,269) (2,658)
Amortization reduction (d) 964 -- --
Other items (170) (209)
--------- --------- ---------
Net loss - U.S. GAAP (71,547) (35,265) (708)
Deficit, beginning of year - U.S. GAAP (89,957) (54,692) (53,984)
--------- --------- ---------
Deficit, end of year - U.S. GAAP $(161,504) $ (89,957) $ (54,692)
========= ========= =========
Basic and diluted loss per share - U.S. GAAP $ (0.80) $ (0.62) $ (0.02)
--------- --------- ---------
</TABLE>
The significant differences in the balance sheet as at December 31, 1997
relative to U.S. GAAP were:
<TABLE>
<CAPTION>
PER CDN. CDN./U.S. PER U.S.
GAAP ADJ. GAAP
--------- --------- ---------
<S> <C> <C> <C>
Current assets $ 19,148 $ -- $ 19,148
Property, plant and equipment (d) 59,880 (17,528) 42,352
--------- --------- ---------
$ 79,028 $ (17,528) $ 61,500
========= ========= =========
Current liabilities $ 19,386 $ -- $ 19,386
---------
Provision for reclamation and future closure costs 4,568 -- 4,568
--------- --------- ---------
23,954 -- 23,954
Common shares (a), (b) 120,870 76,754 197,624
Contributed surplus (a) -- 2,786 2,786
Retained deficit (a), (b), (c), (d) (64,436) (97,068) (161,504)
Currency translation adjustment (1,360) -- (1,360)
--------- --------- ---------
$ 79,028 $ (17,528) $ 61,500
========= ========= =========
</TABLE>
Cash flows for the Corporation under Canadian GAAP are presented in the
consolidated statement of changes in cash resources. Under Canadian GAAP all
financing and investment activities are presented on the face of the statement.
Under U.S. GAAP only cash transactions are presented, with non-cash transactions
disclosed separately. The purchase of Da Capo (note 1) was a non-cash
transaction. Accordingly, under U.S. GAAP, the non-cash portion ($48,730,000) of
the acquisition of, and issue of shares for, Da Capo would not be included in
the statement. The 1995 gain on the sale of the Corporation's base metal
properties was a non-cash transaction. Accordingly, under U.S. GAAP, the
proceeds from the sale of mineral properties and marketable securities and the
purchase of investments would both be reduced by $4,921,000, the value of the
non-cash transaction.
- 57 -
<PAGE> 61
Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------ ---- ---- ----
<S> <C> <C> <C>
Cash paid during the year for:
Interest $674 $ -- $149
Income taxes 91 -- 193
</TABLE>
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", effective
for financial statements for periods ending after December 15, 1997. The
Statement requires dual presentation of basic and diluted earnings per share on
the face of the income statement. The Corporation adopted the Statement
effective December 31, 1997, for U.S. GAAP reporting.
ITEM 18. FINANCIAL STATEMENTS.
The registrant has elected to provide financial statements and related
information specified in Item 17 in lieu of Item 18.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
A. CONSOLIDATED FINANCIAL STATEMENTS OF VISTA GOLD CORP.
The following consolidated financial statements of Vista Gold and its
subsidiaries are included in Item 17:
Independent Auditor's Report dated March 18, 1998.
Consolidated Statements of Earnings (Loss) - Years ended
December 31, 1997, 1996 and 1995.
Consolidated Statements of Retained Earnings (Deficit) -
Years ended December 31, 1997, 1996 and 1995.
Consolidated Balance Sheets - at December 31, 1997 and 1996.
Consolidated Statements of Cash Flows - Years ended
December 31, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
B. FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements
or notes thereto.
- 58 -
<PAGE> 62
C. EXHIBITS
1. Amendments or modifications, not previously filed, to all
exhibits previously filed:
1.01 Amendment No. 1 dated as of September 30, 1997
between The Bank of Nova Scotia and Hycroft Inc.
with respect to the Credit Agreement (the "Hycroft
Credit Agreement") dated as of February 20, 1997
between The Bank of Nova Scotia and Hycroft Inc.
1.02 Consent letter dated February 4, 1998 from The
Bank of Nova Scotia to Hycroft Inc. with respect
to the Hycroft Credit Agreement.
2. Contracts and other documents executed or in effect during
the 1997 fiscal year and not previously filed:
2.01 Articles of Continuation of Vista Gold.
3. Lists or diagrams requested by the Commission: None.
4. Documents incorporated by reference herein (to the extent
specifically referenced):
4.01 Management Information and Proxy Circular for the
Annual General Meeting of Vista Gold held on May
11, 1998, filed with the Securities and Exchange
Commission under cover of Form 6-K concurrently
with the filing of this report.
OTHER
ADDITIONAL INFORMATION
Additional information, including directors' and officers' remuneration and
indebtedness, principal holders of the Corporation's securities, options to
purchase securities and interests of insiders in material transactions, where
applicable, is contained in the Corporation's information circular for its most
recent annual meeting of shareholders that involved the election of directors.
- 59 -
<PAGE> 63
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this annual report to be signed on its behalf
by the undersigned, thereunto duly authorized.
VISTA GOLD CORP.
Date: March 30, 1998 /s/ MICHAEL B. RICHINGS
-----------------------------
Michael B. Richings
President and Chief Executive Officer
- 60 -
<PAGE> 1
EXHIBIT 1.01
AMENDMENT NO. 1 TO CREDIT AGREEMENT
DATED AS OF SEPTEMBER 30, 1997
BETWEEN
HYCROFT RESOURCES & DEVELOPMENT, INC.
AS THE BORROWER,
AND
THE BANK OF NOVA SCOTIA,
AS THE LENDER.
<PAGE> 2
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (this "Amendment No. 1"),
dated as of September 30, 1997, between HYCROFT RESOURCES & DEVELOPMENT, INC.,
a Nevada corporation (the "Borrower"), and THE BANK OF NOVA SCOTIA (the
"Lender").
WITNESSETH:
WHEREAS, the Borrower and the Lender are parties to that certain
Credit Agreement, dated as of February 20, 1997 (as the same has been from
time-to-time amended, hereinafter referred to as the "Existing Credit
Agreement"); and
WHEREAS, the Borrower has requested that certain amendments be made to
the Existing Credit Agreement; and
WHEREAS, the Lender is willing to make certain amendments to the
Existing Credit Agreement on the terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 CERTAIN DEFINITIONS. The following terms (whether or not
underscored) when used in this Amendment No. 1 shall have the following
meanings:
"Amended Credit Agreement" means the Existing Credit Agreement as
amended by this Amendment No. 1.
"Amendment No. 1 Effective Date" has the meaning provided in Section
5.1.
SECTION 1.2 OTHER DEFINITIONS. Unless otherwise defined or the context
otherwise requires, terms used herein (including in the preamble and recitals
hereto) have the meanings provided for in the Existing Credit Agreement.
<PAGE> 3
ARTICLE II.
AMENDMENTS TO
EXISTING CREDIT AGREEMENT
Effective on the Amendment No. 1 Effective Date, the Existing Credit
Agreement is amended in accordance with the terms of this Article II except as
so amended, the Existing Credit Agreement shall continue to remain in all
respects in full force and effect.
SECTION 2.1 AMENDMENTS TO SECTION 1.1.
(a) The definition of "Capital Stock" in the Existing Credit
Agreement is deleted and the following definition is inserted in its
place:
"Capital Stock" means, relative to any Person, any and ah
shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, including partnership
interests, limited liability company membership interests,
participations quotas and other indicia of ownership of such
Person and all warrants, options, purchase rights, conversion
or exchange rights, voting rights, calls or any claims of any
character with respect thereto.
(b) The definition of "Change in Control" in the Existing Credit
Agreement is amended by deleting the word "or" at the end of subsection
(c), deleting the period at the end of subsection (d) and replacing it
with a semicolon and adding the following subsections (e), (f) and (g):
"(e) the failure of Parent to own (legally or
beneficially, or directly or indirectly), free and clear of
all Liens or other encumbrances, at least 100% of the
outstanding shares of Voting Stock of Yamin on a fully diluted
basis; or
(f) the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 30%
or more of the outstanding shares of Voting Stock of Parent;
or
(g) any amalgamation, merger, consolidation or similar
transaction affecting or involving Parent such that Parent is
not the surviving and controlling entity."
(c) The definition of "Guaranty" in the Existing Credit Agreement
is deleted and the following definition is inserted in its place:
"Guaranty" means, as the context may require, the Parent
Guaranty, the Holdings Guaranty, the Preferred Shareholder
Guaranty, the Yamin Guaranty and/or any
-2-
<PAGE> 4
Subsidiary Guaranty, in each case as amended, supplemented,
amended and restated or otherwise modified.
(d) The definition of "Hedging Obligation" nu the Existing Credit
Agreement is deleted and the following definition is inserted in its
place:
"Hedging Obligations" means, with respect to any Person, all
liabilities of such Person under Hedging Agreements, including
but not limited to obligations and liabilities arising in
connection with or as a result of early or premature
termination of a Hedging Agreement, whether or not occurring
as a result of a default thereunder.
(e) The definition of "Loan Document" in the Existing Credit
Agreement is deleted and the following definition is inserted in its
place:
"Loan Document" means this Agreement, the Note, each Borrowing
Request, each Continuation Conversion Notice, each Borrowing
Base Certificate, each Compliance Certificate, the Master
Subordination Agreement, each Pledge Agreement, each Hedging
Agreement between Parent, the Borrower or any of its
Subsidiaries and the Lender or any Affiliate of the Lender,
each Security Agreement, each Guaranty, each Mortgage, and
each other agreement, certificate, report, document or
instrument delivered in connection with this Agreement and
such other agreements, whether or not specifically mentioned
herein or therein.
(f) The definition of "Material Adverse Effect" in the Existing
Credit Agreement is amended by inserting "Yamin," after ",Holdings" in
subsection (a)
(g) The definition of "Mortgage" in the Existing Credit Agreement
is deleted and the following definition is inserted in its place:
"Mortgage" means each mortgage, deed of trust or agreement
executed and delivered by the Borrower or any other Obligor in
favor of the Lender pursuant to the requirements of this
Agreement in substantially the form of Exhibit I hereto, as
applicable, under which a Lien is granted on the Real Property
of the Borrower, such Obligor and each Subsidiary Guarantor
and fixtures and other property described therein, in each
case as amended, supplemented, amended and restated or
otherwise modified.
(h) The definition of "Obligations" in the Existing Credit
Agreement is deleted and the following definition is inserted in its
place:
"Obligations" means all obligations (monetary or otherwise) of
the Borrower and each other Obligor arising under or in
connection with this Agreement, the Notes and each other Loan
Document, including, without limitation, all Hedging
-3-
<PAGE> 5
Obligations arising under Hedging Agreements between Parent,
the Borrower or any of its Subsidiaries and the Lender or an
Affiliate of the Lender.
(i) The definition of "Obligor" in the Existing Credit Agreement
is deleted and the following definition is inserted in its place:
"Obligor" means the Borrower or any other Person (other than
the Lender) obligated under any Loan Document (including the
Parent, Holdings, Vista Gold U.S. Inc., Yamin and each
Subsidiary Guarantor).
(j) The definition of "Security Agreement" in the Existing Credit
Agreement is deleted and the following definition is inserted in its
place:
"Security Agreement" means, as the context may require, the
Borrower Security Agreement, the Yamin Security Agreement
and/or each Subsidiary Security Agreement, in each case as
amended, supplemented, amended and restated or otherwise
modified.
(k) The definition of "Stated Maturity Date" in the Existing
Credit Agreement is deleted and the following definition is inserted in
its place:
"Stated Maturity Date" means December 31, 1999 (as such date
may be extended pursuant to Section 2.8 and as such date may
be accelerated by virtue of any prepayment pursuant to Section
3.1).
(1) The definition of "Rate Protection Agreement" in the Existing
Credit Agreement is deleted and the following definition is inserted in
its place:
"Rate Protection Agreement" means, any currency exchange
agreement, interest or currency rate swap, cap, collar or
floor, forward rate agreement, basis swap agreement, and all
other similar agreements designed to protect a Person against
fluctuations in interest rates or currency exchange
(m) Section 1.1 of the Existing Credit Agreement is amended to add
the following defined terms in the proper alphabetical order:
"Amayapampa Project" means the (a) the properties
which comprise the Amayapampa property, located approximately
300 kilometers southeast of La Paz in Bustillo Province,
Department of Potosi, in the south-central portion of the
Nation of Bolivia, and as described in the description of the
Mining Rights for the Amayapampa Mine on Schedule I hereto and
(b) those certain associated facilities, together with all
plant sites, waste dumps, ore dumps, crushing circuits, heap
leach pads, abandoned heaps, power supply systems and
ancillary and
-4-
<PAGE> 6
infrastructure facilities thereat which are used in connection
with the operation thereof.
"Borrowing Base Reinstatement" means the reinstatement
of the Borrowing Base mechanism as set forth in Section 3.5.
"Excess Cash Flow" means, for the twelve-month period
ending December 31, 1998, the sum of: (a) net income of the
Borrower and its Subsidiaries, plus (b) non-cash expenses of
the Borrower and its Subsidiaries, minus (c) capital
expenditures paid by the Borrower or its Subsidiaries in
connection with the development and operation of the Hycroft
Mine, to the extent included in the approved Life of Mine Plan
and operating plan in effect from time-to-time for the Hycroft
Mine, plus (d) all fees or charges paid by the Borrower or any
of its Subsidiaries to Parent or any other Subsidiary of
Parent in respect of overhead, management or general
administrative services to the extent that the sum of such
payments exceeds $15,000 per month.
"Hedging Agreement" means
(a) any Rate Protection Agreement, and
(b) any forward contract, option, futures
contract, futures option, commodity swap, commodity
option, commodity collar, commodity cap, commodity
floor or any other agreement or arrangement designed
to protect a Person against fluctuations in the price
of commodities.
"Pledge Agreement - Yamin" means the Pledge Agreement
executed and delivered by Parent and David O'Connor, as
amended, supplemented, amended and restated or otherwise
modified.
"Vista Line of Credit" means that certain letter
agreement captioned "Establishment of Operating Credit
Facility in Favour of Vista Gold Corp." dated November 22,
1996, between Parent and the Lender, as amended by the Vista
Line of Credit Amendment, as the same may be, from time to
time, further amended, supplemented, amended and restated or
otherwise modified.
"Vista Line of Credit Amendment" means that amendment
dated as of September 30, 1997 to the Vista Line of Credit.
"Yamin" means Sociedad Industrial Yamin Limitada, a
limitada organized under the laws of the Nation of Bolivia,
and a wholly-owned Subsidiary of Parent.
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<PAGE> 7
"Yamin Guaranty" means the Guaranty executed and
delivered by the Yamin pursuant to Section 4.1(b), as
amended, supplemented, amended and restated or otherwise
modified.
"Yamin Security Agreement" means the Security
Agreement executed and delivered by Yamin in favor of the
Lender pursuant to the terms of this Agreement, as amended,
supplemented, amended and restated or otherwise modified.
"Yamin Security Release" means the release or
termination of the Yamin Guaranty, the Yamin Security
Agreement, the Pledge Agreement - Yamin and the Mortgage from
Yamin pursuant to Section 3.5 hereof.
SECTION 2.2 AMENDMENTS TO SECTION 2.1.
(a) Section 2.1.1 of the Existing Credit Agreement is amended by
deleting the last sentence of such Section and inserting the following
sentence in its place:
"On the terms and subject to the conditions hereof, the
Borrower may from time to time borrow and prepay U.S. Loans,
but may not reborrow any amounts paid or prepaid."
(b) Section 2.1.2 of the Existing Credit Agreement is amended by
deleting the last sentence of such Section and inserting the following
sentence in its place:
"On the terms and subject to the conditions hereof, the
Borrower may from time to time borrow and prepay Canadian
Loans, but may not reborrow any amounts paid or prepaid."
SECTION 2.3 AMENDMENTS TO SECTION 2.2.
Section 2.2 of the Existing Credit Agreement is deleted and
the following is inserted in its place:
"Lender Not Permitted or Required To Make Credit Extensions.
After the earlier to occur of (i) the Yamin Security Release
or (ii) the Borrowing Base Reinstatement, the Lender shall not
be permitted or required to make any Credit Extension if,
after giving effect thereto, the Outstanding Amount would
exceed the lesser of (a) the Commitment Amount and (b) the
Borrowing Base Amount."
SECTION 2.4 AMENDMENTS TO SECTION 3.1.
(a) Section 3.1 (b) of the Existing Credit Agreement is amended by
deleting the existing Section 3.1 (b) and inserting the following in
its place:
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<PAGE> 8
"(b) shall, on each date when any reduction in the Commitment
Amount shall become effective pursuant to Section 2.3, make a mandatory
prepayment of all Loans equal to the excess, if any, of the aggregate,
outstanding principal amount of all Loans over the Commitment Amount,
as so reduced; provided that if the Yamin Security Release or the
Borrowing Base Reinstatement has occurred on or before such date, the
mandatory prepayment of all Loans shall be equal to the excess, if any,
of the aggregate outstanding principal amount of Loans over the lesser
of (i) the Commitment Amount as so reduced and (u) the then existing
Borrowing Base Amount;"
(b) Section 3.1(c) of the Existing Credit Agreement is amended by
inserting the following before the beginning of the text thereof:
"after the earlier to occur of (i) the Yamin Security Release
or (ii) the Borrowing Base Reinstatement,"
(c) Section 3.1 of the Existing Credit Agreement is amended by
relettering Section 3.1(d) as Section 3.1(g) and inserting the
following new Sections 3.1(d), (e) and (f) immediately prior thereto:
"(d) shall, prior to the Yamin Security Release or the
Borrowing Base Reinstatement, commencing on the Monthly
Payment Date for January 1999 and ending on the Monthly
Payment Date for December 1999 (or such earlier date on which
all Loans have been paid in full), make a mandatory repayment
on each Monthly Payment Date equal to $1,083,333.33;
(e) shall, if the Yamin Security Release or the Borrowing Base
Reinstatement shall not have then occurred, on January 31,
1999, make a mandatory prepayment equal to 100% of all Excess
Cash Flow;
(f) shall, prior to the Yamin Security Release or the
Borrowing Base Reinstatement, immediately upon receipt
thereof, make a mandatory prepayment equal to 100% of the
gross proceeds from the sale or other disposition of any asset
owned by the Borrower, including without limitation, the
equipment listed on Schedule II hereto; provided that, solely
with respect to equipment (other than equipment listed on
Schedule II hereto), such proceeds shall be net of actual,
reasonable expenses which Borrower is required to pay and pays
to non-Affiliated brokers, agents, security-holders, lessors
or others with whom the Borrower has binding, arms-length
contractual obligations, and provided further, that the
Borrower shall not be obligated to pay over any proceeds from
the sale of equipment (i) which is replaced within 30 days,
(ii) is replaced by equipment having a value equal to or
greater than the value of the equipment sold or otherwise
disposed of and (iii) is necessary for the efficient operation
of the Hycroft Mine;"
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<PAGE> 9
(d) Section 3.1 of the Existing Credit Agreement is amended by
deleting the last sentence thereof and inserting the following sentence
in its place:
"Each prepayment of Loans pursuant to this Section 3.1 shall
be applied, to the extent of such prepayment, in the inverse
order of maturity."
SECTION 2.5 AMENDMENTS TO SECTION 3.2.
Section 3.2.1 of the Existing Credit Agreement is amended by
deleting "1 %" in subsection (a) and replacing it with "one and
one-half percent (1.5%)", and deleting "1.5%" in subsection (b) and
replacing it with "two percent (2%)".
SECTION 2.6 NEW SECTION 3.5.
Article III of the Existing Credit Agreement is amended by
adding the following new Section 3.5 following the existing Section
3.4:
"SECTION 3.5. Yamin Security Release and Borrowing Base
Reinstatement.
(a) Upon the request and at the sole cost and expense of the
Borrower and if no Default shall have occurred and be
continuing, the Lender shall release or terminate the Yamin
Guaranty, the Yamin Security Agreement, the Pledge Agreement -
Yamin and the Mortgage from Yamin if, for the three (3)
consecutive months prior to such request, the Lender has
received Borrowing Base Certificates showing that the
Borrowing Base Amount in each of such months was greater than
or equal to the aggregate principal amount of all Credit
Extensions outstanding such that, if Section 3.1(c) were then
in effect, that no mandatory prepayment would have been
required for such month.
(b) Prior to the release of the security described in the
preceding Section 3.5(a), the reporting obligations of Section
7.1.1(c) shall be suspended, provided that the reports
required by Section 7.1.1(e) shall contain all information
about the operation of the Hycroft Mine reasonably requested
by the Lender, including operating costs, quantities of ore
placed on the pads, contained ounces of gold on the pad,
ounces of gold sold and the price received in respect of the
sale of such gold.
(c) If the Lender has not made Loans in the aggregate
principal amount of the Commitment Amount on or before January
2, 1998, then the borrowing base provisions of Sections 2.2.
3. 1(b)(ii). 3.1(c). and 7.1.1(c) of the Existing Credit
Agreement shall be immediately reinstated and any mandatory
repayment of Loans required thereby shall be made on such
day."
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<PAGE> 10
SECTION 2.7 AMENDMENTS TO SECTION 7.2.
Section 7.2.2 of the Existing Credit Agreement shall be
amended by deleting the word "and" at the end of subsection (f)(ii)
thereof, inserting the word "and" at the end of subsection (g) thereof
and inserting a new subsection (h) thereafter as follows:
"(g) Indebtedness of the Borrower and its Subsidiaries to the
Lender represented by Guaranties given by the Borrower and its
Subsidiaries of the Vista Line of Credit;"
SECTION 2.8 AMENDMENTS TO SECTION 7.2.4.
Section 7.2.4 of the Existing Credit Agreement shall be
amended by deleting the existing Section 7.2.4 and inserting the
following in its place:
"SECTION 7.2.4 Financial Condition. The Borrower will not
permit at any time its Tangible Net Worth to be less than U.S.
$30,000,000; provided, that such amount shall be reduced
(dollar for dollar), subject to the following proviso, to the
extent (and only to the extent) such repayment is made with
proceeds from Borrowings made hereunder, by the amount of each
repayment of the intercompany Indebtedness of the Borrower
outstanding on the Effective Date and owing to the Parent and
permitted pursuant to clauses (b) and (c) of Section 7.2.2;
provided, further that, in any event, the aggregate amount of
ali such reductions pursuant to the foregoing proviso shall
not exceed U.S. $14,700,000."
SECTION 2.9 AMENDMENTS TO SECTION 8.1.
Section 8.1 of the Existing Credit Agreement is amended by
inserting a new Section 8.1.11 and a new Section 8.1.12 immediately
following existing Section 8.1.10 as follows:
"SECTION 8.1.11 Default on Vista Line of Credit. A default
shall occur in the payment when due (subject to any applicable
grace period), whether by acceleration or otherwise, of any
Indebtedness of Parent under the Vista Line of Credit, or the
holder of such Indebtedness shall have given notice of a
default in the performance or observance of any obligation or
condition with respect to the Vista Line of Credit if the
effect of such default described in such notice is to
accelerate the maturity of any such Indebtedness or such
default shall continue unremedied for any applicable period of
time sufficient to permit the holder or holders of such
Indebtedness, or any trustee or agent for such holders, to
cause such Indebtedness to become due and payable.
SECTION 8.1.12 Default under Yamin Guaranty. Yamin Security
Agreement or Pledge Agreement - Yamin. A Default or Event of
Default shall occur under
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<PAGE> 11
any of the Yamin Guaranty, the Yamin Security Agreement or the
Pledge Agreement - Yamin."
SECTION 2.10 AMENDMENTS TO SECTION 9.3.
Section 9.3 of the Existing Credit Agreement shall be amended
by deleting the word "and" at the end of subsection (b) thereof,
inserting the word "and" at the end of subsection (c) thereof and
inserting a new subsection (d) thereafter as follows:
"(d) evaluations, investigations, assessments, or reports
undertaken by engineers or other technical experts reasonably
requested by the Lender at any time and from time to time
relating to any collateral security for the Obligations."
SECTION 2.11 AMENDMENTS TO SCHEDULES AND EXHIBITS.
(a) Schedule III to the Existing Credit Agreement is deleted and a
new Schedule III in the form attached hereto as Schedule III is
inserted in its place.
(b) Schedule 1V to the Existing Credit Agreement is deleted and a
new Schedule IV in the form attached hereto as Schedule IV is inserted
in its place.
(c) Attachment 1 to Exhibit E to the Existing Credit Agreement is
deleted and a new Attachment 1 in the form attached hereto as
Attachment 1 is inserted in its place.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to make the amendments provided for in
Article II, the Borrower hereby
(a) acknowledges and agrees that, immediately prior to the
Amendment No. 1 Effective Date, the aggregate outstanding principal
amount of all U.S. Loans is $9,300,000.00, and the aggregate
outstanding principal amount of all Canadian Loans is $0.00;
(b) represents and warrants that the Borrower has full power
and authority to execute, deliver and perform its obligations under
this Amendment No. 1 and all other Loan Documents delivered to Lender
in connection herewith, and this Amendment No. 1 and all such Loan
Documents are the legally valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms;
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<PAGE> 12
(c) represents and warrants, that each of the representations
and warranties contained in the Existing Credit Agreement and in the
other Loan Documents is true and correct as of the date hereof as if
made on the date hereof (except, if any such representation and
warranty relates to an earlier date, such representation and warranty
shall be true and correct in all material respects as of such earlier
date) and Borrower has performed each of the covenants and agreements
in the Existing Credit Agreement and the other Loan Documents required
to be performed by Borrower as of the date hereof; and
(d) There is no Default or Event of Default by Borrower or
any other Obligor under the Existing Credit Agreement or any other Loan
Document and no event exists which, with the giving of notice or the
passage of time or both, would give rise to a Default or Event of
Default by Borrower or any other Obligor under the Existing Credit
Agreement or any Loan Document, except that, but for the execution,
delivery and effectiveness of this Amendment, the Borrower would be
obligated to make a mandatory prepayment of Loans because the
outstanding amount of all Loans exceeds the Borrowing Base Amount.
ARTICLE IV.
COVENANTS
SECTION 4.1 Affirmative Covenants. In order to induce the Lender to
enter into this Amendment and to amend the Credit Agreement as provided herein,
the Borrower hereby agrees to perform the obligations set forth in this Section
4.1 by NOVEMBER 12, 1997:
(a) Pledge of Yamin Ownership Interest. The Lender shall receive
counterparts of Pledge Agreement - Yamin, substantially in the form of Exhibit
B to this Amendment No. 1, duly executed and delivered on behalf of Parent and
David O'Connor (who holds legal title to a 20% interest in Yamin in trust for
the benefit of Parent), and the Lender, together with (i) the certificates, if
any, evidencing all of the issued and outstanding Capital Stock of Yamin
pledged pursuant to the Pledge Agreement - Yamin, which certificates shall in
each case be accompanied by undated stock powers, or equivalent instruments,
duly executed in blank, and (ii) all Pledged Notes (as defined in such Pledge
Agreement), if any, evidencing Indebtedness payable to Parent, duly endorsed to
the order of the Lender.
(b) Guaranty from Yamin. The Lender shall receive counterparts of
the Yamin Guaranty, duly executed and delivered on behalf of Yamin,
substantially in the form of Exhibit A-1 to this Amendment No. 1.
(c) Yamin Security Agreement. The Lender shall receive counterparts of
the Yamin Security Agreement, substantially in the form of Exhibit C to this
Amendment No. 1, duly executed and delivered on behalf of Yamin and the Lender,
together with
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<PAGE> 13
(i) acknowledgment copies of properly filed Uniform
Commercial Code financing statements (Form UCC-1), dated a date
reasonably near to the Amendment No. 1 Effective Date, or such other
evidence of filing as may be acceptable to the Lender, naming the
Yamin, as the debtor and the Lender as the secured party, or other
similar instruments or documents, filed under the Uniform Commercial
Code of ali jurisdictions as may be necessary or, in the opinion of the
Lender, desirable to perfect the security interest of the Lender
pursuant to the Yamin Security Agreement;
(ii) executed copies of proper Uniform Commercial Code Form
UCC-3 termination statements, if any, necessary to release all Liens
(other than Liens of the type described in clause (f) of the definition
of "Permitted Lien", if any) and other rights of any Person
(A) in any collateral described in the Yamin
Security Agreement previously granted by any Person, or
(B) securing any of the Indebtedness identified in
item 7.2.2(b) ("Indebtedness to be Paid") of the Disclosure
Schedule,
together with such other Uniform Commercial Code Form UCC-3 termination
statements as the Lender may reasonably request from Yamin; and
(iii) certified copies of Uniform Commercial Code Requests for
Information or Copies (Form UCC-11 or Form UCC-2), or a similar search
report certified by a party acceptable to the Lender, dated a date
reasonably near to the Amendment No. 1 Effective Date, listing ali
effective financing statements which name Yamin (in each case, under
its present name and any previous names) as the debtor and which are
filed in the jurisdictions in which filings were made pursuant to
clause (a) above, together with copies of such financing statements
(none of which (other than (x) those described in clause (a), if such
Form UCC-11 or search report, as the case may be, is current enough to
list such financing statements described in clause (a) and (y) those in
respect of Liens of the type described in clause (f) of the definition
of "Permitted Lien") shall cover any collateral described in the Yamin
Security Agreement).
(d) Mortgage from Yamin. The Lender shall receive counterparts of
a Mortgage, substantially in the form of Exhibit D to this Amendment No. 1,
with respect to the Real Property comprising the Amayapampa Project, dated as
of the Amendment No. 1 Effective Date, duly executed and delivered by Yamin,
together with
(i) evidence of the completion (or satisfactory
arrangements for the completion) of all recordings
and filings of such Mortgage as may be necessary or,
in the reasonable opinion of the Lender, desirable
effectively to create a valid, perfected first
priority Lien against the properties purported to be
covered thereby;
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<PAGE> 14
(ii) evidence of the title of Yamin to such Real Property
in the form of a title opinion from reputable counsel in Bolivia
acceptable to the Lender, in form and substance satisfactory to the
Lender and its legal counsel, which opinion will show title of Yamin
in such Real Property satisfactory to the Lender and its legal counsel
and that Yamin has placed of record in the Offices of the Registry of
Real Property and the Registry of Commerce such instruments, in form
satisfactory to the Lender and its legal counsel, necessary to perfect
the Lien and security interest granted by the Yamin in such Real
Property and in the other Collateral described in (and as such term is
defined in) such Mortgage; and
(iii) such other approvals, opinions (including an opinion of
reputable counsel in Bolivia as to the enforceability of the Yamin
Guaranty, the Yamin Security Agreement and the Yamin Mortgage under
Bolivian laws), or documents as the Lender may reasonably request.
SECTION 4.2 REMOVAL OF LIENS. The Borrower hereby agrees that, by
November 5, 1997, it will cause to be removed all Liens (in favor of parties
other than the Lender) against the Hycroft Mine or any portion thereof that
purport to secure Indebtedness in excess of the amount stated in Section
7.2.3(d) of the Existing Credit Agreement.
SECTION 4.3 EVENT OF DEFAULT. Borrower's failure to satisfy all of the
covenants set forth in (i) Section 4.1 hereof on or prior to November 19, 1997
and (ii) Section 4.2 on or prior to November 5, 1997 shall constitute an Event
of Default.
ARTICLE V.
CONDITIONS TO EFFECTIVENESS
SECTION 5.1 EFFECTIVE DATE. This Amendment No. 1 shall become
effective on SEPTEMBER 30, 1997, or, if later, the date (herein called the
"Amendment No. 1 Effective Date") when the conditions set forth in this Section
5.1 have been satisfied.
(a) Execution of Counterparts. The Lender shall have received
counterparts of this Amendment No. 1 duly executed and delivered on behalf of
the Borrower and the Lender.
(b) Amendments to Existing Security Documents. The Lender shall
have received counterparts of amendments to the Master Subordination Agreement
and each of the Pledge Agreements, each duly executed and delivered on behalf
of the applicable Obligor and the Lender, substantially in the forms of
Exhibits E and F to this Amendment No. 1.
(c) Guaranty from the Borrower. The Lender shall have received
counterparts of the Borrower Guaranty, each duly executed and delivered on
behalf of the Borrower, substantially in the form of Exhibit A-2 to this
Amendment No. 1.
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<PAGE> 15
(d) Amendments to Guaranties. The Lender shall have received
counterparts of amendments to each of the Parent Guaranty, the Holdings
Guaranty, the Preferred Shareholder Guaranty and each Subsidiary Guaranty, each
duly executed and delivered on behalf of the applicable Obligor and the Lender,
substantially in the form of Exhibit G to this Amendment No. 1.
(e) Assignment of Hedging Agreements. The Lender shall have received
counterparts of Hedging Agreements, duly executed and delivered on behalf of
the Borrower and counter parties acceptable to the Lender, that will ensure
that a price of not less than (i) US$340/ounce of gold will be realized from
the sale by the Borrower of at least 100,000 ounces of gold produced from the
Hycroft Mine in each of the years 1998 and 1999, and (u) US$325/ounce of gold
will be realized from the sale by the Borrower of at least 30,000 ounces of
gold produced from the Hycroft Mine in the year 2000. Each of such Hedging
Agreements shall have been collaterally assigned to the Lender pursuant to
documents in form and substance satisfactory to the Lender and its counsel.
(f) Vista Line of Credit Amendment. The Lender shall have received
counterparts of Vista Line of Credit Amendment duly executed and delivered on
behalf of Parent and the Lender, substantially in the form of Exhibit H to this
Amendment No. 1.
(g) Opinions. Certificates. etc. The Lender shall have received
such certificates and opinions of counsel as the Lender shall have reasonably
requested.
(h) Compliance with Warranties. No Default. etc. The following
statements shall be true and correct
(i) the representations and warranties set forth in
Article VI of the Existing Credit Agreement (excluding, however, those
contained in Section 6.7), Article III of each Guaranty, Article III
of each Pledge Agreement, Article III of each Security Agreement,
Article I of each Mortgage and Section 10 of the Master Subordination
Agreement shall be true and correct with the same effect as if then
made (unless stated to relate solely to an early date, in which case
such representations and warranties shall be true and correct as of
such earlier date);
(ii) except as disclosed by the Borrower to the Lender
pursuant to Section 6.7 of the Existing Credit Agreement
(A) no labor controversy, litigation, arbitration
or governmental investigation or proceeding
shall be pending or, to the knowledge of the
Borrower, threatened against the Parent,
Holdings, Yamin, the Borrower or any of its
Subsidiaries which might reasonably be
expected to have a Material Adverse Effect,
and
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<PAGE> 16
(B) no material adverse development shall have
occurred in any labor controversy, litigation, arbitration or
governmental investigation or proceeding disclosed pursuant to
Section 6.7 which might reasonably be expected to have a
Material Adverse Effect; and
(iii) no Default or Event of Default shall have then occurred
and be continuing, and neither the Parent, Holdings, Yamin, the
Borrower, any other Obligor, nor any Subsidiary is in material
violation of any law or governmental regulation or court order or
decree.
(i) Borrowing Request. The Lender shall have received a Borrowing
Request for any Credit Extension requested on the Amendment No. 1 Effective
Date.
(j) Closing Fees. Expenses. etc. The Lender shall have received
all reasonable costs and expenses due and payable pursuant to Sections 3.4 and
9.3 of the Existing Credit Agreement, if then invoiced.
(k) Legal Details. etc. All documents executed or submitted
pursuant hereto, and ali legal matters incident thereto, shall be satisfactory
in form and substance to the Lender and its counsel.
SECTION 5.2 EXPIRATION. If all of the conditions set forth in Section
5.1 hereof shall not have been satisfied on or prior to October 29, 1997, the
agreements of the parties contained in this Amendment No. 1 shall, unless
otherwise agreed by the Lender, terminate effective immediately on such date
and without further action.
ARTICLE VI.
APPROVAL OF MINE PLAN
The revised Hycroft Mine Plan dated as of July, 1997, and attached
hereto as Schedule V is hereby approved by the Borrower and the Lender.
ARTICLE VII.
MISCELLANEOUS
SECTION 7.1 LOAN DOCUMENT PURSUANT TO EXISTING CREDIT AGREEMENT. This
Amendment No. 1 is a Loan Document executed pursuant to the Existing Credit
Agreement. Except as expressly amended or waived hereby, all of the
representations, warranties, terms, covenants and conditions contained in the
Existing Credit Agreement and each other Loan Document shall remain unamended
and in full force and effect. The amendments set forth herein shall be limited
precisely as provided for herein and shall not be deemed to be a waiver of,
amendment of, consent to or modification of any other term or provision of the
Existing
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<PAGE> 17
Credit Agreement or of any term or provision of any other Loan Document or of
any transaction or further or future action on the part of the Borrower or
which would require the consent of the Lender under the Existing Credit
Agreement or any other Loan Document.
SECTION 7.2 COUNTERPARTS, ETC. This Amendment No. 1 may be executed by
the parties hereto in several counterparts, each of which shall be deemed to be
an original and all of which shall constitute together but one and the same
agreement with the same effect as if all parties hereto had signed the same
signature page. Any signature page of this Amendment No. 1 may be detached from
any identical counterpart of this Amendment No. 1 having attached to it one or
more additional signature pages.
SECTION 7.3 GOVERNING LAW: ENTIRE AGREEMENT.
THIS AMENDMENT NO. 1 SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
SECTION 7.4 TITLES AND HEADINGS. The titles and headings of the
Sections of this Amendment No. 1 are intended for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Amendment No. 1.
SECTION 7.5 CHANGES AND MODIFICATIONS IN WRITING. No provision of this
Amendment No. 1 may be changed or modified except by an instrument in writing
signed by the party against whom enforcement of the change or modification is
sought.
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to be executed by their respective officers hereunto duly authorized as of the
day and year first above written.
BORROWER
HYCROFT RESOURCES & DEVELOPMENT INC., A
Nevada corporation
By: /s/ MICHAEL B RI CHINGES
-----------------------------------
Title: Director
--------------------------------
By: /s/ AJ ALI
-----------------------------------
Title: VP Finance & CFO
--------------------------------
LENDER
THE BANK OF NOVA SCOTIA
By: /s/ Ray Clarke
-----------------------------------
Title: Manager
--------------------------------
<PAGE> 1
EXHIBIT 1.02
[SCOTIABANK LETTERHEAD]
February 4, 1998
Mr. A.J. Ali
Vice President Finance and Chief Financial Officer
HYCROFT RESOURCES & DEVELOPMENT, INC.
370 Seventeenth Street
Suite 3000
Denver, CO
80202 USA
Dear Mr. Ali,
We refer to our discussions regarding amendments to the credit
agreement ("the Agreement") between The Bank of Nova Scotia ("the Bank") and
Hycroft Resources & Development, Inc. ("Hycroft") dated September 30, 1997. The
amendments are required as a result of: (i) the unwinding of gold hedges
assigned to the Bank; (ii) repayment of US$4,500,000 of indebtedness to the
Bank; and (iii) release of proceeds of the unwound gold hedges to Hycroft and
Vista Gold Corp. ("Vista").
We confirm that the Bank's consent to the transactions outlined
above is subject to the following:
a) Vista and Hycroft are to hedge 90,000 ozs. of gold production
during 1998 to achieve a gold price of no less than US$282 par
ounce. The Bank will hold a security interest in these hedge
contracts and trading counterparties will be notified of same.
b) Vista will provide cash collateral for letters of credit
aggregating C$54,000 issued by the Bank on behalf of Vista to the
provinces of British Columbia and Saskatchewan. Alternately, Vista
will replace these letters of credit with cash bonds for the
beneficiaries.
o) Hycroft will repay its remaining indebtedness to the Bank in
instalments during 1998 as follows, on the last business day of
each month shown:
<TABLE>
<S> <C>
April - US$ 500,000 May - US$ 500,000
June - US$1,500,000 July - US$1,000,000
August - US$1,000,000 September - US$1,000,000
October - US$1,500,000 November - US$ 750,000
December - US$ 750,000
</TABLE>
<PAGE> 2
d) Hycroft will revise its mine plan for 1998 as shown on the
attached monthly forecast and cease mining operations in May this
year.
e) The Bank's security interest in Yamin Ltda. will remain in
effect until all indebtedness of Vista and Hycroft to the Bank is
retired.
Please return an executed copy of this letter to us to confirm
acceptance of the terms herein.
Yours very truly,
THE BANK OF NOVA SCOTIA
/s/ RAY CLARKE
Ray Clarke
Relationship Manager
Confirmed and accepted,
HYCROFT RESOURCES & DEVELOPMENT, INC.
By: /s/ AJ ALI
Title: VP Finance & CFO
Date: 2/5/98
VISTA GOLD CORP.
By: /s/ MICHAEL B RICHINGS
Title: President
Date: 2/5/98
<PAGE> 1
EXHIBIT 2.01
ARTICLES OF CONTINUANCE
YUKON BUSINESS CORPORATIONS ACT Form 3-01
JUSTICE (Section 190)
ARTICLES OF CONTINUANCE
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1. Name of Corporation:
Vista Gold Corp.
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2. The classes and any maximum number of shares that the corporation is
authorized to issue:
See Schedule 1 attached hereto.
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3. Restrictions if any on share transfers:
None.
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4. Number (or minimum or maximum number) of Directors:
Minimum 3 - Maximum 8
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5. Restrictions if any on businesses the corporation may carry on:
The Corporation is restricted from carrying on the business of a
railway, steamship, air transport, canal, telegraph, telephone or
irrigation company.
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6. If change of name effected, previous name:
Not applicable.
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7. Details of incorporation:
Amalgamated under the laws of British Columbia on November 1, 1996
under the name "Vista Gold Corp.".
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8. Other provisions if any:
See Schedule 1 attached hereto
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9. Date Signature Title
December 17, 1997 (signed) William F. Sirrett Secretary
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(STAMP)
FILED
DEC 17 1997
REGISTRAR OF CORPORATIONS
<PAGE> 2
SCHEDULE 1
to the Articles of Continuance
of
VISTA GOLD CORP.
1. The classes and any maximum number of shares that the Corporation is
authorized to issue:
an unlimited number of Common Shares; and
an unlimited number of Preferred Shares.
The Common Shares and the Preferred Shares shall have attached thereto
the special rights and restrictions attached hereto as Annexure A.
2. Other provisions, if any:
(a) Shareholder meetings may be held in Vancouver, British
Columbia or such place or places as the directors in their
absolute discretion may determine from time to time.
(b) The directors may, between annual general meetings,
appoint one or more additional directors of the Corporation,
to serve until the next annual general meeting, but the number
of additional directors shall not at any time exceed one third
of the number of directors who held office at the expiration
of the last annual meeting of the Corporation, and in no event
shall the total number of directors exceed the maximum number
of directors fixed pursuant to paragraph 4 of the Articles of
Continuance.
<PAGE> 3
ANNEXURE A
SPECIAL RIGHTS AND RESTRICTIONS ATTACHING
TO THE COMMON SHARES WITHOUT PAR VALUE
The Common Shares shall have attaching thereto the following special rights and
restrictions:
1.1 The holders of the Common Shares shall be entitled to receive notice of
and to attend and vote at all meetings of the shareholders of the Corporation
and each Common Share shall confer the right to one vote in person or by proxy
at all meetings of the shareholders of the Corporation, other than meetings of
the holders of any other class of shares of the Corporation.
1.2 Subject to the rights of the holders of the Preferred Shares, the holders
of the Common Shares shall in each year, in the discretion of the Directors, be
entitled out of monies lawfully available for dividends to dividends in such
amounts as may be determined in the absolute discretion of the Directors from
time to time.
1.3 Subject to the rights of the holders of the Preferred Shares, in the
event of the liquidation, dissolution or winding-up of the Corporation whether
voluntary or involuntary, or any other distribution of the assets of the
Corporation among its shareholders for the purposes of winding up its affairs,
the remaining property and assets of the Corporation shall be distributed
rateably to the holders of the Common Shares.
SPECIAL RIGHTS AND RESTRICTIONS ATTACHING
TO THE PREFERRED SHARES
The Preferred Shares shall have attached thereto the following special rights
and restrictions:
2.1 The Preferred Shares may, upon compliance with the applicable provisions
of the Business Corporations Act (Yukon Territory) (the "Corporations Act"), be
issued at any time and from time to time in one or more series.
2.2 The Directors may, by resolution duly passed before the issuance of
Preferred Shares of any series, alter the Articles to fix the number of
Preferred Shares in, and to determine the designation of the Preferred Shares of
each series and alter the Articles to create, define and attach special rights
and restrictions to the Preferred Shares of each series, subject to the special
rights and restrictions attached to all Preferred Shares and subject to the
provisions of the Corporations Act.
2.3 The Preferred Shares shall be entitled to preference over the Common
Shares of the Corporation with respect to the payment of dividends and may also
be given such other preferences not inconsistent herewith over the Common Shares
of the Corporation as may be determined by the Directors as to the series
authorized to be issued.
2.4 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of assets of the Corporation among its
shareholders for the purpose of winding-up its affairs, the holders of the
Preferred Shares shall be entitled rateably to receive the amount paid up on
such shares before any amount shall be paid or any property or assets of the
Corporation distributed to the holders of the Common Shares.
<PAGE> 4
2.5 The Preferred Shares of each series shall rank on a parity with the
Preferred Shares of every other series with respect to priority in payment of
dividends and in the distribution of assets in the event of liquidation,
dissolution or winding-up of the Corporation whether voluntary or involuntary.
2.6 So long as any Preferred Shares are outstanding, the Corporation
shall not at any time without, in addition to any approval that may then be
prescribed by applicable law, the approval of the registered holders of the
Preferred Shares given in writing by the registered holders of all the issued
and outstanding Preferred Shares or given by a resolution passed at a meeting
called and conducted in accordance with subparagraph 2.8 hereof and carried by
the affirmative vote of not less than two-thirds of the votes cast at such
meeting, create or issue any shares ranking prior to the Preferred Shares with
respect to the payment of dividends or the distribution of assets in the event
of the liquidation, dissolution or winding-up of the Corporation, whether
voluntary or involuntary, or in the event of any other distribution of assets of
the Corporation among its members for the purpose of winding up its affairs.
2.7 Except as otherwise provided with respect to any particular series of
Preferred Shares and except as otherwise required by law, the registered holders
of the Preferred Shares shall not be entitled as a class to receive notice of or
to attend or to vote at any meetings of the shareholders of the Corporation.
2.8 The rights, privileges, restrictions and conditions attached to the
Preferred Shares of the Corporation may be modified, abrogated, dealt with or
affected with the sanction of either the consent in writing signed by the
holders of all of the issued Preferred Shares, or a special resolution passed at
a special meeting of the holders of Preferred Shares who are present in person
or represented by proxy. To any such special meeting, all the provisions of the
by-laws of the Corporation relating in any manner to general meetings or to the
proceedings thereat, or to the rights of shareholders at or in connection
therewith, shall mutatis mutandis apply, but so that the necessary quorum shall
be two in number of the holders of Preferred Shares collectively holding or
representing by proxy 51% of the issued Preferred Shares, and that if at any
adjourned meeting a quorum is not present those holders of Preferred Shares who
are present shall be a quorum.
