Vista Gold study doubles value, slashes costs for smaller Mt Todd project

[Ben Graham]

A feasibility study update for Vista Gold’s (TSX, NYSE-AM: VGZ) open-pit Mt Todd project in Australia almost doubles its value and mine life while cutting costs by 59% over the previous update last year. Shares rose.

The study pegs Mt Todd’s initial capital costs at $425 million, while outlining a smaller operation with a 15,000 tonne-per-day (tpd) production rate, down from the 50,000 tpd in last year’s study, Vista said Tuesday. With a 5% discount rate, the net present value jumps almost 95% to $2.2 billion at a price assumption of $3,300 per oz., around the yellow metal’s current price of $3,320 per ounce.

That also boosts the internal rate of return (IRR) to 44.7%, with a payback period of 1.7 years. Mt Todd is about 250 km southeast of Darwin in the Northern Territory.

“This study marks a significant shift in the strategy for Mt Todd, demonstrating the potential for near-term development of a smaller initial project by prioritizing higher grade ore to the processing plant, significantly lowering initial capital costs, and incorporating contractors to reduce development and operational risks,” Vista President and CEO Frederick Earnest said in a release.

“[The study] positions Mt Todd as a project with technical and economic parameters that are comparable to several highly valued Australian gold producers.”

Vista shares gained 2.3% to C$1.33 apiece on Tuesday morning in Toronto, for a market capitalization of C$166.4 million. The stock has traded in a 12-month range of C$0.66 to C$1.84.

30-year life

Average annual output in the mine’s first 15 years is estimated at 153,000 oz. grading 1.04 grams gold per tonne; and 146,000 oz. at 0.97 gram gold over its 30-year life.

The net present value shrinks by 2.6% from last year’s feasibility to $1.1 billion at a $2,500 per oz. gold price, while the IRR rises more than 7% to 27.8%, with a 2.7-year payback period.

The study raises all-in sustaining costs by 45% to $1,449 per oz. in the first 15 years and $1,499 per oz. years over the mine life.

Among largest reserves

Mt Todd hosts 171.97 million tonnes in proven and probable reserves grading 0.94 gram gold for 5.1 million contained ounces. When compared with its development-stage gold project peers in Australia, Ramelius Resources’ (ASX: RMS) Rebecca and Regis Resources’ (ASX: RRL) McPhillamys projects, Mt Todd has the largest contained reserve base and highest NPV.

Its capex is higher than Rebecca’s but lower than McPhillamys. Mt Todd’s IRR is higher than that of the two other projects, while its annual gold output is about 22% lower than McPhillamys’ but 18% higher than Rebecca’s.