Vista Gold: Smart $600M Cost Reduction Paves Way for Mount Todd Gold Project's Development

• Vista Gold is advancing the large Mount Todd gold project in Australia, utilising a lower capex development approach
• Feasibility study underway to evaluate a 15,000 tpd operation with a significant reduction in initial capital cost from $1B to <$400M
• New plan still targets very respectable production of 150-200koz/yr gold, a >30 year mine life, and potential future expansions
• Project has key permits in place and could commence construction quickly; smaller scale, higher grade and improved economics to attract partners/investors
• Recent drilling at new South Crossload area hit multiple thick high-grade intercepts between 3g/t and 50g/t Au), suggesting underground mining potential to supplement future production

Vista Gold Corp (NYSE-AMERICAN & TSX:VGZ) is taking decisive steps to unlock the value of its flagship Mount Todd gold project in Australia's Northern Territory. The company recently announced plans to evaluate a smaller-scale development scenario through a new feasibility study, with the goal of significantly reducing capital costs while maintaining robust production and mine life.

Under the previous development scenario, Mount Todd was envisioned as a large 50,000 tonne per day operation producing approximately 480,000 ounces of gold annually. However, this plan came with a hefty initial capital cost of just over $1 billion. Vista Gold's CEO Frederick Earnest explained the rationale behind the change in an interview:

We've been talking to a lot of people and we've been doing a fair amount of ​work ourselves. We completed a trade-off study and there's some significant advantages to starting the project at a much smaller scale.

Evaluating an Optimized Development Plan

The new feasibility study will evaluate a 15,000 tonne per day operation, which the company believes is the optimal throughput to maximize project economics while minimizing execution risk. At this scale, Vista Gold is targeting approximately 150,000-200,000 ounces of annual gold production over an initial 30+ year mine life based on current reserves. Notably, the company sees the potential to expand the operation over time to increase output and more closely match the original large-scale production profile.

Most importantly, initial capital costs are expected to come in at less than $400 million, a roughly 60% reduction compared to the previous estimate. The key drivers behind the lower capex include the use of a smaller processing plant, contract mining, and improved construction techniques. For example, the crushers will now be built on structural steel instead of concrete pedestals, while water retaining embankments will utilize gabions rather than full-height concrete walls. These adjustments are commonly used in successful Western Australian gold projects.

Interview with CEO Frederick H. Earnest

Leveraging a Higher Cut-Off Grade 

In conjunction with the smaller processing throughput, Vista Gold plans to utilize a higher cut-off grade of 0.45-0.5 g/t gold compared to 0.35 g/t in the previous mine plan. This should lift the reserve grade closer to 1.0 g/t and further improve project economics. Although this change could reduce the overall reserve tonnage, Vista Gold expects the updated reserve to still contain a robust 5-5.5 million ounces of gold.

Frederick Earnest elaborated on the benefits:

That helps us get over a hurdle that the market sees as an impediment to commencing development of a project; so lower capex, higher grade. All of these things bode well for improved economics and more interest and more traction for the development of the project.

A Fully-Permitted, Shovel-Ready Gold Project

One of Mount Todd's greatest attributes is its advanced permitting status. Vista Gold has secured all major authorizations required to commence development, including the Federal Environmental Impact Statement approval and Northern Territory operating permits. Reducing the initial scale simplifies engineering but does not impact the validity of the existing permits.

This means that once a construction decision is made, Vista Gold could mobilize equipment almost immediately. It's a unique position that gives the company a huge head start compared to most gold development projects globally. By fast-tracking Mount Todd to production at a manageable scale, Vista Gold can take advantage of Australia's stable mining jurisdiction and supportive government to generate meaningful cash flow as quickly as possible.

Contract Mining to Optimize Costs

Another key change in the upcoming feasibility study is the incorporation of contract mining. Vista Gold has already engaged with well-known Australian contract mining firms to solicit preliminary quotes for the project. Contract mining helps reduce upfront capital costs by transferring equipment financing to the contractor. Although this can result in slightly higher operating costs, the net impact to overall project economics can be positive, especially for single-asset developers. Earnest noted:

Obviously when you have contract mining, you're trading capex on the front-end for operating costs on the back-end. So our all-in sustaining costs will be higher than they were in the previous study.

Based on initial estimates, Vista Gold expects all-in sustaining costs for Mount Todd to fall in the range of USD$1,200-$1,250 per ounce under the new development scenario. While higher than the sub-$1,000/oz AISC in the previous pre-feasibility study, this cost profile still provides significant margins at current gold prices and ranks favorably compared to many global gold operations.

Testing a New Exploration Model

Resource growth is another value driver that could propel Mount Todd forward. Vista Gold's recent drilling campaign tested a parallel structure called the South Crossload. Excitingly, initial results included thick high-grade intercepts such as:

• 2.1 meters grading 13.0 g/t gold
• 1.0 meter grading ~26 g/t gold
• 0.5 meters grading 50 g/t gold

This style of mineralization has not been previously encountered at Mount Todd and represents a potential game-changer. The South Crossload could become a high-grade underground mining opportunity that supplements the main operation in the future. It also points to district-scale potential on the 5.4 kilometer long mineralized trend that has seen minimal drilling to date.Frederick Earnest conveyed his team's excitement:

This is the sort of thing that there potentially could be an adit that takes off from the pit wall of the Batman pit and mines these high-grade structures through various underground mining methods and provides some very high-grade additional feed to the Mount Todd operation.

The Investment Thesis for Vista Gold:

• Mount Todd is a world-class gold project with huge production scale potential, long mine life, and exploration upside in a top mining jurisdiction
• Vista Gold's new 15,000 tpd development plan aims to cut initial capex by ~60% to <$400M while maintaining strong economics
• Leveraging a higher 1.0 g/t cut-off grade should improve head grades and project economics
• The project is fully-permitted and could transition to construction very quickly once a development decision is made
• Contract mining helps reduce upfront capital while providing operating flexibility
• Recent high-grade drill results highlight resource growth potential from underground mining that could boost future production
• The new feasibility study results expected in mid-2025 to bring more exposure to this large, de-risked gold project

Macro Thematic Analysis:

The gold industry faces a major problem: declining global gold reserves, lackluster exploration success, and chronic underinvestment in new projects has set the stage for a supply crunch. Frederick Earnest points out:

We're passing it down to others and we're not developing new projects, we're not discovering new large deposits...I mean, we can't as an industry continue to produce roughly 3,000 tons of gold per year without developing some new projects and without discovering some major new deposits.

Dwindling production profiles will force larger miners to look externally for ounce growth. Developers like Vista Gold that can fast-track quality projects into production are set to benefit. With gold prices holding firmly above $2000/oz, successful new gold mines will generate substantial cash flows for years to come.