This article is presented in partnership with Vista Gold Corp. It is a sponsored communication intended to inform investors and should not be taken as a recommendation or financial advice.
Author Brien Lundin, Gold Newsletter.
| Some of the world’s largest gold projects have remained undeveloped for years because lower gold prices made them only marginally profitable. Now a gold price over $3,000 has suddenly transformed many of these into absolute cash cows — and perhaps none more dramatically than Vista Gold (VGZ.NYSE-A; VGZ.TO). Now the value of Vista Gold’s massive, multi-million-ounce gold deposit will soon be unlocked by the release of a scaled development plan that promises to spark a big market re-rating. |
| Dear Fellow Investor, Major gold discoveries have become increasingly rare. According to S&P Global Market Intelligence, “Since 2020, there have been only five major discoveries with a total of 17 million ounces of gold.” In a world of $3,000/oz.+ gold, this lack of new, significant deposits is putting a premium on those large deposits that are available, particularly in good mining jurisdictions. That’s good news for Vista Gold (VGZ.NYSE-A; VGZ.TO), whose Mt Todd project in northern Australia is home to seven million ounces of open-pittable gold reserves. Mt Todd’s only hold up to advancement has been a somewhat marginal grade and a sizeable upfront capex. But that’s about to change, as the company is currently working on a ready-to-build plan for development that it thinks will increase the deposit’s grade to the magic threshold of 1 g/t and reduce its initial capex by fully 60% — all while reducing its reserve footprint by only two million ounces. Results of the new feasibility study are expected to hit the market in the next several weeks and will remind reserve-hungry producers that Mt Todd is primed for development right now. Given the current red-hot gold market, this study could provide a big boost to Vista Gold’s share price, making now the time to take a closer look at this undervalued junior. A Truly Massive Gold Deposit Mt Todd is located south of the city of Darwin in Australia’s Northern Territory. |
| Mt Todd is a multi-million-ounce gold deposit that lies just off the Stuart Highway that connects the project to the city of Darwin in Australia’s Northern Territory. |
| The previous feasibility study Vista Gold put out for the project showed it with 7.8 million ounces of measured and indicated resources and another 1.6 million ounces of inferred resources. Using a conservative gold price of $1,800/oz., the study showed Mt Todd to have an after-tax NPV, discounted at 5%, of $1.13 billion. The internal rate of return at that low gold price is still healthy, at over 20%. |
| While some may have considered Mt Todd’s profitability “marginal” at lower gold prices, it becomes an absolute cash cow near current gold prices. In fact, every $100 increase in gold boosts Mt Todd’s NPV by about $200 million! And at today’s gold prices? Mt Todd’s after-tax NPV nearly quadruples to $4.0 billion at $3,000/oz. gold. |
| As mentioned, the main hurdle to getting this world-class gold project into production was a $1.03 billion initial capital expense. That figure limits the universe of gold producers with the wherewithal to partner with Vista Gold and build a Tier 1 gold mine at Mt Todd. |
| A Fit-For-Purpose Design Unlocks The Potential |
| Vista Gold’s management team has elected to address this issue head on and is in the process of generating a new feasibility study on a fit-for-purpose design for Mt Todd with a goal of an initial capital expense of only around $400 million. |
| That level of capex should be easily financeable by any gold producer…or even Vista Gold itself. |
| Right-sizing the project to get that reduction in capex would boost Mt Todd’s reserve grade from 0.84 g/t to 1.0 g/t. The tradeoff is a smaller mine that will produce “only” 150,000-200,000 ounces of gold per year via the processing of 15,000 tonnes per day of material. |
| That’s still a massive project — and one that would move the needle for any mid-tier gold producer. |
| This new design will have a conventional flow sheet, employ contract mining and third-party power generation, and leverage the work already completed on the 50,000 tpd feasibility study. |
| Fully Permitted…In A World-Class Jurisdiction |
| Better still, thanks to the work done on Mt Todd for the previous feasibility study, the deposit is already permitted for a larger footprint. |
| With just some minor changes to its permitting application, Vista Gold can get the revised plan for Mt Todd quickly approved. |
| Thanks to its status as a brownfield project, Mt Todd already has excellent existing infrastructure, including a tailing storage facility, a free water reservoir and a water retention pond. |
| As a brownfield project, Mt Todd comes with a wealth of on-site infrastructure. |
| It lies along paved roads from the Stuart Highway, and there’s a natural gas pipeline to the site for future power generation. It’s also connected to the Northern Territory’s electric grid. Add in the fact that Australia is one of the world’s most mining friendly jurisdictions, and the revised plan for Mt Todd should attract significant producer interest. |
| Extraordinarily Undervalued By Any Measure |
| The meteoric rise in the gold price over the last year or so has shocked the market…with the result that many large-scale gold projects have yet to be repriced to appropriate levels. |
| Perhaps none are better positioned…and primed for re-rating…than Vista Gold. |
| Right now, Vista Gold’s plan for Mt Todd is to use the upcoming feasibility study to attract a joint venture partner that can help the company put Mt Todd into production in this gold cycle. News of a JV partner could provide yet another catalyst for Vista Gold’s share price to go with the release of the new feasibility study. |
| Sporting a current market cap of only around $125 million, the company looks extraordinarily undervalued by practically any measure…and especially with gold at over $3,000/ounce. |
| In a world in short supply of large-scale, easily mineable gold deposits, Mt Todd makes Vista Gold a company you’ll want to put on your short-list of development-stage juniors. |
| CLICK HERE To Learn More about Vista Gold Corp. |
Stockhouse does not provide investment advice or recommendations. All investment decisions should be made based on your own research and consultation with a registered investment professional. The issuer is solely responsible for the accuracy of the information contained herein.
