Vista unwinds hedge to improve cash position

Vista Gold (VGZ-X) has improved its cash flow by unwinding its gold hedge and suspending mining operations at the Hycroft gold mine in Nevada.

The company liquidated its hedging position, which had covered about 200,000 oz. of production, thereby generating US$9.5 million for the coffers.

In order not to be left vulnerable to further drops in the gold price, Vista President Michael Richings says the company has entered into another hedge for 90,000 oz. at the current price of US$282 per oz.

“The hedge ensures us a satisfactory margin for most of 1998.” Vista plans to use the money to pay down US$13 million in project debt at Hycroft, as well as provide working capital for holding costs at the Amayapampa-Capa Circa project in Bolivia and Guariche project in Venezuela.

Suspension of the Hycroft mine is expected to further reduce cash expenditures, and should improve cash flow for the company by US$16.5 million.

Vista will immediately discontinue mining waste rock at Hycroft, and expects to stop mining fresh ore by May. The decision will place 130 of the mine’s 200 employees out of work, Richings says.

The company expects to produce 100,000 oz. gold this year. Hycroft has a leach-pad gold inventory of 50,000 oz., and another 60,000 oz. will be added before mining stops in May. Hence, even if mining does not resume, the operation could still produce another 12,000 oz. in 1999, Richings notes.

Vista will maintain its mining fleet and other equipment at Hycroft in case the price of gold rebounds.

At year-end 1997, Hycroft was estimated to contain 25.2 million tons grading 0.02 oz. per ton.

Vista has reduced its staff in Denver by nearly half, and has also cut staff in Bolivia. Remaining employees have been given a pay cut.

Richings remains optimistic that should the gold price recover to the US$325 per oz. level, Vista could proceed with the development of the Amayapampa gold project. Based on a feasibility study, the capital necessary for the 30,000-oz.-per-year operation would be US$20 million.

Amayapampa contains proven and probable reserves of 9.8 million tons grading 0.054 oz. per ton, equivalent to 527,000 contained ounces. Cash operating costs have been estimated at US$155 per oz.