Attached files
file | filename |
---|---|
EX-32.2 - SECTION 906 CERTIFICATION OF CFO - VISTA GOLD CORP | exhibit32-2.htm |
EX-23.1 - CONSENT OF TETRA TECH MM, INC. - VISTA GOLD CORP | exhibit23-1.htm |
EX-31.2 - CERTIFICATION OF CFO - VISTA GOLD CORP | exhibit31-2.htm |
EX-10.3 - UNITED STATES FINDER AGREEMENT - VISTA GOLD CORP | exhibit10-3.htm |
EX-23.2 - CONSENT OF MINE DEVELOPMENT ASSOCIATES - VISTA GOLD CORP | exhibit23-2.htm |
EX-31.1 - CERTIFICATION OF CEO - VISTA GOLD CORP | exhibit31-1.htm |
EX-10.4 - CANADIAN FINDER AGREEMENT - VISTA GOLD CORP | exhibit10-4.htm |
EX-10.2 - CANADIAN AMENDED AND RESTATED AGENT AGREEMENT - VISTA GOLD CORP | exhibit10-2.htm |
EX-10.1 - CANADIAN AGENT AGREEMENT - VISTA GOLD CORP | exhibit10-1.htm |
EX-32.1 - SECTION 906 CERTIFICATION OF CEO - VISTA GOLD CORP | exhibit32-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2010
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from ___________ to ______________
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Commission File Number 1-09025

VISTA GOLD CORP.
(Exact name of registrant as specified in its charter)
Yukon Territory, Canada
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98-0542444
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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Suite 5, 7961 Shaffer Parkway
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||
Littleton, Colorado
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80127
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(Address of principal executive offices)
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(Zip Code)
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(720) 981-1185
(Registrant’s telephone number, including area code)
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 o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o
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Accelerated filer x
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Non-accelerated filer o
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Smaller reporting company o
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 46,586,708 common shares, without par value, outstanding at November 8, 2010.
(An Exploration Stage Enterprise)
FORM 10-Q
For the Quarter Ended September 30, 2010
INDEX
Page
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||||
In this Report, unless otherwise indicated, all dollar amounts are expressed in United States dollars.
VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED BALANCE SHEETS - UNAUDITED
September 30,
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December 31,
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|||||||
(U.S. dollars in thousands)
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2010
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2009
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||||||
Assets:
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||||||||
Cash and cash equivalents
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$ | 12,988 | $ | 28,408 | ||||
Marketable securities - Note 5
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1,163 | 1,150 | ||||||
Short-term investments
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- | 250 | ||||||
Other current assets
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1,007 | 509 | ||||||
Current assets
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15,158 | 30,317 | ||||||
Mineral properties - Note 6
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50,364 | 38,696 | ||||||
Plant and equipment - Note 7
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18,842 | 18,747 | ||||||
Amayapampa disposal consideration - Note 4
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4,813 | 4,813 | ||||||
74,019 | 62,256 | |||||||
Total assets
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$ | 89,177 | $ | 92,573 | ||||
Liabilities and Shareholders' Equity:
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||||||||
Convertible notes - Note 8
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$ | 21,834 | $ | - | ||||
Accounts payable
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164 | 63 | ||||||
Accrued liabilities and other
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1,792 | 863 | ||||||
Current liabilities
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23,790 | 926 | ||||||
Convertible notes - Note 8
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- | 24,939 | ||||||
Other long-term liabilities
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228 | 228 | ||||||
Total liabilities
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24,018 | 26,093 | ||||||
Capital stock, no par value:
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||||||||
Common - unlimited shares authorized; shares outstanding:
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||||||||
2010 - 46,586,708 and 2009 - 44,679,024 - Note 9
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252,072 | 245,964 | ||||||
Warrants
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336 | 336 | ||||||
Stock compensation - Note 10
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4,403 | 4,818 | ||||||
Contributed surplus - Note 11
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3,333 | 1,848 | ||||||
Equity component of convertible notes - Note 8
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4,721 | 5,998 | ||||||
Accumulated other comprehensive income - Note 12
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548 | 575 | ||||||
Deficit
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(200,254 | ) | (193,059 | ) | ||||
Total shareholders' equity
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65,159 | 66,480 | ||||||
Total liabilities and shareholders' equity
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$ | 89,177 | $ | 92,573 |
Nature of operations and Liquidity risk– Note 2
Subsequent Events – Note 19
The accompanying notes are an integral part of these consolidated financial statements.
VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED STATEMENTS OF EARNINGS AND (LOSS) AND COMPREHENSIVE LOSS - UNAUDITED
Three Months Ended September 30,
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Nine Months Ended September 30,
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Cumulative during Exploration
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||||||||||||||||||
(U.S. dollars in thousands, except share data)
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2010
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2009
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2010
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2009
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Stage
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|||||||||||||||
Income:
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||||||||||||||||||||
Interest income
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$ | 17 | $ | 16 | $ | 106 | $ | 65 | $ | 2,738 | ||||||||||
Gain on disposal of marketable securities
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52 | 14 | 265 | 6,829 | 7,327 | |||||||||||||||
Other income
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39 | (2 | ) | 135 | (2 | ) | (2,293 | ) | ||||||||||||
Total other income
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$ | 108 | $ | 28 | $ | 506 | $ | 6,892 | $ | 7,772 | ||||||||||
Costs and expenses:
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||||||||||||||||||||
Exploration, property evaluation and holding costs
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$ | (422 | ) | $ | (412 | ) | $ | (1,291 | ) | $ | (1,014 | ) | $ | (5,616 | ) | |||||
Corporate administration and investor relations
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(837 | ) | (1,320 | ) | (2,904 | ) | (3,305 | ) | (27,444 | ) | ||||||||||
Depreciation and amortization
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(70 | ) | (66 | ) | (202 | ) | (180 | ) | (834 | ) | ||||||||||
Interest expense
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(298 | ) | (560 | ) | (1,389 | ) | (1,723 | ) | (5,713 | ) | ||||||||||
Gain/(loss) on currency translation
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152 | 52 | 70 | 97 | (205 | ) | ||||||||||||||
Write-down of marketable securities
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- | - | - | (123 | ) | (849 | ) | |||||||||||||
Gain/(loss) on early extinguishment of convertible notes - Note 8
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- | 537 | (1,981 | ) | 537 | (1,444 | ) | |||||||||||||
Loss on sale of mineral property
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- | - | - | (131 | ) | (263 | ) | |||||||||||||
Total costs and expenses
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(1,475 | ) | (1,769 | ) | (7,697 | ) | (5,842 | ) | (42,368 | ) | ||||||||||
Earnings/(loss) from continuing operations before income taxes
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$ | (1,367 | ) | $ | (1,741 | ) | $ | (7,191 | ) | $ | 1,050 | $ | (34,596 | ) | ||||||
Future income tax benefit/(expense)
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$ | 23 | 24 | $ | (4 | ) | (757 | ) | $ | 97 | ||||||||||
Loss from continuing operations after income taxes
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$ | (1,344 | ) | $ | (1,717 | ) | $ | (7,195 | ) | $ | 293 | $ | (34,499 | ) | ||||||
Loss from discontinued operations
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$ | - | $ | - | $ | - | $ | - | $ | (16,879 | ) | |||||||||
Net loss
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$ | (1,344 | ) | $ | (1,717 | ) | $ | (7,195 | ) | $ | 293 | $ | (51,378 | ) | ||||||
Other comprehensive income/(loss):
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||||||||||||||||||||
Unrealized gain on available-for-sale securities
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210 | 149 | 206 | 1,521 | ||||||||||||||||
Realized gain on available-for-sale securities
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(46 | ) | (13 | ) | (233 | ) | (5,805 | ) | ||||||||||||
164 | 136 | (27 | ) | (4,284 | ) | |||||||||||||||
Comprehensive loss
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$ | (1,180 | ) | $ | (1,581 | ) | $ | (7,222 | ) | $ | (3,991 | ) | ||||||||
Weighted average number of shares outstanding
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46,586,708 | 35,408,438 | 45,897,307 | 34,790,115 | ||||||||||||||||
Basic and diluted earnings/(loss) per share from continuing operations
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$ | (0.03 | ) | $ | (0.05 | ) | $ | (0.16 | ) | $ | 0.01 | |||||||||
Basic and diluted earnings/(loss) per share
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$ | (0.03 | ) | $ | (0.05 | ) | $ | (0.16 | ) | $ | 0.01 |
The accompanying notes are an integral part of these consolidated financial statements.
VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED STATEMENTS OF DEFICIT — UNAUDITED
Three Months Ended September 30,
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Nine Months Ended September 30,
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|||||||||||||||
(U.S. dollars in thousands)
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2010
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2009
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2010
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2009
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||||||||||||
Deficit, beginning of period
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$ | (198,910 | ) | $ | (189,107 | ) | $ | (193,059 | ) | $ | (191,117 | ) | ||||
Net loss
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(1,344 | ) | (1,717 | ) | (7,195 | ) | 293 | |||||||||
Deficit, end of period
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$ | (200,254 | ) | $ | (190,824 | ) | $ | (200,254 | ) | $ | (190,824 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
VISTA GOLD CORP. (An Exploration Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED
Three Months Ended September 30,
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Nine Months Ended September 30,
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Cumulative during Exploration
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||||||||||||||||||
(U.S. dollars in thousands)
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2010
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2009
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2010
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2009
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Stage
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Cash flows from operating activities:
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||||||||||||||||||||
Loss for the period - continuing operations
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$ | (1,344 | ) | $ | (1,717 | ) | $ | (7,195 | ) | $ | 293 | $ | (34,499 | ) | ||||||
Adjustments to reconcile loss for the period to cash provided by / (used in) operations:
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||||||||||||||||||||
Depreciation and amortization
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70 | 66 | 202 | 180 | 857 | |||||||||||||||
Stock-based compensation
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53 | 422 | 197 | 662 | 6,755 | |||||||||||||||
Gain on disposal of marketable securities
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(52 | ) | (14 | ) | (265 | ) | (6,829 | ) | (7,589 | ) | ||||||||||
(Gain)/loss on early extinguishment of convertible notes
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- | (537 | ) | 1,981 | (537 | ) | 1,444 | |||||||||||||
Future income tax (benefit)/expense
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(23 | ) | (24 | ) | 4 | 757 | (97 | ) | ||||||||||||
Accretion of convertible notes
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158 | 252 | 650 | 775 | 2,557 | |||||||||||||||
Accrued interest
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140 | 308 | 739 | 948 | 3,158 | |||||||||||||||
Write-down of marketable securities
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- | - | - | 123 | 849 | |||||||||||||||
Loss on sale of mineral property
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- | - | - | 131 | 263 | |||||||||||||||
Other non-cash items
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(38 | ) | - | (38 | ) | - | 1,490 | |||||||||||||
Change in operating assets and liabilities:
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||||||||||||||||||||
Interest paid
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- | (11 | ) | (1,150 | ) | (1,511 | ) | (6,436 | ) | |||||||||||
Other current assets
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(64 | ) | 123 | (498 | ) | (23 | ) | (1,269 | ) | |||||||||||
Accounts payable, accrued liabilities and other
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169 | 168 | 178 | (158 | ) | (660 | ) | |||||||||||||
Net cash used in operating activities
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(931 | ) | (964 | ) | (5,195 | ) | (5,189 | ) | (33,177 | ) | ||||||||||
Cash flows from investing activities:
|
||||||||||||||||||||
Acquisition of marketable securities
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(19 | ) | (9 | ) | (26 | ) | (9 | ) | (1,091 | ) | ||||||||||
Proceeds from sale of marketable securities
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57 | 21 | 285 | 9,055 | 10,429 | |||||||||||||||
Short-term investments
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- | - | 250 | - | - | |||||||||||||||
Additions to mineral properties, net of cost recoveries - Note 7
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(2,739 | ) | (1,371 | ) | (8,206 | ) | (3,010 | ) | (37,138 | ) | ||||||||||
Additions to plant and equipment - Note 6
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(114 | ) | (95 | ) | (294 | ) | (419 | ) | (19,412 | ) | ||||||||||
Proceeds on disposal of mineral properties
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- | - | - | 188 | 188 | |||||||||||||||
Proceeds on disposal of plant and equipment
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- | - | - | - | 52 | |||||||||||||||
Cash transferred to Allied Nevada Gold Corp., net of receivable
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- | - | - | - | (24,517 | ) | ||||||||||||||
Net cash used in investing activities
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(2,815 | ) | (1,454 | ) | (7,991 | ) | 5,805 | (71,489 | ) | |||||||||||
Cash flows from financing activities:
|
||||||||||||||||||||
Net proceeds from equity financings
|
- | 20,707 | - | 20,707 | 74,787 | |||||||||||||||
Early extinguishment of convertible notes - Note 8
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- | (866 | ) | (2,242 | ) | (866 | ) | (3,108 | ) | |||||||||||
Proceeds from exercise of warrants
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- | - | - | - | 39,020 | |||||||||||||||
Proceeds from exercise of stock options
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8 | - | 8 | - | 3,047 | |||||||||||||||
Issuance of convertible notes, net of issuance costs
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- | - | - | - | 28,345 | |||||||||||||||
Prepaid transaction costs
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- | - | - | - | (1,841 | ) | ||||||||||||||
Net cash provided by financing activities
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8 | 19,841 | (2,234 | ) | 19,841 | 140,250 | ||||||||||||||
Increase/(decrease) in cash and cash equivalents - continuing operations
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(3,738 | ) | 17,423 | (15,420 | ) | 20,457 | 35,584 | |||||||||||||
Increase/(decrease) in cash and cash equivalents - discontinued operations
|
- | - | - | - | (23,270 | ) | ||||||||||||||
Net increase/(decrease) in cash and cash equivalents
|
(3,738 | ) | 17,423 | (15,420 | ) | 20,457 | 12,314 | |||||||||||||
Cash and cash equivalents, beginning of period - continuing operations
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16,726 | 16,300 | 28,408 | 13,266 | 674 | |||||||||||||||
Cash and cash equivalents, end of period
|
$ | 12,988 | $ | 33,723 | $ | 12,988 | $ | 33,723 | $ | 12,988 |
Supplemental cash flow information - Note 14
The accompanying notes are an integral part of these consolidated financial statements.
- 4 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
1. General
The consolidated interim financial statements of Vista Gold Corp. (an Exploration Stage Enterprise) (collectively, “Vista”, the “Corporation”, “we”, “our” or “us”), as of September 30, 2010 have been prepared by us without audit and do not include all of the disclosures required by generally accepted accounting principles in Canada for annual financial statements. As described in Note 16, generally accepted accounting principles in Canada differ in certain material respects from generally accepted accounting principles in the United States. In the opinion of management, all of the adjustments necessary to fairly present the interim financial information set forth herein have been made. These adjustments are of a normal and recurring nature. The results of operations for interim periods are not necessarily indicative of the operating results of a full year or of future years. These interim financial statements should be read in conjunction with the financial statements and related footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2009.
2. Nature of operations and liquidity risk
Nature of operations
We evaluate, acquire and explore gold exploration and potential development projects. As such, we are considered an Exploration Stage Enterprise. Our approach to acquisitions of gold projects has generally been to seek projects within political jurisdictions with well-established mining, land ownership and tax laws, which have adequate drilling and geological data to support the completion of a third-party review of the geological data and to complete an estimate of the gold mineralization. In addition, we look for opportunities to improve the value of our gold projects through exploration drilling, and/or reengineering the operating assumptions underlying previous engineering work.
We are continuing to move our more advanced projects through advanced and pre-feasibility studies in preparation for mine development so that production decisions can be made on those projects.
Although we have reviewed and are satisfied with the title for all mineral properties in which we have a material interest, there is no guarantee that title to such concessions will not be challenged or impugned.
Liquidity risk
Our consolidated interim financial statements have been prepared on a going concern basis and contemplate the realization of assets and the settlement of liabilities in the normal course of operations. Liquidity risk is the risk that we will be unable to meet our financial obligations as and when they fall due.
As of September 30, 2010, we had cash and cash equivalents of $12,988,370. The principal balance owing on our senior secured convertible notes (the “Notes”) is $23,000,000, which is due on March 4, 2011. At present, we do not have sufficient cash and cash equivalents to meet this obligation. In connection with the issuance of the Notes (as defined in Note 8), we granted a pledge over the assets and mining concessions related to the Concordia (previously Paredones Amarillos, see Note 6 below) gold project (collectively, the “Pledged Assets”).
On September 30, 2010, we announced our intention to undertake a private placement financing, subject to shareholder and regulatory approvals, in which we plan to raise gross proceeds of up to $30,000,000 (subsequently increased to up to $33,757,000 and completed for gross proceeds of $33,733,500 on October 22, 2010, see Note 19, below) from the sale of up to 13,043,479 (subsequently increased to up to and issued 14,666,739 on October 22, 2010, see Note 19, below) special warrants of Vista (the “Special Warrants”), each priced at $2.30. The Special Warrants will automatically be exercised, for no additional consideration, for one Common Share and one Common Share purchase warrant (a “Warrant”) upon receipt of our shareholders’ approval of the private placement (the “Shareholders’ Approval”) and the receipt of the approval of the NYSE Amex. Each Warrant will be exercisable over a five-year period from the closing of the private placement, to purchase one Common Share (a “Warrant Share”) at a purchase price (“Purchase Price”) of $3.50 during the first year, $4.00 during the second year, $4.50 during the third year and $5.00 until the expiry of the Warrant. If the closing price of the Common Shares on the NYSE Amex Equities Stock Exchange is at least 35% above the current Purchase Price of the Warrants for a period of 15 consecutive trading days, then we will have the option to request that the Warrants be exercised. If the Warrants are not exercised within 15 business days (subsequently increased to 25 business days, See Note 19, below) following this request, they will be cancelled.
In the event we do not receive the Shareholders’ Approval and the Special Warrants are cancelled and we are also unable to generate adequate additional financing or renegotiation of the terms of the Notes does not prove successful, we will not have sufficient cash or cash equivalents to repay the Notes. However, the Notes are secured only by the Pledged Assets. In the event that we cannot raise sufficient capital to repay our obligations under the Notes, the holders of the Notes are entitled to require that possession of the Pledged Assets be transferred to them (or a company appointed by them) and to seek court approval for the sale
- 5 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
of the Pledged Assets. Any proceeds received by the holders of the Notes from the sale of the Pledged Assets would be applied to any principal and interest owing by the Corporation under the Notes, with the Corporation continuing to be obligated to repay any remaining balance owing under the Notes on an unsecured basis. The assets of the Concordia gold project have a total carrying value of $38,995,688 as at September 30, 2010 (see Notes 6 and 7), of which $17,187,429 relates to plant and equipment stored in Canada to be used at the Concordia gold project.
3. United States Generally Accepted Accounting Principles (“U.S. GAAP”)
We have, since inception, reported to security regulators in both Canada and the United States, financial statements prepared in accordance with Canadian GAAP with reconciliation to U.S. GAAP. In 2006, the Canadian Accounting Standards Boards (“AcSB”) published a new strategic plan that outlines the convergence of Canadian GAAP with International Financial Reporting Standards (“IFRS”) over an expected five year transitional period. In February 2008, the AcSB announced that 2011 is the changeover date for publicly-listed companies to use IFRS, replacing Canadian GAAP. However, due to a change in the United States Securities and Exchange Commission’s (“SEC”) position in late 2009, and because we are considered to be a domestic filer under SEC rules for reporting purposes, we will be unable to adopt IFRS and instead will be required to report under U.S. GAAP beginning with fiscal year 2011, with our financial statements and selected financial data recast into U.S. GAAP for all periods presented in the financial statements.
4. Amayapampa disposal consideration
On April 7, 2008, we entered into an agreement to dispose of our wholly-owned subsidiary Vista Gold (Antigua) Corp. (“Vista Gold Antigua”) to Republic Gold Limited (“Republic”). Vista Gold Antigua indirectly held our interest in the Amayapampa gold project in Bolivia. Under the terms of the transaction, Republic agreed to pay to us, $3,000,000 in three payments of $1,000,000. The first of these payments will be due and payable upon the start of Commercial Production (as defined in the purchase and sale agreement) at the Amayapampa gold project followed by $1,000,000 payments on each of the first and second anniversaries of the start of Commercial Production. In addition, Republic agreed to pay to us a net smelter return royalty (“NSR”) on the gold produced by or on behalf of Republic from the Amayapampa gold project in varying percentages depending on the price of gold per ounce. When gold is between $500.01 and $650.00 per ounce, a 2% NSR is payable; when the price of gold is between $650.01 and $750.00 per ounce, a 3% NSR is payable; and when the price of gold is $750.01 per ounce and above, an NSR of 3.5% is payable. The NSR is capped at 720,000 gold equivalent ounces and no NSR payments are due to us if the gold price is below $500 per ounce. The fair value of the consideration received on the disposal of the Amayapampa gold project has been estimated at $4,813,371 using probability weighted cash flow scenarios and assumptions including future gold prices, estimated gold production and the timing of commencement of Commercial Production. These inputs in the “income approach” valuation model used by us are considered to be level three unobservable inputs as defined by CICA 3862 “Financial Instruments – Disclosures”. These are our own assumptions based on management’s best estimates and the best information available at the time.
- 6 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
5. Marketable securities
At September 30, 2010
|
At December 31, 2009
|
|||||||||||||||||||||||
Cost
|
Unrealized gain/(loss)
|
Fair value
|
Cost
|
Unrealized gain/(loss)
|
Fair value
|
|||||||||||||||||||
Esperanza Silver Corp.
|
10 | 162 | 172 | 10 | 101 | 111 | ||||||||||||||||||
Black Isle Resources
|
50 | 3 | 53 | 12 | 16 | 28 | ||||||||||||||||||
Nevgold Resources Corp.
|
87 | 163 | 250 | 87 | 69 | 156 | ||||||||||||||||||
Other
|
371 | 317 | 688 | 365 | 490 | 855 | ||||||||||||||||||
$ | 518 | $ | 645 | $ | 1,163 | $ | 474 | $ | 676 | $ | 1,150 |
6. Mineral properties
2009
|
2010
|
|||||||||||||||||||||||||||||||
December 31, net balance
|
Acquisition costs
|
Option payments
|
Exploration & land costs
|
Capitalized interest
|
Capitalized stock based compensation
|
Year to date activity
|
September 30, ending balance
|
|||||||||||||||||||||||||
Long Valley, United States
|
978 | - | - | 15 | - | - | 15 | 993 | ||||||||||||||||||||||||
Yellow Pine, United States
|
984 | - | - | 197 | - | - | 197 | 1,181 | ||||||||||||||||||||||||
Concordia, Mexico
|
14,650 | - | - | 3,100 | 3,049 | 73 | 6,222 | 20,872 | ||||||||||||||||||||||||
Guadalupe de los Reyes, Mexico
|
3,275 | - | - | 2 | - | - | 2 | 3,277 | ||||||||||||||||||||||||
Awak Mas, Indonesia
|
3,975 | - | - | 6 | - | - | 6 | 3,981 | ||||||||||||||||||||||||
Mt. Todd, Australia
|
14,616 | - | - | 5,122 | - | 37 | 5,159 | 19,775 | ||||||||||||||||||||||||
Other
|
218 | - | 50 | 17 | - | - | 67 | 285 | ||||||||||||||||||||||||
$ | 38,696 | $ | - | $ | 50 | $ | 8,459 | $ | 3,049 | $ | 110 | $ | 11,668 | $ | 50,364 |
The recoverability of the carrying values of our mineral properties is dependent upon the successful start-up and commercial production from, or the sale or lease of, these properties, and upon economic reserves being discovered or developed on the properties. Development and/or start-up of any of these projects will depend, among other things, on management’s ability to raise additional capital for these purposes. Although we have been successful in raising such capital in the past, there can be no assurance that we will be able to do so in the future.
We have determined that no impairment provision is required. A write-down in the carrying values of one or more of our mineral properties may be required in the future as a result of events and circumstances, such as our inability to obtain all the necessary permits, changes in the legal status of our mineral properties, government actions, the results of technical evaluation and changes in economic conditions including the price of gold and other commodities or input prices. We regularly evaluate the carrying value of our mineral properties to determine if impairment is required in view of such factors.
On September 7, 2010, we announced that we had changed the name of our wholly-owned Paredones Amarillos gold project to the Concordia gold project.
7. Property, plant and equipment
September 30, 2010
|
December 31, 2009
|
|||||||||||||||||||||||
Cost
|
Accumulated Depreciation and Write-downs
|
Net
|
Cost
|
Accumulated Depreciation and Write-downs
|
Net
|
|||||||||||||||||||
Concordia, Mexico
|
18,179 | 55 | 18,124 | 18,173 | 35 | 18,138 | ||||||||||||||||||
Awak Mas, Indonesia
|
118 | 91 | 27 | 118 | 89 | 29 | ||||||||||||||||||
Mt. Todd, Australia
|
1,081 | 447 | 634 | 833 | 321 | 512 | ||||||||||||||||||
Corporate, United States
|
351 | 294 | 57 | 311 | 243 | 68 | ||||||||||||||||||
$ | 19,729 | $ | 887 | $ | 18,842 | $ | 19,435 | $ | 688 | $ | 18,747 |
8. Brokered private placement of convertible notes
On March 4, 2008, we completed a private placement in which we issued and sold $30,000,000 in aggregate principal amount of senior secured convertible notes (the “Notes”). The Notes were issued on March 4, 2008 and mature at face value on March 4, 2011 (the “Maturity Date”). The Notes pay interest of 10% per annum. Interest is payable each year in two installments on June 15 and December 15, and the principal is payable on the Maturity Date.
- 7 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
The Notes are convertible at the holder’s or issuer’s discretion in accordance with the terms of the Notes. The holder can convert all or part of the debt underlying the Notes at any time prior to the Maturity Date or the business day immediately preceding the Redemption Date (as defined below) at a price of $6.00 per Common Share (subsequently adjusted to $4.80 per Common Share, as discussed below), subject to adjustment in certain circumstances. The “Redemption Date” represents the date that the Notes will be redeemed in the event that we redeem the Notes.
Pursuant to the terms of the Notes, on March 4, 2009, the conversion price of the Notes was automatically adjusted from $6.00 per Common Share to $4.80 per Common Share. As of September 30, 2010, our Common Share price was below the $4.80 conversion price.
Simultaneously with the issuance of the Notes, we issued to Casimir Capital LP 200,000 Common Share purchase warrants with an exercise price of $6.00 per warrant and an expiration date of March 4, 2011, as partial consideration for acting as agent for the transaction. We also paid to Casimir Capital LP a cash fee of $1,200,000, being 4% of the gross proceeds of the offering of the Notes. The warrants provide for cashless exercise if the market price of our Common Shares is above the exercise price of the warrants. In addition, the exercise price is subject to standard anti-dilution adjustment provisions.
The Notes have been accounted for in accordance with Emerging Issues Committee Abstract No. (“EIC”) 164, “Convertible and other Debt Instruments with Embedded Derivatives”. Under EIC 164, the fair value of the conversion feature is recorded as equity. The issuance date fair value of the conversion feature was estimated to be $6,755,000 and was classified as the equity component of convertible notes with the residual balance of $23,245,000 being recorded as the fair value of our obligation to make principal and interest payments and has been classified as long-term debt. The total fees of $1,988,444 related to the issuance of the Notes have been allocated pro-rata between debt issuance costs of $1,531,102 and equity issuance costs of $457,342.
On July 14, 2009, we entered into Note Repurchase Agreements (the “Whitebox Repurchase Agreements”) with each of Whitebox Combined Partners, LP (“Whitebox Combined Partners”), Whitebox Convertible Arbitrage Partners, LP (“Whitebox Convertible Arbitrage”) and Whitebox Special Opportunities Fund Series B Partners, LP (“Whitebox Special Opportunities”) whereby we agreed to repurchase their respective Notes.
Pursuant to the Whitebox Repurchase Agreements, we agreed to repurchase $1,333,000 (carrying value of $1,102,932) Notes (i) in the principal amount of $504,000 from Whitebox Combined Partners for an aggregate purchase price, including interest, of $331,800; (ii) in the principal amount of $510,000 from Whitebox Convertible Arbitrage for an aggregate purchase price, including interest, of $335,750; and (iii) in the principal amount of $319,000 from Whitebox Special Opportunities for an aggregate purchase price, including interest, of $210,008, based on a settlement date of July 14, 2009. We allocated the consideration paid on the repurchase of the Notes to the liability and equity elements of the security based on their relative fair values at the date of the transaction as is required under EIC 96. A gain of $536,629 was recorded in our Consolidated Statement of Earnings and (Loss) as a result of the Notes repurchase.
On May 20, 2010, we entered into a Notes Repurchase Agreement (the “Agreement”) with Whitebox Advisors LLC (“Whitebox”) whereby we agreed to repurchase Whitebox’s remaining Notes.
Pursuant to the Agreement, we agreed to repurchase Notes in the principal amount of $5,667,000 (carrying value of $5,155,989) and to settle interest payable through maturity on the Notes of $690,572. We agreed to pay Whitebox $2,232,798 in cash and to issue 1,902,684 Common Shares to Whitebox as consideration for the Notes and interest payable of $6,357,572, in aggregate. The Common Shares issued were based on a share price of $2.15. We allocated the consideration paid on the repurchase of the Notes to the liability and equity elements of the security based on their relative fair values at the date of the transaction as is required under EIC 96, “Accounting for the Early Extinguishment of Convertible Securities Through (1) Early Redemption or Repurchase and (2) Induced Early Conversion,” ("EIC 96"). A loss of $1,981,103 was recorded in our Consolidated Statement of Earnings and (Loss) as a result of the Notes repurchase. As a result of the completion of the Agreement, 4,791,667 Common Shares are issuable upon conversion of the remaining Notes.
We capitalize interest and accretion based on expenditures on qualifying assets. As of September 30, 2010, we had qualifying expenditures of approximately $17,476,582 related to the equipment purchase and drilling expenditures for the Concordia gold project. As of December 31, 2009, we had utilized all the cash received for the Concordia gold project. A reconciliation of the carrying value of the long-term liability portion of the Notes is as follows:
- 8 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
Principal amount of the Notes
|
$ | 30,000 | ||
Issuance costs allocated to long-term liabilities
|
(1,531 | ) | ||
Conversion feature allocated to equity before issuance costs
|
(6,755 | ) | ||
Carrying value of the Notes upon issuance
|
21,714 | |||
Repurchase of $1,333,000 of convertible notes
|
(1,103 | ) | ||
Repurchase of $5,667,000 of convertible notes
|
(5,156 | ) | ||
Accretion expense
|
6,379 | |||
Carrying value of the Notes at September 30, 2010
|
$ | 21,834 |
9. Capital stock
Number of shares issued
|
Capital stock
|
|||||||
As of December 31, 2009
|
44,679,024 | $ | 245,964 | |||||
Exercise of employee stock options - cash
|
5,000 | 8 | ||||||
Exercise of employee stock options - fair value - Note 10
|
- | 5 | ||||||
Early extinguishment of convertible notes - Note 8
|
1,581,488 | 5,491 | ||||||
Interest payment on extinguished convertible notes - Note 8
|
321,196 | 604 | ||||||
Issued during the nine months ended September 30, 2010
|
1,907,684 | 6,108 | ||||||
As of September 30, 2010
|
46,586,708 | $ | 252,072 |
On May 20, 2010, we issued an aggregate of 1,902,684 Common Shares as partial consideration for the repurchase of Notes, including interest payable through to the Maturity Date (see Note 8).
10. Stock-based compensation
A summary of the fair value of all awards issued under Vista’s stock compensation plans included within Shareholders’ Equity is as follows:
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Stock options
|
4,382 | 4,818 | ||||||
Restricted stock units
|
21 | - | ||||||
$ | 4,403 | $ | 4,818 |
Stock Option Plan
Under our Stock Option Plan (the “Plan”), we may grant options to our directors, officers, employees and consultants of our subsidiaries. The maximum number of our Common Shares that may be reserved for issuance under the Plan, together with those reserved for issuance under the LTIP (as discussed below), is a variable number equal to 10% of the issued and outstanding Common Shares on a non-diluted basis. Under the Plan, the exercise price of each option shall not be less than the market price of our Common Shares on the date preceding the date of grant, and an option’s maximum term is 10 years or such other shorter term as stipulated in a stock option agreement between us and the optionee. Options under the Plan are granted from time to time at the discretion of the Board of Directors, with vesting periods and other terms as determined by the Board.
The fair value of stock options granted to employees and directors was estimated at the grant date using the Hull-White trinomial lattice option pricing model, using the following weighted average assumptions:
- 9 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
September 2010
|
September 2009
|
|||||||
Expected volatility
|
N/A | 77.69 - 78.80 | % | |||||
Risk-free interest rate
|
N/A | 2.45 - 2.58 | % | |||||
Expected lives (years)
|
N/A | 5 | ||||||
Dividend yield
|
N/A | N/A |
Option pricing models require the input of highly subjective assumptions including the expected price volatility. Expected price volatility is based on the historical volatility of our Common Shares. Changes in the subjective input assumptions can materially affect the fair value estimate, and therefore, the existing models do not necessarily provide a reliable measure of the fair value of our stock options. The expected term of the options granted is derived from the output of the option pricing model and represents the period of time that the options granted are expected to be outstanding. The risk-free rate for the periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the date of grant.
A summary of option activity under the Stock Option Plan as of September 30, 2010, and changes during the nine-month period then ended is set forth in the following table:
Number of Shares
|
Weighted-Average Exercise Price
|
Weighted-Average Remaining Contractual Term
|
Aggregate Intrinsic Value
|
|||||||||||||
Outstanding - December 31, 2009
|
2,788,145 | $ | 3.75 | 3.43 | $ | 534 | ||||||||||
Outstanding - March 31, 2010
|
2,788,145 | $ | 3.75 | 3.19 | $ | 170 | ||||||||||
Granted
|
60,000 | $ | 2.24 | |||||||||||||
Expired
|
(9,484 | ) | 2.15 | |||||||||||||
Outstanding - June 30, 2010
|
2,838,661 | $ | 3.75 | 2.99 | $ | - | ||||||||||
Exercised
|
(5,000 | ) | $ | 1.77 | ||||||||||||
Cancelled
|
(325,000 | ) | 5.07 | |||||||||||||
Outstanding - September 30, 2010
|
2,508,661 | $ | 3.56 | 2.82 | $ | 642 | ||||||||||
Exercisable - September 30, 2010
|
2,478,661 | $ | 3.57 | 2.79 | $ | 633 |
A summary of the fair-value changes included in stock options within Shareholders’ Equity as of September 30, 2010 is set forth in the following table:
- 10 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
Fair Value
|
||||
As of December 31, 2009
|
$ | 4,818 | ||
Expensed
|
75 | |||
Capitalized as mineral properties
|
22 | |||
As of March 31, 2010
|
$ | 4,915 | ||
Expensed
|
69 | |||
Capitalized as mineral properties
|
63 | |||
Expired
|
(20 | ) | ||
As of June 30, 2010
|
$ | 5,027 | ||
Expensed
|
40 | |||
Exercised
|
(5 | ) | ||
Cancelled
|
(699 | ) | ||
Capitalized as mineral properties
|
19 | |||
As of September 30, 2010
|
$ | 4,382 |
The total number of stock options outstanding at the end of the quarter is 2,508,661 with exercise prices ranging from approximately $1.77 to $7.45 and remaining lives ranging from 0.43 to 4.62 years. The total number of options outstanding represents 5.4% of our issued and outstanding capital.
A summary of the status of our unvested stock options as of September 30, 2010, is set forth below:
Number of Shares
|
Weighted-Average Grant Date Fair Value
|
|||||||
Unvested - December 31, 2009
|
430,000 | $ | 0.92 | |||||
Vested
|
(25,000 | ) | 1.09 | |||||
Unvested - March 31, 2010
|
405,000 | $ | 0.91 | |||||
Granted
|
30,000 | 1.17 | ||||||
Unvested - June 30, 2010
|
435,000 | $ | 0.93 | |||||
Vested
|
(405,000 | ) | 0.91 | |||||
Unvested - September 30, 2010
|
30,000 | $ | 1.17 |
As of September 30, 2010, there was $21,560 of unrecognized compensation expense related to the unvested portion of options outstanding. This expense is expected to be recognized over a weighted-average period of 0.62 years
Long-term equity incentive plan
In May 2010, our shareholders approved the Long Term Equity Incentive Plan (the “LTIP”), effective March 8, 2010 (“Effective Date”). Under the LTIP we may grant Restricted Stock Units (“RSU awards”) or Restricted Stock Awards (“RSA awards”) to the directors, officers, employees and consultants of Vista and our subsidiaries. The maximum number of our Common Shares that may be reserved for issuance under the LTIP, together with those reserved for issuance under the Plan (as discussed above), is a variable number equal to 10% of the issued and outstanding Common Shares on a non-diluted basis. The total number of Common Shares issuable to our insiders at any time and issued to our insiders within any one year period under the LTIP, together with any stock options issued under the Plan, shall not exceed 10% of the issued and outstanding Common Shares on a non-diluted basis. The total number of Common Shares issuable to a director under the LTIP shall not exceed the lesser of: (i) 1% of the issued and outstanding Common Shares; and (ii) an annual award value of $100,000 per director.
- 11 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
The LTIP is administered by the Board of Directors, which can delegate the administration to the Compensation Committee or to
such other officers and employees of Vista as designated by the Board of Directors. The Board of Directors will determine the persons to whom awards are made, set the size, type, terms and conditions of the awards, fix the prices (if any) to be paid for the award, interpret the LTIP, adopt, amend and rescind and take all other actions it believes are necessary or advisable for the implementation and administration of the LTIP.
Restricted stock units
The estimated fair value of each of our RSU awards was determined on the date of grant based on the closing market price of our Common Shares on the date of grant.
The following table summarizes the RSU awards during the nine-month period ended September 30, 2010:
Number of Units
|
Weighted-Average Grant Date Fair Value
|
|||||||
Unvested - December 31, 2009
|
- | $ | - | |||||
Granted
|
177,500 | 2.37 | ||||||
Unvested - September 30, 2010
|
177,500 | $ | 2.37 |
On September 13, 2010, we granted 177,500 RSU awards to employees, directors and consultants of Vista. The market price on the date of grant was $2.37. All of the RSU awards granted vest on the one-year anniversary of the grant date and upon vesting, a holder of an RSU award will receive one Common Share, for no additional consideration, for each RSU award held.
A summary of the amortization of the fair-value included in stock compensation within Shareholders’ Equity as of September 30, 2010 is set forth in the following table:
Fair Value
|
||||
As of December 31, 2009
|
$ | - | ||
Expensed
|
13 | |||
Capitalized as mineral properties
|
8 | |||
As of September 30, 2010
|
$ | 21 |
As of September 30, 2010, there was $399,929 of unrecognized compensation expense related to the unvested RSU awards outstanding. This expense is expected to be recognized over a weighted-average period of 0.95 years
11. Contributed surplus
September 30,
|
December 31,
|
|||||||
2010
|
2009
|
|||||||
Balance, beginning of year
|
$ | 1,848 | $ | 1,387 | ||||
Early extinguishment of convertible notes
|
$ | 766 | $ | - | ||||
Cancelled options
|
699 | 14 | ||||||
Expired options—Note 9
|
20 | 447 | ||||||
Balance, end of period
|
$ | 3,333 | $ | 1,848 |
- 12 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
On May 20, 2010, we completed the Agreement to repurchase Notes in the principal amount of $5,667,000 and interest payable through maturity of $690,572 (see Note 8). Upon completion of the Agreement, the carrying value of the equity portion of the extinguished Notes exceeded the fair value of the equity portion by $766,380 resulting in an increase to our contributed surplus account.
12. Accumulated other comprehensive income
A reconciliation of the amounts contained in accumulated other comprehensive income is as follows:
Accumulated other comprehensive income, before tax
|
Accumulated other comprehensive income, net of tax
|
|||||||
As of December 31, 2009
|
$ | 676 | $ | 575 | ||||
Increases to fair market value during period
|
51 | 45 | ||||||
Decreases due to realization of gain
|
(213 | ) | (187 | ) | ||||
As of March 31, 2010
|
$ | 514 | $ | 433 | ||||
Decreases to fair market value during period
|
(56 | ) | (49 | ) | ||||
As of June 30, 2010
|
$ | 458 | $ | 384 | ||||
Increases to fair market value during period
|
239 | 210 | ||||||
Decreases due to realization of gain
|
(52 | ) | (46 | ) | ||||
As of September 30, 2010
|
$ | 645 | $ | 548 |
13. Financial instruments
Financial assets and financial liabilities are classified into one of five categories: held-to-maturity, available-for-sale, held-for-trading, loans and receivables and other financial liabilities.
All financial instruments classified as available-for-sale or held-for-trading are subsequently measured at fair value. Changes in the fair value of financial instruments designated as held-for-trading are charged or credited to the statement of loss for the relevant period, while changes in the fair value of financial instruments designated as available-for-sale, excluding impairments, are charged or credited to other comprehensive income until the instrument is realized. All other financial assets and liabilities are accounted for at cost or at amortized cost depending upon the nature of the instrument. After their initial fair value measurement, they are measured at amortized cost using the effective interest rate method.
Financial Assets
The carrying amounts and fair values of financial assets are as follows:
September 30, 2010
|
December 31, 2009
|
||||||||||||||||
Category
|
Estimated
Fair Value
|
Carrying
Value
|
Estimated
Fair Value
|
Carrying
Value
|
|||||||||||||
Cash and cash equivalents
|
Loans and receivables
|
$
|
12,988
|
$
|
12,988
|
$
|
28,408
|
$
|
28,408
|
||||||||
Accounts receivable (1)
|
Loans and receivables
|
615
|
615
|
24
|
24
|
||||||||||||
Amayapampa disposal consideration
|
Held-for-trading
|
4,813
|
4,813
|
4,813
|
4,813
|
||||||||||||
Marketable securities (2)
|
Available-for-sale
|
1,163
|
1,163
|
1,150
|
1,150
|
||||||||||||
Total financial assets
|
$
|
19,579
|
$
|
19,579
|
$
|
34,395
|
$
|
34,395
|
|
(1)
|
Carrying amount is a reasonable approximation of fair value.
|
|
(2)
|
The fair value represents quoted market prices in an active market.
|
- 13 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
Financial liabilities
The carrying amounts and fair values of financial liabilities are as follows:
September 30, 2010
|
December 31, 2009
|
||||||||||||||||
Category
|
Estimated
Fair Value
|
Carrying
Value
|
Estimated
Fair Value
|
Carrying
Value
|
|||||||||||||
Accounts payable and accrued liabilities (1)
|
Other financial liabilities
|
$
|
1,956
|
$
|
1,956
|
$
|
926
|
$
|
926
|
||||||||
Other long-term liabilities
|
Other financial liabilities
|
228
|
228
|
228
|
228
|
||||||||||||
Convertible notes (2)
|
Other financial liabilities
|
22,634
|
21,834
|
26,678
|
24,939
|
||||||||||||
Total financial liabilities
|
$
|
24,818
|
$
|
24,018
|
$
|
27,832
|
$
|
26,093
|
|
(1)
|
Carrying amount is a reasonable approximation of fair value.
|
|
(2)
|
The carrying value of the Notes is being accreted to their maturity value over their expected life using the effective interest rate method.
|
Financial instrument risk exposure and risk management
We are exposed in varying degrees to a variety of financial instrument related risks. Management approves and monitors the risk management processes. The types of risk exposure and the way in which such exposures are managed are as follows:
Credit risk
Our credit risk is primarily attributable to our cash and cash equivalents. We monitor our cash and cash equivalents in order to limit our exposure to credit risk.
Liquidity risk
Our objective is that there is sufficient capital in order to meet short term business requirements, after taking into account our holdings of cash and cash equivalents and cash flows from financing activities. Our cash and cash equivalents are held in interest-bearing liquid savings accounts. Please see Note 2 for further discussion regarding our liquidity risk.
Market risk
The significant market risk exposure to which we are exposed is interest rate risk. Our policy is to invest cash at floating rates of interest in short-term, highly liquid cash savings accounts in order to maintain liquidity. Fluctuations in interest therefore have little impact on the value of cash equivalents and short term investments. With respect to financial liabilities, the Notes are not subject to interest rate risk because they bear interest at a fixed rate.
14. Capital disclosures
Our objectives when managing capital are to safeguard our access to sufficient funding as needed to continue our development of mineral properties and to maintain a flexible capital structure which optimizes the costs of capital at an acceptable level of risk.
In the management of capital, we include the components of shareholders’ equity and debt. We manage our capital structure and make adjustments in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust our capital structure, we may issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of our investments. We had no restrictions or covenants on our capital structure as of September 30, 2010. Please see Note 2 for further discussion regarding our management of capital.
In order to facilitate the management of our capital requirements, we prepare annual expenditure budgets which project expected cash and debt positions which are updated as necessary depending on various factors, including successful capital deployment and general industry conditions. The annual and updated budgets are approved by the board of directors (the “Board of Directors” or the “Board”).
In order to maximize cash available for our development efforts, we do not pay dividends. Our cash investment policy is to invest our cash in highly liquid short-term interest-bearing investments with maturities of three months or less when acquired, selected
- 14 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
with regards to the expected timing of expenditures from operations.
15. Supplemental cash flow information
Significant non-cash transactions during the nine months ended September 30, 2010 include the issuance of 1,902,684 Common Shares as partial consideration for the repurchase of Notes in the principal amount of $5,667,000 and interest payable through to the Maturity Date of $690,572 (Note 8). Also, during the nine-month period ended September 30, 2010, we received 800,000 common shares in the capital of Black Isle Resources Corp. for the repayment of an outstanding $662,000 loan that was previously written off as an uncollectable receivable. These common shares were valued at $38,400 when received and accordingly have been recorded as a gain in the Consolidated Statements of Loss.
There were no significant non-cash transactions during the nine-month period ended September 30, 2009.
16. Geographic and segment information
We evaluate, acquire and explore gold exploration and potential development projects. These activities are focused principally in Mexico, Australia, North America and Indonesia. We reported no revenues in the nine-month period ended September 30, 2010, or for the same period in 2009. Geographic segmentation of mineral properties and plant and equipment is provided in Notes 6 and 7.
17. Differences between Canadian and United States generally accepted accounting principles
We prepare our financial statements in accordance with accounting principles generally accepted in Canada, which differ in some respects from those in the United States. The significant differences between generally accepted accounting principles (“GAAP”) in Canada and in the United States, as they relate to these financial statements, are as follows:
|
(a)
|
In accordance with U.S. GAAP, exploration, mineral property evaluation and holding costs are expensed as incurred. When proven and probable reserves are determined for a property and a bankable feasibility study is completed, then subsequent development costs on the property would be capitalized. Total capitalized cost of such properties is measured periodically for recoverability of carrying value under Accounting Standards Codification (“ASC”) 360 Property, Plant and Equipment. Under Canadian GAAP, all such costs are permitted to be capitalized.
|
|
(b)
|
Under Canadian corporate law, we underwent a capital reduction in connection with the amalgamation of Granges, Inc. (“Granges”) and Hycroft Resources & Development, Inc. 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 amalgamation. Under U.S. corporate law, no such transaction is available and accordingly is not allowed under U.S. GAAP.
|
|
(c)
|
In accordance with U.S. GAAP (ASC 718 Compensation Stock Expenses), the fair value of all options granted after January 1, 2006 is calculated at the date of grant and expensed over the expected vesting period. On transition to this new standard, the unvested portion of options granted to employees before January 1, 2006 is expensed over the remaining vesting period using the fair value on the date of grant. Prior to January 1, 2006, we did not record any compensation cost on the granting of stock options to employees and directors as the exercise price was equal to or greater than the market price at the date of grants for U.S. GAAP purposes under APB Opinion No. 25. ASC 718 Compensation Stock Expenses essentially aligns U.S. GAAP with Canadian GAAP for accounting for stock-based compensation.
|
|
(d)
|
In accordance with U.S. GAAP, the entire amount of convertible debt is classified as a liability and recorded at fair value on the date of issuance. Under Canadian GAAP, the fair value of the conversion feature of the convertible debt is classified as equity and the residual balance is classified as a liability. Under Canadian GAAP a portion of the debt issuance costs were allocated to equity. Under U.S. GAAP all issuance costs were allocated to debt. The liability portion is accreted each period in amounts which will increase the liability to its full face amount of the convertible instrument as of the maturity date. In accordance with U.S. GAAP (ASC 470 Debt) the early extinguishment of debt was accounted for as an inducement with the full amount of gain or loss calculated upon the date of extinguishment being allocated to the liability portion and accordingly shown on the Consolidated Statements of Loss. Under Canadian GAAP, the early extinguishment was accounted for under EIC 96 with the gain or loss calculated upon the date of extinguishment being allocated to debt and equity with the equity portion being accounted for as an addition to or reduction of contributed surplus.
|
|
(e)
|
In accordance with U.S. GAAP (ASC 740 Income Taxes), the reversal of a valuation allowance which is directly
|
- 15 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
related to the gain or loss of available-for-sale securities, when a corporation has no expectations of taxable income in future periods, is recorded in other comprehensive income/(loss). Under Canadian GAAP, we adopted EIC 172 “Income Statement Presentation of a Tax Loss Carryforward Recognized Following an Unrealized Gain Recorded in Other Comprehensive Income,” effective September 30, 2008. This standard requires the recognition of the tax benefit or loss of previously unrecognized tax loss carryforwards associated with the unrealized holding gains and losses of available-for-sale securities to be recognized in net income or net loss. This abstract required retrospective restatement of all prior periods beginning with January 1, 2007. The adoption of EIC 172 resulted in a future income tax expense being recorded as part of our Net Loss, whereas under ASC 740 Income Taxes, the future income tax expense would be recorded as part of our Comprehensive Loss.
The significant differences in the consolidated statements of loss and comprehensive loss relative to U.S. GAAP were:
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS - UNAUDITED
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
Cumulative during Exploration Stage
|
||||||||||||||||
Net loss – Canadian GAAP
|
$ | (1,344 | ) | $ | (1,717 | ) | $ | (7,195 | ) | $ | 293 | $ | (51,378 | ) | ||||||
Exploration, property evaluation and holding costs - continuing operations(a)
|
(2,902 | ) | (2,159 | ) | (8,569 | ) | (3,101 | ) | (27,148 | ) | ||||||||||
Exploration, property evaluation and holding costs - discontinued operations(a)
|
- | - | - | - | 4,016 | |||||||||||||||
Interest accretion on convertible notes (d)
|
158 | 251 | 650 | 776 | 2,556 | |||||||||||||||
Amortization of debt issuance costs (d)
|
(34 | ) | (69 | ) | (150 | ) | (202 | ) | (647 | ) | ||||||||||
Future income tax benefit/(expense) (e)
|
(23 | ) | (24 | ) | 4 | 757 | (97 | ) | ||||||||||||
Loss on early extinguishment of convertible notes (d)
|
- | (122 | ) | 416 | (122 | ) | 294 | |||||||||||||
Financing costs
|
- | - | - | - | (222 | ) | ||||||||||||||
Stock-based compensation expense (c)
|
- | - | - | - | 2,251 | |||||||||||||||
Beneficial conversion feature
|
- | - | - | - | (2,774 | ) | ||||||||||||||
Gain on sale of Amayapampa
|
- | - | - | - | 2,124 | |||||||||||||||
Net loss – U.S. GAAP
|
(4,145 | ) | (3,840 | ) | (14,844 | ) | (1,599 | ) | (71,025 | ) | ||||||||||
Unrealized gain on marketable securities (e)
|
187 | 162 | (31 | ) | (5,038 | ) | (6,940 | ) | ||||||||||||
Comprehensive loss – U.S. GAAP
|
$ | (3,958 | ) | $ | (3,678 | ) | $ | (14,875 | ) | $ | (6,637 | ) | $ | (77,965 | ) | |||||
Basic and diluted loss per share – U.S. GAAP
|
$ | (0.09 | ) | $ | (0.11 | ) | $ | (0.32 | ) | $ | (0.05 | ) |
- 16 -
VISTA GOLD CORP. (AN EXPLORATION STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
(All amounts in tables are in thousands of US Dollars, except per share amounts and number of shares, unless noted otherwise)
The significant differences in the consolidated statements of cash flows relative to U.S. GAAP were:
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
Cumulative during Exploration
|
||||||||||||||||||
2010
|
2009
|
2010
|
2009
|
Stage
|
||||||||||||||||
Cash flows from operating activities, Canadian GAAP
|
$ | (931 | ) | $ | (964 | ) | $ | (5,195 | ) | $ | (5,189 | ) | $ | (33,177 | ) | |||||
Additions to mineral properties, net (a)
|
(2,598 | ) | (2,126 | ) | (8,265 | ) | (3,033 | ) | (28,333 | ) | ||||||||||
Cash flows from operating activities, U.S. GAAP
|
(3,529 | ) | (3,090 | ) | (13,460 | ) | (8,222 | ) | (61,510 | ) | ||||||||||
Cash flows from investing activities, Canadian GAAP
|
(2,815 | ) | (1,454 | ) | (7,991 | ) | 5,805 | (71,489 | ) | |||||||||||
Additions to mineral properties, net (a)
|
2,598 | 2,126 | 8,265 | 3,033 | 28,333 | |||||||||||||||
Cash flows from investing activities, U.S. GAAP
|
(217 | ) | 672 | 274 | 8,838 | (43,156 | ) | |||||||||||||
Cash flows from financing activities, Canadian GAAP
|
8 | 19,841 | (2,234 | ) | 19,841 | 140,250 | ||||||||||||||
Cash flows from financing activities, U.S. GAAP
|
8 | 19,841 | (2,234 | ) | 19,841 | 140,250 | ||||||||||||||
Net increase/(decrease) in cash and cash equivalents - continuing operations
|
(3,738 | ) | 17,423 | (15,420 | ) | 20,457 | 35,584 | |||||||||||||
Net increase/(decrease) in cash and cash equivalents - discontinued operations
|
- | - | - | - | (23,270 | ) | ||||||||||||||
Net increase/(decrease) in cash and cash equivalents
|
(3,738 | ) | 17,423 | (15,420 | ) | 20,457 | 12,314 | |||||||||||||
Cash and cash equivalents, beginning of period
|
16,726 | 16,300 | 28,408 | 13,266 | 674 | |||||||||||||||
Cash and cash equivalents, end of period
|
$ | 12,988 | $ | 33,723 | $ | 12,988 | $ | 33,723 | $ | 12,988 |
The significant differences in the consolidated balance sheets as at September 30, 2010, and December 31, 2009, relative to U.S. GAAP were:
CONSOLIDATED BALANCE SHEETS - UNAUDITED
September 30, 2010
|
December 31, 2009
|
|||||||||||||||||||||||
Per Cdn. GAAP
|
Cdn./U.S. Adj.
|
Per U.S. GAAP
|
Per Cdn. GAAP
|
Cdn./U.S. Adj.
|
Per U.S. GAAP
|
|||||||||||||||||||
Current assets
|
$ | 15,158 | - | $ | 15,158 | $ | 30,317 | $ | - | $ | 30,317 | |||||||||||||
Property, plant and equipment (a)
|
69,206 | (36,598 | ) | 32,608 | 57,443 | (26,944 | ) | 30,499 | ||||||||||||||||
Other assets
|
4,813 | - | 4,813 | 4,813 | - | 4,813 | ||||||||||||||||||
Total assets
|
$ | 89,177 | $ | (36,598 | ) | $ |