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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-9025
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VISTA GOLD CORP.
(Exact Name of Registrant as Specified in its Charter)
CONTINUED UNDER THE LAWS OF THE YUKON TERRITORY NONE
(State or other Jurisdiction of Incorporation or (IRS Employer
Organization) Identification Number)
SUITE 5, 7961 SHAFFER PARKWAY
LITTLETON, COLORADO 80127
(Address of Principal Executive Offices) (Zip Code)
(720) 981-1185
(Registrant's Telephone Number, Including Area Code)
------------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common shares without par value American Stock Exchange
The Toronto Stock Exchange
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
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 / /
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-KSB OR ANY AMENDMENT TO
THIS FORM 10-KSB: /X/
REVENUES FOR THE MOST RECENT FISCAL YEAR: $915,000
AGGREGATE MARKET VALUE OF OUTSTANDING COMMON SHARES HELD BY NON-AFFILIATES:
As of March 18, 2002, the aggregate market value of outstanding Common Shares of
the registrant held by non-affiliates was approximately $10,108,350.
OUTSTANDING COMMON SHARES: As of March 18, 2002, 112,315,040 Common Shares of
the registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: To the extent herein specifically
referenced in Parts III and IV, the Management Information and Proxy Circular
for the registrant's 2002 Annual General Meeting. See Parts III and IV.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT: YES /X/ NO / /
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TABLE OF CONTENTS
PAGE
--------
GLOSSARY.............................. 1
CURRENCY.............................. 3
METRIC CONVERSION TABLE............... 3
UNCERTAINTY OF FORWARD-LOOKING
STATEMENTS.......................... 3
PART I
ITEM 1. BUSINESS...................... 4
Overview............................ 4
Refining and Marketing.............. 4
Exploration and Business
Development....................... 5
Property Interests and Mining
Claims............................ 5
Reclamation......................... 6
Government Regulation............... 6
Environmental Regulation............ 6
Competition......................... 6
Employees........................... 7
Risk Factors........................ 7
ITEM 2. PROPERTIES.................... 9
Hycroft Mine........................ 9
Amayapampa.......................... 13
ITEM 3. LEGAL PROCEEDINGS............. 18
ITEM 4. SUBMISSION OF MATTERS TO VOTE
OF SECURITY
HOLDERS............................. 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER
MATTERS............................. 20
Price Range of Common Shares........ 20
Dividends........................... 20
Exchange Controls................... 20
Certain Canadian Income Tax
Considerations for Non-Residents
of Canada......................... 20
ITEM 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............... 21
PAGE
--------
Introduction........................ 21
Results of Operations............... 21
Outlook............................. 23
ITEM 7. CONSOLIDATED FINANCIAL
STATEMENTS AND SUPPLEMENTARY
DATA................................ 24
Management's Responsibility for
Financial Information............. 24
Report of Independent Accountants... 25
Consolidated Financial Statements... 26
Notes to Consolidated Financial
Statements........................ 30
ITEM 8. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE................ 44
PART III
ITEM 9. DIRECTORS AND OFFICERS OF
REGISTRANT.......................... 45
Directors........................... 45
Executive Officers.................. 46
Executive and Audit Committees...... 46
ITEM 10. COMPENSATION OF DIRECTORS AND
OFFICERS............................ 46
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT.... 47
ITEM 12. CERTAIN RELATIONSHIP AND
RELATED TRANSACTIONS................ 47
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K... 48
Documents Filed as Part of Report... 48
Reports on Form 8-K................. 51
SUPPLEMENTAL INFORMATION.............. 52
SIGNATURES............................ 53
i
GLOSSARY
"ADIT" means a horizontal or nearly horizontal passage driven from the surface
for the working or dewatering of a mine.
"AMALGAMATION" means the amalgamation of Granges and Da Capo effective on
November 1, 1996.
"ASSAY" means to test ores or minerals by chemical or other methods for the
purpose of determining the amount of valuable metals contained.
"BRECCIA" means rock consisting of fragments, more or less angular, in a matrix
of finer-grained material or of cementing material.
"CLAIM" means a mining title giving its holder the right to prospect, explore
for and exploit minerals within a defined area.
"COMMON SHARES" means common shares without par value of Vista Gold.
"COMPUTERSHARE" means Vista Gold's registrar and transfer agent, Computershare
Trust Company of Canada (formerly Montreal Trust Company of Canada.
"CORPORATION" means the consolidated group consisting of Vista Gold Corp. and
its subsidiaries Hycroft Resources & Development, Inc., Hycroft Lewis
Mine, Inc., Vista Gold Holdings Inc., Vista Gold U.S. Inc., Granges Inc., Vista
Gold (Antigua) Corp., Compania Inversora Vista S.A., Minera Nueva Vista S.A.,
Compania Exploradora Vistex S.A.
"CUT-OFF GRADE" means the minimum grade of ore used to establish reserves.
"DA CAPO" means Da Capo Resources Ltd., a predecessor of Vista Gold.
"DEPOSIT" means an informal term for an accumulation of mineral ores.
"DIAMOND DRILL" means a rotary type of rock drill that cuts a core of rock and
is recovered in long cylindrical sections, two centimeters or more in diameter.
"DORE" means unrefined gold and silver bullion consisting of approximately 90%
precious metals, which will be further refined to almost pure metal.
"GRANGES" means Granges Inc., a predecessor of Vista Gold.
"HEAP LEACH" means a gold extraction method that percolates a cyanide solution
through ore heaped on an impervious pad or base.
"HYCROFT INC." means Hycroft Resources & Development, Inc., an indirect
wholly-owned subsidiary of Vista Gold.
"HYCROFT LEWIS" means Hycroft Lewis Mine, Inc., an indirect wholly-owned
subsidiary of Vista Gold.
"MERRILL-CROWE" means a process for recovering gold from solution by
precipitation with zinc dust.
"MINERALIZATION" means material containing valuable minerals.
"MINERAL RIDGE INC." means Mineral Ridge Resources Inc., an indirect
wholly-owned subsidiary of Vista Gold.
"ORE" means material containing valuable minerals that can be economically
extracted.
"OXIDE RESERVE" or "OXIDE RESOURCE" means mineralized rock in which some of the
original minerals have been oxidized. Oxidation tends to make the ore more
porous and permits a more complete permeation of cyanide solutions so that
minute particles of gold in the interior of the minerals will be more
readily dissolved.
1
"PROBABLE RESERVES" means reserves for which quantity and grade and/or quality
are computed from information similar to that used for proven reserves, but the
sites for inspection, sampling and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance, although lower than
that for proven reserves, is high enough to assume continuity between points of
observation.
"PROVEN RESERVES" means reserves for which (a) quantity is computed from
dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or
quality are computed from the results of detailed sampling and (b) the sites for
inspection, sampling and measurement are spaced so closely and the geologic
character is so well defined that size, shape, depth, and mineral content of
reserves are well-established.
"RECOVERY" means that portion of the metal contained in the ore that is
successfully extracted by processing, expressed as a percentage.
"RESERVES" or "ORE RESERVES" mean that part of a mineral deposit, which could be
economically and legally extracted or produced at the time of the reserve
determination.
"RESOURCE" or "MINERAL RESOURCE" means a deposit or concentration of minerals
for which there is sampling information and geologic understanding for an
estimate to be made of the contained minerals.
"RUN-OF-MINE" refers to mined ore of a size that can be processed without
further crushing.
"SAMPLING" means selecting a fractional, but representative, part of a mineral
deposit for analysis.
"STRIKE", when used as a noun, means the direction, course or bearing of a vein
or rock formation measured on a level surface and, when used as a verb, means to
take such direction, course or bearing.
"STRIKE LENGTH" means the longest horizontal dimension of an orebody or zone of
mineralization.
"STRIPPING RATIO" means the ratio between waste and ore in an open pit mine.
"SULFIDE" means a compound of sulfur and some other element.
"TAILINGS" means material rejected from a mill after most of the valuable
minerals have been extracted.
"TRENCHING" means prospecting in which subsurface strata are exposed by digging
pits across the strike of a lode.
"VEIN" means a fissure, fault or crack in a rock filled by minerals that have
traveled upwards from some deep source.
"VISTA GOLD" means Vista Gold Corp.
"VOLCANICLASTIC" means derived by ejection of volcanic material from a volcanic
vent.
"WASTE" means rock lacking sufficient grade and/or other characteristics of ore.
"YAMIN" means Sociedad Industrial Yamin Limitada, until February 7, 2000, a
direct wholly-owned subsidiary of Vista Gold.
"ZAMORA" means Zamora Gold Corp.
2
CURRENCY
Unless otherwise specified, all dollar amounts in this report are expressed in
United States dollars.
METRIC CONVERSION TABLE
TO CONVERT IMPERIAL MEASUREMENT UNITS TO METRIC MEASUREMENT UNITS MULTIPLY BY
------------------------------------- --------------------------- -----------
Acres................................... Hectares................................ 0.4047
Feet.................................... Meters.................................. 0.3048
Miles................................... Kilometers.............................. 1.6093
Tons (short)............................ Tonnes.................................. 0.9071
Gallons................................. Liters.................................. 3.7850
Ounces (troy)........................... Grams................................... 31.103
Ounces (troy) per ton (short)........... Grams per tonne......................... 34.286
UNCERTAINTY OF FORWARD-LOOKING STATEMENTS
This document, including any documents that are incorporated by reference as set
forth on the face page under "Documents incorporated by reference", contains
forwarding-looking statements concerning, among other things, projected annual
gold production, mineral resources, proven or probable reserves and cash
operating costs. Such statements are typically punctuated by words or phrases
such as "anticipates", "estimates", "projects", "foresees", "management
believes", "believes" and words or phrases of similar import. Such statements
are subject to certain risks, uncertainties or assumptions. If one or more of
these risks or uncertainties materialize, or if underlying assumptions prove
incorrect, actual results may vary materially from those anticipated, estimated
or projected. Important factors that could cause actual results to differ
materially from those in such forward-looking statements are identified in this
document under "Item 1. Business--Risk Factors". Vista Gold assumes no
obligation to update these forward-looking statements to reflect actual results,
changes in assumptions, or changes in other factors affecting such statements.
3
PART I
ITEM 1. BUSINESS.
OVERVIEW
The Corporation is engaged in the exploration for and the acquisition,
development and operation of mineral properties in North and South America.
Since 1971, the Corporation and its predecessor companies have held
participating interests in seven mines, four of which were discovered by the
Corporation. The Corporation has also operated five of the seven mines.
Vista Gold was originally incorporated on November 28, 1983 under the name
"Granges Exploration Ltd.". In November 1983, Granges Exploration Ltd. acquired
all the mining interests of Granges AB in Canada. On June 28, 1985, Granges
Exploration Ltd. and Pecos Resources Ltd. amalgamated under the name "Granges
Exploration Ltd." and on June 9, 1989, Granges Exploration Ltd. changed its name
to "Granges Inc.". On May 1, 1995, Granges and Hycroft Resources & Development
Corporation were amalgamated under the name "Granges Inc.". Effective
November 1, 1996, Granges and Da Capo Resources Ltd. amalgamated under the name
"Vista Gold Corp.". Effective December 19, 1997, Vista Gold was continued from
British Columbia to the Yukon Territory, Canada under the BUSINESS CORPORATIONS
ACT (Yukon Territory).
During 2001, the Corporation's primary operation, the Hycroft mine in Nevada
remained shut down pending improved gold prices. However, the Hycroft mine
continued to be the principal source of earnings for the Corporation because
gold and by-product silver continued to be produced from ore previously placed
on the heap leach pads. See "Item 2. Properties--Hycroft Mine".
In 1998, the Corporation acquired 100% of the shares of Mineral Ridge Inc., the
entity that owned the Mineral Ridge mine, a gold property located in Nevada.
During 1999, Mineral Ridge Inc., sought protection under the U.S. Bankruptcy
Code in order to begin the process of a permanent cessation of all mining
activities. By the end of 2000, the court appointed trustee had sold all the
assets of Mineral Ridge Inc. and in January 2001, the bankruptcy case was
dismissed. See "Item 3. Legal Proceedings".
The Corporation owns the Amayapampa gold property in Bolivia for which a
feasibility study was completed in 1997 and a revised feasibility study was
completed in the first quarter of 2000.
The Corporation holds several mining claims in Canada and owns approximately a
25% equity interest in Zamora, a Canadian mineral exploration company with
interests in mineral concessions in southern Ecuador. The Corporation performed
no exploration or development activity in 2001.
The current addresses, telephone and facsimile numbers of the offices of the
Corporation are:
EXECUTIVE OFFICE REGISTERED AND RECORDS OFFICE
---------------- -----------------------------
Suite 5 - 7961 Shaffer Parkway 200 - 204 Lambert Street
Littleton, Colorado, USA Whitehorse, Yukon Territory, Canada
80127 Y1A 3T2
Telephone: (720) 981-1185 Telephone: (867) 667-7600
Facsimile: (720) 981-1186 Facsimile: (867) 667-7885
REFINING AND MARKETING
The gold and by-product silver produced at the Hycroft mine are refined by
Metalor USA Refining Corporation in North Attleboro, Massachusetts. Gold and
silver can be sold on numerous markets throughout the world, and the market
price is readily ascertainable. Alternate refiners for the gold and silver
produced at the Hycroft mine are available if necessary. As a result of the
large number of available gold and silver purchasers, the Corporation is not
dependent upon the sale to any one customer of either its gold or silver.
4
GOLD AND SILVER SALES
The profitability of gold and silver mining is directly related to the market
price of the metal compared with the cost of production. The following is a
brief description of factors affecting, and historical trends in, the market
prices of gold, which accounts for most of the Corporation's revenue.
Gold prices fluctuate and are affected by numerous factors, including, but not
limited to, expectations with respect to the rate of inflation, exchange rates
(specifically, the U.S. dollar relative to other currencies), interest rates,
global and regional political and economic circumstances and governmental
policies, including those with respect to gold holdings by central banks. The
demand for and supply of gold affect gold prices, but not necessarily in the
same manner as demand and supply affect the prices of other commodities. The
supply of gold consists of a combination of new mine production and existing
stocks of bullion and fabricated gold held by governments, public and private
financial institutions, industrial organizations and private individuals. The
demand for gold primarily consists of jewelry and investments. Additionally,
hedging activities by producers, consumers, financial institutions and
individuals can affect gold supply and demand. Gold can be readily sold on
numerous markets throughout the world and its market value can be ascertained at
any particular time. As a result, the Corporation is not dependent upon any one
customer for the sale of its product.
The Corporation has no forward sales commitments and does not currently hedge
any gold production.
EXPLORATION AND BUSINESS DEVELOPMENT
The Corporation's exploration and business development activities are focused on
gold. In the United States, the Corporation has an exploration project at the
Hycroft mine located in Nevada. In Bolivia, the Amayapampa properties represent
both development and exploration projects. The Corporation's exploration
headquarters are in Littleton, Colorado. The exploration department has a
permanent staff of one geologist. Consultants and contract personnel are used on
a project basis. The Corporation did not have sufficient funds to perform any
exploration and development work in 2001.
PROPERTY INTERESTS AND MINING CLAIMS
In the United States, most of the Corporation's exploration activities are
conducted in the state of Nevada. Mineral interests may be owned in Nevada by
(i) the United States, (ii) the state of Nevada, or (iii) private parties. Where
prospective mineral properties are owned by private parties, or by the state,
some type of property acquisition agreement is necessary in order for the
Corporation to explore or develop such property. Generally, these agreements
take the form of long term mineral leases under which the Corporation acquires
the right to explore and develop the property in exchange for periodic cash
payments during the exploration and development phase and a royalty, usually
expressed as a percentage of gross production or net profits derived from the
leased properties if and when mines on the properties are brought into
production. Other forms of acquisition agreements are exploration agreements
coupled with options to purchase and joint venture agreements. Where prospective
mineral properties are held by the United States, mineral rights may be acquired
through the location of unpatented mineral claims upon unappropriated federal
land. If the statutory requirements for the location of a mining claim are met,
the locator obtains a valid possessory right to develop and produce minerals
from the claim. The right can be freely transferred and, provided that the
locator is able to prove the discovery of locatable minerals on the claims, is
protected against appropriation by the government without just compensation. The
claim locator also acquires the right to obtain a patent or fee title to his
claim from the federal government upon compliance with certain additional
procedures.
Mining claims are subject to the same risk of defective title that is common to
all real property interests. Additionally, mining claims are self-initiated and
self-maintained and therefore, possess some unique vulnerabilities not
associated with other types of property interests. It is impossible to ascertain
the validity of unpatented mining claims solely from an examination of the
public real estate records and, therefore, it
5
can be difficult or impossible to confirm that all of the requisite steps have
been followed for location and maintenance of a claim. If the validity of a
patented mining claim is challenged by the Bureau of Land Management or Forest
Service on the grounds that mineralization has not been demonstrated, the
claimant has the burden of proving the present economic feasibility of mining
minerals located thereon. Such a challenge might be raised when a patent
application is submitted or when the government seeks to include the land in an
area to be dedicated to another use.
RECLAMATION
Although reclamation is conducted concurrently with mining whenever feasible,
the Corporation generally is required to mitigate long-term environmental
impacts by stabilizing, contouring, resloping, and revegetating various portions
of a site after mining and mineral processing operations are completed. These
reclamation efforts are conducted in accordance with detailed plans, which have
been reviewed and approved by the appropriate regulatory agencies.
Management estimates the remaining reclamation costs for the Hycroft mine to be
$2.9 million. These costs have been charged to earnings over the life of the
mine and the provision as of December 31, 2001 was $3.1 million. An amended
Crofoot/Lewis Mine Reclamation Plan that included the new Brimstone deposit was
submitted to the Nevada Bureau of Land Management (the "BLM") in March 1994. In
April 1995, the BLM approved the plan and a surety bond in the amount of
$5.1 million was posted to secure reclamation obligations under the plan.
GOVERNMENT REGULATION
Mining operations and exploration activities are subject to various national,
state, provincial and local laws and regulations in the United States, Bolivia,
Canada and other jurisdictions, which govern prospecting, development, mining,
production, exports, taxes, labor standards, occupational health, waste
disposal, protection of the environment, mine safety, hazardous substances and
other matters. The Corporation has obtained or has pending applications for
those licenses, permits or other authorizations currently required to conduct
its operations. The Corporation believes that it is in compliance in all
material respects with applicable mining, health, safety and environmental
statutes and the regulations passed thereunder in the United States, Canada,
Bolivia and the other jurisdictions in which the Corporation operates. There are
no current orders or directions with respect to the foregoing laws and
regulations.
ENVIRONMENTAL REGULATION
The Corporation's mining operations and exploration activities are subject to
various federal, state and local laws and regulations governing protection of
the environment. These laws are continually changing and, as a general matter,
are becoming more restrictive. The Corporation's policy is to conduct business
in a way that safeguards public health and the environment. The Corporation
believes that its operations are conducted in material compliance with
applicable laws and regulations.
Changes to current local, state or federal laws and regulations in the
jurisdictions where the Corporation operates could require additional capital
expenditures and increased operating and/or reclamation costs. Although the
Corporation is unable to predict what additional legislation, if any, might be
proposed or enacted, additional regulatory requirements could render certain
mining operations uneconomic.
During 2001, there were no material environmental incidents or non-compliance
with any applicable environmental regulations.
COMPETITION
The Corporation competes with other mining companies in connection with the
acquisition of gold and other precious metals properties. There is competition
for the limited number of gold acquisition
6
opportunities, some of which is with other companies having substantially
greater financial resources than the Corporation. As a result, the Corporation
may have difficulty acquiring attractive gold mining properties.
The Corporation believes no single company has sufficient market power to affect
the price or supply of gold in the world market.
EMPLOYEES
As at December 31, 2001, the Corporation had 10 full-time employees, of which
five were employed at the Hycroft mine, one was employed in exploration
activities in Littleton, Colorado and four were employed at the Corporation's
executive office.
The Hycroft mine has never experienced a loss of production due to a work
stoppage. The Corporation considers its relations with its employees to be
satisfactory.
RISK FACTORS
FLUCTUATING PRICES
The Corporation's revenues are expected to be, in large part, derived from the
mining and sale of gold and other precious metals or interests related thereto.
The price of those commodities has fluctuated widely, and is affected by
numerous factors beyond the control of the Corporation, including international,
economic and political trends, expectations of inflation, currency exchange
fluctuations, central bank activities, interest rates, global or regional
consumption patterns (such as the development of gold coin programs),
speculative activities and increased production due to new mine developments and
improved mining and production methods. The effect of these factors on the price
of precious metals, and therefore the economic viability of any of the
Corporation's projects, cannot accurately be predicted.
EXPLORATION
Substantial expenditures are required to establish ore reserves through drilling
and analysis, to develop metallurgical processes to extract metal from the ore
and, in the case of new properties, to develop the mining and processing
facilities and infrastructure at any site chosen for mining. Although
substantial benefits may be derived from the discovery of a major mineralized
deposit, no assurance can be given that minerals will be discovered in
sufficient quantities to justify commercial operations or that the funds
required for development can be obtained on a timely basis.
OPERATING HAZARDS AND RISKS
Mineral exploration involves many risks that even a combination of experience,
knowledge and careful evaluation may not be able to overcome. Operations in
which the Corporation has direct or indirect interests will be subject to all
the hazards and risks normally incidental to exploration, development and
production of gold and other metals, any of which could result in work
stoppages, damage to property and possible environmental damage. Although the
Corporation has obtained liability insurance in an amount that it considers
adequate, the nature of these risks is such that liabilities might exceed policy
limits; it is also possible that the liabilities and hazards might not be
insurable; or, the Corporation could elect not to insure itself against such
liabilities due to high premium costs or other reasons, in which event, the
Corporation could incur significant costs that could have a material adverse
effect upon its financial condition.
MINORITY INTEREST IN PROPERTIES
Third parties hold minority interests in certain of the Corporation's
properties. Under Bolivian law, a minority interest in a mining concession is an
undivided interest in that concession and the holder of such a
7
minority interest may take action to restrict all exploration and development of
the mining concessions by the holder of the majority interest if such
exploration and development is conducted without the minority owner's
permission. Furthermore, if the majority and minority parties wish to separate
their interests, but are unable to agree as to the method of division or
purchase of the property, the parties must file a request for division before a
Bolivian civil court.
CALCULATION OF RESERVES AND GOLD RECOVERY
There is a degree of uncertainty attributable to the calculation of reserves and
corresponding grades being mined or dedicated to future production. Until
reserves are actually mined and processed, the quantity of ore and grades must
be considered as an estimate only. In addition, the quantity of reserves and ore
may vary depending on metal prices. Any material change in the quantity of
reserves, mineralization, grade or stripping ratio may affect the economic
viability of the Corporation's properties. In addition, there can be no
assurance that gold recoveries or other metal recoveries in small-scale
laboratory tests will be duplicated in larger scale tests under on-site
conditions or during production.
ENVIRONMENTAL FACTORS
All phases of the Corporation's operations are subject to environmental
regulation. Environmental legislation is evolving in a manner which will require
stricter standards and enforcement, increased fines and penalties for
non-compliance, more stringent environmental assessments of proposed projects
and a heightened degree of responsibility for companies and their officers,
directors and employees. There is no assurance that future changes in
environmental regulation, if any, will not adversely affect the Corporation's
operations.
COMPETITION AND AGREEMENTS WITH OTHER PARTIES
The mining industry is intensely competitive in all of its phases, and the
Corporation competes with many companies possessing greater financial resources
and technical facilities than itself. Competition could adversely affect the
Corporation's ability to acquire capital, to attract skilled employees, or to
obtain suitable producing properties or prospects for mineral exploration in the
future.
CONFLICTS OF INTEREST
Certain directors of the Corporation are officers and/or directors of, or are
associated with other natural resource companies that acquire interests in
mineral properties. Such associations may give rise to conflicts of interest
from time to time. In the event that any such conflict of interest arises, a
director who has such a conflict will disclose the conflict to a meeting of the
directors of the company in question and will abstain from voting for or against
approval of any matter in which such director may have a conflict. In
appropriate cases, the company in question will establish a special committee of
independent directors to review a matter in which several directors, or
management, may have a conflict. In accordance with the laws of the Yukon
Territory, the directors of all companies are required to act honestly, in good
faith and in the best interests of a company for which they serve as a director.
TITLE TO ASSETS
Although the Corporation has reviewed and is satisfied with the title for all
mineral properties in which it has a material interest, there is no guarantee
that title to such concessions will not be challenged or impugned.
POLITICAL AND ECONOMIC INSTABILITY IN SOUTH AMERICA
Certain of the Corporation's exploration and development interests are in
Bolivia and Ecuador. As a result, the Corporation may be affected by risks
associated with political or economic instability in those
8
countries. The risks include, but are not limited to: military repression,
extreme fluctuations in currency exchange rates, labor instability or militancy,
mineral title irregularities and high rates of inflation. Changes in mining or
investment policies or shifts in political attitude in the aforementioned
countries may adversely affect the Corporation's business. Operations may be
affected in varying degrees by government regulation with respect to
restrictions on production, price controls, export controls, income taxes,
expropriation of property, maintenance of claims, environmental legislation,
land use, land claims of local people, water use and mine safety. The effect of
these factors cannot be accurately predicted.
FOREIGN CURRENCY
The Corporation's operations throughout North and South America render the
Corporation subject to foreign currency fluctuations, which may materially
affect financial position and results. The Corporation does not engage in
currency hedging to offset any risk of currency fluctuations.
CASH RESOURCES AND LIQUIDITY
The Corporation believes that it has sufficient financial resources to continue
producing gold from previously mined ore at the Hycroft mine. However, the
Corporation will have to raise additional funds from external sources in order
to restart mining activities at the Hycroft mine or begin construction and
development activities at the Amayapampa project in Bolivia. There can be no
assurance that additional financing will be available at all or on acceptable
terms and, if additional financing is not available, the Corporation may have to
substantially reduce or cease its operations.
In January 2002, the Corporation announced that it had finalized an agency
agreement for a private placement financing of $3.8 million, subject to
shareholder and regulatory approval. This is discussed in Item 7, Consolidated
Financial Statements, Note 14.
REPORTS TO SECURITY HOLDERS
The Corporation files reports with the United States Securities and Exchange
Commission (the "SEC") as required under United States' securities laws. These
reports, proxy and information statements, and other information regarding the
Corporation and other issuers that file electronically with the SEC can be found
on the SEC's Internet site at www.sec.gov.
ITEM 2. PROPERTIES.
Detailed information is contained herein with respect to the Hycroft mine and
the Amayapampa properties. Vista Gold holds the Hycroft mine through its
wholly-owned subsidiaries, Vista Gold Holdings Inc., Hycroft Resources
Development, Inc. and Hycroft Lewis Mine, Inc. Vista Gold holds the Bolivian
properties through its wholly-owned subsidiaries, Vista Gold (Antigua) Corp.,
Compania Inversora Vista S.A., Minera Nueva Vista S.A., and Compania Exploradora
Vistex S.A. Estimates of reserves and production herein are subject to the
effect of changes in metal prices and to the risks inherent in mining and
processing operations.
HYCROFT MINE
The Hycroft mine and related facilities are located 54 miles (86 kilometers)
west of Winnemucca, Nevada. The mine is an open-pit, heap leaching operation
that produces gold and by-product silver. In 1983, the Lewis Mine commenced
operation as a small heap-leach gold mine. The Corporation acquired the Lewis
mine in early 1987 and completed construction of the adjacent Crofoot mine
project in April 1988. In early 1989, the two mines were consolidated into a
single operation under an ore purchase agreement, with ore from both properties
processed through the larger and more efficient Crofoot plant. Hycroft Inc.
began stripping at the new Brimstone pit, located one mile to the east of the
existing Central Fault pit, in April 1996 and commenced construction of a new
3 million-square-foot (280,000 square meter) leach pad
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and a 2,800 gallon-per-minute (10,598 liter-per-minute) leach solution
processing plant in the summer of the same year. Ore from the Brimstone pit was
hauled to the new leach pad beginning in September 1996 and the Brimstone plant
commenced operation in February 1997. Mining operations at the Hycroft mine were
suspended in December 1998.
Gold production, from continued leaching and rinsing of the heap leach pads,
continued in 1999, 2000, and 2001. Production has declined steadily, as
expected, although the recoveries from the heap leach pads have been better than
originally anticipated. In 2001, the Hycroft mine produced 3,232 ounces of gold,
gold production for 2002 is expected to be approximately 1,000 ounces.
DESCRIPTION OF PROPERTIES
The Crofoot and Lewis properties together comprise approximately 12,230 acres
(4,950 hectares). The Crofoot property, originally held under two leases, covers
approximately 3,544 acres (1,435 hectares). The Lewis property, which virtually
surrounds the Crofoot property, is held through a lease that covers
approximately 8,686 acres (3,515 hectares). The mine is accessible by road and
has access to adequate supplies of water and power. The major mining facilities
consist of four leach pads, two Merrill-Crowe gold-silver recovery plants, two
carbon plants and associated maintenance and support facilities.
GEOLOGY AND HISTORY
The Hycroft mine is located on the western flank of the Kamma Mountains. The
deposit is hosted in a volcanic eruptive breccia and conglomerates associated
with the Tertiary Kamma Mountain volcanics. The volcanics are mainly acidic to
intermediate tuffs, flows and coarse volcaniclastic rocks. Fragments of these
units dominate the clasts in the eruptive breccia. Volcanic rocks have been
block-faulted by dominant north-trending structures, which have affected the
distribution of alteration and mineralization. The Central Fault and East Fault
control the distribution of mineralization and subsequent oxidation. A
post-mineral range-front fault separates the orebody from the adjacent
Pleistocene Lahontan Lake sediments in the Black Rock Desert. The geological
events have created a physical setting ideally suited to the open-pit,
heap-leach mining operation at the Hycroft mine. The heap leach method is widely
used in the southwestern United States and allows the economical treatment of
oxidized low-grade ore deposits in large volumes.
The known gold mineralization within the Crofoot and Lewis properties extends
for a distance of three miles (4.8 kilometers) in a north-south direction by 1.5
miles (2.5 kilometers) in an east-west direction. Mineralization extends to a
depth of less than 330 feet (100 meters) in the outcropping to near-outcropping
portion of the deposit on the northwest side to over 990 feet (300 meters) in
the Brimstone deposit in the east. Not all the mineralization is oxidized and
the depth of oxide ore varies considerably over the area of mineralization. The
determination of whether mineralization can be mined economically is dependent
on the grade of mineralization, the depth of overburden and the degree
of oxidation.
In 1992, Hycroft Inc. exercised its options to convert its leasehold interests
in the Crofoot property into a 100% ownership interest in the patented mining
claims, a 100% possessory interest in the unpatented claims and a 100% interest
in the incidental rights thereto, all subject to 4% net profits royalties and
excluding rights to sulfur. No royalty payments were made in 1995, 1994 and 1993
because minimum royalty payments made prior to 1993 aggregating $2.8 million
were available for credit against the royalty obligations. The Crofoot
lease/purchase agreement was amended in 1996 to provide for minimum advance
royalty payments of $120,000 on January 1 of each year in which mining occurs.
An additional $120,000 payment is due if ore production exceeds 5.0 million tons
from the Crofoot property in any calendar year. All advance royalty payments are
available as credit against the 4% net profit royalty. The aggregate acquisition
cost to Hycroft Inc. was $6,881,481 and was financed by the issuance of Common
Shares and the assumption of certain debts associated with the Lewis mine.
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The leasehold interest in the Lewis property extends until January 1, 2013 or
for so long thereafter as Hycroft Lewis continues to conduct commercial mining
operations on the property. The Lewis lease provides for the payment to the
lessor of a 5% net smelter return royalty on gold production. The royalty
increases for ore grades above 0.05 ounce per ton and is offset by annual
advance minimum royalties. The Corporation has the right to commingle the ore
from the Lewis property with ore from the adjoining Crofoot property under an
agreement with the lessor of the Lewis property.
The ore mined to date from the Brimstone deposit, which lies partially on the
Crofoot property and partially on the Lewis property, was processed on both the
Brimstone leach pad and the Crofoot leach pad. The allocation of metal produced
from the commingled Crofoot and Lewis ores is calculated using methods
consistent with industry standards.
MINING AND PROCESSING
During 2001, no ore was excavated at the Hycroft mine. Waste stripping was
suspended in January 1998 and ore mining was suspended in December 1998.
Until November 1996, higher-grade ore was crushed prior to treatment on the
leach pads. From November 1996 to December 1998, all ore was hauled directly to
the leach pads without crushing. Dilute alkaline cyanide solution is pumped from
a pond to the heap surface and distributed evenly over the crushed and
run-of-mine ore through a network of pipes and irrigation sprinklers or drip
emitters. The solution percolates down through the layers of ore, preferentially
leaching gold and silver from the rock. This pregnant solution, containing
dissolved gold and silver, flows along the surface of the impervious leach pad
to a collection ditch from which it drains into one of two pregnant solution
ponds. The low-grade solutions are recirculated to the heaps to increase the
amount of gold in the solution, and the high-grade solution is pumped directly
to the recovery plant where the gold and silver are extracted. The process is a
zero-discharge closed circuit.
Early in 2000 Hycroft purchased two used carbon adsorption plants; one with a
nominal capacity of 500 gallons per minute and the other with a capacity of
1,500 gallons per minute. These plants are used to concentrate gold from leach
solutions by adsorbing it onto activated carbon. Typically at Hycroft the carbon
will load to around 100 ounces of gold per ton of carbon. Periodically a batch
of the carbon is removed and shipped to Metals Research, an independent company
in Idaho, which strips the gold off of the carbon, and produces a dore bar which
is then shipped to Metalor for refining and sale. The Crofoot/Merrill-Crowe
plant was shut down in April 2000, and all of the gold production since April
was via the 1,500 gpm carbon plant. The Brimstone/Merrill-Crowe plant was shut
down at the end of October 2000 and all production from that time has been from
the 500 gpm carbon plant. The Merrill-Crowe plants are available for restart
once mining restarts, and the amount of gold, the volume of solutions and the
reagent levels return to normal production levels. In the mean time, however,
the carbon plants are the preferred method for continuing gold production as
they function well with the current lower and variable flow rates, the lower
precious metals values in solution and the lower reagent values in the solution.
ORE RESERVES
Gold production from the Brimstone deposit at the Hycroft mine has consistently
exceeded projections. During 1999 and 2000, the Corporation conducted a
$0.6 million exploration program to determine the reasons for the excess gold
production, and to re-estimate the grade and tons of the reserves in the
Brimstone deposit. Mineral Resources Development, Inc. ("MRDI"), an independent
consultant was retained to assist with the evaluation and to provide an
independent review of the recalculated mineable reserves. During the period 1996
through 1998, gold mined from the north end of the Brimstone deposit exceeded
planned production by 47,090 ounces, or 26%. The excess gold production was a
result of mining 13% more ore tons at a 12% higher average grade than predicted
in the exploration reserve model.
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To evaluate the potential for a similar favorable variance in the remaining
Brimstone resource, nine diamond drill holes for a total of 4,870 feet (1,484
meters) and 11 reverse-circulation drill holes for a total of 5,540 feet (1,689
meters) were completed in the unmined southern portion of the Brimstone deposit.
Seventeen of the 20 holes were twin holes, which were used to establish an
adjustment (upgrade) factor for the remaining Brimstone resource. Working with
MRDI engineers, a gold-grade enhancement of 25% was estimated.
During 1999 and the early part of 2000, Vista Gold completed a new study of the
ore reserves in the Brimstone deposit, the largest ore resource at the Hycroft
Mine. Proven and probable minable reserves contained in the planned Brimstone
Pit contain 23,791,000 tons (21,581,000 tonnes) of ore with an average gold
content of 0.020 ounces per ton (0.69 grams per tonne). Ore reserve calculations
were based upon a gold price of US$300 per ounce and an economic cut-off grade
equivalent to 0.007 ounces of gold per ton of ore (0.24 grams per tonne).
Metallurgical recovery of gold from run-of-mine leaching of the Brimstone ore is
projected to be 57% and the planned pit would have a stripping ratio of
1.2-to-1. The ore reserves calculated at US$275 per ounce are not significantly
different.
The planned pit contains an additional 2,349,000 tons (2,130,778 tonnes) of
material classified as inferred resource containing an estimated 41,535 ounces
of gold (average grade--0.018 ounces per ton (0.62 grams per tonne).
Ore reserves and resources were estimated under the direction of Mr. Warren
Bates, International Exploration Manager, and have been independently reviewed
by MRDI. The definition of "ore reserve" employed by Vista Gold is consistent
with USGS Circular 831 and meets the standard for "probable mining reserve"
under National Instrument 43-101 of the Canadian Securities Administrators.
Stated inferred resources are equivalent to "inferred mineral resources" under
National Instrument 43-101 of the Canadian Securities Administrators.
OPERATING STATISTICS
Operating statistics for the Hycroft mine for the period 1997 to 2001 were as
follows:
YEARS ENDED DECEMBER 31
----------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
Ore and waste material mined (000's of tons)..... Nil Nil Nil 10,127 37,531
Strip ratio...................................... Nil Nil Nil 0.42 2.53
Ore processed (000's of tons)(1)................. Nil Nil Nil 7,117 10,629
Ore grade (oz. gold/ton)......................... N/A N/A N/A 0.018 0.020
Ounces of gold produced.......................... 3,232 13,493 40,075 112,685 117,378
Cash operating costs ($/oz. of gold)(2).......... $210 $183 $277 $229 $261
------------------------
(1) Ore processed means ore placed on pads but not necessarily leached during
the year.
(2) Cash operating costs is composed of all direct mining expenses including
inventory changes, refining and transportation costs, less by-product silver
credits.
Gold production for 2001 was down significantly from 2000. The decreased gold
production was due to the suspension of mining activities at the Hycroft mine in
December 1998 and the continued depletion by leaching and rinsing of gold
contained in the heaps. All 2001, 2000 and 1999 gold production was from ore
that had been mined in previous years.
MINE SITE EXPLORATION
At the Hycroft mine in Nevada, nine diamond drill holes for 4,870 feet (1,485
meters) and 11 reverse-circulation drill holes for 5,540 feet (1,690 meters)
were completed in the unmined southern portion of the
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Brimstone deposit in 1999. Seventeen of the 20 holes were twin holes, which were
used to establish an upgrade factor for the remaining Brimstone resource. The
upgrade program was necessary in light of the fact that historical gold
production from the Brimstone deposit was 26% greater than predicted from the
1995 ore reserves.
Over 525 reverse-circulation drill holes were re-logged in the Albert and
Brimstone area, a new geologic model was built, and the current assay and
geologic files were audited and re-entered into a new database.
There is significant potential to extend the oxide mineralization to the south,
along strike, at both the Central Fault and Brimstone deposits, but the greatest
upside lies in the largely unexplored sulfide mineralization below the Brimstone
deposit, as well as higher grade intercepts along the Central Fault.
Current resources at Brimstone are limited to the oxide cap of an apparently
large but previously unexplored gold-bearing sulfide system. Two diamond drill
holes, drilled in 1996 and earlier, have intercepted mineralized sulfides
averaging 0.023 ounces per ton gold and 0.5 ounces per ton silver over intervals
exceeding 500 feet (153 meters) in thickness. In 1996, the Corporation also
intercepted 30 feet (nine meters) of gold mineralization in drill hole 95-2728.
This intercept assayed 0.155 ounces per ton gold at a true depth of 310 feet (94
meters) below surface. The hole terminated in this mineralization, so the true
width of the mineralization is unknown. Vista Gold intends to investigate these
targets when market conditions improve and funding is available.
AMAYAPAMPA
SUMMARY
The Amayapampa property consists of 24 mining concessions covering 805 hectares
(1,989 acres) plus an additional 6,800 hectares (16,803 acres) in regional
exploration and exploitation concessions. The Corporation is in the process of
refiling the concessions as required by the new mining law. The deposit is
approximately 600 meters (1,970 feet) in strike length, 30 to 70 meters (98 to
230 feet) in width, and extends to over 200 meters (656 feet) in depth. Gold
occurs free and associated with sulfides in a structural zone in which quartz
veins were emplaced then sheared prior to introduction of sulfides and gold
mineralizing solutions. Prior to the Amalgamation, CEM (as defined below under
"Ownership") mined the Amayapampa deposit using primarily open-stope methods at
a rate of approximately 220 tons (200 tonnes) of ore per day, and processed the
ore in two mills on site. See "Ownership" and "History" below.
Approval of the permit to construct and operate, called the DECLATORIA DE
IMPACTO AMBIENTAL, under Article 24 of the Environmental Law was received on
May 6, 1998. This permit was based on a 3,300-tonne-per-day (3,638-ton-per-day)
ore processing project, and if financing arrangements for the project are
obtained, the Corporation will request a modification of the permit to allow
operation at the lower production rate.
In the fall of 1999, with gold prices rising above $300 per ounce, an update and
additional optimization of the feasibility study was begun. It was completed in
the first quarter of 2000. Based on a gold price of $300 per ounce, the proven
and probable reserves at Amayapampa were calculated by Mine Reserve
Associates, Inc., an independent consultant, to be 9.3 million tonnes
(10.2 million tons) grading 1.76 grams per tonne (0.051 ounces per ton)
including dilution, containing 526,000 ounces of gold. Gold production during
the first five years of operations is estimated to average approximately 47,400
ounces per year. The initial capital costs are estimated to be about
$25 million, including contingency and necessary working capital. Average
operating costs are estimated to be $7.99 per tonne ($7.25 per ton) of ore for a
total cash cost of $168 per gold ounce. The Corporation is examining various
development and production scenarios, and believes that a gold price of $325 per
ounce will be required for construction and development to commence. At a gold
price of $325 per ounce, the project is expected to generate an after-tax
internal rate of return of 20%.
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In February 2000, the Corporation signed an agreement with the government of
Bolivia, which provides for the refund of approximately $2.0 million of
value-added taxes and customs duties that would be paid by the Corporation
during the construction period. These refunds will be used to pay for certain
improvements to infrastructure that are required by the project and will also
benefit the inhabitants of the area. The Corporation would be entitled to a
refund of these taxes and duties over time anyway, but the agreement accelerates
the refund.
LOCATION AND ACCESS
The Amayapampa property is located 300 kilometers (186 miles) southeast of La
Paz in the Chayanta Municipality, Bustillos Province, Department of Potosi, in
southwestern Bolivia (Latitude: 18 DEG.34.5"S, Longitude: 66 DEG.22.4"W). Access
is via 268 kilometers (167 miles) of paved road from La Paz to Machacamarca near
Oruro, followed by 100 kilometers (62 miles) of gravel road to Lagunillas, then
14 kilometers (nine miles) of dirt road to Amayapampa. Total driving time is
about six hours. Charter air service is available to Uncia, 35 kilometers (22
miles) from the project.
The Amayapampa property is situated within the moderately rugged Eastern
Cordilleran region of Bolivia with elevations at the property varying from 3,750
meters to 4,100 meters (12,300 to 13,450 feet) above sea level. The area is
generally arid with a defined rainy season during the summer months of November
through April. There is little or no precipitation during the rest of the year.
OWNERSHIP
On April 28, 1994, Da Capo entered into an agreement with Mr. David Anthony
O'Connor of Casilla 11314, La Paz, Bolivia and La Compania Minera Altoro S.R.L.
("Altoro") of Casilla 11314, La Paz, Bolivia, both parties at arm's length to
Da Capo, which was amended by agreements dated June 10, 1994 and July 15, 1994
(the "Altoro/O'Connor Agreement"), pursuant to which Mr. O'Connor and Altoro
assigned to Da Capo:
(a) Altoro's exclusive right and option to acquire a 51% interest in eight
mining concessions that constitute a part of the Amayapampa property (and
a further option to acquire an additional 19% interest in such
concessions), pursuant to an option agreement dated March 22, 1994 (the
"Amayapampa Option") between Altoro and Raul Garafulic Gutierrez
("R. Garafulic") of Ave. Argentina No. 2057, Casilla 9285, La Paz,
Bolivia and Compania Exploradora de Minas S.A. ("CEM", and collectively
with R. Garafulic, the "Amayapampa Vendors") of Calle San Salvador 1421,
Casilla 4962, La Paz, Bolivia. The Amayapampa Vendors are both parties at
arm's length to Da Capo;
(b) Mr. O'Connor's exclusive right and option to acquire the Capa Circa
property pursuant to an option agreement dated January 12, 1994 (the
"Yamin Option Agreement") between Mr. O'Connor and Yamin. See "Capa Circa
Property--Ownership"; and
(c) a 100% interest in the Santa Isabel Property, for which an exploration
concession application had been made on behalf of Altoro.
As consideration for the assignment of the above interests, Da Capo issued a
total of 1,000,000 Da Capo common shares to Mr. O'Connor between June 30, 1994
and April 16, 1996.
On February 5, 1996, Da Capo exercised the Amayapampa Option and acquired a 51%
interest in the eight mining concessions that constitute a part of the
Amayapampa property in consideration for: (i) the cancellation of a loan in the
amount of $2,425,000 which had been previously made by Da Capo to R. Garafulic
on December 22, 1994; and (ii) payment of $75,000 by Da Capo to R. Garafulic
between March 22, 1994 and September 22, 1994.
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On March 8, 1996, Da Capo entered into an agreement (the "Amayapampa Acquisition
Agreement") with the Amayapampa Vendors to acquire the following interests in
the Amayapampa property:
(a) R. Garafulic's remaining 24% interest in two mining concessions (the
Gran Porvenir and Chayentena concessions) that are part of the Amayapampa
property;
(b) R. Garafulic's 49% interest in six mining concessions that are part of
the Amayapampa property; and
(c) CEM's 100% interest in 16 mining concessions that are part of the
Amayapampa property.
In consideration for these interests, Da Capo:
(a) issued 1,000,000 special warrants (the "Amayapampa Special Warrants"),
each exercisable to acquire one Da Capo Common Share without further
payment, to a nominee of the Amayapampa Vendors on April 11, 1996; and
(b) made a non-recourse, interest-free loan of $3.24 million (the
"Amayapampa Loan") to a nominee of the Amayapampa Vendors on April 11,
1996.
The Amayapampa Loan was secured by an assignment of all proceeds from the sale
of any of 1,000,000 Da Capo common shares held by such nominee. The Amayapampa
Loan was canceled on April 29, 1996 upon the sale of such Da Capo common shares
and Cdn. $4,355,000 received from the proceeds of such sale on or before
May 7, 1996.
After being acquired by the Amayapampa Vendors, the Amayapampa Special Warrants
were transferred to third parties at arm's length to Da Capo in transactions
exempt from prospectus requirements under the relevant securities legislation.
On August 14, 1996, Da Capo issued 1,000,000 Da Capo common shares without
payment of any additional consideration upon the deemed exercise of the
Amayapampa Special Warrants.
All of Da Capo's interests in the Amayapampa property were transferred into the
name of its subsidiary, Yamin, on April 11, 1996. As a result of the
Amalgamation with Da Capo, Vista Gold acquired the Amayapampa property. During
1999 and subsequent to December 31, 1999 Yamin transferred these interests to
Minera Nueva Vista.
Ms. Elizabeth Mirabel, a resident of Bolivia at arm's length to Vista Gold, held
the remaining 25% interest in the Gran Porvenir and Chayentena mining
concessions, which constitute 603 hectares (1,488 acres) of the Amayapampa
property. On June 28, 1996, Da Capo and Ms. Mirabel entered into a lease
agreement (the "Lease") under which Ms. Mirabel granted a lease for her 25%
interest in the two mining concessions in favor of Da Capo for a term of ten
years commencing July 10, 1996 and renewable for an additional ten year term.
During the first two years of the Lease, Da Capo will pay Ms. Mirabel $7,000 per
month, and $10,000 per month for the subsequent eight years.
On May 23, 1997, Ms. Mirabel transferred ownership of the La Chayantena and Gran
Porvenir mining concessions to Mr. Agustin Melgarejo Zuleta.
On March 1, 2000, Minera Nueva Vista S.A. and Mr. Agustin Melgarejo signed a
"Lease with option to purchase" agreement for the 25% interest of Gran Porvenir
and La Chayanena mining concessions, which superceded the leasing agreement of
June 28, 1996 with Ms. Mirabel. In March 2002, the 2000 Lease with option to
purchase was replaced with a new lease with Mr. Agustin Melgarejo. This new
lease agreement is for a period of five years starting January 1, 2002, and
requires the payment of $2,000 per month for the period of the lease. At any
time, Minera Nueva Vista S. A., at its option, may exercise the purchase option
for $500,000; but the purchase option must be exercised at the start of
commercial production.
A legal dispute in Bolivia, in which a Mr. Estanislao Radic brought legal
proceedings in the lower penal court in Bolivia against Raul Garafulic, resulted
in comments in the Bolivian press questioning the validity
15
of the Corporation's ownership of the Amayapampa property. In May 1998, a judge
in the Bolivian penal court found that there was no justifiable case. In
June 1998, a judge of the Superior Court of the District of Potosi dismissed the
appeal of the case and indicated that there could be no further appeals on the
matter in the Bolivian penal courts. In 1999, Radic filed a lawsuit against
Garafulic in civil court, but the Corporation does not anticipate that the
outcome will have any impact on its title to the Amayapampa property. See
"Item 3. Legal Proceedings".
HISTORY
The Amayapampa district was initially mined on a very small scale by indigenous
peoples prior to the arrival of the Spanish conquistadors and small-scale mining
continued during the Spanish colonial period into modern times. Prior to the
Amalgamation, CEM mined the Amayapampa deposit using primarily open-stope
methods at a rate of about 220 tons (200 tonnes) of ore per day and processed
the ore in two mills on site. At that time, the Amayapampa mine was one of the
largest producing underground gold mines in Bolivia and consisted of 32 levels
of underground development. Upper level, generally oxidized ore was removed via
the upper Virtus Adit (4,100 meters/13,450 feet elevation) and trucked to the
Porvenir mill, while lower sulfide ore was dropped by ore passes to the
850-meter--(2,790-foot-) long Virquicocha Adit (3,970 meters/13,025 feet
elevation) and taken out by electric locomotives to the Virquicocha mill. At
both mills, gold was recovered via amalgam plates and gravity tables. The lower
mill included a flotation circuit to upgrade the pyrite concentrate.
Approximately 150 people worked at the mine and lived locally at the village of
Amayapampa and at other small camps near the mine.
Since the Amalgamation, mining has ceased and the old mills removed as per an
agreement with the previous owner. The Corporation kept the miners employed in
exploration, development and socio-economic projects during the period when the
original feasibility study was being prepared. During 1999, the workforce was
inactive, but was paid a subsistence allowance to promote good will and maintain
social stability in the region. With low gold prices continuing into 2000, this
subsistence allowance was discontinued in April 2000 and the Amayapampa workers
were laid off. The Corporation continues to provide community assistance by
providing teachers and a nurse and by allowing restricted access to the old
underground workings to some of the ex-miners.
GEOLOGY
The Amayapampa property is located along the east flank of a north-south
trending regional anticline near the top of the Ordovician sequence. The
Amayapampa deposit underlies a north-northwest trending ridge approximately 0.5
kilometers (0.3 miles) east of the town of Amayapampa. The deposit is defined by
about 48 diamond drill holes; 96 reverse-circulation drill holes; and 315
underground channel samples totaling 5,360 meters (17,585 feet) from more than
200 accessible cross-cuts in 43 different levels and sub-levels extending over a
vertical distance of 208 meters (682 feet). The deposit is approximately 600
meters (1,969 feet) in strike length, 30 to 70 meters (98 to 230 feet) in width
and has an overall dip of the mineralized envelope of 80 to 90 degrees west. The
depth extent of continuous mineralization is in excess of 200 meters (656 feet)
to about the 3,900-meter (12,795-foot) elevation, although some mineralization
is present below this depth.
Da Capo channel, core drill and reverse-circulation drill hole samples were
analyzed at Bondar-Clegg Laboratories in Oruro, Bolivia, with check samples
analyzed at Chemex Laboratories in Vancouver, British Columbia. Because of the
coarse gold particles and concerns about nugget effect, all samples were
processed using the Hammer Mill Process (similar to a metallic screen assay). In
addition to check assaying, Vista Gold has continued to use Bondar-Clegg and the
Hammer Mill Process to analyze its samples, and in addition, has had an on-going
check assay program in place for samples generated by Vista Gold's exploration
and development program. Approximately 225 random assay pulps were check-assayed
by three laboratories (American Assay Laboratory in Reno, Nevada, Cone
Geochemical Inc. in Lakewood, Colorado, and Rocky Mountain Geochemical in Salt
Lake City, Utah) and compared to original pulp
16
assays with generally good agreement. Approximately 600 reverse-circulation
drill hole sample splits from the Da Capo program were assayed and used to
verify assays obtained from the original reverse-circulation sample splits.
Sample splits are duplicate samples taken at the drill rig at the time of
drilling. Sample splits show good correlation with original samples with some
dispersion expected for this type of deposit. Check assays show that assaying
precision meets industry standards.
The host rocks are composed of black shales, sandstones, and siltstones, which
were weakly metamorphosed to argillites, quartzites, and siltites, respectively.
Bedding dips are steep at 60 to 80 degrees west, with the east limb of the
anticline being overturned and thus, also dipping steeply west.
The mineralized envelope is best described as a structural zone, within which
were emplaced quartz vein sets along a preferential pre-quartz-vein fracture
direction and post-quartz-vein faults and shears which were probably the
conduits for gold-bearing fluids.
Most faults, shears and fractures are north-northeast to north-northwest
trending and steeply dipping, both east and west, at 60 to 90 degrees. Quartz
veins predominantly dip east. Locally, within the zone of mineralization, flat,
thrust-like faults are present, which have offset quartz veins to a minor
extent. These flat faults, commonly west-dipping at 40 to 45 degrees, are not
generally mappable outside of the main structural zone, which hosts the gold
mineralization. A west dipping, 45-degree fault projects into the pit on the
northeast side of the deposit and was intersected by two vertical, geotechnical
core holes. The base of mineralization may also be slightly offset by a similar
west-dipping, 45-degree fault.
Oxidation effects are pervasive from the surface to depths of 20 to 30 meters
(66 to 98 feet), with only partial oxidization below those depths. Hydrothermal
alteration effects evident in fresh rock are minor, and occur as coarse sericite
(muscovite) in thin (2 to 5 millimeter/0.08 to 0.20 inch) selvages along some
quartz veins. In addition, chlorite is present in and adjacent to some quartz
veins, but this presence may be a product of low-grade metamorphism. Alteration
effects are minimal overall, except for surface oxidization.
Mineralization is composed of quartz veins and sulfides and both constitute a
visual guide to ore. Quartz veins, actually pre-gold, are a locus for later gold
mineralization. Quartz veins are typically a few centimeters to 0.5 meters (two
feet) in width and commonly occur as sub-parallel vein sets. The strike extent
can be 50 to 75 meters (164 to 246 feet) or more for any one vein or vein set,
but the dip extent is not as well established and probably ranges up to 20 to 30
meters (66 to 98 feet). Multiple vein sets are present in the overall
mineralized envelope and veins commonly pinch and swell along strike and
down dip.
Sulfide mineralization entered the multiple fractures to deposit predominantly
pyrite within and adjacent to quartz veins, as sulfide veinlets in the host
rocks and as clots of coarse sulfides and disseminations of sulfide grains along
fractures in the black argillites. Locally, sulfide disseminations are more
prevalent in the quartzite/siltite interbeds than in the argillites. The total
sulfide concentration for the overall mineralized zone is estimated at 3 to 5%.
Petrographic examination of the sulfide mineralization shows pyrite to dominate
at plus 95% of the total sulfides; arsenopyrite is also present, as are minor
amounts of chalcopyrite, galena, sphalerite, stibnite and tetrahedrite. Gold is
present as free gold in association with pyrite, on fractures within pyrite and
attached to the surface of pyrite and is often visible as discrete grains on
fractures in quartz and argillite. Gold grains exhibit a large size-range, with
much of the gold being relatively coarse at 40 to 180 microns. All gold grains
display irregular shapes with large surface areas. No gold was noted to be
encapsulated in either quartz or sulfide. The content of gold grains was
verified as over 97% gold by scanning-electron-microprobe analysis.
EXPLORATION
In 2001, no exploration was undertaken at Amayapampa.
17
District-scale exploration potential exists for defining styles of gold
mineralization similar to Amayapampa, which could be developed as satellite ore
bodies. In addition, at least 15 drill holes beneath the planned Amayapampa pit
suggest the presence of four higher grade shoots.
UPDATED FEASIBILITY STUDY
The Corporation began updating and optimizing the feasibility study on the
Amayapampa property in the fall of 1999 and completed this work during the first
quarter of 2000. Based on a gold price of $300 per ounce, the proven and
probable reserves at Amayapampa were calculated by Mine Reserve
Associates, Inc., an independent consultant, to be 9.3 million tonnes
(10.2 million tons) grading 1.76 grams per tonne (0.051 ounces per ton)
including dilution, containing 526,000 ounces of gold. These reserves are
consistent with the definition of Proven and Probable ore reserves under USGS
Circular 831 and are classified as Probable Minable Reserves under Canadian
Instrument 43-101. Within this reserve, an optimized plan at a gold price of
$325 per ounce will generate an after-tax internal rate of return of 20%. The
optimized study includes the same flow sheet consisting of a gravity and
carbon-in-leach circuit with a projected metallurgical recovery of 84% and
operating at a rate of 2,330 tonnes (2,563 tons) of ore per day.
Gold production the first five years of operations is estimated atapproximately
47,400 ounces per year. The initial capital costs are estimated to be about
$25 million, including contingency and necessary working capital. Average
operating costs are estimated to be $7.99 per tonne ($7.25 per ton) of ore for a
total cash cost of $168 per gold ounce.
Approval of the permit to construct and operate, called the DECLATORIA DE
IMPACTO AMBIENTAL, under Article 24 of the Environmental Law was received on
May 6, 1998. This permit was based on a 3,300-tonne- (3,638-ton-) per-day ore
processing project, and if financing arrangements for the project are obtained,
the corporation will request a modification of the permit to allow operation at
the lower production rate.
During 2001, steps were taken to minimize the holding costs of Amayapampa and
hold the property pending an improvement in gold prices.
ITEM 3. LEGAL PROCEEDINGS
Except as described below, the Corporation is not aware of any material pending
or threatened litigation or of any proceedings known to be contemplated by
governmental authorities which is, or would be, likely to have a material
adverse effect upon the Corporation or its operations, taken as a whole.
On December 10, 1999, Mineral Ridge Inc., a wholly owned subsidiary of Vista
Gold, voluntarily filed for protection under the U.S. Bankruptcy Code.
Early in 2000, a trustee was appointed by the court to dispose of the assets of
Mineral Ridge Inc. At the end of 2000, all assets of Mineral Ridge Inc. had been
disposed of and in January 2001, the Mineral Ridge Inc. Chapter 11 case was
dismissed.
On August 25, 2000, United States Fidelity & Guarantee Company ("USF&G") filed
an action in the United States District Court against Vista Gold Corp., Vista
Gold Holdings, Inc., Stockscape.com Technologies, Inc., Cornucopia
Resources, Inc., Red Mountain Resources, Inc. and Touchstone Resources, Inc.
This action involves a General Contract of Indemnity in connection with the
posting of a reclamation bond for mining activities by Mineral Ridge Inc., the
Corporation's wholly owned subsidiary that holds the investment in the Mineral
Ridge mine, at Silver Peak, Nevada. In the action, USF&G seeks to compel all of
the defendants to post additional collateral for the bond in the total amount of
$793,583. Neither Vista Gold Corp. nor Vista Gold Holdings, Inc. was a party to
the General Contract of Indemnity and both have denied any liability in
connection therewith.
18
In November 2000, the parties stipulated to an agreed upon discovery plan and
scheduling order. On March 12, 2001 Stockscape.com Technologies, Inc.,
Cornucopia Resources, Inc., and Red Mountain Resources, Inc. (collectively the
"Stockscape defendants") filed a cross-claim against the Corporation relating to
the same issues but referring to the Share Purchase and Sale Agreement between
Cornucopia Resources Ltd. and Vista Gold Corp. In July 2001, USF&G filed for a
summary judgment requesting the court to compel the Stockscape defendants to
post $902,819 in additional collateral. The increase from $793,583 accounts for
additional expenses incurred by USF&G. At the same time, the Stockscape
defendants moved for partial summary judgment on cross-claim against the
Corporation. The maximum potential exposure to the Corporation is the additional
collateral requested in the amount of $902,819 together with the attorneys' fees
and costs related to the defense of the action. Other defendants, if found to be
jointly liable, could reduce the amount for which the Corporation has exposure.
The Corporation has reserved $814,087 which must be used for a proposed
settlement of this lawsuit, as discussed in Item 7 Consolidated Financial
Statements, Note 14.
In April 1998, a legal dispute was initiated in Bolivia by a Mr. Estanislao
Radic ("Radic") who brought legal proceedings in the lower penal court against
Mr. Raul Garafulic ("Garafulic") and the Corporation, questioning the validity
of the Garafulic's ownership of the Amayapampa property. Garafulic sold
Amayapampa to a wholly owned subsidiary of the Corporation. In May 1998, a judge
in the Bolivian penal court found there was no justifiable case. In June 1998, a
judge of the superior court of the district of Potosi dismissed the appeal of
the case and indicated that there could be no further appeals on the matter in
the Bolivian penal courts. In 1999, this time in civil court, Radic filed a
second lawsuit against Garafulic, in Potosi, and Garafulic filed a civil lawsuit
for damages against Radic in La Paz. Garafulic appealed to the Court to have
both cases combined under the jurisdiction of a judge in La Paz. Finally, in
January 2001, the Court decreed that the lawsuits should be combined and heard
in Potosi. The Corporation never has and does not now have direct ownership of
the disputed property and is therefore uncertain as to why it was a named
defendant in this lawsuit. The court in Potosi agreed with this assessment and
annulled the case in June 2001. In September 2001, Radic appealed to the Supreme
Court. The Corporation does not anticipate that there will be any material
adverse impact on the Corporation or the value of its holdings in Bolivia.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, by Vista Gold during the quarter ended
December 31, 2001.
19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
PRICE RANGE OF COMMON SHARES
The Common Shares of Vista Gold are listed on the American Stock Exchange and
The Toronto Stock Exchange under the symbol VGZ. The following table sets out
the reported high and low sale prices on the American Stock Exchange and on The
Toronto Stock Exchange for the periods indicated as reported by the exchanges:
AMERICAN STOCK THE TORONTO STOCK
EXCHANGE (US$) EXCHANGE (CDN$)
------------------------ ------------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
2000 1st quarter................................... 0.16 0.09 0.22 0.13
2nd quarter................................... 0.13 0.09 0.16 0.13
3rd quarter................................... 0.11 0.06 0.18 0.10
4th quarter................................... 0.25 0.03 0.14 0.04
2001 1st quarter................................... 0.13 0.05 0.17 0.06
2nd quarter................................... 0.15 0.07 0.18 0.10
3rd quarter................................... 0.11 0.07 0.15 0.09
4th quarter................................... 0.10 0.05 0.15 0.08
On March 18, 2002, the last reported sale price of the Common Shares of Vista
Gold on the American Stock Exchange was $0.09 and on The Toronto Stock Exchange
was Cdn. $0.15. As of March 18, 2002, there were 112,315,040 Common Shares
issued and outstanding, and Vista Gold had 909 registered shareholders of
record.
DIVIDENDS
Vista Gold has never paid dividends. While any future dividends will be
determined by the directors of Vista Gold after consideration of the earnings
and financial condition of Vista Gold and other relevant factors, it is
currently expected that available cash resources will be utilized in connection
with the ongoing acquisition, exploration and development programs of the
Corporation.
EXCHANGE CONTROLS
There are no governmental laws, decrees or regulations in Canada that restrict
the export or import of capital, including foreign exchange controls, or that
affect the remittance of dividends, interest or other payments to non-resident
holders of the securities of Vista Gold, other than a Canadian withholding tax.
See "Item 5. Certain Canadian Income Tax Considerations for Non-Residents of
Canada".
CERTAIN CANADIAN INCOME TAX CONSIDERATIONS FOR NON-RESIDENTS OF CANADA
Canadian withholding tax at a rate of 25% (subject to reduction under the
provisions of any relevant tax treaty) will be payable on dividends paid to a
holder of Common Shares who is not resident in Canada. The rate of withholding
tax applicable to dividends paid on the Common Shares to a resident of the
United States who beneficially holds such Common Shares would generally be
reduced to 15% or, if the non-resident holder is a corporation that owns at
least 10% of the Common Shares, to 5%. It is the Canada Customs and Revenue
Agency's present published policy that entities (including certain limited
liability companies) that are treated as being fiscally transparent for United
States federal income tax purposes will not qualify as residents of the United
States under the provisions of the Canada-United States Income Tax Convention.
20
Upon a disposition or deemed disposition of Common Shares, a capital gain (or
loss) will generally be realized by a non-resident holder to the extent that the
proceeds of disposition are greater (or less) than the aggregate of the adjusted
cost base of the Common Shares to the non-resident holder thereof immediately
before the disposition and any reasonable costs of disposition. Capital gains
realized on a disposition of Common Shares by a non-resident shareholder will
not be subject to Canadian tax unless the non-resident holder and/or persons
with whom the non-resident holder did not deal at arm's length, at any time
within the five-year period before the disposition, owned or had an option to
acquire 25% or more of the issued Common Shares of any class or series of Common
Shares of Vista Gold. Under the Canada-United States Income Tax Convention, a
resident of the United States who does not carry on a business from a permanent
establishment or fixed base in Canada and who realizes a capital gain on the
disposition of Common Shares that is otherwise subject to tax in Canada, will be
exempt from Canadian income tax. It is the Canada Customs and Revenue Agency's
present published policy that entities (including certain limited liability
companies) that are treated as being fiscally transparent for United States
federal income tax purposes will not qualify as residents of the United States
under the provisions of the Canada-United States Income Tax Convention.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
INTRODUCTION
This discussion should be read in conjunction with the consolidated financial
statements of the Corporation for the three years ended December 31, 2001 and
the related notes thereto, which have been prepared in accordance with generally
accepted accounting principles ("GAAP") in Canada. Differences from United
States GAAP are described in Note 13 to the consolidated financial statements.
During 2001, 2000 and 1999, the Corporation's principal source of earnings was
the Hycroft mine in Nevada. In December 1998, mining activities were suspended
at the Hycroft mine. Gold processing and recovery from previously mined ore
continued at a declining rate in 1999, 2000 and 2001.
RESULTS OF OPERATIONS
SUMMARY
The Corporation's 2001 net loss was $3.3 million ($0.04 per share), compared to
the 2000 net loss of $13.2 million ($0.15 per share). The improvement in 2001 is
mainly attributable to a non-recurring $10.9 million write-down in 2000 for the
impairment of mineral properties, offset by an $0.8 million unusual expense in
2001 for the proposed settlement of the USF&G law suit, as discussed in Item 3,
Legal Proceedings.
2001 gold revenue of $0.9 million is substantially lower than the $3.8 million
in revenues earned in 2000. This reduction in revenue is a direct result of the
steadily decreasing gold production at the Hycroft mine. Similarly, 2001
production costs of $0.7 million have been reduced from $2.6 million in 2000.
Also, management has further reduced discretionary costs in 2001, reflecting the
decreasing gold production.
Gold production is expected to continue to decline in 2002, to approximately
1,000 ounces. Gold revenues and operating costs at the Hycroft mine are expected
to be reduced accordingly.
GOLD PRODUCTION AND REVENUE
The Hycroft mine remains the Corporation's principal source of earnings and cash
flows. In December 1998, mining activities at Hycroft were suspended. Gold
recovery from the Hycroft mine heap leach pads continued in 2001, although at a
lower rate than in 2000.
21
HYCROFT MINE
GOLD PRODUCTION AND REVENUE 2001 2000
--------------------------- -------- --------
Gold production (ounces)................................... 3,232 13,493
Average revenue per ounce produced......................... $ 275 $ 278
Total gold revenues (000s)................................. $ 890 $ 3,757
The decrease in gold production is attributable to the progressive depletion of
recoverable gold in the Hycroft leach pads. Although this gradual decrease in
production has been expected, 2001 production was 7.7% better than anticipated.
The decline in gold revenues in 2001 reflects the decrease in gold production
from 2000.
COSTS AND EXPENSES
Production costs at the Hycroft mine decreased to $0.7 million in 2001 from
$2.6 million in 2000. The decrease was primarily due to the progressive
reduction of leach solution volume processed at the Hycroft mine, with related
reductions in manpower, in consumption of materials and supplies, and in
electrical power.
HYCROFT MINE
2001 2000
-------- --------
(IN THOUSANDS,
EXCEPT PER OUNCE)
Production costs............................................ $ 746 $2,560
Cash operating cost per ounce............................... $ 210 $ 183
Exploration and holding costs (Hycroft mine)................ $1,106 $1,185
Cash operating costs per ounce in 2001 were $210, up from $183 per ounce in
2000. The increase is mainly a result of the lower gold production in 2001.
Hycroft exploration and holding costs of $1.1 million in 2001 are similar, as
expected, to the $1.2 million incurred in 2000. These costs are incurred to
maintain and protect the Corporation's interest in the Hycroft mine. They are
comprised of ongoing property holding costs such as property taxes, bonding,
permit and claim fees, insurance and site security.
Depreciation, depletion and amortization costs at Hycroft were $0.3 million in
2001 compared to $0.8 million in 2000. A significant portion of the Hycroft
property plant and equipment has been sold, and a substantial portion of the
remaining equipment has been fully depreciated. Disposals of idle Hycroft mining
equipment resulted in total gains of $0.1 million. See Note 3 of the
Consolidated Financial Statements.
2001 exploration and holding costs for Amayapampa were $0.1 million, compared to
$0.7 million in 2000. This reduction is mainly a result of manpower reductions
effected in April 2001, and resulting reduced office and administration costs in
Bolivia.
Corporate administration and investor relations costs were $1.2 million in 2001,
similar to the $1.2 million incurred in 2000, as expected. Interest expense of
$21,000 was lower than $0.1 million incurred in 2000 because the Corporation
repaid most of its debt in the first quarter of 2001. See Note 4 of the
Consolidated Financial Statements.
Corporate depreciation expense was $41,000 and $34,000 in 2001 and 2000
respectively.
A gain on the sale of marketable securities of $0.3 million was realized in
2000; no similar gain was realized or realizable in 2001.
22
In 2001, the Corporation recorded a provision of $0.8 million for the settlement
of the USF&G lawsuit as discussed in Item 7, Consolidated Financial Statements,
Note 7.
Management regularly reviews the carrying values of its long-lived assets. In
2000, based on these reviews, management wrote-down the Bolivian properties by
$10.6 million, and certain Hycroft assets by $0.3 million. No similar
write-downs were deemed necessary in 2001.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's consolidated cash balance at December 31, 2001 was
$0.7 million, an increase of $0.6 million from the end of 2000. This increase
resulted from the sale of idle mining equipment at the Hycroft mine, which
provided $3.0 million; operating activities consumed $1.7 million; and
$0.7 million was used to repay all of the Corporation's outstanding debt. Of the
$1.7 million used for operating activities, $0.2 million was for reclamation and
closure costs comprised mainly of employee severance costs.
Cash consumed in operating activities in 2001 was $1.7 million, compared to
$2.8 million in 2000. The $1.1 million improvement in 2001 is comprised mainly
of the reduction in reclamation and mine closure costs: $0.2 million compared to
$1.0 million in 2001 and 2000 respectively. The remainder of the cash
improvement reflects the Corporation's successful cost reduction efforts, offset
by a reduction in gold revenues.
The Corporation made no capital expenditures in 2001, and no material capital
expenditures in 2000.
On January 22, 2002, the Corporation announced that it had finalized an agency
agreement for a private placement financing of $3.8 million, subject to
shareholder and regulatory approvals. Approximately $1.0 million of this amount
has been received by the Corporation, of which $0.8 million has been reserved
and must be for the settlement of the USF&G lawsuit disclosed in Item 3, Legal
Proceedings. The remaining $2.8 million of this private placement is scheduled
to be completed in March 2002. Details of this financing are fully discussed in
Item 7, Consolidated Financial Statements, Note 14.
OUTLOOK
Management feels that the potential cash infusion from the above-mentioned
private placement, together with the potential for subsequent cash infusions,
should the warrants issued pursuant to this private placement be exercised,
greatly improves the Corporation's short-term outlook and could provide funding
that will allow the Corporation to fully apply its technical expertise to
acquire and enhance gold exploration and development properties, while
maintaining and improving its existing gold reserves in Nevada and Bolivia.
The Corporation is encouraged by the recently improved gold prices, but with the
benefit of this new funding, is under no pressure to make any short-term
production decisions. The resumption of mining at Hycroft, although economic at
current gold prices, would attract more favorable financing terms and yield a
greatly improved return for shareholders at a sustained gold price above $300.
The Corporation is reluctant to deplete its valuable gold resources before
insuring a higher return on the necessary investment.
In Bolivia, holding costs have been reduced to a minimum and, as a result of the
2000 sale of Yamin and Capa Circa to a worker's co-operative in 2000, Bolivia is
expected to earn enough royalty revenues to pay for its modest holding costs.
Development of Amayapampa will require initial capital of $25 million and a gold
price of more than $325 per ounce.
23
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL INFORMATION
To the Shareholders of Vista Gold Corp.
The consolidated financial statements are the responsibility of the Board of
Directors and management. The accompanying consolidated financial statements of
the Corporation have been prepared by management based on information available
through March 18, 2002; these consolidated financial statements are in
accordance with Canadian generally accepted accounting principles, and have been
reconciled to United States generally accepted accounting principles as
presented in Note 13.
A system of internal accounting and administrative controls is maintained by
management in order to provide reasonable assurance that financial information
is accurate and reliable, and that the Corporation's assets are safeguarded.
Limitations exist in all cost-effective systems of internal controls. The
Corporation's systems have been designed to provide reasonable but not absolute
assurance that financial records are adequate to allow for the completion of
reliable financial information and the safeguarding of its assets. The
Corporation believes that the systems are adequate to achieve the
stated objectives.
The Audit Committee of the Board of Directors is comprised of three outside
directors, and meets regularly with management and the independent auditors to
ensure that management is maintaining adequate internal controls and systems and
to recommend to the Board of Directors approval of the annual and quarterly
consolidated financial statements of the Corporation. The committee also meets
with the independent auditors and discusses the results of their audit and their
report prior to submitting the consolidated financial statements to the Board of
Directors for approval.
The consolidated financial statements have been audited by
PricewaterhouseCoopers LLP, Chartered Accountants, who were appointed by the
shareholders. The auditors' report outlines the scope of their examination and
their opinion on the consolidated financial statements.
/s/ RONALD J. MCGREGOR /s/ JOHN F. ENGELE
---------------------------- ----------------------------
Ronald J. McGregor John F. Engele
President and Vice President Finance and
Chief Executive Officer Chief Financial Officer
24
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Vista Gold Corp.
We have audited the consolidated balance sheets of Vista Gold Corp. as of
December 31, 2001 and 2000 and the consolidated statements of loss, deficit and
cash flows for the years ended December 31, 2001, 2000 and 1999. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in Canada and the United States of America. Those standards require that we plan
and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Corporation as of
December 31, 2001 and 2000 and the consolidated results of its operations and
cash flows for the years ended December 31, 2001, 2000 and 1999 in accordance
with Canadian generally accepted accounting principles.
/s/ PRICEWATERHOUSECOOPERS LLP
----------------------------
Chartered Accountants
Vancouver, British Columbia, Canada
February 22, 2002, except as to Notes 1 and 14,
which are as at March 18, 2002
Comments by the Auditors for U.S. Readers on Canada-U.S. Reporting Difference
In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the Corporation's ability to continue as a going concern such as those described
in Note 1 of the consolidated financial statements. Our report to the
shareholders dated February 22, 2002, except as to Notes 1 and 14, which are as
at March 18, 2002, is expressed in accordance with Canadian reporting standards,
which do not permit a reference to such conditions and events in the auditors'
report when these are adequately disclosed in the financial statements.
/s/ PRICEWATERHOUSECOOPERS LLP
----------------------------
Chartered Accountants
Vancouver, British Columbia, Canada
February 22, 2002
25
VISTA GOLD CORP.
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31
-----------------------------
2001 2000
----------- -----------
(U.S. DOLLARS IN THOUSANDS)
ASSETS:
Cash and cash equivalents................................... $ 674 $ 96
Accounts receivable......................................... 180 760
Supplies inventory and prepaid expenses..................... 301 464
--------- ---------
Current assets.............................................. 1,155 1,320
--------- ---------
Property, plant and equipment--Note 3....................... 12,734 15,912
Total assets................................................ $ 13,889 $ 17,232
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable............................................ $ 145 $ 218
Accrued liabilities and other--Note 8....................... 1,209 301
Current portion of long-term debt--Note 4................... -- 695
--------- ---------
Current liabilities......................................... 1,354 1,214
--------- ---------
Accrued reclamation and closure costs--Note 5............... 3,134 3,339
Other liabilities........................................... -- 6
--------- ---------
3,134 3,345
--------- ---------
Total liabilities........................................... 4,488 4,559
--------- ---------
SHAREHOLDERS' EQUITY:
Capital stock, no par value per share--Note 6:
Preferred--unlimited shares authorized; no shares
outstanding
Common--unlimited shares authorized; shares outstanding:
2001 and 2000--90,715,040............................... 121,146 121,146
Deficit..................................................... (110,260) (106,985)
Currency translation adjustment............................. (1,485) (1,488)
--------- ---------
Total shareholders' equity.................................. 9,401 12,673
--------- ---------
Total liabilities and shareholders' equity.................. $ 13,889 $ 17,232
========= =========
Nature of operations and going concern--Note 1
Commitments and contingencies--Note 7
Subsequent events--Note 14
Approved by the Board of Directors
/s/ C. THOMAS OGRYZLO /s/ JOHN M. CLARK
-------------------------- --------------------------
C. Thomas Ogryzlo John M. Clark
Director Director
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
26
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF LOSS
YEARS ENDED DECEMBER 31
--------------------------------------
2001 2000 1999
---------- ---------- ----------
(U.S. DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
REVENUES:
Gold sales............................................ $ 890 $ 3,757 $ 19,496
Other revenues........................................ 25 48 109
---------- ---------- ----------
Total revenues........................................ 915 3,805 19,605
---------- ---------- ----------
COSTS AND EXPENSES:
Production costs...................................... 746 2,560 20,578
Depreciation, depletion and amortization.............. 301 867 4,421
Provision for reclamation and closure costs........... -- -- 232
Operating leases...................................... -- -- 44
Mineral exploration, property evaluation and holding
costs............................................... 1,246 1,875 2,802
Corporate administration and investor relations....... 1,158 1,244 1,183
Interest expense...................................... 21 114 1,146
Loss (gain) on disposal of assets..................... (105) (41) 5
Gain on sale of marketable securities................. -- (280) --
Equity in loss and impairment of Zamora Gold Corp..... -- -- 601
Other (income) expense................................ 9 (218) 74
Provision for settlement of USF&G suit--Notes 7 and
14.................................................. 814 -- --
Write-down of mineral properties and other assets..... -- 10,926 16,219
---------- ---------- ----------
Total costs and expenses.............................. 4,190 17,047 47,305
---------- ---------- ----------
Loss before income taxes.............................. (3,275) (13,242) (27,700)
Income taxes--Note 10................................. -- (33) --
---------- ---------- ----------
Loss for the year..................................... $ (3,275) $ (13,209) $ (27,700)
========== ========== ==========
Weighted average shares outstanding................... 90,715,040 90,715,040 90,715,040
----------------------------------------------------------------------------------------------
Basic and diluted loss per share...................... $ (0.04) $ (0.15) $ (0.31)
----------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
27
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF DEFICIT
YEARS ENDED DECEMBER 31
------------------------------
2001 2000 1999
-------- -------- --------
(U.S. DOLLARS IN THOUSANDS)
Deficit, beginning of year.................................. $106,985 $ 93,776 $66,076
Loss for the year........................................... 3,275 13,209 27,700
-------- -------- -------
Deficit, end of year........................................ $110,260 $106,985 $93,776
======== ======== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
28
VISTA GOLD CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31
------------------------------
2001 2000 1999
-------- -------- --------
(U.S. DOLLARS IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss for the year........................................... $(3,275) $(13,209) $(27,700)
ADJUSTMENTS TO RECONCILE LOSS FOR THE YEAR TO CASH USED IN
OPERATIONS:
Depreciation, depletion and amortization.................... 301 867 4,421
Recognition of hedging gains................................ -- -- (1,150)
Provision for reclamation and closure costs................. -- -- 232
Reclamation and closure costs paid in the period............ (163) (982) (1,800)
Loss (gain) on disposal of assets........................... (105) (41) 5
Gain on disposal of marketable securities................... -- (280) --
Equity in loss and impairment of Zamora Gold Corp........... -- -- 601
Loss (gain) on currency translation......................... 3 (7) 59
Write-down of mineral properties............................ -- 10,926 16,219
Other non-cash items........................................ 142 -- (11)
------- -------- --------
(3,097) (2,726) (9,124)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Marketable securities....................................... -- -- 13
Accounts receivable......................................... 580 461 1,723
Gold inventory.............................................. -- 117 3,397
Realization of hedging gains acquired....................... -- -- 3,041
Supplies inventory and prepaid.............................. 4 391 (133)
Accounts payable, accrued liabilities and other............. 804 (1,039) (664)
------- -------- --------
Net cash used in operating activities....................... (1,709) (2,796) (1,747)
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment.................. -- (7) (1,917)
Proceeds on disposal of fixed assets and supplies........... 2,982 810 86
Proceeds on disposal of marketable securities............... -- 357 --
Investment in and advances to Zamora Gold Corp.............. -- -- (30)
Other assets................................................ -- 22 139
------- -------- --------
Net cash provided by (used in) investing activities......... 2,982 1,182 (1,722)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt........................................... (695) (587) (520)
Proceeds from debt.......................................... -- -- 1,500
------- -------- --------
Net cash provided by (used in) financing activities......... (695) (587) 980
------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 578 (2,201) (2,489)
Cash and cash equivalents, beginning of year................ 96 2,297 4,786
------- -------- --------
Cash and cash equivalents, end of year...................... $ 674 $ 96 $ 2,297
======= ======== ========
Supplemental cash flow disclosure--Note 9
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
1. NATURE OF OPERATIONS AND GOING CONCERN
(a) NATURE OF OPERATIONS
The Corporation is engaged in gold production in the United States, and gold
development and exploration activities in the United States, and Latin America.
During 2001, 2000 and 1999, the Corporation's principal source of earnings and
operating cash flow was the Hycroft mine in Nevada. In December 1998, mining
activities were suspended at the Hycroft mine. Gold processing and recovery from
previously mined ore continued at a declining rate in 1999, 2000 and 2001.
Amayapampa, in Bolivia, is being held for development, pending higher
gold prices.
(b) GOING CONCERN
These consolidated financial statements have been prepared on the basis of
accounting principles applicable to a going concern that assume the realization
of assets and the discharge of liabilities in the normal course of business. As
disclosed in Note 14, on January 22, 2002, the Corporation finalized an agency
agreement for a private placement of $3.8 million, to be completed in two steps.
On February 1, 2002 the first step was completed, resulting in the receipt of
$1.026 million, $814,087 of this amount has been reserved and must be used for
the proposed settlement of an outstanding claim against the Corporation and
other defendants by USF&G as disclosed in Note 7. The second step, which
involves the issue of $2.77 million of convertible debentures subject to
shareholder approval, is not yet completed. There can be no assurance that this
$2.77 million debenture financing will be timely completed and approved by the
shareholders. There is therefore, substantial doubt about the Corporation's
ability to continue as a going concern. These financial statements do not give
effect to any adjustments, which may be necessary should the Corporation be
unable to continue as a going concern.
The recoverability of the carrying values of the Hycroft mine and the Amayapampa
project is dependant upon the successful start-up or the sale of these
properties. The Corporation is investigating the economic feasibility of
restarting the Hycroft mine and developing the Amayapampa project in Bolivia.
The plans to restart the Hycroft mine and develop the Amayapampa project will
also depend on management's ability to raise additional capital for these
purposes. Although management has been successful in raising such capital in the
past, there can be no assurance that it will be able to do so in the future.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The consolidated financial statements of the Corporation and its subsidiaries
have been prepared in accordance with accounting principles generally accepted
in Canada. For purposes of these financial statements these principles conform,
in all material respects, with generally accepted accounting principles in the
United States, except as described in Note 13.
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Corporation
and its subsidiaries. All material intercompany transactions and balances have
been eliminated. The Corporation's subsidiaries and percentage ownership in
these entities as of December 31, 2001 are:
OWNERSHIP
---------
Vista Gold Holdings Inc. and its wholly-owned
subsidiaries.............................................. 100%
Hycroft Resources & Development, Inc. and its wholly-owned
subsidiary Hycroft Lewis Mine, Inc.
Vista Gold U.S. Inc.
Granges Inc. (previously called Granges (Canada) Inc.)...... 100%
Vista Gold (Antigua) Corp. and its wholly-owned
subsidiary................................................ 100%
Compania Inversora Vista S.A. and its wholly-owned
subsidiaries
Minera Nueva Vista S.A.
Compania Exploradora Vistex S.A.
In 1999, Mineral Ridge Resources Inc. ("MRRI") voluntarily filed for protection
under the U.S. bankruptcy Code. Accordingly, effective in 1999, the Corporation
ceased consolidating the accounts of MRRI.
(c) USE OF ESTIMATES
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the consolidated financial
statements and the reported amount of revenues and expenses during the reporting
period. Significant areas requiring the use of estimates include mine closure
and reclamation obligations, useful lives for asset depreciation purposes, and
impairment of mineral properties. Actual results could differ from
these estimates.
(d) FOREIGN CURRENCY TRANSLATION
Sales revenues and a significant portion of the Corporation's expenses are
denominated in U.S. dollars. The Corporation's executive office is located in
Littleton, Colorado. The U.S. dollar is the principal currency of the
Corporation's business. Accordingly, all amounts in these consolidated financial
statements of the Corporation are expressed in U.S. dollars, unless
otherwise stated.
The accounts of self-sustaining foreign operations are translated using the
current rate method. Under this method, assets and liabilities are translated at
the rate of exchange on the balance sheet date, and revenue and expenses at the
average rate of exchange during the period. Exchange gains and losses are
deferred and shown as a currency translation adjustment in shareholders' equity
until transferred to earnings when the net investment in the foreign operation
is reduced or settled.
The accounts of integrated foreign operations are translated using the temporal
method. Under this method, monetary assets and liabilities are translated at the
year-end rate of exchange, non-monetary
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
assets and liabilities are translated at the rates prevailing at the respective
transaction dates, and revenue and expenses, except for depreciation, are
translated at the average rate of exchange during the year. Translation gains
and losses are reflected in the loss for the year.
(e) REVENUE RECOGNITION
Since ceasing mining operations at the Hycroft mine, the Corporation recognizes
revenue upon adsorption of gold onto carbon.
Carbon plants are used to concentrate gold from dilute solution, which has been
circulated through the heap leach pad, by adsorbing the gold onto activated
carbon. The amount of gold adsorbed onto carbon is measured by assaying the
solutions before and after passing through the carbon circuit and applying the
difference in assay values to the volume of solution that has passed through the
carbon circuit. Periodically, a batch of the carbon is removed and shipped to an
independent company which strips the gold from the carbon, and produces a dore
bar which is then refined and sold.
(f) MINERAL EXPLORATION
Exploration expenditures on mineral properties are expensed when incurred.
Holding costs to maintain a property on a stand-by basis are also expensed
as incurred.
(g) CASH EQUIVALENTS
Cash equivalents are investments in short-term funds consisting of highly liquid
debt instruments such as certificates of deposit, commercial paper, and money
market accounts purchased with an original maturity date of less than three
months. The Corporation's policy is to invest cash in conservative, highly rated
instruments and limit the amount of credit exposure to any one institution.
(h) INVENTORIES
Materials and supplies inventories are valued at the lower of average cost and
net replacement value.
The Corporation has recovered more gold than anticipated from the heap leach
pads at the Hycroft mine, accordingly heap leach pad inventory has been fully
recognized in prior years.
(i) PROPERTY, PLANT AND EQUIPMENT
(i) Mineral properties
Property acquisition and development costs are carried at cost less
accumulated amortization and write-downs. Amortization is provided on the
units-of-production method based on proven and probable reserves.
Expenditures incurred on non-producing mineral properties identified as
having development potential, are deferred until the viability of the
property is determined.
Management reviews the carrying value of the Corporation's interest in each
property quarterly and, where necessary, these properties are written down
to net recoverable amount, based on estimated future cash flows.
Management's estimates of gold price, recoverable proven and probable
reserves, operating, capital and reclamation costs are subject to risks and
uncertainties affecting the
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
recoverability of the Corporation's investment in property, plant and
equipment. Although management has made its best estimate of these factors
based on current conditions, it is possible that changes could occur in the
near term that could adversely affect management's estimate of net cash
flows expected to be generated from its operating properties and the need
for possible asset impairment write-downs.
Although the Corporation has reviewed and is satisfied with the title for
all mineral properties in which it has a material interest, there is no
guarantee that title to such concessions will not be challenged or impugned.
(ii) Plant and equipment
Plant and equipment are recorded at cost and depreciated using the
straight-line method over estimated useful lives. The cost of normal
maintenance and repairs is charged to expense as incurred. Significant
expenditures, which increase the life of an asset, are capitalized and
depreciated over the remaining estimated useful life of the asset. Upon sale
or retirement of assets, the costs and related accumulated depreciation or
amortization are eliminated from the respective accounts and any resulting
gains or losses are reflected in operations.
(j) PROVISION FOR FUTURE RECLAMATION AND CLOSURE COSTS
Minimum standards for mine site reclamation and closure have been established by
various government agencies that affect certain operations of the Corporation.
The Corporation calculates its estimates of reclamation liability based on
current laws and regulations and the expected future costs to be incurred in
reclaiming, restoring and closing its operating mine sites. It is possible that
the Corporation's estimate of its reclamation, site restoration and closure
liability could change in the near term due to possible changes in laws and
regulations and changes in cost estimates.
A provision for reclamation and mine closure is charged to earnings over the
lives of the mines on a units-of-production basis.
(k) LOSS PER SHARE
Loss per share is calculated by dividing the loss for the year by the weighted
average number of common shares outstanding during the year. The Corporation has
adopted the revised recommendations of the Canadian Institute of Chartered
Accountants, whereby new rules are applied in the calculation of diluted
earnings per share. The revised standard has been applied on a retroactive basis
and did not result in any restatement. Basic and diluted losses per share are
the same because inclusion of common share equivalents would be anti-dilutive.
(l) FINANCIAL INSTRUMENTS
The recorded value of the Corporation's cash and cash equivalents, accounts
receivable and accounts payable and accrued liabilities and other, approximate
their fair values due to the relatively short periods to maturity. The
Corporation had no debt as of December 31, 2001
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m) STOCK-BASED COMPENSATION
The Corporation has a stock-based compensation plan, which is described in
Note 6. No compensation expense is recognized for the plan when stock or stock
options are issued to directors and employees. Any consideration paid by
directors and employees on the exercise of stock options or the purchase of
stock is credited to capital stock.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following:
2000 1999
----------------------------------- -----------------------------------
ACCUMULATED ACCUMULATED
DEPRECIATION, DEPRECIATION,
AMORTIZATION AMORTIZATION
AND AND
COST WRITE-DOWNS NET COST WRITE-DOWNS NET
-------- ------------- -------- -------- ------------- --------
MINERAL PROPERTIES
Hycroft mine, United
States..................... $ 21,917 $21,917 -- $ 21,917 $ 21,917 --
Amayapampa, Bolivia.......... 57,624 46,894 10,730 57,624 46,894 10,730
-------- ------- ------- -------- -------- -------
$ 79,541 $68,811 $10,730 $ 79,541 $ 68,811 $10,730
-------- ------- ------- -------- -------- -------
PLANT & EQUIPMENT
Hycroft mine, United
States..................... $ 31,278 $29,397 $ 1,881 $ 39,036 $ 34,057 $ 4,979
Amayapampa, Bolivia.......... 181 181 -- 405 366 39
Corporate assets, United
States..................... 467 344 123 467 303 164
-------- ------- ------- -------- -------- -------
$ 31,926 $29,922 $ 2,004 $ 39,908 $ 34,726 $ 5,182
-------- ------- ------- -------- -------- -------
TOTAL PROPERTY, PLANT AND
EQUIPMENT.................... $111,467 $98,733 $12,734 $119,449 $103,537 $15,912
======== ======= ======= ======== ======== =======
SALE OF MINING EQUIPMENT
During 2001, Hycroft mining equipment with a net book value of $2.8 million, was
sold for $2.9 million.
ROYALTIES
The Crofoot property at the Hycroft mine is subject to a 4% net profit royalty.
During 2001, 2000 and 1999 there was no mining activity and as a result the
Corporation did not pay any Crofoot royalties.
The Lewis property at the Hycroft mine is subject to a 5% net smelter royalty.
During 2001 and 2000 only nominal minimum royalties were required in relation to
this property. During 1999 royalties paid were $123,000.
4. LONG TERM DEBT
During 2001, the Corporation repaid $0.6 million term loan from the proceeds of
the sale of mining equipment. The Corporation also repaid a $75,000 term note.
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
5. ACCRUED RECLAMATION AND CLOSURE COSTS
At December 31, 2001, the Corporation's future reclamation and mine closure
costs are estimated to be $3.1 million. Estimated reclamation and mine closure
costs are determined using management's best estimates of the scope and the cost
of required activities. These estimates may change, based on future changes in
operations, regulatory requirements or costs to complete the reclamation
activity. Reclamation and closure costs are charged to earnings over the life of
the mine on a units-of-production basis. The aggregate obligation accrued to
December 31, 2001, net of the actual cost of reclamation activities performed to
December 31, 2001, is $3.1 million (2000: $3.3 million).
6. CAPITAL STOCK
COMMON SHARE OPTIONS
Under the Corporation's Stock Option Plan (the "Plan"), the Corporation may
grant options to directors, officers, employees and consultants of the
Corporation or its subsidiaries, for up to 4,500,000 Common Shares. Under the
Plan, the exercise price of each option shall not be less than the market price
of the Corporation's stock on the date preceding the date of grant, and an
option's maximum term is 10 years or such other shorter term as stipulated in a
stock option agreement between the Corporation and the optionee. Options and
vesting periods under the Plan are granted from time to time at the discretion
of the Board of Directors.
At December 31, 2001, 1,500,000 Common Shares were reserved for issuance under
options granted to directors, officers and management employees. These options
expire as follows:
YEAR OF EXPIRATION NUMBER OF OPTIONS
------------------ -----------------
2004... 5,715
2005... 112,143
2006... 171,428
2007... 435,714
2008... 50,000
2009... 100,000
2010... 200,000
2011... 425,000
---------
Total.. 1,500,000
=========
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
6. CAPITAL STOCK (CONTINUED)
The following tables summarize information about stock options under the Plan:
2001 2000 1999
------------------------- ------------------------- -------------------------
NUMBER WEIGHTED- NUMBER WEIGHTED- NUMBER WEIGHTED-
OF AVERAGE OF AVERAGE OF AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
(000)'S (CDN.$) (000)'S (CDN.$) (000)'S (CDN.$)
-------- -------------- -------- -------------- -------- --------------
Outstanding--beginning of
year......................... 1,758 $0.212 2,308 $0.237 2,270 $1.630
Cancelled...................... -- -- -- -- (2,270) 1.630
Granted........................ 425 0.120 275 0.070 2,500 0.237
Forfeited / expired............ (683) 0.222 (825) 0.235 (192) 0.235
----- ------ ------ ------ ------ ------
Outstanding--end of year....... 1,500 $0.181 1,758 0.212 2,308 $0.237
OPTIONS OUTSTANDING AND EXERCISABLE
---------------------------------------------------------------------------------------------------------
WEIGHTED-
NUMBER AVERAGE WEIGHTED- NUMBER WEIGHTED-
RANGE OF OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
EXERCISE PRICES DEC. 31, 2001 CONTRACTUAL LIFE EXERCISE PRICE DEC. 31, 2001 EXERCISABLE
(CDN.$) (000) (YEARS) (CDN.$) (000) (CDN.$)
--------------------- -------------- ---------------- -------------- -------------- -----------
$0.070 200 9.00 $0.070 200 $0.070
0.120 425 9.50 0.120 425 0.120
0.235 775 5.20 0.235 775 0.235
0.250 100 7.25 0.250 100 0.250
----- ------ ----- ------
1,500 $0.181 1,500 $0.181
===== ====== ===== ======
7. COMMITMENTS AND CONTINGENCIES
(a) On August 25, 2000, United States Fidelity & Guarantee Company ("USF&G")
filed an action in the United States District Court against Vista Gold
Corp., Vista Gold Holdings, Inc., Stockscape.com Technologies, Inc.,
Cornucopia Resources, Inc., Red Mountain Resources, Inc. and Touchstone
Resources, Inc. This action involves a General Contract of Indemnity in
connection with the posting of a reclamation bond for mining activities by
MRRI, the Corporation's wholly owned subsidiary that holds the investment in
the Mineral Ridge mine, at Silver Peak, Nevada. In the action, USF&G seeks
to compel all of the defendants to post additional collateral for the bond
in the total amount of $793,583. Neither Vista Gold Corp. nor Vista Gold
Holdings, Inc. was a party to the General Contract of Indemnity and both
have denied any liability in connection therewith.
In November 2000, the parties stipulated to an agreed upon discovery plan
and scheduling order. On March 12, 2001 Stockscape.com Technologies, Inc.,
Cornucopia Resources, Inc., and Red Mountain Resources, Inc. (collectively
the "Stockscape defendants") filed a cross-claim against the Corporation
relating to the same issues but referring to the Share Purchase and Sale
Agreement between Cornucopia Resources Ltd. and Vista Gold Corp. In
July 2001, USF&G filed for a summary judgment requesting the court to compel
the Stockscape defendants to post $902,819 in additional collateral. The
increase from $793,583 accounts for additional expenses incurred by USF&G.
At the same time, the Stockscape defendants moved for partial summary
judgment on cross-claim against the Corporation. The maximum potential
exposure to the Corporation is the additional collateral
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
requested in the amount of $902,819 together with the attorneys' fees and
costs related to the defense of the action. Other defendants, if found to be
jointly liable, could reduce the amount for which the Corporation has
exposure.
During the year ended 2001, the Corporation provided $814,087 with respect
to this claim, as discussed in Note 14.
(b) The Corporation has provided a surety bond in the amount of $5.1 million to
ensure reclamation obligations under an approved reclamation plan at the
Hycroft mine.
8. ACCRUED LIABILITIES AND OTHER
2001 2000
-------- --------
USF&G settlement (Notes 7 and 14)........................... $ 814 $ --
Trade payables and other accruals........................... 395 301
------ ----
$1,209 $301
====== ====
9. SUPPLEMENTAL CASH FLOW DISCLOSURE
2001 2000 1999
-------- -------- --------
Cash paid (received) during the year for:
Interest.................................................... $21 $114 $1,146
Income taxes................................................ -- (33) 196
10. INCOME TAXES
(a) A reconciliation of the combined Canadian federal and provincial income
taxes at statutory rates and the Corporation's effective income tax expenses
(recovery) is as follows:
2001 2000 1999
-------- -------- --------
Income taxes at statutory rates............................. $(1,412) $(5,959) $(12,440)
Increase (decrease) in taxes from:
Permanent differences..................................... 2 (149) (84)
Differences in foreign tax rates.......................... 270 2,214 1,592
Benefit of losses not recognized.......................... 1,140 3,894 10,932
Large Corporations Tax.................................... (33) --
------- ------- --------
$ -- $ (33) $ --
======= ======= ========
(b) Future income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The tabular information set out below is in thousands of United States dollars,
except share data.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
10. INCOME TAXES (CONTINUED)
The significant components of the company's future tax assets as at
December 31, are as follows:
FUTURE INCOME TAX ASSETS 2001 2000
------------------------ -------- --------
Excess tax value over carrying value of property, plant and
equipment................................................. $ 9,383 $ 9,649
Operating loss carryforward................................. 15,859 15,672
Accrued reclamation provision............................... 1,057 1,111
-------- -------
26,299 26,432
Valuation allowance for future tax assets................... (26,299) (26,432)
-------- -------
Total....................................................... -- --
======== =======
The Corporation has incurred income tax losses in prior periods of $43.5
million, which may be carried forward and applied against future taxable
income when earned.
The losses expire as follows:
CANADA UNITED STATES TOTAL
-------- ------------- --------
2002........................................................ 442 1,358 1,800
2003........................................................ 417 5,418 5,835
2004........................................................ 1,718 1,373 3,091
2005........................................................ 7,774 -- 7,774
2006........................................................ 638 -- 638
2007........................................................ 464 -- 464
2008........................................................ 467 388 855
2009........................................................ -- 11 11
2010........................................................ -- 5,106 5,106
2011........................................................ -- 9,415 9,415
2019........................................................ -- 5,301 5,301
2020........................................................ -- 310 310
2021........................................................ -- 2,926 2,926
------- ------- -------
$11,920 $31,606 $43,526
======= ======= =======
11. RETIREMENT PLANS
The Corporation sponsors a qualified tax-deferred savings plan in accordance
with the provisions of Section 401(k) of the U.S. Internal Revenue Service code,
which is available to permanent U.S. employees. The Corporation makes
contributions of up to 4% of eligible employees' salaries. The Corporation's
contributions were as follows: 2001--$ 28,764; 2000--$56,000; and 1999--$
126,000.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
12. SEGMENT INFORMATION
The Corporation operates in the gold mining industry in the United States, has a
property being held for development in Latin America, and has exploration
properties in the United States, Canada and Latin America. Its major product and
only identifiable segment is gold, and all gold revenues and operating costs are
derived in the United States. All revenues are earned in the United States and
geographic segmentation of capital assets is provided in Note 3.
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
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) Under Canadian corporate law, the Corporation underwent a capital
reduction in connection with the amalgamation of Granges and Hycroft
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 the amalgamation. Under
U.S. corporate law, no such transaction is available and accordingly is
not allowed under U.S. GAAP.
(b) In 1999 and 2000 the carrying values of certain long-lived assets
exceeded their respective undiscounted cash flows. Following Canadian
GAAP, the carrying values were written down using the undiscounted cash
flow method. Under U.S. GAAP, the carrying values were written down to
their fair values using the discounted cash flow method, giving rise to a
difference in the amounts written down.
Amortization of the remaining carrying values in subsequent periods
following Canadian GAAP must be reduced to reflect the difference in the
amounts written down following U.S. GAAP.
(c) Under U.S. GAAP, items such as foreign exchange gains and losses and
unrealized gains and losses on marketable securities are required to be
shown separately in the derivation of comprehensive income.
(d) The Corporation recognizes revenue upon adsorbtion of gold onto carbon.
In accordance with U.S. GAAP, revenue is not recorded before title is
passed.
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED)
The significant differences in the consolidated statements of loss relative to
U.S. GAAP were as follows:
YEAR ENDED DECEMBER 31
------------------------------
2001 2000 1999
-------- -------- --------
Loss for the year--Canadian GAAP............................ $(3,275) $(13,209) $(27,700)
Impairment of mineral properties (b)........................ -- (7,637) 13,248
Amortization reduction (b).................................. -- 99 736
Revenue Recognition (d)..................................... 81 (172)
Cumulative impact of adopting SAB 101 (d)................... -- (59) --
------- -------- --------
Net loss--U.S. GAAP for the year before other comprehensive
income adjustments........................................ (3,194) (20,978) (13,716)
Unrealised (gains) losses on marketable securities (c)...... -- 144 (21)
Foreign currency exchange gain (loss) (c)................... 3 (7) 59
------- -------- --------
Comprehensive loss.......................................... $(3,191) $(20,841) $(13,678)
======= ======== ========
Loss per share.............................................. $ (0.04) $ (0.23) $ (0.15)
======= ======== ========
The significant differences in the balance sheet as at December 31, 2001 and
2000 relative to U.S. GAAP were:
2001 2000
--------------------------------- ---------------------------------
PER CDN. CDN./U.S. PER U.S. PER CDN. CDN./U.S. PER U.S.
GAAP ADJ. GAAP GAAP ADJ. GAAP
--------- --------- --------- --------- --------- ---------
Current assets (d)............ $ 1,155 $ (30) $ 1,125 $ 1,320 $ (231) $ 1,089
Property, plant and
equipment (b)............... 12,734 (7,637) 5,097 15,912 (7,637) 8,275
Common shares (a)............. 121,146 76,754 197,900 121,146 76,754 197,900
Contributed surplus (a)....... -- 2,786 2,786 -- 2,786 2,786
Retained deficit (a, b, d).... (110,260) (87,327) (197,587) (106,985) (87,408) (194,393)
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY UNDER U.S. GAAP
NUMBER OF CUMULATIVE OTHER
COMMON SHARE CONTRIBUTED TRANSLATION COMPREHENSIVE
SHARES CAPITAL SURPLUS DEFICIT ADJUSTMENT INCOME
---------- -------- ----------- --------- ----------- -------------
Balance at
December 31, 1998...... 90,715,040 $197,900 $2,786 $(159,699) $(1,540) $(123)
Currency translation
adjustment (c)......... -- -- -- -- 59 --
Comprehensive income
(c).................... -- -- -- -- -- (21)
Net Loss................. -- -- -- (13,716) -- --
---------- -------- ------ --------- ------- -----
Balance at
December 31, 1999...... 90,715,040 $197,900 $2,786 $(173,415) $(1,481) $(144)
Comprehensive income
(c).................... 144
Currency translation
adjustment (c)......... -- -- -- -- (7) --
Net Loss................. -- -- -- (20,978) -- --
---------- -------- ------ --------- ------- -----
Balance at
December 31, 2000...... 90,715,040 $197,900 $2,786 $(194,393) $(1,488) $ 0
Currency translation
adjustment (c)......... -- -- -- -- 3 --
Net Loss................. -- -- -- (3,194) -- --
---------- -------- ------ --------- ------- -----
Balance at
December 31, 2001...... 90,715,040 $197,900 $2,786 $(197,587) $(1,485) $ 0
========== ======== ====== ========= ======= =====
STOCK BASED COMPENSATION PLANS
The Corporation applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its plans in its U.S. GAAP presentations. If
compensation cost for the Corporation's stock-based compensation plans had been
determined based on the fair value at the grant dates for awards under the plans
consistent with the method described in SFAS No. 123, the Corporation would have
recorded compensation expense of $20,000, $15,000 and $361,000 in 2001, 2000 and
1999 respectively. Accordingly, the consolidated net loss and loss per share
under U.S. GAAP would have increased to the pro forma amounts indicated below:
2001 2000 1999
-------- -------- --------
Net earnings (loss) under U.S. GAAP................ As reported $(3,194) $(20,978) $(13,716)
Pro forma (3,214) (20,993) (14,077)
Loss per share under U.S. GAAP..................... As reported (0.04) (0.23) (0.15)
Pro forma (0.04) (0.23) (0.16)
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
13. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (CONTINUED)
The fair value of each option grant is estimated on the date of grant for all
plans using the Black-Scholes option-pricing model with the following weighted
average assumptions used for grants in 2001, 2000 and 1999:
2001 2000 1999
-------- -------------- ---------
Expected volatility...................................... 75.0% 61.9% 61.9%
Risk-free interest rate.................................. 5.00% 5.09% to 5.74% 4.81%
Expected lives........................................... 2 years 2 years 4.5 years
Dividend yield........................................... 0% 0% 0%
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board issued SFAS No. 141,
Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets.
These new standards eliminate pooling as method of accounting for business
combinations, and feature new accounting rules for goodwill and intangible
assets. The company does not foresee any impact on a cumulative effect of an
accounting change or on the carrying values of assets and liabilities recorded
in the Consolidated Balance Sheet upon adoption. SFAS No. 141 is effective for
business combinations initiated from July 1, 2001. SFAS No. 142 will be adopted
on January 1, 2002.
Also issued in June 2001 was SFAS No. 143, Accounting for Asset Retirement
Obligations. This Statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. It requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset. The Corporation is analyzing the impact of SFAS
No. 143 and will adopt the standard on January 1, 2003.
In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long -lived Assets. This statement addresses accounting for
discontinued operations and the impairment or disposal of long-lived assets. The
Corporation does not expect that the implementation of these guidelines will
have a material impact on its consolidated financial position or results of
operations.
In November 2001 the Accounting Standards Board of the Canadian Institute of
Chartered Accountants issued new Handbook Section 3870, Stock-based Compensation
and Other Stock-based Payments. This Section establishes standards for the
recognition, measurement and disclosure of stock-based compensation and other
stock-based payments made in exchange for goods and services. It applies to
transactions, including non-reciprocal transactions, in which an enterprise
grants shares of common stock, stock options, or other equity instruments, or
incurs liabilities based on the price of common stock or other equity
instruments and sets out a fair value based method of accounting which is
required for certain, but not all, stock-based transactions. The Corporation is
analysing the impact of Section 3870 and will adopt the Section on January 1,
2002.
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
14. SUBSEQUENT EVENTS
On January 22, 2002, the Corporation announced that it had finalized an agency
agreement for a private placement financing of $3.8 million to be arranged by
Global Resource Investment Ltd. ("Global") of Carlsbad, California. This private
placement, which is subject to regulatory and shareholder approval, has been
effected in two steps.
On February 1, 2002, the Corporation completed the first step, a private
placement (the "Unit Offering") of 20,000,000 units (the "Offered Units") to
Stockscape.com Technologies Inc. ("Stockscape"), and 1,600,000 units (the
"Agent's Units") to Global, as consideration for its services as agent in
connection with the Unit Offering. Each Offered Unit and each Agent's Unit
consisted of one common share and one common share purchase warrant (a
"Warrant"). Subject to shareholder approval, each Warrant entitles the holder to
purchase one common share at a price of $0.075 per share until February 1, 2007.
The closing of the Unit Offering provided the Corporation with net proceeds of
$1,026,000 and the potential for an additional $1,500,000, if the Warrants
issued as part of the Unit Offering are exercised. Of these proceeds, $814,087
has been reserved and must be used for a proposed settlement of the lawsuit
initiated by USF&G (note 7) and the balance will be used by the Corporation as
working capital.
The Toronto Stock Exchange (the "TSE") has approved the Unit Offering, subject
to shareholders approving the issuance of the Warrants at the Corporation's
Annual and Special General Meeting (the "Meeting") scheduled to be held on
April 26, 2002.
The second step of the private placement, comprised of convertible debentures
("Debentures") in the principal amount of $2,774,000 to various investors, and
4,325,925 special warrants (the "Agent's Special Warrants") to Global, as
consideration for its services as agent in connection with the Debenture
Offering is scheduled to be completed in March, 2002, at which time the gross
proceeds raised by the issuance of the Debentures will be placed in escrow.
Subject to shareholder approval, the Debentures are convertible into units (the
"Debenture Units") at a price of $0.0513 per Debenture Unit, with each Debenture
Unit consisting of one Common Share and one Warrant with the same terms as the
Offered Units (described above under). The Debentures bear interest at a rate of
1% per annum and will mature on September 20, 2003 (the "Maturity Date"), unless
they are converted or otherwise become due and payable prior to that date.
Subject to shareholder approval prior to March 18, 2007, the Agent's Special
Warrants are convertible into 4,325,925 Agent's Units, with each Agent's Unit
consisting of one Common Share and one Warrant with the same terms as the
Offered Units.
Subject to shareholder approval (the "Approval") of the Debenture Offering at
the Meeting and the release to the Corporation from escrow of the gross proceeds
raised by the issuance of the Debentures (as described below), the Debentures
may, at the option of the holder, be converted into Debenture Units at any time
prior to the Maturity Date. In addition, if the Approval is obtained at the
Meeting, the Debentures will automatically be converted into Debenture Units on
the later of (i) the date a registration statement filed under the United States
SECURITIES ACT OF 1933 (a "Registration Statement") relating to the Debentures,
the Debenture Units and the common shares and Warrants underlying the Debenture
Units is declared effective by the United States Securities and Exchange
Commission (the "SEC"), and (ii) the date the gross proceeds raised by the
issuance of the Debentures are released to the Corporation from escrow (as
described below). Also, if Approval is obtained the Debentures will become due
and payable, in cash, at the option of the holder at any time after
September 20, 2002, if by such date the SEC has not declared effective a
Registration Statement relating to the Debentures, the Debenture Units and the
Common Shares and Warrants underlying the Debenture Units.
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THE TABULAR INFORMATION SET OUT BELOW IS IN THOUSANDS OF UNITED STATES DOLLARS,
EXCEPT SHARE DATA.
14. SUBSEQUENT EVENTS (CONTINUED)
The gross proceeds raised by the issuance of the Debentures will remain in
escrow pending shareholder approval of the Debenture Offering at the Meeting and
the dismissal of the USF&G lawsuit. If shareholders approve the Debenture
Offering at the Meeting, these proceeds will be released to the Corporation
within three business days of the later of the Meeting or the date the USF&G
lawsuit is dismissed. If shareholders do NOT approve the Debenture Offering at
the Meeting, the proceeds from the issuance of the Debentures and all accrued
interest will be returned to investors. The Agent's Special Warrants will not be
converted into Agent's Units unless shareholder approval is obtained at the
Meeting or at a subsequent meeting held prior to March 18, 2007.
The TSE has approved the Debenture Offering, subject to, among other things,
shareholders approving the issuance of the Debentures and the Agent's Special
Warrants at the Meeting.
If shareholders approve the Debenture Offering at the Meeting, management of the
Corporation expects that the Debenture holders will nominate a person to be
appointed as a director of the Corporation.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
44
PART III
ITEM 9. DIRECTORS AND OFFICERS OF REGISTRANT
DIRECTORS
The directors of Vista Gold are elected each year at the annual general meeting
of shareholders and hold office until their successors are elected or appointed.
The present directors of Vista Gold, together with the location of their
residences, age, length of service and business experience, are described below.
NAME, RESIDENCE, PRINCIPAL OCCUPATION,
POSITION AND AGE DIRECTOR SINCE BUSINESS OR EMPLOYMENT
---------------- ------------------ ----------------------------------------------
JOHN M. CLARK.................. May 18, 2001 Chartered Accountant, President of Investment
Toronto, Ontario and Technical Management Corp., a firm engaged
DIRECTOR in corporate finance and merchant banking,
Age - 46 from February 1999 to present; independent
consultant providing investment and management
advisory services from February 1998 to
January 1999; Executive Chairman of Laurasia
Resources Limited, an oil and gas company,
from 1988 to February 1998.
RONALD J. MCGREGOR............. May 19, 1999 President and Chief Executive Officer of Vista
Littleton, Colorado Gold from September 2000 to present; Vice
DIRECTOR President, Development and Operations of Vista
Age - 54 Gold from July 1996 to September 2000.
C. THOMAS OGRYZLO.............. March 8, 1996 Businessman, President and Chief Executive
Toronto, Ontario Officer Canatec Development Corporation, a
DIRECTOR resource management company, from January 2000
Age - 62 to present; President and Chief Executive
Officer of Black Hawk Mining Inc. and its
subsidiary, Triton Mining Corporation, both
gold mining companies, from July 1997 to
January 2000; prior thereto, Chairman of
Kilborn SNC-Lavalin Inc., an engineering
group.
MICHAEL B. RICHINGS............ May 1, 1995 Mining engineer; formerly, President and Chief
Littleton, Colorado Executive Officer of Vista Gold from
DIRECTOR June 1995 to September 2000.
Age - 57
A. MURRAY SINCLAIR............. February 21, 2002 Businessman, Director of Quest Management
Vancouver, British Columbia Corp., a firm that provides management
DIRECTOR services to the resource industry, from
Age - 40 December 1996 to present; President and
Director of Quest Ventures Ltd., a firm that
provides merchant banking services to the
resource industry, from September 1997 to
present.
None of the above directors has entered into any arrangement or understanding
with any other person pursuant to which he was, or is to be, elected as a
director of the Corporation or a nominee of any other person, except that
Mr. Sinclair was appointed to the Board of Directors as a nominee of
Stockscape.com
45
Technologies Inc. (defined below as "Stockscape") in connection with the private
placement transaction that was completed on February 1, 2002. See Item 7,
Consolidated Financial Statements, Note 14. Stockscape currently holds
approximately 17.8% of the outstanding Common Shares.
EXECUTIVE OFFICERS
The executive officers of Vista Gold are appointed by and hold office at the
pleasure of the Board of Directors of Vista Gold. The executive officers of
Vista Gold during 2001, together with their age, length of service and business
experience, are described below.
NAME, POSITION AND AGE HELD OFFICE SINCE BUSINESS EXPERIENCE DURING PAST FIVE YEARS
---------------------- ------------------ ----------------------------------------------
RONALD J. MCGREGOR............. September 8, 2000 President and Chief Executive Officer of Vista
PRESIDENT, CHIEF EXECUTIVE Gold from September 8, 2000 to present; Vice
OFFICER AND DIRECTOR President Development and Operations for Vista
Age - 54 Gold from July 1, 1996 to September 8, 2000.
JOHN F. ENGELE................. May 1, 2001 Vice President Finance of Vista Gold from
VICE PRESIDENT FINANCE AND May 1, 2001 to present; Director of
CHIEF FINANCIAL OFFICER Accounting, Vista Gold, from March 2001 to
Age - 50 April 2001; Director of Planning, Analysis and
Operations Accounting, Echo Bay Mines Ltd.
from June 1996 to February 2001.
ROBERT L. FOLEN................ September 15, 2000 Vice President Finance of Vista Gold from
VICE PRESIDENT FINANCE (until May 1, 2001) September 15, 2000 to May 1, 2001; Accounting
Age - 50 Manager of Hycroft Resources and
RESIGNED AS OF MAY 1, 2001 Development Inc. and Mineral Ridge
Resources Inc., from October 1998 to
September 2000; Accounting Manager of Hayden
Hill Mine, Sleeper Mine and Wind Mountain Mine
for Amax Gold Inc., from December 1994 to
September 1998.
WILLIAM F. SIRETT.............. January 1, 1996 Lawyer; Partner, Borden Ladner Gervais LLP, a
SECRETARY law firm.
Age - 51
None of the above executive officers has entered into any arrangement or
understanding with any other person pursuant to which he was or is to be elected
as an executive officer of Vista Gold or a nominee of any other person.
EXECUTIVE AND AUDIT COMMITTEES
Vista Gold does not have an executive committee. Vista Gold is required to have
an audit committee under section 173 of the BUSINESS CORPORATIONS ACT (Yukon
Territory). Vista Gold's audit committee consists of the following directors:
John M. Clark, C. Thomas Ogryzlo and A. Murray Sinclair.
ITEM 10. COMPENSATION OF DIRECTORS AND OFFICERS.
During the financial year ended December 31, 2001, the aggregate cash
compensation paid by the Corporation to all directors and officers of Vista
Gold, as a group was $299,470. This sum includes compensation paid to executive
officers pursuant to the cash incentive plan and retirement savings plan
described below.
46
Information specified in this Item for individually named directors and officers
is incorporated by reference from the Management Information and Proxy Circular
prepared in connection with Vista Gold's Annual General Meeting to be held on
April 26, 2002, filed with the Securities and Exchange Commission concurrently
with the filing of this report.
Pursuant to the terms of the Corporation's incentive policy adopted by the
Corporation in 1989 or certain employment contracts, executive officers and
senior employees of the Corporation are eligible to receive incentive payments.
The Corporation did not make any incentive payments to executive officers or
senior employees under this plan in 2001. Any incentive payments are awarded at
the discretion of the Board of Directors based on recommendations from the
compensation committee. There is no established formula utilized in determining
these incentive payments. The award of incentive payments is motivated by the
Corporation's desire to reward past services rendered to the Corporation and to
provide an incentive for continued service to the Corporation. Incentive
payments to be made during 2002, which may include amounts related to
performance during a portion of 2001, have not yet been determined. The
Corporation has not made any restricted stock awards during the last three
fiscal years.
During the fiscal year ended December 31, 2001, the Corporation set aside or
accrued a total of $11,245 to provide pension, retirement or similar benefits
for directors or officers of Vista Gold pursuant to plans provided or
contributed to by the Corporation. As a part of the aggregate cash compensation
disclosed above, the Corporation sponsors a qualified tax-deferred savings plan
in accordance with the provisions of section 401(k) of the United States
Internal Revenue Service Code which is available to permanent United
States-based employees. Under the terms of this plan, the Corporation makes
contributions of up to 4% of eligible employees' salaries.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information specified in this Item for individually named directors and officers
is incorporated by reference from pages of the Management Information and Proxy
Circular prepared in connection with Vista Gold's Annual General Meeting to be
held on April 26, 2002, filed with the Securities and Exchange Commission
concurrently with the filing of this report.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except as described below, there have been no transactions or series of similar
transactions during 2000 or 2001, or any currently proposed transactions or
series of similar transactions, to which Vista Gold or any of its subsidiaries
was or is a party in which the amount involved exceeds $60,000 and in which any
director or executive officer, any nominee for election as a director, any
security holder known to the Corporation to own of record or beneficially more
than 5% of the Corporation's Common Shares, or any member of the immediate
family of any of the foregoing persons, had or will have a direct or indirect
material interest.
As a result of the private placement transaction that was completed on
February 1, 2002, the Corporation issued 20,000,000 common shares and subject to
shareholder approval, warrants to acquire an additional 20,000,000 common shares
to Stockscape.com Technologies Inc. ("Stockscape"), and 1,600,000 common shares
and subject to shareholder approval, warrants to acquire an additional 1,600,000
common shares to Global Resource Investments Ltd. ("Global"), as consideration
for its services as agent with respect to the transaction. As at March 18, 2002,
the common shares held by Stockscape represented 17.8% of the issued and
outstanding common shares. The Corporation understands that more than 10% of the
issued and outstanding shares of Stockscape, and all of the issued and
outstanding shares of Global are beneficially owned by Mr. Arthur Richard Rule.
47
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
DOCUMENTS FILED AS PART OF REPORT
FINANCIAL STATEMENTS
The following consolidated financial statements of the Corporation are filed as
part of this report:
1. Report of Independent Accountants dated February 22, 2002 except as to
Notes 1 and 14, which are as at March 18, 2002.
2. Consolidated Balance Sheets--At December 31, 2001 and 2000.
3. Consolidated Statements of Loss--Years ended December 31, 2001, 2000,
and 1999.
4. Consolidated Statements of Deficit--Years ended December 31, 2001, 2000
and 1999.
5. Consolidated Statements of Cash Flows--Years ended December 31, 2001, 2000,
and 1999.
6. Notes to Consolidated Financial Statements.
See "Item 7. Consolidated Financial Statements and Supplementary Data".
FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are filed as part of this report because such
schedules are not applicable or the required information is shown in the
consolidated financial statements or notes thereto. See "Item 7. Consolidated
Financial Statements and Supplementary Data".
EXHIBITS
The following exhibits are filed as part of this report:
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
3.01 Articles of Continuation filed as Exhibit 2.01 to the
Form 20-F for the period ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
3.02 By-Law No. 1 of Vista Gold filed as Exhibit 2.01 to the
Form 20-F for the period ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
3.03 Share Certificate of Vista Gold (File No. 1-9025)
3.04 Amended By-Law No. 1 of Vista Gold (File No.1-9025)
10.01 Lease and Option dated July 1, 1985 between Henry C.
Crofoot, trustee, and Hycroft Resources--Development Inc.
(Crofoot Patented Claims), as amended, filed as
Exhibit 10.8 to Granges' Registration Statement on
Form S-1, as amended, and incorporated herein by reference
(File No. 33-17974)
10.02 Lease and Option dated July 1, 1985, between Henry C.
Crofoot, trustee, and Hycroft Resources--Development Inc.
(Crofoot Unpatented Claims), as amended, filed as
Exhibit 10.9 to Granges' Registration Statement on
Form S-1, as amended, and incorporated herein by reference
(File No. 33-17974)
48
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
10.03 Lewis Mine Lease and Assignment Agreement included in the
Assignment of Mining Lease dated January 23, 1987 among
Standard Slag Company, Hycroft Lewis, Hycroft Resources
Corporation and Granges, filed as Exhibit 10.7 to Granges'
Registration Statement on Form S-1, as amended, and
incorporated herein by reference (File No. 33-17974)
10.04 Amendment Agreement dated January 14, 1988, among Henry C.
Crofoot et al and Hycroft Resources--Development Inc. filed
as Exhibit 10.13 to Granges' Annual Report on Form 10-K for
the fiscal year ended December 31, 1988, as amended, and
incorporated herein by reference (File No. 1-9025)
10.05 Lewis Hycroft Agreement dated January 10, 1989, among Frank
W. Lewis, Hycroft Lewis and Hycroft
Resources--Development Inc. filed as Exhibit 10.16 to
Granges' Annual Report on Form 10-K for the fiscal year
ended December 31, 1988, as amended, and incorporated herein
by reference (File No. 1-9025)
10.06 Second Amendment Agreement dated March 3, 1989, among Henry
C. Crofoot et al and Hycroft Resources--Development Inc.
filed as Exhibit 10.24 to the Form 20-F/A for the year ended
December 31, 1994 and incorporated herein by reference (File
No. 1-9025)
10.07 Second Lewis-Hycroft Agreement dated March 15, 1991 among
Frank W. Lewis, Granges, Hycroft
Resources--Development Inc. and Hycroft Lewis filed as
Exhibit 10.20 to the Form 20-F/A for the year ended
December 31, 1994 and incorporated herein by reference (File
No. 1-9025)
10.08 Third Amendment Agreement dated August 16, 1991 among Henry
C. Crofoot et al, Hycroft Resources & Development Inc. and
Blackrock Properties, Inc. filed as Exhibit 10.25 to the
Form 20-F/A for the year ended December 31, 1994 and
incorporated herein by reference (File No. 1-9025)
10.09 Agreement dated May 13, 1994 between Granges and Atlas
Corporation filed as Exhibit 2.01 to the Form 20-F for the
period ended December 31, 1994 and incorporated herein by
reference (File No. 1-9025)
10.10 Purchase and Sale Agreement dated June 24, 1994 between
Granges and Hudson Bay Mining and Smelting Co., Limited
filed as Exhibit 10.10 to the Form 20-F/A for the year
ended December 31, 1994 and incorporated herein by reference
(File No. 1-9025)
10.11 Amalgamation Agreement dated February 24, 1995 between
Granges and Hycroft Inc. included in the Joint Management
Information Circular of Granges and Hycroft Inc. filed as
Exhibit 20.1 to the Form 8-K dated May 1, 1995 and
incorporated herein by reference (File No. 1-9025)
10.12 Agreement dated February 24, 1995 between Granges and Atlas
Corporation filed as Exhibit 2.03 to the Form 20-F for the
period ended December 31, 1994 and incorporated herein by
reference (File No. 1-9025)
10.13 Employment Agreement dated June 1, 1995 between Granges and
Michael B. Richings filed as Exhibit 10(i) to the Form 10-Q
for the quarterly period ended June 30, 1995 and
incorporated herein by reference (File No. 1-9025)
49
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
10.14 Private Placement Subscription Agreement dated August 25,
1995 between Granges and Zamora filed as Exhibit 10.10 to
the Form 20-F/A for the year ended December 31, 1994 and
incorporated herein by reference (File No. 1-9025)
10.15 Letter of Intent between Granges and Atlas Corporation dated
as of October 4, 1995 to enter into an Exploration Joint
Venture Agreement filed as Exhibit 10.14 to the
Form 20-F/A for the year ended December 31, 1994 and
incorporated herein by reference (File No. 1-9025)
10.16 Registration Agreement between Granges and Atlas Corporation
dated as of November 10, 1995 filed as Exhibit 10.12 to the
Form 20-F/A for the year ended December 31, 1994 and
incorporated herein by reference (File No. 1-9025)
10.17 Indemnification Agreement between Granges and Atlas
Corporation dated as of November 10, 1995 filed as
Exhibit 10.13 to the Form 20-F/A for the year ended
December 31, 1994 and incorporated herein by reference (File
No. 1-9025)
10.18 Commitment letter dated November 14, 1995 between Granges
and Deutsche Bank AG filed as Exhibit 10.09 to the
Form 20-F/A for the year ended December 31, 1994 and
incorporated herein by reference (File No. 1-9025)
10.19 Exploration and Purchase Option Agreement effective June 7,
1996 between Granges and L.B. Mining filed as Exhibit 2.01
to the Form 20-F for the year ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
10.20 Special Warrant Indenture dated June 7, 1996 between Granges
and Montreal Trust filed as Exhibit 2.02 to the Form 20-F
for the year ended December 31, 1997 and incorporated herein
by reference (File No. 1-9025)
10.21 Warrant Indenture dated June 7, 1996 between Granges and
Montreal Trust filed as Exhibit 2.03 to the Form 20-F for
the year ended December 31, 1997 and incorporated herein by
reference (File No. 1-9025)
10.22 Stock Option Plan of Vista Gold dated November 1996 (File
No. 1-9025)
10.23 Supplemental Warrant Indenture made as of November 1, 1996
between Vista Gold and Montreal Trust with respect to the
Warrant Indenture dated April 25, 1996 between Granges and
Montreal Trust filed as Exhibit 1.01 to the Form 20-F for
the year ended December 31, 1997 and incorporated herein by
reference (File No. 1-9025)
10.24 Supplemental Warrant Indenture made as of November 1, 1996
between Vista Gold and Montreal Trust with respect to the
Warrant Indenture dated June 7, 1996 between Granges and
Montreal Trust filed as Exhibit 1.02 to the Form 20-F for
the year ended December 31, 1997 and incorporated herein by
reference (File No. 1-9025)
10.25 Establishment of Operating Credit Facility dated
November 22, 1996 from The Bank of Nova Scotia to Vista Gold
and accepted by Vista Gold on November 26, 1996 filed as
Exhibit 2.05 to the Form 20-F for the year ended
December 31, 1997 and incorporated herein by reference (File
No. 1-9025)
10.26 Termination Agreement dated January 10, 1997 between Granges
(U.S.) Inc. and Atlas filed as Exhibit 1.03 to the
Form 20-F for the year ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
50
EXHIBIT NUMBER DESCRIPTION
-------------- ------------------------------------------------------------
10.27 Credit Agreement dated as of February 20, 1997 between The
Bank of Nova Scotia and Hycroft Inc. filed as Exhibit 2.06
to the Form 20-F for the year ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
10.28 Guaranty dated as of February 20, 1997 by Vista Gold in
favor of The Bank of Nova Scotia filed as Exhibit 2.07 to
the Form 20-F for the year ended December 31, 1997 and
incorporated herein by reference (File No. 1-9025)
10.29 Amendment No. 1 dated as of September 30, 1997 between The
Bank of Nova Scotia and Hycroft Inc. Credit Agreement dated
as of February 20, 1997 between The Bank of Nova Scotia and
Hycroft Inc. filed as Exhibit 1.01 to the Form 20-F for the
year ended December 31, 1998 and incorporated herein by
reference (File No. 1-9025)
10.30 Letter Agreement of Private Placement dated April 24, 1998
between Zamora and Gribipe and Amendment dated June 1, 1998
to Letter Agreement of Private Placement Agreement dated
April 24, 1998 (File No. 1-9025)
10.31 Share Purchase Agreement dated October 21, 1998 among
Cornucopia Resources Ltd., Cornucopia Resources Inc., Vista
Gold Holdings Inc. and Vista Gold (File No. 1-9025)
10.32 Restated and Amended Loan Agreement dated as of October 21,
1998 between Mineral Ridge Inc. and Dresdner Bank AG,
New York and Grand Cayman Branches (File No. 1-9025)
10.33 Stock Option Plan of Vista Gold dated November 1996 as
amended in November 1998 (File No. 1-9025)
10.34 Loan and Security Agreement dated as of April 12, 1999
between Hycroft Resources & Development, Inc. and Finova
Capital Corporation. (File No. 1-9025)
10.35 Voluntary Petition under Chapter 11 of the U.S. Bankruptcy
Code dated December 10, 1999 filed by Mineral Ridge
Resources Inc. (File No. 1-9025)
10.36 Sale Agreement dated January 31, 2000 on one hand between
David O'Connor and Vista Gold and on the other hand Empresa
Minera Multiple Capacirca. (File No. 1-9025)
10.37 Employment Agreement dated September 8, 2000 between Vista
Gold and Ronald J. McGregor. (File No. 1-9025)
10.38 Agency Agreement dated February 1, 2002 between Vista Gold
and Global Resources Investments Ltd. (File No. 1-9025)
10.39 Amendment Agreement dated March 18, 2002 between Vista Gold
and Global Resources Investments Ltd. (File No. 1-9025)
24.01 Powers of Attorney (File No. 1-9025)
REPORTS ON FORM 8-K
The following reports were filed under cover of Form 8-K during the quarter
ended December 31, 2001:
1. Report dated November 15, 2001 regarding the Corporation's results for the
quarter ended September 30, 2001.
51
SUPPLEMENTAL INFORMATION
Additional information, including directors' and officers' remuneration and
indebtedness, principal holders of the Corporation's securities, options to
purchase securities and interests of insiders in material transactions, where
applicable, is contained in the Management Proxy and Information Circular for
the annual and special general meeting of shareholders held on April 26, 2002.
52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
VISTA GOLD CORP.
Dated: March 18, 2002 By: /s/ RONALD J. MCGREGOR
------------------------------------------
RONALD J. MCGREGOR
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the date indicated:
Dated: March 18, 2002 By: /s/ RONALD J. MCGREGOR
------------------------------------------
RONALD J. MCGREGOR
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: March 18, 2002 By: /s/ JOHN F. ENGELE
------------------------------------------
JOHN F. ENGELE
VICE PRESIDENT FINANCE AND
CHIEF FINANCIAL OFFICER
53
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ RONALD J. MCGREGOR
------------------------------------------- President and Chief Executive March 18, 2002
Ronald J. McGregor Officer and Director
*
------------------------------------------- Director March 18, 2002
John M. Clark
*
------------------------------------------- Director March 18, 2002
C. Thomas Ogryzlo
*
------------------------------------------- Director March 18, 2002
Michael B. Richings
*
------------------------------------------- Director March 18, 2002
A. Murray Sinclair
* Pursuant to a Power of Attorney dated March 18, 2002, the undersigned by
signing his name hereby signs this report in the name and on behalf of the
foregoing directors.
/s/ RONALD J. MCGREGOR
-------------------------------------------
Ronald J. McGregor
54