Long-term bullish on Vista GoldThanks for viewing.
Vista Gold is a gold miner developer. They have one property. It is a gold mine in the Northern Territory of Australia with proven and probable reserves of around 7 million ounces. There is just under 7 million ounces indicated, which may be converted to reserves at some point in the future, if borne out by drilling programs. Drilling is ongoing and has expanded gold finds beyond what is in the current reserve.
They are expecting to issue a revised gold reserve and revised feasibility plan that will allow them to extract 150 to 200k ounces pa vs 500k/pa in the previous one. The revision is because the lower production target will require less funding to get underway (USD400m vs USD1 billion), but it will also extend mine life.
I don't like the grade of ~1g/ton of ore. But due to the accessibility, even a low grade like this is economical to extract. They set a cut-off of economical extraction at 0.35g/ton.
If they reach 200k ounces of production within the next 5 years I would value this equity at 12 times its current price - even if gold prices do not rise over time. Price target $9.20 up from 0.75.
If they subsequently expand production to 500k ounces pa my price target is $23 (30.4x).
This is without the conversion of the 7m ounces into reserves or any new gold strikes.
This mine was #3 on the largest undeveloped gold mines list I read yesterday. One in the top 3 is from Russia.
Its relatively high risk. They may not secure funding. The jurisdiction is very friendly. They are just 2 hours drive south of a major city. Infrastructure in place. Approvals in place.
With gold price where it is currently, and the extreme size of the gold reserve, I consider it a foregone conclusion that they, or someone else will realise the extraction of this gold. I just hope they don't get taken over with some crazy low offer like a 50% premium on current share price. No, I want to hold this equity and get my 12 to 30 x benefits. If I have to wait 10 years, then so be it. That will allow me to increase my position.
Now that people have realised that the US is basically insolvent (I am not a US hater) and US treasuries are a guaranteed loss-maker (real inflation is around 8% and a 10 year note returns 4.5%pa for a -3.5%pa real return), more people will flock to gold and gold stocks trying to gain protection from inflation. The only way the US can get control is to allow inflation to reduce the future value of today's debt until it becomes manageable. That and cost reductions, but cost reductions now have come a little too late IMO. The cat is out of the bag.
The blue box is my pessimistic view. If price drops that low, I am doubling my holding.
