DENVER, Jan. 30 /CNW/ -- Vista Gold Corp.
(Amex: VGZ; TSX) is pleased to announce that it has received an updated
feasibility study for the possible restart of operations at the Hycroft Mine,
an open-pit, heap-leach, gold mine located 54 miles west of Winnemucca,
Nevada. The Hycroft Mine has produced in excess of one million ounces of gold
and two million ounces of silver and is currently on a care and maintenance
basis.
The updated study was issued on January 25, 2006 by Mine Development
Associates (MDA) of Reno, Nevada, a consulting firm, in accordance with
Canadian National Instrument 43-101 guidelines. The study and verification of
the data employed in the study was undertaken under the supervision of
Mr. Neil Prenn, P. Eng., a qualified person independent of Vista. The Hycroft
resource estimate on which the feasibility study was based and which was used
by MDA to calculate mineral reserves was prepared by Ore Reserves Engineering
(ORE) of Lakewood, Colorado, under the direction of Mr. Alan Noble, P. Eng., a
qualified person independent of Vista. The results of the ORE resource
estimate, which was prepared in accordance with National Instrument 43-101
guidelines, were previously released by the Corporation in a news release
dated August 4, 2005.
Proven and probable mineral reserves were determined within a design pit
based on a US$450 per ounce gold price employing a Lerchs-Grossman
optimization. The results are summarized in the following table.
Hycroft Mineral Reserve Estimate (1)
(0.005 opt cyanide-soluble gold cutoff grade)
Reserve Short Tons Fire Assay Contained Strip Ratio
Category (millions) Gold Grade Gold Ounces Waste Tons (Waste:Ore)
(opt) (millions)
Proven 11.954 0.022 260,900
Probable 21.366 0.019 401,900
Totals 33.320 0.020 662,800 50.808 1.52
1) Cautionary Note to U.S. Investors concerning estimates of Proven and
Probable Reserves: The estimates of mineral reserves shown in this
table have been prepared in accordance with Canadian National
Instrument 43-101. The definitions of proven and probable reserves
used in NI 43-101 differ from the definitions in SEC Industry Guide 7.
Accordingly, the Corporation's disclosure of mineral reserves herein
may not be comparable to information from U.S. companies subject to
the SEC's reporting and disclosure requirements.
MDA generated a new mining schedule and mining plans to develop the mine
at a nominal mining rate of 24 million tons per year. Updated capital and
operating costs were estimated for the proposed operation supported by
engineering estimates or production parameters from previous operating
experience at Hycroft and price quotations for commodities and equipment
needed. The study assumed leasing of new major mining equipment and purchase
of support equipment. The study estimates that following a pre-production
period of 6-9 months, the mine is expected to produce, over a five year
period, 375,400 ounces of gold and 1.5 million ounces of silver. (All
estimates are presented on a pre-tax basis.) Total cash production costs were
estimated in the study to be US$351 per ounce of gold produced with a silver
credit equivalent to US$28 per ounce of gold produced based on a US$7 per
ounce silver price. Total investment, including working capital, required for
recommencement of operations is estimated to be US$25.6 million based on a
US$450 gold price, but this is reduced to US$18.5 million at a US$550 gold
price. As set forth in the updated study, the investment would generate an
estimated internal rate of return (IRR) of 29.5% at a US$450 per ounce gold
price and a US$7 per ounce silver price, but this increases to 69.6% at a
US$550 gold price and a US$9 silver price. Similar effects are seen on the
net present value (NPV) which is estimated at a US$450 gold price and a US$7
silver price, at a 5% discount rate to be US$18.9 million, and at a 0% rate to
be US$26.8 million, with these NPV estimates increasing to US$51.6 million and
US$65.7 million respectively at a US$550 per ounce gold price and a US$9 per
ounce silver price.
In light of significantly higher gold prices in recent months, the
Corporation also wishes to present the potential effects of the higher prices
on the Paredones Amarillos gold project in Baja California, Mexico. In August
2005 the Corporation presented the results of a feasibility study completed by
MDA, referred to above, in accordance with National Instrument 43-101
guidelines, under the supervision of Mr. Neil Prenn, P. Eng., a qualified
person independent of Vista. At that time, with a gold price of $400 per
ounce, MDA estimated the IRR on the US$100.3 million investment to be 4% and
the NPV at a 5% discount rate to be US$6.7 million and at a 0% discount rate
to be US$37.1 million. Vista has estimated that at a gold price of US$550 per
ounce, based on the MDA economic model, the IRR would be 24% and the NPV at a
5% discount rate would be US$144 million or US$248 million at a 0% discount
rate (these calculations have not been verified by MDA). Paredones Amarillos
is an advanced-stage project with over US$35 million spent by previous owners
on evaluation and engineering, and the project now proposed by Vista has been
further defined with additional metallurgical and engineering design work.
Mike Richings, President and CEO, commented, "Completion of the updated
restart feasibility study at the Hycroft Mine, as well as the update of
economics for Paredones Amarillos, highlights engineering efforts to add value
to our projects and underscores the importance of our basic strategy of
acquiring and holding these valuable resources in the ground while waiting for
higher gold prices. As previously announced, we recently made a significant
addition to our ownership interest in the Hycroft Mine with our acquisition of
F. W. Lewis Inc. Total consideration for the acquisition was US$5.25 million
and 250,000 Vista shares. F. W. Lewis Inc. owned a production royalty at
Hycroft, plus approximately 20,000 acres of mineral claims in Nevada. The
production royalty (applying to approximately 70% of the reported reserves)
was 5% Net Smelter Return (NSR) on gold and 7.5% NSR on silver (and other
metals), which would have been paid by Hycroft Resources and Development Inc.,
a Vista subsidiary. The production royalty no longer applies by virtue of
Vista's acquisition. In light of the current high gold prices this timely
acquisition means that, with the royalty no longer being payable, Vista has
the potential for adding significantly to estimated cash flows from the
potential restart of the Hycroft Mine."
Vista Gold Corp., based in Littleton, Colorado, evaluates and acquires
gold projects with defined gold resources. Additional exploration and
technical studies are undertaken to maximize the value of the projects for
eventual development. The Corporation's holdings include the Maverick
Springs, Mountain View, Hasbrouck, Three Hills, Wildcat projects and Hycroft
Mine, all in Nevada, the Long Valley project in California, the Yellow Pine
project in Idaho, the Paredones Amarillos and Guadalupe de los Reyes projects
in Mexico, and the Amayapampa project in Bolivia.
The statements that are not historical facts are forward-looking
statements involving known and unknown risks and uncertainties that could
cause actual results to vary materially from targeted results. Such risks and
uncertainties include those described from time to time in the Corporation's
periodic reports, including its latest annual report on Form 10-K filed with
the U.S. Securities and Exchange Commission. The Corporation assumes no
obligation to publicly update any forward-looking statements, whether as a
result of new information, future events or otherwise.
