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Vista Gold Corp (NYSEMKT:VGZ)

The Wall Street Analyst Forum

August 14, 2007 9:10 am ET

Executives

Greg Marlier - CFO

Presentation

Greg Marlier

Good morning. Thanks for attending. I was here in February. It was an interesting case. I was leaving Wednesday afternoon and United called me up and said your next flight out is Saturday. I said that's four days. And sure enough I had to get a flight the next night at midnight going through Atlanta. It's amazing what a little storm in Chicago could do to New York City. But it's nice to be back, nice time of year, a little warmer and, like you said, the Yankees are playing well. So that’s good.

There has been a lot going on with Vista Gold since February. Before I get started, I have to put these cautionary notes up, especially the last paragraph, if you want to read about the resources versus reserves. Just to give you a little background, I recognize a lot of the faces in the crowd here. I've been in the mining business for about 30 years. I took Apex Silver public in '97, prior to that I was with Cambior USA, basically holding the same position.

I came to Vista Gold over three years ago. I was hired by a fellow named Jock McGregor, who was the past President. He passed away on the first day I joined the company, while he was jogging at lunch. Mike Richings, who was the previous President, came back in that capacity and was going to be an Interim President. However, as time has gone on, Mike's enjoyed the company, enjoyed the challenges, and he is still with us. And we really appreciate that.

There was a recent announcement. We brought in Fred Ernest as a Senior VP of Development. He was named the President and Chief Operating Officer here recently. Mike is staying on as the Chief Executive Officer, and I will be reporting to Mike.

Vista, as you might be well aware -- we had a spin-off here in May of our Nevada properties into a new public company called Allied Nevada Gold Corp. That transaction was completed on May 10th. Prior to that date, on May 9th, our stock was at $9.36 -- prior to us spinning off our assets. Our current price is $4.70. If you look at the 52-week range from $3.80 to the $13.55, that's comparable to the timeframe of $9.36 prior to the spin-off.

Our shareholders in Vista received Allied Nevada shares, which I'll get into a little later. Our market cap currently is $150 million. We are in a strong cash position of $19 million. We have zero debt. The outstanding shares are 32.1 million and fully diluted 34.7 million.

Our model, since the beginning of 2002, was to pick up gold resources which other companies were not having an economical viable situation with. The particular projects we picked up -- we have picked up 12 projects during that timeframe, on an average of $1 to $2 an ounce of gold resource that we purchased it for. The reasons we could get it at this level was because the prices at that time were in the $300 to $400 an ounce range and these projects wouldn't be economical until they hit the $400 to $500 to $600 range. The properties that we picked-up all have 43-101 instruments on them, which is a Canadian calculation of the resources.

We are not a junior exploration company. We are not an operating company. So what we do is pick-up properties with the 43-101 known resources, and in the past few years we have done drilling on various properties to bring them up from the inferred into measured and indicated ore resources into reserves. We've also done studies at various properties, which improved the flow sheets to make them more economical. As we will see later on, I will show the various projects and the prices, the capital and the operating costs to achieve some rate of returns.

Once again, our strategy is to hold the metal in the ground for higher gold prices. In the early part of this year, we turned our strategy around to where we are now going to move several of the more advanced projects to production decisions. We have bankable feasibility studies, pre-feasibility studies. We are looking for any opportunity to realize and create value for our shareholders, as we felt we've done with the Allied Nevada Gold Corp spin-off, which I will talk about shortly.

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As I stated, since 2002 we went from 1.9 million ounces of gold resources up to 18.1 million ounces of gold resource in January of this year. After the spin-off, in which we shifted 4.8 million of these resources down to Allied Nevada from our Nevada properties, we still retain 13.3 million gold resource ounces in the ground on seven major projects. That converts to about 0.4 ounce of gold resource per share.

What have we done for our shareholders? Well, from January of 2002 to May of 2007, the price has gone up 490%, which outperforms the metal price of the XAU and the HUI industries. As I stated, we had a spin-off, and redeemed dividend to our shareholders worth $125 million or $4.63 a share of Allied Nevada to our shareholders.

If you look at Allied Nevada's current or recent price of $5.45, what we gave our shareholder was 0.8 shares of Allied Nevada for each share they held in Vista Gold. That would convert to $4.30 if you take the 80% of the $5.45. So if you look at our current price of $4.70, the total value right now is approximately $9 a share.

Once again, we have a very strong balance sheet. We have no debt. We have $19 million in cash, which we have raised from accelerated warrants of last year and the equity offering that we did in November of last year to raise monies for the Allied Nevada spin-off of $25 million -- we retained $4 million of that. We preserved our share structure and resources for today's higher prices.

What was the rationale behind the Allied spin-off? Well, like I said, we are not a junior exploration company. We don't do grass-roots explorations. We are not an operating company. So, when we picked up, we had the Hycroft Mine that we produced up until the late 90s, and it had a royalty on it of up to 10% net smelter, which was unbearable when companies would look at that particular project. So, in December of 2005, we bought out that royalty, which gave us control of it. It also brought with it 50 grass-root type exploration properties in Nevada, which really didn't fit our portfolio.

So, that's when we decided to spin-off these properties into a new public company. During this period, we negotiated with Carl Pescio, who also had 50 properties in Nevada. And we formed Allied Nevada Gold Corp. So, that particular company now has the Hycroft Mine, which is fully permitted, fully bonded, and ready to go. A 100-plus exploration of properties that make up approximately 160,000 acres of claims, land position, put it third behind Newmont and Barrick in Nevada -- a very, very attractive package. And, we also pushed down $10 million in working capital to the company to get started, bringing to a very strong position.

Once again, it trades both on the American Exchange and the TSX. Obviously, a very large package -- land package; it has the Hycroft property, it has over $6.5 million in resources, and they just raised another $17 million recently, so their working capital is approximately $24 million. They are receiving about $3 million annually this year in advance royalties that could climb up to $7 million in a few years. And, they have a top quality experienced Board management team; they have Bob Buchan, who is the past CEO of Kinross, Scott Caldwell is the President and current CEO of Allied Nevada, he was also the Chief Operating Officer at Kinross. So, the company has a very, very strong management and Board.

With Vista remaining what it is on the post-spin off, currently it has a market cap of about $11 per ounce. We retained $13.6 million in gold resources. Once again, all with 43-101s on seven properties. Our strategy currently is to look at the top four projects that we have and make positive production decisions on these properties.

We still, even at that price, people ask us all the time, are you still looking for acquisitions? And we are. We continue to look for them. Obviously, it's tougher to find at the price where we are at right now, but if we look at Mount Todd -- we just picked up Mount Todd in the spring of last year. And we feel that there are some acquisitions potentially still out there, well-funded and a management team that has over 30 years experience with each one of our executives.

Here are the remaining properties after the spin-off for Vista Gold. We have Paredones Amarillos, it's located in the Baja California; Mount Todd, which is South of Darwin in Australia; the Yellow Pine project, which is in Idaho; Awak Mas, which is in Indonesia; Long Valley located in California; Guadalupe de los Reyes, which is in Central Mexico; and we have an option on the Amayapampa project in Bolivia.

The first property that I am going to talk about is the furthest one that has moved along in our pipeline, if you will -- the Paredones Amarillos. It's located, as you can see on the map, in Southern Baja on the east side, close to the town of La Paz. We acquired this property from Viceroy for $2 million. The previous owner was Echo Bay. We picked up this resource. It has 2 million ounces, 1.9 million of which is in the measured and indicated. Echo Bay had this property permitted and ready to go in the late 90s. They spent over $35 million in drilling, testing and engineering. We improved their flow sheet with the information we received from them. We feel that flotation plus concentrate leaching -- we are in an environmentally friendly area, and with our new flow sheet it is more water-efficient.

We did a pre-feasibility study on this property in September of 2005, and it was updated in June of 2007. As a matter of fact, we had an announcement yesterday -- a press release that stated that we are moving along with a bankable feasibility study on this project. SRK will be the lead consultant to pull all the information together from the other consultants. We also hired a Project Manager who has over 30 years experience in Mexico. And, we also hired a local consulting firm to push along the permitting.

With the current information that we updated in June of 2007, we have reserves of 1.6 million ounces. As I stated on the last slide, we have a new process flow sheet; the average annual production would be 113,000 ounces of gold per year. It would have a 13-year life using 11,000-tons-per-day plan.

Our cash operating costs are $358 an ounce. The capital cost would be $110 million, and at a price of gold of $650 -- where we are currently, it would show a 24% internal rate of return or a cash flow of $284 million.

What are our 2007 activities? We have completed the preliminary study. Like I said, we are currently in a bankable feasibility stage. We are going to do some drilling this fall to confirm and get some new metallurgical samples. The engineering studies will be leading to the bankable feasibility study. We have options on land surrounding the property that we are going to exercise. The environmental permitting has commenced and we are looking at more water right acquisitions.

The second project in our pipeline is a property that I’ve discussed earlier, that we picked up last spring. It’s the Mount Todd project; its south of Darwin and has over 3.3 million ounces of gold resource on a 43-101, of which 1.8 million ounces are in the measured and indicated area.

Picking this property up from the Northern Territory Government, we have no reclamation liabilities for the past operations on this property until the mine production permits are granted. This property, as you might remember, was owned by Pegasus. They spent over $200 million on this property -- putting it into production.

Once again with the lower gold prices seen in the late 90s, they had to shut it down and as a matter of fact, they went into bankruptcy. We took it out of receivership for $2.1 million, cash and shares. It has an excellent potential over thousand square kilometers of a large tenement package, which I will show you now.

We ran an economic study on this particular project in December of last year. With an open pit mine of floatation concentrator, it would be a 10-year project with annual production of 266 ounces of gold and 4.3 million pounds of copper annually. Our operating cash cost is $376 per ounce.

Once again with an upfront capital cost of $264 million and a gold price at $600, we have generated $179 million cash flow and an internal rate of return of 17%.

Our 2007 activities would spin over $2 million in drilling this summer. We have just completed the drilling program about a month ago. Our target is to move a lot from the inferred into the measured and indicated. Also, identify new resources on strike and more importantly determine the copper grade.

We are commencing a pre-feasibility study this year, but if you look at the bottom right of the slide, the current property that we have is in the blue box. The yellow box is all of our tenement areas. What we are showing here are two gold zones, if you will, the one going from the Southwest to the Northeast is the Mount Todd trend. And going across, as a matter of fact, if you go to the mine site, there are a lot of old workings in this area. There is an old stamp mill back in there, a lot of potential that we have not looked at yet.

Also, the one running horizontally is another trend, the Pine Creek trend, and there is actually mining going on about 100 kilometers to the west and it's producing about 100,000 ounces a year at that particular mine.

Our third project in the pipeline is the Yellow Pine project in Idaho. We purchased this for $1 million. It has a resource base of 3 million ounces, 2.2 million measured and indicated, 0.8 million ounces of inferred. It has had substantial expenditures made on the property by Barrick, Dakota, Hecla, Santa Fe, and others.

Then what we want to do in 2007, once again is advance the permitting, drilling and metallurgical studies. We ran a preliminary economic assessment in December of last year on this project using an 8,600 ton per day plant. It gives it a 10-year life with 190,000 ounces of gold per year. The initial upfront capital cost would be $170 million with an operating cash cost of $402 per ounce. Our net cash flow at $630 an ounce gold price would give us $266 million. And that price would give a 19% internal rate of return.

The fourth project is the Awak Mas project on the island of Sulawesi. We acquired this for $1.5 million cash. Once again, it has about 1.9 million ounces of gold resource, of which 1.66 is in the measured and indicated. This property also had over $40 million spent by the previous owners, which was [Salu Siwa] Mining, PT Masmindo Mining. Battle Mountain was in there at one point -- so quite a few expenditures on that property.

Last summer we completed a drilling program. Once again, we spent over $2 million on this particular project. Once again, if you look at this property, it is similar to Mount Todd, it has just a tremendous exploration potential. We did come up with a new resource estimate that was competed. We came up with the measured and indicated at 1.7 million ounces and inferred of 0.5 million ounces, but more importantly, through the whole project and exploration program, we came up with a 15% higher grade at 1.24 grams per ton.

We are planning our pre-feasibility study that's going on currently later in the year. If you would look at all the properties that I have put up -- the four major properties, and look at various gold prices, it’s $550, $650, $750 gold. As I had stated, the cash flows that you had at the Paredones Amarillos, Mount Todd and Yellow Pine based on these prices, along with the Amayapampa sale, which we have an option on, the cash in the bank close to $20 million, and then take the rest of the resources, the other properties that I did not discuss, and just put a price of $15 to $20 to $25 an ounce, you would come up with a total of $550 gold price of a valuation of $402 million on our properties. The value per share fully diluted would be $12. If you look at a $650 price, you would generate in excess of $1 billion in cash flow or $30 per share on a fully diluted basis. It’s $750 gold, $1.6 billion or $48 per diluted share.

Anticipating the revaluation as developments advance, if we would look at our particular market cap, which is currently at $150 million -- on the total resources of gold ounces in millions of 13.3, we come up with what I had stated earlier, $11 market cap per resource ounce. If you compare this to the other companies, such as Yamana with $180 market cap per resource ounce, Alomos Gold $96, Miramar $91, Anatolio $73, Gabriel Resources $60, Goldbelt Resources $42, Seabridge, which has a model similar to ours, $36, you can see why we feel that we are really at this point undervalued compared to the other companies, especially with our resource base.

What are our short-term goals? As I stated earlier, we are going to advance our major projects. Paredones Amarillos -- a bankable feasibility study, permitting; Mount Todd -- a preliminary feasibility study, more metallurgy testing; Yellow Pine -- drilling, metallurgy and permitting; and Awak Mas -- a pre-feasibility study. And then, we are going to continue to strategically move our other projects forward in the pipeline. We just really have to communicate the value of Vista to the marketplace.

Here is the management of the company that I stated earlier, and we have a very experienced Board of Directors. As you noticed, Bob Quartermain -- our model is very similar to Silver Standard Resources. Bob Quartermain is on our Board of Directors. He is very instrumental in some of our decision making. John Clark is our Audit Committee Chairman; Tom Ogryzlo, Canada; Randy Eppler, who was the past President of Newmont, Indonesia; and of course Mike Richings.

So that's the presentation at this point, I’ll open up to any questions you might have.

Question-and-Answer Session

Unidentified Audience Member

You've said that you are still looking for more mines to acquire? I mean how has the universe shrunk, as you had pretty good pricing in the last number of years? And are you bumping into a lot of competitors looking for any fields out there? If so, how do you leverage your expertise?

Greg Marlier

The question is how? If we are going after other acquisitions in this marketplace where the prices are high, how can we leverage our experience to still pick up any properties that are out there at a good price compared to other companies?

Well, if you look just at Mount Todd, we started the Mount Todd acquisition when the prices were around $400. When we completed it, it was over $500 an ounce, the gold price. And we still picked up Mount Todd for a very reasonable price. It has shrunk. With the price where it is now, $650, these acquisitions are more difficult to obtain, more difficult at the world price also. But we feel that with our expertise—we have five executives that have over 25 to 30 years experience—we know a lot of the world mining areas that we can look at. And we are always looking for projects. They are going to be tougher to get. That’s why we’ve decided to move our plans -- the properties that we have currently up to a production decision, so we can move ahead with those. And that’s our strategy right now.

Unidentified Audience Member

(Question Inaudible)

Greg Marlier

Yeah, if you would look at the burn rate, we have to remember we only have seven people in the company all located in Denver. The burn rate is approximately $2 million a year. Prior to making decisions on bankable feasibility studies, exploration drilling, for instance, we did this year at Mount Todd an exploration program that was in excess of $2 million. The previous year, we did an exploration program at Awak Mas in excess of $2 million. So you have to add on things like that on top of the basic burn rate.

Unidentified Audience Member

(Question Inaudible)

Greg Marlier

Well, currently with the [demand and all of our holding costs would] be around $2 million. If you add on a bankable feasibility study, you are looking in excess of $1 million on that. We haven't really put the exploration budgets together for next year for the other projects. So the biggest cost we are going to have is bankable feasibility study and the pre-feasibility studies at Awak Mas and Mount Todd, which could be in the neighborhood of $200,000 to $400,000.

Unidentified Audience Member

Are you expecting any difficulties in Indonesia?

Greg Marlier

The question was, do we have any indications of any problems in Indonesia?

Unidentified Audience Member

(Question Inaudible)

Greg Marlier

For permitting. Right now we are on our seventh generation CoW, a Contract of Work with the country. They have extended us another year for the pre-feasibility study. So we remain in an exploration phase until February of next year. They have been very cooperative in everything that we have done so far. As far as drilling, exploration and the pre-feasibility study work that we have done, we have not seen any problems at all with the Indonesian government.

Unidentified Audience Member

How about the people?

Greg Marlier

We are in the southwest tip of Sulawesi. We’ve used local people there on our exploration drilling program and we've had no problems at all. They have been very cooperative and they look forward to a mine being put in there.

Unidentified Audience Member

The IRRs in cash flow in here, are they before tax or after tax?

Greg Marlier

The question is the IRRs in the cash flows that I was referring to in all of these slides earlier, the gentlemen wants to know if they are pre-tax or are after tax? They are all pre-tax. Any other questions? Well, thank you very much for attending.

TRANSCRIPT SPONSOR

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