utwiq

Vista Gold: Ready for the Middle Tier

Thomas, I appreciate you replying to the comments but I think with respect that you haven't grasped the nature of Vista's business model. The company built its portfolio of projects by picking up cheap gold properties that were marginal at lower gold prices, reasoning that when gold shot up their projects would become robustly economic. That was not a silly line of reasoning but it hasn't worked out. If anything, this is a much tougher operating environment for gold producers than when gold was at $500. It sounds bizarre but it is plainly true. The problem is not just the price of oil, but also the rise in steel prices and perhaps most importantly major shortages of qualified labour. There are a great many quality gold companies out there, which offer great value and leverage to the price of gold. Vista's strategy is extremely high risk, alas, because the prospects for gold to outpace operating and capital costs - at least by enough to transform the economics of their projects and underpin debt financing etc. - are not good.

Incidentally, the comparison of Aurelian to Vista is crazy and confirms, I fear, that you haven't grasped the nature of Vista's projects or the cost problems they face. Yes, Vista may have the same number of ounces in the ground as Aurelian, but this is split across several projects, most of which are low-grade and face particular processing difficulties. Aurelian by contrast has a single extremely high-grade and enormous gold deposit, with plenty of expansion potential. Kinross is getting a bargain because of political risk (overstated in my view) but Aurelian's project is amongst the very best - most economic, most promising for expansion - in the world. All ounces in the ground are not equal and Aurelian's, political risk aside (which explains the price), the best there are. You absolutely should not use the price they receive to value Vista's set of projects.