UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 Washington, D.C. 20549

 

FORM 10-Q

 

 

For the transition period from              to

          

Commission file number: 001-9025

 

  

 

VISTA GOLD CORP.

 (Exact Name of Registrant as Specified in its Charter)

 

 

(720) 981-1185

(Registrant’s Telephone Number, including Area Code)

 

Indicate by checkmark whether the registrant (1)  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 such filing requirements for the past 90 days.  Yes ☒No □

 

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☒No □

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “Accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

      Large Accelerated Filer □  Accelerated Filer □  Non-Accelerated Filer □Smaller Reporting Company  ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes □ No ☒    

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date: 82,883,562 common shares, without par value, outstanding as of October 27, 2015.

 

 

VISTA GOLD CORP. 

(An Exploration Stage Enterprise) 

FORM 10-Q 

For the Quarter Ended September 30, 2015 

INDEX  

 

 

 

 

 

 

PART I

 

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

VISTA GOLD CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollar amounts in U.S. dollars and in thousands, except shares)

 

 

Approved by the Board of Directors

The accompanying notes are an integral part of these consolidated financial statements.

 

 

VISTA GOLD CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS) AND COMPREHENSIVE INCOME/(LOSS)

(Dollar amounts in U.S. dollars and in thousands, except share and per share data)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

VISTA GOLD CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollar amounts in U.S. dollars and in thousands)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

VISTA GOLD CORP.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollar amounts in U.S. dollars and in thousands)

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

1. Nature of Operations and Basis of Presentation

 

Vista Gold Corp. and its subsidiaries (collectively, “Vista,” the “Company,” “we,” “our,” or “us”) operate in the gold mining industry. We are focused on the evaluation, acquisition, exploration and advancement of gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions such as earn-in right agreements, option agreements, leases to third parties, joint venture arrangements with other mining companies, or outright sales of assets for cash and/or other consideration.  We look for opportunities to improve the value of our gold projects through exploration drilling and/or technical studies focused on optimizing previous engineering work. 

 

Our principal asset is our flagship Mt Todd gold project (“Mt Todd”) in Northern Territory (“NT”), Australia. We also hold 4.9% of the outstanding common shares in the capital of Midas Gold Corp. (“Midas Gold Shares”), non-core projects in Mexico and the United States, and royalty interests in projects in Bolivia and Indonesia. 

 

The interim Condensed Consolidated Financial Statements (“interim statements”) of the Company are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with the Company’s Consolidated Financial Statements for the year ended December 31, 2014 as filed on March 3, 2015 on Form 10-K. The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by United States generally accepted accounting principles (“GAAP”) have been condensed or omitted. 

 

References to C$ refer to Canadian currency, A$ to Australian currency and $ to United States currency.

 

2. Other Investments

 

Midas Gold Shares 

 

During February 2014, we sold 16,000,000 Midas Gold Shares at a price of C$0.80 ($0.73) per Midas Gold Share, for net proceeds of $10,560, reducing the total Midas Gold Shares we owned to 15,802,615 or approximately 11.2% of the Midas Gold Shares outstanding, on a non-dilutive basis, at that time. This sale resulted in a realized gain on other investments of $155 based on the realized value at the time of the sale compared to the fair value of the Midas Gold Shares at December 31, 2013, net of costs to sell.

 

During March 2015, we sold 8,000,000 Midas Gold Shares, at a price of C$0.46 ($0.36) per Midas Gold Share, for net proceeds of $2,772, reducing the total Midas Gold Shares we own to 7,802,615 or approximately 4.9% of the Midas Gold Shares outstanding, on a non-dilutive basis. This sale resulted in a realized loss on other investments of $348 based on the realized value at the time of the sale compared to the fair value of the Midas Gold Shares at December 31, 2014, net of costs to sell. 

 

Upon initial recognition of its investment in the Midas Gold Shares, Vista elected to apply the fair value option, and as such, the investment is recorded at fair value in the  Condensed Consolidated Balance Sheets. Subsequent changes in fair value are recorded in the Condensed Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss) in the period in which they occur. 

 

The following table summarizes our investment in Midas Gold Shares as of September 30, 2015 and December 31, 2014.  

 

 

 

 

3.  Mineral Properties

 

 

Guadalupe de los Reyes Gold/Silver Project, Sinaloa, Mexico

 

During April 2014, Minera Gold Stake S.A. de C.V. (“MGS”), Vista’s wholly-owned subsidiary, entered into a definitive option agreement (the “Option Agreement”) to option a  70% interest in the Guadalupe de los Reyes gold/silver project in Sinaloa, Mexico to Great Panther Silver Limited (formerly Cangold Limited) (“Great Panther”) for consideration of $5,000 in payments over a three-year period, with payments totaling $1,000 in the first year ($500 received in 2014 and $496 net of legal costs was received in March 2015), $1,500 in January 2016 and $2,500 in January 2017.

 

The Option Agreement provides that all cash payments are non-refundable and optional to Great Panther, and in the event Great Panther fails to pay any of the required amounts on the scheduled dates or fails to comply with its other obligations, the Option Agreement will terminate and Great Panther will have no interest in the Guadalupe de los Reyes gold/silver project. Provided it is not in breach of the Option Agreement, Great Panther may at its discretion advance the above payment schedule and exercise the initial option for a 70% interest in the Guadalupe de los Reyes gold/silver project any time during the three-year period.

 

Subject to Great Panther earning a 70% interest in the Guadalupe de los Reyes gold/silver project, MGS has granted Great Panther the option to earn the remaining 30% interest in the Guadalupe de los Reyes gold/silver project by notifying MGS of a production decision no later than the tenth anniversary of exercising the first option and by making a cash payment to MGS of $3,000 plus an additional cash payment based on a formula that includes the growth, if any, in estimated measured and indicated mineral resources of the Guadalupe de los Reyes gold/silver project, and the then prevailing spot gold price (“Escalator Payment”). 

 

Should Great Panther determine not to put the Guadalupe de los Reyes gold/silver project into production, the Option Agreement provides MGS with the right to buy back Great Panther’s 70% interest in the Guadalupe de los Reyes gold/silver project for a cash payment of $5,000 plus the Escalator Payment described above.  If MGS does not exercise its buyback option, MGS will still retain a right of first refusal should Great Panther elect to sell its 70% interest in the Guadalupe de los Reyes gold/silver project to a third party.

 

Los Cardones

 

In October 2013, we sold our 100% debt and equity participation in the Los Cardones gold project located in Baja California Sur, Mexico (“Los Cardones Sale”) to Invecture Group, S.A. de C.V. (“Invecture”) and RPG Structured Finance S.a.r.l. (together the “Purchasers”) for a total of $13,000 ($7,000 of which was paid in October 2013 and $6,000 of which was originally payable in January 2014 (the “Subsequent Payment”) subject to the Purchasers’ option to elect to not make the Subsequent Payment).  In 2014, the due date for the Subsequent Payment was extended to January 30, 2015 for additional consideration of $500.  In October 2014, Invecture announced that the Los Cardones gold project had been suspended because the conditions for its development were not favorable at that time, which introduced substantial doubt that the Subsequent Payment would be made.  After making this announcement, there were no apparent significant favorable changes to incentivize Invecture to lift the suspension. In January 2015, we agreed to amend the payment terms (the “Amendment”) of the Los Cardones Sale. Under the Amendment, the Company received a payment of $496 net of legal costs from the Purchasers as the final payment for 100% of the Company’s interest in the project.    This resulted in a realized gain of $1,958.  

 

4.  Plant and Equipment

 

 

 

 

 

5.  Additional Paid-in Capital

 

Warrants 

 

Warrant activity is summarized in the following table: 

 

 

The 15,219,802 warrants outstanding expired  October 22, 2015. Warrants were excluded from weighted average diluted shares as the exercise price is greater than the average price per common share.   

 

Stock-Based Compensation

 

Under our Stock Option Plan (the “Plan”) and our Long-Term Equity Incentive Plan (the “LTIP”), we may grant options and/or restricted stock units (“RSUs”) or restricted stock awards to our directors, officers, employees and consultants.  The combined maximum number of shares in the capital of Vista (“Common Shares”) that may be reserved

for issuance under the Plan and the LTIP is a variable number equal to 10% of the issued and outstanding Common Shares on a non-diluted basis.  Options and RSUs under the Plan and LTIP, respectively, are granted from time to time at the discretion of the Board of Directors of the Company (“Board”), with vesting periods and other terms as determined by the Board.  Stock-based compensation expense for the three and nine months ended September 30, 2015 and 2014 is as follows: 

 

 

As of September 30, 2015, stock options and RSUs had unrecognized compensation expense of $24 and $598, respectively, which is expected to be recognized over a weighted average period of 3.25 and 1.29 years, respectively.  Stock options were excluded from weighted average diluted shares as the exercise prices are greater than the average price per common share.  The restricted costs recovery for the three months ended September 30, 2014 is due to the cancellation of RSUs that had been expenses in prior periods but did not satisfy the vesting conditions. Certain RSUs were excluded from weighted average diluted shares as they are considered anti-dilutive.

 

Stock Options

 

A summary of options under the Plan as of September 30, 2015 is set forth in the following table:

 

 

A summary of our unvested stock options as of September 30, 2015 is set forth in the following table:

 

 

Restricted Stock Units

 

The following table summarizes the RSUs under the LTIP as of September 30, 2015:

 

 

A portion of the RSU awards vest on a fixed future date provided the recipient continues to be affiliated with Vista on that date.  Other RSU awards vest subject to certain performance and market criteria, including the accomplishment of certain corporate objectives and the Company’s share price performance.  The vesting period for RSUs is at least one year.   

 

6.  Accumulated Other Comprehensive Income/(Loss)

 

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7. Commitments and Contingencies

 

Our exploration and development activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. As such, the future expenditures that may be required for compliance with these laws and regulations cannot be predicted. We conduct our operations to minimize effects on the environment and believe our operations are in compliance with applicable laws and regulations in all material respects. During May 2015, we settled a contract dispute for $295.  

 

Under our agreement with the Jawoyn Association Aboriginal Corporation (the  “JAAC”), we must offer the JAAC the opportunity to establish a joint venture with Vista holding 90% and the JAAC holding a 10% participating interest in the Mt Todd mining licenses. In addition, the JAAC will be entitled to an annual cash payment, or payment in kind, equal to 1% of the value of the annual gold production from the current mining licenses, and a 1% NSR royalty on other metals, subject to a minimum payment of A$50 per year.

 

8.  Fair Value Accounting

The following table sets forth the Company’s assets measured at fair value by level within the fair value hierarchy. As required by accounting guidance, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 

 

 

 

Our short-term investments  (as defined below), marketable securities and investment in Midas Gold Shares are classified as Level 1 of the fair value hierarchy as they are valued at quoted market prices in an active market.  Marketable securities are included in other current assets on the Consolidated Balance Sheets for each period presented.

 

Short-term investments consist of government securities with original maturity dates greater than ninety days and less than one year. Short-term investments are recorded at amortized cost and are classified as debt securities held-to-maturity as the Company has the intention and ability to hold these instruments until their original maturity date at the time of purchase.

 

The mill equipment is classified as Level 3 of the fair value hierarchy as its value is based on a third party assessment of the projected sale value less costs to sell giving full consideration to current market conditions and an orderly sale process. The mill equipment is categorized as assets held for sale on the Condensed Consolidated Balance Sheets.

 

At September 30, 2015, the assets classified within Level 3 of the fair value hierarchy represent 32% of the total assets measured at fair value. There have been no transfers between levels in 2015 nor have there been any changes in valuation techniques.  

 

9.  Geographic and Segment Information

 

The Company has one reportable operating segment, consisting of evaluation, acquisition, and exploration activities.  We evaluate, acquire, explore and advance gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions.  These activities are focused principally in Australia and North America. We reported no revenues during the three and nine months ended September 30, 2015 and 2014.  Geographic location of mineral properties and plant and equipment is provided in Notes 3 and 4, respectively.

 

10.  Research and Development Grant

 

In June 2015, the Company received an A$7,608 ($5,863) Research & Development (“R&D”) Tax Incentive refund, net of costs to prepare and file, paid under the Australian Government’s R&D Tax Incentive Program, a program designed to encourage industry to engage in R&D activities that benefit Australia.  This refund is related to costs we incurred during the 2012 fiscal year for qualifying R&D programs.  

 

In July 2015, the Company received an additional approximately A$5,862 ($4,357) R&D Tax Incentive refund, net of costs to prepare and file, paid under the Australian Government’s R&D Tax Incentive Program.  This refund is related to costs we incurred during the 2013 fiscal year for qualifying R&D programs.

 

Accounting practice generally refers to International Accounting Standard 20 “Accounting for Government Grants and Disclosure of Government Assistance” (“IAS 20”) to determine the most appropriate accounting for payments of this type.  The Company’s activities in Australia do not generate revenue subject to Australian income tax. Consequently, under IAS 20, the R&D Tax Incentive payment is considered a government grant, as opposed to an income tax refund.  Grants are recognized when there is reasonable assurance that the grant will be received and that conditions attached to the grant have been met.

 

 

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2015, and the related notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). This discussion and analysis contains forward-looking statements and forward-looking information that involve risks, uncertainties and assumptions.  Our actual results may differ materially from those anticipated in these forward-looking statements and information as a result of many factors.  See section heading “Note Regarding Forward-Looking Statements” below.

 

All dollar amounts stated herein are in U.S. dollars in thousands, except per share amounts and currency exchange rates unless specified otherwise. References to C$ refer to Canadian currency, A$ to Australian currency and $ to United States currency.

 

Overview

 

Vista Gold Corp. and its subsidiaries (collectively, “Vista,” the “Company,” “we,” “our,” or “us”) are engaged in the gold mining industry. We are focused on the evaluation, acquisition, exploration and advancement of gold exploration and potential development projects, which may lead to gold production or value adding strategic transactions such as earn-in right agreements, option agreements, leases to third parties, joint venture arrangements with other mining companies, or outright sales of assets for cash and/or other consideration.  We look for opportunities to improve the value of our gold projects through exploration drilling and/or technical studies focused on optimizing previous engineering work. 

 

Our principal asset is our flagship Mt Todd gold project (“Mt Todd”) in Northern Territory (“NT”), Australia.  We also hold 4.9%  of the outstanding common shares in the capital of Midas Gold Corp. (“Midas Gold Shares”), non-core projects in Mexico and the United States, and royalty interests in projects in Bolivia and Indonesia.

 

Outlook

 

We do not currently generate cash flows from mining operations. The prices for gold equities, particularly those with early stage projects, have decreased significantly during the past few years, and capital raising on reasonable terms has become more difficult for mining companies which do not have producing assets.  These market conditions are expected to continue for the foreseeable future, and could affect our ability to raise sufficient capital to advance our Mt Todd gold project on reasonable terms, if at all. 

 

Since 2013 we have raised cash without share dilution and significantly reduced our costs to strengthen our balance sheet and mitigate the effects of these difficult markets.  We believe we have sufficient working capital to fund our currently planned programs into 2018, while retaining opportunities to access additional financing from non-dilutive sources such as the sale of our used mill equipment and monetization of other non-core assets. We believe we have addressed our liquidity needs and positioned the Company to continue to evaluate and execute programs that could better position the Mt Todd gold project for fast-track development when economic conditions permit. With our improved treasury position and strong management team we are in a position to judiciously evaluate and pursue other near-term value creating opportunities.

 

The Company’s flagship asset is its 100% owned Mt Todd gold project. Completion of a feasibility study or the development of the project is not justified at this time due to the current low gold price. However, with the completion of the environmental impact study in 2014 and the previous completion of a significant amount of the project engineering and design, much of which is contained in the previously released preliminary feasibility study, the permitting risk is substantially reduced and the potential development timeline at Mt Todd is well defined. We are now well positioned, subject to sustained improvement in gold prices, to move forward quickly with the completion of the Mt Todd gold project feasibility study. We estimate that the feasibility study could be completed within six months of its commencement and at a cost of approximately $2,500.

 

Results from Operations

 

Summary

 

As a result of our commitment to non-dilutive financing, together with our strict cost management policies, the Company continues to be well funded and able to execute selected strategic discretionary programs.

 

Consolidated net income/(loss) for the three months ended September 30, 2015 and 2014 was $536 and $(4,908) or $0.01 and $(0.06) per share, respectively.  Consolidated net income/(loss) for the nine months ended September 30, 2015 and 2014 was $3,178 and $(8,967) or $0.04 and $(0.11) per share, respectively.  The principal components of these year-over-year changes are discussed below.

 

Exploration, property evaluation and holding costs

 

Exploration, property evaluation and holding costs were $1,306 and $755 during the three months ended September 30, 2015 and 2014, respectively, and $3,265 and $3,176 during the nine months ended September 30, 2015 and 2014, respectively.  The cost increases in 2015 resulted mainly from discretionary technical studies and drilling programs at the Mt Todd exploration licenses and at the Batman deposit, substantially completed during the three months ended September 30, 2015. These increases are offset partly by a weaker Australian dollar in 2015, and the Government of the Northern Territory’s sharing of the costs for water treatment and discharge at Mt Todd in 2015. There was no similar program in 2014. In addition, 2014 costs included a non-cash cost recovery related to certain RSU’s that did not meet the vesting criteria.

 

Corporate administration 

 

Corporate administration costs were $832 and $134 during the three months ended September 30, 2015 and 2014, respectively, and $2,674 and $2,497 during the nine months ended September 30, 2015 and 2014, respectively. Cash costs during the three months ended September 30, 2015 were substantially the same as those for the same period of 2014.  For the nine months ended September 30, 2015 cash costs were slightly lower than those for the same period in 2014, mainly due the effects of cost cutting initiatives introduced in 2013 and 2014. In addition, 2014 costs included a non-cash cost recovery related to certain RSU’s that did not meet the vesting criteria.

 

Write-down value-added tax receivable

 

For three and nine months ended September 30, 2015, we incurred a non-cash write-down associated with value-added tax (“VAT”) receivable in Mexico of $572. As the Mexican tax authorities have denied our claim for the VAT recovery; we are contesting their position.  No similar write-down occurred during the three and nine months ended September 30, 2014.

 

Non-operating income and expenses  

 

Unrealized gain/(loss) on other  investments

 

Unrealized gain/(loss) on other investments was $(624) and $(3,792) for the three months ended September 30, 2015 and 2014, respectively, and $(1,326) and $(2,370) for the nine months ended September 30, 2015 and 2014, respectively.  These amounts are the result of changes in fair value of our Midas Gold Shares.  The Company also holds approximately half the number of Midas Gold Shares in 2015 compared to the number held in 2014.       

 

Realized gain/(loss) on other investments

 

Realized loss on other investments of $348 for the nine months ended September 30, 2015 was due to the sale of 8,000,000 Midas Gold Shares during March 2015.  Realized gain on other investments of $155 for the nine months ended September 30, 2014 was due to the sale of 16,000,000 Midas Gold Shares during February 2014.  No similar transactions occurred during the three months ended September 30, 2015 or 2014.

 

Research and development grant

 

During the three and nine months ended September 30, 2015, the Company received $4,357 and $10,220, respectively, net of costs to prepare and file, from the Australian Government related to research and development activities at Mt Todd.  No similar transactions occurred in 2014.

 

Financial Position, Liquidity and Capital Resources

 

Operating activities

 

Net cash provided by/(used in) operating activities was $4,741 and $(5,511) for the nine months ended September 30, 2015 and 2014, respectively.  Cash provided in 2015 includes grants totaling  $10,220 from the Government of Australia related to research and development expenditures we incurred in 2012 and 2013.  Other factors that contributed to the positive year-over-year change are the lower 2015 operating expenses as discussed in “Results from Operations” above. 

 

Investing activities

 

The Company continues to monetize non-core assets as a non-dilutive means of financing. Net cash of  $5,587 for the nine months ended September 30, 2015 was provided from proceeds received from the Los Cardones Sale (defined in Project Updates below) of $2,994 net of legal costs,  the Guadalupe de los Reyes Option Agreement (defined in Project Updates below) of $496 net of legal costs, and the sale of 8,000,000 Midas Gold Shares for net proceeds of $2,772, offset by the purchase of U.S. Treasury bills of $11,880. 

 

Net cash of $11,642 for the nine months ended September 30, 2014 was provided mainly from the sale of 16,000,000 Midas Gold Shares.  

 

Financing activities

 

There were no cash transactions from financing activities during the nine months ended September 30, 2015. Net cash of $6,344 was used in financing activities for the nine months ended September 30, 2014 for the repayment of the loan facility entered into in 2013. 

 

Liquidity and capital resources

 

Capital raising during the nine months ended September 30, 2015 included the receipt of $2,772 net proceeds from the sale of 8,000,000 Midas Gold Shares; the receipt of $2,994 net of legal costs as the final payment for the Los Cardones gold project; the receipt of a scheduled $496 option payment net of legal costs for the Guadalupe de los Reyes gold/silver project; and receipt of grants totaling  $10,220, net of costs to prepare and file, from the Government of Australia related to a Research & Development (“R&D”) Tax Incentive refund regarding R&D expenditures we incurred in 2012 and 2013.  As a result of these transactions, our cash and short term investments (comprised mainly of U.S. Treasury Bills) as of September 30, 2015  increased to $14,748, from $3,714 as at December 31, 2014; and our working capital increased to $15,954 compared with working capital of $8,619 at December 31, 2014. We believe that we are able to fund our currently planned programs into 2018.

 

As a result of the cost cutting measures introduced during 2013 and 2014 and continued to date, the Company’s fixed costs, those expenditures necessary to ensure that we preserve our property rights and meet all of our safety, regulatory and environmental responsibilities, are expected to average $1,500 to $1,700 per quarter for the foreseeable future.  In addition, we have undertaken and will continue to consider selected discretionary programs, mainly consisting of technical studies and exploration programs, that are expected to add value to Mt Todd and better position the project for fast-track development when economic conditions warrant. 

 

Potential future sources of financing include the $1,500 option payment which we expect to receive in the first quarter of 2016 pursuant to the Guadalupe de los Reyes Option Agreement (defined in Project Updates below).  In addition, we

will continue to seek additional financing with priority given to non-dilutive sources such as the sale of our used mill equipment, other non-core assets, and, depending on market conditions, our remaining Midas Gold Shares.

 

The continuing long-term viability of the Company is dependent upon our ability to secure sufficient funding and ultimately to generate future profits from operations. The underlying value and recoverability of the amounts shown as mineral properties and plant and equipment in our Condensed Consolidated Balance Sheets are dependent on our ability to fund exploration and development activities that could lead to profitable production or proceeds from the disposition of these assets.

 

Fair Value Accounting

The following table sets forth the Company’s assets measured at fair value by level within the fair value hierarchy. As required by accounting guidance, assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  

 

 

 

 

Our short-term investments (as defined below), marketable securities and investment in Midas Gold Shares are classified as Level 1 of the fair value hierarchy as they are valued at quoted market prices in an active market.  Marketable securities are included in other current assets on the Consolidated Balance Sheets for each period presented.

 

Short-term investments consist of government securities with original maturity dates greater than ninety days and less than one year. Short-term investments are recorded at amortized cost and are classified as debt securities held-to-maturity as the Company has the intention and ability to hold these instruments until their original maturity date at the time of purchase.

 

The mill equipment is classified as Level 3 of the fair value hierarchy as its value is based on a third party assessment of the projected sale value giving full consideration to current market conditions and an orderly sale process. The mill equipment is categorized as assets held for sale on the Condensed Consolidated Balance Sheets.

 

At September 30, 2015, the assets classified within Level 3 of the fair value hierarchy represent 32% of the total assets measured at fair value. There have been no transfers between levels in 2015 nor have there been any changes in valuation techniques.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements required to be disclosed in this quarterly report on Form 10-Q.

 

Contractual Obligations

 

We have no material contractual obligations as of September 30, 2015.