On Monday, H.C. Wainwright adjusted its outlook on Vista Gold Corp (NYSE:VGZ), raising the price target to $2.75 from $2.50, while maintaining a Buy rating on the shares. The revision comes in light of new legislation in the Northern Territory (NT) of Australia, where Vista Gold's Mt. Todd project is located.
The new Mineral Royalties Act 2024 (MRA), set to take effect on July 1, 2024, will overhaul the current net profits royalty system with an ad valorem royalty structure for new mining operations. This change is anticipated to enhance the attractiveness of the NT for mining exploration and development by offering a more competitive royalty system.
According to the firm, the updated royalty framework should positively affect the economics of Vista Gold's Mt. Todd project, which is considered one of the leading mining projects in the NT. Under the new MRA, Mt. Todd's applicable royalty rate will be 3.5% of the gold produced, a significant reduction from the 7% ad valorem rate previously factored into the company's Feasibility Study (FS).
The analyst from H.C. Wainwright believes that the new legislation supports the potential for continued development and exploration in the region, which could benefit Vista Gold Corp and its Mt. Todd project in particular. The firm's revised price target reflects the anticipated favorable impact on the company's project economics following the legislative changes.
In other recent news, Vista Gold Corp announced the appointment of Maria Vallejo Garcia as Director, Projects and Technical Services. This development follows the company's positive Q1 financial results, which showed a 45% reduction in net loss and an improved cash position of $11.9 million, largely due to a $7 million installment payment from Wheaton Precious Metals (NYSE:WPM). Vista Gold Corp also revealed an updated feasibility study on the Mt Todd gold project, showing a favorable after-tax net present value and internal rate of return.
The company is working with CIBC Capital Markets to maximize shareholder value and plans to complete a feasibility study for a smaller-scale Mt Todd project in the first half of the next year. Despite these developments, Vista Gold emphasized that there are currently no earnings from the Mt Todd project. However, the company is actively advancing the project and improving its financial standing.
InvestingPro Insights
Following the positive outlook from H.C. Wainwright on Vista Gold Corp, current metrics from InvestingPro present a mixed financial picture for the company. As of the last twelve months as of Q1 2024, Vista Gold Corp reported an operating income and EBIT of -$6.8 million, indicating ongoing operational challenges. Furthermore, the EBITDA stood at -$6.76 million, albeit with a modest growth of 4.4%. These figures underscore the importance of the new Mineral Royalties Act for the company's future profitability.
InvestingPro Tips highlight that Vista Gold's stock price has been volatile, with a 1-month price total return of -11.03% but showing a slight recovery in the short term with a 1-week total return of 0.16%. Additionally, the company has not been profitable over the last twelve months and does not pay dividends to shareholders, which might concern income-focused investors. On a positive note, the company's liquid assets exceed its short-term obligations, suggesting financial stability in the near term.
For investors considering a stake in Vista Gold, the updated price target of $2.75 by H.C. Wainwright appears optimistic when compared to the current analyst fair value estimate of $1.75. For those looking for a deeper dive into Vista Gold's financials and additional analysis, InvestingPro offers further tips—there are 5 additional InvestingPro Tips available for VGZ. Interested readers can unlock these insights and use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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