From the 3/28/2013 press release, "significant development commitments will be deferred until market conditions improve for junior gold equities." In other words, in order to develop a mine they need to keep printing and selling more shares, but since nobody wants to buy shares now they need to shut down development. And what happen just as soon as the market for this stock improves? Bamm! New shares are printed and dumped on the market.
Meanwhile, the milling equipment that was bought way back in 2008 is being put up for sale. This equipment was used to entice many an investor to buy newly printed shares. See, we've got the milling equipment, a gold mine must be just around the corner. And five years later? Now they're selling the equipment.
I believe this equipment is carried on the books, so they just got a $10 million loan to cover their salaries until the sale goes through. The lender had great "confidence" in the company because they only charged a 3.5% fee up front ("Here's $10 million, now give us back $350k right away") plus 8% interest. Any shareholder can borrow money under better terms. Confidence.
There will be no mine without further stock sales, and nobody wants to buy more stock. Ergo, no gold mine.
I spoke to Fred Earnest about the sale of the mining equipment in Mexico. The Invecture Group, the investors that will earn 62.5% of the project once they pay in $20MM and begin mining, wanted their own (different) equipment to begin mining.
They were offered the Vista accumulated equipment, but choose to go a different route for mining there.
I also spoke to him about the Sprott loan. Sprott has investors that want reliable, monthly dividends and this is a product they offer to good junior miners they believe in who have adequate cash balances. In a world where there is so much uncertainty in financing, Fred felt it best to take advantage of the loan to make sure there was financing available down the road when they begin mining at Mt. Todd.
'Any' shareholder CANNOT borrow under better terms....as this loan was not secured so it was partly balanced with a 3.5% up front fee. As a business owner with a $2MM credit facility at a major bank.....that credit facility is secured by cash, cash equivalents and receivables on a near 1-for-1 basis. I think our current rate is prime + 1% today...but there is no up front fee because it's 'secured' any time we make use of it thru the year as business warrants it's use.
You may be being too caustic, Fred - there may be methodology to the apparent madness at Vista ; )
Well said Chair... Another rationale is that Sprott - the billionaire - would not lend $10M to anyone who can not pay it back. Given that VGZ have no earnings - he must be confident that at some point they will have!! I am also confident of this. VGZ have one of the top 40 underdeveloped mines in the world at Mt Todd, it is in a great mining jurisdiction and with the mgmt team it has I think it can go all the way or at least a t/o. Here's hoping anyway!