The following discussion and analysis should be read in conjunction with our consolidated financial statements for the three years ended December 31, 2008, and the related notes thereto, which have been prepared in accordance with generally accepted accounting principles ("GAAP") in Canada. Reference to Note 19 to the consolidated financial statements should be made for a discussion of differences between Canadian and United States GAAP and their effect on the financial statements. All amounts stated herein are in U.S. dollars in thousands, except loss per share, and gold price per ounce, unless specified otherwise.

Overview

We are engaged in the evaluation, acquisition, exploration and advancement of gold exploration and potential development projects with the aim of adding value to the projects. Our approach to acquisitions of gold projects has generally been to seek projects within political jurisdictions with well-established mining, land ownership and tax laws, which have adequate drilling and geological data to support the completion of a third-party review of the geological data and to complete an estimate of the mineralized material (mineral resources under Canadian guidelines) and mineral reserves. In addition, we look for opportunities to improve the value of our gold projects through exploration drilling and re-engineering the operating assumptions underlying previous engineering work. In 2007, the Board of Directors and management reevaluated the corporate strategy regarding the development of the Corporation's more advanced projects. As a result of this reevaluation, the Corporation has begun moving its more advanced projects toward production by undertaking advanced engineering studies, including feasibility studies as appropriate.

Our holdings include the Paredones Amarillos and Guadalupe de los Reyes gold projects in Mexico; the Mt. Todd gold project in Australia; the Yellow Pine gold project in Idaho; the Long Valley gold project in California; the Awak Mas gold project in Indonesia; and claims located in Colorado and Utah. We also own approximately 25% of the shares of Zamora Gold Corp., a company exploring for gold in Ecuador.

Outlook

Gold prices started 2008 at $841 per ounce and finished the year at $865 per ounce as quoted on the London Metal Exchange morning quote. This rise of approximately 3% during the year reflected factors such as rising oil prices, global instability, real and threatened terrorism activities, the war in Iraq, and the rise in demand for

investment and jewelry. Current prices are at a 25-year high and no assurance can be given that such prices will be sustained.

At the end of 2008, we owned or controlled six properties containing mineralized material. In the early part of 2007, we decided with the higher gold prices, to bring the more advanced projects, such as Paredones Amarillos and Mt. Todd, to production decisions. The emphasis in late 2007 was to start a bankable feasibility study on Paredones Amarillos with a major mining consultant being contracted to manage this study, which was completed in September 2008. In addition, we believe that additional value can be added to most of the remaining projects through exploration drilling and engineering studies, thus advancing them closer to a production decision.

We do not currently generate operating cash flows. Subject to sustained gold prices and the risk factors disclosed in "Part I-Item 1A. Risk Factors" above, we hope to generate revenues and cash flows in the future. We may generate revenues and cash flows from our portfolio of gold projects by several means, including but not limited to options or leases to third parties, joint venture arrangements with other gold producers, outright sales for cash and/or royalties, or project development and operation.

With respect to our current property holdings, aggregate expenditures for purchase installments, to maintain options and conduct exploration activities are currently anticipated being approximately $4,600 in 2009 and $2,800 in 2010. As at December 31, 2008, we had working capital of $21,209 and cash on hand of $13,266. At present, we believe that the current cash balances as of December 31, 2008 of $13,266 and marketable securities of $8,153 will cover these activities as well as general and administrative expenses and our semi-annual interest payments associated with the Notes through 2010. In subsequent years, we anticipate that we will need to raise additional capital to meet property purchase installment obligations and scheduled payments on those properties that we decide to retain under option. Further, additional capital would be necessary to advance the projects to a positive production decisions; and to conduct additional exploration drilling and engineering studies on current properties. Additional capital may be raised via revenues, if earned, equity and/or debt financings. However, there can be no assurance that we will be successful in efforts to raise additional capital.

Results from Operations

Summary

Our 2008 consolidated net loss was $9,973 or $0.29 per share compared to the 2007 consolidated net loss of $13,150 or $0.41 per share for a net decrease of $3,177. The decrease of $3,177 in 2008 is primarily the result of the impairment of the Amayapampa gold project of $5,513 and costs related to the completion of the Arrangement Agreement of $2,901, both of which occurred during the 2007 period. These amounts are offset by decreased interest income of $719, an increase in interest expense of $2,004, an increase in the income tax expense of $1,371, an increase in the impairment loss of $558 with respect to certain marketable securities, costs to dispose of the Amayapampa gold project of $132 and an increase in the loss on currency translation of $343.

Our 2007 consolidated net loss was $13,150 or $0.41 per share compared to the 2006 consolidated net loss of $4,171 or $0.16 per share for a net increase of $8,979. The increase of $8,979 in 2007 is primarily the result of the impairment of the Amayapampa project of $5,513, costs related to the completion of the Arrangement of $2,901, increased corporate administration and investor relations costs of $2,661 and increased exploration, property evaluation and holdings costs of $317; partially offset by an increase in the income tax benefit of $1,051.

Exploration, property evaluation and holding costs

Exploration, property evaluation and holding costs increased to $1,043 during the year ended December 31, 2008, compared with $734 for the same period in 2007. The increase of $309 is primarily due to increases in holding costs at the Paredones Amarillos gold project of $267 and the Mt. Todd gold project of $118. The increase in costs at the Paredones Amarillos gold project reflects increasing consultant fees for activities related to permitting and other administrative work and accounting fees as we evaluate financial and tax implications to Vista Gold as we move the project towards a development decision. The increase at the Mt. Todd gold project is primarily the result of an increase in tenement expenditures.

Corporate administration and investor relations

Corporate administration and investor relations costs increased to $5,476 during the year ended December 31, 2008, compared to $5,162 in 2007. The slight increase of $314 from the prior period is primarily due to an increase in labor and benefit costs of $325, which is mostly the result of a severance charge of $215 for lay-offs at the Awak Mas gold project and increased salary and benefit charges of $100 for the addition of new employees as we head towards the development of certain projects.

Corporate administration and investor relations costs increased to $5,162 during the year ended December 31, 2007, compared to $2,501 in 2006. The increase of $2,661 from the prior period is primarily due to the following:

º •
º An increase in non cash stock-based compensation expense of $1,412 compared to the prior period. This is due to an increase of $700 for options vesting immediately upon the grant date, an increase of $517 from the prior year for options granted and vesting over time and a decrease of $188 in the allocation of stock-based compensation expense to Allied Nevada during the 2007 period;

º •
º A decrease in the allocation of certain corporate expenses to Allied Nevada as part of the Arrangement Agreement of $606 compared to the prior period;

º •
º An increase in labor and benefit costs of $302 compared to the prior period. This increase is due to the addition of employees as we head towards anticipated development of certain projects; and

º •
º An increase in investor relations costs of $101 compared to prior period. This increase is due to increased communication programs resulting from a change in strategic direction towards production and the need to communicate developmental issues on one of our projects in 2008.

Depreciation and amortization

Depreciation and amortization expense increased to $170 during the twelve-month period ended December 31, 2008 as compared to $112 for the same period in 2007. This increase is mostly due to capital expenditures at both the Mt. Todd gold mine and the Paredones Amarillos gold project during 2008 that have begun being depreciated.

Depreciation and amortization expense increased to $112 during the twelve-month period ended December 31, 2007 as compared to $42 for the same period in 2006. This increase is mostly due to capital expenditures at the Mt. Todd gold mine during 2007 that have begun being depreciated.

Other Income and Expenses

Interest income

Interest income was $509 during the twelve-month period ended December 31, 2008, as compared to $1,228 for the same period in 2007. The decrease of $719, from the respective prior period is primarily attributable to a decrease in interest earned on our liquid savings accounts as compared to the same period in 2007. This decrease is due to Vista Gold's decision to no longer purchase short-term commercial paper due to the declining interest rates in the market.

Interest income increased to $1,228 during the twelve-month period ended December 31, 2007 as compared to $673 for the same period in 2006. This increase is the result of an increase in interest earned on our liquid savings account which can be attributed to higher cash balances and higher interest rates.

Interest expense was $2,004 during the twelve-month period ended December 31, 2008. Of this amount, $837 is attributable to the accretion of the debt discount and $1,167 is attributable to interest expense. These amounts are approximately 47% of the full interest expense associated with the issuance of the Notes. We are able to capitalize the remaining 53% as additions to mineral properties in accordance with SFAS No. 34 and our accounting policy. During 2007 and 2006, we did not incur any interest expense as we had no commercial debt during these years.

Gain/(loss) on disposal of marketable securities

In 2008, we realized a loss on disposal of marketable securities of $98, compared to a gain of $158 in 2007 and a gain of $129 in 2006. In 2008 the loss on disposal of marketable securities was the result of selling certain available-for-sale securities that had a book value of $203 for proceeds of $105.

In 2007 the gain on disposal of marketable securities was the result of selling certain available-for-sale securities that had a book value of $38 for proceeds of $258. We allocated $62 of the gain on disposal of marketable securities to Allied Nevada as part of the completion of the Arrangement Agreement. These costs were allocated as part of the general overhead income and expense allocation.

In 2006 the gain on disposal of marketable securities was the result of selling certain available-for-sale securities that had a book value of $190 for proceeds of $380. We allocated $61 of the gain on disposal of marketable securities to Allied Nevada as part of the completion of the Arrangement Agreement. These costs were allocated as part of the general overhead income and expense allocation.

At December 31, 2008, we held marketable securities available for sale with a quoted market value of $8,153. With the exception of our shares of Allied Nevada common stock, as discussed herein, we purchased the securities for investing purposes with the intent to hold the securities until such time that it would be advantageous to sell the securities at a gain. Although there can be no reasonable assurance that a gain will be realized from the sale of the securities, the market status of the securities is consistently monitored in order to mitigate the risk of loss on the investment. At December 31, 2008, also included in marketable securities were 1,529,848 shares of Allied Nevada common stock at a quoted market value of $7,741. We will hold these shares until such time that it would be advantageous to sell the securities at a gain.

Income tax (benefit)/expense

Effective September 30, 2008, the Corporation adopted EIC 172, which provides guidance on whether the tax benefit from the recognition of previously unrecognized tax loss carryforwards consequent to the recording of unrealized gains in other comprehensive income, such as unrealized gains on available-for-sale financial assets, should be recognized in net income or in other comprehensive income. EIC 172 should be applied retrospectively, with restatement of prior periods from January 1, 2007, the date of adoption of CICA 3855.

Income tax expense was $320 for the year ended December 31, 2008 as compared to an income tax benefit of $1,051 for the 2007 period. The increase of $1,371 in expense as compared to the benefit from the 2007 period is attributable to the declining market during 2008, in which we have had more unrealized losses as compared to 2007 where we had more unrealized gains. There was no income tax benefit or expense during the 2006 period as the company had not yet adopted CICA 3855 and as a result did not record unrealized holding gains or losses on its available-for-sale securities.

Write-down of marketable securities

The write-down of marketable securities was $583 for the year ended December 31, 2008 as compared to a write-down of marketable securities of $25 for the 2007 period. There were no write-downs during the year ended December 31, 2006. At December 31, 2008, Vista Gold evaluated the market value of its available-for-sale securities and found that certain securities had become impaired. These securities were written down to their fair market value as of December 31, 2008. In 2007, the write-down of marketable securities was due to the expiration of warrants with a value of $25.

Operating Activities

Net cash used in operating activities in 2008 was $7,638 compared to $4,285 in 2007 and $1,508 in 2006. The increase of $3,353 in 2008 as compared to 2007 is mostly the result of aggregate interest payments of $2,342 made on June 15, 2008 and December 15, 2008 for the Notes and an increase in the loss from continuing operations of $2,848, which has been partially offset by an increase in non-cash items of $2,111.

Net cash used in operating activities in 2007 was $4,285 compared to $1,508 in 2006. The increase of $2,777 in 2007 as compared to 2006 is primarily due to an increase in the loss from continuing operations of $4,912 and an increase in cash used for accounts payable, accrued liabilities and other of $602, which is partially offset by an increase in non-cash items of $2,260.

Investing Activities

Net cash used in investing activities in 2008 was $26,913 compared to $31,349 in 2007. The decrease of $4,436 is mostly the result of a decrease of $24,517 in the cash transferred to Allied Nevada in conjunction with the completion of the Plan of Arrangement in May 2007, which has been offset by the following:

º •
º An increase in additions to plant and equipment of $17,524. On March 4, 2008, with the completion of a brokered private placement of $30,000 principal amount of the Notes (see "Financing activities" below) we used $16,000 of the proceeds towards the purchase of gold processing equipment to be used at our Paredones Amarillos gold project. The aggregate purchase price was approximately $16,000, which included the costs of relocating the equipment to Edmonton, Alberta, Canada. The purchase was finalized in April 2008 with the completion of the relocation of the major equipment components to Edmonton. There were no similar purchases during the 2007 period.

º •
º An increase in the acquisition of mineral properties of $452. On January 24, 2008, we completed the acquisition of interests in various mineral properties adjacent to our Guadalupe de los Reyes gold project in Mexico. The consideration paid by Vista Gold for the acquisition of these interests included cash payments totaling $452 and the issuance of a total of 213,503 Common Shares of Vista Gold (with an aggregate fair value of $1,000) to various parties.

º •
º An increase in the additions to mineral properties of $2,149. This increase primarily reflects the costs associated with the feasibility study for the Paredones Amarillos gold project and a drilling program at the Mt. Todd gold project.

Net cash used in investing activities in 2007 was $31,349 compared to $3,682 in 2006. The increase of $27,667 mostly reflects $24,517 cash transferred to Allied Nevada in conjunction with the Arrangement Agreement representing our payment of $25,000 less $483 in loans repaid to us by Allied Nevada pursuant to the terms of the Arrangement Agreement. Other variances include an increase in additions to mineral properties of $4,169 which is mostly due to a drilling program we undertook at the Mt. Todd gold project during 2007 and a decrease in expenditures related to acquisitions of gold properties of $1,269. There were no acquisitions during 2007 as compared to the acquisition of the Mt. Todd gold project in 2006.

Financing Activities

Net cash provided by financing activities was $31,425 for the twelve-month period ended December 31, 2008, as compared to $4,324 for the same period in 2007. This increase is primarily the result of the completion of a brokered private placement on March 4, 2008 in which we offered and sold $30,000 in aggregate principal amount of senior secured convertible notes (the "Notes") (see Consolidated Financial Statements-Note 7). Proceeds to Vista Gold after legal and other fees were $28,345. There were no similar transactions during the 2007 period.

We received net cash from financing activities of $4,324 in 2007 compared to net cash provided from financing activities of $54,279 in 2006.

The exercise of stock options produced cash of $139 during 2008 as compared to $715 during 2007 and $808 during 2006 (See Consolidated Financial Statements-Note 10).

Liquidity and Capital Resources

At December 31, 2008, our total assets were $75,765 as compared to $51,346 and $92,731 as of December 31, 2007 and 2006, respectively. Long-term liabilities totaled $23,724 at December 31, 2008, there were no long-term liabilities at December 31, 2007 and $4,877 at December 31, 2006. At the same date in 2008, we had working capital of $21,209 compared to $27,254 in 2007 and a $49,693 in 2006.

Our working capital of $21,209 as of December 31, 2008, decreased from 2007 by $6,045 which was decreased from 2006 by $22,439. The principal component of working capital for both 2008 and 2007 is cash and cash equivalents of $13,266 and $16,686, respectively. Other components include marketable securities (2008-$8,153; 2007-$10,882), accounts receivable (2008-$127; 2007-$91) and other liquid assets (2008-$466; 2007-$289). The decrease of $6,045 in working capital from 2008 to 2007 relates to the decrease in cash balances from 2007 to 2008 and a decline in market values of our marketable securities.

As a result of the delay in the issuance of the Change of Land Use Permit at the Paredones Amarillos gold project and the current uncertainty in the resource and financial markets, management has adopted a revised plan and budget for the year 2009. The plan continues those programs necessary to expedite the development of the Paredones Amarillos gold project, while minimizing expenditures in other areas. The budget estimates that in the event that financing for the Paredones Amarillos gold project is not available on acceptable terms in 2009, Vista Gold has sufficient working capital to fund its planned operations at least through the end of 2009, without additional financing. We will continue to examine potential funding alternatives for the project, which may include project financing, debt financing or equity financing.

On March 4, 2008, the Corporation completed a private placement in which the Corporation issued and sold $30 million in aggregate principal amount of the Notes. The Notes were issued on March 4, 2008 and mature at face value on March 4, 2011 (the "Maturity Date"). The Notes pay interest of 10% per annum. Interest is payable each year in two installments on June 15 and December 15, and the principal is payable on the Maturity Date.

The Notes are convertible at the holder's or issuer's discretion in accordance with the terms of the Notes. The holder can convert all or part of the debt at any time prior to the Maturity Date or the business day immediately preceding the Redemption Date at a price of $6.00 per Common Share, subject to adjustment in certain circumstances. The Redemption Date represents the date that the Notes will be redeemed in the event that we redeem the Notes.

We can convert all, but not part, of the Notes after March 4, 2009 if the weighted-average price of our shares as quoted on the NYSE Amex has been equal to or greater than $9.00 per share for 15 consecutive trading days. The notice of conversion must occur within 10 days of any such 15-day period and the share price must be equal to or greater than $9.00 on the date the notice is delivered. The conversion price is $6.00 per Common Share subject to adjustment in certain circumstances.

Pursuant to the terms of the Notes, on March 4, 2009, the conversion price of the Notes was automatically adjusted from $6.00 per share to $4.80 per share. As a result of the adjustment, 6.25 million Common Shares are issuable upon conversion of the Notes. Prior to the adjustment 5 million Common Shares were issuable upon the conversion of the Notes.

The issuance date fair value of the warrants of $336,000 and legal fees and other expenses of $1.9 million related to the issuance of these Notes have been allocated pro-rata between debt issuance costs of $1,531,000 and equity issuance costs of $457,000. The transaction costs are added to the cost of the convertible debt and presented as a reduction of the related debt and equity portions. The issuance costs related to the debt portion will be amortized over the term of the Notes using the effective interest rate method. Vista capitalizes interest and accretion based on expenditures on qualifying assets. As of December 31, 2008, Vista had qualifying expenditures of approximately $17.0 million related to the equipment purchase for the Paredones Amarillos project. Vista has used approximately $24.0 million of the proceeds for ongoing operations at the Paredones Amarillos gold project, which includes approximately $17.0 million towards the purchase of gold processing equipment. Vista has $6.0 million remaining that will be used to fund ongoing operations pursuant to the covenants of the Notes.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements required to be disclosed in this
Annual Report on Form 10-K.

Contractual Obligations

                                                       Payments due by period (in thousands)
                                   ------------------------------------------------------------------------------
                                                   Less than                                         More than
Contractual Obligations               Total         1 year        1 to 3 years     3 to 5 years       5 years
--------------------------------   -----------    -----------    ---------------   -------------   --------------
Long-term debt obligations(1)      $    36,750    $     3,000    $        33,750   $           -   $            -
Operating lease obligations        $        84    $        84    $             -   $           -   $            -
Purchase obligations(2)            $       400    $       200    $           200   $           -   $            -
                                   -----------    -----------    ---------------   -------------   --------------
Total                              $    37,234    $     3,284    $        33,950   $           -   $            -
                                   -----------    -----------    ---------------   -------------   --------------


--------------------------------------------------------------------------------
   º (1)

º (2)
º Purchase obligations include option payments totaling $400 on the Guadalupe de los Reyes and Yellow Pine gold projects. For the Guadalupe de los Reyes gold project, we still have outstanding $100, which is to be paid in . . .