Wesdome Announces 2021 Third Quarter Financial Results

Kiena Progresses Towards Commercial Production

Wesdome Gold Mines Ltd. (TSX: WDO) announces third quarter financial results. All figures are stated in Canadian dollars unless otherwise noted.

Achievements for Q3 include:

Eagle River Complex production of 23,833 ounces Au and YTD production of 76,773 ounces Au sets up well for achieving mid to high end of 2021 guidance (92,000 ounces Au – 105,000 ounces Au)
Kiena pre commercial production of 5,511 ounces ramping up as planned. Good progress made on Tailings Management Facility enhancements, Paste Fill Plant construction, and mobile equipment procurement advancing this asset towards commercial production status
The company remains well funded with $69.5 M of cash on hand which allows for organically funding the Kiena restart and aggressive company wide exploration program

Mr. Duncan Middlemiss, President and CEO commented, “During the quarter, the Company completed a significant milestone with the successful restart of the Kiena mill, the commencement of underground mining, and the increase in mine construction activities associated with the mine restart. The restart at Kiena has been entirely internally funded, with no debt or dilution to the Company. We produced 5,511 pre-commercial production ounces, and expect 2021’s total production from the asset to be within guidance range of 15,000 – 25,000 ounces. As expected, due to initial start up focused on the lower grade S50 zone, located closest to existing development, Kiena cash costs of $1,844 (US$1,463 per ounce) and AISC of $1,891 (US$1,501) per ounce, are not reflective of the asset long term. We expect to be in full commercial production at this asset in Q2 2022. As we continue to ramp up our production, we continue to expect costs to trend downward.

At Eagle, cash costs of $987 (US$783) per ounce and AISC of $1,451 (US$1,152) per ounce were within our guidance range. Operating cash flows were $33.9 million or $0.24 per, and cash margin was $35.3 million. Free cash outflow of $9.1 million was incurred, net of an investment of a $41.1 million investment into the operations, including $27.5 million at Kiena. Year to date, production at Eagle River of 76,773 ounces, leaves us very well positioned to meet the mid to high point of our guidance range of 92,000 ounces – 105,000 ounces.

With the higher costs realized in Q3 from the Kiena start up, year to date combined cash costs of $983 (US$785) per ounce and AISC cost of $1,406 ($US1,123) are slightly above our US cost guidance range of $900 – $1,000 (US$680 – $770) per ounce for cash costs and $1,300 – $1,450 (US$980 – $1090) per ounce AISC. The Kiena costs are pre-commercial production and we expect to achieve full year production guidance. We expect reductions in unit costs as Kiena comes progresses towards commercial production, expected mid next year.

Q3 2021 was a very successful quarter in terms of achieving our stated corporate goals. We now are on the path to having our second operating high-grade underground gold mine, de-risking the Company’s single asset producer status, and bringing us that much closer to our objective of becoming Canada’s next intermediate gold producer.”

The Company also announces today the resignation of Marc-Andre Pelletier, Chief Operating Officer, effective January 15, 2022. Marc will be pursuing another opportunity in a more senior role, a natural progression in his career trajectory. We wish to sincerely thank him for his extensive contributions to the Company, and his key role in the reopening of the Kiena mine, and wish him all the best in his new endeavour.”

Key operating and financial highlights of the Q3 2021 results include:

Gold production of 29,344 ounces, which includes 5,511 Kiena pre-commercial ounces, is a 47% increase over the same period in the previous year (Q3 2020: 20,008 ounces):
- Eagle River Underground 56,003 tonnes at a head grade of 13.4 grams per tonne for 23,621 ounces produced, 22% increase over the previous year (Q3 2020: 19,319 ounces).
- Mishi Open Pit 3,727 tonnes at a head grade of 2.3 g/t Au for 212 ounces produced (Q3 2020: 689 ounces).
- Kiena 30,470 tonnes at a head grade of 5.8 grams per tonne for 5,511 pre-commercial ounces produced.
Revenue of $67.5 million, a 23% increase over the previous year (Q3 2020: $55.0 million).
Ounces sold were 30,000 at an average sales price of $2,249/oz (Q3 2020: 21,700 ounces at an average price of $2,532/oz).
Cash margin¹ of $35.3 million, a 10.0% increase over Q3 2020 (Q3 2020 – $32.1 million).
Operating cash flows increased by 33% to $33.9 million or $0.24 per share¹ as compared to $25.6 million or $0.18 per share for the same period in 2020.
Free cash outflow of $9.1 million, net of an investment of $27.5 million in Kiena, or ($0.06) per share¹ (Q3 2020: free cash flow of $3.3 million or $0.02 per share).
Net income of $15.3 million or $0.11 per share (Q3 2020: $14.6 million or $0.10 per share) and Net income (adjusted)¹ of $18.3 million or $0.13 per share (Q3 2020: $14.6 million or $0.10 per share).
Cash position increased to $69.5 million compared to $67.8 million in the previous quarter.
Cash costs¹ of $1,072/oz or US$851/oz, a 2% increase over the same period in 2020 (Q3 2020: $1,052/oz or US$790/oz) due to the inclusion of the higher cost Kiena pre-commercial ounces ($1,844 (US$1,463) per ounce), which increased the cash cost per ounce sold by $85 (US$67) per ounce;
All-in sustaining costs (“AISC”) ¹ increased by 7% to $1,495/oz or US$1,186/oz (Q3 2020 – $1,395 (US$1,047) per ounce) due to the inclusion of the higher cost Kiena pre-commercial ounces ($1,891 (US$1,501) per ounce), which increased the AISC per ounce sold by $44 (US$35), combined with higher sustaining capital, corporate and general expenses and lease payments.

¹	^{Refer to the Company’s 2021 Third Quarter Management Discussion and Analysis, section entitled “Non-IFRS Performance Measures” for the reconciliation of these non-IFRS measurements to the financial statements.}

Production and
Exploration Highlights

Achievements

Eagle River

Q3 2021 Eagle River production increased by 22% from Q3 2020 to 23,621 ounces of gold, due to a 25% increase in total throughput; offset partially by a 3% decrease in head grade. Head grade at Eagle River in Q3 2021 averaged 13.4 g/t.
Q3 2021 Cash cost of $987 (US$783) per ounce of gold sold¹ decreased by 6% or $66 from Q3 2020 primarily due to a 24% increase in ounces sold.
Q3 2021 AISC of $1,451 (US$1,152) per ounce of gold sold¹ increased by 6% or $56 from Q3 2020 primarily due to higher mine development and infrastructure spending; partially offset by a 24% increase in ounces sold.
Generated $34.2 million in cash margin in Q3 2021 compared to $32.1 million in the same period in 2020, despite the average realized Canadian gold price being 11% lower at $2,249/oz (Q3 2020 – $2,532/oz).
The Eagle River underground ore processed was slightly lower in Q3 2021 due to two weeks of scheduled downtime for the installation of a new cone crusher and the annual mill maintenance. Production in Q4 is expected to increase to 650 tpd as no project maintenance downtime is planned. Ventilation improvements continue at depth, which has increased the air flow in the deepest section of the ramp area. Production from the Falcon Zone started late in Q3 and will continue in Q4, providing a new high-grade area. Initial sill development has been completed on the Falcon 7 zone on the 622 and 635 levels in support of the current mining. Chip sampling and test holes taken on these two horizons during the initial development confirms earlier exploration drill results by returning high gold grades over continuous strike length. 622 level chip sampling yielded 54.3 grams of gold per tonne (g/t Au) (uncapped) and 37.9 g/t Au (capped at 125 g/t Au) over an average thickness of 2.1 metres (m) over a continuous strike length of 75.6 m. Also, 635 level chip sampling yielded 67.3 g/t Au (uncapped) and 34.3 g/t Au (capped) over an average thickness of 1.9 m over 61.0 m. Additionally the Company is continuing to develop and explore the 311 West Zone along the western margin of the mine diorite. The zone has transitioned from the diorite into the adjacent mafic volcanics, again highlighting the potential of the volcanic rocks to host gold mineralization, similar to that observed at the neighbouring Falcon 7 zone.
Additional underground exploration is ongoing further to the east of the current mining areas, in the east-central area of the mine, to test for parallel zones north of the historic 8 and 6 zones. A comprehensive structural study has been completed and is being utilized to assist the exploration targeting.
Surface drilling is ongoing with 2 drills both east and west of the mine to follow up on anomalous values returned from the regional drilling program in 2020.

Kiena

During Q3 2021, operations at the Kiena Mine commenced, producing 5,511 ounces from the lower grade S-50 zone. The mill start-up in July went according to plan with no major issues. Mine operations were halted for 18 days in September for upgrading of the hoist system which has now been completed. Progress on the paste fill plant and tailings management area construction is on schedule. All key mobile equipment has been ordered and we have already received four underground haulage trucks with the remainder of the equipment scheduled to arrive by Q2 of 2022.
Total throughput was 30,470 tonnes or 331 tpd and the head grade averaged 5.8 g/t.

Generated $1.1 million in cash margin despite the high cash costs of $1,844 per ounce of gold sold¹ due to low pre-commercial production levels.
Late in Q3, first stope production began at the higher grade A Zone, and this is expected to increase significantly in the coming quarters. The reconciliation of the A zone bulk sample that was processed in Q4 2020 recovered 6% more gold than the MRE with a feed grade of 15.7 g/t Au versus model grade of 14.7 g/t Au. Total gold produced from the 7,032 tonnes milled was 3,479 ounces with gold recovery in the Kiena mill of 98.2%.
The new Footwall Zone was initially announced in March of this year. To date, the Footwall Zone is defined by new intersections of gold mineralization located within a 50 metre wide corridor adjacent to the footwall of A2 Zone. The Footwall Zone corridor remains open laterally and down plunge. The location of new gold intercepts in recent holes suggest that the Footwall Zone extends over 300 m along plunge. The deepest hole returned 41.2 g/t Au (uncapped) over 51.2 m core length.

Ongoing drilling also continues to better define and expand the Kiena Deep A Zone predominantly along the lateral extensions of the zone. The high grades intersected will be included in future resource updates. One hole returned 132.1 g/t Au over 7.4 m core length (27.6 g/t Au capped, 3.9 m true width) A Zone.
Initial surface drilling has focused on the Presqu’ile and Shawkey areas located northwest and southeast of the Kiena Mine, respectively. Since July 2021, two drills on barges have been testing the continuity of some gold anomalies in the Jacola Formation which host the Kiena mine. Recent drilling at Presqu’ìle zones returned 1515.0 g/t Au over 0.5 m core length.
Wesdome finalized the purchase of the Tarmac Gold Property from Globex Mining Enterprises. The Property consists of 6 claims covering 94 hectares located entirely within Wesdome’s Kiena Mine Complex and less than 2 kilometers northeast of the Kiena underground mine, all located beneath Lac De Montigny.

Technical Disclosure

The technical content of this release has been compiled, reviewed and approved by Marc-Andre Pelletier, P. Eng, Chief Operating Officer, and Michael Michaud, P.Geo., Vice President, Exploration of the Company and each a “Qualified Person” as defined in National Instrument 43-101 –Standards of Disclosure for Mineral Projects.

ABOUT WESDOME

Wesdome is Canadian focused with two producing underground gold mines. The Company’s strategy is to build Canada’s next intermediate gold producer, producing 200,000+ ounces from two mines in Ontario and Québec. The Eagle River Underground Mine in Wawa, Ontario is currently producing gold at a rate of 92,000 – 105,000 ounces per year. The Kiena Complex is a fully permitted mine with a 930-metre shaft and 2,000 tonne-per-day mill, and a restart of operations was announced on May 26, 2021. The Company has completed a PFS in support of the production restart decision. Wesdome is actively exploring both underground and on surface within the mine area and more regionally at both the Eagle River and Kiena Complex. The Company also retains meaningful exposure to the Moss Lake gold deposit, located 100 kilometres west of Thunder Bay, Ontario through its equity position in Goldshore Resources Inc. The Company has approximately 140.0 million shares issued and outstanding.

Wesdome Gold Mines Ltd.
Summarized Operating and Financial Data
(Unaudited, expressed in thousands of Canadian dollars, except per share and per unit amounts and otherwise indicated)



		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2021		2020		2021		2020
Operating data
Milling (tonnes)
Eagle River		56,003		44,667		172,600		142,890
Mishi		3,727		11,533		30,293		36,301
Kiena		30,470		0		30,470		0
Throughput ²		90,200		56,200		233,363		179,191
Head grades (g/t)
Eagle River		13.4		13.8		13.8		15.1
Mishi		2.3		2.5		2.4		2.7
Kiena		5.8		0.0		5.8		0.0
Recovery (%)
Eagle River		97.9		97.7		97.5		97.6
Mishi		78.0		74.7		81.4		77.8
Kiena		97.9		0.0		97.9		0.0

Production (ounces)
Eagle River		23,621		19,319		74,853		67,893
Mishi		212		689		1,920		2,379
Kiena		5,511		0		5,511		0
Total gold produced ²		29,344		20,008		82,284		70,272
Total gold sales (ounces) ⁴		30,000		21,700		80,957		71,340

Eagle River Complex (per ounce of gold sold) ¹
Average realized price	$	2,254	$	2,532	$	2,240	$	2,341
Cash costs		987		1,052		966		1,022
Cash margin	$	1,267	$	1,480	$	1,274	$	1,319
All-in Sustaining Costs ¹	$	1,451	$	1,395	$	1,413	$	1,348

Mine operating costs/tonne milled ¹	$	388	$	389	$	347	$	385

Average 1 USD → CAD exchange rate		1.2600		1.3321		1.2513		1.3541

Cash costs per ounce of gold sold (*US$*) ¹	$	783	$	790	$	772	$	755
All-in Sustaining Costs (*US$*) ¹	$	1,152	$	1,047	$	1,129	$	995

Kiena Mine (per ounce of gold sold) ¹
Average realized price	$	2,210	$	0	$	2,210	$	0
Cash costs ³		1,844		0		1,243		0
Cash margin	$	366	$	0	$	967	$	0
All-in Sustaining Costs ^{1, 3}	$	1,891	$	0	$	1,288	$	0

Mine operating costs/tonne milled ¹	$	335	$	0	$	335	$	0

Average 1 USD → CAD exchange rate		1.2600		1.3321		1.2513		1.3541

Cash costs per ounce of gold sold (*US$*) ¹	$	1,463	$	0	$	993	$	0
All-in Sustaining Costs (*US$*) ¹	$	1,501	$	0	$	1,029	$	0

Financial Data
Cash margin ¹	$	35,306	$	32,116	$	97,672	$	94,039
Net income	$	15,344	$	14,614	$	110,254	$	42,224
Net income adjusted ¹	$	18,266	$	14,614	$	44,467	$	42,224
Earnings before interest, taxes, depreciation and amortization¹	$	32,828	$	28,564	$	84,302	$	84,325
Operating cash flow	$	33,890	$	25,560	$	82,798	$	89,399
Free cash flow	$	(9,087)	$	3,295	$	(18,119)	$	37,822
Per share data
Net income	$	0.11	$	0.10	$	0.79	$	0.30
Adjusted net income ¹	$	0.13	$	0.10	$	0.32	$	0.30
Operating cash flow¹	$	0.24	$	0.18	$	0.59	$	0.64
Free cash flow ¹	$	(0.06)	$	0.02	$	(0.13)	$	0.27

1	Refer to the Company’s 2021 Third Quarter Management Discussion and Analysis, section entitled “Non-IFRS Performance Measures” for the reconciliation of these non-IFRS measurements to the financial statements.
2	Totals for tonnage and gold ounces information may not add due to rounding.
3	YTD 2021 includes a $0.4 million charge for product inventory costs from the sale of 1,793 ounces of gold from the Kiena bulk sample, which was processed in Q4 2020.
4	YTD 2021 includes 1,793 ounces of gold from the Kiena bulk sample, which was processed in Q4 2020.

Wesdome Gold Mines Ltd.
Consolidated Statements of Financial Position
(Unaudited, expressed in thousands of Canadian dollars)


	As at September 30, 2021		As at December 31, 2020
Assets
Current
Cash and cash equivalents	$	69,473	$	63,480
Receivables and prepaids	12,690		8,974
Share consideration receivable	4,930		–
Inventories	17,780		12,451
Total current assets	104,873		84,905

Restricted cash	657		657
Deferred financing costs	840		827
Mining properties, plant and equipment	203,053		128,670
Mines under development	179,029		–
Exploration properties	10,826		143,524
Share consideration receivable	13,585		–
Investment in associate	19,451		–
Total assets	$	532,314	$	358,583

Liabilities
Current
Payables and accruals	$	38,823	$	21,123
Income and mining tax payable	3,961		3,481
Current portion of lease liabilities	6,466		5,901
Total current liabilities	49,250		30,505

Lease liabilities	7,753		5,604
Deferred income and mining tax liabilities	75,259		37,354
Decommissioning provisions	21,832		22,270
Total liabilities	154,094		95,733

Equity
Equity attributable to owners of the Company
Capital stock	184,849		179,540
Contributed surplus	6,279		6,472
Retained earnings	187,092		76,838
Total equity attributable to owners of the Company	378,220		262,850
	$	532,314	$	358,583

Wesdome Gold Mines Ltd.
Consolidated Statements of Income and Comprehensive Income
(Expressed in thousands of Canadian dollars except for per share amounts)

Three Months Ended

Nine Months Ended

September 30,

2021

2020

2021

2020

Revenues

67,548

55,000

177,402

167,104

Cost of sales

(39,636)

(30,487)

(99,674)

(94,903)

Gross profit

27,912

24,513

77,728

72,201

Other expenses

Corporate and general

2,565

1,371

7,797

5,147

Stock-based compensation

558

518

2,071

2,262

Reversal of impairment charges

–

(58,563)

–

Gain on disposal of mining equipment

(3)

–

(3)

–

Impairment charge on exploration properties

4,394

–

7,507

–

7,514

1,889

(41,191)

7,409

Operating income

20,398

22,624

118,919

64,792

Gain on sale of Moss Lake exploration properties

–

39,143

–

Interest expense

(325)

(263)

(855)

(802)

Accretion of decommissioning provisions

(176)

(88)

(410)

(265)

Share of loss of associate

(15)

–

(104)

–

Fair value adjustment on share consideration
receivable

368

–

360

–

Other income (expenses)

464

(294)

(239)

(203)

Income before income and mining taxes

20,714

21,979

156,814

63,522

Income and mining tax expense

Current

3,309

2,195

8,655

6,234

Deferred

2,061

5,170

37,905

15,064

5,370

7,365

46,560

21,298

Net income and total

comprehensive income

15,344

14,614

110,254

42,224

Earnings per share

Basic

0.11

0.10

0.79

0.30

Diluted

0.11

0.10

0.77

0.30

Weighted average number of common

shares (000s)

Basic

140,432

139,308

139,872

138,898

Diluted

143,069

142,969

142,653

142,478

Wesdome Gold Mines Ltd.
Consolidated Statements of Total Equity
(Unaudited, expressed in thousands of Canadian dollars)

Capital

Contributed

Retained

Total

Stock

Surplus

Earnings

Equity

Balance, December 31, 2019

174,789

5,590

26,123

206,502

Net income for the period ended

September 30, 2020

–

42,224

Exercise of options

2,405

–

2,405

Value attributed to options exercised

1,103

(1,103)

–

Value attributed to RSUs exercised

577

(577)

–

Stock-based compensation

–

2,262

–

2,262

Balance, September 30, 2020

178,874

6,172

68,347

253,393

Balance, December 31, 2020

179,540

6,472

76,838

262,850

Net income for the period ended

September 30, 2021

–

110,254

Exercise of options

3,045

–

3,045

Value attributed to options exercised

1,478

(1,478)

–

Value attributed to RSUs exercised

786

(786)

–

Stock-based compensation

–

2,071

–

2,071

Balance, September 30, 2021

184,849

6,279

187,092

378,220

Wesdome Gold Mines Ltd.
Consolidated Statements of Cash Flows
(Unaudited, expressed in thousands of Canadian dollars)

Three months ended
September 30,

Nine months ended
September 30,

2021

2020

2021

2020

Operating Activities

Net income

15,344

14,614

110,254

42,224

Depreciation and depletion

7,395

6,322

19,945

20,001

Stock-based compensation

558

518

2,071

2,262

Accretion of decommissioning provisions

176

410

265

Deferred income and mining tax expense

2,061

5,170

37,905

15,064

Amortization of deferred financing cost

104

328

269

Interest expense

325

263

855

802

Reversal of impairment charges

–

(58,563)

–

Gain on sale of Moss Lake exploration properties

–

(39,143)

–

Impairment charge on exploration properties

4,394

–

7,507

–

Gain on disposal of mining equipment

(3)

–

(3)

–

Share of loss of associate

–

104

–

Fair value adjustment on share consideration

(368)

–

(360)

–

receivable

Foreign exchange loss (gain) on lease financing

(83)

(15)

30,065

26,990

81,295

80,981

Net changes in non-cash working capital

6,638

2,139

9,677

13,307

Mining and income tax paid

(2,813)

(3,569)

(8,174)

(4,889)

Net cash from operating activities

33,890

25,560

82,798

89,399

Financing Activities

Exercise of options

1,814

623

3,045

2,405

Deferred financing costs

(5)

–

(339)

(198)

Repayment of borrowings

–

(3,636)

Repayment of lease liabilities

(1,877)

(1,322)

(5,277)

(3,531)

Interest paid

(325)

(263)

(855)

(802)

Net cash used in financing activities

(393)

(962)

(3,426)

(5,762)

Investing Activities

Additions to mining properties

(12,620)

(6,981)

(30,492)

(18,972)

Additions to mines under development

(27,481)

–

(40,882)

–

Additions to exploration properties

–

(13,962)

(23,267)

(29,074)

Purchase of exploration property

(1,000)

–

(1,000)

–

Cash proceeds on sale of Moss Lake, net

–

11,762

–

of transaction costs

Proceeds on disposal of mining assets

–

Net changes in non-cash working capital

9,205

3,125

10,427

2,265

Net cash used in investing activities

(31,823)

(17,818)

(73,379)

(45,781)

Increase in cash and cash equivalents

1,674

6,780

5,993

37,856

Cash and cash equivalents – beginning of the period

67,799

66,733

63,480

35,657

Cash and cash equivalents – end of the period

69,473

73,513

69,473

73,513

Cash and cash equivalents consist of:

Cash

69,473

73,513

69,473

73,513

69,473

73,513

69,473

73,513

Posted November 11, 2021

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