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Wesdome Announces 2022 First Quarter Results

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Wesdome Announces 2022 First Quarter Results

 

 

 

 

 

Wesdome Gold Mines Ltd. (TSX: WDO) announces first quarter (“Q1 2022”) financial results. All figures are stated in Canadian dollars unless otherwise noted.

 

Duncan Middlemiss, President and CEO commented, “In Q1, with combined production of 25,611 ounces we increased cash flow from operations by 36%, and cash margins by 39% over the same period last year, ending the quarter with $52.5 million in cash. This is sufficient to fund our final year of elevated growth capex as we finish projects related to the ramp up at Kiena, such as the fleet purchase, tailings dam, and paste fill plant construction.

 

It was a challenging quarter due to the unpredictable supply chain, inflationary pressures seen across the industry, as well as the Omicron variant surge which impacted work force availability. Q1 production at Kiena was impacted by the unscheduled downtime of the underground crusher (since rectified) and the delay in the delivery of underground mobile equipment, which was received at the end of the quarter. Ground conditions within the Kiena Deep A Zone, specifically the schist and komatiite rock types which are in the foot wall of the zone, are challenging as expected. We look forward to the completion of the paste fill plant (now expected to be commissioned in the summer) in order to speed up our production cycle and mitigate delays.

 

While the Kiena restart is generally progressing as planned, the aforementioned challenges have impacted various aspects of the project to date. The addition of paste fill capabilities in Q3 will have significant production benefits. Wesdome is very fortunate to have commenced this start up activity in June of 2021, as most major components critical to commercial restart of operations have now been received at site.

 

Combined cash costs for the quarter of $1,295 per ounce (US $1,023) and AISC costs of $1,695 per ounce (US$1,339) were higher than the upper end of full-year guidance ranges due to planned lower production (the low for 2022)) and increased corporate and general expenses. A more detailed breakdown of costs for each operation is provided in the table below. Free cash outflow was $6.8 million, net of an investment of $28.4 million in Kiena, or ($0.05) per share. The Company expects to return to positive free cash flow status in the second half of the year as production ramps up and growth capital spending is significantly reduced.

 

At Eagle, we are continuing to open up additional stopes in the high-grade Falcon Zone, with the mine plan calling for higher production in the second half of the year.

 

Executive Appointments

 

Subsequent to quarter-end, the Company is pleased to announce two new executive management updates. Frederic Mercier-Langevin has been appointed as Chief Operating Officer, effective June 15, 2022.

 

Frederic brings over 17 years of project execution and operational experience with Agnico Eagle Mines Limited. Most recently, Mr. Langevin served as General Manager of Agnico Eagle’s Meliadine mine in Nunavut, which produced 391,687 koz Au in 2021 from both underground and open pit operations. Prior to his role at Meliadine, Mr. Langevin held roles of increasing responsibility, including overseeing the execution of the Goldex project and Lapa Mine in Val d’or, Quebec where he was eventually appointed General Manager. He is bilingual in English and French and holds a Bachelor of Science degree in Mining Engineering and a M.Sc. in Mining Engineering (Rock Mechanics) from Laval University.

 

The Company also announces that Joanna Miller has been promoted to the position of Vice President, Sustainability and Environment (previously Director Sustainability).

 

Joanna is an experienced sustainability strategist with over 15 years experience in the mining industry in consulting, site-based and corporate roles, managing external affairs, Indigenous relations, ESG reporting and social & environmental risk. She joined Wesdome in 2020 as the Director of Sustainability & Environment, having previously spent 6 years with Centerra Gold and Thompson Creek Metals in British Columbia. Prior to her work in the mining industry, Joanna managed engagement and investment campaigns for clients including Scotiabank, Hyundai and Loblaws. She holds a Bachelor of Arts from Queen’s University and has completed certification programs in Indigenous law and environmental management. Joanna is the current Vice-Chair of the Ontario Mining Association’s Indigenous Relations Committee.

 

“Frederic’s experience in Canadian gold mining operations, and the Abitibi region specifically will be a tremendous asset to our team, as we ramp up Kiena to commercial production. Joanna, who has been working with us for the last eighteen months in a director role, has significantly improved our ESG disclosure and performance, and brings a wealth of knowledge and experience to this role.”

 

Key operating and financial highlights of the Q1 2022 results include:

  • Gold production of 25,611 ounces, including 5,112 Kiena pre-commercial ounces, is a 13% increase over the same period of the previous year (Q1 2021: 22,565 ounces):
    • Eagle River Underground milled 53,217 tonnes at a head grade of 11.6 grams per tonne for 19,334 ounces produced, a 10% decrease over the same period in the previous year (Q1 2021: 21,396 ounces).
    • Mishi Open Pit milled 11,873 tonnes at a head grade of 3.6 grams per tonne for 1,165 ounces produced (2021: 1,169 ounces).
    • Kiena milled 21,162 tonnes at a head grade of 7.7 grams per tonne for 5,112 pre-commercial ounces produced.
  • Revenue2 of $66.7 million, a 45% increase over the same period of the previous year (Q1 2021: $46.0 million).
  • Ounces sold3 were 28,000 at an average sales price of $2,379/oz (Q1 2021: 20,664 ounces at an average price of $2,223/oz).
  • Cash margin1,2,4 of $30.3 million, a 39% increase over the same period of the previous year (Q1 2021: $21.8 million).
  • Operating cash flows2,4 increased by 36% to $29.9 million or $0.21 per share1 as compared to $22.0 million or $0.16 per share for the same period in 2021.
  • Free cash outflow of $6.8 million, net of an investment of $28.4 million in Kiena, or ($0.05) per share1 (Q1 2021: free cash inflow of $0.1 million or $nil per share).
  • Net income2,4 and Adjusted net income attributable to shareholders of $7.1 million or $0.05 per share (Q1 2021: $7.1 million or $0.05 per share).
  • Cash position at the end of the quarter of $52.5 million.
  • Cash costs1,4,5 of $1,295/oz or US$1,023/oz, a 20% increase over the same period in 2021 (Q1 2020: $1,076/oz or US$850/oz);
  • AISC1,5 increased by 13% to $1,695/oz or US$1,339/oz (Q1 2021: $1,497 or US$1,182 per ounce) due to lower ounces sold and increased corporate and general expenses.
  1. Refer to the Company’s 2021 Annual Management Discussion and Analysis section entitled “Non-IFRS Performance Measures” for the reconciliation of these non-IFRS measurements to the consolidated financial statements.
  2. Q1 2021 excludes $3.9 million of revenue from the Kiena bulk sample, which was processed in Q4 2020 and sold in Q1 2021. The incidental revenue was credited against the cost of the Kiena exploration asset.
  3. Q1 2021 excludes 1,793 ounces from the Kiena bulk sample, which was processed in Q4 2020 and sold in Q1 2021.
  4. 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 and sold in Q1 2021.
  5. In determining the Cash cost per ounce and AISC per ounce, the total ounces sold includes 1,793 ounces of gold from the Kiena bulk sample, which was processed in Q4 2020 and sold in Q1 2021.

 

Production and Exploration Highlights Achievements
Eagle River Complex
  • Q1 2022 Eagle River underground ore production decreased by 10% from Q1 2021 to 19,334 ounces of gold due to a planned decrease in head grade. Head grade at Eagle River in Q1 2022 averaged 11.6 g/t, which exceeded the plan, but is slightly below the 2022 grade guidance of 12.1 – 13.4 g/t Au as expected.
  • Q1 2022 cash cost of $1,262 (US$997) per ounce of gold sold1 increased by 10% or $113 from Q1 2021 due to a 9% decrease in ounces sold. Despite inflationary pressure and pandemic related impacts, the overall aggregate cash costs remained consistent with Q1 2021.
  • Q1 2022 AISC of $1,771 (US$1,399) per ounce of gold sold1 increased by 9% or $164 from Q1 2021 due to a 9% decrease in ounces sold.
  • Generated a cash margin in Q1 2022 of $21.3 million compared to $22.2 million in Q1 2021 due to the 9% decrease in ounces sold; partially offset by an 8% higher average realized Canadian gold price of $2,396/oz (Q1 2021 – $2,223/oz).
  • Definition drilling is focused at the Falcon Zone and 300 E Zone. A record Inferred Resource inventory provides a platform for potential increase Reserve replacement for 2022.
  • Underground exploration is focused on extending the high grade 300 E and Falcon zones and targeting parallel zones in the volcanic rocks. Additionally, drilling is planned at the recently discovered North Contact zone.
  • Surface drilling is ongoing with 2 drills both east and west of the mine to follow up on encouraging values returned from the regional drilling program in 2021.
Kiena
  • Generated $9.0 million in cash margin despite the high cash costs of $1,364 per ounce of gold sold1 due to planned low pre-commercial production levels.
  • Q1 2022 cash cost of $1,364 (US$1,023) per ounce of gold sold1 and AISC of $1,541 (US$1,217) per ounce of gold sold1.
  • Kiena Deep continues to show potential to add additional ounces in the resource base and additional ounces are planned for conversion to reserves with 2022 drilling, particularly at the Footwall Zone where an inferred resource has been defined.
  • Additionally, underground drills have been moved onto the 33 level to test historic zones and encouraging drill results further to the east along strike from the Kiena mine.
  • Initial surface drilling has focused on the Presqu’ile and Shawkey areas located northwest and southeast of the Kiena Mine, respectively.
  • Surface drilling is ongoing and will be accelerated once the ice has melted utilizing the two barges at site. Planned drilling is concentrated around the Shawkey and newly discovered Bourgo zone.

 

Technical Disclosure

 

The technical content of this release has been compiled, reviewed and approved by Jacqueline Wheeler, P. Eng, Director, Corporate Development and Technical Projects 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.

 

COVID-19

 

The health and safety of our employees, contractors, vendors, and consultants is the Company’s top priority. In response to the COVID-19 outbreak, Wesdome has adopted all public health guidelines regarding safety measures and protocols at all of its mine operations and corporate office. These protocols are still in place at all sites despite the loosening of some provincial public health guidelines. In addition, our internal COVID-19 Taskforce continues to monitor developments and implement policies and programs intended to protect those who are engaged in business with the Company.

 

Through care and planning, to date the Company has successfully maintained operations; however, there can be no assurance that this will continue despite the Company’s best efforts, with the emergence of new, highly contagious variants such as Omicron. To date, the Company has been impacted by this most recent variant outbreak, with employees at both operations and corporate office becoming infected, which may negatively impact our ability to maintain projected timelines and objectives. Consequently, the Company’s actual future production and production guidance is subject to higher levels of risk than usual. The Company is continuing to monitor the situation closely and will provide updates as they become available.

 

ABOUT WESDOME

Wesdome is Canadian focused with two producing underground gold mines.  The Company’s goal is to build Canada’s next intermediate gold producer, producing over 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 95,000 – 105,000 ounces per year. The Company is currently milling the final stockpile of ore from the Mishi Pit with 1,000 – 2,000 ounces expected. The recently re-started Kiena Complex in Val d’or, Quebec is a fully permitted underground mine and milling operation and the Kiena Mine is expected to produce 64,000 – 73,000 ounces in 2022. On a combined basis, 2022 guidance is 160,000 ounces – 180,000 ounces. Wesdome is actively exploring underground and on surface within the mine areas and more regionally at 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 142.5 million shares issued and outstanding and trades on the Toronto Stock Exchange under the symbol “WDO,” with a secondary listing on the OTCQX under the symbol “WDOFF.

 

 

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
    March 31,
    2022     2021
Operating data        
Milling (tonnes)        
Eagle River   53,217     53,540
Mishi   11,873     17,219
Kiena   21,162     0
Throughput 2   86,252     70,759
Head grades (g/t)        
Eagle River   11.6     12.8
Mishi   3.6     2.5
Kiena   7.7     0.0
Recovery (%)        
Eagle River   97.4     97.1
Mishi   84.8     84.8
Kiena   98.0     0.0
         
Production (ounces)        
Eagle River   19,334     21,396
Mishi   1,165     1,169
Kiena   5,112     0
Total gold produced 2   25,611     22,565
Total gold sales (ounces) 4   28,000     22,457
         
Eagle River Complex(per ounce of gold sold)1    
Average realized price $ 2,396   $ 2,223
Cash costs $ 1,262   $ 1,076
Cash margin $ 1,134   $ 1,147
All-in Sustaining Costs1 $ 1,771   $ 1,497
         
Mine operating costs/tonne milled1 $ 385   $ 335
         
Average 1 USD → CAD exchange rate   1.2662     1.2660
         
Cash costs per ounce of gold sold (US$)1 $ 997   $ 850
All-in Sustaining Costs (US$)1 $ 1,399   $ 1,182
         
Kiena Mine (per ounce of gold sold)1        
Average realized price $ 2,344   $ 0
Cash costs3, 5 $ 1,364   $ 238
Cash margin $ 980   $ 0
All-in Sustaining Costs1, 3, 5 $ 1,541   $ 0
         
Mine operating costs/tonne milled1 $ 579   $ 0
         
Average 1 USD → CAD exchange rate   1.2662     1.2660
         
Cash costs per ounce of gold sold (US$)1 $ 1,077   $ 0
All-in Sustaining Costs (US$)1 $ 1,217   $ 0
         
Financial Data        
Cash margin1 $ 30,342   $ 21,776
Net income $ 7,061   $ 7,103
Net income adjusted1 $ 7,061   $ 7,103
Earnings before interest, taxes, depreciation and amortization1 $ 20,650   $ 18,662
Operating cash flow $ 29,893   $ 22,033
Free cash flow1 $ (6,796 ) $ 99
Per share data        
Net income $ 0.05   $ 0.05
Adjusted net income1 $ 0.05   $ 0.05
Operating cash flow1 $ 0.21   $ 0.16
Free cash flow1 $ (0.05 ) $ 0.00
         
  1. Refer to the Company’s 2021 Annual Management Discussion and Analysis section entitled “Non-IFRS Performance Measures” for the reconciliation of these non-IFRS measurements to the consolidated financial statements.
  2. Totals for tonnage and gold ounces may not add due to rounding.
  3. Q1 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. Q1 2021 includes 1,793 ounces of gold from the Kiena bulk sample, which was processed in Q4 2020
  5. In determining the Cash cost per ounce and AISC per ounce, the total ounces sold includes 1,793 ounces of gold from the Kiena bulk sample, which was processed in Q4 2020 and sold in Q1 2021.

 

 

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

 

       As at March 31, 2022    As at December 31, 2021  
Assets            
Current            
  Cash and cash equivalents     $ 52,472   $ 56,764    
  Receivables and prepaids       13,621     13,793    
  Share consideration receivable       3,924     4,560    
  Inventories       21,142     17,918    
Total current assets       91,159     93,035    
             
Restricted cash       657     657    
Deferred financing costs       674     758    
Mining properties, plant and equipment       208,945     212,394    
Mines under development       241,955     214,089    
Exploration properties       1,139     1,139    
Marketable securities       2,370     1,860    
Share consideration receivable       9,131     10,729    
Investment in associate       18,441     19,058    
Total assets     $ 574,471   $ 553,719    
             
Liabilities            
Current            
  Payables and accruals     $ 53,791   $ 40,093    
  Income and mining tax payable       2,297     5,490    
  Current portion of lease liabilities       8,216     7,789    
Total current liabilities       64,304     53,372    
             
Lease liabilities       5,649     6,786    
Deferred income and mining tax liabilities       79,689     77,195    
Decommissioning provisions       19,250     21,191    
Total liabilities       168,892     158,544    
             
Equity            
Equity attributable to owners of the Company            
  Capital stock       192,367     187,911    
  Contributed surplus       4,246     5,859    
  Retained earnings       208,696     201,645    
  Accumulated other comprehensive income (loss)       270     (240 )  
Total equity attributable to owners of the Company       405,579     395,175    
Total liabilities and equity     $ 574,471   $ 553,719    
             

 

 

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  
      March 31  
        2022       2021    
             
Revenues     $ 66,694     $ 45,973    
Cost of sales       (44,706 )     (30,264 )  
Gross profit       21,988       15,709    
             
Other expenses            
Corporate and general       3,375       2,391    
Stock-based compensation       76       310    
Exploration and evaluation       2,956          
Gain on disposal of mining equipment       (2 )        
Total other expenses       6,405       2,701    
             
Operating income       15,583       13,008    
             
Fair value adjustment on share consideration receivable       (2,234 )        
Interest expense       (263 )     (259 )  
Accretion of decommissioning provisions       (171 )     (110 )  
Share of loss of associate       (412 )        
Loss on dilution of ownership       (205 )        
Other expense       (265 )     (303 )  
Income before income and mining taxes       12,033       12,336    
             
Income and mining tax expense            
  Current       2,488       1,096    
  Deferred       2,494       4,137    
Total income and mining tax expense       4,982       5,233    
             
Net income     $ 7,051     $ 7,103    
             
Other comprehensive income            
    Change in fair value of marketable securities       510          
Total comprehensive income     $ 7,561     $ 7,103    
             
Earnings per share            
  Basic     $ 0.05     $ 0.05    
  Diluted     $ 0.05     $ 0.05    
             
Weighted average number of common            
  shares (000s)            
  Basic       141,830       139,732    
  Diluted       143,467       142,617    
             

 

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

 

 

                  Accumulated    
                  Other      
      Capital   Contributed   Retained   Comprehensive   Total  
      Stock   Surplus   Earnings   Income (Loss) Equity  
                         
Balance, December 31, 2020     $ 179,540   $ 6,472     $ 70,357   $     $ 256,369  
Net income for the period ended                        
  March 31, 2021                 7,103           7,103  
Exercise of options       321                     321  
Value attributed to options exercised       155     (155 )                
Value attributed to RSUs exercised       786     (786 )                
Stock-based compensation           310                 310  
                         
Balance, March 31, 2021     $ 180,802   $ 5,841     $ 77,460   $     $ 264,103  
                         
Balance, December 31, 2021     $ 187,911   $ 5,859     $ 201,645   $ (240 )   $ 395,175  
Net income for the period ended                        
  March 31, 2022                 7,051           7,051  
Other comprehensive income                     510       510  
Exercise of options       2,767                     2,767  
Value attributed to options exercised       1,051     (1,051 )                
Value attributed to RSUs exercised       638     (638 )                
Stock-based compensation           76                 76  
Balance, March 31, 2022     $ 192,367   $ 4,246     $ 208,696   $ 270     $ 405,579  
                         

 

 

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

 

      Three Months Ended
      March 31,
        2022       2021  
Operating Activities          
  Net income     $ 7,051     $ 7,103  
  Depreciation and depletion       8,354       6,067  
  Stock-based compensation       76       310  
  Accretion of decommissioning provisions       171       110  
  Deferred income and mining tax expense       2,494       4,137  
  Amortization of deferred financing cost       84       105  
  Interest expense       263       259  
  Gain on disposal of mining equipment       (2 )      
  Share of loss of associate       412        
  Loss on dilution of ownership       205        
  Fair value adjustment on share consideration receivable     2,234        
  Foreign exchange gain on lease financing       (32 )     (29 )
  Net changes in non-cash working capital       14,264       4,170  
  Mining and income tax paid       (5,681 )     (199 )
Net cash from operating activities       29,893       22,033  
           
Financing Activities          
  Exercise of options       2,767       321  
  Deferred financing costs             (239 )
  Repayment of lease liabilities       (2,086 )     (1,516 )
  Interest paid       (263 )     (259 )
Net cash from (used in) financing activities       418       (1,693 )
           
Investing Activities          
  Additions to mining properties       (6,190 )     (8,519 )
  Additions to mines under development       (28,413 )      
  Additions to exploration properties             (11,899 )
  Net changes in non-cash working capital             482  
Net cash used in investing activities       (34,603 )     (19,936 )
           
(Decrease) increase in cash and cash equivalents       (4,292 )     404  
Cash and cash equivalents – beginning of period       56,764       63,480  
Cash and cash equivalents – end of period     $ 52,472     $ 63,884  
           
Cash and cash equivalents consist of:          
  Cash     $ 52,472       63,884  
      $ 52,472     $ 63,884  

 

Posted May 12, 2022

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