Wesdome Announces 2020 First Quarter Financial Results; Generates $16.7 Million in Free Cash Flow

2020-05-05 / @nasdaq

TORONTO, May 05, 2020 (GLOBE NEWSWIRE) -- Wesdome Gold Mines Ltd. (TSX: WDO) (“Wesdome” or the “Company”) today announces first quarter (“Q1 2020”) financial results. All figures are stated in Canadian dollars unless otherwise noted.

Mr. Duncan Middlemiss, President and CEO commented, “In Q1, mill availability improved to 89%, resulting in 55,874 tonnes milled at a head grade of 14.0 grams per tonne (“g/t Au”) for 24,457 ounces produced, 36% increase over the previous year (Q1 2019: 17,955 ounces) at the Eagle River Underground Mine. With our strong production and favourable gold price, the company was able to generate $16.7 million in free cash flow, thereby resulting in a cash position at the end of the quarter of $49.4 million. Cash costs of $1,120 (US$833) and all-in sustaining costs of $1,423 (US$1,058) per ounce increased over Q1 2019 ($866 or US$651 per ounce) and ($1,311 or US$986 per ounce) because of lower grades and the decision to accelerate the processing of the stockpiles in response to the uncertainty surrounding the impact of COVID-19.

The Eagle River mine is in reduced operations mode due to management of COVID-19. As a result, and because of accelerated mining of the stockpile, we expect slightly lower production in Q2, but we are maintaining annual guidance of 90,000 – 100,000 ounces and operating cost guidance of $800 – $875 (US$615 – $670) and AISC guidance of $1,280 - $1350 (US$985 - $1,040) per ounce. As a result of the uncertainty related to COVID-19, it is likely that we will not drill our planned 237,000 metres this year. Further impacts are likely and an update on our progress, along with a revised capex forecast, will be provided as more details become available.

At Kiena, a definitive restart date has not been provided by the Government, but May 11, 2020 is a possibility. We will resume all drilling and development as soon as the Government allows exploration to commence, and the preliminary economic assessment will be published later this month.

On behalf of management and the board of directors, I would like to thank all our employees for their efforts and cooperation with new protocols and procedures during these unprecedented times.”

Key operating and financial highlights of the Q1 2020 results include:

Gold production of 25,122 ounces from the Eagle River Complex, a 32% increase over the same period in the previous year (Q1 2019: 19,010 ounces):
- Eagle River Underground 55,874 tonnes at a head grade of 14.0 grams per tonne (“g/t Au”) for 24,457 ounces produced, 36% increase over the previous year (Q1 2019: 17,955 ounces).
- Mishi Open Pit 11,047 tonnes at a head grade of 2.5 g/t Au for 665 ounces produced (Q1 2019: 1,055 ounces).
Revenue of $57.3 million, a 76% increase over the previous year (Q1 2019: $32.5 million).
Ounces sold 26,500 at an average sales price of $2,162/oz (Q1 2019: 18,760 ounces at an average price of $1,733/oz).
Earned mine profit¹ of $27.6 million, a 70% increase over Q1 2019 (Q1 2019 - $16.3 million).
Operating cash flow of $33.4 million or $0.24 per share¹as compared to $12.6 million or $0.09 per share for the same period in 2019.
Free cash flow of $16.7 million, net of an investment of $9.2 million in Kiena, or $0.12 per share¹ (Q1 2019: free cash outflow flow of ($0.4 million or nil per share).
Net income of $11.5 million or $0.08 per share (Q1 2019: $8.1 million or $0.06 per share) and Net income (adjusted)¹ of $11.5 million or $0.08 per share (Q1 2019: $5.7 million or $0.04 per share).
Cash position increased to $49.4 million compared to $35.7 million in the previous quarter.
Cash costs¹ of $1,120/oz or US$833/oz, a 29% increase over the same period in 2019 (Q1 2019: $866/oz or US$651/oz) due to the lower head grade and the decrease in the stockpile levels.
All-in sustaining costs (“AISC”) ¹ of $1,423/oz or US$1,058/oz, a 9% increase over the same period in 2019 (Q1 2019: $1,311/oz or US$986/oz), due to the lower head grade and the decrease in stockpile levels.

1. Refer to the Company’s 2020 First 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

The mineral resources and reserves for the Eagle River Complex were recently updated and can be summarized as follows:
Increased Eagle River reserves by 36% net of 91,066 ounces of depletion. Mineral Reserves at Eagle River of 550,000 contained gold ounces (1,186,000 tonnes at 14.4 g/t Au, an increase of 20% in grade), of which 72% is located in the high grade 300 Zone.
Mishi Pit reserves slightly decreased compared to 2018 at 10,500 contained ounces (116,000 tonnes at 2.8 g/t Au)
Increased Eagle River Measured and Indicated Resources (exclusive of reserves) by 258%, or 3.6 times over 2018. Measured & Indicated Mineral Resources (exclusive of reserves) at Eagle River increased to 111,000 contained gold ounces (380,000 tonnes at 9.0 g/t Au).
Inferred resources (exclusive of reserves) at Eagle River and Mishi remain the same at 159,000 and 212,000 contained ounces respectively.
Ongoing extension and definition drilling of the 300 East Zones, and in particular the 303 Lens, has continued to return high grade gold intersections. Initially defined from the 750 m-level to 1,000 m-level, this zone has now been extended an additional 300 m down plunge to the 1,300 m-level.
Surface drilling continues to extend and better define the Falcon Zones, located in volcanic rocks approximately 200 m west of the mine diorite. Surface drilling has continued to expand the zone of mineralization to a depth of 4400 m elevation (i.e. 600 vertical m below surface) and over a strike of 200 m.
In order to better test the down plunge extension of the Falcon Zone, a drill rig has been positioned underground on the 772 m elevation. Initial drilling from underground has intersected visible gold mineralization in quartz veining approximately 70 m down plunge of the Falcon Zone. Given the steep easterly plunge defined by the recent drilling, it is interpreted that the Falcon 7 Zone now extends an additional 500 m down plunge and is the up plunge extension of the 7 Zone currently being mined near the 1,000 m elevation.

Kiena

On September 25, 2019, Wesdome announced an updated Mineral Resource Estimate including drill data as of August 6, 2019. Highlights include

Increased Kiena Deep A Zone Indicated resources from 99,300 to 405,100 ounces
Increased Kiena Deep A Zone Inferred resources from 241,100 ounces to 332,000 ounces
Increased Kiena Deep A Zone Indicated resource grade from 9.95 g/t Au to 18.55 g/t Au
Increased proportion of Indicated resources to over 50% in the A Zone (versus 30% previously in A Zone).

Current operational suspension in Quebec due to the COVID-19 pandemic will challenge the Company in achieving it’s full 2020 exploration program.
Prior to the COVID-19 suspension, seven underground drills were in operation completing the infill and up and down plunge extension drilling of the Kiena Deep A Zone. This drilling has continued to confirm the overall continuity of the geometry and the high-grade gold mineralization of the Kiena Deep A Zone and identify additional mineralization outside of the most recent resource estimate. Recent drilling has extended the gold mineralization of the A Zone an additional 100 m down plunge and now extends a total in excess of 830 m.
The 79 Level Ramp was completed in early 2020. It provides optimal drill platforms for testing the up-plunge extension of the Kiena Deep A Zone between the 670 m-level and the 1050 m-level and will serve as a haulage drift for any future production from this area as it accesses the main shaft level dump pocket. Two of the seven drills are drilling the potential up plunge extension of the Kiena Deep A Zone. Previous limited drilling into the up-plunge area from 67 Level returned a number of good intersections that require follow up. Based on recent drilling from 67 Level, it is interpreted that the VC zones are folded as they extend down plunge to connect with the Kiena Deep A Zone.
In addition, a total of 172m of advance was achieved in the main ramp, below the 1050m elevation, reaching the 109 Level at the end of the quarter.

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.

Cautionary Note to United States Investors Concerning Estimates of Reserves and Resources

The mineral reserve and resource estimates reported in this news release were prepared in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) as required by Canadian securities regulatory authorities. The United States Securities and Exchange Commission (the “SEC”) applies different standards in order to classify and report mineralization. This news release uses the terms “measured”, “indicated” and “inferred” mineral resources, as required by NI 43-101. Readers are advised that although such terms are recognized and required by Canadian securities regulations, the SEC does not recognize such terms. Canadian standards differ significantly from the requirements of the SEC. Readers are cautioned not to assume that any part or all of the mineral deposits in these categories constitute or will ever be converted into mineral reserves. In addition, “inferred” mineral resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource exists, is economically or legally mineable or will ever be upgraded to a higher category of mineral resource.

Wesdome Gold Mines 2020 First Quarter Financial Results Conference Call:

North American Toll Free: + 1 (844) 202-7109
International Dial-In Number: +1 (703) 639-1272
Conference ID: 2377817
Webcast link: https://edge.media-server.com/mmc/p/a94d2d3n

Webcast can also be accessed under the News and Events section of the Company’s website (www.wesdome.com)

ABOUT WESDOME
Wesdome Gold Mines has had over 30 years of continuous gold mining operations in Canada. The Company is 100% Canadian focused with a pipeline of projects in various stages of development. The Company’s strategy is to build Canada’s next intermediate gold producer, producing 200,000+ ounces from two mines in Ontario and Quebec. The Eagle River Complex in Wawa, Ontario is currently producing gold from two mines, the Eagle River Underground Mine and the Mishi Open pit, from a central mill. Wesdome is actively exploring its brownfields asset, the Kiena Complex in Val d’Or, Quebec. The Kiena Complex is a fully permitted former mine with a 930-metre shaft and 2,000 tonne-per-day mill. The Company has further upside at its Moss Lake gold deposit, located 100 kilometres west of Thunder Bay, Ontario. The Company has approximately 138.5 million shares issued and outstanding and trades on the Toronto Stock Exchange under the symbol “WDO”.

For further information, please contact:

Duncan Middlemiss	or	Lindsay Carpenter Dunlop
President and CEO		VP Investor Relations
416-360-3743 ext. 2029		416-360-3743 ext. 2025
duncan.middlemiss@wesdome.com		lindsay.dunlop@wesdome.com

220 Bay St, Suite 1200
Toronto, ON, M5J 2W4
Toll Free: 1-866-4-WDO-TSX
Phone: 416-360-3743, Fax: 416-360-7620
Website: www.wesdome.com

This news release contains “forward-looking information” which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company and its projects. Often, but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances, management’s estimates or opinions should change, except as required by securities legislation. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements. The Company has included in this news release certain non-IFRS performance measures, including, but not limited to, mine operating profit, mining and processing costs and cash costs. Cash costs per ounce reflect actual mine operating costs incurred during the fiscal period divided by the number of ounces produced. These measures are not defined under IFRS and therefore should not be considered in isolation or as an alternative to or more meaningful than, net income (loss) or cash flow from operating activities as determined in accordance with IFRS as an indicator of our financial performance or liquidity. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company's performance and ability to generate cash flow.

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
		2020		2019
Operating data
Milling (tonnes)
Eagle River		55,874		30,941
Mishi		11,047		18,470
Throughput ²		66,922		49,411
Head grades (g/t)
Eagle River		14.0		18.5
Mishi		2.5		2.2
Recovery (%)
Eagle River		97.3		97.6
Mishi		74.8		80.6
Production (ounces)
Eagle River		24,457		17,955
Mishi		665		1,055
Total gold produced ²		25,122		19,010
Total gold sales (ounces)		26,500		18,760

Eagle River Complex (per ounce of gold sold) ¹
Average realized price	$	2,162	$	1,733
Cash costs		1,120		866
Cash margin	$	1,042	$	867
All-in Sustaining Costs ¹	$	1,423	$	1,311

Average 1 USD → CAD exchange rate		1.3449		1.3295

Cash costs per ounce of gold sold (US$) ¹	$	833	$	651
All-in Sustaining Costs (US$) ¹	$	1,058	$	986

Financial Data
Mine profit ¹	$	27,619	$	16,259
Net income	$	11,513	$	8,092
Net income adjusted ¹	$	11,513	$	5,723
Operating cash flow	$	33,429	$	12,581
Free cash flow (outflow) ¹	$	16,672	$	(429	)
Per share data
Net income	$	0.08	$	0.06
Adjusted net earnings ¹	$	0.08	$	0.04
Operating cash flow	$	0.24	$	0.09
Free cash flow (outflow) ¹	$	0.12	$	-

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

			March 31, 2020		December 31, 2019
Assets
Current
	Cash and cash equivalents	$	49,398	$	35,657
	Receivables and prepaids		1,897		1,996
	Sales tax receivable		3,538		3,344
	Inventories		11,321		19,667
Total current assets			66,154		60,664

Restricted Cash			657		657
Deferred financing cost			952		988
Mining properties, plant and equipment			118,272		116,765
Exploration properties			115,798		106,644
Total assets		$	301,833	$	285,718

Liabilities
Current
	Borrowings	$	-	$	3,636
	Payables and accruals		21,289		19,219
	Income and mining tax payable		2,367		1,419
	Current portion of lease liabilities		4,527		3,781
Total current liabilities			28,183		28,055

Lease liabilities			6,258		5,889
Deferred income and mining tax liabilities			27,329		23,829
Decommissioning provisions			20,962		21,443
Total liabilities			82,732		79,216

Equity
Equity attributable to owners of the Company
	Capital stock		176,372		174,789
	Contributed surplus		5,093		5,590
	Retained earnings		37,636		26,123
Total equity attributable to owners of the Company			219,101		206,502
Total liabilities and equity		$	301,833	$	285,718

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

			Three Months Ended
			March 31
			2020			2019

Revenues		$	57,332		$	32,535
Cost of sales			(37,590	)		(20,185	)
Gross profit			19,742			12,350

Other expenses
	Corporate and general		1,971			2,008
	Stock-based compensation		404			1,099
			2,375			3,107

Operating income			17,367			9,243

Quebec exploration credits refund			-			2,867
Interest expense			(324	)		(112	)
Accretion of decommissioning provisions			(125	)		(115	)
Interest and other income			364			294
Income before mining and income tax			17,282			12,177
Income and mining tax expense
	Current		2,270			968
	Deferred		3,499			3,117
			5,769			4,085
Net income and total comprehensive income		$	11,513		$	8,092

Net earnings per share
	Basic	$	0.08		$	0.06
	Diluted	$	0.08		$	0.06

Weighted average number of common shares (000s)
	Basic		138,464			135,788
	Diluted		142,024			139,550

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

								Retained
			Capital		Contributed			Earnings/			Total
			Stock		Surplus			(Deficit)			Equity

Balance, December 31,2018		$	166,387		5,777			(14,955	)		157,209
Net income for the period ended
	March 31, 2019		-		-			8,092			8,092
Exercise of options			1,902		-			-			1,902
Value attributed to options exercised			933		(933	)		-			-
Value attributed to options expired			-		(59	)		59			-
Value attributed to RSUs exercised			253		(253	)		-			-
Stock-based compensation			-		1,099			-			1,099
Balance, March 31, 2019		$	169,475	$	5,631		$	(6,804	)	$	168,302


Balance, December 31,2019		$	174,789		5,590			26,123			206,502
Net income for the period ended
	March 31, 2020		-		-			11,513			11,513
Exercise of options			682		-			-			682
Value attributed to options exercised			324		(324	)		-			-
Value attributed to RSU exercised			577		(577	)		-			-
Stock-based compensation			-		404			-			404
Balance, March 31, 2020		$	176,372	$	5,093		$	37,636		$	219,101

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

			Three Months Ended
			March 31
			2020			2019

Operating activities
	Net income	$	11,513		$	8,092
	Depletion and depreciation		7,877			3,909
	Stock-based compensation		404			1,099
	Accretion of decommission provisions		125			115
	Deferred income and mining tax expense		3,499			3,117
	Interest expense		324			112
	Foreign exchange loss on lease financing		351			-
			24,093			16,444
	Net changes in non-cash working capital		10,656			(3,863	)
	Mining tax paid		(1,320	)		-
Net cash from operating activities			33,429			12,581
Financing activities
	Exercise of options		682			1,902
	Amortization of deferred financing cost		32			-
	Repayment of borrowings		(3,636	)		-
	Payments of lease liabilities		(1,057	)		(1,255	)
	Interest paid		(324	)		(112	)
Net cash from (used in) provided by financing activities			(4,303	)		535
Investing activities
	Additions to mining properties		(6,546	)		(6,217	)
	Additions to exploration properties		(9,154	)		(5,538	)
	Net changes in non-cash working capital		315			(892	)
Net cash used in investing activities			(15,385	)		(12,647	)
Increase in cash and cash equivalents			13,741			469
Cash and cash equivalents, beginning of period			35,657			27,378
Cash and cash equivalents, end of period		$	49,398		$	27,847

Cash and cash equivalents consist of:
	Cash	$	49,398		$	17,847
	Term deposits		-			10,000
		$	49,398		$	27,847

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