Wesdome Announces 2021 Second Quarter Financial Results Kiena Mill Successfully Restarted

2021-08-11 / @nasdaq

TORONTO, Aug. 11, 2021 (GLOBE NEWSWIRE) -- Wesdome Gold Mines Ltd. (TSX: WDO) (“Wesdome” or the “Company”) today announces second quarter (“Q2 2021”) financial results. All figures are stated in Canadian dollars unless otherwise noted.

Mr. Duncan Middlemiss, President and CEO commented, “Strong gold production in the second quarter of 30,375 ounces drove significant improvement in cost performance. Cash costs of $814 per ounce (US$663) and AISC of $1,240 (US$1,009), a decrease of 24% and 17% respectively over Q1 2021. H1 2021 production of 52,939 ounces, and cash costs of US$745 per ounce and AISC of US$1,085 per ounce has us well positioned to deliver on both our production and cost guidance for the year at Eagle River Mine Complex (92,000 – 105,000 ounces at cash costs of US$680 – 770 and AISC of US$980 – 1,090). Cash margins also improved quarter on quarter with $40.1 million earned in Q2 compared to $21.8 million in Q1. Cash position increased to $67.8 million compared to $63.9 million in the previous quarter.

During Q2, there were some one-time non-cash items which impacted net income. After announcing a restart of operations at Kiena on May 26, we recorded an impairment reversal charge of $58.6 million pre-tax ($36.3 million after-tax), as well, we had an after-tax gain on the disposal of the Moss Lake mineral properties of $34.5 million. Consequently, net income was $87.8 million, or $0.63 per share. Net income adjusted for these one-off items was $17.0 million, or $0.12 per share.

As a result of the above items and also due to a higher capital spending rate at Kiena, free cash outflow for the quarter was $9.1 million. A total of $24.1M was spent at Kiena in Q2 in preparation for the production restart that was approved by the Board of Directors of the Company late in May. This decision was based on the positive outcome of the independent Pre-Feasibility Study published earlier this year. The investment includes $13.7 of mine development and restart costs, $7.2M on mobile and fixed equipment purchases, including headframe bin repairs and hoist system upgrades. As a result of the preparatory work the mill was restarted on July 12, and has been successfully processing S50 ore since then. As well, work is underway to prepare the A Zone for its first production stope starting in August, slightly ahead of schedule. In addition, $3.2M was spent in surface and underground exploration, which has confirmed the discovery of the new footwall zone in the Kiena Deep.”

Key operating and financial highlights of the Q2 2021 results include:

Gold production of 30,375 ounces from the Eagle River Complex, a 21% increase over the same period in the previous year (Q2 2020: 25,142 ounces):
- Eagle River Underground 63,057 tonnes at a head grade of 15.1 grams per tonne for 29,836 ounces produced, 24% increase over the previous year (Q2 2020: 24,117 ounces).
- Mishi Open Pit 9,347 tonnes at a head grade of 2.4 g/t Au for 539 ounces produced (Q2 2020: 1,026 ounces).
Revenue of $63.9 million, a 17% increase over the previous year (Q2 2020: $54.8 million).
Ounces sold were 28,500 at an average sales price of $2,239/oz (Q2 2020: 23,140 ounces at an average price of $2,365/oz).
Cash margin¹ of $40.6 million, a 18.0% increase over Q2 2020 (Q2 2020 - $34.3 million).
Operating cash flow of $26.9 million or $0.19 per share¹ as compared to $30.3 million or $0.22 per share for the same period in 2020.
Free cash outflow of $9.1 million, net of an investment of $24.1 million in Kiena, or ($0.07) per share¹ (Q2 2020: free cash flow of $17.8 million or $0.13 per share).
Net income of $87.8 million or $0.63 per share (Q2 2020: $16.1 million or $0.12 per share) and Net income (adjusted)¹ of $17.0 million or $0.12 per share (Q2 2020: $16.1 million or $0.12 per share).
Cash position increased to $67.8 million compared to $63.9 million in the previous quarter.
Cash costs¹ of $814/oz or US$663/oz, an 8% decrease over the same period in 2020 (Q2 2020: $882/oz or US$637/oz).
All-in sustaining costs (“AISC”) ¹ of $1,240/oz or US$1,009/oz, a 2% increase over the same period in 2020 (Q2 2020: $1,218/oz or US$879/oz), due to higher sustaining capital, corporate and general expenses and lease payments, which was partially offset by a 23% increase in ounces sold.

Refer to the Company’s 2021 Second 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 Eagle River underground ore production increased to 693 tpd in Q2 2021 due to the ventilation system upgrade that occurred in the previous quarter, which included the development of the 640 m ramp to provide a connection with the main ramp, a new ventilation raise underground, and the installation of a second fan on surface. Operational efficiencies have also contributed positively.
Definition drilling and initial sill development continues at the Falcon Zone, which will provide an opportunity to assess the gold mineralization of the Falcon Zone in the volcanic rocks. 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.
Surface drilling is ongoing both east and west of the mine to follow up on anomalous values returned from regional drilling program in 2020.

Kiena

The Preliminary Feasibility Study (“PFS”) was completed in Q2 2021 and based on the positive results the operations will restart in H2 2021. Mineral reserves are over 1.5M tonnes at a head grade of 11.89 g/t for a total of 602,000 ounces. Remaining mineral resources (exclusive of mineral reserves) for the Kiena Complex total 0.6M tonnes grading 7.6 g/t Au totaling 156,500 ounces of gold and remaining inferred resources totaling 3.4 million tonnes grading 5.9 g/t Au for 649, 200 ounces.

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 (‘m’) 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.

The discovery of the high-grade Footwall Zone could have significant positive impacts on the resources, the ounces per vertical metre, and the overall project economics. This drilling highlights the potential to add ounces not only in this area but illustrates the untested potential of the entire gold system around the Kiena mine. This footwall zone will be one of the zones of focus for the continuing drilling.

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. Hole 6750 returned 122.1 g/t Au over 7.5 m core length (26.7 g/t Au capped, 4.7 m true width).
Surface drilling is ongoing with a 42,000 m drilling program. These initial targets are located along the Marbenite Fault (within 1.5 km from Kiena Mine Complex).
Wesdome purchased 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.

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 2021 Second Quarter Financial Results Conference Call

North American Toll Free: + 1 (844) 202-7109
International Dial-In Number: +1 (703) 639-1272
Conference ID: 9491665
Webcast link: https://edge.media-server.com/mmc/p/xxgwkhek
The webcast can also be accessed under the News and Events section of the Company’s website (www.wesdome.com)

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

ABOUT WESDOME
Wesdome is 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 Québec. The Eagle River Underground Mine in Wawa, Ontario is currently producing gold at a rate of 92,000 – 105,000 ounces per year. Wesdome is actively exploring its brownfields asset, the Kiena Complex in Val d’Or, Québec. The Kiena Complex is a fully permitted former 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. 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 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					Six Months Ended
		June 30,					June 30,
		2021			2020		2021			2020
Operating data
Milling (tonnes)
Eagle River		63,057			42,349		116,596			98,223
Mishi		9,347			13,721		26,567			24,768
Throughput ²		72,404			56,070		143,163			122,991
Head grades (g/t)
Eagle River		15.1			18.1		14.1			15.8
Mishi		2.4			2.9		2.4			2.7
Recovery (%)
Eagle River		97.4			97.9		97.3			97.6
Mishi		76.1			79.8		81.9			77.8
Production (ounces)
Eagle River		29,836			24,117		51,232			48,574
Mishi		539			1,026		1,707			1,690
Total gold produced ²		30,375			25,142		52,939			50,264
Total gold sales (ounces)		28,500			23,140		50,957			49,640

Eagle River Complex (per ounce of gold sold) ¹
Average realized price	$	2,239		$	2,365	$	2,232		$	2,257
Cash costs		814			882		930			1,009
Cash margin	$	1,425		$	1,483	$	1,302		$	1,248
All-in Sustaining Costs ¹	$	1,240		$	1,218	$	1,353		$	1,327

Mine operating costs/tonne milled ¹	$	324		$	331	$	330		$	383

Average 1 USD → CAD exchange rate		1.2282			1.3853		1.247			1.3651

Cash costs per ounce of gold sold (US$) ¹	$	663		$	637	$	745		$	739
All-in Sustaining Costs (US$) ¹	$	1,009		$	879	$	1,085		$	972

Financial Data
Cash margin ¹	$	40,590		$	34,304	$	62,366		$	61,923
Net income	$	87,807		$	16,097	$	94,910		$	27,610
Net income adjusted ¹	$	17,028		$	16,097	$	24,131		$	27,610
Earnings before interest, taxes, depreciation and amortization¹	$	32,812		$	30,347	$	51,474		$	55,761
Operating cash flow	$	26,875		$	30,348	$	48,908		$	63,839
Free cash flow	$	(9,131	)	$	17,793	$	(9,032	)	$	34,527
Per share data
Net income	$	0.63		$	0.12	$	0.68		$	0.20
Adjusted net income ¹	$	0.12		$	0.12	$	0.17		$	0.20
Operating cash flow¹	$	0.19		$	0.22	$	0.35		$	0.46
Free cash flow ¹	$	(0.07	)	$	0.13	$	(0.06	)	$	0.25

Refer to the Company’s 2021 Second Quarter Management Discussion and Analysis, section entitled “Non-IFRS Performance Measures” for the reconciliation of these non-IFRS measurements to the financial statements.
Totals for tonnage and gold ounces information may not add due to rounding.

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


	As at June 30, 2021		As at December 31, 2020
Assets
Current
Cash and cash equivalents	$	67,799	$	63,480
Receivables and prepaids		10,997		8,974
Share consideration receivable		4,882		-
Inventories		16,761		12,451
Total current assets		100,439		84,905

Restricted cash		657		657
Deferred financing costs		938		827
Mining properties, plant and equipment		193,641		128,670
Mines under development		151,651		-
Exploration properties		15,202		143,524
Share consideration receivable		13,265		-
Investment in associate		19,466		-
Total assets	$	495,259	$	358,583

Liabilities
Current
Payables and accruals	$	23,088	$	21,123
Income and mining tax payable		3,466		3,481
Current portion of lease liabilities		6,744		5,901
Total current liabilities		33,298		30,505

Lease liabilities		6,465		5,604
Deferred income and mining tax liabilities		73,198		37,354
Decommissioning provisions		21,794		22,270
Total liabilities		134,755		95,733

Equity
Equity attributable to owners of the Company
Capital stock		182,144		179,540
Contributed surplus		6,612		6,472
Retained earnings		171,748		76,838
Total equity attributable to owners of the Company		360,504		262,850
	$	495,259	$	358,583

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						Six Months Ended
	June 30,						June 30,
		2021			2020			2021			2020

Revenues	$	63,881		$	54,772		$	109,854		$	112,104
Cost of sales		(29,774	)		(26,826	)		(60,038	)		(64,416	)
Gross profit		34,107			27,946			49,816			47,688

Other expenses
Corporate and general		2,841			1,805			5,232			3,776
Stock-based compensation		1,203			1,340			1,513			1,744
Reversal of impairment charges		(58,563	)		-			(58,563	)		-
Write-down of exploration properties		3,113			-			3,113			-
		(51,406	)		3,145			(48,705	)		5,520

Operating income		85,513			24,801			98,521			42,168

Gain on sale of Moss Lake exploration properties		39,143			-			39,143			-
Interest expense		(271	)		(284	)		(530	)		(539	)
Accretion of decommissioning provisions		(124	)		(52	)		(234	)		(177	)
Share of loss of associate		(89	)		-			(89	)		-
Fair value adjustment on share consideration receivable		(8	)		-			(8	)		-
Other income (expenses)		(400	)		(204	)		(703	)		91
Income before income and mining taxes		123,764			24,261			136,100			41,543

Income and mining tax expense
Current		4,250			1,769			5,346			4,039
Deferred		31,707			6,395			35,844			9,894
		35,957			8,164			41,190			13,933

Net income and total
comprehensive income	$	87,807		$	16,097		$	94,910		$	27,610

Earnings per share
Basic	$	0.63		$	0.12		$	0.68		$	0.20
Diluted	$	0.62		$	0.11		$	0.67		$	0.19

Weighted average number of common
shares (000s)
Basic		139,754			138,918			139,587			138,691
Diluted		142,630			142,430			142,454			142,227

Wesdome Gold Mines Ltd.
Consolidated Statements of Total Equity
(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
June 30, 2020		-		-			27,610		27,610
Exercise of options		1,782		-			-		1,782
Value attributed to options exercised		825		(825	)		-		-
Value attributed to RSUs exercised		577		(577	)		-		-
Stock-based compensation		-		1,744			-		1,744
Balance, June 30, 2020	$	177,973	$	5,932		$	53,733	$	237,638


Balance, December 31, 2020	$	179,540	$	6,472		$	76,838	$	262,850
Net income for the period ended
June 30, 2021		-		-			94,910		94,910
Exercise of options		1,231		-			-		1,231
Value attributed to options exercised		587		(587	)		-		-
Value attributed to RSUs exercised		786		(786	)		-		-
Stock-based compensation		-		1,513			-		1,513
Balance, June 30, 2021	$	182,144	$	6,612		$	171,748	$	360,504

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


	Three months ended June 30,						Six months ended June 30,
		2021			2020			2021			2020

Operating Activities
Net income	$	87,807		$	16,097		$	94,910		$	27,610
Depreciation and depletion		6,483			5,802			12,550			13,679
Stock-based compensation		1,203			1,340			1,513			1,744
Accretion of decommissioning provisions		124			52			234			177
Deferred income and mining tax expense		31,707			6,395			35,844			9,894
Amortization of deferred financing cost		119			102			224			164
Interest expense		271			284			530			539
Reversal of impairment charges		(58,563	)		-			(58,563	)		-
Gain on sale of Moss Lake exploration properties		(39,143	)		-			(39,143	)		-
Write down of exploration properties		3,113			-			3,113			-
Share of loss of associate		89			-			89			-
Fair value adjustment on share consideration		8			-			8			-
receivable
Foreign exchange loss (gain) on lease financing		(50	)		(236	)		(79	)		184
		33,168			29,836			51,230			53,991
Net changes in non-cash working capital		(1,131	)		512			3,039			11,168
Mining and income tax paid		(5,162	)		-			(5,361	)		(1,320	)
Net cash from operating activities		26,875			30,348			48,908			63,839

Financing Activities
Exercise of options		910			1,100			1,231			1,782
Deferred financing costs		(95	)		(99	)		(334	)		(198	)
Repayment of borrowings		-			-			-			(3,636	)
Repayment of lease liabilities		(1,884	)		(1,152	)		(3,400	)		(2,209	)
Interest paid		(271	)		(284	)		(530	)		(539	)
Net cash used in financing activities		(1,340	)		(435	)		(3,033	)		(4,800	)

Investing Activities
Additions to mining properties		(10,050	)		(5,445	)		(17,873	)		(11,991	)
Additions to mines under development		(12,704	)		-			(13,400	)		-
Additions to exploration properties		(11,368	)		(5,958	)		(23,267	)		(15,112	)
Cash proceeds on sale of Moss Lake, net		11,762			-			11,762			-
of transaction costs
Net changes in non-cash working capital		740			(1,175	)		1,222			(860	)
Net cash used in investing activities		(21,620	)		(12,578	)		(41,556	)		(27,963	)

Increase in cash and cash equivalents		3,915			17,335			4,319			31,076
Cash and cash equivalents - beginning of the period		63,884			49,398			63,480			35,657
Cash and cash equivalents - end of the period	$	67,799		$	66,733		$	67,799		$	66,733

Cash and cash equivalents consist of:
Cash	$	67,799		$	66,733		$	67,799		$	66,733
Term deposits		-			-			-			-
	$	67,799		$	66,733		$	67,799		$	66,733

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