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Good morning, and welcome to Wesdome Gold Mines first quarter financial results conference call. I will now hand it over to Heather Laxton to begin today.
Excellent. Thanks, operator, and good morning, everyone. Thanks for joining us today. Before we begin, we'd like to take this opportunity to remind everyone that during this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today.Actual events or results could cause outcomes to differ materially due to a number of risks and uncertainties, including those mentioned in the detailed cautionary note contained in yesterday's press release and in the company's management discussion and analysis dated May 12, 2021. Both documents are available on our website and on SEDAR.Please be advised that this morning, we refiled the Q1 interim financial statements in order to reclassify and entry that impacts cash flow from operations and cash used in investment activities. This correction does not impact our cash balance at the end of the quarter.This was an isolated transcription error in the financial statements only, and these figures were correctly reported in both the press release and the MD&A. We apologize for any inconvenience.Please note that all figures discussed on this call are in Canadian dollars, unless otherwise stated. The slides used for this presentation and a recording of this call will be posted on the company's website.And now it's over to Lindsay Dunlop, VP of Investor Relations.
Great. Thanks, Heather, and good morning, everyone. Here with us today, we have Duncan Middlemiss, President and CEO.
Good morning.
Scott Gilbert, Chief Financial Officer.
Hello, everybody.
Marc-Andre Pelletier, Chief Operating Officer.
Hello, this is Marc-Andre.
Michael Michaud, Vice President, Exploration.
Good morning.
And Raj Gill, Vice President, Corporate Development.
Good morning.
We will begin today with an operational review from Marc-Andre, followed by a financial review from Scott. Then an exploration update from Mike and finally, Duncan will conclude with a summary and outlook.Marc, Please go ahead.
Thanks, Lindsay. We started to see the benefit of the ventilation upgrade at Eagle in Q1 as we commissioned the second pressure plant on surface, allowing us to add another haulage truck at the bottom of the mine.Mill throughput began to increase, and we are on track to average 650 tonnes per day this year as we ended the quarter with a surplus stockpile of 4,300 tonnes.Head grade of 12.8 grams per tonne were slightly lower than budget, particularly at the beginning of the year due to stope sequencing and lower-grade ore in the underground [ circuit ]. Grades steadily increased during the quarter and will continue through the year as we are preparing a new stope on the high-grade fuel free zone.We are also getting better growth with the development in ore at the Falcon Zone, a significant milestone because that will open an additional workplace, diversifying stock production from the bottom of the mine. This will allow us to reach our medium-term objectives of filling the mill to capacity exclusively with a high-grade Eagle underground overall.To that end, Mishi was mined out per plan in Q4 '20 and only stockpile ore will be processed this year. Also, in Q1, we sold 1,793 ounces from the refining of Kiena bulk sample ore that was processed last year. We recovered 6% more gold compared to the resource block model grade. A very exciting accomplishment and obviously, an important step as we derisk the company from a single asset producing mine to a 2 producing high-grade gold mines company. We cannot wait to release the PFS results later this quarter.Scott will now take over and provide a review of the financials.
Thanks, Marc. We sold 20,664 ounces of gold at an average realized price of $2,223 per ounce to generate $46 million of revenue from the Eagle River Complex. We generated $22 million in operating cash flow. We spent $20.4 million on capital, which includes $12.6 million at Kiena and $2.2 million on growth capital at Eagle River.The cash balance remains at $64 million. The net income was $7.1 million or $0.05 per share. Earnings should be higher in the rest of the year due to a planned increase in production.The cash cost was $1,076 per ounce, and the AISC was $1,497 per ounce, which were higher than guidance due to lower gold production and higher cost for development, equipment fleet and surface infrastructure, some of which are onetime expenditures. We are tracking to achieve guidance.Now to Mike for a review of exploration.
Thanks, Scott. Exploration drilling within the Eagle River mine continues to expand the known zones of gold mineralization, including the high-grade 300 East Zone that has now been extended to the 1,400 meter level.Also, definition drilling continues at the Falcon Zone, and initial sill development is expected to commence in Q2, thereby providing an exciting opportunity for the first time to assess the gold mineralization in the volcanic rocks.Additionally, we are 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 rocks, again highlighting the potential of the volcanic rocks to host gold mineralization.Brownfields exploration remains a priority for the next several years. Meanwhile, surface drilling is ongoing both East and West of the mine to follow-up on anomalous values, returning from regional drilling completed in 2020, an independent comprehensive analysis of the structural geology is being completed to aid this exploration. In total, in excess of 150,000 meters of drilling are planned for this year.At Kiena, had a great quarter, with 7 drills that have continued to provide spectacular exploration results. In March, we announced a very exciting new discovery within 50 meters of the footwall of the A Zone.For the first time, more optimal drilling platforms, improved drilling practices and the use of drilling wedges permitted the drills to effectively penetrate the footwall area and resulted in the discovery of at least 2 new zones of high-grade gold mineralization.Longhole returned 11.9 grams per tonne over 22 meters of core length. Although it's early days, this discovery of additional high-grade could have a very significant positive impact on the resource base as well as the ounces per vertical meter of the A Zone 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. Obviously, this area remains a major focus for this year's drilling, and there are 3 rigs currently dedicated to further proving out this potential new zone.In addition to this new discovery, we have also focused the drilling on expansion, not only at the A and VC Zones, but at other prospective targets within the mine area. As part of this exploration focus, initial drilling has successfully expanded the size of several known mineralized zones.At the A Zone, for instance, one hole returned 46.2 grams per tonne gold over 24 meters of core length or around 7 -- or around 37 grams per tonne gold over 7 meters true width. This is not in the current resource base. Continued drilling in this area is expected to contribute ounces to any future resource updates.We have many explore targets with best this year and have in place an aggressive program in excess of 65,000 meters of underground drilling to test these targets. We are excited to start exploration on the underexplored B zone, which is interpreted as the down plunge extension of the previously mined S50 Zone.The 2021 surface exploration program consists of 42,000 meters and is ongoing to test regional targets from surface. Overall, an exciting year with expected good news flow.Over to you, Raj.
Thanks, Mike. We're on track to close Moss Lake transaction in Q2 of the $57 million in headline value, we expect to receive that closing $12.5 million in cash and a 30% equity stake worth approximately $20 million prelisting.Goldshore's initial marketing has been very well received, and we're confident that Wesdome shareholders will benefit alongside Goldshore shareholders as the team aggressively explores a land package and updates the Moss Lake resource.Over to you, Duncan.
Great. Thanks, Raj. In summary, it has been an active start to the year with many positive developments. Mainly, the exciting exploration and progress made towards a quick restart at Kiena.We completed the reconciliation of A Zone bulk sample, which has produced 6% more gold at a feed grade of 15.7 grams per tonne versus 14.7 grams, which was predicted in the resource block model. We also made significant strides towards the completion of the PFS and are on track to release the results along with a restart decision later this quarter.This is a very exciting time in the company's future. And by the end of the year, we expect to have 2 high-grade underground gold mines producing in Canada, each on their way to producing over 100,000 ounces per year and on our way to realizing our goal of becoming Canada's next mid-tier gold producer.At Eagle, we continue to make operational and efficiency improvements to increase daily tonnage rates despite the challenges of operating in the pandemic. In the first quarter, the mine generated healthy operating cash flow, the majority of which was reinvested at Kiena.Free cash flow generation will improve in the coming quarters as grade increases at Eagle and as we get set to produce and sell initial ounces from Kiena based on a positive restart decision.With cash of $64 million, we are fully funded for all our exploration and development programs this year. We will also get a top-up of $12.5 million into the treasury when the Moss Lake transaction closes later this quarter.The company has performed very well despite the challenges of the global pandemic. I would like to thank all employees and stakeholders for their diligence and commitment to safety.At this time, I would also like to invite all shareholders about our upcoming Annual General Meeting held on June 1 at 10:00 a.m. Eastern Time. Due to the current stay-at-home order in Toronto, the meeting will be conducted virtually once again this year. Please pre-register using the link available on our website.I'll now open the call up for the question-and-answer session. Operator, Please go ahead.
[Operator Instructions] Your first question comes from the line of George Topping from Industrial Alliance.
Duncan or Marc-Andre, I think, for this one. On the Falcon, can you update us on your expectations on the time line to bring that into production, so when you expect the first stope there with the drilling and development that's required ahead of that. When do you expect to see some production from there?
Yes. I'll let Marc take that, George.
This is Marc. So as you know, we've been very active this year at the Kiena mine to get prepared for a restart. We think that we can bring the mine into production within 3 months following the formal decision on the Kiena restart.
I think George was talking about the Falcon Zone, really not George?
The Falcon Zone, yes.
Yes, the Falcon Zone. Yes.
I apologize for that. Okay. So actually, we -- it's in this quarter plan that we're going to be developing in, George. So we're getting very close to that. And if I can add on what we see for the remaining of the year as we -- see actually some production coming from the Falcon in the third quarter this year.
I take it bit -- quite slow buildup of few hundred tonnes?
Yes. I'd say less than 10,000 tonnes this year. The key thing for the Falcon Zone is the development, we have about 900 meters of development in the budget this year, and we're basically setting up the production for 2022 from the Falcon Zone.
Now the Kiena ramp up getting closer -- hopefully starting at Q4. Have you got better visibility on what you might be looking for in 2022 and 2023 in terms of the production there?
Yes, absolutely.
Have you changed anything from the technical report?
From the PEA, George, I guess you're referring to. Yes. Certainly, there's some changes. I would have to say that they're overall positive in terms of the ramp-up. I don't want to get into particulars, of course, until we release this. But I think that we're quite satisfied with how Kiena is moving. And we discussed and I look at the discovery in the footwall that we've been able to generate and some other interesting targets down there. So really we -- we really have the view that our ounces per vertical meter are really likely to increase over that sort of base load of the resource that we had. It was kind of set down in December of 2020, right?
And then just last, last question, before I hand it over is, I mean, everybody is talking about inflation. We know the steel and all of that. But I'm more concerned about underground wages. You're finding it difficult to get people to come and work at the cost -- the wages that we used to pay?
It's -- it is competitive, George. There's no doubt about it. The Val d'Or is really one of the -- probably the hottest areas in Canada, probably North America in terms of mining activity. What we're seeing right now is kind of an over demand for diamond drills and diamond drillers. That remains, I would say, probably the #1 aspect of this right now.Definitely, we have been able to kind of fulfill our manpower needs so far from an underground mining perspective. Again, we're very fortunate to be right in the center of the Abitibi there because there is a great sort of talent pool to draw from. But it is getting more competitive. There's no doubt about it. And it does sort of remind me of 2005, '06 and '07 when we entered this phase, whether it's a super cycle, but there certainly is a broad demand for commodities in that. So -- thanks, George.
Your next question comes from the line of Andrew Mikitchook from BMO Capital Markets.
Just one quick question for [ Marc ]. But the PEA from last year for Kiena had a relatively nominal CapEx. And you guys are diligently giving us updates on how you're making progress through advancing Kiena. Can you give us any guidance on how much of that $35 million you may have already spent or will have spent within -- by the time you're in a position to start this, to have an official research decision?
Yes. Yes, exactly. I mean, as you know, Andrew, I mean our -- officially, our exploration -- advanced exploration activities continue through this period. We're not set up for, I'd say, commercial production, but obviously, some of the things that we've been doing certainly does parallel well to us getting into commercial production rather quickly.So in terms of some of the things that we've been able to do, like really the focus is here so far is the tailings management facility, continued underground development. The ramp development, of course, being key. Of course, as it is -- the majority of the A Zone is beneath us. So essentially, those are the activities.In terms of what we've been able to accomplish through -- what you would have seen for the $35 million. I don't have a number for that right now, but we are progressing along the lines of the advanced exploration. But I think that we can quickly pivot to commercial production in the subsequent quarter, almost. So we will be set up. And obviously, with us having to access the bulk sample area that really is sort of the basis for, I'd say, a restart rate there in the A Zone, so we're in good shape.
But to state the obvious, there's no risk of -- or indication on your part that this number is going up, you've been, if anything, decreasing that number. Is that fair expectation?
As we've been spending along? Yes. I mean, there's a couple of likely scope changes, Andrew, but no, we're quite comfortable with where we stand on this right now. Thanks.
This concludes today's conference call. You may now disconnect.