© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to Wesdome Gold Mines Second Quarter Financial Results Conference Call. I will now hand the call over to Heather Laxton to begin today's call.
Great. 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 August 11, 2021. Both documents are available on our website and on SEDAR. Please note that all figures discussed on this call are in Canadian dollars unless otherwise stated. The slide views 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, Vice President of Investor Relations.
Thanks, Heather. Here, with us this morning, 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.
Michael Michaud, Vice President, Exploration.
Good morning.
And Raj Gill, Vice President, Corporate Development.
Good morning.
Today, we will begin 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 the summary and outlook. Marc, please go ahead.
Thanks, Lindsay. We had strong gold production of 30,375 ounces, a 39% improvement over Q1, driven by an 18% increase in both gold grades and in total tonnes milled during the quarter. Total H1 production of 52,900 ounces leaves us in a very good position to achieve the upper half of our guidance of 920,000 to 105,000 ounces. The Eagle mine continues to benefit from previous ventilation work and other mine improvements with daily ore tonnages averaging around 650 tonnes per day in the first half of the year. Production rates will be slightly below in the second half as we had 2 planned mill shutdowns scheduled in both Q3 and Q4. For that reason, we anticipate slightly lower production in H2. The development in the newly discovered Falcon Zone is ongoing, and we expect to start production activities there later in the third quarter. This zone will bring to Eagle another high-grade mining fund at a reserve grade nearly 20 grams per tonne. The pre-feasibility study at Kiena was completed and published late in Q2. Highlights are on the slide. And using conservative reserves and resource estimates and gold price assumptions, this project demonstrates a 98% IRR. Now, there are lots of activities ongoing in preparation of the restart. The recruitment process is ongoing as planned with about 100 Wesdome employees hired to date. Production successfully started in the S50 Zone late in the second quarter with the first production blast since the closure of the mine in 2013. Mining operations are resumed in July with no major issues. Mine development is now completed only 112 meters level in the A Zone and production activities are ongoing. We continue to provide production and exploration updates as they become available. Passing it on to Scott for the financial review.
Thanks, Marc. Cash cost and AISC per ounce of gold sold in Q2 were $840 an ounce and $1,240 per ounce, a decrease of 24% and 17%, respectively over Q1. H1 2021 cash cost of $930 per ounce and AISC of $1,356 per ounce are within guidance, and we expect to be within our cost guidance range for the rest of the year. During Q2, there were some onetime noncash items, which impacted net income. After announcing the restart of operations at Kiena on May 26, we recorded an impairment reversal charge of $58.6 million pretax or $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. After giving effect to these onetime adjustments, the net income adjusted is $17 million or $0.12 per share. Free cash outflow for the quarter was $9.1 million. Total capital expenditures incurred in Q2 2021 were $34.1 million, with $24.1 million spent at Kiena, in preparation of the production restart. Our ending cash balance was $67.8 million. Over to you, Mike.
Thanks, Scott. At Eagle River, initial sale development is continuing at the Falcon 7 Zone and to date has confirmed the high-grade nature of this zone and the continuity defined by the exploration drilling. We continue to be very excited by development and drilling results at the Falcon Zone and expect to release results shortly. The company is also continuing to develop and explore the 311 West Zone along the western margin of the mine diorite. This 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 neighboring Falcon 7 zone. Although we experienced some challenges with staffing of drills, we have successfully expanded a number of our known zones, particularly the high-grade 300 East Zone. In addition, surface drilling is ongoing, both east and west of the mine to follow up on a normal size return from regional drilling completed in 2020, and also at targets recently identified by our structural analysis of the mine and the surrounding property. At Kiena, drilling continues to return exciting results. In March, we announced a very exciting new discovery on the footwall of the A Zone. In May, we released the second set of high-grade deal results, which included one of our most impressive holes at Kiena, returning 41 grams per tonne gold over 51 meters. The footwall zone is a 50-meter wide corridor of parallel zones of gold mineralization adjacent to the footwall of the A-2 Zone. The footwall zone extends over 300 meters along plunge and remains open laterally and down plunge. The discovery of the high-grade footwall zone could have significant positive impacts on the resources, the ounces per vertical meter and also 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. Also, ongoing drilling continues to better defined and expand laterally, the Kiena Deep A Zone resource, which was used in the recent PFS study. One of these expansion holes returned 122 grams per tonne over 7.5 meters of core length, which will be included in future resource updates. We have a strong pipeline of targets to drill this year, both from underground and from surface, including the underexplored B zone, which is interpreted as the down plunge extension of the previously mined S50 Zone. Surface barge drilling has commenced with 2 drills to test many underexplored targets along trend from the Kiena mine, and results from all of this drilling will be released in the near future. Finally, Wesdome recently purchased the Tarmac Gold property from Globex Mining Enterprises. The purchase of these claims help to consolidate our land package and provides additional exploration potential based on the existence a number of historic drill intersections. Over to you, Duncan.
Thanks, Mike. The results of the first half of the year have us well positioned to achieve our guidance at Eagle River on both production and costs. We expect slightly lower production in the second half, with Q4 seeing higher production than Q3. As we move towards 100% production from the Eagle River Mine, annual production of 100,000 ounces is very achievable going forward. The Goldshore transaction involving our sale of the Moss Lake asset also closed during the quarter. And in addition to the $12.5 million in cash, the company received a 30% equity stake worth approximately $20 million prelisting. Goldshore commenced trading on June 4 under the symbol GSHR.The second half of the year will be a very exciting time for the company as we begin production at the Kiena Mine. The mill has been started successfully and mining has begun from the S50 Zone. At the same time, development work is ongoing in the high-grade A Zone, and we should have our first production from this area next month.Our Kiena guidance for the year is 15,000 to 25,000 ounces, not included in the 92,000 to 105,000 ounces of Eagle. And we will evaluate after Q3, whether there are opportunities to increase guidance estimates? We are fully funded for the construction and commercial restart at Kiena. With a combined production of 107,000 to 127,000 ounces this year, we are well on our way to achieving our stated goal of becoming Canada's next mid-tier gold producer, with 2 high-grade underground mines in operation. This is a significant milestone, which both derisk the company from a single asset producer and allows us the opportunity to potentially double our annual production output.I would like to extend my thanks to all employees and stakeholders who have helped us to begin to realize this vision. Another step forward as of today is our listing on the OTCQX market in the United States. We believe this will enhance our liquidity and visibility in the U.S. and broaden our shareholder base. Shares are now trading under the symbol WDOFF. I will now hand the call back over to the operator for the Q&A session. Thanks.
[Operator Instructions] And our first question comes from Don DeMarco with National Bank Finance.
Congratulations on a surprise, getting Kiena up and running sooner than expected. It's great to see. Question about what are you -- what throughput are you running it at? Just maybe if you can share any more information about maybe throughput, is this low-grade material from the S50? And is this throwing off any production? And whatever modest production that might be coming off, would this be included in the 15,000 to 25,000 preliminary guidance?
Don, this is Marc. So as we mentioned during the call, I mean the mill we started very successfully in the month of July. The throughput has been around 40 tonnes per hour. So we did have a few days over 1,000 tonne per day actually. So the mill we started has been going very well. The mill is on the 4-3 schedule. It was basically stated in the PFS. So we're processing 4 days, and we're doing maintenance work on the three last days of the week. So that's basically what we planned for mining time for the remainder of the year.About the S50, I mean as per the PFS, the grid was a bit lower than the A Zone, about 4, 5 grams per tonne. The intent was to test the mill and ensure the process is working as it's supposed to be before we stop feeding the mill with higher-grade ore later in the quarter.
Okay. Okay. Great. Now in terms of the spending at Kiena, I see year-to-date CapEx spend at Kiena is a total somewhere around $36 million, $37 million Versus a full year budget of spend at Kiena about $68 million. Can I take anything away from this that maybe you're ahead of spend? Are you comfortable with where you're at versus the full year estimate?
We just did the reforecast for the year. And we actually plan to spend more and more money compared to what we had in the PFS. It's about $10 million. And it's mainly equipment and the construction of the new base plant. So we actually plan to spend more money, Don.
Okay. Okay. Would we expect that the spending at Kiena is probably going to take -- are you going to probably continue with the heavy spend into August and then it will taper off in September and thereafter? Or how should we allocate our quarterly spend through Q3 and Q4?
We're fairly even on that, Don. Actually, we're probably -- like as Marc-Andre said, we've already spent about 37. We're going to spend a total actually of about...
Yes, 79.
79, sorry, 79. So really, we think it's going to be fairly balanced in Q3, Q4. So the remainder of that.
Okay. We look forward to more results from the footwall zone and continued success at Kiena.
[Operator Instructions] Our next question comes from Andrew Mikitchook with BMO Capital Markets.
Really well done on the quarter and the trajectory for the balance of the year, I think. I just had a question as to how we should expect the Kiena restart to work from an accounting perspective? Or are we -- should we expect a standard precommercial period? And at some point, Scott takes over and discloses costs for Kiena? Or is there some other permutation here considering this is a restart of an asset on care and maintenance?
Andrew, there's been a change in the IFRS standard. So therefore, any of our revenue going forward will be included in the income statement. There will not be any offset against the capitalized exploration asset.
Okay. And my second question is, I guess for Mike, in terms of drilling. Some of this stuff, like the Deep A and some of the other targets around Kiena, how much effort in terms of exploration drifts and other infrastructure access do you need in terms of time to get that set up to properly drill, something like the footwall or some of the other targets underneath the other historical zones at Kiena?
Yes. We have that in the budget. I mean where we're drilling the footwall zone from most of the drilling can be done from our current platforms, but as the ramp continues to depth, we're going to be generating other platforms that will be closer and at better angles. And certainly, for the more historic zones to the east of Kiena, you want to get to up on 33 level, we are continuing to slash out the areas because there's an old tractor, right? We're slashing that out so we can get the drills down those areas and start testing that. So we are continuing right now with the development sort of as we needed for the drills.
Just a last question, I'm unsure if it's Marc-Andre or who, but at what point would the current infrastructure plan for Deep A essentially provide access to what's known of the footwall at this point in time? Is it several years? Or is it next year? Or what do you...
Yes. So the -- as it is, the newly footwall discovery is up -- it is about mid elevation of the A Zone. So considering the current life of mine, it's about in 3 years, Andrew.
To be clear, I don't think we've really found the upfront of that either. So that's going to be a real moving target, hopefully, sooner, so...
Sooner is better. Got it.
Yes, absolutely.
This concludes today's conference call. Thank you for participating. You may now disconnect.