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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning. Welcome to Wesdome Gold Mines' Q2 2023 Financial Results Conference Call.
I will now turn the call over to Heather Laxton, Chief Governance Officer, to begin today.
Great. Thanks, operator, and good morning, everyone. Welcome to Wesdome Gold Mines' second quarter 2023 results conference call. Our release yesterday should be read in conjunction with our MD&A and financial statements, both of which can be found on SEDAR and on our website. Following the prepared remarks, we will open the call for questions. All figures discussed on this call are in Canadian dollars, unless otherwise noted.
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 10, 2023. Both documents are available on our website and on SEDAR. The slides used for this presentation and the recording of this call will be posted on the company's website.
I will now turn the call over to Anthea Bath, President and CEO.
Thanks, Heather, and good morning, everyone. After about six weeks at Wesdome, I must express my sincere gratitude for both the warm welcome and the chance to immerse myself in our operations and engage with our dedicated team, as well as our valued partners in the investment community and other stakeholders.
I come away excited that the underlying potential of this asset as well as the opportunities that present the fantastic pathways have increased value generation of its high-quality Canadian assets.
Speaking on the call with me today will be our COO, Fred Langevin; our current CFO, Scott Gilbert; and our VP Exploration, Mike Michaud. Before we delve into finer operational details, I'd like to share a few thoughts of my own.
In the second quarter, both sites delivered solid operational performance, showing sequential improvements over the first quarter in terms of the business rate and throughput despite facing challenges from regional product buyers. The rapid response, processes, procedures and commitment to safety driven this time is to be commended. Looking ahead, we are well positioned to meet the midpoint of annual guidance at 110,000 to 130,000 ounces at an all-in sustaining cost of US$1,620 to US$1,800 an ounce. We do forecast cash flow to remain back-end weighted this year as Q3 will propose start of peak capital spend and lower sales volumes due to planned maintenance shutdown at Eagle. I must emphasize that the guidance we set forth at the beginning year remains intact.
Despite the improvement to consistent operational delivery in 2023, there's more work to be done. Over the coming months, I'm committed to developing and implementing a strategy pondering our long-term per share value maximization, starting with improving our technical capacity to manage risk, optimize spend and sustainably drive our unit costs. These initiatives, in addition to an increased focus on [step-chain] exploration, we will serve to maximize value of the strong assets within a risk framework that's acceptable to our business.
Shifting to our balance sheet, I'm pleased to announce that after an extensive and holistic review of near-term operating and financial projections, we are determined that the use of the ATM tool is no longer necessary. Based on preliminary updates to our life of mine plan, we are confident in our outlook, and we look forward to issuing at least two years of achievable production and cost guidance at Kiena. With a substantial credit line of $150 million at our disposal, we have more than enough liquidity to meet short-term cash requirements. As such, I'd like to extend my thanks to Scott for working with our supportive vendors to put the content. Although we have not worked long together, I've enjoyed our relationship and wish Scott all the best in his next endeavor where I know you'll do a great job.
With that, I'll pass over to Fred to walk through an operational performance in the quarter.
Thank you, Anthea, everyone, and thank you for attending this morning. As Anthea mentioned, we're happy to report another strong quarter of execution in both operations. Production was either in line or slightly better than internal targets again in Q2 at the two sites.
Starting with Eagle River, Q2 production of 22,845 ounces was an improvement over Q1 and slightly higher than internal production. Now that the Mishi stockpile is depleted, the only source of ore at the mill is from the underground and the underground really delivered in Q2 with a record throughput of 64,672 tonnes or 718 tonnes per day, a testament to the effort of our people at site to focus on connectivity with particular emphasis on material movement in the mine.
Similarly, development performances in Q2 continue to achieve targets, and we now project 2023 to be a record year for overall development at the mine. This higher development rate results in slightly higher operating and CapEx costs in 2023 on an absolute basis, but it positions us very well for 2024.
At Kiena, Q2 production came in at 8,147 ounces, a slight improvement over Q1 and higher than our internal projections. Rates pretty much have been slightly higher than the upper end of guidance in Q2 as a result of higher-than-anticipated bridge on the newly commissioned A2 Zone and continued positive reconciliation of the recovered diluted ore from previously mined areas at Kiena Deep.
Given the positive results seen in the reconciliation to date, we're now expecting Greater Kiena to track slightly higher in the upper end of the guidance for the year. Throughput in Q2 was also a record at Kiena since we started with 51,824 tonnes processed. All of this despite the fact that operations had to be suspended sporadically over the entire month of June due to the forest fires raging in the region. In total, the underground mine lost 15 shifts from the end of May to the end of June.
Development performances were also excellent at Kiena in Q2, and the Kiena Deep brand continues to track ahead of budget schedule, and earlier commissioning of the 129 level at A Zone positions us very well to deliver on increased production levels in '24. It also enables us to proceed with delineation drilling ahead of mining, validating ore grades and shape and firming up our jobs still understanding of the area and informing the 2024 budget process that we're just about to kick off.
We also continue to advance preparation work of the tested ramp to proceed as soon as the authorizations are granted. Initial results of our internal technical study have been positive.
Finally, we processed approximately 7,500 tonnes of ore from Eagle River Mine and Kiena in Q2, which are not showing in the numbers on the previous slide. This enabled us to use some of our exceptional capacity with the added operational benefit to us, aside from making some profit, of improving stop cycle time underground by increasing the availability of the [indiscernible] over the quarter. This agreement was put in place and concluded in Q2 and no further agreements are being discussed at the moment.
So all-in-all, a strong quarter on the execution side for both mines where our teams continue to show disciplined operation, consistently achieving our plan despite headwinds from weak weather events.
I'll now -- I'll pass it on to Scott to walk through the financial highlights for this quarter.
Thank you, Fred. We generated $84.6 million of revenue from the sale of 32,000 ounces of gold, which includes 22,500 ounces from Eagle River and 9,500 ounces from Kiena. Of the cash margin of $28.7 million, $24.7 million was generated at Eagle River.
The company's gross profit was approximately $0.5 million due to the depreciation and depletion charges of $28.3 million. Depreciation and depletion has increased by $16.9 million compared to the same period in 2022, primarily due to the inclusion of $14.3 million from Kiena due to the commercial production being declared at December 1, 2022.
Current depreciation is based on units of production using tonnes. Although the Q2 cash cost of $1,743 per ounce is above the guidance level, the cash cost of $1,580 per ounce remains in the middle of the range and AISC of $2,111 per ounce at the lower end of guidance.
In H1, we have spent $40.6 million in capital and are currently forecasting to spend full $100 million to be included in our original guidance by December 31, 2023. At June 30, the cash balance was $22.1 million with $39 million drawn on the $150 million revolver and the working capital deficit is $2.9 million compared to $38 million at December 31, 2022.
To date, we have raised $45.1 million of gross proceeds in the ATM, and I'm pleased to announce that based on our most current outlook, use of the ATM tool is no longer required to support the liquidity needs, and we are comfortable with the available capacity under our existing facility.
And over to you, Mike.
Thanks, Scott. Well, I think exploration is going strong. We are continuing with our aggressive drilling program in 2023 with underground drilling focused on converting the large inferred resource base into indicated, and subsequently, into reserves at year-end. The majority of this drilling has been completed at the high-grade 300 East Zone at depth.
As announced in June, drilling of the 300 East Zone returned a number of exciting intersections with high grades and wider widths including 78-gram per tonne gold over 9.4 meters core length or approximately 40 grams per tonne gold capped over 6 meters to width. This is approximately 4x the average thickness of the current veins at the mine. These wider hits occur at the intersection of two shear zones and is characteristic of the previously mined 303 Lens. You'll recall that the 303 Lens was mined primarily in 2019, with an average grade in excess of 1 ounce per tonne.
Confirming the extension of the 300 East Zone down plunge bodes well for the neighboring zones, such as of 800 and 700 series veins to have similar down plunge potential. And as such, these will be tested as part of a deeper directional drilling program to commence in Q3.
On surface, a comprehensive 3D litho structure model has been developed to guide exploration drilling in the volcanic rocks immediately west of the mine diorite. This drilling is designed to discover mineralization similar to that of the Falcon 7 Zone that is currently being mined. Limited drilling in the past has returned several high-grade hits that could be part of a network of safety plunging shoots within the volcanic rocks. The first phase of drilling approximately 8,000 meters started in July. Any resources discovered here could meaningfully enhance the future operational flexibility of the mine.
At Kiena, underground drilling at the Kiena Deep Zone has continued to return good results from the South Limb and Hanging Wall Basalt zones at depth. Given the importance of these zones adding ounces to the resource base, close-space based drilling will be completed once more optimal drilling platforms are established at depth.
Meanwhile, on surface, definition drilling is ongoing at the Presqu’ile Zone, which is located less than 2 kilometers west of the Kiena mine. The drilling is designed to convert the inferred resources to indicated and into reserves by year-end. As part of this exploration, a ramp will be driven to provide the ideal platform to test the mineralization at depth where it remains open. The start of the excavation of the exploration ramp is expected to commence in H2 2023 after the required permits are secured. An added benefit of the exploration ramp is that it could be connected to Kiena's existing underground ramp network, providing access to service for the existing operation and provide a second access for conveyance of material and personnel, freeing time for additional ore voicing via the shaft.
Additionally, surface drilling east of the Kiena mine returned encouraging results from several zones with vastly different styles of gold mineralization. This highlights the amount of gold in the Kiena system and the number of different gold deposits that could exist in this region.
For example, drilling at the Shawkey Zone returned 2.3 grams per tonne gold over 72 meters within the diorite and represents a more bulk minable opportunity, whereas, at Dubuisson Zone, drilling returned 10 grams over 25 meters from a sheer zone. Finding gold in various forms makes this relatively underexplored part of the property very exciting, not just for the prospectivity, but also due to the fact that it is proximate to the 33 level track drift that extends over 3 kilometers east of the Kiena mine shaft. Any ore found here will provide a second source of mill feed for the underutilized Kiena mill.
Over to you, Anthea.
Thanks, Mike. To wrap up today, I'm pleased with the swift indication that’s in the organization. I'll be using the next 12 to establish plans and elaborating with my team to drive an agenda towards increased value for all our stakeholders. All this done in the context of the risk profile in which we are comfortable to operate and most importantly, what ensures the safety of our people, which remains my #1 priority.
Thanks for listening today. This concludes the formal portion of the call today, and we'll open up the lines for questions.
[Operator Instructions] Our first question comes from Don DeMarco with National Bank.
The -- just a couple of questions. First off, on the cost volatility at Eagle and I see the throughput increase -- mining rates throughput increasing -- but it's -- can you just give a little bit more color as to whether that's a one-off and you expect a rebound in -- to cost lower in Q3, Q4?
Yes. Thanks, Don. It's Scott here. So when we look at the cost on an aggregate basis, there could be fairly consistent throughout the year. However, in Q1, we received a credit on our inventory movement and that would be just because we shut the mills down a little bit early to do some maintenance. So therefore, we had a little bit higher on the stockpile. And then the only other fluctuating factor is ever with the in-circuit inventory. It's very dependent on the grade at the time that we're processing, if the grade is higher material at that point. Typically, there is going to be more in the circuit at the end of the month. And therefore, the carrying value of the inventory will be higher. So therefore, it just flushes out in the next quarter usually.
Okay. Good to hear. And I saw the news on the ATM. The -- so it's no longer required. Just a couple of quick questions on this. Did you draw anything on the ATM in Q3, say, prior to last time’s release? And also, do you plan to terminate it then, so when -- or you just -- or do you plan to just let it expire?
Right now, Don, we didn't draw anything in Q3. As you're aware, we can't draw anything during a blackout period. So we drew about $11 million or raised about $11 million in Q2. And the intentions are that based on our liquidity, that we're not going to utilize the ATM at this point.
Just adding to what Scott said, that we are not using the ATM.
Okay. You won't be using it going forward. Okay. That's all for me. Good luck with Q3.
[Operator Instructions] Our next question comes from Ralph Profiti with Eight Capital.
Two questions for me. First one, maybe for Fred. Is there any of the 120 level or even 121 or 123 at Kiena that's going to be available for mining in 2023? Or is that mostly sort of a 2024 plan? And if so, maybe you can help us with context around when and how much do you expect to be mining from those areas?
Thanks for the question, Ralph. Ultimately, yes, the upper part of the 129 horizon will be available for mining, but only later in '24 and into '25 because the mining sequence as we draw or, if you will, from the orebody has to start from the bottom up. So we start from -- we drive the ramp down all the way down to 129 and we start stoping there and then stoping upwards.
Okay. Great. That sounds very encouraging for ounces per vertical meter. Second question maybe for Scott. Scott, if all goes according to plan with regards to sort of these internal forecasts, how much, if any, of the credit facility will be required into year-end to address CapEx and working capital needs?
When we look at the internal forecasts and look at the numbers, we're not going to use a majority of the revolver, and we're very comfortable with the level that we have at this point. And that's why we decided to spend it at this point.
Thank you. This concludes the Q&A session, and this concludes today's conference call. Thank you for participating. You may now disconnect.