Q3 2020 Wesdome Gold Mines Ltd Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin shortly please continue to standby and thank you for your patience.
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Good morning, everyone and welcome to the Whetstone Gold mines third quarter financial results Conference call.
I'll now turn the call over to Heather Luxton to begin.
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 deep.
Cautionary note contained in yesterday's press release and in the company's management discussion and analysis dated November Threerd 2020, 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.
Slides used for this presentation and the recording of this call will be posted on the company's website.
Over to Lindsey Dunlap, Vice President of Investor Relations. Thanks.
Thanks, Heather here with US. This morning, we have Duncan Middlemiss, President and CEO good morning.
Got Gilbert Chief Financial Officer, Good morning, everyone.
Morbid retail chain Chief operating officer.
Hello, This is mark.
Like me show Vice President exploration good morning, Adam.
Roger Gill, Vice President of corporate development and good morning.
We'll begin today with an operational review from Mark and Greg followed by a financial review from Scott then a summary of the year to date results and 2020 guidance from Duncan Mike will then take us through an exploration update and Duncan will conclude with a summary and outlook. Please go ahead mark.
Expenses.
Production in the third quarter was 20000 ounces Nora.
Lower compared to the previous quarter, mainly due to planned maintenance shutdown.
And the underground hoist system upgrades.
More than expected from Eagle money has to be trucked up to surplus due to these days and the installation of the new voice control.
The hoist and the mill I know, we're running well and we have not experienced any problems. Since then.
Production that makes you resumed in the quarter ask Brian.
Mifi operations were stopped earlier this year in order to reduce the amount of people that the cap funds.
Participating I think what social dispensing.
In Q4, we will undertake the construction work for the installation of a second ventilation fan on Surepost, which will allow more pressure in the west side of the mine increasing the outage capacity.
This project will be completed early in 2021 and will increase the underground production to around 600 tonnes per day.
From the high grade Eagle.
Q4 grades are expected to be higher compared to Q3.
Scotland, all gave US a review of the financials.
Thanks Mark.
In Q3, the total capital spending at both assets increased to 20.9 million from 11.4 million in Q2, primarily because we restart exploration and development work at Keno after the Qubec government deemed safe to do so.
13.9 million at Keno compared to 5.9 million in Q2 and as a result are almost fully caught up in plan drilling and development meters.
As well we started the Eagle ventilation project, which will increase our production to 600 tonnes per day and also continued to work on increasing our tailings capacity.
This is sold in Q3 were 21700 ounces at an average realized gold price to.
$2532 per ounce Canadian rig.
Free cash flow was 3.2 million lower than Q1, and Q2 as a result of the increased capital spend.
Cash balances continue to grow with the cash at the end of the quarter of 73 point.
$5 million up from 66 million in Q2.
Net income per share was 10 cents per share and the operating cash flow per share was 18 cents per share for Q3.
[noise] operating costs per ounce for the quarter was higher than budgeted due to less productivity was scheduled and unscheduled downtime and COVID-19 safety measures due to the pandemic the timing of some sustaining capital projects were pushed from Q2 to Q3 and as a result Q3 E. S C.
Yes were above guidance, we expect to see cost to remain within guidance in Q4.
Over to Duncan for a review of guidance and year to date summary.
Great. Thanks, guys.
Year to date, we have produced 70272 ounces versus a full year guidance of 90 to 100000 ounces, we're confident in achieving this guidance likely ending the year in the midpoint of this range. We also expect to be within guidance on Eagle grade of 15 to 16.7 grams per tonne you're.
Year to date, all in sustaining costs are within the high end of the guidance range and we expect to end the year within this range.
Operating costs have been higher than budgeted and due to the continuing situation of the COVID-19 pandemic. We expect this trend to continue into Q4.
Over to Mike for a review of expiration.
Second although.
Although exploration drilling that Eagle is currently operating at a reduced capacity due to COVID-19 restrictions three.
Three underground drills and one surface drill are in operation.
One drill continues to better define and extend the down plunge extension of the Soc and seven zone, which now extends from surface to the 1000 meter elevation.
Recent drilling returned 314 grams per ton gold uncapped over six meters accordingly.
This drilling was completed from the southern 72 meter elevation that was established to test the down plunge extension of the Falcons on since.
Since that time additional mine development has been completed on 622 metre elevation to allow for drilling and is now within 50 meters in the footwall of the Falcons seven zones.
With nearby development already established on the sudden 72 and 622 metre elevation is the Falcon zones have the potential to be included in future mine production and ultimately augmenting production rates in the medium term. Additionally surface fly drilling program has commenced with one draw to test more regional exploration targets.
At Keno.
Full drilling and development capacity resumed in June.
We are now currently operating seven underground drills. The ongoing drilling program continues to focus on the definition drilling of the high grade A's own in order to convert inferred resources to indicated resources.
We expect to publish an updated resource estimate in Q4 of this year, which will subsequently be incorporated into the pre feasibility study.
Drilling has now extended the A's owned down plunge in excess of 880 meters. In addition drilling has extended the V.C. one zone.
475 meters down plunge from 67 level to one or seven level, where development drilling are personally being completed.
We're also happy to have commenced our regional exploration with the start of a 10000 meter surface drilling program.
In addition to the ongoing drilling access development is currently being completed towards the A's own on 111 level. She wants to position the company to take a bulk sample.
Results are expected before the end of 2020 future.
Future bulk sampling on the A's zone will provide an opportunity to assess the geologic block model and rock quality characteristics and will provide the necessary information to complete the ongoing Prefeasibility study expected to be completed in H. 120 21.
In fact, you Duncan.
Thanks, Mike.
I'd like to take this time to thank our employees contractors and suppliers for their dedication and navigation of the evolving situation of the cold with 19 pandemic.
Although the year, it's been challenged with the uncertainty surrounding the pandemic, we have achieved record year to date free cash flow of $37.2 million and completed some important steps towards advancing keena into operation we.
We expect to publish an updated resource estimate in Q4, which will be the basis for the pre feasibility study and restart decision expected in the first half of 2021.
We have also made strides at Eagle initiating short term expansion projects are expected to increase underground production to more than 600 tonnes per day and advancing development nine to 12 months ahead of our production.
Our cash position has continued to build ending the quarter with over $73 million, which will fund the work to advance both the kina and Eagle River projects, we are well position.
With that I would like to open up the floor to questions.
Thank you.
As a reminder to ask a question you won't need to press star one on your telephone withdraw your question. Please press the pound key.
If I ever be compiled the Q and a roster.
Oh first question comes from George topping of Industrial Alliance. Your line is open.
Thanks, Sabra Purtill, although Duncan Hello, everyone I'm.
I was interested in the development is easily seen other companies have underground development fall behind due to go over the personnel restrictions should we look for a fairly substantial increase in.
The costs incurred for the development and preparation for going to the 600 tonnes per day.
Good morning, George as we know a eagle mine because of the type of the ore body, which has not whole narrow gold gold vein, we need a significant amount of development in order to maintain our production.
So in order for us to get to 600 tonnes per day. We we believe we are at this stage that we do have enough development ahead in order to sustain that level of production next year. So so.
In term of cost I mean, it's it's a I believe its about $13 million to $15 million a year. Just just indicated from development. So basically we are we out that piece as it is.
Got it.
And then on on the production gold production for the.
Exceeded a 100000 ounces, but still the its still a logical reasonable target.
Yeah, absolutely I mean, we're in the process of just tying up the budget right now George but yeah, I know, where you know incremental increases towards that level. Then continue to go it's not that I want to point out and then just because we got asked earlier about you know a this ventilation projects that we're doing is going to facilitate the production of 600 tons.
Today, well, that's that's really just a step in the in the whole story here, we do expect to expand or Eagle River production out to 800 tons a day in order to match.
Our mill capacity and so you know as we can see things developing with the Faulcon seven zone and trying to bring that into production as soon as we can and I get that shored up wouldn't certainly eat us in not the goal.
So yeah, no we're definitely on our on our on our March towards.
Good Okay last question on the usual before I hand, it over just briefly on the exploration around the mine.
Area, though around the lease area you mentioned on the last call you have you done much on not not regard.
George and good morning.
Yeah, we have actually we've we had the surface drill and we found the Falcon zone, which we thought was very significant given that it's in the volcanic and now we're going to be bringing that cellcom zone into you know that into production at some stage here and so we're really happy with that and what was intra.
Thing was when we drilled off the near surface expression of that zone.
You know it was a bit spotty, we weren't sure about that its own but with depth. It seem to get a lot better. So this is why we've been able to extend down 1000 meters and that kind of looks similar to some of the other zones that we found within the die right. So that's where we're going back now to lucky that some of the other sure official ones, where we've had some good results on surface and started in the drilling and really this year was just a.
Program I'm going to some of those historic places drilling around them that are assessing those targets. So we can hit it with a much bigger program next year on surface. So you know we expect a lot more brownfields exploration is gonna find zones and we expect the surface drilling that's now on going with a bigger program next year.
We'll start a follow up on some of these more regional targets, but I think there's a lot of good good news to come out of here you know I believe will be pretty successful, it's really not an area that hasn't been very well explored right.
Yep Yep good thank you.
Thank you.
And next we have a question from Andrew make Oh.
Vmoso capital markets. Your line is open.
Thank you.
Just a quick question on timing or expectations for the 600 tonnes per day.
That kind of a a ramping thing throughout next year or or.
Yeah have you essentially done by the end of this year your homework. So that the vast majority if not all of next year is at 600 tonnes per day.
Hi, Good morning, Andrew we basically expect to be up around that beta in Q4, so really it's not going to be a ramp up as well we believe that for you.
We're going to be there.
As the the ventilation upgrade so it gets completed early in the year. So we believe we're going to be there.
Okay, and then just one other timing question.
You guys reiterated the PFS.
<unk> for next year.
The first half.
What would be the timing of the resource that goes into that and does that come before before year end this year or is that going to roll into next year.
Yeah, that's going to be a before year end thing sometime in the first half of December probably you know we are working with our consultants to make sure. We can hit that timeline that we want to make sure. We have an independent resource estimate put out so that should be coming then.
And so the the cut off for for drill results. It's got to be very soon I'm, assuming it's it's Rx actually already happened, so a which was sometime during a sort of a third week of September. So we have that data and we're putting the resources are together now.
Okay. Thank you very much for taking my questions I'll, let others jump in.
Thanks.
Thank you.
Our next question is from Ryan Walker <unk> <unk> partners. Your line is open.
Hi, guys. Thanks for the call just a quick one for me. So there the covert costs during the quarter up to or just sorry, 1.3 million up from brought up just over half million due to this it's kind of a level we can.
Spectra kind of stick around for the foreseeable future internal.
[laughter] until I guess on a vaccine ultimately.
Yeah, you know what Ryan I think you know we're comfortable with those costs I mean, it's a matter of capturing I think that really were probably not identifying all the costs. There are so many inefficiencies that I think we've almost just accepted right now and are tailing routine or my my Prime example is four guys on the cage or you know that keen instead of 12.
Okay, and then just you know just impact the whole thing I mean, you you need maintenance down there at the same time, you have you know development cruise and all that and it just doesn't happen, it's always a a staggered or delayed effect and the same thing goes with a you know diamond drills and supervision of the whole that so that's just an example, I think you know but for Sir.
Only you know that I think we identified about 1.2 this quarter and so year to date. We're at 1.8, I think that that pretty conservative compared to where some of our peers are probably tracking right. Now. However, you know we still strive to identify a what we and we also look at where.
People are comfortable and the audit to crew is comfortable on those on those costs collections.
Okay, that's great and the other the questions have been answered so I'll pass it along thank you okay.
Okay. Thanks.
Thank you.
And next we have John Tumazos of John Thomas So young.
Line is open.
Thank you very much for taking my question.
Dr and you've always been very conservative those at St Andrews.
West Elm avoiding having.
Having very strong financers it's.
It's notable that the cash balances are increasing even a shoot.
Spends or restart kiana.
Even making the finance is stronger.
Yes, yes.
Surely financial caution.
Or.
Are you prepared financially.
For another project potentially going from 100000 ounces was Eagle 200000 names neighborhood with caveat.
The 300000 due to exploration success, either in New York.
Or somewhere else.
Yeah, well John definitely read on the Horizon is Tina there's there's no doubt I mean, you know the the P.A. indicated a fairly low level of capital expenditure like we're sort of in the $35 million to $40 million range.
Obviously as within our capabilities, especially you know you project out into 2021, we worry for C. A gold prices at this level, we're going to be generating a lot of cash from Eagle. So really what we generate from Eagle probably take care Aquino without even touching every bank's bell.
So yeah that does certainly doesn't give you to win on what the next level.
And so yeah. It does give us the capability I can't say that we have you know identified or something at this point, but certainly the opportunity is there for for ourselves to to continue with that financial position in order to part of any of that into a building you know growth for for west on it.
It's really great to finance the next discovery before you draw it out.
Are there any parts of the infrastructure it eagle or can a two or three years down the road that might require.
Replacement or investment that would be more than.
10, or 20 million.
Mm Hmm.
Are we at a at the Eagle I mean, we we are going to continue to spend money Oh, I thought worth paying management area in the <unk> to build up some more capacity EPS as we are growing our reserves. So that's something that we we plan to continue year span we have.
Spend quite a quite a bit of money at the mill last year, and this year and and Oh, One man is getting in good shape. So I think we've pretty well covered on that.
For <unk> ego, mainly the gold mine, it's mainly equipment. So so so we are going to spend some money on on the equipment at the kina.
Uh huh.
We have spent quite a bit of money at the mill this year to get them back back in production. So I think that is behind us.
Yeah, the key cost that the kina is going to be a development. So as we.
Keep expanding to the keynote deep zone that debt. So we are going to drive that plan and that's going to be the main cost there how about 50% of the cost is just development.
Yeah. The one thing I you know just speculating on how the future may go at Eagle I mean, it would be great to get a shaft deepening in there where you know, but obviously we have to have the encouragement to do that so we need to understand you know what a potential resources, we would have below the 2000 meter level at a at Eagle right now.
So I think the dot dot might be that that sort of level of capex, John you're a alluding to like what would be sort of the 40 to 50 million.
Really that's just I raise up into the bottom of the shop, we don't.
Transport a mentor materials in that shop, it's for rock only.
So we can certainly do it you know was certainly a a less expensive costs and a different to the system of shop.
Thank you and congratulations.
Uh huh.
Thank you.
And next we have still care Oh Oh.
Pi financial your line is open.
Thanks, Operator, just a question on a piano.
Other than the updated resource in PT fees coming next year, what other key milestones do you see being required to Oh make a full Oh go ahead restart decision there.
Hey, Phil It said Duncan Yeah really what we're looking for is that a comprehensive pre feasibility study that makes it very easy for our board to say, yes. This is a this is a goal and essentially that's that said so a were.
We're locking down the resource right now we're working hard on the you know the PFS Weve got all all a everybody on Dec in order to facilitate dot we're aiming for a each one of the 2021 I mean, we would love nothing more than to put keen into production and get into a commercial readiness or by the end of 2021, So really I think that.
That's the next step for us.
And any significant infrastructure requirements I think the previous question may have touched a little bit on that but you.
You know anything for the mill hoist shops things like that are required in the meantime.
In the meantime, though the mill repairs are going very well, we're almost at that level, where we can't daus you, but a task we do want to upgrade some infrastructure like we are essentially the same thing that we did at the voice or the Eagle, which is just to put a digital drive in essentially I think we have to do that at a key.
And also.
You know other than tweaking ventilation and power I think that really Oh, that's a keen is in pretty good shape really in terms of a infrastructure.
And the bulk sample are you planning and processing of their elsewhere.
Currently processing it in house profit.
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That's it for me thanks, guys.
Thanks.
Yeah.
Thank you.
And next we have a question from Ralph Profiti of eight capital Sir Your line is open.
Hi, there thanks, everyone Duncan.
Stage for that added four years to the Tms is my calculation is correct that this takes you to about 2029.
Oh, Yes, no no Ralph that's only four years also stage for us to take us to 2024 sort of in around there.
I see okay.
Yeah. So we're planning whats the next and you know with growing reserves and resources of course it. It becomes you know much more to the front burner of the others. So as they say so.
The good problem to have.
Understood totally yes, and my second question on the ventilation project are you good now for.
You know a thousand meters down 2000 meters at 600 tonnes per day, because you talked about 800 tons a day being the milling capacity. So we should we just kind of straight line at that that's probably another $5 million or so to get you up to that then and if that's the case.
I suspect that there's going to be no issues from a technical perspective, as you move ventilation into the volcanic.
Yeah, So really what we're seeing right now are often that's good point I mean that ventilation is provide adequate flows down at the bottom of the mine, which you know, we're we're sort of pushing down to about 11 50 right now so.
But as you know the the falloff in seven is actually more of a lateral drives towards further up in the mine. So it won't actually have the same resistance for ventilation, we'll be able to provide volumes. The other thing that's going to perhaps less than our ventilation is a yeah. Our exploration here of the battery electric.
Vehicles.
So that would lessen our ventilation requirements also so it's a two part a I would say right now we're expanding out the ventilation that we have them. We're also examining battery electric vehicles plot wherever the next workplace comes around and I think the Faulcon seven is a likely candidate who I think a you know I don't think its going to be.
It is difficult to ventilate as the bottom of the mine and the big upside of defaults on its own is that a shorter haulage distance to the shot show. So we see some production go yeah on that aspect.
Yeah.
Got it yeah, Great point is good color. Thank you everyone.
Thank you.
<unk> I see no more questions in the queue.
So ladies and gentlemen.
This concludes today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.
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