Q4 2020 Wesdome Gold Mines Ltd Earnings Call
Good morning, everyone and welcome to West Elm Gold mines fourth quarter and year end 2020 financial results Conference call I will now give a dollar to Heather laxman sugarcane today.
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 outcome.
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 and the company's management discussion and analysis dated March 10, 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 and as long as you use for this presentation and a recording of this call will be posted on the company's website and now it's over to Lindsay Dunlap, Vice President of Investor Relations. Thanks.
Thanks, Heather here with US. This morning, we have Dunkin' middle and its president and CEO. Good morning, Scott Gilbert Chief Financial Officer, and Hello, everybody and Marc Henri Paul Jay Chief Operating Officer. Hello. This is a small country like Michelle Vice President exploration and good morning, and Raj Gill Vice President corporate development and good morning.
We will begin today with Duncan discussion on 'twenty, and 'twenty achievements versus guidance and 2020. One forecast followed by a more detailed operational review and from Mark Andre. We will then move to a financial review from Scott followed by an exploration update from Mike Bradley Duncan will conclude with a summary and outlook Duncan. Please go ahead.
Thanks Lindsey.
And 'twenty was not without its challenges as we navigated our way through safely operating Eagle River and advancing kina during the COVID-19 pandemic I'm very proud that we were able to do this without one incident of COVID-19 at any of our offices or sites. Our team's response and implementation of the rigorous health and safety measures is to be commended.
Social distancing and I'll start to the Covid safety protocol definitely had an impact on efficiencies and cost and the ability to generate and drilled meters, which we'll talk about later in the call.
With regards to production we came in at the low end of guidance and 90000, and 278 ounces, we did France and load a production because at the time the circumstances surrounding the pandemic were very uncertain and we felt it was prudent to push production in the event there was a mandated shutdown and Ontario.
And the second half of the year Eagle River generated about 10000 ounces less and the first half and that negatively impacted our costs and consequently, we did come in higher than guidance on both cash and all in sustaining costs.
Additionally, we identified almost $3 million and direct health and safety costs related to COVID-19.
Meanwhile, understanding that operational efficiencies and certainly took a hit and.
And those rolled up into our costs also.
Looking ahead to 2021, we are guiding 92 to 105000 ounces at the Eagle River complex and.
As you can see on the slide where factory and and and slightly higher costs. We're on.
Also guiding and additional 15 to 25000 ounces of Cana production based on our Q2 restart decision and we'll talk about that later on the call.
I'll now hand, it over to Mark laundry, who will provide a more detailed review of operations.
Thanks Duncan.
Daily production throughput and at the Eagle mine and significantly increased compared to 2019, mainly due to mine efficiencies and ventilation and improvement.
The main fresher and found upgrade is now completed and will allow us to increase the production up to 600 tonnes per day in 2020 one.
2020 average mine grade on 14 grams per tonne.
We're in line with the reserve grade.
<unk> was lower than our guidance of 15 grandson.
Great.
Negatively impacted due to the geotechnical challenges affecting the great performance and one of the Keystone mine in Q4.
We have made some modification in our stope design to address debt issues.
As well the men and their ability was low at 76% for the quarter.
The b and experience unplanned mechanical downtime associated with the cone crusher in December.
This year, we expect grades to average between 13 and 15 grams per tonne at igo.
At Michigan, Pip, all mining or perish on a finished as per plan.
And there are 50000 tons grading tool and a gram per tonne stockpile available from meaning.
Yeah.
The company was able to replace the depletion or bind and reserves in 'twenty, and 'twenty and increase them by 5% or 31000 ounces, despite much less meters drilled due to evolving pandemic.
Those reserves on.
On the close to 590000 ounces.
The bulk of their reserves increases mainly came from the Falcon and seven zone with over 86000 ounces at a grade near 20 grams per tonne.
Development toward the newly discovered <unk> zone.
Is underway and will continue all year.
Those will result represents a great achievement and clearly demonstrated the potential for adding more profitable ounces at Eagle.
Gross who the existing mine and trust structures and a very near future.
Now over to Scott and for a financial review.
Thanks Mark.
The challenges in 'twenty, and 'twenty, we generated $215 million and gold sales and an average price of 2000 and $360 per ounce.
$119 million and mine operating profit and.
Free cash flow of 29 million net of $68 4 million spent on sustaining and growth capital projects.
Net income and adjusted net income increased by 1.2, and one point and three times over 2019.
We ended the year with a cash balance of $63 $5 million, which is more than sufficient to restart Makena mine later this year and execute on major exploration programs on both assets, which is budgeted at $16 million per site.
Now over to Mike for an exploration update.
Thanks Scott.
Ondrej mentioned the drilling that Eagle River was less and plan, but we are pleased to have replaced what we mined and even out and some we have a much larger program planned for this year over 120000 meters of exploration and we're currently ramping up now to achieve this.
We are in the midst of completing a little structural review of the mine area and the surrounding region as well by well respected consulting firm. The results will help us better understand the controls on gold mineralization and help with our exploration targeting.
Our goal is to now find mineralized zones within the mine diary east of our current mining area. We.
We have done a really good job, finding and delineating the Falcon and seven zone and giving the given that this zone was adjacent to mine infrastructure. It is expected. This one will have a significant impact on mine production in coming years.
The Moss Lake mineral resource remains unchanged compared to last year and Raj will speak to this later.
No doubt the Falcon and seven and the 300 East zone have been the star players of the year.
The drilling and as continued return and exceptional high Greens and high grades this year and as importantly continuity upgrades down plunge.
Gives us a lot of confidence and achieving good production results going forward.
Ongoing extension and definition drilling of the 300 East Zone has continued to return high grade gold intersections and this zone has now been extended to the 1400 meter level and remains open down plunge. In addition limited drilling has intersected a new zone of mineralization approximately 40 meters to the north and then the hanging walls and the 300.
Zone, returning on a roof over 40 grams per tonne gold this.
And this intersection really highlights the potential of finding additional sub parallel zones in this area and it remains a priority throughout 2021.
Meanwhile, the Falcons zone has been extended to the 1000 meter level with one hole returned 314 grams per tonne gold over six meters. This drilling was.
Completed from the seven and 72 meter elevation and since that time additional mine development has been completed on the 622 meter elevation to allow for drilling and it's now within 50 meters and the footwall of the Falcon and seventh zone, so getting close to first mining.
Surface drilling is also now ramping up with two drills, turning and more later in the year. The drills will focus on discovering someone's near the mine area such as the Falcons zones and also testing the 20 kilometers of regional exploration potential.
Over the past year at Ciena, the impact of reduced drilling was to focus the underground drilling on converting the large inferred mineral resource at the as on to indicated resources that could then be used in the ongoing pre feasibility study.
This definition drilling resulted in an increase of 77% and indicated resources.
In addition, and initial sill development was completed on the Kina D pays on on 111 level. The development has confirmed the continuity of this as on high grade mineralization along strike.
The mill was restarted to process the as on bulk sample and December of which a total of 1500 ounces of gold have been sold to date.
Our goal from the mill circuit cleanup has been recovered and will be refined by the end of Q1.
Followed by the final reconciliation of the bulk sample once all the information is available.
Since the start of the year the drilling has since been refocused on expansion drilling and exploration not only at the a M. D C zones, but on other prospective targets within the mine area.
As part of this exploration focus initial drilling was seven underground drills has already successfully expanded the size of the A&P C zones will follow up drilling expected to contribute to future resource updates.
Since the closeout date of the last mineral resource estimate in September of last year 28000 meters of.
Drilling have been completed along the perimeter of the zone.
Including one hole and I recently returned 326 grams per ton gold over eight meters korlym.
There exists excellent potential around the zone to discover additional zones and this under explored area.
Also drilling of the <unk> zone has continued to return a number of high grade intersections at depth and has now confirmed that the V. C. One zone extends 475 meters down plunge.
From 67 level to 107 level.
The down plunge extension of this zone will be drilled from new platforms on one O seven level that are currently being developed and.
Any additional mineralization found on this area could be mined using existing and planned development at the <unk> zone. This is a very exciting area. So stay tuned.
Over to you Rush things Mike in January we were pleased to enter into an agreement with Gould shore resources to monetize Moss Lake the transaction will further enhance our balance sheet with upfront proceeds of 12, and a half million, while maintaining exposure to long term upside and the asset by milestone payments, a meaningful equity stake and a royalty.
The asset now has a dedicated team with a strong track record for creating value, allowing western to focus on our core portfolio of high grade underground mines.
Great. Thanks Raj.
2020 was a year that nobody expected and I wanted to extend my thanks and appreciation to all our employees and contractors for their attentiveness to safety.
And in 'twenty, one will be a transformational year for us as we plan to bring keena and to production significantly reducing the risk associated with being a single asset producer.
We were very happy with the successful restart of the mill I keener to process. The a zone bulk sample, which has so far exceeding our expectations.
A pre feasibility study is progressing well and is on track to be released and the second quarter.
We would expect to begin production.
And the second half of the year.
At the same time, we are carrying out a $16 million exploration program with 65000 meters focus alone on the easel and numerous step out targets within the mine and more regionally.
And Eagle, we're forecasting and 92 to 105000 ounces up slightly from our results and 2020.
We are equally excited about the $60 million exploration program in and around Eagle with many targets being generated through our structural analysis.
With a solid cash position to start the year plus the additional proceeds from the Moss Lake sale, we are well positioned to execute on all our plans this year and look forward to keeping you updated as they unfold.
I will now open it up for question and answer session and back to the operator.
Thank you and ladies and gentlemen to ask a question and you will need to press star one on your telephone to win.
Volume question press, the pound or hash key.
And you standby, while we compile the Q&A roster.
First question comes from George topping with industrial Alliance.
Great. Thanks, operator, although Duncan and oil derivatives.
Just interested on the bulk sample that's G and the next week or two or so.
Can you give us more information on that on top.
Cut was used and not area, how representative will be of the rest of the deposits.
In general what we've seen with other high grade deposits.
On a positive reconciliation change.
Changes.
Mining for example, with the Laura touch, but we will.
What would.
And representative and how much can we infer from from another fact on spot positive Buzz you had mentioned in your press release.
George It's Mike here.
I mean, I think you're on the bulk sample was really positive and and and that it showed that the geometry of the mineralized zones and.
You know the visible gold that we saw on core we're certainly easy to see and the underground development. So we were happy about that and you can see already that we've recovered and 1500 ounces of gold and and the rest is cannot be and process off site and a smaller facility but.
The copy and that we use and the block model you know for the as on was sort of a you know on.
Three stage.
And copying protests and you.
When we when we compare that block model to what we found from the underground drilling we capped out at around 90 grams per tonne, but you know, we'll probably be doing a three D block model just based on the chip data and the muck data and we'll compare that against your original drill hole data, but I would say overall from what we saw you know on the underground sampling there.
Have a good chance to.
And recover more gold than we originally predicted.
It is on the edge of the deposit so I mean, even if it's going to be positive I don't think we're going to rush out and change the block model right away because it was only about just a little over 5000 tons. I mean, my experience you know, maybe 10 or 20000 tons would be and maybe a little bit more representative but.
I think we're happy with the geometry confirmed by the drilling was confirmed by the bulk sample and I think probably we'll do a little better than what we bought for the uncut block model, so that would be really positive.
We'd like to get going with the mining there and get some more results back and see if that makes them adjustment.
And our model going forward, but are very happy with what we've seen so far.
Okay. Good.
The production for this year, you've had to cut back and who's on.
<unk> grown because of Covid is the development of the development up to up to speed and up the funnel and of advanced to get to that 620.
Tonne per day rate.
Early in the year.
Yeah. Good morning, Josh This is mark on.
Despite despite the Covid and social distancing protocol.
We have done quite well on the development last year.
And.
And basically we are basically on budget and are on track so shortly.
We are on very good position.
And that's about half of their production. This year is all of the day the block. So basically when we were away all developing the second half production and and we were all a day starting to to look at 2022 with the development up there and you will file comes on so all in good shape.
Okay. Thanks, Mark I'll pass it on operator, thank you.
Thank you on.
Our next question is from.
Don Demarco with National Bank.
Oh, hi, Thank you operator, thanks Duncan.
Maybe this is a bit of an extension to George's question, but.
With respect to exploration drilling and you've got a pretty heavy program set up for 2020. One can you tell me how many rigs do you have and each site and and I know you faced some challenges that limited drilling in 2020 are those fully mitigated on the exploration front too.
Hey, Don and Spike here look at Cana, We certainly you know we have seven drills running the underground now we're really comfortable with achieving those meters.
And you know really what hurt us last year when it was the government shutdown and everything for two months straight and that really hurt the meters from couldn't catch back up on that but with the seven drills and the current production productivity that we see.
No problem with that you know and I think that this is an exciting year. There as we started doing exploration drilling and we get into something new you might you might even see us adding a few more drills underground there. So I think that would be really great.
And on surface we're.
Drilling right now with three drills and we do have one drill on the ice which is great. We're drilling from completely untested areas before and and so we're kind of excited to see some of that but surface drilling is easier always to catch up on your targets because the.
And can always add another drill we certainly have seen a little bit.
A little harder to find drills, but we have big programs. So it's easier for us to get the drilling contractors to want to hook up with us at Eagle again on surface drilling there and no problem, let's go and while we've we've ramped back up to two drills now we have a fly drill sitting there on surplus from when the what day start to get longer we will put that back.
Into action.
The only area that we have to push a little harder at this year is eagle underground typically we run five drills. We afford there now we have a fifth drill that it's going to be starting up and shortly and we'll probably and the six drill later part of the problem there as Duncan mentioned that with the.
The social distancing and required a camp we've had a shortage of rooms.
We fixed that we have another trailer coming in and another 48 man camp coming in and that's going to help provide more rooms, and then we'll be able to out of <unk>. So you know, having just gone through the board cycle here.
And we're very anxious with.
Getting those those meters going and we are really pushing hard to make sure we hit our budgeted meters for the year yeah. Okay. Good to hear yes, because I see even with the truncated program last year, you still manage some on.
Reserve accretion, but until that point Mark mentioned that there was 86000 ounces at all concerned and this is the priority target and Eagle.
And how much of that was reserves and what was the grade.
On the telecom.
<unk> 6000, and yes, that's the reserves. So that's yeah, that's the reserve shutdown, yeah styles and all.
Ounces at 20 grams, 20, Grand and lower reserves.
Yeah, and more accounts because it was it was lumpy and I'll go ahead.
Yes, Okay, we're actually really close to getting the footwall drifts established at the Falcon, So really sort of two fold, we definitely want to go in and and have some selling along the ore and but we definitely want to go a little bit further to the west and see if we can continue to convert some of the existing resources there and upgrade.
And then to reserves, but very excited about Falcon Vulcan is it's very high grade shoot and we're looking forward to getting over there.
Okay. So just to confirm like the number seven zone and you have a 160000 ounces grading 12, six so you're saying of that and there's 86000 ounces on Falcon at 20 grams per tonne.
No it's separate on corn.
Separate from the number seven Falcon is yes, they link at around 1000 meters by Falcon as its own entity and the reserves.
Okay.
And just final question on the.
2021 grade, one and 14, Youre guiding 14 grams per ton and 2020, it was a little bit variable from quarter to quarter do you think that.
It's going to be a little more consistent or will see a little bit more variability like we did last year.
No.
The Eagles.
Very lumpy mine as we call. It I mean, when you're in the I agree boy, you certainly feel it and.
And our reserves as an example, as you know.
And we got to 13.4 grams, and the reserves right now and I mean, some of those reserves, obviously, youre and 20 Gram and some of them are at 10 or even less right. So and it all comes around to mine sequencing and because it's not a big mine.
Youre not able to you know it takes a couple of buckets out of here and not the blended or whatever it's so basically we saw that especially back in in 2019 with our mining of the you know the top 70 meters of of the 303 I mean, the grades were spectacular and.
And everything so it was it was good but like I said this is a.
Very difficult to smoothed out in terms of great performance at that line.
Okay. Thanks for that that's all from me.
Okay. Thank you.
Our next question comes from Ryan Walker with excellent partners.
Yeah.
Hey, guys good morning.
Thanks for the call just first off just wanted to congratulate you guys on your Covid performance, that's very commendable on it.
So.
Just great.
Just turning to unit costs.
Creeping back up again.
Do you expect that to be sticky and is that mostly COVID-19 related the increase.
Yeah.
What we see I mean, we identified $3 million.
Direct costs, so those are easy to capture.
The cost and I think are creeping and there is the cost of inefficiency and we didn't identify them, but I mean, if you listen to Mckinsey I think they had said that they can attribute to about 15% cost creep because of because of Covid and so as an example, Ryan I mean, even at Keno, which does not and production, but we are.
Drilling and developing and that you know.
And the cage used to have.
Have a capacity of 12 and it's now got a capacity of four so I mean, just everything is taking.
Longer to kind of establish and to get I'd have to say, though that the protocols are really working on and knock on wood, because we have been extremely lucky in terms of not.
And having any kind of operational disruption due to COVID-19.
However.
And I do see that Oh things are just a little more difficult and we look forward to the vaccination and actually our mine rescue team is going to get vaccinated as their first responders eagle. So we're starting to see that now and hopefully we can get back to more normal and the second half of the year and kind of really focus on.
Our efficiencies back and the whole debt right.
Alright, Okay, great and then and a lot.
Questions and answers.
But the net.
News flow going forward, you've got very aggressive drill programs at each operation and when can we expect to start to see.
So he has come out of that.
I would say shortly.
And certainly as you saw.
And with so many drills running and you know kina is producing.
Producing a lot of core and wish them and some great areas. There. So that's going to produce some good results shortly and throughout the year I mean, that's really good target rich environment, I would say and that Eagle you know typically we go about every couple of months and and we put out some news so I'm going to be a pretty exciting year on the exploration side.
Yeah, My guess would be youll, probably see a net.
Exploration news release every four to six weeks apart.
Okay, great. Thanks, guys.
Thanks, Brian.
Thank you. Our next question is from failed car with Pi financial.
Thanks, operator, good morning, everyone. Just a couple of questions I was curious if you could elaborate a little further on.
Some of the specifics of the Covid costs and alright.
And you know.
And just site related you touched on and you know the cage.
You know what can I only only holding more of her time, but could you go into further detail on over at Eagle.
Sure Hi, Scott here and.
So we identified the direct cost as Duncan indicated.
Looked at some of the costs such as incremental overtime.
And we were keeping people in and longer it'd be.
We also implemented from social distancing protocols with regards to safety are doing exports down to certain areas and those are the main cost as debt.
And said there was a lot of inefficiencies regarding on a.
Related to the operational costs that we just weren't able to capture.
But that's sort of the main ones that we were looking at like PPE fill and things like that additional security I mean, we have the ability to do rapid task and of course, we have our basically our own and help you and it now kind of at the.
At the gate and.
Eagle So yes.
And that all cost money and so.
Where we capture that and like we said we did not.
Capture the cost of.
And on inefficiencies.
Okay fair enough and.
And then just second question and your Q4, maybe you could just refresh your memory here, but the you know.
And the grade and production profile was the weakest on a year and looking towards guidance and a great profile for 2020 one it doesn't really seem like we're on.
Anticipating some of that 20 tons on per ton.
Material could you just.
And on you know, maybe the mine plan and any potential weather, whether it does this year and 'twenty 'twenty two to start to tap into that higher grade on but you know again.
So basically what we see this year and our buy jet and basically we're going to be mining and within our guidance through the year.
In Q3, and thank the Green is expected to go a bit higher because we are going to have the stope and 303 zone. So it's what we expect and kept at the higher grades there, but overall within our guidance as I mentioned before we are.
They're not being toward the fall comes on and we certainly done and see the benefits on that.
And the newly discovery and the 2020 two budget.
And so we are going to begin the production there and so so I think what we were targeting for 2020 twos.
Continuing to increase the throughput from them and from Eagle and and Pablo are at a higher rate cycle with but.
Bringing and you'll falcons on into production.
And then maybe just quickly last question on Nokia and Oh and.
And these are noted here production of 15 to 25000 ounces and.
And second half of the year, but with respect to cost and you're going to be some more fine tuning or expectation.
Declaring those costs on numbers, maybe later this year or perhaps within the feasibility study.
Yeah, and they're going to be captured and the and the PFS. So youll see that and of course the life of mine production will be available through there. So you'll see how we're ramping up.
Yeah. So we're like on I'd say tabled for completion and Q2 sort of mid Q2, I think and.
You know get a production restart decision shortly after and I think they're really you know we've always had the kina is not going to take long I mean, we've been doing.
Development and support of exploration here for a while but it's also going to be and support of our production very quickly. So it's going to be a relatively shorter timeframe to start generating some ounces.
Understood. Thank you very much.
Thank you and ladies and gentlemen, this concludes our Q&A session and program for today. Thank you for your participation have a great day you may now disconnect.
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