Q4 2021 Wesdome Gold Mines Ltd Earnings Call
Okay.
Ladies and gentlemen, please standby your conference call will begin momentarily once again, ladies and gentlemen, thank you for calling please remain on your lines. Your conference call will begin momentarily. Thank you for your patience.
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'twenty, one financial results conference call.
Now I'll turn the call over to Heather Laxton to begin today.
Thank you Howard and good morning to everyone joining us on the phone and online this morning.
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 prediction.
Patients as of today and 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. Even March 10, 2022, 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.
Why do you use for this presentation and a recording of this call will be posted on the company's website and that's over to Lindsay <unk> Vice President of Investor Relations.
Speaking on the call today, we will be talking middleman, President and CEO . Good morning, Scott Gilbert CFO . Good morning, Unlike Michelle Vice President exploration. Good morning also on the call.
Today is Bryan Gill Vice President corporate development.
Right.
We'll begin today with an operational review from them.
Followed by a financial review from Scott.
Exploration and reserve and resource update for Mike and Tony will then conclude with a summary and outlook. Please go ahead.
Great. Thanks Lindsay.
First and foremost I'd like to thank our employees for making 2021, a record year for West zone is such a challenging environment.
<unk> production at Eagle in the strong buildup of Ciena has been exceptional and as a result of our annual production is up 37% over 2020.
In the fourth quarter, we produced a total of 41600 ounces companywide 2000, and 4300 ounces at Eagle and <unk> 16900 ounces Ikea.
Total production for the year was 123843 ounces, including the 22440 preproduction ounces from keynote 101403 from Eagle.
Henry at Eagle River Underground mine averaged $13 eight grams per tonne and a keener 10, four grams per tonne.
In 2022, we will be increasing production slightly from the Eagle River mine to 95% to 105000 ounces guidance.
Let me see the remaining stockpile is estimated to produce between one to 2000 ounces.
Going forward production will be entirely from the high grade underground Eagle River mine.
At Keener production ramp up has been progressing, albeit with some COVID-19 related delays at the start of the year impacting exploration development and construction activities.
Situation has definitely improved and we are still on pace to place keener and declared commercial production towards the end of the second quarter.
As per our previously released 2021 guidance, we achieved both of our production in great objectives at Eagle River, and our unit cost declined 6% over those of 2020 with cash cost of 990 per ounce and all in sustaining a fortune 508.
Per ounce within our guidance range.
<unk> costs were slightly above guidance due to exchange rate variation.
In 2022, we are guiding higher production at both Eagle in Cana for a combined total of 160 to 180000 ounces and a decrease in combined cash and all in sustaining costs.
Full cost reduction benefits will be demonstrated in the back half of this year as cana production ramps up to commercial production.
Additionally, this year's Eagle production is somewhat backend loaded. So overall costs are expected to be higher in the first half of the year and declining in Q3 and Q4 as production increases.
I will now turn the call over to Scott for a review of the financial results. Thank you Patrick.
With the inclusion of the kina pre commercial ounces the revenue cash margin.
And operating cash flow have increased compared to 2020, and 2021, we generated $262 $9 million of revenue compared to $215 $5 million in 2020.
$145 $4 million of cash margin versus $119 3 million in 2020, and $131 million of operating cash flow compared to $2 3 million in 2020.
We spent $99 6 million to support the restart of <unk>, which was fully funded internally.
Our cash costs for fiscal year 2021 decreased to $990 per ounce from 1053 per ounce in 2020 due to the increase in ounces sold which includes the.
Tina pre commercial ounces.
<unk> increased by 1% from $30 96 in 2020 to $14 in 2021.
Cash balance was $56 8 million.
I will now turn the call over to Mike to discuss exploration and our reserve and resource update.
Thanks Scott.
Despite the challenges that we incurred from the Corpus who is still a very exciting year ethylene projects. Firstly in Eagle River. This marks the first time in the mines history reporting resources and reserves using the best practice three the block model.
The work was completed under the guidance of SRT consulting and will be included in an updated 43 101 technical report to be issued within the next 45 days.
Current proven and probable reserves for $1 1 million.
<unk>, great $15 three grams per tonne gold for 525000 ounces of gold.
This represents a slight decrease from the previous year due to reduced drilling and also due to a much more conservative classification used by a S. R K consulting missing.
This included a much lower gold price than previous of $1400 U S per ounce for reserves at $500 for resources, which is more in line with our peers.
However, it is important to note that the reserve grade is now over 15 grams per tonne and this is due to the larger proportion of the higher grade Falcon and 300 East zone. This higher grade for sure. It has the potential to increase the <unk> margins.
The three D mall will greatly improve our efficiency and annual resource reporting reconciliation and life of mine planning.
This methodology is now similar to the approach that kina as we continue to standardize our two operations.
A keener additional drilling and ceiling and the ASR led to an improved geological understanding of the deposit compared to the PFS and has been used to update the resources and reserves.
Ciena the reserves have increased by approximately 10% after depletion of 22000 ounces of pre production goal increasing from 600000 ounces in may.
PFS to 651000 ounces at the end of.
December .
Yes.
For our resources at Eagle River, we now have a record inferred resource inventory of 255000 ounces of gold.
Which gives us a strong foundation to convert to reserves this year with the planned drilling.
A keener successful infill and step out drilling increased mobile resources by 11% from 2021, PFS and <unk>. This totals approximately 50000 ounce increase in F&I and 70000 ounces in inferred.
Dana deep continues to show potential to expand an additional ounces are planned for conversion to reserves with the planned 2022 drilling, particularly the newly discovered Footwall zone, where an initial inferred resource has been defined.
On the exploration side at Eagle we.
We have been focused on extending the high grade 300, eastern south consoles and targeting parallel zones to that of the Falcon <unk> zone.
The discovery of these parallel zone shows the potential of the surrounding volcanic to host more zones of gold mineralization, especially were whole structures continue across the direct volcanic contacts such as up to 311 west eight at <unk>.
In addition development of the $3 55 meter level is proceeding on schedule and will be completed in June and this will provide for development and exploration of.
Southern zone at higher elevations in the volume and also provide a platform to test for other parallel results.
The north contact zone, which is a new discovery. We made this year is located along the northern contacted the mind irate near the 1000 meter level is now interpreted the more contact zone has been previously intersected in 2016 with some near surface widely spaced exploration drilling again, demonstrating the <unk>.
This potential of this zone.
And is located within 150 meters from the mining infrastructure.
On surface joined us continuing to drill testing, both east and west of the mine to follow up on the nominal values return from the regional drilling program in 2021, and also to follow up with the North contact zone.
A keener, we've continued to drill the keynote <unk> eight zone and also now on the 33 level.
And really the drilling at the <unk> zone has been able to confirm that this zone continues down plunge and is continuous zone of high grade mineralization.
In addition, the drilling confirmed that the footwall is comprised of at least three sub parallel zones and one cross cutting zone.
Now with extended over 300 meters down plunge is sold where maintenance open laterally and down plunge and additional drilling platforms are now being established as the as the ramp progresses to provide for more optimal drilling.
Drilling also identified in the Haynesville into a zone.
And the basic volcanic new zones of mineralization grading around five to six grams per ton gold over thickness is up two to three meters and this has the potential to be mined as access development in the hanging wall due to their proximity to the eight zone stoping areas.
On the surface a new zone called Borgo was discovered earlier this year and this appears to be perpendicular to the general northwest southeast trend of the region.
<unk> supports fans with very low sulfide content hosted intermediate the salt units. The northern orientation is similar to that of the orientation of the nearby <unk> zones.
So as you can imagine drilling is planned to further understand this area throughout the year.
Thanks, Mike this.
This year is poised to be a very exciting years keener ramps up production levels throughout the year in Eagle River continues its strong delivery of ounces.
With these two high grade assets in production at the same time, we expect to generate significant earnings and free cash flow as well, we will be continuing our aggressive exploration programs to further organically drove production at each asset.
At Eagle the Balkan zone is showing extreme promise as another source of high grade ore located away from the bottom of the rent.
This will enable us to diversify store locations in the mine and increased feed to the mill, which currently has excess capacity.
'twenty two plan is to average 700 tonnes per day.
Exploration of the parallel Falcon zone hold promise for us to further rely on this area for future production.
As well we are continuing to aggressively explore a keener.
Where theres also excess capacity at the mill and further opportunities for organic growth.
The Footwall zone is a focus this year as well as expanding diesel.
We are developing an important hanging wall zone platform, which will allow us to better define the zone and football so throughout the year.
This is a very exciting time in the company's evolution to an intermediate gold producer.
Again, I would like to thank all of our employees for their hard work and dedication.
Proud of what the team has built so far including putting the mine back into production in just four years from a new discovery and funded entirely from internally generated cash flow from Eagle River.
I'll open up the Florida questions.
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Our first question or comment comes from the line of Andrew Mackenzie.
BMO capital markets. Your line is open.
Hi, Thanks for hosting the call and congratulations on a strong finish to 2021 .
Can you just expand a little bit on your comments, where you said you're expecting a stronger second half at Eagle versus the first half is.
Should we be thinking it's just tons and tons per day goes up or is there is some great scheduling as well too to take into account.
Yes.
As we know that's just going to increase throughout the year and as we assumed commercial production really H. Two Andrew then we will sort of hit our stride there at that one at Eagle, Yes, It's definitely I would say that will be great related.
First quarter was always a little bit leaner second.
Second quarter improves in the third and fourth quarter successively better and better but.
Feel really confident in terms of our production guidance no issue there with Eagle at 95 to 105000 ounces.
So we're good on that.
Can you maybe just a quick second question, Ken can you give us some sense of how we should.
Think about having a 15 gram per ton reserve grade versus.
Either or.
Our long term or at least a medium term.
Right that you would expect to come to the.
Head grade that would come to the mill at Eagle.
Well certainly.
And the Dolphins. So now that's been developing and that's showing quite high grades and certainly 300 is that way as well so.
We certainly look forward to mining those reserves typically at Eagle what.
We've often find us we're going we drill off extensions to these songs and newer zones that are small in the area that would take us. We're mining so we probably will throw in those zones in that as well, but we're happy with the 15 grams per tonne because.
That really better represents where we are with this new resource and reserve model.
Looked at the capping we have standard cap previously where they were before.
The resource polygonal model and now we've looked at that and embedded by uncertainty. So I think we're comfortable and as the year progresses, we're going to be doing this where an additional reconciliation to make sure. We got it exactly right, but the Falcon is looking good and the 300 looking good so were.
I think we're pretty comfortable with that 15 grams per tonne and we can achieve that.
Okay, I will let others ask questions. Thank you very much for your time.
Thanks, Dan.
Thank you. Our next question or comment comes from the line of Barry Allen from Laurentian Bank. Your line is open.
Yes, good morning.
Yeah, 2021, a very good operational year really no surprises there.
My focus.
Really though has been on the reserves and resources.
And if I understand correctly.
We had budgeted about $32 million in exploration expenditures for 2021.
But the actual balances added in fiscal 2021 was rather modest for the level of expenditure.
When you add in what you actually produced your boat just shy of 350000 ounces that you added.
$32 million expenditure, that's a very high funding costs, but I'm trying to get my head around that.
Is it that you didn't actually spend all the money or is it and so our K took a much stronger methodology pay.
And the calculation of reserves and resources or.
Is it that you just didn't get the drilling done could you maybe clarify that for me a little bit. Please.
Yes, certainly.
It's never just one thing.
Typically under drilling, we probably averaged around 75% of the budgeted meters.
And as we look Eagle underground was even less and that's really due.
Because of the Covid and then of course these numbers.
Application for drillers.
It was certainly part of it.
This year was also a year, where we put in a lot of money into surface exploration and <unk>.
Barge drilling at Keener and using the helicopter drill at Eagle, So that certainly is expensive drilling and.
Really what we'd want and well during these first couple of years, particularly at Cana, where it's covered by a lake is just to collect good geologic data has some pretty good hits, but really it's just building the geologic model. We're just doing the structural model now at Keener and we completed the structure model at Eagle. This past year, So thats, helping us guide the exploration going.
But we felt it was important to get out there and just collect geologic data. So that's part of why the outhouse down a little bit I think we're happy with the infill drilling that we've been doing in the near mine extension drilling that was filed by stepping up to do exploration.
But we're still in its infancy, that's why we're expecting some higher cost per ounce that we've seen in the past certainly wherever we are concentrated on the new Falcon zone. The 300 zone. The <unk> zone, I mean that was really great drilling.
We can just sit there and drill off the zones and we're finding analysis, there probably for 20% to $25 an ounce were probably.
Double that or even a little bit more now for the year in mine exploration and then the regional.
Exploration is really just that it's more conceptual testing at this stage okay.
Gary I think additionally, too I mean, we only added 75000 ounces into the Footwall zone. It really that's a function of not being able to get the drilling there. That's why the hanging wall exploration platform is going to be important it's situated around the 200.
Meter level at.
Keener, and it's just going to make the drilling a lot more perpendicular or allow us to really penetrate and get good intercepts into that so quite sure that those ounce.
Yelled count in the Footwall is going to rise definitely dramatically in 2022, and further I'd say upside on the <unk> zone.
Really starting to get a little bit of expansion. There also so I think yes. It is.
B.
Yeah.
Didn't probably claim a lot of ounces this year, but more to come.
Okay and then just.
One final point there it is a fairly conservative new model that we have.
As consultants kind of deal and either they don't have the 25 years of mining deposit like we do at Eagle.
And I think that had something to do it and also the CIM definitions for resource reporting this year requires the use of MRO for underground ounces. So that means anything thats isolated that would past initial shape for economics has kicked outward previously these might be zones that were included that are now that's been.
Where it was.
Okay. Good.
I.
Understand that.
2022 is going to look a lot like last year in the sense of without a lot of money expended at each mine.
And exploration.
Yes.
Roughly $14 million planned eagle and about $17 million planned at Cana.
To get back to your earlier point, yes, because obviously our drilling volumes were down 275% essentially our plan yes.
Our planned expenditures were probably at about 75%. So we spent about $25 billion last year not okay.
So okay we.
We try very hard.
I couldn't get the people. So yeah. Okay. Thanks, very much gentlemen, I appreciate it thanks.
Thank you. Our next question or comment comes from the line of Ryan Walker from Echelon capital. Your line is open.
Good morning, everyone. Thanks for the call.
Quick one here.
And in the press release and the M D.
I just don't know if you just found a freezing.
The footwall.
So in our Cana.
Third resources have been identified so as they're there.
It's not actual split or calculation of zone.
Sure.
I don't believe there is one in the MD&A, but it is about $75 analysis.
And then it's inferred and really that was just because we.
We expect this to grow laterally, we essentially had.
About three sort of strings of Wichita Stuart So when youre drilling like that you don't get a chance to really develop a strike length or plunge length. So what we wanted to do at least get it into their resources for this year and.
As this year continues on and now the development of the hanging wall drift that will be completed later this year.
To be able to drill that with a lot more holes expand at that converted to indicated and bring that into reserves at the end of.
In 2022, so it's still looking pretty good and the grade is really good at.
We're confident now we understand it so that's just a matter of drill them at all.
Okay great.
75 times or what kind of grade are you talking here.
It's over 11.
Great. Okay. That's it for me thank you.
Thank you. Our next question or comment comes from the line of John and myself and John D moves very pinned interest your line is open.
Good morning, Congratulations on all the progress.
One would be your expectation for escalation mining and milling cost per ton this year.
Ego in it.
Initial costs in China yesterday, I listened to a company based in Mexico endeavor that has 17% more tons in 17% higher cost per ton last year.
<unk> Chan as Scott less inflation in Mexico.
We all got the same bugs.
[laughter].
Hi, John .
Yeah, no absolutely I mean, we look at our cost escalation across the board to be able to probably 5%.
Some things have taken off obviously hydrocarbons and anything related to the hydrocarbons are impacting it.
However, I mean, we counter that John obviously, we're getting better volume. So our unit costs are starting to decline naturally.
Of course, we're blessed with good grades one thing I will mention it's very fortunate that we're able to kind of the knock the kina.
<unk> build out when we did because essentially I would say not that we're immune to any sorts of supply chain delays or escalations of materials, but it's certainly good to be.
Building right now as opposed to contemplating to build right now because I think I'd be a little baffled as to what we put the escalation into the contingency. So we're very fortunate.
Relatively small.
And like I say I think there's lots of levers for us left to use here like obviously keen on are coming on and the volumes, especially of ounce is starting to grow.
I think that the synergies between the mines.
Definitely starting to come off.
Our continuous improvement programs are continuing to battle down inflation as much as we can to get more efficient. So I think we have a few levers in there to to pull in order to combat it.
It looks like its initial development or is the cost per tonne were in the high three hundreds.
By the end of this year when it's running in a fully normal basis.
Is the 150 or $200 U S mining cost per ton of reasonable target.
U S.
Yeah, Thanks, Steve Yeah.
Next year definitely be about a 120 I mean, the PFS, obviously has got some.
Some pretty great all in sustaining costs of that in unit cost per tonne definitely is around the if you look at the PFS I think it was about 188 Canadians.
But yes, definitely if youre talking U S I'd be happy with that remember is the PFS as a whole.
So the development of the <unk> zone as we're ramping down on it we don't actually get to the heart you don't see around <unk> hundred until 2024, and so really our production volumes based on the PFS production schedules are about 65% to 70000 ounces.
This year and about the same next year of course that doesn't incorporate any of the upside that we've been able to kind of.
Discover the Footwall zone I mean, we don't really know how far it comes up right now we've got it kind of tagged in place from say, 14% to 1700 meters. The <unk>.
<unk> is currently at 200 meters. So.
I would say in two years, we've got a certainly a very good chance to.
Definitely increase are our base case, which.
Dean the PFS Debbie.
Exploration success continues and I think there's lots of opportunities around keener to pull an additional.
Resources and reserves so I can.
See better better optimization of the DSS going forward.
As Igor Cana unionized.
No.
Well that's good do you think your workers measure inflation.
Gas price or the T bone steak price or what other barometers you think are important.
I think I think.
CPI again is probably right now is running.
Seven seven.
7%, yes gas is obviously because of this issue we have over in the Ukraine and definitely been exacerbated a lot of fluctuation in that but we.
Have been projecting food price increases anywhere from 5% to 10% this year so.
We certainly try to keep pace with our the escalations for our employees to make sure that.
Their quality of life doesn't doesn't suffer either so.
Thank you.
Thanks, John .
Thank you. Our next question or comment comes from the line of Don Demarco from National Bank Finance Your line is open.
Oh, hi, Thank you operator, good morning, gentlemen, Hi, Duncan.
Okay.
Disconnected for a bit there, but I so apologize if this.
This was touched on but.
Just regarding I think your valuation is and your stock is just rocketed it and.
With the valuation of where it's at.
Maybe the M&A opportunities.
Come to bear a little bit more.
I think in the past at one point, you said that once Keane is up and restarted you'd look at M&A, a little bit more closely.
Are there any changes on your thinking there.
And if the company wants to do M&A, what what Magna.
Magnitude would it be just told type stuff or is there something potentially.
More significant that would be considered.
We run the gamut really I mean, we look at the whole.
The spoken hub scenario, because we do have excess mill capacity, both at Cana, we know that eagle could be expandable. So definitely there was a.
Small satellite deposit or something like that that would definitely be on our on our radar.
<unk>.
Told an interesting.
Progestin companies, Yeah, that's definitely part of it too I think we'd like to participate on on the way up and feel that we are involved in what's going on.
Our screen unchanged, Don we're very Canadian focus we love the Abitibi, but we love, Canada, that's definitely where we are looking at.
I think for US we want to stay nimble and to really understand what the opportunities are out there you got anything to add that Raj, Yes, I think we're being pretty disciplined everything has to compare to what we have organically and the compelling on a kind of ROI basis.
So we're being.
<unk> been conservative on that front.
Okay. Okay. Thanks, guys.
Great and follow up to the last caller's question on Keener cough.
Sure.
The garden didn't provide mine by mine a I N. C. For example should we be modeling like 900, Difc Makena for 2022 launch or was Q4, maybe just kind of a.
A one off low cost quarter Burkina.
We're going to be.
Leasing more numbers on a go forward basis every quarter, we will report on the <unk> right now.
Keane is obviously, a little bit lower than Eagle River with regards to the number.
With Q4 numbers.
Our 2020.
One numbers for Aif Eagle River was $14 56.
It's below that.
In 2022, most of the capital spend it all going to be considered growth capital. So it is going to be definitely lower.
Okay. Okay.
Okay, guys well congratulations on a good year and good luck in 2022.
Great. Thanks, Tom Thanks, a lot.
Thank you. Our next question or comment is a follow up from Mr. Andrew <unk> from BMO capital markets. Your line is open.
Thank you just a quick follow up for Mike.
Are you positioned in terms of our drill budget or maybe even drilling locations to follow up.
Alright.
On things like Shockey and press Gil.
Kind of single homes really encouraging stuff, but.
It will require more drilling and.
The best case scenario could something like that into resource by the end of this year or is that kind of a multi year thing.
Yes, we're certainly in a.
And our position this year last year, we ran the barges. The barges are still sitting there. So we're just waiting for breakup to get that started again.
Part of that initial program is to test our tarmac project that we acquired last year, where there is a historic resource. We're also looking at testing some up.
The shockey zones for where we've had some good success here the <unk> zone.
And anything that we can access from 33 level, we're trying to target this year as well because we want to get that into the mine plan and as we develop 33 level of rehab that for the drilling that means we will also be able to use it for hauling muscle Virginia shafts. So that's certainly a focus for this year.
We just built a regional exploration office built when we bought one and now we're just modify it but.
Well the post all the sort of.
Mine and regional exploration geologist and cortex. There. So it would be more efficient, but also makes more room on the island for us.
As we populate the key the mine. So I think we're really gearing up while we have some good people. We've had some initial success there and I think we have a good plan this year to start putting the ounces on the book books. So that we can start to evaluate plans to bring them into production.
Because it's coming down 33 level or separate from the kina deep eight that's just going to augment our production, we have and it's going to make it a lot easier on 33, because that's tracked.
Ventilation will be separated in electricity and everything else zone.
Certainly.
Focus for this year.
Yes.
Andrew I look at.
The evolution of things West zone.
This year, we're really concentrating on optimizing drill platforms. So.
Before we got a hanging wall drift going out on around 200 meter level.
Get more perpendicular drilling into the zone, and Footwall zone and better define Mike's also really looking at this 33 level.
Great platform, it's about a five kilometer long drift that really runs in the quarter between the Marvin eight and the northern night.
The nice thing about that is.
It's not weather related it's very constant climate, where we are there we're going to have to drill they're pretty well all year follow up zone. I mean, we've got the Mark of zone. The <unk> zone, the wishbone and continues all the way down to the.
So eastern part of our our property there. So it's a really exciting exploration platform over at <unk>.
Eagle River I mean, we're doing the platform to better assess the Balkan zone to the west there so on the $3 55 meter level.
Extending out west that's in progress right now and it really that's going to give us great access to do good drilling on some of these parallel falcon zones in the north contact zone. So.
It's great to have a platform to develop better SaaS, what we have.
Okay, well, thank you very much for those comments.
Yes.
Thank you I'm showing no additional questions in the queue at this time, ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.
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