Q3 2022 Wesdome Gold Mines Ltd Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Yeah.
Yeah.
Okay.
Good morning, and welcome to the West Elm Gold mines, Q3, 2022 financial results earnings call.
Heather Laxton chief.
Chief Governance officer will begin today.
Thank you operator, and good morning, everyone. Thanks for joining us today.
While 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.
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 November nine 2022.
Both documents are available on our website and on SEDAR.
Hi.
Please note that all figures discussed on this call are in Canadian dollars, unless otherwise stated so idea for this presentation and a recording of this call will be posted on the company's website and without us over to Lindsay Dunlap, Vice President Investor Relations.
Thanks, Heather speaking on the call today will be CEO Dunkin' Middle Miss C O O Fred Laundromat, CFO , Scott Gilbert and Mike Michelle VP exploration also on the call today is Raj Gill VP corporate development, Fred will begin today with a review of operations.
Okay.
Hi, everyone and thank you for calling in this morning.
This quarter the <unk> refurbishment shutdown was successfully completed on schedule in July .
That's great. We're in line with revised guidance the production tons got licensed short of internal expectations due to the latest introduction September as a result of the Covid spike in the workforce, which forced us to extract underground crews on two occasions.
Also production lapping issues belief our extraction to some extent.
We expect significantly higher higher gold production in Q4 with no shutdowns planned during the quarter and Covid numbers trending.
Finally, we have significantly increased our confidence level on the <unk> zone as a result of additional delineation drilling and experienced with <unk> and actual production results.
But this additional information.
Reconciliation processes, we have a much better understanding upgrades coming from Brazil going forward.
<unk>, which was also in shutdown in July for refurbishment of the <unk>. The team has made significant headway towards achieving commercial production.
Most importantly at the basal Brian all electrical components for the controls were delivered and installed pre commissioning activities have started and we expect that frankly to be fully operational shortly this.
This is very good news as it will provide the mine with improved capabilities to deal with the challenging ground conditions encountered.
Additionally, it will free up equipment currently being used to backfill stopes to focus on developing the ramp to access a wider part of the kina either.
We continue to be challenged with mobile equipment delivery, especially our critical bolting equipment, but in Q3, we have been able to source rental equipment and we expect those to be commissioned in Q4 de risking any further supply chain issues on that front.
Over to you Scott.
Thanks, Matt.
Cash at the time.
Great. Thank you.
Great.
Due to an 8%.
The inclusion of the higher.
Commercial office.
Thanks, Derek hedges at Eagle River, the cash cost decreased 49%.
473.
Median.
AFC.
The 7% to $269 per ounce, primarily due to a 30% decrease.
We are still experiencing reached investor.
With deep will decrease by approximately 7%.
<unk> 2002, thank you.
Favorable.
Okay.
Sure.
During the quarter the company generates.
Operating cash flow by Eagle Ford would be 15.
<unk> 58.
For 2020 schedule payments.
The capital of $8 8 million.
$42 8 million.
Do you expect.
In Q4, we expect capital spending to remain.
Great you complete the remaining project.
Four we declared commercial production.
We expect cost to trend.
As production.
Our major capital projects believe acute.
Commercial production.
As of today, we've got $54 million of the secured 80 billion.
Okay.
Jody.
Over to you Mike.
Thanks Scott.
Well go wherever we are now about a year into the mining of the Falcons zone and given some initial challenges of forecasting we've since remedied the situation with the addition of 95 definition drill holes and several hundred meters up development at various levels.
Further to this infill drilling in October we released the results of exploration drilling that.
That was completed from surface and from the new 355 meter level development that now extends 400 meters west of the mine into the volcanic rocks. This drilling has extended the plunge to surface.
In addition, a number of drill holes have intersected mineralization and sub parallel zones in the haynesville saw concessions on possibly the minus five and $3 11 west zones, including our recent holdout returned 43 grams per ton gold over one five years.
355 meter level development is not only an important level for drill platforms to test these hanging wall targets, but also for future mining.
Based on the success along the western boundary of the data. We have now started to test the eastern boundary within the volcanic rocks for the east and directly beneath the previously mined Tucson initial drilling returned 233 grams per tonne gold of $1 four meters. This area remains a focus given that disk.
Could represent a separate future mining fronts.
Elsewhere drilling within the central portion of the mine Diorite has discovered a new lender gold mineralization. Recent highlights include 27 grams per tonne over $4 six meters at 44 grams over three meters accordingly.
This new lens will now be drilled and access from underground adjacent infrastructure along the previous slide eight zone, located only 100 meters to the south.
So overall, a good quarter exploration at <unk>.
Our Cana, we also had good exploration success in Q3 in particular at the press Gil Zone, which is located only two kilometers west of the Kina mine.
Recent drill highlights include 24, three grams per tonne over $3 three meters and 30 grams per ton over nine four meter correlate and the mineralization remains open at depth.
Given the significant upside that the press skilled zones could represent Burkina the company has commenced the planning to develop an exploration ramp from surface already the initial soil investigation and geotechnical drilling has been completed determined the optimal corner locations and the permit application has been submitted.
So the exploration ramp could be easily connected the keynotes existing underground network, providing access to surface for the existing operation that comes with many benefits, including improved ventilation less reliance on the shock for the transportation of men and materials access to higher level ore bodies et cetera.
And the underground exploration drilling continued to return the exciting results with the Footwall zone discovery last year and more recently, the discovery episodes Smith or having the potential to increase the number of ounces per vertical meter and to provide additional working basis driven by.
Encouraged by these results we continue to explore within the basalt in this area, which we expect to report. These results later this month.
Over to you Doug.
Thanks, Mike Stena Keener for a moment.
Slide 15 depicts the current development in place that gives us access to the upper portion of the Eagle, which is narrower than the portion below the 12 to 15 year elevation.
The first two years of the PFS production scenario were built on the mining in the upper portion of the April the.
The increase in the PSS mining rates were starting in 2024 as we develop the reserve down towards the wider area of the Haynesville.
Currently the operations behind in the plan advance of the ramp base, mostly attributable to challenges in the supply chain.
As it stands we will be developing into the wider part of this zone in yellow towards the end of 2023.
SaaS development, we'll be able to advance much more quickly once the final pieces of our long awaited mobile fleet arrived in Q4 Q1.
Namely our mechanize bolter.
We have been able to source some short term both of the rental to augment this.
Additionally, once the paste plant is operational this will eliminate.
The need to use the method Rockville, which will free up additional resources, such as scoop and workforce.
We're finalizing our 2023 budget now and will reduce production and cost guidance in early January .
123 production.
It will be lower than the PFS schedule, reflecting the delays incurred to date. However, 2024 is more in line with the PFS.
On a positive note Fred and his team were able to develop more assured that October than in any previous point and we are continuing to build on that success.
2022 is often one of our better years, a downward revision in guidance and currently chock near the lower end and part of that performance. We are proud of.
As implied by our guidance Youre expecting a big fourth quarter.
Moving forward the two major issues. We have faced this year then the Ballston grade reconciliation and a keen as a supply chain issue.
The variability of the Boston Zone has negatively impacted our ability to accurately forecast production.
Our block model and the Falcon, which informed our budget for 2022 was largely Jill indicated.
Now that we have drilled an additional 95 holes completed substantial or development within the zone, we feel our predictability is increasing.
The Falcon zone industrial described it's a high grade <unk> zone, and so far we have experienced both positive and negative reconciliation.
As our additional information gets incorporated we're confident our forecast look through.
We will take into account the high grade variable nature of this zone when issuing 2023 guidance is Eagle Ford.
A keener, we finally have the majority of our components critical to mining with the exception of our Mechanize Bolter, which we expect in the next few months.
Even with new equipment breakdowns occur in sourcing parts is still an issue. However, this is improving.
We are in the pre commissioning phase at the Batesville plant and look towards the full commissioning of this critical piece of infrastructure as the final preproduction item, which needs to be in place.
We are still on track to finalize the beef plant commissioning for December .
Global conditions have certainly made the development of keen a process much more difficult than I have ever it's there.
I am confident we are better equipped now to continue the path to become an all Canadian mid tier gold producer with the asset the team the jurisdiction and the exploration potential we all seek.
I will now open up the call for questions.
As a reminder to ask a question you will need to press star one one on your telephone please standby, while we compile the Q&A roster.
Okay.
One moment for your first question.
And our first question comes from Ralph <unk> of eight capital. Please proceed.
Good morning, Thanks, very much two questions from me Duncan Firstly.
Im seeing improved reconciliation of predictability.
Eagle in the Falcons on and just wondering when I think about these 95.
Mission drill holes.
In terms of like tons or meters right, what I'm trying to get a sense of is how much I'm trying to quantify how much development is needed ahead of the plan in order to reduce great variability going forward.
So really the issue with bulk and I would say is because.
Kind of located about 300 meters to the west of the <unk>.
The higher rate.
We did have a little bit of development in the upward part that was the 692% to 635.
In Q4.
Which over reconciled to be quite Frank it really performed well.
However, as sort of the heart of the zone in which we sort of saw from 700 772 was largely not develop within Europe , we have the access to it and it wasn't coming online until Q2.
Frankly Eagle Q1 performed as it was supposed to do it was only upon.
The sort of the heart of the <unk>.
<unk> zone that we ended up with the grade reconciliation problems that we then recognize so.
I would think that we'd like to be up to six months ahead in terms of the development, which will give us much.
Much better I would say forecasting accuracy in terms of actual meters of <unk> zone typically about 75 meters wide those are still development.
We want to have at least.
Order levels in there so 300 300 meters of redevelopment.
Just on the <unk> itself. So we're actually getting at that point now there was a bit of a lag of developing the bulk of them just because it was.
Periphery to where we.
And all the infrastructure within the IRI.
Yeah got you yeah, good answer I appreciate that.
And if I can switch over to Tina.
Just thinking about.
Whether or not ground conditions are still only.
Challenged within the footwall zones, and whether or not this ground support is really can only there's only required to be remedied to sort of bolting equipment. The Bolton strategies as opposed to other ground support remedies that may be needed.
Yes, no. Good question so yes it does.
And the PFS Lenny.
All of us recognize that the shift in the commodity exhaust dates which are in the footwall zone. So just to put it in perspective, we've got a great confidence of salt in the hanging wall of the zone as you go into the footwall.
So the shift in the commodity yet so quite frankly, we didn't really have the tools in order to adjust it correctly I mean.
We all see that standup time of scope.
Critical event so when.
When we substitute the Crs or paste fill that.
And the.
The whole billing cycle substantially so.
I see that the paste bill coming online is going to significantly reduce the.
Closure time that the openings out Additionally to not really have a mechanized bolter is.
Really.
Problematic I would say.
We're expecting our bolstered through arrived in February .
February and March.
Way, we are going we might get to the February March 2023, Okay.
It's been really aggravating so Brad has done a good job of sourcing rental bolstered we're going to get those online but.
We can proceed.
Certainly that's going to be helpful. Additionally, I would have to say just our experience with the with the.
The shifts not yet has been beneficial for our our understanding of it and how best to deal with it I mean Fred.
<unk> certainly quite experienced with despite the sort of converging shifts I would call it very.
Prevalent in the in the Abitibi bouquet.
Keep in mind, however, fed work before and.
We're not the only ones for sure.
And so I think his experience is really aided us in really controlling that much better.
Yes very helpful.
Thanks for that company.
Thank you one moment for our next question.
And our next question comes from Don Demarco of National Bank. Please proceed.
Well, thank you and good morning, gentlemen, My first question is.
So it sounds like Youre going to declare commercial production at keno. After the paste backfill plant is commissioned sometime probably in December .
Does this imply that there isn't much growth capex remaining at Cana in 2023.
Yes, it does.
Yes.
I think.
Our forecast for this year is somewhere over $100 million.
We're not going to be doing anything close to that it just depends again.
People aren't on the supply chain hangover, sometimes you think youre going to have expenditures in December that might go into January yes.
Okay. It sounds good and Duncan.
Looking at Eagle I mean.
I can't obviously, we've seen the cost increase quarter over quarter, and we're looking forward to the paste backfill plant to largely remedying that I mean, there might be some ground conditions. Thanks to also dropped but but that paste backfill plant should be an inflection point.
At Eagle.
It sounds encouraging that there is a turnaround that might actually happen at the same time as kina in terms of cost reduction.
But.
How much of the cost escalation as we've seen in eagle due to great volatility or so on versus say inflation and maybe if we look at three to six or nine months.
What kind of can.
Can you give us a sense of the magnitude of cost improvement that we might expect at Eagle.
Thanks, Don really.
We're still doing the budgeting exercise, though that's not finalized so I don't really want to get too deep into that.
What we see at Eagle is it's really I would say at that age too thin honestly is what I'm seeing right now.
The cost inflation, we're really most exposed to wage inflation I think and so really when we look at the cost breakdown.
Because really it's a small development at the mine.
Really I think 65% of our costs are likely.
Our own <unk> business contracts right. So we've seen an escalation of that 5% to 7%.
Okay, who are most exposed to in terms of the consumable.
We're really not that exposed to these are smaller clients, we built that arent yet.
With the huge.
Cost increases because diesel went up or things.
Things like that a lot of our cost performance not that we did I would say in terms of building a keener, especially in that period.
Just for example look at steel and shot up 35% that certainly affected our RFP cell plant build and everything else. However, I think that we're starting to see hopefully a little bit of a retrenchment of inflation. So.
In terms of volume is sold on I think they really.
Thats really demand.
Correct.
Okay. Okay.
Okay, well thanks for that appreciate it.
Good luck with the restart and ramp up thereafter, yes. Thank you all for me.
Thank you one moment for our next question.
And our next question comes from Michael Fairbairn of Canaccord. Please proceed.
Hi, Duncan and team good morning, and thank you very much for taking my question I just wanted to ask about the balance sheet I just wanted to confirm that I heard correctly that you've drawn down $54 million on your credit facility now of the $80 million total.
That's correct that is correct.
And kind of following up on that just wondering how you see your.
Our cash flow progressing over the next few months here do you see yourselves drawing down further on our credit facility and then on the other side. After you achieve commercial production at Keno.
How quickly do you think youll be able to start paying that down.
For the remainder of this year, we're going to be pretty consistent I think.
$4 million.
Hey, guys.
The remainder of Q4, but we have 500.
Yes.
Positive expectations for May.
We ended up Q4, and therefore, we should be able to drive.
Revolver down somewhat and then I think.
It all depends on how they are ramping up with Keybanc for next year.
I would probably be using the revolver in and out.
In the first half of the year of next year.
Okay perfect. That's really helpful. Thank you very much and good luck with the ramp up.
Michael.
Thank you.
This concludes today's conference call. Thank you for participating and you may now disconnect.
The conference.
Vince will begin shortly to raise Johan during Q&A, you can dial star one one.
[music].
Okay.
[music].
Yes.
[music].
Okay.
[music].
Yes.
[music].
Yes.
[music].
Thank you.
Okay.
Yes.
[music].
Okay.
Okay.
Yes.
Yes.
Thanks.
Yes.
[music].
Thank you.
[music].
Yes.
[music].
Yes.
Okay.
Yes.
Yes.
[music].
Yes.
[music].
Okay.
[music].
Yes.
Okay.
[music].
Okay.
[music].
Yes.
Okay.
Yes.
Okay.
[music].
Yes.
Okay.
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
Yes.
Sure.
Thank you.
Yes.
Okay.
Yes.
Okay.
[music].
Yes.
Okay.
Thank you.
Okay.
Okay.
Okay.
Yes.
Thank you.
Yes.
Sure.
Sure.
Sure.
Sure.
[music].
Yes.
Okay.
Yes.
[music].
Okay.
Yes.
Thanks.
Yes.
Yes.
Okay.
Yes.
[music].
Okay.
Thank you.
Yes.
Okay.
Yes.
Thank you.
Thank you.
Yes.
Right.
[music].
Okay.
Okay.
Okay.
[music].
Sure.
Okay.
[music].
Okay.
[music].
Sure.
Yes.
Okay.
Yes.
Sure.
Okay.
Right.
Yes.
Thank you.
[music].
Okay.
[music].
Okay.
Okay.
Okay.
Okay.
Okay.
[music].
Yes.
[music].
Yes.
Thank you.
Yes.
Okay.
[music].
Thanks.
Okay.
[music].
Okay.
Okay.
[music].
Thanks.
Yes.
Yes.
Okay.
Yes.
Sure.
Okay.
Okay.
Yes.
Yes.
[music] Alex.
Yes.
[music].
Okay.
[music].
Sure.
Okay.
Yes.
Yes.
Okay.
Sure.
Yes.
Yes.
[music].
Okay.
Sure.
Sure.
[music].
Okay.
Yes.
[music].
Yes.
Hum.
Tom.
Yes.
Sure.
Yes.
Yes.
Okay.
Yes.
Yes.
Okay.
Okay.
[music].