Wesdome Gold Mines Ltd. Q1 2023 Earnings Call
Speaker 2: Great, thank you operator and good morning everyone. Thank you for joining us. Before we begin we'd like to take this opportunity to remind everyone that during this call we'll discuss our business outlook and we'll make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could cause outcomes to differ materially due to a number of risks and uncertainties including those mentioned in the detailed cautionary note contained in yesterday's press release and in the company's management discussion and analysis dated May 10th 2023. Both documents are available on our website and on CEDAR.
Speaker 2: Please note that all figures discussed on this call are in Canadian dollars unless otherwise stated. The slides used for this presentation and a recording of this call will be posted on the company's website. And now it's over to Lindsay Dunlop, Vice President of Investor Relations.
Speaker 3: Thanks Heather. Speaking on the call today will be Board Chair and Interim CEO Warwick Borley-Justin, COO Fran Langevin, CFO Scott Gilbert, and VP Exploration Mike Michaud. Also on the call today is Raj Gill, VP Corporate Development. Warwick, please go ahead.
Speaker 4: I am pleased to report that we have had a good start to the year, producing 28,368 ounces of gold. Both cash costs and the all-in sustaining costs came in slightly below our annual guidance and we are well positioned to meet our production and cost guidance for the year. The second quarter is off to a good start as well, as the benefits of the mining cycle embed themselves within the use of the pasteful at TINA and reconciliation to provide positive results at Eagle River. Fred will now take us through the operational results in more detail.
Speaker 5: Above that, the underground mine performed above expectations. The main contributing factor to this overperformance being the positive reconciliation seen in Q1 of last year in Falcon, continuing into Q1, with two slopes together yielding close to 15,000 times that 25 grams from Falcon.
Speaker 5: As planned, we also process the last of the remaining eCQR in Q1.
Speaker 5: Development performance exceeds targets in Q1, which puts us into a good position to deliver on our plan for the rest of the year.
Speaker 5: Finally, drink-you-won at EGOL we have successfully transitioned long-hole drilling activities from contractors to self-perform and we're happy to report that bringing this activity 100% under control is already yielding benefits both in efficiencies and on costs.
Speaker 5: At Kina, mining in QM yielded better grades than expected, mainly due to the fact that we were able to source a higher proportion of material from the higher grade P&E, as opposed to the lower grade material in other zones, such as S-50.
Speaker 5: Also, our recovery efforts of diluted ore from previously mined areas yielded better than anticipated rates.
At quarter end, the rank was just shy of level 123 elevation. This positions the mine very well for seamless transition into the new 129 mining horizon to ramp up production in 2024. It also provides drilling platforms for delineations to proceed sooner, validating ore grades and shapes and bringing up our geological understanding in the area well ahead of mining. We also had great success in developing to and into the new A2 zone of 118, 116 and 114 levels.
Where I'm scheduled to commence mining in this new zone in Q2 and development grades so far have outperformed the block model.
The Baseville plant has been steadily operating in Q1 and the team at SITE is already seeing opportunities to optimize the process. We'll be acting on those in the near future.
First excavation of the portal and subsequently of the ramp is expected to proceed in HQ after the required permits are secured. This improved ability to find and execute at both sites is a direct result of our newly bolstered technical team. We're further leveraging this bench strength in other key areas such as our annual internal life of mine process which has been launched a few weeks ago and is expecting to further increase our confidence in our assets. Also we've made significant headway on the procurement side of things, locking down savings on key consumables such as fuel and ground support. Over to you Scott.
of the portal and subsequently of the renter is expected to proceed in HQ after the required permits are secured. This improved ability to find and execute at both sites is a direct result of our newly bolstered technical team. We're further leveraging this bench strength in other key areas such as our annual internal life online process which has been launched a few weeks ago and is expecting to further increase our confidence in our assets. Also we've made significant headway on the procurement side of things, locking down savings on key consumables such as fuel and ground support. Over to you Scott. Thanks Greg.
Here in C1 2023, we sold 30,000 ounces of gold, which generated revenue of $76.7 million and a cash margin of $34.4 million.
The cash cost was $1,407 per ounce and the AAFD was $1,977 per ounce.
The operating cash flow was $5.1 million and the fee cash flow was $19.6 million.
Eagle River Complex sold 24,000 ounces, generating a cash margin of $32.5 million with cash cost per ounce of $11.92 and AISC of $17.09 per ounce. Keena sold 6,000 ounces, generating a cash margin of $1.9 million with cash cost per ounce of $22.67 and AISC of $11.92.
30, 48 per ounce. The cost per ounce are high due to processing overgrade oil from the S50 and modern zone while the ramp to the Kina deed is developed. The unit cost will decrease as production increases throughout the remainder of the year. All of the equipment, infrastructure upgrades and the ramp to government at Kina will be included both capital and...
meter of 29 feet.
Also, during the quarter, $20.1 million of net proceeds.
$20.1 million of net proceeds was raised under the ATM.
Funds were used to take down the revolver by $8 million and the payable by $12 million. At March 31, 2020, the cash balance is $25.1 million to $46.7 million drawn on the revolver. Working capital efficiency has decreased from $38 million at December 31, 2022 to $14.7 million at March 31, 2020. Over to you Mike. Thanks Scott. At December 31, 2022, Westone's combined proven and probable mineral reserves remain just over 1 million ounces at an average grade of almost 13 grams per ton. Additionally, we have a combined measure of indicated mineral reserves that are estimated to be less than 1 million ounces.
to convert a portion of the existing large M&I and inferred resource base into reserves. We also plan to add ounces at several of the new discoveries made in 2022.
At Kina, recent drilling at the Kina Deep Zone has continued to return good results and have extended the Kina Deep A Zone an additional 125 metres down plunge. The A Zone now extends continuously from 1100 metres to approximately 2000 metres below surface and remains open at depth.
Highlights of the recent drilling include 76 grams per tonne of lube over 10 metre corallite.
We are pleased with the recent drilling that continues to better define and expand the recent discoveries adjacent to the QDP zone, namely the footwall, sublim and hanging wall basalt zones. These zones have the potential to increase the number of ounces per vertical meter, and provide additional working phases during mining.
but will be using the same underground infrastructure utilized to access the A zone.
The discovery of the hanging wall basalt zones highlights the potential bad outages within the basalt with a rock quality significantly better than any gay zone. At Frisbee, recent drilling has continued to highlight the higher grades and the continuity of the mineralization, including one hole that returned 24 grams per tonne over 3.3 metres poorly.
Given the significant upside that the rescue zone can represent for Kena.
The company is planning to commence an exploration ramp from surface later this year, once we are in receipt of the necessary permits. This exploration ramp, which is already included in this year's budget, will provide the ideal platform to complete further drilling to improve our confidence in the resource space, but also to test the mineralization at depth where it remains open downpunch.
An added benefit of the exploration ramp is that it could be used to connect the Kina's existing underground ramp network.
providing access to surface for the existing operation.
This could represent a significant milestone on the company's journey to unlock additional potential of Kina, as it would provide a second access for conveyance of material and personnel.
Freeing time for additional ore hoisting via the shaft.
Other gains, such as reduced ventilation costs and savings from added operational flexibility, are also expected. Studies are ongoing to pursue these options.
Prestiote is just one example of a number of near-mind, near-surface resources that could be used to augment production ethics.
As such, surface exploration started last year to test some of these additional targets, namely the Schottky and Duperçon songs.
Initial encouraging results have been returned and we plan to disseminate the results in the near term.
At Eagle River, drilling has continued to extend the mineral resources downpunch, particularly at the high-grade 300 East zone.
This represents the longer-term mining areas.
However, the focus is shifting to explore areas laterally, along strike and near surface, and within the volcanic rocks similar to that of the Falcon Zone. Most recently, surface and underground drilling from the 355 meter level exploration drift on the west side of the mine has defined the uplunch extent of the Falcon 7 zone.
and has now extended the mineralization to surface. This could represent a new mining area with new infrastructure which could provide improved logistics for mining.
Additionally, surface drilling over the past year has returned encouraging results from what are interpreted to be parallel zones to Falcon 7, including the 5 zone, which is similar to and believed to be an extension of the MIND 5 zone within the diarrhane.
Access to this zone from the neighboring Falcon 7 zone will improve drilling, development and future mining of this zone. Surface soil has also returned a number of good values further to the west of the Falcon 7 zone in what are interpreted to be shoots having a similar periodicity to the high-grade shoots within the mine diary.
These zones will be further explored from surface, but longer term, the 355 meter level development could be extended further to the west to provide drilling platforms and for mining.
Further, the discovery of the Falcon 7 zone in Volcanics has prompted exploration along the strike and to the east of the diary, particularly in the area of the previously mined 2 zone that has its own infrastructure.
One drill hole returned beneath the two zones.
223 grams per tonne gold over 0.4 meters and will be one of the priorities for drilling in the future. Thank you.
Thanks Mike. In summary, during our Q4 call earlier this year, I highlighted these four primary focus areas that must be executed on this year.
I'm happy to say that we continue to make excellent strides in the first quarter towards the ramp that gives us access
to the Kina Deep later.
this year and early next year. The ramp is now below 123 level, progressing ahead of this year's budget, and we should see production and cash flow benefits earlier in 2024 than initially expected.
We have communicated our intentions to reduce our outstanding balance on our credit facility and we have done exactly that, reducing the debt in Q1 from $55 million down to $47 million. And our plan is to continue an aggressive pay down throughout the course of the year through operating cash flow and disciplined use of the ATM.
From what we have seen at the operation so far and assuming gold prices stayed strong I see this year as a free cash flow inflection point.
New film this year and returning to pre-catch flow positive status in 2024.
The key technical hires added last year in this are already showing their value addressing several challenges and opportunities.
and have yielded cost savings.
savings in the procurement process.
We will be publishing our annual EST report this summer which will be available on our website.
On the subject of hiring of our permanent CEO , good progress has been made and we hope to be in a position to update you on this in Q2.
Lastly, our Annual General Meeting will be held this year on May 24th at 10am ET.
at the TMX Board Car Center in Toronto.
We are pleased to be returning to an in-person format, and I do look forward to meeting you then.
This concludes our call today. We will now open the lines for Q&A. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while you compile the Q&A roster.
One moment for questions. Wayne, I believe the first question comes from yourself. Would you like to go ahead?
Our first question will come from Don DeMarco from National Bank Financial. Your line is open. Okay. Thank you very much. Good morning, team, and hello, Warwick. So, congratulations on a great quarter. Now, EGLE performed well in the quarter, and I was hearing that maybe So do we
one of the contributing factors is that over the last month the grades were elevated. Does that suggest that there's going to be momentum at Eagle into Q2? If so, would we expect this kind of cost performance through the rest of the year, or is this just more of a one-off quarter?
Fred, sometimes I'll give you some of the detail there. But one thing that I would like to point out that we did make reference to the answers that were left on the ground as a result of our attack was stab stab stab Grapevine and Er?
challenge that we had in transporting material from the mine to the mill at the end of 2022. Our drapes were higher than what we had.
in our current guidance and that was the start of a good beginning in Q1. Fred, would you like to give a little bit more clarity? Yeah, of course. As e-goal, the very high grade nature of the lower body makes for inherent variability and really be great over performance.
year. Okay. Great. Thanks. Next question then. Okay.
You know, you're progressing ahead of schedule and reaching a 129 level.
Are you at a point where you can kind of dial in the specific month that you expect you might reach the 129? I think it's Maybe sometime in Q1, but you know with that level of resolution what month you might hit at this point?
Yes, certainly as we said, we are some couple of months ahead in the program. We started off...
at the beginning of the year having achieved rates greater than what we have in our budget and that has continued to be seen during the
the first quarter and now into the second quarter.
We had indicated that our budget called for our arrival at 1.29 almost at year-end, and we see that coming forward at this time to in and around October . So it is positive, but what we need to also appreciate that when we get to...
129 level, we do need to develop that station.
The station itself being one of the largest stations with inter-levels between as we mine up. So what we really are doing is bringing the production from 129 level forward in 2024 and not into 2023 at this stage.
Oh, okay. So you're going to potentially hit the 129 in October , but it'll take some time to develop a station there. And maybe just finally also on progressing on toward the 129, the ramp.
What are some of the factors that contributed to your outperformance versus schedule? Is it regarding the labor or the rock that you're going through? How is it that you're ahead of schedule? What's going well, in other words? And do you expect it to continue?
Yeah, I'll hand over to Fred again, but what I would say from a ROC point of view, we are in a bathhouse, which is the more competent material that we have down in the area. And so from that point of view, it is consistent. And also just to reiterate the fact that we have got all the equipment.
and the teams where they need to be at a time where it was the challenge in 2022.
Lots of little bit more colour on that trade. Well nothing much more to add basically it's very good gun conditions in the Bazau. I mean there's there's no challenge developing there and it's very predictable in terms of behavior. Also very good discipline on the operation side of things where the goal of getting towards the bottom of that ramp is the absolute priority at site and everyone needs is.
well aware of that. And as Warwick mentioned, we have additional equipment now that have secured our capacity to not only deliver on our development targets but also exceed them to some extent, and we're using that capacity with those extra bolters to...
as Orick mentioned, we have additional equipment now that have secured our capacity to not only deliver on our development targets but also exceed them to some extent and we're using that capacity with those extra bolters to exceed our internal targets.
Okay. Thank you very much. Congratulations again on a strong quarter and good luck with Q2. That's all for me.
Okay, thank you very much. Congratulations again on a strong quarter and good luck with Q2. That's all for me. Thanks very much, Tom.
One moment for our next question. Our next question comes from Wayne Lamb from RBC. Your line is open. Great, thank you. Morning guys.
Just a question on Kina, just on the timing of capital spend, given the progress that you've made relative to schedule, should we expect the growth spend to be relatively front half weighted and then are there any additional large equipment type purchases remaining or is the majority of spend all just related to the underground development?
I'd say the spending in Q1 is typically lower than what we'd see throughout the year. The spends tend to increase as we get our vaccine going into Q2 and Q3.
So they're not going to increase significantly from where we are now. Our overall spend for the year remains as we have given guidance. Just over hundred-
and 4 million for the year or both sides.
And as far as clean is concerned, it contributes just over 45% of that amount.
Okay, great thanks. And then just curious if you had any detail on how the ground conditions or the rock competency is looked as you kind of move deeper into the mine?
Great, would you like to take this one?
Yes, of course. In terms of the ramp itself as we move deeper, like I mentioned, the ramp being in the bevel, there is no concern there with ground stability at all. The ground conditions are excellent and development precedes the pace. In terms of when we get into the shift and the commodity ice, which typically holds...
the ore of the A1 and A2 zones. I would say the development in the A2 zone has been promising where the ground conditions that we've encountered there on level 118, 116, and 114 are actually a bit better than what we had anticipated and that is contributing to the fact that we're going to be able to mine that zone in early Q2 now. I'd also just like to add to what Fred has said.
One issue is what we anticipated, the other is our learnings from the experience that we're gaining through mining into the shift.
So that certainly is benefiting us a great deal as well.
Okay, great. Thank you. And then maybe just last one for me, just curious on the ATM, you guys had executed out the same amount on that facility versus the free cash outflow this quarter. Can we anticipate a similar pace on that ATM as you kind of complete the spend at Kina?
Yeah, Wade, I'd just like to say that it's been our intention to get ourselves to a cash neutral position.
The right, though.
execution has really been one that is defined by the discipline approach to how we're dealing with it, assessments of where the gold price is and our control costs through the execution of our mining operations.
We also are keenly aware of the issues that have been raised by analysts and investors as to the use of the ATM and so we we would like to execute it and make use of it on a continued discipline basis.
but also driving to a position on which we can close it as soon as we can. So if we see the opportunity to make use of it during the course of this quarter in a disciplined fashion, we certainly would do so.
That would be great. Thanks for taking my questions.
Thanks for taking my questions.
One moment for our next question. Our next question comes from the line of Andrew Mirekchuk from BMO Capital Markets. Your line is open.
Congratulations on the quarter and thank you for all the comments and answers on the Kiana question. Going back to EGLE, is there any...
guidance or commentary you can give us on how Q2 is going? Is generally the performance you've seen in Q1? Are you generally seeing that extend into Q2?
Fred is going to give you some kind of a... Fred speaking here. Right now Q2 is lining up to be I would say in the similar range as Q1. One thing I would like to mention though is the overperformance in Q1 really is at this point we see this as a 1-up.
Okay, and-
Generally, are there any other?
I guess variations that we should expect in the year in terms of performance of the mine in terms of scheduled downtime, scheduled moves in mining phases that would create variation in your expected.
performance for this year or is it looking more stable than, you know, call it recent quarters?
of the mills or any of the bigger equipment, let's say, at the mines and that's true for both operations. So yeah, you can expect a steady stream of production from the two sites based on what we're seeing so far. It looks like the year is going to be, I would say, a year and a half.
There was going to be very few variations. Okay, last question is just maybe for Mike. On one of those slides you put up had a had the boundary between the exploration license and the mine license and if I interpreted that correctly does the Falcon zone
head for that boundary or am I looking at misinterpreting that? That is correct Andrew. Right now the Falcon Zone and what we consider the recent extension of that zone is within the least boundary.
And then after that further to the west towards New Lake and Nine Zone, that would be on our regular expiration claims.
and that's an area that we have permits typically to drill on that area and would require a separate if we ever got to the mining stage there. But for now any mine that we would do in Falcon and the immediate extension of that is on our lease area.
and that's an area that we have permits typically to drill on that area and would require a separate version if we ever got to the mining stage there. But for now any mine that we would do in Falcon and the immediate extension of that is on our lease area, our mining lease.
Thank you very much for all the answers and I'll pass the microphone to the next person. Thank you. Thanks Andrew.
One moment for our next question. Our next question comes from the line of John Schooldick from Desjardins. Your line is now open.
Yeah, thanks for taking my questions guys. Most of them have been answered, but I've got one boring one left for you just on depreciation. It was higher this quarter than in the past. So just wondering if this is kind of a new run rate. We should look at going forward.
Yeah, it definitely is the level that we're going to be at. We've started to depreciate Kina using the EOP approach since we declared commercial production December 1st, 2022. So that's where the significant increase is. Okay, so we can look at kind of the per ounce depreciation this quarter and kind of apply that.
Okay, that makes sense. And last one for me, just looking at the resource grades, I think you're doing some.
Some conversion drilling and just wondering if with the tighter drill spacing, do you expect some higher grades? Do you expect those resource grades to move closer to reserve grades with the tighter spacing? Yeah, sorry. So was that an Eagle or a Kenan? I didn't catch that. Sorry. I guess
Both more I guess at Kina though it's a bit more pronounced. Yeah certainly you know that the Kina is you know definitely the high grade part of all the mineralization on the property. And you know that's what's really in our reserve base and a lot of the inferred is in some of the surrounding zones where the grade is lower.
So that's how that balances in the equation of the inverted. Some of them measured and indicated this lower grade overall. Certainly more drilling helps a lot here.
better identify these high-grade shoots at both projects, really in both high-grade mines. Typically with that, better defining the resources and reserves to get a bump in grade typically as we get closer to the reserve status.
Okay, no, interesting. I appreciate that. That's it for me. Thanks, guys.
Thanks Joe.
One moment for our next question. Our next question is from the line of John Tomassos from John Tomassos' very independent research. Your line is open. Your line is open.
Congratulations on all the good work. Now that it's May 11 and the second quarter is almost half over.
Does it look like the June quarter production will be at least as much as the first quarter production?
If I could answer the question John , the answer is...
very much in line with that. We are in a good position going into...
the year satisfying the guidance that we've provided and We believe that our performance will continue. We did say previously that we were back in weighted
Because of the mining sequence that we saw in Q1, we have brought some of those answers into Q into H1 but generally we'll see a consistent...
performance going forward. I saw in the release that you already raised Canadian $20 million of equity. I guess that was through March 31.
and the cash balance is Canadian 25 or
slightly over half of the Canadian 47 in debt.
Should we interpret from that that you might only need to raise another Canadian 10 or 20 million of equity in view of the rising gold price, the good production?
the horizontal development being slightly ahead of budget, etc. Yeah, I'd like to just emphasize that the $25 million that we have in cash is generally what we need from a continued working capital point of view. So making that regional revenue less aspirational on what's being paid might be tough, but it
We need to have that in place on a continuous basis. So we really look at the $47 million in the revolver with the debt that we're carrying there at a rate of close on 7.7%. So now intentions are to have that pay down. I'd say the numbers that you quoted there.
would be at least what we choose to do during the quarter. It could well be higher if we see the opportunity.
I'm not smart enough to understand stocks morally. Today we're down 10%.
Is your policy
opportunistic with the ATM where when there's a lousy day like today when we're down 9 or 10%, you wouldn't sell shares and on a good day when you're up 10% that's the day you'd sell shares or you just sell a little bit every day.
It's very much a basis of what the market is doing on an ongoing basis. I mean we do see...
significant fluctuation during the day as you know and so we provide a floor and guidance to those that are doing it for us and we are all involved almost on a
half-day basis as to where we are relative to that floor and what the market is doing and how we wish to make use or not make use of the
be true. So you know that's part of the discipline that we exercise in the use of it.
So you know that's part of the discipline that we exercise in the use of it. Good, thank you very much.
Thank you. That concludes our Q&A session for today. As well as this concludes today's conference call, thank you for participating. You may now disconnect. Everyone have a great day.