Mr. Rolly Uloth reports
WESDOME REPORTS FOURTH QUARTER AND ANNUAL OPERATING AND FINANCIAL RESULTS
Wesdome Gold Mines Ltd. has released its financial and
operating results from its Canadian operations for the year ended
Dec. 31, 2013. This information should be read in conjunction with
the company's annual financial statements, and management's discussion
and analysis.
Highlights
- $4.4-million free cash flow generated in the fourth quarter, despite weak gold prices;
- Eagle River produces 15,700 ounces at 12.3 grams per tonne gold in Q4;
- $14.7-million in cash and gold bullion at market as at Dec. 31, 2013;
- Reserves increase 28 per cent, net of depletion;
- Two new high-grade discoveries at Eagle River;
- Technical and management experience strengthened;
- Announced Moss Lake Gold Mines acquisition.
Rolly Uloth, president and chief executive officer, commented: "A weak gold market forced the
industry to reinvent itself. We refocused on our core assets and liked
what we saw. I think the fourth quarter performance demonstrates what our team and assets are capable
of."
Overall performance
The company owns and operates the Eagle River mine complex in Wawa,
Ont., and the Kiena mine complex in Val d'Or, Que. On Jan. 1,
2012, the Mishi mine in Wawa commenced commercial production. The
Eagle River and Mishi mines feed a common mill, and are referred to as
the Eagle River mine complex. The Eagle River mine has been in
continuous production since commercial production commenced Jan. 1,
1996. It has produced 961,936 ounces to date. The Kiena mine was
purchased by the company in 2003. It restarted commercial production
on Aug. 1, 2006. It was previously in production from 1982 to 2002.
To date the Kiena mine has produced 1,757,475 ounces of gold.
At Dec. 31, 2013, the company had $8.5-million in working capital.
In 2013, revenue exceeded mining and processing costs by $15.4-million,
and $10.9-million in capital costs were incurred. Cash flow from
operations totalled $13.3-million and a net loss of $3.9-million was
recorded on one-time, non-cash changes.
In 2013, 52,980 ounces of gold were produced and 54,914 ounces were
sold. Production costs decreased 25.3 per cent to average $1,088 per ounce for
the year, and at year-end the company had 7,034 ounces of gold
inventory.
On March 7, 2013, the company announced the suspension of operations at
the Kiena mine complex. This preserved and improved the company's
financial position, allowing capital allocation to projects with better
returns to shareholders. Kiena remains a good long-term investment, but
tight margins and declining gold prices forced prompt action.
External factors that significantly influenced the financial and
operational results in 2013 were threefold:
- Weather -- Spring floods and a lightning strike on the main electrical transformer resulted in a loss of about two months of milling.
- Crashing market confidence -- Gold prices dropped 30 per cent after rising for 10 years. Investors capitulated and sold off gold shares. The situation was exacerbated by fund redemptions forcing sales into an illiquid, no-bid market. The consequences of these losses were an industry-wide management rout (and its associated costs) to which the company was not immune.
- Rise of anti-mining public sentiment -- The consequences of this are intensified regulation and economic pressures on mine operators. Significant cumbersome amendments to both the Ontario and Quebec Mining Acts were adopted in 2013. The implementation of these amendments could have a material impact on financial results going forward.
On the bright side, conditions forced a refocus on basics and pruning of
higher-cost production, increased quality manpower availability, and
enabled quality strategic tuck-in acquisitions at very reasonable
costs. The company remains confident in the longer-term potential of its assets
and is relieved to put 2013 in the rear-view mirror.
RESULTS OF OPERATIONS
Three months ended Dec. 31, 12 months ended Dec. 31,
2013 2012 2013 2012
Eagle River mine complex
Eagle River mine
Tonnes milled 39,766 36,940 124,861 155,020
Recovered grade (g/t) 12.3 7.0 10.7 6.5
Production (oz) 15,726 8,314 42,850 32,223
Mishi mine
Tonnes milled 2,788 11,919 22,536 64,915
Recovered grade (g/t) 2.5 1.5 3.3 2.3
Production (oz) 221 562 2,360 4,776
Surface stockpile (tonnes) 81,443 37,301 81,443 37,301
Total Eagle River mine complex
Production (oz) 15,947 8,876 45,210 36,999
Sales (oz) 13,400 7,500 46,800 36,400
Bullion revenue ($000) 17,882 12,709 67,777 60,545
Mining and processing costs
(cost of sales) ($000) 12,114 11,460 50,446 44,759
Mine operating profit ($000) 5,768 1,246 17,331 14,786
Kiena mine complex
Tonnes milled - 70,279 97,158 265,872
Recovered grade (g/t) - 2.2 2.5 2.2
Production (oz) - 4,869 7,700 18,814
Sales (oz) 1,514 5,000 8,114 19,100
Bullion revenue ($000) 2,046 8,498 11,949 31,763
Mining and processing costs
(cost of sales) ($000) 1,970 6,970 13,836 31,780
Mine operating profit (loss) ($000) 76 1,528 (1,887) (17)
Total mine operations
Production (oz) 15,947 13,745 52,980 55,813
Sales (oz) 14,914 12,500 54,914 55,500
Gold inventory (oz) 7,034 8,965 7,034 8,965
Bullion revenue ($000) 19,928 21,207 79,726 92,308
Mining and processing costs
(cost of sales) ($000) 14,084 18,430 64,282 76,539
Mine operating profit ($000) 5,844 2,777 15,444 15,769
Gold price realized ($/oz) 1,336 1,697 1,452 1,660
In 2013, bullion sales exceeded mining and processing costs resulting in
a mine operating profit, or gross margin, of $15.4-million. In
addition to these direct operating costs, additional cash costs,
including royalty payments, corporate and general costs, and interest
payments amounted to $8.8-million. These other costs were $4.0-million
greater than last year's due to expenses related to reconfiguring the
board and management, and costs related to suspending mining operations
at Kiena. The company expects such costs to return to normal levels in
subsequent years. Additionally, as a result of the decline in gold
prices observed in 2013, the company recorded a one-time impairment
charge of $1.7-million against its deferred tax assets, due to the
adverse impact of the price decline on future revenue forecasts.
At the Eagle River mine recovered grades increased 65 per cent from last year's
average to 10.7 g/t Au. This lowered production costs per ounce to
$980 from $1,212 in 2012. Proven and probable reserves increased 28 per cent,
net of depletion. Two new parallel zones were discovered, and the company is now forecasting potential to extend the high-grade mining sequence
beyond 2015.
At Mishi, the company suspended contract mining in the spring and continues to work
off substantial ore stockpiles of 81,443 tonnes grading 2.8 g/t Au
at year-end. In 2013, the company milled 22,536 tonnes at a recovered grade of
3.3 g/t Au to produce 2,360 ounces. Mishi proven and probable
reserves increased to 1,592,000 at 2.2 g/t Au with a life-of-mine
stripping ratio of 2.7 to 1.
The company is focused on refurbishing and expanding the milling and tailings
management systems to increase production and decrease unit costs
moving forward. The company expects a 50-per-cent increase in mill throughput in 2014
with overall costs stable.
Mining operations at Kiena were suspended June 30, 2013. Costs
associated with this action amounted to about $3.5-million. This
included a one-time charge in the fourth quarter of $1.5-million
against its parts inventory at the mine. Also, an additional $600,000 impairment charge was recorded to cover the period Jan. 1,
2013, to June 30, 2013. About $500,000 in cash proceeds was derived
from equipment sales. Furthermore, some equipment and materials
transported to the Eagle River mine complex are already generating
tangible productivity improvements. The company estimates costs to maintain and
explore the Val d'Or properties and infrastructure at about $2.0-million per year. The company envisions a two-year exploration program,
targeting higher-grade portions of substantial resources for
expansion. In 2014, planning, costing and scheduling work will be
undertaken to define more clearly the economic conditions required to
generate reasonable risk-adjusted returns. All options will be
considered for the Kiena property to enhance shareholder value.
Two strategic acquisitions were initiated in 2013. The company merged with
Windarra Minerals Ltd. to consolidate and expand its land position at
Mishi and eliminate future royalties. Subsequent to year-end, the company announced a business combination with subsidiary company Moss Lake Gold
Mines. This is scheduled to close in the spring of 2014, and will
clarify ownership and a potential development path for the large Moss
Lake gold deposit located near Thunder Bay, Ont.
In summary, in an environment of unforeseen tumultuous celestial and
market upheavals, the company posted a small loss of $2.2-million on one-time
costs and charges, reduced costs per ounce significantly, and set a
clear capital investment path that should generate strong returns
moving forward.
Fourth quarter
During the fourth quarter of 2013, combined operations produced 15,947
ounces of gold and 14,914 ounces were sold at an average realized price
of $1,336 per ounce. This represents a 16-per-cent increase in production and
a 19-per-cent increase in ounces sold compared with the fourth quarter of 2012.
Realized gold prices were $1,336 per ounce, or 21 per cent lower than in the
fourth quarter, 2012.
Production came primarily from Eagle River, which generated 15,726
ounces of gold from 39,766 tonnes milled at an average recovered grade
of 12.3 g/t Au.
This solid performance generated free cash flow of $4.4-million in the fourth
quarter despite weak gold prices. The company believes this is a good
representation of what its streamlined operations are capable of.
Liquidity and capital resources
At Dec. 31, 2013, the company had working capital of $8.5-million
compared with $13.9-million at Dec. 31, 2012. During fiscal 2013,
capital expenditures totalled $11.1-million compared with $11.2-million
in 2012. Capital expenditures were concentrated in underground
development, mine and mill infrastructure. If the one-time charge of
$1.5-million related to Kiena's parts inventory is not taken into
account, working capital as at Dec. 31, 2013, would have been $10.0-million, compared with $9.8-million as at Sept. 30, 2013.
The company carries an inventory of gold. At Dec. 31, 2013, this
liquid asset consisted of 7,034 ounces of gold with a market value of
approximately $9.0-million. The gold inventory is carried at the lower
of cost or market, in this case at a cost of $5.7-million.
Furthermore, the Mishi ore stockpile at the mill is estimated to
contain about 6,500 ounces of recoverable gold, or approximately $4.5-million, net of milling costs. Including these non-international financial reporting standards working
capital adjustments, working capital would increase to approximately
$16.3-million.
On May 24, 2012, the company completed a $7,021,000 placement of
unsubordinated convertible debentures. The term is five years bearing
interest at 7 per cent per annum payable semi-annually and convertible into
common shares at $2.50 per common share. The net proceeds of
$6,821,000, along with cash at hand, were used to redeem existing
convertible debentures in the amount of $10,931,000 that matured on May
31, 2012. This resulted in the company paying down $4.1-million in
debt.
Management believes the company has sufficient liquidity to carry out mining, development and exploration programs, and prefers not to dilute
shareholder interest with equity issues.
With current gold prices, operations are capable of generating strong
cash flow as evidenced by the fourth quarter results.
Outlook
In 2014 the company forecasts 50,000 ounces of gold production, or a 10-per-cent increase
from Eagle River and Mishi over 2013. Production will come primarily
from the Eagle River mine and the Mishi stockpile, and strong grades at
the Eagle River mine are expected to persist. Mill throughput is
expected to increase 50 per cent during the year, resulting in increased Mishi
throughput, as mill feed from Eagle River is expected to remain steady.
A strong fourth quarter performance, new gold discoveries, recently
resurgent gold prices and an ambitious yet realistic capital investment
plan give the company great confidence in the potential of its streamlined
operations.
At Mishi, reserves within the existing mine plan represent less than one-third of the open-pit resource base. Subject to positive infill
drilling results, and increased mill availability and capacity, the company sees
significant potential for future expansion.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands, except per share)
Three months ended Dec. 31, 12 months ended Dec. 31,
2013 2012 2013 2012
Revenue
Gold and silver bullion $ 19,928 $ 21,207 $ 79,726 $ 92,308
Operating expenses
Mining and processing 14,083 18,430 64,281 76,539
Depletion of mining properties 2,228 1,570 7,838 8,340
Production royalties 397 252 1,158 965
Corporate and general 652 920 3,436 2,703
Share-based compensation 149 90 349 601
Kiena restructuring and care and
maintenance costs 2,091 - 3,437 -
Impairment charges - 60,948 633 61,898
19,600 82,210 81,132 151,046
(Loss) income from operations 328 (61,003) (1,406) (58,738)
Interest and other income 34 10 149 70
Interest on long-term debt (196) (206) (785) (1,081)
Other interest (1) (8) (30) (26)
Accretion of decommissioning liability 175 (14) 111 (54)
(Loss) income before income tax 340 (61,221) (1,961) (59,829)
Income tax expense (recovery)
Current - 2 - 13
Deferred 2,122 (14,759) 1,907 (14,589)
2,122 (14,757) 1,907 (14,576)
Net (loss) (1,782) (46,464) (3,868) (45,253)
Total comprehensive (loss) (1,782) (46,464) (3,868) (45,253)
Net (loss) and total comprehensive
(loss) attributable to
Non-controlling interest (53) (41) (160) (195)
Owners of the company (1,729) (46,423) (3,708) (45,058)
(1,782) (46,464) (3,868) (45,253)
Basic and diluted (loss) per share
Basic (0.02) (0.46) (0.04) (0.44)
Diluted (0.02) (0.46) (0.04) (0.44)
We seek Safe Harbor.
© 2025 Canjex Publishing Ltd. All rights reserved.