Mr. Duncan Middlemiss reports
WESDOME ANNOUNCES FOURTH QUARTER AND FULL YEAR 2016 FINANCIAL RESULTS AND RESERVE AND RESOURCE UPDATE
Wesdome Gold Mines Ltd. has released fourth quarter and full-year financial results for the year ended Dec. 31, 2016.
2016 summary:
-
Gold production of 47,737 ounces (2015: 50,470) in line with the company's revised guidance of 45,000 to 50,000 ounces;
- Eagle River mine underground production of 40,252 ounces (2015: 41,013) at a head grade of 7.9 grams per tonne (2015: 7.8) with a mill recovery of 93.5 per cent (2015: 94.9 per cent);
- Mishi open-pit mine production of 7,485 ounces (2015: 9,457) at a head grade of 2.0 g/t (2015: 2.6) with a mill recovery of 85.4 per cent (2015: 87.3 per cent);
- Total mill throughput of 309,035 tonnes averaging 844 tonnes per calendar day comparable with the previous year of 836 tonnes per calendar day;
- The Eagle River complex rebounded from an unusually poor first quarter 2016 to post respectable 2016 results; the mine sequence is now better balanced to avoid a recurrence going forward;
- Eagle River complex revenue of $81.6-million (2015: $73.5-million) on gold sales of 48,680 ounces (2015: 49,804) at an average realized price of $1,676 or $1,265 (U.S.) per ounce (2015: $1,475 or $1,153 (U.S.));
- Mine operating profit (1) of $26-million (2015: $17.7-million) increased compared with the previous year due to higher realized gold price despite a slight reduction in production and sales;
- Net income of $7.8-million (2015: loss of $4.7-million), or six cents per share (2015: loss of four cents); the 2015 year includes $5.2-million Kiena complex decommissioning costs, which were recorded directly on the income statement;
- Operating cash flow of $19.9-million (2015: $10.0-million), or 16.1 cents per share (2015: nine cents) increased due to higher realized gold price, $2.5-million revenue from gold derived from the Kiena complex mill cleanup and $2.6-million refund of prior-year exploration credits;
- Free cash flow (1) of ($8.4-million) (2015: ($5.7-million)), or (seven cents) per share (2015: (five cents)); the increased outflow in 2016 is due to increased exploration and capital expenditures as the company increased its exploration efforts and invested in equipment and infrastructure at the Eagle River complex;
- Production cash costs per ounce (1) were $1,194 or $901 (U.S.) (2015: $1,115 or $872 (U.S.)); the 7-per-cent increase in unit cost is due to a 5-per-cent decrease in gold production, stockpiling of low-grade Mishi ore, which was written down to net realizable value; increases in underground equipment maintenance costs, utility costs and development metres;
- All-in sustaining costs per ounce (AISC) (1) on a production basis of $1,707 or $1,289 (U.S.) (2015: $1,542 or $1,206 (U.S.)), an increase of 11 per cent over 2015 due to necessary expenditures on underground drilling, development and equipment;
- Cash and cash equivalents of $26.8-million, 1,234 ounces gold in inventory at market price of $1.9-million and working capital of $15.6-million as at Dec. 31, 2016.
2016 exploration and corporate development highlights:
- Eagle River surface drilling of the north portion of the mine diorite target returns promising results of the No. 7 zone along strike.
- Eagle River underground drilling extends No. 7 zone up plunge and enhances potential of the 300E zone, now 200 metres up plunge.
- Surface drilling discovers new zone 1.7 kilometres west of the Mishi open-pit mining operations.
- Kiena Deep drilling launched in second quarter 2016 intercepts high grades, which are substantially higher than the historical production grade profile of 4.5 grams per tonne. Drilling results support the presence of multiple zones of mineralization that remain open to depth and along strike.
- In 2016, the company spent $10-million on exploration for 104,000 metres of drilling (2015: $1-million for 21,000 metres).
- Mineral reserves net of 2016 production increased for the fourth consecutive year. Proven and probable reserves at Eagle River were 344,000 ounces (2015: 300,000 ounces) as at Dec. 31, 2016 -- a 15-per-cent increase from the prior year. Mishi pit reserves were lowered to 102,000 ounces (2015: 131,000) after mining and reconfiguring the west pit. Total reserves for the Eagle River complex was 446,000 ounces as at Dec. 31, 2016 (2015: 431,000).
- An equity financing was completed for net proceeds of $16-million in second quarter 2016.
- The sale of non-core Kiena complex assets was completed for proceeds of $7-million in second quarter 2016.
- The acquisition of the Coldstream and Hamelin properties in second quarter 2016 was followed by Moss Lake/Coldstream Fall/Winter exploration program launched with the goal of demonstrating potential to double the footprint of mineralization.
- Duncan Middlemiss was appointed president and chief executive officer on Aug. 15, 2016.
Fourth quarter summary:
- Gold production of 11,887 ounces (fourth quarter 2015: 13,570): Eagle River mine underground production of 10,595 ounces (fourth quarter 2015: 11,625) at a head grade of 8.2 g/t (fourth quarter 2015: 9.2 g/t) with mill recovery of 94.6 per cent (fourth quarter 2015: 94.2 per cent); Mishi open-pit mine production of 1,292 ounces (fourth quarter 2015: 1,945) at a head grade of 1.6 g/t (fourth quarter 2105: 2.3 g/t) with mill recovery of 81.6 per cent (fourth quarter 2015: 79.6 per cent);
- Total mill throughput of 73,321 tonnes (fourth quarter 2015: 75,285) averaging 797 tonnes (fourth quarter 2015: 818) per calendar day declined slightly from fourth quarter 2015 due to maintenance requirements on conveyors and dry stacker;
- Eagle River revenue of $22.2-million (fourth quarter 2015: $23.6-million) on gold sales of 13,490 ounces (fourth quarter 2015: 16,023) at an average realized price of $1,655 or $1,240 (U.S.) per ounce (fourth quarter 2015: $1,474 or $1,104 (U.S.));
- Mine operating profit (1) of $7.1-million (fourth quarter 2015: $7.8-million);
- Net income of $2.4-million (fourth quarter 2015: $1.1-million), or two cents per share (fourth quarter 2015: one cent);
- Operating cash flow of $5.0-million (fourth quarter 2015: $5.2-million), or 4.1 cents per share (fourth quarter 2015: four cents);
- Free cash flow (1) of ($3.7-million) (fourth quarter 2015: $2.7-million), or (three cents) per share (fourth quarter 2015: two cents);
- Production cash costs per ounce (1) were $1,185 or $888 (U.S.) (fourth quarter 2015: $1,029 or $770 (U.S.));
- All-in sustaining costs per ounce (1) on a production basis were $1,702 or $1,275 (U.S.) (fourth quarter 2015: $1,388 or $1,039 (U.S.)).
Note:
(1) A non-international financial reporting standard performance measure.
Mr. Middlemiss, president and chief executive officer, commented on the year-end 2016 results: "This was a transitional year for Wesdome with many achievements and positive changes. Despite a slow start to production, operating results improved throughout the year. The team brought higher-grade stopes into the mine plan ahead of schedule and controlled production costs, even as additional investments were made to expand mineral reserves, renew our capital equipment and extend our operating infrastructures. Work continues to increase gold production from the Eagle River underground mine, where our margins are highest. This, along with higher gold prices, resulted in higher operating cash flow and net income over 2015, despite lower production. Free cash flow was lower than 2015 primarily due to increased exploration spending and reserve development. This exploration work is necessary to determine the appropriate production profile scenario at the Eagle River complex.
"Wesdome had an exceptional year for exploration. Eagle River reserves increased 15 per cent net of depletion. The 300 E zone was drilled further and delineated, where the widths are significantly greater than previously encountered at Eagle River. The 7 zone was traced 200 metres up plunge towards surface. These results set the path for diversified working places underground with the goal of raising and stabilizing quarter-to-quarter production. We are very excited by the Kiena Deep discovery in Val d'Or, Que. Since announcing the discovery in August, 2016, we have increased the number of drills from two to four, and results continue to deliver grades substantially higher than the historic production-grade profile at Kiena of 4.5 g/t. Stepout holes confirmed mineralization now tested along 550 metres of strike length, indicating a potential large new gold system. We expect to make a decision on underground ramp development in the short term.
"In 2017, we expect production to increase over 2016's levels to range between 52,000 to 58,000 ounces at operating costs between $1,030 to $1,130 per ounce ($765 (U.S.) to $835 (U.S.) per ounce). We have implemented a cost-cutting program at the Eagle River complex, which is starting to yield results, and underground development work completed in 2016 has resulted in improved mine sequencing. We have a total of 11 drills on four assets -- three underground at Eagle River, two at Mishi, four at Kiena and two at Moss Lake. Our asset base is strong, and these are appropriate levels of exploration in order to return value to shareholders."
HIGHLIGHTS
(in $000, except per-share amounts)
Quarter ended Dec. 31, Year ended Dec. 31,
2016 2015 2016 2015
Revenue (1) $22,166 $23,622 $84,031 $73,465
Mine operating profit (2) 7,133 7,767 26,036 17,680
Net income (loss) 2,352 1,110 7,786 (4,701)
Net income adjusted (2) 3,047 1,977 7,988 3,186
Basic income (loss) per share 0.02 0.01 0.06 (0.04)
Basic income per share adjusted (2) 0.02 0.02 0.06 0.03
Cash flows from operating activities 4,976 5,153 19,927 10,055
Cash flows from operating activities adjusted (2) 5,671 5,783 20,129 12,771
Free cash flow (2) (3,735) 2,736 (8,437) (5,719)
Cash and cash equivalents 26,760 15,424 26,760 15,424
Working capital 15,561 12,507 15,561 12,507
Quarter ended Dec. 31, Year ended Dec. 31,
2016 2015 2015 2015
Eagle tonnes milled 42,607 42,185 170,369 173,189
Mishi tonnes milled 30,714 33,100 138,688 132,038
Total tonnes milled 73,321 75,285 309,037 305,227
Eagle River head grade (g/t) 8.2 9.2 7.9 7.8
Mishi head grade (g/t) 1.6 2.3 2.0 2.6
Eagle River underground mill recovery (%) 94.6 94.2 93.5 94.9
Mishi open-pit mill recovery (%) 81.6 79.6 85.4 87.3
Eagle recovered grade (g/t) 7.7 8.7 7.4 7.4
Mishi recovered grade (g/t) 1.3 1.9 1.7 2.2
Eagle ounces produced 10,595 11,625 40,252 41,013
Mishi ounces produced 1,292 1,945 7,485 9,457
Total ounces produced 11,887 13,570 47,737 50,470
Ounces sold 13,490 16,023 48,680 49,804
Average realized price (Cdn$/oz) $1,655 $1,474 $1,676 $1,475
Average realized price (U.S.$/oz) 1,240 1,104 1,265 1,153
Production cash costs (Cdn$/oz) 1,185 1,029 1,194 1,115
Production cash costs/oz (U.S.$/oz) 888 770 901 872
All-in-sustaining costs (Cdn$/oz) 1,702 1,388 1,707 1,542
All-in-sustaining costs (U.S.$/oz) 1,275 1,039 1,289 1,206
Average U.S. $ to Cdn $ exchange rate 1.3344 1.3353 1.3253 1.2790
Notes:
(1) Revenue for the year ended Dec. 31, 2016, includes $2.4-million in gold sales from
the Kiena complex mill cleanup in third quarter 2016.
(2) A non-international financial reporting standard performance measure.
MINERAL RESERVES
Mine Category Tonnes Grade Contained
(g/t) ounces
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2016 2015 2014 2013
Eagle River Proven 208,000 10.2 68,000 53,000 39,000 41,000
Probable 949,000 9.0 276,000 247,000 226,000 128,000
--------- ---- ------- ------- ------- -------
Proven + probable 1,157,000 9.2 344,000 300,000 265,000 169,000
Mishi Proven 259,000 1.8 15,000 11,000 12,000 16,000
Probable 1,361,000 2.0 87,000 120,000 109,000 96,000
--------- ---- ------- ------- ------- -------
Proven + probable 1,620,000 2.0 102,000 131,000 121,000 112,000
Total 446,000 431,000 386,000 281,000
MINERAL RESOURCES (exclusive of reserves)
Mine Category Tonnes Grade Contained
(g/t) ounces
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2016 2015 2014 2013
Eagle River Inferred 327,000 8.1 85,000 170,000 80,000 105,000
Mishi open pit Indicated 3,679,000 2.1 248,000 248,000 248,000 248,000
Inferred 764,000 2.4 59,000 59,000 59,000 59,000
Mishi underground Indicated 567,000 4.5 82,000 82,000 82,000 82,000
Inferred 437,000 5.8 81,000 81,000 81,000 81,000
------- ------- ------- -------
Total Indicated 330,000 330,000 330,000 330,000
Inferred 225,000 310,000 220,000 245,000
------- ------- ------- -------
EAGLE RIVER PROVEN AND PROBABLE RESERVE BREAKDOWN BY ZONE
Structure Tonnage Grade (g/t) Contained oz Per cent (oz)
No. 8 255,000 10.6 87,000 25
No. 300 456,000 9.0 132,000 38
No. 7 310,000 9.2 91,000 27
Other 136,000 7.8 34,000 10
--------- ---- ------- ---
Total 1,157,000 9.2 344,000 100
Notes to mineral reserves and mineral resources tables:
- Mineral reserves and mineral resources estimates have been made in accordance with the standards
of the Canadian Institute of Mining, Metallurgy and Petroleum and National Instrument 43-101
(standards of disclosure for mineral projects).
- Numbers reflect rounding to nearest 1,000 tonnes and ounces.
- All mineral resources are in addition to mineral reserves.
- Mineral resources are not in the current mine plan and therefore do not have demonstrated economic viability.
- Assumed gold price of $1,550 per ounce.
- All mineral reserves at Eagle River employ a 1.5-metre minimum width, a 3.0-gram-per-tonne minimum grade for
continuity and include 1.0 metre of external dilution. Mineral resources are reported in situ with no dilution provision.
- All mineral reserves at Mishi employ a 1.0-gram-per-tonne-cut-off grade and a 3.0-metre minimum width. Estimates provide for 10-per-cent
dilution, 11-per-cent lost ore and metallurgical recoveries of 86 per cent. Open-pit mineral reserves extend to an average depth of
70 m.
- Mishi mineral reserves currently have a life-of-mine stripping ratio of 2.3 tonnes of waste per tonne of ore.
- Mishi open-pit mineral resources extend to a depth of 110 m, employ a 1.0-gram-per-tonne-cut-off grade and a 3.0-metre minimum width, and
are reported in situ with no dilution or lost ore provisions.
- Mishi underground mineral resources are reported in situ employing a 3.0-gram-per-tonne-cut-off grade and a 1.5-metre minimum mining
width.
- At Eagle River, all high assays are cut to either 60 g/t or 140 g/t for individual zones. This is based on grade frequency histograms at 95 percentile.
- At Mishi, all high drill core assays are cut to 45 g/t. All high blasthole assays are cut to 25 g/t. These are based
on where a ragged tail on grade frequency histograms commence.
- A density or tonnage factor of 2.7 tonnes per cubic metre is applied at Eagle River and 2.8 at Mishi.
Technical disclosure
The technical and scientific disclosure in this press release has been prepared and approved by George Mannard, PGeo, vice-president, exploration, and Philip Ng, chief operating officer, of Wesdome, qualified person, as defined by National Instrument 43-101 disclosure standards.
Conference call details
Wesdome will be hosting a call to discuss these results at 9 a.m. ET on Feb. 23, 2017. Participants are invited to join using the following information:
Wesdome Gold Mines fourth quarter and full-year 2016 financial results conference call:
North American toll-free: 1-844-202-7109
International dial-in number: 1-703-639-1272
Passcode: 73151421
The webcast can also be accessed under the news and events section of the company's website.
About Wesdome Gold Mines Ltd.
Wesdome Gold Mines is in its 29th year of continuous gold mining operations in Canada. The Eagle River complex in Wawa, Ont., is currently producing gold from two mines, the Eagle River underground mine and the Mishi open pit, from a central mill. Wesdome is actively exploring its brownfields asset, the Kiena complex in Val d'Or, Que. The company has further upside at its Moss Lake gold deposit, located 100 kilometres west of Thunder Bay, Ont., which is being explored and evaluated to be developed in the appropriate gold price environment.
We seek Safe Harbor.
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