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Press release from CNW Group

Wesdome Reports Further Improvement in Earnings and Cash in Q3 2012

Monday, November 12, 2012

Wesdome Reports Further Improvement in Earnings and Cash in Q3 201208:00 EST Monday, November 12, 2012TORONTO, Nov. 12, 2012 /CNW/ - Wesdome Gold Mines Ltd (TSX: WDO) ("Wesdome" or the "Company") is pleased to report its unaudited financial and operating results from its Canadian operations for the third quarter ended September 30, 2012.  This information should be read in conjunction with the Company's interim unaudited financial statements and Management's Discussion and Analysis for the third quarter ended September 30, 2012 which will be available for viewing on the Company's website at www.wesdome.com and on SEDAR (www.sedar.com).  All figures are in Canadian dollars unless otherwise specified.The Company owns and operates the Eagle River mine complex in Wawa, Ontario and the Kiena mine complex in Val-d'Or, Quebec.  On January 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 complex.  The Eagle River mine has been in continuous production since commercial production commenced January 1, 1996.  It has produced over 900,000 ounces to date.  The Kiena mine was purchased by the Company in 2003.  It restarted commercial production on August 1, 2006.  It was previously in production from 1982 - 2002.  To date the Kiena mine has produced over 1.7 million ounces of gold.The third quarter of 2012 highlights are as follows:Production of 14,500 ounces of gold compared to 10,300 ounces last yearCash flow from operations of $3.9 million and $10.5 million year-to-dateCash and bullion at market $18.8 millionNet Income $1.2 million or $0.01 per shareDonovan Pollitt, President & CEO comments "We've made considerable progress in controlling costs and generated modest earnings and decent cash flow from operations.  The new Mishi mine's grades are above forecast, which is very positive for the first year of any new mine."At September 30, 2012, the Company had $15.9 million in working capital including 7,722 ounces of gold bullion in inventory.  For the first nine months of the year, revenue exceeded mining and processing costs by $13.0 million, $7.6 million in capital costs were incurred and $4.1 million of debt was retired.  Cash flow from operations totalled $10.5 million and net earnings were $0.01 per share.During the third quarter, the new Mishi mine produced a recovered grade of 3.0 gAu/tonne.  The stockpile of ore at the mill grew 10% to 40,000 tonnes since June 30, 2012.  The Eagle River mine continued its steady performance and the Kiena mine showed steady, modest production while aggressively developing new mining areas.In general, the mining industry has been stretched due to unprecedented activity.  Experienced and competent manpower remain in short supply.  We see contractor and materials availability starting to ease at this point.  Large international capital projects have been suspended and tight risk capital markets have inhibited competing exploration and development projects.RESULTS OF OPERATIONS      Three Months Ended Sept 30 Nine Months Ended Sept 30 2012 20112012 2011EAGLE RIVER COMPLEX         Eagle River Mine          Tonnes milled 43,55646,867 134,188133,810 Recovered grade (g/t) 5.64.65.54.7 Production (oz) 7,7976,86123,90920,127     Mishi Mine (commercial production commenced January 1, 2012)          Tonnes milled 18,284 - 52,996- Recovered grade (g/t)3.0 - 2.5 - Production (oz) 1,747 -4,214- Surface stockpile (tonnes)40,000-40,000-     Total Eagle River Complex          Production (oz) 9,544 6,861 28,123 20,127 Sales (oz) 8,400 8,000 28,900 24,000      Bullion revenue ($000) † 13,851 13,184 47,836 36,015 Mining and processing costs ($000) 10,244 10,470 33,299 23,844      Mine operating profit ($000) *3,607 2,71414,537 12,171 Gold price realized ($Cdn/oz)1,643 1,668 1,653 1,499     KIENA MINE COMPLEX          Tonnes milled68,400 57,395195,593198,897 Recovered grade (g/t) 2.31.92.22.3 Production (oz) 4,9623,47613,94514,898 Sales (oz) 5,600 4,00014,10018,000 Bullion revenue ($000) †9,2576,43923,26526,422 Mining and processing costs ($000) 8,1268,35624,81026,892      Mine operating profit (loss) ($000) *1,131 (1,917)(1,545)(470) Gold price realized ($Cdn/oz)1,6431,6061,6531,464     TOTAL MINE OPERATIONS          Production (oz)14,50610,33742,06835,025 Sales (oz)14,00012,00043,00042,000 Bullion inventory (oz)7,7225,9317,7225,931 Bullion revenue ($000) †23,10819,62371,10162,437 Mining and processing costs ($000)18,37018,82658,10950,736      Mine operating profit ($000) *4,73879712,99211,701 Gold price realized ($Cdn/oz)1,6431,6461,6531,484† Bullion revenue includes minor by product silver sales* The Company has included in this report certain non-IFRS performance measures, including mine operating profit and mining and processing costs to applicable sales. These measures are not defined under IFRS and therefore should not be considered in isolation or as an alternative to or more meaningful than, net income(loss) or cash flow from operating activities as determined in accordance with IFRS as an indicator of our financial performance or liquidity. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company's performance and ability to generate cash flow. Mine operating profit excludes the following specific items included as operating expenses on the Consolidated Statements of Income: Depletion, Production royalties, Corporate and general, Share-based compensation and Amortization of capital assets.During the third quarter, 2012, combined operations produced 14,506 ounces of gold and 14,000 ounces were sold at an average realized price of $1,644 per ounce.  This represents a 40% increase in production compared to the third quarter, 2011, while realized gold prices were essentially the same.For the first nine months of 2012, our mines produced 42,068 ounces of gold and 43,000 ounces were sold at an average price of $1,651 per ounce representing a 20% increase in production and an 11% increase in gold prices compared to the first nine months of 2011.In the third quarter, 2012, mining and processing costs related to sales declined 2% compared to those in the third quarter, 2011.  For the year to date, 2012, mining and processing costs are up 15% compared to last year.  This increase is due primarily to Kiena's first quarter performance in 2012.  As previously disclosed, Kiena's first quarter was a catch-up development period with weak production following the insolvency of a key development contractor in late 2011.  We are very encouraged to see third quarter costs declining in light of industry-wide inflation, the location of our current production areas and the fact that we have a third mine in production this year.In the third quarter, 2012, bullion revenue exceeded mining and processing costs resulting in a mine operating profit, or gross margin, of $4.7 million.  In addition to these direct operating costs, other direct costs, including royalties, corporate and general costs and net interest costs for the third quarter amounted to $1.0 million.  Capital costs were reduced to $1.8 million in the third quarter compared to $5.4 million in the third quarter, 2011.The combined Eagle River and Mishi operations produced 9,544 ounces in the third quarter and 28,123 ounces year to date.  Grades increased 22% quarterly compared to last year and 17% for the nine month period compared to last year.  We are in the process of developing a haulage drift on the 740 metre level at Eagle River.  This will enable production to start in an area of the 811 Zone where rich grades have been confirmed by sublevel development.  We expect initial production from this area near the end of the year.The Mishi mine produced 1,747 ounces of gold from 18,284 tonnes at a recovered grade of 3.0 gAu/tonne during the third quarter.  Throughput was about half what was initially planned due to availability of higher grade Eagle River millfeed.  We are very encouraged by the results of rigorous grade control efforts at this early stage in the life of mine.  The ore stockpile at the mill has grown to 40,000 tonnes.  We are investing to increase efficiencies and capacity at the mill.  Favourable drilling results both east and west of existing and planned operations give us confidence in potential to increase mine life or expand operations.At Kiena, both grade and throughput increased compared to the third quarter, 2011.  We continue to aggressively develop new production areas.  Although gross margins are thin, they are positive and hopefully will continue to buy us time as we develop some areas with better grades.  The mine's performance remains extremely sensitive to gold prices.  Work will continue to ensure tight cost control and optimize development and production sequences.LIQUIDITY AND CAPITAL RESOURCESAt September 30, 2012, the Company had working capital of $15.9 million compared to $7.2 million at December 31, 2011.  During the first nine months of 2012, capital expenditures totalled $7.6 million compared to $14.1 million in the first nine months of 2011.  Capital expenditures were concentrated in minesite development, mine and mill infrastructure.On May 24, 2012, the Company completed a $7,021,000 placement of unsubordinated convertible debentures.  The term is 5-years bearing interest at 7% 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 $11,539,000 that matured on May 31, 2012, of which $10,931,000 were still outstanding on the maturity date.  This resulted in the Company paying down $4.1 million in debt.The result of this financing is that interest costs moving forward will decline and working capital improved by moving the liability component to long term liabilities from short term liabilities.The Company traditionally maintains an inventory of refined gold bullion.  At September 30, 2012, this liquid asset consisted of 7,722 ounces of gold with a market value of $13.5 million.  The bullion inventory is carried at the lower of cost or market, in this case at a cost of $11.1 million.Additionally, the Mishi ore stockpile at the mill, which totals 40,000 tonnes is carried in inventory at a cost of $3.2 million.Management believes we have sufficient liquidity to carry out our mining, development and exploration programs and prefers not to dilute shareholders' interest with equity issues.With current gold prices, our mining operations are capable of generating strong operating cash flow as they have in the past.OUTLOOKWe continue to aim for a 60,000 ounce annual production target.  We plan to be in position to have some of the high grade 811 Zone ore we have been developing at Eagle River into the production sequence near year-end and to be ready for a strong start in 2013.ABOUT WESDOMEWesdome is celebrating its 25th year of continuous mining operations in Canada.  It currently has three producing gold mines with wholly-owned mining and milling complexes located in Wawa, Ontario and Val d'Or, Québec.  The Company has 101.9 million shares issued and outstanding and trades on the Toronto Stock Exchange under the symbol "WDO".This news release contains "forward-looking information" which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company and its projects. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances, management's estimates or opinions should change, except as required by securities legislation. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.                                        Wesdome Gold Mines Ltd.                   Condensed Interim Consolidated Statements of Financial Position                   (Unaudited, expressed in thousands of Canadian dollars)                                        September 30         December 31 2012          2011Assets                   Current                    Cash and cash equivalents$   3,253         $   5,215 Receivables    8,081             7,337 Inventory     17,451             15,271     28,785             27,823                    Restricted funds     2,065             2,385Deferred income taxes     445              615Mining properties and equipment     90,981             90,114Exploration properties    30,008             30,886 $   152,284         $   151,823                    Liabilities                   Current                    Payables and accruals$   12,238         $   8,944 Current portion of obligations under finance leases      662              913 Convertible 7% debentures     -               10,726     12,900             20,583                    Income taxes payable    33             22Obligations under finance leases    324             818Convertible 7% debentures    5,702              -Provisions    1,633             1,593     20,592             23,016                    Equity                   Equity attributable to owners of the Company                    Capital stock      122,651             122,685 Contributed surplus    2,251             1,960 Equity component of convertible debentures     1,204             1,970 Retained earnings    5,133             1,585     131,239             128,200                    Non-controlling interest    453             607Total equity    131,692             128,807                     $   152,284         $   151,823  Wesdome Gold Mines Ltd.Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)(Unaudited, expressed in thousands of Canadian dollars)     Three Months Ended Sept 30Nine Months Ended Sept 30     20122011 20122011Revenue         Gold and silver bullion  $23,108$19,623$71,101$62,437 Operating expenses Mining and processing   18,370 18,826 58,109 50,736 Depletion of mining properties   2,321 1,518 6,770 4,990 Production royalties   238 223 713 592 Corporate and general   524 536 1,783 2,084 Share based compensation   159 237 511 803      21,612 21,340 67,886 59,205 Income (loss) from operations   1,496 (1,717) 3,215 3,232Interest and other income   (47) 45 60 256Interest on long term debt   (220) (401) (875) (1,191)Other interest   - - (18) (1,190)Accretion of decommissioning liability   (13) (16) (40) (48)Write-down of exploration property   - - (950) -Income (loss) before income tax   1,216 (2,089) 1,392 1,059Income tax expense (recovery)           Current   (18) 28 11 403 Deferred   415 (501) 170 912       397 (473) 181 1,315Net income (loss)   819 (1,616) 1,211 (256)Total comprehensive income (loss)    $819$(1,616)$1,211$(256)Net income (loss) and total comprehensive income attributable to:            Non-controlling interest$(78)$(51)$(154)$(174)  Owners of the Company 897 (1,565) 1,365 (82)     $819$(1,616)$1,211$(256) Earnings (loss) and comprehensive earnings (loss) per share           Basic  $0.01$(0.02)$0.01$(0.00) Diluted  $0.01$(0.02)$0.01$(0.00)                      Wesdome Gold Mines Ltd.         Condensed Interim Consolidated Statements of Cash Flows        (Unaudited, expressed in thousands of Canadian dollars)                      Three Months Ended Sept 30     Nine Months Ended Sept 30     2012  2011  2012  2011  Operating activities          Net income (loss) $819$(1,616)$1,211$(256)  Depletion of mining properties  2,321 1,637 6,770 5,109 Accretion of discount on convertible debentures  60 170 290 495 Write-down of exploration property   -  -  950  -  Gain on sale of equipment   -  23 23 (22) Share-based compensation   159 237 511 803 Deferred income taxes   415 (501) 170 912 Interest paid   159 231 585 1,885 Accretion of decommissioning liability   13 17 40 49    3,946 198 10,550 8,975            Net changes in non-cash working capital  (1,779) (1,565) (91) (4,491)    2,167 (1,367) 10,459 4,484Financing activities          Exercise of options   -  148  -  1,595 Shares issued by a subsidiary of the Company to third parties   -   -   -  160 Funds paid to repurchase common shares under NCIB   -  (14) (42) (18) Redemptions of convertible debentures   -   -  (10,931)  -  Issuance of convertible debentures, net of financing   -   -  6,821  -  Repayment of obligations under finance leases  (187) (272) (745) (1,004) Interest paid  (159) (231) (585) (1,885) Dividends paid   -  -   -  (2,028)    (346) (369) (5,482) (3,180)Investing activities           Additions to mining and exploration properties  (1,771) (5,406) (7,565) (14,122) Proceeds on sale of equipment    - 30 3 141 Funds held against standby letters of credit  (5) 40 320 (5)    (1,776) (5,336) (7,242) (13,986)            Net changes in non-cash working capital  (355) 675 303 (585)    (2,131) (4,661) (6,939) (14,571)           Decrease in cash and cash equivalents  (310) (6,397) (1,962) (13,267)Cash and cash equivalents,          beginning of period  3,563 15,936 5,215 22,806Cash and cash equivalents,          end of period  $3,253$9,539$3,253$9,539            Cash and cash equivalents consist of:          Cash $2,448$4,475$2,448$4,475 Term deposit (1.46%, 2011: 1.00%)  805 5,064 805 5,064   $3,253$9,539$3,253$9,539  SOURCE: Wesdome Gold Mines Ltd.For further information: Donovan Pollitt, P.Eng., CFA  President & CEO 416-360-3743 ext 25 or George Mannard, P.Geo. Vice President, Exploration 416-360-3743 ext 22 8 King St. East, Suite 1305 Toronto, ON, M5C 1B5 Toll Free: 1-866-4-WDO-TSX Phone: 416-360-3743, Fax: 416-360-7620 Email: invest@wesdome.com, Website: www.wesdome.com