The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

Wesdome reports fourth quarter and annual operating and financial results

Friday, February 28, 2014

Wesdome reports fourth quarter and annual operating and financial results

08:52 EST Friday, February 28, 2014

TORONTO, Feb. 28, 2014 /CNW/ - Wesdome Gold Mines Ltd (TSX: WDO) ("Wesdome" or the "Company") is pleased to report its financial and operating results from its Canadian operations for the year ended December 31, 2013.  This information should be read in conjunction with the Company's annual financial statements and Management's Discussion and Analysis.  All figures are in Canadian dollars unless otherwise specified.

HIGHLIGHTS

  • $4.4 million free cash flow generated in Q4, despite weak gold prices
  • Eagle River produces 15,700 ounces at 12.3 gAu/tonne in Q4
  • $14.7 million in cash and gold bullion at market as at December 31, 2013
  • Reserves increase 28%, 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 & CEO comments "A weak gold market forced the industry to reinvent itself.  We refocused on our core assets and liked what we saw.  I think the 4th 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, 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 Mine Complex.  The Eagle River mine has been in continuous production since commercial production commenced January 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 August 1, 2006.  It was previously in production from 1982 - 2002.  To date the Kiena mine has produced 1,757,475 ounces of gold.

At December 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% 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 three-fold:

1)  Weather - Spring floods and a lightning strike on our main electrical transformer resulted in a loss of about two months of milling.
   
2)  Crashing Market Confidence - Gold prices dropped 30% 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 we were not immune.
   
3)  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.  We remain confident in the longer term potential of our assets and are relieved to put 2013 in the rear view mirror.

RESULTS OF OPERATIONS

  Three Months Ended Dec31  Twelve 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)
                 
  Three Months Ended Dec31  Twelve Months Ended Dec 31
  2013  2012  2013  2012
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 ($000) *  5,844  2,777 15,444 15,769
  Gold price realized ($Cdn/oz)  1,336  1,697  1,452 1,660

RECONCILIATION OF PRODUCTION COSTS TO MINING AND PROCESSING COSTS (Cost of Sales)

  Three Months Ended Dec 31  Twelve Months Ended Dec 31
  2013  2012  2013  2012
Eagle River Mine Complex        
  Mining and processing costs ($000)  12,114  11,460  50,446  44,759
  Inventory-related adjustments ($000) ††  (217)  2,089  (6,122)  1,143
  Production costs ($000) *  11,897  13,549  44,324  45,902
  Production costs per ounce ($Cdn)  746  1,526 980  1,241
           
Kiena Complex        
  Mining and processing costs ($000)  1,970  6,970  13,836 31,780
  Inventory-related adjustments ($000) ††  (1,970) (289)  (506) (477)
  Production costs ($000) *  -  6,681  13,330  31,303
  Production costs per ounce ($Cdn)     1,372  1,731 1,664
           
TOTAL MINE PRODUCTION COSTS        
  Production costs ($000) *  11,897  20,230  57,654  77,205
  Production costs per ounce ($Cdn)  746  1,383  1,088  1,383

†  Bullion revenue includes minor by-product silver sales
   
* The Company has included in this report certain non-IFRS performance measures, including mine operating profit, mining and processing costs to applicable sales, and production costs. Production costs per ounce reflect actual mine operating costs incurred during the fiscal period divided by the number of ounces produced. 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.
   
†† Inventory-related adjustments are adjustments made to production costs in order for the Company's gold inventory to be valued at the lower of production cost on a first-in, first-out basis and at net realizable value, in accordance with its accounting policy under IFRS.

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.  We expect 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% from last year's average to 10.7 gAu/tonne.  This lowered production costs per ounce to $980 from $1,212 in 2012.  Proven and Probable Reserves increased 28%, net of depletion.  Two new parallel zones were discovered and we are now forecasting potential to extend our high grade mining sequence beyond 2015.

At Mishi we suspended contract mining in the spring and continue to work off substantial ore stockpiles of 81,443 tonnes grading 2.8 gAu/tonne at year end.  In 2013, we milled 22,536 tonnes at a recovered grade of 3.3 gAu/tonne to produce 2,360 ounces.  Mishi proven and probable reserves increased to 1,592,000 at 2.2 gAu/tonne with a life-of-mine stripping ratio of 2.7:1.

We are focused on refurbishing and expanding our milling and tailings management systems to increase production and decrease unit costs moving forward.  We expect a 50% 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 $0.6 million impairment charge was recorded to cover the period January 1, 2013 to June 30, 2013.  About $0.5 million cash proceeds were derived from equipment sales.  Furthermore, some equipment and materials transported to the Eagle River Mine Complex are already generating tangible productivity improvements.  We estimate costs to maintain and explore our Val d'Or properties and infrastructure at about $2.0 million per year.  We envision a two year exploration program, targeting higher grade portions of our 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 our Kiena property to enhance shareholder value.

Two strategic acquisitions were initiated in 2013.  We merged with Windarra Minerals Ltd. to consolidate and expand our land position at Mishi and eliminate future royalties.  Subsequent to year end, we announced a business combination with subsidiary company Moss Lake Gold Mines Ltd.  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, Ontario.

In summary, in an environment of unforeseen tumultuous celestial and market upheavals, we 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, 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% increase in production and a 19% increase in ounces sold compared to the fourth quarter of 2012.  Realized gold prices were $1,336 per ounce, or 21% 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 gAu/tonne.

This solid performance generated free cash flow (Cash Flow from Operations less capital investments) of $4.4 million in the fourth quarter despite weak gold prices.  We believe this is a good representation of what our streamlined operations are capable of.

LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2013, the Company had working capital of $8.5 million compared to $13.9 million at December 31, 2012.  During fiscal 2013, capital expenditures totalled $11.1 million compared to $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 December 31, 2013, would have been $10.0 million, compared to $9.8 million as at September 30, 2013.

The Company carries an inventory of gold.  At December 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-IFRS 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 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 $10,931,000 that matured on May 31, 2012.  This resulted in the Company paying down $4.1 million in debt.

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, operations are capable of generating strong cash flow as evidenced by the fourth quarter results.

OUTLOOK
In 2014 we forecast 50,000 ounces of gold production, or a 10% 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% during the year, resulting in increased Mishi throughput, as millfeed 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 us great confidence in the potential of our streamlined operations.

At Mishi, reserves within the existing mine plan represent less than a third of the open pit resource base.  Subject to positive in-fill drilling results and increased mill availability and capacity, we see significant potential for future expansion.

ABOUT WESDOME
Wesdome is in its 27th year of continuous mining operations in Canada.  It currently has two producing gold mines in Wawa, Ontario, and owns the Kiena Mine Complex in Val d'Or, Québec.  The Company has 105.8 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.            
Consolidated Statements of Financial Position            
(Expressed in thousands of Canadian dollars)            
             
December 31    2013       2012
Assets            
Current              
  Cash and cash equivalents     5,651     4,633
  Restricted funds - short term       -        200
  Receivables       1,982       4,298
  Inventory       10,757       19,633
    8,390       28,764
                 
Restricted funds     2,994        2,381
Deferred income taxes     13,025        14,870
Mining properties, plant and equipment     35,118         32,681
Exploration properties     33,522        30,154
  103,049       108,850
             
Liabilities            
Current            
  Payables and accruals     9,393     13,996
  Current portion of obligations under finance leases       526        898
    9,919        14,894
                 
Income taxes payable     22       22
Obligations under finance leases     380        641
Convertible debentures     5,996        5,760
Provisions     2,434        2,545
    18,751        23,862
                 
Equity            
Equity attributable to owners of the Company            
  Capital stock       125,352       122,651
  Contributed surplus       2,150        2,059
  Equity component of convertible debentures       932        870
  Deficit       (44,400)        (41,009)
    84,034        84,571
                 
Non-controlling interest       264         417
Total equity       84,298        84,988
    103,049      $  108,850

 
Wesdome Gold Mines Ltd.
Consolidated Statements of Loss and Comprehensive Loss
(Expressed in thousands of Canadian dollars)
  Three Months Ended Dec 31    Twelve 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)
 
Basic and diluted weighted average
  number of common shares (000)
    Basic     101,880    101,880     102,892    101,887
    Diluted     101,880   101,880      102,892   101,887

 
Wesdome Gold Mines Ltd.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
  Three Months Ended Dec 31    Twelve Months Ended Dec 31
  2013 2012    2013 2012
Operating activities
  Net loss $  (1,782) (46,464)   $  (3,868) $  (45,253)
  Depletion of mining properties     2,228   1,570      7,838    8,340
  Accretion of discount on
    convertible debentures     63    58      236    348
  Impairment charges    -    60,948      633   61,898
  Loss (gain) on sale of equipment     -    -      27    23
  Share-based compensation     149     90      349    601
  Deferred income taxes     2,122    (14,759)      1,907    (14,589)
  Interest expensed     134   148       550   733
  Accretion of decommissioning provisions    (175)   14       (111)   54
    2,739   1,605       7,561   12,155
  Net changes in non-cash working
    capital     4,794     2,107     5,692     2,016
    7,533    3,712      13,253   14,171
Financing activities
  Funds paid to repurchase common
    shares under NCIB     -    -      (51)    (42)
  Redemptions of convertible debentures    -   -      -   (10,931)
  Issuance of convertible debentures,
    net of financing     -     -       -   6,821
  Repayment of obligations
    under finance leases     (214)   553      (863)    (192)
  Interest paid     (134)   (148)      (550)    (733)
    (348)   405      (1,464)   (5,077)
Investing activities
  Additions to mining and exploration
    properties     (3,167)    (3,669)      (10,875)    (11,234)
  Proceeds on sale of equipment     11    -      582   3
  Cash received on acquisition of assets     -    -      6    -
  Funds held against standby letters
    of credit     (400)    (516)      (413)    (196)
    (3,556)    (4,185)      (10,700)    (11,427)
  Net changes in non-cash working
    capital     576   1,448      (71)    1,751
    (2,980)    (2,737)      (10,771)    (9,676)
Increase (decrease) in cash and     4,205   1,380      1,018    (582)
  cash equivalents, beginning of period     1,446   3,253       4,633   5,215
Cash and cash equivalents,
    end of period $  5,651  $  4,633   $  5,651 4,633
 
Cash and cash equivalents consist of:
  Cash $  5,651 3,826   $  5,651 3,826
  Term deposit (2012: 0.93%)     -   807      -   807
    $  5,651  $  4,633   $  5,651 4,633

 

 

 

SOURCE Wesdome Gold Mines Ltd.

For further information:

Rolly Uloth,
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

Products
  • Globe Unlimited

    Digital all access pass across devices. subscribe

  • The Globe and Mail Newspaper

    Newspaper delivered to your doorstep. subscribe

  • Globe2Go

    The digital replica of our newspaper. subscribe

  • Globe eBooks

    A collection of articles by the Globe. subscribe

See all Globe Products

Advertise with us

GlobeLink.ca

Your number one partner for reaching Canada's Influential Achievers. learn more

The Globe at your Workplace
Our Company
Customer Service
Globe Recognition
Mobile Apps
NEWS APP
INVESTING APP
Other Sections