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TORONTO, Aug. 11 /CNW/ - Wesdome Gold Mines Ltd (WDO: TSX) ("Wesdome" or the "Company") is pleased to report its unaudited financial and operating results from its Canadian operations for the second quarter ended June 30, 2009. This information should be read in conjunction with the Company's annual financial statements, notes to the financial statements and Management's Discussion and Analysis. All figures are in Canadian dollars unless otherwise specified.
The Company owns the Eagle River gold mining operation in Wawa, Ontario and the Kiena mining complex in Val d'Or, Quebec. The Eagle River mine commenced commercial production on January 1, 1996, and the Kiena mine on August 1, 2006.
HIGHLIGHTS
- Q2 earnings $7.8 million or $0.08 per share
- Q2 cash flow from operations $11.6 million or $0.12 per share
- H1 earnings $15.4 million or $0.16 per share
- H1 cash flow from operations $21.8 million or $0.22 per share
- H1 production totals 48,393 ounces
- H1 sales total 48,700 ounces at $1,102 per ounce or $53.8 million
- Production guidance increased
- Cash, bullion receivables and gold bullion at market value June 30,
2009, rose to $29.7 million
Rolly Uloth, CEO comments "We are generating earnings and cash flow per share comparable to much larger producers and believe this will be recognized in the marketplace. The accumulation of significant free cash flow over the last 12 months presents us with many options looking forward."
OVERALL PERFORMANCE
At June 30, 2009, the Company had working capital of $24.9 million. During the first half of 2009, revenue exceeded cash operating costs by $23.8 million and $5.0 million was invested in exploration and development, $0.8 million on the acquisition of exploration properties and $0.9 million in capital equipment. Cash flow from operations totalled $21.8 million before working capital adjustments and net income was $15.4 million or $0.16 per share in the first half of 2009. Earnings and cash flow were about equal in the first and second quarters of 2009.
The cash cost per ounce in the first half was $614Cdn or $506US applying a 0.825Cdn/US exchange rate.
In the first half, production exceeded 2008 levels by 12%, realized gold prices increased 20% and costs remained stable. For the first half of 2009 bullion revenue totalled $53.8 million with 48,700 ounces of gold sold at an average price of $1,102Cdn per ounce.
RESULTS OF OPERATIONS
Three Months Ended June 30 Six Months Ended June 30
2009 2008 2009 2008
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Eagle River Mine
Tonnes milled 32,908 25,588 65,195 54,957
Recovered grade (g/t) 13.4 16.6 14.8 14.8
Ounces produced 14,183 13,662 31,068 26,220
Ounces sold 19,000 13,600 30,300 22,437
Bullion inventory (oz) 8,395 7,250 8,395 7,250
Bullion revenue
(thousands) 20,459 12,419 33,299 20,684
- Operating (thousands) 8,397 8,777 14,900 14,045
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Mine operating profit
(loss)($m)(x) 12,062 3,642 18,399 6,639
Gold price realized
($Cdn/oz) 1,075 913 1,098 922
Kiena Mine Complex
Tonnes milled 67,216 65,831 125,234 129,148
Recovered grade (g/t) 3.1 4.3 4.3 4.1
Ounces produced 6,776 9,129 17,325 16,974
Ounces sold 9,000 9,000 18,400 17,500
Bullion inventory (oz) 1,877 2,683 1,877 2,683
Bullion revenue
(thousands) 9,744 8,209 20,455 16,093
- Operating (thousands) 9,243 7,502 15,006 14,790
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Mine operating profit
(loss)($m)(x) 501 707 5,449 1,303
Gold price realized
($Cdn/oz) 1,079 912 1,110 921
Total
Production (oz) 20,959 22,791 48,393 43,194
Sales (oz) 28,000 22,600 48,700 39,937
Bullion inventory (oz) 10,272 9,933 10,272 9,933
Bullion revenue
(thousands) 30,203 20,628 53,754 36,777
- Operating (thousands) 17,640 16,279 29,906 28,835
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Mine operating profit
($m)(x) 12,563 4,349 23,848 7,942
Gold price realized
($Cdn/oz) 1,076 913 1,102 921
(x) The Company has included in this report certain non-GAAP performance
measures, including mine operating profit (loss) and operating costs
to applicable sales. These measures are not defined under GAAP 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 GAAP as an
indicator of our financial performance or liquidity. The Company
believes that, in addition to conventional measures prepared in
accordance with GAAP, certain investors use this information to
evaluate the Company's performance and ability to generate cash flow.
During the second quarter, combined operations produced 20,959 ounces of gold. Revenues climbed to $30.2 million on sales of 28,000 ounces at an average realized price of $1,076 per ounce. At June 30, 2009, gold inventory was 10,272 ounces, which is carried on the balance sheet at cost. The costs and revenue for this inventory will be recognized in the fiscal period in which it is sold.
During the second quarter, revenue exceeded operating costs resulting in a mine operating profit, or gross margin, of $12.6 million. In addition to the direct operating costs of $17.6 million, other costs, including royalties, corporate and general costs and interest costs amounted to $1.3 million.
Eagle River exceeded expectations as the 811 zone produced more high grade tonnes than planned. At June 30, 2009, underground broken ore and surface stockpiles exceeded 21,000 tonnes containing an estimated 8,000 ounces of gold.
At the Kiena mine, higher than expected dilution in the North zone had a negative impact on grade. The Company will work its way through this low grade and expects contributions from the VC and Schist zones to start helping halfway through the third quarter.
External conditions remain favourable for Canadian gold producers. Favourable exchange rates and a marked easing in labour markets, service industry markets, energy costs and commodity-based input costs are all combining to increase margins.
Exploration activity is increasing at both mines and exploration projects as the summer/fall season is upon us. The purpose of the drilling is twofold:
1) to replace/increase reserves; and
2) to provide our engineers and shareholders with a longer term view of
the potential of our mines
Early results are encouraging as the high grade 811 zone at the Eagle River mine has been shown to extend at least 300 metres (1,000 feet) below our deepest level. Drill results included 42.37 gAu/tonne over 2.26 metres, 19.81 gAu/tonne over 2.34 metres and 55.52 gAu/tonne over 2.34 metres. The zone remains open at depth and to the east. Underground drilling at Kiena was highlighted by some very strong intersections in the Schist zone, including 7.15 gAu/tonne over 4.70 metres, 16.13 gAu/tonne over 3.50 metres and 201.87 gAu/tonne over 3.20 metres. Results have prompted us to immediately develop this high grade zone to provide a sweetener to blend with lower grade material in the current mining sequence. Surface drilling has started at the Dubuisson discovery located three kilometres east of the Kiena shaft. The Company hopes to demonstrate continuity and size through infill and stepout drilling.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2009, the Company had working capital of $24.9 million, an increase of $11.8 million from year-end 2008. During the second quarter, capital expenditures totalled $4.8 million, included $0.8 million for the acquisition of exploration properties. In the second quarter, 2008, capital expenditures totalled $4.0 million.
At June 30, 2009, the Company had 10,272 ounces of gold inventory carried at a cost of $9.5 million. The market value at June 30, 2009, was $11.2 million.
The Company believes it has sufficient capital resources to cover its operating and capital cost requirements in 2009. The Company is undertaking an aggressive exploration program which will partially be funded by a December 22, 2008, private placement of 1.5 million flow-through shares for gross proceeds of $1.7 million.
Production planned in 2009 should generate operating cash flow, even at gold prices well below those currently being realized.
OUTLOOK
For 2009, we forecasted approximately 75,000 ounces of production. We are now increasing our forecast to 80,000 ounces based on the very strong first half performance. The mining sequence has not changed and we continue to forecast lower grades in the second half of the year. We continue to expect that lower input costs and increased mill throughput will help offset the lower grades.
Our ambitious exploration and development programs at both mines are accelerating and early results are very encouraging. We aim to provide longer term clarity on resource potential near existing infrastructure and prove up the potential of the exciting new Dubuisson discovery in Val d'Or.
Economic conditions have never been more favourable for Canadian gold mines. Our unhedged philosophy, bullion inventory and exploration potential serve to maximize leverage to gold prices.
ABOUT WESDOME
Wesdome is an established Canadian gold producer with wholly-owned mining and milling complexes located in Wawa, Ontario and Val d'Or, Quebec. Wesdome has been producing gold continually for 20 years on an unhedged basis and to date has produced in excess of 1.0 million ounces. The Company has 99.9 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.
Consolidated Balance Sheets
June 30 December 31
2009 2008
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(in thousands) (Unaudited) (Audited)
Assets
Current
Cash and cash equivalents $ 12,008 $ 8,029
Receivables 9,611 4,205
Inventory 12,135 10,165
Marketable securities 144 44
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33,898 22,443
Restricted funds 2,569 2,303
Capital assets 9 10
Mining properties 61,974 61,294
Exploration properties 29,834 28,956
Property held for sale - 378
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$ 128,284 $ 115,384
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Liabilities
Current
Payables and accruals $ 7,441 $ 7,865
Current portion of obligations under capital
leases 1,522 1,478
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8,963 9,343
Income taxes payable 103 173
Obligations under capital leases 1,912 2,396
Convertible 7% debentures 9,225 9,413
Reclamation obligation 1,083 1,042
Future income taxes 2,091 1,292
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23,377 23,659
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Minority interest in Moss Lake Gold Mines Ltd. 876 903
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Shareholders' Equity
Capital stock 113,586 113,872
Contributed surplus 3,769 3,648
Accumulated other comprehensive loss (290) (290)
Equity component of convertible debentures 1,959 2,062
Deficit (14,993) (28,470)
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104,031 90,822
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$ 128,284 $ 115,384
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Wesdome Gold Mines Ltd.
Interim Consolidated Statements of Operations and Deficit
(Unaudited)
Three Months Ended June 30 Six Months Ended June 30
2009 2008 2009 2008
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(in thousands, except
per share amounts)
Revenue
Gold and silver
bullion $ 30,167 $ 20,629 $ 53,754 $ 36,777
Interest and other 42 85 75 174
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30,209 20,714 53,829 36,951
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Costs and expenses
Operating costs 17,640 16,148 29,906 28,927
Amortization of mining
properties 3,494 2,915 5,861 5,237
Production royalties 228 214 568 413
Corporate and general 518 246 948 547
Stock compensation expense 137 96 192 187
Interest on long-term debt 399 381 791 756
Other interest - 1 7 2
Amortization of office
equipment - 1 1 1
Accretion of reclamation
obligation 20 16 41 33
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22,436 20,018 38,315 36,103
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Net income before the
following 7,773 696 15,514 848
Gain on property held for
sale - - 122 -
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7,773 696 15,636 847
Future income tax - - 273 -
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Net income before minority
interest 7,773 696 15,363 847
Minority interest 44 67 30 72
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Net income $ 7,817 $ 763 $ 15,393 $ 919
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Net income per common share
Basic and diluted $ 0.08 $ 0.01 $ 0.16 $ 0.01
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Deficit, beginning of
period $ (22,810) $ (37,694) $ (28,470) $ (37,851)
Gain on equity component
of early repurchase of
convertible debentures - - 79 -
Net income 7,817 763 15,393 920
Dividends - - (1,995) -
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Deficit, end of period $ (14,993) $ (36,931) $ (14,993) $ (36,931)
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Wesdome Gold Mines Ltd.
Interim Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended June 30 Six Months Ended June 30
2009 2008 2009 2008
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(in thousands)
Operating activities
Net income $ 7,817 $ 763 $ 15,393 $ 919
Amortization of
mining properties 3,494 2,915 5,861 5,237
Accretion of discount
on convertible
debentures 139 115 265 226
Gain on sale of Moss
Lake shares - 3 - (14)
Minority interest (44) (66) (30) (72)
Stock compensation expense 137 96 192 187
Amortization of office
equipment 1 1 1 1
Future income taxes - - 273 -
Gain on sale of equipment (7) - (7) -
Gain on property held for
sale - - (122) -
Gain on redemption of
convertible debentures - - (24) -
Accretion of reclamation
obligation 19 16 41 33
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11,556 3,843 21,843 6,517
Net changes in non-cash
working capital 1,458 (2,148) (7,621) (6,302)
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13,014 1,695 14,222 215
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Financing activities
Exercise of options 139 - 188 27
Funds paid to repurchase
common shares under
NCIB - (4) (14) (4)
Funds paid to repurchase
debentures (7) - (453) -
Flow-through shares issued - (6) (5) (6)
Dividends paid (1,995) - (1,995) -
Shares issued by a
subsidiary of the
company to third parties - (4) - (4)
Repayment of obligations
under capital leases (408) (442) (804) (864)
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(2,271) (456) (3,083) (851)
Net changes in non-cash
working capital - - - 276
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(2,271) (456) (3,083) (575)
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Investing activities
Additions to mining and
exploration properties (4,786) (3,965) (7,064) (6,311)
Proceeds on sale of
Moss Lake shares to
minority interests - - - 26
Proceeds on sale of
equipment 20 - 20 -
Proceeds on option to
sell property - - 400 567
Funds held against
standby letters of
credit 239 (13) (267) (37)
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(4,527) (3,978) (6,911) (5,755)
Net changes in non-cash
working capital (158) 426 (249) 429
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(4,685) (3,552) (7,160) (5,326)
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Increase (decrease) in cash
and cash equivalents 6,058 (2,313) 3,979 (5,686)
Cash and cash equivalents,
beginning of period 5,950 4,036 8,029 7,409
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Cash and cash equivalents,
end of period $ 12,008 $ 1,723 $ 12,008 $ 1,723
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