Wesdome reports second quarter and first half operating and financial results

TORONTO, Aug. 6, 2013 /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 second quarter ended June 30, 2013.  This information should be read in conjunction with the Company's interim unaudited financial statements and Management's Discussion and Analysis for the second quarter ended June 30, 2013 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 929,408 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 1,752,708 ounces of gold.

HIGHLIGHTS

• Production on track to meet or exceed guidance
• 13,700 ounces in 2^nd quarter of 2013
• 28,300 ounces in 1^st half of 2013
• Eagle River production costs of $1,066/oz in the 1^st half of 2013
• Eagle River grades double to 11.3 gAu/tonne in 1^st half of 2013
• Mishi grades up 50% to 3.4 gAu/tonne in 1^st half of 2013
• Mining operations rationalized - high cost production suspended
• Earnings flat, cash flow from operations covers capital expenditures
• 2^nd half outlook bright with large, strong grade stockpiles and exclusive focus on best margin operations
• Drilling to accelerate at the Eagle River Mine in 2^nd half of 2013

Donovan Pollitt, President & CEO comments "We have streamlined operations, built large stockpiles and have strong grades in the pipeline.  Milling efficiencies are incrementally improving towards our goal of doubling throughput at our Eagle River Complex.  We have beefed up our operating expertise and are defensively positioned with good upside.  An exclusive focus on our best grade, lowest cost operations will translate into improved financial performance in the second half."

OVERALL PERFORMANCE

On March 7, 2013, the Company announced the suspension of mining at Kiena.  On June 30, 2013, mining activities ceased.  Focusing efforts on our best grade mine will increase margins and reduce overall costs and risks for the second half of 2013 and production in future years.

At June 30, 2013, the Company had $12.2 million in working capital, and 9,233 ounces of gold in inventory.  The inventory is carried at cost and is recorded as mining and processing costs in the fiscal period in which it is sold.  For the first half of the year, revenue exceeded mining and processing costs attributable to sales by $7.3 million, $5.6 million in capital costs were incurred and cash flow from operations totalled $5.6.

In the second quarter, gold production totalled 13,739 ounces.  For the first half of the year production was 28,268 ounces, slightly ahead of last year.  Production costs averaged $1,246 per ounce for the six month period, including 7,613 ounces from Kiena at a cost of $1,735 per ounce and 20,655 ounces at $1,066 per ounce from the Eagle River Complex.  With 100% focus on the Eagle River complex in the second half of the year and improving mill throughput, we expect improved financial performance.

Market confidence in gold mining continues to decrease.  Recent declines of 25% in the gold price have been partially offset by declines in the $Cdn/$US exchange rate.  We are confident our high grades at Eagle River offer the best protection from this price weakness.  We are defensively positioned with rationalized mining operations, large stockpiles and strong grades.

RESULTS OF OPERATIONS

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

During the second quarter, bullion sales exceeded mining and processing costs attributable to sales by $3.6 million.  In addition to these direct operating costs, additional cash costs, including royalty payments, corporate and general costs and interest payments amounted to $1.1 million.

At the Eagle River Complex, we lost about a month of milling due to severe regional and local flooding during the spring thaw.  Despite the floods, recovered grades at Eagle River were about double those experienced last year and recovered grades at Mishi were up more than 50%.  As previously disclosed, we are in a high grade mining sequence in the 811 Zone, expected to be a significant contributor through 2015.

Mill stockpiles grew to about 100,000 tonnes, including about 85,000 tonnes of Mishi ore at about 2.5 gAu/tonne and about 15,000 tonnes of Eagle River ore at about 7.0 gAu/tonne.  We decided to curtail contract mining activities at Mishi until perhaps next spring in order to work through the stockpile.  This will save about $0.5 million per month in production costs throughout the remainder of the year.

With no shortage of good grade millfeed available and improving reliability in our milling operation, we expect to meet or exceed our 2013 production guidance of 55,000 ounces.  We are proceeding with an aggressive permitting timeline for our new tailings management area and are evaluating options to double mill capacity.

At Kiena, costs declined and grades improved as operations wound down.  On March 7, 2013, the Company announced its intention to suspend mining operations at the Kiena Mine.  We are placing Kiena on care and maintenance status.  Active mining ceased June 30, 2013.  Equipment is available to help our other operations and a care and maintenance schedule and budget is being developed.

Subsequent to the end of the quarter, two important events were announced.  First, we announced the appointment of Philip Ng, P.Eng., as Chief Operating Officer of the Company.  This bolsters our management's operating experience and with recent Board additions brings direct mining operating experience to the table.

Secondly, we announced an amalgamation with Windarra Minerals Ltd.  This amalgamation is a win-win for both companies and Windarra is expected to hold a special meeting to approve the transaction in the fall.

At Eagle River, underground drilling will accelerate in the second half of the year.  We will be drilling the 811 Zone where it is open at depth.  Production year-to-date in the 811 Zone has averaged 15.4 gAu/tonne.  We are excited about our prospects.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2013, the Company had working capital of $12.2 million compared to $13.9 million at December 31, 2012.  During the first half of 2013, capital expenditures totalled $5.6 million compared to $3.0 million in 2012.  Capital expenditures were concentrated in minesite development, mine and mill infrastructure.  Cash balances have declined since the beginning of the year, but we had gold on hand and have reduced our accounts payable by about $5 million since March 31, 2013.

The Company traditionally maintains an inventory of gold.  At June 30, 2013, this liquid asset consisted of 9,233 ounces of gold with a market value of $12.0 million at $1,300 Cdn/ounce.  The gold inventory is carried at the lower of cost or market, in this case at $11.6 million or about $1,251 per ounce.  The costs of this inventory are recognized in the fiscal period in which the gold is sold based on a first-in, first-out inventory basis.  Accordingly, recognized costs presented in quarterly and annual financial statements include a component of costs incurred in previous periods.

Additionally, the Mishi ore stockpile at the mill, which totals 84,232 tonnes, is carried in inventory at a cost of $4.5 million or $52.93 per tonne.

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.

The result of this financing is that interest costs have declined and working capital has improved by moving the liability component to long term liabilities from short term liabilities.

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.  The Kiena mining suspension will improve our financial position and improve return on capital.

With current gold prices, operations are capable of generating good operating cash flow, as they have in the past.

OUTLOOK

We have streamlined our mining operations, built large stockpiles and have strong grades in the pipeline.  We are defensively positioned with good upside.  We expect to meet or exceed our 2013 production guidance of 55,000 ounces.  Furthermore, we forecast cost reductions and improving cash flows in the second half of 2013, due to suspended mining at Kiena and deferral of mining activities at Mishi for the remainder of the year.

At Eagle River, drilling of the 811 Zone at depth has started and will continue through the second half of the year.  We are excited about our prospects here.  The 811 Zone is our richest and lowest cost zone, with production year to date averaging 15.4 gAu/tonne.

ABOUT WESDOME

Wesdome is in its 26^th year of continuous mining operations in Canada.  It currently has two producing gold mines in Wawa, Ontario and owns the Kiena Complex in Val d'Or, Québec.  The Company has 101.8 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.

SOURCE: Wesdome Gold Mines Ltd.