Wesdome Gold Mines Limited - Earns $0.04 Per Share in 2010
23.03.2011 | CNW
TORONTO, March 23 /CNW/ - Wesdome Gold Mines Ltd (WDO: TSX) ("Wesdome" or the "Company") is pleased to report its financial and operating results from its Canadian operations for the year ended December 31, 2010. 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
- Production of 68,874 ounces
- Earnings of $3.7 million or $0.04 per share
- Revenues of $89.4 million
- Cash flow from operations of $21.1 million or $0.21 per share
- Cash and bullion at market at year-end of $40.9 million
- Reserves increase 70% net of depletion
- Bullion inventory of 12,906 ounces
Donovan Pollitt, CEO comments "This year's financial statements demonstrate modest earnings and decent Cash Flow from operations. I am pleased that the re-investment of this Cash Flow in 2010 resulted in 70% and 365% increases in reserves and resources per share, respectively. With a solid 2011 year ahead of us, I am pleased to forecast strong production growth in 2012 as the results of 2010 and 2011's investments show up at the mill".
OVERALL PERFORMANCE
The Company owns and operates the Eagle River gold mining operations in Wawa, Ontario and the Kiena Mine Complex in Val d'Or, Quebec. The Eagle River mine commenced commercial production January 1, 1996 and the Kiena mine August 1, 2006.
At December 31, 2010, the Company had working capital of $30.7 million. During the year ended December 31, 2010, cash flow from operations totalled $21.1 million, $19.6 million of capital investments in exploration, development and mining equipment were made and $2.0 million in dividends were paid. Net income for the year ended December 31, 2010, was $3.7 million.
In 2010, mining operations at the Eagle River mine were in a low grade sequence with recovered grades averaging about half those of 2009. During this time development work to access the higher grade western portions of the mine was undertaken. Once access is established at new depths the orebody will be developed for mining of higher grade material over the next three years. We expect these better grades to come onstream in 2012.
Also, in 2010, the Company launched development programs for the Dubuisson Zone in Val d'Or and the Mishi open pit mine in Ontario. These new projects form the basis of the Company's internal production growth prospects over the short and medium term.
RESULTS OF OPERATIONS
Three Months Ended Dec Twelve Months Ended Dec
31 31
2010 2009 2010 2009
Eagle River
Mine
Tonnes
milled 39,281 29,970 155,554 132,004
Recovered
grade (g/t) 7.9 13.0 7.3 14.3
Production
(oz) 10,004 12,503 36,712 60,754
Sales (oz) 10,000 15,000 40,000 56,300
Bullion
inventory
(oz) 8,793 12,081 8,793 12,081
Bullion
revenue
($thousands) 14,013 17,543 50,690 62,649
Operating
costs
($thousands) 10,760 7,650 34,700 28,273
Mine
operating
profit
($thousands)
* 3,253 9,893 15,990 34,376
Gold price
realized
($Cdn/oz) 1,399 1,168 1,266 1,112
Kiena Mine
Complex
Tonnes
milled 84,751 89,536 285,527 302,034
Recovered
grade (g/t) 4.2 3.0 3.5 3.6
Production
(oz) 11,508 8,690 32,162 35,398
Sales (oz) 9,000 9,000 30,000 36,400
Bullion
inventory
(oz) 4,113 1,951 4,113 1,951
Bullion
revenue
($thousands) 12,621 10,515 38,693 40,621
Operating
costs
($thousands) 6,226 7,204 28,084 29,746
Mine
operating
profit
($thousands)
* 6,395 3,311 10,609 10,875
Gold price
realized
($Cdn/oz) 1,398 1,166 1,286 1,114
Total
Production
(oz) 21,512 21,193 68,874 96,152
Sales (oz) 19,000 24,000 70,000 92,700
Bullion
inventory
(oz) 12,906 14,032 12,906 14,032
Bullion
revenue
($thousands) 26,634 28,058 89,383 103,270
Operating
costs
($thousands) 16,986 14,854 62,784 58,019
Mine
operating
profit
($thousands)
* 9,648 13,204 26,599 45,251
Gold price
realized
($Cdn/oz) 1,398 1,167 1,275 1,113
* The Company has included in this report certain non-GAAP performance measures, including mine operating profit 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.
Gold sales exceeded operating costs resulting in a mine operating profit, or gross margin, of $26.6 million. In addition to these direct operating costs, additional costs, including royalty payments, corporate and general costs and interest costs totalled $5.0 million.
At the Eagle River mine grades averaged 7.3 gAu/tonne in 2010 compared to 14.3 gAu/tonne in 2009. We were mining low grade portions of the mine while establishing access at deeper levels to the high grade western portion of the mine. Very encouraging drilling results in this area served to increase Eagle River's proven and probable mineral reserves 50%, net of depletion, compared to last year. More importantly, the quality of the reserves improved with the average diluted grade almost doubling to 15.0 gAu/tonne. This material will start being introduced into the mining sequence in 2012.
The Kiena mine produced 32,162 ounces of gold and posted a strong fourth quarter. Kiena continues to be a steady, efficient, lower margin mine with a tremendous safety record and outstanding exploration potential.
Overall average operating costs rose to $897Cdn per ounce sold in 2010 compared to $626Cdn per ounce in 2009. The gross margin declined to $378Cdn per ounce in 2010 compared to $488Cdn per ounce in 2009. The difference is almost entirely related to the mining of lower grade ore in the mine sequence at Eagle River. The average sales price increased 14.5% to $1,275Cdn from $1,113Cdn in 2009.
In 2010, the Company started driving a one kilometre long exploration drift to the Dubuisson Zone, east of the Kiena mine. Detailed drilling proposed for 2011 will establish size, continuity and mineability of this material. Positive results would offer potential to generate production growth for our Val d'Or operations over the short to medium term.
In Wawa, we completed a pre-feasibility study for the Mishi Project located two kilometres west of the Eagle River mill. A 5-year initial mine plan was developed which offers very attractive returns at current gold prices and very modest capital costs. We intend to generate initial production in the fourth quarter of 2011 pending successful completion and regulatory approval of key preproduction activities. The successful initiation of production for Mishi is expected to generate significant incremental cost savings for the Eagle River mine operations.
In 2010, we advanced our internal growth projects and developed access towards higher grade portions of our mines. Combined with an aggressive drilling program we significantly increased our mineral reserves and resources, mine lives and advanced growth projects.
FOURTH QUARTER
Wesdome's production totalled 21,512 ounces. Sales during the quarter totalled $26.6 million with 19,000 ounces sold at an average price of $1,398Cdn per ounce. The cost of sales, or cash cost, was $894Cdn per ounce.
The Eagle River mine produced 10,004 ounces of gold from 39,281 tonnes milled at an average recovered grade of 7.9 gAu/tonne. Sales totalled 10,000 ounces at an average realized price of $1,399Cdn per ounce. Cost of sales, or cash cost, averaged $1,076Cdn per ounce. Mine operating profit for the quarter was $3.3 million.
The Kiena mine produced 11,508 ounces from 84,751 tonnes milled at an average recovered grade of 4.2 gAu/tonne. Sales totalled 9,000 ounces at an average realized price of $1,398Cdn per ounce. Cost of sales, or cash cost, averaged $692Cdn per ounce. With the combination of higher grades, throughput and gold prices the Kiena mine generated a mine operating profit, or gross margin, of $6.4 million.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2010, the Company had working capital of $30.7 million, compared to $35.2 million at year-end 2009. The Company invested $16.7 million in exploration and development, $0.7 million on exploration properties and $2.2 on capital equipment for a total of $19.6 million, compared to $14.2 million in exploration and development, $0.8 million on the acquisition of exploration properties and $4.2 million on capital equipment for a total of $19.2 million in 2009.
The Company's inventory includes 12,906 ounces of gold bullion, a liquid asset with a market value of $18.1 million on December 31, 2010.
The Company believes it has sufficient capital resources to cover its obligations, capital and operating
costs going forward. On April 30, 2010, the Company paid a dividend of $0.02 per share.
Production planned in 2011 should generate operating cash flow, even at gold prices well below those
currently being realized.
OUTLOOK
In 2011, we expect similar outputs from Kiena and Eagle River plus initial production from Mishi. This should put us over 70,000 ounces for the year. Clarity on the contribution from Mishi will improve as regulatory requirements are met. We expect 2012 to be a very strong year, perhaps our best ever, as grades rise at Eagle River and the first full year of Mishi kicks in. At Dubuisson drilling will provide information to decide on further development potential.
ABOUT WESDOME
Wesdome is an established Canadian gold producer with wholly-owned mining and milling complexes located in Wawa, Ontario and Val d'Or, Québec. Wesdome has been producing gold continually for 20 years on an unhedged basis and to date has produced in excess of 1.2 million ounces. The Company has 101.2 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 forwardlooking 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 forwardlooking 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
December 31 2010 2009
(in thousands)
Assets
Current
Cash and cash equivalents $ 22,806 $ 23,702
Receivables 7,442 4,022
Inventory 14,490 14,624
Marketable securities - 211
Future income taxes 1,514 1,199
46,252 43,758
Restricted funds 2,420 2,588
Future income taxes 940 2,245
Capital assets - 9
Mining properties 74,771 64,637
Exploration properties 30,762 30,018
$ 155,145 $ 143,255
Liabilities
Current
Payables and accruals $ 12,938 $ 7,322
Mining taxes 1,317 -
Current portion of obligations
under capital leases 1,262 1,240
15,517 8,562
Income taxes payable 58 82
Obligations under capital leases 1,735 1,108
Convertible 7% debentures 10,072 9,483
Asset retirement obligation 1,597 1,324
28,979 20,559
Non-controlling interest in Moss
Lake Gold Mines Ltd. 740 857
Shareholders' Equity
Capital stock 116,217 114,567
Contributed surplus 3,807 3,770
Accumulated other comprehensive
loss - (222)
Equity component of convertible
debentures 1,970 1,970
Retained earnings 3,432 1,754
125,426 121,839
$ 155,145 $ 143,255
Wesdome Gold Mines Ltd.
Consolidated Statements of Income and Comprehensive Income
Years Ended December 31 2010 2009
(in thousands, except per share
amounts)
Revenue
Gold and silver bullion $ 89,383 $ 103,270
Interest and other 78 266
89,461 103,536
Costs and expenses
Operating costs 62,784 58,019
Amortization of mining properties 14,040 12,869
Production royalties 917 1,073
Corporate and general 2,489 2,064
Stock based compensation expense 516 495
Interest on long term debt 1,598 1,596
Other interest - 16
Amortization of capital assets 9 1
Accretion of asset retirement
obligation 79 71
82,432 76,204
Net income before the following 7,029 27,332
Dilution (loss) gain on Moss Lake
Gold Mines Ltd. (7) 9
Net income before income tax and
non-controlling interest 7,022 27,341
Income tax (recovery)
Current 1,293 (91)
Future 2,106 (4,676)
3,399 (4,767)
Net income before non-controlling
interest 3,623 32,108
Non-controlling interest 112 57
Net income 3,735 32,165
Other comprehensive income:
Change in fair value of
available-for-sale marketable
securities - 68
Comprehensive income $ 3,735 $ 32,233
Earnings per share
Basic and diluted $ 0.04 $ 0.32
Wesdome Gold Mines Ltd.
Consolidated Statements of Cash Flows
Years Ended December 31 2010 2009
(in thousands)
Operating activities
Net income $ 3,735 $ 32,165
Amortization of mining
properties 14,040 12,869
Accretion of discount on
convertible debentures 589 516
Dilution loss (gain) on Moss
Lake Gold Mines Ltd. 7 (9)
Non-controlling interest (112) (57)
Stock based compensation
expense 516 495
Amortization of capital assets 9 1
Future income taxes 2,106 (4,676)
Gain on sale of equipment (216) (1)
Gain on property held for sale - (122)
Loss on sale of marketable
securities 362 -
Accretion of asset retirement
obligation 79 71
21,115 41,252
Net changes in non-cash working
capital (568) (4,745)
20,547 36,507
Financing activities
Exercise of options 1,232 984
Funds paid to repurchase common
shares under NCIB (78) (38)
Funds paid to repurchase
debentures - (477)
Share issuance costs (40) (105)
Dividends paid (2,013) (1,995)
Shares issued by a subsidiary
of the company to third parties - 17
Repayment of obligations under
capital leases (1,589) (1,890)
(2,488) (3,504)
Investing activities
Additions to mining and
exploration properties (23,620) (17,857)
Proceeds on sale of equipment 235 577
Proceeds on sale of marketable
securites 71 -
Proceeds on property held for
sale - 400
Funds held against standby
letters of credit 168 (285)
(23,146) (17,165)
Net changes in non-cash working
capital 4,191 (165)
(18,955) (17,330)
(Decrease) increase in cash and
cash equivalents (896) 15,673
Cash and cash equivalents,
beginning of year 23,702 8,029
Cash and cash equivalents, end of
year $ 22,806 $ 23,702
For further information:
Donovan Pollitt, P.Eng., CFA
President & CEO
416-360-3743 ext 25
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