Wesdome reports second quarter results
TORONTO, Aug. 15, 2011 /CNW/ --
TORONTO, Aug. 15, 2011 /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, 2011. 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, 2011 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 gold mining operations in
Wawa, Ontario and the Kiena mine complex in Val d'Or, Quebec. It is
developing the Mishi project in Wawa and the Dubuisson project in Val
d'Or. The Eagle River mine commenced commercial production January 1,
1996 and the Kiena mine on August 1, 2006.
The second quarter of 2011 highlights are as follows:
-- Production of 10,459 ounces
-- Loss of $1.1 million or $0.01 per share
-- Revenues of $19.2 million on sales of 13,000 ounces at $1,475
per ounce
-- Cash flow from operations of $1.4 million or $0.01 per share
-- Bullion inventory of 7,594 ounces or $11.0 million marked to
market as at June 30, 2011
Donovan Pollitt, President & CEO comments 'This quarter marks the low
tide mark from which an extended period of growth will ensue'.
OVERALL PERFORMANCE
At June 30, 2011, the Company had $15.9 million in working capital and
7,594 ounces of refined gold bullion in inventory. For the first half
of the year, revenue exceeded mining and processing costs by $10.9
million and $8.7 million in capital costs were incurred. Cash flow
from operations totalled $8.8 million and net income was $1.4 million,
or $0.01 per share.
Both mining operations processed greater volumes of lower grade ore
compared to last years' first half. The cost per tonne milled declined
to $140 per tonne, while the realized gold price increased 19% to
$1,424 per ounce. The operating cost per ounce increased to $1,064 per
ounce due to lower ore grades during the first half, 2011.
External factors which influenced results in this quarter included
unfavourable strength of the $Cdn/$US exchange rate, continued
tightness in the skilled labour market and inflating energy and
consumables costs.
More ounces of gold were sold than were produced. Favourable gold
prices enabled us to realize a reasonable financial performance during
a transitional period of weak production and increased development. We
expect this to be our weakest quarter as higher grade ore progressively
comes into the mining sequence.
RESULTS OF OPERATIONS
Three Months Ended June Six Months Ended June 30
30
2011 2010 2011 2010
Eagle River Mine
Tonnes milled 43,316 39,271 86,943 73,387
Recovered grade 3.9 6.5 4.7 7.7
(g/t)
Production (oz) 5,479 8,189 13,266 18,088
Sales (oz) 7,000 10,000 16,000 22,000
Bullion inventory 6,059 8,169 6,059 8,169
(oz)
Bullion revenue 10,350 12,445 22,831 26,302
($000)
Mining and
processing costs 7,572 9,608 13,374 17,443
($000)
Mine operating 2,778 2,837 9,457 8,859
profit ($000) *
Gold price 1,476 1,244 1,425 1,195
realized ($Cdn/oz)
Kiena Mine Complex
Tonnes milled 70,505 68,072 141,502 133,732
Recovered grade 2.2 3.5 2.5 3.3
(g/t)
Production (oz) 4,980 7,683 11,422 14,143
Sales (oz) 6,000 8,000 14,000 13,000
Bullion inventory 1,535 3,094 1,535 3,094
(oz)
Bullion revenue 8,870 9,971 19,983 15,691
($000)
Mining and
processing costs 9,654 7,554 18,536 12,816
($000)
Mine operating
profit (loss) (784) 2,417 1,447 2,875
($000) *
Gold price 1,474 1,244 1,423 1,204
realized ($Cdn/oz)
Total
Production (oz) 10,459 15,872 24,688 32,231
Sales (oz) 13,000 18,000 30,000 35,000
Bullion inventory 7,594 11,263 7,594 11,263
(oz)
Bullion revenue 19,220 22,416 42,814 41,993
($000)
Mining and
processing costs 17,226 17,162 31,910 30,259
($000)
Mine operating 1,994 5,254 10,904 11,734
profit ($000) *
Gold price 1,475 1,244 1,424 1,198
realized ($Cdn/oz)
*( )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.
Summary of Quarterly Results
(in thousands 2011 2010 (IFRS)
except per
share data)
2(nd) Quarter 1(st) Quarter 4(th) Quarter 3(rd) Quarter
Total revenue $ 19,220 $ 23,594 $ 26,634 $ 20,756
Net income (1,094) 2,454 3,380 (118)
(loss)
Earnings
(loss) per
share
basic and (0.01) 0.02 0.03 (0.00)
diluted
2010 (IFRS) 2009 (GAAP)
2(nd) Quarter 1(st) Quarter 4(th) Quarter 3(rd) Quarter
Total revenue $ 22,416 $ 19,577 $ 28,218 $ 21,489
Net income 291 1,718 13,162 3,610
Earnings per
share
basic and 0.00 0.02 0.12 0.04
diluted
Second Quarter
During the second quarter, combined operations produced 10,459 ounces of
gold and 13,000 ounces were sold at an average price of $1,475 per
ounce. Bullion inventory at June 30, 2011, stood at 7,594 ounces which
is carried at net realizable value. In accordance with Company policy,
bullion inventory is carried at the lower of production cost, or net
realizable value.
Gold sales exceeded mining and processing costs resulting in a mine
operating profit*, or gross margin, of $2.0 million. In addition to
these mining and processing costs, other costs, including royalty
payments, corporate and general costs and net interest costs totalled
$1.28 million. An additional $2.0 million was paid in dividends.
At Eagle River, mining focused on low grade stopes and salvage work
while the new decline advanced towards the high grade 811 Zone. The
new decline has now arrived at the 811 Zone and we are opening it up on
the 670 metre level. This is providing some higher grade development
ore. Since breaking into the zone in June, year-to-date development
muck has averaged 8.35 gAu/tonne. A larger volume of lower grade ore,
including stockpiles, was processed. During the second quarter, the
mine produced 5,479 ounces of gold from 43,316 tonnes milled at an
average recovered grade of 3.9 gAu/tonne. We expect grades and
production to pick up in the second half of the year.
At Kiena, difficult mining conditions in two small stopes dampened
second quarter production, as previously disclosed. The mine produced
4,980 ounces of gold from 70,505 tonnes milled at an average recovered
grade of 2.2 gAu/tonne.
The mine schedule at Kiena was relying on two small stopes for
production in a transitional period, while larger stopes were being
developed. Both of these stopes experienced excessive dilution and
loss of ore due to poor ground conditions.
Development of our larger stopes remains behind schedule, but we are
confident that we will catch up and increase production in the second
half of the year.
Both mining operations are in major development phases to access and
develop the next generation of production areas. These efforts will
result in a growing production profile from 2012 onwards. We believe
the second quarter was our worst and we will see continual improvement
during the balance of the year.
Project Development
The Mishi project is being developed for an initial 5-year plan. This
surface mining operation is located 2.0 kilometres from the Eagle River
Mill and is expected to produce at about 1,000 ounces per month over
this period. There is significant potential to increase this projected
mine life. The results of drilling the immediate extensions of the
deposit are expected in the third quarter. We received our closure
plan amendment (the outstanding permit) and are rapidly advancing
pre-production activities. De-watering has advanced, surface
construction and overburden removal is advancing and drill-blast
contractors are preparing to mobilize. We expect to generate initial
millfeed late this year and ramp up to rates of about 1,000 ounces per
month by mid-2012.
The exploration drift to the Dubuisson project in Val d'Or continued.
We have mobilized a drill to test depth and western extensions. Access
to the zone will be planned from the drilling information.
Exploration
Exploration work is focused on delineating known mineralization in
proximity to existing infrastructure. At Eagle River we will be in
position to start drilling the depth extension of the 811 Zone to over
1,000 metres in the fourth quarter.
At Kiena, seasonal surface drilling from a barge on Lac De Montigny will
take place from mid-June until freeze-up. We are targeting the
Northwest and Martin Zones which are in range of existing
infrastructure. Underground definition drilling at the Martin Zone,
above the 330 metre level, was very favourable and provided the basis
for mine planning. The zone remains open up-dip and surface drilling
is testing this potential.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2011, the Company had working capital of $15.9 million,
compared to $28.8 million at December 31, 2010. For the first six
months of 2011, capital expenditures totalled $8.7 million compared to
$8.9 million for 2010 and $2.0 million was paid in dividends. Also,
during the second quarter the convertible 7% debentures due May 31,
2012, in the amount of $10.4 million became a current liability. The
Company believes the debentures will either be converted into common
shares or renewed at a favourable rate of interest.
The Company's inventory includes 7,594 ounces of gold bullion, a liquid
asset with a market value of $11.0 million on June 30, 2011. The
Company believes it has sufficient capital resources to cover its
obligations, capital and mining and processing costs going forward.
Production planned in 2011 should generate operating cash flow, even at
gold prices well below those currently being realized.
OUTLOOK
Despite a challenging second quarter, our production forecast remains
60,000 to 65,000 ounces for the year. We have received the final Mishi
permits and expect initial millfeed prior to year end. We have
weathered the worst of unforeseen mining conditions and a tight
mining/development sequence at Kiena. We have accelerated development
of the 388 Zone at Kiena - a new mining area with better grade, which
should commence production in the second half, 2011. We also foresee
renewing production from the high grade Schist Zone - a nice grade
sweetener for the second half. Likewise, grade is scheduled to improve
at Eagle River.
We expect this past quarter to be our weakest and forecast steady
improvement going forward. We are in a transitional development period
on track to establish a production growth profile from 2012 onwards.
We forecast higher grades, growing production and rising 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,
Québec. Wesdome has been producing gold continually for more than 20
years on an unhedged basis and to date has produced in excess of 1.2
million ounces. 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 Statement of Financial Position
(Unaudited, expressed in thousands of Canadian dollars)
June 30 December 31
2011 2010
Assets
Current
Cash and cash equivalents $ 15,936 $ 22,806
Receivables 6,426 7,442
Inventory 14,245 14,077
36,607 44,325
Restricted funds 2,465 2,420
Deferred income taxes 367 1,780
Mining properties and equipment 82,930 77,687
Exploration properties 30,790 30,762
$ 153,159 $ 156,974
Liabilities
Current
Payables and accruals $ 7,850 $ 12,938
Mining taxes 1,371 1,317
Current portion of obligations under finance 1,094 1,262
leases
Convertible 7% debentures 10,397 -
20,712 15,517
Income taxes payable 58 58
Obligations under finance leases 1,171 1,735
Convertible 7% debentures - 10,072
Provisions 1,704 1,574
23,645 28,956
Equity
Equity attributable to owners of the parent
Capital stock 122,258 120,220
Contributed surplus 4,292 4,235
Equity component of convertible debentures 1,970 1,970
Retained earnings 306 853
128,826 127,278
Non-controlling interest 688 740
Total equity 129,514 128,018
$ 153,159 $ 156,974
Wesdome Gold Mines
Ltd.
Condensed Interim Consolidated Statements of Income and Comprehensive
Income
(Unaudited, expressed in thousands of Canadian dollars)
Three Months Ended June 30 Six Months Ended June 30
2011 2010 2011 2010
Revenue
Gold and silver $ 19,220 $ 22,416 $ 42,814 $ 41,993
bullion
Operating expenses
Mining and 17,226 17,161 31,910 30,259
processing
Depletion of
mining 1,604 3,038 3,472 5,295
properties
Production 159 202 369 425
royalties
Corporate and 820 578 1,548 1,276
general
Share based 349 58 566 165
compensation
Amortization of - 8 - 9
capital assets
20,158 21,045 37,865 37,429
Income (loss) from (938) 1,371 4,949 4,564
operations
Interest and other 108 53 211 87
income
Interest on long (401) (418) (790) (789)
term debt
Other interest (8) - (1,190) -
Gain on sale of
marketable - (153) - (153)
securities
Accretion of
decommissioning (17) (16) (32) (27)
liability
Income (loss)
before income (1,256) 837 3,148 3,682
tax
Income tax
Current 68 227 375 460
Deferred (230) 319 1,413 1,213
(162) 546 1,788 1,673
Net income (1,094) 291 1,360 2,009
(loss)
Other
comprehensive
income:
Change in fair
value of
available-
for-sale
marketable
securities - - - (40)
Total
comprehensive $ (1,094) $ 291 $ 1,360 $ 1,969
income (loss)
Profit (loss)
attributable to:
Non-controlling $ (80) $ (11) $ (123) $ (26)
interest
Owners of the (1,014) 302 1,483 2,035
Company
$ (1,094) $ 291 $ 1,360 $ 2,009
Total
comprehensive
income (loss)
attributable to:
Non-controlling $ (80) $ (11) $ (123) $ (26)
interest
Owners of the (1,014) 302 1,483 1,995
Company
$ (1,094) $ 291 $ 1,360 $ 1,969
Earnings and
comprehensive
earnings per share
Basic $ (0.01) $ 0.00 $ 0.01 $ 0.02
Diluted $ (0.01) $ 0.00 $ 0.01 $ 0.02
Wesdome Gold Mines Ltd.
Condensed Interim Consolidated Statements of Cash Flows
(Unaudited, expressed in thousands of Canadian dollars)
Six months ended June 30 2011 2010
Operating activities
Net income $ 1,360 $ 2,009
Depletion of mining properties 3,472 5,295
Accretion of discount on convertible debentures 325 282
Gain on sale of equipment (45) -
Interest paid 1,654 504
Share based compensation 566 165
Amortization of capital assets - 9
Deferred income taxes 1,413 1,213
Gain on sale of marketable securities - 153
Accretion of decommissioning liability 32 27
8,777 9,657
Net changes in non-cash working capital (2,926) (1,249)
5,851 8,408
Financing activities
Exercise of options 1,447 582
Shares issued by a subsidiary of the company to 160 -
third parties
Interest paid (1,654) (504)
Funds paid to repurchase common shares under (4) -
NCIB
Share issuance costs - (27)
Repayment of obligations under capital leases (732) (763)
Dividends paid (2,028) (2,013)
(2,811) (2,725)
Investing activities
Additions to mining and exploration properties (8,716) (9,022)
Proceeds on option to sell property - 33
Proceeds on sale of equipment 111 235
Funds held against standby letters of credit (45) 88
(8,650) (8,666)
Net changes in non-cash working capital (1,260) (8)
(9,910) (8,674)
Decrease in cash and cash equivalents (6,870) (2,991)
Cash and cash equivalents, beginning of period 22,806 23,702
Cash and cash equivalents, end of period $ 15,936 $ 20,711
Cash and cash equivalents consist of:
Cash $ 11,010 $ 15,700
Term deposit (1.0%, 2010: 0.73%) 4,926 5,011
$ 15,936 $ 20,711
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/August2011/15/c3631.html
| Donovan Pollitt, P.Eng., CFA | or | George Mannard, P.Geo. | ||||
| President & CEO | Vice President, Exploration | |||||
| 416-360-3743 ext 25 | 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 |