Wesdome Gold Mines Ltd. (TSX: WDO) (“Wesdome” or the “Company”) announces its second quarter financial results. All figures are stated in Canadian dollars unless otherwise noted.
Duncan Middlemiss, President and CEO commented, “At Eagle River, the one-time challenges which temporarily impacted production, such as the hoist rope manufacturing defect and the leach tank failure have since been addressed. Head grade at Eagle River in Q2 averaged 9.6 g/t, which is below the 2022 grade guidance of 12.1 -13.4 g/t Au. However, once both issues were resolved, we were able to mine and process the significantly higher-grade ore originally planned for June.
At Kiena, the supply chain challenges, which delayed delivery of the underground equipment in Q1 2022 and negatively affected our development rates, have also delayed delivery of key electrical components for the completion of the paste backfill plant. Consequently, the mining rate has been slower to ramp up, which now puts us approximately 3-4 months behind our original 2022 plan. We look forward to the completion of the paste fill plant (now expected to be commissioned in Q4 2022) to speed up our production cycle and mitigate delays.
As previously disclosed on July15, combined production in Q2 was 27,240 ounces resulting in total H1 2022 production of 52,851 ounces. Challenges such as global supply chain related delays, inflationary cost pressures, and lost productivity from COVID related absences persisted into Q2 and beyond. Subsequent to the quarter both operations were shut down for planned maintenance. During July, the Kiena hoist was shutdown for three weeks for planned refurbishment and at Eagle the mill was shutdown for two weeks for annual scheduled maintenance and thickener refurbishment.
As a result of lower production and sales than planned, both cash costs for the quarter of $1,538 (US$1,205) and AISC of $2,020 (US$1,582) were above our guidance range of $875 – $970 (US$700 – $775) for cash costs and $1,270 – $1,400 (US$1,015 – $1,125) per ounce. Free cash outflow for the quarter was $28.6 million, net of an investment of $31.2 million in Kiena, or ($0.20) per share. This is our final year of elevated growth capital (primarily at Kiena) as commercial production is expected in Q4.
In the beginning of the year, the Company set full year 2022 combined production guidance at 160,000 – 180,000 ounces. At Kiena, commercial production will be declared with the successful commissioning of the paste fill plant, which is now expected in Q4. As a result of the paste fill plant delays and the development deficit, we are revising Kiena guidance to 34,000 – 43,000 ounces. At Eagle River Mine, our recent development into the Falcon Zone has indicated that there is more grade variability than initially demonstrated from the 2021 diamond drilling, and we are forecasting lower grades in this zone for the remainder of 2022. However, this has been a zone which has already demonstrated good upside as well with our successful Falcon mining in late 2021 and we would expect this zone to demonstrate the variability associated with high grade chutes of this nature. Consequently, we are revising Eagle’s guidance to 85,000 – 95,000 ounces. As a result of the lower production and continued inflationary pressures affecting labour cost and availability, ongoing supply chain issues, and the ongoing pandemic, the company is revising both its cash and AISC costs for the year as per the below table.
| 2022 Guidance | Initial | Revised | YTD 2022 Achievement |
| Gold production | |||
| Eagle River | 95,000 – 105,000 ounces | 85,000 – 95,000 ounces | 37,090 ounces |
| Mishi | 1,000 – 2,000 ounces | 1,000 – 2,000 ounces | 1,735 ounces |
| Kiena | 64,000 – 73,000 ounces | 34,000 – 43,000 ounces | 14,026 ounces |
| 160,000 – 180,000 ounces | 120,000 – 140,000 ounces | 52,851 ounces | |
| Head grade (g/t Au) | |||
| Eagle River | 12.1 – 13.4 | 10.5 – 11.7 | 10.6 |
| Mishi | 2.0 – 2.5 | 2.9 – 3.3 | 3.3 |
| Kiena | 10.6 – 11.8 | 8.6 – 9.5 | 9.3 |
| Cash cost per ounce 1 | $875 – $970 ( US$700 – US$775 ) |
$1,260 – $1,390 ( US$980 – US$1085 ) |
$1,412 ( US$1,111 ) |
| AlSC per ounce 1 | $1,270 – $1,400 ( US$1,015 – US$1,125 ) |
$1,765 – $1,950 ( US$1,370 – US$1,520 ) |
$1,851 ( US$1,456 ) |
“The Company is continuing its aggressive exploration and drilling program for 2022. We are pleased with the recent expansion of the high grade A Zones and Footwall Zones as well as the discovery of the South Limb zone at Kiena. Similarly at Eagle River, the surface and underground drilling has continued to expand known zones such as 300E and Falcon 7 and identified new areas of mineralization both within the mine diorite and surrounding volcanic rocks. The continued discovery of new mineralization demonstrates the upside exploration potential at both sites.”
Key operating and financial highlights of the Q2 2022 results include:
- Gold production of 27,240 ounces, including 8,914 Kiena pre-commercial ounces, is a 10% decrease over the same period of the previous year (Q2 2021: 30,375 ounces):
- Eagle River Underground milled 59,964 tonnes at a head grade of 9.6 grams per tonne for 17,756 ounces produced, a 40% decrease over the same period in the previous year (Q2 2021: 29,836 ounces).
- Mishi Open Pit milled 7,685 tonnes at a head grade of 2.8 grams per tonne for 570 ounces produced (Q2 2021: 539 ounces).
- Kiena milled 26,478 tonnes at a head grade of 10.6 grams per tonne for 8,914 pre-commercial ounces produced.
- Revenue of $61.9 million, a 3% decrease over the same period of the previous year (Q2 2021: $63.9 million).
- Ounces sold were 26,000 at an average sales price of $2,380/oz (Q2 2021: 28,500 ounces at an average price of $2,239/oz).
- Cash margin1 of $21.9 million, a 46% decrease over the same period of the previous year (Q2 2021: $40.6 million).
- Operating cash flows decreased by 55% to $12.1 million or $0.08 per share1 as compared to $26.9 million or $0.19 per share for the same period in 2021.
- Free cash outflow of $28.6 million, net of an investment of $31.2 million in Kiena, or ($0.20) per share1 (Q2 2021: free cash outflow of $9.1 million or ($0.07) per share1).
- Net loss of $14.3 million or ($0.10) per share (Q2 2021: Net income – $84.9 million or $0.63 per share) and Net loss (adjusted)1 of $5.5 million or ($0.04) per share (Q2 2021: $20.6 million or $0.15 per share)
- Cash position at the end of the quarter of $23.5 million.
- Cash costs1 of $1,538/oz or US$1,205/oz, an 89% increase over the same period in 2021 (Q2 2021: $814/oz or US$663/oz);
- AISC1 increased by 63% to $2,020/oz or US$1,582/oz (Q2 2021: $1,240 or US$1,009 per ounce) due to lower ounces sold and increased corporate and general expenses.
- Refer to the Company’s 2021 Annual Management Discussion and Analysis section entitled “Non-IFRS Performance Measures” for the reconciliation of these non-IFRS measurements to the consolidated financial statements
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Production and Exploration Highlights |
Achievements | |
| Eagle River Complex |
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| Kiena |
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