Wesdome Gold Mines Q2 2023 Earnings Call Transcript

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August 11, 2023

There are 8 speakers on the call.

Operator

Morning. Welcome to Westham Gold Mines Q2 2023 Financial Results Conference Call. I will now turn the call over to Heather Laxton, Chief Governance Officer to begin today.

Speaker 1

Great. Thanks, operator, and good morning, everyone. Welcome to West Elm Gold Mines' Q2 2023 results conference Our release yesterday should be read in conjunction with our MD and A and financial statements, both of which can be found on SEDAR and on our website. Following the prepared remarks,

Speaker 2

we will open the call for questions.

Speaker 1

All figures discussed on this call are in Canadian dollars unless otherwise noted. Before we begin, we'd like to take this opportunity to remind everyone that during this call, we will discuss our business outlook and make forward looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could cause outcomes to differ materially Due to a number of risks and uncertainties, including those mentioned in the detailed cautionary note contained in yesterday's press release and in the company's management discussion and analysis as stated August 10, 2023. Both documents are available on our website and on SEDAR.

Speaker 1

The slides used for this presentation and the recording of this I will now turn the call over to Anthony Bass, President and CEO.

Speaker 2

Thanks, Heather, and good morning, everyone. After about 6 weeks I must express my sincere gratitude for the warm welcome and the chance to immerse myself in our operations and engage with our EDICARE team as well as our valued partners in the investment community and other stakeholders. I come away excited that the underlying potential of this asset as one of the opportunities that presents a fantastic pathway to increase value generation of this high quality Canadian asset. Speaking on the call with me today will be our CFO, Scott Gilbert and our VP of Exploration, Mike Michaud. Before we delve into the final operational details, I'd like to share a few thoughts on my own.

Speaker 2

In the Q2, both sides delivered solid operational performance, showing sequential improvement over the Q1 in terms of the business rate and throughput. Despite facing challenges from regional forest fires, the rapid response processes, procedures and commitment to safety during this time is to be commended. Looking ahead, we are well positioned to meet the midpoint of annual guidance at 110,000 to 130,000 ounces at an all in sustaining cost of US $1.62 to $1800 an ounce. We do forecast cash flow to remain back in weighted This year as Q3 will coincide with peak capital spend and lower sales volume due to planned maintenance shutdown at Eagle. I must emphasize that the guidance we set forth at the beginning of the year remains intact.

Speaker 2

Despite the improvement to consistent operation of Livery in 2023, There's more work to be done. Over the coming months, I'm committed to developing and implementing a strategy final and long term per share value maximization, starting with improving our technical capacity to manage risk, optimize plans and sustainably drive down cost. These initiatives in addition to increased focus on step change aspiration will serve to maximize value of the strong asset within a risk framework that's acceptable to our business. Shifting to our balance sheet, I'm pleased to announce an extensive and holistic review of near term operating and financial projections. We have determined the use of the ATN tool is no longer necessary.

Speaker 2

Based on preliminary updates to our life of mine plans, we are confident in our outlook We look forward to issuing at least 2 years of achievable production and cost guidance in January. With a substantial credit line of $150,000,000 at our disposal, We have more than enough liquidity to meet short term cash requirements. As such, I'd like to extend my thanks to Scott for working with our support of vendors to put this in place. Although we have not worked long together, I've enjoyed our relationship and wish Scott all the best in his next endeavor, where I know he'll do a great job. With that, I'll pass over to Fred to walk through an operational performance in the quarter.

Speaker 3

Thank you, Dhia, everyone, and thank you for attending this morning. As and Pierre mentioned, we're happy to report another strong quarter of execution in both operations. Production was either in line or slightly better than internal targets again in Q2 and Starting with Eagle River, Q2 production of 22,845 ounces was an improvement over Q1 and slightly higher than internal production. Now that the Mishi stockpile is depleted, the only source of ore at the mill is from the underground. And the underground really delivered in Q2 with a record throughput of 64,672 tonnes or 718 tonnes per day, a testament to the efforts of our people outside to focus on productivity with particular emphasis on material movement in the ramp.

Speaker 3

Similarly, development performance is in Q2 continue to exceed targets And we now project 2023 to be a record year for lateral development at the mine. This higher development rate results in slightly higher operating CapEx cost in 2023 on an absolute basis, but it positions us very well for 2023 and the whole. Athena, Q2 production came in at 8,147 ounces, a slight improvement over Q1 and higher than our internal projections. Rate was again slightly higher than upper end of guidance in Q2 as a result of higher than anticipated rates from the newly commissioned A2 zone and continue positive reconciliation of the recovered diluted ore from previously mined areas in Kiena. Given the positive results seen in reconciliation today, We're now expecting great at Kiena to track slightly higher than the upper end of the guidance for the year.

Speaker 3

Throughput in Q2 was also a record Akina since we start with 51,824 tonnes processed. All of this despite the fact Operations had to be suspended sporadically over the entire month of June due to the forest fires raging in the region. In total, the underground mine lost 15 ships from the end of May to the end of June. Development performances were also excellent at Kiena in Q2 Makina Zifran continues to track ahead of budget schedule. And earlier commissioning of the 1.29 level horizon positions us very well to deliver on increased production levels in 2024.

Speaker 3

It also enables us to proceed with delineation drilling ahead of mine, validating ore grades and shapes and firming up our geological understanding of this area in supporting the 2024 budget process that we're just about to kick off. We also continue to advance preparation work of the Pestil ramp to proceed as soon as the authorizations are granted. Initial results of our internal technical study have been positive. Finally, we processed approximately 7,500 tonnes of ore from a neighboring mine of T9 in Q2, which are not shown in numbers on the previous slide. This enabled us to use some of our exceptional capacity with the added operational benefit to us aside from netting some profit of improving stop cycle time underground by increasing the availability of

Speaker 4

the VASIL five over the quarter.

Speaker 3

This agreement was put in place and concluded in Q2 and no further agreements are being discussed at the moment. So all in all, a strong quarter on the execution side for both mines where our teams continue to show disciplined operation, Consistently achieving the plan despite headwinds from weak weather events. I'll pass it on to Scott to walk through the financial highlights for the quarter.

Speaker 5

Thank you, Fred. We generated $84,600,000 of revenue from the sale of 32,000 ounces of gold, which is 22,500 ounces from Eagle River and 9,500 ounces from Sandia. Of the cash margin of $28,700,000 $24,700,000 was generated at Eagle River. The company's gross profit was approximately $500,000 due to the depreciation and depletion charges of $28,300,000 Depreciation and depletion has increased by $16,900,000 compared to the same period in 2022, primarily due to the inclusion of $14,300,000 Sokena due to commercial production being declared on December 1, 2022. Carrying depreciation is based on units of production using time.

Speaker 5

Although the Q2 cash cost of $17.43 per ounce above the guidance level. The year to date cash cost of $15.80 per ounce remains in the middle of the range at AISC of $2,111 per ounce is at the lower end of guidance. In H1, we have spent $40,600,000 in capital and currently forecasting to spend $400,000,000 to be included in our original guidance by December 31, 2023. At June 30, the cash balance is $22,100,000 with $39,000,000 drawn on the $150,000,000 revolver and the working capital deficit is $2,900,000 compared to $38,000,000 at December 31, 2022. To date, we have raised $45,100,000 of gross proceeds from the ATM And I'm pleased to announce that based on our most current outlook, use of the ATM tool is no longer required to support the waiting needs.

Speaker 5

We are comfortable with the available capacity under our existing facility. And over to you, Mike.

Speaker 4

Thanks, Scott. Well, I think we're over exploration is going strong. We are continuing with our aggressive drilling program in 2023 with underground drilling focused on converting large inferred resource base into indicated and subsequently into reserves at year end. The majority of the drilling has been completed at the high grade 300 East zone at depth. As announced in June, Drilling up the 300 Keystone returned a number of exciting intersections with high grades and wider widths, including 78 grams per tonne gold over 9 point 4 meters core length for approximately 40 grams per tonne gold capped over 6 meters to width.

Speaker 4

This is approximately 4 times the average thickness of current veins of the mine. These wider hits occur at the intersection of 2 shear zones and is characteristic of the previously mined 303 lens. You'll recall that the 303 lens was mined primarily in 2019 with an average grade in excess of 1 ounce per ton. Confirming the extension of the 300 East Zone down plunge, ode's fall for the neighboring zones such as at the 80700 Terrace Veins to have similar down plunge potential. And as such, these will be tested as part of a deeper directional drilling program to commence in Q3.

Speaker 4

On surface, a comprehensive 3 d lithostructure model has been developed to guide exploration drilling in the volcanic rocks immediately west of the mine diary. This drilling is designed to discover mineralization similar to that of the Falcon 7 zone that is currently being mined. Limited drilling in the past has returned several high grade hits that could be part of a network of steeply plunging shoots within the volcanic rocks. The first phase of drilling approximately 8,000 meters started in July. Any resources discovered here could meaningfully to enhance the future operational flexibility of the mine.

Speaker 4

At Kiena, underground drilling at the Kiena Deep Zone has continued to return good results from the South Wind and annual basalt zones at depth. Given the importance of these zones adding ounces to the resource base, Hostly stage drilling will be completed once more optimal drilling platforms are established at depth. Meanwhile on surface, Definition drilling is ongoing at the Presque Isle, which is located less than 2 kilometers west of the CNMI. The drilling is designed to convert the inferred resources to indicated and into reserves by year end. As part of this exploration, a ramp will be driven to provide the ideal platform to test the mineralization at depth where it remains open.

Speaker 4

The start of the excavation of the exploration ramp is expected to commence in H2 2023 after the required permits are secured. An added benefit of the exploration ramp is that it could be connected to Kiena's existing underground ramp network, providing access to service for the existing operation and provide a second access for conveyance of material and personnel, freeing time for additional ore hoisting via the shaft. Additionally, surface drilling east of the Kennam mine returning encouraging results from several zones with vastly different styles of gold mineralization. This highlights the amount of gold in the Kiena system and the number of different gold deposits that could exist in this region. For example, drilling at the Shockey zone returned 2.3 grams per tonne gold over 72 meters within diary and represents a more bulk mineable opportunity.

Speaker 4

Whereas at the Duquesne zone, drilling returned 10 grams over 25 meters from a shear zone. Finding gold in various forms makes this relatively under explored part of the property, very exciting, not just for the prospectivity, but also due to the fact is proximal to the 33 level tractor that extends over 3 kilometers east of the key mine shaft. Any ore found here will provide a second source of milking for the underutilized key mine milk. Over to you, Anthony.

Speaker 2

Thanks, Mark. To wrap up today, I'm pleased with the first indications of Steven's organization. I'll be using the next well established plan collaboration with my team to drive an agenda towards increased value for all our stakeholders. All this done in the context of the risk profile in which we are comfortable to operate and most importantly, while ensuring the safety of our people, which remains my number one priority. Thanks for listening today.

Speaker 2

This completes the formal portion of the call today. We'll open up the lines for questions.

Operator

Thank you. To withdraw your question. Our first question comes from Don DeMarco with National Bank. You may proceed.

Speaker 6

Thank you, operator, and good morning, everyone. Good morning, Anthea and team. The just a couple of questions. First off, on the cost volatility at Eagle, And I see the mining rates throughput increasing, but it's can you just give a little bit more color as to whether that's Just a one off and you expect a rebound in the cost lower in Q3, Q4? Yes.

Speaker 5

Thanks, Don. It's Scott here. So when we look at the cost on an aggregate basis there, I could be fairly consistent throughout the year. However, in Q1, We received a credit on our inventory movement and that would be just because we actually have to mill down a little bit early to do some maintenance. So therefore, we had a little bit higher on the stockpile.

Speaker 5

And then the only other fluctuating factor As ever with the in circuit inventory, it's very dependent on the grade at the time that we're processing. If the grade is higher material at that point, Typically, there will be more in the circuit at the end of the month and therefore the carrying value of the inventory will be Hi, so therefore, it just flushes out in the next quarter usually.

Speaker 6

Okay, good to hear. And saw the news on the ATM, so it's no longer required. Just a couple of quick questions on this. Did you draw Anything on the ATM in Q3, say prior to last night's release? And also do you plan to terminate it then?

Speaker 6

So when or just want or do you plan to just let it Speyer.

Speaker 5

Right now, John, we didn't try anything in Q3. As you're aware, we can't drive a thing during a blackout period. So we drew about $11,000,000 or raised about $11,000,000 in Q2. And the intentions are that based on our liquidity that we're not going to utilize the ATM at this point. Okay.

Speaker 5

Yes, go ahead.

Speaker 2

I'm just saying, Scott, that we are not using the ATM.

Speaker 6

Okay. You won't be using it going forward. Okay. Thank you so much. That's all for me.

Speaker 6

Good luck with Q3.

Operator

Thank you. One moment for questions. Our next question comes from Ralph Profiti with 8 Capital. You may proceed.

Speaker 7

Thanks, operator. Good morning, Anthony and team. Two questions for me. First one, maybe for Fred. Is there any of the 120 level or 121 or 123 at Kiena that's going to be available for mining in 2023 or is that mostly sort of a 2024 plant and if so maybe you can help us for context around when and how much do you expect to be mining from those areas?

Speaker 3

Thanks for the question, Ralph. Ultimately, yes, the upper part of the 129 horizon Will be available for mining, but only later in 2024 and in 2025 because the mining sequence as we draw ore, if you will, from the ore body has to start From the bottom up. So we start from we drive the ramp down all the way down to 129 and start stoping there and then stoping upwards.

Speaker 7

Okay, great. That sounds very encouraging for ounces per vertical meter. Second question maybe for Scott. Scott, if all goes according to plan with regards to sort of these internal forecasts, How much, if any, of the credit facility will be required into year end to address CapEx and working capital needs?

Speaker 5

When we look at the internal forecasts and look at the numbers, we're not going to use the majority of the revolver. I'm very comfortable with the level that we have at this point and that's why we decided to suspend it at this point.

Speaker 7

Yes, understood. Okay. Thanks, Antti and team for the color. Appreciate it.

Operator

Thank you. This concludes the Q and A session and this concludes today's conference call. Thank you for participating. You may now disconnect.

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