Wesdome Gold Mines Q3 2023 Earnings Call Transcript

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November 9, 2023

There are 11 speakers on the call.

Operator

Good morning. Welcome to the Westham Gold Mines Q3 2023 Financial Results Conference Call. I will turn the call over to Lindsay Dunlop, VP, Investor Relations to begin today.

Speaker 1

Great. Thanks, operator, and good morning, everyone. Welcome to West Elm Gold Mines' Q3 2023 results conference call. Before we begin today, we'd like to take this opportunity to remind everyone that during this call, who will discuss our business outlook and make forward looking statements. These comments are based on our predictions and expectations as of today.

Speaker 1

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 then the company's management discussion and analysis dated November 8, 2023. Yesterday's release should be read in conjunction with the MD and A and financial statements, all of which can be found on SEDAR Plus and on our website. Following the prepared remarks, we will open the call up for questions. All figures discussed on this call are in Canadian dollars unless otherwise noted. I will now turn the call over to Anthea Bass, President and CEO, to begin today.

Speaker 2

Thanks, Lindsay, and good morning, everyone. With one full quarter at Westside concluded, I continue to be impressed with the team in N2,000, and the many opportunities in the tech shopping assets. Speaking on the call with me today will be our CFO, Fred Longerain Interim CFO, Jonathan Singh and Deep Exploration, Michael Schoen. Before we lead into the operational details, I'd like to begin with a brief overview. As we disclosed with our last quarter, Q3 was expected to be the lightest quarter from While we completed sand shutdowns at Eagle River related to annual mill maintenance along with some other infrastructure upgrades, As well, we spent approximately $30,000,000 in CapEx in the quarter, mostly related to the planned production ramp at Kiena.

Speaker 2

I'm very pleased to say That post Q3 access to the 129 meter level has been achieved and Fred will walk through this in a bit more detail a little later. With 87,119 ounces produced at the end of quarter 3 and a production uptick expected in quarter 4, we are well positioned to meet the midpoint of annual guidance at 110,000 to 130,000 ounces and all in sustaining costs of US1620 dollars to US1800 dollars an ounce. With that, I'll pass

Operator

the call over to Fred

Speaker 2

to walk through some operational details.

Speaker 3

Thank you, Anthea. Hi, everyone, and thank you for attending this morning. Lindsay unloaded Q3 was a lighter quarter on production at 2 sites in line with internal projections. That being said, the 2 operations continue to deliver on key initiatives in Q3 that position us very well for Q4 and beyond. Starting with Seagull River, Production in Q3 came in at 20,391 ounces as we performed our annual mill maintenance shutdown in July.

Speaker 3

Land repairs were performed on the grinding, filtration and leach circuits, which resulted in the mill being down for a period of 14 days. Throughput was maintained at similar levels in Q3 of last year, despite the fact that the mill did not have the Nishi stockpile for the Liaparm with the underground mines bridging the gap. Development performances in Q3 continued to exceed budget targets and production grades were consistent with expectations with the bulk Production coming from the high grade Falcon and 300 Zones. With productivity and grades now consistently achieving forecasted numbers at Eagle, We're very confident that the operation can reliably sustain 80,000 to 90,000 ounces per year. That being said, we're launching a thorough benchmarking exercise at Eagle River, Both on productivity and on costs to try and improve our cost structure with a view to value.

Speaker 3

We will provide updates on this initiative in the coming quarters. At Kiena, Q3 production came in at 7,369 ounces. Brake continued to track slightly higher than the upper end of guidance As a result of continued positive reconciliation in the A2 zone, where we continue to successfully cycle stopes entirely in shifts in Q3, Demonstrating our ability to mine in some of the most challenging ground conditions on Aquinas. We continue to be excited with our base still plant, Which not only is proving an invaluable tool in cycling stopes effectively, but also enables us to return up to 45% of our tailings underground, A much higher proportion than what the PFS call for, putting less strain on our tailings capacity. The ramp to key and deep remained a key focus Thank you, Lindsay Dunlop.

Speaker 3

And we're happy to report the development performances continue to track ahead of schedule during the quarter. In fact, As of earlier this week, we've now reached 129 level access. We will now be focusing on developing the level infrastructure required to support mining activities Such as ventilation raises, escape ways, EMPOWUR distribution on levels 127 and 129 with development into the ore In the A Zone set to start in early Q1 of next year. As we establish production on the horizon, high grade production from stoping The ramp up to reach steady state by the end of Q2. During Q3, we've been taking advantage of the ramp positioning to strategically Target delineation holes into next year's production.

Speaker 3

The results received to date confirm the continuity, thickness and high grade of the A Zone attack after the reserve block model. Finally, we received the required authorizations to proceed with the excavation of the Prestea ramp. The contractor has been selected, and we are currently installing support infrastructure at surface to begin excavation of the portal. In addition to providing an exploration platform for the western side of Kiena, this 1700 meters ramp is expected to yield significant debottlenecking of material handling in the mine And ventilation benefits as it will provide a second access to surface for chemo. So overall, Erlighter production in Q3 at the two sites Combined with gold sales, somewhat lagging production, plus cash cost and all in sustaining, it's right outside of guidance range.

Speaker 3

That being said, year to date costs Remain in line with expectations and we're very confident that full year production from both months as well as unit costs will fall within The guidance range that we provided in January. Over to you, Jonathan.

Speaker 4

Thank you, Fred. I guess I'll start with just an overview of the results from the Q3. Previously reported Q3 production of 27,760 Ounces was largely in line with expectations and brought year to date production to 87,119 Ounces. Sales in Q3 were 27,000 ounces and were slightly impacted by the timing of final dore sales. All in sustaining costs of $2,711 or U.

Speaker 4

S. 20.21 were up meaningfully over the first half results, That included the impact of a plant shutdown at Eagle River and the timing of capital spend. We do expect to see improvement on performance in the Q4 of 2023, however, and continue to see the midpoint of cost guidance. We also project to be within the $100,000,000 capital budget set forth in January. Cash flow from operations was $45,000,000 or $0.30 per share, including a $12,500,000 tax refund And the $13,000,000 of non cash working capital adjustments.

Speaker 4

As a result of cash flow during the quarter, total liquidity stands at 143,000,000 As we were able to maintain a revolver draw of $39,000,000 and increase our quarter over quarter cash position by $9,500,000 to 31,000,000 Subsequent to quarter end, we did draw down $10,000,000 of our revolving credit facility, which we plan to pay down by the end of the year. Balance sheet strength remains a priority for us and we expect higher grades at Kiena to drive costs lower and support strong cash flows in coming quarters, Especially at current gold prices, allowing us to pay down the remaining balance of our revolving credit facility as well as fund a range of To reinvest in the organization. Mike will now take us through an exploration review.

Speaker 5

Thanks, John. For exploration, it was a very exciting quarter at Eagle River. Although it's early days, it looks like we have discovered another gold zone at the Eagle River mine That occurs within the volcanic rocks immediately west of the Lydari. Initial surface drilling returned high grade hits within 200 meters from surface With 1 hole returning 64.4 grams per tonne gold over 0.4 meter core length. Meanwhile, Underground drilling, 750 meters down the interpretive plunge of this new zone has also intersected a similar style of mineralization I returned 33.4 grams per tonne over 0.4 meter core length.

Speaker 5

The goldenization occurs within an intermediate volcanic plastic, Similar to the host rock of the Falcon 7 zone, which is known to be a more brittle and a better host for gold mineralization than the encompassing mafic volcanic tailings. The drilling suggests the potential of a new subparallel zone with results consistent with those seen in early drilling of the Falcon 7 zone in 2019. Not only is this new zone near existing mine infrastructure, but demonstrates the potential for high grade mineralization in a rock pipe that has seen limited drilling to date. Additionally, gold mineralization has also been discovered further to the west near the historic 9 Zone. Gold occurs within steeply plunging shoots that have a similar periodicity to the gold mineralization in the mine diary.

Speaker 5

All of the surface drilling is part of a renewed strategy focused on the upper areas of the mine, which also includes an assessment of remnant mine areas. Developing and optimizing the strategic plan around these potential resources could add incremental tonnes for processing at Eagle River's Mill, Which has spare installed capacity. Since the recent announcement of the new discovery, drilling has been ongoing along the interpretive plunge of the zone. Most recently, an underground drill hole returned 12 meters of alteration, quartz fading and sulfide mineralization, as you can see in the slide. All the assets are pending.

Speaker 5

We are excited to continue drilling this area as 12 meters thickness is well beyond the typical thickness of the mine. Elsewhere within the Eagle River Mine, underground drilling continues to confirm the continuity and high grades of the 300 East Summit depth. And with wider which returned locally could represent an area similar to the previously mined 303 lands. The continuity of the mineralization down plunge at 300 East also suggests that the other Parallel Zones, namely the 8 and 7 Zones, have the same potential to continue at depth. The company has commenced directional drilling to aid in the extensions of the known zones at wider step outs at depth to provide an indication for future mining.

Speaker 5

At Kiena, recent surface and underground drilling was focused on better defining our On surface, drilling was focused at the Perskill zone, which is located 1.3 kilometers northwest of the GMI. The surface drilling has confirmed the continuity of gold mineralization with 1 hole returning 32 grams per ton of gold over 3 meter core length. However, as importantly, the drilling has confirmed the down plunge potential Yes. And this is going to be an area that we're going to continue to explore with the development of the ramp. The recent drill results support the decision to proceed with the exploration ramp from surface to test the down plunge extension of the deposit.

Speaker 5

The excavation of the ramp is now proceeding with the recent receipt of its required permits. Of course, the Presque Isle is just one of several zones Having the potential to offer a supplementary source of mill feed near surface or in the upper area of the mine with the spare in salt capacity at the Q Mill. Recent drilling results from the Shockey and DuPont zones earlier this year, including 2.3 grams per tonne gold over 72 meters Indicates this potential. Both of these zones are accessible from the existing 33 level development that extends across the property. So many styles of gold mineralization observed east of the Kiena mine.

Speaker 5

We are confident that as our exploration continues, We will be able to identify more zones of gold mineralization. Within the Kiena mine, drilling has been focused on better delineating He and A Zones to derisk the 2024 minutee production, particularly given the high grades in the reserve model. To date, the delineation is in agreement with the previously drilled wider space exploration holes. One delineation hole returned 4,190 grams per tonne of gold or just over 4 kilograms per tonne of gold over 0.8 meters. You can see this in the attached slide.

Speaker 5

Obviously, these types of intercepts provide confidence in the forecast for next year. Over to you, Adrienne.

Speaker 2

Thanks, Mike. As you've heard, we remain on track for a strong Q4 and we're excited about the future of the business. As we highlighted on our recent investor and analyst tour of both operations, we see 4 main near term area objectives for success. Firstly, we need to continue executing on Kiena Rapid Development, which is now at the 129 meter level. Concurrent delineation drilling is improving our standing on the results, giving us a high degree of confidence in our near term plans.

Speaker 2

Secondly, I continue to see opportunities for organic growth By utilizing the strength still capacity of our mill and refocusing the strategy to re optimize in our mine plan from first principle. Complying with an exploration strategy focused on developing near mine potential, we are more effectively leveraging our fixed costs to sustain and improve our unit economics. Thirdly, the leadership team is coming together nicely with a genuine cohesion developing between all levels of organization. Lastly, Looking ahead, we expect a marked increase in cash flow in 2024, particularly at current gold prices. Preliminary budget plans Yes, we are well positioned to achieve a net cash position in the coming months in the coming quarters, but also invest significantly in increasing our developed ore inventory through capital development, Aggressively advancing our pipeline on near mine exploration opportunities and make overdue infrastructure upgrades to maximize the long term value of these assets.

Speaker 2

Consequently, I'm expecting the capital budget for next year to be consistent with this year's levels. We look forward to providing the market with 2 years of production and cost guidance at each Asset in January. This initiative is part of our ongoing commitment to maintaining clear and forward looking communication with our stakeholders. Thanks for listening today. And with that, I'll turn the line back to operator for any questions.

Operator

Thank Our next question Our next question comes from Aaron Lamba with TD Securities. Your line is open.

Speaker 6

Hi. Yes. Thanks for the update and congrats on the good quarter. You mentioned you're going to give 2 year guidance in January And you mentioned the higher grades at Kiena are going to kind of kick in sometime in the first half of twenty twenty four. But can you just remind us like what The mine and mill is kind of capable at Kiena.

Speaker 6

Just trying to get a rough guidance on what Potentially, you can do next year. I know you're catching up on development this year. And when I look at the last feasibility study, There's a little bit of a ramp up in terms of tons processed in the 1st couple of years versus later in the mine plan. So Any color, just to remind us on what the mining mill can do there would be appreciated.

Speaker 2

So, Amit, thank you for the question. I think just first of all, we should talk about permitted capacity on the mill and the potential of the mill. I think the mill's capacity And potential is about 2,040 tonnes per day. In the current plan, we're running more likely around 750 to 850 if I'm not Yes. So we're way below the current capacity of the mill and the permitted capacity of the mill.

Speaker 2

Yes.

Speaker 6

That's it for me. Thanks.

Operator

Thank you. Our next question comes from Don DeMarco with National Bank. Your line is open.

Speaker 7

Well, hi. Good morning. Thank you, operator, and hello, Anthony and team. Congratulations on the quarter. I guess a couple of questions here.

Speaker 7

First one is, So you broke through on the 129 level. The ramp is there. It seems like this is earlier than targeted at the end of November. So does this shift your schedule forward for Kiena Deep Production in any way?

Speaker 2

Well, Don, thank you. Nice to hear your voice. Yes, and I think in terms of the internal updated plan, definitely, we are quarter ahead of our internal Plans are obviously different from what you perceive in the PFS. But from an internal perspective, we are quarter ahead. And yes, it certainly will result in Uptech next year ahead of our previously perceived

Speaker 6

plans.

Operator

Thank you. Our next question comes from Ryan Walker with Exelon. Your line is open.

Speaker 8

Hi, good morning guys. Thanks for the call. So I just wanted to go back to the Debt, so you said subsequent to quarter's end, you drew down another $10,000,000 What's kind of a net movement going to be in Q4 there? Do you still Plan aggressive payback during the quarter.

Speaker 1

Sorry, Ryan, could you repeat that?

Speaker 8

Yes. So just on the drawdown from the facility, you subsequent quarter end, you drew down another 10,000,000 So I'm just wondering during the balance of the quarter, are there repayments still planned on the you've been fairly aggressive on the repayment front, still plan to do that in Q4?

Speaker 2

We planned, Bryan, to go back to pay back the $10,000,000 to be freed down by the end of the year.

Speaker 8

Okay. And then just on the capital budget, so around about the same $100,000,000 ish this year into next year. Is that ex any kind of savings identified during this cost initiative program? And is that kind of a number we should be sticking with into the foreseeable future?

Speaker 2

Yes. Absolutely, it's not any savings, but I think I can give you a bit of an understanding what it really is. It's really for focused on deferred development or development. We're trying to keep pushing on the ramp. And secondly, obviously, looking at the skill development as well.

Speaker 2

And lastly, I think it's important to note that it's about exploration and growing our exploration budget too. So I think It's really important to understand that we're going to keep pushing these 3 initiatives that help build the mine in the longer term. So you can assume that that will continue for next year.

Speaker 8

Great. Okay. Thank you. That's it for me.

Operator

Thank you. Our next question comes from John Sklodnick with Desjardins. Your line is open.

Speaker 9

Hey, yes. Thanks for taking my question, guys. I guess I'll just follow-up on Ryan's question with that CapEx and not sure if I'm getting ahead here, but wonder if you may be able to break out kind of how you see that Flat CapEx year over year broken out between maybe assets and sustaining versus growth or exploration?

Speaker 2

Yes. I look at things together, John, but I and it's Sort of, you must get the guys to break it up better for me. But from a if you look at it together, I think what you'll see is that number continue next year. And like I said, I'll I'll repeat it again. It really is around pushing development and ensuring that we keep pushing that ramp down because what we want to do is get to the next level at mine And obviously, continue with our development and get ahead of ourselves inside Eagle as well.

Speaker 2

And secondly, we really want to push our exploration And it should be getting those programs really strong to drive the business in a more longer term. And obviously, for skills including that capital as well for next year, Which obviously continued the year thereafter as well.

Speaker 9

Okay. Yes, that makes sense. I guess one more just on Depreciation, it's been a bit elevated in the last three quarters and just curious kind of how you see that going forward in a run rate into Q4 And into 2024 in terms of a per ounce number, if you have that handy.

Speaker 2

Sure. I'll ask Garush to actually cover that. Garush? Sure. So John, you

Speaker 5

can basically model it on units of production on a dollar per ton basis, we use 2P reserves for that.

Speaker 7

And given Kiena ramping up, that's

Speaker 5

why you're seeing that mark increase. So that's just the way I would model it.

Speaker 9

Okay. No, that makes sense. Appreciate that and that's all for me. Thanks guys.

Speaker 2

Thanks, Ben.

Operator

Thank you. Our next question comes from Wayne Lam with RBC. Your line is open.

Speaker 10

Yes, thanks. Good morning, everyone. Just wondering, for SKU, what's the kind of magnitude of CapEx spend for the ramp. And what's kind of the timeline of events you're kind of contemplating there in terms of the development of the ramp in mining and Thanks, James. 33 level.

Speaker 10

Just curious if you're able to provide a bit more context around that?

Speaker 2

Sure. Wayne, I'll hand over to Fred on this one, if

Speaker 3

that's Yes. I feel right now we're still working out the detailed numbers, I would say, for the budget exercise. But I guess in terms of scale for the ramp, it's about 1700 meters, like I stated in the statement earlier, factor in the Development cost of about CAD 6,000 and so on. That's going to be in the scheduled write down that we see as development in this year and A little bit into next year well, in 2024, sorry, and

Speaker 5

then a little bit in 2025 as well and through the schedule.

Speaker 10

Okay, great. Thanks. And then just in relation to that CapEx commentary, should we also be thinking about a catch up in exploration spend as well next year?

Speaker 2

Yes. You can absolutely assume that that's included in capital spend too.

Speaker 1

Okay, great. Thanks. That's all for me.

Operator

Thank you. Our next question comes from Jeremy Hoi with Canaccord Genuity. Your line is open.

Speaker 9

Hi all. Thanks for taking my questions. So Wayne actually covered a few of the things I wanted to ask. I guess just a clarification for me then. The Millakiana is permitted to 2,040 tonnes per day.

Speaker 9

Can you remind us of what Type of capital would be required in additions to get to that level? Or can it do that in its current state?

Speaker 2

Yes. Jamie, it's very little capital that's required to do that. It actually is, I would almost call it, Yes. Non relevant actually capital through this. I'll ask, I'm afraid that you'll put a little bit further because it really is all the equipment is there.

Speaker 2

It's merely by connection.

Speaker 6

Rick, do you

Speaker 2

want to just comment?

Speaker 3

Yes, just provide a little bit more flavor here. The mill has the installed capacity. It's just that we're currently not using the Secondary crusher at surface. This is really the infrastructure that

Speaker 5

will bump up the tonnage

Speaker 3

to 3,000 plus. And right now, we're bypassing this Structure has been dormant, I would say, for a few years. So ultimately, the CapEx is only to update the biz de electrics Change a few conveyor belts and away we go, so minimum.

Speaker 9

Okay, excellent. Thank you for the clarification.

Operator

Thank you. There are no further questions at this time. Thank you for your participation. This does conclude the program and you may now disconnect. Everyone have a great day.

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Key Takeaways

  • Q3 production was a lighter quarter at 27,760 ounces (87,119 ounces YTD) due to annual mill maintenance and Kiena ramp-up CapEx, with a Q4 uptick expected to meet the midpoint of 110,000–130,000 ounce guidance at AISC US$1,620–1,800/oz.
  • West side Kiena ramp development reached the 129-metre level ahead of schedule, with A Zone stoping set to begin in early Q1 2024 and steady state production targeted by end of Q2, supported by the newly authorized Prestea ramp for expanded material handling and ventilation.
  • Financially, Q3 generated C$45 million in operating cash flow, ending with C$143 million in liquidity (including C$31 million cash), and the company plans to repay the C$10 million revolver drawdown by year-end while keeping 2023 CapEx under the C$100 million budget.
  • Exploration delivered a high-grade discovery near Eagle River, intersecting up to 64.4 g/t Au over 0.4 m and 33.4 g/t over 0.4 m in a potential subparallel zone near existing infrastructure, with ongoing drilling testing continuity along the plunge.
  • Looking ahead, management aims to leverage under-utilized mill capacity through near-mine exploration, expects a notable increase in 2024 cash flow at current gold prices, and will provide two-year production and cost guidance for each asset in January.
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Earnings Conference Call
Wesdome Gold Mines Q3 2023
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