Wesdome Earns $0.04 per Share in 2010
PRESS RELEASE
WESDOME EARNS $0.04 PER SHARE IN 2010
Toronto, Ontario – March 23, 2011 – 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
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Reserves increase 70% net of depletion
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Bullion inventory of 12,906 ounces
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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 $3.7 million.
In 2010, mining operations at the Eagle River mine were in a low grade sequence with recovered grades averaging about half those of 2009. During this time development work to access the higher grade western portions of the mine was undertaken. Once access is established at new depths the orebody will be developed for mining of higher grade material over the next three years. We expect these better grades to come onstream in 2012.
Also, in 2010, the Company launched development programs for the Dubuisson Zone in Val d’Or and the Mishi open pit mine in Ontario. These new projects form the basis of the Company’s internal production growth prospects over the short and medium term.
RESULTS OF OPERATIONS
Three Months Ended Dec 31 Twelve Months Ended Dec 31
2010 2009 2010 2009
Eagle River Mine
| Tonnes milled | 39,281 | 29,970 | 155,554 | 132,004 |
| Recovered grade (g/t) | 7.9 | 13.0 | 7.3 | 14.3 |
| Production (oz) | 10,004 | 12,503 | 36,712 | 60,754 |
| Sales (oz) | 10,000 | 15,000 | 40,000 | 56,300 |
| Bullion inventory (oz) | 8,793 | 12,081 | 8,793 | 12,081 |
| Bullion revenue ($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
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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.
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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”.
For further information, please contact:
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: [email protected], Website: www.wesdome.com
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.
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Consolidated Balance Sheets
December 31 2010 2009
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
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Consolidated Statements of Income and Comprehensive Income
(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
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Consolidated Statements of Cash Flows
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 |
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