Wesdome Announces 2021 Fourth Quarter and Full Year Financial Results

472
Mining Update

TORONTO – MINING – Wesdome Gold Mines Ltd. (TSX: WDO) (“Wesdome” or the “Company”) today announces fourth quarter (“Q4 2021”) and full year financial results. All figures are stated in Canadian dollars unless otherwise noted.

Key Highlights:

  • Record full year production at the Eagle River Complex of 101,403 ounces
  • Decreased Eagle River cash costs by 6%
  • Increased revenues and cash margins by 22%
  • Increased operating cash flows by 28%
  • Increased Eagle River reserve grade by 15%
  • Increased Eagle River resources (exclusive of reserves) by 25%
  • Kiena Mine embarked on a construction and mining ramp up as per the May 2021 Pre-Feasibility study – fully funded from internally generated cash flow
  • Successfully restarted Kiena in Q3, producing 22,440 pre-commercial ounces
  • Increased Kiena Measured and Indicated Resources (exclusive of reserves) by 7%

Mr. Duncan Middlemiss, President and CEO commented, “Q4 2021 demonstrated strong operating and financial performance with total gold production of 41,559 ounces and 37,544 ounces sold. Operating cash flows increased by 274% to $48.2 million or $0.34 per share1  (Q4 2020: $12.9 million or $0.09 per share). Net income and net income (adjusted)1 for the quarter were $24.8 million or $0.18 per share (2020: $8.5 million or $0.06 per share).

We are very pleased with both our operating and financial results in 2021. Total gold production of 123,843 ounces was pre-released, and both cash and all-in sustaining costs (“AISC”) of $990 and $1,408 respectively, within guidance of $900 – $1000 and $1,300 – $1,450 per ounce. Operating cash flows increased by 28% to $131.0 million (2020: $102.3 million) and cash margins increased by 22% to $145.4 million (2020: $119.3 million). We successfully restarted the Kiena operation fully funded by internally generated cash flow, spending $99.6 million during the year and producing our first ounces in Q3 2021. Kiena precommercial production generated $17.6 million of cash margin. We ended the year with $56.8 million in cash, sufficient to carry out all exploration and project work in 2022.

We have determined the 2021 year end resources using a 3D block model, in accordance with the industry best practises and standards. At Eagle, current reserves stand at 524,000 ounces of gold from 1.1 M tonnes at an average grade of 15.3 g/t Au. Reserve ounces declined modestly by 10% after depleting Eagle’s record year of production, but saw a significant grade increase of 15% compared to 2020, which will improve mine margins going forward. A record Inferred Resource inventory of 255,000 ounces, an increase of 24% compared to 2020, provides a platform for potential increased Reserve replacement for YE 2022. Near term infill drilling is expected to increase confidence of current resources which could be deemed economic for reserve inclusion next year.”

At Kiena, the Kiena Deep geological interpretation was improved on from the PFS model with additional drilling and silling along the zone in 2021, the new interpretation provided higher confidence in the Resource and will add to the successful mining of the zone. Due to successful infill and step out drilling the MI&I Resource (inclusive of reserves) increased 11% from the 2021 PFS, with a 7% increase in M&I leading to an overall Reserve increase by 8% with a very small decrease in grade due to bringing additional material from A1 and A2 zones which are lower grade compared to the A Zone.

Full MRMR data can be found in the Eagle River Complex and Kiena reserves and resources section below.

In 2022, production guidance is 160,000 – 180,000 ounces, and consolidated cash cost per ounce sold guidance to range between $875 – $970 per ounce (US $700 – $775), and AISC to range between $1,270 and $1,400 per ounce (US$ 1,015 – $1,125), slightly lower than 2021’s results.”

Key operating and financial highlights of the full year 2021 results include:

  • Gold production of 123,843 ounces, which includes 22,440 Kiena pre-commercial ounces, is a 37% increase over the same period in the previous year (2020: 90,278 ounces):
    • Eagle River Underground 228,759 tonnes at a head grade of 13.8 grams per tonne for 99,120 ounces produced, 13% increase over the previous year (2020: 87,560 ounces).
    • Mishi Open Pit 36,508 tonnes at a head grade of 2.4 grams per tonne for 2,283 ounces produced (2020: 2,718 ounces).
    • Kiena 68,470 tonnes at a head grade of 10.4 grams per tonne for 22,440 pre-commercial ounces produced.
  • Revenue2 of $262.9 million, a 22% increase over the previous year (2020: $215.5 million).
  • Ounces sold3 were 116,708 at an average sales price of $2,250/oz (2020: 91,229 ounces at an average price of $2,360/oz).
  • Cash margin1,2,4 of $145.4 million, a 22% increase over the previous year (2020 – $119.3 million).
  • Operating cash flows2,4 increased by 28% to $131.0 million or $0.93 per share1 as compared to $102.3 million or $0.74 per share for the same period in 2020.
  • Free cash outflow of $21.3 million, net of an investment of $99.6 million in Kiena, or ($0.15) per share1 (2020: free cash flow of $29.0 million or $0.21 per share).
  • Net income2,4 of $131.3 million or $0.94 per share (2020: $50.7 million or $0.36 per share) and Net income (adjusted)1,2,4 of $69.9 million or $0.50 per share (2020: $50.7 million or $0.36 per share).
  • Cash position at the end of the year of $56.8 million.
  • Cash costs1,4,5 of $990/oz or US$789/oz, a 6% decrease over the same period in 2020 (2020: $1,053/oz or US$785/oz);
  • AISC1,5 increased by 1% to $1,408/oz or US$1,123/oz (2020: $1,396 or US$1,040 per ounce) due to higher sustaining capital, corporate and general expenses and lease payments.
  • Eagle River Proven and Probable reserves of 1.1 M tonnes at an average grade of 15.3 grams per tonne for 524,000 ounces
  • Eagle River Measured and Indicated Resources (exclusive of reserves) of 465,000 tonnes grading 10.2 for 153,000 ounces
  • Eagle River Inferred Resources (exclusive of reserves) 596,000 tonnes grading 13.3 g/t for 255,000
  • Kiena Proven and Probable Reserves of 1.8 M tonnes at 11.1 g/t for 651,000 ounces
  • Kiena Measured and Indicated Resources (exclusive of reserves) of 734,000 tonnes grading 4.8 g/t for 113,000 ounces
  • Kiena Inferred Resources (exclusive of reserves) of 4 M tonnes grading 5.9 g/t for 761,000 ounces

Other Achievements for 2021 include:

  • Combined revenue from gold sales of $262.6 million (which excludes an additional $3.9 million from a bulk sample at the Kiena Mine).
  • Published Kiena Pre-Feasibility Study (“PFS”); IRR 98%.
  • Monetized Moss Lake via vend-in transaction with Goldshore Resources for aggregate consideration of $57 million including $12.5 million upfront in cash and 30% of issued and outstanding shares at closing
  • Included in TMX 30 recognition program for the third consecutive year. This flagship program showcases the TSX’s 30 top-performing stocks based on dividend adjusted share price appreciation.

Key operating and financial highlights of Q4 2021 results include:

  • Gold production of 41,559 ounces, which includes 16,929 Kiena pre-commercial ounces, is a 108% increase over the same period in the previous year (Q4 2020: 20,006 ounces):
    • Eagle River Underground 56,159 tonnes at a head grade of 13.7 grams per tonne for 24,267 ounces produced, 23% increase over the previous year (Q4 2020: 19,667 ounces).
    • Mishi Open Pit 6,215 tonnes at a head grade of 2.1 grams per tonne for 363 ounces produced (Q4 2020: 339 ounces).
    • Kiena 38,000 tonnes at a head grade of 14.1 grams per tonne for 16,929 pre-commercial ounces produced.
  • Revenue of $85.5 million, a 77% increase over the previous year (Q4 2020: $48.4 million).
  • Ounces sold were 37,544 at an average sales price of $2,275/oz (Q4 2020: 19,889 ounces at an average price of $2,430/oz).
  • Cash margin1 of $47.7 million, an 89% increase over the previous year (Q4 2020 – $25.2 million).
  • Operating cash flows increased by 274% to $48.2 million or $0.34 per share1 as compared to $12.9 million or $0.09 per share for the same period in 2020.
  • Free cash outflow of $3.2 million, net of an investment of $35.5 million in Kiena, or ($0.02) per share1 (Q4 2020: free cash outflow of $8.8 million or ($0.06) per share).
  • Net income and Net income (adjusted)1of $24.8 million or $0.18 per share (2020: $8.5 million or $0.06 per share).
  • Cash costs1 of $1,005/oz or US$797/oz, a 14% decrease over the same period in 2020 (Q4 2020: $1,162/oz or US$892/oz);
  • AISC1 decreased by 10% to $1,412/oz or US$1,121/oz (Q4 2020: $1,567 or US$1,203 per ounce).
  1. 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.
  2. FY 2021 excludes $3.9 million of revenue from the Kiena bulk sample, which was processed in Q4 2020 and sold in Q1 2021.  The incidental revenue was credited against the cost of the Kiena exploration asset.
  3. FY 2021 excludes 1,793 ounces from the Kiena bulk sample, which was processed in Q4 2020 and sold in Q1 2021.
  4. Includes a $0.4 million charge for product inventory costs from the sale of 1,793 ounces of gold from the Kiena bulk sample, which was processed in Q4 2020 and sold in Q1 2021.
  5. In determining the Cash cost per ounce and AISC per ounce, the total ounces sold includes 1,793 ounces of gold from the Kiena bulk sample, which was processed in Q4 2020 and sold in Q1 2021.

Eagle River Complex Reserves and Resources

MINERAL RESERVES – EAGLE RIVER (see notes) December 31, 2021 December 31, 2020
Tonnes
(000s)
Grade
(g/t Au)
Contained ounces Tonnes
(000s)
Grade
(g/t Au)
Contained ounces
Eagle River Proven 116 11.3 42,000 370 12.6 150,000
Probable 951 15.8 482,000 982 13.7 431,000
Proven + Probable 1,066 15.3 524,000 1,352 13.4 581,000
     

Notes:

  1. Mineral reserves are founded on measured and indicated mineral resources with an effective date of December 31, 2021
  2. The Qualified Person for the Mineral Reserves estimate as per NI 43-101 is Gary Poxleitner P. Eng, SRK Consulting, and independent of the Company
  3. Mineral Reserves are reported using a 5.5 g/t Au cut off
  4. Mineral Reserves demonstrated economic viability with the following parameters:
    1. gold price of C$1,820 (US$1,400) per ounce for the Reserves, with a USD:CAD exchange rate of 1.3.
    2. a 1.5 m minimum width,
    3. 1.0 m of external dilution (0.5m in HW, 0.5m in FW),
    4. 90% mine recovery,
    5. mining cost of C$161.7/t,
    6. milling cost of C$64.3/t,
    7. surface and G&A cost of C$78.2/t,
    8. Royalty of 2% of gold sold,
    9. selling cost of C$7.65/oz and
    10. metallurgical recoveries of 97.0%.
    11. A bulk density factor of 2.7 tonnes per cubic m (t/m3)
  5. Mineral Reserves have been estimated in accordance with the Standards of the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”)
  6. Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade, and metal content
MINERAL RESOURCES
(Exclusive of Mineral Reserves)
(see notes)
December 31, 2021 December 31, 2020
Tonnes
(000s)
Grade
(g/t Au)
Contained ounces Tonnes
(000s)
Grade
(g/t Au)
Contained ounces
EAGLE RIVER Measured  126 13.4 54,000 23 12.1 9,000
  Indicated  339 9.1  99,000 320 9.0 93,000
Measured + Indicated  465 10.2  153,000 343 9.2 102,000
Inferred  596 13.3  255,000 510 12.5 205,000
       
  1. The effective date of the estimate is December 31, 2021
  2. The estimate was prepared by Sandeep Prakash, P. Geo., Senior Resource Geologist of the Company, under the supervision of the André M. Deiss, BSc (Hons), Pri.Sci.Nat. of SRK Consulting (Canada) Inc., who is a “Qualified Person” under NI 43-101
  3. Mineral resources are reported exclusive of mineral reserves; mineral resources that are not mineral reserves do not have demonstrated economic viability
  4. Mineral resources are considered for underground extraction and have been reported within potentially mineable volumes without external dilution. Must take material inside these volumes below the stated block grade cut-off has been included in the total.
  5. A bulk density factor of 2.7 tonnes per cubic m (t/m3) was applied
  6. Resources have been reported considering mining progress as of December 31, 2021
  7. Resources are reported using a 4.22 g/t Au cut-off grade
  8. Economic parameters for the determination of the cut-off grade include:
    1. a gold price of US$1,500 per ounce, a USD/CAD exchange rate of 1.30 (resulting in C$1,950 per ounce gold price);
    2. mining cost C$107.6/t milled;
    3. processing cost C$64.3/t;
    4. G&A C$78.2/t milled;
    5. 97.0% mill recovery
    6. Royalty of 2% of gold sold, and
    7. selling cost at C7.65$/oz
  9. Mineral resources are classified in accordance with CIM standards
  10. Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade, and metal content
MINERAL RESOURCES (Exclusive of Mineral Reserves) (see notes) December 31, 2021 December 31, 2020
Tonnes
(000s)
Grade
(g/t Au)
Contained ounces Tonnes
(000s)
Grade
(g/t Au)
Contained ounces
MISHI      
Open pit Indicated
  Inferred   2,300 1.6 120,000 2,808 1.6 147,000
Underground Indicated
  Inferred       373 5.4 65,000
MISHI TOTAL Indicated
  Inferred   2,300 1.6 120,000 3,182 2.1 212,000
       

Notes – Mishi

  1. The effective date of the estimate is December 31, 2021
  2. The estimate was prepared by Dr. Lars Weiershäuser, P. Geo., Director, Geology of the Company, who is a “Qualified Person” under NI 43-101
  3. Mineral resources are reported exclusive of mineral reserves; mineral resources that are not mineral reserves do not have demonstrated economic viability
  4. Mineral resources are amenable for open pit extraction and have been reported within a conceptual pit shell.
  5. A bulk density factor of 2.7 tonnes per cubic m (t/m3) was applied
  6. Resources have been reported considering mining progress as of December 31, 2021
  7. Resources are reported using an in-situ marginal cut-off grade of 0.52 g/t
  8. Ounces are contained ounces
  9. Economic parameters for the determination of the cut-off grade include:
    1. a gold price of US$1,500 per ounce, a USD/CAD exchange rate of 1.30 (resulting in C$1,950 per ounce gold price);
    2. Mining cost C$5.00/t;
    3. Processing cost C$21.00/t including base processing, sustaining CAPEX, variable and G&A
    4. Refining and transport cost $7.65/oz gold recovered
    5. Royalty of 2% of gold sold and
    6. 82% mill recovery
  10. Assumed pit slope angles between 36.8 and 52.4 degrees
  11. Mineral resources are classified in accordance with CIM standards
  12. Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade, and metal content

Kiena Complex Mineral Reserves and Resources

MINERAL RESERVES – KIENA (see notes) December 31, 2021 May 26, 2021 Pre-Feasibility Study
Tonnes
(000s)
Grade
(g/t Au)
Contained ounces Tonnes
(000s)
Grade
(g/t Au)
Contained ounces
Kiena Proven 71 13.2 30,000 95 4.1 12,000
Probable 1,758 11.0 621,000 1,387 13.0 577,000
Proven and Probable 1,829 11.1 651,000 1,574 12.0 602,000
     
  1. Mineral reserves are founded on measured and indicated mineral resources with an effective date of December 31, 2021
  2. The Qualified Person for the Mineral Reserves estimate as per NI 43-101 is Simon Fontaine P. Eng, Mining Engineer at Kiena Mine and employee of the Company
  3. Mineral Reserves are reported using a 3.7 g/t Au cut off
  4. Mineral Reserves demonstrated economic viability with the following parameters:
    1. gold price of C$1,820 (US$1,400) per ounce for the Reserves, with a USD:CAD exchange rate of 1.3.
    2. a 2.1 m minimum width,
    3. 15% external dilution in the A Zone, H1ZA1, BZA1, BZA2, S50, and Martin, 12% external dilution in the VC Zone and 25% external dilution in the A1 and A2 Zones,
    4. S50 considers a dilution grade of 0.7 g/t Au, all other zones consider 0.0 g/t Au dilution grade.
    5. 90% mine recovery,
    6. mining cost of C$113.7/t,
    7. milling cost of C$40.3/t,
    8. surface and G&A cost of C$58.3/t,
    9. selling cost of C$ 1.59/t, and 97% metallurgical processing recovery for the S50, VC & Martin Zones and 98.5% for the Kiena Deep Zones
    10. A bulk density factor of 2.8 tonnes per cubic m (t/m3)
  5. Kiena Deep incorporates, Zone A, A1, A2, H1ZA, BZA1, BZA2
  6. Mineral Reserves have been estimated in accordance with the Standards of the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”)
  7. Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade, and metal content.
MINERAL RESOURCES
(Exclusive of Mineral Reserves)
(see notes)
December 31, 2021 December 31, 2020
Tonnes
(000s)
Grade
(g/t Au)
Contained ounces Tonnes
(000s)
Grade
(g/t Au)
Contained ounces
KIENA Measured 21 9.6 6,000
  Indicated 713 4.6 106,000 643 7.6 157,000
Measured + Indicated 734 4.8 113,000 643 7.6 157,000
Inferred 4,011 5.9 761,000 3,404 5.9 649,000
       

Notes:

  1. The effective date of the estimate is December 31, 2021
  2. The estimate was prepared by Karine Brousseau, P. Eng., Senior Engineer – Mineral Resources of the Company, who is a “Qualified Person” under NI 43-101
  3. Mineral resources are reported exclusive of mineral reserves; mineral resources that are not mineral reserves do not have demonstrated economic viability
  4. Mineral resources are considered for underground extraction and have been reported below a 100m crown pillar and within potentially mineable volumes without external dilution. Must take material inside these volumes below the stated block grade cut-off has been included in the total.
  5. A bulk density factor of 2.8 tonnes per cubic m (t/m3) was applied
  6. Resources have been reported considering mining progress as of December 31, 2021
  7. Resources are reported using a 3.0 g/t Au cut-off grade
  8. Economic parameters for the determination of the cut-off grade include:
    1. a gold price of US$1,500 per ounce, a USD/CAD exchange rate of 1.30 (resulting in C$1,950 per ounce gold price);
    2. mining cost C$85.7/t milled;
    3. processing cost C$40.3/t;
    4. G&A C$58.3/t milled;
    5. 98.5% mill recovery and
    6. selling cost at C1.59$/oz
  9. Mineral resources are classified in accordance with CIM standards
  10. Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade, and metal content.
Production and Exploration Highlights Achievements
Eagle River
  • FY 2021 Eagle River underground ore production increased by 13% from 2020 to 99,120 ounces of gold, due to a 16% increase in total throughput; offset partially by a 3% decrease in head grade. Head grade at Eagle River in 2021 averaged 13.8 g/t.
  • FY 2021 cash cost of $978 (US$780) per ounce of gold sold1 decreased by 7% or $74 from FY 2020 primarily due to a 10% increase in ounces sold.
  • FY 2021 AISC of $1,456 (US$1,162) per ounce of gold sold1 increased by 4% or $60 from FY 2020 primarily due to higher mine development and infrastructure spending; partially offset by a 10% increase in ounces sold.
  • Generated $127.7 million in cash margin in FY 2021 compared to $119.3 million in FY 2020, despite the average realized Canadian gold price being 5% lower at $2,250/oz (2020 – $2,360/oz).
  • Current mineral reserves at Eagle River as of December 31, 2021 are 525,000 ounces of gold from 1.1 Mt at an overall grade of 15.3 g/t Au. Measured and Indicated resources were impacted by reduced definition drilling and a revised, more conservative classification criteria, leading to a slightly smaller, higher grade reserve estimate for YE 2021. Reserve ounces declined modestly 11% after depleting Eagle’s record year of production, but saw a significant grade increase of 15% compared to 2020 further improving the mines margin.
  • A record Inferred Resource inventory of 255,000 ounces provides a platform for potential increase Reserve replacement for YE 2022. Near term infill drilling is expected to increase confidence of current resources which could be deemed economic for reserve inclusion next year.
  • Current strategy for the corporation is to have production from the Eagle River operations to be in the 100,000 ounces per annum range by focused exploration and development of the Eagle River Mine thereby generating higher margin tonnes. This is supplemented by a growing production profile at Kiena.
  • Underground exploration is focused on extending the high grade 300 E and Falcon zones and targeting parallel zones in the volcanic rocks. Additionally, drilling is planned at the recently discovered North Contact zone.
  • Surface drilling is ongoing with 2 drills both east and west of the mine to follow up on anomalous values returned from the regional drilling program in 2021.
Kiena
  • In Q2 2021, based on the positive results of the Preliminary Feasibility Study (“PFS”), a Kiena restart decision was made.  In H2 2021, Kiena produced 22,240 pre-commercial ounces.  Total throughput was 68,470 tonnes or 372 tpd and the head grade averaged 10.4 g/t. The mill start-up in July went according to plan with no major issues. Mine operations were halted for 18 days in September for upgrading of the hoist system which has now been completed. Progress on the paste fill plant and tailings management area construction is on schedule. All key mobile equipment has been ordered and the mine has already received four underground haulage trucks with the remainder of the equipment scheduled to arrive by Q2 of 2022.
  • Despite the planned low pre-commercial production levels, FY 2021 cash cost was $1,052 (US$839) per ounce of gold sold1 and AISC was $1,138 (US$908) per ounce of gold sold1.
  • Generated $17.6 million in cash margin despite the high cash costs of $1,052 per ounce of gold sold1 due to planned low pre-commercial production levels.
  • Successful underground exploration at Kiena resulted in a 11% increase in the 2021 MI&I Resource (inclusive of reserves) from the 2021 PFS MI&I Resource at a slightly lower grade on average. An increase in the Measured and Indicated resources lead to an 8% increase of Reserves.
  • Current mineral reserves at Kiena as of December 31, 2021 are 651,000 ounces of gold from 1.8 Mt at an overall grade of 11.1 g/t Au.
  • Kiena Deep continues to show potential to add additional ounces in the resource base and additional ounces are planned for conversion to reserves with 2022 drilling, particularly at the Footwall Zone where an inferred resource has been defined.
  • The discovery of a new Footwall Zone was initially announced in March of this year. To date, the Footwall Zone is defined by new intersections of gold mineralization located within a 50 metre (‘m’) wide corridor adjacent to the footwall of the A2 Zone.  The Footwall Zone corridor remains open laterally and down plunge.  The location of new gold intercepts in recent holes suggest that the Footwall Zone extends over 300 m along plunge.  The deepest hole returned 41.2 g/t Au (uncapped) over 51.2 m core length.
  • Ongoing drilling also continues to better define and expand the Kiena Deep A Zone predominantly along the lateral extensions of the zone. The high grades intersected will be included in future resource updates. One hole returned 132.1 g/t Au over 7.4 m core length (27.6 g/t Au capped, 3.9 m true width).
  • Initial surface drilling has focused on the Presqu’ile and Shawkey areas located northwest and southeast of the Kiena Mine, respectively. Since July 2021, two drills on barges have been testing the continuity of some gold anomalies in the Jacola Formation which host the Kiena mine. Recent drilling at Presqu’ìle zones returned 1515.0 g/t Au over 0.5 m core length.
  • Wesdome finalized the purchase of the Tarmac Gold Property from Globex Mining Enterprises. The Property consists of 6 claims covering 94 hectares located entirely within Wesdome’s Kiena Mine Complex and less than 2 kilometers northeast of the Kiena underground mine, all located beneath Lac De Montigny.

Technical Disclosure

The technical content of this release has been compiled, reviewed and approved by Jacqueline Wheeler, P. Eng, Director, Corporate Development and Technical Projects and Michael Michaud, P.Geo., Vice President, Exploration of the Company and each a “Qualified Person” as defined in National Instrument 43-101 –Standards of Disclosure for Mineral Projects.