Wesdome Gold Mines Ltd. (WDO) Earnings Call Transcript & Summary

Mr. Chair, I have been advised by the scrutineers that the ballots and proxies deposited for the meeting have been voted in favor of each of the resolutions as follows: the appointment of Grant Thornton LLP as the auditors of the company has been approved, and the Board of Directors of the company has been authorized to fix their remuneration. Each of the 7 nominees have been elected as directors of the company to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed. And on an advisory basis, the company's shareholders accept the approach to executive compensation disclosed in the company's management information circular dated April 19, 2021. The results of the voting will be announced in a press release and filed on SEDAR in accordance with the policies of the TSX.

One moment please, the Chairman has stepped away.

I can continue. Thank you, Madam Secretary. I ask that the results of the poll be included with the minutes of this meeting. As the formal business of the meeting of shareholders of the company has now been completed, I will ask for a motion to terminate the meeting. I so move.

I second the motion.

Thank you. As there is no other business coming before this meeting, I declare the meeting terminated.

Everyone, this concludes the meeting. You may now disconnect, and have a pleasant day.

No.

No.

No. We have the presentation that I would like to give on the...

Sorry about that.

Yes. Not a problem.

Okay. You can continue.

Yes. Thank you. Great. So first and foremost, I'd like to extend this opportunity of my sincere thanks to the Board of Directors for their continued support, and I'd also like to recognize the Wesdome team for their tremendous efforts and express my thanks. As the ongoing COVID-19 pandemic continues to present challenges in 2021, each and every member of the team has demonstrated patience, skill and resilience in order to make Wesdome successful. I will now give a presentation, which is available on the web lumiagm.com website, which you've entered through the wesdome.com portal. And I will -- it's a self-navigating presentation. So there are arrows on the left and right side of the presentation on the right side of the screen. So I will announce the slides as I go through them. So of course, we have the cautionary statements throughout this presentation, I will be making forward-looking statements through. Slide #3. Today, we have management also joining us on the call. We're joined today by Marc-Andre Pelletier, our Chief Operating Officer; Michael Michaud, our Vice President of Exploration; Scott Gilbert, our Chief Financial Officer; Raj Gill, our Vice President of Corporate Development; Lindsay Dunlop, our Vice President of Investor Relations; Stacy Kimmett, our Vice President of Human Resources; and Heather Laxton, our Chief Governance Officer and Corporate Secretary. Also, the directors, one more time, we've got Warwick Morley-Jepson, our Chairman; Charles Main; Nadine Miller, Brian Skanderbeg, Edie Thome and Bill Washington. Slide #4, the Wesdome value proposition. Wesdome is very well positioned in terms of jurisdictions. I think that Ontario and Quebec could hardly be better in terms of locating assets. The assets that we have is certainly of high-grade nature, the Eagle River mine located in Ontario, has an average reserve grade of almost 14 grams. The high-grade mineralization that we've been able to discover at the west -- at the Kiena mine, certainly is a testament to the high-grade nature of that mine. So the company is very blessed with high-grade mineralization and high torque-to-gold price, I would say, very little risk profile. I mean we have a fully funded low CapEx restart at Kiena. Last week, we announced that the positive PFS study and subsequent to that, the Board of Directors' go-ahead decision to restart Kiena mine. This is huge for the company in terms of becoming that mid-tier gold producer that we've been talking about for the past couple of years. And with the addition of Kiena coming on and getting up to over 100,000 ounces in a very short term, we feel that this company will be very well positioned to be producing 200,000 to 250,000 ounces in probably a matter of 3 years. We are debt-free. We have good liquidity, currently about $63 million in the bank. We have a $45 million credit line. So we do have adequate liquidity to invest into Kiena in order to do the restart. Additionally, the Eagle River mine is free cash flowing. And management, I think that really turning around challenged assets is certainly one of the mantras of this management team. We've done it before. We'd like to do it again. And on the right side of that slide, you can see our share price performance really starting to take off from about May 2018 as things started to get derisked at the Kiena mine with more discovery, the Eagle mine turnaround in terms of operational performance. We've been able to get the Eagle mine up to almost 100,000 ounces of annual production, really twice that of where it was previous. Off to Slide #5, you can see our highlights and achievements over the last 12 months. It's been a busy year. There's no doubt. With the COVID, of course, impacting things, I look at this and I'm almost in awe as to what we've been able to complete. We've done the technical study to begin things off at Kiena, the PEA. We've added, certainly, the -- an ESG director and corporate development departments. Our Q2 results highlighted strong free cash flow in a great gold price environment, there's no doubt about that. Exploration drilling at Eagle confirmed the down plunge extension of the Falcon Zone to the mine number -- the number 7 Zone. We were added to the TSX 30 for a second consecutive year. Kiena resource update, which was then really the embarkation point for our PFS study. And so having made our 2020 production results within guidance, we are able to continue funding the advancement of Kiena. Eagle River reserves increased net of depletion, which is another, I'd say, great testament to the fact that even during COVID, we were able to drill enough meters in order to figure out the ore body and add to the reserves. We've recently divested off Moss Lake and maintained upside potential there. I think that, that's a very important aspect. And just 2 weeks ago, we announced the continuation of the Footwall Zone expanding. We now have 300 meters along plunge of this Footwall Zone, which is located approximately 50 meters into the Footwall of the A Zone. This is a huge, I'd say, advent for us. We are in the process of drilling it. We've got 7 drills underground in order to understand it, but really the net takeaway here is additional ounces per vertical meter at Kiena. Seems quite likely. We look forward to the resource and reserve statement at the end of the year. And of course, the Kiena mine restart, which I think is quite a milestone for this company in order to continue along the path to building a mid-tier producer. Off to Slide #6, we look at the asset base, we see Ontario and Quebec here, again. Eagle River, this is the mine that's been going for over 25 years now, which is funding the entire company. Cash flow positive, been able to invest into the Kiena project significantly really since 2016. The guidance currently is 92,000 to 105,000 ounces. We see that the all-in sustaining guidance is USD 9.80 to USD 10.90 an ounce. Again, our reserves are around 580,000 ounces at 13.4 grams, and we have good resources in which to continue the growth of reserves. Over at Kiena, again, we're on a restart. We do expect to have production in the third quarter, very high-grade nature of the A Zone and what we're discovering in the Footwall. So certainly, we do see growth here. Just declared reserves based on the PFS, we have over 600,000 ounces of reserves at 11.9 grams. We also have good measured and indicated resources in and around the mine and inferred resources along the property. So we've got a very good inventory of ounces which to convert into future reserves. Moss Lake Project, I just mentioned that we have divested that. The company is receiving about $12.5 million of cash. We're also going to be a 30% shareholder of the successor company, Goldshore Resources. And participate in the upside, additionally, a 1% NSR. So the company is certainly, I'd say, participating in the long-term success of Moss Lake project. And so we look forward to the success of Gold Shore. On to Slide #7, our ESG strength. ESG is something that, certainly, with the addition of our Director of Sustainability and Environment, we've been able to really take this and move it ahead. Quite frankly, the company has had a pretty good performance over the past couple of years. And now we've really got a venue to discuss it and bring it to the shareholders. We have just added to our website, our 2020 sustainability report. So if you get on to wesdome.com, you'll be able to view that. It's quite a good document and will really add a lot of information for those. Additionally, we were added to the Global and Mail 2021 Board Games survey. We're ranked the top 20 highest brand companies in the materials industry group. I think that, that's quite a significant advent for us. Socially, we definitely participate in the communities from which we are located, community support for Kiena restart. We have 86% of the stock based locally. COVID protocols at both mines and operations, we haven't had one case of COVID. We've been very fortunate. We've, obviously, have been doing something right with the protocols and now with the vaccinations that are coming out now, we feel that we'll be able to take this forward and be able to continue our performance. On to Slide #8. Responsible mining. There's a great picture of the crew at Kiena, socially distancing. We're currently implementing the Mining Association of Canada's towards sustainable mining program which enhances our efforts at both sites. As I mentioned before, we prioritized local employment and procurement. Throughout the pandemic, we've been engaging in supporting our local communities and indigenous groups. Donated over $130,000 in 2020 to support programs focused on health, education and the environment. Off to Eagle mine, the next slide and then following on the next slide. So we've got the Eagle River overview, Slide #10. You've got a nice regional map, I'd say, of the Mishibishu Greenstone Belt. When I look at this belt, I really marveled at how underexplored it is and just really, I think that perhaps, not just us, but others are really just getting going here. Hemlo was one of the last major finds in Canada with probably 30 million ounces, and that was really 1980. And we're looking at this prospective ground here, and we see the property that we're on and just how underexplored it's been. And now that people are really starting to invest in the ground around them, things are starting to really, I would say, getting a lot more interesting in terms of gold discovery. We've been able to discover high-grade parallel lenses that weren't previously known about at our own mine, at Eagle River. The high-grade 303 lens has just been a real bonus for the company in terms of high grades and above-average widths in order to generate cash flow. We do have an aggressive underground and surface exploration program plan for actually both sites. We have $16 million earmarked for Eagle River and $16 million earmarked for Kiena, by far is the largest exploration program that this company has ever seen. 2020 production, just over 90,000 ounces, free cash flow of $29 million despite the COVID challenges that we had. Off to Slide #11. We've got the Eagle River asset summary. You can see the property, which we're most in tune with right now in terms of exploration is the Eagle River mine property. It's a good 20-kilometer belt on very perspective ground shear zones within mafic volcanics. The mining method here is a long haul, and we do have an open pit, which is now depleted up at Mishi. The processing facility, the mill is capable of doing 1,200 tonnes per day on the softer Mishi rock, it's good for about 850 tonnes per day on the Eagle River material. When we look at the existing mine that we have on Slide #12, we've always been talking about operational improvements. And so really, the mill at 850 tonnes a day for capacity for Eagle River. And really, the mine has come a long way. From 2016, the annual production was less than 400 tonnes per day. We're now up to a point where we're approaching 650 tonnes a day. And that's really been a benefit of having exploration success and attacking it like that. You can see here the Falcon Zone off to the West or the left-hand side of the page, we discovered from surface drilling a couple of years ago. We're now at a point where we're actually selling a long ore in the Falcon Zone. This, we believe, will be able to drive our daily production higher so that we can match mill capacity in the shorter term. We think that we're able to do that next year -- in the following year, start to approach that 850 tonnes a day. The reserve grade that we have at 850 tonnes a day, this mine is 120,000 ounce producer. So very exciting. We're definitely keeping a strong exploration focus in order to bring home new resources and hence, reserves. Off to the Slide 13, we have high grade. What you can see here on the left-hand side is the Falcon Zone, some very high grades. You can see some of the assays within the Falcon Zone just in the center of that slide. I mean 51.3 grams over 1.8 meters of core length and 18 -- or sorry, yes, 19.6 over 12.5 meters of core length. So there's certainly higher grades here. There's certainly some better widths than what we've experienced at the mine. So there's really, I'd say, a lot of upside here. I think the fact that we do have mineralization outside of the mine diorite out in the volcanics really opens up 20 kilometers of strike length here along the shear zone. So I think that this is a really exciting aspect of what we have. The 303 lens, I mentioned before, it's just been fantastic. The high-grade nature of it, the above-average widths that just keeps going and going. Most of our lenses are open at depth also. So currently, we've got reserves defined down to about 1,400 meters. Current mine workings are just above, I'd say, the 1,200-meter level. We have a ramp that goes down to 1,200 and the shaft that goes down to 600 meters. So we truck up the material over to the shaft and then skip at the surface. Looking at the Slide 14, which is the surface of regional potential. What you see on the left-hand side of the screen is the mine diorite. You can see the shear zones going through there. So the 8 Zone is really what the mine survived on for over 20 years. The parallel zones, very newer to the game, I would say. So the 300 Zone and the 7 Zone, very high grade. We are continuing to look for that mineralization throughout the diorite, but we now know with the discovery of the Falcon Zone, the potential that we have in the surrounding volcanics. When you look at the nice surface regional map just to the right of it, what you see in the gold dots there are known gold occurrences that really just haven't been properly followed up. So we have a lot of potential along our land position here. And which we are definitely attacking through, I'd say, scientific exploration, helicopter drills. The focus, of course, is to try to expand in and around the mine, first and foremost, but as we know, we've got some very good prospective geology that needs to be certainly assessed outside of that. Next slide over to the Kiena restart and then off to Slide 16. When I look at this regional map here of really the Abitibi, I've been in awe myself for the number of ounces that have been produced here. And it's the same situation that we find often that an old mine is not dead you just haven't found it all yet. And that certainly describes Kiena. Kiena was a very good mine. It was a good producer, 1.75 million ounces produced at a head grade of 4.5 grams. And so now all of a sudden, here we are with reserves approaching 12 grams and resources up around 17, 18 grams. This is exciting. Things have seemed to really turned over a depth here below 1,000 meters, mineralizations file has changed. It's -- as I say, it's become a quality situation and not a quantity situation. But I think that, that really describes what's going on here. Again, Kiena mine is sitting there, fully permitted. We've got good infrastructure, recently did a bulk sample in the fourth quarter. The mill works fantastic, 98.2% recovery, the reconciliation indicated that we actually are getting 6% more gold for that area within the block model. So I think really exciting times for Wesdome. Again, our pathway to getting into production, we feel that -- strongly that we'll be in production in the third quarter of this year. So certainly, on the right path. Current guidance for that is 15,000 to 25,000 ounces. However, we will reassess based on how quickly the restart gets going. Onto the prefeasibility study, Slide 17. Again, we just published the results of this and have a restart decision coming from the Board. After-tax net present value of $367 million; average annual gold production, 84,000 ounces. However, in 3 years, we're up over 100,000 ounces per year. We've always viewed this as a base case. The situation we were faced with, especially during the height of the pandemic in Quebec is, we were shut down by the government for over 2 months. It was difficult to get drilling done. We, all of a sudden, instead of continuing on the path that we had sort of envisioned where we wanted to expand out to current resources, maximize the measured and indicated, we just were not able to do that. All of a sudden, we just had to focus almost entirely on converting the inferred portion of the A Zone into measured and indicated. I'd have to say that, that was very successful. We essentially did all of that and added another 100,000 ounces of inferred within the A Zone. So I think that really, as we march towards another resource update and a reserve update at the end of the year, I think that our numbers are going to get a lot more robust than what they currently are indicated in the PFS. When we look quickly at the metrics on Slide 18 of the prefeasibility, you can see the tonnes mined, 1.6 million tonnes at 11.9 grams. Almost 600,000 ounces of payable gold. Again, this is base case. We do believe that this will be enhanced. We have a lot of faith in our exploration success here at Kiena. The Footwall, of course, being certainly one of the more exciting discoveries in the last year. So definitely getting down to it. You can see that the after-tax NPV, again, $367 million. Our long-term gold price that we used is USD 1,600 an ounce. There's some -- certainly some upside there. Obviously, we're enjoying USD 1,900 an ounce now. Production profile, just to the right of that, what you can see their costs are quite reasonable. We've got all-in sustaining cost per ounce of USD 676. And again, I feel that this is a base case, which can be enhanced. Looking at our exploration effort here, and this is really what I was talking about when I -- so we're on Slide 19 now. We've got to proceed zone of transition, and that's just been such a -- it's around 1,000 meters of depth. Everything above that historically in the mine was of lower grade. It was brecciated. It was associated with sulfides. As I mentioned before, Kiena was a 4.5-gram mine. So all of a sudden, we discovered the A zones, things really seem to change significantly at depth here. So 1,000 meters below, it becomes a quartz vein with high-grade nuggety gold in it. We also see this sort of changeover in other zones that were existing, such as the VC1 Zone, which we've been able to get a couple of holes in, the mineralization has changed to that high-grade quartz vein. You can see a hit there, 36.4 grams over 6.3 meters. The B Zone, we're still looking for some nice mineable widths there. However, it's the same type of mineralization below the 1,000 meters. So we certainly do have lots of things to assess. And again, we've got $16 million earmarked for Kiena, $10 million underground. Currently, we have 7 drills turning away. Next slide, we've got a nice slide here about the Kiena deep A Zone and the new Footwall intercepts. I can only tell you when Mike Michaud, our VP of Exploration, told us that we had a hit of almost 41 grams over 51 meters, I could honestly say that I almost fell off my chair. This is a really big, I'd say, benefit for Kiena mine right now. Of course, we're following up on that. This Footwall Zone kind of exists between 1,400 meters to 1,700 meters. So we've got another sort of 300 meters of plunge. Very exciting. We're drilling it hard right now to try to understand what we have. I think what I really love about it from a mining sense is the fact that it's 50 meters into the Footwall of the A zones. So essentially, we're doing all this infrastructure, ramp development to go access the A Zone, and 50 meters away, there's another new parallel zone which is starting to emerge. So very excited about that and the prospects of adding ounces per vertical meter. Next slide, 21, upside from surface targets, we do have excess mill capacity. We know that we could do some capital improvements at the Eagle River mill. We could certainly get it to 1,200 tonnes per day. Obviously, right now, the mine is not at that position to do that. However, exploration success is something we look for. The Kiena mine, Kiena had a -- it's got a 2000-tonne-per-day mill nameplate capacity. And currently, the PFS is indicating about 850 tonnes per day. However, I point out that with exploration success, I think, we're going to be able to generate more mining phases and start to perhaps increase on that. Just the -- on the right-hand side here, we've got a nice sort of geological map of the Kiena area itself. The most important aspect of this area, I think, is the fact that the rocks are bending in between this Marbenite Fault and the Norbenite Fault. So through that corridor, and this is where the A Zone exists, we think that there's possibly other A zones. It's certainly very prospective. We see that the mine, the mineralogy, the mineralization has really changed at about 1,000 meters. And we look forward to further probing and exploring that throughout the year. And hope we'll be able to keep the excitement going with the exploration. That concludes my presentation. I think that open up the -- sorry, so that would be it for me. Warwick, are you there?

Yes, I am, Duncan. Thank you very much. And ladies and gentlemen, I'm sure that you would agree with me, the Wesdome continues to pursue a very, very exciting future that has the potential to deliver increased value to its shareholders. Management have had continued to step up to the challenge under somewhat challenging times given the pandemic. And with that, I would like to open up the meeting to our question-and-answer session. [Operator Instructions] Lindsay, over to you when you've received any questions.

Mr. Chair, we have no questions today.

Thank you very much, Lindsay. As there does not appear to be any more questions or any questions at all, that concludes our meeting for today. But before I sign off, I first of all would like to apologize for the technical challenge that I've had on this phone call at this meeting. But certainly, it was great to be with you all and I would like to, once again, thank all our shareholders for their continued support. Thank you. Keep safe, and have a wonderful day.

Everyone, this concludes the meeting. You may now disconnect, and have a pleasant day.