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

Okay. Well, welcome, everybody, and thanks to Laurentian Bank for hosting us. This is a really good venue definitely on a virtual basis. Really, the title slide, that really, I think, says it all right now for Wesdome. I mean it's building Canada's next mid-tier gold producer. You can see a great photo there of the Kiena mine. Of course, we've just announced the production restart at Kiena. So we're putting that into commercial production based on a positive PFS and a positive PEA prior to that. So very active right now in Val-d'Or, very active in Wawa, Ontario, also at the Eagle River. So I'll go on here. Of course, throughout the presentation, I will be speaking in forward-looking statements. Nothing you wouldn't expect. Yes. So really, the Wesdome proposition. I mean really what Wesdome brings, I think, is Tier 1 jurisdictions, Ontario and Quebec. We really are very fortunate to have our assets in both those provinces and, of course, in Canada. Long-standing gold production region, Val d'Or, Quebec in the heart of the Abitibi. Wawa, really, I'd say Wawa, perhaps a little bit later to the party but definitely really starting to catch a lot of interest and exploration. And we're starting to see more and more investment in mining there. So it's again, 2 very supportive jurisdictions, and communities are great. Wesdome, also really blessed with high grade. The reserve grade at the Eagle River Mine, 13.4 grams. We just declared reserves at Kiena, 11.9 grams per tonne. We're very fortunate to have such a high-grade mineralization. I mean obviously, this definitely makes the Wesdome proposition very turnkey in terms of gold price. Low risk. I mean when we look at Kiena, Kiena was an existing producer, of course. So really, the mill was there. The shaft was there. A lot of the infrastructure was there and in really good shape. And we maintained it. We've added to it. We're in the process really now of just bringing that forth and getting ready for commercial production. We are going to have production out of Kiena this year. We've guided the market 15,000 to 25,000 ounces, but there's been a lot happening at Kiena in terms of the evolution of the exploration, and we do see a lot of upside here. The company, currently debt-free. We have adequate liquidity to start up Kiena, definitely a good place to be. And proven management. I think that I have to be thankful for the people that I have around myself, both my Board and my management team. I've worked with some of these people for a long time, formerly at St. Andrew's. And I would have to say that brownfields turnaround seems to be what we like to do best. So I think that, that certainly fits in well with the Wesdome model. And you can see here off to the right, the relative share price performance has certainly been really a pretty positive event since about May of 2018, a high-grade discovery and I'd say optimization of existing assets in order to kind of bring forth that cash flow that we require to do the exploration and the improvements that we need. If we look at the capital markets, I mean, you can see the 52-week high/low there. $15 is the high. Certainly, the share count really hasn't grown very much. We haven't gone out for any sort of share issuance since probably April of 2016. So it's been good. Market cap is nicely in there, but CAD 1.6 billion. You can see there that the P/NAVPS is over 1, which is really good. Last reported cash position, around CAD 63 million, CAD 64 million. And of course, the credit facility available, $45 million. So again, very good liquidity in order to do what we need to do here. Great analytical coverage. Really based mostly out of Toronto, certainly. And it's a good shareholding. It really hasn't changed much since I've been involved with Wesdome in that about 55% of the shareholders are institutional, 45% are retail. The largest shareholder we have holding over 10% right now is Van Eck, and that's by virtue of the GDX and GDXJ inclusion. When we look at the assets and where they are located in Canada, I mean, the Eagle River Mine, it's really very close to the North Shore of Lake Superior, about 50 kilometers as the crow flies from Wawa, Ontario. High-grade underground mine, been in commercial existence really since 1996. And again, it sort of sputtered, I think, with sort of lack of exploration. And really, in the last couple of years, we've been able to incrementally increase the commercial production here. Currently, the 2021 guidance is 92,000 to 105,000 ounces. All-in sustaining, you can sort of see CAD 1,000 to CAD 1,100. And as I mentioned before, the reserve base is around 581,000 ounces at 13.4 grams per tonne. And there are some good resources there combined, the M&I plus the inferred, over 300,000 ounces in which to go to. So really steadily reinvesting more money into Eagle in order to do the exploration job that really needs to be done here. Further to that though, I'd say that the operational improvements have really added to being able to really double production here since 2016. So it's been a good story, and it's been really the thing that's been able to find everything that we've been doing over here at Kiena. So it will be nice that we got Kiena up and run be able to take that onus off Eagle. Kiena, as I mentioned before, great past producer, developed by Falconbridge Gold, taken over by Placer Dome, 1.75 million ounces of production. It's a 4.5 gram head grade mine, which is very dissimilar to what it is now. I mean obviously, with reserve grades approaching 12 grams per tonne, we have resources that were formerly up to 17 grams per tonne. So certainly, it's a different model, definitely, what we're seeing here. And again, we can see the life of mine profile based on the PFS. And I will emphasize. The PFS is certainly just a base case. So much has changed even since we've had the PFS out, obviously, exploration success in the footwall and other targets. I think that it's just really going to start building here, so -- which is great. Current 2P reserves are about 600,000 ounces, as I mentioned. And you can see here, quite a healthy resource base in which to convert. Kiena has got a large land. It's about 70 square kilometers. Probably about 85% of it is underneath the lake, and that's really made it, I'd say, fairly difficult to continue exploration throughout the years. But I think now that we're really -- we have the land package, I would say, secured and under one umbrella, we're able to really go forth on a regional basis and follow up on some of these great trends that we're on. When we look at really where we've come from, I think cumulative production and reserve growth, I think that that's an interesting graph over here on the left. And so really what you see here is that with increasing production, we've actually been able to grow our reserve base, which is really good. So I mean as it is right now, the Eagle River has got sort of comfortably 7 years ahead of it and way more to go. We are investing heavily in exploration at both Kiena and Eagle, $16 million at Eagle this year, $16 million at Kiena. As I say, we like them both equally. So definitely having a good exploration program, both underground and on surface and more of -- at Eagle, more kind of a regional, I'd say, exploration program along the trend that we're on there. Really at Kiena, the focus is primarily in and around the mine as we're just getting going here, but we do have some step-outs to look at. You can see the NAV per share growth over that period of 2016 to 2020 and the 3-year share price performance, which has been pretty good. When we look at the long sections of the mine, so over here on the left, you've got the Eagle River Mine. So what you see here is a shaft that goes down to about 600 meters below surface. It's a narrow vein high-grade mine. It's got a ramp system that goes from surface all the way down to approaching 1,200 meters now. Some really exciting discoveries here over the last couple of years, the parallel zones and bringing those on within the mine diorite. But now what we're seeing is new mineralization outside the diorite. So out in the surrounding volcanics. And this is really good news for us because really, the shear zone that the mine is within actually extends at least 20 kilometers outside into the surrounding volcanics. And there's known gold occurrences all throughout there that really need to be further investigated and I'd say methodically sort of checked off in order to make sure that we understand what we have here. Over at Kiena. Kiena has been just a fabulous mine. What a high-grade entity this has turned out to be. As I said, it's a mine which has slipped from really quantity to quality because back in the days when it was operating in the '80s and '90s, it was like a 2,000 tonne per day mine, 4.5 grams. It was just really built for bulk. Now what we have is really high grade, narrower mineralization definitely where a lot of the veins are typically 3 to 5 meters thick. We are going to be long hauling here, however. But certainly, things have really flipped over in terms of the style of mineralization at Kiena. So very fortunate. When we look at accomplishments, of course, bringing Kiena forth to commercial production, successively derisking it with -- you start off with the PEA. And obviously, that was quite good, an IRR of 102%. Let's face it though, the infrastructure sitting there, it's in good shape. And all of a sudden, you start to discover high grades, and it just sort of builds from that, continuing on. We've been included in the TSX30 for 2 years in a row. We've been able to get the PFS through challenges of the pandemic, I would say. Certainly, one of the things that we see during 2020, it was very difficult to get the drilling done at Kiena. We really have to, I'd say, cut our program short from what we did, but I think we all realized that the -- derisk the mine significantly in order to get a restart, and we have lots of time to continue to drill here. So that's good. So really, what's left here is we're in production really in the third quarter of this year. So it's a very quick pivot from advanced exploration over into production. And as I said before, it's 15,000 to 25,000 ounces this year. But then, of course, building up to 65,000 and up and beyond at that point. Additionally, the Falcon Zone is the mineralization I was referring to outside of the Eagle River diorite. That's beginning stope production also. And I think that the exploration program is going to really be focusing on additional mineralization out in the volcanics nice and close to the mine. So we should hopefully have some good news about that. When we look at our ESG performance, really -- I think it's really a focus now with investors. I'd have to say that I think that we've done the right things throughout. I don't believe we've really reported on it in such an extensive way as we do now. Actually, we've just published our 2020 sustainability report, which is available on our website. And really, I just see the evolution of this, and it's really good to see in terms of how our environmental performance has been really quite good. Our governance has been quite good. We are actually included in the Globe and Mail Board Games this year as a first time sort of inductee, which is good. Socially, I mean, we definitely do want to support the communities which we surround and support us. And Kiena, 86% of the workforce is really from the Val-d'Or area. Over at Wawa, it's a bigger catchment area there, but definitely, there's -- almost half of the people we have are from the Wawa, White River area. Other people do travel from as far away as Thunder Bay and Sudbury and Timmins and Kirkland Lake, in places like that. So like I said, it's just the communities on that part of Ontario are just a little bit smaller. So -- and there's a fairly good competition, I would say, for labor here with all things going on in the area. Proud to say that we haven't had to have any sort of impact with shutting down with COVID. We actually haven't had any COVID cases associated with the sites, both Kiena and Wawa. I'd like to really thank the employees for being so diligent. And of course, now as vaccinations get a little more rolled out, I think that we're going to be able to finally kind of layer in the exploration team that we need at Eagle River because we had to pare them back in order to allow for social distancing during the waves of the pandemic. So Eagle Mine, we'll just get into some of the nuts and bolts here. So really located in the Mishibishu Greenstone Belt. It's a great area. I really look at this area as kind of late to the party. I mean one of the last world-class load deposits discovered was probably Hemlo, and I think Hemlo had probably 30 million ounces. So fairly significant discovery. When you look a little bit to the east as -- the Timmins, Kirkland Lake, Val-d'Or camps, we're all much before that. So certainly, the amount of exploration that's gone on here has been just a little more muted than it was in, I'd say, the Northeastern Ontario, Northwestern Quebec and up in the Red Lake. And you can see some of the neighbors, and I mean there's lots of really good things going on. I mean you can see where Eagle is. You've got Island Gold there. You've got the Magino project, Harte Gold. So certainly, lots of development happening. It's very -- the area, I'd say, is very supportive of what's going on. The communities are good. So really, this is a good spot to be, definitely. When we look at the actual geology. Really, the -- we have 2 land packages. One is to the south, closer to the lake. One is to the north where the open pit was and the processing facility is right now. So they're separated by about 15 kilometers. And so really, the trend that we're really focusing on right now is the Eagle River trend. And really, it sits on these high-grade quartz shears and the Eagle River Mine is in an intrusive. But as I mentioned before, we're now starting to see mineralization appear outside in the surrounding volcanic. So it really opens up a lot of ground here for us, and we really need to check it out. When we look at -- again, back to the long section of the Eagle River mine, you can see the Falcon Zone over here on the left-hand side, which is actually the West. Again, this mineralization, we're just over there now. We've been sealing on the Falcon Zone. It's a very high-grade shoot. And that, of course, gives us a lot of optimism if we can find more of these high-grade shoots fairly close to the mine. This zone actually joins in with the mineralization in the mine at around 1,000 meters that joins the 7 Zone. So we are really starting to look for these different zones of mineralization out in the volcanics close by to the mine, so that we'll be able to get this mine up to the 850 tonnes a day on a shorter-term basis. I'd say 850 tonnes a day just because really that is the mill capacity for Eagle. Based on that sort of production level, we'd be doing about 120,000 to 125,000 ounces a year from Eagle, which would be a very good, I'd say, progress since 2016. It was 50,000 ounces at that point. So certainly a lot happened here. There's been a lot of really positive developments. And I think that the focus on exploration right now is really exciting for us, and it's good to see that the company is able to really fund itself into a program which has probably been long overdue. When we look at some of these high-grade shoots on the left, you can see the Falcon Zones. You can see some of the high-grade assays in the center panel there. Over to the right, we've got this high-grade shoot within the mine, the mine diorite called the 303. We're back into the 303 now. We're doing an Alimak stope from 990 up to 925. Very -- I'd say above-average width here, above-average grades. Falcon Zone, definitely above-average grades also. So we're taking a slope out of Falcon shortly. I think it would be Q3, Q4. So we're excited to see how that works out, of course, developing the Falcon. What we see with the Falcon though is additional incremental increases in our daily tonnage. So we're at about 650 tonnes per day, moving definitely into the 7s, I would say, for next year. So whether it's 700 or 725, but getting closer to the mill capacity, which is something that we've been wanting for quite some time. Even within the mine diorite, I think that there's still lots of opportunities for these parallel zones to appear over on the east end side. And we are definitely targeting those right now, and we want to make -- Eagle River, I'd love to have it at 1,000 tonnes a day. And we'd be happy to invest in the mill in order to bring that up. Regionally, as I mentioned before, so what you have here on the inside here, that's the diorite. It probably came up as a round plug. And of course, it was squeezed and is something that's a little more ellipsoid. You can see that these shear zones are going through and going through the volcanics over here on the right-hand side. What you see on the right-hand side are all these gold dots, and these gold dots are known gold occurrences. So whether it was a ground sample, channel sample, a diamond drill hole, not that there are many of them, but certainly, things we need to follow up on. So there is a lot of potential along this trend for us to discover additional mineralization and just really do the -- I'd say the exploration work, which has been long overdue here because there just hasn't been the sort of regional systematic, scientific focus on what this could be. So we're excited about that. Over to Kiena. I mean there's a great picture of the head frame. And like I said, the Kiena infrastructure was certainly good infrastructure. It was put on care and maintenance back in 2013 by Wesdome and really put to bed, I think, in the proper manner. It was never flooded and always maintained. So we certainly do benefit from that in terms of a quick restart here. When I look at this map, boy, this is the Abitibi. And I think about all the ounces that have come out of this area along the Porcupine-Destor to the north and the Cadillac-Larder Lake Fault to the south here. And I mean just so many great gold camps, Val d'Or, Quebec, of course, being one of them. But Kirkland Lake, Timmins, it's really -- it's just a prolific area. And you know what, a lot of these mines that have been kind of declared mined out and dead have found new life with different exploration techniques and going a little bit deeper. Often, I would have to say that what we see along some of these past properties is nothing was really drilled that deep. Kiena just gets way more exciting below 1,000 meters. From what we can see here, just how the mineralization turns over from that lower -- I'd say, lower grade, sulfidated, brecciated sort of mineralization down to that quartz vein with the visible nuggety gold in it. So it's really -- it's quite dramatic how it changes out. Kiena is fully permitted. As I mentioned before, there's significant upside to the current resource. We've had some very significant exploration success in the last couple of months. The Footwall Zone from the A Zone comes to mind, and we'll get into that shortly. So the PFS really, I mean, again, I'd have to say that the resource base that we used for that was a little bit muted just based on our challenges of drilling through the pandemic. However, 98% IRR. I think we made the decision. We have a winning project here. We just have to get it going in order to be able to bring forth what we can really find here. And we always looked at this PFS and this resource base as a base case. And certainly -- so we've got a mine life right now of 7 years. You can see some of the all-in sustaining cost here, almost CAD 900, almost USD 700. Great cash flow. I mean at USD 1,600 an ounce, it's almost $86 million a year from 2022 to 2027. Life-of-mine capital, CAD 230 million, up from the PEA. However, I would just say scope changes. I think that the realization that we'd be able to cycle much quicker with paste fill. And we had a different plan for the tailings management facility, where we use the existing ones and buttress those up and do a vertical raise to do a lesser footprint, I would say, in terms of what we were planning on in the PEA. So certainly some very good developments and obviously, the economics of the PFS really speak for themselves. And like I said before, really the drilling program that's ongoing right now with 7 drills underground and 3 on surface, I think that the resource and the reserve base at year-end is going to be a different number than it is now. Here's just some of the metrics within the PFS here. You can see the average diluted grade, 11.9 grams per tonne. We do have a little bit of the more historic mineralization in there. We're actually starting off with a stope in the S50. So that was the big sort of 4.5-gram mineralization above us that they mine for all those years. And as we're -- as obviously we're ramping down on the A Zone and as more horizons get exposed with the ramp, it just adds to our ability to increase the amount of high grade. So incredible recovery here. This is very free milling gold. I've never seen this in my life. I mean the metallurgical recovery in the PFS for the A Zone was 98.5%. So certainly, very, very recoverable gold. There's no issue here whatsoever. You can see some of the other metrics there. But I think the after-tax NPV, $367 million. And you can see the operating cost over there, in and around $188 per tonne. However, really, if you look at the production profile over the 7 years that we have laid out right now, as the throughput increases, the cost per tonne and the cost per ounce actually decrease based on -- just on a volume basis. So here's what I was mentioning about just how interesting Kiena has become. And so we've got this interpreted the zone of transition, I'll call it. So that's that sort of gold thing. It's going sort of up towards the right and down towards the left here. It seems that everything kind of below that 1,000-meter level, the mineralization changes dramatically from what was there before. It was -- as I said before, it was a 4.5-gram mine. What the heck is 17 grams all of a sudden doing here and in a totally different quartz vein? And like I said, a lot of visible gold. And really what's interesting and what we're seeing now is the VC zone, which again was one of those former above 1,000-meter horizons that we would be mining, it would probably be in the sort of 5-gram range. We've now actually got some hits into it below the 1,000-meter level where all of a sudden, it's transitioned into that quartz vein with a visible gold in it. You can see one of the hits there. It's like 36 grams over 6 meters. So really good. There's other things to follow up on. I know that our Vice President of Exploration, Mike Michaud, is very excited about the B Zone. We interpret the B Zone, which is the light blue zone just off to the left of the A Zone, as being really the conduit for all those ounces up above. So really, we do have indications that the style of mineralization has changed down here. We're just really looking for where does it start to increase in width. And so we're excited about that. But a lot of things to go to, obviously, the Footwall Zone, which is the next slide. But I think other things to check out here, obviously, is the North Zone and just so many zones of mineralization that we want to check below 1,000 meters because I think that this trend really seems to be holding true here. So that's very, very exciting. Here's the Footwall Zone, which I was alluding to. So we first announced this back in March. We had another news release a couple of weeks ago. It was 41 grams over 51 meters. So it was quite a hole for sure. The fact of the matter is this zone seems to be about 50 meters offset into the footwall. It's parallel, subparallel. We do have about 300 meters of it now a long plunge defined. I think that when we look at what we have here, the A Zone, you know what, it's about 1,000 ounces per vertical meter. Anything that we can do here to add to our ounces per vertical meter is just going to be exciting. So we're already developing the ramp to go get the A Zone, which is wildly economic here. And so the matter of going another 50 meters into the footwall to perhaps get another, what is it, another 1,000 ounces per vertical meter, that remains to be seen. However, looking at some of the intercepts that we have been able to generate through here, it has been pretty exciting. And I think that it kind of looks like the A Zone and kind of smells like the A Zone. It's actually in really good ground off into the footwall, as I mentioned, and having that 50-meter offset really segregates the mining. So I think that the mining fronts can be, I'd say, exclusive, which will really add to our base case. Again, we're going back to the base case where this mine is producing 800 tonnes a day based on the PFS where all of a sudden, if you can add another 50% in terms of tonnage and ounces, that gets very exciting quickly. Just expansion at both the nameplate capacity at the Eagle River Mine, 1,200 tonnes a day. The Eagle Rock is a little bit harder. That's why we do about 850 tonnes per day. But when we were doing the Mishi open pit, a little bit softer rock, we can get it up to 1,000, 1,100 tonnes per day. Kiena mill, big mill. I mean really, it's 2,000 tonnes per day. In order to do 2,000 tonnes a day, you have to really use the cone crusher and size it down at the start of the mill. But right now, current plan is 850 tonnes a day. So we certainly have a lot of gap here between our production and our capabilities. So really, what we're looking at, I'd say the $32 million investment this year in exploration, $16 million at Eagle, $16 million at Kiena, so many good targets to look at here. Definitely, when I -- we had a good discussion already earlier in the presentation just about what we're looking for at Eagle. But when we look at the Kiena property, and I see all the past producers and known zones of mineralization, what I think I'm most excited about here is really the corridor that we find the A Zone in. And it's really between 2 regional faults, significant regional faults, one called the Marbenite and the other one is the Norbenite. And the A Zone is this Riedel shear, which connects those 2 faults, and it's remained relatively intact, I would say. And I think along that corridor, we've got the right mix of mafic/ultramafic rocks. I think that there's just going to be a lot of success here. And I think that spending $16 million this year is certainly the right thing to do. Yes. So that really concludes the presentation for Wesdome. Then maybe one thing I haven't mentioned is we recently monetized the Moss Lake asset that we had with help from Laurentian Bank as a matter of fact. And I think that it's -- we still have upside participation. We are a 30% shareholder, and we got a little bit of cash in the front door. So I think it's certainly, I think, been a good event for us. I think we know where our knitting is. I think we're underground miners by and large, not to say we wouldn't tackle an open pit. But I think that, that certainly has been a good event for Wesdome. So with that, I'll open it up to Q&A.

Terrific. Duncan, thank you very much. A very in-depth and expansive review of where the company is. It's always great to hear from the source. And also great to hear that there was a minimal impact with COVID. And I was really amazed with the $16 million investment number, and that is a real excitement, especially in the corridor A Zone. So we do have some great questions from the audience. We encourage you to drop your questions in here. I'll start off with a question that suggests here, can you talk a bit more about the newly discovered Footwall Zone, the size and potential bucket?

Yes. Well, I mean right now, it's early days, but I'll be forward-looking here. I really think that this is like the A Zone. And I mentioned before, the A Zone is about 1,000 ounces per vertical meter. And so right now, we've got 300 meters of plunge potential that we've already identified in the footwall. So we really need to do the infill drilling here. It's not closed going up. It's not closed going down. So up/down, we have openings. What I would really -- if you had your way, boy, oh, boy, we'd certainly love to get discovery closer to where the ramp is right now so that we could have earlier ounces. Right now, the footwall is sort of defined from, I'd say, 1,400 meters below surface down to about 1,700 meters. So we're not going to get down there for a little while, but we're certainly on the way. The other thing that I like though is the potential which the VC Zone has and also the B Zone, I think that those are probably higher up in terms of where the ramp is and closer to that. So perhaps we'd be able to augment production quickly.

Great. Great. That leads us to a great question about production. The question reads, what do you think 2022 production will be like for Kiena?

Well, right now, I mean, we just put out the PFS. So we haven't changed it yet. But I'm sure we will when it comes to budget time because we'll know that much more. I mean really, when you look at the nature of the information, I mean, I hate to say it, it's almost like it's stale, right, because we're on our way to creating new resources and reserves at Kiena. So we're opportunistic. What we see at the A Zone right now is as we drill more, we are actually getting expansion within the existing -- outside of the existing mineral resource block. And I think that there's going to be lots of opportunity. So I mean for next year, we're definitely looking at about 64,000, 65,000 ounces. So on the way, definitely becoming that 100,000-ounce producer, which I think this will probably blow it away myself, but we'll see what happens.

Great. Great. Exciting news to hear. Any dividends for shareholders just to move over to the [ progress in ] the finance.

Yes. Well, right now, I think what we really are trying to do is really understand our potential organically, okay? So I think like the big investment right now is $16 million at Kiena, $16 million at Eagle in terms of our exploration. We continue to do improvements at Eagle, and we augment the mill. We're doing things with ventilation there. We're adding different aspects in order to make it a more efficient mine. When we go to Kiena, we've got the capital program laid out here, $230 million from this day forward more or less to go stand at Kiena. And so I think give us a year, I'd say, to see where we can go, but it's not off the table at all. We'll do the right thing for the shareholders. I guarantee it.

Okay. Great. And I have a great segue here as well, Duncan. Can you comment on what you think the cost profile will be for each asset in the near and medium term?

Yes. Yes. You know what, that's -- what we can see at Eagle, we've guided sort of CAD 1,000 to CAD 1,100 all-in sustaining. I can see with the additional throughput that it's going to come down. What I think mining is feeling right now, we're starting to see some cost pressures. I mean let's face it. I think we're -- kind of are we at the forefront of a super cycle? I'm not sure. It sort of feels like 2005 and '06 and '07 again. You've got a lot of the commodities starting to run, and then we're starting to feel it. We're starting to feel it in ground support, of course, which is steel. Exposures are starting to sort of creep up. So we may not see -- it might be more flat than anything just because of inflationary pressures. At Kiena, I think that definitely will -- as you start to add to your volume there, it's just going to decrease. Like the all-in sustaining over the PFS, I mean, is almost CAD 900 an ounce or like 6 -- I think, USD 75 an ounce. And I think if we're able to start augmenting that with 30%, 40%, 50% more gold, then you're going to see a reduction. It's definitely a first quartile cost profile.

Okay. Great. A question from Ryan here. Given the recent exploration success at Kiena, how do you see this factoring into the mining plan? Would you consider the 12-gram average diluted grade from the PFS to be conservative?

Yes. I mean -- so we did a bulk sample. And we got 6% more gold than what the prediction was from the geological block model. So it's -- it would have been great to get 50%, but then you question that also because -- how accurate it is. And I'd have to say we're definitely into the ballpark of reality in terms of estimating the gold content. I think that there's going to be some -- like I said, I think that the mineral resource block right now is going to stretch definitely along the edges. So there'll be some other opportunities. So definitely, the more A Zone we can get into the mill, the higher grade we're going to be.

Very good. Pinpoint questions on Eagle and Kiena. Do you have the underground working areas at Eagle to support higher production?

Well, we're developing them. So I mentioned the Falcon Zone off to the west, and we're just getting into it. We're going to have our first stope coming out of there Q3. Excited about that. It looks good, though I'd have to say the rock is very competent the grade, it's very visual. It's high grade. You can see lots of gold there. So I think next year -- right now, we're probably doing about 650 tonnes per day. Next year, we'll definitely be in the sort of 700 mark. And like I said, the mill is in and around 800 to 850 tonnes a day. That's always been the short to midterm goal, is let's fill the mill with high-grade Eagle. If we do that, I mean, Eagle is going to be produced in 120,000, 125,000 ounces. Well, I see it's sort of more incremental. We've been able to kind of add sort of 10,000 ounces of production kind of per year. So I can see us marching up perhaps to maybe 105 or 110 next year or something like that. So yes, it's certainly on a good sustainable march, I think, is what I would say about that.

Great to hear that. What grade do you expect, Duncan, at Kiena?

Kiena, I mean, you see the reserve grade there. I mean it's almost 12 grams. Really, it's based on where you get to in the A Zone and depending on what opportunities. But certainly, it's always above 10 grams, and it can go as high as 16 grams really throughout the PFS. So I look at next year, the PFS is calling for almost reserve grade, about 11.8 grams per tonne. 2023, a little bit lower, 10.7 grams per tonne. But I just think at that point, you're starting to layer in new discoveries, and I think things become a lot more evident of what a high-grade mine this place is.

Okay. Just trying to tie some questions that relate to each other. So a question from Ryan reads, given the high-grade nature at Kiena, can you speak to the challenges associated with cutting and capping and any conservatism that might be baked in?

Yes. Yes. It's always a little bit of a thumb suck when it comes to that. And like I said, I think that really when we look at the bulk sample, we're certainly in the ballpark as 6%. That was good. I'm glad it was positive, definitely. But I think that we always examine it and reexamine it. We've got a really good team of -- we've got a great resource engineer there and a good geology team at Kiena. So we're always looking at the capping. And the bulk sample was 7,000 tonnes out of a 1.2 million tonne deposit so far, right, defined. So how representative is that? I'm not sure, but so far so good.

Okay. Great to hear that. Great to hear that. A question from Barry reads, how many drills on surface testing new targets at both Eagle River and Kiena? And how many holes to date at the surface? When might we hear about results of those drill holes?

We'll leave it to Barry to add a 5-part question here. So drills on site, let's see. I think we'll call it 3 at Kiena right now on surface and 3 at Eagle, okay? How many holes [indiscernible]? I don't have that at the top of my head. More than one, I know that. But yes, no, listen, the challenge with Kiena, 85% of it being under the lake. I think there's great mineralization to be found there. And the reason why it's there is because it was never easy to explore, right? So you're either doing ice drilling or barge drilling or doing something from underground. And so that has made it a challenge. And like I said, now that it's all under one umbrella, this big land package -- because back in the day, it was quite fragmented, so some really exciting resources to look at here. I mean past producers, there's -- I can't wait to get up there. It's a little further north of the mine, but it's called the Siscoe mine, and it was the highest-grade mine in Val d'Or, Quebec, which I find pretty -- yes. Well, other than Kiena, right? So it was 9 grams. It was 9 grams so -- yes.

Very good. Good. Good. Good. We have probably the most technical question so far from [ Lionel ], which reads, do you recognize [indiscernible] stratigraphic similarities at Kiena with the HMC complex at Timmins, where 32 million ounces of gold were extracted over 4 kilometers of strike?

Listen, I think that that's -- [ Lionel ] should get a hold of mic for the answer to that. Duncan, the engineer, just wants to break rock and liberate gold, okay?

Nothing wrong with that.

No. No. No.

Very good. In terms of the team, you mentioned this as well, Duncan. Superstars inside the company. It's always a great opportunity for us to meet with the key leaders of the company to talk about the structure of your team. You've obviously taken a lot of time mining the right talent. So tell me a bit about the well-roundedness and the structure of the company, why we feel so confident in the team at Wesdome.

You know what, I think a lot of the team has been established from before. I think that really -- I was born and raised in Kirkland Lake and lucky enough to spend the majority of my career mining gold in the Abitibi. So you get to know who's who. And definitely, I just look at our Chief Operating Officer, Marc-Andre Pelletier. I worked with Mark -- first time I worked with him was back in 2000 at Barrick, Holt-McDermott. And then he came to work for me at St. Andrews at the same mine, Holt-McDermott as a matter of fact, back in 2009. And really, we've basically work together for all those years. And so it's just when you have trust in people and you let them do their jobs, and I definitely get rewarded. Mike Michaud, I worked with Mike, our VP of Exploration, at St. Andrew's from probably 2008 to 2012. And then he came back to us in, I think, 2017 at Wesdome. But significant experience in the Abitibi, right? So this is what -- I think it's important. Not only that, but I think you want to set the culture out there that people want to come work for you. It's a huge competition right now to get good people. There's no doubt about that. And you -- we're very well networked, I would say, within the Abitibi. And certainly, that doesn't hurt us.

Okay. Good to hear that. Just curious as well, Duncan, in your thoughts about coming out of the pandemic the last year and change. We've all been in lockdown. The world has been upside down. The industry of gold, a long-standing investment favorite for many investors. Curious to your thoughts about the pandemic. Again, great to hear there was minimal impact at the mines and operations. But moving forward into the new norm and the new reality that we come from, what are your thoughts and advice for investors when it comes to gold in general?

Well, I think really what we're seeing here, it's a great market for gold. I think it's setting up very well. I think we see the economies of the world aren't chugging along like everyone would like us to think. And I think what we're seeing here now is certainly some currency devaluation. I mean you got some inflationary pressures. And dollar yesterday is not worth what a dollar today is, right? So where do you go? And we never go to crypto, okay?

Nicely said.

We like hard assets. Yes.

I understand. I understand. Just as we wind down here, Duncan, thank you very much for the insights. Is there anything else that you'd like to share with our audience today as we finish up?

No. Listen, I think really stay tuned. I think that there's just a lot of potential for this company. I think that we've got the right environment right now. And I think like I say, you look at all -- what's going well for Wesdome. Number one, jurisdiction is great. We've got supportive communities. We've got a good team around us. We've got a good Board able to help us through whatever we need. And I think that is really recipe for success, I think.

I hear that. Absolutely. Duncan, thank you for all the insights. Much appreciative of your time, and we look forward to hearing more good news. There's a lot of positive insights coming through.