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

Good morning. Welcome to Wesdome Gold Mines' conference call to discuss the company's financial and operating results for the first quarter ended March 31, 2025. As a reminder, this call is being recorded. Your host for today is Trish Moran, Wesdome Vice President of Investor Relations. Ms. Moran, please go ahead.

Thank you, and good morning, everyone. Before we get started, I'd like to point out that during today's call, we may make forward-looking statements as defined under Canadian securities law. I ask that you view our slide presentation for cautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Please note that all figures discussed on this call are in Canadian dollars, unless otherwise noted. Our press release, MD&A, and financial statements are available both on SEDAR+ and on our corporate website, wesdome.com. With us on today's webcast is Anthea Bath, Wesdome's President and CEO; Guy Belleau, our COO; Fernando Ragone, our CFO; Jono Lawrence, SVP, Exploration; Raj Gill, SVP, Corporate Development and Investor Relations; and Kevin Lonergan, SVP, Technical Services. Following management's formal remarks, we will then open the call to questions. And now over to Anthea.

Thank you, Trish. Good morning, everyone. The year is off to a good start, and we're pleased to be sharing with you another quarter with solid results across the board. Starting with health and safety, we continue to see reductions in our lagging indicators. By way of example, our total recordable incident frequency rate in the first quarter is at its lowest level in more than 4 years, a result that demonstrates that our efforts to build a safety culture are working. As shown on Slide 4, we produced nearly 46,000 ounces, and our quarter 1 financials captured the upside move in the gold price and set many quarterly records, revenue, EBITDA, net income, free cash flow. Importantly, these records were set on a per-share basis as well. We also increased our liquidity to $318 million, which included $168 million in cash and $150 million of undrawn full capacity on our revolver. As we go through this quarter's results, there are 3 key messages that we want to emphasize. Firstly, as outlined in our release, operating performance is expected to be second-half weighted, primarily driven by Presqu'île orebody coming online in the second half of 2025. Two, we are making progress on embedding our principles of optimization and value creation across these operations. And thirdly, we are advancing the fill-the-mill strategy, which will daylight value for our shareholders. Post quarter end, we announced the acquisition of Angus Gold, a transaction expected to close by the end of June. The acquisition is a strong fit within our strategy. As you can see on Slide 5, it offers a unique opportunity to consolidate and expand the prospective land position around Eagle River, quadrupling it to roughly 400 square kilometers. This transaction underscores our long-term commitment to Eagle River and will meaningfully enhance our regional greenfield exploration pipeline. We are the logical acquirer of Angus. With a strong balance sheet, established infrastructure, and strategic relationships, we're in a great position to build on the impressive groundwork already laid out and accelerate both exploration and development across the combined land package, creating real value for our shareholders. Moving to Slide 6. Our organic growth strategy, what we call the fill-the-mill, has the potential to unlock significant additional value to our shareholders over the next 3 to 5 years. If you recall, the strategy has 3 pillars, namely the global resource model initiative, strategic exploration, and cost optimization. Work related to each of these initiatives is ongoing and will be incorporated into new technical reports for both Eagle River and Kiena next year. Let me update you on what we hope to achieve on each of these assets. At Eagle River, the focus of the global model initiative is on incorporating all available data. To get there, we're completing the QA/QC processes to qualify the database, including all historic drilling that was recently digitized. We have modeled the target areas and designed an aggressive drill program aimed at maximizing conversion. We want to ensure we can revisit the potential for restart at the historic Magnacon areas. Moving to Kiena. Our ultimate aim is the same, but our focus areas to unlock value are different. Whereas the Eagle River technical report is looking to drive value primarily from the global model resource model initiative. At Kiena, we look to unlock value through a combination of cost optimization, the inclusion of near surface deposits along 33 level, and holistic strategic mining planning. There's much work upfront to be done to publish these 2 technical reports in 2026, and we'll certainly keep you updated along the way. Now over to Gill to review the quarter's operating highlights.

Thank you, Anthea. Good morning, everyone. The year is off to a solid start. Moving to Slide 9. Eagle River delivered a strong quarter 1 performance, producing approximately 29,000 ounces, up 16% compared to the same quarter in 2024, driven by sequence and dilution control. As planned, approximately 65% of tonnes produced came from 2 zones, 300 and 720 Falcon. The average head grade at Eagle River was above the guidance range for the quarter due to 2 main factors: carryover of material from the high-grade stope in the 300 Zone from late 2024 into Q1 and positive grade reconciliation in a stope in the 720 Falcon Zone. Sequencing remains compliant to the overall plan for the year. And in the second quarter, process grades are planned to be back within the guidance range. As we open up new mine fronts, we are creating optionality and flexibility within our mining plan, resulting in a higher level of predictability. Notably, we have increased our available stock inventory to 3 months and are establishing new mining areas for sustainable production, such as 6, 8, and 5 zones. 300 zones development is planned to be 1 year ahead of the production front, giving us ample time for delineation of the ore body at depth. As part of our plan to set up Eagle River for long-term success, a continuous improvement program has been implemented and is beginning to see results. One of our focus areas has been a transition from contractor to owner-operated activities. Plans are in place to transition the surface ore haulage to owner-operated by the end of the second quarter, and we also continue to see a progressive transition of the underground development meters. Another focus has been on maintenance and warehouse improvements. By investing in infrastructure and improving our practices in these areas, we can significantly enhance equipment availability and reliability. Furthermore, dilution control continues to improve, contributing to Eagle River's positive results, particularly in long-haul stoping through a multiphase program initiated late in 2024. On the processing side, throughput increased to an average of 667 tonnes per day, an increase of 18% over the first quarter of last year and 10% above the 2024 average. This reflects the success of our 2024 initiatives to boost drilled and developed inventory as well as operational debottlenecking and optimization. All-in sustaining costs for quarter 1 were USD 1,337 per ounce, including $13 million in sustaining CapEx. In 2025, we're also making investments to improve mill reliability and upgrade infrastructure during a 2-week scheduled shutdown this month. We're proud of Eagle River's performance to date and are excited about what lies ahead. Turning now to Kiena on Slide 10. Our focus remains on ramping up Kiena Deep and delivering value to our shareholders. In quarter 1, Kiena produced about 16,700 ounces, double the output of quarter 1 2024. While it was planned that Q1 would be the lowest production quarter of the year due to planned sequencing, there was also a delay in the sequencing of some key high-grade stoping and development areas due to lower-than-planned equipment availability, which is being addressed. Maintaining strict adherence for the mine plan remains a critical performance driver for Kiena Deep. The second quarter is expected to improve and the back half of the year is projected to represent 60% of total production as outlined in our guidance release in January. Overall grade reconciliation of Kiena Deep is trending well to block model grades, and the mine delivered an average head grade of 10.8 grams per tonne in quarter one 2025, despite processing a small volume of lower grade material from recovered stope. In the quarter, we experienced a delay in the sequencing in some key high-grade stoping and development areas due to lower-than-planned equipment availability. To improve performance, our focus remains on maintenance reliability, mine planning and execution, and increasing available mining fronts as we move towards first production from Prestfill and mining at Level 136 next year. The hybrid cut and fill mining method continues to be implemented in specific areas and is yielding better-than-expected results with a significant reduction in dilution. Moving from mining to processing. The mill performed well in quarter one, 2025, processing 541 tonnes per day, up 7% year-over-year. Associated production costs per tonne were $489 a tonne, a 5% increase over Q1 2024, primarily due to higher mining and site administration costs. All-in sustaining costs for the quarter were US$1,412 per ounce and includes $9 million in sustaining CapEx. Another $9 million in sustaining CapEx, mostly related to delivery of our first battery electric trucks was carried over from quarter one to quarter 2. These new energy-efficient vehicles, the first one for Wesdome, will improve material movement and free up ventilation capacity. There is a lot going on at Kiena beyond day-to-day operations. Let me highlight the status of several ongoing projects. First, we recently completed the exploration drift on Level 134, setting us up for drilling success with 2 active underground platforms. Next, 136 is expected to be completed in Q3, establishing a second mining horizon. Our goal is to have 3 mining fronts by year-end. The Frisco continues to advance towards a year-end completion target. This 2.5-kilometer ramp is the final major step in gaining access to material in the upper portion of the Kiena mine and a critical component of achieving our fill-the-mill strategy. Across the Crestield deposit is already established, and our guidance calls for up to 10,000 ounces from the area in 2025. It's a busy year at Kiena, and the team remains sharply focused on safe, disciplined execution. And now over to Jono to discuss exploration.

Thank you, Gill. Good morning, everyone. So during my first 4 months at Wesdome, I've had the opportunity to have robust conversations with the exploration and geology teams at site, visit our extensive land packages, familiarize myself with the geology, and review past drill programs and results. From this collaborative work, the teams and I have revised Wesdome's exploration strategy to better support the company's organic growth plans. The key shift in focus has been from short-term reserve replacement to a longer-term growth-oriented thinking. We've come up with a program that creates the most value for our shareholders by effectively supporting our short, medium, and long-term growth aspirations. I'm going in reference to Slide 12, I'm going to highlight this strategy, which is a time-guided resource-generative approach, resulting in a project pipeline designed to extend the life of our mines. The strategy is designed to generate incremental additions to resources in the near-term, to generate at least one new discovery in the medium-term, and to extend the mine life with further discoveries in the long term to deliver stable production and cash flow beyond 2028. The strategy has 3 aims. The first is to support our life of mine over the next 12 months by replacing depletion, growing our resource base, and supporting our fill-the-mill strategy. The second is to extend our life of mine over the next one to 3 years by evaluating the continuity of deposits both laterally and at depth and targeting discovery of at least one new deposit. We do this by continuous global portfolio management, constant ranking of opportunities, and district consolidation. The third element of our strategy is to transform our life of mine in the long-term by taking a holistic approach to the exploration and mineralization potential in our districts, understanding the geometallurgy and mineralization style of potential targets, balancing the grade and volume characteristics of targets and the potential economic upsides in a rising gold price environment and regional consolidation. These 2 aims are critical as exploration is a truly iterative and data-driven process. The tool that we have chosen to manage our global exploration program is the Target Triangle. While not a new concept in the industry, spending the last few months assessing our property-wide prospects of both assets has really given me a sense of the tremendous opportunity that we have at Wesdome. As you can see from Slide 13, we have taken the approach of ranking our targets in terms of priority. Our consolidated global view of the current opportunity at Wesdome includes 76 targets in the Tier 4, 5, and 6 categories. As you can see, there's no shortage of target opportunities for us to work on. Now that we have our list of targets, both Eagle and Kiena are in the target selection and probability weighted ounce potential stage. This is a critical part of the process, and it will help rank the targets for prioritizing work and associated budget activities. Our primary objective for the rest of the year is to complete detailed geologic evaluations of the mining permit areas and surrounding claims. And at Eagle, this includes the Eagle River, Mishi, and Magnacon claims and the exploration claims immediately adjacent to these areas. Evaluation will focus on 2 aspects: surface target areas defined during the ranking process and underground targets defined as part of the global model fill-the-mill work processes. While the process at Kiena is similar, the unique nature of the ore body under the lake requires us to use slightly different tools. To help delineate and fine-tune targets, a high-resolution drone magnetic survey will be executed over the lake and permit areas. The survey will deliver more detailed information than previously available, which could help identify key features that contribute to development of the mineralized loads. Stay tuned. Before I wrap up, let me give you a brief update on our exploration programs in the first quarter. Starting at Eagle on Slide 14. Drilling at the 6th Central Zone is successful in confirming the continuation of mineralization down plunge at similar thickness and grade. The latest interpretation of drill results in the 300 zone indicates the presence of a separate subparallel structure to that hosting the main 300 zone mineralization. Initial assays in this zone, now known as the 300-fold support continuation of thickness in the tenor of mineralization with down-plunge continuation open for further exploration. Results are also indicating that the mineralization is plunging at a more moderate angle than the steeply plunging main 300 zone. This is a key interpretation as it highlights the variability of the plunge of the shoes, and this gives exploration opportunities for testing down plunge continuation. Finally, during our surface drilling programs, we drilled 5 holes at Per anomaly D and 11 holes at the Birch Vein on the Eagle River Splay. Two of the holes at Per anomaly D intercepted anomalous gold, and several holes at the Birch Vein have intercepted smoky quartz veining with strong biotite alteration. Assays are pending. Our work continues to follow up on these results, and we'll be discussing more on these areas in the press release in quarter 3. Turning to Kiena on Slide 15. The focus in the first quarter has been on preparing development for the rest of the year's drilling. Currently, there are 6 rigs underground with barge drilling expected to commence in July. The exploration drift on the 109 level was completed, and drilling commenced targeting the VC zone. It's a top priority for us to drill in 2025. BC zone historically returned a high-grade intercept at the base of the mineralization, wide frame, and the mineralization is open at depth and demonstrates a style that's analogous to Kiena Deep. Drilling to date has been unsuccessful due to poor ground conditions between the drilling day and the VC zone. We're reviewing options to extend the underground development to a more optimal location, which is expected to enable more effective drilling of both the VC Zone and the nearby North Zone targets. Drilling continues at the Kiena Deep, and we remain encouraged with the results we have seen, particularly in the football zone. Excitingly, preparation of the first 2 drill platforms on the 134 exploration drill is almost completed, and drilling is expected to commence at month end. Drilling from this platform will target both the Kiena Deep and football zones, giving us more optimal drill intersection angles. Exploration drilling also commenced from Level 33, confirming the continuity of the porphyry host in the Shake 22 zone, and work has progressed on setting up platforms to drill Dubesson and Duchenne in July. An exploration update is planned to be released later this quarter. Now over to Fernando, who will take you through this quarter's financial results.

Thank you, Jono, and good morning, everyone. Turning to Slide 17. We have achieved a strong gold production of nearly 46,000 ounces, a 37% increase over the comparative quarter in 2024. The year-over-year increase in ounces produced was driven mainly by accessing a greater proportion of high-grade ore from the 300 Zone at Eagle River and high-grade ore from Kiena Deep. Recall that we were still advancing the ramp in Q1 last year, and we did not start mining and processing Kiena Deep material until around mid-April 2024. On a per ounce basis, we have seen another sequential decline in quarterly all-in sustaining costs to USD 1,366 per ounce, which includes about $230 for sustaining exploration and development in the first quarter. Now moving to Slide 18. The first quarter of 2025 was really solid from a financial perspective. Revenue increased 86% year-over-year to $198 million, driven mainly by a significantly higher production and a 38% increase in average realized gold price per ounce sold in U.S. dollars. During the first quarter, the company recorded net income of over $62 million or $0.42 per share, an increase of almost 5x over the prior year due to the increased production and a higher average realized gold price. In addition, compared to the first quarter of 2024, cash margin was up by 174% to $128 million. EBITDA nearly tripled to $120 million. Net cash from operating activities grew by 72% to $80 million, and free cash flow increased by about 2.5x to $48 million. We have a clean balance sheet with 0 debt. Our working capital increased to $181 million from $131 million as of December 31, 2024, due to primarily an increase in our cash balance, which grew by $45 million during the quarter to $168 million at the end of March. The Angus acquisition is scheduled to close by the end of June, and therefore, you should model the cash portion of the purchase of approximately $31 million in your Q2 cash projections. Between cash on hand and our fully undrawn senior secured revolving credit facility, we had $319 million in liquidity. I should mention that we're currently in discussion with a group of banks to renew our revolving credit facility, which matures in late August. We will keep you appraised of our progress in that area. As a reminder, on Slide 19 outlines our guidance for 2025. The only change I would note, and again, this is effective with the Angus transaction, is that our annual exploration spend is expected to increase by up to $5 million following the closing of the transaction. And lastly, for those of you who did not pick up in our management information circular filed a couple of weeks ago, Grant Thornton, who has been our auditor for more than 20 years, has changed its overall strategic direction. As a result of that, we're changing our auditors. Subject to shareholders' approval, Ernst & Young will assume auditor responsibilities in relation to the period ended in June 30. We would like to thank Grant Thornton for the many years of service. With that, operator, you can now open the line to questions.

[Operator Instructions] And our first question comes from the line of Wayne Lam with TD Cowen.

Just wondering, maybe on the recent Angus Gold transaction, given the proximity of the operations to the prior Mishi pit, would there be an accelerated permitting process to operations today if everything was drilled off? And then maybe just curious in terms of the future tailings storage, what's the current capacity remaining? And what does the permitting time line look like for construction of the next facility?

Hi Wayne. Thank you for your question. Can I just ask you just to help me a little bit with your first question regarding Angus? What were you asking?

Just wondering what the permitting time line might be.

From a tailings perspective.

In terms of advancing it into operations, like if everything was drilled off, would you guys be able to mine it today? Or you'd have to go through it and get an operating permit?

Yes, absolutely. I think there will be a whole process around that. So the focus right now at Angus is to get a drilling program that supports the development of the resource in the light way following that we start the permitting process accordingly. Your second question on the tailings is we have sufficient tailings obviously, to run the growth plan quite substantially for the period of -- how far ahead, Kevin? So the tailings from are well managed within Eagle River.

And maybe at Kiena, can you maybe provide us a bit more detail on the planned switch to the hybrid mining approach with the greater cut and fill? Just wondering if that's a function of dilution control or ground conditions. And would that entail a scale back in underground mining rates at Kiena Deep or impact the fill the mill strategy?

Again, let me maybe reiterate the message on the hybrid model. The hybrid model is to optimize the dilution within the mine, which we see as an opportunity in recovery. So we see it only impacting, I think, 1/3 of the ore body for 2025, and it's slowly coming in. I think he told me he's only done 2 stopes this year of the total stopes that have been produced. And this should increase slightly in 2026 in terms of percentage of the total stopes that are actually being impacted by it. We do not see it impacting the sequence or the timing underground.

And maybe just last one at Presqu'ile. It seems like pretty good progress there. Are you guys ahead of schedule on development there, given the mining of ore this quarter? And then what would the targeted tonnage contribution be on a go-forward basis?

So we are on track on the development to deliver as per plan for Presqu'île for this year, and obviously, this continues into next year, and it ramps up year-on-year. Tonnage contribution for next year is what you're asking, Wayne, or for this year?

Maybe for next year.

Okay. It's about 100,000 tonnes for next year.

And our next question comes from the line of Don DeMarco with National Bank.

Congratulations on a strong quarter. So, first question, Kiena, you mentioned a delay in the sequencing of some key high-grade areas due to lower-than-expected equipment availability. Has this been resolved? And is it potentially re-occurring?

So, Don, it is definitely due to the availability of equipment, and it is understood, and we're dealing with it.

And was it something that came about toward the -- like how much of an impact did it have? And how should we think about it going forward in terms of the timing of expectations to get resolved?

I think what you should see is these is normal operations issues that we need to manage, and we'll manage it. I don't think you should see it as a concern. The problem with Kiena is you do run 5 stopes a month typically. So when you delay on the stope, it will go over into the next quarter. This is the reality of not managing these things perfectly in this kind of month. However, we understand it very well, and we'll continue to solve it.

So you mentioned that you're reiterating your back-end loaded year, but maybe should at Kiena, would we expect Q2 to be maybe just a touch soft then or really no material impact?

You should see Q2 increasing from Q1, certainly, but it's aligned with our plan.

And then just carrying on with Wayne's questions on Presqu'île. And maybe if you could, are you still on track to come out with updated technical reports early next year? And in those reports, would we see the contributions from Presqu'ile? You mentioned tonnage next year. What are you thinking about first, pour through the mill this year, and tonnage this year? And how much more -- you've got spare mill capacity certainly at Kiena. How much of the mill capacity might this utilize once it gets ramped up?

It's a good question. Just on the technical reports, I think we're saying within the first half of next year is what we're aiming for. I want to reaffirm the importance of making sure that the inputs into that report are there, which is really around the QA/QC of our current drill database into the digitized database. That's the key criteria point that's going through. For Presqu'ile for 2025, we have between 35,000 and 40,000 tonnes that are in the current plan, and that increases. will certainly be a part of the technical report going forward. And you could probably imagine that we won't in the technical report see more than the current reserve, which we include Don as well, and other potential areas that Jon is able to drill out this year. But it will not see the full utilization of the mill, I believe, within the technical report for Kiena.

And then perhaps just as a final question. The balance sheet is getting stronger, and we would expect that to continue. What are your plans for the cash? Do you want to stockpile dry powder in the event of M&A or potential next mine development? Or are you considering a potential dividend or share buyback program?

Great question. Again, as we all know, hopefully, after the AGM, we can appoint Ed to his seat as our Chairman. And we're certainly going to be having these conversations with Ed. I think just from a capital movement perspective, the most important thing is really on organic opportunities in the current operation. So I'm looking next towards my friend Jono here and pushing on driving the exploration program as hard as we can. So that's one of the strategic pillars that we're driving within West right now. Thereafter, I think, as we've always said, we remain very prudent on everything we're doing with regards to capital deployment. And we'll make those decisions with our shareholders in mind, obviously. And then if there's money to spend, that's a conversation we'll be having with our Board, and we're hoping to talk to the market at the second half of the year to discuss those thoughts.

Well, we look forward to those developments as they progress.

[Operator Instructions] And our next question comes from the line of Andrew Mikitchook with BMO Capital Markets.

Some great one has already been asked. Can we come back to the developed ore tonnes for both Eagle and Kiena? I think I scribbled down that there was 3 months available stopes for Eagle. How does that contrast with maybe where you were previously and where you want to get to? And then I didn't hear any sense of where you are on the similar situation for Kiena in terms of tonnes developed and where you want to get them to, please?

Just with regards to Eagle River, I mean, I think our baseline, I can't be perfectly clear on it, but we do know it's significantly higher right in terms of inventory. And we're targeting and tracking it for 3 months that we're really making sure we deliver at a minimum in that operation. For Kiena, the different Kiena is currently still very much just in time on that operation. And we're obviously working on opening up the other mining front in 136 to assure that value as well, and get more flexibility within the mine. And then obviously, with Bill, that adds the third mining front will be the second in the sequence, which gives us the next level of flexibility. So this is something that you hopefully will see next year start to grow further. When we speak about ramp-up, this is the kind of stuff we speak to around. This is the flexibility we like to give us that ability to be much more certain going forward. So this is the kind of initiative that's really going to drive a much more stable execution from us.

So just to be clear, so that 3 months at Eagle, that's there today, you guys would look to increase that with time. Is that fair?

3 months is sufficient with respect to what we believe is good for us from that perspective from a development, it's a sweet spot for us from that side. Obviously, from the drill outside, it's a bit further. Each of these parameters might be slightly different. But yes, we're comfortable with that level.

And then just one last question on this exploration. The pyramid, I think, kind of puts everything into perspective, the one that was up on the presentation. But my question is, how long in terms of time or even dollars would it take to incorporate the Angus acquisition into that? Is that something that would take just a few months? Or is it a more material amount of work to integrate that into the process?

Andrew, it's Jono here. We had a look at the opportunities on the Angus ground before we initiated the transaction. We definitely do see upside in that property. And when the transaction is finalized, we'll be going through that data in a very aggressive manner and treating it in the same methodology that we have for our existing assets all around Eagle. Timing-wise, we would be doing drilling this year in the second half, utilizing and advancing the programs at Dorset as well as over at the Einstein formation, more background information for us, but also setting the grounds for work in 2026 and 2027. So confirmation drilling, approval of ideas, validation of some holes, but definitely drilling and advancing. More work will set up in 2026, but we will be aggressive in processing and reviewing that data as soon as the transaction finishes.

And ladies and gentlemen, this concludes our question-and-answer session and also concludes this morning's call. If you have any further questions, please contact [email protected]@Wesdome.com. Thank you for participating today, and you may now disconnect.