Wesdome Gold Mines : Fourth Quarter 2024 Transcript

Published: 2025-03-24 13:03:12 ET WDO.TO

Q4 / FY 2024 Conference Call

Thursday, March 20, 2025 @ 10 a.m. ET

Wesdome Participants

Other Participants

Operator

Good morning, and welcome to Wesdome Gold Mines conference call to discuss the company's financial and operating results for the three and twelve months ended December 31, 2024. As a reminder, this call is being recorded.

Your host for today is Trish Moran, Wesdome's Vice President of Investor Relations. Ms. Moran, please go ahead.

Trish Moran

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 Chief Financial Officer; Jono Lawrence, SVP Exploration; Raj Gill, SVP, Corporate Development and

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Investor Relations; and Kevin Lonergan, SVP Technical Services. Following management's formal remarks, we will then open the call to questions.

Following management's formal remarks, we will then open the call to questions. And now over to Anthea.

Anthea Bath

Thank you, Trish. Good morning, everyone. I'd like to begin today's call by recognizing the outstanding efforts of the entire Wesdome team throughout the year. The hard work and commitment of everyone in this organization has led to the most robust operating and financial year in the company's history.

As shown on slide 4, we've seen significant year over year reduction in both incident frequency and severity rates. These improvements clearly demonstrate that the safety culture we've been building over the past eighteen months is proving effective.

Together with this year's safety achievements, we broke all-time company records in terms of production, revenue, EBITDA, net income, free cash flow and net cash balance. This performance is not just a result of higher gold prices. This is due to strong execution by the team bringing on a second mine just as gold began its ascent.

We have renewed leadership across the organization and they're doing a brilliant job bringing their teams together and aligning to the overall vision. Our success of course depends on our people and we're taking steps to ensure everyone understands their role and how they contribute to the organization. Compensation is aligned with driving value for shareholders, and this is reflected in the behaviors and the decisions that we are making.

It was a year of achievement and Kiena had a standout year. We commenced processing of the high-grade Kiena Deep ore in mid-April. We subsequently ramped up production and delivered three solid quarters of production. Rehabilitation of the near surface 33-level was complete, and we commenced development of the secondary mine egress and ramp, which will give us access to both production of the Presqu'île deposits and a platform for drilling other near surface zones.

Like Kiena, Eagle River also had an outstanding year. The team exceeded both original and revised guidance and completed the first phase of the global resource model initiative. We kicked off several continuous improvement initiatives at Eagle River last year and we are excited about what we're seeing as this translates into better unit costs and productivity metrics.

2024 marked the first step in our fill-the-mill strategy at both Eagle River and Kiena. This strategy is anchored by three key initiatives: the global resource model, strategic exploration and thirdly, optimizing and leveraging our fixed cost base. These initiatives are the foundation of our growth strategy ensuring we maximize the asset value while driving sustainable production. Let's walk through each these initiatives in a little bit more detail.

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In 2024, we completed the first phase of the global resource model, digitizing critical data from drilling, sampling and mapping. The next step is to construct an unconstrained resource model, which will be essential for optimizing production at both operations. This work is also enhancing our geological understanding.

By incorporating decades of historical data into our modeling, we're understanding and updating mine plans with more comprehensive real-time models to identify new opportunities near existing workings and enhancing drill targeting and maximizing installing exploration.

At Eagle River, applying the global model has already begun to show promise. We have already identified near surface assets, supporting increased production at lower cost and improving our ability to see opportunities across multiple mining areas. We've already seen these cost trends moving in the right direction.

Secondly, our long-term success continues to allow consistently growing high quality reserves and resources. To that end, we increased our exploration budget and focused on delineation and conversion drilling in 2024. We incorporated geological models into a centralized view of the assets, and we deployed grassroots exploration practices, such as geophysics and historical data reinterpretation. Again, these efforts are already paying off into a high-quality mineral reserve and mineral resource estimate update for year-end. We saw a 37% increase in resources in the measured category. Relatedly, proven reserves grew 34% at Eagle and 462% at Kiena, which is really, really important because these ounces support more detailed and reliable mine plans at our operations. Despite our success, a significant portion of our man package remains unexplored presenting future upside. Jono will explain further around how we changed the geological model, which will explain the change in grade.

The third pillar of our strategy focuses on operational efficiency and cost leverage.

Our goal is to fill-the-mill at both Eagle River and Kiena by blending high-grade ore with near surface low-cost material without displacing high-grade tons and without sacrificing mine life. At Kiena, we are making advancements to support the strategy. We are unlocking multiple mining fronts. We have proven our Kiena Deeps further. We've extended and drilled to understand Presqu'île, so we can produce in 2025.

And we upgraded Dubuisson, so we can start planning to mine it further. We're developing new drill platforms to finally test Kiena Deep down-plunge and we're opening up level 33 in order to open up the mines laterally and down-plunge, so we can advance overall geological potential.

At Eagle River, we started by strengthening our mine planning capabilities, specifically by building a more robust model for real-time understanding of the mine and kicking off a range of continuous improvement initiatives, which Guy will touch on shortly.

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Stepping back, these three integrated workflows directly support our goal of maximizing mill utilization and margins, all while sustainably extending mine life. To summarize, Wesdome's organic growth strategy remains our highest return opportunity, and we remain completely excited about what we see.

Now over to Guy for the quarterly operating highlights.

Guy Belleau

Thank you, Anthea. Good morning, everyone. It was a solid finish to a record year.

Importantly, on top of strong results, we also improved safety at both sites. Starting in mid-2023, there has been a major emphasis of rigorous leading indicators by its site leadership. As you can see now on slide 9, our efforts to improve our safety culture started to bear fruit in 2024. This performance is a true testimony of the strong culture of safety we are building.

Moving to slide 10, 2024 was a record year for Wesdome with 172,000 ounces produced, an increase of 39% compared to 2023.

Eagle River represented 55% of full-year 2024 production with 94,500 ounces. Its production for the year, which was driven by a strong fourth quarter, exceeded Eagle River's increased revised guidance and was higher over the prior year by 8%.

Delivering another solid production year is even more noteworthy when you consider that Eagle River has been in continuous production since 1996. Average head grade in 2024 also exceeded revised guidance with an average of 13.7 grams per tonne. This outperformance was primarily driven by higher-than-expected grades as well as improvements in our dilution control practices. We're seeing this trend continue in early 2025.

We improved material movement during the back half of the year and, as a result, in Q4 Eagle River processed 652 tonnes per day, which is more than 60,000 tonnes. This represents an increase of 10% over the fourth quarter of 2023, driven by improved access to ore and additional high-grade stockpile feed, taking advantage of mill availability.

The mill at Eagle River continues to run well. For the full year, it processed more than 222,000 tonnes or 610 tonnes per day on average at a recovery rate of 96.8%. We are looking at potential investments that could improve recoveries over the medium term.

All in sustaining costs per ounce at Eagle River were US$1,512 for the fourth quarter and US$1,540 for the full year. Lowering our cost is a key component of our organic growth strategy. At Eagle River, we have commenced the first significant continuous improvement project in recent history. The focus of this initiative is to improve site

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cost structure and focus on areas where we are confident in achieving meaningful savings and productivity improvements, such as:

These initiatives, together with the gradual integration of technology and automation, will help create a more safe, efficient and productive workforce. We expect to start realizing the benefits of this program starting this year. In 2024, we made investments to improve operational flexibility by increasing drill and develop ore inventory.

Additional investment in 2025 will ensure that we also have infrastructure in place to support our fill-the-mill strategy, increase our adherence to our plans and reduce variability in the coming years. Eagle River has been operating for more than 30 years, and we are focused on ensuring it continues to have a bright and long future.

Turning now to Kiena on slide 11. The team has shown consistent performance since mining started in the Kiena Deep Zone with excellent production results to date. Kiena, which started mining and processing high-grade Kiena Deep material in April, delivered three consecutive quarters and ending the year with production of more than 77,000 ounces of gold. This was within its revised guidance range.

Due to the high-grade nature at Kiena, grade fluctuates from quarter to quarter depending on the stoping sequence. We ended the year with an average process grade of 11.2 grams per tonne. While process grades for the full year were on the low end of revised guidance, it should be noted that once we started producing from Kiena Deep process grades in Q2, Q3 and Q4 came in at the midpoint of the original guidance range.

Ore milled in the fourth quarter exceeded 62,000 tonnes, a first since the restart of operations at Kiena in 2021. For the full year, ore milled increased by 13% year over year to nearly 217,000 tonnes. The ramp up of Kiena Deep is ongoing. We continue to refine our mining methods for optimal performance and have recently introduced a hybrid cut and fill approach, targeting reduced dilution and increased mining recoveries.

Last year, we completed the level 109 exploration drift. The newest one, level 134 is expected to be ready in Q2. The ramp is currently heading to level 136, where we anticipate first stoping will take place in the fourth quarter. This new mining front will add flexibility to our mining operations in the coming years. The goal is to have three mining fronts by the end of 2026, including two high-grade and one low-grade.

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Beyond Kiena Deep, there is a lot of work ongoing to unlock the upper portion of our mine. Last year, we completed the rehabilitation of the level 33 drift and commenced development of a more than 2-kilometre exploration ramp from Presqu'île that will intersect level 33 and provide additional material movement and ventilation.

The ramp at Presqu'île is progressing and expected to be completed at the end of 2025. This ramp marks an important component of our fill-the-mill strategy as it provides access to the first source of supplemental ore outside of Kiena Deep. Kiena's production guidance for 2025 includes up to 10,000 ounces from Presqu'île late in the year. We are currently set up to progress our mining in three different mining horizons in 2026.

I want to thank each of our site teams for your tremendous work in 2024, and I look forward to working with you all to achieve another year of record performance in 2025.

And now over to Jono for his first quarterly exploration update at Wesdome.

Jono Lawrence

Thank you, Guy. First, I would like to say that whilst I've only been in the seat for a couple of months, it's been a pleasure to be part of the Wesdome team. I'm extremely excited about the potential of our two mines and the large land packages.

At Eagle River, more than 105,000 metres were drilled as part of the 2024 exploration program, which focused on the surface and underground drilling, delineation expansion of key zones close to existing infrastructure, as well as identifying new targets advancing geological understanding.

Some highlights of the 2024 drill program include successful extension of the resource envelope at 6 Central down-plunge by 70% or some 250 metres, whilst also identifying a parallel structure to the north now known as the 6 Central Parallel Zone. The 6 Central story is significant as the global model work highlighted this area as a potential target for investigation. It now has a reserve grade that's second only to the 300 Zone and it remains open at depth.

Intersection of high-grade mineralization approximately 50 metres west of existing drilling at Falcon 311 results highlight the potential for continuation of mineralization outside of the diorite and demonstrated the continuity of high-grade mineralization in the 300 Zone, reinforcing the zone's continued exploration and resource conversion potential.

At the 300 Zone, drilling from the 1201 level achieved several objectives. First, it improved our understanding of the litho-structural mine. Second, it tested the strike length and down-plunge extension of the structure below the 1,400 level. And finally, it targeted the high-grade plunge of the deposit. The result of the drilling across

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approximately 500 metres of strike length is a combination of higher and lower grade drilling to steps indicating some pinch and swell structures that have developed within the host shear. Whilst these results have a short-term impact on the overall inferred resource grades at Eagle River, it has helped us to home in on the high-grade portion of the 300 Zone, the delineation of the high-grade portion and its continuation is the next part of the work process.

In 2025, we've expanded the exploration program at Eagle River in terms of metres, dollars and scope. While historically, Eagle River has focused primarily on infill and conversion drilling, greenfield and brownfield drilling will be front and centre to drive expansion and discovery in 2025 and going forward.

New for 2025 will be a reinterpretation of the shear zone between the historic 2 and 6 zones to develop drill targets, regional drilling at the Birch and Fork veins and completion of drill testing, including induced polarization anomalies that were generated in 2024. We plan to complete an additional much larger IP survey this year, testing the area further to the west of the mine diorite. The addition of surface geochemical work, soil and barge sampling will provide a multi-pronged approach to regional target generation.

Finally, the addition of oriented core programs at Mishi and Magnacon will support our global resource model initiative by helping to validate geologic models and structural information that we used in previous resource modeling. Improving our integration of the Mishi-Magnacon corridor forms a key part of our regional strategy.

Moving on to Kiena on slide 14, during 2024 more than 80,000 metres of drilling was focused on converting Dubuisson and Kiena Deep's inferred resources to the indicated category and subsequently into reserves. Some highlights of the 2024 drill program include the continued intersection of high grades over mineable widths at Kiena Deep, including the footwall and hanging wall zones. Results of data are encouraging and the understanding of the geologic complexity of the Kiena Deep deposit at depth continues to improve with geologic interpretations based on the drilling adjusted accordingly.

Completion of the exploration drift from the 109-level will allow drilling to test down-plunge extensions of the VC Zone. This zone is significant. It's geologically analogous to Kiena Deep and therefore testing of the zone is top priority for 2025.

At Dubuisson, the continuity of the deposit was confirmed and drilling provided better geological context for interpretation and planning. The deposit remains open laterally and down-plunge and is a high priority for drilling from level 33 and surface this year.

At Presqu'île, drilling confirmed not only the continuity of gold mineralization and the validity of the geologic model, but also the potential for down-plunge extensions towards the east. Further drilling, targeting lateral and depth extensions from the surface is planned for the coming year.

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Until now, drilling at Kiena has been difficult due to limited number of drill platforms underground. Steeper dipping ore bodies really are a challenge for drilling. Drilling angles and intercept angles for Kiena Deep in particular had been challenging.

With the completion of 33-level rehabilitation and the new exploration drifts on levels 109 to 134, we look forward to more optimal drilling this year and are excited to start testing the targets.

Turning to slide 15, our 2024 mineral reserve and resource update exceeded depletion and delivered a 5% increase in total contained reserve ounces.

Our mineral reserves now total 3.6 million tonnes at an average grade of 10.2 grams per tonne. Critically, we are pleased with increased confidence levels in our resource and reserves. The focus of the 2024 drilling program was primarily on converting material for mining and the results demonstrate this.

Our proven reserves increased by 79% and our indicated resources, good for planning purposes, increased by 37% year on year. These increases will help us to optimize our mine plans and reduce variability over the short- term allowing us to increase our focus on medium to long-term exploration.

Our resource and reserve update demonstrates our new integrated approach including 3D modeling. We have adopted a holistic methodology to better align with industry best practices and support an improved understanding of the structural architecture of our deposits and the controls on mineralization.

At Eagle, this 3D modeling and resource work is a journey, and this mineral resource mineral reserve update is a point in time. Ongoing work reviews and domaining optimization, including sensitivity analysis on a two-stage high-grade, low-grade domaining approach are expected to lead to improved grades.

The results of this work will be fed into updated mineral resource and mineral reserve models for the Eagle River PFS. We'll update the market accordingly in quarter two. Looking ahead, we plan to increase the proportion of expansion drilling, testing down-plunge of existing structures and unlocking near surface potential, particularly at Dubuisson and Presqu'île. With the addition of a new greenfield exploration team, we are turning our focus outwards from our operations and into the substantial land packages that we have to explore.

We are convinced of the prospectivity of our ground and determined to showcase this prospectivity in 2025 and beyond. Between the geologic resource models at both Eagle River and Kiena, upcoming technical reports and a renewed focus on regional exploration, 2025 is shaping up to an exciting year for Wesdome. We'll be starting to discuss initial results of these programs in the coming quarters.

And now over to Fernando, who will take you through the quarter's financial results.

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Fernando Ragone

Thank you, Jono, and good morning, everyone.

Turning to slide 17. In the fourth quarter, we achieved a strong gold production of nearly 50,000 ounces, a 37% increase over Q4 2023. This in turn drove record annual production of 172,000 ounces. The year over year increase was driven mainly by two key areas: accessing a greater proportion of ore from high-grade zones in Eagle River and three quarters of processing high-grade ore from Kiena Deep.

On a per ounce basis, we have seen a sequential decline in quarterly all-in sustaining costs to US$1,373 per ounce in the fourth quarter. For the full year, all-in sustaining cost was US$1,459 per ounce. I would like to highlight that in 2024, 17% of the all-in sustaining cost was attributable to sustaining exploration and development, which has been ramping up significantly over the last two years.

Moving now to slide 18, financially we delivered strong results in the fourth quarter.

Revenue for the quarter increased 79% year over year to $183 million driven by both higher production and a 34% increase in average realized gold price per ounce in US dollars.

During the quarter, the company recorded net income of $57 million, or $0.38 per share, an increase over the prior year due to the increased production and the higher realized gold price. In addition, when we compare to Q4 2023, cash margin of $125 million was up by 16%. EBITDA more than tripled to $115 million. Net cash from operating activity doubled to $76 million and free cash flow increased by about five times to $40 million.

We have a clean liquid balance sheet with zero debt. We ended 2023 with $41 million of cash. Fast forward just one year and our cash balance tripled to $123 million at the end of 2024 and this is after paying off $39 million owing under the revolving credit facility in the first half of this year. Together with our fully undrawn revolver facility, we have over $273 million in liquidity.

Our balance sheet has continued to strengthen with working capital increasing to $131 million at the December from a negative $19 million at the start of the year. Essentially, we improved our net position by $150 million in 2024, all supported by increasing free cash flow.

Next, let's look at our guidance for the year on slide 19. Consolidated production is expected to be between 190,000 and 200,000 ounces, which based on the midpoint represents a 16% increase compared to 2024. Production is anticipated to strengthen in the second half of 2025 with the first and fourth quarters accounting for approximately 20% and 30% of total gold production, respectively.

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We're guiding to all-in sustaining costs in the range of US$1,325 and US$1,475 per ounce and self-funding capex of US$160 million. This includes $40 million for exploration and $40 million in growth capital related to the ramp at Kiena, which is foundational for the fill-the-mill strategy and long-term growth.

With the gold price over US$3,000 we are setting up for another good year in terms of free cash flow.

At current gold prices, our expected free cash flow is almost 70% higher than our current budget expectation. This would imply that we are currently trading at a double-digit free cash flow yield. This underscores why Wesdome is a higher return, lower risk proposition.

With that operator, you can now open the line for questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. Our first question comes from Wayne Lam with TD. You may proceed.

Wayne Lam

Yes, thanks guys. Good morning, everyone. Just wondering if you could provide a bit more detail on this change in reserve grade, particularly at Eagle River, and the new litho-structural model. Just wondering exactly what changed with this new model and how the reserve haircut is being informed by greater drill density?

Anthea Bath

Okay. I'm going to pass to Jono to start and then I'll add that. But hello, Wayne. Go ahead, Jono.

Jono Lawrence

Wayne, hi. It's Jono speaking. Can you hear me okay?

One of the changes to the reserve grade is due to variance in the cutoff grade. By lowering the cutoff grade, we are already looking at larger tonnes and an overall drop in the grade. So that's one aspect. That's a function of our review and part of our growth as a company. The second part on the resources side that feed into the reserve, the drill density, we did drill a lot of holes last year. The results of those holes did feed into a modeling process. The implicit modeling on the wireframing has been quite robust. We're using Leapfrog to help drive us through. Leapfrog has some components, where if it's not controlled will lead to higher volumes and bubbles. The person that we engaged to do that work as part of our global model work and resources work is excellent.

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Disclaimer

Wesdome Gold Mines Ltd. published this content on March 24, 2025, and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on March 24, 2025 at 17:02:03.840.