"I think the investing public saw a company that operates a mine in a great jurisdiction (Ontario), visibility to opening a mine in another great jurisdiction (Québec), and a tangible path to become a 200,000+ oz/y producer in the near-term"
How has Wesdome’s performance in 2020 been impacted by the pandemic?
During Q2 we focused on getting as much gold through the mill as possible, accelerating some of the ounces that would have been mined in Q3 because of the uncertainty at the time as to how long operations would remain limited due to the pandemic. This was complicated further by regional quarantine measures in Québec that shutdown work at Kiena for two months and made the transfer of manpower very difficult.
However, we have been fortunate to remain on guidance in terms of production. After Q3 we have about 70,000 oz Au produced and 71,000 oz sold. Our guidance for 2020 was 90,000 to 100,000 oz, so we are on pace to hit that. We would like to get our AISC back down to the high end of guidance, which was C$1,350 (US$1,026), but have built up the cash balance from C$35 million at the start of the year to C$73 million today (November 2020).
Will the cash flow accumulation in 2020 be enough to organically fund the restart at Kiena?
The Kiena start-up will be between C$35 to C$40 million according to the PEA, and we are in the process of doing the PFS which will further define costs. Wesdome is able to organically fund the restart. We have a pristine balance sheet with no debt and a C$45 million line of credit, so total liquidity is C$115 million – a level this company has never seen before. If things go to plan, we will be able to get Kiena up and running by the end of 2021, providing value to shareholders without having to go back to the market.
Wesdome was ranked 7th on the TSX30 list in 2020 (up from 19th in 2019). If you had to pick two or three factors in particular, what do think has been driving the share price?
It is a 1A/1B situation. I think it all started with operational improvements at the Eagle River Complex, which would be 1A, but exploration at Eagle has also been transformative, so that would be 1B. Eagle had been underexplored and underinvested when I got involved, but we have managed to transform the asset from a 50,000 oz/y operation to 90,000+ oz/y, which we continue to incrementally grow.
I think the investing public saw a company that operates a mine in a great jurisdiction (Ontario), visibility to opening a mine in another great jurisdiction (Québec), and a tangible path to become a 200,000+ oz/y producer in the near-term. To be clear, this is just another step for us and not the final goal. If gold remains at these levels, Wesdome is going to be a cash-flowing cow, and there will also be possibilities to inorganically create value.
Which investments have been made to upgrade operations at Eagle River in the last 12 months?
We are augmenting the ventilation system by adding a second fan on surface, and doing underground development as Eagle River evolves and gets deeper. These are steeply dipping ore shoots that are very Abitibi-typical. We have also modernized our hoists.
To what extent has drilling been constrained in 2020, and do you plan to add rigs in 2021?
Drilling has been challenged at both operations in 2020. At Eagle, because it is a camp job, we ceased all diamond drilling in late March. Pre-pandemic we had five drills underground and two on surface, and we have been able to get back to three drills underground and one on surface by November. At Kiena, drilling was shut down for 8 weeks in the spring, but we have been fortunate to be able to ramp up and now have seven drills operating underground. We have big plans to drill in 2021, but this will be partly dependent on what happens with the pandemic.
What potential do you see to expand the resource at Kiena through exploration?
The mill at Kiena is a 2,000 mt/d entity, and what we have is a very high-grade, smaller volume deposit at the A Zone, which should produce between 750 to 1,000 mt/d. Kiena has a great land position of 70 km2 with a lot of potential evident through historical results from past mining operations. We are in the midst of compiling deep-seated geophysical data, and see a lot of opportunities for growing the resource.
Would you also consider M&A activity to grow Wesdome’s production profile?
There is a need for size to gain relevance, and US$5 billion market cap companies seem to be more investible for funds, which provides for better liquidity. However, moving towards that there is still a lot of opportunity for torque, as we have seen in the last three years.