Wesdome earns $2.6m in first half of 2010

TORONTO, Aug. 16 /CNW/ - Wesdome Gold Mines Ltd (WDO: TSX) ("Wesdome" or the "Company") is pleased to report its unaudited financial and operating results from its Canadian operations for the second quarter ended June 30, 2010. This information should be read in conjunction with the Company's interim unaudited financial statements and Management's Discussion and Analysis for the second quarter ended June 30, 2010 which will be available for viewing on the Company's website at www.wesdome.com and on SEDAR (www.sedar.com). All figures are in Canadian dollars unless otherwise specified.

The Company owns the Eagle River gold mining operation in Wawa, Ontario and the Kiena mining complex in Val d'Or, Quebec. The Eagle River mine commenced commercial production on January 1, 1996, and the Kiena mine on August 1, 2006.

The second quarter 2010 highlights are as follows:

    
    -   Production of 15,872 ounces
    -   Revenues of $22.4 million on sales of 18,000 ounces at $1,244 per
        ounce
    -   Cash flow from operations of $4.6 million or $0.05 per share
    -   Bullion inventory of 11,263 ounces or $14.9 million marked to market
        as at June 30, 2010
    

Donovan Pollitt, President & CEO comments, "The second quarter demonstrated modest earnings and respectable cash flow from operations as we continue to treat lower grade material from both mines in view of higher gold prices. We expect to meet our production forecasts due to improving grades in the fourth quarter of 2010. Recent exploration press releases demonstrate the potential of both producing assets as well as our Mishi mine going forward."

OVERALL PERFORMANCE

As at June 30, 2010, the Company had working capital of $34.0 million. During the first half of the year, cash flow from operations totalled $10.0 million; $8.9 million of capital investments in exploration, development and mining equipment were made and $2.0 million in dividends were paid. Net income for the six month period ended June 30, 2010, was $2.6 million with most of this earned in the first quarter.

Both mines are producing from low grade areas in their mining sequences currently. We are aggressively developing new zones, upgrading our mining fleet, advancing growth projects and drilling.

RESULTS OF OPERATIONS

    
                                    Three Months Ended      Six Months Ended
                                               June 30               June 30
                                       2010       2009       2010       2009
                                  -------------------------------------------
    Eagle River Mine

      Tonnes milled                  39,271     32,908     73,387     65,195
      Recovered grade (g/t)             6.5       13.4        7.7       14.8
      Production (oz)                 8,189     14,183     18,088     31,068
      Sales (oz)                     10,000     19,000     22,000     30,300
      Bullion inventory (oz)          8,169      8,395      8,169      8,395

      Bullion revenue ($thousands)   12,445     20,459     26,302     33,299
      Operating costs ($thousands)    9,450      9,137     17,021     14,900
    -------------------------------------------------------------------------
      Mine operating profit
       ($thousands)*                2,995     11,322      9,281     18,399
      Gold price realized ($Cdn/oz)   1,244      1,075      1,195      1,098

    Kiena Mine Complex

      Tonnes milled                  68,072     67,216    133,732    125,234
      Recovered grade (g/t)             3.5        3.1        3.3        4.3
      Production (oz)                 7,683      6,776     14,143     17,325
      Sales (oz)                      8,000      9,000     13,000     18,400
      Bullion inventory (oz)          3,094      1,877      3,094      1,877

      Bullion revenue ($thousands)    9,971      9,744     15,691     20,455
      Operating costs ($thousands)    7,463      8,503     12,688     15,006
    -------------------------------------------------------------------------
      Mine operating profit
       ($thousands)*                2,508      1,241      3,003      5,449
      Gold price realized ($Cdn/oz)   1,244      1,079      1,204      1,110

    Total

      Production (oz)                15,872     20,959     32,231     48,393
      Sales (oz)                     18,000     28,000     35,000     48,700
      Bullion inventory (oz)         11,263     10,272     11,263     10,272

      Bullion revenue ($thousands)   22,416     30,203     41,993     53,754
      Operating costs ($thousands)   16,913     17,640     29,709     29,906
    -------------------------------------------------------------------------
      Mine operating profit
       ($thousands)*                5,503     12,563     12,284     23,848
      Gold price realized ($Cdn/oz)   1,244      1,076      1,198      1,102

    * The Company has included in this report certain non-GAAP performance
        measures, including mine operating profit and operating costs to
        applicable sales. These measures are not defined under GAAP and
        therefore should not be considered in isolation or as an alternative
        to or more meaningful than, net income(loss) or cash flow from
        operating activities as determined in accordance with GAAP as an
        indicator of our financial performance or liquidity. The Company
        believes that, in addition to conventional measures prepared in
        accordance with GAAP, certain investors use this information to
        evaluate the Company's performance and ability to generate cash flow.
    

During the second quarter, combined operations produced 15,872 ounces of gold and 18,000 ounces were sold at an average price of $1,244 per ounce. Bullion inventory at June 30, 2010, stood at 11,263 ounces which is carried at cost. The costs and revenues for this inventory will be recognized in the financial statements in the fiscal period in which it is sold.

In the second quarter, bullion revenue exceeded operating costs resulting in a mine operating profit, or gross margin, of $5.5 million. In addition to these direct operating costs, other costs, including royalty payments, corporate and general costs and interest costs, totalled $1.2 million. Both mines contributed equally to the mine operating profit.

At the Eagle River mine, mining occurred in lower grade areas. We are currently developing the high grade 811 Zone and expect production grades to improve in the second half. The mine produced 8,189 ounces of gold from 39,271 tonnes milled at an average recovered grade of 6.5 gAu/tonne.

At the Kiena mining complex we worked our way through a very low grade sequence and are happy to see grades finally improving. For the second quarter, Kiena produced 7,683 ounces of gold from 68,072 tonnes milled at an average recovered grade of 3.5 gAu/tonne. In May, Kiena attained a safety milestone of 750,000 hours worked without a lost time accident.

The Company is undertaking an aggressive exploration, development and evaluation program this year with the goal of increasing reserves and growing production. At the Kiena mining complex drifting towards the new Dubuisson discovery on the 330 metre level advanced on schedule. Infill drilling on the S50 Zone enhanced the potential of a previously outlined resource block. Evidence of better grades here demonstrates this area shows potential to add at least one year of reserves. The highlight of the drilling was a 20.1 metre true width intersection grading 9.51 gAu/tonne (see press release dated June 22, 2010 available at www.wesdome.com).

At Eagle River, definition drilling continues to exhibit robust grades and continuity in the 811 Zone between depths of 500 and 800 metres (see press release dated July 6, 2010).

Resource modelling at the Mishi Project continues to demonstrate potential that exceeds expectations. A new resource estimate tallied Measured and Indicated Resources totalling 5.7 million tonnes at 2.4 gAu/tonne, or 438,000 contained ounces (see press release dated July 12, 2010). Ninety percent of this total falls within an open pit scenario above a depth of 110 metres. A 6,000 metre diamond drilling program is underway tracing the mineralization eastward where it remains open. A pre-feasibility study has commenced. This project offers excellent potential for expansion in a step-wise manner with little capital at risk.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2010 the Company had working capital of $34.0 million, compared to $35.2 million at December 31, 2009. During the second quarter, 2010, capital expenditures totalled $4.4 million compared to $4.8, including $0.8 million for the acquisition of exploration properties in the second quarter, 2009.

The Company's inventory includes 11,263 ounces of gold bullion, a decrease from 13,391 ounces at the end of the first quarter, a liquid asset with a market value of $14.9 million on June 30, 2010.

The Company believes that it has sufficient capital resources to cover its obligations, capital and operating costs going forward. On April 7, 2010, the Company declared a dividend of $0.02 per share payable April 30, 2010.

Production planned in 2010 should generate operating cash flow, even at gold prices well below those currently being realized.

OUTLOOK

We continue to forecast 70,000 ounces production in 2010. We are investing in our operations for the long term and feel judicious capital investments in projects surrounding our existing infrastructure offer the lowest growth risk potential at this time.

Mishi shows considerable promise - more than we expected with ample room to grow. We are also advancing underground towards the Dubuisson Zone, a new discovery in a new area first identified in the fall of 2008.

The strong gold price affords us the opportunity to aggressively develop our higher grade zones while mining at previously marginal grades. This is where we are in our mining-development sequence. We expect grades to improve in the second half of the year and to be stronger next year.

ABOUT WESDOME

Wesdome is an established Canadian gold producer with wholly-owned mining and milling complexes located in Wawa, Ontario and Val d'Or, Québec. Wesdome has been producing gold continually for 20 years on an unhedged basis and to date has produced in excess of 1.0 million ounces. The Company has 100.8 million shares issued and outstanding and trades on the Toronto Stock Exchange under the symbol "WDO".

This news release contains "forward-looking information" which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company and its projects. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances, management's estimates or opinions should change, except as required by securities legislation. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

    
    -------------------------------------------------------------------------

    Wesdome Gold Mines Ltd.
    Consolidated Balance Sheets
    (Unaudited)
                                                        June 30  December 31
                                                           2010         2009
    -------------------------------------------------------------------------
    (in thousands)

    Assets
    Current
      Cash and cash equivalents                       $  20,711    $  23,702
      Receivables                                         5,093        4,022
      Inventory                                          16,860       14,624
      Marketable securities                                  53          211
      Future income taxes                                 1,199        1,199
    -------------------------------------------------------------------------
                                                         43,916       43,758

    Restricted funds                                      2,500        2,588
    Future income taxes                                   1,645        2,245
    Capital assets                                            -            9
    Mining properties                                    68,789       64,637
    Exploration properties                               30,466       30,018
    -------------------------------------------------------------------------

                                                      $ 147,316    $ 143,255
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Current
      Payables and accruals                           $   8,293    $   7,322
      Current portion of obligations under
       capital leases                                     1,552        1,240
    -------------------------------------------------------------------------
                                                          9,845        8,562

    Income taxes payable                                     82           82
    Obligations under capital leases                      2,271        1,108
    Convertible 7% debentures                             9,767        9,483
    Asset retirement obligation                           1,342        1,324
    -------------------------------------------------------------------------
                                                         23,307       20,559
    -------------------------------------------------------------------------

    Minority interest in Moss Lake Gold Mines Ltd.          831          857
    -------------------------------------------------------------------------

    Shareholders' Equity
    Capital stock                                       115,352      114,567
    Contributed surplus                                   3,705        3,770
    Accumulated other comprehensive loss                   (194)        (222)
    Equity component of convertible debentures            1,970        1,970
    Retained earnings                                     2,345        1,754
    -------------------------------------------------------------------------
                                                        123,178      121,839
    -------------------------------------------------------------------------

                                                      $ 147,316    $ 143,255
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    -------------------------------------------------------------------------

    Wesdome Gold Mines Ltd.
    Interim Consolidated Statements of Income and Comprehensive Income
    (Unaudited)

                                  Three Months Ended        Six Months Ended
                                             June 30                 June 30
                                    2010        2009        2010        2009
    -------------------------------------------------------------------------
    (in thousands, except per
     share amounts)

    Revenue
      Gold and silver bullion  $  22,416   $  30,167   $  41,993   $  53,754
      Interest and other              (8)         42         128          75
    -------------------------------------------------------------------------
                                  22,408      30,209      42,121      53,829
    -------------------------------------------------------------------------

    Costs and expenses
      Operating costs             16,913      17,640      29,709      29,906
      Amortization of mining
       properties                  3,913       3,494       6,552       5,861
      Production royalties           202         228         425         568
      Corporate and general          578         518       1,276         948
      Stock compensation expense      58         137         165         192
      Interest on long-term debt     418         399         789         791
      Other interest                   -           -           -           7
      Amortization of capital
       assets                          8           -           9           1
      Accretion of asset
       retirement obligation           9          20          18          41
    -------------------------------------------------------------------------
                                  22,099      22,436      38,943      38,315
    -------------------------------------------------------------------------

    Net income before the
     following                       309       7,773       3,178      15,514
    Gain on property held
     for sale                          -           -           -         122
    -------------------------------------------------------------------------
    Net income before income
     tax and minority interest       309       7,773       3,178      15,636

    Income tax
      Future                           -           -         600         273
    -------------------------------------------------------------------------
    Net income before minority
     interest                        309       7,773       2,578      15,363

    Minority interest                 11          44          26          30
    -------------------------------------------------------------------------

    Net income                 $     320   $   7,817   $   2,604   $  15,393
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other comprehensive loss:
      Realized loss on the sale
       of marketable securities      104           -         104           -
      Change in fair value of
       marketable securities         (36)          -         (76)          -
    -------------------------------------------------------------------------

    Comprehensive income       $     388   $       -   $   2,632   $       -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income per common share
      Basic and diluted        $    0.00   $    0.08   $    0.02   $    0.16



    -------------------------------------------------------------------------

    Wesdome Gold Mines Ltd.
    Interim Consolidated Statements of Cash Flows
    (Unaudited)

                                  Three Months Ended        Six Months Ended
                                             June 30                 June 30
                                    2010        2009        2010        2009
    -------------------------------------------------------------------------
    (in thousands)

    Operating activities
      Net income               $     320   $   7,817   $   2,604   $  15,393
      Amortization of mining
       properties                  3,913       3,494       6,552       5,861
      Accretion of discount on
       convertible debentures        145         139         284         265
      Minority interest              (11)        (44)        (26)        (30)
      Stock compensation expense      58         137         165         192
      Amortization of capital
       assets                          8           1           9           1
      Future income taxes              -           -         600         273
      Gain on sale of equipment      (28)         (7)       (130)         (7)
      Gain on sale of marketable
       securities                    153           -         153           -
      Gain on property held
       for sale                        -           -           -        (122)
      Gain on redemption of
       convertible debentures          -           -           -         (24)
      Accretion of reclamation
       asset obligation                9          19          18          41
    -------------------------------------------------------------------------
                                   4,567      11,556      10,229      21,843
      Net changes in non-cash
       working capital              (201)      1,458      (2,328)     (7,621)
    -------------------------------------------------------------------------
                                   4,366      13,014       7,901      14,222
    -------------------------------------------------------------------------

    Financing activities
      Exercise of options            255         139         582         188
      Funds paid to repurchase
       common shares under NCIB        -           -           -         (14)
      Funds paid to repurchase
       debentures                      -          (7)          -        (453)
      Share issuance costs             -           -         (27)         (5)
      Dividends paid              (2,013)     (1,995)     (2,013)     (1,995)
      Repayment of obligations
       under capital leases         (455)       (408)       (763)       (804)
    -------------------------------------------------------------------------
                                  (2,213)     (2,271)     (2,221)     (3,083)
    -------------------------------------------------------------------------

    Investing activities
      Additions to mining and
       exploration properties     (4,974)     (4,786)     (8,940)     (7,064)
      Proceeds on sale of
       equipment                      20          20         156          20
      Proceeds on sale of
       marketable securities          33           -          33           -
      Proceeds on property
       held for sale                   -           -           -         400
      Funds held against standby
       letters of credit              40         239          88        (267)
    -------------------------------------------------------------------------
                                  (4,881)     (4,527)     (8,663)     (6,911)
      Net changes in non-cash
       working capital               463        (158)         (8)       (249)
    -------------------------------------------------------------------------
                                  (4,418)     (4,685)     (8,671)     (7,160)
    -------------------------------------------------------------------------
    Increase (decrease) in cash
     and cash equivalents         (2,265)      6,058      (2,991)      3,979

    Cash and cash equivalents,
     beginning of period          22,976       5,950      23,702       8,029
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period             $  20,711   $  12,008   $  20,711   $  12,008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

For further information: For further information: Donovan Pollitt, P.Eng., President and CEO, or Shelly John, Manager, Investor Relations, 8 King St. East, Suite 1305, Toronto, ON, M5C 1B5, Toll Free: 1-866-4-WDO-TSX, Phone: 416-360-3743, Fax: 416-360-7620, Email: invest@wesdome.com, Website: www.wesdome.com

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