Western Goldfields Announces Second Quarter Results



    
    -  All second-quarter milestones achieved to bring Mesquite Mine into
       full production
    -  Term loan facility and related gold forward sales contracts in place
    -  Mine fleet deliveries and construction program on schedule
    -  Pre-strip mining commenced June 2007
    -  Full production expected January 2008
    

    TORONTO, Aug. 1 /CNW/ - Western Goldfields Inc. (TSX:WGI, OTC
BB:WGDFF.OB) today announced financial results for the six-month and
three-month periods ended June 30, 2007. The Company's financial statements
were prepared in accordance with accounting principles generally accepted in
the United States (US GAAP). Dollar amounts are expressed in U.S. dollars
unless otherwise stated.
    "Western Goldfields made significant progress in the first six months of
2007 toward bringing the Mesquite Mine into full production," reported Mr.
Randall Oliphant, Chairman. "We have met all of our second-quarter milestones
and we have brought forward anticipated full production by three months.
Everything is now in place to make Mesquite a successful producing mine and to
establish a platform for the growth of Western Goldfields."
    "With the completion of the term loan facility for $105 million, the
project is fully financed," continued Mr. Oliphant. "To secure the terms of
the loan facility, we have executed flat forward gold sales contracts for
approximately 40% of our expected gold production during the life of the loan
at $801 per ounce."
    "We have taken delivery of and commissioned six haul trucks and two
shovels as part of our mine fleet," said Mr. Raymond Threlkeld, President and
Chief Executive Officer. "Pre-stripping commenced in June, and we are planning
for full production of 160,000-170,000 ounces of gold annually commencing in
January 2008."

    Financing Transactions
    ----------------------

    In the first quarter of 2007, the Company completed a common share equity
financing, which provided net proceeds of $59.2 million. On March 30, 2007,
the Company entered into a term loan facility under which the Company will be
able to borrow up to $105 million, of which $87.3 million is expected to be
drawn for the development of Mesquite. The balance will be available for other
corporate purposes until late 2009. In connection with this facility, the
Company has entered into hedging contracts for the forward sale of 429,000
ounces of gold at a price of $801 per ounce during the period July 2008 to
December 2014. On July 18, 2007, an initial draw of $20.4 million was
received. These transactions complete the financing requirements for the
development of the Mesquite Mine.

    Corporate Reorganization
    ------------------------

    Effective June 29, 2007, the Company's place of incorporation was changed
from Idaho, USA to Ontario, Canada, and its name was changed from Western
Goldfields, Inc. to Western Goldfields Inc. The reorganization allows the
Company to take advantage of financial and other business opportunities that
would not be available under its previous corporate structure.
    As a result of the reorganization, the common shares in Western
Goldfields, Inc. (the predecessor Idaho corporation) automatically converted
into an equal number of common shares in Western Goldfields Inc. (the
successor Ontario corporation) and the economic ownership of shareholders in
the new company remained unchanged.

    Mesquite Mine Development
    -------------------------

    Planned spending on the mining fleet is $73.3 million, of which
approximately $37.6 million had been spent as at June 30, 2007. In addition to
the mining fleet, the Company plans to spend approximately $35.3 million on
other plant and infrastructure upgrades and expansion projects at Mesquite, of
which approximately $6.3 million has been spent as at June 30, 2007.

    Since the first quarter of 2007, Western Goldfields has been vigorously
executing its expansion program at Mesquite. Accomplishments to date include:

    
    -  Leach pad expansion contract was awarded, liner material was ordered,
       and the site preparation is well advanced;
    -  Two O&K RH340 45 cubic yard hydraulic shovels were delivered to the
       site from Germany, commissioning is complete and the units are now in
       service;
    -  Six Terex 205-ton haul trucks have been delivered to the site, have
       been commissioned and are now engaged in pre-stripping operations;
    -  Eight more trucks are on schedule for delivery by year-end;
    -  Despite the global shortage of mining truck tires, a full inventory of
       tires for the initial fleet is now on site and additional tires are
       being delivered to establish inventory;
    -  New truck maintenance building has been ordered and site preparation
       is well advanced;
    -  Various site reclamation activities have been completed, including
       regulatory approval of the Vista heap leach pad closure and the
       removal and salvage of redundant facilities; and
    -  All planned senior mine staff positions have been filled with highly
       qualified individuals.
    

    Financial Results
    -----------------

    Western Goldfields reports a net loss to common shareholders for the six
months ended June 30, 2007 of $6.6 million, or $0.06 per share (basic and
diluted), and for the three months ended June 30, 2007 of $4.0 million, or
$0.04 per share. The net loss to common shareholders for the six months ended
June 30, 2006, was $6.4 million, or $0.11 per share (basic and diluted), and
for the three months ended June 30, 2006, was $2.6 million, or $0.04. Gold
sales for the six months ended June 30, 2007 were 4,225 ounces and for the
three months ended June 30, 2007 were 2,350 ounces. Gold sales for the six
months ended June 30, 2006 were 8,375 ounces and for the three months ended
June 30, 2006 were 2,275 ounces. These operating losses are consistent with
the Company's plans during its startup period.

    Liquidity and Capital Resources
    -------------------------------

    At June 30, 2007, the Company's available cash balance was $18.8 million,
restricted cash was $7.5 million and working capital was $11.5 million. This
represents a significant improvement in the Company's financial position since
December 31, 2006 when it reported cash of $5.5 million and working capital
$4.6 million. The improved liquidity is due primarily to the equity offering
of common shares in the first quarter of 2007 which raised net proceeds of
$59.2 million. Liquidity was also improved through the conversion of warrants
and the exercise of stock options for proceeds of $2.3 million. In addition,
the Company has $105 million of available capacity under the term loan
facility.

    Western Goldfields Inc.
    -----------------------

    Western Goldfields is a gold producer focused on completing the expansion
of its Mesquite Mine, located in Imperial County, California, and returning
the mine to full production. With a 2.8 million ounce gold reserve, the
Company is the only multi-million ounce US gold reserve not controlled by a
major gold company. The Company is fully permitted and fully funded, and
estimates production of 160,000-170,000 ounces of gold annually. In June 2007,
Western Goldfields announced that its production schedule has been moved ahead
by one full quarter, which will bring the company into full production by
January 2008. Western Goldfields Inc. is listed on the Toronto Stock Exchange
and trades under the symbol WGI, and is quoted on the OTCBB under the symbol
WGDFF.OB. For further details regarding the mineral reserves and mineral
resources at Mesquite, please visit www.westerngoldfields.com.

    Further Information
    -------------------

    For further information about the financial results of the Company, see
the unaudited interim financial statements of the Company for the six months
ended June 30, 2007 and the related management's discussion and analysis,
which will be filed on Form 10-QSB with the U.S. Securities and Exchange
Commission and the applicable Canadian securities regulatory authorities and
will be available under the profile of the Company on EDGAR and SEDAR.

    Forward-Looking Information
    ---------------------------

    Certain statements contained in this news release and subsequent oral
statements made by and on behalf of the Company may contain forward-looking
information within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and similar Canadian legislation. Such
forward-looking statements are identified by words such as "intends",
"anticipates", "believes", "expects", "plans" and "hopes" and include, without
limitation, statements regarding the Company's plan of business operations,
timing and costs to recommence commercial production, economic viability of
the Mesquite Mine, production and cost estimates, financing options, including
entering into a debt financing arrangement, and the consequences thereof,
potential contractual arrangements, receipt of working capital, anticipated
revenues, exercise of outstanding warrants, and capital and operating
expenditures. There can be no assurance that such statements will prove to be
accurate; actual results and future events could differ materially from such
statements. Factors that could cause actual results to differ materially
include, among others, those set forth in the Company's Annual Report on Form
10-KSB for the year ended December 31, 2006 filed with the U.S. Securities and
Exchange Commission, under the caption, "Risk Factors". Most of these factors
are outside the control of the Company. Investors are cautioned not to put
undue reliance on forward-looking statements. Except as otherwise required by
applicable securities statutes or regulation, the Company disclaims any intent
or obligation to update publicly these forward-looking statements, whether as
a result of new information, future events or otherwise.



    
                           WESTERN GOLDFIELDS INC.
                         CONSOLIDATED BALANCE SHEETS


                                                    June 30,    December 31,
                                                      2007          2006
                                                  ------------- -------------
                                                   (Unaudited)    (Audited)
    ASSETS
      CURRENT ASSETS
        Cash                                      $ 18,750,186  $  5,502,535
        Restricted Cash                              7,500,000             -
        Receivables                                    147,352       223,507
        Inventories                                    551,554       511,663
        Prepaid expenses                               763,127       841,636
                                                  ------------- -------------
          TOTAL CURRENT ASSETS                      27,712,219     7,079,341
                                                  ------------- -------------

      Property, plant, and equipment, net of
       accumulated amortization                     41,862,081     4,328,512
      Construction in progress                       7,963,092     2,880,775
      Gain on mark-to-market of gold hedging
       contracts                                       758,877             -
      Investments - reclamation and remediation      8,448,953     6,337,006
      Long-term deposits                               338,371       329,146
      Long-term prepaid expenses                     1,634,993     1,009,555
      Deferred debt issuance/stock offering costs    3,318,806       250,000
                                                  ------------- -------------
          TOTAL OTHER ASSETS                        64,325,173    15,134,994
                                                  ------------- -------------

    TOTAL ASSETS                                  $ 92,037,392  $ 22,214,335
                                                  ------------- -------------
                                                  ------------- -------------

    LIABILITIES & STOCKHOLDERS' EQUITY
      CURRENT LIABILITIES
        Accounts payable                          $ 12,554,211  $  1,663,080
        Accounts payable to related party               25,387        31,165
        Accrued expenses                             3,364,577       835,740
        Accrued agency and commitment fees             241,250             -
                                                  ------------- -------------
          TOTAL CURRENT LIABILITIES                 16,185,425     2,529,985
                                                  ------------- -------------

      LONG-TERM LIABILITIES
        Reclamation and remediation liabilities      4,825,645     4,805,473
                                                  ------------- -------------

          TOTAL LIABILITIES                         21,011,070     7,335,458
                                                  ------------- -------------


      COMMITMENTS AND CONTINGENCIES

      STOCKHOLDERS' EQUITY
        Common stock, of no par value, unlimited
         shares authorized; 117,221,002 and
         78,452,876 shares issued and outstanding,
         respectively                               95,664,291    32,884,798
        Share subscription receivable                 (150,000)            -
        Stock options and warrants                   7,841,063     7,674,270
        Accumulated deficit                        (32,318,943)  (25,678,233)
        Accumulated other comprehensive income         (10,089)       (1,958)
                                                  ------------- -------------
          TOTAL STOCKHOLDERS' EQUITY                71,026,322    14,878,877
                                                  ------------- -------------

    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $ 92,037,392  $ 22,214,335
                                                  ------------- -------------
                                                  ------------- -------------



                           WESTERN GOLDFIELDS INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                       AND COMPREHENSIVE INCOME (LOSS)
                                 (Unaudited)

                      Three Months Ended June 30,  Six Months Ended June 30,
                     ---------------------------- ---------------------------
                           2007          2006           2007         2006
                     -------------- ------------- ------------- -------------
    REVENUES
      Revenues from
       gold sales     $  1,546,073  $  2,104,315  $  2,778,877  $  4,878,943
                     -------------- ------------- ------------- -------------

    COST OF GOODS SOLD
      Mine operating
       costs             2,662,308     1,892,336     4,569,386     3,871,503
      Mine site
       administration      681,925       348,813     1,112,824       676,595
      Selling,
       transportation,
       and refining          6,252         7,534        11,627        16,876
      Amortization and
       accretion           377,210       335,030       752,318       647,244
      Royalties             59,423        80,383       104,360       183,243
      Inventory
       adjustment          115,310         9,242       (19,351)      312,210
                     -------------- ------------- ------------- -------------
                         3,902,428     2,673,338     6,531,164     5,707,671
                     -------------- ------------- ------------- -------------

    GROSS PROFIT
     (LOSS)             (2,356,355)     (569,023)   (3,752,287)     (828,728)
                     -------------- ------------- ------------- -------------

    EXPENSES
      General and
       administrative    1,137,758     1,105,652     2,222,490     2,175,604
      Stock based
       compensation        820,388       730,231     1,288,554     1,770,156
      Exploration          748,594       272,260     1,031,926       711,217
                     -------------- ------------- ------------- -------------
                         2,706,740     2,108,143     4,542,970     4,656,977
                     -------------- ------------- ------------- -------------

    OPERATING LOSS      (5,063,095)   (2,677,166)   (8,295,257)   (5,485,705)
                     -------------- ------------- ------------- -------------

    OTHER INCOME
     (EXPENSE)

      Interest income      524,750        86,367     1,042,253       178,614
      Interest expense        (839)            -          (839)      (20,434)
      Agency and
       commitment fees    (241,250)            -      (241,250)            -
      Amortization of
       deferred debt
       issuance costs     (109,544)            -      (109,544)            -
      Gain on
       extinguishment
       of debt                   -             -             -       142,949
      Gain on
       mark-to-market
       of gold hedging
       contracts           758,877             -       758,877             -
      Gain on foreign
       exchange            124,200             -       205,050             -
      Loss on sale of
       assets                    -       (18,837)            -       (18,837)
      Expenses of
       Romarco merger
       termination               -             -             -    (1,225,000)
                     -------------- ------------- ------------- -------------
                         1,056,194        67,530     1,654,547      (942,708)
                     -------------- ------------- ------------- -------------

    LOSS BEFORE
     INCOME TAXES       (4,006,901)   (2,609,636)   (6,640,710)   (6,428,413)

    INCOME TAXES                 -             -             -             -
                     -------------- ------------- ------------- -------------

    NET LOSS            (4,006,901)   (2,609,636)   (6,640,710)   (6,428,413)

    PREFERRED STOCK
     DIVIDENDS                   -        (4,479)            -       (16,979)
                     -------------- ------------- ------------- -------------

    NET LOSS TO
     COMMON
     STOCKHOLDERS       (4,006,901)   (2,614,115)   (6,640,710)   (6,445,392)

    OTHER
     COMPREHENSIVE
     INCOME
      Foreign currency
      translation
      adjustment            (2,874)       (4,322)       (8,131)       (3,813)
                     -------------- ------------- ------------- -------------

    NET COMPREHENSIVE
     LOSS             $ (4,009,775) $ (2,613,958) $ (6,648,841) $ (6,432,226)
                     -------------- ------------- ------------- -------------
                     -------------- ------------- ------------- -------------

    BASIC AND DILUTED
     NET LOSS PER
     SHARE            $      (0.04) $      (0.04) $      (0.06) $      (0.11)
                     -------------- ------------- ------------- -------------
                     -------------- ------------- ------------- -------------

    WEIGHTED AVERAGE
     NUMBER OF
     COMMON SHARES
     OUTSTANDING       113,641,025    62,389,376   108,240,372    56,025,181
                     -------------- ------------- ------------- -------------
                     -------------- ------------- ------------- -------------



                           WESTERN GOLDFIELDS INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)

                      Three Months Ended June 30,  Six Months Ended June 30,
                     ---------------------------- ---------------------------
                           2007          2006           2007         2006
                     -------------- ------------- ------------- -------------
    CASH FLOWS FROM
     OPERATING
     ACTIVITIES
      Net loss        $ (4,006,901) $ (2,609,636) $ (6,640,710) $ (6,428,413)
      Adjustments to
       reconcile net
       loss to net
       cash provided
       (used) by
       operating
       activities:
        Amortization
         and
         depreciation      297,671       274,000       592,407       529,509
        Amortization of
         deferred debt
         issuance costs    109,544             -       109,544             -
        Accretion
         expense            84,294        58,868       168,588       117,735
        Loss on sale of
         assets and
         investments             -        18,837             -        18,837
        Interest on
         investments -
         reclamation and
         remediation       (86,644)      (67,749)     (170,269)     (151,696)
        Common stock
         issued for
         exploration
         assets and
         services                -             -             -       136,500
        Stock based
         compensation      820,388       730,232     1,288,554     2,003,157
        Gain on mark-to-
         market of gold
         hedging
         contracts        (758,877)            -      (758,877)            -
        Changes in assets
         and liabilities:
        Decrease (increase)
         in:
          Restricted
           cash         (7,500,000)            -    (7,500,000)            -
          Accounts
           receivable      174,147        (7,459)       76,155       (11,010)
          Inventories       31,405       (44,146)      (39,891)      229,213
          Prepaid
           expenses       (369,126)       50,286      (546,929)      103,719
          Long term
           deposits         (5,938)       (2,385)       (9,224)       (4,872)
        Increase (decrease)
         in:
          Accounts
           payable        (158,672)     (354,565)     (948,783)     (171,865)
          Accounts payable
           - related
           parties           5,138       118,201        (5,778)      118,201
          Accrued
           expenses       (794,623)      215,461       200,559       322,255
          Accrued expenses
           - related
           parties               -             -             -       (45,835)
          Accrued interest
           expense               -             -             -       (48,695)
          Accrued agency
           and commitment
           fees            241,250             -       241,250             -

                     -------------- ------------- ------------- -------------
    Net cash provided
     (used) by
     operating
     activities        (11,916,944)   (1,620,056)  (13,943,404)   (3,283,260)
                     -------------- ------------- ------------- -------------

    CASH FLOWS FROM
     INVESTING
     ACTIVITIES
      Purchase of
       property &
       equipment,
       including
       construction
       in progress     (25,661,610)     (146,474)  (31,376,510)     (387,779)
      Increase in
       reclamation and
       remediation
       investment       (2,090,094)            -    (2,090,094)            -
                     -------------- ------------- ------------- -------------
    Net cash provided
     (used) by
     investing
     activities        (27,751,704)     (146,474)  (33,466,604)     (387,779)
                     -------------- ------------- ------------- -------------

    CASH FLOWS FROM
     FINANCING
     ACTIVITIES
      Principal
       payments on
       loan                      -             -             -    (2,205,186)
      Deferred debt
       issuance costs     (520,516)            -      (850,073)            -
      Common stock
       issued for cash       1,005             -    59,191,196     4,012,000
      Warrants issued
       for cash                  -             -             -     1,988,000
      Exercise of options
       to purchase
       common stock        355,558     3,650,250       500,983     3,650,250
      Exercise of
       warrants to
       purchase
       common stock      1,436,172             -     1,815,552             -
      Preferred stock
       dividends                 -       (51,354)            -       (51,354)
                     -------------- ------------- ------------- -------------
    Net cash provided
     (used) by
     financing
     activities          1,272,220     3,598,896    60,657,658     7,393,710
                     -------------- ------------- ------------- -------------

    Change in cash     (38,396,428)    1,832,366    13,247,651     3,722,671

    Cash, beginning
     of period          57,146,614     1,942,692     5,502,535        52,387
                     -------------- ------------- ------------- -------------

    Cash, end of
     period          $  18,750,186  $  3,775,058  $ 18,750,186  $  3,775,058
                     -------------- ------------- ------------- -------------
                     -------------- ------------- ------------- -------------

    SUPPLEMENTAL CASH
     FLOW DISCLOSURES:
      Interest paid  $         839  $     69,430  $        839  $     69,430
                     -------------- ------------- ------------- -------------
                     -------------- ------------- ------------- -------------

    NON-CASH FINANCING
     AND INVESTING
     ACTIVITIES:
      Stock, options
       and warrants
       issued for
       services       $    820,388  $    730,232  $  1,288,554  $  2,003,157
      Exploration fees
       and assets paid
       by issuance of
       stock          $          -  $          -  $          -  $    136,500
      Equipment purchases
       included in
       accounts
       payable        $ 11,831,783  $          -  $ 11,831,783  $          -
      Deferred debt
       issuance costs
       included in
       accrued
       expenses       $  2,016,277  $          -  $  2,328,277  $          -
    




For further information:

For further information: please visit www.westerngoldfields.com, or
contact Ray Threlkeld, President and Chief Executive Officer, (416) 324-6005,
rthrelkeld@westerngoldfields.com; Brian Penny, Chief Financial Officer, (416)
324-6002, bpenny@westerngoldfields.com; Julie Taylor Pantziris, Director,
Regulatory Affairs and Investor Relations, (416) 324-6015,
jtaylor@westerngoldfields.com

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WESTERN GOLDFIELDS INC.

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