Good morning. Welcome to Wesdome Gold Mines Q4 and Fiscal Year 2023 Financial Results Conference Call. I will turn the call over to Lindsay Dunlop, VP Investor Relations, to begin today.
Great, thanks, operator, and good morning everyone. Welcome to Wesdome Gold Mines Q4 and FY 2023 Results Conference Call. Before we begin today, we'd like to take this opportunity to remind everyone that during this call we'll discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could cause outcomes to differ materially due to a number of risks and uncertainties, including those mentioned in the detailed cautionary note contained in yesterday's press release and in the company's MD&A dated March 12, 2024. Yesterday's release should be read in conjunction with the MD&A and financial statements, all of which can be found on SEDAR+ and on our website. Following the prepared remarks, we will open the call for questions. All figures discussed on this call are in Canadian dollars unless otherwise noted.
Now over to Anthea Bath, President and CEO, to begin today.
Thanks Lindsay, and good morning everyone. Before I begin, I would like to say a big thank you to Lindsay, who will be leaving at the end of March. Lindsay has been a part of the fabric of Wesdome for 10 years now. We're certainly going to miss you and wish you well. Speaking on the call with me today will be Raj Gill, SVP Corporate Development and IR, Fred Langevin, our COO, and Mike Michaud, SVP Exploration Resources. Also in the room we have Fernando Ragone, our recently appointed CFO, who took the reins from Jonathan Singh earlier this week. We welcome Fernando to the executive leadership team and thank Jonathan for agreeing to stay on in a leadership position in the business. Before I pass things over to Fred, I'd like to begin with a brief overview and outline why we're excited about what lies ahead for Wesdome.
Overall, despite significant changes in 2023, Wesdome delivered on its three strategic imperatives. We achieved the midpoint of guidance on production in AISC. We advanced development to the 129 level on Kiena ahead of schedule, and we ended the year with positive net cash and a strengthened balance sheet. Last month, we also updated our year-end mineral reserve and resources, reporting a 12% net increase in corporate reserves after depletion, while keeping overall portfolio grade essentially unchanged. These achievements are a testament to the capacity and the commitment of our operating and corporate teams, and I want to say a special thanks to all those who are listening today. With almost a third of annual production of 123,000 ounces coming in the fourth quarter, we are setting a new pace and are well-positioned to deliver higher production and lower costs in 2024 and 2025.
As we previously announced in January, Kiena is poised to deliver a step-change increase in production on the back of higher-grade Kiena Deep Ore being processed in Q2 this year. The site mining crews are optimizing their approach, and so far development remains on track. At Eagle River, we are seeing more consistent performance on development rates and grade reconciliation. Our focus at Eagle River near term will be on re-optimizing the asset with a view to value and improved margin, which gives us optionality on cut-off grade and subsequently the potential to increase reserve conversion from a resource space. In terms of exploration, it remains the cornerstone of our strategy, and we see a number of brownfield exploration and development opportunities that we are confident will drive resource growth and reserve conversion and eventually utilize the spare mill capacity at both our operations.
More on that from Mike in a moment. Financially, we're in a far better position exiting 2023 than we have been before. Our liquidity ending the year was CAD 153 million, and our net cash, that is, our cash minus our borrowings, has climbed about CAD 24 million, with robust free cash flow expected this year and next. We're on track to close out the remaining CAD 39 million draws on our revolver by the third quarter. And with that, I'll pass over to Fred to walk through the operational details.
Thank you, Anthea, and good morning everyone. Consistent with our internal projections, we had a very strong finish this year on production at the two sites, and all key initiatives are setting up a successful 2024 advanced as per plan during the quarter. Starting with Eagle River, production in Q4 came in at 24,072 ounces. A higher production was mainly driven by higher grades as mill throughput remained consistent with previous quarters. The 300 Zone was the main contributor to gold production in Q4, and this zone continues to provide excellent grades that reconcile positively. For the full year 2024, Eagle has produced a total of 87,799 ounces of gold, firmly above midpoint of guidance range, with very stable production quarter-over-quarter. Development performances in Q4 once again exceeded budgeted targets, which positions us very well for 2024 production.
On the back of this strong execution at Eagle, we continue to benchmark the operation both on productivities and on cost to try and improve our cost structure to offset the cost pressures of increasing debt. We expect to start seeing benefits of this program in 2024. At Kiena, production in Q4 came in at 12,144 ounces. Our rate continued to track higher than upper end of guidance during the quarter due to a combination of continued strong grade performance from the A2 Zone , where we were able to continue successfully cycling stope located entirely in schist, and the contribution of high-grade pre-production ore development into the A2 Zone on the way to level 129. For the full year 2023, Kiena has produced a total of 35,536 ounces, slightly above midpoint of guidance range.
The ramp to Kiena Deep remained a key focus for the team in Q4, culminating in us reaching 129 level access in October. Since then, we've been focusing on developing the level infrastructure required to initiate mining activities, such as ventilation raises, escapeways, and power distribution on levels 127 and 129, with development into the ore in the A2 Zone now ongoing. With focus in Q1 remaining firmly on infrastructure development, early gold production levels are expected to be consistent with the 2023 run rate average. As we complete infrastructure and cell development, stope production is expected to ramp up to reach steady state by the end of Q2, with grades in line with 2P levels.
Finally, after receiving the required authorizations to proceed with the excavation of the Presqu'île portal in Q4, we've made headway installing support infrastructure at surface to begin excavation of the portal, which was initiated in early January. As of last week, blasting of the portal was completed, and the ground support phase of the portal is ongoing. As soon as this phase is completed, development of the underground workings will commence. The 1.7-kilometer exploration ramp is being tracked closely internally, as it will be key in establishing ventilation, secondary transportation, and muckage access for the existing operation, but also allowing us to leverage the 33-level infrastructure to supplement Kiena Deep production, starting with the Presqu'île zone.
Overall, as expected and conveyed in our last update, strong execution at the two sites in Q4 led to record full-year cash costs and all-in sustaining costs falling well within guidance range provided in January 2023. Over to you, Jonathan.
Thank you, Fred. I will start with an overview of the fourth quarter and full-year results. Previously reported Q4 production of 36,216 ounces was largely in line with expectations and brought full-year production to 123,336 ounces. Sales in the fourth quarter were 37,620 ounces, slightly ahead of production due to the timing of final Doré sales. All-in sustaining costs of CAD 2,082 or $1,529 were down slightly from the same period in 2022, primarily due to higher sales volumes. As Anthea mentioned, we expect the trend of higher output driving lower costs to continue for 2024, with guidance set at 160,000-180,000 ounces at a US equivalent of $1,325-$1,475 an ounce. Our net income and adjusted net income for the fourth quarter for 2023 of CAD 2.4 million or CAD 0.02 per share.
We do note that the quarter included a one-time non-cash deferred tax impact of CAD 8.6 million or CAD 0.06 per share, but was still CAD 5.9 million higher than the corresponding period in 2022. Cash flow from operations for the fourth quarter were CAD 37.2 million or CAD 0.25 per share and CAD 101.4 million or CAD 0.69 per share for the full year. As a result of cash flow during the quarter and the year, total liquidity stands at CAD 153 million, up from CAD 143 million at the end of third quarter and from CAD 129 million at the end of 2022.
Balance sheet strength remains a priority for us, and we expect higher grades at Kiena to drive costs lower and support strong cash flows, especially in Q2 and at current gold prices, allowing us to pay down the remaining balance of a revolving credit facility by the third quarter, as well as fund a range of opportunities to reinvest in the organization. Mike will now take us through the exploration review.
Thanks, John. At December 31, 2023, Wesdome's combined proven and probable mineral reserves totaled 1.1 million ounces from 2.8 million tons, grading 12.7 grams per ton gold. Combined measured and indicated resources exclusive of reserves were 327,000 ounces, and combined inferred mineral resources were 808,000 ounces. Reserves continue to be based on $1,400 an ounce gold, and resources are now based on $1,700 per ounce. Gold contained in proven and probable reserves at Kiena increased 21%, driven by a maiden reserve at Kiena Tail of 66,000 ounces, grading 7.6 grams per ton gold, along with replacement and additions in Kiena Deep. At Eagle River, mined ounces were successfully replaced with reserves after we applied more conservative estimation parameters and optimized interpolation techniques. There remains a large resource of measured and indicated and also inferred resources at Eagle River having the opportunity to be converted to reserves in the future.
Reserves and resource estimates at both sites reflect reduced exploration spend in 2023. Drilling was therefore focused on improving geometric understanding of ore bodies and conversion of inferred resources to measured and indicated categories. However, in 2024, the drilling program has been increased substantially compared to 2023 to approximately CAD 30 million or 185,000 meters for a balanced program of underground delineation and exploration as well as surface drilling. It was a very exciting quarter at Eagle River as further drilling on several high-grade intersections in October have developed into a new zone, namely the Falcon 311 Zone that occurs within volcanic rocks immediately west of the mine diorite. Additionally, gold mineralization was identified along the eastern margin of the mine diorite near the historic 6 Zone , confirming our theory that volcanic rocks along this trend are a host for gold mineralization.
Recent drilling returned 123 grams per ton gold over 1.7-meter core length. Meanwhile, underground drilling of the 300 East Zone has continued to confirm the consistency of the high-grade mineralization that now extends to the 1,600-meter level and remains open down plunge. Deeper step-out drilling is planned to provide initial indication of mineralization below this zone to optimize future drilling and development, as well as to convert the large inferred resource space to indicated and subsequently into reserves. As part of the 2024 increased exploration program, testing is also planned at the neighboring zones such as 6 Zone, 711, and the 811 zones. These zones have the potential to also extend to 1,600 vertical meters below surface and beyond.
On surface, drilling is planned to test a number of targets generated using artificial intelligence on our existing databases, as well as several known zones such as the Fork and Birch Veins. However, year to date, warm weather conditions may require this drilling to be reallocated to exploration targets immediately east of the mine dyke near 2 Zones. In October 2023, the company announced the discovery of the Falcon 311 Zone . Subsequent drilling has now delineated the zone to extend at least 200 m along plunge and nearly 100 m along strike, and interpreted to extend 900 m to surface, similar to that of the neighboring Falcon 7 Zone. Recent drilling returned 270 grams per ton over 2.3-m core length, including one section that returned 1,261 grams per ton gold over 0.5 m. Obviously, this area remains a drill priority for 2024.
Despite the reduced drilling at Kiena, it was an exciting year, and we were able to add over 120,000 ounces of reserves between Presqu'île and Kiena Deep. Within Kiena, drilling has been focused on better delineating the Kiena Deep A2 Zone to de-risk 2024 mine production, particularly given the high grades in the reserve model. At Kiena Deep, drilling was focused on the south limb in 2023 and has confirmed the continuity and high grade of this zone. Also, underground exploration has been completed to extend the deeper portion of the Kiena Deep zones as well as the footwall zones. This drilling will be increased in the future once more optimal drill platforms are established.
At Presqu'île, drilling has confirmed not only the continuity of the gold mineralization and the validity of the geologic model, but also the potential for down plunge extensions towards the east, which will be further tested from surface and from underground drill platforms from the exploration ramp. Of course, the Presqu'île zone is just one of several zones having the potential to offer a supplementary source of mill feed near surface or in the upper mine area for the spare installed capacity at the Kiena Mill. To this end, recent drilling results from the Shawkey and Dubuisson zones in 2023 have returned encouraging results. Both of these zones are accessible from the existing 33-level development that extends across the property.
It is an important year for exploration at Kiena, and we have developed a balanced and integrated approach to optimize the exploration spending with a combination of delineation, extension, in-mine exploration, and conceptual regional targets. Other exciting targets to be tested this year are the Wish Zone, which is proximal to the Shawkey Zone and adjacent to the 33-level development. In this area, limited drilling has intersected high-grade gold along a mafic/ultramafic contact. We expect to release these drill results in the coming weeks. And further to the east at Dubuisson, drilling will be focused on refining the 3D geologic model and converting inferred resources to indicated category. Over to you, Anthea.
Thanks, Mike. As you can tell, we're excited about the future of the business. We're also focused on delivering on our commitments to our owners. This year, we are guided to produce 160,000-180,000 ounces, essentially evenly split between the two sites, at an AISC roughly $258 an ounce below our 2023 level. This year, operational delivery at Kiena is the strategic imperative. The team has been learning from development performance year to date, with excitement growing as development ore from 127 level is showing plenty of visible gold, similar to what is shown on the slide.
To wrap up, Wesdome is a compelling story with a compelling future, an all-Canadian production growth platform with a long track record of finding and producing ounces efficiently, significantly unexplored properties with high returns in our drill bit, low capital intensity with an underutilized asset structure, and a balance sheet that will continue to get stronger and stronger. Capital-efficient organic growth is rare in this industry. Wesdome has the assets, the people, and the opportunity to build this business and provide superior returns over the longer run. Thanks for listening today, and with that, I'll turn to the operator for any questions.
Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ralph Profiti from Eight Capital.
Thanks, operator. Good morning, Anthea and team. Two questions. Firstly, on Kiena, maybe you can help me try to understand where are you in respect of development ahead of the mine plan? Is this sort of a six-month phenomenon, and what's sort of the steady-state development versus mining, and are we there yet?
Sure. Fred, would you like to take that one?
Yeah, of course. Thanks for the question, Ralph. Well, to give a bit more, I guess, context as to where we are at Kiena, really establishing the 129 level horizon is the critical part. So what we need to do is develop the infrastructure there, which we've started. And also, as we do that concurrently, we develop towards the ore zone. So that's been ongoing. And at this point, we're at the ore in 127 and on 129. So we need to complete development of the infrastructure that will support mining and, at the same time, continue development in the ore, and then we can start stoping in Q2.
Just to add to that, the mining horizon allows us between 1.5 and 2 years of mining potential to recover.
Okay. Okay. Yes, that's better for clarity. I appreciate that. Maybe switching just to Falcon 311, I noticed that borehole IP will be looked at here. I'm just trying to understand how this can help us delineate a little bit better. Is this done for sort of a better understanding of the geologic settings? Are we looking at sort of improved mineralogy outlook, or is perhaps testing new targets? And is borehole IP going to help us test the up plunge towards surface or at depth, or sort of a combination of all of the above?
Thanks, Ralph. Mike here. Yeah, certainly, the Falcon 311 Zone has more sulfide content, up to about 5% or so in some areas than, say, within the main dyke. So we're looking at surface IP combined with borehole IP. Since we have both, we can actually merge them together to get a good 3D picture of what's going on to help us target the extent of that zone. But also, further to the west, we've been able to do a lot of mapping on surface and define where this favorable horizon is. But picking out where the gold actually occurs along that horizon is important. And we think borehole IP and surface IP is going to be able to detect these sulfides and sort of help with targeting the drill holes.
Yes. Very helpful answers. Thanks very much.
Thanks, all.
Thank you. One moment for our next question. Our next question comes from the line of Wayne Lamb from RBC.
Thanks. Morning, guys. Just curious on the resource update. Good to see the overall reserve additions, but just wondering if you might be able to provide a bit more detail on the change in parameters around the estimate for the resource. And then was there any greater dilution assumptions used? And just curious if keeping the gold price assumption unchanged, what the delta might have been versus last year's estimate.
Great. Thanks. I'm going to hand it to Mike. I think you can help.
Yeah, certainly, on the resource side, what we've been trying to do in the company is certainly standardize our approach to resource estimation. And as part of that, Eagle River was on paper sort of polygonal model just several years ago, and we've converted it to 3D. And we continue to improve there as we mine these zones, particularly in the volcanics that are somewhat new to us. So what we're looking at is standardization. We're looking at maybe introducing slightly more conservative capping levels at the Eagle River just to kind of be more in line with managing risk that we've already had in place at Kiena. And that's a big part of it. We're also starting as you know, we've implemented a fairly comprehensive reconciliation. It's early days.
We're still working on it, but some indications in some areas where we wanted to just manage risk a little bit better. I mean, these are very high-grade zones. Sometimes when you get over several kilograms of gold per ton in an assay, it's how hard do you cap that? I mean, when we go mining, we see these big areas of visible gold. But I think in our estimation and our forecasting budget, we want to manage that risk a little bit. So we've decided to lower the capping values a little bit in some of the zones there. So that was the impact. As far as the lowering of the cut-off grade, we didn't change it for reserve, so that stayed the same. It did have a little bit of an impact at Eagle River so far.
Typically, in some of our high-grade zones, the boundary is quite sharp, although we are noticing that there's some other areas of the mine that we're looking at with some lower-grade values that maybe if we could with some more favorable cut-off grade scenarios, we might be able to bring that into the mine plan as well. But I would say this is a big year for optimizing the work we're doing at Eagle River and determining the best way to mine all of this resource out.
I think it's important to also note that this is a significant unconverted resource. I think that's really going to be the focus of the team over this year.
Okay. Great. Thanks. And then maybe just curious if you might be able to provide a bit more detail on how the cost optimization evaluation has been progressing at Eagle River. And just curious if you anticipate any level of increase in costs as you move further down into the 300 zone versus the Falcon zone closer to surface?
Yeah. I mean, the cost optimization program, we launched about 3 months ago or 4 months ago on the operation, and it's going really well at the moment. I think we're getting to a point where we're getting a sense of the baseline understanding and starting to understand where the cost drivers are for the organization, which we want to leverage. I would say that we're quite excited about what we're seeing in terms of opportunity, and we're going to keep pushing that program very strongly. Its implications, not only on cost are significant, but on the opportunities to convert are significant as well. We're leveraging this alongside our work on mine method and mine logic as well, which is quite exciting too. I think if you look at the overall plan, I don't think you should anticipate an increasing cost or going down.
I think what you should probably anticipate is that you'll see Wesdome looking at cost structure overall and driving a more logical approach to execution at a cost level.
Okay. Sounds good. And then maybe just a last question for me as a follow-up on the ramp-up at Kiena. Just curious in terms of tonnage, if we should kind of assume a ramp-up to where you exit the year at, say, 700-750 tons per day. And then maybe just on the grade profile, if we assume lower grades through Q1 and maybe part of Q2, should we assume that grades kind of reach the upper end of guidance, maybe around the 14-gram level by the end of the quarter as you get into the heart of the 129 level?
That's a good assumption, Wayne. I think quarter one, you can certainly assume that that's a ramp-up. And I think as Fred said, what he's working on is preparing for mining. So it's really important that we note that there's a lot of work being done on ensuring that we're ready to do that, and there's a lot of infrastructure work that his team are looking at in quarter one. So that's a good assumption. And then it does ramp up, and I think that's a good assumption regarding the numbers that you mentioned.
Okay. Perfect. Thanks for taking my questions.
Thank you. One moment for our next question. Our next question comes from the line of Ryan Walker from Echelon Capital Markets.
Good morning, everyone, and congrats on a strong finish to the year. So just sticking with Kiena, you mentioned in the press release here briefly that you're successfully addressing the challenges of mining and the shift. Now that you're in there physically, I mean, is it more challenging than you would have thought, or are you seeing perhaps you're needing to use more ground support or maybe anticipating a higher degree of dilution during mining than you might have previously? Can you kind of just give us a status update in that regard?
A great question. Let me hand over to Fred. I think he's got such a lot of experience in mining this. I think he can tell you himself.
Yeah, Ryan, thanks for the question. I'd say mining and shift right now is going really well. I mean, in terms of support, the support schemes that we have are successful in addressing the challenges that we're faced with. In terms of development assumptions, we also used development assumptions that were derived, I would say, from past life mining in similar conditions. And right now, what we're seeing is our performances in terms of development have actually been slightly higher than what we're assuming in our internal modeling. So things are looking up on that side.
Okay. Great. That's very helpful. Thank you. That's it for me. Thanks.
Thanks, Ryan.
Thank you. One moment for our next question. Our next question comes from the line of John Tumazos from John Tumazos Very Independent Research, LLC.
Thank you very much. For a couple of years, the company was short of funds completing the Kiena project. How much catch-up is needed for machinery replacement, underground development? We had about 165,000 ounces fall in total resources as we infill the past resource categories to add to reserves. Do you think one year is enough to catch up on those fronts?
Hi, John. Great question. There's 2 questions there. Let me start first with the capital requirements to do what we need to do. I think our capital requirements are well defined, and I don't think we have a concern on adding more capital or requiring more equipment and those sort of things. So I think we can safely assume that Wesdome is well-resourced at those levels to do what we need to do. And I think we're well on the way now to leverage, like you said, those issues from the past to actually move forward. I think on the resource itself, it's a really great question, and I think it's a function a little bit of the reduction in drilling that was done in 2023, as most of us know, to catch it back.
My strong suspicion is if you look at the conversion of the drill bit - and I'm going to turn to Mike in a moment - I think I would be very surprised if you can't do a great job with the amount of money we're putting into exploration for us to get the resource back to edge and to see that growth we'd like to see internally retargeting these things. And we wouldn't be putting the money there if we didn't believe that. So let me ask Mike just to add if he's got anything he might see on that.
Yeah. I would just add this year, given the limited drilling that we did, we did add 120,000 ounces of reserves. So I had to take that from the resources to get that. But I would say we're doubling, I would say, at Kiena the amount of drilling this year. And it is designed like I said, it's a balanced and really integrated approach to not only better define some of our known zones but to add resources in areas and also look at some conceptual targets. I mean, we want to have this balanced approach going forward. So we're always looking for a home run on exploration, but we're also looking to replace what we mine out, and that's our goal there. So we're pretty happy with the drilling that we've had to continue to increase the reserves.
In terms of the Press Scale Zone, how many years or how much work is needed for it to reach production?
We actually mentioned it before. We will be developing in that area by let's get my date right. When are we developing into Presqu'île first?
End of next year.
Sorry?
End of next year.
End of next year, we'll be producing from Presqu'île, but we're going to be starting development into Presqu'île during the beginning of next year, right?
Yep.
So I think we, John, I think the resource itself will, sorry, not resource. The actual program of actually mining that is well understood, and we have a plan. We'll be developing in the year, and we'll be producing from Presqu'île itself by the end of the year.
Thank you.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.