Good morning, ladies and gentlemen. Thank you for joining us today. My name is Warwick Morley-Jepson, and I am the Chair of the Board of Wesdome Gold Mines. I will preside as Chair of this annual general and special meeting of shareholders in accordance with the company's bylaws. On behalf of the board and management of Wesdome, we wish to thank all of our shareholders for their continued support as the company navigates through what are certainly unprecedented times. While we would have liked to have hosted our 2020 annual general and special meeting in person, as we have done historically, health and safety are always our top priority. For this reason, we have opted to hold the annual general and special meeting as a hybrid meeting today. We thank you all for your understanding and patience.
We greatly appreciate everyone taking time to virtually join us this morning. Today's general agenda will consist of the formal business of the meeting, followed by a presentation by Duncan Middlemiss, our President and Chief Executive Officer. We will conclude with a question and answer period. Questions may be submitted in writing using the question and answer box on your screen and pressing the enter key to submit. Before we commence the formal business of the meeting, I would like to introduce the other members of our outstanding board of directors. First, please allow me to introduce Charles Main. Chuck joined the board in June of 2017 and is currently the Chair of the Audit Committee and a member of the Compensation and Human Resources Committee.
Thanks, Warwick, and good morning.
Next, we have Duncan Middlemiss. Duncan joined the board of Wesdome in June 2016 and was appointed as President and Chief Executive Officer of the company in August 2016.
Good morning.
We have Nadine Miller, who joined the board in February of 2016. She is currently the Chair of the Governance and Nominating Committee and a member of the Audit Committee and the Technical, Safety and Sustainability Committee.
Hello, everyone.
We have Brian Skanderbeg joined the board in May of 2019. He is currently the Chair of the Technical, Safety and Sustainability Committee and a member of the Governance and Nominating Committee.
Hello, and good morning.
Next, please meet Bill Washington. Bill joined the board in June of 2016, and he is currently the Chair of the Compensation and Human Resources Committee, and he is also a member of the Audit Committee and the Governance and Nominating Committee.
Good morning.
I would now like to introduce a new director candidate, Edie Thome. Edie was most recently the President and Chief Executive Officer of the Association for Mineral Exploration in Vancouver. She has extensive management experience in the area of sustainability, and we look forward to welcoming her to the board.
Good morning. Thank you, Warwick.
Finally, I would like to introduce Heather Laxton, who is our Chief Governance Officer and Corporate Secretary of the company.
Thanks, Warwick. Good morning, everyone.
I now call to order this annual general and special meeting of the shareholders of the company. I ask Heather Laxton to act as Secretary of the meeting. I further ask Roxanne Prasad of Computershare Investor Services, the company's transfer agent, to act as Scrutineer for the meeting. Roxanne is off-screen. However, she will be reporting on the number of shareholders present in person or by proxy for the purposes of the establishment of a quorum and will tabulate the votes on any ballot taken at this meeting. I will now ask the Secretary to report on a few formal matters relating to the holding of this meeting.
Thanks, Mr. Chair. The notice calling this annual general and special meeting of shareholders was dated April 20, 2020 and was mailed to shareholders along with the company's management information circular and the form of proxy on April 28th, 2020. During the course of this meeting, reference may be made from time to time to matters discussed in the management information circular. If any shareholders are unclear as to the meaning of certain terms, please refer to the management information circular, which is available on the company's website and on SEDAR.
Finally, pursuant to Section 910 of the bylaws of the company, quorum for the transaction of business at a meeting of shareholders is two individuals present in person, each being a shareholder entitled to vote at the meeting or a duly appointed proxy or proxyholder for an absent shareholder that is entitled to vote, holding or representing in the aggregate not less than 10% of the issued shares of the company enjoying voting rights at the meeting.
Thank you, Madam Secretary. I request that you table and attach to the minutes of this meeting the proof of mailing indicating that the notice of annual general and special meeting, the management information circular, and the form of proxy were properly mailed to shareholders. I understand the scrutineer's preliminary report has now been provided.
Their report shows that there are present at this meeting 255 shareholders, in person or represented by proxy, representing an aggregate of 71,804,870 common shares. For total representation in person and by proxy of 51.86% of the issued and outstanding shares of the company.
Thank you, Madam Secretary. I ask that you please attach a copy of the scrutineer's final report on attendance to the minutes of this meeting. I now therefore declare that a quorum is present and that this meeting is properly constituted for the transaction of the business for which it was called. As stated in the notice of the meeting, there are four proposals to be voted on today. Being the reappointment of Grant Thornton LLP as independent auditors of the company for the fiscal year ending December 31st, 2020. The election of the directors of the company for the ensuing year. The approval of the company's 2020 Omnibus Equity Incentive Plan. The advisory votes to approve the board's approach to executive compensation. Each of the above proposals is discussed in detail in the management information circular.
For the purposes of the meeting today, voting will be conducted via show of hands. In order to expedite the formal business of the meeting, we have arranged for certain shareholders or their proxies to make and second the formal motions at the appropriate time. I now place before the meeting the audited consolidated financial statements of the company for the financial year ended December 31st, 2019, and the auditor's report thereon. It is not proposed to ask shareholders to approve the financial statements, but management of the company would be pleased to answer any relevant questions concerning the financial statements following the meeting. The first matter to be dealt with is the approval of the reappointment of Grant Thornton LLP to serve as auditor of the company until the next annual meeting of the shareholders, and to authorize the directors to fix the auditor's remuneration.
I will ask for a motion to approve these matters.
I so move.
I second the motion.
You have heard the motion as moved and seconded. Is there any discussion on the motion? As those in favor of the motion, please signify your approval by raising your hand. Any contrary? Carried. I declare that Grant Thornton LLP is appointed auditors of the company and that the board is authorized to fix their remuneration. The next item of business is the election of the directors of the company, to hold office until the next annual meeting of the shareholders of Wesdome or until their successors are elected or appointed. The management information circular was mailed to shareholders, contains the names of seven nominees. The process of voting will be on an individual basis. Shareholders can vote for or withhold from voting on the election of individual directors.
The company's bylaws require advance notice to the company of nominations of directors for election at an annual general meeting of shareholders of no less than 30 days prior to the date of the annual meeting. Since no such nominations were received by the company, only the nominees set out in the management information circular are eligible for election. As indicated in the circular, six directors are standing for re-election at this meeting, and a new director nominee has been named in the circular for a total of seven nominees. For the sake of convenience, I now place in nomination for election as directors the following individuals: Charles Main, Duncan Middlemiss, Nadine Miller, Warwick Morley-Jepson, Brian Skanderbeg, Edie Thome, and Bill Washington.
I now request a motion that the individual so nominated be elected directors of the company to hold office until the next annual meeting of shareholders or until their successors are elected or appointed, subject to the company's articles and bylaws.
I so move.
I second the motion.
You have heard the motion as moved and seconded. Is there any discussion on the motion? All those in favor of the motion, please signify your approval by raising your hand. Any contrary? The motion is carried. I declare that the following nominees have been elected as directors of the company: Charles Main, Duncan Middlemiss, Nadine Miller, Warwick Morley-Jepson, Brian Skanderbeg, Edie Thome, and Bill Washington. The next matter to be dealt with at this meeting is the approval of the company's 2020 Omnibus Equity Incentive Plan. The full text of which is set out in Schedule B of the management information circular. The equity plan was developed with the assistance of the board's external compensation consultant and the company's legal counsel. It is consistent with the guidelines of both Glass Lewis and Institutional Shareholder Services.
As stated in the circular, to be passed, this item must be approved by a simple majority of the aggregate number of votes cast at this meeting by shareholders present in person or represented by proxy. I will now ask for a motion to approve the resolution regarding the adoption of the 2020 Omnibus Equity Incentive Plan, as set forth beginning on page 18 of the management information circular.
I so move.
I second the motion.
You have heard the motion as moved and seconded. Is there any discussion on the motion? All those in favor of the motion, please signify your approval by raising your hand. Any contrary? Carried. I declare that the 2020 Omnibus Equity Incentive Plan is hereby approved. The final matter to be dealt with is consideration of an advisory vote to approve the Board's approach to executive compensation disclosed in the company's management information circular. I will ask for a motion to approve the non-binding resolution as set forth beginning on page 19 of the management information circular.
I so move.
I second the motion.
You have heard the motion as moved and seconded. Is there any discussion on the motion? All those in favor of the motion, please signify your approval by raising your hand. Any contrary? Carried. I declare that on an advisory basis and not to diminish the role and responsibilities of the board, the non-binding motion approving the board's approach to executive compensation is passed. As the formal business of the meeting of shareholders of the company has now been completed, I will ask for a motion to terminate the meeting.
I so move.
I second the motion.
Thank you. As there is no other business coming before this meeting, I declare the meeting terminated. I would now like to introduce Duncan Middlemiss, our President and CEO of the company, to proceed with a brief presentation to review some corporate highlights.
Great. Thanks, Warwick. First and foremost, I would like to take this opportunity to extend my thanks to our board of directors for their continued support, in particular during these uncertain times. On behalf of the management team, I would like to congratulate Edie on her election to the board and extend a warm welcome. I would also like to extend my sincere thanks to each and every member of the Wesdome team. The success of this company is a testament to the hard work and dedication of our employees, and for this, I am grateful and appreciative. Now, before proceeding with the presentation, I would like to take this opportunity to introduce our accomplished senior management team. Marc-André Pelletier joined Wesdome in February 2017 and is the company's Chief Operating Officer.
Hi, everyone.
Scott Gilbert joined Wesdome in December of 2018 as Vice President, Financial Systems and Cost Control, and was appointed to the role of Chief Financial Officer on April 1st of this year.
Good morning, everyone.
Michael Michaud is our Vice President, Administration. Mike joined the company in September of 2017.
Thanks, Duncan, and good morning, everyone.
Stacy Kimmett joined Wesdome in April 2017 as Vice President of Human Resources.
Good morning, everyone.
Lindsay Dunlop joined Wesdome in August of 2014 and is the company's Vice President of Investor Relations.
Hi. Good morning, everyone.
Of course, you've already been introduced to Heather Laxton, the company's Chief Governance Officer and Corporate Secretary, who joined Wesdome in January of 2016.
Thanks, Duncan.
Great. I'll proceed with the presentation. First and foremost, I think it's a real pleasure to be in front of the shareholders in order to give them an update as to the progress of the company. 2019, as we're all aware, was a very strong year in terms of performance operationally, exploration. Financially, it was a very strong year. With that, I will get into the presentation and go over some of the highlights. During this presentation, there will be some forward-looking statements. When we look at the strategy of the company, it's been as such for the last two years. Building Canada's next mid-tier gold producer is very executable. It's a timely and a very, I'd say, value-added strategy for the company. Obviously, our assets in Ontario and Quebec, world-class jurisdictions. They recently announced the Kiena PEA coming in at 102% IRR. Very strong.
Certainly helps to de-risk the company, restart becomes likely at this point. In terms of departing from a single asset entity into one with two producing assets certainly is huge for this company. Eagle River is funding the entire exploration program, the Kiena development project, and adding to cash right now. It's been certainly a very exciting year. When we look jurisdictionally, Ontario and Quebec, our three assets, the first asset, of course, Eagle River on the North Shore of Lake Superior, just outside of the town of Wawa. Eagle River's seen a lot of upside in the past couple of years throughout, I would say, exploration emphasis and operational integrity. We are at the point where we've been able to get our reserves from 400,000 ounces up to 550,000 ounces and increase the grade, and also increase the resources.
This is really setting the stage for what I believe to be a very sustainable operation. Tying back into the strategy, what we really require from Eagle River is to produce at least 100,000 ounces. Last year, the company did almost 92,000 ounces from this asset. This year's guidance is 90 to 100,000 ounces, and we feel comfortable as it is, that we are going to definitely be within guidance. You can see the free cash flow generation for the company. Again, this is after a CAD 25 million investment into the Kiena Mine, of CAD 6.6 million. 2019 was certainly a very good year for Eagle River. There's no doubt. Off to Val-d'Or, Quebec. What we see here is the Kiena Gold Mine. It's our advanced exploration project that we have.
Kiena is certainly a special project in that it's entirely built, entirely permitted, great past producer, and we've been able to find some very high-grade mineralization there. The resources throughout the period 2018 to 2019 have increased substantially. We now have nearly 740,000 ounces of high-grade resources in the A-Zone. 400,000 ounces of that would be in the indicated category at about 18.5 grams and the other 340,000 ounces in the inferred category at about 15.2. A very high-grade situation, very anomalous to the camp. Really, the Kiena Mine was a 4.5 gram head grade throughout its existence, producing 1.75 million ounces. Off to our third asset, Moss Lake. Moss Lake is an excellent asset. It's just one right now which the company is unable to focus entirely on.
We believe that the strategy of becoming mid-tier is a lot more time efficient in terms of optimizing the Eagle River Mine and trying to get Kiena into production in the near term. Moss Lake really doesn't cost the company any money, and we are definitely looking at all sorts of options for it. When we look corporately where we are, 138 million shares outstanding. You can see the market capitalization, CAD 1.5 billion. Quite a change since the start of 2019. Cash position currently is sitting at CAD 49.4 million. I don't believe the company's been in any better situation from a cash perspective. We really have no debt. We've got an existing revolving line of credit for CAD 45 million. We've got very supportive analysts all throughout, you can see on the right side of the screen.
The shareholding is 55% institutional, 45% retail, which I believe to be a very strong shareholding with VanEck being our largest shareholder due to the indices. When we look at our 2019 share performance, we started the year at about CAD 4.40 and ended up the year at just over CAD 10. It was an excellent year. It was an excellent year in terms of operational performance and exploration results. I do believe that the investors and the market really understand the tangibility of us getting to our mid-tier aspirations. When we look at the share price performance versus the indices, of course, we compare well also. Again, a strong year in 2019. 2019 achievement and highlights. Production increased 28% over that of 2018. Actually, we've nearly doubled production since 2016. Cash costs decreased by 9%. Eagle River Complex free cash flow generation of CAD 48.4 million.
Funding the company and its aspirations. Free cash flow generation of CAD 6.6 million. Net income increased 2.7 times over that of 2018. Operating cash flow increased by 1.5 times over 2018. The reserves up by 36%, net of 92,000 ounces depleted, and the resources are also up by almost 3.6 times. Looking at the performance of the exploration, I'd have to say that that's where it all starts. I think that this company's done a very good job in terms of recognizing that the geological assets we have are worthy of expanding CAD 20 million this year. We're also included in the Toronto Stock Exchange inaugural TSX 30, which is a flagship program recognizing top-performing TSX stocks over a three-year period on dividend-adjusted share performance. We also got it added to the GDX.
In terms of Eagle River, again, there's the reserve statement as of this year, 550,000 ounces at 14.4 grams. Previously, it was about 400,000 ounces at 12 grams. We've seen both an increase in ounces and in grade. The resources, especially the measured and indicated, are starting to increase, which is really the plan for sustainability. Q1 production was a strong quarter. We sold 26,500 ounces at an average price of CAD 2,162 per ounce, exceeding our own expectations from our budget. We had actually budgeted 2020 to be around CAD 1,885. We're quite pleased with the gold price in this environment. As we can see, compared to the first quarter of 2019, there's been substantial improvement operationally. I alluded to the exploration program and our focus on it, driving value.
Currently, Eagle River has got five drills operating underground and two on surface. We are exploring the trends of the parallel zones that we've discovered on the western side of the diorite, and we're getting great results there in terms of continuation of finding the high-grade 303 Lens at depth, the 7 Lens, the 300 Lens, and tying into the surface exploration program, the Falcon zones. I think the exciting thing about the Falcon zone is what you can see is from an underground platform off the 772 level, we're able to actually link up the mineralization of the Falcon zone with that from the mine. As you can see, 160.5 grams over 3.9 meters is a fairly strong result and something that we believe is going to continue.
I suppose the focus of all this is really to get the mine up to 800 tons a day as a starting point. Currently, the mine is producing at about 500 tons per day with the additional mill feed coming from the Mishi open pit. We do aspire to get 800 tons a day coming from the Eagle River high-grade mineralization. This would drive our production up towards the 120,000 ounce per annum range. What I mentioned before was the Eagle River surface exploration program, the Falcon zones. Eagle River sits on a 20-kilometer-long shear zone, which the Eagle River mine resides within this intrusive diorite. We had only started to do a regional exploration program, quite frankly, only got about 300 meters outside the mine when we hit the Falcon zone. We do believe we have a lot of exploring to do here.
We have known gold occurrences throughout this 20-kilometer trend. We're in the process right now of putting plans together in order to do an evaluation of what we have. We do believe, however, this is a highly prospective underexplored area. Off to the Kiena Mine. There's a fantastic picture of Kiena right there. What you see is great infrastructure. This mine was built by Falconbridge Gold in the early 1980s, taken over by Placer Dome, and operated till 1997 by them. The mill is a fully permitted 2,000-ton-per-day mill. The mine has never been flooded. The shaft goes down to 930 meters, with the ramp system now almost approaching 1,100 meters deep. The exploration program going on here underground has happened since 2016 when we were in the process of discovering some very high-grade mineralization, which quite frankly, we didn't understand.
We now have a very good understanding of that system. We do believe it's a right L shear that runs between the Marbenite Fault and the Norbenite Fault, which are regional faults parallel to Cadillac Break. We do have belief that on the next resource update that we do in perhaps November or October, November, sorry, that we'll be able to increase our indicated resource substantially. When we look at the resources and what was included in the PEA, what you see here is only those resources that were proximal to the existing underground infrastructure were included. Therefore, there's about 850,000 ounces. Of course, 740,000 ounces of that were the high-grade A-zone mineralization, and the remaining 110,000 ounces came from various zones. Lower grade, however, very close to infrastructure, so would be probably very efficient to mine.
As you can see, however, the Kiena Mine has got on the property almost 1.6 million ounces combined, almost 800,000 ounces of measured and indicated, and 800,000 ounces of inferred. We do believe that upon establishing production at Kiena, we'll be able to systematically continue the property exploration. This is a large property, 70 sq km, and we believe the potential here on the property is huge. Highlights of the recently announced Kiena PEA, I mentioned before an after-tax IRR of 102%. CAD 1.4 billion with a total life of mine after-tax free cash flow of CAD 595 million. The after-tax NPV discount rate at five is CAD 416 million. All-in sustaining costs, CAD 674 per ounce. Total unit operating costs, CAD 163 per ton. Pre-production capital costs of CAD 35 million, and the sustaining life of mine capital costs of CAD 121 million, leading to a great after-tax payback period of 1.7 years.
This is a very strong project. Some of the PEA and some of the inputs that we used, you can see that we used a $1,532 U.S. per ounce at a 0.76 exchange. This was a gold price which was selected for us by an outside consultant, CPM. CPM has been involved since the early 1980s in terms of commodity pricing and are well-respected in the industry. Discount rate 5%. Certainly with the infrastructure largely in place, 5% is a very appropriate discount. As I mentioned before, you can see the resource ounces which we included in the PEA, the high-grade capping, the indicated drill spacing, less than 25 meters and three diamond drill holes within that search limits. Certainly, I would have to say the takeaway from this is, this is a conservative starting point base case.
We believe throughout the continuation of exploration with the seven drills that we currently have underground at the Kiena Mine site, that we will be able to add substantially to our indicated from the inferred category. When we're looking at the exploration program at Kiena, again, seven drills. We've got two on the 79 level. Those drills are focused entirely on finding the down plunge of the VC Zone and the up plunge of the A Zone, which we believe to be a transition. At some point, we believe that the A Zone probably transitions into the VC Zone. We're very well situated in order to hopefully fill that gap of mineralization above the 1050. The other five drills are located on the exploration ramp. One of them, the bottom one, looking for very high-grade mineralization at around the 1,600-meter level.
We're currently successfully using wedge program there in order to try to bring that resource up to the highest category that we possibly can. The other four drills are very focused on converting the inferred category up into the indicated category, as the PFS can only consider measured and indicated resources and reserves. When we look at a plan view of Kiena Mine and what we see here, the A zone is that red dashed line going between the Marbenite and the Norbenite Fault on the upper left part of the screen. We've recently done a magnetotelluric geophysical survey on the ice of the lake, and it's provided for some very interesting targets. Often these Riedel shears go in parallel, and we do believe that there could be a sister shear here.
We do have 10,000 meters of exploration drilling planned for surface in the summertime in order to further evaluate if there is indeed another parallel system here. If there is, this would be very exciting to us as these shears, again, are very high grade and a different mineralization than what's been historically mined. We look at Moss Lake. Moss Lake, again, it's actually the company's largest resource base at nearly 4 million combined ounces of indicated and inferred. The 2016 period, we were able to consolidate the land position around Moss Lake. 2017, we did some geophysical surveys and continued some reconnaissance-type drilling. We do believe that the strike of mineralization went from 2.5 meters all the way to eight. This is a great property. It needs further evaluation.
As mentioned before, the company's focus in terms of the timeliness of getting Wesdome up to a mid-tier status is on Kiena Mine and on Eagle River Mine for the time being. In summary, what we see here is a low-risk strategy. We have expansion of existing mining camps. We see the optimization potential at Eagle River, exploration, infrastructure investment, low CapEx. We see pre-production CapEx at Kiena being CAD 35 million, entirely self-fundable by Wesdome currently. We see highly executable plan. We believe that we have the team together. We have the board, which is supportive. We do believe that this is reality. With that, I'm going to open it up to questions. If there's any shareholder questions, please use the text box at the bottom of your screen and press Enter to submit your questions.
If there are no questions for today, then we'll turn the call back over to Warwick to wrap up today's meeting.
Okay. Thank you, everyone. That concludes our meeting today. Before we sign off, I would like to once again thank you all and all our shareholders for their continued support. We hope to welcome everyone in person to our annual meeting of shareholders next year. Thank you.