Good morning! Welcome to Wesdome Gold Mines conference call to discuss the company's financial and operating results for the three and six months ended June 30, 2024. As a reminder, this call is being recorded. Your host for today is Trish Moran, Wesdome's Vice President, Investor Relations. Ms. Moran, please go ahead.
Thank you, and good morning, everyone. Before we get started, I would like to point out that during today's call, we may make forward-looking statements as defined under Canadian securities law. I ask that you review our slide presentation for cautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Please note that all figures discussed today on this call are in Canadian dollars, unless otherwise noted. Our press release, MD&A, and financial statements are available both on SEDAR+ and our corporate website, wesdome.com. With us on today's call is Anthea Bath, Wesdome's President and CEO, Fred Mercier-Langevin, our COO, Fernando Ragone, our CFO, Michael Michaud, our Vice President, Exploration, and Raj Gill, SVP, Corporate Development, Investor Relations. Following management's formal remarks, we will then open the call to questions. Now over to Anthea.
Thank you, Trish, and good morning to everyone. The second quarter marked a breakthrough for Wesdome with record-setting results. Safety is a top priority for us, and we continue to improve our safety culture through a structured approach with key initiatives developed and implemented across our operating sites. Our safety stats continue to improve, and we had the best quarter in recent history on a year-to-date basis. There have been zero lost time incidents. I'd like to thank the team at Wesdome for all the efforts in this regard. In addition to safety, Q2 also set a record for production, which significantly boosted our free cash flow position to its highest point in over two years. The strong performance led to an increase in our cash balance, which topped CAD 50 million as at June this year, and enabled us to pay off our revolver.
I'm pleased to say that we are now debt-free and expect the balance sheet to continue to strengthen going forward. Of course, a major driver of this quarter's success was our milestone achievement at Kiena. As planned in Q2, Kiena was able to commence mining and processing of the high-grade ore from the Kiena Deep 129 level horizon. This is a significant milestone for Kiena. We're now mining as per the original anticipated plan, showcasing the step change in grade and therefore the increase in gold produced, and the subsequent reduction in site all-in sustaining costs when compared with both Q1 2024 and Q2 2023. Over at Eagle River, our cornerstone mine, maintained a decade-long history of delivering high grades and consistent performance. With its proven track record, Eagle remains a key part of Wesdome's future.
While the immediate future is secure through the great work of our teams, we are excited about the prospects for Wesdome. With both operations running well and positioned to meet their respective 2024 targets, we are focused on positioning Wesdome for the medium to the long term. Given our strong balance sheet, we're able to be deliberate in how we think about driving value for the long term. Now that Kiena is set up for success in 2024 and well beyond the end of this decade, we are focused on further extending its growth profile. We have set in motion several initiatives, which we believe will add value in the near term to the Kiena Mine and have more longer-term initiatives planned out.
Since Kiena Deep is contributing to production, we can now turn our attention to honing in on costs and focusing our efforts toward optimization of the current profile and the mill. As well, we're making good progress on the development of the Presqu'ile exploration ramp, and we will, which will serve to further advance Kiena's operations, exploration, and strategic flexibility. We will thus be able to leverage the 33 level. Kiena has an extensive portfolio of exploration targets, which is a key strategic imperative. We continue to prioritize the multiple opportunities across a highly prospective 74-75 sq km land package on the gold corridor in Val-d'Or. This is a prolific gold area and is known for its interesting geology, and we're still very early on in our exploration phase.
The team at Kiena have checked many boxes over the past 12 months and will continue to work on delivering high-grade ore and improving profitability. Moving on to Eagle River, where the strategic growth initiatives are born from a rich resource base, having provided 30 years of mining of some of the highest grades in Canada, it continues to maintain its position as a high-grade producer today. The Eagle River Mine has always had 3-5 years of mine life ahead of it, and we now looking to increase that duration and increase output over the coming years. Our strategy to deliver this is straightforward: fill the move, ongoing mine plan optimization, improving our cost profile, and more drilling. Optimization remains a key priority at Eagle, where costs have escalated over the last number of years, impacting our resource conversion and the value of our asset.
We have identified initiatives that are at various stages of execution and anticipate that results will yield value over the next year. We're in the process of examining productivity drivers, cost inputs, and our maintenance practices for value. Based on our history of discoveries, we're very excited about our exploration activities. It's a large structure program, and the team has completed significant upfront technical work. For several years, Wesdome has focused on funding growth at Kiena through cash flow generated at Eagle River. Going forward, we are restoring the balance to set both sites up for many more years of success. As well as the two producing mines, we are working on company-wide strategic initiatives to drive value. This includes achieving synergies and supply chain efficiencies, and constructing a global resource model. More about this in the coming quarters.
Now over to Frédéric to review the quarter's operating highlights.
Thank you, Anthea. Good morning, everyone. As mentioned, Q2 was an outstanding quarter for us. On the back of the much-anticipated ramp-up at Kiena, we established a new record for quarterly gold production, with 44,035 ounces produced.
This is even more impressive considering that this was achieved in tandem with one of the best quarterly health and safety performances in company history. Gold production at Eagle River came in at 19,272 ounces in Q2. While quarterly grade was consistent with Q2 of last year, the number of tons processed was 19% lower, due in part to variations in stockpile. The number of tons mined during this period was 12% lower compared to Q2 of last year, primarily due to the shift in the focus of development and mining activities to the 300 Zone at greater depth. As part of our annual life-of-mine planning cycle this year, we're taking a step back to evaluate our options at Eagle at an asset level.
There are several potential opportunities we have identified that could serve to leverage the fixed cost structure of the asset and fill the 1,200 tons per day mill. These options include a newly developed global resource model to evaluate the full potential of historical resource inventory across the product. Year to date, Eagle River Mine has produced 44,171 ounces of gold, an increase of 2% over the first six months of 2023, despite production no longer being supplemented by the since depleted Mishi stockpile. Eagle River continues to be a consistent producer, and as such, we expect it to achieve its 2024 production guidance. On the development side, high priority phases towards the high-grade 300 Zone at depth continues to track ahead of schedule, setting us up to grow production back to historical highs in 2025.
At Kiena, the second quarter was bolstered by the benefits of the much-anticipated high-grade ore from Kiena Deep, specifically from the 129 level horizon, where stoping activity started mid-April. These results are the culmination of two years of dedication and hard work from our team on site. Compared to the corresponding period in 2023, Q2 production tripled to 24,763 ounces, a quarterly record for Kiena. Ore processed rose 11% to establish a new record quarterly since restart of operations, with 57,699 tons processed. Finally, plant recovery improved to 99%. Year to date, the mine has produced 33,186 ounces of gold, more than double what was achieved over the first six months of 2023. Grade at Kiena this quarter exceeded our expectations.
In fact, rather than ramping up gradually throughout the year as anticipated, grades stepped up considerably in Q2 to 13.5 grams per ton, the high end of our guidance. While we're happy with those encouraging early results, we still expect grades to fall within the guidance range for the full year. On the development front, as the 129 level horizon is now in production, we have resumed development of the ramp towards the 136 level horizon and expect to reach the 136 level access by year-end. This new horizon is expected to come online in Q3 of 2025 and provide additional flexibility for production. At Presqu'ile, underground development from the portal commenced in mid-April, and the ramp is approaching 450 meters. The development crew is now hitting its stride.
This ramp remains a priority for us as it provides several benefits to the current operations, such as improved ventilation for secondary transportation and egress. However, what makes the Presqu'ile ramp so exciting is what it means for the future growth of Kiena. First, it will enable us to supplement Kiena Deep production starting in late 2025 by adding incremental feed from the Presqu'ile zone. Second, the ramp will serve as a key exploration platform from which we will be able to drill the Presqu'ile zone at depth and probe the underexplored western side of Kiena with access to zones such as the Shawkey and northwest zones. And third, it will provide the 4-kilometer, 33-level infrastructure and all of its prospective targets with a link to surface to further supplement Kiena Deep production and extend the mine life.
To enhance the multifunctional nature of this ramp, we continue to optimize its design for flexibility and to maximize its ability to create value for us in the future. So overall, it was a strong quarter, where our teams at site continued to deliver on objectives to set new records for Wesdome and establish a new chapter for the company. Now, since this is my last conference call with Wesdome, I'd like to take this opportunity to extend my most heartfelt and sincere thanks to everyone who contributed to making my time here so special. Starting with our people in operations, our head office team, the management team, as well as the board of directors. Today, as I reflect on my journey with the company, I'm immensely proud of what has been accomplished over the past two years.
Our collective efforts have led Wesdome to record levels in both production and health and safety, setting a strong foundation for future success. These achievements are a direct result of the unwavering dedication and resilience of our employees, the strength of our partnership, excellence of our assets, and the strategic guidance of our leadership. Now over to Michael Michaud, who will update you on our exploration program.
Thank you, Frédéric , and good morning. Across the company, we have made significant progress with our expansion exploration activities year to date, completing almost 80,000 meters at our Eagle River Mine and Kiena property. We are planning to surpass 185,000 meters by the end of this year. Let me give you an update on our exploration program. Turning first to Eagle River and starting with the recently discovered Falcon 311 Zone. This zone is similar to the 7 Zone in that it is located in the volcanics, demonstrates the potential for gold mineralization in the underexplored volcanic waste of the mine, and opens up exciting possibilities for discovery of future zones.
What is particularly encouraging about the drilling results from Falcon 311 is the potential with upwards continuity of mineralization to the surface, extending over a potential 800 meters, and the zone open down plus the ability to grow at depth. Defining the Falcon 311 zone remains a top priority for us due to its potential for growth. Therefore, drilling will continue with additional 20 holes planned for year-end, focusing on extending the zone up and down plunge, and targeting certain sectors within the zone for resource conversion. Exploring the interval camps remains a priority for the company with title mapping, geochemical sampling, and geophysical surveys. A geophysical survey planned for quarter three is anticipated to provide visibility and traceability imaging to assist with identifying new drill targets or potential new mineralization shoots. The essential zone is another key priority for us at Eagle River.
It is ideally located towards the eastern part of the deposit, with another 50 meters of existing mine infrastructure and at a relatively shallow depth of 600-750 meters. The zone continues to grow down plus ongoing drilling is confirming the depth potential and enrichment. Additionally, the zone proximity relative to mine development and surface creates a significant growth and source conversion opportunity for us to mine in the future. To date, over 10,280 meters with 39 holes that have been completed, returning significant gold values over an interval width of 58.2 grams over 2.8 meters and 59.7 grams over 3.6 meters. This shows East Rising Zone could represent a new type of shoot within the mine and remains a focus area for us and planned ongoing drilling.
Additional 28 holes planned for the second half of the year to better define the resource and continue to expand the Zone down plunge. Turning now to the 300 Key Zone, which consistently produces ounces from high-grade mineralization and footwall. Our exploration objective here is to continue to upgrade resources and grow the Zone for future mining. The recently completed 1,001 level drill platform at significantly lower elevation compared to previous levels, is facilitating our infill drilling, as well as our ability to drill previous areas down plunge that were either partially or fully inaccessible. Year to date, we have drilled 8,050 meters across 28 holes at 300 Zone. Infill drilling continues to confirm the consistency of the high-grade mineralization that currently extends to the 600-meter level.
Recent results include 32.5 grams over 6.6 meters and 25.7 grams over 3.6 meters. As the 300 East Zone remains key for future production at Eagle River Mine, an additional 25 holes across 15,000 meters are planned between now and December. Our understanding of the structural control of the 300 Zone at depth continues to improve. Several other zones remain open at depth, and additional drilling will be carried out for the purpose of testing the down-plunge extension of the historic 8 Zone, as well as zones within the mine plan, including 711, 811, and 311 West. At Kiena Deep, drilling continues to expand and define existing high-grade zones. Kiena Deep Footwall Zones and southwest areas from the 103- and 170-meter drill platforms.
The Footwall Zone is comprised of three subparallel zones and is located within 30 meters of the A Zone and has been extended over 300 meters and remains open laterally and down plunge. These zones could prove an optimal Kiena geometry and potential thickness to mine several mining widths . Drilling has confirmed the zones will be in a more competent mafic volcanic host rock. 5.7 grams at 3 meters and 30.8 grams over 5 meters. Furthermore, drilling results from the structurally controlled bottom of the A Zone continuity, possibly underscoring the high-grade nature of Kiena Deep, with the depth containing 20.7 grams over 5 meters. Kiena Deep remains a priority due to its high-grade nature, its growth potential, and the opportunity to bolster large-scale converter and high-grade ounce per vertical meter.
Exploration drilling is scheduled for continuation in the second half of the year. Drilling continues to target several areas in an underexplored rich area. After the initial reconnaissance drill, those indicated narrow, high-grade mineralization at the contact of basalt and shear zone-related rocks. In the third quarter, we will use large drilling to commence surface exploration to test the reinterpreted zone, confirming the geologic expectation and converting the large inferred historical inventory. Our surface drilling campaign will also focus on testing continuity of the Northwest Zone at the historical drilled Zone 8, a deeply dependent zone for corridor. This fall, we anticipate commencing a gold program on surface to test the depth potential of the highly expected down-plunge extension still, with a higher-grade resource remains open. Follow-up drilling from underground will further define the resource on its full exploration rate.
Today, in 2024, we have completed 28,000 meters at Kiena and anticipate drilling upwards of 40,000 meters during the third quarter, including more than 20,000 meters of surface drilling at the zone and the Presqu'ile zones, as well as further into the area. Thank you. That concludes my remarks. And now over to Fernando Ragone, who will take you through the quarter's financial results.
Thank you, Michael, and good morning, everyone. It was a strong second quarter compared to Q2 2023, as ounces of gold increased by 25% and the average realized-
... price of gold increased 21% to CAD 3,192, or $2,333. These factors drove growth of 51% in revenue, an increase in cash margin by 2.5 times, growth in operating income to CAD 45 million from a loss of CAD 6 million, a more than 200% increase in EBITDA to CAD 68 million, and a net income of CAD 28 million- CAD 29 million, up significantly from a net loss of CAD 1 million a year ago. On a per ounce of gold sold basis, we saw across-the-board improvements with a decrease of 29% in cost of sales, a decrease of 26% in cash costs, and a decrease of 12% in all-in sustaining costs. With this quarter's strong financial performance, we generated significant cash flow.
Year-over-year operating cash flow tripled to CAD 57 million or CAD 0.38 per share. While this was our fourth consecutive quarter of positive free cash flows, it represented a major breakthrough. During the quarter, we repaid CAD 29 million on our revolving credit facility, fully paying off our bank debt. Free cash flow of CAD 28 million was strong, even after paying over CAD 25 million in capital expenditures. Accordingly, our balance sheet is considerably stronger heading into the second half of this year. With zero debt and a growing cash balance, we ended the quarter with CAD 200 million in available liquidity and a positive working capital of CAD 31 million. If we compare this to where we were at year-end, when we had nearly CAD 40 million in debt and a negative working capital, we have come a long way in only six months.
If current gold prices stay in the current range, we expect our balance sheet to continue to improve throughout the remainder of this year. In fact, with gold prices at record level, about $2,500, versus our budget of $1,875, there is an upside to our cash flows, which give us the flexibility to potentially accelerate exploration and development activities previously slated for 2025. For every $100 price increase in gold prices, our annualized operating cash flow increases by between $15 million and $20 million. Overall, it was a strong quarter and a strong first half of the year. And now, over to you, Anthea, to wrap things up.
Thank you, Fernando. It was a strong first half of the year, and we remain on track to meet our 2024 production and cost guidance. As a reminder, production is expected to be back-end weighted, with approximately 55%-60% of production targeted in the second half. Before we go to Q&A, I'd like to extend our heartfelt thanks to Charles Main, who retired yesterday as a board member and our audit committee chair. As indicated, he is retiring from the industry. Since joining us in 2017, Chuck has brought decades of expertise in industry, accounting, tax, and finance. His deep knowledge and strategic insights have been instrumental in guiding this company through a period of significant growth and transformation. We deeply appreciate his dedication and the pivotal role he has played in our continued success, and we wish him all the best in his retirement.
We also regret to say goodbye to Fred, who'll be leaving at the end of September. During his tenure as Chief Operating Officer, Fred has demonstrated exceptional leadership, leading to significant improvements in safety, performance, and meeting operational commitments. Fred has just built a strong team, and I'm confident that our two site general managers, along with our recently appointed SVP Technical Services, will maintain seamless operations in the interim while we conduct the search for a new COO. On behalf of the board and everyone at Wesdome, I'd like to express our gratitude to Chuck and Fred for their many contributions to Wesdome, and we wish each, each of you all the best for your future. Operator, you can now open the line for questions.
Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star one one on your telephone keypad. You will hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star one one again. We'll pause for a moment if callers join the queue. The first question comes from Ralph Profiti with Eight Capital.
Thanks, operator. Good morning, everyone. Anthea, can you help me understand as we look at the mine plan in Kiena in 2025 where those ore sources are coming from? It seems as though there will be some spillover from that 129 level and the 136 level coming in in Q3 and perhaps some Presqu'ile towards the end of 2025. I'm just wondering, as you think about sort of operational flexibility, will you be looking at mining from multiple levels now that development is in a much better position in the mine plan?
Thank you, Ralph. Yes, that's absolutely correct. If you look at the plan for 2025, it's exactly that. There'll be mining from 129, 136, as well as Presqu'ile towards the latter part of the year. It provides the business now with much more flexibility than we had in 2024, as you rightly point out.
Are we seeing similar grades at 136 versus 129?
Yes, we are.
That's excellent to hear. Okay. Second follow-up question, please, on how you're thinking about, the exploration and evaluation budget at Kiena, right? Only CAD 7 million, you know, was earmarked in 2024, but, that's a multifaceted, stepped-up effort at Kiena. It seems like there's significant room for upsize.
Yeah, so our budget at Kiena is a little bit higher than that, which includes all types of drilling. So I think it's closer to 15, if I'm not mistaken. So yeah, there's absolutely opportunities for continued exploration in Kiena, and we keep working with the team on prioritizing where we should actually spend more money, actually. So right now, we have a strong plan in place. I challenge my team all the time to see if we can find opportunities to drive more success at Eagle, sorry, Kiena.
Great, that's helpful. Thank you, and thank you to Fred and Charles, and best wishes to them.
Thank you.
Our next question will come from the line of Wayne Lam with RBC.
Oh, hey, good morning, guys. Thanks for taking my question. I guess first question at Eagle River. Just wondering, as mining shifts away from the Falcon Zone and more towards the 300 Zone at depth, do you anticipate any change in the mining costs? And then maybe just curious on the optimization on costs there. Is there any more of a definitive timeline on how things are going with the study or when that might be, when the results might be released?
Okay. Thank you, Wayne, and it's nice to hear you. Yeah, regarding mining in Eagle, I'll just try and give a bit of an idea. Yes, we're moving—there's a lot of mining coming obviously from the 300 zone. It's deeper, obviously, than the Falcon itself. However, we continue to work on our optimization efforts to try and drive the cost optimization opportunities inside Eagle. So yeah. Regarding the second question, I didn't quite get that.
Just on the cost optimization study that's ongoing.
Yeah. So yeah, that work is well underway, and I think you'll see it start reaping rewards over the year. There's a lot of work we've done in setting up the benefits of what that cost program looks like. So I think we'd be able to talk a little bit more about that in the coming year.
Okay, great. Thanks. And then, maybe moving to Kiena. Obviously, at the first quarter, in terms of mining, the higher grades from the 129 zone, pretty spectacular. And the grades this quarter were already at the top end of guidance and lower end of costs. Just wondering, as you continue to ramp up through the second half, do you anticipate, potential upside to guidance on grades or costs?
I think we, you know, if you look at the year itself, I think we're still guiding towards the range, as we said. Obviously, quarter one was lower, as you know, in terms of our grades, so you can work out the implications for the second half. I think you essentially, I would plan towards what we guided in terms of our current grade profile.
Okay, great. Thanks. And then maybe just last one. Just in terms of the management changes, you know, this will be the third change in COO over the past few years, and the exploration role seems to have turned over as well. Just wondering, in terms of continuity of the team or, or stability in terms of the operations, maybe if you might be able to speak to some of the changes at the top.
Yeah, I mean, you know, change. We always like to keep stable, and we always like to ensure we have a strong team. I think, you know, we will continue to work on ensuring that that stability remains in Wesdome, and fill those positions, as efficiently as we can and ensure that the teams are maintained. But the transition plan that we have in place is strong. And I think, Wesdome is well positioned with what we have in place right now to assure the plans we have going forward.
Okay, perfect. Thanks for taking my questions.
As a reminder, if you'd like to ask a question at this time, that is star one one. Our next question will come from the line of Don DeMarco with National Bank Financial.
Thank you, operator, and good morning, NT. First off, Fred and Chuck, just want to say thank you for all your contributions and wish you the best in your future endeavors. So perhaps this is directed to Fred first. You're more than a quarter into Kiena Deep. How are the grades and the widths reconciling with expectations? Is it sort of on track or better than expected, more optimistic, or, or how would you assess this at this stage?
Hi, Don. Well, first of all, thanks for the kind words here. I mean, as far as our experience in Kiena Deep so far, the grades are comparing favorably to our short-term models, so we're happy to see that. In terms of productivity, things are lining up with our assumptions. So yeah, so far, so good.
Okay. Okay, well, we'll look forward to the back half of the year with that and certainly... Then just shifting, staying at Kiena, but looking at the, at Presqu'ile. On the ramp, the ramp's advancing, so when do you expect to connect it with the mine, actually use it for ore haulage and even the timing of potential first ore? I mean, of course, you need to sort of do the drilling and upgrade to reserves and so on, but maybe if you could give us a timeline in the upcoming milestones we might expect for this project.
Okay. So we plan to break through in November next year, Don, and then hit into level 33. In terms of the ore, I think you can plan towards second half of next year, Presqu'ile ore coming through. You can look at, the key milestones being that this year we'll be pulling about 1,500 meters in the ramp, in terms of the work we're developing into the ramp right now. Gets us closer to Presqu'ile ore body, where we can start looking at drilling from underground. You know, we plan on moving between 250 tons and 400 tons per day, in late 2025. So I think that will give you a bit of an indication of more or less our thinking around, Presqu'ile ore.
Okay, thank you. Just maybe as a final question, we saw this week the deal between Gold Fields and Osisko Mining, and this is sort of right in your backyard in Quebec. I'm just interested to get your thoughts on this acquisition, and does it maybe change your, your strategy for M&A or, or evaluating companies in any way?
I think, you know, we're consistently removing our M&A, and we're consistently reviewing different opportunities. You know, does it change our way we think? Not really. We'll keep being disciplined in our approach. Yeah, we wish them well.
Okay. Okay, great. Well, that's all for me. So, thank you, and good luck with Q3.
Thank you so much.
Thank you. There are no further questions at this time. This concludes this morning's call. If you have any further questions, please contact Trish Moran at invest@wesdome.com. Thank you for participating today.