Good morning and welcome to Wesdome Gold Mines' Pre-Feasibility Study Teach-In. I will now hand the call over to Heather Laxton, Chief Governance Officer, to begin today's call.
Thank you, Operator, and good morning, everyone. Before we begin, please be reminded 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, which is available on our website and on SEDAR. Please note that all figures discussed on this call are in CAD unless otherwise stated. The slides used for this presentation and a recording of this call will be posted on the company's website. A copy of the NI 43-101 technical report will be filed on SEDAR within 45 days.
Leading the Teach-In this morning will be Duncan Middlemiss, President and CEO, Marc-Andre Pelletier, Chief Operating Officer, and Mike Michaud, Vice President Exploration. Also on the call are Scott Gilbert, Chief Financial Officer, Raj Gill, Vice President Corporate Development, and Lindsay Dunlop, Vice President Investor Relations. Now it is over to Duncan, who will begin today's Kiena PFS Teach-In.
Great. Thanks very much, Heather. Here we are at the announcement of our PFS and a positive restart decision by our board. It's a very exciting time for us. We have a high-grade underground gold project with a prolific location just outside of Val-d'Or, Quebec, the heart of the Abitibi. As we've been saying, the capital to restart Kiena is modest, as the major infrastructure is in good condition and in place: the 930-meter deep shaft, the 2,000 ton per day mill, the tailings area, and the associated buildings all required to operate a modern-day mine. With all permits in place, we're well positioned for a quick restart. As per the PFS, our U.S. dollar per ounce cash cost of $380 per ounce and our all-in sustaining cost of $676 per ounce certainly places the Kiena mine in first quartile of cost metrics.
The current Kiena mine life is seven years. However, with our recent success on the exploration front, with the discovery of the Footwall Zone and expansion of the A Zone, we feel confident that this will grow. Additionally, our other underground targets, such as the B Zone and VC Zones, below the 1,000 meters, hold a lot of promise. Our CAD 6 million surface program to test the property is now underway, with a lot of potential to probe past producing mines and existing resources. I would again reiterate that there is jurisdictional and local community support for the Kiena mine restart, so this can be a win-win situation, as the economic impacts are front and center in the region. We have a community engagement committee, which is in place so that we can best proactively respond to requests and concerns. Next slide, please. Okay.
The after-tax net present value of $367 million at U.S. $1,600 per ounce gold increases to $491 million at current spot, which is U.S. $1,900 per ounce, and shows the torque this project has to spot gold prices. The average annual gold production of 84,000 ounces, with over 100,000 ounces being achieved in 2024 and beyond, and again, with exploration upside, we believe this could certainly grow. As a base case, Kiena mine will average $86 million of free cash flow at U.S. $1,600 per ounce, or $110 million at U.S. $1,900 per ounce. This is a torquey mine. All capital is self-funded. We have the liquidity. Eagle is performing well, and production will start in Q3 at Kiena, thereby funding some of the CapEx.
As discussed in the press release, we've included in a paste fill plant, water treatment plant, tailings management area enhancement, power and ventilation upgrades, which escalated the overall CapEx of the project. However, we are building this for the long term. We believe there are opportunities to reduce project CapEx, and the PFS is a snapshot in time of a base case. I will now pass it over to Marc-Andre to give further details on the PFS.
Thank you, Duncan. Slide four, please. The mineral resources used for the PFS is based on the resource estimate of October last year, with the drill database closeout of September. The A Zone resource conversion, to indicated, went well despite less meters drilled due to the operational disruptions attributed to the COVID-19 pandemic. The total probable mineral reserves are over 1.5 million tons at a grade of 11.9 grams per ton for a total of 601,800 ounces. 96% of the reserved ounces are in the Kiena Deep Zone at a diluted grade of 12.9 grams per ton. The remaining ounces come from the S50 Zone, located on top of the Kiena Deep, and from the Martin Zone, which is in the upper part of the mine.
The VC and the South Zones are not included in the reserve PFS, as they are currently uneconomic due to the amount of development required to access the resource. A larger resource base is required to convert these ounces into mineral reserves. The current mill process circuit is well suited to maximize the gold recovery, with averages of 98.5% for the Kiena Deep ore and 97% for the other zones. A new mineral resource estimate, exclusive of reserves, has been calculated with 156,500 ounces in the indicated category, of which 105,000 ounces is from the Kiena Deep zone. Additional mine design work is required to bring those ounces into reserves. Additionally, more than 112,000 ounces of the Kiena Deep ore remains in the inferred category. Diamond drilling is ongoing for the proposed resource conversion. We have drilled close to 42,000 meters since last September, mainly in the Kiena Deep zone.
This ongoing drilling demonstrates the potential to add more ounces per vertical meter with the discovery of the Footwall Zone that Mike will discuss later in the presentation. Additional ounces discovered in the Kiena Deep will improve the economics to a higher annual throughput over a longer life of mine. Slide five, please. The life of mine capital cost of the project is CAD 230 million, of which CAD 68 million is anticipated to be spent this year. In addition to the project capital cost, CAD 2 million for closure costs will be incurred. Mine capital costs of CAD 130 million, which includes mainly CAD 70 million for development, CAD 27 million for underground infrastructures, and CAD 24 million for mobile equipment. CAD 9 million in electrical power upgrades has been also identified in the PFS.
In addition to mine capital, CAD 53 million will be spent to increase our tailings storage capacity, install the new water treatment facility, and, like Duncan mentioned, a new paste plant. The usage of paste fill underground will allow us to maximize top cycle times in the Kiena Deep, minimize environmental impacts by decreasing the amount of tailings deposited in the truck, and allowing for dry stacking in the future. We believe the new infrastructure will put the operation in very good position, allowing for increased production and longer life of mine as we find additional resource. Only CAD 2.4 million is required at the mill, and the money will be spent this year. This confirms again the readiness of the mill for future production. Other CapEx estimated includes owners' indirect costs, and a contingency of CAD 22.5 million, which represents an overall blended rate of 11%. Slide six, please.
You can see the production profile on the upper right of the slide. The production throughput ramps up during the life of mine to reach over 100,000 ounces produced starting in 2024, as the production for the Kiena Deep reaches about 700 tons per day as more mining blocks become available in the zone. Average gold produced per year is 84,000 ounces. The average operating cost is CAD 187 per ton mill. Note that the operating cost goes down as the production increased starting in 2024 to an average of CAD 164 per ton during the best year of the production. Cash cost per ounce and AISC are respectively CAD 502 an ounce and CAD 894 an ounce. After-tax NPV at 5% discount rates is CAD 367 million for a payback of 2.7 years. Slide seven, please.
The sensitivity analysis reveals that the price of gold and the U.S.-Canadian exchange rate have the most significant influence on the NPV compared to the other parameters based on the range of the values evaluated. By comparison, variations in the capital and operating costs have a limited influence on the NPV. At $1,900 U.S., the after-tax increases by $124 million or $37 million for $491 million. Slide eight, please. The PFS has just been completed, and we already see a lot of opportunities to improve the economics of the project and the potential for adding life of mine to our exploration success. We are already well positioned for adding more ounces with the recent discovery of the Footwall Zone that Mike will introduce shortly. The bulk sample recovers 6% more gold than the reserve estimate at a feed grade of 15.7 grams per ton versus model grade of 14.7.
We are already working on reducing the utilization of sand in our paste fill recipe, which could represent a decrease of paste fill operating costs and provide additional tailings capacity. We see possible lower costs as well for the water treatment facility, as more analysis will be performed once the mine gets into production. Please note that historically, there was no water treatment facility at Kiena as the cyanide destruct ion was done naturally. I will now turn over to Mike.
Thanks, Marc-Andre. What a day for Wesdome. It's been five years since we drilled the discovery hole into the Kiena Deep A Zone, and what a great ride it's been. I mean, now we have the opportunity to bring a great mine back into production. I think that's really a good day for Wesdome. I mean, I think I'm probably as excited now as I've ever been with this project. We had some hard drilling over the last year doing the infill drilling, converting as much of the inferred over to indicated as we can for the PFS, but we have a lot of meat still on the bone, so to speak, a lot of inferred resources there. You can see the results of some of our recent drilling. We have been expanding the A Zone, which is going to be an updated resource estimate.
We still have seven drills going on the ground here. We have expanded the VC Zone at depth. We are not drilling it right now, but we will be as we start to change our focus to exploration here. The B Zone, we have got a few holes into that, which is the down dip extension of the S50, and we are starting to hit some interesting things there. Lots of news to come. I think we have a lot better understanding of this deposit than we did five years ago, and we see the potential at depth and the transitioning from sulfide-rich zones to more higher grade visible gold and quartz veins, and that is what we are focusing on at the moment. We had some great results, and certainly one of those really exciting areas is the Footwall Zone. Next slide there, please. I guess in a word, spectacular.
I mean, here we go again, right? I mean, here we got this zone, corridor veining of high grade, 50 meters wide, potentially extending 300 meters down plunge already. Look, it's early days, but it's pretty good. I mean, this is going to be a great summer. Obviously, a focus for us, we're going to pound away at that zone and see what this can add, but seeing where it sits right now and what we know, it has the potential to add a lot more ounces, more ounces per vertical meter, and change the overall project economics. I mean, that's all down the road, but that's really good so far, and we have a lot of exploration targets from the underground left to drill.
We have targets that we've sort of hit earlier in the year that we can't get back to right now because we're focusing on this Footwall Zone right now. I think a lot going on in the underground. Next slide, please. In addition to the seven underground drills, we also have two drills going on surface. We have a number of targets there. We've done airborne geophysics. We've done some deep MT surveys. We did some ice drilling. We're going to be doing barge drilling. There's really a lot of things that need follow-up here. We have a good geologic model. We have built our team now for surface drilling. Again, a lot of good news coming. Our first drilling is probably going to be following up on some targets that have already been tested and have some good results.
Expect good success in those areas. We also have some conceptual targets to try some new ideas. A good mix of exploration on surface. This will only continue to grow as we go forward here, east and west of the Kiena mine, but also in the north part of our property where we're just currently doing the data compilation, which has a lot of great potential up there as well. We just opened up Val-d'Or Exploration Office. That is going to help us to be able to focus the exploration on the other parts of our property. In cooperation with Raj and the corporate development side, I mean, we're looking for other things and we'll be able to manage other projects in the region through this Val-d'Or office.
That's farther afield and farther down the road, but you can see what Kiena is really doing here. It's getting us back into production. We're going to keep finding more and more targets, and hopefully, more of you will be acquiring additional projects now too in that area to help feed our Kiena mill. All in all, I would say a pretty good day for Kiena. With that, I'll turn it over to you, Duncan.
Thanks, Mike. We are now at the turning point where Wesdome gains traction on its vision of becoming Canada's next mid-tier gold producer. This is a significant milestone. I'd like to thank the board for their confidence, management for their dedication, and all of our employees, contractors, and consultants who have helped us get to this point. I'll now pass it over to the operator for a question and answer session.
Ladies and gentlemen, if you have a question at this time, please press the star and then the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question is from Don DeMarco from National Bank. Your line is open.
Oh, hi guys. Congratulations and thanks for taking my call. Maybe first off, I'll just start off with the bulk sample. You fired up the mill. What did you learn about the mill from processing the bulk sample? Was that a factor in what I see as achieving Kiena production in Q3, which is sooner than potentially previously expected, maybe in Q4? Was there something about the mill that was encouraging or what can you tell us?
Yeah, I can answer that, Don. Really, the mill performed admirably. I would have to say it was put on care and maintenance correctly back in 2013 when Kiena went on care and maintenance. We had been in there now for probably a year getting it ready, doing some upgrades, ensuring that everything was going to perform as per stated. I think we recovered 98.2% of our gold. I haven't seen recoveries like that ever in my life. That's an incredible recovery. As you know, the PFS is 98.5% for the A Zone and 97% for even the S50, which is a four-gram deposit. The Kiena mill certainly is performing well. We expect it to continue to perform well.
The infrastructure is in good shape, and we've been, I would say, tweaking it to modernizing it where we can and making sure that it's ready for good, robust operation.
Okay. Okay, great. Maybe to my next question then, Marc-Andre mentioned opportunities to extend the mine life and so on. What about levers to increase throughput from, say, increasing mining rates and getting the ore to the surface from the deeper parts of the mine? What we see from the PFS is that you got 100,000 ounces in 2024. You got 115,000 in 2025. Are those increases on grade, or is that grade and throughput or both? How can we get those mining rates in production even higher if some of these resources like the Kiena Footwall and Kiena A continue to prove out as expected?
Yeah, I think that's exactly it, Don. I mean, exploration success is certainly going to drive this. Let's face it, with the COVID-impacted resource conversion, we'll call it, from the inferred to the indicated, I mean, could you only imagine if we didn't have that sort of impediment in the way? I can only imagine what sort of measured and indicated resources we would have been able to have as a base case for the pre-feasibility study. We made the decision at that point that, you know what, we got to get on the road here in terms of getting Kiena going. What I really like, as you know, the main ramp, the main ramp going down on the A Zone is around, I'd say, 1,115 meters below. Anything that Mike and the exploration team is going to be able to add.
I mean, there are some additional adds already that we're seeing, Don. There are additions of A Zone proper along strike. If anything in the VC Zone or the B Zone starts to become evident as we continue descending down towards the lower levels of the known deposit, I'll say, because everything seems to be open at depth, I think that just really adds to our gain. Additionally, the S50, although it is a lower grade zone that we have, does seem to have a little bit of upside. I think that there is going to be, as you pointed out, it definitely will be a mix of volume, but with the A Zone, potential additions, I think that we'll see grade. We do view this as a base case.
I think it's just based on where we had for, I would say, limited drilling that we were able to do in 2020. It certainly does support, I'd say, higher throughput.
Okay. Maybe just as my final question then, there has not been a call since your second round of results at the Kiena Footwall, but maybe if you could just refresh, how many rigs do you have testing the Footwall right now? What are the next steps? When could we expect the next drilling update and potentially a resource at some point?
Yeah. I'm going to pass that over to Mike, if that's okay, Don.
Yeah, thanks.
Sorry, I'm just at Eagle River, Don. Can you repeat that? My phone's kind of acting up on me.
Oh, yeah, sure, Mike. I was just asking how many rigs you have testing the Kiena Footwall and when the next update might be out and potentially a resource at some point as well.
Certainly with the seven drills that we have underground, right now we have platforms for three drills to test it, and two are going at the moment. The beauty of deepening the ramp there to get ready for mining is it provides some better platforms. We are going to be using the new platforms to hopefully get holes into it faster than we have over the last several months. We certainly mastered the use of the wedge there and some other drilling techniques. I think that's worked pretty well. As far as the resource goes, it really depends on how, because we still haven't quite confirmed the geometry there yet. Once we get enough holes in that to do that, we'll be able to start building some solids and thinking about a resource estimate.
In a perfect world, we would kind of wait until the end of year to kind of get on this annual reporting of resources and reserves, same as the Eagle River mine. Certainly, if there's something that can be done earlier than that, we will. Certainly, as the results come in, we're going to be releasing them. You will have a better feel for what this thing looks like, and we'll be releasing that information. That's kind of our plan there for the resources.
Okay. Okay. Thanks so much for that. Congratulations again, guys, and good luck on the restart and ramp up the calls. Thank you.
Great. Thanks, Don.
Your next question is from Andrew Mikitchook from BMO Capital Markets. Your line is open.
Good morning, guys. Congratulations on the PFS and the go-ahead for the restart. I was wondering if you could at least give us some broad brushstrokes of guidance of how to reconcile the 2021 guidance of capital that was put out at the beginning of the year for Kiena versus the CAD 68 million in today's PFS. I'm assuming there must be some overlap in there. I think it'd be best if people don't start double-counting those numbers.
Yeah, good point. Okay. I'll pass that over to Scott Gilbert, our CFO, Andrew. Sorry, Scott, you're on mute.
Sorry about that, guys. Andrew, originally we were at CAD 35 million, and the move up to CAD 68 million is mainly due to the pace plan of about CAD 20 million and then the tailings management.
Okay. If you go back to your January press releases, you're talking I think you guys presented a capital budget for Kiena of CAD 60 million-CAD 67 million for 2021. What portion of that is kind of included into the CAD 68 million?
Sorry, could you repeat that?
Your 2021 guidance that came out in January?
Yes.
Had a number of CAD 60-67 million of capital budgeted for Kiena?
Yes.
How much of that is overlapping with the 68 that came out today?
I'm not quite sure I understand. Basically, we're still on schedule for that CAD 68 million. Of that, we've got about CAD 48 million-CAD 50 million, which is in equipment that will be spent between July and December.
Andrew, maybe if I can.
Yeah. Sorry, go ahead.
Go ahead, Duncan.
No, just to reconcile that. The 60-67 was the capital spent really in support of the project that we had guided. What Scott is talking about is the CAD 48-50 million, which is really what we would consider corporately as growth capital, more like the pre-production. As you know, the PFS does not have the pre-production figured out. Everything is in sustaining. Essentially, how we are viewing it internally here is that we probably have about CAD 50 million of what I would deem to be pre-production capital, which would be classified as growth, and the remainder would be in sustaining. In terms of our CAD 60-67 million, we are on pace for that overall. Project-wise, I would say that CAD 48 would probably be growth out of that, and the remainder would be sustaining. Does that help?
Yeah. Those numbers are kind of reconciled. They're in the same ballpark. It's not like people should be modeling both. Not 60-67 plus or other 60. There shouldn't be any misunderstandings there, right?
No. Thanks for clarifying that. That is correct.
Okay. Just a quick question for Mike. I know you already addressed having more drill pads as the ramp goes down. I think the answer is it's not an ideal angle, but is it a workable angle as to where the ramp is to drill back down onto the Footwall Zone, or should something else be planned for next year?
Yeah. I mean, for now, it's certainly workable. I would think as we go further down, we will be developing more platforms that help with the angle. Certainly, the wedging is helping a little bit with some of the angles too. We will see where the zone's going. I mean, the Footwall Zone, I mean, everything looks like it's possibly folding and maybe coming around to something more flat. At least for the area that we know the Footwall Zone is right now, we can probably adequately get it from the drilling that we're doing and the new platform that we're putting in right now. Anything depends where it goes from here. If it folds or goes deeper, then yeah, probably more platforms will be required there.
Okay. Just the last question. Any broad commentary even on the concept of a true thickness across that really long intercept from last week or the week before?
Yeah. That's a tough one to kind of nail down because it seems like there's multiple zones, and then as far as deep hole, they all come together. It is really a hard one to nail down. The average thickness of the Kiena Deep A Zone, A, A1, and A2, is around 4.5 meters or so. I know that as good as our drillers are, it can never drill a 50-meter-long hole in ore in a 4.5-meter-wide zone. I suspect it's going to be wider than that. I think that's why we want to get more holes into this thing as quick as we can so we can figure out what we have. Maybe if I was going to guess or something, and there may be multiple zones. This is the hard thing.
I mean, if this one area where we had the big hit at depth there is 10 meters wide or something, that would be fantastic. That is only 20% of the intersected core length. I think that would be a really good start for it down there.
Okay. Thanks for that color. Congrats on everything, guys. Let other people jump in with questions.
Great. Thanks, Andrew.
Once again, if anyone would like to ask a question, please press star and then the number one key on your touch-tone phone. There are no further questions at this time. Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.