Good morning. Welcome to Wesdome Gold Mines' First Quarter Financial Results Conference Call. I will now hand it over to Heather Laxton to begin today.
Excellent. Thanks, operator, and good morning, everyone. Thanks for joining us today. Before we begin, 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 management discussion and analysis dated May 12th, 2021. Both documents are available on our website and on SEDAR. Please be advised that this morning, we refiled the Q1 interim financial statements in order to reclassify an entry that impacts cash flow from operations and cash used in investment activities. This correction does not impact our cash balance at the end of the quarter.
This was an isolated transcription error in the financial statements only, and these figures were correctly reported in both the press release and the MD&A. We apologize for any inconvenience. Please note that all figures discussed on this call are in Canadian dollars, unless otherwise stated. The slides used for this presentation and a recording of this call will be posted on the company's website. Now it's over to Lindsay Dunlop, VP of Investor Relations.
Great. Thanks, Heather, and good morning, everyone. Here with us today, we have Duncan Middlemiss, President and CEO.
Good morning.
Scott Gilbert, Chief Financial Officer.
Hello, everybody.
Marc-André Pelletier, Chief Operating Officer.
Hello, this is Marc-André.
Mike Michaud, Vice President, Exploration.
Good morning.
Raj Gill, Vice President, Corporate Development.
Good morning.
We will begin today with an operational review from Marc-André, followed by a financial review from Scott, then an exploration update from Mike, and finally, Duncan will conclude with a summary and outlook. Marc, please go ahead.
Thanks, Lindsay. We started to see the benefit of the ventilation upgrade at Eagle in Q1 as we commissioned the second pressure fan on surface, allowing us to add another haulage drop at the bottom of the mine. Mill throughput began to increase, and we are on track to average 650 tons per day this year as we end the quarter with a surface stockpile of 4,300 tons. Head grade of 12.8 grams per ton were slightly lower than budget, particularly at the beginning of the year, due to stope sequencing and lower grade ore in the underground circuit. Grades steadily increased during the quarter and will continue through the year as we are preparing a new stope from the high-grade 203 Zone.
We are also getting very close with the development in ore at the Falcon Zone, a significant milestone because that will open an additional workplace, diversifying stope production from the bottom of the mine. This will allow us to reach our medium-term objectives of filling the mill to capacity exclusively with the high-grade Eagle underground ore. To that end, Mishi was mined out per plan in Q4 2020, and all in-stock pile ore will be processed this year. Also, in Q1, we sold 1,793 ounces from the refining of the Kiena Deep block sample ore that was processed last year. We recovered 6% more gold compared to the resource block model grade. A very exciting accomplishment, and obviously an important step as we de-risk the company from a single asset producing mine to a two producing high-grade gold mines company.
We cannot wait to release the PFS results later this quarter. Scott will now take over and provide a review of the financials.
Thanks, Marc. We sold 20,664 ounces of gold at an average realized price of CAD 2,223 per ounce to generate CAD 46 million of revenue from the Eagle River complex. We generated CAD 22 million in operating cash flow. We spent CAD 20.4 million on capital, which includes CAD 12.6 million at Kiena and CAD 2.2 million on growth capital at Eagle River. The cash balance remains at CAD 64 million. The net income was CAD 7.1 million or CAD 0.05 per share. Earnings should be higher in the rest of the year due to a planned increase in production.
The cash cost was CAD 1,076 per ounce, and the AISC was CAD 1,497 per ounce, which were higher than guidance due to lower gold production and higher costs for development, equipment fleet, and surface infrastructure, some of which are one-time expenditures. We are tracking to achieve guidance. To Mike for a review of exploration.
Thanks, Scott. Exploration drilling within the Eagle River Mine continues to expand the known zones of gold mineralization, including the high-grade 300E Zone that has now been extended to the 1,400 meter level. Also, definition drilling continues at the Falcon Zone. An initial sill development is expected to commence in Q2, thereby providing an exciting opportunity for the first time to assess the gold mineralization in the volcanic rocks. Additionally, we are continuing to develop and explore the 311 West Zone along the western margin of the mine diorite. The zone has transitioned from the diorite into the adjacent mafic rocks, again, highlighting the potential of the volcanic rocks to host gold mineralization. Brownfields exploration remains a priority for the next several years. Meanwhile, surface drilling is ongoing both east and west of the mine to follow up on anomalous values returned from regional drilling completed in 2020.
An independent comprehensive analysis of the structural geology has been completed to aid this exploration. In total, in excess of 150,000 meters of drilling are planned for this year. At Kiena, what a great quarter, with seven drills that have continued to provide spectacular exploration results. In March, we announced a very exciting new discovery within 50 meters of the footwall of the A Zone. For the first time, more optimal drilling platforms, improved drilling practices, and the use of directional drilling resulted in the discovery of at least two new zones of high-grade gold mineralization. One hole returned 11.9 grams per ton over 22 meters of core length. Although it's early days, this discovery of additional high-grade could have a very significant positive impact on the resource base, as well as the ounces per vertical meter of the A Zone and the overall project economics.
This drilling highlights the potential to add ounces, not only in this area, but illustrates the untested potential of the entire gold system around the Kiena Mine. Obviously, this area remains a major focus for this year's drilling, and there are three rigs currently dedicated to further proving out this potential new zone. In addition to this new discovery, we have also focused the drilling on expansion, not only at the A and BC Zones, but at other prospective targets within the mine area. As part of this exploration focus, initial drilling has successfully expanded the size of several known mineralized zones. At the A Zone, for instance, one hole returned 46.2 grams per ton gold over 24 meters of core length, or around 37 grams per ton gold over seven meters true width. This is not in the current resource base.
Continued drilling in this area is expected to contribute ounces to any future resource updates. We have many explore targets to test this year and have in place an aggressive program in excess of 65,000 meters of underground drilling to test these targets. We are excited to start exploration on the underexplored B Zone, which is interpreted as the down-plunge extension of the previously mined S50 Zone. The 2021 surface exploration program consists of 42,000 meters and is ongoing to test regional targets from surface. Overall, an exciting year with expected good news flow. Over to you, Raj.
Thanks, Mike. We're on track to close Moss Lake transaction in Q2. Of the CAD 57 million in headline value, we expect to receive at closing CAD 12.5 million in cash and a 30% equity stake worth approximately CAD 20 million pre-listing. Goldshore's initial marketing has been very well-received, and we're confident that Wesdome shareholders will benefit alongside Goldshore shareholders as the team aggressively explores the land package and updates the Moss Lake resource. Over to you, Duncan.
Great. Thanks, Raj. In summary, it has been an active start to the year with many positive developments. Mainly, the exciting exploration and progress made towards a quick restart at Kiena. We completed the reconciliation of the A Zone bulk sample, which has produced 6% more gold at a feed grade of 15.7 grams per ton versus 14.7 grams, which was predicted in the resource block model. We also made significant strides towards the completion of the PFS and are on track to release the results, along with a restart decision later this quarter. This is a very exciting time in the company's future. By the end of the year, we expect to have two high-grade underground gold mines producing in Canada, each on their way to producing over 100,000 ounces per year and on our way to realizing our goal of becoming Canada's next mid-tier gold producer.
At Eagle, we continue to make operational and efficiency improvements to increase daily tonnage rates despite the challenges of operating in the pandemic. In the first quarter, the mine generated healthy operating cash flow, the majority of which was reinvested at Kiena. Free cash flow generation will improve in the coming quarters as grade increases at Eagle and as we get set to produce and sell initial ounces from Kiena based on a positive restart decision. With cash of CAD 64 million, we are fully funded for all our exploration and development programs this year. We will also get a top-up of CAD 12.5 million into the treasury when the Moss Lake transaction closes later this quarter. The company has performed very well despite the challenges of the global pandemic. I would like to thank all employees and stakeholders for their diligence and commitment to safety.
At this time, I would also like to invite all shareholders about our upcoming annual general meeting held on June 1st at 10:00 A.M. Eastern Time. Due to the current stay-at-home order in Toronto, the meeting will be conducted virtually once again this year. Please pre-register using the link available on our website.
We'll now open the call up for the question and answer session. Operator, please go ahead.
Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. Again, that is star one on your telephone keypad. Your first question comes from the line of George Topping from Industrial Alliance. Your line is open.
Great. Thank you. Duncan or Marc-André, I think for this one. On the Falcon, can you update us on your expectations on the timeline to bring that into production for when you expect the first stope there with the drilling and the development that's required ahead of that? When do you expect to see some production from there?
Yeah, I'll let Marc take that, George.
Good morning, George. This is Marc. As you know, we've been very active this year at the Kiena Mine to get prepared for a restart. We think that we can bring the mine into production within three months following the formal decision of the Kiena restart.
I think George was talking about the Falcon Zone, were you not, George?
The Falcon Zone, yes.
Yeah, the Falcon Zone.
I apologize for that. Okay, actually it's in this quarter plan that we're going to be developing in the north, George, we're getting very close to that.
Very good.
Sorry, if I can add on, what we see for the remaining of the year is we see actually some production coming from the Falcon in the third quarter this year.
All right. I think it'll be quite slow build up, a few hundred tons.
Yeah, I'd say less than 10,000 ton this year. The key thing for the Falcon Zone is the development. We have about 900 meters of development in the budget this year, and we're basically setting up the production for 2022 from the Falcon Zone.
Great. The Kiena ramp Q4, have you got better visibility on what you might be looking for in 2022 and 2023 in terms of the production there?
Yeah, absolutely.
Have you changed anything from the technical report?
From the PEA, George, I guess you're referring to? Yeah, certainly there's some changes. I would have to say that they're overall positive in terms of the ramp up. I don't want to get into particulars, of course, until we release this, but I think that we're quite satisfied with how Kiena is moving, and we just stressed, and I look at the discovery in the footwall that we've been able to generate and some other interesting targets down there. Really, we really have the view that our ounces per vertical meter are really likely to increase over that sort of base load of the resource that we had. It was kind of set down December of 2020, right?
Yeah. Just last question before I hand it over is, everybody's talking about inflation. We know the steel and all of that, but I'm more concerned about underground wages. Are you finding it difficult to get people to come and work at the cost, the wages that you used to pay?
It is competitive, George. There's no doubt about it. Val-d'Or is really one of probably the hottest areas in Canada, probably North America, in terms of mining activity. What we're seeing right now is an overdemand for diamond drills and diamond drillers. That remains, I would say, probably the number one aspect of this right now. Definitely, we have been able to fulfill our manpower needs so far from an underground mining perspective. Again, we're very fortunate to be right in the center of the activity there because there is a great talent pool to draw from. It is getting more competitive, there's no doubt about it. It does sort of remind me of 2005, 2006, and 2007 when we entered this phase, whether it's a super cycle, but there certainly is a broad demand for commodities and that.
Got it. Good. Okay. Thanks, everyone.
Thanks, George.
Your next question comes from the line of Andrew Mikitchook from BMO Capital Markets. Your line is open.
I just have one quick question from my part. The PEA from last year for Kiena had a relatively nominal CapEx. You guys are diligently giving us updates on how you're making progress through advancing Kiena. Can you give us any guidance on how much of that CAD 35 million you may have already spent or will have spent by the time you're in a position to start this, to have an official restart decision?
Yeah, exactly. As you know, Andrew, officially our advanced exploration activities continue through this period. We're not set up for, I'd say, commercial production. Obviously, some of the things that we've been doing certainly does parallel well to us getting into commercial production rather quickly. In terms of some of the things that we've been able to do, like really the focus is here so far is the tailings management facility, continued underground development. The ramp development, of course, being key, of course, as it is the majority of the A Zone is beneath us. Essentially, those are the activities in terms of what we've been able to accomplish through what you would've seen for the CAD 35 million.
I don't have a number for that right now. We are progressing along the lines of the advanced exploration. I think that we can quickly pivot to commercial production in the subsequent quarter almost. Sample area, that really is sort of the basis.
No risk of or indication on your part that this number's going up. You've been, if anything, decreasing that number. Is that fair expectation?
Well, we've been on this right now.
Thank you very much. Congratulations on the quarter.
Thanks.
This concludes today's conference call. You may now disconnect.