Wesdome Gold Mines Ltd 2012 annual and fourth quarter results

TORONTO, March 15, 2013 /CNW/ - Wesdome Gold Mines Ltd (TSX: WDO) ("Wesdome" or the "Company") reports its financial and operating results from its Canadian operations for the year ended December 31, 2012.  This information should be read in conjunction with the Company's annual financial statements, notes to the financial statements and Management's Discussion and Analysis.  All figures are in Canadian dollars unless otherwise specified.

The Company owns the Eagle River and Mishi gold mining operations in Wawa, Ontario and the Kiena mining complex in Val d'Or, Quebec.  The Eagle River mine commenced commercial production on January 1, 1996, the Kiena mine on August 1, 2006 and the Mishi Mine on January 1, 2012.

HIGHLIGHTS

• New Mishi Mine in production
• Revenues of $92.3 million
• Cash flow from operations* of $12.1 million or $0.12 per share
  * prior to working capital adjustments
• Pre-tax earnings of $2.1 million prior to one-time non-cash charge
• Cash and bullion at market at year-end of $14.9 million
• Bullion inventory of 8,965 ounces at year end

Donovan Pollitt, CEO comments "2012 was a year of contrasting successes and challenges.  Our new Mishi Mine came onstream on time and budget, yet we faced milling availability constraints.  Grades and production from Eagle River increased, yet operations at Kiena showed declines in grade.  Restructuring the operations at Kiena showed tangible cost savings, yet margins continued to contract.  We have made some tough decisions to move forward in a focused stepwise fashion which preserves the Company's financial position while investing for increased profitability and production growth."

OVERALL PERFORMANCE

At December 31, 2012, the Company had $13.9 million in working capital, which includes 8,965 ounces of gold bullion in inventory.  In 2012, revenue exceeded mining and processing costs by $15.8 million, $11.2 million in capital costs were incurred and $4.1 million of debt was retired.  Cash flow from operations totalled $12.1 million and the net loss was $45.3 million.  The net loss is entirely attributable to non-cash impairment charges - a $60.9 million write-down to the carrying value of the Kiena Mine Complex - and another non-cash write-down of $1.0 million for an exploration property option which was allowed to lapse in Q2 of 2012.  Without these one-time events, pre-tax earnings would be $2.1 million.

In 2012, production increased 17% to 55,813 ounces of gold and gold sales increased 7% to 55,500 ounces compared to 2011.  Mining and processing costs increased 17% to average $1,385 per ounce for the year on production basis, and at year end the Company had a bullion inventory of 8,965 ounces of gold.

On March 7, 2013, the Company announced the suspension of operations at the Kiena Mine Complex.  This will preserve and improve the Company's financial position, allowing capital allocation to projects with the best shorter term returns to shareholders.  Kiena remains a good long-term investment but our mining development sequence got tight to maintain an economic scale production rhythm at the current grades.

Favourable external factors which influence results are continued low interest rates, currency debasement and general distrust in financial institutions and economic policy.  Negative external conditions included a stronger Canadian dollar and a continued shortage of experienced mine operators, professional staff, and technical services which has proven inflationary in our industry in general.  We believe these demands will ease as risk capital has dried up and regional competing capital projects run their courses or cease being funded.

In general, the mining industry has been stretched due to unprecedented activity.  We see contractor and materials availability starting to ease.  Large international capital projects have been suspended and tight risk capital markets have inhibited competing exploration and development projects from junior companies.

The market's confidence in the gold mining industry is currently very fragile following a string of high-profile cost overruns, foreign mining policy misadventures, and executive ousters.  Demand for gold remains strong, prices remain strong and the underlying fundamentals to support continued strength have never been more favourable.

RESULTS OF OPERATIONS

		Three Months Ended Dec 31		Twelve Months Ended Dec 31
		2012	2011	2012	2011
EAGLE RIVER COMPLEX
Eagle River Mine
	Tonnes milled	36,940	48,639	155,020	182,449
	Recovered grade (g/t)	7.0	5.2	6.5	4.8
	Production (oz)	8,314	8,104	32,223	28,231
Mishi Mine (commercial production commenced January 1, 2012)
	Tonnes milled	11,919	-	64,915	-
	Recovered grade (g/t)	1.5	-	2.3	-
	Production (oz)	562	-	4,776	-
	Surface stockpile (tonnes)	37,301	-	37,301	-
Total Eagle River Complex
	Production (oz)	8,876	8,104	36,999	28,231
	Sales (oz)	7,500	5,000	36,400	29,000
	Bullion revenue ($000) ^†	12,709	8,598	60,545	44,613
	Mining and processing costs ($000)	11,460	5,604	44,759	29,448
	Mine operating profit ($000) *	1,249	2,994	15,786	15,165
	Gold price realized ($Cdn/oz)	1,695	1,717	1,661	1,536
KIENA MINE COMPLEX
	Tonnes milled	70,279	56,414	265,872	255,311
	Recovered grade (g/t)	2.2	2.5	2.2	2.4
	Production (oz)	4,869	4,618	18,814	19,516
	Sales (oz)	5,000	5,000	19,100	23,000
	Bullion revenue ($000) ^†	8,498	8,608	31,763	35,030
	Mining and processing costs ($000)	6,970	8,676	31,780	35,568
	Mine operating profit (loss) ($000) *	1,528	(68)	(17)	(538)
	Gold price realized ($Cdn/oz)	1,700	1,717	1,658	1,519
TOTAL MINE OPERATIONS
	Production (oz)	13,745	12,722	55,813	47,747
	Sales (oz)	12,500	10,000	55,500	52,000
	Bullion inventory (oz)	8,965	8,652	8,965	8,652
	Bullion revenue ($000) ^†	21,207	17,206	92,308	79,643
	Mining and processing costs ($000)	18,430	14,280	76,539	65,016
	Mine operating profit ($000) *	2,777	2,926	15,769	14,627
	Gold price realized ($Cdn/oz)	1,697	1,717	1,660	1,529

^†	Bullion revenue includes minor by product silver sales
*	The Company has included in this report certain non-IFRS performance measures, including mine operating profit and mining and processing costs to applicable sales. These measures are not defined under IFRS and therefore should not be considered in isolation or as an alternative to or more meaningful than, net income (loss) or cash flow from operating activities as determined in accordance with IFRS as an indicator of our financial performance or liquidity. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate the Company's performance and ability to generate cash flow.
	Mine operating profit excludes the following specific items included as operating expenses on the Consolidated Statements of Income: Depletion, Production royalties, Corporate and general, Share-based compensation and Amortization of capital assets.

In 2012, bullion sales exceeded mining and processing costs resulting in a mine operating profit, or gross margin, of $15.8 million.  In addition to these direct operating costs, additional cash costs, including royalty payments, corporate and general costs and interest payments amounted to $4.8 million.

At the Eagle River Mine, grades steadily improved as we worked our way through a heavily diluted sequence of stopes and development ore.  In 2012, recovered grades were 35% higher than in 2011 and forward development in the 811 Zone reflects the start of a higher grade mining sequence expected to last through 2015.

The new Mishi Mine commenced commercial production on January 1, 2012.  In 2012, we mined 102,216 tonnes of ore and 1,213,664 tonnes of waste for a stripping ratio of 11.9:1.  With the incorporation of a 200 metre long east pit extension into the mine plan, the current life-of-mine stripping ratio decreases to 2.7:1.  In 2012, mill availability was less than expected.  Over the year we averaged 625 tonnes per day and we were planning for 900 tonnes per day.  Considerable efforts have been made to debottleneck processes, update equipment and human resources and improve reliability and throughput.  This work is ongoing and represents our easiest route to increasing production growth over the short term.  Mishi reserves and resources justify a longer term view.  We have commenced studies to select a new tailings management facility, with a view towards increasing our milling capacity.

We have substantially worked our way through the high strip early stages of the Mishi Mine, stockpiled over 37,000 tonnes of ore at the mill and increased our reserve life to 10 years at current rates.  The fact that the first year's production returned better grades than estimated gives us great optimism in the potential of this asset to drive a longer term vision and support key infrastructure investments.

The Kiena Mine in Val d'Or continued to operate on very thin margins.  The last two years have been marginal in both grade and production.  Mining viability, reserve and resource estimates are acutely leveraged and reliant on external factors, particularly the gold price.  Despite this, we keep identifying new zones with limited drilling enforcing the view of this property's outstanding exploration potential.  On March 7, 2013, the Company opted to suspend mining at Kiena by June 30, 2013.  Salvage mining of developed reserve blocks will continue, after which the infrastructure will be placed on care and maintenance status.  The decision was made in context of optimizing returns of capital allocated amongst all our operating mines and projects.  Management does not favour equity financing options under current fragile market conditions to fund further exploration and development work at this point at Kiena.

In summary, 2012 demonstrated a good bounce back from a challenging 2011 and provided us the confidence that this production growth can continue.

FOURTH QUARTER

During the fourth quarter, 2012, combined operations produced 13,745 ounces of gold and 12,500 ounces were sold at an average realized price of $1,697 per ounce.  This represents an 8% increase in production and a 25% increase in ounces sold compared to the fourth quarter of 2011, while realized gold prices were similar.

At Eagle River, recovered grades improved 35% to 7.0 gAu/tonne, yet mill throughput declined 24% to 36,940 tonnes.  Mill throughput was challenged by an unprecedented series of mechanical failures that were very frustrating and costly.  These events likewise affected Mishi throughput and recovered grades during the quarter.  As previously mentioned, we are investing in equipment, infrastructure and human resources to increase the mill's efficiency, capacity and reliability.

Kiena posted a steady, uneventful quarter of production with sales of 5,000 ounces of gold (same as in 2011) and contributed $1.53 million of the fourth quarter's $2.78 million mine operating profits.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2012, the Company had working capital of $13.9 million compared to $7.2 million at December 31, 2011.  During fiscal 2012, capital expenditures totalled $11.2 million compared to $19.3 million in 2011.  Capital expenditures were concentrated in minesite development, mine and mill infrastructure.

On May 24, 2012, the Company completed a $7,021,000 placement of unsubordinated convertible debentures.  The term is 5-years bearing interest at 7% per annum payable semi-annually and convertible into common shares at $2.50 per common share.  The net proceeds of $6,821,000, along with cash at hand, were used to redeem existing convertible debentures in the amount of $10,931,000 that matured on May 31, 2012.  This resulted in the Company paying down $4.1 million in debt.

The result of this financing is that interest costs moving forward will decline and working capital improved by moving the liability component to long term liabilities from short term liabilities.

The Company traditionally maintains an inventory of refined gold bullion.  At December 31, 2012, this liquid asset consisted of 8,965 ounces of gold with a market value of $14.9 million.  The bullion inventory is carried at the lower of cost or market, in this case at a cost of $13.3 million.

Additionally, the Mishi ore stockpile at the mill, which totals 37,301 tonnes, is carried in inventory at a cost of $3.2 million, or $85 per tonne.

Management believes we have sufficient liquidity to carry out our mining, development and exploration programs and prefers not to dilute shareholders' interest with equity issues.  The Kiena mining suspension will help preserve our financial position and improve return on capital.

With current gold prices, operations are capable of generating cash flow as they have in the past.

OUTLOOK

Management believes the suspension and salvage operations at Kiena will enhance the Company's cash flow generating capacity.

Currently forecast production for 2013 is 55,000 ounces.  We continue to expect the Eagle River Mine to produce about 41,000 ounces and the Mishi Mine about 9,000 ounces.  We believe Kiena will contribute about 5,000 ounces by the time mining activities are suspended in June, 2013.

ABOUT WESDOME

Wesdome is in its 26^th year of continuous mining operations in Canada.  It currently has two producing gold mines in Wawa, Ontario and owns the Kiena Complex in Val d'Or, Québec.  The Company has 101.9 million shares issued and outstanding and trades on the Toronto Stock Exchange under the symbol "WDO".

This news release contains "forward-looking information" which may include, but is not limited to, statements with respect to the future financial or operating performance of the Company and its projects. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The Company undertakes no obligation to update forward-looking statements if circumstances, management's estimates or opinions should change, except as required by securities legislation. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

Wesdome Gold Mines Ltd. Consolidated Statements of Financial Position (Expressed in thousands of Canadian dollars)
December 31			2012		2011
Assets
Current
	Cash and cash equivalents	$	4,633	$	5,215
	Restricted funds - short term		200		-
	Receivables		4,298		7,337
	Inventory		19,633		15,271
			28,764		27,823
Restricted funds			2,381		2,385
Deferred income taxes			14,870		615
Mining properties, plant and equipment			32,681		90,114
Exploration properties			30,154		30,886
	$		108,850	$	151,823
Liabilities
Current
	Payables and accruals	$	13,996	$	8,944
	Current portion of obligations under finance leases		898		913
	Convertible 7% debentures		-		10,726
			14,894		20,583
Income taxes payable			22		22
Obligations under finance leases			641		818
Convertible 7% debentures			5,760		-
Provisions			2,545		1,593
			23,862		23,016
Equity
Equity attributable to owners of the Company
	Capital stock		122,651		122,685
	Contributed surplus		2,059		1,960
	Equity component of convertible debentures		870		1,970
	(Deficit) retained earnings		(41,009)		1,585
			84,571		128,200
Non-controlling interest			417		607
Total equity			84,988		128,807
		$	108,850	$	151,823

Wesdome Gold Mines Ltd.
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Expressed in thousands of Canadian dollars)
		Three Months Ended Dec 31				Twelve Months Ended Dec 31
			2012		2011		2012		2011
Revenue
	Gold and silver bullion	$	21,207	$	17,206	$	92,308	$	79,643
Operating expenses
	Mining and processing		18,430		14,280		76,539		65,016
	Depletion of mining properties		1,570		1,550		8,340		6,540
	Production royalties		252		230		965		822
	Corporate and general		920		520		2,703		2,604
	Share based compensation		90		132		601		935
	Impairment charges		60,948		-		61,898		-
			82,210		16,712		151,046		75,917
(Loss) income from operations			(61,003)		494		(58,738)		3,726
Interest and other income			10		293		70		549
Interest on long term debt			(206)		(384)		(1,081)		(1,575)
Other interest			(8)		(111)		(26)		(1,301)
Accretion of decommissioning liability			(14)		(18)		(54)		(66)
(Loss) income before income tax			(61,221)		274		(59,829)		1,333
Income tax expense (recovery)
	Current		2		(475)		13		(72)
	Deferred		(14,759)		253		(14,589)		1,165
			(14,757)		(222)		(14,576)		1,093
Net (loss) income			(46,464)		496		(45,253)		240
Total comprehensive (loss) income		$	(46,464)	$	496	$	(45,253)	$	240
Net (loss) income and total comprehensive   (loss) income attributable to:
	Non-controlling interest	$	(41)	$	(34)	$	(195)	$	(208)
	Owners of the Company		(46,423)		530		(45,058)		448
		$	(46,464)	$	496	$	(45,253)	$	240
Earnings and comprehensive   earnings per share
	Basic	$	(0.46)	$	0.00	$	(0.44)	$	0.00
	Diluted	$	(0.46)	$	0.00	$	(0.44)	$	0.00
Wesdome Gold Mines Ltd.
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)
		Three Months Ended Dec 31				Twelve Months Ended Dec 31
			2012		2011		2012		2011
Operating activities
	Net (loss) income	$	(46,464)	$	496	$	(45,253)	$	240
	Depletion of mining properties		1,570		1,431		8,340		6,540
	Accretion of discount on   convertible debentures		58		159		348		654
	Impairment charges		60,948		-		61,898		-
	Loss (gain) on sale of equipment		-		3		23		(19)
	Share-based compensation		90		132		601		935
	Deferred income taxes		(14,759)		253		(14,589)		1,165
	Interest expensed		148		(965)		733		920
	Accretion of decommissioning liability		14		17		54		66
			1,605		1,526		12,155		10,501
	Net changes in non-cash working   capital		2,107		(1,041)		2,016		(5,532)
			3,712		485		14,171		4,969
Financing activities
	Exercise of options		-		5		-		1,600
	Shares issued by a subsidiary of the
	Company to third parties		-		-		-		160
	Funds paid to repurchase common   shares under NCIB		-		(100)		(42)		(118)
	Redemptions of convertible debentures		-		-		(10,931)		-
	Issuance of convertible debentures,   net of financing		-		-		6,821		-
	Increase in (repayment of) obligations   under finance leases		553		(262)		(192)		(1,266)
	Interest paid		(148)		965		(733)		(920)
	Dividends paid		-		-		-		(2,028)
			405		608		(5,077)		(2,572)
Investing activities
	Additions to mining and exploration   properties		(3,669)		(5,158)		(11,234)		(19,280)
	Proceeds on sale of equipment		-		20		3		161
	Funds held against standby letters   of credit		(516)		40		(196)		35
			(4,185)		(5,098)		(11,427)		(19,084)
	Net changes in non-cash working   capital		1,448		(319)		1,751		(904)
			(2,737)		(5,417)		(9,676)		(19, 988)
Decrease in cash and cash equivalents			1,380		(4,324)		(582)		(17,591)
Cash and cash equivalents,   beginning of period			3,253		9,539		5,215		22,806
Cash and cash equivalents,   end of period		$	4,633	$	5,215	$	4,633	$	5,215
Cash and cash equivalents consist of:
	Cash	$	3,826	$	5,215	$	3,826	$	5,215
	Term deposit (2012: 0.93%)		807		-		807		-
		$	4,633	$	5,215	$	4,633	$	5,215

 

SOURCE: Wesdome Gold Mines Ltd.

Donovan Pollitt, P.Eng., CFA
President & CEO
416-360-3743   ext 25

8 King St. East, Suite 1305
Toronto, ON, M5C 1B5
Toll Free: 1-866-4-WDO-TSX
Phone: [phone], Fax: [phone]
Email: [email protected], Website: www.wesdome.com