Wesdome Gold Mines (WDO.TO | WDOFF) reported Q4 and 2018 financial results on Thursday, February 21 after markets closed.
Management then held a conference call at 10am this morning (https://edge.media-server.com/m6/p/hm9wut3y).
Here are my main takeaways. Note some of the below are my own interpretations from the call and not representative of what was said by Wesdome management.
Confidence in Eagle River getting to 100k production is now tangible and it may be able to produce a bit more than that if the grade increases – model forecast uses 12gpt, 97% recovery, 800tpd. The stairway to 100k + is now visible.
Confidence in 7 and 300 at Eagle River becoming more apparent – the grades and widths are better and growth in 2018 inferred is a reflection of that potential. It is interesting to observe that if these zones are similar to the 8 zone, the potential could be meaningful because the 8 zone has been mined for over 1m ounces historically.
Something observed that was also interesting to me is the head grade forecast for 2019 being between 15.5gpt-16.5gpt, which is not only higher than reserve grade, but also higher than proven grade, which stands at 14gpt.
Up-plunge extension at Kiena would save about $15M so $35M in capex to start up vs $50M. The up-plunge extension to VC would extend another 400m + of strike on top of the 500m already defined. The confidence shown on this front is very reassuring.
2019 budget is based on $1550 CAD Gold. A $200 price difference annualized translates into $15M in additional revenues. This is very meaningful to the funding equation and I always enjoy seeing a conservative approach to budgeting.
Kiena Deep A zone capping factor will be revisited again, particularly in the area that was capped at 45gpt. A PEA will be published later in the year, which will be the green light to re-start. Something to keep an additional eye on aside from up-plunge and down plunge extension possibilities is the 9,000m of surface drilling targeting additional parallel zones. I wait patiently for any updates on this.
Exploration updates will be a constant theme this year so be on the lookout for a busy year. I would estimate updates every 4-6 weeks. Perhaps we may get a surprise at BMO next week.
For me, it is important to remain steadfast and keep reminding myself that the thesis here is not just about the re-birth of Kiena but also the transformation of Eagle – simultaneously.
What you end up getting is a mid-tier cross over from junior status that will be going from single mine risk to multiple assets that just so happens to be located in very good jurisdiction with a side dish of high grade to boot. This warrants a premium valuation to NAV with multiple expansion as market prices in a higher terminal rate of a 200k + producer over x number of years discounted at whatever rate it deems reasonable for the risk. Yes it has run up quite a bit already. But look around, how many of these profiles exists today? Low supply in very high demand.
One final point. I still think 2019 production guidance is conservative, but who’s counting, too many other catalysts to focus on. That’s it for now. Stay tuned.