Wesdome Q2 Production Preview

At the beginning of the year, Wesdome Gold Mines guided a production profile for the first half of 2019 ranging from 31,000 – 35,000 ounces, with the second half production estimated at between 41,000 – 45,000 ounces. For the year, the company has guided 72,000 to 80,000 ounces, or 76,000 at the midpoint. They are on track to meet these targets, but I suspect there is ample room for an upside surprise.

Wesdome Gold Mines started the year on a very strong note when they announced Q1 production of 19,010 ounces on the back of an 18.5 gpt showing from the Eagle River mine. This was despite the fact that the mill had a planned shut down of 24 days in the quarter, including 19 days in March.

The strong showing allowed for maintenance work that was originally scheduled for Q2 to be completed in Q1 instead. With only 79% mill availability during the quarter, Wesdome was left with an Eagle ore stockpile of 15,000 t at the end of Q1.

Assuming this stockpile is whittled down somewhat in Q2 as well as mill availability returning to more normalized levels, would indicate to me another strong Q2 is in the works.

Assuming 18,000 ounces are produced in Q2, which I think is achievable and could be higher, that would put their production at 37,000 or 2,000 ounces above the high end of their 31,000-35,000 1H guide.

This result in conjunction with achieving the low end of their previously stated 41,000-45,000 H2 guide would put Wesdome above the full year mid point of 76,000 by 2,000 ounces, or at 78,000 ounces.

As it is expected that Wesdome will be mining the 303 high grade lens through at least the rest of this year, and given the grade and tonnage is coming in higher than previously expected, raising annual guidance therefore appears to be a very high likelihood.

By simply keeping H2 production intact at between 41,000-45,000, it is my belief that Wesdome would be in a position to revise their annual production guidance to somewhere in the 78,000 – 82,000 neighborhood during their August Q2 earnings release, much like the playbook of last year.

Such a guidance revision would be a step up from the initial annual guidance of 72,000-80,000, and would increase the mid-point by 4,000 to 80,000 from 76,000. Keeping the H2 guide intact under this scenario would provide a margin of safety for Duncan & Co to go forward with the guidance raise.

We will find out soon enough what surprises, if any, Wesdome may have in store for us.

That’s it for now.

Advertisements

4 thoughts on “Wesdome Q2 Production Preview

  1. Have owned Wesdome for months, sadly not years. I understand what u say but is the valuation getting a bit rich? Alot seems to be bet on the actual and satisfactory kick start for Kiena? The odds would say that this will be problematic. Its mining after all. Everything seems good. Management iis excellent, grades, etc etc.I am still confident but ……? What could be a problem? JM

    Like

    1. Kiena is the transformational asset for the company. Indeed, quite a bit is priced in. Still a lot of unknowns, including how many ounces, the economics, how big the A zone system is etc. There are also parallel structures and potential extensions beyond what is known today. Things could go wrong, yes. But I will give management the benefit of the doubt. Quite frankly, think Wesdome gets bought out here in next 12-18 months. We shall see. In the meantime, higher gold is an added buffer.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.