Shares in Wesdome Gold Mines (TSX: WDO) shed nearly 11% of their value on Friday after the company reported production was down nearly a quarter from a year ago, while conditions at its Kiena mine in Quebec are challenging.
Third-quarter output of 22,883 oz. gold was 16% less than the same quarter a year ago and 22% less for the first nine months of this year compared with the same period in 2021, the company said in a news release.
The shares had lost 98¢ or 10.7%, hitting $8.16 by 2 p.m., regaining slightly from their low.
Wesdome operates the Eagle River mine 50 km west of Wawa, Ont. near Lake Superior and the Kiena mine near Val-d’Or, Que. Both mines had planned shutdowns in July for upgrades. Wesdome said it is aiming for around 120,000 oz. production this year, the lower end of its guidance.
The production target could be optimistic when fourth-quarter output needs to hit 45,000 oz. and it hasn’t surpassed 41,600 oz. yet, analyst Echelon Capital Markets said in a note on Friday. Still, Echelon maintained a buy rating on the stock with a $11.75 per share price target.
“Despite recent operational challenges (exogenous and home grown), we continue to highlight WDO‘s organic production growth profile solely in a Tier 1 Jurisdiction and the potential for continued positive exploration results from aggressive drilling at both Kiena and Eagle River,” Echelon analyst Ryan Walker wrote.
“We look for improved operational performance in the quarters ahead, especially on the back of commissioning of the paste plant at Kiena which should help improve the mining rate ramp-up and speed up the mine’s production cycle.”
The challenging conditions at Kiena concern the company’s efforts to increase production at the site of a former mine with a 930-metre shaft and 2,000 tonne-per-day mill that was restarted in May, 2021. The paste fill plant installed in the third quarter is on track to start by year-end, the company said.
Wesdome has proven and probable reserves of 1.18 million oz. gold, according to data compiled by Mining Intelligence. The grade is at 10.7 grams gold per tonne at Eagle River and 10.2 grams gold per tonne at Kiena, Wesdome said in the release. The cash cost per oz. is $875 to $970 with gold sales this year so far earning an average of $2,246 per oz., the company said.
“There was a planned shut down in July to complete mill upgrades and refurbishment work, which went according to plan and has already yielded operational gains such as reduced reagents consumption,” Wesdome president and chief executive officer Duncan Middlemiss said in the statement. “We will have the ability to focus on mine development which will result in increased operational flexibility, and be better positioned to operate successfully in the challenging ground conditions encountered in Kiena Deep.”
Wesdome shares have traded in a 52-week window of $7.43 and $16.77. It has a market cap of $1.1 billion.
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