Wesdome management talks high-grade discovery at Kiena

VANCOUVER — Shares of Wesdome Gold Mines (TSX: WDO; US-OTC: WDOFF) were off to the races following an impressive set of assays from a new underground discovery at the Kiena gold complex in Val D’Or, Quebec. The results are especially promising since the company was forced to shutter the mine back in 2013 due to falling gold prices, lower grades and related cost pressures.

Kiena’s measured and indicated resources total 2.5 million tonnes grading 5.59 grams gold per tonne for 449,000 contained oz., while inferred resources include 1.6 million tonnes at 7.97 grams gold for 400,000 contained oz.

The discovery was made when two drills tested for a “repetition of the S-50 Zone along a Z-fold interpretation 200 metres to 300 metres below existing mine infrastructure at a depth of approximately 1,200 metres.” Wesdome has identified “at least” two quartz veins and quartz vein breccia systems near altered and deformed komatiite-tholeiitic basalt contacts.

The high-grade results include: 17.4 metres of 94.35 grams gold from 491.5 metres depth in hole 6124; 14.25 metres of 223.12 grams gold from 695 metres depth in hole 6125; and 8.2 metres of 8.43 grams gold from 469 metres depth in hole 6130A.

Staff working underground at the Kiena mine. Credit: Wesdome Gold Mines.

“I’d say the property is one of the best brownfield gold exploration assets on the planet. We’re drilling a structural style that has been demonstrated by the historic mine, which was a large Z-fold with a big, fat north-south arm on it. We’ve done some drilling in the past to examine the southeast corner to depth, and we basically turned the drills around,” explained vice-president exploration George Mannard during an interview.

“The S-50 Zone at Kiena was really interesting due to the size and uniform grades. So it was a nice bulk-mining operation. These new results are showing similar lithological controls, and, assuming the structural style holds, we’re looking at something really exciting here,” he added.

Jumbo drilling at the Kiena underground mine in Val D’Or, Quebec. Credit: Wesdome Gold Mines.

The Kiena complex is fully permitted and includes a 900 metre production shaft and 2,000 tonne per day capacity mill. From 1981 through 2013 the mine produced 1.75 million oz. gold from 12.5 million tonnes at a grade of 4.5 grams gold. The bulk of the production came from the S-50 Zone between depths of 100 metres and 1,000 metres.

Wesdome has budgeted $3 million in exploration at Kiena this year, which will fund a two-phase drill program totaling eight holes.

“[Kiena] has definitely moved up in terms of priority. It’s something that may have been slightly discounted, or forgotten about, in terms of our story,” said president and CEO Duncan Middlemiss, who joined Wesdome in late July after helming St. Andrew Goldfields until its acquisition by Kirkland Lake Gold (TSX: KGI; US-OTC: KGILF) in early 2016.

“In terms of exploration success I don’t think you can beat what we’re looking at here. It’s a great advantage to make a discovery at a fully-permitted site with a shaft and ramp. The infrastructure is all there, and the only thing really lacking is a solid core of resources,” he continued.

Wesdome surged roughly 72%, or $1.08, following the news en route to a $2.58 per share close at press-time. The company reported $26.8 million in cash and equivalents at the end of the second quarter, and maintains 130 million shares outstanding for a $356 million market capitalization at the time of writing.

Wesdome operates the Eagle River and Mishi mines in the Wawa gold complex in central Ontario, and produced 12,147 oz. during the second quarter at all-in sustaining costs on a production basis of US$1,309 per oz. The company reported net quarterly income of $1.8 million, or 1¢ per share.

The Mishi open-pit mine in Wawa, Ontario. Credit: Wesdome Gold Mines.

The new discovery marks a welcome change in fortunes for the company, which has weathered a proxy fight from Resolute Funds and various takeover rumors over the past few months.

“I think our strategy is driven by the fact we believe, first and foremost, that the company has a lot of potential. We feel we’re undervalued in terms of our peers, and we want to focus on unlocking that value,” Middlemiss continued.

“I mean, we’ve heard all the merger-and-acquisition talk and that’s fine, but it isn’t our focus. We’re fully funded for the time being, but things could change quickly at Kiena. This year Wesdome has the highest exploration budget in its history, and I think we’re starting to see our potential,” he concluded.