Wesdome ‘proud’ of its Ontario gold mines

For a company that hasn’t had to raise equity since 2006 and whose last financing was a $7-million convertible debenture in 2012, which isn’t due until 2017, Wesdome Gold Mines (TSX: WDO; US-OTC: WDOFF) has performed fairly well since the recession struck in 2008.

The company’s wholly owned Eagle River underground mine near Wawa, Ont., which started production in January 1996 and still has at least a five-year mine life ahead, also happens to have the third-highest reserve grade (10.10 grams gold per tonne) of all underground gold mines in North America, Wesdome says.

And there seems to be no shortage of organic growth opportunities at Eagle River. Late last year, Wesdome discovered the No. 7 and 300 zones, which are parallel structures that are open laterally and at depth, with exploration targets and internal expansion potential for years to come, the company’s management says.

“The two new high-grade parallel zones — No. 7 and 300 — are 100 and 300 metres from the 811 zone, which has been our main producing zone for the last couple of years,” Rolly Uloth, the company’s president and CEO, says in an interview.

“We have just approached the 300 zone and started mining it about a month or so ago. We’re continuing with the exploration underground, and we’re increasing our drill program to explore other parallel zones and define the 7 zone and 300 zone at depth.”

This year, Wesdome has budgeted $1 million for 17,000 metres of exploration drilling and $2 million for 34,000 metres of delineation drilling at Eagle River, and the drill campaigns are returning significant results.

Highlights from drilling the 300 zone include intercepts of 230.19 grams gold over 2.5 metres, 12.61 grams gold over 1.95 metres, 65.15 grams gold over 4 metres and 79.13 grams gold over 3.5 metres.

In the 7 zone, step-out holes returned intercepts of 20.41 grams gold over 5.6 metres, 101.2 grams over 2.7 metres and 20.6 grams gold over 3.7 metres.

“We’re optimistic about our drill program,” Uloth says, adding that if gold prices come back, “we see nothing but blue sky ahead.”

Last year the Eagle River mine produced 123,375 tonnes at a head grade of 12.7 grams per tonne. At a 96% recovery rate, the mine churned out 48,190 oz. gold, in a 12.5% increase from 2013’s 42,850 oz.

This year the Eagle River mine is at a low-grade point in its cycle, and so far is averaging 8 grams gold per tonne. But Uloth says this is “still good by most mines’ standards — it’s just that we’ve been spoiled by having had upwards of 10 grams gold per tonne for the last 20 years, or an average of 9.5 grams, which is very high.”

The company expects the grade at Eagle River will probably pick up in the second half of this year and average between 8 and 9 grams gold per tonne.

Ten kilometres away, at Wesdome’s wholly owned Mishi open-pit mine — which has a 10-year mine life ahead — the company produced 67,149 tonnes at a 2.5-gram-per-tonne head grade. At an 85% recovery rate, Mishi turned out 4,567 oz. gold, in a 93% increase over 2013.

Mishi sits 2 km from the Eagle River complex’s 1,200-tonne-per-day milling facility. The mill averages 1,000 tonnes per day, which is more than double the throughput of just two years ago, when a new management team took over the company, Uloth says.

Together the two Ontario mines — 50 km west of Wawa and 60 km southeast of Hemlo — produced 52,757 oz gold in 2014, exceeding Wesdome’s 52,000 oz. guidance. This year, the miner expects to produce between 55,000 and 57,000 oz. gold — a 6–10% rise over 2014.

At the end of last year, Wesdome increased Eagle River’s proven and probable reserves by 57% to 816,000 tonnes grading 10.1 grams gold per tonne for 265,000 contained oz. gold. Inferred resources stand at 292,000 tonnes grading 8.5 grams gold for 80,000 contained oz. gold.

The company also increased Mishi’s open-pit proven and probable reserves by 8%, net of depletion, and with the addition of a western extension, to 1.79 million tonnes grading 2.1 grams gold for 121,000 contained oz. gold.

The open pit’s measured and indicated resource is 3.7 million tonnes grading 2.1 grams gold for 248,000 contained oz. gold. The inferred resource stands at 764,000 tonnes grading 2.4 grams gold for 59,000 oz. gold.

Mishi’s underground measured and indicated resource tallies 567,000 tonnes grading 4.5 grams gold for 82,000 oz., and the inferred resource measures 437,000 tonnes grading 5.8 grams gold for 81,000 oz. gold.

This year Wesdome is spending $500,000 for a 10,000-metre exploration and infill drilling program at Mishi, and a scoping study for expanding the pit is underway. The pit measures 1.5 km in both length and width.

“The total strike is 7–8 km and we’re only doing 2 km of that strike. So we’re studying both ends of the pit to see how far they go and see if the grade really holds up, and if it’s worth expanding the mill beyond 1,500 tonnes per day,” Uloth says. “If Mishi proves what we think it will, we may have the need for a 10,000-tonne-per-day mill.”

As for an underground mining component at Mishi, Uloth says, “that hasn’t been fully developed yet, but I’m going to say that’s a fifty-fifty proposition, and it would be really interesting.

“We’re very optimistic and proud about our two producing mines and the future,” he adds.

Elsewhere in Ontario, Wesdome owns the Moss Lake gold deposit, 100 km west of Thunder Bay. The deposit has measured and indicated resources of 39.8 million tonnes averaging 1.1 grams gold for 1.38 million contained oz. gold, and inferred resources of 50.4 million tonnes grading 1.1 grams gold for 1.75 million oz. gold.

“Moss Lake is a property that we’re holding for an increasing gold price,” Uloth says. “It’s low grade and high volume, but there are a lot of similar properties like that around us that we may acquire, or they may want to acquire it, but at this stage it’s just an asset that we intend to hold onto.”

Uloth says the company is “always looking for the right opportunity” to add to its property portfolio, and “would be willing to look at anything that makes sense.

“There are a number of interesting opportunities in Ontario, and this low gold price has opened up a lot of doors for people who want to do M&A.”

Over the last year, Wesdome’s shares have traded in a
range of 62¢ to $1.40, and at press time changed hands at 94¢ a share.

The company has 111 million shares outstanding, of which management and directors hold 8%. Major shareholders include Resolute Funds, Gabelli, Mackenzie Financial and Orell Capital.