Wesdome Gold Mines earns $2.15-million in Q3

2008-11-12 12:24 ET - News Release

Mr. Rowland Uloth reports

WESDOME'S PROFITS RISE WITH GOLD PRICE

Wesdome Gold Mines Ltd. has released its financial and operating results from its Canadian operations for the third quarter ended Sept. 30, 2008, and its year-to-date (YTD) results. This information should be read in conjunction with the company's third-quarter financial statements, notes to financial statements, and management's discussion and analysis.

The company owns the Eagle River gold mining operation in Wawa, Ont., and the Kiena mining complex in Val d'Or, Que. The Eagle River mine commenced commercial production on Jan. 1, 1996, and the Kiena mine on Aug. 1, 2006.

Highlights:

• Quarterly gold sales averaged $902 per ounce -- up 28 per cent from 2007.
• Quarterly net income rose to $2.2-million.
• Quarterly cash flow from operations rose to $5.6-million.
• Quarterly revenue of $22.2-million is up 35 per cent from 2007.
• Year-to-date revenue of $59.1-million is up 44 per cent from 2007.
• Year-to-date cash flow from operations is $12.1-million.
• Costs held steady.

Revenue and earnings

During the third quarter of 2008, revenue, cash flow from operations and earnings increased dramatically due to higher gold prices. Net income rose to $2.2-million in the third quarter of 2008, compared with a net loss of $3.0-million in the third quarter of 2007. Likewise, cash flow from operations increased to $5.6-million for the quarter, compared with $500,000 in 2007. Revenue rose to $22.2-million from $16.4-million in 2007 due to higher gold prices. Gold sales averaged $902 per ounce in the third quarter of 2008, compared with $712 per ounce in the third quarter of 2007.

For the nine-month period, year to date, net income stood at $3.1-million. Cash flows from operations totalled $12.1-million and revenue climbed to $59.1-million.

During the third quarter of 2008, combined operations produced 23,721 ounces of gold. Bullion revenues climbed to $22-million on sales of 24,433 ounces at an average price of $902 per ounce. At Sept. 30, 2008, gold inventory stood at 9,191 ounces. This is carried on the balance sheet at cost. The costs and revenue for this inventory will be recognized in the fiscal period in which it is sold.

Revenue exceeded operating and development costs resulting in a mine operating profit of $6.2-million for the third quarter and $14.1-million for the first nine months of 2008. In addition to direct operating costs, other costs, including royalty payments, corporate, general and interest costs, amounted to $800,000 in the third quarter and $2.5-million for the first nine months.

Costs remained relatively stable year over year, in the face of general cost inflation experienced in the mining industry. In fact, on a unit basis, costs applicable to sales or cash costs decreased to $645 per ounce in the third quarter and $694 per ounce, year to date. Subsequent to the end of the quarter, tight labour markets and input costs, such as diesel and steel, have eased considerably in international markets. These trends, if sustained, will help reduce costs further, but there may be a time lag in realizing these reductions at the mine level.

The highlight of the quarter was continued improvement at the Kiena operations. The recovered grade increased 40 per cent compared with the first half of 2008, and tight cost control measures contained costs at last year's levels. Subsequent to quarter-end, a potentially significant new find located three kilometres east of the shaft was announced in Stockwatch on Oct. 14, 2008. Preliminary drilling results included intersections of 4.45 grams per tonne Au (gold) over 5.1 metres and 6.82 g/t Au over 7.7 metres. Drilling is continuing on this exciting prospect, with the purpose of defining its geometry and dimensions.

Liquidity

At Sept. 30, 2008, the company had working capital of $8.3-million. During the third quarter, capital expenditures totalled $4.9-million. In addition, gold inventories of 9,191 ounces were carried at $6.5-million at Sept. 30, 2008. Their market value at Sept. 30, 2008, was $8.6-million.

Production for the remainder of 2008 should continue to generate cash flow, even at gold prices below those currently being realized. Exploration expenditures will ease as the surface drilling winds down.

Outlook

The company forecasts steady production in the coming quarter and expects to comfortably exceed its 2008 production forecast of 80,000 ounces.

To date, gold sales have averaged $913 per ounce, $173 per ounce higher than last year's average of $740 per ounce. By controlling costs, Wesdome has demonstrated its leverage to the gold price.

The company's surface exploration program has identified a brand new gold occurrence in a previously untested part of the Val d'Or mining camp, and Wesdome is hopeful that continuing drilling will continue to excite.

Since September, extremely volatile markets and economic conditions have made future planning and forecasts very difficult. The company believes fundamentally that the evolving conditions are strongly supportive of much higher future gold prices and possibly shorter-term relief from the escalating cost pressures that the industry has faced since 2004.

The recent volatility in the gold price has been buffered by equally volatile United States/Canadian-dollar exchange rates, resulting in relative stability in the $900-per-ounce range. The company anticipates a strong fall/winter rally. Operations are generating strong cash flow, and Wesdome intends to proceed prudently and does not have a current need to access very tight capital markets

Hg