Wesdome Gold Mines Ltd.

Good morning and welcome to West Dome Goldmine's second quarter financial results conference call. I will now hand the call over to Heather Laxton to begin today's call.

Great. Thanks, Operator, and good morning, everyone. Thanks for joining us today. Before we begin, we'd like to take this opportunity to remind everyone that during this call, we will discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. Actual events or results could cause outcomes to differ materially due to a number of risks and uncertainties, including those mentioned in the detailed cautionary note contained in yesterday's press release and in the company's management discussion and analysis dated August 11, 2021. Both documents are available on our website and on CEDAW. Please note that all figures discussed on this call are in Canadian dollars unless otherwise stated. The slides used for this presentation and a recording of this call will be posted on the company's website. And now it's over to Lindsay Dunlop, Vice President of Investor Relations.

Thanks, Heather. Here with us this morning, we have Duncan Middleness, President and CEO.

Good morning.

Scott Gilbert, Chief Financial Officer.

Hello, everybody.

Mark-Andre Pelche, Chief Operating Officer.

Hello, this is Mark.

Mike Michaud, Vice President Exploration.

Good morning.

And Raj Gill, Vice President Corporate Development.

Good morning.

Today we will begin with an operational review from Marc Andre, followed by a financial review from Scott, then an exploration update from Mike, and finally Duncan will conclude with a summary and outlook. Marc, please go ahead.

Thanks, Lindsay. We have strong gold production of 30,375 ounces, a 39% improvement over Q1, driven by an 18% increase in both gold grades and in total tons mill during the quarter. Total H1 production of 52,900 ounces leaves us in a very good position to achieve the upper half of our guidance of 92 to 105,000 ounces. The Eagle Mine continues to benefit from previous ventilation work and other mine improvements, with daily ore tonnages averaging around 650 tons per day in the first half of the year. Production rates will be slightly below in the second half, as we have two planned mill shutdowns scheduled in both Q3 and Q4. For that reason, we anticipate slightly lower production in H2. The development in the newly discovered Falcon Zone is ongoing and we expect to start production activities there later in the third quarter. This zone will bring to EGLE another high-grade mining fund at a reserve grade nearly 20 gram per ton. The pre-feasibility study at Kena was completed and published late in Q2. Highlights are on this slide. And using conservative reserves and resource estimates and gold price assumptions, this project demonstrates a 98% IRR. Now, there are lots of activities ongoing in preparation of the restart. The recruitment process is ongoing as planned with about 100 Wisdom employees hired to date. Production successfully started in the S50 zone late in the second quarter with the first production blast since the closure of the mine in 2013. Mining operations have resumed in July with no major issues. Mine development is now completed on the 112 meters level in the A zone and production activities are ongoing. We continue to provide production and exploration updates as they become available. Passing it on to Scott for the financial review.

Thanks, Mark. Cash cost and AISC per ounce of gold sold in Q2 were $840 an ounce and $1,240 per ounce, a decrease of 24% and 17% respectively over Q1. H1 2021 cash costs of $930 per ounce and AISC of $1,356 per ounce are within guidance, and we expect to be within our cost guidance range for the rest of the year. During Q2, there were some one-time non-cash items which impacted net income. After announcing the restart of operations at Kena on May 26th, we recorded an impairment reversal charge of $58.6 million pre-tax or $36.3 million after-tax. As well, we had an after-tax gain on the disposal of the Moss Break mineral properties of $34.5 million. Consequently, net income was $87.8 million or $0.63 per share. After giving effect to these one-time adjustments, the net income adjusted is $17 million or $0.12 per share. Free cash outflow for the quarter was $9.1 million. Total capital expenditures incurred in Q2 2021 were $34.1 million, with $24.1 million spent at Kena in preparation of the production restart. Our ending cash balance was $67.8 million. Over to you, Mike. Thanks, Scott.

At Eagle River, initial sill development is continuing at the Falcon 7 zone and to date has confirmed the high-grade nature of this zone and the continuity defined by the exploration drilling. We continue to be very excited by development and drilling results at the Falcon zone and expect to release results shortly. The company is also continuing to develop and explore the 311 west zone along the western margin of the mine diorite. This zone has transitioned from the diorite into the adjacent mafic volcanics, again highlighting the potential of the volcanic rocks to host gold mineralization, similar to that observed at the neighboring Falcon 7 zone. Although we experienced some challenges with staffing of drills, we have successfully expanded a number of our known zones, particularly the high-grade 300 East zone. In addition, surface drilling is ongoing both east and west of the mine to follow up on anomalous values returned from regional drilling completed in 2020, and also at targets recently identified by our structural analysis of the mine and the surrounding property. At Kena, drilling continues to return exciting results. In March, we announced a very exciting new discovery on the footwall of the A Zone. In May, we released a second set of high-grade drill results, which included one of our most impressive holes at Kena, returning 41 grams per tonne gold over 51 metres. The footwall zone is a 50-metre-wide corridor of parallel zones of gold mineralisation adjacent to the footwall of the A2 Zone. The footwall zone extends over 300 meters along plunge and remains open laterally and down plunge. The discovery of the high-grade footwall zone could have significant positive impacts on the resources, the ounces per vertical meter, and also the overall project economics. This drilling highlights the potential to add ounces not only in this area, but illustrates the untested potential of the entire gold system around the Kena mine. Also, ongoing drilling continues to better define and expand laterally the Kena Deep A Zone resource, which was used in the recent PFS study. One of these expansion holes returned 122 grams per ton over 7.5 meters of core length, which will be included in future resource updates. We have a strong pipeline of targets to drill this year, both from underground and from surface. including the underexplored B zone, which is interpreted as the down plunge extension of the previously mined S50 zone. Surface barge drilling has commenced with two drills to test many underexplored targets along trend from the Kena mine, and results from all of this drilling will be released in the near future. Finally, West Dome recently purchased the Tarmac Gold property from Globex Mining Enterprises. The purchase of these claims helped to consolidate our land package and provides additional exploration potential based on the existence of a number of historic drill intersections. Over to you, Duncan.

Thanks, Mike. The results of the first half of the year have us well positioned to achieve our guidance at Eagle River on both production and cost. We expect slightly lower production in the second half, with Q4 seeing higher production than Q3. As we move towards 100% production from the Eagle River Mine, annual production of 100,000 ounces is very achievable going forward. The Gold Shore transaction involving our sale of the Moss Lake asset also closed during the quarter, and in addition to the $12.5 million in cash, the company received a 30% equity stake worth approximately $20 million pre-listing. Gold Shore commenced trading on June 4th under the symbol GSHR. The second half of the year will be a very exciting time for the company as we begin production at the Kena mine. The mill has been started successfully and mining has begun from the S50 zone. At the same time, development work is ongoing in the high-grade A zone and we should have our first production from this area next month. Our Kena guidance for the year is 15,000 to 25,000 ounces, not included in the 92,000 to 105,000 ounces of EGLE. and we will evaluate after Q3 whether there are opportunities to increase guidance estimates. We are fully funded for the construction and commercial restart of Kena. With a combined production of 107,000 to 127,000 ounces this year, we are well on our way to achieving our stated goal of becoming Canada's next mid-tier gold producer, with two high-grade underground mines in operation. This is a significant milestone which both de-risks the company from a single asset producer and allows us the opportunity to potentially double our annual production output. I would like to extend my thanks to all employees and stakeholders who have helped us to begin to realize this vision. Another step forward as of today is our listing on the OTCQX market in the United States. We believe this will enhance our liquidity and visibility in the U.S. and broaden our shareholder base. Shares are now trading under the symbol WDOFF. I will now hand the call back over to the operator for the Q&A session. Thanks.

Thank you. To ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. And our first question comes from Don DeMarco with National Bank Finance. Your line is open.

Oh, thank you, Operator, and good morning, Duncan and team. Hope everyone's doing well. Congratulations on the surprise, getting Keen up and running sooner than expected. It's great to see. Question about the mail. What throughput are you running it at? Maybe if you can share any more information about maybe throughput. Is this low-grade material from the S50? And is this throwing off any production, and whatever modest production there might be coming off, would this be included in the 15 to 25K preliminary guidance?

Good morning, Don. This is Mark. So as we mentioned during the call, I mean, the mill restarted very successfully in the month of July. The throughput has been around 40 tons per hour. So we did have a few days over 1,000 tons per day, actually. So the mill restart has been going very well. The mill is on a 4-3 schedule. It was basically stated in the PFS. So we're processing four days, and we're doing maintenance work on the three last days of the week. So that's basically what we planned for mailing time for the remainder of the year. About the S50, I mean as per the PFS, the grade was a bit lower than years on, about four or five grams per ton. The intent was to test the mill and ensure the process is working as it's supposed to be before we start feeding the male with higher grade oil later in the quarter.

Okay. Okay, great. Thanks for that. Now, in terms of the spending at Kena, I see year-to-date CapEx spend at Kena is a total somewhere around $36-37 million versus a full-year budget of spend at Kena of about $68 million. Okay. Can I take anything away from this that maybe you're ahead of spend? Are you comfortable with where you're at versus the full year estimate?

We just did the forecast for the year, and we actually plan to spend more money compared to what we had in the PFS. It's about $10 million, and it's mainly equipment and the construction of the new base plant. So we actually plan to spend more money.

Okay. Would we expect that the spending at Kena is probably going to continue with the heavy spend into August and then it will taper off in September and thereafter? Or how should we allocate our quarterly spend through Q3 and Q4?

We're fairly even on that, Don. Actually, we're probably, like Mark-Andre said, we've already spent about $37. We're going to spend a total, actually, of about $79. So, really, we think it's going to be fairly balanced in Q3, Q4, so the remainder of that.

Okay. Okay, guys. Thanks so much. That's all from me. Appreciate it, and we'll look forward to... More results from the football zone and continued success at Kena. Thanks. Yeah, good stuff. Thanks, Doug.

Thank you. As a reminder, to ask a question, you will need to press star one. Our next question comes from Andrew Mikachuk with BMO Capital Markets. Your line is open.

Hi, guys. Really well done on the quarter and the trajectory for the balance of the year, I think. I just had a question as to how we should expect the Kena restart to work from an accounting perspective or Should we expect a standard pre-commercial period and at some point Scott takes over and discloses costs for Kiana, or is there some other permutation here considering this is a restart of an asset on care and maintenance?

Andrew, there's been a change in the IFRS standard, so Therefore, any of our revenue going forward will be included in the income statement. There will not be any offset against the capitalized exploration asset.

My second question is, I guess, for Mike, in terms of drilling, some of this stuff like the DPAY and some of the other targets around Kiana, how much effort in terms of drilling exploration drifts and other infrastructure access do you need in terms of time to get that set up to properly drill something like the footwall or some of the other targets underneath the other historical zones at Kiana?

Yeah, we have that in the budget. I mean, where we're drilling the footwall zone from... Most of the drilling can be done from our current platforms, but as the ramp continues to depth, we're going to be generating other platforms that will be closer and at better angles. And certainly for the more historic zones to the east of Kena, which we want to get to up on 33 level, we are continuing to slash out the areas because there's an old track drift, right? And we're slashing that out so we can get the drills down those areas and start testing that. So We are continuing right now with the development sort of as we need for the drills.

Just the last question, I'm not sure if it's Marc-Henri or who, but at what point would the current infrastructure plan for DeepAce essentially provide access to what's known of the footwall at this point in time? Is it several years? Is it next year?

What's the timeframe? So as it is, the newly foot-walled discovery is about mid-elevation of the A-zone. So considering the current life of mine, it's about in three years. Andrew?

Okay, great. That runs me out of questions. Thank you. I'll let others follow.

Thanks, Andrew. Congratulations. To be clear, I don't think we really found the up-plunge of that either, so that's going to be a real moving target hopefully sooner.

Sooner is better. Got it. Yeah, absolutely.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.