Wesdome Gold Mines Ltd.

Good morning and welcome to Westom Goldmine's fourth quarter and four-year 2021 Financial Results Conference call. I will now turn the call over to Heather Laxton to begin today.

Thank you, Howard, and good morning to everyone joining us on the phone and online this morning. Before we begin, we'd like to take this opportunity to remind everyone that during this call, we'll 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 March 10, 2022. Both documents are available on our website and on CDAR. Please note that all figures discussed on this call are in Canadian dollars unless otherwise stated. The slides used for this presentation and the recording of this call will be posted on the company's website. And with that, it's over to Lindsay Dunlop, Vice President of Investor Relations.

Thanks, Heather. Speaking on the call today will be Duncan Middleman, President and CEO.

Good morning.

Scott Gilbert, CFO.

Good morning.

And Mike Michaud, Vice President, Exploration.

Good morning.

Also on the call today is Raj Gill, Vice President, Corporate Development. Good morning. We will begin today with an operational review from Duncan, followed by a financial review from Scott. then an exploration and reserve and resource update for Mike, and Duncan will then conclude with a summary and outlook. Please go ahead, Duncan.

Great. Thanks, Lindsay. First and foremost, I'd like to thank our employees for making 2021 a record year for West Dome in such a challenging environment. The increasing production at Eagle and the strong build-out of Kena has been exceptional, and as a result, our annual production is up 37% over 2020. In the fourth quarter, we produced a total of 41,600 ounces company-wide, 24,300 ounces at Eagle and 16,900 ounces at Kena. Total production for the year was 123,843 ounces, including the 22,440 pre-production ounces from Kena and 101,403 from Eagle. Head grades at the Eagle River underground mine average 13.8 grams per ton and at Kena, 10.4 grams per ton. In 2022, we will be increasing production slightly from the Eagle River mine to 95 to 105,000 ounces guidance. At Michi, the remaining stockpile is estimated to produce between 1 to 2,000 ounces. Going forward, production will be entirely from the high-grade underground Eagle River mine. At Kena, Production ramp-up has been progressing, albeit with some COVID-related delays at the start of the year, impacting exploration, development, and construction activities. The situation has definitely improved and we are still on pace to place Kena into commercial production towards the end of the second quarter. As per our previously released 2021 guidance, we achieved both of our production and grade objectives at Eagle River and Kena. Our unit cost declined 6% over those of 2020, with cash costs of $990 per ounce and all-in sustaining of $1,408 per ounce within our guidance range. U.S. costs were slightly above guidance due to exchange rate variation. In 2022, we are guiding higher production of both Eagle and Kena for a combined total of 160,000 to 180,000 ounces and a decrease in combined cash at all-in sustaining costs. Full cost reduction benefits will be demonstrated in the back half of this year as Kena production ramps up to commercial production. Additionally, this year's Eagle production is somewhat back-end loaded, so overall costs are expected to be higher in the first half of the year and declining in Q3 and Q4 as production increases. I will now turn the call over to Scott for a review of the financial results.

Thanks, Dr. With the inclusion of the Kena pre-commercial ounces, the revenue, cash margin, and operating cash flow have increased compared to 2020. In 2021, we generated $262.9 million of revenue compared to $215.5 million in 2020, $145.4 million of cash margin versus $119.3 million in 2020, and $131 million of operating cash flow compared to $102.3 million in 2020. We spent $99.6 million to support the restart of the Kena Mine fully funded internally. The cash cost for fiscal year 2021 decreased to $990 per ounce from $1,053 per ounce in 2020 due to the increase in ounces sold, which includes the Kena pre-commercial ounces. The AISD increased by 1% from $1,396 in 2020 to $1,408 in 2021. The ending cash balance was $56.8 million. I will now turn the call over to Mike to discuss exploration and our reserve and resource update.

Thanks, Scott. Well, despite the challenges that we incurred from the COVID, it was still a very exciting year at both projects. Firstly, at Eagle River, this marks the first time in the mine's history to be reporting resources and reserves using the best practice 3D block model. The work was completed under the guidance of SRK Consulting and will be included in an updated 43-101 technical report to be issued within the next 45 days. Current proven and probable reserves hold 1.1 million tons grading 15.3 grams per ton gold for 525,000 ounces of gold. This represents a slight decrease from the previous year due to reduced drilling. and also due to a much more conservative classification used by SRK Consulting. This included a much lower gold price than previous, of $1,400 US per ounce for reserves and $1,500 for resources, which is more in line with our peers. However, it is important to note that the reserve rate is now over 15 grams per ton, and this is due to the larger proportion of the higher grade Falcon and 300 East zones. This higher grade reserve has the potential to increase the mine's margins. The 3D model will greatly improve our efficiency in annual resource reporting, reconciliation, and life of mine planning. This methodology is now similar to the approach at Kena as we continue to standardize our two operations. At Kena, additional drilling and sealing in the A Zone led to an improved geological understanding of the deposit compared to the PFS. and has been used to update the resources and reserves. At Kena, the reserves have increased by approximately 10% after depletion of 22,000 ounces of pre-production gold, increasing from 600,000 ounces in May PFS to 651,000 ounces at the end of December. For resources, At Eagle River, we now have a record inferred resource inventory of 255,000 ounces of gold, which gives us a strong foundation to convert to reserves this year with the planned drilling. At Kena, successful infill and step-out drilling increased global resources by 11% from the 2021 PFS. And for Kena Deep, this totals approximately 50,000 ounce increase in M&I and 70,000 ounces in inferred. Kena Deep continues to show potential to expand and additional ounces are planned for conversion to reserves with the planned 2022 drilling, particularly at the newly discovered football zone where an initial inferred resource has been defined. On the exploration side at Eagle, We have been focused on extending the high-grade 300 Eastern Falcon zones and targeting parallel zones to that of the Falcon 7 zone. The discovery of these parallel zones shows the potential of the surrounding volcanics to host more zones of gold mineralization, especially where host structures continue across the direct volcanic contact, such as at the 311 West, 8, and 5 zones. In addition, Development of the 355-meter level is proceeding on schedule and will be completed in June, and this will provide for development and exploration of Falcon 7 Zone at higher elevations in the mine, and also provide a platform to test for other parallel zones. The North Contact Zone, which is a new discovery we made this year, is located along the northern contact of the mine diorite near the 1,000-meter level. It is now interpreted that the North Contact Zone has been previously intersected in 2016 with some near-surface, widely spaced exploration drilling, again demonstrating the size potential of this zone and is located within 150 meters from the mine infrastructure. On surface, drilling is continuing with two drills testing both east and west of the mine to follow up on anomalous values returned from the regional drilling program in 2021 and also to follow up with the North Contact Zone. At Kena, we've continued to drill the Kena Deep A Zone and also now on the 33 level. And really the drilling at the A Zone has been able to confirm that this zone continues down plunge and is continuous zone of high-grade mineralization. In addition, the drilling confirmed that the footwall is comprised of at least three sub-parallel zones and one cross-cutting zone that has now been extended over 300 meters down plunge. This zone remains open laterally and down plunge, and additional drilling platforms are now being established as the A-Zone ramp progresses to provide for more optimal drilling. The drilling also identified in the hanging moats in the A-Zone, in the Mafic Volcanics, new zones of mineralization, grading around five to six grams per ton gold over thicknesses of two to three meters. potential to be mined as access development in the hanging wall due to their proximity to the A Zone's sloping area. On surface, a new zone called Borgo was discovered earlier this year, and this appears to be perpendicular to the general northwest-southeast trend of the region. It consists of quartz veins with very low sulfide content, hosted in commadiate basalt units. The northern orientation is similar to that of the orientation of the nearby Hena Deep A Zones. So as you can imagine, drilling is planned to further understand this area throughout the year. Over to you Duncan.

Thanks Mike. This year is poised to be a very exciting year as Kena ramps up production levels throughout the year and Eagle River continues its strong delivery of ounces. With these two high-grade assets in production at the same time, we expect to generate significant earnings and free cash flow. As well, we will be continuing our aggressive exploration programs to further organically grow production at each asset. At Eagle, the Falcon Zone is showing extreme promise as another source of high-grade ore, located away from the bottom of the ramp. This will enable us to diversify stoke locations in the mine and increase speed to the mill, which currently has excess capacity. The 2022 plan is to average 700 tonnes per day. Exploration of the parallel falcon zones hold promise for us to further rely on this area for future production. As well, we are continuing to aggressively explore at Kena, where there is also excess capacity at the mill and further opportunities for organic growth. The football zone is the focus this year, as well as expanding the A-Zone. We are developing an important hanging wall drill platform, which will allow us to better define the A-Zones and football zones throughout the year. This is a very exciting time in the company's evolution to an intermediate gold producer. Again, I would like to thank all of our employees for their hard work and dedication. We are very proud of what the team has built so far, including putting a mine back into production in just four years from a new discovery and funded entirely from internally generated cash flow from Eagle River. I'll open up the floor to questions.

Ladies and gentlemen, if you have a question or comment at this time, please press star then 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press the pound key. Again, if you have a question or comment at this time, please press star then 1 on your telephone keypad. Our first question or comment comes from the line of Andrew McKitch from BMO Capital Markets. Your line is open.

Hi, thanks for hosting the call, and congratulations on a strong finish to 2021. Can you just expand a little bit on your comment where you said you're expecting a stronger second half at Eagle versus the first half? Should we be thinking it's just tons as tons per day goes up, or is there some grade scheduling as well to take into account?

Yeah, well, I mean, Keenan, as we know, that's just going to increase throughout the year, and, you know, as we assume commercial production and really, you know, H2, Andrew, then we'll sort of hit our stride there at that one. At Eagle, yeah, it's definitely, I would say, a little bit grade-related. The first quarter was always a little bit leaner. Second quarter improved, and then the third and fourth quarter successively better and better, but... feel really confident in terms of our production guidance. No issue there with Eagle at 95 to 105,000 ounces, so we're good on that.

Okay, maybe just a quick second question. Can you give us some sense of how we should think about having a 15 gram per ton reserve grade versus, you know, either a a long-term or at least a medium-term grade that you would expect to come to the head grade that would come to the mill at Eagle?

Well, certainly, you know, we're in the Falcon Zone now, and that's been developing, and it's showing quite high grades, and certainly 300 is that way as well. So, you know, we certainly look forward to mining those reserves. You know, typically at Eagle, what You know, we often find as we're going, we drill off, you know, extensions to these zones and newer zones that are small in the area that we take as we're mining. So we probably will throw those zones in as well. But we're happy with the 15 grams per ton because, you know, that really better represents where we are, you know, with this new resource and reserve model. You know, we looked at the capping. You know, we had a standard cap previously for the resource and the polygonal model. And, you know, now we've looked at that, had it vetted by SRK. So I think we're comfortable. And, you know, as the year progresses, we're going to be doing some more additional reconciliation to make sure we got it exactly right. But the Falcon is looking good and the 300 is looking good. So, you know, I think we're pretty comfortable with that 15 grams per ton and we can achieve that.

Okay. I will let others ask questions. Thank you very much for your time.

Great. Thanks, Adam.

Thank you. Our next question or comment comes from the line of Barry Allen from Laurentian Bank. Your line is open.

Yes, good morning. Yeah, 2021, a very good operational year. Really no surprises there. My focus really, though, has been on the reserves and resources. And if I understand correctly, we had budgeted about $32 million in exploration expenditures for 2021. But the actual ounces added in fiscal 2021 was rather modest for the level of expenditure. You know, when you add in what you actually produced, you're about just less shy of 350,000 ounces that you added, or a $32 million expenditure. That's a very high funding cost. I'm trying to get my head around that. Is it that you didn't actually spend all the money, or is it SRK took a much stronger methodology? in calculation reserves and resources, or is it that you just didn't get the drilling done? Could you maybe clarify that for me a little bit, please?

Yeah, certainly. It's never just one thing. Typically, on our drilling, we probably averaged around 75% of the budgeted meters, and Eagle Underground was even less, and that's really beautiful. because of the COVID and then of course the competition for drillers. That was certainly part of it. This year was also a year where we put in a lot of money into surface exploration and we're barge drilling at Kena and we're using the helicopter drill at Eagle. So that certainly is expensive drilling and really what we want to go out there in these first couple of years particularly at Kena where it's covered by a lake, is just to collect good geologic data. We've had some pretty good hits, but really it's just building a good geologic model. We're just doing a structural model now at Kena and we completed a structural model at Eagle this past year. So that's helping us guide the exploration going forward, but we felt it was important to get out there and just collect geologic data. So that's probably why that out counts down a little bit. I think we're happy with the infill drilling that we've been doing in the near-mine extension drone, that was fine, but stepping out to do exploration, you know, that we're still in its infancy, you know, that's where we're expecting some higher cost per ounce than we've seen in the past, certainly where we're concentrated on the new Falcon zone, the 300 zone, the Kennedy phase zone. I mean, that was really great drilling, you know, where we just sit there and drill off the zones and we're finding ounces there probably for, you know, 20 to $25 an ounce. We're probably, you know, double that, or even a little bit more now for the in-mine exploration, and then the regional exploration is really just that, it's more conceptual test infestation.

I think additionally too, I mean, we only added 75,000 ounces into the footwall zone, and really that's the function of not being able to get the drilling there. That's why this hanging wall exploration platform is going to be important. It's situated around the 1,200-meter level at Kena. And it's just going to, you know, make the drilling a lot more perpendicular, allow us to really penetrate and get good intercepts into that. So quite sure that the ounce count in the football is going to rise definitely dramatically in 2022. And, you know, further, I'd say upside on the A zones is really starting to, you know, get a little bit of expansion there also. So I think, yeah, it's going to be, you know, kind of a, Didn't probably claim a lot of ounces this year, but more to come.

Yeah, and just to add one final point there, it is a fairly conservative new model that we have, as consultants kind of do, and they don't have the 25 years of mining deposit like we do at Eagle, and I think that had something to do with it. And also the CIM definitions for resource reporting this year requires the use of MRO for underground ounces, so that means anything that's isolated that won't pass initial

shape for economics has kicked out where you know previously these might be zones that were included that are are now have been removed okay good um and i i i understand that uh 2022 is going to look a lot like last year in the sense of the amount of money expended at each mine in expiration yeah so it's uh roughly 14 million planned at eagle and about 17 million planned at kena

Just to get back to your earlier point, yeah, because, you know, obviously our drilling volumes were down to 75%. Essentially, our planned expenditures were probably at about 75%. So we spent about $25 million last year, not $33 million.

Okay.

We tried hard, but we couldn't get to people.

Okay. Thanks very much, gentlemen. Appreciate it.

Good, Gary. Thanks.

Thank you. Our next question or comment comes from the line of Ryan Walker from Echelon Capital. Your line is open.

Morning, everyone. Thanks for the call. Just a quick one here. There's some mention in the press release in the NBA, I don't know if it's just down to phrasing, but the football zone at Kena, an inferred resource has been identified. So there's not an actual split out calculation of that zone, is there?

I don't believe there is one in the MD&A. But it is about 75,000 ounces and it's inferred. And really that was just because we expect this sown to grow laterally. We essentially had about three sort of strings of wedged holes through it. So when you're drilling like that, you don't get a chance to really develop any strike length or punch length. So what we wanted to do, at least get it into the resources for this year. And as this year continues on, And now the development of the hanging wall drift that will be completed later this year, you know, we're going to be able to drill that with a lot more holes, expand it, and then convert it to indicated and bring that into reserves at the end of, you know, 2022. So it's still looking pretty good. And the grade is really good. And, I mean, we're confident now we understand it. So now it's just a matter of drilling it off.

Okay, great. And so, sorry, $75,000? What kind of grade are you talking there?

It's over 11.

Great.

Okay, that's it for me. Thank you.

Thank you. Our next question or comment comes from the line of John Dumasos from John Dumas, very pendentious. Your line is open.

Good morning. Congratulations on all the progress. What would be your expectation for escalation in mining and milling costs per ton this year at Eagle and at initial costs at Kiana? Yesterday I listened to a company based in Mexico, Endeavor, that had 17% more tons and 17% higher costs per ton last year. I think Canada's got less inflation than Mexico, but... We all got the same bugs.

Hi, John. Yeah, I know, absolutely. I mean, we look at, you know, our cost escalation across the board to be probably 5%. You know, some things have taken off, obviously, hydrocarbons and anything related to hydrocarbons are impacting us. However, I mean, we counter that. John, obviously, we're getting better volumes, so our unit costs are starting to decline naturally. Of course, we're blessed with good grades. One thing I will mention is it's very fortunate that we were able to kind of enact the KINA PFS build-out when we did because essentially, I would say not that we're immune to any sorts of supply chain delays or escalations of materials but it's certainly good to be building right now as opposed to you know contemplating to build right now because I think I'd be a little baffled as to you know what we put the escalation into and the contingency so we're very fortunate I mean it's a relatively small build out and like I say I think you know there's lots of levers for us left to use here like obviously Kina coming on and the volumes you know especially of ounces starting to grow But I think that the synergies between the mines, you know, is definitely starting to come. Our continuous improvement programs are continuing, you know, to battle down inflation as much as we can to get more efficient. So I think we have a few levers in there to pull in order to combat it.

It looked like in this initial development, or as the Kiana costs per ton were in the high 300s, By the end of this year, when it's running in a fully normal basis, is $150 or $200 U.S. mining cost per ton a reasonable target?

U.S.? $120 Canadian. Yeah. Next year. Yeah. Next year, definitely be about $120. I mean, the PFS obviously has got some you know, some pretty great, all-encompassing costs for that. And unit cost per ton definitely is around the, if you look at the PFS, I think it was about 188 Canadians. But, yeah, definitely if you're talking U.S., I'd be happy with that. Remember with the PFS, you know, the whole, you know, sort of the development of the A's, as we're ramping down on it, we don't actually get to the heart, you know, say around 1,400 until 2024. And so really our production volumes based on the, you know, the PFS production schedule is about 65,000 to 70,000 ounces this year and about the same next year. Of course, that doesn't incorporate any of the upside that we've been able to kind of, you know, discover. The football zone, I mean, we don't really know how far it comes up. Right now we've got it kind of tagged in place from, say, 1,400 to 1,700 metres. The ramp is currently at 1,200 metres, so... I would say in two years we've got certainly a very good chance to definitely increase our base case, which I deem the PFS to be. Exploration success continues, and I think there's lots of opportunities around Kena to pull in additional resources and reserves so I can see better optimization of the PFS going forward.

Is Eagle or Kiena unionized? No. Well, that's good. Do you think your workers measure inflation at the gas pump price or the T-bone steak price, or what other barometers you think are important?

I think CPI in Canada probably right now is running, what, 7%? Yeah, gas is obviously, because of this issue we have over in the Ukraine, has definitely been exacerbated a lot of fluctuation in that. But, you know, we have been projecting food price increases anywhere from 5% to 10% this year. So we certainly try to keep pace with our pay escalations for our employees to make sure that, you know, their quality of life doesn't suffer either. Thank you. Thanks, John. Thanks.

Thank you. Our next question or comment comes from the line of Don DeMarco from National Bank Finance. Your line is open.

Well, hi. Thank you, operator. Good morning, gentlemen. Hi, Duncan. I think it's just disconnected for a bit there, but I still apologize if this was touched on. But just regarding, I see your valuation is, and the stock has just rocketed. And with the valuation where it's at, you know, maybe the M&A opportunity is, come to bear a little bit more. I think in the past at one point you said that once Keen is up and restarted, you'd look at M&A a little bit more closely. Are there any changes on your thinking there? And if the company was to do M&A, what magnitude? Would it be just toehold type stuff or is there something potentially more significant that would be considered?

We run the gamut, really. I mean, we look at the spoken hub scenario because we do have excess milk capacity, both at Kena. We know that Eagle could be expandable. So definitely, if there was a small satellite deposit or something like that, that would definitely be on our radar. Additionally, you know, toeholds into interesting, you know, projects and companies. Yeah, that's definitely part of it too. I think we like to participate on the way up and feel that we're involved in what's going on. Our screen hasn't changed, Don. We're very Canadian focused. We love the Abitibi, but we love Canada. That's definitely where we are looking. And I think for us, we want to stay nimble and just really understand what the opportunities are out there.

You got anything to add, Raj? Yeah, I think we're being pretty disciplined. Everything has to compare to what we have organically and be compelling on a kind of ROI basis. And so we're being, you know, reasonably conservative on that front for now. Okay. Okay, thanks, guys.

In follow-up to the last caller's question on Kena cost, the guidance didn't provide mind-by-mind AISE, for example. Should we be modeling like 900 AISC for Kena for 2022, or was Q4 maybe just kind of a one-off low-cost quarter for Kena?

We're going to be releasing more numbers on Go4 basis. Every quarter we'll report on the AISC right now. Kena's obviously a little bit lower than Eagle River with regards to that number. You know, with Q4 numbers, or 2021 numbers for AISC, the Eagle River was $14.56. It's below that in 2022. Most of the capital spend is all going to be considered growth capital, so it's going to be definitely lower.

Okay.

Okay, guys. Well, congratulations on a good year, and good luck in 2022. Great. Thanks, Don.

Thanks a lot.

Thank you. Our next question or comment is a follow-up from Mr. Andrew McKinchick from BMO Capital Markets. Your line is open.

Thank you. Just a quick follow-up for Mike. Are you positioned in terms of drill budget or maybe even drilling locations to follow up at Kiena on things like Shawkey and Presque Isle, which had kind of almost single hole, really encouraging stuff, but will require more drilling? And... you know, in the best case scenario, could something like that enter your resource by the end of this year, or is that kind of a multi-year thing?

Yeah, no, we're certainly in a position this year. You know, last year we ran the barges. The barges are still sitting there, so we're just waiting for breakup to get that started again. You know, part of that initial program is to test our tarmac project that we acquired last year, where there's, you know, historic resource. We're also looking at testing some of, You know, the shawky zones where we've had some good success here, the Dupuisson zone. You know, anything that we can access from 33 level, we're trying to target this year as well because we want to get that into a mine plan. And as we develop 33 level and rehab that for the drilling, that means we'll also be able to use it for hauling muck over to the shaft. That's certainly a focus for this year. We just built our regional exploration office. Well, built, we bought one and now we're just modifying it, but we'll host all the sort of mine and regional exploration geologists and cortex there. So it'll be more efficient, but also makes more room on the island for, you know, as we populate the Kenan mine. So I think we're really gearing up well. We have some good people. We've had some initial success there, and I think we have a good plan this year to start putting ounces on the books so that we can start to evaluate plans to bring them into production. And, you know, because it's coming down 33 levels separate from the Kena Deep A, that's just going to augment the production we have. And it's going to make it a lot easier on 33 because it's tracked and ventilation will be separated and electricity and everything else. So it's certainly a focus for this year.

Maybe I could just add, you know, Andrew, I look at, you know, kind of the evolution of things at West Home, and this year we're really concentrating on optimizing drill platforms. So, as I mentioned before, we've got a hanging wall drift going out on around the 1,200-meter level to, you know, get more perpendicular drilling into the aid zone and into the football zone and better defiance. Mike's also, you know, really looking at this 33 level. So it's a great platform. It's about a five-kilometer-long drift that really runs in the corridor between the Marbonite and the Norbonite. And the nice thing about that is it's not weather-related. It's very constant climate where we are there. We're going to have two drills there pretty well all year. follow-up zones. I mean, we've got the Martin Zone, the Wizik Zone, the Wish Zone, and, you know, continues all the way down to the sort of southeastern part of our property there. So it's a really exciting exploration platform. Over at Eagle River, I mean, we're doing a platform to better assess the falcon zones out to the west there. So on the 355-meter level, it's extending out west. That's in progress right now. And really, that's going to give us great access to do good drilling on some of these parallel falcon zones and north contact zones. So, you know, it's great to have platforms developed that will better assess what we have.

Okay, well, thank you very much for those additional comments.

Thank you. I'm sure no additional questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.