Wesdome Gold Mines Ltd.

Good morning, everyone, and welcome to the West Dome Gold Mines first quarter 2023 financial results conference call. I will now hand the call over to Heather Lacson to begin today.

Great. Thank you, Operator, and good morning, everyone. Thank you for joining us. Before we begin, we'd like to take this opportunity to remind everyone that during this call, we'll discuss our business outlook and we'll 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 May 10th, 2023. 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 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. Speaking on the call today will be Board Chair and Interim CEO, Warwick Worley-Jepson, COO, Fred Langevin, CFO, Scott Gilbert, and VP Exploration, Mike Michaud. Also on the call today is Raj Gill, VP Corporate Development. Warwick, please go ahead.

Thank you, Lindsay, and good morning, everyone. I am pleased to report that we have had a good start to the producing process 28,368 ounces of gold. Both cash costs and the all-in sustaining costs came in slightly below our annual guidance, and we are well positioned to meet our production and cost guidance for the year. The second quarter is off to a good start as well, as the benefits of the mining cycle embed themselves with the use of the pasteful at Kina, and reconciliations provide positive results at Eagle River. Greg will now take us through the operational results in more detail.

Hi everyone and thank you for attending this morning. As Warwick mentioned, we're off to a good start to 2023 with both mines producing either in-line or better than internal targets, while diligently advancing initiatives that are key to unlocking the full potential of the two assets. Starting at Eagle, Q1 production significantly exceeded internal projections due to two main factors. The ore left on process at the end of 2022 due to the weather issues causing the shutdown of hauling between the mine and the mill contributed to the grade analysis overperformance. But over and above that, the underground mines performed above expectations. The main contributing factor to this overperformance being the positive reconciliation seen in Q1 of last year in Falcon, continuing into Q1, with two stoves together yielding close to 15,000 tons at 25 grams per pound. As planned, we also process the last of the remaining niche EOR in Q1. Development performance exceeds targets in Q1, which puts us into a good position to deliver on our plan for the rest of the year. Finally, during Q1 at Eagle, we have successfully transitioned long-haul drilling activities from contractors to self-reform, and we're happy to report that bringing this core activity 100% under our control is already yielding benefits, both in efficiencies and on cost. At KINA, mining in Q1 yielded better grades than expected, mainly due to the fact that we were able to source a higher proportion of material from the higher grade KINA deep, as opposed to the lower grade material in other zones, such as S50. Also, our recovery efforts of diluted ore from previously mined areas yielded better than anticipated grades. On the development side, the team's relentless focus on the KINA deep ramp execution continued in Q1, with development performances feeding internal targets against this quarter. At quarter end, the ramp was just shy of level 123 elevation. This positions the mine very well for a seamless transition into the new 129 mining horizon to ramp up production in 2024. It also provides drilling platforms for delineation to proceed sooner, validating ore grades and shapes, and bringing up our geological understanding in the area well ahead of mining. We also had great success in developing two and into the new A2 zone on 118, 116, and 114 levels. We're on schedule to commence mining in this new zone in Q2, and development grades so far have outperformed the block model. The baseball plant has been steadily operating in Q1, and the team at site is already seeing opportunities to optimize the process. We'll be acting on those in the near future. Finally, at Presqu'ile, we continue to engage with regulators to secure the authorizations to execute on the exploration ramp project. First excavation of the portal and subsequently of the ramp is expected to proceed in H2 after the required permits are secured. This improved ability to find and execute at both sites is a direct result of our newly bolstered technical team. We're further leveraging this bench strength in other key areas such as our annual internal life online process, which has been launched a few weeks ago and is expected to further increase our confidence in our app. Also, we've made significant headway on the procurement side of things, locking down savings on key consumables, such as fuel and ground support.

Over to Scott. Thanks, Fred. During Q1 2023, we sold 30,000 ounces of wool, which generated revenue of $76.7 million and a cash margin of $34.4 million. The cash cost was $1,407 per ounce, and the AISD was $19.77 per ounce. The operating cash flow was $5.1 million, free cash outflow was 19.69. Eagle River Complex sold 24,000 ounces, generating a cash margin of 32.5 million with cash cost per ounce of 11.92 and AISC of 17.09 per ounce. Keener sold 6,000 ounces, generating a cash margin of 1.9 million with cash cost per ounce of 22.67 and AISC of 30.48 per ounce. The cost per ounce are high due to processing lower grade water All of the equipment, infrastructure upgrades, and the ramp development at Keno will be included in both capital for the remainder of 2023. Also, during the quarter, $20.1 million of net proceeds was raised under the APM. The funds were used to pay down the revolver by $8 million and the tables by $12 million. At March 31, 2023, the cash balance is $25.1 million, with $46.7 million drawn on the revolver. has decreased from $38 million at December 31, 2022 to $14.7 million at March 31, 2023. Over to you, Mike.

Thanks, Scott. At December 31, 2022, West Tome's combined proven and probable mineral reserves remain just over 1 million ounces at an average grade of almost 13 grams per ton. Additionally, we have a combined measured and indicated mineral resource exclusive of reserves of 350,000 ounces and an inferred mineral resource of 1.1 million ounces. Resource and reserves estimates of both sides reflect the higher cutoff rates, reduced exploration budget in H2, a higher allocation towards definition infill drilling, including 25,000 meters in the Falcon Zone and Eagle River, as well as a more stringent and robust approach to reconciliation, 3D modeling, and resource classification. In 2023, the company has budgeted 137,000 metres of drilling to convert a portion of the existing large M&I and inferred resource base into reserves. We also plan to add ounces at several of the new discoveries made in 2022. At Kena, recent drilling at the Kena Deep Zone has continued to return good results and have extended the Kena Deep A Zone an additional 125 metres down plunge. The A Zone now extends continuously from 1,100 metres to approximately 2,000 metres below surface, and remains open at depth. Highlights of the recent drilling include 76 grams per tonne dual over 10-metre core length. We are pleased with the recent drilling that continues to better define and expand the recent discoveries adjacent to the Keywood Deep A Zone, namely the footwall, south limb, and hanging wall assault zones. These zones have the potential to increase the number of ounces per vertical metre, and to provide additional working bases during mining that will be using the same underground infrastructure utilized to access the A-Zone. The discovery of the hanging wall basalt zones highlights the potential to add ounces within the basalt, with a rock quality significantly better than any A-Zone. At Preskill, recent drilling has continued to highlight the higher grades and the continuity of the mineralization, including one hole that returned 24 grams per ton over a 3.3-meter core length. Given the significant upside that the Presque Isle zone can represent for Kena, the company is planning to commence an exploration ramp from surface later this year, once we are in receipt of the necessary permits. This exploration ramp, which is already included in this year's budget, will provide the ideal platform to complete further drilling to improve our confidence in the resource space, but also to An added benefit of the exploration ramp is that it could be used to connect the Kena's existing underground ramp network, providing access to surface for the existing operation. This could represent a significant milestone on the company's journey to unlock additional potential of Kena, as it would provide a second access for conveyance of material and personnel, freeing time for additional ore hoisting via the shaft. Other gains, such as reduced ventilation costs, and savings from added operational flexibility are also expected. Studies are ongoing to pursue these options. Pressfield is just one example of a number of near-mine, near-surface resources that could be used to augment production at the mill. As such, surface exploration started last year to test some of these additional targets, namely the Shockey and Dupesaw zones. Initial encouraging results have been returned, and we plan to disseminate the results in the near term. At Eagle River, drilling has continued to extend the mineral resources down plunge, particularly at the high-grade 300 East Zone. This represents the longer-term mining areas. However, the focus is shifting to explore areas laterally, along strike and near surface, and within the volcanic rocks similar to that of the Falcon Zone. Most recently, surface and underground drilling from the 355-metre level seven zone and has now extended the mineralization to surface this could represent a new mining area with new infrastructure which could provide improved logistics for mining additionally surface drilling over the past year has returned encouraging results from what are interpreted to be parallel zones to falcon 7 including the five zone which is similar to and believed to be an extension of the mine five zone within the diary Access to this zone from the neighboring Falcon 7 zone will improve drilling, development, and future mining of this zone. Surface soil has also returned a number of good values further to the west of the Falcon 7 zone in what are interpreted to be shoots having a similar periodicity to the high-grade shoots within the mine diary. These zones will be further explored from surface, but longer term, a 355-meter level development could be extended further to the west to provide drilling platforms and for mining. Further, the discovery of the Falcon 7 zoning volcanic has prompted exploration along strike and to the east of the diary, particularly in the area of the previously mined two zone that has its own infrastructure. One drill hole returned beneath the two zone, 223 grams per tonne gold over 0.4 metres, and will be one of the priorities for drilling in the future. Back to you, Austin. Thanks, Mike.

During our Q4 call earlier this year, I highlighted these four primary focus areas that must be executed on this year. I'm happy to say that we continue to make excellent strides in the first quarter towards the ramp that gives us access to the Keenan Deep later this year and early next year. The ramp is now below 123 level, progressing ahead of this year's budgets. and we should see production and cash flow benefits earlier in 2024 than initially expected. We have communicated our intentions to reduce our outstanding balance on our credit facility, and we have done exactly that, reducing the debt in Q1 from $55 million down to $47 million. And our plan is to continue an aggressive pay down throughout the course of the year through operating cash flow and disciplined use of the ATMs. From what we have seen at the operation so far, and assuming gold prices stayed strong, I see this year as a free cash flow inflection point. Neutral this year and returning to free cash flow positive status in 2024. The key technical hires added last year and this are already showing their value, addressing several challenges and opportunities, and have yielded cost savings in the procurement process. We will be publishing our annual ESG report this summer, which will be available on our website. On the subject of hiring of our permanent CEO, good progress has been made, and we hope to be in a position to update you on this in Q2. Lastly, our annual general meeting will be held this year on May the 24th at 10 a.m. Eastern Time at the TMX Broadcast Center in Toronto. We are pleased to be returning to an in-person format, and I do look forward to meeting you then. This concludes our call today. We will now open the lines for Q&A.

To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

One moment for questions. Wayne, I believe the first question comes from yourself.

Would you like to go ahead?

Don DeMarco. Our first question comes from Don DeMarco from National Bank Financial. Your line is open.

Okay. Thank you very much. Good morning. team and hello Warwick. So congratulations on a great quarter. Now, Eagle performed well in the quarter, and I was hearing that maybe one of the contributing factors is that over the last month, the grades were elevated. Does that suggest that there's going to be momentum at Eagle into Q2? And if so, would we expect this kind of cost performance through the rest of the year, or is this just more of a one-off quarter?

I'm going to give... Chris, I'm sorry to give you some of the detail there, but one thing that I would like to point out that we did make reference to the ounces that were left on the ground as a result of our challenge that we had in transporting material from the mine to the mill at the end of 2022. Those grades were higher than what we had in our current guidance. And that was the start of a good beginning in Q1. Fred, would you like to give a little bit more color there?

Yeah, of course. Yeah, as Eagle, I mean, the very high grade nature of the Our Body makes for inherent variability and really the great overperformance that we've seen in Q1 really was due to two specific stoves that we mined out and started to mine out in Q4, the continued strong performance. Those things are now behind us, they're mined out, and so we expect grades to normalize the budgeted levels for the rest of the year.

Okay, great. Thanks. Next question then. You're progressing ahead of schedule in reaching the 129 level. Are you at a point where you can kind of dial in the specific month that you expect you might reach the 129? I think it's maybe sometime in Q1, but do you know with that level of resolution what month you might hit at this point?

Yes, certainly, as I said, we are some couple of months ahead in that program. We started off at the beginning of the year having achieved rates greater than what we have in our budget, and that has continued to be seen during the first quarter and now into the second quarter. We had indicated that our budget called for our arrival at 129 almost at year end, and we see that coming forward at this time to in and around October. So it's positive, but what we need to also appreciate that when we get to 129 level, we do need to develop that station. The station itself being one of the largest stations with the inter-levels between as we mine up. What we really are doing is bringing the production from 129 level forward in 2024 and not into 2023 at this stage. Oh, okay.

So you're going to potentially hit the 129 in October, but it'll take some time to develop a station there. And maybe just finally also on progressing toward the 129, the ramp. What are some of the factors that contributed to your outperformance versus schedule? Is it regarding the labor or the rock that you're going through? Or how is it that you're ahead of schedule? What's going well, in other words? And do you expect it to continue?

Yeah, I'll hand over to Fred again. But what I would say from a rock point of view, we are in the basalts, which is the more competent material that we have down in the area. And so from that point of view, it is consistent. And I'd also, you know, just to reiterate the fact that we have got all the equipment and the teams where they need to be at a time where it was the challenge in 2022. Would you like to give a little bit more color on that, Fred?

Well, nothing much more to add. Basically, it's very good going conditions in the Basel. I mean, there's no challenge developing there, and it's very predictable in terms of behavior. Also, very good discipline on the operations side of things, where the goal of getting towards the bottom of that ramp is the absolute priority at site, and everyone is well aware of that. And as Warwick mentioned, I mean, we have additional equipment now that have secured our capacity to not only deliver on our development targets, but also exceed them to some extent, and we're using that capacity with those extra bolters

feed our internal targets.

Okay, thank you very much. Congratulations again on a strong quarter and good luck with Q2. That's all for me.

Thanks very much.

One moment for our next question. Our next question comes from Wayne Lamb from RBC. Your line is open.

Oh, great. Thank you. Morning, guys. Just a question on Kina, just on the timing of capital spend. Given the progress that you've made relative to schedule, should we expect the growth spend to be relatively front half weighted? And then are there any additional large equipment type purchases remaining or is the majority of spend all just related to the underground development?

I'd say the spending in Q1 is typically lower than what we'd see throughout the year. Spends tend to increase as we get our ducks in a row going into Q2 and Q3. So they're not going to increase significantly from where we are now. Our overall spend for the year remains, as we have given guidance, just over $104 million for the year for both sites. And as far as cleanup is concerned, it contributes just over 45% of that amount.

Okay, great. Thanks. And then just curious if you had any detail on how the ground conditions or the rock competency has looked as you kind of moved deeper into the mine? Fred, would you like to take this one?

Yes, of course. In terms of the ramp itself, as we move deeper, like I mentioned, the ramping and the bevel, there is no concern there with ground stability at all. The ground conditions are excellent and development proceeds at pace. In terms of when we get into the shift in the commodity, which typically holds the core of the A1 and E2 zones, I would say the development in the A2 zone has been promising. where the ground conditions that we've encountered there on level 118, 116, and 114 are actually a bit better than what we had anticipated. And that is contributing to the fact that we're going to be able to mine that zone in early Q2 now.

I'd also just like to add to what Fred has said. The one issue is what we anticipated. The other is our learnings from the experience that we're gaining through mining into the So that certainly is benefiting us a great deal as well.

Okay, great. Thank you. And then maybe just last one for me. Just curious on the ATM. You guys had executed out the same amount on that facility versus the free cash outflow this quarter. Can we anticipate a similar pace on that ATM as you kind of complete the spend at Kena?

Yeah. Wade, I'd just like to say that been our intention to get ourselves to a cash-neutral position. The rate of execution has really been one that is defined by the discipline approach to how we're dealing with it, our assessment of where the gold price is, and our control of costs through the execution of our mining operations. So we're also keenly aware of the issues that have been raised by analysts and investors as to the use of the atm and so we we would like to execute it and make use of it on a continued discipline basis but also driving to a position on which we can close it as soon as we can so if we see the opportunity to make use of it during the course of this quarter in a disciplined fashion we certainly would

Okay, great. Thanks for taking my questions. Thanks, Wade. One moment for our next question.

Our next question will come from the line of Andrew from BMO Capital Markets. Your line is open.

Good morning. Congratulations on the quarter, and thank you for the comments and answers on the Q&A question. Just coming back to EGLE, is there any guidance or commentary you can give us on how Q2 is going? Is generally the performance you've seen in Q1, are you generally seeing that extend into Q2?

Yeah, Fred's going to give you some kind of a… Yeah, Fred speaking here.

Basically, right now, Q2 is lining up to be, I would say, in a similar range as Q1. One thing that I would like to mention, though, is the overperformance in Q1 really is, at this point, we see this as a one-off. And where the ounces were more heavily skewed towards H2 for Eagle, now we see the ounces being a bit more regular throughout the year.

Okay. And generally, are there any other, I guess, variations that we should expect in the year in terms of performance of the mine, in terms of scheduled downtime, scheduled moves in mining phases that would create variation in your expected performance for this year? Or is it looking like more stable than Priya, you know, call it recent quarters.

Yeah, Fred again. Yeah, we don't expect significant shutdowns or downtimes to any of the mills or any of the bigger equipments, let's say, of the mines, and that's true for both operations. So, yeah, you can expect a steady stream of production from the two sites based on what we are seeing so far. It looks like the year is going to be – I would say there was going to be very few variations.

Last question is just maybe for Mike. One of those slides you put up had the boundary between the exploration license and the mine license. If I interpreted that correctly, does the Falcon Zone head for that boundary, or am I misinterpreting that?

Well, that's... Correct, Andrew. Right now, the Falcon Zone and what we consider to be a reasoned extension of that zone is within the lease boundary. And then after that, further to the west towards Newt Lake and Nine Zone, that would be on our regular exploration claims. And that's an area that we have permits typically to drill on that area and would require a separate version We haven't got to the mining stage there, but for now, any mining that we would do in Falcon and the immediate extension of that is in our lease area, our mining lease.

Okay. That's great. Thank you very much for all the answers, and I'll pass the microphone to the next person. Thank you.

Thanks, Andrew.

One moment for our next question. Our next question comes from the line of John.

color, Dick, from Desjardins, your line is now open.

Yeah, thanks for taking my questions, guys. Most of them have been answered, but I've got one boring one left for you. Just on depreciation, it was higher this quarter than in the past, so just wondering if this is kind of a new run rate we should look at going forward.

Yeah, it definitely is the level that we're going to be at. We've started to depreciate Keenah using the EOP approach to be declared commercial production on September 1st, 2022.

So that's where the significant increase is. Okay, so we can look at kind of the per ounce depreciation this quarter and kind of apply that roughly going forward, I guess. Yeah, exactly.

That would be the majority of the assets would be

Okay. No, it makes sense. And last one for me, just looking at the resource trades, I think you're doing some conversion drilling and just wondering if with the tighter drill spacing, do you expect some higher grades? Do you expect those resource grades to move closer to reserve grades with the tighter spacing?

Mark, did you want to take that? Yeah, sorry. So was that an Eagle or a Kena? I didn't catch that.

Sorry. I guess Both more, I guess, at Kena, though, it's a bit more pronounced.

Yeah, certainly, you know, the Kena is, you know, definitely the high-grade part of all the mineralization on the property. And, you know, that's what's really in our reserve base. And a lot of the inferred is in some of the surrounding zones where the grade is lower. So that's how that balances into the equation of the inferred and some of the measured and indicated is lower grade overall. You know, certainly more drilling helps a lot here. We're finding that then we can, you know, better identify these high-grade sheets at both projects, really, I mean, they're both high-grade mines. And, you know, typically with that and better defining the resources and reserves, you can get a bump in grade typically as we get, you know, closer to the reserve status.

Okay. No, interesting. I appreciate that. That's it for me. Thanks, guys.

Thanks, Joe. One moment for our next question.

Our next question is from the line of John Tomasos from John Tomasos Very Independent Research. Your line is open.

Congratulations on all the good work. Now that it's May 11 and the second quarter is almost half over, Does it look like the June quarter production will be at least as much as the first quarter production?

If I could answer that question, John, the answer is very much in line with that. We are in a good position going into the year satisfying the guidance that we've provided. We believe that our performance will continue. We did say previously that we were back in weighted because of the mining sequence that we saw in Q1. We have brought some of those ounces into H1, but generally we'll see a consistent performance going forward.

I saw in the release that you already raised Canadian 20 million of equity. I guess that was through March 31. And the cash balance is Canadian 25 or slightly over half of the Canadian 47 in debt. Should we interpret from that that you might only need to raise another Canadian 10 or 20 million of equity in view of the rising gold price, the good production, the horizontal development being slightly ahead of budget, et cetera?

Yeah, I'd like to just emphasize that the 25 million that we have in cash is generally what we need from a continued working capital point of view. And so we need to have that in place. on a continuous basis. So we really look at the $47 million in the revolver with the debt that we're carrying there at a rate of close to 7.7%. So our intentions are to have that pay down. I'd say the numbers that you quoted there would be at least what we choose to do during the quarter. It could well be higher if we see the opportunity.

I'm not smart enough to understand stocks morally. Today we're down 10%. Is your policy opportunistic with the ATM where when there's a lousy day like today when we're down 9% or 10%, you wouldn't sell shares, and on a good day when you're up 10%, that's the day you'd sell shares, or do you just sell a little bit every day?

That's very much... a basis of what the market is doing on an ongoing basis. I mean, we do see significant fluctuations during the day, as you know. And so we provide a crawl and guidance to those that are doing it for us. And we are all involved almost on a half-day, half-day basis. as to where we are relative to that flaw and what the market is doing and how we wish to make use or not make use of the tool. So, you know, that's part of the discipline that we exercise in the use of it, John.

Good. Thank you very much.

Thank you. That concludes our Q&A session for today. as well as this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone have a great day.