In a Jan. 17 research note, iA Securities analyst George Topping reported that Wesdome Gold Mines Ltd.'s (WDO:TSX) "2019 production guidance is in line" and the pace at Kiena is accelerating. "Management is advancing Kiena to a low cost, short timeline restart," he wrote.
Topping reviewed the company's Q4/18 and 2018 production results. The miner produced 17,300 ounces (17.3 Koz) gold in Q4/18, which was less than Q3/18's "outstanding" 19.8 Koz. Total production for 2018 was 71.7 Koz gold.
As for grades from the underground Eagle mine, they were lower in Q4/18, at 10.6 grams per ton (10.6 g/t) versus Q3/18's 13.3 g/t. However, Topping noted, Q3/18's grades were atypical, as mining focused on the high grades in August due to mill problems. Grades, though, in 2019 should rebound.
Topping also discussed the company's production, grade and capex targets for 2019. Wesdome guided to 72–80 Koz production, which is in line with iA's projected 77 Koz. Guidance grades at the Eagle underground mine are expected to increase about 3% to between 15.5 and 16.5 g/t. This should lower the all-in sustaining cost to about US$985–1,040 per ounce.
Wesdome has budgeted to spend $26.9 million in 2019 on exploration drilling with five rigs and underground development at Kiena, whose resource should expand to 1 million ounce. That could support about 100 Koz of an annual production, ramping up to 170 Koz per year, as exploration efforts progress. Exploration at Eagle will continue as well.
The company had $27 million in cash at year-end 2018 and remains free cash flow positive from its Eagle mine.
IA Securities has a Strong Buy recommendation and a CA$6.20 per share price target on Wesdome, whose stock is currently trading at about CA$4.27 per share.
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Disclosures from iA Securities, Wesdome Mines Ltd., Research Update, January 17, 2019
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