Wesdome Gold Mines Ltd. (WDO:TSX) earnings in Q3/22 missed targets due to lower-than-expected production, reported Echelon Capital Markets analyst Ryan Walker in a November 10, 2022, research note. Consequently, Echelon revised its rating and target price on the company to Hold from Buy and to CA$9.50 per share from CA$11.75, respectively. Wesdome's current share price is about CA$9.50.
"Despite recent operational challenges, we continue to highlight Wesdome's organic production growth profile solely in a Tier 1 jurisdiction and the potential for continued positive exploration results from aggressive drilling at both Kiena and Eagle River," wrote Walker.
Wesdome management says the company is on track to reach the low end of its 120,000–140,000 ounces (120–140 Koz) of production guidance this year, according to Walker, but this will require a record yield of 44.3 Koz in Q4/22 alone. (The miner has produced about 75.7 Koz year to date.)
Subsequently, 2023 will be "a consolidation year with financial improvement expected as Kiena capex tapers off and production increases throughout the year," Walker reported Wesdome saying.
Q3/22 at a Glance
The Toronto-based miner, however, is in good shape financially, Walker pointed out, and should be able to cover the remaining capex required for Kiena.
As for the mining company's Q3/22 performance, it posted earnings per share of -CA$0.03, a clear miss from consensus' estimate of CA$0.03, relayed Walker.
Production during the quarter was 22,883 ounces, down 16% from the previous quarter and down 22% from the previous year.
At the same time, all-in-sustaining costs (AISCs) were up, coming in at US$1,698 per ounce versus US$1,582 in Q2/22, but as the Street expected.
Problems Being Addressed
Operational challenges drove these outcomes, Walker noted, most notably July shutdowns at Eagle River and Kiena, for 15 and 24 days, respectively. Difficult ground conditions at Kiena also was an issue, resulting in a slower production ramp-up than anticipated. Now, ramp-up is expected to carry over into 2023. Lower grade in the Falcon zone also affected Eagle River.
Management has taken steps to remedy these problems and anticipates AISCs for full-year 2022 to end up being at the high end of guidance, between US$1,370 and US$1,520 per ounce.
Strong Balance Sheet
The Toronto-based miner, however, is in good shape financially, Walker pointed out, and should be able to cover the remaining capex required for Kiena, about CA$23M. In addition to cash flow from two mines, Wesdome has about CA$26M of capacity remaining on the credit facility, and this will increase to CA$150M when commercial production is declared at Kiena, expected in Q4/22.
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Disclosures For Echelon Wealth Partners Inc., Wesdome Gold Mines Ltd., November 10, 2022
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ANALYST CERTIFICATION
Company: Wesdome Gold Mines Ltd. | WDO:TSX
I, Ryan Walker, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
