When the latest list of the 30 top performing companies on Toronto Stock Exchange (TSX) by average three-year share price was released in the middle of September, 14 mining companies were included, matching the sector’s contribution in 2020. However, only one name from the mining industry has appeared in all three editions of the TSX30 since its launch in 2019: Wesdome Gold Mines. This recognition of the company’s consistent delivery of shareholder value over the last three years is actually the culmination of over 30 years of continuous gold mining in Canada, through various guises. The current incarnation of Wesdome is rapidly evolving into a mid-tier player in the gold space with production heading towards 200,000 ounces this year from its assets in Val d’Or, Québec and Wawa, Ontario. President and CEO Duncan Middlemiss salutes the ‘amazing accomplishment’ of the Wesdome team for its inclusion in the TSX30 for the third year in a row. “Operational turnaround and optimisation are what facilitates our success,” he says. “The second step is investment in exploration at what we view as high potential underground properties. We’ve had operational success and have been able to fund a robust exploration programme. The third aspect of this trifecta for inclusion in the TSX30 is our jurisdiction here in Canada. Overall, we’ve got a team that delivers and we’re really proud of that.”
Since RGN last featured Wesdome in 2020, the company has continued to churn out more ounces at the Eagle River mine in Ontario, alongside brownfields exploration work across the Eagle Mine Complex and at the Kiena mine in Québec, which started producing gold again in Q3 after eight years on care and maintenance.
But at the start of the year, Wesdome announced it would be divesting the remaining asset on its portfolio – the large-scale Moss Lake gold project, located 100 km west of Thunder Bay in Ontario – to Canadian junior Goldshore Resources for a total fee of C$57 million.
“We wanted to remain focused on our core high-grade underground operations, which are best suited to this team’s DNA if you ask me. We like Moss Lake but recognise there will have to be a lot of heavy lifting in order to advance the project,” Middlemiss explains.
“We sold the asset but retain meaningful exposure to the Moss Lake gold deposit through our equity position in Goldshore. This is a very well respected junior company in the space; a lot of the individuals have a good track record and that’s good for our shareholders in terms of upside participation. It’s also great to see investment in the ground at Moss Lake, after Goldshore started to drill there recently.”
There has also been significant news flow coming out of Wesdome this year with regards to the Kiena mine. In Q2, the company published a pre-feasibility study (PFS) for the restart project, which headlined with an IRR of 98% and an after-tax NPV(5%) of US$367 million at a conservative gold price of $1,600 per ounce.
The project’s average annual gold production is estimated at 84,000 ounces per year with all-in sustaining costs at $676 per ounce over a current seven year mine life. However, the company expects to build significantly greater value into the Kiena mine through optimisation and exploration and is already delivering on this after the discovery of the Footwall Zone in Q1.
Since the discovery of this new high-grade gold zone in the footwall of the Kiena Deep A Zone, Wesdome has undertaken drilling in order to further define the mineralisation within the 50 metres wide corridor. None of these potential ounces were baked into the Kiena PFS, which is why Middlemiss describes the study as ‘a base case’, with the potential for expansion now in clear view.
The company was actually able to restart the 2,000 tonnes per day (tpd) mill at Kiena in July and has been processing ore since then, largely thanks to the sound condition of the mill and mine throughout the entire period of care and maintenance, along with the preparatory work undertaken by Wesdome since the restart was approved by the board in Q2.
“We see Q3-Q4 as a ramp up period at Kiena,” Middlemiss says. “Then I think 2022 and 2023 will be base case years looking at production rates of around 65,000 ounces per annum until we reach 100,000 ounces after that. There’s good opportunity to grow that already with the Footwall Zone discovery, which remains open laterally and along plunge.”
Eyes on ESG
Wesdome’s ESG report for 2020 was published in June, in another important news release for the company and its stakeholders. The second annual report of its kind provided a comprehensive overview of the company’s ESG performance last year, along with ongoing strategies, policies and commitments.
During the year, Wesdome committed $56 million to local procurement expenditures (resembling 36% of total procurement expenditures) from the Eagle River and Kiena complexes, in a continuation of its long-term role as a positive socio-economic actor in the regions close to its operations.
The report also noted a further alignment with the Sustainability Accounting Standards Board reporting standard for Metals & Mining. “What’s really come out of this ESG focus is the fact that we have to do a better job reporting on what we do and how we do it. We’re a fairly junior company and definitely hitting above our weight class, so we had to get more technical help in.”
Here, Middlemiss is referring to the appointment of Joanna Miller last year as the company’s director for sustainability and environment. In this role, she draws on her experience in stakeholder engagement and community investment campaigns across Canada to deliver positive social and environmental outcomes in Québec and Ontario.
“Last year’s report was much more polished compared to the previous year and I expect that trend to continue. I think we’re all in this together and we have to act responsibly for our employers and our communities in which we operate in globally,” says the chief executive.
Exploring Eagle River
Wesdome’s Eagle River mine, located along Ontario’s Mishibishu Greenstone Belt, has been in production for well over 25 years now and remains one of the richest gold mines on the planet. In fact, the 12.8 g/t gold grade reported in Q1 makes Eagle River the 5th highest grade gold mine in the world.
However, the company’s recent brownfields exploration efforts show there is potentially decades of life left in this mature mining complex. Eagle River is situated on a 20 km mineralised shear zone, although all of the mine’s resources to date have been extracted from just a 2.5 km diorite intrusive plug.
But the discovery of the Falcon Zone in nearby volcanic rock outside of the diorite has transformed the company’s perception of the geology at Eagle River while providing an opportunity to enhance reserves and improve operational flexibility.
“We’re very excited about the Falcon Zone. The mineralisation and reserves and resources sitting out in the surrounding volcanics has just opened up another 18 km of strike length for us to continue exploring.
“We started to mine our first stope [from the Falcon Zone in Q3] so we’re excited about that too. We think there is a certain amount of repeatability in terms of mineralisation through the volcanics, which is something we will be looking at in the future.”
In addition, Wesdome has just started getting into some surface exploration drilling for parallel zones, employing cutting-edge science and rigour to its programmes in a comprehensive manner for the first time at Eagle River, according to Middlemiss.
“We’d love to discover something like the Falcon Zone again around the existing mine infrastructure. That’s a win-win situation where you’re able to feed the mill with ready production and then have something in the pipeline which can be turned on later.”
Wesdome is targeting an increased mining rate of 650 tpd in 2021, which is still less than the total nameplate capacity of 850 tpd at Eagle River’s mill, although the firm is looking to bridge the gap with reserves from new underground zones (including Falcon), as well as infrastructural developments such as increased ventilation capacity and renewing the fleet.
“Ultimately the goal would be – with exploration success – to fill the mill with high-grade Eagle River ore, since we will finish mining from the lower grade Mishi pit this year.”
A golden year
As we enter the final quarter of 2021, Middlemiss casts his mind towards the annual production and cost guidance made by the company earlier in the year. The production guidance for Eagle River was 92,500-105,000 ounces – a larger range than normally due to ongoing uncertainty around the pandemic and availability of manpower.
We’re sitting at 53,000 ounces produced in the first half, so I don’t see any issue hitting our guidance and really over 100,000 ounces should be our goal this year. There is a little bit of cost pressure due to the inflationary conditions in the wider market. But we can mitigate that by becoming smarter and more productive.”
And while Wesdome is just getting started at Kiena, it has set a guidance of 15-25,000 ounces of gold in 2021, ahead of its first full year of production in 2022. “I think in the next 18 months we’re going to be tracking towards a total of 200,000 ounces per annum production.
“That’s quite a milestone as this company started with just 50,000 ounces back in 2016. Kiena was closed and didn’t have the best prospects until the discovery of the A Zone and Eagle River wasn’t firing on all cylinders. There’s been a lot of balls in the air, but we’ve certainly delivered operational improvements and that’s been beneficial for our shareholders, which goes back to our recognition on the TSX30.”