Wesdome Gold Mines is an established player in the world-leading Canadian mining sector with over 30 years of continuous gold production in the country. The next big target for the TSX-listed company is to break into the mid-tier rank of producers in Canada with a total annual output figure exceeding 200,000 ounces of gold.
Wesdome’s current portfolio is arguably located in the most fertile geological region in the world and contains three assets along a 1,000 km stretch between Thunder Bay in Northwestern Ontario and Val d’Or in Northwestern Québec. The company’s president and CEO Duncan Middlemiss reveals to RGN that Wesdome was constrained to only minimal growth in the last downturn of the mining cycle, but since 2015 it has been able to optimise the performance of its Eagle River mine in Wawa, Ontario while investing heavily in exploration across the portfolio.
The crowning glory of Wesdome’s resurgence was achieved last year when it was included in the inaugural TSX30 list of top performing stocks across the entire exchange. Wesdome was even able to retain its place on this year’s TSX30 ranking after averaging share price growth of 285% over the last three years. “[Our success is down to] everybody coming together to understand the geological potential of the properties we have. To define that potential, you have to invest in exploration and our recent efforts have gone very well at Eagle River in Ontario and Kiena in Québec.”
Wesdome’s current incarnation is a product of three decades of evolution from its early days under the name Western Québec Mines, when it owned several properties that were eventually amalgamated into the current Kiena Complex.
A storied history
In 1994, Western Québec acquired a property in Ontario and spun out the assets – including Wesdome’s current Eagle River and Moss Lake assets – to a company called River Gold Mines, and in 1999 Wesdome Gold Mines was created in order to develop a portfolio of properties in Val d’Or.
“Wesdome bought the Kiena mine from the Québec government in 2005 and it was probably the deal of the century,” Middlemiss claims. “It cost only $5 million and now we are looking at the very positive future Kiena has with us.”
By 2007, River Gold and Wesdome completed a merger and this is the point in the company’s history that you see the current assets come together under one portfolio umbrella.
“Eagle River has been in commercial production since 1996, so it’s been operating now for 25 years and has had a great mine life compared to what people may have initially thought when it first started producing.”
Meanwhile, the Kiena mine was in production under Wesdome from 2006 to 2013, but has been in care and maintenance ever since, with Middlemiss citing a suppressed gold price environment (following the highs of 2011-12) and a lack of subsequent drilling to sustain activity at the property.
However, a bull run has been gathering pace in the gold market since around 2016, and the price reached new highs earlier this year in response to the major financial uncertainty triggered by the COVID-19 pandemic. This brighter environment for gold miners over the last four years has allowed Wesdome to re-instigate drilling programmes at Kiena, with encouraging results thus far.
Meanwhile, the company expects to produce between 90-100,000 ounces of gold this year at the Eagle River Complex, despite the unwanted emergence of COVID-19 and the wide-ranging impact of the virus on mining operations and the wider mineral resources supply chain.
“Eagle River in Wawa, Ontario is a camp situation,” Middlemiss explains. “So what we had to do back in March was reduce the numbers in camp to allow for social distancing. Unfortunately, we had to suspend all diamond drilling, which is something we definitely didn’t want to do because we were quite excited about that programme.”
Other large-scale projects were also deferred to the latter stages of the year in the aftermath of the deadly first wave from around March to June. Projects completed in Q3 included upgrades to the hoist and ventilation systems and work to increase tailings capacity. These projects are expected to bring underground production to 600 tonnes per day in 2021.
Return of the drill rigs
There had been up to seven exploration drills turning at Eagle River pre-pandemic, but Wesdome has since managed to bring back online four drills (three underground, one near-surface) with a focus on follow-up delineation of the Falcon Zone – a new section to the West of the mine.
“This is something we discovered from our surface drilling programme of 2019. It’s a very high grade shoot that links with the mineralisation at the 7 Zone within the existing mine. We are now in a process of exploring from appropriate underground platforms.
“We’re also doing surface exploration, which involves a lot of delineation of the various shoots we have. Essentially, we would like to continue the growth of our resource there.”
Last year, Wesdome grew the total reserve at Eagle River from 400,000 ounces to 550,000 ounces and the company is confident that its current exploration work can add further years to the life of the mine, which is already into its 26th year of production.
Over in Val d’Or, Wesdome had to comply with a Québec government mandate to close all mining operations at the peak of the pandemic, which contributed to around eight weeks of lost work that it had dedicated to exploration drilling at the Kiena mine.
“In terms of our drilling, we didn’t catch stride again until around June or July. But we now have seven drills turning underground and one on-surface at the Kiena property. The goal for us this year is to convert a lot of our inferred resources into indicated so we can then do a pre-feasibility study in support of a restart decision for the Kiena mine.”
A preliminary economic assessment (PEA) of the project was completed in May and provides strong supporting evidence towards a restart, which will be considered by the board during the first half of 2021.
The PEA indicated just US$35 million will be required in pre-production capital expenditure, a figure that Middlemiss ensures will be fully funded by the company. The study also estimated that Kiena will provide an after-tax IRR of 102% and will generate gross revenue of $1.4 billion, alongside other attractive economic metrics.
There is also a mounting belief within the company that the time is fast approaching to ramp up mineral development at the Moss Lake property near the city of Thunder Bay in Ontario.
Moss Lake is in fact Wesdome’s largest mineral resource with indicated resources of 40 million tonnes at 1.1 g/t of gold, totalling 1.4 million ounces. Previous drilling in 2017 extended the strike length mineralisation from 2.5 km to 8 km and the geophysical expression (IP) extends over the entire strike length, with potential to significantly add to existing resources.
“Moss Lake is envisioned to be a large resource, low grade operation. In order to develop this mine, we have to get the drills back there and do a substantial programme in order to further upgrade the resource.”
The rise of ESG investing
Away from the exploration side of the business, Wesdome – like a multitude of resources firms in recent years – has heightened the spotlight on its commitment to sustainable and responsible mining, in response to a new wave of ESG-driven investors.
“ESG has really come to forefront and is something I think we did in the past, but perhaps didn’t talk about when we were a junior company. We were a small group and didn’t have the capacity to do comprehensive reporting. But now you see the investment community is very focused on ESG and we are definitely here to do the right thing across all facets of our operations and the reporting of our progress on these fronts.”
The company has begun to ‘staff-up’ to better manage the growing expectations of the investment community, hiring a new director for sustainability and environment – Joanna Miller – in August. Miller will help lead community engagement programmes at Eagle River and Kiena while managing the firm’s environmental and social pledges.
One could deduce that Wesdome’s focus on ESG programmes over the last few years has been suitably recognised by the investment community, especially considering the company’s inclusion on the TSX30 for the second consecutive year.
Middlemiss believes that the expansion of Wesdome’s ESG focus has occurred in tandem with the overall growth of the company, which goes to show just how entwined sustainability is with success for the modern-day mining firm.
“I would say that we are on the right track, people are recognising that we are trying to do the right thing and we have received credit for it.”
Pushing for mid-tier status
Wesdome’s primary aim over the next few years is to become a mid-tier gold producer. Reaching this level would see it churning out at least 200,000 ounces per annum, but Middlemiss is confident that this goal is within reach given the company’s recent success in adding resources at Eagle River through exploration, which is ongoing at the sprawling complex in Ontario.
Since 2016, Wesdome has doubled annual gold production to 100,000 ounces at Eagle River and it has the Kiena mine waiting in the wings, which will add another 100,000 ounces per year according to the PEA.
“Once we give the go ahead for the restart, it would be two years until Kiena is back up and running. At that point I would say we have a soft base of 200,000 ounces, but I would speculate that Eagle River and Kiena can together produce 250,000 ounces if we maintain our commitment to exploration.”
In addition to the exploration opportunities in Wawa and Val d’Or, Wesdome could also benefit from a bolt-on situation at the 2,000 tonnes per day mill within the Kiena Complex.
“Northwestern Québec is a very prospective area, particularly Val d’Or and Rouyn-Noranda. It’s got a great history and is very active right now in terms of exploration, so we’re definitely monitoring the situation there to see if we can augment the mill with additional feed.”