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Wesdome's earnings miss estimates

Higher than expected costs in the first quarter of 2021 have contributed to Canada-focused Wesdome Gold’s earnings missing analyst expectations while the company has stayed the course for its 2022 guidance.
Wesdome's earnings miss estimates Wesdome's earnings miss estimates Wesdome's earnings miss estimates Wesdome's earnings miss estimates Wesdome's earnings miss estimates

Wesdome's Eagle River

"It was a challenging quarter due to the unpredictable supply chain, inflationary pressures seen across the industry, as well as the Omicron variant surge which impacted work force availability," Wesdome's president and CEO Duncan Middlemiss said.

He said that combined cash costs for the quarter of C$1,295 per ounce (US$1,023) and all-in sustaining costs of C$1,695 per ounce (US$1,339) were higher than the upper end of full-year guidance ranges of C$875-C$970 (US$700-US$775) and C$1,270-C$1,400 (US$1,015-US$1,125), respectively, "due planned lower production", Middlemiss said.

Canaccord Genuity Capital Markets analyst Michael Fairbairn said CG had forecast cash costs and AISC of US$874/oz and US$1,183/oz, respectively.

"As expected, lower gold sales at Eagle River in Q1 drove higher cash costs and AISC in the quarter, while Kiena was impacted by unscheduled downtime due to the underground crusher, equipment delays, and Omicron-relatedstaff absences," Fairbairn said.

He noted that Wesdome's adjusted earnings per share of C$0.05 was below the consensus view amongst analysts of C$0.11 as well as CG's forecast of C$0.08.

"The miss against our estimate was driven by a softer than expected quarter at Kiena which saw a substantial increase in cash costs and AISC q/q and the inclusion of exploration and evaluation expenses on the P&L," he said.

The issues at Kiena impacted its ramp-up and head grade in Q1 with the mine producing 5,100oz Au after processing 21,000 tonnes of 7.7g/t ore which compares to 16,900oz from 7.7g/t ore in Q4 2021, he noted.

"Importantly, the paste plant is now expected to be commissioned in the summer, which should speed up the production cycle and help mitigate delays, resulting in a much strong performance in the back half of the year," he said.

Wesdome had expected Q1 to be the weakest quarter of production for the year. Combined production for the quarter was 25,611oz while full-year guidance stands at 160,000-180,000oz.

Wesdome's share price was quoted as C$12.50 (US$9.6) on May 11, having dropped 3% day on day. The company's market capitalization is C$1.78 billion.