Western Goldfields Inc. - Mesquite Mine Ramps Up Gold Production; Second Quarter Production at High End of Target; Record Output in July
- Gold production of 28,524 ounces of gold is at high end of the target
range for the second quarter
- Gold sales of 22,760 ounces of gold averaged $894 per ounce for the
quarter, at a cost of sales of $548 per ounce
- Record gold production and gold sales achieved in July of
20,112 ounces and 20,950 ounces of gold, respectively
- On track for strong third quarter and 2008
- Impact on cost of sales of industry-wide increase in fuel and
material prices mitigated by operational improvements
- Cash on hand is $34.0 million as of June 30, 2008, including
$7.5 million restricted cash
TORONTO, Aug. 7 /CNW/ - Western Goldfields Inc. (TSX:WGI, AMEX:WGW) The
Company today announced financial results for the three-month and six-month
periods ended June 30, 2008. During the first half of 2008, the Company made
operational improvements to increase production, mitigate cost pressures
facing the industry and benefit from the strong gold price environment.
Results are based on U.S. GAAP and expressed in U.S. dollars unless otherwise
indicated.
"We're firing on all cylinders, with production setting a strong upward
trend as we add more ore to the leach pad at our Mesquite operation," stated
Mr. Raymond Threlkeld, President and Chief Executive Officer. "Furthermore, we
are very pleased with our strong start to the third quarter in which we
produced a record 20,112 ounces of gold during the month of July - an
excellent beginning to our third quarter."
"The second quarter and July production results are clear indicators that
our efforts have paid off and the Mesquite Mine has overcome its initial slow
start," continued Mr. Threlkeld. "Heap leach gold recovery rates are now at
the levels we originally anticipated."
Gold production in the second quarter was 28,524 ounces, which is at the
high end of the forecasted range of 20,000 - 30,000 ounces of gold. Gold sales
during the quarter totaled 22,760 ounces, at an average cost of sales(1) of
$548. Gold revenues during the quarter were $894 per ounce.
Gold production for the first six months was 37,590 ounces. Gold sales
were 32,720 ounces, at an average cost of sales(1) of $667 per ounce. Gold
revenues for the first six months were $905 per ounce.
July production was 20,112 ounces of gold, and gold sales for July were
20,950 ounces. Gold production has increased to an average of 600 ounces per
day, and we expect to meet the year-end target of 135,000 to 145,000 ounces of
gold at a cost of sales(1) of $470 - $490 per ounce.
The Company is currently focused on maximizing Mesquite's potential
through exploration and further production and cost improvements, including
the potential of a new mine plan to produce more ounces of gold over the next
five years to take advantage of the rising gold price. The Company has also
made an application to increase its mining rate by 25 percent to 75 million
tons per year. "We are focused on achieving higher margins and increased gold
production in a strong gold price environment," added Mr. Threlkeld.
Second Quarter and Year-to-Date Highlights
------------------------------------------
For the second quarter 2008, the Company produced 28,524 ounces of gold -
at the high end of the forecasted range of 20,000 - 30,000 ounces of gold.
Gold sales during the quarter totaled 22,760 ounces, at an average cost of
sales(1) of $548.
Production for the second quarter tripled as compared with the previous
quarter. While Mesquite made operational improvements to increase production
and hold down costs, cost of sales(1) were impacted by increased costs for
fuel, tires and explosives, which together comprise 52.5 percent of total
costs.
Total year-to-date gold production was 37,590 ounces. Year-to-date gold
sales totaled 32,720 ounces, at an average cost of sales(1) of $667.
During the second quarter, 2.0 million tons of ore at an average grade of
0.036 ounces gold per ton, and containing 71,958 ounces of gold, were mined
and placed on the leach pad. In addition, waste mining production for the
second quarter was 11.8 million tons.
Year-to-date, 3.3 million tons of ore at an average grade of 0.029 ounces
gold per ton, and containing 92,839 ounces of gold, have been delivered to the
leach pad.
Second Quarter 2008 Six Months 2008
---------------------------------------------------
Tons Mined Grade Tons Mined Grade
------------ ------------ ------------ ------------
Ore Mined 1,985,177 0.036 3,253,913 0.029
Waste Mined 11,830,409 - 22,872,459 -
------------ ------------
TOTAL 13,815,586 26,126,372
------------ ------------
------------ ------------
No mine production was recorded in the first six months of 2007.
Exploration Results
-------------------
Exploration drilling targeted additions to Mesquite's reserve potential,
with 46 holes drilled in total. No significant results were returned. The
exploration drilling results are summarized as follows:
- The Brownie deposit has been closed off;
- Non-oxide mineralization southeast of the Brownie deposit was
confirmed through drilling but results from the latest exploration do
not indicate that this mineralization can be profitably mined; and
- Additional targets to the southwest of the Brownie deposit remain
untested.
Financial Results
-----------------
For the second quarter, Western Goldfields recorded a gross profit of
$5.6 million compared to a gross loss of $2.4 million for the second quarter
of 2007. For the three- and six-month periods ended June 30, 2008, the Company
incurred a net loss to common shareholders of $4.1 million and $23.7 million,
or $0.03 and $0.17 per share, respectively. This compares to a loss of
$4.0 million and $6.6 million, or $0.04 and $0.06 per share for the three and
six-month periods ended June 30, 2007, respectively. The net loss for the
three and six-months includes a non-cash pre-tax loss of $8.7 million and
$32.8 million, respectively, arising from the mark-to-market of contracts for
the forward sale of gold, which were taken out as a requirement of our term
loan facility. The mark-to-market loss reflects the fact that the spot gold
price increased from $836 per ounce at December 31, 2007 to $930 at June 30,
2008. In addition, during the second quarter, long-term interest rates
increased, which increased the discount rate applied in the mark-to-market
valuation of these contracts. Year-to-date results for 2008, as compared with
2007, show an increase in gold sold to 32,720 ounces from 4,225 ounces; the
average selling price per ounce rose to $905 in 2008 from $658 in 2007.
Liquidity and Capital Resources
-------------------------------
At June 30, 2008, the Company's cash balance was $26.5 million, our
restricted cash was $7.5 million, and our working capital was $34.7 million.
In addition, the Company had unutilized credit facilities of $18.7 million.
The Mesquite Mine became operating cash flow positive in June 2008.
Mesquite Capital Expenditures
-----------------------------
Western Goldfields' latest forecast for the mine expansion capital
program is $109.9 million, of which $107.0 million was incurred to June 30,
2008, with the balance of $2.9 million to be spent during the third quarter of
2008.
In addition to the expansion capital, $1.1 million was spent on other
projects during the first half of 2008. Planned spending for the balance of
the year is $3.4 million, primarily for a front-end loader scheduled to be
delivered in August and operational in September. This additional loading unit
will provide the ability to improve production levels now that the additional
fourth crew has been mobilized.
2008 Outlook
------------
The Mesquite Mine is expected to produce between 55,000 to 60,000 ounces
of gold during the third quarter of 2008 as higher-grade ore from the Rainbow
Pit is placed on the leach pad. Cost of sales(1) is forecast at approximately
$400 per ounce of gold. Gold production for 2008 is projected to be 135,000
-145,000 ounces of gold at an average cost of sales(1) of between $470 -
$490 per ounce of gold.
Now that Mesquite is performing on plan, the Company continues to focus
on adding value by pursuing the following opportunities:
1) Sulfide resources: a sulfide gravity scoping study has been initiated
to improve recovery rates for the property's significant sulfide
resources.
2) Continuous Improvement: a continuous improvement program is underway
for the mining fleet to further increase productivity. In addition,
we are completing a conveyor haulage study.
3) Increase Mining Rate: Mesquite has applied for a permit to increase
its mining rate from 60 million tons per year to 75 million tons per
year, with the outcome expected by the end of the year.
4) Increase annual gold production over the next four to five year
period through a revised mining plan that will allow the Company to
optimize its cash flow.
The Company is well-positioned to utilize Mesquite's cash flow as a
strategic platform for disciplined growth, through the acquisition of
undervalued and overlooked assets in politically stable North America.
(1) Cost of sales per ounce is defined as cost of sales as per the
Company's financial statements divided by the number of ounces sold.
Western Goldfields Inc.
-----------------------
Western Goldfields Inc. is an independent gold production and exploration
company with a focus on precious metal mining opportunities in North America.
The Mesquite Mine, currently the Company's sole asset, was brought into
production in January 2008, and the Company's focus is now on achieving the
anticipated rate of production and completing planned improvements to the
property. With 4.3 million ounces in Measured and Indicated Mineral Resources
(inclusive of reserves), Mesquite is the only multi-million ounce U.S. reserve
in North America not controlled by a major gold company. Western Goldfields
common shares trade on the Toronto Stock Exchange under the symbol WGI, and on
the American Stock Exchange under the symbol WGW.
Forward-Looking Information
---------------------------
Certain statements contained in this news release and subsequent oral
statements made by and on behalf of the Company may contain forward-looking
information within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and similar Canadian legislation. Such
forward-looking statements are identified by words such as "intends",
"anticipates", "believes", "expects", "plans" and include, without limitation,
statements regarding the Company's plan of business operations, production and
cost estimates, receipt of working capital, anticipated revenues, and capital
and operating expenditures. These forward-looking statements are based on the
best estimates of management at the time such statements are made. Expected
production results and cost of sales are based in part on current and
historical production and cost data factoring certain assumptions with respect
to future metal prices, costs of supplies and labour and other parameters.
There can be no assurance that such statements will prove to be accurate;
actual results and future events could differ materially from such statements.
Factors that could cause actual results to differ materially include, among
others, variations in metal prices and/or cost of supplies, possible
variations in ore grade or recovery rates, failure of plant, equipment or
processes to operate as anticipated, accidents, labour disputes, as well as
those set forth in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2007 filed with the U.S. Securities and Exchange
Commission, under the caption "Risk Factors". Most of these factors are
outside the control of the Company. Investors are cautioned not to put undue
reliance on forward-looking statements. Except as otherwise required by
applicable securities statutes or regulations, the Company disclaims any
intent or obligation to update publicly these forward-looking statements,
whether as a result of new information, future events or otherwise.
WESTERN GOLDFIELDS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands U.S. dollars)
June 30, December 31,
2008 2007
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 26,549 $ 43,870
Restricted cash 7,500 7,500
Receivables 940 298
Inventories 25,134 11,201
Prepaid expenses 800 887
Current portion of deferred income
tax asset 3,498 755
------------- -------------
TOTAL CURRENT ASSETS 64,421 64,511
------------- -------------
Plant, and equipment, net of accumulated
amortization 98,454 77,951
Construction in progress 10,246 21,864
Investments - reclamation and remediation 8,803 8,661
Long-term deposits 357 348
Long-term prepaid expenses 1,469 1,555
Deferred debt issuance costs, net of
accumulated amortization 2,997 3,227
Deferred income tax asset 45,497 36,379
------------- -------------
TOTAL OTHER ASSETS 167,823 149,984
------------- -------------
TOTAL ASSETS $ 232,244 $ 214,495
------------- -------------
------------- -------------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 5,673 $ 8,781
Current portion of mark-to-market loss
on gold hedging contracts 8,969 1,935
Current portion of loan payable 15,109 6,882
------------- -------------
TOTAL CURRENT LIABILITIES 29,751 17,598
------------- -------------
LONG-TERM LIABILITIES
Mark-to-market loss on gold hedging
contracts 82,753 56,966
Loan payable 71,230 69,581
Reclamation and remediation liabilities 5,235 5,061
------------- -------------
TOTAL LIABILITIES 188,969 149,206
------------- -------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock, of no par value, unlimited
shares authorized; 136,731,919 and
135,049,685 shares issued and
outstanding, respectively 135,250 133,725
Stock options and warrants 7,695 7,551
Accumulated deficit (99,670) (75,987)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 43,275 65,289
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 232,244 $ 214,495
------------- -------------
------------- -------------
WESTERN GOLDFIELDS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(In thousands U.S. dollars)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ---------------------------
2008 2007 2008 2007
------------- ------------- ------------- -------------
REVENUES
Revenues from
gold sales $ 20,347 $ 1,546 $ 29,602 $ 2,779
------------- ------------- ------------- -------------
EXPENSES
Mine operating
costs 12,122 3,466 21,209 5,674
Royalties 340 59 605 105
------------- ------------- ------------- -------------
Cost of sales 12,462 3,525 21,814 5,779
Amortization
and accretion 2,291 377 4,384 752
------------- ------------- ------------- -------------
Cost of goods
sold 14,753 3,902 26,198 6,531
------------- ------------- ------------- -------------
GROSS PROFIT
(LOSS) 5,594 (2,356) 3,404 (3,752)
------------- ------------- ------------- -------------
EXPENSES
General and
administrative 1,197 1,138 2,308 2,222
Stock based
compensation 289 820 658 1,289
Exploration 591 749 814 1,032
------------- ------------- ------------- -------------
2,077 2,707 3,781 4,543
------------- ------------- ------------- -------------
OPERATING INCOME
(LOSS) 3,517 (5,062) (377) (8,295)
------------- ------------- ------------- -------------
OTHER INCOME (EXPENSE)
Interest income 289 525 673 1,042
Interest expense
and commitment
fees (1,320) (242) (2,019) (242)
Amortization of
deferred debt
issuance costs (115) (110) (231) (110)
Unrealized gain
(loss) on
mark-to-market
of gold forward
sales contracts (8,708) 759 (32,820) 759
Gain (loss) on
foreign currency
exchange 250 124 (770) 205
------------- ------------- ------------- -------------
(9,605) 1,056 (35,167) 1,655
------------- ------------- ------------- -------------
LOSS BEFORE INCOME
TAXES (6,088) (4,007) (35,544) (6,640)
INCOME TAX
RECOVERY (2,029) - (11,861) -
------------- ------------- ------------- -------------
NET LOSS (4,059) (4,007) (23,683) (6,640)
OTHER COMPREHENSIVE
LOSS
Foreign currency
translation
adjustment - (3) - (8)
------------- ------------- ------------- -------------
NET COMPREHENSIVE
LOSS $ (4,059) $ (4,010) $ (23,683) $ (6,648)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
BASIC AND DILUTED
NET LOSS PER
SHARE $ (0.03) $ (0.04) $ (0.17) $ (0.06)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
WEIGHTED AVG. NO.
OF COMMON SHARES
OUTSTANDING 136,406,008 113,641,025 136,035,903 108,240,372
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
WESTERN GOLDFIELDS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands U.S. dollars)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ---------------------------
2008 2007 2008 2007
------------- ------------- ------------- -------------
CASH FLOWS FROM
OPERATING
ACTIVITIES
Net loss $ (4,059) $ (4,007) $ (23,683) $ (6,641)
Adjustments to
reconcile net
loss to net
cash provided
(used) by
operating
activities:
Items not
affecting
cash:
Amortization
of plant
and equipment 2,219 298 3,030 592
Amortization
of deferred
debt issuance
costs 115 110 231 110
Accretion
expense 87 84 174 169
Deferred
income taxes (2,029) - (11,861) -
Interest net
of reimbursed
costs -
reclamation
and remediation (80) (87) (142) (170)
Stock based
compensation 289 820 658 1,289
Mark-to-market
loss on gold
hedging
contracts 8,708 (759) 32,820 (759)
Changes in
assets and
liabilities:
Decrease
(increase) in:
Restricted
cash - (7,500) - (7,500)
Accounts
receivable (720) 174 (642) 76
Inventories (7,894) 31 (12,732) (40)
Prepaid
expenses
and deposits 87 (369) 173 (547)
Long term
deposits (6) (6) (9) (9)
Increase
(decrease)
in:
Accounts
payable 810 (154) (529) (955)
Payroll and
related
taxes payable - - (1,562) -
Accrued
expenses (287) (795) 764 201
Accrued
interest
expense (59) 241 (230) 241
------------- ------------- ------------- -------------
Net cash
provided (used)
by operating
activities (2,817) (11,917) (13,539) (13,943)
------------- ------------- ------------- -------------
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of
property &
equipment,
including
construction in
progress (5,920) (25,662) (14,669) (31,377)
Increase in
reclamation and
remediation
investment - (2,090) - (2,090)
------------- ------------- ------------- -------------
Net cash provided
(used) by
investing
activities (5,920) (27,752) (14,669) (33,467)
------------- ------------- ------------- -------------
CASH FLOWS FROM
FINANCING
ACTIVITIES
Loan payable 2,017 - 9,877 -
Deferred debt
issuance costs - (521) - (850)
Common stock
issued for cash - 1 - 59,191
Exercise of
options to
purchase common
stock 440 356 672 501
Exercise of
warrants to
purchase common
stock - 1,436 337 1,816
------------- ------------- ------------- -------------
Net cash provided
by financing
activities 2,457 1,272 10,887 60,658
------------- ------------- ------------- -------------
Change in cash (6,280) (38,396) (17,321) 13,248
Cash and cash
equivalents,
beginning of
period 32,829 57,147 43,870 5,503
------------- ------------- ------------- -------------
Cash and cash
equivalents, end
of period $ 26,549 $ 18,750 $ 26,549 $ 18,750
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
SUPPLEMENTAL CASH
FLOW DISCLOSURES:
Interest paid
(received),
net $ 933 $ 1 $ 1,346 $ 1
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
NON-CASH FINANCING
AND INVESTING
ACTIVITIES:
Stock, options
and warrants
issued for
services $ 289 $ 820 $ 658 $ 1,289
Equipment
purchases
included in
accounts
payable $ (180) $ 11,832 $ 334 $ 11,832
Deferred debt
issuance
costs
included in
accrued
expenses $ - $ 2,328 $ - $ 2,328
Non-cash
component of
inventories $ (2) $ 2,328 $ 1,201 $ 2,328
%CIK: 0001394186
For further information: please visit www.westerngoldfields.com, or contact:
Raymond Threlkeld, President and Chief Executive Officer, (416) 324-6005,
rthrelkeld@westerngoldfields.com; Brian Penny, Chief Financial Officer,
(416) 324-6002, bpenny@westerngoldfields.com; Julie Taylor Pantziris,
Director, Regulatory Affairs and Investor Relations, (416) 324-6015,
jtaylor@westerngoldfields.com
.
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