Wesdome Gold Mines in the Gold Mining Market | Company Overview & CEO Profile
Wesdome Gold Mines Ltd. (WDO.TO, WDOFF, RKVA.F, 0VOA.L, RKVA.DU, RKVA.SG) is a Canadian gold mining company headquartered in Toronto. The company is engaged in the exploration, extraction, and processing of gold, producing it in the form of doré bars. Additionally, Wesdome Gold Mines produces silver as a by-product. Canada accounts for 100% of the company’s sales. Wesdome Gold Mines possesses two underground gold mines in Canada — the Eagle River Complex in Ontario with an annual gold production of around 100,000 ounces and the Kiena Mine Complex in Quebec with an annual gold output of approximately 84,000 ounces.
The company was founded as a joint venture in the 1970s by Dome Mines Ltd. and Western Quebec Mines Inc to develop a gold mine in Quebec. In 1997, Western Quebec Mines became the full owner of Wesdome Gold Mines and several years later, acquired the Kiena Complex. At that time, Wesdome Gold Mines was operating Kiena, Wesdome, Siscoe, and Shawkey, as well as a mill and related infrastructure.
In 1999, Wesdome Gold Mines Inc. went public on the Toronto Stock Exchange. In 2006, the company merged with River Gold Mines Ltd. which owned the Eagle River underground mine located to the west of Wawa in Ontario. The next year, Wesdome Gold Mines Inc. completed a merger with Western Quebec Mines Inc. to simplify its corporate structure and remove the controlling shareholder.
Assets Owned by Wesdome Gold Mines
Wesdome Gold Mines is successfully mining high-grade deposits and plans aggressive underground and surface exploration programs. The Eagle River has an average reserve grade of 15.3 g/t, while the Kiena mine’s reserve grade is 11.1 g/t. Also, there are new discoveries that help to extend high-grade mineralization.
Although the Eagle River and Kiena are not among the largest mines in Canada, they are among the country’s top 3 gold reserve grades after the Macassa, which is owned by Kirkland Lake Gold and is the richest gold mine measured by gold grade in reserves. As a reference, the shares of Kirkland Lake Gold were delisted from the Toronto Stock Exchange after its merger with Agnico Eagle Mines (AEM) in February 2022.
The Eagle River underground mine is situated 50 km to the west of Wawa, a township in the Canadian province of Ontario. The mine has been producing gold for more than 25 years and the company aims to raise gold output from 650 tonnes a day to 850 tonnes a day. For this purpose, Wesdome Gold Mines has been actively exploring the property. In 2017, the company announced a new discovery at the Eagle River Mine. “Development on the 844 metre level was completed in May on the 300E Zone where drifting results have confirmed continuity and strong grades, and the existence of a new and significant production area for the Eagle River Mine,” Wesdome Gold Mines said.
In May of 2022, Wesdome Gold Mines announced the results from expansion drilling of the Falcon 7 Zone located at the Eagle River Mine. While historically, mineralization of the mine has been hosted in the diorite, the Falcon 7 Zone is hosted in volcanic rocks. According to the company, that means that the discovery and development of the Falcon 7 Zone “highlights the prospectivity of the volcanic rocks to host additional gold mineralization beyond the currently existing footprint of the Eagle River Mine”.
In 2020, the Eagle River mine produced 90,278 ounces of gold and has 524,000 ounces of proven and probable reserves. The mine generates over 86% of the company’s total revenue. Last year, gold production at the Eagle River mine was increased to 99,120 ounces.
The Kiena Mine is situated in Val-d'Or, a highly prospective city in Quebec where gold was discovered as far back as 100 years ago. The Kiena Deep A Zone was discovered in 2016 and includes a mill with a capacity of 2,000 tonne per day. Recently, the company has successfully completed a project feasibility study and announced restarting operations at the mine. In 2022, the Kiena Mine is expected to produce between 64,000 and 73,000 ounces of gold.
Wesdome Gold Mines & Canada’s Gold Mining Market
In Canada, gold is mined in 9 provinces and territories, while the majority of mining operations occur in Ontario and Quebec. These two provinces account for 71% of mined gold in Canada. In particular, Ontario accounted for over 40% of total gold output in Canada, while Quebec produces around 31% of gold. In total, Canadian mines produce around 170 tonnes of gold, making the country the 5th largest gold producer in the world. As of 2021, Canada accounted for 6% of global gold production. However, over the last two years, Canada’s gold output dropped from 175 tonnes in 2019 and 183 tonnes in 2018. Also, Canada ranks 8th in terms of gold reserves, after Australia, Russia, the USA, South Africa, Peru, Indonesia, and Brazil.
After a 6.3% decline in 2020, gold output in Canada saw 16.7% growth in 2021 and reached 7 million ounces. That growth was primarily due to an increase in gold production at six mines including Canadian Malartic, Meliadine, Detour Lake, Meadowbank Complex, Young-Davidson, and Eagle Gold mines. The Detour Lake project owned by Kirkland Lake Gold Ltd. was Canada’s largest contributor to overall production growth in 2021, with an annual output of 712,800 ounces of gold.
Gold mining and production is an integral part of the nation’s domestic and international economy. Canada ranks first in terms of equity financing raised for mining and mineral exploration. Around 47% of all public mining companies in the world are listed on the Toronto Stock Exchange and TSX Venture Exchange. Over the past 5 years, mining companies have raised over $44 billion on these stock exchanges, which is 52% of all global mining finances in the period. Additionally, the Canadian government is actively supporting innovations in the mining industry. In particular, the 155-million-dollar Clean Growth Program invests in clean technologies in Canada’s mining industry.
Toronto-based Barrick Gold Corporation (GOLD) with a market capitalization of $32 billion is Canada’s top gold mining company and the second-largest in the world. Last year, Barrick produced around 4.4 million ounces of gold. It is followed by Agnico Eagle Mines Limited (AEM), which has $20 billion of market capitalization and 1,7 million ounces of gold output. Kinross Gold Corporation (KGC) is third with $4 billion in market capitalization and 2.1 million ounces of gold output, while the private company Kirkland Lake Gold produced 1.4 million ounces of gold. The fifth-biggest gold mining company in Canada is Yamana Gold Inc. (AUY) which has $4.2 billion in market capitalization and an annual gold output of 786,000 ounces.
Wesdome Gold Mines, which reported 101,400 ounces of gold output in 2021 and has a market capitalization of $1.5 billion, is not among the top gold miners in Canada. The company falls into the category of mid-tier gold miners, meaning it produces less gold compared to gold mining giants but more than small companies. “Mid-tiers are far less risky than juniors, and amplify gold’s uplegs much more than majors,” says Adam Hamilton from Zeal Intelligence. “Their unique mix of sizable diversified gold production, material output-growth potential, and smaller market capitalizations is ideal for outsized gains. They are the best gold stocks for traders to own”.
This is particularly true for Wesdome Gold Mines as it has significant growth potential. Wesdome Gold Mines is one of the fastest-growing Canadian gold stocks in terms of revenue growth. With 45% of quarterly revenue growth, it is third after OceanaGold Corporation (OGC.TO), which registered a 92% increase in revenue, and Lundin Gold Inc. (LUG.TO) with 54% of revenue growth.
In 2021, Wesdome Gold Mines was named among the top 10 best-performing stocks on the Toronto Stock Exchange. Commenting on Wesdome Gold Mines featuring in the annual TSX30 list, Wesdome Gold Mines’ CEO Duncan Middlemiss said:
“A number of factors contributed to this success, one of which is the excellent jurisdictions we operate in: Ontario and Québec. Another contributing factor is our operational optimization period that allowed us to double production from our producing asset, Eagle River, and show a lot of upside through the exploration efforts there… We have a lot of US investors who wanted easier access to the market and to our shares, so trading on the OTCQB was our way to facilitate that. The company is predominantly self-funded with our last share issuance being in 2016. There is no dilution and our shareholders appreciate that”.
Why buy the Wesdome Gold Mines stock? The company has solid growth potential, generates consistent profits, develops high-grade deposits, uses existing infrastructure, and runs aggressive exploration programs worth $16 million at both assets. Another positive factor is that both Wesdome mines are located in politically safe jurisdictions — Canadian provinces Ontario and Quebec. Last year, the company achieved record production at the Eagle River Complex of 101,403 ounces and started pre-production and construction activities at the Kiena mine, where commercial production is expected to be launched in the second quarter of 2022. This year, Wesdome Gold Mines plans to produce between 160,000 and 180,000 ounces of gold, an increase of 30% to 45% compared to 2021.
Wesdome Gold Mines’ Financial Performance
Over the past five years, the company’s market capitalization has risen from 300 million Canadian dollars to more than 1 billion Canadian dollars, reaching its peak of around 2.3 billion Canadian dollars in March of 2022. So we did revenue, which more than doubled from 116 million Canadian dollars in 2018 to 262 million Canadian dollars in 2021. On a year-over-year basis, the company’s revenue was up by 22%, while gold production increased by 37% as compared to 2020.
According to the 2021 Annual Report, operating cash flows grew by 28% to $131 million Canadian dollars or $0.93 per share year-over-year. Net income was $131.3 million Canadian dollars or $0.94 per share compared to $50.7 million Canadian dollars or $0.36 per share in 2020. This represents an impressive 159-percent increase from the previous year. Adjusted net income increased from 50.7 million Canadian dollars in 2020 to $69.9 million Canadian dollars in 2021.
“We successfully restarted the Kiena operation fully funded by internally generated cash flow, spending $99.6 million during the year and producing our first ounces in Q3 2021,” said Duncan Middlemiss, President and CEO of Wesdome Gold Mines. “Kiena pre-commercial production generated $17.6 million of cash margin. We ended the year with $56.8 million in cash, sufficient to carry out all exploration and project work in 2022. At Eagle, current reserves stand at 524,000 ounces of gold from 1.1 million tonnes at an average grade of 15.3 g/t Au. Reserve ounces declined modestly by 10% after depleting Eagle’s record year of production, but saw a significant grade increase of 15% compared to 2020, which will improve mine margins going forward”.
In the first quarter of 2022, revenues of Wesdome Gold Mines increased from 49,9 million Canadian dollars to 66,6 million Canadian dollars. Gross profit was up from 15,7 million to 21,9 million Canadian dollars. However, net income declined from 7,1 million to 7 million Canadian dollars. At the same time, the company made significant investments in its business during the first quarter to increase productivity. In particular, at Eagle, Wesdome will have additional ore available from the Falcon Zone, which is expected to boost both volume and grade.
The average target price for the Wesdome Gold Mines stock is 16 Canadian dollars per share, which implies a 52% upside for investors. The high target price is 20 Canadian dollars, while a low target price is 12.8 Canadian dollars. The average recommendation for the stock is “buy”.
Leadership & Shareholders
The largest shareholders in the company are T. Rowe Price Associates, Inc., Van Eck Associates Corp., and 1832 Asset Management LP that own 13%, 10.2%, and 4.62% of shares. The largest individual shareholder is Duncan Middlemiss, CEO of Wesdome Gold Mines, who holds 174,000 shares. He is followed by Morley-Jepson Warwick, Chairman of Wesdome Gold Mines, who owns 101,000 of shares.
Duncan Middlemiss (58 years old) was appointed CEO and President of Wesdome Gold Mines in 2016. Prior to that, he had served as CEO at the gold mining company St. Andrew Goldfields Ltd. until it was acquired by Kirkland Lake Gold Inc. in 2016. He also worked as Chief Mine Engineer with Barrick Gold Inc, the world’s second-largest gold producer. In particular, he was tasked with overseeing the development of the Macassa Mine. Middlemiss was born in Kirkland Lake in Ontario and holds a B.S. in mining engineering from Queen’s University.
Morley-Jepson Warwick (63 years old) has been working in the mining industry for over 35 years, specializing in precious metals. Before joining Wesdome Gold Mines, he was Executive Vice President at Kinross Gold Corporation, one of Canada’s largest gold miners. Warwick also served as Regional Vice President in charge of Russia. Prior to that, Warwick was Chief Executive Officer at the private mining company SUN Gold, which has assets in Russia and Kazakhstan. He also worked in several Barrick Group’s companies based in Russia and served as Managing Director of Barrick Africa. Morley-Jepson Warwick graduated from the faculty of Mechanical Engineering at the Technicon Witwatersrand.
