Western Goldfields Announces Third Quarter Results
TORONTO, Nov. 1 /PRNewswire-FirstCall/ — Western Goldfields Inc. (TSX:WGI, OTC BB:WGDFF.OB) today announced financial results for the nine-month and three-month periods ended September 30, 2007. The Company’s financial statements were prepared in accordance with accounting principles generally accepted in the United States (US GAAP). Dollar amounts are expressed in U.S. dollars unless otherwise stated.
“Western Goldfields continued to make excellent progress through the third quarter towards our goal of bringing the Mesquite Mine into full production in January 2008,” reported Mr. Randall Oliphant, Chairman. “We continue to meet the milestones we have set. Everything is now in place to make Mesquite a successful producing mine and to establish a platform for the growth of Western Goldfields.”
“Completion of the term loan facility for $105 million in May secured the financing for the project,” continued Mr. Oliphant. “The equity financing in early October of $33.5 million provides us with additional financial flexibility as we seek out new investment opportunities.”
“Eleven of the fourteen mine haul units on order were commissioned by quarter-end and we are pleased at the capabilities of the units,” said Mr. Raymond Threlkeld, President and Chief Executive Officer. “Pre-stripping operations are now well advanced, new ore is being placed on the leach pad and we look forward to achieving commercial production in January 2008. Once we have achieved full production, the Company will commence further exploration activities at Mesquite.”
Financing Transactions ———————-
In the first quarter of 2007, the Company completed a common share equity financing at a price of C$2.25 per share, which provided net proceeds of $59.2 million. On March 30, 2007, the Company entered into a term loan facility under which the Company will be able to borrow up to $105 million, of which $87.3 million is available for development of Mesquite. The balance will be available for other corporate purposes until late 2009. As required under the terms of the loan facility, the Company has entered into hedging contracts for the forward sale of 429,000 ounces of gold at a price of $801 per ounce during the period July 2008 to December 2014. On October 12, 2007, the Company completed a further common share equity financing at a price of C$3.05 per share, which provided net proceeds of $33.5 million.
Mesquite Mine Development ————————-
Capital spending on the project to September 30, 2007 is $80.8 million of which $63.4 million relates to the mining fleet and $17.4 million relates to other plant and infrastructure upgrades. Since late in the first quarter of 2007, Western Goldfields has been vigorously executing its expansion program at Mesquite. Accomplishments to date include:
– Leach pad expansion project is approximately 50% complete; – Two O&K RH340 45 cubic yard hydraulic shovels were delivered to the site from Germany, commissioning is complete and the units are now in service; – Eleven Terex 205-ton haul trucks have been delivered to the site, have been commissioned and are now engaged in pre-stripping operations; – Three more trucks are on schedule for delivery by year-end; – New truck maintenance facility is under construction; – Various site reclamation activities have been completed, including regulatory approval of the Vista heap leach pad closure and the removal and salvage of redundant facilities; and – All planned senior mine staff positions have been filled with highly qualified individuals. Financial Results —————–
Western Goldfields reports a net loss to common shareholders for the nine months ended September 30, 2007 of $43.0 million, or $0.39 per share (basic and diluted), and for the three months ended September 30, 2007 of $36.4 million, or $0.31 per share. The net loss for the nine and three month periods includes non-cash losses of $27.6 million and $28.3 million, respectively, resulting from the mark-to-market of forward gold sales contracts. The net loss to common shareholders for the nine months ended September 30, 2006, was $8.4 million, or $0.14 per share (basic and diluted), and for the three months ended September 30, 2006, was $2.0 million, or $0.02 per share. Gold sales for the nine months ended September 30, 2007 were 6,101 ounces and for the three months ended September 30, 2007 were 1,876 ounces. Gold sales for the nine months ended September 30, 2006 were 11,445 ounces and for the three months ended September 30, 2006 were 3,070 ounces. These losses are in line with the Company’s plan during its startup period.
Liquidity and Capital Resources ——————————-
At September 30, 2007, the Company’s available cash balance was $18.0 million, restricted cash was $7.5 million and working capital was $23.6 million. Subsequent to quarter-end the Company received a further $33.5 million as proceeds of a further common share equity issue. This represents a significant improvement in the Company’s financial position since December 31, 2006 when it reported cash of $5.5 million and working capital $4.6 million. The improved liquidity is due primarily to the equity offering of common shares in the first quarter of 2007 which raised net proceeds of $59.2 million. Liquidity was also improved through the conversion of warrants and the exercise of stock options for proceeds of $3.4 million. In addition, at September 30, 2007 the Company had $53.9 million of available capacity under the term loan facility.
Western Goldfields Inc. ———————–
Western Goldfields is a gold producer focused on completing the expansion of its Mesquite Mine, located in Imperial County, California, and returning the mine to full production. With a 2.8 million ounce gold reserve, and total resources of 3.9 million ounces inclusive of reserves, the Company is the only multi-million ounce US gold reserve not controlled by a major gold company. The Company is fully permitted and fully funded, and estimates average production of 160,000-170,000 ounces of gold annually during the first eight years of mine life. In June 2007, Western Goldfields announced that its production schedule has been moved ahead by one full quarter, which will bring the company into full production by January 2008. Western Goldfields Inc. is listed on the Toronto Stock Exchange and trades under the symbol WGI, and is quoted on the OTCBB under the symbol WGDFF.OB. For further details regarding the mineral reserves and mineral resources at Mesquite, please visit http://www.westerngoldfields.com/.
Further Information ——————-
For further information about the financial results of the Company, see the unaudited interim financial statements of the Company for the nine months ended September 30, 2007 and the related management’s discussion and analysis, which will be filed on Form 10-QSB with the U.S. Securities and Exchange Commission and the applicable Canadian securities regulatory authorities and will be available under the profile of the Company on EDGAR and SEDAR.
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 “hopes” and include, without limitation, statements regarding the Company’s plan of business operations, timing and costs to recommence commercial production, economic viability of the Mesquite Mine, production and cost estimates, financing options, including entering into a debt financing arrangement, and the consequences thereof, potential contractual arrangements, receipt of working capital, anticipated revenues, exercise of outstanding warrants, and capital and operating expenditures. These forward-looking statements are based on the best estimates of management at the time such statements are made. 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, those set forth in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006 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 regulation, 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.
Cautionary Note to U.S. Investors Concerning Estimates of Measured, Indicated and Inferred Resources ————————————————————————-
This press release uses the terms “measured”, “indicated” and/or “inferred” mineral resources. United States investors are advised that while such terms are recognized by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. United States investors are cautioned not to assume that all or any part of mineral resources will ever be converted into mineral reserves. Inferred mineral resources have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of an inferred mineral resource exists, or is economically or legally mineable.
The technical information contained in this press release has been prepared under the supervision of Wes Hanson, a qualified person under NI 43-101. Mr. Hanson is an officer of Western Goldfields.
WESTERN GOLDFIELDS INC. CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, ————- ————- 2007 2006 ASSETS CURRENT ASSETS Cash $ 18,038,341 $ 5,502,535 Restricted Cash 7,500,000 – Receivables 128,873 223,507 Inventories 2,378,899 511,663 Prepaid expenses 1,826,246 841,636 ————- ————- TOTAL CURRENT ASSETS 29,872,359 7,079,341 ————- ————- Property, plant, and equipment, net of accumulated amortization 69,325,464 4,328,512 Construction in progress 13,222,505 2,880,775 Investments – reclamation and remediation 8,555,114 6,337,006 Long-term deposits 342,926 329,146 Long-term prepaid expenses 1,590,847 1,009,555 Deferred debt issuance and stock offering costs 3,342,675 250,000 ————- ————- TOTAL OTHER ASSETS 96,379,531 15,134,994 ————- ————- TOTAL ASSETS $126,251,890 $ 22,214,335 ————- ————- ————- ————- LIABILITIES & STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 4,735,977 $ 1,663,080 Accounts payable to related party 15,156 31,165 Accrued expenses 1,181,107 835,740 Accrued interest 291,905 – ————- ————- TOTAL CURRENT LIABILITIES 6,224,145 2,529,985 ————- ————- LONG-TERM LIABILITIES Mark-to-market loss on gold hedging contracts 27,572,494 – Loan payable 51,107,815 – Reclamation and remediation liabilities 4,909,939 4,805,473 ————- ————- TOTAL LIABILITIES 89,814,393 7,335,458 ————- ————- COMMITMENTS AND CONTINGENCIES – – STOCKHOLDERS’ EQUITY Common stock, of no par value, unlimited shares authorized; 118,774,335 and 78,452,876 shares issued and outstanding, respectively 97,173,005 32,884,798 Stock options and warrants 7,957,442 7,674,270 Accumulated deficit (68,692,950) (25,678,233) Accumulated other comprehensive income – (1,958) ————- ————- TOTAL STOCKHOLDERS’ EQUITY 36,437,497 14,878,877 ————- ————- TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $126,251,890 $ 22,214,335 ————- ————- ————- ————- WESTERN GOLDFIELDS INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ————————— ————————— 2007 2006 2007 2006 ————- ————- ————- ————- REVENUES Revenues from gold sales $ 1,281,229 $ 1,897,155 $ 4,060,106 $ 6,776,098 ————- ————- ————- ————- COST OF GOODS SOLD Mine operating costs 6,066,818 2,239,154 11,741,304 7,116,338 Amortization and accretion 1,609,092 342,248 2,361,410 989,492 Royalties 49,726 72,475 154,086 255,718 Reclamation cost recovery – (1,459,859) – (1,459,859) ————- ————- ————- ————- 7,725,636 1,194,018 14,256,800 6,901,689 ————- ————- ————- ————- GROSS PROFIT (LOSS) (6,444,407) 703,137 (10,196,694) (125,591) ————- ————- ————- ————- EXPENSES General and administrative 958,085 1,102,603 3,180,575 3,278,207 Stock based compensation 661,892 868,208 1,950,446 2,638,364 Severance costs payable in common shares – 547,200 – 547,200 Exploration (272,774) 251,104 759,152 962,321 ————- ————- ————- ————- 1,347,203 2,769,115 5,890,173 7,426,092 ————- ————- ————- ————- OPERATING LOSS (7,791,610) (2,065,978) (16,086,867) (7,551,683) ————- ————- ————- ————- OTHER INCOME (EXPENSE) Interest income 341,213 88,839 1,383,466 267,453 Interest expense (456,522) – (457,361) (20,434) Agency and commitment fees (149,579) – (390,829) – Amortization of deferred debt issuance costs (117,601) – (227,145) – Unrealized loss on mark-to-market gold hedging contracts (28,331,371) – (27,572,494) – Gain on extinguishment of debt – – – 142,949 Gain (Loss) on foreign currency exchange 89,022 (7,645) 294,072 (7,645) Gain (Loss) on sale of assets 42,441 – 42,441 (18,837) Expenses of Romarco merger termination – – – (1,225,000) ————- ————- ————- ————- (28,582,397) 81,194 (26,927,850) (861,514) ————- ————- ————- ————- LOSS BEFORE INCOME TAXES (36,374,007) (1,984,784) (43,014,717) (8,413,197) INCOME TAXES – – – – ————- ————- ————- ————- NET LOSS (36,374,007) (1,984,784) (43,014,717) (8,413,197) PREFERRED STOCK DIVIDENDS – – – (16,979) ————- ————- ————- ————- NET LOSS TO COMMON STOCKHOLDERS (36,374,007) (1,984,784) (43,014,717) (8,430,176) OTHER COMPREHENSIVE INCOME Foreign currency translation adjustment 8,131 6,610 – 2,797 ————- ————- ————- ————- NET COMPREHENSIVE LOSS $(36,365,876) $ (1,978,174) (43,014,717) $ (8,410,400) ————- ————- ————- ————- ————- ————- ————- ————- BASIC AND DILUTED NET LOSS PER SHARE $ (0.31) $ (0.02) (0.39) $ (0.14) ————- ————- ————- ————- ————- ————- ————- ————- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 118,281,240 68,009,489 111,628,367 60,063,849 ————- ————- ————- ————- ————- ————- ————- ————- WESTERN GOLDFIELDS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended Nine Months Ended September 30, September 30, ————————— ————————— 2007 2006 2007 2006 ————- ————- ————- ————- updated CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(36,374,007) $ (1,984,784) $(43,014,717) $ (8,413,197) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Amortization 1,530,576 277,590 2,122,983 807,099 Amortization of deferred debt issuance costs 117,601 – 227,145 – Accretion expense 84,294 67,538 252,882 185,273 Reclamation cost recovery – (1,459,859) – (1,459,859) Reclamation costs incurred – (69,695) – (69,695) Gain on sale of assets and investments (42,441) – (42,441) 18,837 Interest on investments – reclamation and remediation (106,270) 1,003 (276,539) (150,693) Common stock issued for exploration assets and services – – – 136,500 Common stock issued in respect of severance agreements – 547,200 – 547,200 Stock based compensation 661,892 635,207 1,950,446 2,638,364 Mark-to-market loss on gold hedging contracts 28,331,371 – 27,572,494 – Warrants issued for services of consultant – 233,000 – 233,000 Changes in assets and liabilities: Decrease (increase) in: Restricted cash – – (7,500,000) – Accounts receivable 18,479 (130,571) 94,634 (141,581) Inventories (1,827,345) 190,722 (1,867,236) 419,935 Prepaid expenses (1,018,973) 45,049 (1,565,902) 148,768 Long term deposits (4,556) (2,430) (13,780) (7,302) Increase (decrease) in: – Accounts payable 1,285,607 (264,581) 336,824 (436,445) Accounts payable – related parties (10,231) (84,507) (16,009) 33,694 Accrued expenses 144,806 (171,293) 345,366 150,962 Accrued expenses – related parties – – – (45,835) Accrued interest expense 291,905 – 291,905 (48,695) Accrued agency and commitment fees (241,250) – – – ————- ————- ————- ————- Net cash provided (used) by operating activities (7,158,542) (2,170,411) (21,101,945) (5,453,671) ————- ————- ————- ————- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property & equipment, including construction in progress (43,304,571) (85,290) (74,681,081) (473,069) Increase in reclamation and remediation investment – – (2,090,094) – ————- ————- ————- ————- Net cash provided (used) by investing activities (43,304,571) (85,290) (76,771,175) (473,069) ————- ————- ————- ————- CASH FLOWS FROM FINANCING ACTIVITIES Term loan advances (repayments) 51,107,815 – 51,107,815 (2,205,186) Deferred debt issuance costs (2,469,747) – (3,319,820) – Common stock issued for cash – – 59,191,196 4,012,000 Warrants issued for cash – – – 1,988,000 Exercise of options to purchase common stock 408,200 (3,650,250) 909,183 – Exercise of warrants to purchase common stock 705,000 5,286,238 2,520,552 5,286,238 Preferred stock dividends – – – (51,354) ————- ————- ————- ————- Net cash provided (used) by financing activities 49,751,268 1,635,988 110,408,926 9,029,698 ————- ————- ————- ————- Change in cash (711,845) (619,713) 12,535,806 3,102,958 Cash, beginning of period 18,750,186 3,775,058 5,502,535 52,387 ————- ————- ————- ————- Cash, end of period $ 18,038,341 $ 3,155,345 $ 18,038,341 $ 3,155,345 ————- ————- ————- ————- ————- ————- ————- ————- SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid (received) $ 164,617 $ (300) $ 165,456 $ 69,130 ————- ————- ————- ————- ————- ————- ————- ————- NON-CASH FINANCING AND INVESTING ACTIVITIES: Stock, options and warrants issued for services $ 661,892 $ 635,207 $ 1,950,446 $ 2,638,364 Exploration fees and assets paid by issuance of stock $ – $ – $ – $ 136,500 Equipment purchases included in accounts payable $ (9,093,639) $ – $ 2,738,144 $ – Deferred debt issuance costs included in accrued expenses $ (2,328,277) $ – $ – $ –
Western Goldfields Inc.
CONTACT: please visit http://www.westerngoldfields.com/, or contact: RayThrelkeld, President and Chief Executive Officer, (416) 324-6005,rthrelkeld@westerngoldfields.com; Brian Penny, Chief Financial Officer, (416)324-6002, info@westerngoldfields.com; Julie Taylor Pantziris, Director,Regulatory Affairs and Investor Relations, (416) 324-6015,jtaylor@westerngoldfields.com