Western Goldfields Announces First Quarter Results
TORONTO, May 6 /PRNewswire-FirstCall/ — Western Goldfields Inc. (TSX:WGI, AMEX:WGW) – today announced financial results for the three months ended March 31, 2008. The Company’s financial statements were prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). All dollar amounts are stated in U.S. dollars unless otherwise indicated.
During the first quarter: – 9,960 ounces of gold were sold; – The expanded leach pad, activated in late 2007, became operational; – The process plant upgrade was completed; – New carbon columns for the processing circuit were installed and were brought on line April 25, 2008.
“During the first quarter of 2008, we had 9,146 ounces of gold production from newly mined ore,” reported Raymond Threlkeld, President and Chief Executive Officer. “We also substantially completed the remaining aspects of our capital program at the Mesquite Mine.”
Financial Results —————–
Western Goldfields incurred a net loss to common shareholders for the three month period ended March 31, 2008 of $19.6 million, or $0.14 per share. This compares to a loss of $2.6 million, or $0.03 per share for the three month period ended March 31, 2007. The net loss includes a non-cash pre-tax loss of $24.1 million 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. Results for 2008, as compared with 2007, show an increase in gold sold to 9,960 ounces from 1,875 ounces. The average selling price per ounce rose to $929 in the first quarter of 2008 from $658 in the first quarter of 2007.
Liquidity and Capital Resources ——————————-
At March 31, 2008 our cash balance was $32.8 million, our restricted cash was $7.5 million, and our working capital was $39.9 million. In addition, the Company had unutilized credit facilities of $20.7 million of which $3.0 million was available for the Mesquite Expansion project and $17.7 million was available for general corporate purposes.
Mesquite Mine Production ————————
The Mesquite Mine, in its first quarter of production placed 1.3 million tons of ore on the leach pad at an average grade of 0.0165 ounces of gold per ton. Waste mining production for the quarter was 11.0 million tons. Total recoverable ounces placed on the leach pad in the first quarter were 15,661 ounces of gold.
First Quarter 2008 First Quarter 2007 Change —————— —————— —— Tons Mined Grade Tons Mined Grade Tons Mined Grade ———- —– ———- —– ———- —– Ore Mined 1,268,736 0.0165 — — 1,268,736 0.0165 Waste Mined 11,042,050 — — — 11,042,050 — ———- ———- ———- TOTAL 12,310,786 — 12,310,786 ———- ———- ———- ———- ———- ———-
Gold poured during the quarter was 9,146 ounces and gold sold was 9,960 ounces at an average selling price of $929 per ounce and cost of sales of $939 per ounce of gold(1). Gold sales were at the low end of the Company’s projection in March 2008 of 10,000-13,000 ounces due to the slower than expected production of gold bullion resulting in higher than planned inventories in the heap leach pad.
Operating costs were negatively impacted by higher tire costs during the first quarter due to performance related issues. Subsequent to the end of the quarter the Company has been successful in procuring Belshina tires for the haul trucks which to date perform better, last longer and result in improved tire costs.
Mesquite Capital Expenditures —————————–
During the first quarter, the remaining aspects of our capital program were substantially completed. The retrofit of the process plant was completed, and new carbon columns for the processing circuit were also installed during the quarter and were brought on line April 25, 2008. Good progress was also made in construction of the new truck repair shop and warehouse and mine administrative offices, which will be completed during the second quarter.
Our latest forecast for spending on the mine expansion capital program is $110.1 million, of which $95.9 million was incurred in 2006 and 2007 and $7.8 million was incurred in the first quarter of 2008, with the remainder of $6.4 million to be spent during the second quarter of 2008.
In addition to the expansion capital, $1.3 million was spent during the first quarter, of which approximately 50% was spent on development drilling. Planned spending for the balance of the year is $3.5 million primarily for a front-end loader which will be delivered during the third quarter. This additional loading unit will provide the ability to maintain production levels now that the additional fourth crew has been mobilized.
2008 Outlook ————
Mesquite is expected to produce between 20,000-30,000 ounces of gold in the second quarter. The decrease in production as compared with prior estimates is related to the timing of leaching and gold tied up in solution as pad inventory. Ounces placed on the heap leach pad are above budget, but the timing and amount of solution going to the carbon columns for gold recovery has not reached anticipated levels. Now that the new process facility is operating, solution flow has more than doubled and will allow more gold in solution to be processed from the heap leach pad.
Fuel prices have risen steadily since late December 2007. Our initial cost model for 2008 was $2.75 per gallon for off-road diesel fuel. Fuel not only affects the direct mining costs as consumed by our trucks and shovels, but also affects the cost of delivered consumables, such as explosives and lime. Our current forecasts assume a cost of $3.55 per gallon, which is consistent with both current spot and forward prices for diesel.
Given the slower leach recovery and the increase in consumable costs, mainly of diesel fuel, gold production for 2008 is projected to be 135,000-145,000 ounces, a decrease from the 155,000-165,000 ounces previously estimated. Cost of sales for 2008 is expected to average between $470-$490 per ounce of gold(1), up $60 per ounce from previous estimates of $410-$430 per ounce(1).
Going forward, 2009 gold production is expected to be 135,000-145,000 ounces of gold production at a cost of sales of $430-$450 per ounce(1). Average annual gold production for the period 2010-2015 is expected to grow to 160,000-170,000 ounces of gold at an average cost of sales of $390-$410 per ounce(1).
(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. Western Goldfields common shares trade on the Toronto Stock Exchange under the symbol WGI, and on the American Stock Exchange under the symbol WGW. For further details, please visit http://www.westerngoldfields.com/.
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. 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, 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) March 31, December 31, 2008 2007 ————- ————- (Unaudited) (Audited) ASSETS CURRENT ASSETS Cash and cash equivalent $ 32,829 $ 43,870 Restricted cash 7,500 7,500 Receivables 220 298 Inventories 17,242 11,201 Prepaid expenses 845 887 Current portion of deferred income tax asset 2,458 755 ————- ————- TOTAL CURRENT ASSETS 61,094 64,512 ————- ————- Property, plant, and equipment, net of accumulated amortization 94,981 77,951 Construction in progress 12,082 21,864 Investments – reclamation and remediation 8,723 8,661 Long-term deposits 352 348 Long-term prepaid expenses 1,512 1,555 Deferred debt issuance costs, net of accumulated amortization 3,112 3,227 Deferred income tax asset 44,507 36,379 ————- ————- TOTAL OTHER ASSETS 165,269 149,984 ————- ————- TOTAL ASSETS $ 226,363 $ 214,495 ————- ————- ————- ————- LIABILITIES & STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 7,274 $ 8,781 Current portion of mark-to-market loss on gold hedging contracts 6,303 1,935 Current portion of loan payable 7,589 6,882 ————- ————- TOTAL CURRENT LIABILITIES 21,166 17,598 ————- ————- LONG-TERM LIABILITIES Mark-to-market loss on gold hedging contracts 76,710 56,966 Loan payable 76,734 69,581 Reclamation and remediation liabilities 5,148 5,061 ————- ————- TOTAL LIABILITIES 179,758 149,206 ————- ————- COMMITMENTS AND CONTINGENCIES – – STOCKHOLDERS’ EQUITY Common stock, of no par value, unlimited shares authorized; 136,234,196 and 135,049,685 shares issued and outstanding,respectively 134,596 133,725 Stock options and warrants 7,620 7,551 Accumulated deficit (95,611) (75,987) Accumulated other comprehensive income – – ————- ————- TOTAL STOCKHOLDERS’ EQUITY 46,605 65,290 ————- ————- TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 226,363 $ 214,495 ————- ————- ————- ————- WESTERN GOLDFIELDS INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands U.S. dollars) (Unaudited) Three Months Ended March 31, —————————- 2008 2007 ————- ————- REVENUES Revenues from gold sales $ 9,256 $ 1,233 COST OF GOODS SOLD Mine operating costs 9,087 2,209 Amortization and accretion 2,094 375 Royalties 265 45 ————- ————- 11,446 2,629 ————- ————- GROSS LOSS (2,190) (1,396) ————- ————- EXPENSES General and administrative 1,111 1,085 Stock based compensation 370 468 Exploration 224 283 ————- ————- 1,704 1,836 ————- ————- OPERATING LOSS (3,894) (3,232) ————- ————- OTHER INCOME (EXPENSE) Interest income 384 518 Interest expense and commitment fees (699) – Amortization of deferred debt issuance costs (115) – Unrealized loss on mark-to-market of gold forward sales contracts (24,112) – Loss on foreign currency exchange (1,020) 81 ————- ————- (25,563) 598 ————- ————- LOSS BEFORE INCOME TAXES (29,456) (2,634) INCOME TAX RECOVERY (9,832) – ————- ————- NET LOSS TO COMMON STOCKHOLDERS (19,624) (2,634) OTHER COMPREHENSIVE INCOME Foreign currency translation adjustment – (5,257) ————- ————- NET COMPREHENSIVE LOSS $ (19,624) $ (7,891) ————- ————- ————- ————- BASIC AND DILUTED NET LOSS PER SHARE $ (0.14) $ (0.03) ————- ————- ————- ————- WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 135,659,101 102,882,801 ————- ————- ————- ————- WESTERN GOLDFIELDS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands U.S. dollars) (Unaudited) Three Months Ended March 31, —————————- 2008 2007 ————- ————- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (19,624) $ (2,634) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Items not affecting cash: Amortization of property, plant and equipment 2,013 295 Amortization of deferred debt issuance costs 115 – Accretion expense 87 84 Deferred income taxes (9,832) – Interest net of reimbursed costs – reclamation and remediation (63) (84) Stock based compensation 370 468 Mark-to-market loss on gold hedging contracts 24,112 – Changes in assets and liabilities: Decrease (increase) in: Accounts receivable 78 (98) Inventories (6,041) (71) Prepaid expenses and deposits 86 (178) Long term deposits (3) (3) Increase (decrease) in: Accounts payable (1,339) (801) Payroll and related taxes payable (1,562) – Accrued expenses 1,051 683 Accrued interest expense (171) – ————– ————- Net cash provided (used) by operating activities (10,723) (2,338) ————– ————- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property & equipment, including construction in progress (8,749) (5,715) ————– ————- Net cash provided (used) by investing activities (8,749) (5,715) ————– ————- CASH FLOWS FROM FINANCING ACTIVITIES Term loan advances 7,860 – Deferred debt issuance costs – (18) Common stock issued for cash – 59,190 Exercise of options to purchase common stock 233 145 Exercise of warrants to purchase common stock 337 379 ————– ————- Net cash provided by financing activities 8,430 59,697 ————– ————- Change in cash (11,041) 51,644 Cash and cash equivalents, beginning of period 43,870 5,503 ————– ————- Cash and cash equivalents, end of period $ 32,829 $ 57,147 ————– ————- ————– ————- SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid (received), net $ 413 $ – ————– ————- ————– ————- NON-CASH FINANCING AND INVESTING ACTIVITIES: Stock, options and warrants issued for services $ 370 $ 468 Equipment purchases included in accounts payable $ 513 $ – Deferred debt issuance costs included in accrued expenses $ – $ 312
Western Goldfields Inc.
CONTACT: please visit http://www.westerngoldfields.com/, or contact: RaymondThrelkeld, 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