Western Goldfields Announces 2008 Financial Results
- 2008 gold sales of 110,880 ounces at $861 per ounce, cost of sales(1)
of $508 per ounce
- Net income of $14.6 million or $0.11 per share, including an after-
tax mark-to-market gain on our gold forward sales contracts of $8.0
million or $0.06 per share
- The Company completed the planned capital expansion of the Mesquite
mine during the year, within budget; going forward, sustaining
capital is minimal
- The Company reduced its debt by $17.7 million to $68.6 million at
December 31, 2008
“During the early part of 2008, the Company met the challenges of our start-up, and made appropriate changes to Mesquite to ensure it remains a long-lived asset that will generate significant cash flow year over year with very little additional capital requirement,” stated Mr.
Gold sales during the year totaled 110,880 ounces, at an average cost of sales(1) of
In 2008, Western Goldfields’ production and sales were below expectations due to a combination of factors including: equipment and parts availability, optimization of process solution flow, a delay in placing the second ore lift and the focus on stripping in the latter part of the year under the revised mine plan. These production challenges, combined with an industry wide rise in input costs, such as fuel, tires, explosives and process chemicals, made 2008 a challenging start-up year for the Company.
Western Goldfields proved to be both flexible and decisive in its reaction to these challenges. A revised mine plan, announced in October, moved to sequential mining of the pits, reducing costs and increasing efficiency, while simultaneously improving the production profile. In addition, the Company was proactive in controlling costs by hedging approximately 50% of its diesel fuel requirements in each of 2009 and 2010 and also began procuring lower-cost, better-performing radial tires.
“In 2008, a number of factors resulted in the Company not meeting its expectations. While some were beyond our control, others were well within it and we are committed to learning from this, continuously improving and meeting our operational targets going forward,” said Mr.
Fourth Quarter 2008 Results
---------------------------
For the fourth quarter 2008, gold sales totaled 30,625 ounces, at an average cost of sales(1) of
As a result of the new mine plan, during the fourth quarter the Company did not produce as many ounces as anticipated. The plan resulted in increased stripping activity at the Rainbow pit in the fourth quarter of 2008. The combination of issues encountered throughout the year led to a delay in placing the second ore lift on the leach pad. The resulting lack of secondary leaching led to lower than expected recoveries and production particularly in late 2008 when the benefit of these additional recoveries would have started to be realized.
Operations Update
-----------------
During 2008, the Company showed continuous progress in mining operations, most specifically, tons mined and gold ounces delivered to the leach pad. From October forward, under the revised mine plan, Western Goldfields met budgeted targets in both of these critical areas. The impact of this was a large build of recoverable gold ounces on the leach pad. As the ounces were mined and placed late in 2008, they did not have the necessary time to flow through the full leach cycle into production and will instead add to production in 2009 and beyond. The following table presents a summary of key operational metrics for the Mesquite mine for 2008 and the 2009 forecast:
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2008 2009 Forecast
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Total Tons Mined (millions) 54.5 52.0 - 56.0
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Ore Tons Mined (millions) 8.9 13.0 - 14.0
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Gold Ounces Placed (000's ounces) 201.1 205.0 - 215.0
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Gold Sales (000's ounces) 110.9 140,000 - 150,000
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Ending Gold Inventory (000's ounces) 54.6 63.0 - 67.0
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Consistent with the experience of many of Western Goldfields' peers, 2008
represented a year of escalating input costs. The following table presents a
summary of the Company's cost metrics for 2008 and the 2009 forecast:
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2008 2009 Forecast
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Mining cost per ton mined $1.03 $0.80 - $0.84
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Processing cost per ton of ore $1.55 $1.10 - $1.15
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G&A cost per ton of ore $0.47 $0.35 - $0.38
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Royalty cost per ton of ore $0.23 $0.20 - $0.22
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2008 Financial Results
----------------------
For the full year 2008, Western Goldfields reported net income of
Fourth Quarter 2008 Financial Results
-------------------------------------
For the fourth quarter 2008, Western Goldfields reported net income of
Liquidity and Capital Resources
-------------------------------
At
Capital Expenditures
--------------------
During 2008, the Company substantially completed its capital program. The
expansion capital program was completed at a cost of $111.3 million, within 1%
of the budget. Total capital expenditures in 2008 were $22.1 million. Capital
expenditures in 2009 are forecast to be $1.5 million. Sustaining capital
requirements are expected to be nominal going forward.
Reserves and Resources
----------------------
Proven and probable mineral reserves as at
2009 Outlook
------------
In 2009, the Company expects to produce and sell 140,000 to 150,000 ounces of gold at a cost of
While total operating costs are expected to remain consistent on a quarterly basis from
Assumptions:
------------
In providing the Company's 2009 forecast, Western Goldfields assumes an
average gold price for 2009 of $850 per ounce and fuel costs for the 50% of
the Company's diesel that is unhedged of $1.75 per gallon (including tax and
delivery). Western Goldfields utilizes an ultra low sulfur west coast red
diesel as specified by California and Imperial County.
(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.
Revenues per ounce are determined by the revenues from gold sales as
per the Company's financial statements divided by the number of
ounces sold.
Business Combination with New Gold
----------------------------------
On
Based on the closing price of New Gold’s common shares on the TSX of
Highlights of the Transaction:
- Diversified gold production base from three gold mines in mining-
friendly jurisdictions with forecasted gold production of
approximately 335,000 ounces in 2009, expected to grow to over
400,000 ounces in 2012
- Strong cash flow to fully fund the development at the New Afton gold-
copper project in British Columbia
- Delivers on industry consolidation in a rising gold price environment
- Combines experienced management teams and boards of directors
- Enhances market presence
- Increases mineable reserves totaling 7.6 million gold ounces within a
measured and indicated resource of 12.2 million gold ounces
Western Goldfields Inc.
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Western Goldfields Inc. is an independent gold production and exploration company with a focus on precious metal mining opportunities in
Mr.
Cautionary Note to U.S. Investors Concerning Estimates of Measured,
Indicated and Inferred Resources
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This press release uses the terms “measured”, “indicated” and/or “inferred” mineral resources.
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 securities law. 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 (including without limitation, statements made with respect to future production and costs contemplated by our new mine plan) are based in part on current and historical production and cost data factoring certain assumptions with respect to future metal prices, costs and availability 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
WESTERN GOLDFIELDS INC.
CONSOLIDATED BALANCE SHEETS
(In thousands U.S. dollars) (Unaudited)
December 31, December 31,
2008 2007
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 11,275 $ 43,870
Restricted cash 7,500 7,500
Receivables 2,550 298
Inventories 35,098 11,201
Prepaid expenses 1,747 887
Current portion of deferred income
tax asset 2,045 755
------------- -------------
TOTAL CURRENT ASSETS 60,215 64,511
------------- -------------
Plant and equipment, net of accumulated
amortization 111,334 77,951
Construction in process - 21,864
Investments - reclamation and remediation 8,934 8,661
Long-term deposits 367 348
Long-term prepaid expenses 1,384 1,555
Deferred debt issuance costs, net of
accumulated amortization 2,766 3,227
Deferred income tax asset 22,368 36,378
------------- -------------
TOTAL OTHER ASSETS 147,153 149,984
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TOTAL ASSETS $ 207,368 $ 214,495
------------- -------------
------------- -------------
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 7,484 $ 8,781
Current portion of mark-to-market loss
on gold hedging contracts 5,606 1,935
Current portion of mark-to-market loss
on fuel hedging contracts 540 -
Current portion of loan payable 11,656 6,882
Current portion of reclamation and
remediation liabilities 339 129
------------- -------------
TOTAL CURRENT LIABILITIES 25,625 17,727
------------- -------------
LONG-TERM LIABILITIES
Mark-to-market loss on gold hedging
contracts 39,580 56,966
Mark-to-market loss on fuel hedging
contracts 391 -
Loan payable 56,984 69,581
Reclamation and remediation liabilities 4,737 4,932
------------- -------------
TOTAL LIABILITIES 127,317 149,206
------------- -------------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY
Common stock, of no par value,
unlimited shares authorized; 134,801,286
and 135,049,685 shares issued and
outstanding, respectively 133,383 133,725
Stock options and warrants 8,291 7,551
Accumulated deficit (61,623) (75,987)
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TOTAL STOCKHOLDERS' EQUITY 80,051 65,289
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 207,368 $ 214,495
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WESTERN GOLDFIELDS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(In thousands U.S. dollars)
(Unaudited)
Three Months
Ended December 31, Year Ended December 31,
--------------------------- ---------------------------
2008 2007 2008 2007
------------- ------------- ------------- -------------
REVENUES
Revenues from
gold sales $ 24,472 $ 606 $ 95,427 $ 4,666
------------- ------------- ------------- -------------
COST OF GOODS SOLD
Mine operating
costs 15,431 7,359 54,231 19,100
Royalties 540 38 2,073 192
------------- ------------- ------------- -------------
Cost of sales
(excludes
amortization and
accretion) 15,971 7,397 56,304 19,292
Amortization
and accretion 2,384 1,880 9,332 4,242
Reclamation costs
recovery (209) (22) (209) (22)
------------- ------------- ------------- -------------
18,146 9,255 65,427 23,512
------------- ------------- ------------- -------------
GROSS PROFIT (LOSS) 6,326 (8,649) 30,000 (18,846)
------------- ------------- ------------- -------------
EXPENSES
General and
administrative 1,570 3,239 6,061 8,370
Exploration and
business
development 170 36 1,106 795
------------- ------------- ------------- -------------
1,740 3,275 7,167 9,165
------------- ------------- ------------- -------------
OPERATING INCOME
(LOSS) 4,586 (11,924) 22,833 (28,011)
------------- ------------- ------------- -------------
OTHER INCOME
(EXPENSE)
Interest income 151 593 1,093 1,976
Interest expense
and commitment
fees (1,101) (1,015) (4,127) (1,863)
Amortization of
deferred debt
issuance costs (115) (115) (461) (342)
Realized and
unrealized gain
(loss) on
mark-to-market
of gold forward
sales contracts 15,121 (31,328) 13,078 (58,901)
Unrealized loss
on mark-to-market
of fuel forward
contracts (931) - (931) -
Gain on sale of
assets - - - 42
Loss on foreign
currency exchange (2,224) (637) (3,820) (343)
------------- ------------- ------------- -------------
10,901 (32,502) 4,832 (59,431)
------------- ------------- ------------- -------------
INCOME (LOSS)
BEFORE INCOME TAXES 15,487 (44,426) 27,665 (87,442)
INCOME TAX RECOVERY
(EXPENSE) (7,704) 37,133 (13,049) 37,133
------------- ------------- ------------- -------------
NET INCOME (LOSS) $ 7,783 $ (7,293) $ 14,616 $ (50,309)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
NET INCOME (LOSS)
PER SHARE
- BASIC $ 0.06 $ (0.06) $ 0.11 $ (0.43)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
- DILUTED $ 0.05 $ (0.06) $ 0.10 $ (0.43)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
WEIGHTED AVERAGE
NUMBER OF COMMON
STOCK OUSTANDING
- BASIC 135,864,664 132,554,570 136,169,809 116,903,752
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
- DILUTED 143,770,106 132,554,570 148,171,716 116,903,752
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
WESTERN GOLDFIELDS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands U.S. dollars)
(Unaudited)
Three Months
Ended December 31, Year Ended December 31,
--------------------------- ---------------------------
2008 2007 2008 2007
------------- ------------- ------------- -------------
CASH FLOWS FROM
OPERATING
ACTIVITIES
Net income
(loss) $ 7,783 $ (7,293) $ 14,616 $ (50,309)
Adjustments to
reconcile net
income (loss)
to net cash
provided (used)
by operating
activities:
Items not
affecting cash:
Amortization of
plant and
equipment 2,456 1,802 9,196 3,925
Amortization of
deferred debt
issuance costs 115 115 461 342
Accretion expense (38) 84 224 337
Deferred
income taxes 7,941 (37,133) 12,720 (37,133)
Reclamation cost
recovery (209) (22) (209) (22)
Reclamation costs
incurred - (148) - (148)
Gain on sale
of assets - - - (42)
Interest net of
reimbursed costs
- reclamation
and remediation (50) 42 (273) (234)
Stock based
compensation 260 611 1,335 2,561
Mark-to-market
(gain) loss on
gold hedging
contracts (15,120) 31,329 (13,715) 58,901
Mark-to-market
loss on fuel
hedging
contracts 931 - 931 -
Changes in assets
and liabilities:
Decrease
(increase) in:
Accounts
receivable (1,959) (169) (2,025) (74)
Inventories (4,793) (8,822) (23,897) (10,689)
Prepaid
expenses and
deposits (544) 970 (708) (610)
Increase
(decrease) in:
Accounts
payable (506) 1,819 (1,759) 2,156
Payroll and
related taxes
payable - - (1,561) -
Accrued
expenses (726) 1,772 3,447 2,101
Accrued
interest
expense (60) 68 (316) 360
------------- ------------- ------------- -------------
Net cash used by
operating
activities (4,519) (14,975) (1,533) (28,578)
------------- ------------- ------------- -------------
CASH FLOWS FROM
INVESTING
ACTIVITIES
Restricted cash - - - (7,500)
Purchase of plant
and equipment,
including
construction in
process (2,206) (19,930) (22,050) (94,611)
Proceeds from
sale of assets - 98 - 98
Increase in
reclamation and
remediation
investment - - - (2,090)
------------- ------------- ------------- -------------
Net cash used by
investing
activities (2,206) (19,832) (22,050) (104,103)
------------- ------------- ------------- -------------
CASH FLOWS FROM
FINANCING
ACTIVITIES
Shares acquired
under normal
course issuer bid (2,507) - (2,507) -
Advances under
loan facilities - 25,354 9,877 76,462
Repayments under
loan facilities (17,700) - (17,700) -
Deferred debt
issuance costs - (250) - (3,570)
Common stock
issued for cash - 33,417 - 92,608
Exercise of
options to
purchase common
stock 293 131 980 1,040
Exercise of
warrants to
purchase common
stock - 1,987 338 4,508
------------- ------------- ------------- -------------
Net cash provided
(used) by financing
activities (19,914) 60,639 (9,012) 171,048
------------- ------------- ------------- -------------
Change in cash
and cash
equivalents (26,639) 25,832 (32,595) 38,367
Cash and cash
equivalents,
beginning of period 37,914 18,038 43,870 5,503
------------- ------------- ------------- -------------
Cash and cash
equivalents, end
of period $ 11,275 $ 43,870 $ 11,275 $ 43,870
------------- ------------- ------------- -------------
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SUPPLEMENTAL CASH
FLOW DISCLOSURES:
Interest paid $ (1,161) $ (663) $ (4,358) $ (2,374)
Interest
received $ 215 $ 246 $ 887 $ 1,500
Taxes paid $ 570 $ - $ 570 $ -
NON-CASH FINANCING
AND INVESTING
ACTIVITIES:
Stock, options
and warrants
issued for
services $ 260 $ 625 $ 1,335 $ 2,575
Equipment
purchases
included in
accounts
payable $ 235 $ 852 $ 551 $ 1,886
Non-cash
component of
inventories $ (67) $ - $ 1,556 $ -
SOURCE Western Goldfields Inc.