Wesdome shares fall after missing analysts’ Q2 forecasts

Shares of Wesdome Gold Mines (TSX: WDO) fell to their lowest in a year after the company reported a “weak” performance in its second quarter and said that it would be re-evaluating its 2022 guidance.

The company’s total gold production fell by 10% to 27,240 oz. in the second quarter of 2022, compared to 30,375 oz. in the same quarter last year. Wesdome’s flagship mine, Eagle River near Wawa, Ontario, saw production decline by about 40% to 17,756 oz., compared to 29,836 oz. gold in the quarter last year.  

The company also faced issues at its Kiena mine, in Val d’Or, Que, where production restarted this year after an eight-year hiatus. Delayed delivery of the mine’s electrical and underground equipment due to global supply challenges has pushed the mine’s ramp up behind by about three –to four months, Wesdome said.  

Stockpiled ore processed from the company’s Mishi mine in Ontario, which was mined out in 2021, added 570 oz. gold to the total production.  

“During quarter two, there were a number of one-time operational issues that impacted production,” the company’s CEO Duncan Middlemiss said in a press release. “At Eagle River, production was lower than budget due to a manufacturing defect on a new hoist rope, resulting in two weeks of lower productivity as ore was trucked to surface.”  

He added that a delayed replacement of a leach tank at the project’s mill impacted nearly a week’s production. Once the problems were resolved, Wesdome said it produced “significantly higher-grade ore” but wasn’t able to offset the initial impact.  

Michael Fairbairn, an analyst with Canaccord Genuity, described Wesdome’s results as a “significant miss.”  

“Gold production of 27,200 oz. was sizable miss by 35% vs. our 42,000 oz. estimate,” he wrote in a research note to clients.  He added that production at Kiena was 44% below Canaccord’s estimate of 15,800 oz. gold. 

BMO analyst Andrew Mikitchook has lowered his 2022 gold forecast for Wesdome to 140,900 oz. from 151,300 ounces.  

“With the operational challenges at Eagle now behind them, Wesdome expects production to be higher in the second half (both at Eagle and Kiena). However, after weaker production in Q1 and Q2, the company is reevaluating its guidance and will provide an update on August 10 with the release of Q2 financials,” he wrote in a note to clients.  

“Wesdome’s Q2 production results missed our estimate by 15% (27,240 oz. vs. our 32,000 oz.)…while these appear to be one-off issues that are since resolved, this marks the second operationally challenging quarter in a row (last quarter at Kiena, this time at Eagle),” he added.  

At noon in Toronto, shares of Wesdome were trading at C$8.95, down $1.93 or about 17%. Its previous 52-week low was C$9.76. The company has 142.5 million common shares for a market cap of C$1.2 billion.