Source: Ryan Walker 11/24/2022
The company aims to achieve record production in Q4/22 to recover from the hit in Q3/22, noted an Echelon Capital Markets report.
earnings in Q3/22 missed targets due to lower-than-expected production, reported Echelon Capital Markets analyst Ryan Walker in a November 10, 2022, research note. Consequently, Echelon revised its rating and target price on the company to Hold from Buy and to CA$9.50 per share from CA$11.75, respectively. Wesdome’s current share price is about CA$9.50. (WDO:TSX)
“Despite recent operational challenges, we continue to highlight Wesdome’s organic production growth profile solely in a Tier 1 jurisdiction and the potential for continued positive exploration results from aggressive drilling at both Kiena and Eagle River,” wrote Walker.
Wesdome management says the company is on track to reach the low end of its 120,000–140,000 ounces (120–140 Koz) of production guidance this year, according to Walker, but this will require a record yield of 44.3 Koz in Q4/22 alone. (The miner has produced about 75.7 Koz year to date.)
Subsequently, 2023 will be “a consolidation year with financial improvement expected as Kiena capex tapers off and production increases throughout the year,” Walker reported Wesdome saying.
Q3/22 at a Glance
The Toronto-based miner, however, is in good shape financially, Walker pointed out, and should be able to cover the remaining capex required for Kiena.
As for the mining company’s Q3/22 performance, it posted earnings per share of -CA$0.03, a clear miss from consensus’ estimate of CA$0.03, relayed Walker.
Production during the quarter was 22,883 ounces, down 16% from the previous quarter and down 22% from the previous year.
At the same time, all-in-sustaining costs (AISCs) were up, coming in at US$1,698 per ounce versus US$1,582 in Q2/22, but as the Street expected.
Problems Being Addressed
Operational challenges drove these outcomes, Walker noted, most notably July shutdowns at Eagle River and Kiena, for 15 and 24 days, respectively. Difficult ground conditions at Kiena also was an issue, resulting in a slower production ramp-up than anticipated. Now, ramp-up is expected to carry over into 2023. Lower grade in the Falcon zone also affected Eagle River.
Management has taken steps to remedy these problems and anticipates AISCs for full-year 2022 to end up being at the high end of guidance, between US$1,370 and US$1,520 per ounce.
Strong Balance Sheet
The Toronto-based miner, however, is in good shape financially, Walker pointed out, and should be able to cover the remaining capex required for Kiena, about CA$23M. In addition to cash flow from two mines, Wesdome has about CA$26M of capacity remaining on the credit facility, and this will increase to CA$150M when commercial production is declared at Kiena, expected in Q4/22.
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Disclosures For Echelon Wealth Partners Inc.,, November 10, 2022
Echelon Wealth Partners Inc. is a member of IIROC and CIPF. The documents on this website have been prepared for the viewer only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy.
Any opinions or recommendations expressed herein do not necessarily reflect those of Echelon Wealth Partners Inc. Echelon Wealth Partners Inc. cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money. Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate. Echelon Wealth Partners Inc. employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients.
Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.
U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States and is not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. Any resulting transactions should be effected through a U.S. broker-dealer.
I, Ryan Walker, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
( Companies Mentioned: WDO:TSX,
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