Western Goldfields Announces First Quarter Results
Ticker Symbol: C:TORONTO:WGI U:WGDF
TORONTO, May 2 /PRNewswire-FirstCall/ - Western Goldfields, Inc. today announced financial results for the three-month period ended March 31, 2007. The Company's financial statements were prepared in accordance with accounting principles generally accepted in the United States (US GAAP). Dollar amounts are stated in U.S. dollars unless otherwise stated.
"Western Goldfields made significant progress in the first three months of 2007 toward bringing the Mesquite Mine into full production," reported Mr. Randall Oliphant, Chairman. "We have met all of our first-quarter milestones and full production is expected to be less than one year away. Everything is now in place to make Mesquite a successful producing mine and to establish a platform for the growth of Western Goldfields."
"The first deliveries of our mine fleet have arrived at the Mesquite Mine," said Mr. Raymond Threlkeld, President and Chief Executive Officer. "Our pre-stripping is expected to commence in June, and we expect to see the first ore to the pad by January 2008. We are planning for full production of 165,000 ounces of gold annually by April 2008."
"With the results of our drilling program which was commenced in September 2006, we were able to increase reserve and resource estimates at the Mesquite Mine, adding approximately two years to the initial 9-1/2 year project life," continued Mr. Threlkeld. "We are presently exploring ways to increase annual production with our current planned mining fleet."
In the first quarter of 2007, the Company completed a common share equity financing, which provided the Company with net proceeds of $59.2 million. On March 30, 2007, the Company entered into a new term loan facility with Investec Bank (UK) Limited under which the Company will be able to borrow up to $105 million. The availability of funds under the term loan facility is subject to certain conditions, including entering into an acceptable gold hedging program for approximately 450,000 ounces, the resolution of certain ancillary agreements and the delivery of the usual and customary documents, opinions and certificates. The Company plans to draw $85 million under this term loan facility for the development of the Mesquite Mine. The balance will be available for other corporate purposes until late 2009. This agreement, together with the first quarter equity financing, completes the financing requirements for the development of the Mesquite Mine.
In March, the Company announced increases to its reserve and resource estimates. Proven and Probable reserves increased to 2.77 million ounces of gold from 2.36 million ounces announced in August 2006, which represents an increase of 17%. Measured and Indicated resources (inclusive of mineral reserves) increased to 3.87 million ounces of gold from the previously announced 3.61 million ounces. Based on these results, the Company has increased the life of the Mesquite Mine by approximately two years.
Also in March, the Company announced that its Board of Directors had approved a plan to reorganize the Company's corporate structure so that its place of incorporation will effectively be changed from Idaho, USA to Ontario, Canada, subject to approval by the Company's shareholders at its annual meeting. This strategy will enable the Company to more quickly complete Corporate transactions requiring shareholder approval. The Company's Board of Directors considers this an appropriate strategy in view of the pre-eminence of The Toronto Stock Exchange for mining company listings as well as the fact that, as at April 25, 2007, 55% of the Company's shares were registered outside of the United States.
Mesquite Mine Development
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The Company has made purchase commitments of $70.6 million for its mining fleet and related equipment for the development of the Mesquite Mine. As of March 31, 2007, equipment totaling $4.1 million was delivered to the site. In addition, the Company has planned capital spending of approximately $36.9 million in 2007 on other aspects of the mine expansion program, of which $4.4 million has been spent as at the end of the first quarter of 2007.
Since the end of the first quarter of 2007, Western Goldfields has been quickly ramping up the construction activities at the Mesquite Mine. Highlights include:
- The leach pad expansion contract has been awarded to N.A. Degerstrom,
Inc. including ordering all pad liner material;
- The first O&K RH340 shovel has arrived in Los Angeles with shipping
to the site planned for the first week of May;
- Delivery of the mine haul trucks remains on schedule in support of
commencement of pre-stripping in June 2007;
- Despite a global shortage of mining truck tires, Mesquite Mine has a
full inventory of tires for the initial fleet and is accepting
delivery of additional tires to establish a tire inventory;
- The new mine truck shop building has been ordered;
- Certain site reclamation activities have been completed including the
rinsing of the Vista heap leach pad and removal and salvage of
redundant facilities; and
- All planned senior mine staff positions have been filled.
Western Goldfields has evaluated its pre-production capital spending program, with a particular emphasis on operating costs and compliance with California emissions standards. Our latest forecast for pre-production spending is $108.5 million, which reflects our decision to accelerate the acquisition of three haul trucks that were originally included in our 2008 production phase capital program and $1.6 million of additional development drilling. With the acceleration of the purchase of the three haul trucks, life-of-mine capital expenditures remain in line with previous estimates.
Financial Results
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Western Goldfields reports net loss to common shareholders for the first quarter of 2007 of $2.6 million, or $0.03 per basic and diluted share from the sale of 1,875 ounces of gold, compared with a loss of $3.8 million, or $0.08 per basic and diluted share, for the corresponding 2006 quarter from the sale of 5,000 ounces of gold.
Liquidity and Capital Resources
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At March 31, 2007, the Company's cash balance was $57.1 million and working capital was $56.4 million. 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 $0.5 million.
Western Goldfields, Inc. |
