estern Goldfields improves Mesquite gold outlookWestern Goldfields Inc (2)(C:WGI)
Shares Issued 136,398,586
Last Close10/3/2008 $1.60
Monday October 06 2008 - News Release
Mr. Raymond Threlkeld reports
WESTERNGOLDFIELDS ANNOUNCES IMPROVED MINE PLAN FOR MESQUITE, RELEASES THIRDQUARTER PRODUCTION RESULTS, AND REVISES FULL-YEAR PRODUCTION TARGET
Western Goldfields Inc. has released itsimproved mine plan and unaudited third quarter production and goldsales update for its Mesquite mine.
- Improved mine plan expected to boost production to approximately 700,000 ounces over the four-year period from 2009-2012;
- Gold sales of 47,534 ounces of gold averaged $857 per ounce for the quarter;
- Gold production in the third quarter totalled 42,372 ounces, compared to 28,524 ounces in the second quarter and 9,066 in the first quarter;
- Shifting to new mine plan entails lowering the 2008 full-year target to approximately 117,000 ounces of gold sold, as increased stripping is required to prepare for 2009-2012;
- Strong financial position with cash on hand of approximately $44-million, including $7.5-million of restricted cash; Mesquite generating positive operating cash flow.
The company today announces an improved mine plan for its Mesquite minein California that it expects to increase production to approximately 700,000ounces of gold at average costs of sales of $420 per ounce for thefour-year period from 2009-2012. This compares to a previously planned 635,000ounces at an average $425-$435 cost of sales per ounce during the period.
"Our new mine plan for Mesquite will allow us to increase efficiencies,minimize haul distances and produce more gold ounces over the next four yearswith a resulting increase in annual cash flow generation," said RaymondThrelkeld, President and Chief Executive Officer. "This will result in reducedproduction in the short-term, as we focus on sequential mining of the pits,but we expect attractive gains beginning in 2009."
The company also announced unaudited third quarter results for productionand gold sales. Gold production in the third quarter was 42,372 ounces ofgold, up from the second quarter but below the previous estimate. "During thequarter, we continued to improve operations since our start-up in January,"said Mr. Threlkeld. "However, we did encounter challenges due to shovelavailability." Gold sales during the quarter totalled 47,534 ounces. Goldrevenues during the quarter were $857 per ounce.
"I'm excited by the launch our new mining plan," added Mr. Threlkeld. "Itallows us to maximize the potential of Mesquite, a multimillion-ounce mine,for the benefit of our shareholders."
Benefits of the improved mine plan
Under the new mine plan, the operation will focus on mining ore from theRainbow pit starting in 2009. This compares to the previous plan in whichmining moved between the Rainbow and Big Chief pits. The company expects toachieve increased efficiency by consolidating equipment in one location,including reduced mining costs due to short haulage distances, no wasted timemoving between pits, as well as operator efficiency. The estimated mine liferemains at 14 years and the company plans to mine its three pits sequentiallythrough the duration of the mine life to continue to maximize theseefficiencies.
Over the duration of the new mine plan, from 2009-2012, the operation isexpected to benefit from:
- Higher annual production;
- Higher annual cash flow generation;
- Total production of approximately 700,000 ounces of gold for the four-year period from 2009-2012 at cost of sales of $420 per ounce. The production represents an increase of approximately 65,000 ounces over the four years compared to the previous plan.
Third-quarter and year-to-date production results
The Mesquite mine achieved the following:
- Gold sales for the quarter were 47,534 ounces
- Production for the quarter was 42,372 ounces of gold, lower than the previous forecast, mainly reflecting a delay in the availability of replacement parts for one shovel in its mining fleet
- Gold production for the nine months ended September 30, 2008 was 79,962 ounces; gold sales were 80,255 ounces
Outlook
Gold sales for full-year 2008 are expected to total approximately 117,000ounces of gold at an average cost of sales of $500 per ounce, compared to aprevious estimate of 135,000-145,000 ounces at $470-$490 per ounce. Therevised estimate reflects the company's focus on preparations for its enhancedmining plan, which include increased stripping operations planned for thefourth quarter at the Rainbow pit. The Mesquite mine is expected to sellapproximately 37,000 ounces of gold in the fourth quarter.
Beginning in 2009, the company expects to achieve higher production andcash flow under its new mine plan. The outlook could be further enhanced as itcontinues to focus on adding value by pursuing the following opportunities:
1. Sulfide Resources: Mesquite contains meaningful sulfide resources,and the company continues to explore cost-effective alternatives toenhance recovery and economically justify the mining of these sulfideores.
2. Continuous Improvement: A continuous improvement program throughoutthe Mesquite operation continues in an effort to further increaseproductivity. One of the options considered was conveyor haulage,however, after completing a conveyor haulage study, the company hasdetermined that the option would not achieve sufficient annual costefficiencies to warrant the significant upfront capital expenditure.
3. Fleet Enhancement: The company is currently negotiating andanticipates deliveries of lower cost tires for its mining fleet inthe early part of 2009.
4. Increased Mining Rate: Mesquite is continuing to negotiate withImperial County to increase its mining permit above the current60-million tons per year.
Liquidity and Capital Resources
Western Goldfields is well-positioned to utilize Mesquite's cash flow incombination with the company's strong balance sheet as a strategic platformfor disciplined growth, through the acquisition of undervalued and overlookedassets in politically stable North America. Western Goldfields had cash onhand at September 30, 2008 of approximately $44-million, including $7.5million of restricted cash.
© 2008 Canjex Publishing Ltd.