Western Goldfields Announces Record Production, Earnings and Operating Cash Flow in Third Quarter 2008
Record gold sales of 47,535 ounces of gold averaged $870 per ounce in the third quarter compared to 22,760 ounces in the second quarter and 9,960 ounces in the first quarter
Net income of $30.5 million or $0.22 per share, including an after-tax mark-to-market gain of $18.8 or $0.14 per share, in the third quarter
Cash flow provided from operating activities of $16.5 million in the third quarter
Cost of sales of $390 per ounce in the quarter below previous guidance
Strong financial position with cash of $45.4 million, including $7.5 million of restricted cash, an increase of $11.4 million in the quarter
Toronto, November 4, 2008 - Western Goldfields Inc. ("Western Goldfields" or the "Company") (TSX:WGI, NYSE Alternext:WGW) today announced financial results for the three-month and nine-month periods ended September 30, 2008. During the nine-month period ended September 30, 2008 the Company continued to increase production and further improved efficiencies to reduce cost of sales per ounce. Results are based on U.S. GAAP and expressed in U.S. dollars unless otherwise indicated.
"We are pleased to report our strongest quarter ever with our highest sales, lowest cost of sales and most significant cash flow," stated Mr. Raymond Threlkeld, President and Chief Executive Officer.
Gold sales during the quarter totaled 47,535 ounces, at an average cost of sales(1) of $390 per ounce which is below the Company's previous cost guidance. Gold revenues during the quarter were $870 per ounce. Gold production was 42,357 ounces.
Gold sales for the first nine months were 80,255 ounces, at an average cost of sales(1) of $503 per ounce. Gold revenues for the first nine months were $884 per ounce. Gold production was 79,947 ounces.
Subsequent to the quarter end, the Company announced the completion of one of its previously stated value-enhancing initiatives by introducing Western Goldfields' improved mine plan. The improved plan is designed to focus on sequential mining of the Mesquite pits in order to increase production to over 700,000 ounces through the next four years, reduce costs and improve cash flow.
"We are very excited about the improved mine plan as it increases production and cash flow in the next four years for the benefit of our shareholders," said Mr. Threlkeld.
Third Quarter and Year-to-Date Highlights
For the third quarter 2008, gold sales totaled 47,535 ounces, at an average cost of sales(1) of $390 per ounce which was below the Company's previous cost guidance. The Company produced 42,357 ounces of gold.
Production for the third quarter continued to ramp-up. The Company continued to focus on controlling costs and improving equipment efficiency resulting in lower cost of sales(1) per ounce than previously forecast, despite a decrease in shovel availability that negatively impacted production.
Total year-to-date gold sales totaled 80,255 ounces, at an average cost of sales(1) of $503 per ounce. The Company produced 79,947 ounces of gold.
Third Quarter 2008 Nine Months 2008
Tons Mined Grade Tons Mined Grade
Ore Mined 3,012,630 0.023 6,266,543 0.026
Waste Mined 11,280,193 -- 34,152,652 --
TOTAL 14,292,823 40,419,195
For the third quarter, Western Goldfields reported net income of $30.5 million compared to a net loss of $36.4 million for the third quarter of 2007. For the three and nine-month periods ended September 30, 2008, the Company had net income to common shareholders of $30.5 million and $6.8 million, or $0.22 and $0.05 per share, respectively. This compares to a loss of $36.4 million and $43.0 million, or $0.31 and $0.39 per share for the three and nine-month periods ended September 30, 2007, respectively. The net income for the three and nine months includes a after-tax gain of $18.8 million and loss of $1.2 million, respectively, arising from the mark-to-market of contracts for the forward sale of gold, which were taken out as a requirement of our term loan facility. The mark-to-market gain reflects the fact that the spot gold price decreased from $930 per ounce at June 30, 2008 to $885 at September 30, 2008. Year-to-date results for 2008, as compared with 2007, show an increase in gold sold to 80,255 ounces from 6,101 ounces; the average selling price per ounce rose to $884 in 2008 from $665 in 2007.
Liquidity and Capital Resources
At September 30, 2008, the Company's cash balance was $45.4 million, including restricted cash of $7.5 million. In addition, the Company had unutilized credit facilities of $18.7 million. The Mesquite Mine generated $16.5 million and $3.0 million of cash flow from operating activities for the three and nine-month periods ended September 30, 2008, respectively.
The third quarter represented Western Goldfields' last significant quarter of expansion capital spending with the Company incurring $5.2 million of capital expenditure at its Mesquite mine. Planned spending for the balance of the year is $1.6 million. The Company expects future capital requirements to achieve the current mine plan at Mesquite to be minimal. We continue to assess the potential of the sulfide resources.
Gold sales for full-year 2008 are expected to total approximately 117,000 ounces of gold at an average cost of sales(1) of $500 per ounce. The Mesquite Mine is expected to sell approximately 37,000 ounces of gold in the fourth quarter.
(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.
Western Goldfields Inc.
Western Goldfields Inc. is an independent gold production and exploration company with a focus on precious metal mining opportunities in North America. The Mesquite Mine, currently the Company's sole asset, was brought into production in January 2008, and the Company's focus is now on achieving the anticipated rate of production and completing planned improvements to the property. The Company has 2.8 million ounces in Proven and Probable Reserves. Western Goldfields common shares trade on the Toronto Stock Exchange under the symbol WGI, and on the New York Stock Exchange Alternext under the symbol WGW.
Mr. Wes Hanson, P.Geo., Vice President of Mine Development, Western Goldfields Inc., is the qualified person under National Instrument 43-101 who supervised the preparation of the technical information contained in this news release. Mr. Hanson is an officer of the Company.