- Gold production of 28,524 ounces of gold is at high end of the
target range for the second quarter TORONTO, Aug. 7
/PRNewswire-FirstCall/ -- Western Goldfields Inc. (TSX:WGI,
AMEX:WGW) The Company today announced financial results for the
three-month and six-month periods ended June 30, 2008. During the
first half of 2008, the Company made operational improvements to
increase production, mitigate cost pressures facing the industry
and benefit from the strong gold price environment. Results are
based on U.S. GAAP and expressed in U.S. dollars unless otherwise
indicated. "We're firing on all cylinders, with production setting
a strong upward trend as we add more ore to the leach pad at our
Mesquite operation," stated Mr. Raymond Threlkeld, President and
Chief Executive Officer. "Furthermore, we are very pleased with our
strong start to the third quarter in which we produced a record
20,112 ounces of gold during the month of July - an excellent
beginning to our third quarter." "The second quarter and July
production results are clear indicators that our efforts have paid
off and the Mesquite Mine has overcome its initial slow start,"
continued Mr. Threlkeld. "Heap leach gold recovery rates are now at
the levels we originally anticipated." Gold production in the
second quarter was 28,524 ounces, which is at the high end of the
forecasted range of 20,000 - 30,000 ounces of gold. Gold sales
during the quarter totaled 22,760 ounces, at an average cost of
sales(1) of $548. Gold revenues during the quarter were $894 per
ounce. Gold production for the first six months was 37,590 ounces.
Gold sales were 32,720 ounces, at an average cost of sales(1) of
$667 per ounce. Gold revenues for the first six months were $905
per ounce. July production was 20,112 ounces of gold, and gold
sales for July were 20,950 ounces. Gold production has increased to
an average of 600 ounces per day, and we expect to meet the
year-end target of 135,000 to 145,000 ounces of gold at a cost of
sales(1) of $470 - $490 per ounce. The Company is currently focused
on maximizing Mesquite's potential through exploration and further
production and cost improvements, including the potential of a new
mine plan to produce more ounces of gold over the next five years
to take advantage of the rising gold price. The Company has also
made an application to increase its mining rate by 25 percent to 75
million tons per year. "We are focused on achieving higher margins
and increased gold production in a strong gold price environment,"
added Mr. Threlkeld. Second Quarter and Year-to-Date Highlights
------------------------------------------ For the second quarter
2008, the Company produced 28,524 ounces of gold - at the high end
of the forecasted range of 20,000 - 30,000 ounces of gold. Gold
sales during the quarter totaled 22,760 ounces, at an average cost
of sales(1) of $548. Production for the second quarter tripled as
compared with the previous quarter. While Mesquite made operational
improvements to increase production and hold down costs, cost of
sales(1) were impacted by increased costs for fuel, tires and
explosives, which together comprise 52.5 percent of total costs.
Total year-to-date gold production was 37,590 ounces. Year-to-date
gold sales totaled 32,720 ounces, at an average cost of sales(1) of
$667. During the second quarter, 2.0 million tons of ore at an
average grade of 0.036 ounces gold per ton, and containing 71,958
ounces of gold, were mined and placed on the leach pad. In
addition, waste mining production for the second quarter was 11.8
million tons. Year-to-date, 3.3 million tons of ore at an average
grade of 0.029 ounces gold per ton, and containing 92,839 ounces of
gold, have been delivered to the leach pad. Second Quarter 2008 Six
Months 2008 ---------------------------------------------------
Tons Mined Grade Tons Mined Grade ------------ ------------
------------ ------------ Ore Mined 1,985,177 0.036 3,253,913 0.029
Waste Mined 11,830,409 - 22,872,459 - ------------ ------------
TOTAL 13,815,586 26,126,372 ------------ ------------ ------------
------------ No mine production was recorded in the first six
months of 2007. Exploration Results ------------------- Exploration
drilling targeted additions to Mesquite's reserve potential, with
46 holes drilled in total. No significant results were returned.
The exploration drilling results are summarized as follows: - The
Brownie deposit has been closed off; - Non-oxide mineralization
southeast of the Brownie deposit was confirmed through drilling but
results from the latest exploration do not indicate that this
mineralization can be profitably mined; and - Additional targets to
the southwest of the Brownie deposit remain untested. Financial
Results ----------------- For the second quarter, Western
Goldfields recorded a gross profit of $5.6 million compared to a
gross loss of $2.4 million for the second quarter of 2007. For the
three- and six-month periods ended June 30, 2008, the Company
incurred a net loss to common shareholders of $4.1 million and
$23.7 million, or $0.03 and $0.17 per share, respectively. This
compares to a loss of $4.0 million and $6.6 million, or $0.04
and $0.06 per share for the three and six-month periods ended June
30, 2007, respectively. The net loss for the three and six-months
includes a non-cash pre-tax loss of $8.7 million and $32.8 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 loss reflects the fact that
the spot gold price increased from $836 per ounce at December 31,
2007 to $930 at June 30, 2008. In addition, during the second
quarter, long-term interest rates increased, which increased the
discount rate applied in the mark-to-market valuation of these
contracts. Year-to-date results for 2008, as compared with 2007,
show an increase in gold sold to 32,720 ounces from 4,225 ounces;
the average selling price per ounce rose to $905 in 2008 from $658
in 2007. Liquidity and Capital Resources
------------------------------- At June 30, 2008, the Company's
cash balance was $26.5 million, our restricted cash was $7.5
million, and our working capital was $34.7 million. In addition,
the Company had unutilized credit facilities of $18.7 million. The
Mesquite Mine became operating cash flow positive in June 2008.
Mesquite Capital Expenditures ----------------------------- Western
Goldfields' latest forecast for the mine expansion capital program
is $109.9 million, of which $107.0 million was incurred to June 30,
2008, with the balance of $2.9 million to be spent during the third
quarter of 2008. In addition to the expansion capital, $1.1 million
was spent on other projects during the first half of 2008. Planned
spending for the balance of the year is $3.4 million, primarily for
a front-end loader scheduled to be delivered in August and
operational in September. This additional loading unit will provide
the ability to improve production levels now that the additional
fourth crew has been mobilized. 2008 Outlook ------------ The
Mesquite Mine is expected to produce between 55,000 to 60,000
ounces of gold during the third quarter of 2008 as higher-grade ore
from the Rainbow Pit is placed on the leach pad. Cost of sales(1)
is forecast at approximately $400 per ounce of gold. Gold
production for 2008 is projected to be 135,000 -145,000 ounces of
gold at an average cost of sales(1) of between $470 - $490 per
ounce of gold. Now that Mesquite is performing on plan, the Company
continues to focus on adding value by pursuing the following
opportunities: 1) Sulfide resources: a sulfide gravity scoping
study has been initiated to improve recovery rates for the
property's significant sulfide resources. 2) Continuous
Improvement: a continuous improvement program is underway for the
mining fleet to further increase productivity. In addition, we are
completing a conveyor haulage study. 3) Increase Mining Rate:
Mesquite has applied for a permit to increase its mining rate from
60 million tons per year to 75 million tons per year, with the
outcome expected by the end of the year. 4) Increase annual gold
production over the next four to five year period through a revised
mining plan that will allow the Company to optimize its cash flow.
The Company is well-positioned to utilize Mesquite's cash flow as a
strategic platform for disciplined growth, through the acquisition
of undervalued and overlooked assets in politically stable North
America. (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.
With 4.3 million ounces in Measured and Indicated Mineral Resources
(inclusive of reserves), Mesquite is the only multi-million ounce
U.S. reserve in North America not controlled by a major gold
company. Western Goldfields common shares trade on the Toronto
Stock Exchange under the symbol WGI, and on the American Stock
Exchange under the symbol WGW. Forward-Looking Information
--------------------------- Certain statements contained in this
news release and subsequent oral statements made by and on behalf
of the Company may contain forward-looking information within the
meaning of the United States Private Securities Litigation Reform
Act of 1995 and similar Canadian legislation. Such forward-looking
statements are identified by words such as "intends",
"anticipates", "believes", "expects", "plans" and include, without
limitation, statements regarding the Company's plan of business
operations, production and cost estimates, receipt of working
capital, anticipated revenues, and capital and operating
expenditures. These forward-looking statements are based on the
best estimates of management at the time such statements are made.
Expected production results and cost of sales are based in part on
current and historical production and cost data factoring certain
assumptions with respect to future metal prices, costs of supplies
and labour and other parameters. There can be no assurance that
such statements will prove to be accurate; actual results and
future events could differ materially from such statements. Factors
that could cause actual results to differ materially include, among
others, variations in metal prices and/or cost of supplies,
possible variations in ore grade or recovery rates, failure of
plant, equipment or processes to operate as anticipated, accidents,
labour disputes, as well as those set forth in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2007 filed
with the U.S. Securities and Exchange Commission, under the caption
"Risk Factors". Most of these factors are outside the control of
the Company. Investors are cautioned not to put undue reliance on
forward-looking statements. Except as otherwise required by
applicable securities statutes or regulations, the Company
disclaims any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information,
future events or otherwise. WESTERN GOLDFIELDS INC. CONSOLIDATED
BALANCE SHEETS (In thousands U.S. dollars) June 30, December 31,
2008 2007 ------------- ------------- ASSETS CURRENT ASSETS Cash
and cash equivalents $ 26,549 $ 43,870 Restricted cash 7,500 7,500
Receivables 940 298 Inventories 25,134 11,201 Prepaid expenses 800
887 Current portion of deferred income tax asset 3,498 755
------------- ------------- TOTAL CURRENT ASSETS 64,421 64,511
------------- ------------- Plant, and equipment, net of
accumulated amortization 98,454 77,951 Construction in progress
10,246 21,864 Investments - reclamation and remediation 8,803 8,661
Long-term deposits 357 348 Long-term prepaid expenses 1,469 1,555
Deferred debt issuance costs, net of accumulated amortization 2,997
3,227 Deferred income tax asset 45,497 36,379 -------------
------------- TOTAL OTHER ASSETS 167,823 149,984 -------------
------------- TOTAL ASSETS $ 232,244 $ 214,495 -------------
------------- ------------- ------------- LIABILITIES &
STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and
accrued liabilities $ 5,673 $ 8,781 Current portion of
mark-to-market loss on gold hedging contracts 8,969 1,935 Current
portion of loan payable 15,109 6,882 ------------- -------------
TOTAL CURRENT LIABILITIES 29,751 17,598 ------------- -------------
LONG-TERM LIABILITIES Mark-to-market loss on gold hedging contracts
82,753 56,966 Loan payable 71,230 69,581 Reclamation and
remediation liabilities 5,235 5,061 ------------- -------------
TOTAL LIABILITIES 188,969 149,206 ------------- -------------
COMMITMENTS AND CONTINGENCIES - - STOCKHOLDERS' EQUITY Common
stock, of no par value, unlimited shares authorized; 136,731,919
and 135,049,685 shares issued and outstanding, respectively 135,250
133,725 Stock options and warrants 7,695 7,551 Accumulated deficit
(99,670) (75,987) ------------- ------------- TOTAL STOCKHOLDERS'
EQUITY 43,275 65,289 ------------- ------------- TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 232,244 $ 214,495 -------------
------------- ------------- ------------- WESTERN GOLDFIELDS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In
thousands U.S. dollars) Three Months Ended June 30, Six Months
Ended June 30, ---------------------------
--------------------------- 2008 2007 2008 2007 -------------
------------- ------------- ------------- REVENUES Revenues from
gold sales $ 20,347 $ 1,546 $ 29,602 $ 2,779 -------------
------------- ------------- ------------- EXPENSES Mine operating
costs 12,122 3,466 21,209 5,674 Royalties 340 59 605 105
------------- ------------- ------------- ------------- Cost of
sales 12,462 3,525 21,814 5,779 Amortization and accretion 2,291
377 4,384 752 ------------- ------------- -------------
------------- Cost of goods sold 14,753 3,902 26,198 6,531
------------- ------------- ------------- ------------- GROSS
PROFIT (LOSS) 5,594 (2,356) 3,404 (3,752) -------------
------------- ------------- ------------- EXPENSES General and
administrative 1,197 1,138 2,308 2,222 Stock based compensation 289
820 658 1,289 Exploration 591 749 814 1,032 -------------
------------- ------------- ------------- 2,077 2,707 3,781 4,543
------------- ------------- ------------- ------------- OPERATING
INCOME (LOSS) 3,517 (5,062) (377) (8,295) -------------
------------- ------------- ------------- OTHER INCOME (EXPENSE)
Interest income 289 525 673 1,042 Interest expense and commitment
fees (1,320) (242) (2,019) (242) Amortization of deferred debt
issuance costs (115) (110) (231) (110) Unrealized gain (loss) on
mark-to-market of gold forward sales contracts (8,708) 759 (32,820)
759 Gain (loss) on foreign currency exchange 250 124 (770) 205
------------- ------------- ------------- ------------- (9,605)
1,056 (35,167) 1,655 ------------- ------------- -------------
------------- LOSS BEFORE INCOME TAXES (6,088) (4,007) (35,544)
(6,640) INCOME TAX RECOVERY (2,029) - (11,861) - -------------
------------- ------------- ------------- NET LOSS (4,059) (4,007)
(23,683) (6,640) OTHER COMPREHENSIVE LOSS Foreign currency
translation adjustment - (3) - (8) ------------- -------------
------------- ------------- NET COMPREHENSIVE LOSS $ (4,059) $
(4,010) $ (23,683) $ (6,648) ------------- -------------
------------- ------------- ------------- -------------
------------- ------------- BASIC AND DILUTED NET LOSS PER SHARE $
(0.03) $ (0.04) $ (0.17) $ (0.06) ------------- -------------
------------- ------------- ------------- -------------
------------- ------------- WEIGHTED AVG. NO. OF COMMON SHARES
OUTSTANDING 136,406,008 113,641,025 136,035,903 108,240,372
------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- WESTERN
GOLDFIELDS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands
U.S. dollars) (Unaudited) Three Months Ended June 30, Six Months
Ended June 30, ---------------------------
--------------------------- 2008 2007 2008 2007 -------------
------------- ------------- ------------- CASH FLOWS FROM OPERATING
ACTIVITIES Net loss $ (4,059) $ (4,007) $ (23,683) $ (6,641)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities: Items not affecting cash: Amortization of
plant and equipment 2,219 298 3,030 592 Amortization of deferred
debt issuance costs 115 110 231 110 Accretion expense 87 84 174 169
Deferred income taxes (2,029) - (11,861) - Interest net of
reimbursed costs - reclamation and remediation (80) (87) (142)
(170) Stock based compensation 289 820 658 1,289 Mark-to-market
loss on gold hedging contracts 8,708 (759) 32,820 (759) Changes in
assets and liabilities: Decrease (increase) in: Restricted cash -
(7,500) - (7,500) Accounts receivable (720) 174 (642) 76
Inventories (7,894) 31 (12,732) (40) Prepaid expenses and deposits
87 (369) 173 (547) Long term deposits (6) (6) (9) (9) Increase
(decrease) in: Accounts payable 810 (154) (529) (955) Payroll and
related taxes payable - - (1,562) - Accrued expenses (287) (795)
764 201 Accrued interest expense (59) 241 (230) 241 -------------
------------- ------------- ------------- Net cash provided (used)
by operating activities (2,817) (11,917) (13,539) (13,943)
------------- ------------- ------------- ------------- CASH FLOWS
FROM INVESTING ACTIVITIES Purchase of property & equipment,
including construction in progress (5,920) (25,662) (14,669)
(31,377) Increase in reclamation and remediation investment -
(2,090) - (2,090) ------------- ------------- -------------
------------- Net cash provided (used) by investing activities
(5,920) (27,752) (14,669) (33,467) ------------- -------------
------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES
Loan payable 2,017 - 9,877 - Deferred debt issuance costs - (521) -
(850) Common stock issued for cash - 1 - 59,191 Exercise of options
to purchase common stock 440 356 672 501 Exercise of warrants to
purchase common stock - 1,436 337 1,816 ------------- -------------
------------- ------------- Net cash provided by financing
activities 2,457 1,272 10,887 60,658 ------------- -------------
------------- ------------- Change in cash (6,280) (38,396)
(17,321) 13,248 Cash and cash equivalents, beginning of period
32,829 57,147 43,870 5,503 ------------- -------------
------------- ------------- Cash and cash equivalents, end of
period $ 26,549 $ 18,750 $ 26,549 $ 18,750 -------------
------------- ------------- ------------- -------------
------------- ------------- ------------- SUPPLEMENTAL CASH FLOW
DISCLOSURES: Interest paid (received), net $ 933 $ 1 $ 1,346 $ 1
------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- NON-CASH
FINANCING AND INVESTING ACTIVITIES: Stock, options and warrants
issued for services $ 289 $ 820 $ 658 $ 1,289 Equipment purchases
included in accounts payable $ (180) $ 11,832 $ 334 $ 11,832
Deferred debt issuance costs included in accrued expenses $ - $
2,328 $ - $ 2,328 Non-cash component of inventories $ (2) $ 2,328 $
1,201 $ 2,328 DATASOURCE: Western Goldfields Inc. CONTACT: please
visit http://www.westerngoldfields.com/, or contact: Raymond
Threlkeld, President and Chief Executive Officer, (416) 324-6005, ;
Brian Penny, Chief Financial Officer, (416) 324-6002, ; Julie
Taylor Pantziris, Director, Regulatory Affairs and Investor
Relations, (416) 324-6015,
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