Gold Production At The Mesquite Mine
TORONTO - Western Goldfields Inc. reported its 2009 guidance for Western Goldfields' Mesquite Mine in California. In 2009, the Company expects to incur $68.0 to $72.0 million in operating costs to place and process approximately 155,000 recoverable ounces of gold on the leach pad, resulting in a cost per recoverable ounce placed of $430 to $450 per ounce for the year. At the end of 2008, Western Goldfields had approximately 55,000 recoverable ounces of inventory on the leach pad which is estimated to increase to approximately 65,000 ounces at the end of 2009. Due to the timing of leach pad recoveries and the impact of inventory adjustments, the Company forecasts production and sales to be between 140,000 and 150,000 ounces at cost of sales per ounce of $530 to $540. As higher cost leach pad gold inventory at December 31, 2008 is planned to be replaced by lower cost inventory at December 31, 2009, the planned cost of sales for 2009 includes approximately $11 million from the expected reduction in the value of leach pad gold inventory. These costs were included in work in process inventory at December 31, 2008 and therefore do not affect 2009 operating cash flow. Operating cash flow is expected to be $40 - $45 million for 2009 assuming a gold price of $850 per ounce. Western Goldfields expects
production and sales to grow again in 2010 to approximately 175,000 ounces with total operating costs remaining similar to 2009 at $68 to $72 million, thus reducing the cost of sales per ounce in 2010 to approximately $400.
"We are very excited as we move into 2009; our increased production and cash flow generation will allow us to continue to de-lever our balance sheet and better position us to pursue the strategic growth opportunities that lie before us," said Randall Oliphant, Chairman.
While total operating costs are expected to remain consistent on a quarterly basis from $16.5 to $18.5 million, higher stripping ratios and lower grades result in lower ounces placed and lower production in the first three quarters of 2009. Approximately 50% of the recoverable ounces placed in 2009 are forecast to be placed in the fourth quarter. Production in each of the first three quarters is expected to be 33,000 to 38,000 ounces before increasing to 38,000 to 43,000 ounces in the fourth quarter. The cost of sales per ounce in the first three quarters of the year are forecast to be $595 to $605 and include approximately $4 million per quarter of costs from the expected reduction in the value of leach pad gold inventory quarter to quarter. The fourth quarter cost of sales per ounce are expected decline to $365 to $375 and include approximately a $1 million reduction to cost of sales from the expected increase in the value of leach pad gold inventory during the fourth quarter. The inventory related costs do not impact the Company's cash flow in the respective quarters.
The 2009 cost of sales forecast assumes a diesel price of $1.75 per gallon for the 50% of Mesquite's 2009 diesel requirement that is currently unhedged; $1.75 per gallon corresponds to the current price paid for diesel at Mesquite. Diesel represents approximately 20% of Mesquite's annual operating cost. Cost of sales per ounce is impacted by changes in diesel price as approximately 50% of Mesquite's annual diesel consumption remains unhedged. Every $0.10 per gallon movement in diesel price now results in an approximate $2 per ounce change in cost of sales per ounce.
The Company also announced its 2008 unaudited fourth quarter and full year production results. During the fourth quarter and full year 2008, Western Goldfields sold 30,625 and 110,880 ounces, respectively. Gold production was 30,465 and 110,412 ounces during the fourth quarter and full year, respectively. The Company realized average gold prices of $799 and $855 per ounce during the fourth quarter and full year, respectively. Unaudited cost of sales per ounce for the fourth quarter were $515 with unaudited cost of sales per ounce for the full year of $508.
The company's address is Royal Bank Plaza, South Tower 200 Bay Street Suite 3120, PO Box 167, Toronto, ON M5J 2J4.