New approach bolsters Western Goldfields

Western Goldfields (WGI-T, WGW-N) reported its best quarter ever with record sales, lower costs and solid cash flows.

The news sent the Torontobased company with an open pit gold mine in California up 4% or 4 to $1.06 on 1.7 million shares traded.

The company credits better financials to increased production and reduced costs the two things miners the world over are in constant search of.

Gold sales for the quarter came in at 47,535 oz, at an average cost of sale of $390 per oz — beating its own cost guidance. Gold revenues were at US$870 per oz. for the quarter.

For the first nine months of the year gold sales totalled 80,255 oz. at an average cost of US$503 per oz. with gold production for the period at 79,947 oz.

Net income for the quarter was US$30.5 million compared to a net loss of US$36.4 million for the third quarter of 2007.

The key to the improvement was a re-vamping of its Mesquite mine, which sits roughly 80-km from the Mexican border in southern California.

On Oct. 6 Western announced it had successfully implemented a new mining plan for the open pits at the project. The move to sequential mining is slated to increase production to over 700,000 oz. over the next four years, it says, as well as reducing costs.

To reap those benefits, Western spent US$5.2 million at the mine for the quarter and plans to spend another US$1.6 million over the balance of the year on further improvements.

The project has 2.8 million oz. of gold in proven and probable reserves.

The cash position on the asset side of Western’s balance sheet is also robust with roughly US$45 million in cash.

Western also gave guidance on gold sales for the full year, saying it expects to sell 117,000 oz. for the full year at an average cost of US$500 per oz.

The Mesquite Mine Western’s only asset — was brought into production in January 2008.