Wesdome discovers new gold structures at Eagle River

VANCOUVER — Toronto-based producer Wesdome Gold Mines (TSX: WDO; US-OTC: WDOFF) enjoyed a warm reception from markets following news of underground drilling success at its wholly owned Eagle River mine, located 50 km west of Wawa, Ont. The company is targeting depth potential at Eagle River’s high-grade 811 zone, and caught investor attention when it discovered two gold-bearing structures.

Wesdome has cranked out 20,655 oz. gold at its Eagle River complex over the past six months — which also includes its satellite Mishi mine — at cash costs of $1,066 per oz. A big benefit for the company has been higher grades, with the average head grade at Eagle River doubling to 11.3 grams gold, while the average grade at Mishi jumped 50% to 3.4 grams gold.

Gold mineralization at Eagle River is hosted by west-striking, steeply north-dipping laminated quartz veins. The veins occur as tabular lenses occupying discrete shear zones following the long axis of a quartz-diorite stock that runs 2 km east to west by 500 metres north to south.

“We have streamlined operations, built large stockpiles and have strong grades in the pipeline. Milling efficiencies are incrementally improving towards our goal of doubling throughput at [Eagle River],” noted former president and CEO Donovan Pollitt. 

Wesdome reported that mill stockpiles grew to 100,000 tonnes, including 85,000 tonnes of Mishi ore averaging 2.5 grams gold and 15,000 tonnes of Eagle River ore grading 7 grams gold.

But as of Aug. 26, Wesdome has seen a big turnover in its management and board of directors. Due to an agreement with 20% shareholder Resolute Performance Fund, the company has replaced Pollitt with former executive Rowland Uloth — who served as Wesdome’s president from 2007 through 2009. Board members J.P. Chauvin, Will Bawden and Bill Stein have also been replaced by Joseph Hamilton, Uloth, Rostislav Raykov and Barry Smith.

“We are pleased to have reached this constructive resolution today and look forward to working with the new board members and with Rolly Uloth as CEO to increase value for all of Wesdome’s shareholders,” chairman Hemdat Sawh commented.

A big driver at Eagle River has been access to the 811 zone, which has contributed ore at an average grade of 15.4 grams gold to Wesdome’s production profile. The deepest mining level at 811 is 765 metres, where the zone has graded 37 grams gold over a 2.1-metre average width and 142-metre length.

The company expects that its high-grade mining sequence at 811 will be a big contributor through 2015, and if recent drill results are any indication, it could continue pulling ore from the zone well beyond that target.

Wesdome’s first order of business was establishing a depth extension at 811, and it succeeded in doing that with hole EU-701, which confirmed the zone persists to 1,200 metres when it cut 1.7 metres true width grading 78.43 grams gold. The company also discovered two gold structures — the 7 and 300 zones — that could show potential for parallel zones.

The 7 zone was found around 200 metres north of 811, where hole EU-693 cut 27 grams gold over 3.5 metres true width and hole EU-694 intersected 30 grams gold over 1.5 metres true width. The holes are 125 metres apart and run from depths of 387 metres to 494 metres.

The 300 zone lies 400 metres north of 811, and was highlighted by three intervals, including 21 grams gold over 2.4 metres true width in hole EU-695, 20 grams gold over 1.4 metres true width in hole EU-696 and 10 grams gold over 1.5 metres true width in hole EU-697. Drill coverage at 300 is tightly clustered near the drill collars, and the company reports that more drilling is needed to assess potential dimensions.

“It’s still early in the game, but we are excited about the potential implications of parallel zones and that the 811 structure persists [at depth],” vice-president of exploration George Mannard said. “We will be drilling here at least until year-end in an effort to delineate and define these zones. They are visually strong, distinctive and traceable shear-zone hosted quartz vein systems — Eagle River’s hallmark.”

Wesdome’s shares have benefitted from the discoveries, with the company’s stock jumping 39%, or 16¢ over the two days after its announcement, en route to a 55¢-per-share close at press time. The company maintains 102 million shares outstanding for a $56-million press time market capitalization.

Wesdome stopped operating its Kiena gold mine in Val-d’Or, Que., at the end of June to focus on higher-grade operations as gold prices declined. The company held $12.2 million in working capital to end June, and reported that revenue exceeded mining and processing costs attributable to sales by $7.3 million in the first half.