Western Goldfields secures funding for Mesquite mine

Western Goldfields (WGI-T) says that its to do list for the first quarter this year has become a done list as the company gears up for production at its Mesquite open-pit gold mine in California by early 2008.

The mine life has been increased by two years to 11.5 years from results of a drill program that started last September. Proven and probable reserves increased by 17% to 2.77 million oz. gold and measured and indicated resources are now 3.87 million oz. compared with an earlier estimate of 3.61 million oz. The company expects to be producing 165,000 oz. gold per year by next April.

We have met all our first quarter milestones and full production is expected to be less than one year away, said chairman Randall Oliphant in a statement.

The company expects to start pre-stripping overburden this June. The leach pad expansion contract has been awarded to NA. Degerstorm, and the company has committed itself to buy US$70.6 million for its mining fleet and other equipment. So far, the delivery of mine haul trucks are on schedule, a tire inventory is being established and other equipment has already begun to arrive.

The company raised US$59.2 million in a financing during the first quarter and secured a US$105 million loan with Investec Bank to help bring the US$108.5-million project to the production stage. The company plans to use US$85 million for the development of Mesquite, leaving the remainder available for other corporate purposes until 2009.

One condition of the loan was the company had to agree to hedge 450,000 oz. of gold.

Western Goldfields sold 1,875 oz. gold during the first quarter, resulting in a net loss of US$2.6 million, or US3 per share, compared with a loss of US$3.8 million at the end of the first quarter in 2006, during which time the company sold 5,000 oz. gold.

The gold is being produced through residual leaching of ore left in heaps by previous owners.

Up next for Western Goldfields is to reorganize its corporate structure so that its place of incorporation will no longer be Idaho but instead Ontario. The company says this strategy is appropriate due to the reputation of the Toronto Stock Exchange and the fact that 55% of the companys shares are registered outside of the United States.