- Company makes excellent progress toward bringing Mesquite Mine into full production
- First ore to the pad expected by January 2008, with full production of 165,000 ounces per year expected April 2008
- Recent equity offering and new debt financing agreement expected to be signed in first-quarter 2007 should provide all funds required to proceed with Mesquite development plan
- New Reserve and Resource estimates will be released at the end of first-quarter 2007
- Company views Mesquite as its platform for growth as it seeks other similar development opportunities
Toronto, Canada, March 5, 2007 -- Western Goldfields, Inc. (TSX:WGI, OTC BB:WGDF.OB) today announced financial results for the year ended December 31, 2006. The Company's financial statements conform to accounting principles generally accepted in the United States (US GAAP). Currency amounts are expressed in U.S. dollars unless otherwise stated.
"Western Goldfields made exciting progress in 2006 toward bringing our Mesquite Mine in California into full production," said Mr. Randall Oliphant, Chairman. Since the new management team was put in place in February 2006, the Company:- injected new capital ($6 million) in February to move the Company forward;
- completed a resource estimate in April that identified gold resources of 3.61 million ounces;
- released the findings of a Feasibility Study in August that confirmed gold reserves of 2.36 million ounces;
- initiated in September a 70,000-foot reverse-circulation drilling program aimed at increasing the gold resources and reserves at Mesquite; and
- placed $67.0 million of orders for its mining fleet with deliveries expected in May 2007.
"With the recent completion of an equity offering that raised net proceeds of $59.3 million, as well as the signing in late November 2006 of a mandate letter to arrange debt financing for up to $105 million, we should have in place shortly all of the financing needed to bring Mesquite into full production based on our development plan," continued Mr. Oliphant. "We expect to sign the definitive debt-financing agreement within the next few weeks."
"We are continuing to target April 2008 for full production of 165,000 ounces annually at Mesquite," said Mr. Raymond Threlkeld, President and Chief Executive Officer. "We are continuing our reverse circulation drilling program that commenced in September 2006, and initial results show the potential for higher-grade resource additions. We intend to release new Reserve and Resource estimates at the end of first-quarter 2007."
"We regard the Mesquite Mine as the platform for growth on which we can create increasing value for the shareholders of Western Goldfields," added Mr. Oliphant. "Our strength as a management team is to successfully identify, acquire and bring mineral resources into full production. Our strategy is to pursue additional precious metals opportunities that we identify as having similarly exciting potential as Mesquite, particularly in North America."
Financial Results
Western Goldfields reports a net loss to common shareholders for the year ended December 31, 2006 of $11.6 million, or $0.18 cents per basic and diluted share from the sale of 13,210 ounces of gold, compared with a net loss of $5.1 million, or $0.13 cents per basic and diluted share from the sale of 23,818 ounces of gold for the year ended December 31, 2005. Lower production from the material placed in prior years on Mesquite Mine's heap leach pads was substantially offset by a 45 percent increase in the average selling price per ounce from $411 to $595, reflecting the continuation of relatively strong pricing in world markets and the sale of the Company's entire output on the spot market. Nevertheless, revenue for 2006 was $7.9 million, down from $9.8 million in 2005. The Company incurred significantly higher expenses in 2006 mainly as the result of bringing in a new management team and proceeding with the measures needed to bring the Mesquite Mine into full production in 2008.
Liquidity and Capital Resources
With the increase in Western Goldfields' stock price subsequent to its restructuring and re-financing in February 2006, the Company's liquidity has been improved through the conversion of warrants and the exercise of stock options. In 2006, the Company received cash of $11.5 million upon the exercise of 11,671,310 warrants. In addition, 500,000 preferred share warrants were exercised for proceeds of $300,000 and 1,135,000 options were exercised for proceeds of $633,000.
At December 31, 2006, the Company's cash balance was $5.5 million and working capital was $4.5 million. This represents a significant improvement in the Company's financial position since December 31, 2005 when it reported cash of $52,000 and a working capital deficit of $2.5 million.
The Company has issued purchase orders totaling $67.0 million for the mining fleet and has incurred expenditures and other commitments of approximately $3.8 million at February 28, 2007. To finance these capital expenditure commitments and to proceed with the other aspects of the project, the Company has pursued a range of options for equity and debt financing. The closing of the public offering of shares in January and February 2007, and signing of a debt financing mandate, as described below, once
completed, should effectively secure the capital required to carry out the Company's development plans into 2008.
On November 30, 2006, Western Goldfields announced the signing of a mandate letter to arrange and underwrite up to $105 million of project debt. The Company is currently negotiating the terms of the credit agreement and anticipates signing a definitive agreement before the end of the first quarter of 2007.
On January 25, 2007 the Company announced that it had completed the public offering of 31,115,000 shares of its common stock for gross proceeds of approximately $59.4 million (net proceeds of approximately $55.3 million). In connection with the issue, the Company granted the underwriters a 30-day option to purchase up to 2,215,000 additional shares of common stock to cover over-allotments. The underwriters exercised this option on February 1, 2007 for gross proceeds to the Company of approximately $4.2 million (net proceeds of approximately $4.0 million).
2007 Outlook
In addition to the mining fleet purchase commitment of $67.0 million, Western Goldfields is planning to spend approximately $30.9 million during 2007 on plant and infrastructure upgrades at Mesquite. All major environmental permits are in place for resumption of mining operations and the Company anticipates approval of local building permits in the near future to allow it to commence construction of new leach pads, carbon columns, and pipelines.
The Company expects to sign a definitive agreement on the previously announced project debt facility by the end of the first quarter 2007. Initial deliveries of the mining fleet commenced in February, with the majority of the fleet delivery scheduled for May 2007. Pre-production stripping operations will commence in June 2007 and will continue through to January 2008, when the Company expects to see the first ore to the pads. Full mining operations are expected to be underway by April 2008.
Western Goldfields, Inc.
Under a new, highly experienced, and dynamic management team, Western Goldfields is a gold producer focused on completing the expansion of its Mesquite Mine, located in Imperial County, California, and returning the mine to full production. On August 9, 2006, Western Goldfields announced that the Mesquite Mine's Proven and Probable reserves are estimated at 2.36 million ounces of gold and Measured and Indicated resources exclusive of reserves are estimated at 1.25 million ounces. The Company is estimating average annual production of 165,000 ounces of gold from the mine at total cost of sales of approximately $335 per ounce commencing in April 2008, with an initial project life of 9-1/2 years. Following completion of a drilling program currently underway, the Company expects to issue new Reserve and Resource estimates by the end of March 2007.
Western Goldfields, Inc. is listed on the Toronto Stock Exchange and trades under the symbol WGI, and is quoted on the OTCBB under the symbol WGDF.OB. For further details regarding the mineral reserves and mineral resources at Mesquite, please visit www.westerngoldfields.com.
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", and "hopes" and include, without limitation, statements regarding the Company's plan of business operations, financing options and the consequences thereof, potential contractual arrangements, receipt of working capital, anticipated revenues, and related expenditures. 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, those set forth in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2005 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 regulation, 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.
For further details, please visit www.westerngoldfields.com, or contact:
Brian Penny
Chief Financial Officer
(416)-324-6002
bpenny@westerngoldfields.com
Julie Taylor Pantziris
Director, Regulatory Affairs and Investor Relations
(416)-324-6015
jtaylor@westerngoldfields.com
Richard Wertheim
Investor and Media Relations
Wertheim + Company Inc.
(416)-594-1600
wertheim@wertheim.ca
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