Kiena Complex

On March 7, 2013, the Company announced suspension of mining activities at Kiena, by June 30, 2013. Accordingly, Proven and Probable Mineral Reserves were reclassified as Measured and Indicated Mineral Resources. Facing decreasing recovered grades, persistent industry cost pressures and uncertainty in the Canadian dollar gold price, Wesdome management determined that mining operations at the Kiena mine were not currently economically feasible and operations should be suspended. Wesdome management continues to believe that the Kiena Complex has excellent geological potential and believes it will deliver value to shareholders at a future date. Overview (2003 – 2012) On December 30, 2003, Wesdome Gold Mines completed the purchase of the Kiena Mine property and related infrastructure. In December, 2003, the gold price was $415US/oz. The previous owner was in financial distress and subsequently declared bankruptcy. Wesdome Gold Mines already owned the surrounding Wesdome, Shawkey and Siscoe properties and had considerable capital and exploration investments in these properties, including establishment of surface infrastructure and collaring a shaft just north of the Kiena property on the Wesdome property. Wesdome Gold Mines’ strategy was to use the existing Kiena Mine infrastructure to drift north to the Wesdome property and to drift east to the Shawkey property. The purpose of this underground exploration and development program was to evaluate the Wesdome A Zone to the north and the Shawkey 22 Zone to the east. The existing shaft provided a strategically located entry to conduct systematic underground exploration of a vast, combined and contiguous property package, the bulk of which lay under the surface of Lac De Montigny which had previously restricted options available for underground exploration. Wesdome immediately initiated a comprehensive exploration program, including refurbishing the existing shaft, hoist and underground infrastructure to gain safe and regulatory compliant underground access. Development crews, engineers and geologists were hired and equipment was either purchased or refurbished. A comprehensive geological compilation was undertaken and two long exploration drifts were planned and started. The north drift, targeting the Wesdome A Zone on the 520 metre level, was planned to pass by the VC, North and 388 Zones on the way to its target. These are situated 750 metres, 900 metres and 1,200 metres, respectively, north of the S-50 Zone. The east drift was planned to pass by the Wisik Zone, 900 metres east of the S-50 Zone and the Martin Zone structure located 1,250 metres east of the S-50 Zone. These targets host historical gold occurrences that were believed to have exploration merit. The Shawkey 22 Zone was the subject of much previous surface drilling and was the ultimate target of the drift 2.1 kilometres east of the shaft. The Company’s intention was to systematically and progressively explore and evaluate satellite zones via the Kiena Mine infrastructure, future systematic exploration would no longer be impeded by previously existing property boundaries and that success in this venture would lead to production as soon as possible. Drifting and exploration drilling advanced rapidly. As early as November, 2004, positive drilling results from the north drift suggested potential to identify new satellite zones between the S-50 and VC Zones (Press Release dated Nov. 26, 2004). By December, 2004, early drilling results from the VC Zone showed promise. Definition drilling was planned as the zone appeared to be getting wider and richer at depth – very exciting indeed (Press Release dated Dec. 15, 2004). The VC Zone continued to grow at depth displaying grades and widths much greater than previously recognized at shallower depths (Press Releases dated Jan. 19, 2005; Mar. 4, 2005; and Apr. 6, 2005). A deep hole drilled below the 520 metre level cut a corelength of 45.5 metres at 6.3 gAu/tonne (Press Release dated Sept. 22, 2005). A crosscut was driven into the zone which revealed impressive occurrences of coarse native gold and provided a weighted average grade of 33.05 gAu/tonne across a true width of 17.8 metres. As the VC Zone was opened up in the fall of 2005 revealing coarse, native gold and an encouraging style of mineralization not previously seen at Kiena, efforts focused on getting into production as soon as possible. In order to advance to commercial production and continue the exploration work, the Company had to raise capital. On March 23, 2006, the Company announced the closing of a public offering of 9.0 million shares at $2.20 per share, for gross proceeds of $19.8 million. This was done via a prospectus where the “Use of Proceeds” followed the recommended budget of Geologica Groupe Conseil in the NI43-101 Technical Report dated April 15, 2005 (www.sedar.com). Pre-production development advanced rapidly with the workforce increasing from 74 employees and contractors to a peak of 213 in June, 2006. Production was attained on August 1, 2006. Exploration work continued (even today) on the east drift where we are now approaching a new discovery made in 2008 located 3.5 kilometres east of the Kiena shaft.

Production since August 1, 2006, is tallied below.

 

Property History and the S-50 Zone The first gold discoveries were made on Parker Island (site of the present Kiena Mine surface infrastructure) during the period 1911 to 1914. Kiena Gold Mines Ltd. was established in 1936 as part of the Ventures group of Thayer Lindsley. A shaft with four levels was developed. The Parker Vein had limited extensions. The North Zone was identified by surface drilling and a drift was extended north from the shaft on the 120 metre level. This drift encountered the VC Zone and continued north to provide a drilling platform to test the continuity of the North Zone. In 1940, the operation was abandoned due to limited reserves, economic conditions and the war effort. Twenty years later, the property’s potential was re-examined by G.K. Polk for Falconbridge. Drilling in 1961 based on this work discovered the S-50 Zone. By 1963 exploration work had outlined a resource of 4.5 million tonnes averaging 6.34 gAu/tonne for the S-50 Zone. Shaft No.1 (the current shaft) was sunk to a depth of 400 metres and extensive underground exploration and development was completed. In 1965, the project was again abandoned due to adverse mining conditions and the low gold price of $35US per ounce. In 1979, with soaring gold prices, the project was successfully developed with commercial production commencing in October, 1981. In 1986 Kiena Mines was sold to Campbell Red Lake Mines, which subsequently merged with Dome Mines Ltd. and Placer Development Ltd. to form Placer Dome Canada Ltd. In 1997 Placer Dome sold Kiena to McWatters Mines Inc. Initial production was custom milled offsite until Kiena built their own mill, which commenced in September, 1984. The mill treated 1300 tonnes per day from the S-50 Zone. In 1999 McWatters Mines Inc. decided to develop the North Zone and expand the mill to 2000 tonnes per day capacity. The strategy was to increase production and lower unit costs by providing 1000 tonnes per day from the S-50 Zone and 1000 tonnes per day from the North Zone. The North Zone provided 780,000 tonnes of 3.43 gAu/tonne between 1999 and 2002. Concurrently, the S-50 Zone rapidly depleted and constraints in production from both resulted in mining and milling operations ceasing in October, 2002. On October 1, 2002, the gold price was $321US per ounce.