Wesdome CEO resigns in surprise move after delayed projects, output

Delays in a plan to increase production at Wesdome Gold Mines’ Kiena site in Quebec may be behind the resignation of CEO Duncan Middlemiss. Credit: Wesdome

Wesdome Gold Mines (TSX: WDO) president and chief executive officer Duncan Middlemiss has resigned after the Kiena mine upgrade in Quebec fell behind schedule and the company missed production goals.

Middlemiss, who led the company for six years, has been replaced by Wesdome board chairman Warwick Morley-Jepson while the Toronto-based company searches for a replacement.

Laurentian Bank said the unexpected resignation is causing anxiety among investors because Morley-Jepson is little known and the miner needs stable management to see through its strategy.

“The sudden resignation of the president and CEO is too much like falling on his sword at time when Wesdome needs good leadership more than ever,” mining analyst Barry Allan wrote in a note late Tuesday. “His departure was premature and occurs at an extremely unfortunate time.”

The announcement comes just a week after Wesdome said supply chain snarls were delaying the Kiena project near Val-d’Or, Quebec, by up to a year while lower-than-expected grades at the Eagle River mine in northern Ontario knocked output.

This month, Wesdome reported gold production of 110,850 oz. last year after saying in October it was aiming for around 120,000 oz. production, the lower end of its guidance.

Wesdome is working to increase production at Kiena, the site of a past-producing mine with a 930-metre shaft and 2,000 tonne-per-day mill. It was restarted in May 2021. It’s also trying to find higher grades at its Eagle River mine 50 km west of Wawa just north of Lake Superior.

Morley-Jepson, who joined the Wesdome board in 2017, previously served as executive vice-president and chief operating officer of Ivanhoe Mines (TSX: IVN) and Kinross Gold (TSX: K; NYSE: KGC). Wesdome described him as a “seasoned operator with significant experience.”

Analyst Allan maintained his buy rating on the stock, downplaying the Kiena delays by noting the entire industry remains under similar pressures, but expressed concern for the months ahead to be consumed by a difficult search for a new CEO.

“In the context of mine developments in the mining industry over the last two years, missed timelines and unexpectedly high costs of construction have become the norm, not the exception,” Allan said.

“However, we see this sudden resignation as a further erosion in the market profile of Wesdome which has unfavourable overtones about the near-term future.”

Shares in Wesdome were down 2% to C$6.28 each in Toronto on Tuesday morning, valuing the company at about C$906 million.