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Tags: 8mm, company statistics, e mail, eagle river, fluctuations, gold mines, kiena, mail mark, mail peter, mark turner, market cap, milling, mining gold, p eng, peter campbell, q2, quarter basis, risk rating, target, tonne,
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Language: english
Created: Fri Aug 22 11:41:05 2008

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August 22, 2008

Recommendation: SPECULATIVE BUY
WESDOME GOLD MINES LTD. 12-Month Target: C$1.80
(TSX-WDO C$1.07) Risk Rating: ABOVE AVERAGE
Q2/08 FINANCIALS: HIGHER GRADES AT Sector: MINING, GOLD & PRECIOUS
KIENA AND EAGLE RIVER HELP WESDOME MINERALS
Revenue was in line, but net income was lower than
Analyst: PETER CAMPBELL, P.ENG.
e-mail: peter.campbell@jenningscapital.com
our estimate. Q2/08 actual revenue was $20.7 million, Tel: (416) 304-3963 Fax: (416) 214-0177
versus our estimate of $18.7 million prior to release of
the production results. However, fully diluted EPS for Associate: MARK TURNER, MBA
the quarter were $0.01 versus our estimate of $0.03, e-mail: mark.turner@jenningscapital.com
largely as a result of higher mining costs at Eagle River. Tel: (416) 304-3964 Fax: (416) 214-0177
Combined mining and milling costs at Eagle River Company Statistics
were approximately C$208/tonne of ore versus our Market Cap Basic 106.8MM
estimate of C$91/tonne of ore. Small underground Basic Shares O/S 99.8MM
operations can experience wide unit cost fluctuations on Fully Diluted Shares O/S 108.1MM
a quarter-by-quarter basis. It is likely that mining costs at 52-Week Range $0.77 - $1.85
Eagle River will average out over the ensuing quarters Cash and Equivalents (06/30/2008) $1.6MM
when lower than average mining costs will be
Working Capital (06/30/2008) $7.9MM
experienced.
Convertible Debenture $11.5MM
Q2/08 production totalled 22,700 oz Au, exceeding Book Value per Share $1.10
our production forecast by 1,930 oz Au. NAV5% $59.47
Gold production for the year is running approximately Earnings Summary
8% ahead of guidance of 80,000 oz Au. FYE: Dec.31 2007A 2008E 2009E 2010E
Increased gold production is largely due to higher EPS (FD) (C$) ($0.14) $0.05 $0.09 $0.11
quarter-over-quarter head grades at Eagle River. CFPS (FD) (C$) ($0.05) $0.10 $0.18 $0.20
P/E (FD) N/A 22.2x 12.3x 9.9x
The Company realized an average price of C$913/oz P/CF (FD) N/A 10.7x 6.0x 5.3x
Au sold in the quarter, at an average production cost
of approximately C$720/oz.
Our revised full year 2008 estimates are for EPS of
$0.05 CFPS of $0.10 on a fully diluted basis. Our
estimate for the next twelve months cash flow is
$0.16 per fully diluted share.
We have increased the short-term mining and milling
cost estimate at Eagle River in our model, and
revised our $C/$US foreign exchange rate assumptions
to current JCI forecasts.

We continue to recommend purchase of Wesdome
Gold Mines Limited as a SPECULATIVE BUY for Wesdome operates two underground gold mines: Kiena in the Val
d'Or mining camp and Eagle River near Wawa, Ontario. Kiena
exposure to stable gold production. Our 12-month produced 1.56 M oz Au between 1981 and 2002 and was
target price is C$1.80 per share. reopened by the Company in 2006. Eagle River has been in
continuous production since 1995 and has reserves grading
9.4 gpt Au. Wesdome is well positioned to increase gold reserves
and resources at these two operations.

Please see important disclosures on pages 4 and 5.
2

Q2 FINANCIALS: HIGHER GRADES AT KIENA AND EAGLE RIVER HELP WESDOME
Wesdome Gold Mines Ltd. released its Q2/08 financials on August 8. Revenue was in line, but net income was
lower than our estimate, largely as a result of higher mining costs at Eagle River.

Summary of Q3/08 Financials and JCI Estimates

JCI Estimate JCI Revised Estimate Q2/08
After Release of Q2/08
Original Production Results Actual

Revenue $18.7 MM $20.6 MM $20.7 MM
Net Income $2.7 MM $3.6 MM $0.76 MM
EPS (F/D) $0.03 $0.03 $0.01
Source: JCI

Wesdome's Q2/08 production totalled 22,700 oz Au, exceeding our production forecast by 1,930 oz Au. Total
sales for the quarter were 22,600 oz Au at an average realized price of C$913/oz. Gold production for the year is
running approximately 8% ahead of guidance of 80,000 oz Au.
Increased gold production, once again, is largely due to higher quarter-over-quarter head grades at Eagle River.
The Eagle River mine produced 13,600 oz Au from 25,500 tonnes milled (17.1 g/t at 97.2% average recovery).
This exceeded our forecast of 11,735 oz Au from 27,300 tonnes milled (13.8 g/t at 97.0% average recovery). The
production increase is primarily due to mining in the high-grade "811" stope, which we originally anticipated
happening in Q3/Q4 2008.
Gold production from Kiena increased in the quarter and is in line with our production forecast. The Kiena mine
produced 9,100 oz Au from 65,800 tonnes milled (4.4 g/t at 98.5% recovery) as compared to our forecast of
9,037 oz Au from 62,800 tonnes millrd (4.57 g/t at 98.0% recovery). The Company realized an average price of
C$913/oz Au sold in the quarter, at an average production cost of C$720/oz.
Wesdome appears to be slightly ahead of our expectations for total production of 80,000 oz Au for the remainder
of 2008. Our revised full year 2008 forecasts are for production of 81,460 oz Au, EPS of $0.05 and CFPS of $0.10
on a fully diluted basis.

MINING COSTS
Development and operating costs were significantly higher at Eagle River in the quarter. Combined mining and
milling was approximately C$208/tonne of ore versus our estimate of C$91/tonne of ore, totalling C$6 million for
the quarter. An additional C$2.9 for development was expended at Eagle River in Q2/08. It is important to
remember that Eagle River is a small underground operation, and unit costs can vary widely from one quarter to
the next. This is especially true for development costs, where even a small change in the amount of development
can significantly skew the numbers. It is likely that mining costs at Eagle River will average out over the ensuing
quarters, when lower than average mining costs will be experienced. However, until this is proven to be the case,
we have increased our per tonne mining and milling costs at Eagle River to C$150 for the remainder of 2008,
C$125 for the first two quarters of 2009 and C$100 thereafter.

The information contained in this report was obtained from sources we believe to be reliable. We do not represent that such information is accurate or complete
and it should not be relied on as such. Any opinions expressed herein reflect our judgment at this date and are subject to change. Jennings Capital Inc. and/or
employees from time to time may hold shares, options or warrants on any issue included in this report and may buy or sell such securities. This report is not to be
construed as an offer to sell or solicitation to buy securities. Member � CIPF. Jennings Capital (USA) Inc. is a member of SIPC.
3

VALUATION
We have adjusted our DCF model to reflect the Q2/08 results and revised our assumptions for the
aforementioned outlook on Eagle River mining and milling costs and our $C/$US foreign exchange rate. Applying
a 10.0x multiple to our forecast next twelve months cash flow from operations and a 2.0x multiple to our NAV, we
obtain an average value of Wesdome's operations of C$1.38 per fully diluted share.

Wesdome Operations Valuation

Adjusted NAV Value per Value per Fully
Valuation Method (Millions) Basic O/S Diluted Share O/S
2.0x Net Asset Value 118.9 1.19 1.10
10.0 x NTM Cash Flow* 176.4 1.77 1.65
Average (Equal Weighting) 147.7 1.48 1.38
* Normalized cash flow from operations adjusted to reflect changes in bullion inventory.
Source: JCI

Accounting for Wesdome's Moss Lake interest, as well as current cash and discounted cash from the potential
exercise of dilutive securities, we continue to value Wesdome at C$1.80 per fully diluted share.

Wesdome 12-Month Target Valuation

Adjusted NAV Target per Target per Fully
Item (Millions) Basic O/S Diluted Share O/S
Average of Valuation Methods 147.7 1.48 1.38
Moss Lake 41.5 0.42 0.38
Current Cash 1.8 0.02 0.02
Cash From Options/Warrants* 2.2 - 0.02
12-Month Target 193.2 1.91 1.80
* Cash from exercise of options and warrants have been discounted from expiration date to present at 5.0%.
Source: JCI

Jennings Capital Inc. Research Disclosures
Company Ticker
Wesdome Gold Mines Ltd. TSX-WDO
I, Peter Campbell, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I
also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or
views in this report.
Note: We initiated coverage on Wesdome Gold Mines Ltd. on February 27, 2008 with a BUY recommendation, an ABOVE AVERAGE risk rating and
a target price of C$2.20 per share. Share price at that time was $1.56. On May 20, 2008 we decreased our target price to C$1.80. Share price at that
time was C$1.30.

U.S. Client Disclosures

This research report was prepared by Jennings Capital Inc., a member of the Investment Dealers Association of Canada and the Canadian Investor
Protection Fund and a Participating Organization of the Toronto Stock Exchange and the TSX Venture Exchange. Jennings Capital Inc. is an affiliate of
Jennings Capital (USA) Inc. Jennings Capital (USA) Inc. accepts responsibility for the contents of this research report, subject to the terms and
limitations as set out above. Jennings Capital (USA) Inc. is a registered broker-dealer with the Securities and Exchange Commission and a member of
the National Association of Securities Dealers Inc.
THE FIRM THAT PREPARED THIS REPORT MAY NOT BE SUBJECT TO U.S. RULES WITH REGARD TO THE PREPARATION OF RESEARCH
REPORTS AND THE INDEPENDENCE OF ANALYSTS.
This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Any transaction in these
securities by U.S. persons must be effected through either Westminster Securities Corporation, a U.S. broker-dealer registered with the Securities and
Exchange Commission and a member of the National Association of Securities Dealers Inc. and the New York Stock Exchange Inc. or through Jennings
Capital (USA) Inc., A U.S. broker-dealer registered with the Securities and Exchange Commission and a member of the National Association of
Securities Dealers Inc.
U.S. PERSONS
This research report was prepared by an affiliate of Jennings Capital (USA) Inc. or other person that may not be registered as a broker-dealer in the
United States. The firm that prepared this report may not be subject to U.S. rules regarding the preparation of research reports and the independence of
research analysts.
Subject to the limitations on liability described above, Jennings Capital (USA) Inc. takes responsibility for the content of this research report in
accordance with Rule 15a-6 under the U.S. Securities Exchange Act of 1934, as amended. All transactions by U.S. persons in securities discussed in
this report must be performed through Jennings Capital (USA) Inc.

U.K. Client Disclosures

This research report was prepared by Jennings Capital Inc., a member of the Investment Dealers Association of Canada and the Canadian Investor
Protection Fund and a Participating Organization of the Toronto Stock Exchange and the TSX Venture Exchange.
JENNINGS CAPITAL IS NOT SUBJECT TO U.K. RULES WITH REGARD TO THE PREPARATION OF RESEARCH REPORTS AND THE
INDEPENDENCE OF ANALYSTS.
The contents hereof are intended solely for the use of, and may only be issued or passed onto, persons described in part VI of the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2001.
This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein.

Stock Ratings
Speculative Buy: The stock is expected to provide a total return in excess of 10% over the current trading price over the next 12 months; however,
there is material event risk associated with the investment.
Buy: The stock is expected to provide a total return in excess of 10% over the current trading price over the next 12 months.
Hold: The stock is expected to provide a total return of 0% to 10% over the current trading price over the next 12 months.
Sell: The stock is expected to provide a negative total return over the next 12 months.

Risk Ratings
Low/Average Risk -- Stocks with less volatility than the market as a whole, with solid balance sheets and dependable earnings.
Above Average Risk -- Stocks with more volatility than the market. Financial leverage is considerable but not threatening, earnings are more erratic,
or other quality concerns regarding accounting, management track record, and similar issues.
Speculative -- Stocks of unproven companies or ones with very high financial leverage, suspicious accounting, or with other significant quality
concerns. A speculative risk rating implies at least the possibility of financial distress leading to a restructuring.
5

Distribution Ratings: Out of approximately 61 stocks in the Jennings Capital Inc. coverage universe, the ratings distribution is as follows:

BUY 38%
SPECULATIVE BUY 56%
HOLD 0%
RESTRICTED 3%
UNDER REVIEW 0%
SELL 3%
Revised Monthly

Security Abbreviations: NVS (non-voting shares); RVS (restricted voting shares); RS (restricted shares); SVS (subordinate voting shares); MV
(multiple voting shares).
Quarterly Recommendation Hierarchy: Is a ranking distribution identifying the percentage of total, number, and the investment banking relationship
(%) for all recommendation categories that can be found on the Jennings Capital Inc. website (www.JenningsCapital.com).
Analyst Stock Holdings: Equity Research analysts, associates and members of their households are permitted to invest in securities covered by
them. No Jennings Capital Inc. analyst, associate or employee involved in the preparation of an analyst report is permitted to effect a trade in the
security of an issuer whereby there is an outstanding recommendation for a period of 30 calendar days before and 5 calendar days after issuance of
the research report
Compensation: The compensation of the analyst and/or associate who prepared this research report is based upon in part, the overall revenues and
profitability of Jennings Capital Inc. Analysts are compensated on a salary and bonus system. Some factors affecting compensation including the
productivity and quality of research, support to institutional, retail and investment bankers, net revenues to the equity and investment banking revenue
as well as compensation levels for analysts at competing brokerage dealers. Analysts are not directly compensated for specific Investment Banking
transactions.
Jennings Capital Inc. Relationships: Jennings Capital Inc. may receive or seek compensation for investment banking services from all issuers under
research coverage within the next 3 months.
Jennings Capital Inc. or its officers, employees or affiliates may execute transactions in securities mentioned in this report that may not be consistent
with the report's conclusions.

Company Specific Disclosures

Is this an issuer related or industry related publication? Issuer Industry

Does the Analyst or any member of the Analyst's household have a financial interest in the securities Yes No
of the subject issuer? If yes, nature of interest:

Is Jennings Capital Inc. or Jennings Capital (USA) Inc. a market maker in the issuer's securities Yes No
at the date of this report?

Do Jennings Capital Inc., Jennings Capital (USA) Inc. and their affiliates in the aggregate Yes No
beneficially own more than 1% of any class of common equity of the issuer?

Does Jennings Capital Inc., Jennings Capital (USA) Inc. or the Analyst have any actual material conflicts Yes No
of interest with the issuer? Explanation:

Does the Analyst or household member serve as a Director or Officer or Advisory Board Member of Yes No
the issuer?

Has the Analyst received any compensation from the subject company in the past 12 months? Yes No

Has Jennings Capital Inc., Jennings Capital (USA) Inc. and/or any affiliates managed or Yes No
co-managed an offering of securities by the issuer in the past 12 months?

Has Jennings Capital Inc., Jennings Capital (USA) Inc. and/or any affiliates received compensation for Yes No
investment banking and related services from the issuer in the past 12 months?

Has the Analyst had an onsite visit with the Issuer? Yes No
(The extent to which the analyst has viewed the material operations is available on request)

Has the Analyst ever been compensated for travel expenses incurred as a result of an onsite visit with
an Issuer? Yes No