- Record gold sales of 47,535 ounces of gold averaged $870 per ounce in the third quarter compared to 22,760 ounces in the second quarter and 9,960 ounces in the first quarter TORONTO, Nov. 4 /PRNewswire-FirstCall/ -- Western Goldfields Inc. ("Western Goldfields" or the "Company") (TSX:WGI, NYSE Alternext:WGW) today announced financial results for the three-month and nine-month periods ended September 30, 2008. During the nine-month period ended September 30, 2008 the Company continued to increase production and further improved efficiencies to reduce cost of sales per ounce. Results are based on U.S. GAAP and expressed in U.S. dollars unless otherwise indicated. "We are pleased to report our strongest quarter ever with our highest sales, lowest cost of sales and most significant cash flow," stated Mr. Raymond Threlkeld, President and Chief Executive Officer. Gold sales during the quarter totaled 47,535 ounces, at an average cost of sales(1) of $390 per ounce which is below the Company's previous cost guidance. Gold revenues during the quarter were $870 per ounce. Gold production was 42,357 ounces. Gold sales for the first nine months were 80,255 ounces, at an average cost of sales(1) of $503 per ounce. Gold revenues for the first nine months were $884 per ounce. Gold production was 79,947 ounces. Subsequent to the quarter end, the Company announced the completion of one of its previously stated value-enhancing initiatives by introducing Western Goldfields' improved mine plan. The improved plan is designed to focus on sequential mining of the Mesquite pits in order to increase production to over 700,000 ounces through the next four years, reduce costs and improve cash flow. "We are very excited about the improved mine plan as it increases production and cash flow in the next four years for the benefit of our shareholders," said Mr. Threlkeld. Third Quarter and Year-to-Date Highlights ----------------------------------------- For the third quarter 2008, gold sales totaled 47,535 ounces, at an average cost of sales(1) of $390 per ounce which was below the Company's previous cost guidance. The Company produced 42,357 ounces of gold. Production for the third quarter continued to ramp-up. The Company continued to focus on controlling costs and improving equipment efficiency resulting in lower cost of sales(1) per ounce than previously forecast, despite a decrease in shovel availability that negatively impacted production. Total year-to-date gold sales totaled 80,255 ounces, at an average cost of sales(1) of $503 per ounce. The Company produced 79,947 ounces of gold. Third Quarter 2008 Nine Months 2008 --------------------------------------------------- Tons Mined Grade Tons Mined Grade ------------ ------------ ------------ ------------ Ore Mined 3,012,630 0.023 6,266,543 0.026 Waste Mined 11,280,193 - 34,152,652 - ------------ ------------ TOTAL 14,292,823 40,419,195 ------------ ------------ ------------ ------------ Financial Results ----------------- For the third quarter, Western Goldfields reported net income of $30.5 million compared to a net loss of $36.4 million for the third quarter of 2007. For the three and nine-month periods ended September 30, 2008, the Company had net income to common shareholders of $30.5 million and $6.8 million, or $0.22 and $0.05 per share, respectively. This compares to a loss of $36.4 million and $43.0 million, or $0.31 and $0.39 per share for the three and nine-month periods ended September 30, 2007, respectively. The net income for the three and nine months includes a after-tax gain of $18.8 million and loss of $1.2 million, respectively, arising from the mark-to-market of contracts for the forward sale of gold, which were taken out as a requirement of our term loan facility. The mark-to-market gain reflects the fact that the spot gold price decreased from $930 per ounce at June 30, 2008 to $885 at September 30, 2008. Year-to-date results for 2008, as compared with 2007, show an increase in gold sold to 80,255 ounces from 6,101 ounces; the average selling price per ounce rose to $884 in 2008 from $665 in 2007. Liquidity and Capital Resources ------------------------------- At September 30, 2008, the Company's cash balance was $45.4 million, including restricted cash of $7.5 million. In addition, the Company had unutilized credit facilities of $18.7 million. The Mesquite Mine generated $16.5 million and $3.0 million of cash flow from operating activities for the three and nine-month periods ended September 30, 2008, respectively. Capital Expenditures -------------------- The third quarter represented Western Goldfields' last significant quarter of expansion capital spending with the Company incurring $5.2 million of capital expenditure at its Mesquite mine. Planned spending for the balance of the year is $1.6 million. The Company expects future capital requirements to achieve the current mine plan at Mesquite to be minimal. We continue to assess the potential of the sulfide resources. 2008 Outlook ------------ Gold sales for full-year 2008 are expected to total approximately 117,000 ounces of gold at an average cost of sales(1) of $500 per ounce. The Mesquite Mine is expected to sell approximately 37,000 ounces of gold in the fourth quarter. (1) Cost of sales per ounce is defined as cost of sales as per the Company's financial statements divided by the number of ounces sold. Western Goldfields Inc. ----------------------- Western Goldfields Inc. is an independent gold production and exploration company with a focus on precious metal mining opportunities in North America. The Mesquite Mine, currently the Company's sole asset, was brought into production in January 2008, and the Company's focus is now on achieving the anticipated rate of production and completing planned improvements to the property. The Company has 2.8 million ounces in Proven and Probable Reserves. Western Goldfields common shares trade on the Toronto Stock Exchange under the symbol WGI, and on the New York Stock Exchange Alternext under the symbol WGW. Mr. Wes Hanson, P.Geo., Vice President of Mine Development, Western Goldfields Inc., is the qualified person under National Instrument 43-101 who supervised the preparation of the technical information contained in this news release. Mr. Hanson is an officer of the Company. 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 securities law. Such forward-looking statements are identified by words such as "intends", "anticipates", "believes", "expects", "plans" and include, without limitation, statements regarding the Company's plan of business operations, production and cost estimates, receipt of working capital, anticipated revenues, and capital and operating expenditures. These forward-looking statements are based on the best estimates of management at the time such statements are made. Expected production results and cost of sales (including without limitation, statements made with respect to future production and costs contemplated by our new mine plan) are based in part on current and historical production and cost data factoring certain assumptions with respect to future metal prices, costs and availability of supplies and labour and other parameters. 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, variations in metal prices and/or cost of supplies, possible variations in ore grade or recovery rates, failure of plant, equipment or processes to operate as anticipated, accidents, labour disputes, as well as those set forth in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2007 filed with the U.S. Securities and Exchange Commission and with SEDAR, under the caption "Risk Factors" as well as other filings made by the Company with securities regulatory authorities. 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 regulations, 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. WESTERN GOLDFIELDS INC. CONSOLIDATED BALANCE SHEETS (In thousands U.S. dollars) (Unaudited) September 30, December 31, 2008 2007 ------------- ------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 37,914 $ 43,870 Restricted cash 7,500 7,500 Receivables 364 298 Inventories 30,305 11,201 Prepaid expenses 1,165 887 Current portion of deferred income tax asset 1,070 755 ------------- ------------- TOTAL CURRENT ASSETS 78,318 64,511 ------------- ------------- Plant and equipment, net of accumulated amortization 106,757 77,951 Construction in process 4,592 21,864 Investments - reclamation and remediation 8,884 8,661 Long-term deposits 362 348 Long-term prepaid expenses 1,427 1,555 Deferred debt issuance costs, net of accumulated amortization 2,881 3,227 Deferred income tax asset 31,285 36,379 ------------- ------------- TOTAL OTHER ASSET S 156,188 149,984 ------------- ------------- TOTAL ASSETS $ 234,506 $ 214,495 ------------- ------------- ------------- ------------- LIABILITIES & SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities $ 8,315 $ 8,781 Current portion of mark-to-market loss on gold hedging contracts 5,674 1,935 Current portion of loan payable 15,109 6,882 ------------- ------------- TOTAL CURRENT LIABILITIES 29,098 17,598 ------------- ------------- LONG-TERM LIABILITIES Mark-to-market loss on gold hedging contracts 54,633 56,966 Loan payable 71,230 69,581 Reclamation and remediation liabilities 5,323 5,061 ------------- ------------- TOTAL LIABILITIES 160,284 149,206 ------------- ------------- STOCKHOLDERS' EQUITY Common stock, of no par value, unlimited shares authorized; 136,761,919 and 135,049,685 shares issued and outstanding, respectively 135,267 133,725 Stock options and warrants 8,109 7,551 Accumulated deficit (69,154) (75,987) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY 74,222 65,289 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 234,506 $ 214,495 ------------- ------------- ------------- ------------- WESTERN GOLDFIELDS INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (In thousands U.S. dollars) (Unaudited) Three Months Ended Nine Months Ended September 30 September 30 --------------------------- --------------------------- 2008 2007 2008 2007 ------------- ------------- ------------- ------------- REVENUES Revenues from gold sales $ 41,353 $ 1,281 $ 70,955 $ 4,060 EXPENSES Mine operating costs 17,591 6,067 38,800 11,741 Royalties 928 50 1,533 154 ------------- ------------- ------------- ------------- Cost of sales (excludes amortization and accretion) 18,519 6,117 40,333 11,895 Amortization and accretion 2,564 1,609 6,948 2,362 ------------- ------------- ------------- ------------- 21,083 7,726 47,281 14,257 ------------- ------------- ------------- ------------- GROSS PROFIT (LOSS) 20,270 (6,445) 23,674 (10,197) ------------- ------------- ------------- ------------- EXPENSES General and administrative 1,525 1,620 4,491 5,131 Exploration and business development 121 (273) 936 759 ------------- ------------- ------------- ------------- 1,646 1,347 5,427 5,890 ------------- ------------- ------------- ------------- OPERATING INCOME (LOSS) 18,624 (7,792) 18,247 (16,087) ------------- ------------- ------------- ------------- OTHER INCOME (EXPENSE) Interest income 269 341 942 1,383 Interest expense and commitment fees (1,007) (606) (3,026) (848) Amortization of deferred debt issuance costs (115) (118) (346) (227) Realized and unrealized gain (loss) on mark-to-market of gold forward sales contracts 30,777 (28,331) (2,043) (27,573) Gain on sale of assets - 43 - 43 Gain (loss) on foreign currency exchange (826) 89 (1,596) 294 ------------- ------------- ------------- ------------- 29,098 (28,582) (6,069) (26,928) ------------- ------------- ------------- ------------- INCOME (LOSS) BEFORE INCOME TAXES 47,722 (36,374) 12,178 (43,015) INCOME TAX EXPENSE (17,206) - (5,345) - ------------- ------------- ------------- ------------- NET INCOME (LOSS) 30,516 (36,374) 6,833 (43,015) OTHER COMPREHENSIVE INCOME Foreign currency translation adjustment - 8 - - ------------- ------------- ------------- ------------- NET COMPREHENSIVE INCOME (LOSS) $ 30,516 $ (36,366) $ 6,833 $ (43,015) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- NET INCOME (LOSS) PER SHARE - BASIC $ 0.22 $ (0.31) $ 0.05 $ (0.39) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- - DILUTED $ 0.21 $ (0.31) $ 0.05 $ (0.39) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- WEIGHTED AVERAGE NUMBER OF COMMON STOCK OUSTANDING - BASIC 136,739,854 118,281,240 136,272,266 111,628,367 - DILUTED 147,861,514 118,281,240 149,303,191 111,628,367 WESTERN GOLDFIELDS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands U.S. dollars) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, --------------------------- --------------------------- 2008 2007 2008 2007 ------------- ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 30,516 $ (36,374) $ 6,833 $ (43,015) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Items not affecting cash: Amortization of plant and equipment 3,710 1,531 6,740 2,123 Amortization of deferred debt issuance costs 115 118 346 227 Accretion expense 88 84 262 253 Deferred income taxes 16,640 - 4,779 - Gain on sale of assets - (43) - (43) Interest net of reimbursed costs - reclamation and remediation (81) (106) (223) (276) Stock based compensation 417 662 1,075 1,950 Mark-to-market loss (gain) on gold hedging contracts (31,415) 28,331 1,405 27,572 Changes in assets and liabilities: Decrease (increase) in: Accounts receivable 576 18 (66) 95 Inventories (6,372) (1,827) (19,104) (1,867) Prepaid expenses and deposits (323) (1,019) (150) (1,566) Long term deposits (5) (5) (14) (14) Increase (decrease) in: Accounts payable (724) 1,286 (1,251) 337 Payroll and related taxes payable - - (1,562) - Accrued expenses 3,409 (106) 4,173 329 Accrued interest expense (26) 292 (256) 292 ------------- ------------- ------------- ------------- Net cash provided (used) by operating activities 16,525 (7,158) 2,987 (13,603) ------------- ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Restricted cash - - - (7,500) Purchase of plant and equipment, including construction in process (5,175) (43,305) (19,844) (74,681) Increase in reclamation and remediation investment - - - (2,090) ------------- ------------- ------------- ------------- Net cash used by investing activities (5,175) (43,305) (19,844) (84,271) ------------- ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Loan payable - 51,108 9,876 51,108 Deferred debt issuance costs - (2,470) - (3,320) Common stock issued for cash - - - 59,191 Exercise of options to purchase common stock 15 408 687 909 Exercise of warrants to purchase common stock - 705 338 2,521 ------------- ------------- ------------- ------------- Net cash provided by financing activities 15 49,751 10,901 110,409 ------------- ------------- ------------- ------------- Change in cash 11,365 (712) (5,956) 12,535 Cash and cash equivalents, beginning of period 26,549 18,750 43,870 5,503 ------------- ------------- ------------- ------------- Cash and cash equivalents, end of period $ 37,914 $ 18,038 $ 37,914 $ 18,038 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ (693) $ (457) $ (2,982) $ (457) NON-CASH FINANCING AND INVESTING ACTIVITIES: Stock, options and warrants issued for services $ 417 $ 662 $ 1,075 $ 1,950 Equipment purchases included in accounts payable $ (18) $ (9,094) $ 316 $ 2,738 Deferred debt issuance costs included in accrued expenses $ - $ (2,329) $ - $ - Non-cash component of inventories $ 422 $ - $ 1,623 $ - DATASOURCE: Western Goldfields Inc. CONTACT: please visit http://www.westerngoldfields.com/, or contact: Raymond Threlkeld, Chief Executive Officer, (416) 324-6005, ; Brian Penny, Chief Financial Officer, (416) 324-6002, ; Hannes Portmann, Director, Corporate Development and Investor Relations, (416) 324-6014,

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