West Red Lake Gold Mines (TSXV:WRLG) - PFS Showcases Robust Economics at Madsen Mine

Interview with Shane Williams, President & CEO of West Red Lake Gold Mines

Our previous interview: https://www.cruxinvestor.com/posts/we...

Recording date: 7th January 2025

West Red Lake Gold Mines (WRLG) offers a rare and attractive investment opportunity as a near-term gold producer with a clear path to low-cost, high-margin production. The company's flagship Madsen Mine in the world-class Red Lake district of Ontario, Canada is on track to pour first gold in mid-2025 based on a recently completed pre-feasibility study (PFS). At a conservative gold price of US$2200 per ounce, the PFS demonstrates exceptional economics including an after-tax NPV5% of $315 million, average annual free cash flow of $70 million, and a rapid payback driven by a robust 255% IRR.

One of the key differentiators for the Madsen project is the substantial infrastructure already in place. Previous operators invested over $450 million in underground development, a 600 tonne per day mill, and surface facilities prior to West Red Lake Gold's acquisition. As a result, the remaining capital to first production is estimated at only $95 million, a fraction of what comparable stand-alone development projects require. This unique aspect significantly de-risks the project from a financing standpoint and translates to a much quicker path to positive cash flow for investors.

West Red Lake Gold Mines' management team has taken a disciplined and pragmatic approach to advancing the asset. Over the past 18 months, the company has effectively been operating in a pre-production environment, putting all the necessary systems and processes in place to ensure a smooth transition to commercial operation. The team's focus on operational readiness and proactive de-risking initiatives such as test mining, bulk sampling, and detailed definition drilling set West Red Lake Gold apart from many of its junior mining peers.

While the PFS outlines an initial seven-year mine life at an average production rate of 67,500 ounces per annum, this only scratches the surface of the geological potential at Madsen. The mine plan is confined to three main zones near existing infrastructure and does not include a number of high-grade satellite deposits or the deeper 8 Zone which management views as a potential game changer. These areas offer ample opportunity to both expand the production profile and extend the mine life in the years ahead.

West Red Lake Gold's strategic focus is on margin over volume. With all-in sustaining costs estimated at $1100 per ounce, Madsen is expected to generate robust 57% operating margins at current gold prices. Management sees tremendous opportunity to drive margin expansion over time by blending in high-grade feed from the 8 Zone and selectively toll milling ore from satellite deposits like the Rowan target which grades over 10 g/t gold. The company is also evaluating the use of ore sorting technology which has the potential to significantly upgrade head grades while reducing material movement and processing costs.

The macro backdrop for gold is increasingly constructive. A faltering global economy, persistent inflation, and a reversal in the US dollar and real interest rate cycle are all supportive of higher bullion prices going forward. At the same time, the gold industry is facing a dearth of new development projects due to a lack of new discoveries, ESG permitting challenges, and inflationary capital pressures. Against this backdrop, West Red Lake Gold Mines represents a scarce and timely investment opportunity - a high-margin, fully-permitted development asset in a tier-one jurisdiction with a clear path to near-term cash flow.

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