Thank you for your interest in West Red Lake Gold Mines (WRLG.V). This is Part 2 of seven messages I am sending to WRLG shareholders to share my insights about the project and to state clearly our business objectives.
Our flagship Ontario asset, The Madsen Gold Mine, was once valued at $1 billion. In the spring of 2023 we acquired it for $6.5 million cash, 28.5 million shares, while granting the seller a 1% Net Smelter Royalty.
I am often asked: “How is it possible to purchase a fully permitted gold mine with a new 800+ tonne per day mill so cheaply?” There is a simple answer: when the mine was briefly in production it was “sub-economic” - which is a fancy way of saying, “It didn’t make money”. That put off a lot of potential buyers.
After three months’ due diligence we discovered that the problems with the mine were caused by a compounding series of financial and operational decisions, not the mineral asset itself.
The previous operators took on debt with repayment terms that forced them into an early production date with the lowest capex possible. This meant neglecting delineation drilling, leasing equipment that should’ve been purchased, and targeting a close-to-surface lower grade zone.
Covid protocols also created a headwind for the previous operator.
My technical team has reviewed every available financial, engineering, geological and metallurgical document relating to the Madsen project.
We have made a decision to optimize this mine before restarting production. This will involve infill and expansion drilling, underground development, engineering studies and a PEA.
To put it bluntly, the rich 9 gram/tonne gold starts 500 meters below the surface. We are determining the best way to get down there, extract and process the gold for maximum long-term profit.
Next week in Part 3 of my message to shareholders, I will talk about the existing infrastructure at Madsen, including the modern fully permitted $100 million mill.
Sincerely,
Shane Williams
CEO of West Red Lake Gold Mines
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