RE:RE:RE:A great upcoming Gold producer to own Bob Moriarty's comment on West Red Lake Gold yesterday:
West Red Lake Gold (WRLG-V) is probably the easiest stock to call. The primary asset is an 800 TPD mill that cost $350 million to build in the heart of the Red Lake gold district in Ontario. The project had been owned by Pure Gold who built the mill and attempted to get into production only to run into the snags that always occur in any startup.
Pure Gold made a few critical missteps and blew up. But the
brand-new mill and gold mine was still an outstanding asset. At one point the market valued Pure Gold at $1.15 billion in market cap. West Red Lake, backed by famed Canadian investor Frank Giustra took over the asset with West Red Lake Gold and closed in mid-2023.
The deal was a steal.
The Madsen mine came with a 2.1-million-ounce gold resource and an 800 TPD mill with a total investment of over $350 million. WRLG paid $6.5 million in cash and issued 28.46 million shares and a 1% NSR on the Madsen mine. In addition, there is a $10 million USD deferred payment due in the case of a change in control to Sprott Lending.
The deal came with a few benefits the market has been pretty much ignoring.
There is no doubt the Madsen mine has enough gold to feed their mill. But deposits in the Red Lake District can be tricky. The management of Pure Gold now admit they started production too soon with insufficient drill data and it cost them their company. Current investors today are still pissed at Pure Gold going teats up and haven’t forgiven WRLG for owning the asset.
But WRLG also has the
Rowan Gold project with a 43-101 resource of almost 0.9 million high-grade gold ounces within driving distance of the Madsen mill. The company is conducting a major resource definition and expansion program at both the Madsen property and at Rowan with exceptional results. The possible plan is to feed Rowan high-grade gold to the Madsen Mill in addition to the Madsen ore as necessary. The biggest issue will be the cost of trucking but that is an issue you can figure out on the calculator on your iPhone.
A pretty much hidden advantage is the strength of
the management team led by an Irishman named Shane Williams. I’ve talked to him a couple of times and he patiently answers any questions I ask. I’m going to climb way out on a limb here and offer my readers my opinion. This is not a fact. It is just an opinion but I have run into at least a thousand professional geologists in the last 24 years. Shane Williams is the best manager of a gold company I have ever met.
Face it. The average Canadian junior has half a dozen people working for it with a tiny market cap and a lot of dreams. Most juniors are led by people who only dream of their next paycheck. If that arrives, they are happy. Shane Williams is building what is going to be recognized as one of the premier gold companies in Canada. He has surrounded himself with some very bright people and they are not hobby miners looking for a weekly paycheck.
And something else everyone ignores at their peril. The WRLG purchase of Pure Gold brought with it a $273 million tax write-off. Madsen will go back into production when the time is right. It will make a profit. And the first $273 million will be tax free.
Here’s the math. At today’s price of the shares, WRLG is worth about $141 million. The same mine and mill, less Rowan with its 900,000 ounces of gold, used to be worth $1.15 billion. It cost $350 million to put Madsen into production under management that ended up running it into the ground. With current management and $2200 gold I see WRLG being worth 500 to 1,000 percent higher when investors wake up.