The Actual Reason Why Mining Teams Make or Break Your Investment

• West Red Lake Gold Mines and Rio2 demonstrate two different but equally viable approaches to gold mining – high-grade underground mining versus large-scale open-pit operations.
• Both companies are led by executives with demonstrated track records of building and operating successful mines, a critical differentiator in the junior mining sector.
• The management teams have implemented comprehensive data-driven approaches to minimize operational risk and optimize production potential.
• Both companies emphasize transparency with investors and empower their teams through flat organizational structures.
• West Red Lake and Rio2 are both positioned for production growth with clear pathways to scaling operations once initial production targets are met.

Introduction to West Red Lake Gold Mines & Rio2

The gold mining sector can be notoriously challenging for investors to navigate. For every success story, there are multiple cautionary tales of failed projects, poor management, and destroyed capital. In this landscape, identifying companies with the right combination of assets, leadership, and operational expertise becomes crucial for investors seeking exposure to the gold sector without taking on excessive risk.

West Red Lake Gold Mines and Rio2 represent two distinct approaches to gold mining, yet share common attributes that position them favorably in today's market. West Red Lake Gold Mines, led by CEO Shane Williams, is advancing the Madsen mine, a high-grade underground operation in Ontario targeting 65,000-70,000 ounces of annual production. This project has a storied history, having previously been operated by Pure Gold Mining before encountering operational difficulties. Under Williams' leadership, West Red Lake Gold Mines has implemented a comprehensive restructuring of the operation with a focus on geological understanding and operational discipline.

Meanwhile, Rio2, under Executive Chair Alex Black, is constructing the Phoenix Gold Mine in Chile, an open-pit heap leach operation that will ultimately produce around 100,000 ounces annually. Black brings significant experience to this project, having previously built multiple similar operations in Peru through Rio Alto Mining (which was later acquired). This established track record in building and operating heap leach operations provides a blueprint for the Phoenix project.

As Williams notes:

"We have a mine that's already there effectively... I have 300 people on site at the moment as we speak, and we're moving forward."

This stands in contrast to Rio2's project which, as Black explains, involves "mining the peaks of an extinct volcano" to create a working area before production can commence. This distinction highlights the different stages and approaches of these two operations, with West Red Lake Gold Mines focused on optimizing an existing operation while Rio2 is working through the construction phase of a new mine.

Panel with Shane Williams, President & CEO of West Red Lake Gold Mines, and Alex Black, Executive Chairman of Rio2

Geological Insights & Data Management

One of the most striking differences between these operations is their geological approach and data management strategies, yet both demonstrate the critical importance of robust data collection and analysis in modern mining operations.

Williams explains that the Madsen mine is "not a visual mine, you can't visually follow the gold. It's more data driven, basically." This challenge necessitates an extraordinarily intensive data collection approach.

"We've done over 150,000 meters of drilling now. So a lot of drilling has gone into the understanding that ore body".

This isn't exploratory drilling but rather tightly-spaced definition drilling at six-meter intervals, representing a significant investment in geological understanding.

The data management process at Madsen involves three distinct modeling levels, creating a sophisticated geological framework:

"You run a long term, a medium term and a short term model for building a project."

The long-term model supports life-of-mine planning and resource estimation, the medium-term model enables detailed mine design and engineering, and the short-term model incorporates ongoing sampling data from active mining faces.

This level of detail is crucial for managing the high-grade but geometrically complex ore body at Madsen. As Williams describes, "We have a swarm of what I call production geologists. They're like gophers on the ground running around constantly taking samples as we go, as the miners are going." This intensive sampling regime provides critical data for mine planning and grade control, ensuring that the operation can maintain its target head grade.

In contrast, Rio2's Phoenix project represents a fundamentally different geological challenge. Black explains:

"We've got a massive 400 million ton ore body sitting at the top of a hill."

Their approach uses computer algorithms for pit optimization:

"Obviously, there are computer algorithms that do Lerchs-Grossman, pit optimization... you plug in your costs and your metal prices and you come up with your ultimate pits."

While the scale differs dramatically from the Madsen operation, Phoenix still requires systematic data collection. Black notes:

"We're doing grade control drilling... closer space drilling just to confirm the resource model to see if there's any surprises, pluses or minuses in respect to the way we modeled the deposit."  

This grade control drilling focuses on the areas representing the first three years of production, ensuring that initial mining operations encounter minimal geological surprises.

Despite these operational differences, both executives emphasize the critical importance of comprehensive geological understanding before proceeding with development. As Williams succinctly puts it:

"At the end of the day, all mines start with a resource and an ore body and you've got to get that right before you move forward."

The significant investment both companies have made in geological understanding represents a fundamental de-risking of their respective projects.

Open Pit vs. Underground Mining Strategies

The contrast between underground and open-pit operations reveals important distinctions in operational approach, capital intensity, and risk profiles, while demonstrating that different geological settings can lead to equally viable mining operations.

West Red Lake Gold's Madsen mine operates at approximately 800 tonnes per day, focusing on high-grade material averaging around 8 grams per tonne. As Williams explains:

"Underground's are more about selectivity and focusing on grade." This requires intense geological control, with Williams describing how "every bucket of ore we move, we sample."

This level of sampling intensity represents a significant operational investment but is necessary to maintain grade control in a high-grade underground operation.

The higher grade at Madsen provides significant operational flexibility and resilience against gold price fluctuations. As Black notes:

"Shane's got grade, right? So eight to nine grams is a good number. There's been too many mines that have got off the ground, underground mines, three and a half, four grams. That to me is really scary."

This insight highlights how grade provides a critical buffer against operational challenges in underground mining.

Rio2's Phoenix project, by contrast, will process around 20,000 tonnes per day at a much lower grade of about half a gram per tonne. This necessitates a focus on operational efficiency and scale economies. The project benefits from favorable topography, with Black explaining they are "mining the peaks of an extinct volcano, which are quite pointy." This configuration allows mining to begin at the top of the deposit with minimal pre-stripping, improving early cash flow.

The capital intensity of these projects also differs significantly. As Black explains:

"The advantage that Shane has is $350 million of plant and infrastructure was spent by somebody else who went bust. And he inherited that, which is great because it was all in brand new condition."

By contrast, Rio2's starter project requires approximately $150 million in capital expenditure, though this reflects the different scale and nature of heap leach versus conventional milling.

Despite these profound operational differences, both projects are expected to produce similar annual gold output at full capacity—65,000-70,000 ounces for Madsen and up to 100,000 ounces for Phoenix—highlighting the different paths to profitability in the gold mining sector.

Black draws attention to this fundamental contrast:

"Shane's going to move 800 tonnes a day to the plant and we're going to move 20,000 tonnes a day."

This stark difference in throughput balanced against the equally stark difference in grade demonstrates how different geological settings can lead to similarly viable economic outcomes. Both approaches require specialized expertise appropriate to their specific operational requirements.

Production Ramp-Up & Operational Challenges

Both companies are taking measured approaches to production ramp-up, recognizing the risks of moving too quickly and demonstrating the operational realism that comes from experienced management.

Williams emphasizes that "a lot of people think that you can turn on the mine and away you go. It never works like that." This candid assessment reflects the operational complexity inherent in commissioning a mining operation, particularly an underground mine with complex geology. He outlines that ramp-ups typically take "three to six months," with West Red Lake Gold expecting to produce between 20,000-40,000 ounces in 2025 before reaching full production of 65,000-70,000 ounces in 2026.

The measured approach at West Red Lake Gold includes a "bulk sample" program currently underway. Williams explains:

"We're doing this thing we call a bulk sample, where we're going to test a number of these areas and stopes and do a full reconciliation against the model and area."

This methodical testing process allows the company to verify geological models against actual mining results before committing to full-scale production.

Williams also highlights an often-overlooked aspect of mine commissioning:

"It's also about getting the people right. Sometimes the people who build the mine are not the people who should run the mine."

This recognition that different project phases require different skillsets demonstrates the operational maturity that comes from previous mine-building experience.

Similarly, Rio2 expects first gold in January 2026, with production of around 70,000 ounces that year before reaching a steady-state of about 100,000 ounces annually by 2027. Black explains that they're currently "on track" with their timeline and will be "putting out a press release hopefully next week about our performance during Q1 and how we're going and tracking."

The ramp-up strategy at Phoenix is shaped by the site's unique topography. Black describes how "we're mining the peaks of an extinct volcano, which are quite pointy... So what you've got to do is you've got to slowly bring those peaks down and start to make a work area for yourselves. And so that takes time." This practical assessment of the site-specific challenges informs the company's production timeline.

Both executives stress the importance of realistic timelines and careful operational planning, suggesting that companies with overly aggressive ramp-up schedules may be setting themselves up for disappointment. Their cautious approach to forecasting contrasts sharply with the often-optimistic projections provided by less experienced management teams, highlighting another advantage of seasoned leadership.

The Importance of Experienced Management

Perhaps the most emphatic point made by both executives is the crucial importance of experienced leadership in mining project development—a factor that may be underappreciated by investors but proves decisive in project outcomes.

Williams identifies a "big problem with experienced people" in the industry, noting that "there's very few young people in the industry coming in who has that project experience." This creates challenges for companies attempting to build new mines without seasoned leadership. He elaborates on the industry's demographic challenge:

"As you both know, the last 10 years, 15 years, the industry has been pretty down from the last big boom, which was in 10, 11, 12. And since that period, there hasn't been a lot done. And so people left the industry."

This exodus of talent has created a critical gap in practical experience. Williams explains:

"People who have that experience of building, building companies and building operations, it takes 10 years. By the time you build a real company and the big project builders and company builders of all the Ross Beaty's, the Robert Friedland's, they're not going to be there for the cycle."

This reference to legendary mining entrepreneurs highlights the generational challenge facing the industry.

Black concurs with this assessment, stating:

"It all comes down to people and there has been a brain drain in the mining sector over the last 20 years."

He emphasizes the importance of track record: "Shane and his team have obviously demonstrated to the market because they put together 140 million bucks, 150 million bucks to do what they're doing. And you saw the photo, Shane standing there with a gold bar."

Both executives distinguish between management teams that have peripheral involvement in projects versus those who have carried full responsibility—a critical distinction for investors. As Williams observes:

"A lot of people claim to be builders and they've worked for a consultant for seven years... but that's not the same, it's the ownership and the ownership of taking it from A to B and the challenges of a team. That's hard to find today."

Black adds a personal perspective on the scarcity of practical experience:

"When you do talk to a CEO or a Corp Dev guy or whatever, you've got to drill into whether it's real what they're saying about their management and their capability."

He notes with frustration, "I've got to say, there was this heap leech panel on another show, not yours, Matt, just recently, and there were three companies that were represented in that, and we weren't asked to be there. I mean, we're the only guys, and out of those three companies, we're the only guys that have built two in the last 15 years from scratch."

This practical experience translates directly into improved project outcomes. Williams explains, "Through that, there's certain triggers that should trigger some responses. And, you know, if you haven't been through it, you don't know what those are." This intuitive understanding of warning signs and decision points comes only through direct experience with previous mining projects.

Investor Insights & Management Evaluation

For investors attempting to evaluate mining companies amid a sea of seemingly similar pitches, both executives offer practical advice that stems from decades of industry experience.

Black suggests healthy skepticism about standard corporate presentations:

"All these junior companies have the same script, right? If you look at all their presentations, they start off with management, experience, blah, blah, blah, blah, blah, right? It's a hymn sheet."

This standardized approach makes it difficult for investors to distinguish between genuinely capable teams and those merely presenting well.

He urges investors to "drill down into whether it's real what they're saying about their management and their capability," advocating a verification approach to management claims. Williams adds that investors should question projects that have lingered for years without advancing:

"There's a lot of projects that come around quite a lot of times... investors should know, well, why is is that around still? Why didn't it go forward? Why didn't they advance it...Most people who are project builders, their aim is to build a project."

This stagnation often signals fundamental issues with either the project or the management team.

He elaborates on this warning sign:

"If that project is not moving, there's something there that either they can't advance or there's some issues."

Williams notes that some projects repeatedly change hands without progressing: "There's projects around that come around every five years. They're the same projects."

He also emphasizes the importance of education for retail investors:

"Education for investors is important. I think that retail investors get a bad rep - short-term in and out. And then they complain when they lose money in these juniors."

He suggests that investor understanding has been hampered by the sector's prolonged downturn:

"A lot of the investors were trying to get into the mining industry, weren't there 15 years ago, 20 years ago. They didn't go through the last boom. They've had the last 10 years of, how would I say it, down in the doldrums. Suddenly gold is the new hot thing and they'll just pounce at whatever's there. That's a very dangerous way to be."

This perspective offers a valuable filter for investors reviewing the multitude of junior mining companies in the market. By focusing on genuine operational experience and the demonstrated ability to advance projects, investors can better identify companies with the potential to succeed in the challenging mining development landscape.

Understanding Management & Team Dynamics

Both executives emphasize team empowerment as critical to project success, revealing a management philosophy that differs markedly from the traditional hierarchical approach common in the mining industry.

Williams states, "I don't see it as the whole company works for me. I see it I work for them." This inverted perspective on organizational hierarchy creates an environment where team members feel ownership over project outcomes. He elaborates: "I'm doing certain things that allows them to do their job...The site team here, our management team works for them, not the other way around because they're trying to help them."

This approach proves particularly effective in attracting younger talent. Williams explains:

"The young people today want to be in companies that are empowering them, making them do things, do things together, work as a team. The old way of doing things in the industry, 'baton from the top', this is what you're doing - today's young people don't want that."

Black strongly concurs with this philosophy:

"That key word of empowerment, give people the rope, let them run and if they fall over, help them get up, find out why they fell over."

He contrasts this with the micromanagement approach he witnessed in other companies: "At the end of the day, if you're a micro manager, you're going to lose. I saw that in a recent thing that happened to us when Rio Alto was taken over by Tahoe Resources, and Tahoe Resources was run by Kevin MacArthur, who came with this stellar reputation of Goldcorp - the guy was useless. He was a micromanager. nobody in that business could do anything."

This management philosophy is particularly important in the project development phase. Williams explains: "In the project development space, if you are micromanaging, you're going to fail because there's so much to be done. There's so much to be done in parallel. You can't do it."

The complexity of modern mining projects necessitates distributed decision-making:

"You have to empower your people. There's so many different things, permitting, financing, construction, all that has to run in parallel. And one person can't do them. And if they try to, they will fail."

Black describes how this philosophy shapes organizational structure: "If you look at our organogram, it's very flat at the top, it's not a pyramid. And where companies have pyramids, they're the ones that are going to fail."

He adds that his team maintains focus on their ultimate responsibility:

"Who you're working for are shareholders... We reinforce that...You're not working for me. You're working for more than a thousand people out there that are giving us money and we have to look after that money."

Both executives suggest that their approach to team management has been crucial in attracting and retaining talented professionals, particularly younger team members who seek greater autonomy and responsibility. Williams notes their success in this regard: "We've been lucky at attracting young people in because of that attitude. They worked in big companies. They don't want to work there anymore. They want to take empowerment, and they've come in. And that's been very successful for us."

Transparency & Accountability in Projects

Transparency with investors emerges as another shared value between the companies, with both executives emphasizing its importance for long-term credibility and shareholder relationships.

Black emphasizes the fundamental importance of honesty in corporate communications:

"I think as a management team, you have to be honest and transparent, right? Because if you don't - I'm the sort of guy, I sleep pretty well at night and I don't want to go to have things hanging around."

He describes how Rio2 faced significant permitting challenges but communicated these clearly to investors:

"We've been to hell and back in our situation with an EIA that was rejected when we thought we were just about there. We had to regroup. That was soul searching for everybody in the management team because everybody was looking around saying, what happens now? But we got through it. It took 18 months. We got through it. And we messaged as well as we could to the market about what went wrong and what we're doing about it."

Williams firmly agrees that "transparency in the market is very important for sure because you lose credibility and once you start to lose credibility, then it's a slippery slope." This credibility has tangible value in the market, particularly for companies that may need to return to investors for additional capital in the future.

He notes that transparent operations build long-term shareholder loyalty, pointing to examples of mining entrepreneurs who have maintained investor support across multiple companies:

"As Alex has done a number of times, once you do one project, shareholders will come back around the second time and the third time because of that."

The discussion also touches on how a lack of transparency contributed to the failure of the previous operator at Madsen. When asked about how to handle situations where operations aren't proceeding as planned, Williams suggests that the previous management should have "stood up and said, no, this is not right, this is the way it needs to be done." While this might have caused short-term market difficulties, "they would have said to the market, they're down, but the project would have survived. Okay, they would have to refinance and et cetera, et cetera, but the project would have survived."

This commitment to transparency represents another differentiating factor for both West Red Lake Gold Mines and Rio2, positioning them as management teams that investors can trust to communicate honestly about both successes and challenges.

Investment Thesis for West Red Lake Gold Mines

• Production Growth: West Red Lake Gold is already producing gold with plans to ramp up to 65,000-70,000 ounces annually by 2026, providing near-term cash flow potential.
• Grade Advantage: With average grades of approximately 8 grams per tonne, the Madsen mine offers operational resilience even during potential gold price fluctuations.
• Infrastructure Value: The company acquired approximately $350 million of existing plant and infrastructure, substantially reducing capital requirements for production.
• De-risked Geology: The comprehensive drilling program (150,000+ meters) and data-driven approach significantly mitigate geological risk.
• Experienced Management: Led by a team with proven experience building and operating mines, reducing execution risk.

Investment Thesis for Rio2

• Construction Progress: Rio2 is on track for first gold production in January 2026, with clear timelines to reach 100,000 ounces annually.
• Scalability: The massive 400 million ton ore body offers significant expansion potential beyond the initial production plan.
• Capital Efficiency: The open-pit heap leach approach requires lower initial capital ($150 million vs. $350 million for comparable underground operations).
• Proven Leadership: Management successfully built two similar mines in Peru before this project, demonstrating relevant expertise.
• Pipeline Development: The Phoenix project has defined expansion phases, providing a clear growth path beyond initial production.

West Red Lake Gold Mines and Rio2 represent compelling investment opportunities within the gold mining sector, each approaching production from different angles but sharing critical success factors: experienced leadership, data-driven operations, team empowerment, and transparent communication with investors.

As Williams succinctly states, "At the end of the day, all mines start with a resource and an ore body and you've got to get that right before you move forward." Both companies have demonstrated their commitment to this fundamental principle while building operations that capitalize on their specific geological assets.

For investors seeking exposure to gold production with reduced execution risk, these companies offer alternative approaches to the same outcome: profitable gold production in a market environment increasingly favorable to precious metals producers.

Gold Mining Macro Thematic Analysis

The gold mining sector is currently experiencing a significant fundamental shift that enhances the investment case for producers like West Red Lake Gold Mines and Rio2. With gold prices recently surpassing all-time highs above $2,400 per ounce, producers are generating unprecedented margins. This price strength comes amid several converging macro factors: persistent global inflation concerns, geopolitical instability, central bank gold purchasing at record levels, and ongoing currency debasement concerns.

Concurrently, the sector faces significant supply constraints. Major gold discoveries have become increasingly rare, with the average grade of new discoveries declining steadily over the past decade. This scarcity is compounded by lengthening timelines for mine development, with permitting processes and regulatory requirements extending project development cycles to 10+ years in many jurisdictions.

As Alex Black notes in the discussion, "The junior sector is not loved so far, right? And they are finding it difficult to get money." This capital scarcity paradoxically strengthens the position of companies that have already secured financing and are advancing toward production, as they face reduced competition for investor attention.

The sector is also experiencing what Black describes as a "brain drain," with experienced mining executives becoming increasingly scarce. "People who have that experience of building and building companies and building operations, it takes 10 years. You know, by the time you build a real company... they're not going to be there for the cycle." This skills shortage further advantages companies with proven management teams already in place.

The convergence of these factors – rising gold prices, supply constraints, capital scarcity, and expertise shortages – creates a particularly favorable environment for companies like West Red Lake Gold Mines and Rio2, which have already overcome many of these industry-wide challenges. As the sector inevitably moves toward consolidation, companies demonstrating production success will likely command premium valuations and potentially become consolidators themselves, further enhancing shareholder returns.