Underground Fleet Renewal & Mine Sequencing Drive Madsen's Operational Step-Up

• Development-first execution lifted production. Gold production increased 51% quarter-over-quarter to 8,576 ounces, while mined gold increased 73% to 10,459 ounces, as underground development, fleet upgrades, and improved stope availability drove operational gains.
• Fleet renewal improved underground reliability. New underground trucks, loaders, and auxiliary equipment increased mobile equipment availability to 75% to 80%, supporting more consistent haulage and development schedules.
• Higher mining rates created operational flexibility. Underground mining averaged 878 tonnes per day during the second quarter of 2026 and exceeded 1,000 tonnes per day from mid-quarter, allowing the company to build a surface stockpile of approximately 15,000 tonnes to buffer mill feed.
• Survey corrections reduced dilution risk. Updated underground surveying identified that many planned stopes were farther from historical workings than previously believed, enabling larger longhole stopes with reduced dilution and faster mining.
• Operational improvements supported positive cash generation. Higher mined tonnes, stronger grades of 4.3 grams per tonne gold, and 95% mill recoveries moved the operation from first-quarter cash breakeven to positive free cash flow (FCF) and voluntary debt repayments.

Development-First Strategy Unlocks 51% Production Surge

West Red Lake Gold Mines Ltd. (TSXV: WRLG | OTCQX: WRLGF) mark a distinct mechanical transition at the Madsen Mine in Ontario's Red Lake district. Following the declaration of commercial production on January 1, 2026, the company focused its initial execution on establishing underground development access, re-equipping the mobile fleet, and correcting historical survey discrepancies across legacy workings.

The physical outcome of this development-first strategy became visible during the three months ended June 30, 2026, as gold production rose 51% to 8,576 ounces, up from 5,667 ounces reported in the first quarter of 2026, as reflected in the financial results dated May 27, 2026, while mined ounces increased 73% to 10,459 ounces. Rather than pulling forward high-grade stopes to boost short-term output, the operational step-up was driven by improved stope availability, enhanced mobile equipment utilisation, and the systematic expansion of active underground mining faces.

Equipment Fleet Renewal & Availability Gains

A primary operational challenge inherited from prior operators at Madsen was severe equipment unreliability and constrained underground haulage capacity. During 2025, West Red Lake Gold directed capital toward the complete renewal of its mobile equipment fleet, introducing new underground trucks, loaders, and auxiliary equipment to support sustained daily tonnage targets.

By the second quarter of 2026, the arrival and deployment of this fleet delivered a material increase in mechanical availability, raising equipment uptime to between 75% and 80%. This reliability allowed underground haulage cycles to match planned development and production schedules without the chronic fleet downtime that previously restricted daily ore movement to surface.

President and Chief Executive Officer of West Red Lake Gold Mines, Shane Williams, commented on the impact of the equipment recapitalisation:

"We bought a lot of equipment last year, and it all came in the back end of last year. So we're seeing the benefit of all that new equipment, and the capital has been spent. We have seven or eight trucks now, brand new trucks, a lot of new equipment, which is helping. As you remember, we were left with very little equipment when we bought them. So over time, we’ve transitioned that fleet to newer equipment, and we're seeing the benefits of that; we're getting that 75% to 80% availability."

Stope Cycling & Underground Production Rates

The increased mechanical availability directly supported an expansion in active underground working faces. The second quarter of 2026 operating results, released on July 15, 2026, showed that underground ore mined rose 46% quarter-over-quarter to 75,524 tonnes from 51,616 tonnes in the first quarter of 2026. Daily underground mining rates averaged 878 tonnes per day across the full quarter, representing a 53% increase over the 573 tonnes per day achieved in the first quarter of 2026.

From mid-quarter onward, underground productivity consistently exceeded 1,000 tonnes per day. Because the Madsen processing plant is currently permitted for 800 tonnes per day, the excess mine production allowed the company to build a surface stockpile of 10,768 tonnes by quarter-end, with surface inventory approaching 15,000 tonnes heading into the third quarter. This stockpile provides approximately half a month of mill feed buffer, insulating processing operations from temporary underground sequencing delays.

Williams detailed the operational mechanics behind the stope cycling and stockpile growth:

"We're working on six or seven stopes in a cycle at a time, between drilling them underground for drilling and then silling them and stoping them and mining them. To get that sequence right takes a long time, as you're probably aware, and we're just getting to there now. Another quarter of that to get to there, but that's where we're getting the tonnage. More importantly, we have a stockpile on surface as well now; we've developed a 15,000-ton stockpile of material on surface ahead of the mill."

Survey Accuracy, Dilution Control & Longhole Mining

A critical technical issue identified during the remediation of historical mine plans was survey inaccuracy in legacy documentation. Previous operators had frequently experienced unexpected wall sloughing and dilution due to mining directly adjacent to improperly mapped historical stopes. Updated underground surveying and tight-spaced definition drilling revealed that unmined panels were frequently positioned further from legacy voids than historic maps indicated.

This survey correction allowed engineering teams to establish clean, independent longhole stopes away from historical voids. All production mined during the quarter utilised longhole open stoping methods rather than more labour-intensive cut-and-fill techniques, reducing mining dilution and increasing extraction speed across larger stope dimensions.

Williams explained how updated survey data and mining methods resolved dilution concerns:

"As we've gone into the mining of the old areas, we're finding that survey was a big issue actually. Survey was off a little bit from the old-timers, and we're finding that we're actually mining a lot more away from existing stopes. We're not actually mining; there was a story that was here that we're mining right up beside old stopes, and we wouldn't be able to mine them. We're finding that that's not actually the case as much as you would think. So we're getting newer stopes away from that, so that's helping mine dilution, the ability to mine quicker, the bigger stopes, etc."

Model Reconciliation & Cash Flow Transition

Underpinning the operational step-up is the performance of the updated geological resource model. Built on more than 200,000 metres of underground definition drilling completed at 6 to 7-metre hole spacing, the block model demonstrated tight reconciliation between predicted grades and actual mill recovery. Mined grades averaged 4.3 grams per tonne gold in the second quarter of 2026, up 23% from 3.5 grams per tonne in the first quarter, as mining transitioned into intact panels such as the 4447 complex in South Austin.

The combination of a 46% increase in mined tonnage to 75,524 tonnes, a 23% grade step-up to 4.3 grams per tonne of gold, and 95% mill recoveries shifted operational cash flow from a first-quarter 2026 breakeven to net cash accumulation and debt reduction. Having reached cash breakeven in the first quarter of 2026 at a production rate of approximately 2,000 to 2,500 ounces per month, the higher output in the second quarter enabled the operation to generate positive free cash flow (FCF) and commence voluntary debt repayments.

As development advances into lower-level complexes such as 904 and 4447, management is targeting mined grades in the 6-8 grams per tonne gold range through the second half of 2026. With mining rates established above mill capacity and definition drilling extending mine plans into 2027 and 2028, the physical foundation at Madsen is positioned to support full-year 2026 production guidance targeting 35,000 to 45,000 ounces of gold.

Execution Risks & Key Monitoring Variables

While the second-quarter 2026 operating mechanics demonstrate de-risking in haulage and mine sequencing, several operational variables remain critical to achieving full-year 2026 guidance targeting 35,000 to 45,000 ounces of gold. Investors must monitor whether daily underground mining rates can sustain levels above 1,000 tonnes per day without causing stope sequencing bottlenecks. Furthermore, as mining advances deeper into the 4447 and 904 complexes, maintaining grade continuity toward targeted 6 to 8 grams per tonne gold levels requires continuous definition drilling at tight 6 to 7-metre spacing to prevent grade dilution in lower-level panels.

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