West Red Lake Gold Mines - Unlocking the Potential of the Madsen Mine, To Restart Production in 2025

• West Red Lake Gold Mines acquired the Madsen mine project out of bankruptcy and plans to restart production by mid-2025
• The company is implementing solutions as previous owner experienced operational issues due to mismanagement, lack of expertise, and insufficient financing
• West Red Lake has spent the past year analyzing the operation to identify issues and determine fixes, and has $50M to implement changes
• Plans include infill drilling to better define the resource, improving the mining method, connecting mine portals, and installing a crusher
• A pre-feasibility study is expected in early 2025 prior to restarting production in H2 2025

Unlocking the Potential of the Madsen Mine

West Red Lake Gold Mines (TSXV:WRLG) presents an intriguing opportunity for investors seeking exposure to a high-grade gold project with near-term production potential. The company acquired the Madsen mine project out of bankruptcy in 2023 and has spent the past year laying the groundwork to restart the mine by the second half of 2025.

The Madsen mine, located in the prolific Red Lake district of Ontario, was previously operated by Pure Gold. Despite the project's strong fundamentals, Pure Gold encountered significant challenges due to a combination of factors, as Gwen Preston, VP Investor Relations for West Red Lake Gold, explains:

"There was just mismanagement, there wasn't a focus on operational excellence, there wasn't enough experience in operations, and the way that it was financed, there wasn't enough money. Everybody was always scrambling to try and make things work, pushing costs into operating and then making last minute decisions for where to mine and how to mine."

As a result, the ore delivered to the mill graded well below expectations while operating costs ran significantly higher than anticipated, ultimately leading to Pure Gold's bankruptcy.

Interview with VP of Investor Relations, Gwen Preston

Identifying Issues & Implementing Solutions

Recognizing the inherent value of the Madsen project, WRLG acquired the asset for just $6.5 million after $350 million had been invested by the previous owner. Over the past year, the WRLG team has thoroughly analyzed the operation to pinpoint the underlying issues and develop a comprehensive plan to address them.

A key issue identified was the lack of detailed knowledge about the high-grade, vein-hosted gold mineralization. Pure Gold had based its mine plan on widely spaced drilling, which proved insufficient for such a nuanced deposit.

As Preston notes, "When you have widely, relatively widely spaced drill holes, you just run the risk of not actually knowing where the gold is."

Compounding this challenge was the use of an inappropriate mining method that resulted in excessive dilution. To rectify these issues, WRLG is embarking on an extensive infill drilling program to better define the resource on a stope-by-stope basis. The goal is to have a year's worth of clearly defined stopes ahead of mining. Additionally, the company is refining its geological model and adjusting the mining method to minimize dilution and optimize grade delivered to the mill.

Infrastructure Improvements & Operational Readiness

Beyond the technical aspects of the deposit, WRLG is also focusing on critical infrastructure improvements to enhance operational efficiency. A prime example is the planned 1,200-meter connection drift that will link the east and west mine portals. As Preston explains, the lack of this connection under previous ownership led to congestion, ventilation issues, and the need to transport ore across public roads. By investing in this key piece of infrastructure, WRLG aims to streamline mine operations and reduce potential bottlenecks.

The company is also addressing equipment requirements, such as the purchase and installation of a primary crusher. Under Pure Gold's management, the crusher was leased at an exorbitant cost - nearly $600,000 per month for an asset that would cost $1-1.5 million to purchase outright. By owning this critical piece of equipment, WRLG can significantly reduce operating costs and improve margins.

Well-Funded to Advance the Project

To support its efforts to restart the Madsen mine, with WRLG having $50 million on hand. This gives the company ample resources to carry out its planned infill drilling, complete the pre-feasibility study, and begin implementing the necessary operational improvements.

"We've raised $100 million over the last year so that we can do the work that's needed to turn what was a bankrupt mine into a profitable mine that we're proud to operate and confident in," states Preston.

The Path Forward

Looking ahead, WRLG has set a clear timeline for advancing the Madsen project. The company aims to complete a pre-feasibility study by early 2025, which will provide a more detailed analysis of the project's economics and serve as a critical milestone for investors.

In the lead-up to the pre-feasibility study, WRLG will be actively implementing its plans, including the infill drilling program, the connection drift, test mining, and the installation of the primary crusher. By completing a significant portion of the work required for the restart in advance of the study, the company aims to demonstrate its commitment to reaching production in the second half of 2025.

Positioned for Success

With a high-grade resource, existing infrastructure, and a clear path forward, WRLG appears well-positioned to unlock the potential of the Madsen mine. The company's approach, which focuses on thorough analysis, targeted investments, and operational improvements, stands in stark contrast to the previous owner's shortcomings.

As Preston concludes, "We know the gold is there. We need to get it out of the ground efficiently...and it requires a mine model that we have a lot of confidence in - the resource model and all the infill drilling."

For investors, WRLG presents a unique opportunity to gain exposure to a high-quality gold project with the potential for near-term production and significant value creation. With a proven leadership team, a strong financial position, and a clear plan in place, WRLG is an investment opportunity worth considering for those bullish on gold.

Investment Thesis for West Red Lake Gold Mines:

• High-grade gold resource in prolific Red Lake district
• Existing infrastructure (~$350M invested) acquired at a steep discount ($6.5M)
• Experienced management team has identified and is addressing previous operational issues
• Well-funded with $50M to advance project and implement improvements
• Pre-feasibility study expected in early 2025, with production targeted for H2 2025
• Attractive entry point for investors ahead of upcoming milestones and potential re-rating

Macro Thematic Analysis

The current macro environment, characterized by heightened economic uncertainty, inflationary pressures, and geopolitical tensions, has reignited investor interest in gold as a safe-haven asset and hedge against market volatility. This backdrop bodes well for gold-focused companies like West Red Lake Gold Mines, particularly those with advanced-stage projects and a clear path to production.

As central banks grapple with the challenge of taming inflation without tipping economies into recession, the prolonged low-interest rate environment and the potential for further monetary policy missteps could provide additional tailwinds for gold prices. In this context, companies with high-quality assets, experienced management teams, and the financial resources to advance their projects are likely to attract investor attention.

With a disciplined approach focused on operational improvements and a clear timeline to production, WRLG is well-positioned to capitalize on the favorable macro backdrop for gold and deliver value for investors.