West Red Lake Gold's Madsen PFS Demonstrates Strong Economics Ahead of 2025 Production

• West Red Lake is moving into production at the Madsen Mine in Red Lake, Ontario in mid-2025
• Pre-feasibility study shows NPV of $315M, $70M annual cash flow, and over 255% IRR at $2200/oz gold
• Substantial prior investment of $450M+ in infrastructure enables low capex and quick path to production
• High margin operation with all-in sustaining costs in line with industry averages of $1400-1500/oz
• Significant expansion potential to increase production and mine life

About West Red Lake Gold Mines

West Red Lake Gold Mines (WRLG) is on the cusp of bringing its flagship Madsen Mine in the prolific Red Lake mining district of Ontario, Canada into production. With a recently completed pre-feasibility study (PFS) demonstrating robust economics, West Red Lake offers investors a rare near-term production opportunity in a tier-one jurisdiction. The combination of imminent cash flow, high margins, and compelling exploration upside makes WRLG a junior mining story worth paying attention to.

Interview with President & CEO, Shane Williams

PFS Results & Economic Outlook

The PFS provides a first look at potential economics of the re-startedMadsen Mine. At a base case gold price of US$2200/oz, the study outlined an after-tax NPV5% of $315 million and an exceptional IRR of over 255%. Even more impressive is projected annual free cash flow of $70 million once in production. These numbers are based on an average annual production of 67,600 ounces over 6 full years of production, within a 7.2 year mine life. With strong margins supported by the current macro environment, President & CEO Shane Williams emphasizes the timing advantage:

"There's very few projects moving into production in 2025. And that's key with the gold price as it is today. We've also used a conservative gold price. We've used $2,200 US dollars and today, we're in that $2,600 environment."

West Red Lake's conservative assumptions in the PFS, including what now looks to be a low $2,200/oz gold price makes the economics even more attractive with today's spot price at around $2,600/oz. The strong projected margins and rapid payback are a function of relatively low initial and sustaining capital requirements for the project.  

Understanding Production Capacity & Longevity

At an average production rate of 67,600 ounces per year, the Madsen Mine is not the largest operation. However, Williams provided important context about mines in the Red Lake district:

"There's lots of mines there that have run for 45 years. They never had more than two or three years of reserves ahead of them. That's how they mine these projects... Red Lake, which is across the road from us, the original Red Lake mine - they've been mining since the 1800s. They never had more than three or four years reserve all that time."

These long-life mines rely on mining and finding more ore as they go deeper, leveraging in-depth understanding of the geology and mineralization. Madsen exhibits similar geologic characteristics to its neighbors with high-grade mineralization open at depth and along strike. While the PFS mine plan focuses on the initial reserve base, there is substantial opportunity to grow production and extend mine life over time.

West Red Lake Gold Mines also has several nearby satellite deposits that were not included in the PFS but provide further potential to feed the centrally located mill. Higher-grade feed sources like these "juice" project economics by increasing margins without having to expand throughput capacity.

Economic Viability & Historical Investment

A key aspect of the Madsen story is the substantial investment made by previous operators. Prior to West Red Lake Gold's acquisition, an estimated $350 million had already been spent on the project, not including the additional $100 million invested by WRLG to further de-risk the asset.This means that much of the heavy lifting from a capital and infrastructure perspective is already done. Effectively, West Red Lake and its shareholders are beneficiaries of the past investment without taking on the burden of excessive future capital requirements to get into production.

CEO Williams emphasized this advantage in the context of inflationary pressures and capital cost increases impacting the mining industry in recent years:

"If you have to build this project today in Ontario, where we are, as we know, there's been lots of blowouts in capital, and lots of delays in projects. A day doesn't go by where there's a project delay due to permitting, due to capital overruns. There's a lot to be said for getting execution, small or big, right, and having that capital under control and having permits."

Confidence in Cost Estimates & Methodology

One of the most common pitfalls for mining projects is underestimating operating and capital costs in technical studies. Anticipated margins end up being squeezed by cost escalations between the study and production phases. West Red Lake Gold took proactive steps to mitigate this risk and instill confidence in the PFS cost estimates. Williams stated:

"We did a lot of benchmarking in Canada. There's a lot of benchmarking in Ontario. There's a lot of benchmarking in Quebec, which are very similar high-grade underground mines. They're running around an average of AISC of $1400 to $1500 an ounce. That's standard in the industry today."

Importantly, West Red Lake Gold didn't just rely on theoretical benchmarking but incorporated actual granular operating cost data it has been generating in the pre-production development phase. With 120 people already working at site, WRLG has hard costs for labor, fuel, power and other key inputs that directly informed the PFS economics.

"We're spending on the ground on development, labour - we have 120 people on site. We have fuel, power, we have actual costs. So we've incorporated all those in to get the actual numbers that we're using so that there's confidence going forward that these are the real numbers."

Development & Ground Conditions

Another potential risk factor in any underground mining operation is encountering adverse development and ground conditions. This can negatively impact advance rates, dilution, productivity, and costs. West Red Lake Gold has significantly de-risked this aspect at Madsen through its approach to drilling out the orebody and pre-development work.

The geology and structure of the Madsen deposit requires detailed information to inform mine planning. West Red Lake Gold has attacked this head on with 50,000 meters of tightly-spaced definition drilling, providing a high degree of granularity and confidence in the orebody. This information not only delineates the gold mineralization but also provides geotechnical data on rock quality.

"The previous operators suffered a little bit. They didn't have enough development or drilling ahead of themselves. The key to these underground mines is lots of flexibility, lots of optionality. To get that, you need drilling ahead of yourself and development. We've done 50,000 metres of definition drilling ahead of ourselves and we've done over 3,000 metres of development. There's been 15,000 metres of development now into this mine. So we're set up in lots of different areas."

West Red Lake Gold's pre-production work, including over 3,000 meters of underground development as part of a test mining program, along with 12,000 meters of historical development, provides valuable insights into ground conditions. So far no ground stability issues have been encountered in the areas planned for mining over the next five years. Importantly, West Red Lake's drilling and development is spread across multiple zones (Austin, South Austin, McVeigh), providing flexibility and optionality for mine sequencing and planning.

Geotechnical Challenges & Mining Techniques

While overall ground conditions have been good, West Red Lake Gold is proactively assessing potential geotechnical risks, particularly as mining advances deeper in the high-grade 8 Zone. The extensive definition drilling program is not just focused on geology but also collecting important geotechnical information.  Data on rock competency, structure, and historical voids all feed into the mine planning process and mining method selection.

West Red Lake's mining team is also conducting test mining to better understand how the rock mass behaves and further refine stope dimensions, pillars, and ground support requirements. This information allows the team to optimize the mining approach and adapt where needed. For example, in some areas long-hole stoping is being prioritized over cut-and-fill methods to improve productivity.

Operational Readiness & Contingency Planning

In addition to technical de-risking, West Red Lake Gold has been proactively setting the project up for operational success. Williams emphasized the importance of this 18-24 month pre-production phase for putting key procedures, systems, and processes in place. Effectively West Red Lake has been operating in a pre-production environment, not just advancing a development project.

This means that critical aspects like budgeting, cost management, maintenance planning, procurement, and inventory management are already functioning in a production setting. The team has also developed contingency plans and built in flexibility to deal with inevitable underground setbacks like equipment down time or maintenance issues. Multiple working areas provide options if one area needs to shut down temporarily or sequence changes are required.

"A lot of companies build a project and then they go into startup. Because we had everything there, we've done 18 months of, 'readiness'. Part of that is key to a start of a mine. Because we've had the people, we've had our budget processes, we've had our maintenance team, we've had everything set up as you'd operate a mine. So that's key. A lot of companies do a project and then they say, 'we can go straight into operations'. That's where they fall down a little bit. We've done it the opposite way."

Processing Recovery & Optimization

The processing side of the operation is another key focus for West Red Lake Gold in the lead up to commercial production. The existing 1100 tonne per day mill requires recommissioning and optimization work to consistently achieve the 800 tpd rate outlined in the PFS. Getting the back end of the plant operating efficiently and managing water balance is critical.

West Red Lake Gold is undertaking a bulk sample program to stress test the processing plant and validate the flowsheet. In addition to providing metallurgical recovery data for the feasibility study, this large-scale trial will help identify any bottlenecks or deficiencies in the milling and tailings circuit. CEO Williams also highlighted the need to commission the previously unused backfill plant which will provide cemented rock fill for underground mining:

"Doing the bulk sample, getting that through will take the month of March roughly. We want to then in parallel build a big stockpile on surface because in any startup you need a stockpile."

Future Expansion & Resource Management

While near-term production is the priority, West Red Lake Gold has a wealth of opportunities to expand the operation organically over time. The processing plant has latent capacity to increase throughput to 1100 tpd with no additional capital and room to scale up to 1500 tpd with a modest $35 million investment.

However, West Red Lake Gold sees more opportunity in optimizing the mill feed than expanding the plant. The key is leveraging high-grade material from the 8 Zone at depth and satellite deposits like Rowan to maximize margin. At 12 g/t, Rowan is nearly double the grade of the average reserve grade at Madsen. Blending in meaningfully higher-grade feed would have a bigger economic impact than higher throughput of lower grade.

"You bring in 12 grams [at Rowan], you bring in the 8 zone, you really get sweetened in grade. Grade makes a big difference."

West Red Lake is also excited about the potential of ore sorting to upgrade the mill feed and improve project economics. Ore sorting test work has demonstrated the ability to increase the grade from Rowan up to 15-17 g/t while reducing the material movement requirements. The quartz-hosted mineralization at Rowan is particularly amenable to sensor-based pre-concentration through sorting.

Market Confidence & Financial Strategy

With the PFS now complete, West Red Lake Gold will be focused on continuing to deliver and hit key milestones to build market confidence. Executing on the test mining and bulk sample programs are the next major de-risking events. CEO Williams believes that demonstration of execution is what will drive a re-rating of the WRLGM story.

"More people are becoming believers as we de-risk more and more...We know what we're doing. Now it's getting that confidence as we're de-risking."

Importantly, West Red Lake Gold has already secured the majority of the funding required to advance Madsen to production. The recently closed Nebari financing not only brought in $115 million of capital, but also represents a strong vote of confidence in the project and team. Nebari conducted extensive due diligence given challenges with other investments in the area. While risks remain, Nebari got comfortable with West Red Lake's risk mitigation plans and ability to deliver.

Investment Thesis for West Red Lake Gold Mines

• Proven high-grade gold mining district with exceptional geologic upside
• Low capital intensity and quick payback due to $450M of historical infrastructure investment
• High-margin operation with sub $1100/oz all-in sustaining costs driving projected 57% operating margins
• Near-term path to production in mid-2025 as one of few late-stage development assets globally
• Multiple levers to drive underground grade including ore sorting, 8-Zone expansion, and satellite deposits

West Red Lake Gold Mines presents a compelling investment case as a high-margin gold developer on the cusp of production in a world-class jurisdiction. With the majority of project capital already spent by previous operators, West Red Lake is benefitting from a substantially de-risked asset with exceptional infrastructure. The Madsen Mine is projected to deliver over $400 million of after-tax free cash flow during its initial mining phase based on the recently completed PFS.

Beyond the base case economics, the exploration upside and expansion potential is exciting. The confluence of high-grade ore sources at depth, nearby satellite deposits, and ore sorting technology provides multiple levers to drive grade and margin growth over time. WRLG's test mining and bulk sample programs in 2025 will be key de-risking milestones to validate the production plan and build market confidence.

"We're in a unique position with substantial infrastructure in place and minimal capital required to get into production. The focus is on targeting higher-grade feed sources to drive margin expansion over time. The combination of a high-grade resource base, operational readiness, and financial flexibility positions West Red Lake Gold Mines to deliver value in a capital efficient manner."

Macro Thematic Analysis

From a macro perspective, West Red Lake Gold is well positioned to capitalize on the constructive outlook for gold. With a global economic slowdown on the horizon and generational inflation yet to be tamed, gold's safe haven status is back in vogue. A weakening US dollar and declining real yields are providing strong tailwinds for the gold price after a challenging year in 2022.

New gold supply is dramatically lagging the industry's production profile from the last cycle. Years of underinvestment and a lack of new discoveries above 5 million ounces means the developed world is critically short of advancing gold projects. Of the limited number of feasibility-stage projects globally, many are struggling with inflationary pressures, declining grades, and ESG headwinds. This macro backdrop places a substantial scarcity premium on high-quality, late-stage development assets like West Red Lake.