Red Lake Gold Producer Lifts Output 51% as Madsen Mill Ramp Targets 1,000 tpd
Research Report

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Disclosures for Cantor Fitzgerald, West Red Lake Gold Mines Ltd., August 28, 2026

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On August 28, 2026, Matthew O'Keefe of Cantor Fitzgerald Canada reiterated a Buy rating and CA$2.20 price target on West Red Lake Gold Mines Ltd. (WRLG:TSX.V; WRLGF:OTCQX; UJ0:FSE), implying a 134% return from the August 27, 2026 closing price of CA$0.94, following second-quarter results that showed the Madsen Mine ramp-up gathering pace, with gold production up 51% quarter-over-quarter and unit costs falling sharply.

Q2/2026 Operating Results

The Madsen Mine produced 8,576 ounces of gold in the quarter and sold 8,260 ounces, a 34% sequential increase. Mining activity accelerated, with 75,524 tonnes mined at 4.3 g/t gold, lifting mined ounces 73% quarter-over-quarter to 10,459 ounces. Mill throughput averaged 842 tonnes per day, up 47% sequentially, at roughly 95% recovery.

Because mining rates outpaced the mill, the company built a surface ore stockpile of approximately 10,768 tonnes by quarter-end, which O'Keefe views as providing operational flexibility as the ramp-up continues through the second half of 2026. Processing rates are expected to rise to about 1,000 tonnes per day in H2/26.

Q2/2026 Financial Results

An average realized gold price of US$4,288 per ounce drove revenue of CA$49.0 million and income from mining operations of CA$20.1 million, up 31% quarter-over-quarter and equating to a 41% operating margin versus 37% in Q1/26. Operating income was CA$15.0 million after general and administrative expenses of CA$3.2 million, share-based compensation of CA$1.6 million, and exploration expenses of CA$0.3 million.

Reported net income was CA$14.7 million, boosted by a CA$4.5 million fair value gain on the company's gold-linked notes; adjusting for that and other items, adjusted net earnings were CA$12.6 million, or CA$0.03 per share. Capital expenditures totaled roughly CA$18.6 million, driven mainly by mine development at Madsen.

Free cash flow swung to a positive CA$9.7 million from negative CA$6.1 million in Q1/26. Cash stood at CA$31.2 million at quarter-end, down from CA$35.9 million at the end of Q1/26, reflecting CA$6.3 million of growth capital directed to the Fork Deposit access drift and Phase II shaft refurbishment.

2026 Guidance Unchanged

Guidance introduced in April 2026 for production of 35,000 to 45,000 ounces of gold, cash costs of US$2,400 to US$3,100 per ounce, and AISC of US$2,800 to US$3,600 per ounce is unchanged. Q2/26 cash costs of US$2,000 per ounce came in below the low end of guidance, and AISC of US$3,284 per ounce landed mid-range, both down 23% and 30% sequentially, which O'Keefe describes as a marked step up from the development-heavy, limited-mining-front conditions that kept Q1/26 costs elevated.

With first-half production of 14,243 ounces tracking within the full-year range, the analyst sees the company "on track to meet full-year guidance, with output still weighted to H2/26" as throughput ramps.

Shaft Development

Earlier in August, West Red Lake Gold completed Phase One of the Madsen Mine Shaft refurbishment program, demonstrating the ability to safely hoist ore and waste via the existing shaft at approximately 200 tonnes per day. Phase Two, targeted for H2 2027, involves hoist and skip upgrades and is expected to support roughly 700 tonnes per day, while Phase Three, targeted for H2 2028, is designed for a steady-state configuration of about 2,000 tonnes per day. All major Phase Two equipment is on site with installation underway.

Phases One and Two reach Level 10 at approximately 500 meters depth, allowing hoisting from the active Austin and South Austin mining complexes, while Phase Three would support haulage from deeper in the mine, potentially at Level 17.

Catalysts and Risks

Near-term catalysts include continued mine development, rising throughput toward 1,000 tonnes per day, progress on the access ramp to the high-grade Fork deposit, and additional assay results from Starratt Olsen drilling and the 904 complex. An updated pre-feasibility study combining Madsen and Rowan is on track for the latter half of September 2026.

Execution remains tied to the ramp-up itself: the company continues to depend on non-sustaining capital for the Fork access drift and shaft refurbishment, carries CA$84.6 million of debt against CA$31.2 million of cash, and its full-year output is weighted to the second half, leaving guidance dependent on throughput and grade improvements still to be delivered.

Valuation and Outlook

Incorporating the quarter had no material impact on Cantor's model. O'Keefe continues to value the company on an equally weighted 0.6x NAV and 6.0x 2027 estimated CFPS basis, yielding the unchanged CA$2.20 per fully diluted share target.

"We expect WRLG's valuation multiples to expand as the company establishes and meets its production and cost guidance over the course of 2026 and 2027," he wrote.

West Red Lake Gold carries a market capitalization of CA$389.6 million, 414.5 million basic shares outstanding, and 554.4 million fully diluted shares, and trades at 0.41x P/NAV within a 52-week range of CA$0.59 to CA$1.49. Company-wide attributable resources total 10,046 kt at 8.11 g/t for 2,618 koz of gold on a measured, indicated, and inferred basis, including probable reserves of 1,823 kt at 8.16 g/t for 478 koz.