West Red Lake Gold Mines Ltd. (WRLG:TSX.V; WRLGF:OTCQB; FRA:UJO) restarted the past-producing mine at its Madsen project in Red Lake, Ontario ahead of its mid-2025 target, Taylor Combaluzier, Red Cloud Securities vice president and mining analyst, reported in a May 23 research note.
"Madsen has a high-grade resource, existing infrastructure, deposit and mill expansion potential, the potential for further cost savings and now the opportunity for near-term free cash flow," Combaluzier wrote.
198% Uplift Possible
The gold miner's share price was CA$0.84 at the time of Combaluzier's report, he noted. In comparison, Red Cloud's target price on West Red Lake Gold is CA$2.50 per share, implying a potential return of 198%.
"The mine restart should help continue to drive momentum for the stock, particularly given that [the company] has rectified numerous issues that the previous operator faced," the anayst wrote.
West Red Lake Gold remains a Buy.
Strong But Improvable Economics
Madsen has attractive economics, and they could be even better, Combaluzier highlighted as a major reason West Red Lake Gold's stock is compelling. According to the prefeasibility study (PFS), the project is to generate a CA$315 million (CA$315M) net present value discounted at 5%, a 255% internal rate of return and a less than one year payback period, at a US$2,000 per ounce (US$2,000/oz) gold price.
The PFS has Madsen producing 67,600 ounces (67.6 Koz) of gold per day over a 7.25-year life of mine (LOM). Mill throughput is 800 tons per day (800 tpd) at an average 8.16 grams per ton (8.16 g/t) gold LOM head grade. The cash cost is US$919/oz, and the all-in sustaining cost is US$1,681/oz.
Higher gold prices would translate into better project economics, noted the analyst. At US$3,300/oz gold, for example, lower grade mineralization could be mined profitably if it surrounds high-grade tons, noted Combaluzier. This configuration would allow for larger stope designs that in turn would reduce cost because long hole stoping could be used instead of the more expensive mechanized cut and fill method.
Additional drilling in undertested area could improve Madsen's economics, too, noted the analyst, by potentially extending mineralization in known reserve areas and converting new resources to reserves. This ultimately could reduce development for access and extend the LOM.
Further, West Red Lake could capitalize on the existing satellite deposit Rowan to provide additional feed for the Madsen mill, capitalizing on its capacity to achieve maximal throughput. Rowan has an Indicated and Inferred resource of 312 Koz of 10.97 g/t gold, and the deposit remains open in all directions. It is within trucking distance of Madsen.
"Rowan could be one of the first deposits used in a potential future hub and spoke model," wrote Combaluzier. "We expect [the company] to leverage Madsen's processing facilities."
Unlike the previous operator, whose mining practices led to increased dilution and ore loss, West Red Lake Gold's approach is one of efficiency, noted the analyst. For instance, the company purchased instead of leasing mining equipment. It increased its investment in underground development. It plans to mine higher-grade areas early in the LOM.
What to Watch For
According to Combaluzier, the Canadian gold producer has three notable catalysts on the horizon. One is release of infill and regional drill results from Madsen, on an ongoing basis.
Another is ramp-up of the Madsen operation, slated for H2/25 after mining and processing an average of 500 tpd for the first two months. The third possible stock-moving event is commercial production, expected in Q4/25.
Stock Data
At the time of Combaluzier's report, he indicated that West Red Lake Gold had 343.2 million (343.2M) basic shares outstanding and 540.6M diluted shares outstanding. Its market cap was CA$288.3M. Its 52-week range was CA$0.52–0.87 per share.
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Important Disclosures:
- West Red Lake Gold Mines Inc. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000.
- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of West Red Lake Gold Mines Inc.
- Steve Sobek wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor/employee.
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