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Will Ontario’s New Gold Mine Ramp-Up Revolutionize Production Profits?
In the latest gold news, West Red Lake Gold Mines Ltd. (WRLG:TSX.V; WRLGF:OTCQB; FRA:UJO) is making headlines as it resumes production at its Madsen mine in Red Lake, Ontario. The company officially restarted operations in May, and recent updates indicate significant progress towards commercial production targets, as highlighted by Red Cloud Analyst Taylor Combaluzier.
The third-quarter update released on October 8 shows that West Red Lake has made considerable strides since acquiring the Madsen asset in 2023. The firm is not only ramping up production but is also poised to capitalize on the favorable gold price environment, which analysts believe will enhance profitability moving forward.
Path to Targeted Output
During the latest quarter, the Madsen mine processed an impressive 35,700 tonnes of ore with an average gold grade of 5.4 grams per tonne (g/t Au). This effort yielded 7,055 ounces of gold, with an average realized sale price of US$3,456 per ounce, contributing to gross proceeds of CA$33 million. Notably, gold production increased by 34% quarter-over-quarter, demonstrating the mine’s potential for growth.
Analysts project that Madsen will reach its targeted output levels by early 2026. The company is focused on effective waste management to enhance ore movement capabilities, a key factor in optimizing production workflow. By storing waste rock underground, the mine can redirect trucking capacity from waste haulage to ore haulage, which is expected to significantly benefit production efficiency.
Ore Movement Plans
Looking ahead, West Red Lake plans to begin transporting 350 tonnes of ore per day up the shaft. While the installation of necessary components is still in progress and scheduled for completion in November, the company is already testing the mill for higher throughput rates. Since August, the mill has focused exclusively on processing directly mined ore, which indicates a shift towards increased operational efficiency.
Sill development has played a crucial role in contributing 25% to 30% of milled tonnage during the third quarter, exceeding expectations in terms of grade. The consistency between modeled and actual grades has remained robust, further validating the company’s operational capabilities.
Additional Funding Secured
In September, West Red Lake successfully closed a CA$41 million bought deal offering, issuing 37.5 million common shares at CA$0.95 each, along with 3.8 million charity flow-through shares at CA$1.33 per share. The net proceeds from this financing will be utilized to advance the Madsen gold mine, pursue growth opportunities, and support general corporate purposes, including ongoing work at the Rowan project.
Emerging Gold Producer
Following a successful restart of operations ahead of schedule, WRLG continues to ramp up production activities. The Preliminary Feasibility Study (PFS) suggests an average head grade of 8.16 g/t Au, estimating approximately 67,600 ounces of annual production over a 7.25-year mine life. With gold prices projected at US$2,200 per ounce, the Madsen project is expected to generate an after-tax NPV5% of US$315 million, an impressive IRR of 255%, and a payback period of less than one year.
Despite recent dilution from the CA$41 million equity financing, the analyst maintains a BUY rating while slightly adjusting the target price to C$2.30 per share. The adjustment is based on a discounted cash flow model of both the Madsen and Rowan projects, with a post-financing NAVPS5% of CA$3.04, applying a 0.75x multiple.
Upcoming catalysts for West Red Lake include ongoing infill and regional drilling assays, the ramp-up of the Madsen mine, and the anticipated shift to commercial production in the fourth quarter of 2025.
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Important Disclosures:
West Red Lake Gold Mines Ltd. is a sponsor of Streetwise Reports and compensates them monthly. Additionally, some employees of Streetwise Reports LLC hold securities of West Red Lake Gold Mines Ltd. This content is for informational purposes only and should not be construed as investment advice.
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