Vancouver’s West Red Lake Gold Mines Ltd. (TSX-V: WRLG) (OTC: WRLGF) has signed an agreement to acquire Pure Gold Mining Inc. (NEX: PGM.H) and its Madsen mine in Red Lake, Ontario — the latter company’s flagship asset.
The Canadian companies announced the deal on Monday and West Red Lake will be providing Pure Gold with $6.5 million in cash, 28,460,000 common shares and a one per cent net smelter royalty on the Madsen gold project in exchange for all of Pure Gold’s issued and outstanding shares.
Pure Gold has been struggling financially in recent days; its current listing on the TSX Venture Exchange’s NEX Board indicates that it has fallen below the exchange’s listed standards. The company suspended activity at its flagship operation last October due to issues with adequate revenue and had to lay off 20 per cent of its workforce last April.
WRLG expects to emerge from the transaction well-capitalized and debt-free.
Shocking Firesale for Bankrupt Gold Miner
Frank Giustra’s West Red Lake Gold Mines (WRLG.V) is acquiring the Madsen gold mine in Red Lake, Ontario from Pure Gold Mining & Sprott Resource Lending for ~9% of its prior investment and ~2% of its Dec 2020 peak market cap. After the… pic.twitter.com/O6jIVuEhda
— Tommy Humphreys (@tommyhump) April 17, 2023
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Characteristics of the Madsen mine
The Madsen mine, Pure Gold’s flagship asset, reached a peak market capitalization of over $1.15 billion in 2021. The past-producing mine has had more than $350 million in historical investments.
The Madsen mine boasts existing infrastructure that includes an 800+ tonne per day mill, double ramp access, significant underground mine development, a 1,275-metre shaft, a tailings management facility, a water treatment facility and all-season access.
“The path forward involves defining a critical mass of high-grade reserves and resources, optimizing the project for sustainable cash flow and executing on the vision,” said Tom Meredith, Director and CEO of West Red Lake.
“This includes conducting infill drilling, resource expansion, regional exploration, underground development, restart planning, engineering studies, and maintaining a strong focus on operability, community benefits and investment in people and infrastructure,” he added.
Red Lake is one of the world’s most prolific mining districts with a history of over 30 million ounces of gold produced to date. It is surrounded by major producers such as Evolution Mining (ASX: EVN), Kinross Gold (TSX: K), and Barrick Gold (TSX: ABX).
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The Madsen Mine has a historical indicated mineral resource of approximately 1.7 million ounces of gold at 7.4 grams per tonne. This indicates a substantial amount of gold resources already identified and underscores the mine’s significant potential for further resource expansion through untested near-mine exploration target areas.
West Red Lake’s stock shot up substantially Monday by 42.86 per cent to $0.60 on the TSX Venture Exchange.
Pure Gold’s shares are currently worth $0.0125 on the TSX Venture Exchange’s Nex Board.