West Red Lake Gold stock – Madsen mine – Red Lake mining district
In today’s video presentation we looked at West Red Lake Gold Mines (TSX-V: WRLG) (OTC: WRLGF). Bob Moriarty mentioned this company in a video interview on the 10th of September, 2024 where the interviewer was focused on undervalued Gold mining stocks.
It is important to note that Bob was not recommending this stock for Investment, nor am I. He simply mentioned the company in response to the interviewer’s question about currently undervalued mining companies. Based on Bob’s reference to the company I chose to perform my own due diligence and share my findings with you.
As always, you and only you are responsible for the Investment decisions you make with your hard-earned money.
WRLG Company highlights
- A fully permitted, emerging Gold producer targeting production in H2 2025
- Bought the Madsen mine and mill for a little over 10 cents on Dollar – the mine and mill had $350 million CAD in recent Investments and WRLG paid $42 million CAD for both
- The mine and mill were in production between 2020 and 2022 so the project has been significantly derisked
- The mill was constructed and commissioned in 2020
- The mill is currently rated at 800 tons per day with potential for expansion to 1,500 tpd with modest Investment – current permits allow for expansion to 1,089 tpd
- There are high-grade drill results at both shallow and deep depths
- Evolution Mining (previously Goldcore) is operating nearby and that company is extracting high-grade ore at a depth of 3,000 meters
- The Madsen mine has only been developed to 1,275 meters so it is reasonable to assume that there could be resources down to 3,000 meters like its neighbors
- WRLG has 100% ownership of the Rowan property which is less than 20 kms (12 miles) from the Madsen mine – this property includes three past producing mines – ore from the Rowan property could be economically hauled to the Madsen mill for processing
- Based on Technical Reports (NI 43-101) prepared in 2024, Red Lake Gold Mines has 1.65 million ounces of Indicated Gold resources at the Madsen mine and an additional 195.7 thousand ounces of Indicated Gold resources at the Rowan property
- WRLG has all necessary infrastructure in place to begin production: water, hydroelectric power from the national grid, easy access to paved highways, and experienced mining personnel from the nearby city of Red Lake
- The company is currently valued as a developer, when it could realistically be valued as an emerging producer – this point is demonstrated in slide 22 of the company’s Investor Presentation which is available on their website
- Able to obtain financing based on future Gold production instead of taking on debt or issuing additional shares of stock – these Gold-linked Notes and Warrants yield 12% interest to investors and will be paid off from Gold production starting in 2026
- WRLG is learning from the past operator’s mistakes – for example, while cleaning up the mill and processing plant, the company discovered locations in the processing circuits where Gold was getting stuck – they recovered 415 troy ounces of Gold from this cleanup effort which resulted in $750,000 CAD revenue – the company is addressing these inefficiencies in the processing plant
- The company poured its first Gold bar from Gold recovered during the mill cleanup process – besides accomplishing an important milestone, this Gold pour demonstrated that the on-site refinery is still operational after an 18-month period of sitting idle
- The existing tailings pond is being expanded to allow for 10-years of production at the 800 tpd rate
- Tightly spaced definition drilling is currently reducing hole spacing from 20 meters to 6 meters prior to defining a mine plan – this drill program will increase efficiency by allowing WRLG to focus on high grade ore while minimizing the amount of low-grade ore sent through the crusher and processing plant
- Test mining is being performed as part of developing the production mine plan – this preliminary mining is also creating a stockpile of ore to be processed in 2025
- A 1,200 meter connection drift is being created to connect the East and West mine portals at the Madsen mine – this will increase the efficiency of hauling ore and waste while also improving ventilation and safety
Capital Structure
Based on slide 29 in the Investor Presentation we find these numbers:
- 270.5 million shares issued & outstanding
- 395 million fully diluted shares outstanding
- $25 million CAD cash on hand
(information above as of September 5, 2024)
Also shown on slide 29 is a breakdown of outstanding warrants with the strike prices and expiry dates.
Given the strike prices of the warrants and the expectation that WRLG is going into production before the warrants expire, it is my opinion that all of them will be exercised. This will result in the 395 million outstanding shares as shown above.
Using the closing price of $0.78 CAD for WRLG on 09/06/2024, we can determine these values for the company’s market capitalization:
- $211 million CAD based on shares issued & outstanding
- $308 million CAD fully diluted
When I first looked at the number of fully diluted shares outstanding (395M), I was disappointed. West Red Lake Gold Mines has so much going for it I was hoping to find that it was also tightly held with a minimal number of shares issued.
My disappointment was somewhat abated after I calculated the market cap using the fully diluted number of shares. Although 395M is a lot of shares, a market cap of $308 million CAD is not excessive for an emerging producer in my opinion.
The rule of thumb I use is that a market cap of $300 million US is fully-valued for an exploration company. $300M US is $407M CAD so WRLG is well under my threshold and, on top of that, the company is an emerging producer not an exploration company. Again, this supports my opinion that the company is currently undervalued.
West Red Lake Gold stock charts
In the video we look at charts of WRLG in both the US over-the-counter market and the Canadian TSX-V market. Both charts show that price broke above a resistance zone on Friday. MACD is in Bull mode suggesting that the primary trend is upwards, and Stochastics is elevated suggesting that WRLG and WRLGF stock has plenty of energy to head higher.
Wrapup
West Red Lake Gold Mines (TSX-V: WRLG) (OTC: WRLGF) is an interesting emerging Gold producer. Given the current environment of rising Gold prices, the company’s planned production start in H2 2025 could catapult the stock price higher.
Investors love a good story so a solid company starting production during a Bull Market could attract more attention than would otherwise occur. Fortunately, WRLG appears to have the fundamentals needed for success, even if investors get carried away and temporarily overvalue the company’s stock price.
Disclosure
At the time the video presentation was recorded and published, I did not have a position in West Red Lake Gold Mines. I did, however, take a small position on the open Monday morning (09/16/2024). As always, I may buy or sell shares in the company without notifying anyone before doing so.
Disclaimer
I cannot and do not give financial recommendations and I am not recommending that anyone invest in this stock. I am simply doing my own due diligence and deciding if I want to invest in this company. I am sharing the information with you to help you do your own due diligence. Please perform your own due diligence before putting your hard-earned money at risk.
