Categories: Precious Metals
Topics: General Precious Metals / Gold Stocks

West Red Lake (TSX-V: WRLG)(OTC: WRLGF) VP Gwen Preson on Moving Towards Production During a Gold Bull Market

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the Vice President of Communications for West Red Lake Gold Mines, Ms. Gwen Preston. Gwen, it's great to have you on. How are you today?

Gwen Preston: I'm great. Thanks for asking. How are you?

Gerardo Del Real: I am fantastic. We're in conference season. I'm pretty sure I will bump into you here over the next several days. I know you have been up and at it with West Red Lake, a lot going on. I thought it'd be a great time. You had some news here recently. And you've had great news release after great news release. You've had a great response to that news. But I thought maybe summarizing 2024 and then chatting a bit about what the team is looking to accomplish in 2025 was timely given the fact that we have gold at $2,715, inflation rampant, and looking to continue higher both on the gold price and the inflation side. Let's start with 2024.

Gwen Preston: Absolutely. No, for sure, this is the right time to have this conversation because 2024 for West Red Lake was really about getting a lot of work done. So we bought the Madsen Mine in 2023. We took the second half of that year when we owned the asset to figure out what were the things that we needed to do to get this mine that has all this incredible opportunity, lots of established infrastructure and a great resource. But what did we need to do to turn that into an economic reality to restart that mine? We figured that out in 2023.

2024, is when we really did the work. So we did 58,000 meters of definition drilling. So that's drill holes from underground into the known resource to tighten up that drill hole spacing from 20 meters down to 7 meters. And that really is the fundamental thing that we're doing. There's lots of other things that we layer on top, but the fundamental thing that we're doing that will mean that we can make Madsen a success when it stumbled prior, is that we're making sure we have a really accurate understanding of where the gold is.

We don't think that 20-meter spacing was close to enough for the kind of system that this is, an orogenic, high-grade, reasonably narrow vein gold system. So 58,000 meters of definition drilling that has put in our hands what we call an in situ mineable inventory. Those are the tonnes and the ounces that we plan to mine over the first 18 months of this mine life. That's drill defined, it's engineered, it's ready to go. Huge thrust of work there.

And then on top of that, there was a bunch of capital projects that we did. The two reasons that the prior operator failed at the Madsen Mine were not having a good enough understanding, an accurate enough understanding of where the gold was. So that's what we're doing with the definition drilling. They delivered poor head grade to the mill. And then the other side was that they had very high costs. And there was two real reasons why they had high costs.

One was a bunch of lack of appropriate protocols and operational readiness on site, so the site just didn't operate smoothly. But underneath that, that team Pure Gold, built the Madsen Mine on as tight a budget as they could. And by squeezing the capital, the build budget, what they did was not do several of the projects that would have made the Madsen Mine more efficient. So we spent 2024 doing those projects.

So one of those is a $10 million, 1.2 kilometer long tunnel that connects the two sides of the mine so that the fantastic new East Portal that Pure Gold built but never used can be used. We can use bigger trucks. We can have more efficient material movement. We don't have to dump and reload the ore. So a connection drift so that we can have more efficient material moving. I mean, mining is an earth moving operation. You got to move the tonnes efficiently.

Other capital projects, getting a tailing stand lift done, so that it isn't part of operating risk or requirement capital once we get up and running. Building a maintenance shop, so that we can attract good mechanics, because good mechanics mean that your equipment remains available, and if your equipment remains available, then you can mine. Building a camp. We're lucky that we can pull about 60% of our workforce. We have 150 people at site right now. 60% of them are local in the Red Lake area. Fantastic. Like a phenomenal place to tap a mining workforce from. But the other 40% are coming from outside and you need to be able to house those. And previously that was done by renting accommodations around Red Lake, which is expensive and difficult to manage. So we built a camp on site. We built a mine dry. These are really fundamental to setting up an efficient operation.

So know where the gold is, figure out good ways of mining the gold, and then set yourself up to be able to mine it efficiently and be operationally ready, not have that sort of chaos on site that existed previously, but practice what you're going to do. We're test mining right now. We're practicing the mining side of things. We established new procurement systems and logistics processes. We've done a bunch of the hiring. We've established who the leaders are at the mine site. That just takes time. You got to cycle through some that don't work out so well and bring in others and replace. These are all of the operational readiness factors that layer on top of the capital projects, that layer on top of the definition drilling. That's what we did in 2024.

Gerardo Del Real: Well, listen, that's a whole heck of a lot, and I know a lot of that work isn't as appreciated as it should be, but it's absolutely fundamental and critical to get as the prior operators do, right, to get that part right to set up for the part that we're going to get in 2025. I'd love to talk about the approach for 2025 and some of the goals that the company has set out, so that the shareholders and potential shareholders know what to expect. We have a booming gold market. I think that continues. I think it's going to actually accelerate. I think your timing is absolutely perfect, how the company's positioned. What comes next?

Gwen Preston: Yeah, for sure. A lot comes next. So we did the work. Now we have to make good on all of the things that the work set us up to do, which is mine and produce gold accurately, efficiently, and on schedule. So we just had some really big pieces of news. At the beginning of January, we announced the close of our 35 million US debt facility with Nebari. That's sort of the last piece of capital that puts us in good position to get this mine back up and running. And then we announced just last week, we announced our pre-feasibility study.

Now most of the time when companies announce pre-feasibility studies, they're like many, many, many years still to production. That's not our case. I mean, everything that we've done at the Madsen Mine site has been unusual. I mean, usually you do a sequential order, you define the resource, you do the PEA, you do more resource work, you do the pre-feasibility study and onwards. We're doing it all at the same time. We bought a mine that was built. It needed some work. We did the work while laying out the mine plan, but all of that happened at the same time. So now we're ready to turn on the mine and we're just now issuing the study for that mine, which is fine.

So the study gets out there, I'd say, pre-feasibility plus, in that all of the costs that are in that, there's almost no guesswork in those costs, right? We've been underground operating for 16 months. So the costs for moving a tonne of material, blasting it and moving it, we know exactly what those costs are because we do it every single day. There's no outstanding engineering questions. In fact, the place is already built. There's no outstanding capital cost questions.

So it's a really thorough, and I suggest accurate pre-feasibility study. It is also a very conservative pre-feasibility study. So SRK who did the study, they're the independent group that did the study, they used a very, very conservative gold price when they were determining what part of our 1.7 million ounces of resource, what part of that is economic to mine? The gold price that they used, if you can believe it, was $1,680 US.

Gerardo Del Real: It's pretty damn conservative.

Gwen Preston: Right. Yes, that's the word that I'm going to go with, conservative. So that kind of reverberated through the study. It means that the areas that we're mining are quite narrow. This study, it means our costs are a little bit higher than we expected in this study because that's what a really high cutoff does. It excludes the three and four gram material. That $1,680 gold price, reserve cutoff translates into about a five gram per tonne cutoff. Anything that was lower than five grams per tonne didn't make it into this official mine plan.

But in practice, on site, we're developing a mine plan, our internal mine plan, what we're actually going to do, it's more like almost three gram cutoff. That's a big difference, especially when a lot of the veins that we're mining have halos around them that are three and four gram material. So in practice, we expect to mine quite a bit more tonnage than made it into this mine plan. The head grade will come down a little bit by including some of those lower grade tonnes. But I think the cost will also come down too because we'll mine wider width, which means we will be able to use more of the lower cost mining method versus the higher cost that ended up more in the study because of that reserve cutoff price. More of the resource will come in, so we won't need as much tunneling to get to different areas, because areas along the way are actually economic to mine.

So the study is super conservative. It still generated strongly positive results. $315 million net present value, 255% internal rate of return, $70 million in annual free cash flow over the six year mine life. So even with the super conservatism, it validates that it makes a lot of sense to start this mine right now. But there's a huge amount of upside. The reason that we're doing this mine is because it makes sense now, but also because we see a lot more. We're going to do a lot more at Madsen and we believe at lower cost than this study captures.

So now we just have to do that. We put the study out, we put the money in the bank, we're test mining right now, establishing a bulk sample on surface. The results of that bulk sample, we're going to run that bulk sample through our mill in March. When we put out the results of that at the beginning of April, that should matter because the previous operator couldn't mine the grades that they said they were going to mine. This bulk sample is our opportunity to demonstrate that we can. That the definition drilling and our approach to mining means that we can deliver the head grades.

So that's another big market moment is going to come in the beginning of April. And then we're going to just roll into production mining so that by June we're just producing gold. And then we ramp up from a smaller initial throughput up to our 800 tonnes per day towards the end of the year. So it's an execution year, and there's not very many gold mines going into production this year, especially owned by smaller companies where you should get the leverage where that re-rating should be the most apparent.

Gerardo Del Real: Well, and it goes without saying obviously, but it's worth highlighting in these interesting times that we live in, that the jurisdictional advantage that the company has should not be discounted or taken for granted, right?

Gwen Preston: Yes, for sure. I mean, permits are in place, which is a really important... There's no permitting risk in this study. We have good relations with all of our stakeholders. We're in a community that started with mining and thrived on mining. There are multiple mines in the area, more being built all the time. I mean, Red Lake has produced 30 million ounces of gold from very high grade resources. They've really established precedence for our expectation that we're going to be mining at Madsen with six or seven years of defined reserve for the next 30 years. Because we're just going to keep moving down plunge with this ore body and it's going to continue at depth because that's what the other mines do. I mean, our resource right now goes to about 1,200 meters depth. The mines right next door, mines at 3,000 meters easily. So there's lots of reason why that sort of jurisdictional premium, it's a deserved thing.

Gerardo Del Real: No, listen, I think obviously the team's excited. You're excited. There's a lot of upside there that's left on the table in the study, and so I'm glad that you were able to highlight that and kind of explain how you plan on unlocking that value. Look forward to having you back on as always, Gwen. Thank you so much for making time.

Gwen Preston: Thank you so much for having me. I hope we run into each other in the next few days.

Gerardo Del Real: Absolutely. Absolutely. We'll chat soon and see you soon.

Gwen Preston: Bye-bye.

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