/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE
SERVICES OR DISSEMINATION IN THE UNITED
STATES/
VANCOUVER, BC, April 17,
2023 /CNW/ - West Red Lake Gold Mines
Ltd. ("West Red
Lake" or "WRLG") (TSXV: WRLG) (OTC: WRLGF) is
pleased to announce that it has entered into a binding letter
agreement with Pure Gold Mining Inc. ("Pure Gold") and
Sprott Resource Lending Corp. ("Sprott") to acquire the
Madsen Gold mine and associated land package (the "Madsen Mine" or
"Madsen") through the acquisition of all of the issued and
outstanding shares of Pure Gold (the "Acquisition"), subject
to approval of the British Columbia Supreme Court in Pure Gold's
ongoing proceedings pursuant to the Companies Creditors
Arrangement Act (the "CCAA Proceedings"). WRLG has
agreed to pay $6.5 million in cash,
issue 28,460,000 common shares and grant a 1.0% secured Net Smelter
Royalty ("NSR") on the Madsen Mine as consideration for the
Acquisition, as well as make up to US$10.0
million in deferred consideration payments. The share and
NSR consideration is expected to accrue to Sprott as a fund managed
by Sprott is the senior secured lender to Pure Gold. In conjunction
with the Acquisition, WRLG has entered into an engagement letter
with Canaccord Genuity in respect of a "bought-deal" private
placement of subscription receipts for gross proceeds of
$20,000,050 and an underwriter's
option of $5,000,100. Following the
transaction, WRLG will become a leading, debt-free, and
well-capitalized explorer and developer of high-grade gold in the
historic Red Lake gold camp.
Madsen Mine Highlights
- As a flagship asset, the Madsen Mine commanded a peak market
capitalization of >$1.15 billion
in 2021
- Madsen is a past-producing
mine that has benefited from >$350M historical investment
- Brownfields site with permits to restart production,
existing infrastructure including a 800+ tonne per day mill, double
ramp access, significant underground mine development, 1,275 metre
shaft, tailings management facility, water treatment facility,
all-season access and nearby workforce
- Historical Indicated Mineral Resources* of approximately 1.7
million oz Au @ 7.4 g/t and Historical Inferred Mineral Resources*
of approximately 0.4 million oz Au @ 6.3 g/t . (See Table 1
below for information on the date and source of the historical
estimates.)
- Located in Red Lake, one of
the world's most prolific mining districts with >30Moz of gold
produced to date. Madsen is
strategically surrounded by major producers Evolution Mining
(ASX:EVN), Kinross Gold (TSX:K) and
Barrick Gold (TSX:ABX)
- Opportunities to expand existing Mineral Resource inventory
with multiple untested near-mine exploration target areas
- Significant exploration potential along the regional
structures controlling mineralization
Benefits to WRLG
Shareholders
- Post transaction WRLG emerges debt-free and well
capitalized.
- $59.4M post money
valuation.
- $19.9M in treasury
- Robust mineral inventory with historical resource of
~1.7M oz Au Indicated* and ~0.4M oz Au Inferred* at Madsen
Mine, and a current mineral resource of 0.8M oz Au Inferred at Rowan
- 80 Km2 strategically located combined land
package in the heart of the Red
Lake District
- Further strengthened shareholder registry with significant
institutional ownership
- Improved capital markets profile and access to further
capital
*These are historical estimates and WRLG is not treating these
as current mineral resources as no qualified person retained by
WRLG has done sufficient work to classify the historical estimate
as a current mineral resource. See Table 1 below for
information on the source and date of the historical estimates.
Following closing of the Transaction WRLG intends to update the
resource calculation to become NI 43-101 compliant, taking into
account, among other matters, material that has been mined since
December 31, 2021.
Tom Meredith, CEO and Director of
WRLG, stated, "The acquisition of the Madsen Mine is a major step,
and positions us as a leader in Red
Lake gold exploration and development. This transaction is
highly accretive to WRLG shareholders. 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. 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. With a wealth of targets near the Madsen Mine,
alongside regional prospects and those within our existing Rowan
Project, we are confident that the brightest days for our
consolidated portfolio are just ahead."
Mining investor Frank Giustra,
who owns 18.1% of WRLG shares and has committed to lead the
proposed Financing, commented, "I am proud to be supporting the
company that continues the work of past generations at the Madsen
Mine. The acquisition appeals to me due to its high-grade
resources, modern infrastructure, potential, and strategic
location. I look forward to contributing to the company's growth
and energizing this iconic Canadian gold camp for future
generations."
Transaction Details
The Acquisition will be completed pursuant to a reverse vesting
order obtained in the CCAA Proceedings. WRLG has agreed to
pay $6.5 million in cash, issue
28,460,000 common shares and grant a 1.0% secured NSR on the Madsen
Mine in consideration of the Acquisition. The share and royalty
consideration is expected to accrue to Sprott as a fund managed by
Sprott is the senior secured lender to Pure Gold. In addition, up
to US$10.0 million in deferred
consideration is payable upon a change of control of WRLG and WRLG
has the right to pay down any part of the deferred consideration
prior to any change of control of WRLG. Sprott shall have the
right to nominate and appoint a director to WRLG's board, as long
as Sprott or an affiliates owns 15% or more of the issued and
outstanding shares of WRLG. Upon closing of the Acquisition and the
concurrent financing, it is anticipated that Sprott will own
approximately 24% of the outstanding shares of the Company. Sprott
may, at its election, convert such portion of the US$10 million deferred consideration into WRLG
common shares as is necessary to maintain such interest, upon
completion of any future equity , merger, acquisition or other
corporate transaction. Sprott has advised WRLG of its intention to
convert a sufficient portion of the deferred consideration to
maintain its 24% interest following the currently contemplated
financings. Maintaining such interest assuming the completion of
$25.6 million in financings would
require issuance of up to 12,270,677 WRLG common shares to Sprott
at $0.35 per share, which would
result in a reduction in the deferred consideration amount by
$4,294,737.
Closing of the Acquisition is subject to various conditions
precedent including receipt of all required regulatory approvals
including the approval of the TSX Venture Exchange, receipt of the
reverse vesting order from the Supreme Court of British Columbia and the parties entering into
a definitive agreement for the Acquisition by no later than
May 1, 2023.
Pursuant to the binding letter agreement referenced above
Frank Giustra and a group of
associates agreed to guarantee the initial $6.5 million cash payment for the Acquisition and
in consideration for that guarantee will receive warrants to
purchase 3,750,000 shares of WRLG exercisable at $0.42 per share for five years. Fiore Management
and Advisory Corp. has acted as advisor in connection with the
Transaction and will receive 5% in advisory fees.
Concurrent Financing
In connection with the Acquisition, WRLG has entered into a
"bought deal" engagement letter with Canaccord Genuity Corp. (the
"Underwriter") for a private placement of 57,143,000
subscription receipts (the "Subscription Receipts") at a
price of $0.35 per Subscription
Receipt for aggregate gross proceeds of $20,000,050 (the "Offering"). The
Underwriter has been granted an option to sell up to an additional
14,286,000 Subscription Receipts for additional gross proceeds of
$5,000,100. Closing of the Offering
is expected to occur on or before May 9,
2023, with the gross proceeds from the Offering to be placed
into escrow pending satisfaction of certain escrow release
conditions, including satisfaction of all conditions to completion
of the Acquisition. Upon the escrow release conditions being met,
each Subscription Receipt will automatically convert, for no
additional consideration, into one common share of WRLG. In the
event that the escrow release conditions are not satisfied within
90 days of the closing of the Offering, the proceeds of the
Offering will be returned to the holders of the Subscription
Receipts and the Subscription Receipts will be cancelled.
The net proceeds from sale of the Subscription Receipts will be
used to satisfy the initial cash consideration payable in
connection with the Acquisition and for working capital
purposes.
WRLG has also agreed to complete a non brokered private
placement of $600,000 of flow through
shares to Frank Giustra at a price
of $0.35 share.
Mr. Giustra owns 18.1% of WRLG's outstanding shares and as such
is a related party pursuant to MI 61-101, Protection of Minority
Security Holders in Special Transactions ("MI 61-101"). It is also
expected that other related parties of WRLG will participate in the
Offering. Participation by Mr. Giustra and other related parties in
the concurrent private placements constitute a related party
transaction as defined under MI 61-101. However, such participation
is exempt from the formal valuation and minority shareholder
approval requirements of MI 61-101 as neither the fair market value
of the shares subscribed for, nor the consideration paid for the
shares, exceeds 25% of the Company's market capitalization.
The securities issued in connection with the Offering (including
the common shares issuable on the conversion of the Subscription
Receipts) and the non-brokered private placement are subject to TSX
Venture Exchange approval and all securities will be subject to a
four-month statutory hold period following the closing of the
Offering.
Madsen Property
In September 2022, SRK Consulting
(Canada) Inc. ("SRK") prepared a
resource estimate for Madsen (see
below). WRLG is not treating this estimate as a current mineral
resource as no qualified person retained by WRLG has done
sufficient work to classify the historical estimate as a current
mineral resource. Following closing of the Transaction WRLG intends
to update the resource calculation to become NI 43-101 compliant,
taking into account, among other matters, material that has been
mined since December 31, 2021.
Table 1: August 2022
Madsen Resources Estimate (prepared by SRK)
Classification
|
Deposit -
Zone
|
Tonnes
|
Gold
Grade
(g/t)
|
Gold
Troy
Ounces
|
Indicated
|
Madsen -
Austin
|
4,147,000
|
6.9
|
914,200
|
Madsen - South
Austin
|
1,696,000
|
8.7
|
474,600
|
Madsen -
McVeigh
|
388,700
|
6.4
|
79,800
|
Madsen - 8
Zone
|
152,000
|
18.0
|
87,700
|
Fork
|
123,800
|
5.3
|
20,900
|
Russet
|
88,700
|
6.9
|
19,700
|
Wedge
|
313,700
|
5.6
|
56,100
|
Total
Indicated
|
6,909,900
|
7.4
|
1,653,000
|
Inferred
|
Madsen -
Austin
|
504,800
|
6.5
|
104,900
|
Madsen - South
Austin
|
114,100
|
8.7
|
31,800
|
Madsen -
McVeigh
|
64,600
|
6.9
|
14,300
|
Madsen - 8
Zone
|
38,700
|
14.6
|
18,200
|
Fork
|
298,200
|
5.2
|
49,500
|
Russet
|
367,800
|
5.8
|
68,800
|
Wedge
|
431,100
|
5.7
|
78,700
|
Total
Inferred
|
1,819,300
|
6.3
|
366,200
|
The historical resource estimate referenced above in Table 1 and
elsewhere in this news release is contained in an independent
technical report entitled "Independent NI 43-101 Technical Report
and Updated Mineral Resource Estimate for the Pure Gold Mine,
Canada" with an effective date of
December 31, 2021 and a signature
date of September 23, 2022 prepared
by SRK for Pure Gold Mining Inc. A full copy of the report is
available on Pure Gold's SEDAR site with a filing date of
September 23, 2022. WLRG is not
treating these estimates as current mineral resources as no
qualified person retained by WRLG has done sufficient work to
classify the historical estimate as current mineral resources.
Rowan Property
WRLG's Rowan Property presently hosts a National Instrument
43-101 ("NI 43-101") inferred mineral resource of 2,790,700 tonnes
("t") at an average grade of 9.2 grams per tonne Au ("g/t Au")
containing 827,462 ounces of gold with a cut-off grade of 3.8 g/t
Au (NI 43-101 Technical Report authored by John Kita, P.Eng., filed December 31, 2022). The inferred resource is
located in the area of the historic underground Rowan Mine site and
situated within a 1.8 kilometer ("km") strike length portion of the
regional scale Pipestone Bay St Paul Deformation Zone.
The technical information presented in this news release has
been reviewed and approved by Will
Robinson, P.Geo., Vice President of Exploration for WRLG and
the Qualified Person for exploration at the West Red Lake Project,
as defined by National Instrument 43-101 "Standards of Disclosure
for Mineral Projects".
ABOUT WEST RED LAKE GOLD MINES LTD.
WRLG is a mineral exploration company that is publicly traded
and dedicated to creating value for its shareholders by discovering
new gold mines in the highly productive Red Lake Gold District of
Northwest Ontario, Canada. This
district has yielded 30 million ounces of gold from high-grade
zones and hosts some of the world's richest gold deposits. WRLG
holds an extensive property position spanning 3,100 hectares in
West Red Lake, including three
former gold mines - Rowan, Mount Jamie, and Red Summit. The West
Red Lake Project covers a 12-km strike length along the Pipestone
Bay St. Paul Deformation Zone and WRLG plans to continue exploring
this property along strike and to depth in 2023.
ON BEHALF OF WEST RED LAKE
GOLD MINES LTD.
"Tom Meredith"
Tom Meredith
Chief Executive Officer
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Certain statements contained in this news release constitute
"forward-looking statements". These forward-looking statements
include statements in respect closing of the Acquisition and the
Offering, satisfaction of the escrow release conditions, and use of
proceeds of the Offering. When used in this document, the words
"anticipated", "expect", "estimated", "forecast", "planned", and
similar expressions are intended to identify forward-looking
statements or information. These statements are based on current
expectations of management, however, they are subject to known and
unknown risks, uncertainties and other factors that may cause
actual results to differ materially from the forward-looking
statements in this news release. Readers are cautioned not to place
undue reliance on these statements. West Red Lake Gold Mines Ltd.
does not undertake any obligation to revise or update any forward-
looking statements as a result of new information, future events or
otherwise after the date hereof, except as required by securities
laws.
SOURCE West Red Lake Gold Mines Ltd.