WEST Red Lake GOLD Mines Ltd. to Acquire Madsen GOLD MINE IN Transformative Transaction
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NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES
WEST RED LAKE GOLD MINES LTD. TO ACQUIRE MADSEN
GOLD MINE IN TRANSFORMATIVE TRANSACTION
April 17, 2023
Vancouver, British Columbia – 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 a n engagement letter with Canaccord Genu ity 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.)
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• 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 operabilit y,
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."
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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 o f 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 financing s 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 receiv e 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 Subs cription Receipt for aggregate gross
proceeds of $20,000,050 (the “Offering”). The Underwriter has been granted a n 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
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90 days of the closing of t he 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 h as been mined since
December 31, 2021.
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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, Canad a” 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.
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Figure 1: Near Mine Exploration Potential – long section looking west
Figure 2: Madsen Mine mill and processing facilities
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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 app roved 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
For further information, please contact:
Jasvir Kaloti
CFO & Corporate Secretary
Tel: (604) 609-6110
Amandip Singh, VP Corporate Development
Tel: (416) 203-9181
Email: [email protected]
or visit our website at https://www.westredlakegold.com
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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.