A Vancouver gold exploration company is buying insolvent Pure Gold Mining’s mothballed mine and mill complex in Red Lake for $6.5 million.
West Red Lake Gold Mines delivered the news on Monday that it has entered into a binding letter agreement with Pure Gold Mining and its lender, Sprott Resource Lending, to acquire the former Madsen Gold mine and the entire 80-square-kilometre land package.
This will be the junior miner’s first operating asset. West Red Lake Gold Mines has a 3,100-hectare exploration property containing three former mines, located 15 kilometres west of Evolution Mining's Red Lake mining complex in the northwestern Ontario gold mining camp.
Pure Gold Mining entered CCAA (Companies Creditors Arrangement Act) last Halloween. The underground mine and mill complex is not operating. It was placed on care and maintenance last October and is being overseen by a skeleton crew at the site.
The deal is subject to approval of the British Columbia Supreme Court.
In acquiring all of the issued and outstanding shares of Pure Gold, West Red Lake has agreed to pay $6.5 million in cash, issue 28,460,000 common shares and grant a 1.0 per cent secured net smelter royalty on the mine, along with US$10.0 million in deferred consideration payments.
"The acquisition of the Madsen Mine is a major step, and positions us as a leader in Red Lake gold exploration and development,” said Tom Meredith, CEO and director of West Red Lake, in a statement.
“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 holds 18.1 per cent of West Red Lake’s shares, will lead the proposed financing.
“I am proud to be supporting the company that continues the work of past generations at the Madsen Mine," Giustra said in a release.
"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."
