West Red Lake raising US$20 million for Madsen restart plan
West Red Lake Gold Mines Ltd. [WRLG-TSXV] has arranged to raise US$20 million from a private placement of units priced at US$1,000 each. The net proceeds will be used to continue to advance the development of a restart plan for the Madsen gold mine in Red Lake, Ont., as well as for working capital and general corporate purposes.
Each unit will contain gold-linked notes in the aggregate principal amount of US$1,000 and 710 common share purchase warrants, each of which will entitle the holder to purchase one common share of the company at an exercise price of 95 cents for 60 months following the closing date.
The notes will represent senior unsecured obligations of the company. They will bear a 12% per annum coupon, calculated and payable quarterly in arrears and will mature on December 31, 2029. Commencing on January 1, 2026, the company will cause the gold to be placed in escrow on a quarterly basis into a gold trust account. The aggregate principal amount of notes outstanding will be reduced by the company on a quarterly basis, commencing on March 31, 2026, and with final payment on December 31, 2029, in accordance with the payment schedule to be set forth in the indenture that will govern the notes. The notes will amortize based on a guaranteed floor price of US$1,800 per ounce of gold. Any excess proceeds by which the gold price exceeds the floor price will be paid to investors as a premium.
Vancouver-based mining financier Frank Giustra, who holds 11.07% of the outstanding shares of West Red Lake, has indicated his intention to participate in the offering by subscribing for 3,700 units, representing US$3.7 million in gross proceeds.
“The offering marks another key step in the financing process as we focus our efforts on the development of a derisked and robust restart plan for the Madsen gold mine while minimizing dilution for our shareholders,’’ said West Red Lake CEO Shane Williams.
West Red Lake shares moved lower on the news, easing 1.47% or $0.01 to 67 cents. The shares are currently trading in a 52-week range of 93 cents and 31 cents.
The company was in the news recently when it struck a binding deal with bankrupt Pure Gold Mining Inc. and Sprott Resource Lending Corp. to acquire the Madsen gold mine and associated land in Red Lake, Ont.
The company is focused on both Madsen and an associated 47 square kilometre land package in the Red Lake district of northwestern Ontario. It is a district that has yielded over 30 million ounces of gold from high-grade zones and hosts some of the world’s richest gold deposits. West Red Lake also holds the 100%-owned Rowan property in Red Lake with a 31 square kilometre property position, including three past producing mines – Rowan, Mount Jamie, and Red Summit.