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.
West Red Lake to acquire Madsen Gold Mine. (Credit: Alex Banner from Pixabay)
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.
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.”
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.
Source: Company Press Release