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As measured by spot prices and physically-backed exchange traded funds, gold’s per ounce appreciation has been something to behold this year. In fact, the yellow metal is nearly keeping pace with the S&P 500 – an impressive feat to say the least.
Broadly speaking, shares of gold miners are holding up their end of the bargain, too. In what could be a harbinger of things to come in 2025, small-cap or junior miners, such as West Red Lake Gold Mines (OTC: WRLGF), are performing well this year. Gauges dedicated to junior miners are trouncing the Russell 2000 and S&P SmallCap 600 indexes since the start of 2024.
Past performance isn’t a guarantee of future returns, but with interest poised to decline in 2025 and advisors and investors increasingly concerned about global government debt levels, adding some bullion or gold equities to portfolios could be a prudent move.
For those with a tolerance for risk, West Red Lake Gold Mines could be a tactical idea to consider in 2025. Consider the company a development story with credibility as it operates in the Red Lake region of Ontario, which is one of the most gold-rich areas of Canada.
West Red Lake Gold Making the Right Moves
The Madsen Mine to which Red Lake Gold now has the rights traditionally produced two million ounces of high-grade bullion, but under another company’s stewardship, the project languished due to lack of adequate capital. That conundrum crimped the prior operator’s ability to deal with high costs and led to low-grade production.
West Red Lake Gold is flipping that script. After purchasing the asset in 2023, the company provided the necessary capital infusion and enters 2025 optimistic that it can restore its namesake mining region to previous glory.
“So we really pivoted to let's try and find a project, an asset, a mine, that we could benefit from that gold run, basically, that we're seeing now. So back two years ago, we saw this project,” notes West Red Lake CEO and President Shane Williams. “The idea is to get into production as gold is rising. And that's really the sweet spot for investors. If you're in a gold rising market and you're a gold mining company coming into production, they're the two key elements for rerating of the company in stock.”
Looked at another way, the company’s acquisition of the West Red Lake outfit could prove prescient because it made that purchase as the operation was struggling, but also at a time when gold prices were rising. That trajectory is expected to continue next year, potentially further validating the buy.
Smart Management Matters
Regardless of industry, a company’s management team matters and it’s a consideration that should be emphasized by all investors. Specific to Red West Lake Gold, the management team has the potential to deliver over the long-term for patient investors – a thesis solidified by the fact that it scooped up the Ontario asset for CAD$6.5 million AFTER the prior operator plunked down CAD$350 million on it.
As Williams noted, gold was trading around $1,600 per ounce when his company engaged in the transaction. As of this writing on late Dec. 17, the yellow metal resided at $2,646, highlighting significant appreciation in the time since West Red Lake bought the Ontario mine.
“We had the prediction that gold would get to $2,500 as our plan, when we model the investment and the asset and the return of investment, that's the number we use,” said Williams. “We're now using that $3,000 number as we move forward.”
Bottom line: it appears that West Red Lake Gold bought low on the Ontario property and it may have mastered the element of location – two factors that could augur well for the stock in 2025.
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