The Path to Profits for West Red Lake as Gold Prices Climb with Shane Williams

I mean, how topical is this, Lindsey? Just as Goldman Sachs lifts its gold forecast to 3, 000 an ounce in 2025 and gold's already been on a tear. What do you think, Lindsey? More sticky inflation, a safe among ongoing geopolitical tension. Anything else that gets you bulls up on gold out there, Lindsey?

Lindsey Bell: Yeah, I mean, I think you pretty much nailed it in the head. Gold is having its time in the sun and it's been a while since it's had its time in the sun too. So this is a great time to talk to a miner that is just [00:01:00] getting into production likely next year. And I know Shane's going to tell us more about that.

I think it's going to be an interesting potential opportunity for many investors out there. So I can't wait to learn more.

Chris Versace: With that, Lindsey, that's the perfect setup. Let's get to it. Sit back, folks, listen to our conversation with Shane Williams, CEO and President of West Red Lake Gold Mines.

Lindsey Bell: Welcome back to Why the Buzz. Today we've got West Red Lake Goldmine CEO, President and Director Shane Williams with us. He's going to talk to us about the company, their plans for the future, and the potential opportunity for investors here.

Welcome, Shane.

Shane Williams: Thank you very much, Lindsey. Great to be on.

Lindsey Bell: So let's just start with the basics. Give us the elevator pitch description of who West Red Lake is.

Shane Williams: Yeah, so West Red Lake is a development story, development gold mining story based in the Red Lake region of Ontario. So just to [00:02:00] give your listeners and viewers an overview, Red Lake in Ontario is a very prolific gold mining area in Canada.

So it's probably one of the top gold mining areas. Over 40 million ounces of gold has been produced in this region. So it's a very well known gold mining area. A lot of history of mining there. A lot of history of high grade resources in that region. Average grade of 16 grams so it's a very prolific area. West Red Lake is a company that, we have an asset that's already into production. I mean, a lot of your listeners will see that it's mining. Oh my God, it takes 15 years to go into production. What's going on? How am I going to benefit from that? But we took that opportunity to buy a project that was already built.

It's on the cusp of production. A little bit back to this contrarian view. We saw the gold setup, the gold mining setup, the way the world was going, the macro setup for gold. So we really pivoted to let's try and find a project, an asset, a mine, that we could benefit from that gold run, [00:03:00] basically, that we're seeing now. So back two years ago, we saw this project. The ideas 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.

Lindsey Bell: So the asset, the project that you're talking about, it's called the Madsen mine. And it is something that you bought on the cheap. And so my question for you too, is you bought it from Pure Gold and you bought it a couple of years ago. And like you said, it's already in production.

Was West Red Lake created to buy this project or was it already in existence?

Shane Williams: So the West Red Lake was created really as a more longer term vision. So Frank Jooster, I don't know how many of your listeners and viewers would know, Frank Jooster is a very prolific and resource investor in Canada.

He's built lots of big gold mining companies in Canada over the years. In his last big setup of [00:04:00] gold in 2010 and 11, when the last big gold run was there, he set up some fantastic companies, which are huge companies now, Wheaton Metals, which, is a large streaming gold mining company, Endeavor Mining, which is a big company in Africa.

So really the concept was the setup for gold is coming, we believe in the next five to seven years. And, let's start again, let's find a company or a vehicle, which we can use to get into production. And over the next five years, through M&A and mergers, production grow into a large mid tier mining company.

That was the vision behind it. In order to do that, we had to find an asset that can move quickly into production. it's got two things going on. It's a value play as well. You can buy a fully operating mine. Just to give a context, there's been 350 million Canadian dollars spent on this project and we bought it for six and a half million dollars Canadian.

So that'll give you sort of the value proposition as well as a, you know, some investors are [00:05:00] value investors and some believe in the gold. So we play both really. And the idea was to use this as a base, get this into production quickly. And then from there, when it's in production, you use the cash flow to grow, build more companies over time, scale the business to get to a mid tier.

If we're doing that in a rising gold market, you get a lot of leverage to gold. This is the key focus.

Chris Versace: Shane, I just wanna ask, if the prior company invested 350 million, how is it you were able to pick it up for just six and a half million Canadian?

Shane Williams: The previous company that went in there, unfortunately, as they were ramping up, covid hit them, as they were ramping the project up as they were just at the cusp of production. Everybody knows the COVID pandemic at the end of 19, 20, 21. And so that really, they had took on a lot of debt to build a project.

The conflict of the debt when they had some challenges ramping up and then COVID together, those couple of things together ended [00:06:00] up that they went into actually bankruptcy. They actually, the project went under, it was very well built. Everything was there. They were in commercial production.

They were running, they ran for 10 months. They were had no issues but those conflicts of issues caused them to go into bankruptcy. And that's when you go into bankruptcy in Canada, there's a process and we bought it out of that bankruptcy process. This was going back two years ago, And remember two years ago, nobody cared about gold.

Gold was 15, 1600 dollars gold. Frank and myself had this contrarian view. He's a great believer in the timing of gold. You have to be on the cusp of timing. And two years ago, we saw that set up for gold. And the idea is let's pounce on this when nobody cared about it. Nobody wanted it.

And use that as a platform to grow. Now we look like heroes in the gold current market.

Chris Versace: So let me, boy, there's a lot to jump on there. And I think Lindsey and I both agree with you that when it comes to commodities, you've really got to be very careful when you're buying them throughout the boom [00:07:00] bust cycle.

As we look at gold prices today, up considerably so far this year. Goldman Sachs is out saying, They see 3, 000 an ounce in 2025. You were a contrarian two years ago. Are you still a big gold bull, and where do you see gold going?

Shane Williams: So just to give you some context, when we went back and we did the assets, bought it originally gold was at a 1, 600 gold go back two years.

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 2, 500. We're now using that 3000 number as we move forward. So we, Frank get myself. We're a big believer in this 3, 000 gold going forward 25 and into 26.

Chris Versace: So if three thousand is what you're modeling at and you pick this asset up this mine on the cheap as you [00:08:00] said, what's the break even level for you in terms of gold prices?

Shane Williams: Oh gold price at break even is around fifteen hundred dollar gold twelve to fifteen on canadian dollars.

This is the gold price is around 12 to 1500 roughly. So that's a lot of margin.

Lindsey Bell: What is your leverage look like now? Just because that was the problem, a big part of the problem for pure gold, getting this asset up and running. What is your leverage look like now? What's your debt situation?

Shane Williams: So we have no debt on the project as we bought it clean out of the bankruptcy process. We've no debt on the company and our market, just to give you some context, when pure gold was in production up and running, their market cap was a billion Canadian dollars. No, 1. 2 actually billion Canadian dollars.

Our market cap today is 250 million Canadian dollars. So you can see the sort of, We're quickly into production in 2025. Gold is at that 3, 000 mark. [00:09:00] They were a billion dollars market cap when gold was at 1, 500. So you can see the sort of leverage as we move into production and get closer to that run rate into production.

That's where you get the real leverage with gold price rising and you're building a mine in operation. So you

Lindsey Bell: are expected to get into production in mid 2025, correct? That's still the target and you're still on plan. And if so, could you talk about the unique nature of this project? Because you came about without an official mining plan, which is unusual, right?

It's a differentiated route. So can you talk through that and your timing on production?

Shane Williams: Yeah. So our timing of production is into the middle of 2025. That's been always the target way back when we bought the asset. We set up a plan. As I said, I have done four of these restarts of these sort of projects in my career before.

And so we got in early because of the assets and value and your presentation, as you send out later on, there's a number of good pictures of the project and [00:10:00] the structure. Everything is really in place. I've been building these projects for a long time and some of your listeners and viewers would go, Oh no, not mining.

It takes 10 years to get into production. How are we going to make that up opportunity? But because we identified an asset that had a mill in place, permits are all in place, everything you need to get a mine. And that's where we were able to fast track it into production. Really, There's a lot of media around it takes 10 years to get a mine into production, a lot of stuff, but we identified this asset as a strategy so we could move into production.

Chris Versace: So back in September, I think you were interviewed and you said that you were entering a four month, window of test mining. Are you, Are you still in that test mining phase? Are you coming out of it? What are you learning? How does that confirm your timetable for mid 2025? Yeah.

Shane Williams: Yeah, so we're just in that now.

It takes some time to work through that. So between September and the end of the year, we're in that test mining program. So they've started that. We're getting a lot more confidence [00:11:00] in the mining, obviously. Going underground, test mining, getting some samples, getting some understanding, all that gives us more confidence.

That's as planned at the moment. As per our plan, we're, as we're doing the work, we're getting more and more confident on that.

Chris Versace: Just a quick follow up to that. You, in your comment back then, you said that you were looking for the right ore body. For folks who may not be familiar with what that is, can you give some context for that?

Shane Williams: Yeah, there's parts of the ore body in the mine, the mining underground, there is higher grade parts and there's lower grade parts of the rock effectively. And so we're targeting to start those higher grade portions, which the gold was very high grade. So you would have 10 grams, eight gram, nine grams per ton of rock versus the lower grade were like three or four grams. So you've got to target those high grade parts of the rock to allow you, as you start, you're getting high grade, high prices moving into production. All that helps you in your restarting projects. So that's really been a [00:12:00] focus of this test mining program.

Chris Versace: So just as we look at this milestone, where you're doing this test mining and you're targeting within the next, let's call it six months of going into production, Lindsey asked the question about leverage on the balance sheet.

You don't have any, but how capitalized are you? Can you make it through the start of production without having to tap the capital markets?

Shane Williams: Yeah, we have currently on our balance sheet, we have 34 million Canadian dollars. So, we have the capital. We're in the middle of negotiating balance of that financing.

If people will look at our press release, we're fully financed with this deal we're still working on. So the plan is that we don't need to go back to the market. We're fully financed to allow us to build our plan to get to production.

Lindsey Bell: So this mine in particular has been being mined since the thirties, right?

And the region in particular too. And it's like you said, it is high grade. This is a well known region for mining gold, but since [00:13:00] it's been mined for so long, what is the opportunity specifically to this mine?

Shane Williams: Yeah. So these mines in Canada These mines are all high grade mines and they're very deep.

So, I'll give you an example for some of your listeners, a production mine next door to where the Madsen mine is. They're mining now at 3000 meters. They're still mining gold at 3000 meters into gold and lots of high grade gold. These systems tend to go very deep. They go down very deep in Canada. There's lots of grit. So this has been mined previously, but only down to a certain depth to a thousand meter sort of thing. So the deeper down, there's lots of gold left. And also back in the thirties, gold is at 325 an ounce. They went for the very, very high grade, which in those days was high grade.

And there's a lot of gold that's left that today is very economic. I met some of the old timers who worked there. I think they were excited. Gold went from 375 to 400. [00:14:00] They were all excited about the price. So, in the golden environment we're in today, people complain about the price of gold.

So, there's a lot of gold that was left behind in these areas that was not economic in the time. But it's now economic in certain gold prices. So that's a lot of the gold and also lots of exploration upside. So they're the two really focus of where we're focusing now.

Lindsey Bell: So does this the opportunity and exploration within this mine, does that get you to the midsize producer goal that you're looking to reach? Or is there going to be? You did mentioned M& A. How do you see M& A? I know M& A has been pretty busy in this space in the last couple years as the price of gold has increased and these opportunities have come to market.

How do you think about expansion, in the years ahead?

Shane Williams: In years ahead, definitely exploration on the existing project is an ongoing process. But in order to capitalize on the gold, this gold bull market, M& A becomes a strategy, this buy and [00:15:00] build strategy, which is key to building a company in that you get a project, you get it going, and then you use that as leverage to buy another project.

You're always doing that exploration upside, but, problem with that is it takes time. It takes a long time. You're not getting the leverage. So, these gold bull markets tend to run for five to seven, eight years sort of timeline. And so that's where you need to capitalize quickly.

Lindsey Bell: Okay, and then one follow up question to that.

Do you ever see yourself becoming an M& A target given the level that you're in this for?

Shane Williams: Yeah, so in the region and there is major mining companies in the region are interested in this region and we're the only smaller scale developer in the region. So, if we can get into production ramp up, you definitely become a target in that region.

There was a company called great bear resources in this region. They had success and were bought by Kinross gold, which is a large [00:16:00] company. The original gold mine was bought by evolution. So there's a lot of M&A in this region as well, given the high grade nature of it and the production profile.

So yes, both sides. We're an opportunistic from another major company

Lindsey Bell: when you've got small ownership, from evolution mining to just under 2%. Right.

Shane Williams: Yeah. We haven't because we have a number of properties in the region and evolution are interested. They've been looking at us. Kinross have just come into the area

very big, which is one of the biggest mining companies in the world now, so there's a lot of big players in the region. They want to get into this region. They know Red Lake. They know the high grade nature of it. They know the opportunity. So there's a lot of activity in the region now as well.

Lindsey Bell: And then from evaluation perspective, you alluded to it at the beginning of our conversation,

I guess would you call yourself pre production? You're not getting the production valuation, which is like the next opportunity. Then there's the junior producer, valuation opportunity. How long do [00:17:00] you think it will take the market to realize the opportunity that you do have to then.

Expand the multiple that you do.

Shane Williams: In a normal company in this phase. You have a four or five year runway to get that multiple by the early stage. All the way. We're on this fast track. I would say once we're in production next year, that's where we get the first multiple from a developer to our.

A producer, there's a multiple there. It typically goes from where probably 0. 2, 0. 3 nav now to a 0. 6 nav. And then as you become into the year after into a producer, you get to a one nav sort of thing. So there's a four or five X within a short period of time. As I said, over a 12 to 15 month period.

We're going to have a number of these reratings as we go. and with gold running to that 3000, it's even more pronounced sort of leverage.

Chris Versace: So when you're out meeting, with investors, I mean, it all sounds wonderful, right? Right place, [00:18:00] right time, right price, where you picked up the asset. What are some of the concerns that folks raise with you or said a different way?

What's the pushback that you tend to get? Yeah.

Shane Williams: Yeah, the pushback is really the history of the asset. The fact that it went bankrupt effectively and went over the edge, we understand a lot of the reasons why, and we've done a lot of, when we took over the asset, we did a lot of our own due diligence.

We understood the issues. We went through that detail. But it's, when you get investors, there's always that nervousness around what's going to happen. Are we going to get the production? COVID was an out of the blue issue. This happens to mining, every mine in the world nearly shut down because of COVID.

But I think from our perspective, it was the underground understanding of the ore body, the geology, the grade, the high grade nature of the ore body. I think that's something that we've worked hard at. We've put another 50, 000 meters of drilling into the project to really understand that [00:19:00] ore body.

We've put another, probably another hundred million dollars into the project on top of what was spent, to understand that technical risk, to get comfort in it. There's 150 people on site now. We're ramping up. We're ready to mine. We're on the cusp of production.

So, getting all those elements correct has been a bit of a struggle and getting the right teams in there. So that's always a bit of a hesitation from investors until they see us getting to production, really. Test mining is a key catalyst as well. People want to see the results of that test mining to be able to get another level of confidence.

Chris Versace: We've been talking about the price of gold and and how you guys are going after the opportunity, but one of the things we didn't touch on is, and we've seen this across other companies that have done.

I think you called it a restart where new management teams were able to come in and not only take, opportunity from that reduced cost structure, just given the level that they're coming in at, but they're able to [00:20:00] apply technology and other things to help improve their own profitability as well. Talk to us about that.

Have you been able to leverage technology or process improvement based on I think you said this is your fourth restart, right. So is there a way to address the cost structure of the project as well?

Shane Williams: Yeah, I mean, just again, some history, the original team that were there were not really mine operators and builders.

They were more early stage junior explorers who tried to get a mine into production effectively. So, they didn't leverage what a good mind should look like, how it should operate. So we've built that in early into our restart plans, doing underground development, applying technology, the most better ways of doing it, the better software, some exploration, new ideas on exploration, new ways of doing the mining.

These are all areas that can be applied to the project. There was some [00:21:00] inefficiencies in the way they set up the project, connecting the mine underground in different areas. Logistics associated with that. So there's been a lot of optimizations over the last 12 months that we've put in place that probably the group originally wanted to do, but that COVID just in the end caused them to go over the edge.

I think a key point also Chris is, when they had those troubles, just before that, they brought in some key operations people, with that near the end, and they began to turn it around. We saw the production records, we saw the approach, we saw them beginning to turn it around. And then that COVID came in and hit them the last time.

So we've built upon that. Sometimes it's good to build upon lessons learned of the previous management. So we've built upon that and we've just used that to help us. Go to the next level and they were nearly there. I think if they had another six or seven months and they had a, a bit more of a runway, they would have got the mine into production.

 

Lindsey Bell: So what do you see is the biggest [00:22:00] risk over the next 12 to 18 months? Assuming we don't get another COVID or black swan event. What is the biggest risk that you're thinking about?

Shane Williams: So the biggest risk that we're thinking about is actually our ability to ramp up and get the people. Sometimes in mining now at the moment there's a lack of skill in the industry and we're lucky we're in the red lake region so there's lots of miners there's lots of history in mining but it is a challenge across the industry some key people that are there that we've been so far lucky to get but as we ramp up obviously, if you have a risk with the people, they have a risk of the miners getting that ramp up.

So that is an area we're thinking about trying to address. And also, the scale of the mining underground, getting that right, getting the equipment, the timing of that. So the ramp up is really the next phase. This test mining, making sure we have those key results from that test money program. And then in the new year, we're going to put out a new study.

in January, which would really lay out the plans for the [00:23:00] project. We have the test mining and that ramp up. So they're the kind of things that are on the mind at the moment.

Lindsey Bell: Well, it sounds like you're still set for production. You're pretty dead set on that second half, 2025 production start, which is great.

Is there anything else, Shane, that you want to cover, while we have the time and while we have you here, anything we didn't cover that you want to talk about?

Shane Williams: Yeah, I would like to talk a little bit about, and this is just for general investors in the industry. You know, there's a real shortage of mining talent in the industry at the moment.

 there's a lot of projects and there's some money available. But I think it's key that you have the right team. The right team is important. And we've put together a very technical team. You'll see some of our board of directors. One of our board of directors name is Tony McCooch.

And he built a company called Kirkland Lake, which is one of the biggest gold mining companies at the time that was bought for Agnico Eagle. Also Duncan Middlemass built a company called West Storm in Canada. So there are people with key technical skills and our team, as I said, I've done this before. So [00:24:00] it's that bringing together of the money, the resource and the key team.

And I think we have one of the best teams that's out there in the industry at the moment to deliver. And that's very important for investors as they put in money to have that confidence, that the team have the experience. The background, the backers, Frank Jooster and his backers with the access to capital.

So it all comes together with that area. You have that with a good resource and close to production in a rising gold market. That's the perfect, storm effectively to move in there.

Lindsey Bell: Well, I think that's the perfect way to sum up exactly what West Red Lake is all about and the opportunity that probably exists there.

We thank you for your time today, Shane. It was a really very interesting conversation. I know I learned a lot. I think Chris did too. And we look forward to hearing back from you next year once you get up and in production.

Shane Williams: Excellent. Thank you very much. It was great to be on, Lindsey and Chris.

Chris Versace: All right, Lindsey, what do you think? We're just coming off our [00:25:00] conversation with, Shane at West Red Lake Gold Mines. I gotta tell ya, I think there might be something here, but I do have to wonder, though, If this is a company that's going to be there for the long term, or they might just scooped up because it sounds almost too good to be true.

Lindsey Bell: I agree. I think they have a lot of tailwinds going for them. And the management team, the operational team, it seems completely top notch. And I know Shane talked a lot about that. And his own background was is very impressive. So I think the trouble for them right now, in becoming a long term public company is really just building the confidence of investors. Because the biggest concern and Shane talked about it is the fact that they were able to scoop this amazing asset up out of bankruptcy.

And so. So I think it's just a matter of convincing investors that they have a viable production plan, the cash flow is coming, and that not only growth and expansion in the current mine that they own, but [00:26:00] also potentially from M& A and other outside opportunities are real. So I think there's something there.

Chris Versace: I think you used the right word, Lindsey, tailwind, because we know that the outlook for gold is favorable. I think even Shane said that these, up cycles in gold prices tend to be, I think he said somewhere between five and seven years. And it's really been the last two or so that we've seen gold really explode.

But really, this year, I think, looking back was the demonstrative move in gold. So that we still might be in the, early innings of this upward move in gold prices. But I do think you're right, though. That as with any small company like this, you've really got to understand what the hurdles are, and really look for those confirming data points, which is why, I think Shane said it, if I'm remembering the conversation correctly, come January, they might have an update that could you know, tell perspective investors, Hey, we [00:27:00] are tracking or maybe there's a little backsliding.

So I think that's going to be the next thing to watch for. And if they can really commit to that mid 2025 production start, the second half of the year in 2025 could be a big one for them.

Lindsey Bell: Yeah, I think you know investors looking for value investors interested in gold, this is certainly something to take a look at and consider in the year ahead.

Chris Versace: Totally agree lindsey All right. Well, hey folks, thanks for joining us in our conversation today with West Red lake Gold Mines. Thanks for listening. We really enjoy these conversations that we have with management teams at Why the Buzz, but please be sure to check out the other podcast that Lindsey and I have each and every week, the What Does It Mean podcast, where we dig into some of the biggest issues of the week, whether it's the market, the economy, and other things on mind of investors.

We'll see you soon.