Shocking fire sale for bankrupt gold miner
Frank Giustra's West Red Lake Gold Mines is acquiring the Madsen gold mine in Red Lake, Ontario from Pure Gold Mining & Sprott Resource Lending for ~9% of its prior investment and ~2% of its Dec 2020 peak market cap.
The mine commissioning struggled with Q1 production 70% below expectations. Costs doubled as the Company built more stopes to access higher grade areas. Grappling with debt covenants, PGM raised cash at increasingly lower share prices: $23M in Sep '21 @ $1.05, then $25M in Mar '22 @ $0.53, then $31M in May '22 @ $0.15. A new CEO appointed Jan ‘22 resigned four months later for health reasons.
In 2021, Kinross paid $1.7B for Great Bear Resources, 5 years after the Dixie gold mine discovery, which had little infrastructure compared to PGM. Over $350M has been invested in Madsen according to WRLG's new presentation. There are also $273M in tax write offs, a brand new 800 tpd processing facility, underground ramp access, and 2 million ounces of high-grade gold in the deal. WRLG says PGM underinvested in drilling and underground access.
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