Drill Results From Gold Asset Highlight Potential of Surface Zone

Source: Taylor Combaluzier 10/11/2024

Additional exploration success at this project, in a historical Canadian mining district, “could unlock significant value,” noted a Red Cloud Securities report.

West Red Lake Gold Mines Inc.’s (WRLG:TSX.V; WRLGF:OTCQB) initial drill results from the Upper 8 target at its Madsen project showed the area to be “a shallower analog” of the deeper, high-grade 8 zone, a finding with positive implications, reported Taylor Combaluzier, Red Cloud Securities vice president and mining analyst, in an Oct. 3 research note.

“We believe continued exploration and optimization success at Madsen could unlock significant value and rerate the stock,” Combaluzier wrote.

156% upside potential

The current share price of West Red Lake Gold Mines is about CA$0.78 per share, noted the analyst. With Red Cloud’s target price on the British Columbia-based explorer at CA$2 per share, the implied return is 156%.

Combaluzier reiterated that West Red Lake remains a Buy.

Reason for drilling

The newly announced drill results are for the three initial holes drilled in the Upper 8 target at the company’s flagship Madsen gold project in Ontario’s Red Lake District, reported Combaluzier. He explained that the Upper 8 is the “projected, near-surface extension of the mineralized shear corridor that hosts the 8 zone.”

West Red Lake drill tested the Upper 8 because historical data suggested it was geologically similar to the 8 zone.

Explanation of results

Combaluzier reported and discussed the new drill results. They revealed that the Upper 8 shares two significant characteristics with the deeper 8 zone: high gold grades and the same geology.

“This success shows that the broader project area remains prospective for new, high-grade deposits, like the 8 zone,” the analyst wrote.

The grades of the gold (Au) mineralization encountered in the Upper 8 were as high as 44 grams per ton (44 g/t), with the highlight intercepts being:

• 14.2 g/t Au over 4.1 meters (4.1m) starting 354.8m downhole, including 44.17 g/t Au over 1.3m, from hole WRL24-002
• 6.33 g/t Au over 1.85m starting 332.5m downhole, including 20.63 g/t Au over 0.5m, from hole WRL24-003

Along with high grades, the style of mineralization at the Upper 8 was demonstrated to be the same as in the 8 (but different from that of the main Madsen deposit). In fact, drill results revealed both the Upper 8 and the 8 to be hosted in the same lithologic unit, with the Upper 8 located about 750m uplunge of the 8. Further, the orientation of the two zones suggests there could be subparallel structures between them.[OWNERSHIP_CHART-5614]

“This success shows that the broader project area remains prospective for new, high-grade deposits, like the 8 zone,” added Combaluzier.

More drilling planned

West Red Lake’s focus now will be on the Upper 8, the analyst wrote. While the deeper 8 zone has been attractive for mining, it has not been economically viable to do so from the existing underground infrastructure. The company will keep drilling the Upper 8, adding a second drill in the coming weeks. The analyst noted that the all-in cost to drill the Upper 8 is about CA$200 per meter.

“With the opportunity to delineate a shallower version of the 8 zone, we believe West Red Lake could potentially be on course to deliver some sizzle for investors should drilling continue to yield positive results,” Combaluzier wrote.

Near-term catalysts

In his report, Combaluzier noted that in the near term, investors can expect additional Upper 8 drill results, infill and regional, on an ongoing basis, as well as a new prefeasibility study of Madsen in Q4/24.

Results of test mining and bulk sampling should follow, potentially in H1/25, and West Red Lake could restart the mine in Q4/25.

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