West Red Lake’s Rowan might earn 42% return

West Red Lake Gold Mines (TSXV: WRLG; US-OTC: WRLGF) said a preliminary economic assessment shows that developing the Rowan project in northwestern Ontario may generate a high rate of return.

Based on gold prices of $2,500 per oz., Rowan would have a net present value (NPV) of C$125.3 million ($91.7 million), an all-in sustaining cost of $1,408 per oz. and a post-tax internal rate of return (IRR) of 42%, West Red Lake Gold said Tuesday in a statement. If gold were to average $3,250 per oz., which is less than the current spot price, the NPV would rise to C$239 million while the IRR would jump to 82%.

IRRs above 30% are generally considered exceptional in mining, particularly for hard rock projects like gold, copper or nickel. A 42% IRR signals strong profitability and rapid payback, which is especially attractive in volatile commodity markets. Investors will still examine the jurisdiction, permitting timeline, technical risk, capital cost estimates and the commodity outlook.

“A NPV of C$239 million at close-to-spot gold pricing provides a compelling case to advance Rowan swiftly from here,” CEO Shane Williams said in the statement.

Located in the Red Lake gold district, the Rowan property hosts three historic gold mines. Multiple nearby mills with excess capacity would limit the project’s initial capital costs, West Red Lake said. An option to process ore through toll milling may cost C$70 million, according to the study.

‘Positive PEA’

Red Cloud Securities mining analyst Taylor Combaluzier said the PEA is positive for outlining a smaller, underground operation with simple metallurgy that will serve as a secondary source of feed to the Madsen mill within trucking distance. 

“Rowan could also become one of the first deposits used in a potential future hub and spoke model in the region,” Combaluzier said in a note on Wednesday. “We continue to believe West Red Lake Gold is poised for a re-rating as it ramps up production and incorporates its secondary deposits into the mine plan.”

The company is backed by Canadian Mining Hall of Fame member Frank Giustra. West Red Lake is one of the first explorers that the former film company executive invested in, having once said that strong hits at Rowan helped him “see the light” about backing early projects.

Rowan is planned to tap a deposit that is near vertical and averages 2 metres width. The PEA envisions annual production of 35,230 oz. a year over five years based on an average mining rate of 385 tonnes a day.

Next study

West Red Lake plans to complete a pre-feasibility study on Rowan by next year’s third quarter. There are “multiple opportunities” to define additional mineralization with the company planning to test new, high-potential targets.

The project has 478,707 indicated tonnes grading 12.78 grams gold per tonne for 196,747 oz. contained metal, according to a resource dated June 30. It has about 421,000 inferred tonnes at 8.73 grams for just over 118,000 oz. gold.

“Rowan is a high grade, relatively wide, nearly vertical deposit that starts at surface and this PEA captures how such designed-for-mining characteristics lead to strong economics,” Williams said. “There is ample opportunity to grow the resource further at Rowan along strike, at depth, and via discovery at new nearby targets, but we ideally want to do that work while turning this asset into a mine sending high-grade mineralization to an operating mill in the area and potentially generating significant revenue for the company.”

Ontario law

Ontario Premier Doug Ford has pledged to push mining projects. Following the enactment of Ontario’s Bill 5, which is intended to speed up the approval process, West Red Lake says it’s been engaging with regulators to support expedited permitting.

Bill 5’s adoption “creates potential for a simplified, collaborative and expedited permitting process,” Williams said.

Vancouver-based West Red Lake recently restarted the Madsen mine in Ontario’s Red Lake district, a region that has yielded over 30 million oz. of gold. The company’s land package in the area covers 47 sq. km.

West Red Lake shares dropped 3.5% Tuesday, as wider markets fell on tariff woes, to close at C82¢ apiece in Toronto, giving the company a market capitalization of about C$287 million. The stock has traded between 52¢ and 98¢ in the past year.