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This Gold Mine Finally Started WorkingThumbnail: | West Red Lake Q2 2026 Earnings

The Deep Dive Sep 2, 2026 15:16

Summary

West Red Lake's Madsen mine delivered its best restart quarter: production up 51%, AISC (All-In Sustaining Cost) down 30%, first positive free cash flow.

A 10,768-ton surface stockpile holding 1,500 ounces signals mining rates have finally outpaced the mill at this Ontario operation.

H1 output of 14,000 ounces is only 36% of midpoint guidance, so Q3 and Q4 must average 10,400+ ounces to hit the low end.

WRLG still carries a 68% EV/EBITDA premium to peers and is the only one of five gold comparables in net debt.

A pending pre-feasibility study combining Madsen and Rowan's high-grade 335,000-ounce resource is due mid-to-late September.

Key points on Jaguar Mining Inc

  • Made $1,551/oz of margin in Q2 in the host's peer comparison.
  • Listed as a net-cash peer with $67M of cash and no borrowings.

Key points on Mako Mining Corp

  • Cited as a per-ounce margin comparable alongside Heliostar and Jaguar in the host's Q2 peer set.
  • Listed as a net-cash peer with $72M of cash and no borrowings.

Key points on Serabi Gold

  • Listed as a net-cash peer with $66M of cash and no borrowings.
  • Had not filed Q2 financials at the time of the video, so the host annualized Q1 results for the comparison.

Key points on West Red Lake Gold Mines

  • Q2 was the first positive free cash flow quarter the Madsen mine has produced, with production up 51% and all-in sustaining costs down 30% — the host calls it the best quarter the operation has had.
  • The mill ran at 842 tons/day against an 800 tons/day rated capacity and the company is targeting 1,000 tons/day in H2; a 10,768-ton stockpile at quarter-end shows the mine is now outrunning the mill.
  • Production is only 36% of the way to the midpoint of full-year guidance after H1, requiring a 21-50% step-up from Q2 to hit the 35,000-45,000 oz range.
  • Cash fell $11M in H1 2026 despite the positive FCF, because the FCF definition excludes $6M of growth capex and all debt service; WRLG carries $75M of net debt and is the only net-debt name in the host's peer set, with management stating it is actively looking to lower the cost of capital.
  • An updated pre-feasibility study combining Madsen and Rowan is expected in mid-to-late September 2026, with Rowan's indicated resource coming in at 335,000 oz at 13 g/t.

Steve Hyland's takeaways

  • Top takeaway Argues Q2 demonstrated Madsen is capable of running at the rates it needs — production up 51%, all-in sustaining costs down 30%, margin per ounce up 4x — but says the real test from here is consistency, not the one quarter.
  • Flags valuation concerns: WRLG trades at EV/EBITDA of 6.4x against a peer median of 3.8x (a 68% premium), and is the only name in his peer set carrying net debt (~$75M, ~1x EBITDA).
  • Frames the bull thesis on leverage: at $2,500/oz gold, Madsen throws off roughly $128M of all-in sustaining margin and the EV is under 3x — but cautions 'we're not at stable production' yet.
  • Highlights that the mill has run above its 800 tons/day rated capacity (842 tpd in Q2) and is being pushed toward 1,000 tpd in H2, with potential for 1,300 tpd.
  • Lists the risks management flagged for H2 guidance: labor constraints on experienced underground miners, oversized material that is difficult through the existing crushing circuit, and difficult ground at Red Lake.