(Kitco News) - As major gold producers pursue selective M&A deals in a tightening market, one company is drawing investor attention by doing what few can: restarting a once-failed asset, achieving early cash flow, and scaling up deliberately.
Shane Williams, president and CEO of West Red Lake Gold, said his team is doing what others in the developer space no longer can - and he's betting that patience will yield asymmetric shareholder value.
“We're producing cash flow. We'll be free cash flow probably by November this year,” Williams told Kitco News in an exclusive interview at the Rick Rule Symposium in Boca Raton. “It’s a great time to be a gold producer. At these numbers, that's just a base case: $200 million in revenue next year.”
Strategic Restart, Disciplined Build
West Red Lake’s Madsen mine in Ontario has moved from distressed to active production in under two years. Williams said that when his team acquired the asset, it had already seen $300 million in sunk investment. “We bought it for $6 million,” he said. “We’ve subsequently spent another $100 million to get it to production... If we had to build that mine today, it would be close to a billion dollars and a five- to seven-year permitting window.”
The math, according to Williams, speaks for itself. “Altogether, $400 to $500 million [CAD] has been spent. And we’re talking about making $200 million in revenue next year,” he said. “Some producers are trading at six times sales. That’s where we potentially will be this time next year.”
From ‘Show Me’ to Cash Flow
The company’s progress hasn’t gone unnoticed. Last year, West Red Lake was one of only four developers moving into production, and Williams said it’s the only one in Canada this year. But it didn’t come easy.
“The mine had failed. A lot of people I talked to said they never want to hear of that project again,” he said. “But we've been conservative. We’ve done the work. People are coming back in when they see that. We’re doing a steady approach.”
That included running 5,000 tonnes through the Red Lake mill in a bulk sample to test the geological model. “What we've learned is, yes, it does work. If you do the work, the right way of doing it, it does work,” Williams said. “The Madsen mine works from a geology point of view.”
Why Majors Are Watching
Williams, a veteran of Newmont and Rio Tinto, believes the majors are no longer chasing “Hail Mary” assets. “They're much more selective. M&A has been strategic, measured, and good value,” he said. “They're looking for near-term cash flow. Projects they don't have to develop. Once you go into cash flow, they’re looking for those.”
With fewer standalone developers left, Williams says people — not just projects — are now the bottleneck. “Look at the conference. A lot of people are over 60. Not a lot of mine builders. The big majors don’t have teams anymore to develop early-stage. So, as soon as you get into production, they’re buying.”
But he’s not looking to sell — at least not yet.
“We’re a 60,000-ounce-a-year producer. We can slowly build another to 60, then 120, and build over time. That allows our shareholders to get that value before the majors come in.”
Jurisdiction, Permits, and Cost Discipline
Ontario's stable mining jurisdiction is another strategic advantage. “We’ve been talking to the government about fast-tracking permits. Bill 5 was just passed in Ontario — it allows fast-track permitting. That’s ongoing right now,” Williams said.
With permitting progressing, Rowan PEA just released, and support from the provincial government, Williams sees Canadian assets regaining their premium. “Canadian gold mines are going to get that value... We're having issues around the world — Mexico, West Africa. Everyone’s going to come back to Canada.”
He’s also watching costs closely. “One of the strategies we picked is the Red Lake region — there’s a lot of history. 50% of our staff is local. You don’t have fly-in, fly-out costs,” Williams said. “You have suppliers in the region, you can negotiate. That’s how you control it — by being strategic about where you mine.”
Shareholder Value and the Next Milestone
When asked about returns to shareholders, Williams said the focus right now is on scaling value before discussing dividends or buybacks. “We’re in early stages. The best way we can give back is to keep pushing the company forward... doing M&A, growing to a mid-tier producer,” he said.
West Red Lake expects to enter commercial production by September, with free cash flow beginning by November. “That’s a trigger for free cash flow. Investors can go, ‘They’re there now.’ That’ll be a milestone a lot of people are watching,” Williams said. “The Madsen story is a show-me story. We’re not there yet - but so far, we've been able to prove it.”
For the full conversation with Shane Williams, including details on West Red Lake’s growth strategy, M&A outlook, and permitting progress in Ontario, watch the full interview embedded above.
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