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West Red Lake Gold Mines (WRLG) has agreed to acquire troubled firm Pure Gold Mining’s past-producing Madsen Gold mine and associated land package in north-western Ontario, Canada.

The deal with Pure Gold Mining and Sprott Resource Lending will see WRLG buying all of the issued and outstanding shares of the miner.

As a deal consideration, WRLG will pay C$6.5m in cash, issue 28.5 million common shares, and grant a 1% secured net smelter royalty (NSR) on the mine.

It will also make a deferred payment of up to $10m.

The miner said in a statement: “The share and NSR consideration is expected to accrue to Sprott as a fund managed by Sprott is the senior secured lender to Pure Gold.”

WRLG claims that it will become a ‘debt-free’ and ‘well-capitalised’ explorer following the deal.

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Completion of the deal is subject to some conditions such as the firms reaching a definitive agreement by no later than 1 May 2023 and regulatory clearances.

Pure Gold Mining acquired the historic Madsen mine in 2014 but put it under care and maintenance in October 2022 due to funding constraints.

The brownfield site has approvals to resume production, with current infrastructure, including an 800tpd mill, double ramp access, a 1,275m shaft, a tailings management facility, and a water treatment facility, among others.

The mine is said to have a peak market capitalisation exceeding C$1.15bn in 2021 and has secured a historical investment of nearly C$350m.

WRLG CEO and director Tom Meredith said: “This transaction is highly accretive to WRLG shareholders. The path forward involves defining a critical mass of high-grade reserves and resources, optimising the project for sustainable cash flow, and executing on the vision.

“This includes conducting infill drilling, resource expansion, regional exploration, underground development, restart planning, engineering studies, and maintaining a strong focus on operability, community benefits, and investment in people and infrastructure.”

Besides, WRLG launched a bought-deal private placement of subscription receipts for raking in C$20m, with an underwriter’s option to place a further C$5m.

Frank Giustra, who holds 18.1% of WRLG, will lead the financing for the purchase of the assets.