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Pure Gold greenlights Red Lake mine construction

Cashed up and ready to build, mine developer expects first gold pour in 2020
Pure Gold test mines with a jumbo at their Madsen Mine gold project (Pure Gold photo)

Sprott Resource Lending Corp., a major mining financier, has sunk US$90 million into bringing a former Red Lake gold property back into production.

It prompted the board of directors at Pure Gold Mining to approve a “decision to construct” for their high-grade Madsen Mine gold project.

With two northwestern Ontario First Nation communities also on board with the project, the Vancouver developer announced in an Aug 7 news release that Madsen is now “fully funded” and the wheels arein motion to immediately begin development work.

The company expects the first gold pour will be sometime in late 2020.

Sprott’s financing packaging consists of a credit facility for US$65 million and US$25 million gold stream.

Combined with the C$47.5 million they raised earlier in equity financing, Pure Gold said they have enough flexibility to continue exploration drilling on their 47-square-kilometre property and build up their gold resource base.

And the timing couldn't be better.

Gold prices have risen from US$1,275 per ounce – the number Pure Gold built the project’s feasibility study on – to US$1,474 per ounce.

Moreover, the Canada dollar has remained stable at 75 cents against the US greenback. That translates to a record-high Canadian dollar gold price of C$1,957 per ounce.

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Pure Gold’s property contains the former Madsen and Starratt Mines, which over a 36-year production history mined 2.5 million ounces of gold. It’s located just southwest of the community of Red Lake.

On the site, there’s an existing mill, a tailings facility, power lines, a paved road, a headframe, a 1,275-metre deep shaft, 27 levels of underground workings, a portal and a ramp.

The current indicated resource is 2,063,000 ounces gold at 8.9 grams per tonne (g/t) gold, with an inferred resource of 467,000 ounces gold at 7.7 g/t gold.

A feasibility study released on Madsen back in February outlined a 12-year mine life.

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“We are very pleased with the financial commitments that Sprott have made towards the development of the project,” said Pure Gold president Darin Labrenz in a statement.

“We have achieved our objective of securing a flexible financing package on terms that are competitive and protect the upside for our shareholders. The optionality of repayment of both the facility and the gold stream in a rising gold price environment provides an opportunity to refinance once in production and generating solid cash flows from the mine.

“Combined with the recently completed equity financing, this package secures approximately $90 million of immediate funding enabling us to initiate construction and puts us on track for first gold pour by late 2020.”

As part owners of Pure Gold, Sprott commented that they are excited to partner on the development of the mine.

“Our partnership with Pure Gold is consistent with our strategy of providing innovative and flexible capital to maximize the value of exceptional projects,” said Dušan Petković, principal of Sprott.

"We are pleased to participate alongside our colleagues at Sprott Capital Partners and play an integral role in fully funding the construction of the Madsen Red Lake Mine."