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Gold's meteoric rise this year despite headwinds has puzzled market observers. Since February, gold prices have remained well above the $2,000 mark and even briefly hit a record high over $2,400 in mid April.
As it turns out, the rally may find its roots in China, particularly on the Shanghai Futures Exchange (SHFE), where a surge in retail investors is reshaping the global gold market.1
While gold markets in London and New York have seen increased activity, the SHFE stands out for its dramatic rise from a low base. This surge in trading volumes suggests a wave of Chinese investors propelling gold prices higher.
China's traditional interest in gold as a savings tool has been revitalized by economic uncertainty and deglobalization, reflected in a 17-month buying spree by the People's Bank of China and increased consumer and institutional demand. This surge in demand has been augmented by a surge in speculative trading on the SHFE.
However, not everyone agrees that Chinese investors are the sole drivers of gold's ascent. Jeff Christian, managing director at CPM Group, believes the trend is broad-based, encompassing both institutional and retail investors globally.
Gold's future trajectory may hinge on the sustainability of Chinese interest. Some speculate that investors on the SHFE may be betting on short-term fluctuations in the yuan, particularly during the exchange's night sessions coinciding with shifts in US economic data.
Despite gold prices increasing by over 25% since October 2023 lows, gold stocks have remained undervalued.2 Fortunately, gold mining stocks are building steam as the market takes notice of the high-potential sector.
West Red Lake Gold Mines Ltd. (TSXV:WRLG) (OTCQB:WRLGF) is emerging as a notable player in the gold market, targeting near-term production at its high-grade gold project in Ontario's Red Lake District, a region that hosts some of the world's richest gold deposits producing 30 million ounces of gold to date.3
West Red Lake Gold is focused on developing the fully-permitted Madsen Mine, which boasts a high-grade gold resource of 1.65 million ounces at 7.4 grams per ton (g/t) across 6.9 million tonnes (Indicated), and an additional 366,000 ounces at 6.3 g/t (Inferred). The 47 km2 land package sits on highly prospective exploration targets and includes significant infrastructure including an expandable 800 tonne per day processing mill, underground equipment and a water treatment plant. The company also owns the 31 km Rowan Property in Red Lake, home to three former gold mines: Rowan, Mount Jamie, and Red Summit.
West Red Lake Gold Mines Unlocks More Value from Cleanup at Madsen Mill
Since acquiring the Madsen Mine less than a year ago, West Red Lake Gold Mines Ltd. (TSXV:WRLG) (OTCQB:WRLGF) has been strategically moving it forward to a restart and a targeted timeline for gold production in 2025.
On May 1, the company reported significant progress in their cleanup and gold recovery operations at the Madsen Mine, uncovering substantial amounts of previously unaccounted for gold. This initiative has already yielded 415 ounces of gold valued at approximately $750,000 from an initial recovery phase. Encouraged by these results, West Red Lake Gold began a more thorough cleanup in early 2024, with expectations to recover a substantial amount of gold that was locked up in the milling circuit by the end of May.
West Red Lake Gold Mines Ltd. (TSXV:WRLG) (OTCQB:WRLGF) also recently outlined its 2024 regional exploration strategy for the Madsen and Rowan Properties. At Madsen, regional mapping and geochemical sampling will begin in May 2024, with a focus on the Confederation Assemblage of rocks. This area has seen minimal exploration since 2014.
Historically, exploration in the Red Lake district has concentrated on the Balmer Assemblage of rocks, neglecting the Confederation rocks. However, recent discoveries at Dixie Lake prompted a reevaluation. West Red Lake Gold plans extensive mapping and sampling across Confederation rocks, covering approximately 50% of the Madsen land package.
At the Rowan Property, up to 15,000m of surface drilling is planned at the Rowan Mine deposit, starting in early June 2024. This fully funded drill program aims to expand on the existing high-grade mineral resource.
Additional regional mapping and geochemical sampling programs will begin in June 2024 to generate new drill targets across the Rowan property.
Earlier this month West Red Lake Gold Mines Ltd. (TSXV:WRLG) (OTCQB:WRLGF) announced significant drill results from the high-grade South Austin Zone at Madsen, which holds an Indicated mineral resource of 474,600 ounces of gold at 8.7 g/t and an Inferred resource of 31,800 ounces at the same grade.
Key findings include 1.1 meters at 68.36 g/t gold, encompassing 0.5 meters at 145.44 g/t, and 3.95 meters at 13.83 g/t gold, which includes 0.5 meters at 105.72 g/t.
These recent drill results are encouraging, and contribute to West Red Lake Gold's strategy to build up a base of high-grade, high-confidence gold ounces vital for the early phases of mine production.
The company also just closed an upsized private placement for US$27.1 million, which will be used to continue to advance the development of a restart plan for the Madsen Mine.
Visit their website or explore their corporate presentation to learn more about West Red Lake Gold Mines Ltd. (TSXV:WRLG) (OTCQB:WRLGF).
Footnotes:
[1] https://www.bnnbloomberg.ca/gold-s-record-setting-rally-may-have-its-roots-in-chinese-frenzy-1.2062913
[2] https://www.mining.com/web/gold-stock-upside-targets-2/
[3] https://www.theglobeandmail.com/investing/markets/stocks/WRLG-X/pressreleases/22442097/west-red-lake-gold-announces-sprotts-investment-of-us2631463/
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