TSX-V-listed West Red Lake Gold Mines (WRLG) on Monday announced that it would buy the Madsen mine, in Ontario’s Red Lake gold camp, from struggling miner Pure Gold Mining.

WRLG would pay C$6.5-million in cash, 28.46-million shares and a 1% secured net smelter royalty (NSR), as well as up to $10-million in deferred consideration payments.

The transaction is subject to certain conditions and the approval of the British Columbia Supreme Court in Pure Gold Mining’s ongoing proceedings pursuant to the Companies Creditors Arrangement Act proceedings.

The Madsen mine, also referred to as the PureGold mine, was placed in care and maintenance in October, after Pure Gold Mining failed to secure additional funds to keep the mine operational. The company filed for creditor protection a couple of days later.

WRLG has described the acquisition of PureGold Mining as transformative for the company.

"The acquisition of the Madsen mine is a major step, and positions us as a leader in Red Lake gold exploration and development.

"This transaction is highly accretive to WRLG shareholders. The path forward involves defining a critical mass of high-grade reserves and resources, optimizing 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. With a wealth of targets near the Madsen mine, alongside regional prospects and those within our existing Rowan project, we are confident that the brightest days for our consolidated portfolio are just ahead,” said WRLG CEO and director Tom Meredith.

WRLG explained that the share and NSR consideration would accrue to Sprott as a fund managed by Sprott is the senior secured lender to Pure Gold. WRLG has entered into an engagement letter with Canaccord Genuity in respect of a "bought-deal" private placement of subscription receipts for C$20-million and an underwriter's option of C$5-million. Following the transaction, WRLG will become a debt-free, and well-capitalised explorer and developer of high-grade gold in the historic Red Lake gold camp.

Mining investor Frank Giustra, who owns 18.1% of WRLG shares and has committed to lead the proposed financing, commented: "I am proud to be supporting the company that continues the work of past generations at the Madsen mine. The acquisition appeals to me due to its high-grade resources, modern infrastructure, potential, and strategic location. I look forward to contributing to the company's growth and energising this iconic Canadian gold camp for future generations."