Sigma suspension weighs on McWatters (November 19, 2001)

With mining still suspended at the Sigma-Lamaque open-pit gold mine in Val d’Or, Que., McWatters Mining (MCW-T) has posted a net loss of $1.7 million (or 3 per share) on revenue of $8.2 million for the three months ended September 30.

In the corresponding period of 2000, the company’s restated net loss tallied to $16.9million (22 per share) on revenue of $12.5 million. Cash was consumed by operations to the tune of $532,000 during the latest quarter, compared with positive cash flow of $398,000 a year earlier. Third-quarter 2000 results were restated to reflect a non-recurring charge of $13.9 million related to the permanent closure of the Sigma-Lamaque underground operation.

For the first three quarters of the year, McWatters loss piled up to $5.4 million (8 per share), compared with a year-ago loss of $20.8 million. Revenue slipped to $30.9 million from $47.9 million.

McWatters produced 18,332 oz. of gold at cash operating costs of US$223 per oz. during the latest quarter. The ounces came exclusively from the underground Kiena gold mine. During the same quarter of 2000, McWatters poured 28,847 oz. at US$262 per oz. So far this year, production totals 67,274 oz. at US$228 per oz., down from 108,758 oz. at US$247 per oz. in 2000. The company is seeking additional funds to carry out an exploration program that could extend Kiena’s life into 2002.

The company averaged US$286 per oz. for its third-quarter production and US$281 per oz. so far this year, compared with US$292 and US$296 per oz. in the respective periods of 2000.

In Early August, McWatters obtained all necessary approvals to move a portion of the main highway leading into Val d’Or, Que. Highway 117 currently passes over key, shallow gold reserves that were only discovered in recent years at Sigma-Lamaque. The bulk of the $7.1-million price tag for the relocation will be covered by a $4.4-million grant from the Quebec government and another $2.2 million from the federal government. McWatters has pledged the remaining $500,000, and the town of Val d’Or will manage the project.

On October 9, McWatters was granted an extension December 11, 2001 for the filing of a plan of arrangement under the Companies Creditors Arrangement Act. In mid-February, the company simultaneously halted mining at Sigma-Lamaque and obtained protection under the act to permit a financial restructuring.

Looking ahead, the company says it needs additional capital to resume operations and complete a planned mill expansion at Sigma-Lamaque. The company also notes that if additional capital can’t be raised, it may need to permanently cease all of its operations.