McWatters suspends Sigma-Lamaque to save cash

McWatters Mining (MWA-T) has put a halt to mining activities at the Sigma-Lamaque open-pit operation in Val d’Or, Que., as expenses have been outpacing revenues over the past few weeks.

McWatters says milling at the operation will continue until all stockpiled ore has been processed.

Meanwhile, the company is working with mining consultant RSG Global to confirm tonnage and grade estimates at Sigma-Lamaque with an eye toward coming up with a new mine plan. McWatters also says it will need additional financing to resume mining should the new plan prove economically viable. McWatters is also consulting Dundee Securities about its options.

At last report, Sigma-Lamaque’s reserves stood at 10.4 million tonnes grading 2.67 grams per tonne.

Earlier this summer, McWatters trimmed its 2003 production forecast to 80,000-85,000 oz. gold at US$255-265 per oz. The company had originally planned to pour 100,000-110,000 oz. at $US200-210 per oz. The decrease was attributed to lower-than-expected grades, the result of a waste backlog at the mine (T.N.M., June 30-July 6/03).

Mc Watters had hoped to have the operation running at feasibility levels by 2004. Under the old mine plan, the operation was to have yielded 856,000 oz. before being depleted in 2008. Cash costs were pegged at US$165 per oz.

McWatters re-acquired full ownership of Sigma-Lamaque in late February, by paying $20 million and issuing nearly 84 million treasury shares for Soquem’s 40% stake. Another $2 million is due by mid-2005. In 2002, a bail-out by the provincial government left McWatters with a 60% stake in Sigma-Lamaque; Soquem grabbed the remaining 40% for $15.8 million.

In the boardroom, McWatters founder, president and CEO Claire Derome has resigned. Michel Bouchard, vice-president of mining development replaces Derome on an interim basis.

McWatters cash flow from operations during the second quarter was minus $1.4 million, helping the company to a net loss of $3.5 million (or a penny a share), compared with net profits of $700,000 in the corresponding period of 2002. At quarter’s end, the company had $12 million in cash and working capital of $11.4 million.

McWatters’ share price was halved to 5 in heavy, late afternoon trading in Toronto following the news on Oct. 1. The shares have steadily declined since the beginning of the year as the Sigma-Lamaque operation has been dogged by operational setbacks.