Sigma suspension weighs on McWatters (November 26, 2001)

With operations suspended at the Sigma-Lamaque open-pit gold mine in Val d’Or, Que., McWatters Mining (MCW-T) incurred a quarterly loss for the period ended Sept. 30.

The loss amounted to $1.7 million (or 3 per share) on revenue of $8.2 million for the three months ended Sept. 30, compared with a (restated) loss of $16.9 million (22 per share) on revenue of $12.5 million in the third quarter of 2000. (The year-earlier results were restated to reflect a non-recurring charge of $13.9 million related to the permanent closure of the Sigma-Lamaque underground mine.)

For the first nine months of 2001, McWatters incurred a loss of $5.4 million (8 per share), compared with a year-earlier loss of $20.8 million. Revenue slipped to $30.9 million from $47.9 million.

McWatters produced 18,332 oz. gold at cash operating costs of US$223 per oz. during the latest quarter. The ounces came exclusively from the underground Kiena gold mine, also near Val d’Or. During the third quarter of 2000, McWatters poured 28,847 oz. at US$262 per oz.

So far this year, the company has produced 67,274 oz. at US$228 per oz., down from 108,758 oz. at US$247 in the first nine months of 2000. The company is seeking additional funds to carry out an exploration program that could extend Kiena’s life into 2002.

The company realized an average of US$286 per oz. for its third-quarter production and US$281 per oz. for the first nine months, compared with US$292 and US$296 per oz. in the respective periods of 2000.

In Early August, McWatters was given the go-ahead to move a portion of the main highway leading into Val d’Or. 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.

McWatters has until mid-December to complete 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 expand the mill at Sigma-Lamaque.