McWatters pulls plug at Sigma-Lamaque

McWatters Mining (MWA-T) has ceased mining at its money-losing Sigma-Lamaque open-pit operation in Val d’Or, Que. Milling, however, 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 in the hope of devising a new mine plan. McWatters says it will need additional financing to resume mining should the new plan prove economically viable.

At last report, reserves stood at 10.4 million tonnes grading 2.67 grams gold 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 US$200-210 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).

McWatters 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 2003 by paying $20 million and issuing nearly 84 million treasury shares for Soquem‘s 40% stake. An additional $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.

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

Cash flow from operations during the second quarter was minus $1.4 million, contributing to a net loss of $3.5 million (or a penny a share), compared with a profit 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.