McWatters restarts Sigma-Lamaque

With construction wrapped up on time and on budget, McWatters Mining (MWA-T) has resumed operations at the newly expanded gold mill at the Sigma-Lamaque open-pit mine in Val-d’Or, Quebec.

The mill, which had been idle since last February, is currently running on a regular 24-hours-a-day, seven-days-a-week schedule. It is being fed low-grade stockpiled ore at a rate of 3,000 tonnes per day. The low-grade stockpile, set aside for the resumption of operations, contains 60,000 tonnes of ore averaging 2.5 grams gold per tonne.

Ore grade material will be introduced in early December, and commercial production levels are expected by the beginning of 2003.

Once the circuit is stabilized, McWatters plans to gradually increase throughput to 4,000 tonnes per day in early 2003. By the fourth quarter of 2003, the mill is expected to hit its design capacity of 5,000 tonnes daily.

In the end, the expansion is aimed at boosting production to 150,000 oz. per year over the next six years at a cash cost of US$165 per oz. and a total cost of US$212 per oz.

Mining operations at Sigma-Lamaque are currently turning out about 45,000 tonnes of overburden, waste and ore per day.

At last count Sigma’s in-pit reserves stood at 10.4 million tonnes grading 2.7 grams gold per tonne, using a cutoff grade of 0.9 gram gold. Another 10.5 million tonnes running 2.46 grams is classified a resources.

Earlier this year, a bail-out by the provincial government left McWatters with a 60% stake in Sigma-Lamaque. Quebec government-owned Soquem grabbed the remaining 40% for $15.8 million.

The two have hedged 110,000 oz. of Sigma-Lamaque future production. Put options cover 25% of the production at $450 per oz. Another 25% are covered by variable-term obligations to sell at $540 per oz. Delivery obligations under the variable terms increase from zero at average monthly gold prices of $540 per oz. to 25% at prices of $590 per oz. or higher.

In late-afternoon trade on Nov. 27, McWatters shares were trading half a penny higher at 16 in Toronto. The shares have traded in a 52-week range of 4-20.