Richmont to buy McWatters’ East Amphi (December 09, 2003)

Montreal-based gold miner Richmont Mines (RIC-T) has struck a deal to acquire embattled McWatters Mining‘s (MCW-T) advanced East Amphi gold property and nearby Fourax property, situated near Malartic in northwestern Quebec, for $7 million in cash.

In an unusual move, McWatters is to complete a $6-million exploration program at East Amphi Property by the end of next year, which will constitute additional consideration for Richmont under the agreement. Richmont will manage the exploration work.

After the exploration work, McWatters will be entitled to receive a 2% net smelter return royalty that will be applicable after 300,000 oz. gold is produced from East Amphi and Fourax. Richmont can buy back the royalty for $1.5 million at any time after the start of production.

According to a 2002 study by SNC-Lavalin (SNC-T), East Amphi hosts a measured and indicated resource of 1.85 million tons grading 0.14 oz. gold per ton for 253,000 contained oz. Most of the resources are within 750 ft from surface.

Richmont says it is confident that underground exploration work can convert resources into reserves and identify additional resources.

The company points out East Amphi and Fourax are less than 10 miles from its Camflo mill, which currently runs at 60% of its capacity.

For its part, McWatters will use the proceeds of the sale to partially repay a bank term loan and other obligations arising from the gold hedging program held by the Sigma-Lamaque Limited Partnership.

McWatters wants to “focus all its energies” to establish the economic viability of its suspended open-pit Sigma-Lamaque gold operation in Val d’Or, Que., and to have the drilling program recommended by RSG Global carried out, so that operations are eventually resumed.