McWatters extends reach in northwestern Quebec

Two transactions, one with Quebec mining enterprise SOQUEM and another with Barrick Gold (ABX-T) will give McWatters Mining (MWA-T) a major position in the Val d’Or region of northwestern Quebec.

In one deal, McWatters will buy out SOQUEM’s 40% interest in the Sigma-Lamaque mine and mill complex, bringing its own holding in the property to 100%. SOQUEM gets $22 million in cash and $12 million worth of McWatters shares on closing, and a further $2 million two years later.

Sigma-Lamaque, which recently resumed production after a 20-month shutdown, is putting about 3,600 tonnes per day through its mill, with production scheduled to ramp up to 4,000 tonnes per day this year. The mine should pour between 105,000 and 110,000 oz. gold in 2003 if all goes according to plan.

The second deal sees Barrick sell the mothballed East Malartic mill, about 20 km west of Val d’Or, and the surrounding properties.

McWatters plans to use the mill, which previously processed ore from Barrick’s Bousquet mine, for production from its advanced East Amphi gold project, a 4-km road haul the East Malartic mill. Current feasibility work at East Amphi indicates annual production of 45,000 oz. gold at a cash cost of US$227 per oz.

Barrick gets a variable net smelter return in exchange, amounting to 2% at lower gold prices and 3% at higher prices. The prime benefit in the deal for Barrick is that McWatters assumes environmental and closure liabilities for East Malartic. The major is paying $1.2 million into a reclamation trust for the property, and will subscribe for $5.8 million in McWatters shares.

For McWatters, the purchase frees the Kiena mill, near Val d’Or, for a resumption of production at the Kiena gold mine. At Kiena, where production has been suspended since the third quarter of last year, McWatters has outlined an indicated resource of 2.9 million tonnes grading 4.3 grams gold per tonne, at a cutoff grade of 2 grams per tonne and with a minimum mining width of 2 metres.

The two transactions are being financed by a $35-million share issue, which will cover the cash requirements for the SOQUEM buyout and provide McWatters with some working capital for exploration and development at the East Amphi and Kiena properties.

The East Malartic sale is scheduled to close by the end of March. There is as yet no closing date settled for the Sigma buyout.