The final batch of results from winter drilling has brought
McWatters, which depleted known reserves last fall, has been exploring the so-called Hanging Wall zone. The zone was discovered by
Exploration picked up steam in 2002, after geologists compiled the historic results. By year-end, underground drilling had delineated 1.2 million tonnes of measured and indicated resources grading 4.25 grams per tonne.
The resource is divided among two lenses, dubbed P and R. These are enclosed by a flat-lying alteration corridor and are 10-150 metres above S-50, which also was flat-lying. The lenses are geologically similar to the upper part of S-50, being hosted by sulphide- and gold-enriched schistose and locally brecciated basalts and komatiites.
The recent program included 24 surface holes, of which all except one yielded encouraging grades over appreciable widths. The results also suggest the separate C vein and North-East and South zones are also part of the Hanging Wall zone.
At the P zone, eight holes cut mineralized intervals measuring 1.6-16 metres in core-length and carrying 2.47-7.03 grams gold. The shortest and longest sections had the highest and lowest grades, respectively.
The P zone has now been traced along strike for 1.2 km. It sits 10-30 metres above S-50 and averages 5.5 metres in width and has a vertical extent of 150 metres.
A ninth hole, S-482, ran 4.2 grams over 2.5 metres and 4.48 grams over 2 metres of C-vein material. The C vein is now considered part of the P zone.
At last report, the C vein hosted a measured and indicated resource of 691,000 tonnes at 3.91 grams. Similarly categorized resources in the Northeast zone stand at 893,000 tonnes grading 4.31 grams, and in the South zone, at 108,000 tonnes grading 5.43 grams.
Two holes pierced the R zone to yield 14.27 grams over 2.4 metres and 4.16 grams over 3.6 metres. The R lens is 150 metres above S-50 and, at last report, had a strike length of 410 metres, an average width of 30 metres and a vertical extent of 150 metres.
The winter campaign also extended the S-50 zone for 200 metres from previous workings, toward the C vein. The southeastern extension averaged 1.63-4.56 grams in the five holes drilled there, over 2.5-7.1 metres of core-length.
McWatters is proceeding with a scoping study.
Meanwhile, McWatters has been forced to shut down the nearby Sigma-Lamaque mill, owing to an electrical malfunction in the semi-autogenous grinding circuit. The problem followed a power fluctuation in the main line to the Hydro Quebec grid. McWatters has not determined the cause of the problem but notes that the mill’s motor was not damaged. Normal operations are expected to resume shortly, and open-pit mining has not been affected.
McWatters still expects to achieve full production rates in the fourth quarter and to have produced 110,000 oz. by year-end. The company had been pushing an average of 4,000 tonnes through the mill, or 1,000 tonnes less than capacity.
Cash costs are expected to ring in at US$210 per oz.
At last report, Sigma-Lamaque hosted 10.4 million tonnes of reserves grading 2.67 grams per tonne. In all, the reserve is expected to yield 856,000 oz. by the time it is depleted in 2008. Cash costs are expected to average US$165 per oz.
McWatters recently re-acquired full ownership of Sigma-Lamaque, having paid $20 million and issued nearly 84 million treasury shares to Soquem. Another $2 million is due by mid-2005.
In early 2002, the Quebec Crown corporation acquired a 60% stake after the provincial government lent McWatters $15.8 million to repay debt. McWatters accepted the loan as part of a broader restructuring of its financings that has since given rise to its revival as a gold producer in the Val d’Or region.
More recently, McWatters bought the East Malartic mill and related properties from
At last report, East Amphi contained an underground reserve of 1.4 million tonnes averaging 4.16 grams per tonne. Cash costs are expected to average US$227 per oz.
As part of the deal, Barrick bought $5.8 million worth of McWatters treasury shares. The placement was part of a larger financing, in which McWatters issued 136 million shares to reap $27.2 million in proceeds. Of that, $20 million went to Soquem in return for its interest in Sigma-Lamaque.
McWatters now has roughly 440 million shares outstanding. This will increase by 20.4 million shares if the underwriters of the equity financing exercise an over-allotment option that also is fixed at 20 per share. The option expires in early May.
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