McWatters plans expansion

To pay down debts and expand its Sigma operations in Val d’Or, Que., McWatters Mining (MCW-T) intends to raise more than $15 million via a rights offering to its sharehlders.

The gold miner has already received commitments totalling $6 million from several parties, including its institutional shareholders.

Under the terms of the offering, each McWatters common shareholder will receive one right for each share held, with the rights to be listed on the Toronto Stock Exchange until Jan. 31, 2000.

Every 1.2 rights will entitle the holder to buy one subscription receipt at 38 each. If the offering is fully subscribed, McWatters will be issuing 40.6 million receipts.

Then, at a special meeting in late February, shareholders will be asked to approve the creation of an unlimited number of preferred shares. If there is approval, each receipt will entitle the holder to receive one preferred share that will not pay dividends but will be convertible into a single common share.

If shareholders do not approve the creation of preferred shares, each receipt will entitle the holder to receive one common share.

In another development, Credit Agricole Indosuez has agreed to extend the term of McWatters’ US$10-million revolving credit line by one year to March 31, 2001.

During the nine months ended Sept. 30, 1999, McWatters incurred a net loss of $5 million (12 per share) on gold revenue of $52.5 million, compared with a loss of $1.8 million (6 per share) on revenue of $55.8 million in the corresponding period of 1998. Also, the company produced 127,445 oz. gold at a total production cost of US$261 per oz., compared with the 126,900 oz. at US$278 a year ago.

In 1999 at its Sigma mine, McWatters boosted production from its lower-cost open-pit operations while scaling back its higher-cost underground operations. Resources exploitable by open-pit methods stand at 3.9 million tonnes grading 3.31 grams gold per tonne.

McWatters is considering doubling Sigma’s milling capacity to 4,000 tonnes per day; the cost of doing so would be about $4 million.

After the expansion, cash operating costs at Sigma’s open-pit operations are expected to fall below US$200 per oz. Annual production would rise 33% to 80,000 oz. gold.

Meanwhile, the company is seeking financing for its $7-million East Amphi underground gold project, also in the Val d’Or camp. According to a feasibility study, the project is capable of cranking out 60,000 oz. each year at a total production cost of US$225 per oz.