McWatters slashes costs at Quebec gold mines

McWatters Mining (MCW-T) has rebounded from a difficult first quarter and turned a small profit from its gold mines in Val d’Or, Que.

During the 3-month period ended June 30, McWatters earned $863,511 (or 1 cents per share) on revenue of $18.2 million, compared with a profit of $1.2 million (3 cents per share) on revenue of $20.9 million in the second quarter of 1998. The net loss for the first quarter of 1999 was $5 million (11 cents per share).

Gold production totalled 45,707 oz. during the second quarter (23,922 oz.

from the Sigma-Lamaque complex and 21,785 oz. from the Kiena mine), compared with 47,474 oz. a year ago.

Total production costs were slashed dramatically during the recent quarter to US$240 per oz. gold, compared with US$307 in the first quarter of 1999 and US$255 in the second quarter of 1998.

For the first half of 1999, McWatters produced 85,930 oz. gold at a total production cost US$272 per oz., compared with 88,857 oz. at US$272 in the corresponding period last year.

McWatters attributes its recovery in the second quarter to its restructuring of the Sigma-Lamaque complex, where greater emphasis was placed on low-cost open-pit mining.

While underground mining at Sigma was suspended in March, trial underground production continued at a reduced daily rate of 400-500 tonnes, yielding 6,481 oz. gold during the second quarter at a total production cost of US$199 per oz. This compares with 12,914 oz. produced at US$382 per oz. in the corresponding period last year.

In view of this cost turnaround, McWatters has decided to continue limited underground mining at Lamaque on a permanent basis, securing jobs for at least 63 employees. When McWatters’ reorganization is complete, the company’s workforce in Val-d’Or will total 288 employees, compared with 436 on Dec. 31.

Across town, Kiena continued to be a solid performer for the company, with second-quarter production totalling 21,785 oz. gold at a production cost of US$250 per oz.

McWatters is studying the possibility of boosting annual gold production to 250,000 oz. at cash operating costs of less than US$210 per oz. The study will look at increasing daily milling capacity to 5,750 tonnes, boosting production from open pits and beginning underground production at the East Amphi open-pit.

Overall, McWatters is on track to produce 170,000 oz. gold this year — 85,000 oz. from each of Sigma-Lamaque and Kiena — at a cash operating cost of US$225 per oz.