McWatters to restart Sigma mill soon

Having recently suspended operations at its Kiena underground mine in Val d’Or, Que., McWatters Mining (MWA-T) is looking to regain its gold producer status by re-opening the nearby and newly expanded Sigma-Lamaque open-pit operation, which has been idled since February 2001.

McWatters stopped production at Kiena, its only producing asset, on Sept. 27 and placed the mine on care and maintenance. Kiena’s performance of late hasn’t been terrible: during the quarter ended Sept. 30, the wholly owned mine produced 9,511 oz. gold at a cash operating cost of US$258 per oz. and a total production cost of US$287 per oz. During the same period last year — and prior to a major restructuring in the first quarter of 2002 — Kiena yielded 18,332 oz. gold at a cash cost of US$223 per oz. and a total production cost of US$270 per oz.

For the six-month period ended Sept. 30, 2002, Kiena produced a better-than-anticipated 21,555 oz. gold at a cash cost of US$233 per oz. and a total cost of US$270 per oz. Still, the figures are well off Kiena’s respectable numbers for the previous two years: in 2001, production totalled 81,631 oz. gold at a cash cost of US$202 per oz.; in 2000, output was 86,610 oz. gold at a cash cost of US$227 per oz. McWatters realized an average US$319 per oz. for its gold sales during the recent quarter, and US$310 per oz. for the recent six-month period.

Owing to the dwindling production, McWatters posted a net loss of $573,000 (nil per share) on revenues of $4.7 million, compared with a year-ago, restated loss of $1.9 million (2) on revenues of $8.2 million. For the six months ended Sept. 30, 2002, McWatters squeaked out a profit of $89,000 on revenues of $10.5 million.

McWatters is by no means giving up on Kiena. During the recent quarter, the company carried out a 5,000-metre, 38-hole exploration drilling program which targeted the hanging walls of the deposit between the surface pillar and level 33, at 330 metres depth. McWatters reports that the initial results from the drilling indicate the presence of significant mineralized zones situated 10 to 100 metres above the main deposit.

McWatters is reassessing of Kiena’s economic potential and will add the findings to a feasibility study soon to be completed by consultants SNC-Lavalin at McWatters’ East Amphi project, also situated near Val d’Or. Looking forward, a $34-million development and expansion program at McWatters’ Sigma-Lamaque complex reportedly on-budget and on-schedule for the resumption of commercial production in the first quarter of 2003.

McWatters is boosting Sigma’s mill capacity from 3,000 to 5,000 tonnes of ore per day, which will result in a production capacity of 150,000 oz. per year over the next six years, at a cash cost of US$165 per oz. and total costs of US$212 per oz.

During the recent quarter, preparation work at the site, including moving overburden and waste material, advanced at a daily rate of 40,878 tonness, for a total of 3.8 million tonnes of material moved. Building construction is completed and work related to the installation of a primary crusher and storage system is nearing an end. Carbon-in-pulp and leaching circuits are almost completed, which should allow for the mill to start up in November.

Following a bail out by the provincial government earlier this year, McWatters’ stake in Sigma-Lamaque was reduced from 100% to 60%, though the company remains operator. Government owned Soquem acquired the remaining 40% interest. As a result of the bail-out and restructuring, the number of outstanding McWatters shares has swelled to 205.6 million as of Sept. 30, 2002, up from 79,6 million a year earlier.

McWatters says that the restart of mining at Sigma-Lamaque and an improving gold market leaves the company “very confident” about the future, and that, by 2003, it can “count on a having a solid and profitable base of operations that will enable it to actively develop its other projects.”