Sigma writedown sinks McWatters’ quarter

A dip in production levels and a $16.6-million writedown stemming from the closure of underground operations at the Sigma-Lamaque complex in Val d’Or, Que., pulled McWatters Mining (MCW-T) further into the red during the third quarter.

For the three months ended Sept. 30, McWatters posted a net loss of $17.4 million (or 23 per share) on revenue of $12.5 million, compared with a year-ago loss of $900,000 (3 per share) on revenue of $17.4 million.

The net loss for the first nine months of 2000 was $18.1 million (27 per share) on revenue of $47.9 million, compared with a net loss of $5 million (12 per share) on revenue of $52.5 million during the corresponding period last year.

The open pits at Sigma-Lamaque yielded just 5,904 oz. gold during the third quarter at a total production cost of US$325 per oz., down from 15,202 oz. gold at US$235 per oz. a year ago.

McWatters attributes the lower production to extensive development work, which included the mining of development ore and the removal of waste rock and overburden. The work yielded an additional 3,800 oz. gold to Sigma’s production total during the quarter.

The company recently expanded the milling capacity at Sigma-Lamaque to 3,000 from 2,000 tonnes per day, and engineering studies are under way in an attempt to boost daily capacity further to 4,000 tonnes by mid-2001.

At the Kiena underground mine, west of Val d’Or, McWatters produced 20,814 oz. during the third quarter at a total production cost of US$279 per oz., compared with the 24,147 oz. produced at a total cost of US$218 per oz. during the corresponding period last year.

Overall for the first nine months of 2000, McWatters produced 108,758 oz. gold at a total production cost of US$276 per oz., compared with 127,445 oz. produced at US$261 per oz. a year ago.

McWatters has reduced its forecast production in 2000 by 10,000 oz., to 160,000 oz.

During the recent quarter, McWatters realized an average price of US$292 per oz. for its production, up from US$265 per oz. a year earlier. In the first nine months of 2000, the realized gold price averaged US$296 per oz., compared with US$278 in the year-ago period.

McWatters’ revised hedging program assures the sale of about 25% of its current production at not less than US$290 per oz. The program also caps the potential upside on a maximum of about 25% of production when gold prices exceed US$370 per oz.

At Sept. 30, the company’s current liabilities stood at $28.6 million, whereas long-term debt and capital leases totalled $9.1 million. Current assets totalled $18.1 million.