November 2, 2009 / 8:23 PM / in 8 years

UPDATE 1-Metanor shares drop after accident at Quebec mine

* 1 person reported dead, 2 missing after accident

* Suspends operations at Bachelor Lake mine

* Shares down 22 percent on TSX Venture Exchange (Updates with details on mine accident, investigation)

TORONTO, Nov 2 (Reuters) - Shares of junior Canadian gold miner Metanor Resources Inc (MTO.V) fell 22 percent on Monday following news that it had suspended operations at its Bachelor Lake gold mine in Quebec after an accident that left one miner dead and two missing.

The company said in a statement late on Saturday that it had lost contact with two of its employees and an employee of mining contractor Montali Inc after they were working late on Friday in a part of the mine that flooded.

A spokesman for Metanor was not immediately available for comment, but the Canadian Press reported that one of three men trapped in the flooded mine was found dead on Monday.

The report indicated that rescue operations to find the other two trapped miners were still ongoing.

However, local media reports indicated that hopes of finding the other two men alive were growing dim more than two days after the accident.

A spokeswoman for the Quebec Provincial Police told Reuters that they were not involved in the rescue operation, but confirmed that an investigation had begun into whether criminal negligence had led to the accident at the mine.

Metanor initially acquired a 50 percent stake in the Bachelor Lake property in northwestern Quebec in 2004 from Campbell Resources. In May 2006, it acquired the remaining interest in the property from Halo Resources.

The underground mine, which had produced about 130,000 ounces of gold in the 1980s, required significant capital to rehabilitate.

Metanor acquired the nearby Barry open-pit mine in 2006 to feed its mill at Bachelor Lake and generate the cash flow that would allow it to finance the redevelopment of the higher grade Bachelor Lake mine.

The company had planned to restart mining operations at Bachelor Lake in mid-2010 and has been ramping up operating capacity at its mill to handle additional production.

Bachelor Lake was expected to account for nearly 60 percent of the ore processed at its mill by mid-2010, according to the company’s website.

Metanor had planned to blend the lower-grade ore from the Barry open-pit mine with the higher-grade ore from Bachelor Lake, a move that was expected to more than double its gold production to about 70,000 ounces a year and drastically reduce mining costs.

It was unclear on Monday how the accident might affect the company’s timetable and production goals.

Shares of Metanor were down 13 Canadian cents at 45 Canadian cents on Monday afternoon on the TSX Venture Exchange.

$1=$1.08 Canadian Reporting by Euan Rocha; editing by Peter Galloway

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