Major cash flow improvement anticipated by Queenstake

A marked improvement in operating cash flow is expected by Queenstake Resources this year because of two new acquisitions and a higher gold price. At the annual meeting, Gordon Gutrath, president, also predicted the stronger cash flow would lead to a “much improved share price.”

Queenstake has a 100% interest in the Dos Cabezas gold property in Arizona where it said sufficient reserves exist to develop a gold- silica flux operation. Production would be shipped directly to a nearby smelter and credit given for the gold content. The company noted the reserve potential was such that a 150-200-ton-per-day milling operation might eventually be feasible. There are no plans to farm the property out, rather it will be developed in-house, said Queenstake.

The company’s most recent acquisition is the Pine Creek placer gold mine near Atlin, B.C. It took a year of on-site examination and negotiations to complete the deal which Mr Gutrath said “will dramatically increase our placer gold production in 1987.”A major drill program is under way at Pine Creek and initial results have confirmed the reserves.

In the past five years, the property has produced 4,500 to 6,000 oz gold per year which would allow Queenstake to double its total gold production in 1987.

Giving an overview of Queenstake’s financial situation and objectives, Don Sharp, vice-president finance, said the company’s working capital position of $650,000 “will fund placer operating costs through receipt of production revenues in July.” In the first quarter, Queenstake issued shares for a net of $1.25 million which was used to pay off bank debt, creditors, plus fund placer equipment renovation and project mobilization.

In early May, a 1,150-oz gold bullion loan was drawn from Degussa Corp. yielding $700,000 which is repayable from production. With the exception of the bullion loan, none of Queenstake’s 1987 gold production is hedged, so the company has “gained the full benefit of the recently strong gold market,” he said. Excluding the Atlin project, Queenstake’s placer gold production is expected to exceed the 6,400 oz produced in 1986.

Mr Sharp added that Queenstake’s direct capital outlays in hardrock and placer projects will be marginally reduced this year although “contributions by third parties will increase substantially.”