Queenstake finances Magistral

Two separate agreements have provided Queenstake Mining (QRL-V) with the financing and equipment needed to place its wholly owned Magistral gold project into production.

The proposed heap-leach project is in Mexico’s Sinaloa state, and has proven and probable reserves of 6.1 million tonnes grading 1.86 grams gold per tonne, equal to 368,400 contained ounces gold.

The first agreement will generate US$6.1 million of financing to develop the mine. Midwest, a private corporation based in Delaware, agreed to provide the funds in return for a half-interest in the Magistral joint venture and a 15% equity interest in Pangea Resources, the subsidiary that owns Magistral.

In the second deal, Queenstake acquired a 6-month option to acquire the shares of Oro, a Mexican company owned by Campbell Resources (CCH-T) that had previously operated the Santa Gertrudis gold mine in Sonora state. The option payments are US$25,000 per month, to be paid to Campbell for at least six months. The purchase price will be satisfied by two notes totalling US$2 million, subject to conditions; such as certain milestone gold prices that must be reached and sustained for 120 days before the end of 2005, and credits for reclamation costs.

The past-producing Santa Gertrudis has gold resources that require a higher gold price in order to be economic. Should this come about, Campbell will be entitled to one-third of any profits. Queenstake says mining equipment and buildings from Santa Gertrudis are appropriate for use at Magistral, with the exception of some crushing equipment. The costs of moving and re-erecting this equipment are considered as capital and operating costs within the Magistral joint venture.

An independent feasibility study has been completed for Magistral, with mine planning focused on four discrete pits. Production from known reserves will produce 268,500 oz. over seven years at a recovery rate of 72.9%. The stripping ratio is estimated at 5.6-to-1, whereas direct operating costs are expected to average US$180 per oz. over the life of the project.