First-quarter profit greets Queenston shareholders

A first-quarter net income of $120,000 (1 cents per share) has been recorded by Queenston Gold Mines, compared with a loss of $94,000 (1 cents per share) for the same period in 1986. The company showed lower revenues during the quarter but increased custom milling and gold production royalties.

The debt-free company is now owned 41.5% by two junior mining firms, HSK Minerals and Joutel Resources, each of which recently bought 2 million shares of Queenston at $2 per share from the Canadian Imperial Bank of Commerce.

Queenston President Michael Gray welcomed both of the new major shareholders at the company’s recent annual meeting, which was delayed approximately two weeks to allow the new shareholders an opportunity to participate.

Queenston has two main sources of revenue: it receives royalty income from property owned jointly with Lac Minerals and mined at Lac’s Macassa Mine in Kirkland Lake, and receives revenue from the McBean custom milling joint venture with Inco Ltd., located east of Kirkland Lake. The company also has interests in more than 65,000 acres of prospective gold lands in Ontario and Quebec.

For fiscal year 1986, Queenston recorded a net income of $777,000 (8 cents per share), compared with a loss of $236,000 (3 cents per share) for the previous year. Revenues last year, at $3.3 million, were slightly higher than in 1985. Working capital at the end of 1986 stood at almost $2 million. Properties jointly held

In the Kirkland Lake area, Queenston and Lac jointly own the Gracie East and St. Joseph properties, one or the other of which has been mined continuously as part of Lac’s Macassa mine since the mid-1970s. Macassa’s No 3 shaft, at 7,225 ft deep, is the deepest single-lift shaft in the western hemisphere.

The No 3 shaft is 600 ft west of Gracie East and 400 ft north of the St. Joseph property. It is in full operation, and Lac is currently developing new production levels between 6,450 ft and 7,050 ft.

Development on the 7,050-ft level late last year and early this year encountered the mine’s “04” gold structure, including high-grade mineralization on both the Gracie East and St. Joseph properties. This discovery, and accessing of the indicated high grade reserves (estimated at 70,000 tons at 0.7 oz gold per ton) below the 6,450-ft level, improve the possibility for increased royalty payments for Queenston this year, Mr Gray reports.

Queenston’s royalties last year totalled $86,273, down from royalties in 1985 of $118,109, a drop blamed on a decreased operating profit for the Macassa mine as a whole.

Gold reserves at the end of 1986 were down slightly from those in 1985; Queenston is confident, however, that ongoing exploration will significantly boost reserves.

The McBean open pit operation, in which Queenston’s interest is 35%, was mined out in August, 1986, with sufficient ore stockpiled to allow mill ing operations to continue until November of that year. Queenston recovered its $2.2 million initial investment from the planned 3-year operation, and generated an excess cash flow of $418,000. Custom milling contracts

Queenston also has a 35% interest in the 500-ton-per-day McBean mill. A custom milling contract with Yorbeau Resources was completed in October of last year, and a second contract was signed with Golden Shield Resources. Treatment of Golden Shield’s ore, which began in January, should continue through most of the year, Mr Gray reports.

On the exploration side, Queenston considers the Kirkland Lake West gold property a top priority this year. The company has submitted a proposal to Lac for underground exporation on the property, which is located 300 ft west of Lac’s Macassa mine workings and 1,200 ft from Macassa’s No 3 shaft.

Of two surface drill holes completed on the property in the fall of 1986, one intersected 110 ft grading 0.02 oz, including 12 ft at 0.1 oz and 8 ft at 0.06 oz, while the second, 200 ft to the east, intersected 5 ft grading 0.12 oz.

In other news, Queenston and Inco have agreed in principle to form a new company to accelerate exploration and possible development in the region east of Kikland lake. The new company, initially to be owned equally by Queenston and Inco, will acquire the Inco/ Queenston McBean mine area joint-venture lands, the McBean mine property and mill, and the Upper Canada mine property with related buildings and mine equipment. The companies are hoping a successful completion of public financing will permit exploration to begin this summer.