Queenstake expands horizons from placers to hard rock

After spending a decade building its placer mining base, Queenstake Resources is using cash flow from this sector to develop several hardrock properties. Gordon Gutrath, president, believes a production feasibility study could be ready for the company’s Dos Cabezas property in Arizona during 1988.

Exploration activity in 1988 will include sampling and geologic mapping of the Gold Prince mine where immediate production can be realized, he notes. From 1984 through 1986, Phelps Dodge produced a total of 14,238 tons of ore from the mine which averaged 0.3 oz gold and 0.4 oz silver. Two types of mineralization occur in the district: gold-bearing quartz sulphide veins and copper-bearing contact metamorphic deposits.

A steeply dipping shear zone 500-1,000 ft wide has been exposed on surface and in underground workings for a distance of at least 1.5 miles from the Gold Prince to the Dives mine. Gold-silver mineralization is associated with the shear structure and ore shoots occur on the hangingwall, footwall, or interior of the shear zone.

At least two productive veins are known to exist in the Gold Prince; and vein widths and ore shoot lengths appear to increase below old workings, says Queenstake. Reserves in three principal categories (proven, probable, and possible) total 103,380 tons grading 0.4 oz gold. Gutrath believes Dos Cabezas will enable Queenstake to progress “from being a relatively small placer gold miner into a mid- sized hardrock/placer gold producer.”

Queenstake has a 25.8% interest in Golden Sitka Resources. Its principal asset is the historic Chichagof gold mine in Alaska. The Chichagof fissure vein has a known length of approximately 10,000 ft, 20% of which has been mined.

Golden Sitka was incorporated in 1987 to acquire the holdings of the Chichagof joint venture in the Chichagof and Hirst Chichagof gold mines. Over 7,000 ft of underground workings have been reopened and the upper portion of the Big Croppings ore-shoot and the Kay oreshoots have been drilled. Reserves currently stand at 107,000 tons with an average grade of 0.6 oz gold or better. Continued evaluation on these two oreshoots is planned this year.

Last July, Queenstake purchased the Pine Creek placer properties at Atlin, B.C., and mining equipment associated with earlier production. Drill-proven and drill-indicated reserves currently stand at 25,000 oz of recoverable gold.

Placer gold production from all properties last year amounted to 13,190 oz and it’s forecast to rise to 15,155 oz during 1988. About 7,125 oz of this is expected to come from Pine Creek, 5,300 oz from Yukon placer operations (Black Hills and Maisy May Creek), and 2,770 oz from Moyie River near Cranbrook.

Donald Sharp, Queenstake’s vice-president finance, contends that Queenstake’s shares are trading at a very low multiple of market capitalization to gold production. When the calculation was done, Queenstake’s shares traded at $1.10. With 8.6 million shares outstanding and a market capitalization of $9.5 million, Sharp claims the market capitalization per oz of 1987 gold production works out to $720 and $627 for 1988.

He says the low multiple is based only on existing placer gold operations with no adjustment for Queenstake’s $2.8 million cash balance, investment in shares of Golden Sitka ($2 million at current market prices), extensive hardrock property holdings, and heavy equipment fleet valued at $3-$4 million.