Queenstake moving in right direction

Vancouver — Based on its latest quarterly results, Queenstake Resources‘ (QRL-T, QEE-X) leaner and meaner operating plan at the Jerritt Canyon mine complex in Nevada seems to be hitting its marks. Gold production of 49,613 oz. (at cash operating costs of US$401 per oz.) over the July-September session actually slightly exceeded projections from the company’s redevelopment plan tabled in mid-August.

Shutting down half the roasting circuit seems to be having the desired effect of stemming the stream of red that has besieged the operation since Queenstake acquired it in 2003. A third-quarter loss of US$4.3 million compares to a US$5.6 million loss in the previous quarter. The company had experienced great difficulty in mining enough ore from underground operations to feed the original roaster design capacity. As a result, Queenstake decided to operate only one of the twin roasters, cycling them to increase operating efficiencies, albeit at lower production levels.

To supplement its reduced ore stream, Queenstake is now also actively soliciting refractory ores and concentrates from other mining operations for roasting and cyanide treatment at Jerritt Canyon.

Commercial production recently began from the Steer mine and the higher-grade Mahala deposit at the Smith mine. The company remains on track for projected 2005 annual production of 200,000 to 220,000 oz. gold at cash operating costs of US$380-US$390 per oz.

Third-quarter gold sales of 54,446 oz. benefited from a higher metal price, with an average of US$442 per oz. realized. Recoveries of 86.5% were obtained over the quarter, matching the year-to-date average, with a process grade of 7.2 grams gold per tonne. By September, the average grade was boosted to 8.6 grams gold, up significantly from the 6.2 grams gold realized in July. Queenstake expects an average process grade of about 8.6 grams gold over the remainder of the year.

District exploration was primarily focused on the Starvation Canyon area, about 19 km southwest of the Jerritt Canyon mill. Infill and stepout drilling has boosted the gold deposit’s indicated resource by 16% to 181,600 contained ounces and improved the average grade to 10.1 grams gold per tonne.

The company sits with about US$14 million of cash and equivalents in its treasury. The stock shed a penny to close at 21.5 per share following the quarterly report card, remaining near the low end of its 52-week 19-56 trading range.