Debt-free Queenston quiet on Kirkland West talks

While a shutdown at the McBean open pit near Kirkland Lake, Ont., reduced Queenston Gold Mines’ 1987 earnings, the Toronto company is negotiating a joint venture agreement with Lac Minerals at the promising Kirkland Lake West property.

Queenston Chairman Hugh Harbinson said an agreement has not been reached, but it is likely that a deal will attempt to bring the property to production by the early 1990s.

Debt free, and with HSK Minerals and Joutel Resources sharing a 42% controlling interest, Queenston reported net earnings of $571,000 or 6 cents pe r share in 1987 compared with $777,000 or 8 cents per share last year.

At year-end, Queenston’s working capital position remained steady at $1.94 million compared with $1.95 million in 1986. “The decrease in 1987 was caused by the closure of operations at the McBean Open pit in November, 1986,” Queenston says.

Almost a year after HSK and Joutel bought a block of four million Queenston shares from the Canadian Imperial Bank of Commerce, Queenston is involved in two major underground exploration programs at the Kirkland Lake gold camp where it has both direct and indirect interests in 66,000 acres of gold lands.

They include Lac’s Macassa Mine project and the Anoki gold property at Larder Lake, Ont.

With an estimated 600,000 tons grading 0.15 oz gold per ton in place, Queenston says the Anoki joint venture (Inco Gold 65% and Queenston 35%) project could at the production decision stage this fall.

At a cost of $7 million, the partners are driving in a 3,500-ft ramp to access the 735 level before taking a 30,000-ton bulk sample. Before the program is completed in July, the property will be tested by some 40,000 ft of underground diamond drilling.

A revised reserve picture below level 6,450 at the Macassa mine site where Queenston earns royalties on the 50%-owned Gracie East and St. Joseph zones, was good news for the company.

Production from Gracie East and St. Joseph increased Queenston’s Macassa royalty earnings from $86,273 in 1986 to $206,156 in 1987.

Since Lac was able to access four new development headings from the 7,225-ft No 3 shaft, reserves have increased from 70,000 tons grading 0.7 oz to 83,000 tons grading 0.59 oz.

“Additional drifting and raising is required before a final ore reserve potential can be estimated,” Queenston says.

Next door, Queenston’s Kirkland Lake West property is the subject of negotiatons involving Queenston and Lac Minerals. Regarded as the most valued exploration play in the Queenston portfolio, it is thought to contain the western extension of the Kirkland Lake “Main Break.”

So far, the geological formation has produced 23 million oz gold and supported seven gold mines. It was explored previously by limited surface work and by two underground holes drilled from a depth of 5,700-ft at the Macassa mine.

Recognizing that potential, Northfield Capital Corp. of Toronto and a private company called Canadian Ore Mining, agreed to earn a 50% interest by spending $50 million to bring Kirkland Lake West to production.

Essentially, the deal would have allowed Queenston to bring the property to production without spending a penny.

However, as reported (N.M., Dec 28/87), Northfield was forced to cancel the agreement after the Oct 19 market downturn rendered it unable to finance the 1988 exploration program.

As negotiations between Lac and Queenston continue, market watchers don’t expect a future agreement, to be quite as sweet from the Queenston point of view. “It’s a tougher market now and Lac will try to grind them down on this one,” said Davidson Institutional analyst Ernest Nutter.

The Queenston Gold issue was trading recently on the Toronto Stock Exchange at $1.75 in a 52- week range of $3.15 and $1.10.