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In late March, the three agreed to postpone the closing of an earlier deal by a week until April 7. That deal would have seen Queenstake fork over US$14 million for the 4,000-tonne-per-day underground operation. Also under the deal, Queenstake would have assumed the operation’s closure and reclamation liabilities, including a new, US$32-million bond. Meridian and AngloGold would have retained a sliding-scale production royalty topping out at 4% and based on the price of gold.
Queenstake President Chris Davie says his company’s decision reflects the effect of geopolitical uncertainties on the equity and gold markets.
Although the death of the deal is a blow to Queenstake’s quest for mid-tier-producer status, the company intends to continue shopping around for other assets.
AngloGold operates the mine and has a 70% stake; Meridian holds the remaining 30%. The operation is expected to churn out 300,000 oz. gold at US$270 per oz. in 2003.
At the end of 2002, proven and probable reserves were estimated at 2.2 million tonnes grading 8.09 grams gold per tonne, equivalent to 581,000 contained ounces, and enough to keep the operation running for just under two years. Queenstake had wanted to extend the mine life until late 2007 by converting some of the additional 2.3 million oz. of resources into reserves.
Production during the extension period was pegged at 225,000 oz. per year at a cash operating cost of around US$250 per oz. The capital cost of converting the resources was estimated at US$20-US$25 per oz.
Queenstake shares ended the April 8 trading session 14 lighter at 24 on a trading volume of 1.2 million shares. For their part, Meridian shares gained 7 to make $13.70. In New York, Phelps Dodge shares were off US13 at US$32.92.
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