Magistral nears production (September 23, 2002)

With about 20,000 tonnes of crushed ore stacked on the leach pad, equal partners Queenstake Resources (QRL-T) and privately owned Midwest Mining have begun leaching operations at the Magistral gold project in Mexico’s Sinaloa state.

Over the next few months, production will be gradually increased to the target rate of 40,000 oz. gold per year.

Queenstake expects the originally estimated operating cost of US$180 per oz. to be reduced, thanks to the recent addition of some high-grade reserves via an 8,500-metre drill program in June.

Highlights include the following:

o hole 744 — 34.5 metres grading 6.47 grams gold, including 21 metres of 9.45 grams gold;

o hole 736 — 33 metres grading 6.61 grams gold, including 21 metres of 9.99 grams gold;

o hole 748 — 40.5 metres grading 5.01 grams gold, including a 25.5-metre section which returned 7.02 grams gold.

Over its 8-year lifespan, the operation is expected to average a gold recovery rate (over a 240-day leach cycle) of 73%. The gold will be recovered in the adsorption and stripping circuits.

At last count, Magistral’s proven and probable reserves were just under 7 million tonnes grading 2.07 grams gold per tonne, equivalent to 465,100 contained ounces of gold.

Queenstake is awaiting regulatory approval for the issuance of 978,500 shares to satisfy a US$150,000 promissory note to Campbell Resources (CCH-T).

Also, the company recently issued 5.3 million shares, on the exercise of some outstanding warrants, for gross proceeds of $959,380.