Vancouver – For the first time since acquiring the Jerritt Canyon mining complex in mid-2003, Queenstake Resources (QRL-T, QEE-X) has delivered a profitable quarter from the underground gold operation in northeastern Nevada.
The mid-tier producer earned US$731,000 in its latest second quarter, compared to a loss of US$5.6 million in last year’s Q2, from gold sales of 51,216 ozs. that generated record revenues of US$32.2 million for the company.
Despite a 12-day mill refurbishment shutdown in April, gold output from Jerritt Canyon during the second quarter was 50,421 ozs. at cash operating costs of US$461 per oz. Queenstake president and CEO Dorian L. (Dusty) Nicol commented, “With an average realized gold price of US$627 per oz., our cash margin was US$166 per oz. for the quarter, the best since we acquired Jerritt Canyon in mid-2003.”
Underground development accounted for the lion’s share of the US$6.7 million in capital expenditures incurred over the quarter that also included underground exploration drilling plus the purchase and refurbishing of portions of the processing plant. Besides some capital lease obligations, Queenstake reports no long term debt.
The company, along with all Nevada gold producers, was affected by higher labour, contractor, energy and commodity costs over the quarter, which contributed to the 24% rise in operating costs versus Q2-2005. Blending of some lower grade ore over the quarter resulted in an average process grade of 7.5 grams gold per tonne (0.22 oz. per ton), slightly below the 8.6 grams gold (0.25 oz. per ton) modeled in the redevelopment plan.
“We remain an unhedged U.S. gold producer,” continued Nicol. “Queenstake is one of the most leveraged gold equities, allowing maximum investment exposure to the gold price.”
The Denver-based company has lowered its 2006 gold production estimate to 180,000-to-200,000 ozs., reflective of the mill production issues, longer haul distances from the SSX and Steer mines and its commitment to process lower-grade Newmont ore in the second half of this year.
During the quarter, Queenstake also closed its US$10 million private placement with Newmont Mining (NMC-T, NEM-N) giving the major a 4.9% shareholding. With its Jerritt Canyon mill now back at full capacity, Queenstake is committed to process 500,000 tonnes of Newmont supplied ore in each of 2006 and 2007. The purchased ore was largely stockpiled over the second quarter but the company is now blending it with its own mined material. The Newmont ore is expected to aid in processing during the wet winter season, as it is blockier and does not tend to hold as much moisture as the Jerritt Canyon ore.
In July, the Jerritt Canyon mine marked its 25th year of operation and has produced 7.5 million ozs. of gold.
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