Queenstake gold production may include hardrock mines

Placer gold mining operations will continue to represent Queenstake Resources’ (TSE) principal source of cash flow in the next few years. But revenues from hardrock production could also figure prominently in the company’s long-term business strategy.

Addressing Queenstake’s annual meeting in Vancouver recently, Gordon Gutrath, president, noted that gold output from placer sources more than doubled last year to 13,222 oz. He said this was “largely a result of the acquisition of the Pine Creek property located at Atlin, B.C.” Exploration work last season indicated a reserve of 23,000 oz, good for over three year’s of production.

The mining plan for Pine Creek foresees the processing of 250,000 cu yd of tailings and 150,000 tons of in situ reserves or the equivalent of 600,000 tons. Pointing out that 1987 gold output was 7,000 oz, Gutrath said “this is expected to be exceeded in 1988.”

Queenstake’s Moyie River mine near Cranbrook, B.C., was placed into production last year after an intensive 2-year exploration program. Mining is done on a contract basis and the project operates year round. Last season the operation yielded 1,444 fine ounces of gold and “production is expected to increase substantially in 1988,” he said.

Dredging operations at Clear Creek in the Yukon have ceased because of poor grades. An operating profit was possible with grades as low as 0.005 oz gold but the average dropped to 0.003 oz last year which was uneconomic. The company has been advertising for dredging reserves. In the meantime, however, the dredge has been mothballed. Gutrath estimated its replacement value at about $3 million but he said the company would consider selling the unit for $1 million.

Production from Black Hills 55 miles south of Dawson City totalled 1,767 fine ounces. Most of the easily-developed reserves have been mined out and the emphasis has been on remnant reserves, while developing a new downstream area with the potential of four years of mine life.

At Maisy May Creek, 24 road miles from Black Hills, gold production totalled 2,334 oz and it should be higher this year. Equipment has been upgraded for the upcoming season and four years of reserves are currently under active development.

Cash flow from placer gold operations and contributions from joint venture partners are being utilized to advance several U.S. hardrock prospects including the Dos Cabezas project in Arizona. Underground drilling and sampling are planned this year to better define indicated reserves in the Golden Prince mine. Mine engineering, mine planning and metallurgical test work are under way for a possible production decision at Dos Cabezas later this year.

The Argus project in California is approaching production feasibility and this year’s program will attempt to bring the one million tons of indicated reserves at the Davenport mine to the proven category. Metallurgical test work shows the Argus to be amenable to heap leaching. Three veins at the Chichagof mine in Alaska are being explored and this year’s program will include extensive underground development to gain access to lower extensions of these veins. Golden Sitka Resources (VSE), in which Queenstake has a 26% interest, owns the property.

Discussing the company’s financial outlook, Donald Sharp, chief financial officer, noted that revenues from gold sales totalled $7 million in 1987. This he attributed to the 7,000-oz increase in placer gold production because of the Pine Creek acquisition along with stronger gold prices. Sharp said that 4,500 oz of 1988 gold production will command a fixed price of $504(US) per oz. “With hardrock projects such as the Argus and Dos Cabezas approaching feasibility and new placer acquisitions being completed, Queenstake’s gold production is projected to increase significantly in 1989 and 1990,” he stated. Sharp also predicted that the market price for Queenstake’s shares could “reflect these increases in revenue and cash flow.”