Vancouver — With construction well under way on its 50% held Magistral project,
“We are delighted with the results of this drilling campaign, both in terms of the results generated and the understanding of this structure that has been gained,” says Queenstake’s vice-president of exploration, Dusty Nicol.
The 8,500-metre program tested the mineralization at 25-to-30-metre spacings. The results indicate that the higher-grade zone remains open to the southwest and to the north.
Highlights from the drilling include:
n hole 735 — 18 metres grading 5.61 grams gold, including a 15-metre portion running 6.57 grams gold;
n hole 728 — 28.5 metres grading 5.68 grams gold, including a 7.5-metre section running 16.66 grams gold;
n hole 744 — 34.5 metres grading 6.47 grams gold, including 21 metres of 9.45 grams gold;
n hole 736 — 33 metres grading 6.61 grams gold, including 21 metres of 9.99 grams gold; and
n hole 748 — 40.5 metres grading 5.01 grams gold, including a 25.5-metre section which returned 7.02 grams gold.
Based on these results, Queenstake is updating both its resources and reserves. In addition, the higher-grade zone will be modelled to examine the prospects of mining by underground methods.
Construction work at the site is progressing, with the completion date slated for late July. Earthworks for the leach pads are nearly done, the foundations for major buildings have been poured, water wells and pipeline are complete, the primary crusher retaining wall is approaching completion, and the gold recovery plant is being installed. The company intends to enter production by October at the latest. The facility is being built to treat 1 million tonnes of ore per year, resulting in annual production of 40,000 oz. at a life-of-mine cash cost of US$180 per oz. The mine life is projected at 6.5 years. Based on current reserves and a gold price of US$300 per oz., the project should generate US$24 million in net revenue after preproduction capital expenditures. The stripping ratio comes in at 5.6-to-1, with recoveries averaging 73%. The ore will be mined from four discrete pits known as San Rafael, Samaniego Hill, Sagrado Corazon and Lupita.
Last year, Queenstake managed to move the project into the development phase by inking two separate deals.
The first deal provided the company with the US$6.1 million required to move the project forward. Private company Midwest Mining agreed to supply the capital in return for a 50% stake in the Magistral joint venture, as well as 15% of Queenstake’s U.S. subsidiary Pangea Resources. Pangea owns the shares of the Mexican company that holds the Magistral property. Midwest will receive preferential payback from 70% of the cash flow generated by the operation until its contribution, plus an intial return of 12%, has been paid. A penalty clause is in place if the payback is not achieved in five and a half years. A production decision must be reached within nine months or Queenstake will repurchase Midwest’s interest for US$750,000 payable in cash or stock.
In an effort to trim equipment costs, the joint venture acquired a 6-month option over all the shares of
A production decision was made using the last available reserve calcuation of 6.1 million tonnes grading 1.86 grams of gold, with capital costs slated to hit US$6 million.
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