Queenstake reports 2005 output, lands Newmont as investor

Vancouver – Staying on-track with its redevelopment plan, Queenstake Resources (QRL-T, QEE-X) reported 2005 gold production of just over 204,000 oz. from its Jerritt Canyon operations in north-central Nevada.

Last year’s output came in at a cash operating cost of US$386 per oz., 15% higher than 2004’s average cost of US$336 per oz. on production of 243,333 oz.

Fourth quarter 2005 figures show 45,555 oz. produced at US$413 per oz. versus 60,384 oz. at US$336 per oz. for the prior year’s corresponding period. The drop in comparative output reflects Queenstake’s redevelopment plan implemented in mid-2005 when it scaled back to run just one of its two ore-roasters, to match actual mining rates. Additionally, winter conditions typically have an adverse effect on operations and gold production.

The company posted a net loss of US$19.7 million in 2005, a slight improvement over the US$22.1 million loss in 2004. Elevated fuel, energy and commodity prices all contributed to the loss, along with lower gold production and certain corporate charges. The latest Q4 figures shows signs that the redevelopment initiative is bearing fruit, with the net loss dropping to US$2.6 million versus US$4.6 million in fourth quarter of the prior year.

Queenstake’s balance sheet showed a positive working capital of US$4.5 million at year-end compared with deficiency of US$9.4 million in 2004.

Operations saw just over one million tonnes of ore processed in 2005, averaging 7.5 grams gold per tonne, down from the 1.18 million tonnes processed in 2004 grading 7.2 grams gold. Latest fourth quarter stats show 192,000 tonnes of ore processed at 8.6 grams gold, falling in line with Queenstake’s plan of dropping the mining rate and targeting higher grade ore, compared to the 2004 Q4 operational figures of 301,000 tonnes at 7.2 grams gold.

The company projects 2006 Jerritt Canyon gold production to come in at similar levels to 2005, at between 200,000 and 220,000 oz. with operating costs similar to the US$413 per oz. realized in Q4.

Major investment by Newmont

In unison with its year-end and Q4 report, Queenstake landed significant market attention by announcing a planned $10 million investment by Newmont Mining (NMC-T, NEM-N) subsidiary Newmont Canada.

The agreement will have Newmont purchasing 28.51 million Queenstake shares at 41 apiece, and will also receive warrants exercisable for up to an additional 28.51 million shares at 55 apiece for four years. The initial share position will give the major a 4.9% interest in Queenstake, with the stake rising to 8.5% should Newmont exercise all its warrants. Newmont also retains participatory rights in any equity financings over the next two years to maintain its shareholding percentage.

Under the agreement, Newmont will also transfer over three of its Nevada exploration projects to Queenstake, including the Shwin Ranch gold project in the Cortez-Battle Mountain Trend.

Additionally, a Newmont affiliate will sell concentrates and ore from certain Nevada operations to Queenstake for processing at the Jerritt Canyon roasting and milling facility. The contract will see at least 450,000 tonnes per year purchased by Queenstake over the initial two years and may continue for an additional three years providing there is spare processing capacity.

Shares of Queenstake soared on the March 30th news, trading up 41% to close at a more than 15-month high of 50 apiece on the TSX with volume of almost 43 million.