DENVER, May 15 /PRNewswire-FirstCall/ -- Queenstake Resources Ltd.
(TSX: QRL; Amex: QEE) (the "Company") reported a net loss of $5.1
million for the first quarter of 2007. Cash flow from operations
before working capital changes totaled $1.2 million for the first
quarter of 2007. Cash and cash equivalents at March 31, 2007 were
$3.3 million. All amounts in this news release are in US dollars,
unless otherwise stated. Gold production was 47,235 ounces for the
first quarter of 2007, of which Jerritt Canyon ore produced 28,612
ounces and ore and carbon purchased from Newmont contributed 18,623
ounces. Cash operating costs per ounce of Jerritt Canyon ore were
$535 per ounce for the 2007 first quarter. In the 2006 first
quarter, gold production totaled 29,873 ounces solely from Jerritt
Canyon ore, as there were temporary mill shut downs due to
mechanical gear issues related to the ball mill. Effective March
16, 2007, the Company and YGC Resources Ltd. ("YGC") signed a
definitive combination agreement to merge the companies to form
Yukon-Nevada Gold Corporation ("Yukon-Nevada"). The combination is
structured as a plan of arrangement whereby the Company will become
a wholly-owned subsidiary of Yukon-Nevada. Shareholders of YGC will
retain one common share of Yukon-Nevada for each share of YGC held,
and shareholders of Queenstake will receive one common share of
Yukon-Nevada for each 10 shares of Queenstake held. Completion of
the business combination is subject to shareholder, court and
regulatory approvals and other conditions precedent. The respective
shareholder meetings of the Company and YGC to consider and vote on
the proposed combination are scheduled for May 18, 2007. Operating
Highlights 1Q 2007 1Q 2006 Gold ounces produced from Jerritt Canyon
ore(1) 28,612 29,873 Total gold ounces produced from all sources(1)
47,235 29,873 Gold ounces sold(1) 47,445 28,488 Average realized
gold price ($/oz) $644 $553 Cash operating costs per ounce from
Jerritt Canyon ore(2) $535 $558 Ore tons mined 120,160 228,963 Tons
processed from all sources(1) 210,212 150,228 Grade processed
(opt)(3) 0.21 0.25 Process recovery 85.6% 86.4% Financial &
Operating Review The Company reported a net loss of $5.1 million
for the 2007 first quarter compared with a net loss of $5.8 million
in the 2006 first quarter. Revenues of $30.6 million were generated
from the sale of 47,445 ounces of gold at an average realized gold
price of $644 per ounce, compared with the average market price of
$650 for the quarter. The lower realized gold price reflected
certain price protection covenants related to the Auramet secured
bridge loan financing facility ("the Facility") during the quarter.
As of March 31, 2007, the Company had no forward sales commitments.
The Company continues to sell its gold production at the spot
price. Cash operating costs of $535 per ounce from Jerritt Canyon
ore for the first quarter of 2007 reflected seasonal ore-drying
bottlenecks at the mill and the ongoing reduced mill processing
capacity since the third quarter of 2006 in order to minimize the
risk of further mill pinion and bull gear mechanical issues. (See
more information about the new bull gear below.) Cash operating
costs during the first quarter were in line with the fourth quarter
of 2007. This together with the higher realized gold price,
compared to the fourth quarter of 2006, generated sufficient cash
flow to continue to fund the ongoing operations at Jerritt Canyon
and to reduce the December 31, 2006 trade payables and accrued
liabilities by $2.8 million at the end of March 2007, excluding the
$8 million from the Facility used to pay for the new evaporation
pond. As announced by the Company on May 1, 2007, the Company
reached agreement with Auramet Trading LLC ("Auramet") to extend
the payment date of the $8 million Facility by one month, to June
29, 2007. The borrowed funds, less costs of the transaction,
primarily paid the costs of the new evaporation pond at the Jerritt
Canyon operations which was mandated by the Nevada Department of
Environmental Protection ("NDEP"). The Company is pursuing
reimbursement for such costs under its reclamation insurance policy
with American International Specialty Lines Insurance Company, a
subsidiary of AIG ("the Insurer"), but the timing and receipt of
such reimbursement is uncertain. The matter has been referred to
arbitration. Depreciation and accretion charges were $5.1 million
for the first quarter of 2007, compared with $3.1 million in the
first quarter of 2006. The higher depreciation was due to the
increase in stockpiled ore and work-in-process ore inventories
during the year. Exploration expenses were $258,000 in the first
quarter of 2007 compared with $200,000 in the prior year quarter.
General and administrative costs were $1.0 million, similar to the
prior year quarter. The Company invested $2.3 million in the
Jerritt Canyon mines during the first quarter, compared with $8.2
million in the 2006 quarter, which was impacted by unforeseen costs
for mill gear repairs. Significant capital investments during the
quarter were in underground mine development and in purchasing and
refurbishing plant and equipment. At March 31, 2007, the Company
had a working capital deficit of $12.9 million, primarily due to
the increase in purchased ore stockpile inventories and decreased
cash and cash equivalents. At the end of the first quarter, the
Company was carrying $23.9 million in Newmont purchased ore
inventory and loaded carbon. The Company estimated that there were
approximately 9,500 ounces contained in the Jerritt Canyon ore
stockpile and approximately 45,000 ounces in the Newmont purchased
ore stockpile at the mill at the end of the first quarter. Cash and
cash equivalents were $3.3 million at March 31, 2007 with unsold
gold inventory of $0.6 million compared with $0.3 million at
December 31, 2006. Operations Review First quarter 2007 production
from Jerritt Canyon was 28,612 ounces, excluding production from
ore and carbon purchased from Newmont of 4,476 ounces and 14,147
ounces, respectively. During the fourth quarter of 2006, Jerritt
Canyon started processing loaded carbon under an agreement with
Newmont using existing excess capacity in the Jerritt Canyon carbon
stripping circuit. Total ore tons processed during the first
quarter of 2007 was 210,212, lower than the fourth quarter of 2006
but higher than the first quarter of 2006. Processed ore tonnage
and gold production for the first quarter of 2007 were impacted as
the Company continued to run the mill at reduced capacity to
minimize risk of further mill pinion and bull gear mechanical
issues. The grade of Queenstake ore milled was 0.25 ounce of gold
per ton (opt), similar to a year ago. However, the overall grade of
all ores processed, including the lower grade ores from Newmont was
0.21 opt. During the first quarter, Jerritt Canyon mined 172,992
total tons, of which 120,160 tons were ore. A new bull gear was
fabricated and shipped from Australia in March 2007 and is expected
to arrive on site soon. The bull gear change is scheduled for June
2007 coincident with the annual mill maintenance shutdown. It is
planned that the mill will be down for approximately two weeks at
the end of June to allow for all maintenance and change-out
activities to be completed. During the mill shutdown, the mines
will continue to produce at capacity and ore will be stockpiled
adjacent to the mill. After the installation of the new bull gear,
it is expected that the mill will ramp up its throughput to again
operate at 100% capacity or at an annual rate of approximately 1.5
million tons during the latter part of 2007. The table below
summarizes production results for both Jerritt Canyon ore and ore
purchased from Newmont. For the three months ended March 31, 2007
Jerritt Canyon Purchased ore / ore carbon Total Ore tons processed
153,323 56,889 210,212 Ore grade processed (opt) 0.24 0.09 0.21 Ore
process recovery 84.9% 90.5% 85.6% Gold ounces produced from ore
28,612 4,476 33,088 Gold ounces produced from carbon -- 14,147
14,147 Total Gold ounces produced 28,612 18,623 47,235 Cash cost
per ounce (in millions of U.S. dollars, except cost per ounce):
Mining costs $8.5 $-- $8.5 Processing costs 6.2 2.1 8.3 Ore /
carbon purchases -- 9.7 9.7 Other 0.6 -- 0.6 15.3 11.8 27.1 Cash
cost per ounce $535 $636 $575 Capitalized mine development was
1,159 feet during the first quarter. Outlook The Company expects to
close the Queenstake-YGC business combination in the second quarter
of 2007, subject to shareholder, court and regulatory approvals and
other conditions precedent. Following completion of the merger, the
new Board of Directors and management of Yukon-Nevada Gold
Corporation will determine the production outlook, and exploration
and capital investment expenditures, in order to deliver maximum
value from the Jerritt Canyon operation and assets. Queenstake
Resources Ltd.'s principal asset is the wholly owned Jerritt Canyon
gold operations in Nevada, which has produced over 7.5 million
ounces of gold from open pit and underground mines since 1981.
Current production at the property is from two underground mines.
The Jerritt Canyon District, which comprises 119 square miles (308
square kilometers) of geologically prospective ground controlled by
Queenstake, represents one of the largest contiguous exploration
properties in Nevada. In addition, Jerritt Canyon also has one of
only three permitted roasting facilities in Nevada. # # # (1) First
quarter 2007 production from Jerritt Canyon was 28,612 ounces,
excluding production from ore and carbon purchased from Newmont of
4,476 ounces and 14,147 ounces, respectively. Gold ounces sold are
from all sources of production. (2) Cash operating costs per ounce
is a non-GAAP measure intended to complement conventional GAAP
reporting. Management believes that cash operating costs per ounce
is a useful indicator of a mine's performance. Please refer to the
Company's Management Discussion and Analysis on file at
http://www.sedar.com/ and http://www.sec.gov/ for further
information. (3) The average grade of ore processed was impacted by
the lower grade of ore purchased from Newmont. Refer to the table
on page 3 of this news release for a production summary of Jerritt
Canyon ore and ore purchased from Newmont. (4) The Qualified Person
for the technical information contained in this news release is Mr.
Dorian L. (Dusty) Nicol, President and Chief Executive Officer of
Queenstake. For further information call: Wendy Yang 303-297-1557
ext. 105 800-276-6070 Email - web - http://www.queenstake.com/
Cautionary Statement - This news release contains "Forward-Looking
Statements" within the meaning of applicable Canadian securities
law requirements and Section 21E of the United States Securities
Exchange Act of 1934, as amended and the Private Securities
Litigation Reform Act of 1995. All statements, other than
statements of historical fact, included in this release, and
regarding Queenstake's future plans are forward-looking statements
that involve various risks and uncertainties. Such forward-looking
statements include, without limitation, (i) projections of future
gold production, investments in exploration and capital and
operational improvements, (ii) estimates of mill shut down and
refurbishment, and (iii) statements relating to the pending
business combination of the Company and YGC. Forward-looking
statements are subject to risks, uncertainties and other factors,
including gold and other commodity price volatility, operational
risks, mine development, production and cost estimate risks, risks
relating to the completion of the pending business combination with
YGC and other risks which are described in the Company's most
recent Annual Information Form filed on SEDAR
(http://www.sedar.com/) and Annual Report on Form 40-F on file with
the Securities and Exchange Commission (SEC; http://www.sec.gov/)
as well as the Company's other regulatory filings. Although the
Company has attempted to identify important factors that could
cause actual actions, events or results to differ materially from
those described in forward-looking statements, there may be other
factors that cause actions, events or results not to be as
anticipated, estimated or intended. There can be no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements. The Company
undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. INTERIM CONSOLIDATED STATEMENTS OF
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
Unaudited For the three months ended (In Thousands of U.S. Dollars,
March 31, except per share amounts) 2007 2006 Revenues $30,615
$15,765 Costs and expenses Cost of sales 27,902 16,521
Depreciation, depletion and amortization 4,978 3,270 Non-hedge
derivatives -- 183 Exploration 258 200 General and administrative
1,034 1,072 Accretion of reclamation and mine closure liability 297
294 Stock-based compensation 118 76 34,587 21,616 Loss from
operations (3,972) (5,851) Interest expense 1,804 63 Other income,
net (349) (248) Foreign exchange (gain) loss (1) (46) Gain on
disposal of assets (323) -- Write down of assets -- 166 1,131 (65)
Net loss $(5,103) $(5,786) Net loss per share - basic and diluted
($0.01) ($0.01) Weighted average number of shares outstanding
(000's) - basic and diluted 584,401 549,782 INTERIM CONSOLIDATED
STATEMENTS OF DEFICIT UNAUDITED For the Three Months Ended March
31, (In Thousands of U.S. Dollars) 2007 2006 Deficit, beginning of
period $(103,704) $(82,860) Net loss (5,103) (5,786) Deficit, end
of period $(108,807) $(88,646) INTERIM CONSOLIDATED BALANCE SHEETS
AS AT MARCH 31, 2007 AND DECEMBER 31, 2006 Unaudited (In Thousands
of U.S. Dollars) March 31, December 31, 2007 2006 ASSETS Current
assets Cash and cash equivalents $3,342 $6,580 Trade and other
receivables 458 726 Inventories 32,928 34,196 Marketable securities
24 13 Prepaid expenses 1,355 1,896 Total current assets 38,107
43,411 Restricted cash 27,291 27,035 Mineral property, plant and
equipment, net 48,308 51,491 Other assets 1,191 1,254 Total assets
$114,897 $123,191 LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities Accounts payable and accrued liabilities $41,573
$52,386 Note payable 7,794 -- Other current liabilities 1,683 3,381
Total current liabilities 51,050 55,767 Other long-term obligations
1,772 1,997 Reclamation and mine closure 22,903 22,606 Total
liabilities 75,725 80,370 Shareholders' equity Common shares, no
par value, unlimited number authorized Issued and outstanding
585,171,068 (2006 - 583,706,489) 143,710 143,442 Contributed
surplus 3,201 3,069 Warrants 618 14 Equity component of note
payable 450 -- Deficit (108,807) (103,704) Total shareholders'
equity 39,172 42,821 Total liabilities and shareholders' equity
$114,897 $123,191 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006 For the three months
ended Unaudited March 31, (In Thousands of U.S. Dollars) 2007 2006
OPERATING ACTIVITIES Net loss $(5,103) $(5,786) Non-cash items:
Depreciation, depletion and amortization 4,978 3,270 Non-cash
financing costs 886 -- Write down of mineral property, plant and
equipment -- 166 Gain on disposal of assets (323) -- Fair value
adjustment of marketable securities (11) -- Amortization of
deferred financing costs 84 -- Accretion of reclamation and mine
closure liability 297 294 Accretion of debt portion of loan
facility 244 -- Write down of non-hedge derivatives -- 183
Stock-based compensation 118 76 Foreign exchange gain (1) (46)
1,169 (1,843) Changes in non-cash working capital: Inventories
1,191 (4,816) Accounts receivable and prepaid accounts 725 496
Accounts payable and accruals (10,189) 9,183 Deferred revenue
(1,070) -- Cash provided by (used in) operating activities (8,174)
3,020 INVESTING ACTIVITIES Mineral property, plant and equipment
expenditures (2,304) (8,235) Proceeds from sale of assets 323 --
Restricted cash (256) (271) Cash used in investing activities
(2,237) (8,506) FINANCING ACTIVITIES Common shares issued, net of
costs -- 7 Loan proceeds 8,000 -- Principal payments on capital
leases and notes payable (827) (995) Deferred financing costs --
(278) Cash provided by (used in) financing activities 7,173 (1,266)
Net increase (decrease) in cash and cash equivalents (3,238)
(6,752) Cash and cash equivalents, beginning of year 6,580 10,225
Cash and cash equivalents, end of year $3,342 $3,473 Cash paid for
interest $537 $63 DATASOURCE: Queenstake Resources Ltd. CONTACT:
Wendy Yang of Queenstake Resources Ltd., +1-303-297-1557 ext. 105,
or 800-276-6070, Web site: http://www.queenstake.com/
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