Queenstake drives into snowbank at Jerritt Canyon

Now entering its seventh month as owner and operator of the Jerritt Canyon gold mine in northeastern Nevada’s Independence mountains, Queenstake Resources (QRL-T) is reporting that an “unusually early and severe” onset of winter during December has negatively affected output and cash costs.

The mine produced 81,590 oz. gold in the third quarter of 2003 but only 68,411 oz. in the fourth. With the production shortfall, cash operating cost jumped US$51, or 21%, to US$298 per oz. between the third and fourth quarters, averaging US$270 per oz. in the second half.

Queenstake notes that the December snowfall at the mine site, which lies at an elevation of 7,500 ft. (2,300 metres), was three times the average and that strong winds created “severe drifting” at the mine and on the haul roads. The snow also added unwanted moisture to the ore, causing dryer constraints and grade-control problems.

For all of 2003, Jerritt Canyon produced 302,096 oz. divided almost equally between the Queenstake and the former owners, Anglogold (AU-N) (which had a 70% stake) and Meridian Gold (MNG-T) (30%).

Queenstake acquired the mine on June 30, 2003, by issuing 32 million shares, paying and US$1.5 million upfront, and owing another US$6 million in cash. The two vendors also retain various royalties.

On the plus side, Queenstake’s average realized gold climbed to US$377 per oz. in the fourth quarter, up from US$365 per oz. in the third.

The company has been able to pay down its US$20-million senior debt by US$10 million, consisting of US$5 million in scheduled payments and US$5 million in additional payments.

Queenstake continues to aggressively explore the property at depth and intends to release a new reserve estimate in early February.

In 2004, the company anticipates being able to maintain Jerritt Canyon’s production rate around 300,000 oz., with cash operating costs averaging about US$250 per oz.

The Jerritt Canyon property comprises four operating underground mines and stockpiles that feed a 1.5-million-ton-per-year processing facility.