Vancouver — Following a long string of quarterly losses,
The plan, implemented in mid-August, would see the company becoming cash flow positive in early 2006, after capital expenditures, exploration and corporate expenses. Queenstake’s projections assume a minimum US$425 per oz. gold price.
This year’s total gold output from Jerritt Canyon is expected in the 200,000-to 220,000-oz. range with cash operating costs of about US$385 per oz. Third-quarter cash costs are expected to swell to about US$400 per oz. before falling to the US$375-per-oz. level in the final quarter — when operational improvements will begin to bear fruit.
Operations in the first half of 2005 were negatively affected by labour shortages and flooding-rock stability issues, both contributing to decreased ore mining rates. As such, Queenstake decided that instead of having the tail wag the dog and trying to match underground mining rates to a mill designed to be fed by multiple open pits, it would scale back its processing to match a more realistic mining rate. Citing continued inability to deliver enough ore to feed the 3,800-tonne-per-day twin roaster mill, it has reduced operations to a single roaster, now cycling their usage.
To further bring costs in line, the company has also deferred a large portion of its district exploration effort, instead focusing on underground development and shorter-term reserve replacement.
Production for 2006 is expected in the same range as 2005, about 210,000 oz. gold, but cash operating costs are anticipated to fall in line at about US$340 per oz., largely due to more selective mining of higher-grade ore blocks.
Overall reductions in energy consumption, surface labour, supplies and maintenance, plus closure of the higher-cost Murray mine in the second quarter of 2006, are all expected to net Queenstake annual savings of US$10-US$12 million from 2006 onward.
Deployment of the plan seems to be meeting with some success with average ore grades increasing from 6 grams gold per tonne in July to around 8.8 grams gold in mid-September, about the average grade anticipated for 2006.
The highly leveraged gold producer appears to have bounced off a recent low of 19 per share, now trading in the 23 range on the TSX board.
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