Golden Queen secures environmental permit

VANCOUVER — Golden Queen Mining’s (GQM-T) Soledad Mountain gold-silver project near Mojave, Calif., finally looks to have environmental approval.

The open-pit mine originally got the go-ahead in 1997, but a reworking of the state’s mining laws in 2002 meant that open-pit operations were under greater scrutiny and stricter backfill requirements. Golden Queen thought its project would be grandfathered-in since it had already been approved, but because construction had not started the state mining board ruled that it was subject to the new rules.

The company reworked its mine plan and released a new feasibility study in 2007. The revised plan included a smaller land footprint, a reduced daily output and backfilling that would start sooner.

Now, after a lengthy review process, the Kern County planning commission has approved Golden Queen’s revised supplemental environmental impact report. The company’s stock price jumped 26% on the news.

The 2007 feasibility study outlined an open-pit heap-leach mine with an average throughput of a little over 11,000 tonnes a day, producing gold at a cost of US$427 per equivalent oz. gold. Capital costs were pegged at US$59.8 million.

Using a conservative US$600 per oz. gold and US$12 per oz. silver base case, the company estimated a net present value of US$69.6 million, at a 5% discount rate, and an internal rate of return of 18.4%, both calculated on a pre-tax basis.

Reserves stand at 46.6 million tonnes grading 0.70 gram gold per tonne and 12.96 grams silver per tonne. The company estimates a 12- year mine life and annual production of 90,000 oz. gold and 1 million oz. silver.

The main ore hosts at Soledad are rhyolite porphyry and flow-banded rhyolite, pyroclastics and quartz latite porphyry. Golden Queen estimates it can recover 85% of the ore’s gold and 52.5% of its silver using crushing and heap leaching.

The company could start developing the mine in a matter of months, with construction to take about a year. It is the end of a long wait for Golden Queen, which formed as a company in 1985 to acquire the Soledad Mountain properties, then held by the Golden Queen Mining Co. The company controls a 1-sq.-km land package that encompasses the mountain.

The project is located in Kern County, about 8 km from the rail- road hub of Mojave and about 145 km north of Los Angeles.

Being so close to a major urban area, Golden Queen plans to produce and sell aggregate as a secondary business of the mine. The company estimates it could continue to sell waste rock for upwards of 30 years.

Historic mining started on the site at the turn of the 20th century, with periodic activity since then.

Golden Queen’s stock price jumped 25¢ on the news of the environmental approval to close at $1.20, a new 52-week high after climbing from a low of 40¢ last April. The company has 89 million shares outstanding (106 million fully diluted).