Magistral nears production (September 13, 2002)

With about 20,000 tonnes of crushed ore stacked on the leach pad, equal partners Queenstake Resources (QRL-T) and privately-owned Midwest Mining plan to begin leaching operations at the Magistral gold project in Mexico’s Sinaloa state over the next few days.

Over the next few months, production will be gradually increased to the target rate of 40,000 oz. of gold per year.

Queenstake expects the originally estimated operating cost of US$180 per oz. to be reduced thanks to the recent addition of some high-grade reserves via an 8,500-metre drill program in June.

Highlights include:

• hole 735 — 18 metres grading 5.61 grams gold, including a 15-metre portion running 6.57 grams gold;
• hole 728 — 28.5 metres grading 5.68 grams gold, including a 7.5-metre section running 16.66 grams gold;
• hole 744 — 34.5 metres grading 6.47 grams gold, including 21 metres of 9.45 grams gold;
• hole 736 — 33 metres grading 6.61 grams gold, including 21 metres of 9.99 grams gold; and
• hole 748 — 40.5 metres grading 5.01 grams gold, including a 25.5-metre section which returned 7.02 grams gold.

Over its 8-year lifespan, the operation is expected to average a gold recovery rate, over a 240-day leach cycle, is expected to be 73%. The gold will be recovered, from the pregnant leach solution, in the adsorption and stripping circuits, which will gear up over the next couple of weeks.

At last count, Magistral’s proven and probable reserve stood at just short of 7 million tonnes running 2.07 grams gold per tonne for 465,100 contained ounces of gold.

Queenstake is waiting for regulatory approval for the issuance of 978,500 shares to satisfy a US$150,000 promissory note to Campbell Resources (CCH-T). The payment was triggered on Sept. 9, when the price of gold averaged more than US$315 per oz. during the preceding 120 days. The shares will carry a 4-month hold period.

The company also recently issued about 5.3 million shares, on the exercise of some outstanding warrants, for gross proceeds of $959,380. The company has no others warrants outstanding.