Queenstake bankrolls Jerritt Canyon

Vancouver — A brokered private placement financing worth $21 million will allow Queenstake Resources (QRL-T) to acquire the Jerritt Canyon gold mine in Nevada’s Elko Cty.

Regulators have yet to approve the placement, which will consist of 105 million subscription receipts priced at 20 each. Each receipt can be used to buy one share and half a share purchase warrant once Queenstake completes its acquisition. A whole warrant allows the hold to buy one share at 25 for two years.

“This transaction is the most important event in Queenstake’s history,” says CEO Chris Davie.

The placement was expected to close on June 24, with proceeds placed in escrow pending closing of the acquisition.

According to the Jerritt Canyon purchase agreement with AngloGold (AU-N) and Meridian Gold (MNG-T), Queenstake will issue a total of 32 million shares and pay a total of US$1.25 million in cash to the vendors, as well as deliver a non-refundable US$250,000. The company will pay out a further US$6 million in quarterly $1-million instalments between June 2005 and September 2006, or earlier if project debt is paid off ahead of time. AngloGold and Meridian retain a royalty capped at US$4 million.

AngloGold, which owns 70% of Jerritt and operates the mine, and Meridian, which owns the remaining 30%, will share the proceeds and the net smelter return royalty pro rata. The royalty ranges from 2% to 4% with a floor price of US$320 per oz. Once Queenstake has paid US$4 million, the royalty converts to a 1% net profits interest, payable to AngloGold.

The deal is conditional on Queenstake’s ability to cover the cash element of the purchase price and a US$31.7-million insurance policy to replace existing reclamation surety bonds. Queenstake assumes the reclamation liabilities for the operation.