Queenstake raises $21 million

Vancouver Denver-based Queenstake Resources (QRL-T) has announced a brokered private placement financing worth $21 million for its acquisition of the Jerritt Canyon gold mine in Elko City, Nevada.

The private placement, which is still subject to regulatory approval, will consist of 105 million subscription receipts priced at $0.20 each. Each subscription receipt can be exercised to acquire one common share and one half a common share purchase warrant once Queenstake completes its acquisition of the Jerritt Canyon mine.

Each whole warrant will grant the holder the right to purchase one common share at a price of $0.25 for a period of two years after the acquisition.

“Queenstake has taken another major step toward the successful acquisition of the Jerritt Canyon Mine with the execution of this significant equity financing," commented Chris Davie, President and Chief Executive Officer of Queenstake. "This transaction is the most important event in Queenstake’s history.

The private placement is expected to close on or about June 24, 2003. Proceeds will be placed into escrow pending closing of the acquisition of the mine. If the deal is not completed by the end of July, the escrowed funds and interest will be returned to the purchasers. Queenstake will use the money for the acquisition of Jerritt Canyon as well as for additional exploration, capital expenditures and general corporate purposes.

The agents involved in the financing also have an option to offer up to 20 million units at the same price of the subscription receipts, 30 days following closing of the Subscription Receipt Offering. Each Unit will be comprised of one common share and one half Warrant. Proceeds from the sale of the units will not be subject to escrow.

According to the Jerritt Canyon purchase agreement with AngloGold (AU-N) and Meridian Gold (MNG-T), Queenstake will issue 32 million shares and pay US$1.25 million in cash to the vendors on closing and deliver a non-refundable US$250,000 on signing the agreement. Queenstake will pay out a further US$6 million, in quarterly $1-million installments, 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, scheduled to close on June 25, requires regulatory approval for Queenstake’s share issue. It is also conditional on Queenstake’s successful float of a financing 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.