Queenstake trimming fat at Jerritt Canyon (October 30, 2006)

Vancouver — Looking to garner greater market respect, Queenstake Resources (QRL-T, QEE-X) is moving to slash production costs at its Jerritt Canyon mining complex in northeastern Nevada and will look at ways to get more out of its gold properties.

The plan sees significant cuts at Jerritt Canyon through deferral of production from higher-cost portions of the three underground mines, specifically ore zones in the Smith and SSX mines that are below the current water table.

In addition to production cuts, underground contract development will be reduced, maintenance will be streamlined, and higher-cost mining equipment will no longer be used. The operations cutback will shave about 10% off the workforce at the mine, dropping by 47 employees to a total of 370.

Queenstake anticipates the moves will reduce costs by about US$16 million per year. However, production will drop with this year’s estimated output, now pegged at about 160,000 oz. gold, exclusive of the Newmont Mining (NMC-T, NEM-N) ore processed under a purchase agreement.

The company reports third-quarter output of about 43,800 oz. gold, including ore purchased from Newmont. Fourth-quarter projections foresee about 40,000 oz. of gold production with cash operating costs in the US$420-per-oz. range.

Cost savings are expected to provide ongoing exploration dollars for Queenstake’s drill programs on its large district land package, specifically at Starvation Canyon where a wide gold mineralized interval was recently intersected between two resource blocks.

The company’s financial advisor, Blackmont Capital, will be helping it with strategic options to add value to its asset base, which includes its 308-sq.-km landholding and one of the only three permitted ore roasting facilities in Nevada.