DENVER, May 10 /PRNewswire-FirstCall/ -- Queenstake Resources Ltd.
(TSX: QRL, Amex: QEE) reported gold production of 29,873 ounces of
gold at cash operating costs of $558 per ounce from its Jerritt
Canyon operations in northeastern Nevada in the first quarter of
2006. The higher than expected cash operating costs per ounce were
due principally to lower than expected gold production caused by
mechanical issues at the mill. The mill is now operating at near
capacity. Higher rates of gold production at significantly lower
cash operating costs per ounce are expected in subsequent quarters.
The Company maintains its guidance of 200,000-220,000 ounces of
gold production from Jerritt Canyon in 2006. Highlights from the
operating and financial results during the first quarter of 2006
included: - Mining rate and mined ore tonnage were in line with the
Company's 2006 operating plan, resulting in an accumulation of an
estimated 22,000 ounces contained in an ore stockpile, adjacent to
the mill, at the end of March 2006; - Mine development footage was
on target; - The near-mine exploration program began and has
continued to identify additional high-grade gold mineralization; -
Year-end gold resource and reserve estimations were completed,
showing that Jerritt Canyon replaced reserves net of depletion in
2005; - Cash and cash equivalents on March 31, 2006 totaled $3.5
million, despite lower gold production; and - The Company entered
into a transaction with Newmont Canada Limited, which included
closing of a $10 million private placement on April 13, 2006. Gold
production at Jerritt Canyon was negatively affected by mechanical
issues related to the ball mill pinion gear causing temporary mill
shutdowns, as described in the Company's news releases of March 30
and April 13, 2006. However, the mines continued to deliver ore to
an increasing stockpile for future mill processing. Commenting on
the results, Queenstake President and Chief Executive Officer
Dorian L. (Dusty) Nicol said, "We expect a much improved
performance in the second and third quarters as the mill processes
the ore stockpile. We are operating at near capacity since having
completed the mill repair and annual maintenance during a 12-day
mill shutdown in mid-April. With the mill running well and current
strong gold prices, we expect improved cash flow from operations
for the rest of 2006. We remain unhedged in gold to allow maximum
leverage to the gold price." Operating Highlights 1Q 2006 1Q 2005
Gold ounces produced 29,873 54,767 Gold ounces sold 28,488 50,850
Average realized gold price ($/oz) $553 $427 Cash operating costs
per ounce $558 $365 Operating Statistics 1Q 2006 1Q 2005 Ore tons
mined 289,643 280,635 Tons processed 150,228 311,434 Grade
processed (opt) 0.25 0.21 Process recovery 86.4% 85.8% Note: During
the third quarter of 2005, the Company implemented a redevelopment
plan designed to match mill processing with optimal mining and
underground development, resulting in a scaled back throughput rate
of between 2,500-2,700 tons per day of mined ore. The redevelopment
plan was a substantial change from historical mining and processing
practices. Comparison to operating results from previous periods
should be viewed in that context. Financial Review For the first
quarter of 2006, the Company reported a net loss of $5.8 million,
compared with a net loss of $7.1 million in the year ago quarter.
Compared to the first quarter of 2005, the 2006 results were
impacted by lower gold production. Cash operating costs were
impacted by mechanical issues at the mill, additional labor and
overtime (principally related to the mill issues), increased
contractor costs, and higher energy and commodity prices. Increased
costs were offset by a higher realized gold price, lower depletion
and decreased corporate general and administrative costs. The
depletion reduction was the result of lower gold production,
partially offset by a higher unit-of-production depletion rate in
2006, reflecting increased capital development costs. Corporate
restructuring costs of approximately $1 million were included in
corporate general and administrative costs in the first quarter of
2005 while ongoing general and administrative costs were $0.2
million lower than in the 2005 first quarter from a reduction in
corporate personnel. Revenues totaled $15.8 million on 28,488 gold
ounces sold at an average realized price of $553 per ounce during
the quarter, compared with $427 per ounce realized in the year ago
quarter. Lower gold sales offset the stronger gold price in the
2006 first quarter. Cash operating costs per ounce of $558 for the
first quarter of 2006 reflected lower ounces produced as a result
of the mill mechanical issues and materials handling issues and
constraints in the ore dryer. With the exception of costs
associated with the mill issues, energy and certain commodity
costs, operating costs were largely in line with the Company's 2006
operating plan. The Company had a working capital deficiency of
$2.3 million at March 31, 2006, which is expected to turn positive
during the second quarter. The working capital deficiency was the
result of conserving cash necessitated by the significantly lower
gold production and sales. A $5.6 million increase in inventories,
representing a significant build up in the ore stockpile, was
countered by a $6.4 million increase in accrued liabilities and
trade payables, including the costs of repairs, manpower and
capital required to address the mill mechanical issues late in the
quarter. Cash used in operating activities, before changes in
working capital, was $2.4 million. Changes in the principal
non-cash working capital items were impacted for the reasons
described above. The Company invested $8.2 million in capital
expenditures during the first quarter, principally in underground
mine development, refurbishing equipment and the purchase of a road
grader. 2006 Outlook The quarterly fluctuations in production and
cash operating costs per ounce are expected to even out over the
full year. For 2006, the Company expects to produce between 200,000
and 220,000 ounces of gold, unchanged from prior guidance. Cash
operating costs per ounce for 2006 are adversely affected by
increases in basic commodity prices. The operations are sensitive
to increases in diesel, propane and electric power, all of which
have experienced significant increases through the first quarter of
2006. At current energy prices, cash operating costs per ounce are
estimated to be $395-$435 for 2006. This cash operating cost per
ounce estimate excludes the benefit expected from processing the
purchased ore and concentrates from Newmont's Nevada operations. In
view of the stronger gold prices and proceeds from the recently
completed private placement, the Company's estimated district
exploration budget in 2006 has been increased to $8 million from $6
million. The Company may increase exploration spending further,
subject to results in the second half of the year. Capital
expenditures in 2006 are unchanged and expected to be approximately
$17 million, 14% lower than 2005. Ongoing corporate general and
administrative costs are estimated at $3.5 million-$4.0 million in
2006. The Company expects to fund the balance of these 2006
estimated expenditures from existing cash and expected cash flow
from operations. Queenstake Resources Ltd. is a gold mining and
exploration company based in Denver, Colorado. Its principal asset
is the wholly owned Jerritt Canyon gold operations in Nevada.
Jerritt Canyon has produced over seven million ounces of gold from
open pit and underground mines since 1981. Current production at
the property is from underground mines. The Jerritt Canyon District
comprises 119 square miles (308 square kilometers) of geologically
prospective ground, controlled by Queenstake, representing one of
the largest contiguous exploration properties in Nevada. For
further information call: Wendy Yang 303-297-1557 ext. 105
800-276-6070 Email - web - http://www.queenstake.com/ Cautionary
Statement -- This news release contains "Forward-Looking
Statements" within the meaning of applicable Canadian securities
law requirements and Section 21E of the United States Securities
Exchange Act of 1934, as amended and the Private Securities
Litigation Reform Act of 1995. All statements, other than
statements of historical fact, included in this release, and
Queenstake's future plans are forward-looking statements that
involve various risks and uncertainties. Such forward-looking
statements include, without limitation, (i) estimates and
projections of future gold production, processing rates and cash
operating costs, (ii) estimates of savings or cost reductions,
(iii) estimates of capital expenditures, exploration and
administrative costs, and (iv) estimates related to financial
performance, including cash flow. Forward-looking statements are
subject to risks, uncertainties and other factors, including gold
and other commodity price volatility, operational risks, mine
development, production and cost estimate risks and other risks
which are described in the Company's most recent Annual Information
Form filed on SEDAR (http://www.sedar.com/) and Annual Report on
Form 40-F on file with the Securities and Exchange Commission (SEC;
http://www.sec.gov/) as well as the Company's other regulatory
filings. Although the Company has attempted to identify important
factors that could cause actual actions, events or results to
differ materially from those described in forward-looking
statements, there may be other factors that cause actions, events
or results not to be as anticipated, estimated or intended. There
can be no assurance that forward-looking statements will prove to
be accurate, as actual results and future events could differ
materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking
statements. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. INTERIM CONSOLIDATED
STATEMENTS OF LOSS Unaudited For the Three Months Ended March 31
(In Thousands of U.S. Dollars, except per share amounts) 2006 2005
Gold sales $15,765 $21,706 Costs and expenses Cost of sales 17,118
19,636 Depreciation, depletion and amortization 2,673 5,487
Non-hedge derivatives 183 522 Exploration 200 524 General and
administrative 1,072 2,357 Accretion of reclamation and mine
closure liability 294 132 Stock-based compensation 76 84 21,616
28,742 Loss from operations (5,851) (7,036) Interest expense 63 47
Other income, net (248) (186) Foreign exchange (gain) loss (46) 182
Write down of assets 166 - (65) 43 Net loss $(5,786) $(7,079) Net
loss per share - basic and diluted $ (0.01) $ (0.02) Weighted
average number of shares outstanding (000's) - basic 549,782
419,318 INTERIM CONSOLIDATED STATEMENTS OF DEFICIT Unaudited For
the Three Months Ended March 31 (In Thousands of U.S. Dollars) 2006
2005 Deficit, beginning of period $(82,860) $(63,189) Net loss
(5,786) (7,079) Deficit, end of period $(88,646) $(70,268) INTERIM
CONSOLIDATED BALANCE SHEETS (In Thousands of U.S. Dollars) March
31, 2006 December 31, 2005 ASSETS Unaudited Current assets Cash and
cash equivalents $3,473 $10,225 Trade and other receivables 536 463
Inventories 12,121 6,519 Marketable securities 13 13 Prepaid
expenses 930 1,499 Total current assets 17,073 18,719 Restricted
cash 27,436 27,165 Mineral property, plant and equipment, net
47,018 45,692 Other assets 1,798 1,763 Total assets $93,325 $93,339
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts
payable and accrued liabilities $17,453 $11,063 Other current
liabilities 1,919 2,846 Total current liabilities 19,372 13,909
Other long-term obligations 2,049 2,117 Reclamation and mine
closure 26,676 26,382 Total liabilities 48,097 42,408 Shareholders'
equity Common shares, no par value, unlimited number authorized
Issued and outstanding 549,814,294 (2005 - 550,021,360) 131,767
131,804 Contributed surplus 2,093 1,973 Convertible securities 14
14 Deficit (88,646) (82,860) Total shareholders' equity 45,228
50,931 Total liabilities and shareholders' equity $93,325 $93,339
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited For the
Three Months Ended March 31 (In Thousands of U.S. Dollars) 2006
2005 OPERATING ACTIVITIES Net loss $(5,786) $(7,079) Non-cash
items: Depreciation, depletion and amortization 2,673 5,487 Write
down of assets 166 - Accretion of reclamation and mine closure
liability 294 132 Amortization of non-hedge derivatives 4 522 Write
down of non-hedge derivatives 179 - Stock-based compensation 76 84
Foreign exchange loss (46) 182 Loss on marketable securities - 38
(2,440) (634) Changes in non-cash working capital: Inventories
(4,219) (787) Accounts receivable and prepaid accounts 496 (646)
Accounts payable and accruals 9,183 (5,024) Cash provided by (used
in) operating activities 3,020 (7,091) INVESTING ACTIVITIES
Property, plant and equipment expenditures (8,235) (5,081) Sale of
marketable securities - 442 Restricted cash (271) (119) Cash (used
in) investing activities (8,506) (4,758) FINANCING ACTIVITIES
Common shares issued, net of costs 7 23,411 Notes payable and
leases (995) (275) Deferred financing costs (278) - Cash provided
by (used in) financing activities (1,266) 23,136 Net increase
(decrease) in cash and cash equivalents (6,752) 11,287 Cash and
cash equivalents, beginning of period 10,225 6,132 Cash and cash
equivalents, end of period $3,473 $17,419 DATASOURCE: Queenstake
Resources Ltd. CONTACT: Wendy Yang of Queenstake Resources Ltd.,
+1-303-297-1557 ext. 105, or 1-800-276-6070, Web site:
http://www.queenstake.com/
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