Golden Queen Files Updated Feasibility Study Report for Soledad Mountain Project
VANCOUVER, Oct. 25, 2012 /PRNewswire/ – Golden Queen Mining Co. Ltd. (TSX:GQM;
OTCQX:GQMNF) (“Golden Queen” or the “Company”) is pleased to announce
that in accordance with National Instrument 43-101 and in support of
the Company’s September 6, 2012 news release, it has filed a technical
report entitled “Soledad Mountain Project – Technical Report” dated
October 17, 2012 (the “Technical Report”). The Technical Report was
prepared by Norwest Corporation of Vancouver, based on their 2012
feasibility study and using updated resource estimates prepared by AMEC
E&C Services, Inc. of Sparks, Nevada. The Technical Report is
available on the SEDAR website at www.sedar.com, and on the Company’s website. Results reported in the Technical
Report include updates to the technical information on the Project, as
summarized below.
The US dollar is used in this news release unless otherwise noted.
Highlights
-- The Project is fully permitted
-- Average annual production of 77,000 oz of gold and 890,000 oz
of silver (year 2 to year 14)
-- A projected all-inclusive average cash cost per ounce of gold
produced, net of silver credits, of $256/oz with the London
p.m. fix for precious metals on October 17, 2012
-- A low waste to ore stripping ratio of 1.49:1 (tons:tons)
-- Estimated capital costs, including working capital and assuming
lease financing of the mining equipment, of $107 million
Cash Flow Analysis
The cash flow analysis in the updated Technical Report is done on a
constant US dollar, stand-alone basis. The study provides the
following economic estimates for the Project:
At gold and silver prices of $1,438/oz and $27.65/oz respectively, the
trailing 36-month average precious metals prices to the end of
September 2012, the Project has a pre-tax indicated internal rate of
return (“IRR”) of 64.4%, a net present value (“NPV”) of $735 million
with a discount rate of 5% and the undiscounted, cumulative net cash
flow is approximately $1.13 billion and this is considered the base
case. The all-inclusive average cash cost per ounce of gold produced
including sustaining capital and net of silver credits, is $285/oz.
The after-tax IRR is 52.2%, the NPV is $517 million with a discount
rate of 5% and the undiscounted, cumulative net cash flow is $800
million.
The tax model allows for federal and state taxes and treats the Company
and the Project as stand-alone for tax calculations.
The trailing 36-month average precious metals prices are accepted by the
U.S. Securities And Exchange Commission when reporting mineral
reserves.
At gold and silver prices of $1,749/oz and $33.03/oz respectively, the
London p.m. fix for precious metals on October 17, 2012 and the date of
the Technical Report, the Project has a pre-tax indicated IRR on
capital employed of 82.9%. The NPV is $986 million with a discount rate
of 5%, and the undiscounted, cumulative net cash flow is approximately
$1.49 billion. The indicated contribution of gold and silver to gross
revenues is 83% and 17% respectively. The all-inclusive average cash
cost per ounce of gold produced including sustaining capital and net of
silver credits, is $256/oz. The after-tax IRR is 65.6%, the NPV is
$685 million with a discount rate of 5% and the undiscounted,
cumulative net cash flow is $1.04 billion.
_________________________________________________________________
| | | Pre-Tax | After-Tax |
|__________|______|_______________________|_______________________|
|Gold Price|Silver|NPV @ 5% |NPV @ 5%|IRR |NPV @ 5% |NPV @ 5%|IRR |
| |Price | | | | | | |
|__________|______|_________|________|____|_________|________|____|
| $/oz | $/oz |$ million|$/share | % |$ million|$/share | % |
|__________|______|_________|________|____|_________|________|____|
| 1,749 |33.03 | 986 | 9.81 |82.9| 685 | 6.82 |65.6|
| 1,438 |27.65 | 735 | 7.31 |64.4| 517 | 5.15 |52.2|
|__________|______|_________|________|____|_________|________|____|
Overview
The Company plans to develop a gold-silver, open pit, heap leach
operation on its Soledad Mountain property, located just outside the
town of Mojave in Kern County in southern California. The Project will
use conventional open pit mining methods and the cyanide heap leach and
Merrill-Crowe processes to recover gold and silver from crushed,
agglomerated ore. The planned, average ore and waste mining rates are
4.71 million tons and 7.03 million tons per year with a stripping ratio
of 1.49:1 for a combined mining rate of ore and waste of 11.74 million
tons per year. The permitted combined ore and waste mining rate is 14
million tons per year. Gold and silver production is projected to
average approximately 77,000oz and 890,000oz respectively per year
although this is expected to fluctuate considerably from year to year
depending upon the ore head grades. Gold and silver production is
projected to be 1,067,000 oz of gold and 12,039,000 oz of silver over a
period of 15 years.
Mineral Resource Estimates
The Company announced that it had initiated an infill drill program in a
news release on October 21, 2010. The drill program commenced in April
2011 and was completed in early May 2011. A total of 20 drill holes
(6,288 feet) were completed in the program.
AMEC E&C Services, Inc. (“AMEC”) of Sparks, Nevada, has integrated the
results from the infill drill program into updated mineral resource
estimates. The estimate differs from previous estimates because the
update has used a lower gold-equivalent cutoff grade, higher gold and
silver prices, and current estimates of operating costs and recoveries
for gold and silver. The previous estimates were based on gold and
silver prices and technical parameters from the late 1990s.
The mineral resource estimates prepared by AMEC are set out in Table 1
below and are not materially different from the estimates announced in
the September 6, 2012 press release. Mr. Mark Hertel, an AMEC,
Principal Geologist, is the QP for the Mineral Resources for Soledad
Mountain. Mineral Resources are set out in Table 1, using precious
metals prices of $1,310/oz gold and $24.05/oz silver, a cut-off grade
of 0.004 oz/ton AuEq, and have an effective date of 29 February, 2012.
Mineral Resources are reported inclusive of Mineral Reserves. Note that
mineral resources that are not mineral reserves do not have
demonstrated economic viability.
Table 1 – Mineral Resources
Effective Date: February 29, 2012
_____________________________________________________________________________________
| | | | In-situ Grade | Contained Metal |
|______________|___________|___________|_________________________|____________________|
| | | | Gold | Silver | Gold | Silver |
|______________|___________|___________|____________|____________|_________|__________|
|Classification| tonnes | ton | g/t |oz/ton| g/t |oz/ton| oz | oz |
|______________|___________|___________|_____|______|_____|______|_________|__________|
| Measured | 26,727,000| 29,400,000|0.850|0.025 |13.29| 0.39 | 729,000|11,403,000|
|______________|___________|___________|_____|______|_____|______|_________|__________|
| Indicated |118,090,000|129,900,000|0.442|0.013 | 8.53| 0.25 |1,675,000|32,301,000|
|______________|___________|___________|_____|______|_____|______|_________|__________|
| Total & |144,817,000|159,300,000|0.517|0.015 | 9.42| 0.27 |2,404,000|43,704,000|
| Average | | | | | | | | |
|______________|___________|___________|_____|______|_____|______|_________|__________|
| Inferred | 14,545,000| 16,000,000|0.362|0.011 | 7.89| 0.23 | 169,000| 3,681,000|
|______________|___________|___________|_____|______|_____|______|_________|__________|
Notes:
1. The qualified person for the mineral reserve is Mark Hertel, SME
Registered Member, and an employee of AMEC.
2. Mineral Resources are inclusive of Mineral Reserves.
3. Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability.
4. Mineral Resources are reported at a 0.004 oz/ton (0.137 g/t) AuEq
cut-off.
5. Mineral Resources are reported as undiluted.
6. Mineral Resources are reported within a conceptual pit shell that
has been merged with the Mineral Reserve pit.
7. Mineral Resources are reported using a long-term gold price of
US$1310/oz, silver price of $24.05/oz, mining and processing
costs and variable recoveries that are based on rock type
classification.
8. Gold equivalent grades were calculated based on the equation:
AuEq(oz/ton) = Au(oz/ton) + (Ag(oz/ton) * [(Ag price(US$/oz)/Au
price(US$/oz)) * (Ag recovery(%)/Au recovery(%))]
9. Rounding as required by reporting guidelines may result in
apparent summation differences between tons, grade and contained
metal content.
10. Tonnage and grade measurements are in US and metric units. Grades
are reported in troy ounces per short tons and in grams per tonne.
11. Mineral zones were shaped manually with a cutoff grade of 0.004
oz/ton (0.137 g/t) AuEq.
Mineral Reserve Estimates
Norwest Corporation of Vancouver, British Columbia has used the
information provided by AMEC to update the mineral reserve estimates
and these are set out in Table 2 below.
Table 2 – Mineral Reserves
Effective Date: August 31, 2012
_____________________________________________________________________________
| | | | In-situ Grade | Contained Metal |
|________|__________|__________|_________________________|____________________|
| | | | Gold | Silver | Gold | Silver |
|________|__________|__________|____________|____________|_________|__________|
|Reserve | tonnes | ton | g/t |oz/ton| g/t |oz/ton| oz | oz |
|Category| | | | | | | | |
|________|__________|__________|_____|______|_____|______|_________|__________|
|Proven |18,371,000|20,250,000|0.910|0.027 |14.49|0.423 | 537,700 |8,558,500 |
|Probable|42,237,000|46,558,000|0.529|0.015 |10.58|0.309 | 717,900 |14,372,500|
|________|__________|__________|_____|______|_____|______|_________|__________|
|Total & |60,608,000|66,808,000|0.644|0.019 |11.77|0.343 |1,255,600|22,931,000|
|Average | | | | | | | | |
|________|__________|__________|_____|______|_____|______|_________|__________|
Notes:
1. The qualified person for the mineral reserve is Sean Ennis, Vice
President, Mining, P.Eng., APEGBC Registered Member who is
employed by Norwest Corporation.
2. A gold-equivalent cut-off grade of 0.240 g/t (0.007 oz/ton) was
used to estimate the mineral reserves.
3. AuEq is the gold-equivalent grade, which is calculated as follows:
a. AuEq g/t = Au g/t + {(Ag/R1)xR2} g/t
b. R1 = Au price in $/oz/Ag price in $/oz; R2 = Ag recovery in
%/Au recovery in %.
Gold and Silver Recoveries
Extensive process development done on Soledad Mountain ores from 1988 to
2007 shows that these ores are readily amenable to heap leaching if the
ore is crushed to relatively small sizes. Three series of
metallurgical test programs that evaluated the use of a high-pressure
grinding roll to size and prepare ore particles for heap leaching were
also completed between 2003 and 2007.
The Company’s consulting engineers project recoveries of 85.0% for gold
and 52.5% for silver for the proposed commercial operation.
Capital and Operating Costs
The Project is serviced by existing infrastructure, accessible by state
highway, and proximate to a local experienced workforce and housing.
Engineering has been substantially completed for all major components of
the Project. Capital cost estimates are based upon quotes for
construction from a number of key vendors and contractors based in
southern California. The capital cost is estimated to be $119.0
million and this includes mining equipment with a cost of $17.2
million, unallocated costs of $12.5 million and working capital of
$10.5 million. These estimates also include all sales taxes. The
sustaining capital is estimated to be a further $30.6 million over the
life of the gold and silver heap leach operation. The bulk of the
sustaining capital will be required for construction of the heap leach
pads and for mining equipment replacement.
The Company has also received an attractive and competitive proposal for
lease financing the mining equipment. This will reduce the capital
cost to $107 million and this includes working capital of $10.5
million.
Detailed operating cost estimates have been prepared with information
provided by independent consulting engineers and vendors of services
and supplies such as diesel fuel and explosives, reagents such as
cement and sodium cyanide and operating supplies and spare parts for
both the major mining equipment and support equipment and equipment in
the various processing facilities. The all-inclusive average cash
operating cost including the sustaining capital is projected to be
$10.02/ton of ore mined for the life of the gold and silver heap leach
operation.
Permitting
The Project is fully permitted. A permitting update is provided in the
Company’s September 6, 2012 news release.
Outlook
The Company estimates that construction can be completed
in approximately fifteen months once financing has been secured. The
Company is currently evaluating financing alternatives.
Qualified Persons
Mark Hertel, RM, SME, AMEC E&C Services, Inc. is a qualified person for
the purposes of National Instrument 43-101 and has reviewed and
approved the technical content of this press release as it relates to
the resource estimates completed by AMEC E&C Services, Inc.
Sean Ennis, P.Eng., Vice President Mining, Norwest Corporation, is a
qualified person for the purposes of National Instrument 43-101 and has
reviewed and approved the technical content of this press release as it
relates to the Technical Report completed by Norwest Corporation.
H. Lutz Klingmann, P.Eng., the President of the Company, is a qualified
person for the purposes of National Instrument 43-101 and has reviewed
and approved the technical content of this press release.
Information on Golden Queen Mining Co. Ltd. is available on the SEDAR
web site at www.sedar.com and on the Company’s website at www.goldenqueen.com
Information on data verification, quality assurance and quality control,
as well as information on parameters and methodology used in preparing
resource and reserve estimates is provided in the Technical Report.
Cautionary Note to U.S. Investors Regarding Reserve and Resource
Estimates: This press release uses the terms “measured resources”, “indicated
resources”, and “inferred resources” which are defined in are defined by the Canadian Institute of Mining, Metallurgy and
Petroleum, and are required to be disclosed in accordance with Canadian
National Instrument 43-101 (NI 43-101). The disclosure standards in the
U.S. Securities and Exchange Commission’s (SEC) Industry Guide 7
normally do not recognize information concerning “measured mineral
resources”, “indicated mineral resources” or “inferred mineral
resources” or other descriptions of the amount of mineralization in
mineral deposits that do not constitute “reserves” by U.S. standards in
documents filed with the SEC. In addition, resource that are classified
as “inferred mineral resources” have a great amount of uncertainty as
to their existence and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of an “inferred
mineral resource” will ever be converted into reserves. Under U.S.
standards, mineralization may not be classified as a “reserve” unless
the determination has been made that the mineralization could be
economically and legally produced or extracted at the time the reserve
determination is made. Disclosure of “contained ounces” in a resource
is permitted disclosure under Canadian regulations; however, the SEC
normally only permits issuers to report mineralization that does not
constitute “reserves” by SEC standards as in-place tonnage and grade
without reference to unit measures. The requirements of NI 43-101 for
identification of “reserves” are also not the same as those of the SEC,
and reserves reported by the Company in compliance with NI 43-101 may
not qualify as “reserves” under SEC standards. Accordingly, information
concerning mineral deposits set forth herein may not be comparable with
information presented by companies using only U.S. standards in their
public disclosure.
Caution With Respect To Forward-looking Statements: The information in this press release includes certain “forward-looking
statements”. All statements, other than statements of historical fact,
included herein including, without limitation, plans for and intentions
with respect to our properties, statements regarding intentions with
respect to obligations due for various projects, quantity of reserves,
permitting, construction and production and other milestones, and the
Soledad Mountain project’s future operating or financial performance
including production, rates of return, recoveries, cash costs and
capital costs are forward-looking statements. Statements concerning
Mineral Reserves and Mineral Resources are also forward-looking
statements in that they reflect an assessment, based on certain
assumptions, of the mineralization that would be encountered and mining
results if the project were developed and mined in the manner
described. Forward-looking statements involve various risks and
uncertainties. There can be no assurance that such statements will
prove to be accurate, and actual results and future events could differ
materially from those anticipated in such statements. Important factors
that could cause actual results to differ materially from our
expectations include the uncertainties involving the availability of
project financing in the debt and capital markets; uncertainties
involved in the interpretation of drilling results and geological tests
and the estimation of reserves and resources; risks of construction and
mining projects such as accidents, equipment breakdowns, non-compliance
with environmental and permit requirements, unanticipated variation in
ore grades or recovery rates; unexpected cost increases; fluctuations
in metal prices and currency exchange rates, and other risks and
uncertainties disclosed in our Annual Report on Form 10-K for the year
ended December 31, 2011. Forward looking statements are based on
numerous assumptions and are subject to all of the risks and
uncertainties inherent in our business, including risks inherent in
mineral exploration and development. Investors are cautioned that
forward-looking statements are not guarantees of future performance
and, accordingly, should not to put undue reliance on forward-looking
statements. Any forward-looking statement made by us in this release
is based only on information currently available to us and speaks only
as of the date on which it is made. We undertake no obligation to
publicly update any forward-looking statement, whether written or oral,
that may be made from time to time, whether as a result of new
information, future developments or otherwise.
SOURCE Golden Queen Mining Co. Ltd.
