DENVER, March 30 /PRNewswire-FirstCall/ -- Queenstake Resources
Ltd. (TSX: QRL, Amex: QEE) reported a net loss of $20.8 million for
the full year 2006. Cash flow from operations before working
capital changes totaled $5.1 million for 2006. Cash and cash
equivalents at year-end were $6.6 million. Gold production was
169,851 ounces for the full-year 2006, of which production from
Jerritt Canyon mined ore was 153,581 ounces; the remaining
production was from ore purchased from Newmont. Cash operating
costs for 2006 were $533 per ounce. Jerritt Canyon operating costs
showed improvement in the fourth quarter of 2006 as a result of the
cost reduction measures implemented in late September 2006. The
cost initiatives completed included discontinuing the services of a
higher cost underground mining contractor; reduction by 11% of the
workforce; reorganizing and centralizing the maintenance
department; removing from service the high-hours, high-maintenance
cost mining equipment; and deferring the production of ore from
below the water table at the Smith Mine. During the fourth quarter
of 2006, gold production was 45,776 ounces, of which Jerritt Canyon
mined ore production was 36,398 ounces; the remaining production
was from ore purchased from Newmont. Cash operating costs per ounce
for the fourth quarter of 2006 were $545 per ounce, 18% lower than
the third quarter of 2006. Compared with the year ago quarter, cash
operating costs were 32% higher in the fourth quarter of 2006, due
to decreased ore tons mined, decreased ore grade, mill mechanical
issues discussed under "Operations Review" below and increasing
fuel, labor and commodity prices. As announced on March 22, 2007,
the Company and YGC Resources Ltd. (YGC) have completed all due
diligence requirements and signed a definitive agreement to combine
the companies to form Yukon-Nevada Gold Corporation, subject to
shareholder, court and regulatory approvals and certain other
conditions precedent, including a minimum Cdn$80.0 million net
proceeds financing to be completed by YGC for the benefit of
Yukon-Nevada. The meetings for the respective shareholders to
consider and vote on the proposed combination are scheduled for May
18, 2007. Full Year Full Year Ending Ending Operating Highlights 4Q
2006 4Q 2005 12/31/06 12/31/05 Gold ounces produced(1) 45,776
45,555 169,851 204,091 Gold ounces sold(1) 44,929 46,828 167,762
202,684 Average realized gold price ($/oz) $615 $485 $609 $445 Cash
operating costs per ounce(2) $545 $413 $533 $386 Ore tons mined
199,219 223,060 777,836 959,099 Tons processed 253,945 211,587
973,593 1,106,937 Grade processed (opt)(3) 0.22 0.25 0.21 0.22
Process recovery 85.6% 86.8% 86.2% 86.6% Financial Review All
amounts in this news release are in US dollars, unless otherwise
stated. The Company reported a net loss of $20.8 million for 2006
compared with a net loss of $19.7 million for 2005. For 2006,
revenues of $102.2 million were generated from the sale of 167,762
ounces of gold at an average realized gold price of $609 per ounce.
Also during 2006, the Company generated $0.7 million in revenue
from the processing of loaded carbon for Newmont. Revenues for 2005
were $90.2 million generated from the sale of 202,684 ounces at an
average realized gold price of $445 per ounce. Cash operating costs
of $533 per ounce for 2006 reflected production shortfalls as well
as increases in basic commodity prices. During 2006, cash operating
costs were negatively impacted by $3.2 million in increased
commodity costs, including fuel, electric power, commodities and
freight, $2.1 million in higher labor costs from wage increases and
higher than anticipated overtime, and $3.1 million from increased
contractor costs. These factors accounted for increases in cash
operating costs per ounce totaling $48 for 2006. Depreciation and
accretion charges were $19.0 million for 2006, compared with $17.2
million in 2005. Exploration expenses for 2006 and 2005 were $4.9
million and $3.9 million, respectively. General and administrative
costs were $4.4 million for 2006 compared to $4.9 million in 2005.
The Company invested $31.9 million in the Jerritt Canyon mines
during 2006, compared with $19.7 million in 2005. Significant
capital investments during 2006 included $8.4 million spent for a
state-mandated new evaporation pond, underground mine development,
and in purchasing and refurbishing plant and equipment. At December
31, 2006, the Company had a working capital deficit of $12.4
million, compared to positive working capital of $4.8 million at
December 31, 2005. The year-end 2006 working capital deficit was
primarily due to the liability related to purchased ore stockpile
inventories, increased trade payables and decreased cash and cash
equivalents. At December 31, 2006, there were approximately $8
million of trade payables incurred for the evaporation pond, which
were paid down during the first quarter of 2007 using proceeds of a
bridge loan financing facility. Jerritt Canyon finished the year
with an estimated 11,900 contained gold ounces in Jerritt Canyon
ore and an estimated 37,000 contained gold ounces in ore purchased
from Newmont in stockpiles adjacent to the mill. As stated in the
January 15, 2007 news release, the Company closed the secured
convertible bridge loan financing facility of $8 million with
Auramet Trading LLC. Auramet and the Company have recently reached
agreement to extend the payment date of the facility by one month
to May 31, 2007. The borrowed funds, less costs of the transaction,
primarily paid the costs of the new evaporation pond at the Jerritt
Canyon operations which was mandated by the Nevada Department of
Environmental Protection (NDEP). The Company is pursuing
reimbursement for such costs under its reclamation insurance policy
with American International Specialty Lines Insurance Company, a
subsidiary of AIG (the Insurer), but the timing and receipt of such
reimbursement is uncertain. (Also refer to the Company's news
release of January 22, 2007 pertaining to the Company's lawsuit
against the Insurer.) For the year ended December 31, 2006, the
Company's net loss of $20.8 million, the accumulated deficit of
$103.7 million and the working capital deficit of $12.4 million led
to a going concern disclosure under Canadian and US generally
accepted accounting principles, as described in Note 1 of the Notes
to the Company's Consolidated Financial Statements for such year,
as filed with the Canadian securities commissions and the US
Securities and Exchange Commission. The Company's ability to
discharge its liabilities and realize the carrying value of its
assets in the normal course of operations is dependent upon, among
other things, the resumption of full mill processing capacity
during the second quarter of 2007, further extension, payment or
conversion of the Auramet loan facility and either successful
completion of the proposed merger with YGC or the raising of
additional financing. Operations Review Full-year 2006 gold
production from Jerritt Canyon mined ore was 153,581 ounces,
excluding production from ore purchased from Newmont, as compared
to 204,091 ounces produced in 2005. Lower production in 2006 was
due to ongoing mechanical issues at the mill and declining ore tons
mined, caused by delays in accessing ore from the Smith Mine and
Zone 1 of the SSX Mine. The Smith Mine was adversely affected by
water inflows in excess of the capacity of the pumping system to
dewater. The SSX Mine experienced grade declines from higher mining
dilution as a result of the mining of smaller, less contiguous ore
blocks. Production from below the water table at the Smith Mine and
from Zone 1 of the SSX Mine has been deferred and is not planned
during 2007. The Murray Mine was shut down in the second quarter of
2006. Total ore tons processed in 2006 were 973,593, a decline of
12% from 2005. The reduction in tonnage is due to a combination of
fewer ore tons mined, ongoing mill mechanical issues and the
Company's original plan to scale-back roaster operations in early
2006. The grade of Queenstake ore milled increased to 0.23 ounce of
gold per ton, a 5% improvement from 2005. The table below
summarizes production results for both Jerritt Canyon mined ore and
ore purchased from Newmont. Year ended December 31, 2006 Jerritt
Newmont Canyon ore ore Total Tons processed 792,959 180,634 973,593
Grade processed (opt) 0.23 0.10 0.21 Process recovery 85.8% 90.4%
86.2% Gold ounces produced 153,581 16,270 169,851 Processed ore
tonnage and gold production for the full-year 2006 were unfavorably
impacted as the Company made the decision to run the mill at a
reduced capacity in order to minimize the risk of further mill
pinion and bull gear mechanical issues. A new mill pinion gear was
installed in April 2006 and the bull gear was turned over and
several cracked teeth repaired at that time. However, through the
third quarter of 2006, the new pinion gear exhibited a high degree
of wear and pitting and elevated gear surface temperatures, posing
risk of failure and potential collateral damage if the mill had
continued to run at full capacity. As a result, the mill ran at 75%
capacity through most of the second half of 2006 in order to avoid
potential damage to the pinion and bull gears. A replacement new
bull gear has been completed and is being shipped from Australia
for delivery early in the second quarter. The estimated schedule to
complete the annual mill maintenance and bull gear change in the
second quarter will require a 10-day shutdown of the mill. During
the scheduled mill down-time, the mines will continue to produce
ore and accumulate the ore in stockpiles adjacent to the mill that
will then be processed during the remainder of 2007. Capitalized
mine development of 7,083 feet during the year was essentially on
2006 plan, as the mining emphasis shifted to short-term production.
Two mining contractors that had been dedicated to development were
phased-out during the year and internal crews were assigned to
those headings. During the fourth quarter of 2006, the Jerritt
Canyon mining operations completed 2.8 million man hours without a
lost time accident, while the mill achieved a million man hours
without a lost time accident. Outlook The Company expects to close
the Queenstake-YGC business combination in the second quarter of
2007. Upon completion of the merger, the new Board of Directors and
management of Yukon-Nevada Gold Corporation will determine the
production outlook, and exploration and capital investment
expenditures, in order to deliver maximum value from the Jerritt
Canyon operation and assets. 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, which has produced over 7.5 million ounces of gold from
open pit and underground mines since 1981. Current production at
the property is from two underground mines. The Jerritt Canyon
District, which comprises 119 square miles (308 square kilometers)
of geologically prospective ground controlled by Queenstake,
represents one of the largest contiguous exploration properties in
Nevada. In addition, Jerritt Canyon also has one of only three
permitted roasting facilities in Nevada. (1) The Company's
production and sales for the fourth quarter of 2006 included 9,378
ounces of gold from ore purchased from Newmont. (2) Cash operating
costs per ounce is a non-GAAP measure intended to complement
conventional GAAP reporting. Management believes that cash
operating costs per ounce is a useful indicator of a mine's
performance. Please refer to the Company's Management Discussion
and Analysis on file at http://www.sedar.com/ and
http://www.sec.gov/ for further information. (3) The average grade
of ore processed was impacted by the lower grade of ore purchased
from Newmont. Refer to the table on page 3 of this news release for
a production summary of Jerritt Canyon ore and ore purchased from
Newmont. (4) The Qualified Person for the technical information
contained in this news release is Mr. Dorian L. (Dusty) Nicol,
President and Chief Executive Officer of Queenstake. 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 regarding Queenstake's future plans
are forward-looking statements that involve various risks and
uncertainties. Such forward-looking statements include, without
limitation, (i) projections of future gold production, investments
in exploration and capital and operational improvements, (ii)
estimates of mill shut down and refurbishment, and (iii) statements
relating to the pending combination of the Company and YGC.
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, risks relating to the completion of the pending combination
with YGC 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. CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2006 and 2005 (In Thousands of
U.S. Dollars, For the Years Ended December 31, except per share
amounts) 2006 2005 Revenues $102,910 $90,174 Costs and expenses
Cost of sales 93,389 80,268 Depreciation, depletion and
amortization 19,016 17,194 Non-hedge derivatives 207 2,647
Exploration 4,899 3,880 General and administrative 4,418 4,915
Accretion of reclamation and mine closure liability 1,192 1,174
Stock-based compensation 1,176 579 124,297 110,657 Loss from
operations (21,387) (20,483) Interest expense 368 413 Other income,
net (897) (937) Foreign exchange (gain) loss (109) (213) Gain on
disposal of assets (102) (75) Write down of assets 197 -- (543)
(812) Net loss $(20,844) $(19,671) Net loss per share - basic and
diluted ($0.04) ($0.04) Weighted average number of shares
outstanding (000's) - basic 573,152 509,274 CONSOLIDATED STATEMENTS
OF DEFICIT For the Years Ended December 31, (In Thousands of U.S.
Dollars) 2006 2005 Deficit, beginning of year $(82,860) $(63,189)
Net Income (loss) (20,844) (19,671) Deficit, end of year $(103,704)
$(82,860) CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31, 2006 and
2005 December 31, December 31, (In Thousands of U.S. Dollars) 2006
2005 ASSETS Current assets Cash and cash equivalents $6,580 $10,225
Trade and other receivables 726 463 Inventories 34,196 6,519
Marketable securities 13 13 Prepaid expenses 1,896 1,499 Total
current assets 43,411 18,719 Restricted cash 27,035 27,165 Mineral
property, plant and equipment, net 51,491 45,692 Other assets 1,254
1,763 Total assets $123,191 $93,339 LIABILITIES AND SHAREHOLDERS'
EQUITY Current liabilities Accounts payable and accrued liabilities
$52,386 $11,063 Other current liabilities 3,381 2,846 Total current
liabilities 55,767 13,909 Other long-term obligations 1,997 2,117
Reclamation and mine closure 22,606 26,382 Total liabilities 80,370
42,408 Shareholders' equity Common shares, no par value, unlimited
number authorized Issued and outstanding 583,706,489 (2005 -
550,021,360) 143,442 131,804 Contributed surplus 3,069 1,973
Warrants 14 14 Deficit (103,704) (82,860) Total shareholders'
equity 42,821 50,931 Total liabilities and shareholders' equity
$123,191 $93,339 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
YEARS ENDED DECEMBER 31, 2006 and 2005 For the Years Ended December
31, (In Thousands of U.S. Dollars) 2006 2005 OPERATING ACTIVITIES
Net loss $(20,844) $(19,671) Non-cash items: Depreciation,
depletion and amortization 19,016 17,194 Interest accretion and
deferred financing costs -- -- Write down of mineral property,
plant and equipment 197 -- Gain on disposal of assets (102) (75)
Inventory valuation adjustments 3,575 -- Amortization of deferred
charges -- 1,903 Accretion of reclamation and mine closure
liability 1,192 1,174 Write down of non-hedge derivatives 207 2,647
Stock-based compensation 1,176 579 Foreign exchange (gain) loss
(109) (213) Loss on sale of marketable securities -- 45 Warrants
issued for services -- 14 4,308 3,597 Reclamation costs incurred
(968) (558) Deferred revenue 1,731 -- Changes in non-cash working
capital: Inventories (30,317) (1,435) Accounts receivable and
prepaid accounts 461 (1,178) Accounts payable and accruals 43,124
(8,098) Cash provided by (used in) operating activities 18,339
(7,672) INVESTING ACTIVITIES Mineral property, plant and equipment
expenditures (31,916) (19,662) Purchase of non-hedge derivatives --
(1,242) Environmental risk transfer program -- -- Proceeds from
sale of assets 121 93 Notes receivable -- -- Sale of marketable
securities -- 442 Restricted cash 130 (786) Other, net -- -- Cash
used in investing activities (31,665) (21,155) FINANCING ACTIVITIES
Common shares issued, net of costs 11,559 30,393 Term loan -- --
Notes payable and leases (1,794) 2,527 Other (84) -- Cash provided
by (used in) financing activities 9,681 32,920 Net increase
(decrease) in cash and cash equivalents (3,645) 4,093 Cash and cash
equivalents, beginning of year 10,225 6,132 Cash and cash
equivalents, end of year $6,580 $10,225 Cash paid for interest $322
$413 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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