February 10, 2015 - Golden Queen Mining Co. Ltd. (the “Company”) (TSX:GQM; OTCQX:GQMNF)
announces the completion of updated mineral resource and mineral
reserve estimates supported by a positive, independent updated
feasibility study for its Soledad Mountain Project (the “Project”). The
Company has a 50% interest in the Project pursuant to a joint venture
entered into with Gauss, LLC in 2014. In this news release, all dollar
amounts are in U.S. dollars and mineral resource and reserve estimates
are presented on a 100% basis.
The Company is pleased to report that the Project construction is
progressing on schedule and is approximately 30% complete. At December
31, 2014, estimated remaining capital expenditures, excluding working
capital, contingency, and mobile mining equipment, were approximately
$73.9 million. Cash on hand at the Project level was $83.3 million, and
cash on hand at the Company level, net of $3.0 million in debt
repayment paid on January 5, 2015, was $5.1 million. The Company
expects to make a contribution to the joint venture toward the end of
the second quarter of 2015 in order to maintain its 50% interest in the
Project. The Company’s contribution is not expected to exceed $12.5
million. An update on construction is provided under Construction Update below.
Updated Mineral Resource Estimates
The Company engaged Mine Development Associates, Reno, Nevada (“MDA”) to
update the Project’s geological resource model from first principles
and to provide updated mineral resource estimates. MDA’s work indicates
that vein widths are narrower than previously modeled but that vein
continuity is well defined with excellent predictability, both along
strike and down-dip.
The updated mineral resource estimates are shown in Table 1.
Table 1 - 2015 Resource Estimates Provided by MDA (100% Basis) *
- Mineral Resources are inclusive of Mineral Reserves.
- Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
- Mineral Resources are reported at a 0.004 oz/ton (0.137 g/t) AuEq
cut-off in consideration of potential open-pit mining and heap-leach
- Gold equivalent grades were calculated as follows: AuEq(oz/ton) =
Au(oz/ton) + (Ag(oz/ton)/88), which reflect a long-term Au:Ag price
ratio of 55 and a Au:Ag recovery ratio of 1.6.
- Mineral Resources are reported as partially diluted.
- Rounding as required by reporting guidelines may result in apparent
discrepancies between tons, grade and contained metal content.
- Tonnage and grade measurements are in U.S. and metric units. Grades
are reported in troy ounces per short ton and in grams per tonne.
- The Effective Date of the mineral resource estimates is December 31, 2014.
*See Forward-looking Statements below for cautionary note to U.S. investors concerning Measured, Indicat-ed and Inferred resource estimates.
MDA modeled and estimated the mineral resources for the Project by:
- Evaluating the drill data statistically;
- Interpreting gold and silver mineral domains independently on cross
sections spaced at 100-foot intervals that span the extents of the
deposit, with 50-foot-spaced sections added in the central area of the
- Rectifying the cross-sectional mineral-domain interpretations on level plans spaced at 20-foot intervals;
- Analyzing the modeled mineralization geostatistically to aid in the
establishment of estimation and classification parameters; and
- Interpolating grades into three-dimensional block models, using the
level-plan gold and silver mineral domains to constrain the estimation.
The current geological model and block model allow for high-confidence
mine planning. The 2015 resource estimates report slightly higher gold
grades after allowing for internal dilution, whereas the 2012 resource
estimates reported undiluted grades.
MDA modeled a total of 1.9 million tons as high-grade vein ore mined by
earlier underground operators including Gold Fields American Development
Company (“Gold Fields”) prior to 1942. These volumes are therefore not
included in the reported resources. Total historical production at
Soledad Mountain has been estimated at 1.3 million tons, although
detailed production records are not available. This difference is
significant as it is possible that the model underestimates the amount
of high-grade vein material that remains in place.
Channel samples included in the project database consist entirely of
cross-cut samples; none of the samples taken along the strike of the
mineralized structures were transcribed from original Gold Fields maps
into the project database. The inclusion of the drift-sample data would
increase the accuracy of the modeling of the high-grade portions of the
mineralized structures, which could further enhance the grade of the
The Company is proceeding with an infill drill program within the first
two phases of mining. The goals of the infill drill program are to: (1)
extend mineralization both laterally and in depth below the current
open pit designs; (2) convert Inferred resource estimates to Measured
and Indicated resource estimates and (3) provide material for bottle
roll tests to assess metallurgical performance.
The Company is considering additional work that would be done to
increase and upgrade the resource estimates for the Project. As
discussed above, near-term drill programs will focus on the potential to
define new resources and reserves proximal to the first two open pits
to be mined. In addition, there is excellent potential to add resources
that could significantly impact the longer-term reserves including the
Sheeted Vein zone (West open pit) and the area between the Main and East
open pits, as well as extensions of mineralized structures down-dip.
This exploratory drilling will be deferred until mining approaches the
Updated Positive Feasibility Study
The Company engaged Kappes, Cassiday & Associates, Reno, Nevada
(“KCA”) and Norwest Corporation, Vancouver, British Columbia (“Norwest”)
to update the reserve estimates for the Project based upon current
technical information, capital and operating cost estimates with a gold
price of $1,250/oz and a silver price of $17/oz.
The updated feasibility study highlights provided by KCA and Norwest include:
- Life of mine average annual production of 74k oz of gold and 781k oz of silver during full production Years 2-11;
- Total production of 807k oz of gold and 8.3mm oz of silver;
- Stripping ratio of 3.41:1 (waste tons : ore tons);
- First quartile total cash costs net of by-products of $518/oz of
gold (including royalties, California fees, property taxes, off-site
refining charges and reclamation financial assurance) and of $558/oz of
gold including sustaining capital costs;
- Pre-production capital costs of approximately $144 mm in-line with
the capital costs update provided in March 2014: $99.3 mm in
pre-production capital costs (of which $25.4 mm was spent as of December
31, 2014), $15 mm contingency, $10.5 mm in working capital and
financial assurance estimate and $19.2 mm for the mobile mining
equipment (of which $1.1 mm was spent as of December 31, 2014). The
mobile mining equipment is intended to be financed through Komatsu;
- Base case after-tax net present value (5% discount rate) of $214 mm
with a gold price of $1,250/oz and a silver price of $17/oz; and
- Base case after-tax IRR of 28.3% with a gold price of $1,250/oz and a silver price of $17/oz.
Norwest has completed the feasibility level open pit designs and
scheduling for the updated feasibility study and has provided the Proven
and Probable reserve estimates shown in Table 2:
Table 2 - 2015 Reserve Estimate (100% Basis) *
*See Forward-looking Statements
below for cautionary note to U.S. investors concerning Proven and Probable reserve estimates.
Key details of the 2015 updated feasibility study, including operating
costs, pre-production capital costs, sustaining capital costs and
project economics are presented in the Company’s corporate presentation,
which will be available on the Company’s website at www.goldenqueen.com. The Technical Report will be filed on SEDAR at www.sedar.com and on the Company’s website within 45 days of the issuance of this news release.
The 2015 updated feasibility study demonstrates robust economics and first quartile cash costs. Capital expenditures to date and the expenditures projected for the remainder of 2015 are in line with the capital cost update provided in March of 2014. Approximately 70% of these remaining capital expenditures are now locked in under fixed price contracts with experienced contractors.
Of note is that only 65% of the resource estimate has been included in
the current mine design. Successful infill drill programs and expanding
the Approved Project Boundary could significantly increase the mine
Construction is advancing smoothly and has progressed to a 30%
completion rate; all turn-key projects have been awarded to independent
contractors. Recent developments include:
- The workshop-warehouse was completed in Q3 2014 and the assay
laboratory is well under way with completion projected for early March;
- The Hilfiker wall, a critical first step in the construction of the crushing-screening plant, was completed in February;
- The construction of the Phase 1, Stage 1 heap-leach pad is advancing
and our earthmoving contractor expects to complete this turn-key
project in August;
- Construction of the site-wide power distribution and water supply infrastructure is advancing rapidly;
- An order for a high-pressure grinding roll (HPGR) was placed in July
2014. Fabrication and machining at the factory in Germany is well
advanced and the HGPR is on target for early delivery in June;
- Pre-production mining is expected to start in early April;
- Komatsu delivered a water truck, grader and one articulated haul
truck. The remaining equipment required for pre-production mining will
be delivered in late February or early March and
- There are now 10 full-time employees in Mojave with an expected
increase to ~50 employees for the start of pre-production mining.
Please refer to the Company’s corporate presentation, which will be available at www.goldenqueen.com, for information on the Project and pictures of the progress on site.
About Golden Queen Mining Co. Ltd:
The Company is developing a gold-silver, open pit, heap leach operation
on its fully-permitted 50% owned 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.
Feasibility Study Contributors
The mineral resource estimates were prepared by Mine Development
Associates of Reno, Nevada under the supervision of Michael Gustin,
Ph.D. The updated mineral reserve estimates were prepared by Norwest
Corporation under the supervision Sean Ennis, P. Eng. The updated
feasibility study for the Project was prepared by Kappes, Cassiday &
Associates under the supervision of Carl E. Defilippi. The named
parties are Qualified Persons as defined by NI 43-101 and are
independent of the Company as defined in Section 1.5 of NI 43-101.
Technical information in this news release was approved by H. Lutz
Klingmann, President, and a Qualified Person as defined under NI 43-101.
For further information regarding this news release please contact:
Lutz Klingmann, President & CEO
Telephone: (604) 921-7570
The Toronto Stock Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of the content of this press
Caution With Respect To Forward-looking Statements: The
information in this news release includes certain “forward-looking
statements” that are based on the information available to us as at the
current date, and may prove to be incorrect or uncertain. All
statements in this news release, other than statements of historical
fact, including, without limitation, plans for and intentions with
respect to construction and other development activities on the Soledad
Mountain Project, future mining operations on the Project, expectations
and scheduling related to the contracted turn-key projects, estimates
related to contribution timing and amounts, returns, resources and
reserves, projected cost, positive results of further mineral
exploration drilling and other statements, estimates and plans, are
forward-looking statements. 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 statements in this news release regarding our intentions
include risks of construction and mining such as accidents, equipment
breakdowns, non-compliance with environmental and permit requirements,
actual mining conditions and results being different from current plans
and models, changes to estimates of resources and reserves, financial
projections and assumptions being different from actual results due to
changes in equipment costs, gold and silver prices, planned mining
activities, significant disruptions to mining activity due to actions of
third parties, governments and other risks and uncertainties disclosed
in the section entitled “Risk Factors” contained in our Annual Report on
Form 10-K for the year ended December 31, 2013 and in our Quarterly
reports on Form 10-Q for the periods ended June 30, 2014 and September
30, 2014. 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
Cautionary note to U.S. investors concerning measured, indicated or inferred resources: We advise U.S. investors that while the terms “measured resources”, “indicated resources” and “inferred resources” are recognized and required by Canadian regulations, the U.S. Securities and Exchange Commission (“SEC”) does not recognize these terms and these terms do not comply with SEC Guide 7 requirements. Investors are cautioned not to assume that any part or all of the material in these categories will be converted into reserves. It should not be assumed that any part of an inferred mineral resource will ever be upgraded to a higher category.
Cautionary note to U.S. investors concerning proven or probable mineral reserve estimates:
This news release uses the terms “proven reserves” and “probable
reserves” in accordance with NI 43-101. We advise U.S. investors that
the requirements of NI 43-101 for identification of “reserves” are 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 Guide 7
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.
Back to the News page