Golden Queen Reports Financial Results for the Third Quarter of 2014

November 10, 2014 - Golden Queen Mining Co. Ltd. (TSX:GQM; OTCQX:GQMNF) (the “Company” or “Golden Queen”) today released its third quarter financial results and construction updates for its 50%-owned Soledad Mountain gold-silver project (the “Project”) located just south of the town of Mojave, California. The financial results for the three and nine month periods ended September 30, 2014 are presented in the condensed consolidated interim financial statements and quarterly report filed on Form 10-Q with the SEC, which will be available on the Company’s website at www.goldenqueen.com, on SEDAR at www.sedar.com, and on EDGAR at www.sec.gov. All amounts are in U.S. dollars and are shown on a 100% basis unless otherwise stated.

The Company noted the following progress in the third quarter of 2014:

  • The Company’s shareholders voted to accept the joint venture transaction (the “JV Transaction”) with Gauss LLC (“Gauss”) at the special meeting held on September 9th, 2014. The JV Transaction closed shortly thereafter.
  • The Company’s subsidiary repaid its July 2014 $10 million loan advanced by Leucadia National Corporation (“Leucadia”) and Auvergne LLC (“Auvergne”).
  • Construction continued on site and proceeded smoothly with no incidents to report.
  • The workshop - warehouse and a number of infrastructure and site grading projects were completed.
  • Golden Queen’s consolidated cash position was $97.5 million as at September 30, 2014

Joint Venture Transaction

At the special meeting of shareholders held on September 9, 2014, the Company’s shareholders voted overwhelmingly in support of the resolution approving the JV Transaction with Gauss. Pursuant to the JV Transaction, Golden Queen converted its wholly-owned subsidiary, Golden Queen Mining Co., Inc. (“GQ Inc.”), that is developing the Project, into a California limited liability company (Golden Queen Mining Company, LLC or “GQ California”). On closing of the JV Transaction, Gauss acquired 50% of GQ California in exchange for its $110,000,000 investment. Golden Queen Mining Holdings, Inc. (“GQ Holdco”), a newly incorporated U.S. subsidiary of Golden Queen, holds the other 50% of GQ California.

When the JV Transaction closed, GQ California used a portion of the investment to repay principal and accrued interest on the $10,000,000 loan advanced by Leucadia and Auvergne in July 2014. GQ California also made a $5,000,000 early distribution to each of Gauss and GQ Holdco, for a total early distribution of $10,000,000. GQ California also paid Leucadia and Auvergne a transaction fee of $2,275,000.

GQ California will apply the remainder of the investment to the continued development of the Project.

Financial Highlights

For the third quarter ended September 30, 2014, the Company reported a net loss attributable to the Company of $1.8 million (or $0.02 basic and diluted loss per share), compared to a net loss of $0.6 million (or $0.01 basic and diluted loss per share) for the corresponding period in 2013. This difference is due in part to higher general administrative expenses in the third quarter of 2014 and one-time fees related to the JV Transaction, partially off-set by a decrease of the derivative liability in the amount of $2.9 million.

The Company incurred general and administrative expenses of $1.1 million during the three months ended September 30, 2014, compared to $0.8 million for the same period in 2013. This increase is due to the Company’s extensive work required to conclude the JV Transaction and an increase in corporate activities both at the Company’s head office and on site as the Company continues to advance the Project.

The Company capitalized development costs of $6.7 million in the third quarter of 2014, compared to development costs of $3.3 million for the corresponding period in 2013. Costs included $2.3 million towards the high pressure grinding roll, $0.7 million in engineering costs, $0.5 million towards power supply and distribution and $0.4 million spent on the water supply infrastructure. The capitalized development costs include $0.8 million in capitalized interest costs.

The results for the third quarter of 2014 are summarized in the table below, in thousands, except per share data.

Financial position as at: September 30, 2014 December 31, 2013
On a consolidated basis * $ $
Cash 97,477 5,031
Mineral property interests 25,104 9,919
Total assets 123,623 15,792
Working capital 75,110 3,585
Total liabilities 23,138 9,551
Non-controlling interest - Temporary portion 22,931 Nil
Non-controlling interest - Permanent portion 34,396 Nil
Stockholders’ equity 43,158 6,241
Results for the quarter ended on: September 30, 2014 September 30, 2013
Attributable to Golden Queen $ $
Net income (loss) and comprehensive income (loss) (1,812) (638)
Basic income (loss) per share (0.02) (0.01)
Diluted income (loss) per share (0.02) (0.01)

These consolidated results include the accounts of Golden Queen, GQ Holdco and GQ California. GQ California meets the definition of a Variable Interest Entity. Golden Queen has determined it is the member of the related party group that is most closely associated with GQ California and, as a result, is the primary beneficiary who consolidates GQ California. Golden Queen’s economic interest in GQ California is 50%.

Shareholders are reminded that the Company has no revenues from mining operations as the Project is not yet in production.

Construction Update

Construction continued on site and proceeded smoothly with no incidents to report during the third quarter. Construction proceeded at a much-reduced rate as all major projects that were committed earlier in 2014 had been completed.

Highlights of the third quarter include placing an order for a high-pressure grinding roll which is a key piece of equipment for the Project with delivery scheduled for the third quarter of 2015. As well, the workshop-warehouse and a number of infrastructure and site grading projects were completed during the quarter.

Detailed designs and cost estimates were completed for the assay laboratory, and a contract for the construction of the assay laboratory building was signed in the third quarter.

Detailed engineering for the critical turn-key projects was essentially completed during the third quarter. Plans and specifications were submitted the Kern County Building Department for approval.

About Golden Queen Mining Co. Ltd:

The Company is developing a gold-silver, open pit, heap leach operation on its fully-permitted 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.

Technical information in this news release was approved by H. Lutz Klingmann, President & CEO, 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

Email: lklingmann@goldenqueen.com

Caution With Respect To Forward-looking Statements: The information in this news release includes certain “forward-looking statements”. All statements in this news release, other than statements of historical fact, including, without limitation, the ability of the Company to maintain its current interest in the Project by funding additional capital requirements; plans for and intentions with respect to capital requirements, construction and other development activities on the Project; expectations related to management and operation of GQ California and future mining operations on the Project, 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, without limitation, risks and uncertainties regarding: failure to fund the Company’s required capital contribution to GQ California in accordance with the joint venture agreement and related dilution in GQ California; the development and operation of the Project, including additional capital requirements for the Project, accidents, equipment breakdowns and non-compliance with environmental and permit requirements. Other risks and uncertainties include risks related to fluctuations in gold and silver prices; changes in planned work resulting from logistical, technical or other factors; that results of operations on the Project will not meet projected expectations due to any combination of technical, operational or market factors; uncertainties involved in the interpretation of technical data and the estimation of gold and silver resources and reserves; 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 our Quarterly Report on form 10-Q for the period ended September 30, 2014.

Investors are cautioned that forward-looking statements are not guarantees of future performance and, accordingly, investors should not put undue reliance on forward-looking statements. Any forward-looking statement made by us in this news release is based only on information currently available to us and speaks only as of the date on which it is made.

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