Queenstake Resources Ltd.

Queenstake Resources Ltd.

March 08, 2005 00:24 ET

CORRECTION FROM SOURCE: Queenstake Resources Reports Unaudited Fourth Quarter Results and Appointment of Acting CEO and President


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: QUEENSTAKE RESOURCES LTD.

TSX SYMBOL: QRL
AMEX SYMBOL: QEE

MARCH 9, 2005 - 00:24 ET

CORRECTION FROM SOURCE: Queenstake Resources Reports
Unaudited Fourth Quarter Results and Appointment of
Acting CEO and President

DENVER, COLORADO--(CCNMatthews - March 8, 2005) - In the release issued
today at 22:34 ET MARCH 8, 2005 there was an error in the headings of
the last three tables. The tables should have stated "In Millions of
U.S. Dollars" not "In Thousands of U.S. dollars". The complete and
corrected release follows.

Queenstake Resources Ltd. (TSX:QRL)(AMEX:QEE) (the "Company") reports
its unaudited operating and financial results for the fourth quarter and
year ended December 31, 2004. The Company also reports that due to
health reasons, Mr. Chris Davie is currently not able to serve as the
Company's President and Chief Executive Officer. The Board of Directors
has appointed Mr. Dorian (Dusty) Nicol to serve as the Company's acting
President and Chief Executive Officer in addition to continuing his
duties as Executive Vice President and Director of Exploration.

Summary

Gold production in the years ended December 31, 2004 and 2003 was
243,333 ounces compared to 302,096 ounces. The production for 2003
included 152,095 ounces which were to the account of the former owners
of the Jerritt Canyon Mine and 150,001 ounces which were to the
Company's account. Gold sales totaled 245,651 ounces for the year ended
December 31, 2004, leading to revenues of $97.8 million at an average
gold price of $398 per ounce; as compared to gold sales of 146,823
ounces representing $54.9 million in revenues at an average gold price
of $378 per ounce for the six months of Company mine operations ended
December 31, 2003. All production is sold at spot price. Production for
the 2004 year was derived from 1,305,833 tons of ore at an average grade
of 0.214 ounces per ton ("opt") and an average process recovery of
87.0%; as compared to production of 767,128 tons of ore at an average
grade of 0.221 opt and an average process recovery of 88.5% during the
six-months ended December 31, 2003. Cash operating costs(1) were $336
per ounce for 2004 as compared to $270 per ounce for 2003. The Company
will report a net loss of $22.1 million ($0.06 per share), for the year
ended December 31, 2004 and a net loss of $4.6 million ($0.01 per
share), for the three months ended December 31, 2004.

Gold production in the three months ended December 31, 2004 and 2003 was
60,384 ounces and 68,411, respectively. Gold sales totaled 64,723 ounces
for the three months ended December 31, 2004, leading to revenues of
$27.2 million at an average gold price of $432 per ounce; as compared to
gold sales of 72,932 ounces for the three months ended December 31,
2003, leading to revenues of $28.5 million at an average gold price of
$391 per ounce. Production for the three-month period ended December 31,
2004 was derived from processing 331,619 tons of ore at an average grade
of 0.214 opt with a process recovery of 85.0%. Production for the
three-month period ended December 31, 2003 was derived from processing
369,465 tons of ore at an average grade of 0.212 opt with a process
recovery of 87.3%. Cash operating costs(1) for the three-month period
ending December 31, 2004 was $336 as compared to $298 during the same
period in 2003.

Queenstake's acting CEO and President, Dorian (Dusty) Nicol, commented,
"Production during the fourth quarter was significantly below
expectations. Reasons for the shortfall included mechanical problems
with mining and mill equipment together with stope scheduling issues.
The latter were not as severe as earlier in 2004. Operating costs for
the period were higher than expected, principally due to higher
electricity and commodity costs. Operational issues continue to be
addressed in order to optimize operations, control operating costs, and
realize the full production potential of Jerritt Canyon. Exploration
results, including the 2004 year-end reserve and resource estimate (see
NR 2005-2), continue to validate the Company's excitement about the
future of the Jerritt Canyon District. With a continuing focus on
correcting operational issues, the Company anticipates continued
progress towards higher production levels and lower cash operating
costs(1) in 2005."

Operating Results

Mining through the 2004 year averaged approximately 3,135 tons per day;
ore processing averaged approximately 3,577 tons per day at an average
grade of 0.214 opt of gold. Mining through the six months ended December
31, 2003 averaged approximately 2,958 tons per day; ore processing
averaged approximately 4,169 tons per day at an average grade of 0.221
opt of gold. Ore processing for 2004 included an average of 443 tons per
day of lower grade materials stockpiled by the former owners. Although
processing lower grade stockpile ore has the effect of reducing the
average grade processed, treatment of the stockpile is commercially
viable and has positive effects on the metallurgical performance of the
processing plant.

Gold production for the three-month period ended December 31, 2004 was
60,384 ounces compared to 68,411 ounces for same period in 2003. Fourth
quarter 2004 production was lower for several reasons, including
metallurgical characteristics of the ore mined in 2004, which required
lower mill throughput.

Gold production for the period was approximately 19.5% below
expectations as tons processed, grade and recovery were all lower than
anticipated. Several of the factors that have adversely affected
production levels, such as the number of available working places in the
mines, equipment availability and productivity have been improving.

Jerritt Canyon Operations Data



December 31, December 31, December 31,
2004 2003 2002
--------------------------------------------------------------------
Gold ounces produced 243,333 150,001 Nil
Gold ounces sold 245,651 146,823 Nil
Average sales price per ounce $ 398 $ 378 Nil
Cash operating costs per
ounce(1) $ 336 $ 270 Nil
Ore tons mined 1,144,214 544,341 Nil
Tons processed 1,305,833 767,128 Nil
Grade processed (opt) .214 .221 Nil
Process recovery 87.0% 88.5% Nil
--------------------------------------------------------------------
The Company acquired the Jerritt Canyon Mine on June 30, 2003;
consequently comparisons from period to period are not entirely
meaningful.

(1) The Company has adopted the Gold Institute Production Cost
Standard (the "Standard") to calculate and report cash operating
costs per ounce of gold produced. This is a non-GAAP measure,
intended to complement conventional GAAP reporting; accordingly
these data should not be considered a substitute for GAAP
measures. Management believes that cash operating costs per ounce
is a useful indicator of a mine's performance.


Financial Results

The Company will report a net loss of $22.1 million ($0.06 per share)
and $8.1 million ($0.04 per share) for the years ended December 31, 2004
and 2003, respectively. The principal components of this loss are
illustrated in the attached unaudited Consolidated Statements of Loss.

Revenues of $97.8 million were generated during 2004 from the sale of
245,651 ounces at an average gold price of $398. During the six months
of Company mine operations ended December 31, 2003, revenues of $54.9
million were generated from the sale of 146,823 ounces. Fourth quarter
2004 revenues of $27.2 million were generated from the sale of 64,723
ounces of gold. The average gold price realized was $432 per ounce.
Revenue is net of a $0.7 million premium cost of gold put options, which
expired during the quarter. Revenues for the same period in 2003 were
$28.5 million generated from the sale of 72,932 ounces and an average
realized price of $391 per ounce.

Cash operating costs(1) for the three-month period ended December 31,
2004 were $336 per ounce. The $38 per ounce increase in cash operating
costs(1) from $298 per ounce in the fourth quarter of 2003 is attributed
to the lower 2004 gold production and the remainder is attributable to
increased operating costs, including increased electricity and commodity
prices.

Depreciation, depletion and amortization ("DD&A") are substantially all
associated with the Jerritt Canyon Mine. These costs were as expected.
DD&A was $5.8 million for the three-month period ended December 31, 2004
compared to DD&A cost of $3.9 million for the same period in 2003. The
effect on DD&A of the additional capital invested in 2004 is compensated
by the effect of the increased proven and probable reserves at the end
of 2004.

Exploration expense for the three and twelve-month periods ended
December 31, 2004 was incurred for target generation and follow-up
within the Jerritt Canyon District. The Company did not commence its
District exploration programs during 2003.

General and administrative costs are associated with the Company's
executive offices; the increase in costs incurred during the three
months ended December 31, 2004 compared to the same period in 2003
results from increased corporate activity as the Company has evolved
into a mid-tier gold producer.

Interest expense for the three and twelve-month periods ended December
31, 2004 results from the term loan used to complete the acquisition of
the Jerritt Canyon Mine, as well as from other notes and capital leases
assumed in the Jerritt Canyon acquisition. Interest expense during the
three and twelve-month periods includes a non-cash component of $0.1
million and $4.5 million, respectively, comprised principally of
amortization of costs incurred in arranging the term loan and accretion
of interest related to certain deferred amounts owing to the vendors of
the Jerritt Canyon Mine. Interest costs incurred during the three-month
period ended December 31, 2003 were associated principally with the $20
million term loan, which had been arranged in relation to the
acquisition of the Jerritt Canyon Mine. The term loan and all related
deferred payments to the vendors of the Jerritt Canyon Mine were settled
in full during the third quarter of 2004. The Company therefore expects
future interest expense to be significantly reduced.

Liquidity and Capital Resources

For the three months ended December 31, 2004, operating activities
provided cash of $9.8 million; during the twelve-months ended December
31, 2004, operating activities provided cash of $15.2 million. The
Company's cash flow from operating activities is influenced principally
by gold production and gold prices realized. Cash flow of $9.8 million
provided by operating activities during the three months ended December
31, 2004 exceeded the $7.5 million provided by operations for the same
period in 2003. The increase results from accounts payable increases
offsetting the impact of lower gold production, and higher costs
incurred in 2004. The impact of the lower gold production was partially
offset by higher gold prices realized in 2004.

The Company invested $8.0 and $24.8 million in the Jerritt Canyon Mine
during the three and twelve-month periods ended December 31, 2004,
respectively, principally in underground mine development and reserve
expansion programs and in purchasing and refurbishing plant and
equipment. At December 31, 2004, the Company had $6.1 million in cash
but a working capital deficiency of $5.9 million. The Company is
pursuing the possibility of raising additional capital through debt and
equity financing arrangements and filed a preliminary short form
prospectus dated February 25, 2005 in connection with a minimum offering
Cdn $15.0 million, a maximum offering of Cdn $20.0 million together with
an Agents Option to offer and sell up to an additional Cdn $10.0 million
of securities at the respective offering price. Although management has
successfully raised significant amounts of capital in the past, there
can be no assurance that it will be able to raise additional capital in
the future.

Development and Exploration

At the new Steer Mine at Jerritt Canyon, delineation drilling is
proceeding and in some areas, development of newly defined ore shapes is
providing additional development ore. Within the Smith Mine, development
toward the new Mahala reserve is progressing on schedule and has reached
the main part of the ore zone. Definition drilling has begun and is
being expanded on development progressing parallel to the main ore zone.
Good progress is being made in further developing two new areas within
the SSX Mine: Zone 1 and Zone 5 (Zone 5 is in the western side of the
SSX reserve, adjacent to the approaching Steer decline). SSX comprises
approximately 50% of the current estimated Jerritt Canyon proven and
probable reserve.

The Company's 2004 exploration and development programs totaled $10.4
million. Of this, approximately $6.6 million was for district-scale
exploration, and was expensed for accounting purposes. The remaining
$3.8 million was for reserve expansion and was capitalized. The
Starvation Canyon area, which earlier this year yielded encouraging
drill intersections, continues to be a primary focus of exploration
activity. Numerous other areas, particularly near-mine targets, are
being drill tested as well.

Queenstake Resources Ltd. is a gold mining company based in Denver,
Colorado. Its principal asset is the Jerritt Canyon Mine in Nevada,
acquired in June 2003. The Jerritt Canyon Mine consists of four
underground mines, a 1.5 million ton per year capacity processing
facility and a 100 square mile land package that represents some of the
most exciting gold exploration ground in Nevada. Jerritt Canyon has
produced more than 7,000,000 ounces of gold since 1981.

All amounts are in US dollars, unless otherwise indicated.

Forward-Looking Statements - This news release contains "Forward-Looking
Statements" within the meaning of 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. 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. Forward-looking
statements are based on the estimates and opinions of management on the
date the statements are made, and Queenstake does not undertake any
obligation to update forward-looking statements should conditions or
management's estimates or opinions change.

Appendix



CONSOLIDATED STATEMENTS OF LOSS - UNAUDITED

Three months ended Years Ended
(In Millions December 31, December 31, December 31, December 31,
of U.S. Dollars) 2004 2003 2004 2003
--------------------------------------------------------------------
Restated(2) Restated(2)
Gold sales $ 27.2 $ 28.5 $ 97.8 $ 54.9
--------------------------------------------------------------------
Costs and expenses
Operating costs 23.0 22.3 85.3 40.7
Depreciation,
depletion and
amortization 5.8 3.9 19.6 9.2
Exploration 1.7 - 6.6 -
General and
administrative 0.8 0.3 3.4 1.9
--------------------------------------------------------------------
31.3 26.5 114.9 51.8
--------------------------------------------------------------------
Income (Loss) from
operations (4.1) 2.0 (17.1) 3.1
--------------------------------------------------------------------
Other (income)
expense, net 0.2 - (0.5) (0.2)
Stock-based
compensation 0.3 0.3 0.5 0.3
Interest expense - 3.3 4.9 4.9
Foreign exchange
(gain) loss - (0.4) 0.1 (0.2)
Provision for
impairment of
Magistral JV - 0.1 - 6.2
--------------------------------------------------------------------
0.5 3.3 5.0 11.0
--------------------------------------------------------------------
Net loss ($ 4.6) ($ 1.3) ($ 22.1) ($ 8.1)
--------------------------------------------------------------------

Net loss per share -
basic and diluted ($ 0.01) ($ 0.01) ($ 0.06) ($ 0.04)
--------------------------------------------------------------------
(2) On January 1, 2004, the Company retroactively adopted the
transitional rules of CICA Handbook section 3870, Stock-based
Compensation and Other Stock-based Payments ("CICA 3870"). This
requires the Company to: (a) for fiscal years beginning after
January 1, 2004, commence recording in the accounts the cost of
stock-based compensation, estimated using the fair-value method
prescribed in CICA 3870; and (b) restate prior period financial
statements to record the fair value of stock-based compensation
for the years 2002 and 2003.


CONSOLIDATED CASH FLOWS - UNAUDITED

Three months ended Years Ended
(In Millions December 31, December 31, December 31, December 31,
of U.S. Dollars) 2004 2003 2004 2003
--------------------------------------------------------------------
Operating Activities Restated(2) Restated(2)
Net loss $ (4.6) $ (1.3) $ (22.1) $ (8.1)
Non-cash items 6.6 6.7 24.6 19.5
Changes in non-cash
working capital 7.8 2.1 12.7 2.1
--------------------------------------------------------------------
Cash provided by
(used) in operating
activities 9.8 7.5 15.2 13.5
--------------------------------------------------------------------
Investing Activities
Property, plant and
equipment
expenditures (8.0) (5.3) (24.8) (9.0)
Restricted cash - (1.0) - (26.3)
Other investing
activities 2.1 (2.6) 9.2 (9.8)
--------------------------------------------------------------------
Cash provided by
(used) in investing
activities (5.9) (8.9) (15.6) (45.1)
--------------------------------------------------------------------
Financing Activities
Common shares issued,
net 0.8 10.0 15.1 32.3
Term loan - (6.9) (10.0) 10.0
Notes payable and
leases (1.1) - (8.2) -
Other financing
activities - 1.1 - (1.3)
--------------------------------------------------------------------
Cash provided by
(used) in investing
activities (0.3) 4.2 (3.0) 41.0
--------------------------------------------------------------------

Net increase
(decrease) in cash
and cash equivalents 3.6 2.8 (3.4) 9.4
Cash and cash
equivalents,
beginning of the year 2.5 6.7 9.5 0.1
--------------------------------------------------------------------

Cash and cash
equivalents,
beginning of the
year $ 6.1 $ 9.5 $ 6.1 $ 9.5
--------------------------------------------------------------------
(2) On January 1, 2004, the Company retroactively adopted the
transitional rules of CICA Handbook section 3870, Stock-based
Compensation and Other Stock-based Payments ("CICA 3870"). This
requires the Company to: (a) for fiscal years beginning after
January 1, 2004, commence recording in the accounts the cost of
stock-based compensation, estimated using the fair-value method
prescribed in CICA 3870; and (b) restate prior period financial
statements to record the fair value of stock-based compensation
for the years 2002 and 2003.


CONSOLIDATED SUMMARY BALANCE SHEETS - UNAUDITED

Years Ended
December 31, December 31,
(In Millions of U.S. Dollars) 2004 2003
-------------------------------------------------------------------
Assets Restated(2)
Current assets $ 16.8 $ 30.1
Restricted cash 26.4 26.3
Mineral property, plant and equipment, net 42.5 35.3
Other assets 2.2 6.2
-------------------------------------------------------------------
Total Assets $ 87.9 $ 97.9
-------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities $ 22.7 $ 20.9
Other long-term liabilities 1.1 6.5
Reclamation and mine closure 25.8 25.8
Common shares 101.0 85.2
Other equity accounts 0.5 0.6
Deficit (63.2) (41.1)
-------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $ 87.9 $ 97.9
-------------------------------------------------------------------
(2) On January 1, 2004, the Company retroactively adopted the
transitional rules of CICA Handbook section 3870, Stock-based
Compensation and Other Stock-based Payments ("CICA 3870").
This requires the Company to: (a) for fiscal years beginning
after January 1, 2004, commence recording in the accounts the
cost of stock-based compensation, estimated using the fair-value
method prescribed in CICA 3870; and (b) restate prior period
financial statements to record the fair value of stock-based
compensation for the years 2002 and 2003.


SEC file number 0-24096

-30-

Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    Queenstake Resources Ltd.
    John Haigh
    (303) 297-1557 ext. 105 or 800-276-6070
    info@queenstake.com
    www.queenstake.com
    The Toronto Stock Exchange has neither reviewed nor accepts
    responsibility for the adequacy or accuracy of this release.