VANCOUVER, May 1 /PRNewswire-FirstCall/ -- Golden Queen Mining Co. Ltd. (TSX - GQM) is proposing 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. Every element of the Soledad Mountain Project has been rethought and reengineered in the past three years in an effort to find sound technical and cost-effective solutions that would allow the Project to proceed with a robust internal rate of return or IRR. This phase of the technical work was completed toward the end of 2006.
The following is a summary of recent and ongoing work on the Project.
Independent Technical Report & Mineral Resource Estimates
In 2002, the company engaged SRK Consulting (U.S.), Inc. in 2005 to prepare a National Instrument 43-101 compliant Technical Report to validate and confirm mineral resource estimates. The Technical Report was released on March 6, 2006. The mineral resources confirmed in the Technical Report are estimated to contain 2,162,000 oz of gold and 37,628,000 oz of silver in the Measured and Indicated categories and a further 511,000 oz gold and 11,154,000 oz silver in the Inferred category, both calculated with a gold-equivalent cut-off grade of 0.274g/t (0.008oz/ton). A copy of the Technical Report is available on the company's web site, http://www.goldenqueen.com/.
Independent Feasibility Study & Mineral Reserve Estimates
The company had disclosed mineral reserve estimates in the past based upon technical information and reports that preceded the implementation of NI 43-101. The British Columbia Securities Commission noted that the company's technical disclosure did not comply with NI 43-101 in late 2005. The company therefore withdrew the mineral reserve estimates for the Project on the basis that they were not supported by a current independent Technical Report prepared in accordance with NI 43-101. In January 2007, the company engaged Norwest Corporation of Vancouver to prepare a NI 43-101 compliant Technical Report to assess mineral reserves as part of an independent feasibility study based upon recently completed technical work and engineering designs. This Technical Report is expected to be completed in June 2007.
Permitting Update
All key submissions required for an amended set of approvals and permits for the Project have now been submitted to the responsible regulatory authorities.
- Water Quality
The company and its consulting engineers prepared and submitted a
revised Report of Waste Discharge to the Lahontan Regional Water
Quality Control Board on March 8, 2007. The revised Report of Waste
Discharge was prepared at the request of the Regional Board to
document improvements in the layout and design of the heap leach
facility plus other changes proposed for the Project. The Regional
Board is currently assessing the company's submission.
- Land Use & Conditional Use Permits
The State of California introduced backfilling requirements for
certain types of open pit, metal mines in December 2002. The company
contended that these regulations did not apply to the Project under a
grandfathering provision included in the regulation. The company
therefore pursued both a favourable interpretation under the
regulation and subsequently an amendment of the regulation with the
State Mining and Geology Board (the "Board") in 2006. These efforts
were supported by Kern County officials. Both approaches were
rejected by the Board and the decision was duly recorded by the Board
in January 2007.
The Company and its consulting engineers prepared a life-of-mine
waste rock management plan in 2006 and this plan incorporates
backfilling of mined-out phases of the open pit. The waste rock
management plan plus other changes proposed for the Project will
require an amendment to the Conditional Use Permits for the Project.
The application for a revised Surface Mining Reclamation Plan was
submitted to the Kern County Planning Department on April 9, 2007.
The Planning Department is currently assessing the company's
submission.
- Air Quality
The company had obtained seven Authority To Construct permits dated
March 16, 2002. These permits expired on March 16, 2004 and were not
renewed due to changes anticipated in the Project. WZI Inc. of
Bakersfield was asked to assess air quality for the Project in
February 2006 and was commissioned to obtain Authority To Construct
permits in April 2006. Emissions modeling was done by WZI Inc. and
submitted to the Kern County Air Pollution Control District in
September 2006. The Authority To Construct permits remain
outstanding.
The Authority To Construct permits are converted to a Permit To
Operate after construction has been completed and subject to
inspection by the Kern County Air Pollution Control District.
- Reclamation Financial Assurance
The company provided reclamation financial assurance in the form of
an Irrevocable Standby Letter Of Credit backed by a Certificate Of
Deposit with Union Bank of California in the amount of US$245,337 on
November 21, 2006 and this is the current estimate for reclamation of
historical disturbances on the property. This is the first time in
its history that the company has provided financial assurance and
this is reassessed annually.
Gold & Silver Recoveries
A flow sheet that uses a high-pressure grinding roll (or "HPGR") to prepare ore for heap leaching has been developed for the Project. The primary ore types that will be mined are rhyolite (68.1 %), quartz latite (21.3 %) and pyroclastics (10.5 %). Five series of HPGR and confirmation bottle roll and column leach tests and mineralogical studies were completed on rhyolite and quartz latite ores between 2003 and 2006 to determine operating parameters for the heap leach operation and gold and silver recoveries.
The following recoveries, based upon a tails analysis, are now projected for the commercial operation:
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Proportion Gold Silver
Primary Rock/Ore -------------------------------
Types % % %
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Pyroclastics 10.5 85.4 52.5
Quartz Latite 21.3 89.9 52.5
Rhyolite 68.1 83.4 52.5
Undefined 0.1 Average Average
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Total & Average 100.0 85.0 52.5
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Use Of The High-pressure Grinding Roll
The test results and a technical assessment of the HPGR shows that this will be a viable and cost-effective approach to preparing ores for heap leaching.
The indicated benefits of using the HPGR will be:
- Higher recoveries in the heap leach operation due to micro-cracks in
the ore particles;
- Faster gold and silver extraction rates;
- Stronger agglomerates due to a more favourable overall particle size
distribution and this will also impact the flow rate of solutions
through the heap;
- Substantially lower capital costs than a conventional crushing-
screening plant;
- Manageable dust control with fewer transfer points;
- Lower energy consumption and thus lower operating costs and
- Exceptional circuit flexibility that will readily permit future
upgrades such as a finer HPGR feed size or the recycle of edge
product.
The HPGR consists basically of two counter-rotating rolls - one a fixed roll and the other a 'floating' roll. The 'floating' roll is mounted on and can move freely on two slides and the grinding forces are applied to the 'floating' roll by four hydraulic rams. Ore is choke-fed to the gap between the rolls and comminution takes place by inter-particle crushing in the bed of particles. The gap between the rolls is determined by the nip-in characteristics of the feed and the total grinding force applied, which in turn depends upon the pressures in the hydraulic system. Each roll is driven by an electric motor via a planetary gear reducer. The total grinding force can range from 750 kN to 20,000 kN and pressures in the gap can range from 50 MPa to 250 MPa. The unconfined compressive strength of Soledad Mountain ores ranges from 2.2 MPa to 119 MPa by comparison.
Wear has been the concern in HPGR applications in hard rock. Three HPGR manufacturers have made significant strides in developing wear protection for the rolls in the past five years. Confidence in these developments is high as evidenced by the number of large HPGRs installed in hard rock mining operations in the past few years.
Engineering Designs
An in-pit primary crusher and pipe conveyor will be used to crush and convey ore to the secondary crushing-screening plant from a number of the mining phases. Pipe conveyor technology is well proven in practice with upward of 200 installations in Europe. Regenerative braking is typically used in all loaded downhill applications and the power generated would provide a portion of the power required elsewhere in the Project.
A detailed site layout with the required infrastructure has been completed.
AMEC of Vancouver prepared the design of the crushing-screening plant and this includes the HPGR. Polysius has also completed the detailed design of the commercial HPGR.
Summit Valley Engineering & Equipment of Salt Lake City did the design and capital and operating cost estimates for the Merrill-Crowe plant and refinery.
Mr. Jack E Stanley a consulting engineer of Princeton, British Columbia prepared the design and capital and operating cost estimates for the laboratory.
Intermountain Consumer Protection Engineers of Salt Lake City prepared the design and capital cost estimates for the workshop & warehouse and the water supply and the process water and firewater distribution systems.
Golder Associates of Denver prepared the design of the heap and the heap leach pad and this includes detailed estimates for construction quantities. Site investigations were done by Golder in 2004 and again in 2006.
Terra Nova Technologies of San Diego prepared the heap leach stacking study and capital and operating cost estimates for the conveying and stacking system.
AMEC Americas Limited prepared a detailed motor list and estimated the power consumption for a commercial heap leach operation and did a capital cost estimate for power supply and distribution.
Additional detailed work such as the manpower complement required for a commercial heap leach operation has been completed in-house.
Work Done On Site In 2006
The following is a summary of work done on site in 2006:
- DeWalt Corporation of Bakersfield set out one bench mark for mining
phases 1 and 2 and one bench mark for mining phase 3 of the open pit
as required by the Conditional Use Permits.
- High-grade and low-grade samples of rhyolite ore were taken for HPGR
and column leach test work in April. The total weight of the two
samples was approximately 2,100 kg (4,600 lb). The samples were
shipped by truck to McClelland Laboratories in Sparks, Nevada for
sample preparation and then by air freight to the Polysius AG
laboratory in Germany.
- A soil survey was done in August in an area west of Silver Queen Road
to determine the possible presence and quality of clay. Clay is
required for the construction of one of two liners under the heap
leach pads and the current design is based upon a bentonite
admixture. The use of bentonite would be expensive and a local source
of clay would be preferred if a local source can in fact be located
and quality confirmed. A dozen shallow test pits were excavated and a
set of samples was taken and logged. Laboratory test work has been
completed and all indications that a suitable source of clay has been
located.
- T.J. Cross Engineers of Bakersfield is doing the detailed design for
the turnoff from Silver Queen Road to the mine. The design has been
discussed with and will be submitted to the Kern County Roads
Department for approval. The Kern County Roads Department completed
traffic surveys along Silver Queen Road and provided design
parameters in November.
- T.J. Cross Engineers is also preparing designs for septic systems and
leach fields and these will be submitted to the Kern County
Environmental Health Services Department for permits to construct.
- A PM(10) monitoring and meteorological station was erected by Air
Sciences of Golder, Colorado in August and data is now being recorded
on a continuous basis.
- A study to assess and document baseline soil conditions in the
vicinity of the future Merrill-Crowe plant was completed and
submitted to the Kern County Planning Department.
- Dr. Sam Bamberg of Littleton, Colorado designed a revegetation test
plot in May. This is the first of a number of revegetation test plots
that will ultimately be constructed and is in a location that will
not be disturbed when mine development starts.
The area around production water well PW-2 had been used for waste
disposal at some time in the past and the area was strewn with
general garbage. The first task was therefore a thorough cleanup of
the site and this was done mid-year.
The test plot was prepared on November 6 and 7 with three types of
surface preparation:
- Ripped and graded with formed micro-basins;
- Ripped only and
- No surface preparation.
Seed was sown by hand on November 8. Growth will be monitored to see
what effect surface preparation has on growth and to demonstrate that
use of seed collected and prepared locally can be effective. No
fertilizer will be used and the area will not be watered. The test
plot was fenced.
A team of part-time workers collected seed on site in July and again
in November and a significant quantity of seed has been collected and
is being stored on site.
- Extensive bat surveys were done during the year and a final report
was completed and submitted to the Kern County Planning Department.
- A small contractor from Rosamond is doing cleanup on site. A number
of important safety items such as gates and fences are being
addressed.
- The company's consulting engineers did a first statistical analysis
of water quality data from three monitoring wells and a study of the
groundwater regime around Soledad Mountain.
Outlook
The company plans to put the Project into production as an open pit heap leach operation and to construct facilities to process ore at a rate of 5.7 million tonne (6.3 million ton) per year for an initial mine life of approximately eleven years.
If an independent feasibility study is completed for the Project and a production decision is made, the Company will need significant additional financing to develop the Project into an operating mine and estimates that this could range as high as US$62.5 million in addition to the working capital required. The company believes that financing for the Project can be secured if gold and silver prices remain at or above US$450.00/oz and US$7.50/oz respectively. Gold and silver prices averaged US$604.43/oz and US$11.57/oz in 2006 and prices have traded in a relatively narrow range around US$675.00/oz and US$13.50/oz respectively in April.
It is not expected that the company will hedge any of its gold or silver production.
The company held US$5,513,580 in cash and cash equivalents on December 31, 2006. The company's management does not expect that additional cash will be required (except production financing) beyond cash currently on hand to complete the independent feasibility study for the Project, for ongoing work on approvals and permits and work on site in 2007 and for general corporate purposes to the end of 2008.
Aggregate
The company expects that an aggregate business can be developed on the property once the heap leach operation is in full production. The source of raw materials will be rock from the waste rock dumps. The waste rock can be classified into a range of products such as riprap, crushed stone and gravel. Test work to confirm the suitability of the waste rock for use as aggregate was done in the 1990s and waste rock could be sold over an extended life-of-mine of more than thirty years. The company has, over the years, received expressions of interest from various aggregate producers with the most recent from a producer with experience in southern California markets and this is being actively pursued.
The company does not plan to invest directly in or develop an aggregate business as owner-operator but would participate financially in the sale of aggregate via royalty payments. The royalty payments would make a contribution to cash flows and help support the Project in times of lower gold and silver prices.
A proposal for an aggregate operation was included in the application for a revised Surface Mining Reclamation Plan, which was submitted to the Kern County Planning Department on April 9, 2007.
Wind Power
A large number of wind turbines are located in the area immediately north and west of the Project.
Oak Creek Energy Systems, Inc., an experienced operator based in Mojave, has investigated the feasibility of using Soledad Mountain as a base for a commercial installation of wind turbines and has had discussions with the company. Oak Creek Energy Systems expects to place three wind monitoring stations on and around Soledad Mountain in 2007 to obtain information for a detailed feasibility study. Initial indications are that Soledad Mountain would be a good site and could accommodate up to twelve wind turbines without interfering with a mining operation. The company is now actively pursuing this as a supplemental source of power for the Project although it would still be necessary for a local utility to provide a parallel source of power for periods when there is little or no wind.
Form 10-KSB
The company filed an Annual Report on Form 10-KSB with the US Securities and Exchange Commission in April 2007 and this is available on the SEDAR web site at http://www.sedar.com/.
Qualified Person
Company president H. Lutz Klingmann, P.Eng., is a Qualified Person as described in NI 43-101 and has approved the technical content of this press release.
Caution To US Investors
We advise US investors that while the terms "measured resources", "indicated resources" and "inferred resources" are recognized and required by Canadian regulations, the US Securities and Exchange Commission does not recognize these terms. US investors are cautioned not to assume that any part or all of the material in these categories will ever be converted into reserves.
Caution With Respect To Forward-looking Statements
This press release contains forward-looking statements, including statements which relate to the intent, belief and current expectations of the company and its management. Investors are cautioned that any such forward-looking statements do not guarantee future performance as mineral exploration and development involves risks and uncertainties, including economic risks, regulatory risks and other risks including those disclosed in the company's public filings. Actual results could therefore differ materially from those indicated by such forward-looking statements. In particular, plans to proceed to production are subject to numerous risks, including the ability of the company to confirm the existence of reserves and to obtain the necessary approvals and permits and production financing.
Additional Information
Further information on Golden Queen Mining Co. Ltd. is available on the SEDAR web site at http://www.sedar.com/ and on the company's web site at http://www.goldenqueen.com/.
The current number of shares issued and outstanding is 78,335,880.
The Toronto Stock Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of the contents of this press
release.
CONTACT: H. Lutz Klingmann, President, Telephone: (604) 921-7570, Email:
