A Golden Opportunity - Producing Gold & Silver in California
Golden Queen Mining (TSX: GQM / OTCQX: GQMNF) is producing gold and silver at the Soledad Mountain Project in Kern County, California. The deposit contains an N.I. 43-101 compliant mineral resource totaling 1.54 million ounces of gold and 25.6 million ounces of silver. The project is utilizing conventional open pit mining methods with cyanide heap leach and Merrill-Crowe processes to recover gold and silver from crushed, agglomerated ore. Production is projected to average approximately 74,000 ounces of gold and 781,000 ounces of silver annually over a projected mine life of 11 years.
- Gold and silver producer
- US-based project, 50% owned, fully funded to positive cash flows
- Located in a mining-friendly jurisdiction with existing infrastructure
- Robust project economics; low cost structure
- Construction 100% complete, in-line with budget
- Experienced management team with excellent joint venture partners
- Significant upside potential
Soledad Mountain Project
The Soledad Mountain project is located 5 miles south of the town of Mojave in Kern County, California. The Project utilizes conventional open pit mining methods and cyanide heap leach and Merrill-Crowe recovery processes.
The mine is projected to produce approximately 74,000 ounces of gold and 781,000 ounces of silver annually. Total life of mine gold and silver production is estimated to total 807,000 ounces of gold and 8.3 million ounces of silver over a period of ~11 years.
Highlights of the February 2015 feasibility study, calculated on 100% basis, include:
- Average annual production totaling approximately 74,000 ounces of gold and 781,000 ounces of silver during full production between years 2-11;
- Lower quartile total cash costs (net of by-products) estimated at US$518/oz of gold (including royalties and taxes and US$558/oz of gold including all-in sustaining capital costs;
- 11-yr mine life;
- After-tax net present value of US$214MM (5% discount rate);**
- After-tax internal rate of return of 28.3%;**
- Utilization of a high-pressure grinding roll (the “HPGR”) to size and prepare ore particles for heap leaching; and
- Strong project economics with only 65% of the resource included in the feasibility study
* Base case gold price of US$1,250/oz and silver price of US$17.00/oz
** Net of $25.4MM of capital expenditures spent prior to December 31, 2014
High Pressure Grinding System
The crushing-screening plant includes a primary and secondary crusher and screen in closed circuit with the secondary crusher. The HPGR is used as part of the crushing-screening circuit to prepare the ore particles for stacking on the two leach pads.
The HPGR consists of two counter-rotating rolls - one fixed roll and a ‘floating’ roll. The ‘floating’ roll is mounted on and can move freely on two slides and the grinding forces are applied by four hydraulic rams. Ore is choke-fed to the gap between the rolls.
Assessments carried out by two HPGR manufacturers, third party technical consultants, and Company management have indicated that benefits of using the HPGR could include:
- Higher gold and silver recoveries due to the formation of micro-cracks in ore particles;
- Faster gold and silver extraction rates;
- Stronger agglomerates due to a more favorable overall particle size distribution and this will also impact the flow rate of solutions through the heap;
- Lower capital costs than a four-stage, conventional crushing-screening plant;
- Manageable dust control with fewer transfer points;
- Lower energy consumption and thus lower operating costs and
- Circuit flexibility that will readily permit future upgrades such as a finer HPGR feed size or the recycle of edge product
The Aggregate Potential
Golden Queen Mining is also working to set up an aggregate and construction materials business once heap leach operations are in full production,
The California Department of Transportation projects aggregate demand of approximately 13 million tons per year for the area surrounding Palmdale, Lancaster, and Rosamond and less than 27% of this demand can be met from existing permitted resources. Similarly, estimates suggest that demand from the area surrounding Bakersfield is approximately 5 million tons per year for the next 50 years, and less than 46% of this demand can be met from existing permitted resources.
Research suggests that up to one million tons of waste rock could be sold into the southern California aggregates market annually. The source of raw materials will be quality waste rock stockpiled on a level pad east of the East Pit. The waste rock can be classified into a range of products such as riprap, crushed stone, and sand with little further processing.
Every effort will be made to proceed with processing of the waste rock as early in the life of the mine as possible and it is expected that this can proceed shortly after the start of pre-production mining. Closing reclamation of the facilities required for the processing of waste rock, including the storage pad, will remain the Company’s responsibility.
Three key elements that should create advantages for the Company as an aggregate producer include:
- The run-of-mine waste rock and sand will be produced as a by-product from a mining operation. This should give the Project an economic advantage as an aggregate producer in comparison with producers that have to mine rock or obtain sand from alluvial deposits to produce aggregate.
- Available infrastructure on site will have an important impact on the cost of producing aggregate and shipping aggregate or final products to market.
- It has become difficult to obtain permits for new quarry developments in southern California. The Project has its permits in place and this should be a distinct advantage for an aggregate producer that wishes to work with the Company as a sub-contractor on site or as partner in a bulk concrete products facility on site.
- It is important to note that no contributions from the sale of aggregate products will be included in the cash flow projections until long-term contracts for the sales of products are secured.
Thomas M. Clay / Chairman & Chief Executive Officer
Thomas Clay is Vice President of East Hill Management Co., LLC and Director of the Clay Mathematics Institute and of Thrombogenics N.V. His business education was completed at Harvard College, Oxford University and Harvard Business School. Mr. Clay has served on the Board of Directors since 2009.
Robert C. Walish, Jr. / Chief Operating Officer
Mr. Walish is the President & Chief Executive Officer of Golden Queen Mining LLC and was most recently the General Manager of the SCM Franke Operation of KGHM International, formerly QuadraFNX, located in northern Chile, where he was responsible for mining, processing and administration of a four million pound per month open-pit copper mining, heap-leach and SX-EW operation. Prior to that and over the course of more than 30 years, Mr. Walish worked at mines in Guyana, Arizona, Alaska, South Carolina, Montana and Nevada. He received his Bachelor of Arts degree from the University of Colorado and his Master of Science degree from the University of Wisconsin.
Bryan A. Coates / Director
Mr. Coates currently serves as President of Osisko Gold Royalties since June 2014. Prior to that, he was the Vice President, Finance and Chief Financial Officer of Osisko Mining. He was responsible for all activities related to financing, financial reporting, marketing relating to the gold industry, risk management and government relations. Mr. Coates has more than 30 years of progressive experience within the international and Canadian mining industry. Before joining Osisko, he was Chief Financial Officer of Iamgold (2006-2007), Cambior Inc. (2001-2006), and Cia Minera Antamina (1998-2001). He serves as the Chairman of the Board of Timmins Gold Corp. and is a director on NioGold Mining Corporation and the Quebec Mining Association. He holds an Honours Bachelor of Commerce from Laurentian University and is a member of the Chartered Professional Accountants of Ontario.
Bernard Guarnera / Director
Mr. Guarnera has over 40 years of experience in the global mining industry and is currently employed by Broadlands Mineral Advisory Services Ltd. Mr. Guarnera currently serves as the president of the Mining and Metallurgical Society of America, and is a director of Colorado Mining Association and Northern Zinc and is a former Chairman of the Board of Behre Dolbear Group Inc., a mining consulting firm founded in 1991. Mr. Guarnera is a registered professional engineer and a registered professional geologist.
Guy Le Bel / Director
Guy Le Bel has more than 30 years of international mining experience in strategic and financial planning. Until recently, he served as Vice President Evaluations for Capstone Mining Corp. and is a Director of RedQuest Capital Corp. Previously, Mr. Le Bel was VP, Business Development at Quadra Mining Ltd., and prior to that held business advisory, strategy and planning, business valuation, and financial planning management roles at BHP Billiton Base Metals Ltd., Rio Algom Ltd. and Cambior Inc.
Andrée St-Germain / Vice President Finance & Chief Financial Officer
Andrée St-Germain joined Golden Queen in 2013 and has been involved with the financings and construction of the Project. She is a former investment banker with Dundee Capital Markets Inc. where she worked exclusively with mining companies on a variety of financings and M&A advisory assignments. She holds a Master of Business Administration degree (Honours) from Schulich School of Business (York University).
Soledad Mountain LLC.
Sprott Asset Management
Continental Casualty Co.
Gabelli Funds LLC
Shares Outstanding: 111 Million
Options/Warrants: 25.9 Million
Fully Diluted: 136.9 Million
1066 West Hastings St, Suite 2300
Canada V6E 3X2