Queenstake focused on financing Magistral in Q3
Queenstake Resources Ltd QRL
Shares issued 30,032,864 Dec 6 close $0.085
Thu 7 Dec 2000 Company Review
Mr. Christopher Davie reviews the company
In the second quarter Queenstake was negotiating with banks regarding
financing of the company's 100-per-cent-owned Magistral project in Mexico.
While it is clear that financing of 70 per cent to 85 per cent of the
capital cost of the project could be obtained, terms dictated by banks at
current gold prices are not conducive to project development. Negotiations
with banks for conventional financing have, therefore, been put on hold
while management looks at alternative means of financing the project.
Several scenarios have been identified and the company looks forward to a
project development decision in the first quarter of 2001. Meanwhile,
permitting activities have been continuing and it is anticipated that the
necessary permits will be in hand when a construction decision is made.
On Nov. 23, 2000, Queenstake closed into escrow an 18.5 cent special
warrant financing with the Canadian Imperial Bank of Commerce. The release
from escrow of the $1-million proceeds is subject only to receipt of
regulatory and corporate approvals, including approval of the Toronto Stock
Exchange and the company's shareholders for the financing and the
acquisition.
At a special meeting to be held on Dec. 15, 2000, the company's
shareholders will be asked to approve the issuance of up to 7.6 million
shares of the company to the vendors of Incanore Gold Mines Ltd. to acquire
all of the issued and outstanding shares of Incanore and to approve the
concurrent subscription by the CIBC of 5,405,405 special warrants of the
company at a price of 18.5 cents per special warrant. Each special warrant
is exercisable without payment of additional consideration for one unit
comprising one share and one share purchase warrant. Each non-transferable
warrant can be exercised to purchase one additional common share of
Queenstake for an exercise price of 18.5 cents at any time up to 18 months
after the closing date.
As previously reported, Incanore is an exploration company active in
Burkina Faso, West Africa. Incanore's assets include an 18.5-per-cent
interest in the Taparko gold property, its partners being High River Gold
Mines Ltd., which holds a 61.5-per-cent interest and is operator, and the
Burkina Faso government, which holds a 20-per-cent interest. Incanore also
controls a number of gold, base metal and diamond exploration properties in
Burkina Faso, some the subject of other joint ventures. High River is
attempting to prevent the sale of Incanore to the company by legal
proceedings. The company will continue to work toward completing the
acquisition, provided it is completed by Jan. 31, 2001, subject to
shareholder approval being obtained at the special meeting.
Approval is also being sought at the special meeting for the issuance of
1,990,025 units of the company to an investor for proceeds of $286,577
pursuant to a 3,550,205-unit private placement of the company of which 1.56
million units of the company have been issued at an initial closing on
Sept. 14, 2000, and for convertibility of a $968,783 unsecured note of the
company, issued in connection with a $968,783 loan to the company by this
same investor, at the holder's option, into units of the company at a price
of 18 cents per conversion unit.
If the shareholders approve the above described matters at the special
meeting and the company issues all of the underlying shares there would be
46,588,294 shares issued and outstanding, of which CIBC would own 18.5 per
cent and the investor would own 8.0 per cent of the issued shares of the
company. Assuming the exercise of all CIBC warrants, investor warrants and
investor conversion units, CIBC would own 21.6 per cent and the investor
would own 27.9 per cent of the issued shares of the company. The company
would realize proceeds of up to $2,848,956 upon exercise of the CIBC
warrants and investor warrants and relief from repayment in cash of up to
$968,783 principal amount of the convertible note.
The company continues to focus on putting Magistral into production and
believes that is an attainable goal even at current gold prices. Management
continues to evaluate other growth opportunities and is currently
investigating several which may provide cash flow.
It has been and continues to be a challenging time for the resource
industry. Nonetheless, Queenstake's asset base continues to provide a
strong basis for shareholder growth.
CONSOLIDATED STATEMENT OF LOSS
Nine months ended Sept. 30
2000 1999
Revenue
Interest
income $ 19,983 $ 247,401
Other income 22,105 10,843
------------ ------------
42,088 258,244
------------ ------------
Costs and
expenses
General and
administrative 691,446 839,667
General
exploration 55,105 648,518
Corporate
development 86,454 83,365
Interest
expense 48,533 -
Depreciation 29,806 58,190
------------ ------------
911,344 1,629,740
------------ ------------
(Loss)
before the
undernoted (869,256) (1,371,496)
------------ ------------
Other income
(expense)
Writedown of
mineral
properties and
equipment (505,423) (3,101,218)
(Loss) on
sales of
equipment (4,725) -
(Loss) on
foreign
exchange (53,645) (87,318)
------------ ------------
(Loss) before
non-
controlling
interest (1,433,049) (4,560,032)
Non-
controlling
interest 14,477 4,369
------------ ------------
Net (loss) (1,418,572) (4,555,663)
Deficit --
beginning of
period $(34,458,977) $(28,701,425)
------------ ------------
(Loss) for
the period (1,418,572) (4,555,663)
------------ ------------
Accretion
of equity
element of
convertible
secured note (10,418) -
------------ ------------
Deficit --
end
of period $(35,887,967) $(33,257,088)
============ ============
Net (loss)
per share $(0.05) $(0.15)
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