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Yukon-Nevada Rebuilding With New Strategy
By Jon A. Nones
18 Nov 2007 at 08:52 PM GMT-05:00
SAN FRANCISCO (ResourceInvestor.com) -- The newly combined YGC Resources and Queenstake gold producer, Yukon-Nevada Gold Corp. [TSX:YNG], is shaking off the old cobwebs. President and CEO Graham Dickson told listeners at the San Francisco Hard Assets Conference the new company is launching a new strategy of exploration, joint ventures and, most especially, cost effectiveness.
In speaking with Resource Investor, Dickson highlighted the company’s third quarter results, noting the 180-degree turnaround from loss to profit in a very short time period. The results reflected the first quarter of operations after the acquisition of Queenstake Resources effective 20 June 2007.
The company reported a gross margin from mining operations of US$7.48 million for the third quarter of 2007. After adjustments for depreciation, depletion and accretion, income from mine operations was US$3.25 million. All said and done, the company's net earnings for the third quarter of 2007 were US$547,000.
Dickson said the “big turnaround” broke the streak of 5 long years of losses at Queenstake. He said that Queenstake was “chasing ounces and destroying the mine,” while YNG has focused on “bringing down the unit costs.”
Even with a slow start to the quarter, caused by the roaster undergoing stack testing, production of gold from the company's own Jerritt Canyon ore totalled 34,636 ounces at a cash cost of $354 per ounce. The full operation at Jerritt Canyon produced a total of 48,329 ounces. Queenstake produced only 153,581 ounces all of last year at a cost of $533/oz.
Last quarter, the company purchased 150,000 tonnes of ore from Newmont [NYSE:NEM] and 10,000 tonnes from other parties. The company engages in some forward sale of gold, but Dickson affirmed that this is solely from ore purchased from third parties to ensure an acceptable profit margin on this activity.
Annual production from Jerritt Canyon has historically averaged between 300,000 and 350,000 ounces of gold. This year, Yukon-Nevada forecasts production of just 120,000 ounces from its Smith Mine and SSX Mine to keep unit costs lower.
With a cash position of $67 million and no debt, the company plans to increase tonnage through the processing plant, reduce manpower, improve gold sales techniques and invest in mine development and exploration. Jerritt Canyon currently hosts 485,700 ounces of proven and probable gold reserves, along with 2.5 million ounces of resources.
RI last covered YNG at the Denver Gold Forum after the company released drill results from the Mahala target in Nevada. The results highlighted intersections of 12.72 g/t Au for 10.7 metres from 259.1 to 269.8 metres and 11.52 g/t Au for 18.3 metres from 237.8 to 256.1 metres.
At the time, Dickson said the company has large untested targets: one such being Mahala, where exploration drills were mobilized in late July 2007. The exploration budget for all of Jerritt is slated for $12 million in 2008, but the company also plans to advance the Starvation Mine in the south zone of Jerritt Canyon, scheduled for 2010 production.
In the Yukon, YNG recently teamed up with Northwest Non-Ferrous International Investment Company Limited (NWI), a Chinese investment company, in a new joint venture to explore for and develop mineral resources in the Yukon Territory, Canada. To date, the company had not had the ability to engage in early stage exploration projects in the Yukon.
The new company will be named Yukon-Shaanxi Gold Company Inc., initially 50% owned by YNG and 50% NWI, and will explore for molybdenum, titanium, rare earth metals, aluminium, lead, zinc, gold, silver, uranium, copper and vanadium.
This deal will compliment the company’s existing portfolio in Canada, consisting of the Ketza River and Silver Valley properties. The Ketza Mine is the most developed in the Yukon, with past production of 103,000 ounces of gold from 1987 to 1990. YNG hopes to have a mine and mill in operation producing up to 140,000 ounces of gold per year by 2009.
Shares closed Friday even at C$1.70 on TSX. The company has a market cap of about US$255 with 169.6 million shares outstanding. Management owns about 10%.
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