New Total Capital Expenditure Estimate of $141 Million Including $7
Million Spent to Date
VANCOUVER, March 27, 2014 /CNW/ - Golden Queen Mining Co. Ltd.
(TSX:GQM) (OTCQX:GQMNF) (the "Company") is pleased to provide an update
on the construction underway on its Soledad Mountain Project (the
"Project") and its expected capital costs for the construction of the
Project. (Amounts are shown in U.S. dollars).
Costs incurred on construction of the Project since July 2013 to date,
including access roads and site preparation are largely in-line with
the feasibility study cost estimates provided in a news release dated
October 25, 2012; a copy of which is available on the Company's website
and on SEDAR.
One of the Company's priorities in Q4 2013 and Q1 2014 has been to
complete detailed engineering designs for construction and update cost
estimates for the major turn-key projects. The feasibility study
capital cost estimates were prepared in 2012 and were therefore out of
date by around 18 months by the end of 2013. These detailed designs are
either well under way or have essentially been completed, and the
Company has now received updated cost estimates for all of the turn-key
The typical increase in cost estimates for the turn-key projects is
mostly a result of design changes from the feasibility study. "The
time between the feasibility study and the start of construction has
provided us with the opportunity to re-evaluate the designs and we have
made a number of improvements which we believe will enhance the
efficiency and reliability of the processing operation" said H. Lutz
Workshop-Warehouse: The Company received a proposal for the construction of the
workshop-warehouse from a local contractor in late-2013. This was the
first of the turn-key projects and the contract price was in line with
the feasibility study cost estimate.
Crushing-Screening Plant: The contractor has just completed the design for the crushing-screening
plant as a turn-key project with numerous adjustments to the
feasibility-level design, to improve the operability of the plant both
from an operating and a maintenance point of view. The plant now
includes an agglomeration drum and provision has been made for a
possible future increase in plant throughput and this has added to the
cost of the plant.
Stacking and Conveying System: The feasibility study employed a stacking and conveying system design
completed in 2005. The current design has evolved substantially over
the past year to a fully-automated system with a significant increase
in the reliability of the overall system. Especially the power
distribution along the system has evolved with a separate transformer
and motor control package for each unit of the system. Each of the
grass hopper conveyors now includes dust control covers over the
conveyors and all functions of the stacker are now controlled by radio
Phase 1 Heap Leach Pad: The Phase 1 heap leach pad has been designed as a permanent, single-use
pad with external solution collection and management systems. Crushed
and agglomerated ore will be conveyed to the heap and stacked with a
radial stacker. The Company has received an updated cost estimate for
the construction of the Phase 1, Stage 1 pad and this, after allowance
for the construction of the overland conveyor system and peripheral
roads in 2013, is lower than the feasibility study cost estimate.
Merrill-Crowe Plant: The current design includes an increase in solution flow rates of 50%
decided upon as part of an overall design review for the Project. The
increase in solution flow rates has been accommodated in the original
Merrill-Crowe plant footprint. Costs are elevated due to an increase in
the size of the equipment in the plant.
Assay Laboratory: The assay laboratory has been changed from a laboratory assembled from
three pre-fabricated modules to a laboratory constructed on site.
Water Supply (Supply from Production Wells & Distribution): Both the design and the cost estimates for the water supply from two
production wells were re-done from first principles by a consulting
engineering firm based in Bakersfield. The design for the feasibility
study was inadequate and this was reflected in a cost estimate that was
significantly lower than the current cost estimate.
The construction period will also be longer than the 12 months assumed
in the feasibility study. As a result, the Company increased its EPCM
(engineering, procurement and construction management), pre-production
overhead and general site support cost estimates.
The key cost increases from the feasibility study estimates are shown in
the table below:
Cost Increase from
2012 Feasibility Study
Stacking and Conveying System
Phase 1 / Stage 1 Heap Leach Pad
Water Supply (Supply from Production Wells & Distribution)
Total Impact of Turn-Key Projects Revised Cost Estimates
Approximately 50% of capital expenditures are comprised of turn-key
projects that will be awarded as fixed-price contracts. These contracts
will therefore provide price protection during the construction period.
The Company has selected and is working with contractors with
significant experience and excellent reputations.
The updated designs and other cost updates have raised the total
estimated capital cost to build the Project to $114 million. This
includes a contingency of 15% of estimated construction costs, or
approximately $15 million. The 2012 feasibility study had a cost
estimate of $79 million and unallocated costs of $12 million for a
total of $91 million.
In addition to the construction capital expenditures, the Company
anticipates to require $10.5 million for working capital and
approximately $17 million for mobile mining equipment. These estimates
have not changed from the feasibility study. The Company's new estimate
for the total capital required to bring the Project to production is
$141 million (from $119 million in the feasibility study), of which $7
million has been spent to date.
Phase 1 Construction
Work on the Phase 1 earthmoving projects was essentially completed in
December 2013 with some final touch-up completed in January 2014. This
included the pad where the workshop-warehouse is being constructed, the
interconnecting roads including the main haul road between the area
where the crushing-screening plant will be constructed and the east
waste rock storage pad and the construction of safety berms as required
The Company awarded a contract for the construction of the
workshop-warehouse and wash slab to a local contractor in late-2013. A
key milestone was achieved when the prepared pad was formally handed
over to the contractor in mid-January to commence construction of the
footings as illustrated in Photograph 1.
In addition, the Company has awarded contracts for the construction of
the Phase 1 water supply and a guard shack and gate.
Phase 2 Construction
Phase 2 construction has commenced and will continue concurrently with
the ongoing Phase 1 construction.
The Company anticipates completion of site preparation where the
crushing-screening plant and the assay laboratory will be constructed
The Company has awarded contracts for the construction of the septic
system and leach field and a fuel storage facility.
A second key turn-key project is the assay laboratory. Detailed designs
have been completed and it is expected that a contract for the
procurement and construction of the assay laboratory will be awarded in
About Golden Queen Mining Co. Ltd.
The Company is developing its wholly-owned, gold-silver, open pit, heap
leach operation on its fully-permitted Soledad Mountain property,
located just outside the town of Mojave in Kern County in southern
California. The Project will use conventional open pit mining methods
and the cyanide heap leach and Merrill-Crowe processes to recover gold
and silver from crushed, agglomerated ore.
H. Lutz Klingmann, P.Eng., the President of the Company, is a qualified
person for the purposes of National Instrument 43-101 and has reviewed
and approved the technical content of this press release.
Caution With Respect To Forward-looking Statements
The information in this news release includes certain "forward-looking
statements". All statements in this news release, other than
statements of historical fact, including, without limitation, plans for
and intentions with respect to construction and other development
activities on the Soledad Mountain Project, capital cost estimates, and
future mining operations on the Project, are forward-looking
statements. There can be no assurance that such statements will prove
to be accurate, and actual capital costs, results of our development
plans, and future events could differ materially from those anticipated
in such statements. Important factors that could cause actual results
to differ materially from statements in this news release regarding our
intentions include the uncertainties involving the availability of
project financing in the debt and capital markets; changes in capital
cost estimates or actual costs due to delays in construction or for
other reasons, risks of construction and mining such as accidents,
equipment breakdowns, non-compliance with environmental and permit
requirements, and other risks and uncertainties disclosed in the
section entitled "Risk Factors" contained in our Annual Report on Form
10-K for the year ended December 31, 2013. Investors are cautioned
that forward-looking statements are not guarantees of future
performance and, accordingly, should not to put undue reliance on
forward-looking statements. Any forward-looking statement made by us
in this release is based only on information currently available to us
and speaks only as of the date on which it is made.
Image with caption: "Photograph 1 - Concrete pouring near completion at warehouse area (CNW Group/Golden Queen Mining Co. Ltd.)". Image available at: http://photos.newswire.ca/images/download/20140327_C7543_PHOTO_EN_38442.jpg
SOURCE: Golden Queen Mining Co. Ltd.
For further information:
regarding this news release please contact:
Lutz Klingmann, President
Telephone: (604) 921-7570