On 3 May, Golden Queen Mining Co. Ltd. (Golden Queen) announced its operating results for the quarter ended 31 March 2019, including total gold sale of 11 919 oz and revenue of US$15.5 million from its Soledad Mountain gold-silver mine located south of Mojave (California). All amounts herein are in US dollars and reflect 100% of the operating results of Golden Queen Mining Company, LLC (GQM LLC), unless otherwise stated; the company owns 50% of GQM LLC through its own subsidiary, Golden Queen Mining Holdings, Ltd.
This news release also provides a voting reminder and information regarding the upcoming annual and special shareholder meeting to be held on 13 May 2019, including information on the positive voting recommendation of International Shareholder Services (ISS) on the resolution to approve the sale of our interest in the mine, and comments regarding valuation.
First quarter highlights
- Total of 5.4 million t of ore and waste were mined including 989 kt of ore.
- Plant processed a total of 853 kt of ore at an average grade of 0.022 oz/t.
- 12 032 oz of gold and 95 615 oz of silver were produced.
In the first quarter of 2019, the company continued stripping the East Pit phase 2. Total material mined was up slightly from the previous quarter, while processed ore and gold production were at similar levels. Mechanical availability remained below plan in the first quarter of 2019, although downtime included time required for the installation of a larger secondary crusher.Leaching performance resulted in total apparent gold recovery to 31 March 2019 of 67.4%. The apparent gold recovery during the first quarter of 2019 is caused in part by limits on the amount of leach solution that can be placed on the leach pad, as a result of pad geometry. Management of GQM LLC has designed a potential solution that will be implemented when all permits are obtained. In addition, East Pit ore has exhibited slower leach dynamics, than previously processed ore. The final recovery is expected to remain unchanged, although a longer leach time will be required.
During the quarter, a new draft life of mine plan was prepared. While it has a potential to extend the mine life, the cost structure contemplated is at a higher level than previously stated.Special Committee Chairman, Paul Blythe stated: "While the Soledad Mountain mine continues production, it is clear that the company will not receive any dividends for the foreseeable future. Without an immediate cash injection, the company is unable to service its current debt. Should the transaction not be approved by the shareholders on 13 May 2019, it is likely that the company will commence insolvency proceedings."
Golden Queen shareholder meeting
A shareholder meeting will be held on Monday 13 May 2019 at 10:00 am Pacific, at Suite 2300 - 1066 West Hasting Street, Vancouver, British Columbia, where Golden Queen shareholders will be asked to consider and vote on all the proposed resolutions.
The proxy circular mailed to shareholders in connection with the shareholder meeting includes a proposal to approve a special resolution for the sale of 100% of the shares of Golden Queen Mining Holdings Inc., which currently holds the company's 50% ownership interest in the Soledad Mountain Project, pursuant to the terms of an agreement dated 7 February 2019 between the company and certain purchasers as described in the proxy circular (the Transaction). The proxy circular also includes as agenda items a proposal to consolidate the outstanding common shares on a 10 existing shares for 1 new share basis, the election of directors, the reappointment of PricewaterhouseCoopers LLP as auditors, and an advisory vote on executive compensation.
Ernst & Young LLP formal valuation and fairness opinion
On 5 April 2019, Ernst & Young LLP (EY) provided their formal valuation report and fairness opinion as at 1 April 2019 (the Valuation Date) in connection with the transaction. EY was engaged by an independent special committee of the Board of Directors (the Special Committee) to prepare and deliver a formal valuation of the issued and outstanding common shares of Golden Queen (the formal valuation) and an opinion as to whether the consideration payable by the Clay Group pursuant to the transaction, is fair, from a financial point of view, to the holders of common shares of Golden Queen, other than the Clay Group (the fairness opinion).
Pursuant to the transaction agreement dated 7 February 2019 (the transaction agreement), the consideration payable by the Clay Group consists of US$4.25 million in cash, the extinguishment of debt (approximately US$26.6 million as at 7 February 2019), and the cancellation of all of the Purchasers' ownership interest in the company (consisting of 177 701 229 shares, 457 500 options and 18 million share purchase warrants). The consideration totals approximately US$37.2 million as at the date of the transaction agreement, based on the volume-weighted average price of the company's shares on the OTCQX Best Market for the 20 trading days ended 7 February 2019, and including the principal and accrued interest payable to the purchasers pursuant to the loans to be extinguished. In addition to the above consideration, the purchasers may be obligated to pay a contingent payment to the company if the Soledad Mountain Project is subsequently sold or transferred to a third party in certain circumstances.
Read the article online at: https://www.globalminingreview.com/mining/06052019/golden-queen-announces-1q19-operational-results/
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