Queenstake's Fourth Quarter and 2006 Results

DENVER, March 30  /PRNewswire-FirstCall/ -- Queenstake Resources Ltd. (TSX: QRL, Amex: QEE) reported a net loss of $20.8 million for the full year 2006.  Cash flow from operations before working capital changes totaled $5.1 million for 2006.  Cash and cash equivalents at year-end were $6.6 million.

Gold production was 169,851 ounces for the full-year 2006, of which production from Jerritt Canyon mined ore was 153,581 ounces; the remaining production was from ore purchased from Newmont.  Cash operating costs for 2006 were $533 per ounce.

Jerritt Canyon operating costs showed improvement in the fourth quarter of 2006 as a result of the cost reduction measures implemented in late September 2006.  The cost initiatives completed included discontinuing the services of a higher cost underground mining contractor; reduction by 11% of the workforce; reorganizing and centralizing the maintenance department; removing from service the high-hours, high-maintenance cost mining equipment; and deferring the production of ore from below the water table at the Smith Mine.

During the fourth quarter of 2006, gold production was 45,776 ounces, of which Jerritt Canyon mined ore production was 36,398 ounces; the remaining production was from ore purchased from Newmont. Cash operating costs per ounce for the fourth quarter of 2006 were $545 per ounce, 18% lower than the third quarter of 2006. Compared with the year ago quarter, cash operating costs were 32% higher in the fourth quarter of 2006, due to decreased ore tons mined, decreased ore grade, mill mechanical issues discussed under "Operations Review" below and increasing fuel, labor and commodity prices.

As announced on March 22, 2007, the Company and YGC Resources Ltd. (YGC) have completed all due diligence requirements and signed a definitive agreement to combine the companies to form Yukon-Nevada Gold Corporation, subject to shareholder, court and regulatory approvals and certain other conditions precedent, including a minimum Cdn$80.0 million net proceeds financing to be completed by YGC for the benefit of Yukon-Nevada. The meetings for the respective shareholders to consider and vote on the proposed combination are scheduled for May 18, 2007.

                                                       Full Year  Full Year
                                                         Ending    Ending
  Operating Highlights                 4Q 2006  4Q 2005 12/31/06  12/31/05
  Gold ounces produced(1)               45,776   45,555  169,851    204,091
  Gold ounces sold(1)                   44,929   46,828  167,762    202,684
  Average realized gold price ($/oz)      $615     $485     $609       $445
  Cash operating costs per ounce(2)       $545     $413     $533       $386
  Ore tons mined                       199,219  223,060  777,836    959,099
  Tons processed                       253,945  211,587  973,593  1,106,937
  Grade processed (opt)(3)                0.22     0.25     0.21       0.22
  Process recovery                        85.6%    86.8%    86.2%      86.6%



  Financial Review


All amounts in this news release are in US dollars, unless otherwise stated. The Company reported a net loss of $20.8 million for 2006 compared with a net loss of $19.7 million for 2005. For 2006, revenues of $102.2 million were generated from the sale of 167,762 ounces of gold at an average realized gold price of $609 per ounce. Also during 2006, the Company generated $0.7 million in revenue from the processing of loaded carbon for Newmont.  Revenues for 2005 were $90.2 million generated from the sale of 202,684 ounces at an average realized gold price of $445 per ounce.

Cash operating costs of $533 per ounce for 2006 reflected production shortfalls as well as increases in basic commodity prices. During 2006, cash operating costs were negatively impacted by $3.2 million in increased commodity costs, including fuel, electric power, commodities and freight, $2.1 million in higher labor costs from wage increases and higher than anticipated overtime, and $3.1 million from increased contractor costs.  These factors accounted for increases in cash operating costs per ounce totaling $48 for 2006.

Depreciation and accretion charges were $19.0 million for 2006, compared with $17.2 million in 2005. Exploration expenses for 2006 and 2005 were $4.9 million and $3.9 million, respectively. General and administrative costs were $4.4 million for 2006 compared to $4.9 million in 2005.  The Company invested $31.9 million in the Jerritt Canyon mines during 2006, compared with $19.7 million in 2005.  Significant capital investments during 2006 included $8.4 million spent for a state-mandated new evaporation pond, underground mine development, and in purchasing and refurbishing plant and equipment.

At December 31, 2006, the Company had a working capital deficit of $12.4 million, compared to positive working capital of $4.8 million at December 31, 2005.  The year-end 2006 working capital deficit was primarily due to the liability related to purchased ore stockpile inventories, increased trade payables and decreased cash and cash equivalents.  At December 31, 2006, there were approximately $8 million of trade payables incurred for the evaporation pond, which were paid down during the first quarter of 2007 using proceeds of a bridge loan financing facility.  Jerritt Canyon finished the year with an estimated 11,900 contained gold ounces in Jerritt Canyon ore and an estimated 37,000 contained gold ounces in ore purchased from Newmont in stockpiles adjacent to the mill.

As stated in the January 15, 2007 news release, the Company closed the secured convertible bridge loan financing facility of $8 million with Auramet Trading LLC.  Auramet and the Company have recently reached agreement to extend the payment date of the facility by one month to May 31, 2007.  The borrowed funds, less costs of the transaction, primarily paid the costs of the new evaporation pond at the Jerritt Canyon operations which was mandated by the Nevada Department of Environmental Protection (NDEP).  The Company is pursuing reimbursement for such costs under its reclamation insurance policy with American International Specialty Lines Insurance Company, a subsidiary of AIG (the Insurer), but the timing and receipt of such reimbursement is uncertain.  (Also refer to the Company's news release of January 22, 2007 pertaining to the Company's lawsuit against the Insurer.)

For the year ended December 31, 2006, the Company's net loss of $20.8 million, the accumulated deficit of $103.7 million and the working capital deficit of $12.4 million led to a going concern disclosure under Canadian and US generally accepted accounting principles, as described in Note 1 of the Notes to the Company's Consolidated Financial Statements for such year, as filed with the Canadian securities commissions and the US Securities and Exchange Commission.  The Company's ability to discharge its liabilities and realize the carrying value of its assets in the normal course of operations is dependent upon, among other things, the resumption of full mill processing capacity during the second quarter of 2007, further extension, payment or conversion of the Auramet loan facility and either successful completion of the proposed merger with YGC or the raising of additional financing.

Operations Review

Full-year 2006 gold production from Jerritt Canyon mined ore was 153,581 ounces, excluding production from ore purchased from Newmont, as compared to 204,091 ounces produced in 2005.

Lower production in 2006 was due to ongoing mechanical issues at the mill and declining ore tons mined, caused by delays in accessing ore from the Smith Mine and Zone 1 of the SSX Mine.  The Smith Mine was adversely affected by water inflows in excess of the capacity of the pumping system to dewater.  The SSX Mine experienced grade declines from higher mining dilution as a result of the mining of smaller, less contiguous ore blocks.  Production from below the water table at the Smith Mine and from Zone 1 of the SSX Mine has been deferred and is not planned during 2007. The Murray Mine was shut down in the second quarter of 2006.

Total ore tons processed in 2006 were 973,593, a decline of 12% from 2005. The reduction in tonnage is due to a combination of fewer ore tons mined, ongoing mill mechanical issues and the Company's original plan to scale-back roaster operations in early 2006.  The grade of Queenstake ore milled increased to 0.23 ounce of gold per ton, a 5% improvement from 2005.

The table below summarizes production results for both Jerritt Canyon mined ore and ore purchased from Newmont.

                                  Year ended December 31, 2006
                                 Jerritt      Newmont
                                Canyon ore      ore        Total
  Tons processed                 792,959     180,634     973,593
  Grade processed (opt)             0.23        0.10        0.21
  Process recovery                  85.8%       90.4%       86.2%
  Gold ounces produced           153,581      16,270     169,851





Processed ore tonnage and gold production for the full-year 2006 were unfavorably impacted as the Company made the decision to run the mill at a reduced capacity in order to minimize the risk of further mill pinion and bull gear mechanical issues.  A new mill pinion gear was installed in April 2006 and the bull gear was turned over and several cracked teeth repaired at that time.  However, through the third quarter of 2006, the new pinion gear exhibited a high degree of wear and pitting and elevated gear surface temperatures, posing risk of failure and potential collateral damage if the mill had continued to run at full capacity. As a result, the mill ran at 75% capacity through most of the second half of 2006 in order to avoid potential damage to the pinion and bull gears.  A replacement new bull gear has been completed and is being shipped from Australia for delivery early in the second quarter. The estimated schedule to complete the annual mill maintenance and bull gear change in the second quarter will require a 10-day shutdown of the mill. During the scheduled mill down-time, the mines will continue to produce ore and accumulate the ore in stockpiles adjacent to the mill that will then be processed during the remainder of 2007.

Capitalized mine development of 7,083 feet during the year was essentially on 2006 plan, as the mining emphasis shifted to short-term production.  Two mining contractors that had been dedicated to development were phased-out during the year and internal crews were assigned to those headings.

During the fourth quarter of 2006, the Jerritt Canyon mining operations completed 2.8 million man hours without a lost time accident, while the mill achieved a million man hours without a lost time accident.

Outlook

The Company expects to close the Queenstake-YGC business combination in the second quarter of 2007.  Upon completion of the merger, the new Board of Directors and management of Yukon-Nevada Gold Corporation will determine the production outlook, and exploration and capital investment expenditures, in order to deliver maximum value from the Jerritt Canyon operation and assets.

Queenstake Resources Ltd. is a gold mining and exploration company based in Denver, Colorado.  Its principal asset is the wholly owned Jerritt Canyon gold operations in Nevada, which has produced over 7.5 million ounces of gold from open pit and underground mines since 1981. Current production at the property is from two underground mines.  The Jerritt Canyon District, which comprises 119 square miles (308 square kilometers) of geologically prospective ground controlled by Queenstake, represents one of the largest contiguous exploration properties in Nevada. In addition, Jerritt Canyon also has one of only three permitted roasting facilities in Nevada.

  (1)  The Company's production and sales for the fourth quarter of 2006
       included 9,378 ounces of gold from ore purchased from Newmont.
  (2)  Cash operating costs per ounce is a non-GAAP measure intended to
       complement conventional GAAP reporting. Management believes that cash
       operating costs per ounce is a useful indicator of a mine's
       performance. Please refer to the Company's Management Discussion and
       Analysis on file at http://www.sedar.com/ and http://www.sec.gov/ for further
       information.
  (3)  The average grade of ore processed was impacted by the lower grade of
       ore purchased from Newmont. Refer to the table on page 3 of this news
       release for a production summary of Jerritt Canyon ore and ore
       purchased from Newmont.
  (4)  The Qualified Person for the technical information contained in this
       news release is Mr. Dorian L. (Dusty) Nicol, President and Chief
       Executive Officer of Queenstake.


  For further information call:
  Wendy Yang 303-297-1557 ext. 105
  800-276-6070
  Email -     web - http://www.queenstake.com/



Cautionary Statement - This news release contains "Forward-Looking Statements" within the meaning of applicable Canadian securities law requirements and Section 21E of the United States Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, included in this release, and regarding Queenstake's future plans are forward-looking statements that involve various risks and uncertainties. Such forward-looking statements include, without limitation, (i) projections of future gold production, investments in exploration and capital and operational improvements, (ii) estimates of mill shut down and refurbishment, and (iii) statements relating to the pending combination of the Company and YGC. Forward-looking statements are subject to risks, uncertainties and other factors, including gold and other commodity price volatility, operational risks, mine development, production and cost estimate risks, risks relating to the completion of the pending combination with YGC and other risks which are described in the Company's most recent Annual Information Form filed on SEDAR (http://www.sedar.com/) and Annual Report on Form 40-F on file with the Securities and Exchange Commission (SEC; http://www.sec.gov/) as well as the Company's other regulatory filings.  Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended.  There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

    CONSOLIDATED STATEMENTS OF OPERATIONS
    FOR THE YEARS ENDED DECEMBER 31, 2006 and 2005


    (In Thousands of U.S. Dollars,    For the Years Ended December 31,
    except per share amounts)              2006           2005

    Revenues                            $102,910         $90,174
    Costs and expenses
      Cost of sales                       93,389          80,268
      Depreciation, depletion and
       amortization                       19,016          17,194
      Non-hedge derivatives                  207           2,647
      Exploration                          4,899           3,880
      General and administrative           4,418           4,915
      Accretion of reclamation and mine
       closure liability                   1,192           1,174
      Stock-based compensation             1,176             579
                                         124,297         110,657
      Loss from operations               (21,387)        (20,483)

      Interest expense                       368             413
      Other income, net                     (897)           (937)
      Foreign exchange (gain) loss          (109)           (213)
      Gain on disposal of assets            (102)            (75)
      Write down of assets                   197              --
                                            (543)           (812)
      Net loss                          $(20,844)       $(19,671)

      Net loss per share - basic and
       diluted                            ($0.04)         ($0.04)

    Weighted average number of shares
     outstanding (000's) - basic         573,152         509,274



    CONSOLIDATED STATEMENTS OF DEFICIT

                                       For the Years Ended December 31,
    (In Thousands of U.S. Dollars)         2006            2005

    Deficit, beginning of year          $(82,860)       $(63,189)
    Net Income (loss)                    (20,844)        (19,671)
    Deficit, end of year               $(103,704)       $(82,860)



    CONSOLIDATED BALANCE SHEETS
    AS AT DECEMBER 31, 2006 and 2005
                                        December 31,   December 31,
    (In Thousands of U.S. Dollars)         2006           2005
    ASSETS
    Current assets
    Cash and cash equivalents             $6,580         $10,225
    Trade and other receivables              726             463
    Inventories                           34,196           6,519
    Marketable securities                     13              13
    Prepaid expenses                       1,896           1,499
    Total current assets                  43,411          18,719

    Restricted cash                       27,035          27,165
    Mineral property, plant and
     equipment, net                       51,491          45,692
    Other assets                           1,254           1,763
    Total assets                        $123,191         $93,339

    LIABILITIES AND SHAREHOLDERS'
     EQUITY
    Current liabilities
    Accounts payable and accrued
     liabilities                         $52,386         $11,063
    Other current liabilities              3,381           2,846
    Total current liabilities             55,767          13,909

    Other long-term obligations            1,997           2,117
    Reclamation and mine closure          22,606          26,382
    Total liabilities                     80,370          42,408

    Shareholders' equity
    Common shares, no par value,
     unlimited number authorized
    Issued and outstanding 583,706,489
     (2005 - 550,021,360)                143,442         131,804
    Contributed surplus                    3,069           1,973
    Warrants                                  14              14
    Deficit                             (103,704)        (82,860)
    Total shareholders' equity            42,821          50,931
    Total liabilities and shareholders'
     equity                             $123,191         $93,339



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    FOR THE YEARS ENDED DECEMBER 31, 2006 and 2005

                                      For the Years Ended December 31,
    (In Thousands of U.S. Dollars)         2006         2005

    OPERATING ACTIVITIES
     Net loss                           $(20,844)       $(19,671)
     Non-cash items:
      Depreciation, depletion and
       amortization                       19,016          17,194
      Interest accretion and deferred
       financing costs                        --              --
      Write down of mineral property,
       plant and equipment                   197              --
      Gain on disposal of assets            (102)            (75)
      Inventory valuation adjustments      3,575              --
      Amortization of deferred charges        --           1,903
      Accretion of reclamation and mine
       closure liability                   1,192           1,174
      Write down of non-hedge
       derivatives                           207           2,647
      Stock-based compensation             1,176             579
      Foreign exchange (gain) loss          (109)           (213)
      Loss on sale of marketable
       securities                             --              45
      Warrants issued for services            --              14
                                           4,308           3,597

     Reclamation costs incurred             (968)           (558)
     Deferred revenue                      1,731              --
     Changes in non-cash working capital:
      Inventories                        (30,317)         (1,435)
      Accounts receivable and prepaid
       accounts                              461          (1,178)
      Accounts payable and accruals       43,124          (8,098)
     Cash provided by (used in)
      operating activities                18,339          (7,672)

    INVESTING ACTIVITIES
     Mineral property, plant and
      equipment expenditures             (31,916)        (19,662)
     Purchase of non-hedge derivatives        --          (1,242)
     Environmental risk transfer program      --              --
     Proceeds from sale of assets            121              93
     Notes receivable                         --              --
     Sale of marketable securities            --             442
     Restricted cash                         130            (786)
     Other, net                               --              --
     Cash used in investing activities   (31,665)        (21,155)

    FINANCING ACTIVITIES
     Common shares issued, net of costs   11,559          30,393
     Term loan                                --              --
     Notes payable and leases             (1,794)          2,527
     Other                                   (84)             --

     Cash provided by (used in)
      financing activities                 9,681          32,920

     Net increase (decrease) in cash
      and cash equivalents                (3,645)          4,093
     Cash and cash equivalents,
      beginning of year                   10,225           6,132
     Cash and cash equivalents, end of
      year                                $6,580         $10,225

    Cash paid for interest                  $322            $413


DATASOURCE: Queenstake Resources Ltd.



CONTACT:  Wendy Yang of Queenstake Resources Ltd., [phone],

ext. 105, or [phone], 



Web site:  http://www.queenstake.com/ 

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