|
Quarterly Report
Item 2. Management's Discussion and Analysis or Plan of Operations
The
following discussion of the operating results and financial position of Golden
Queen Mining Co. Ltd. (the "Company") is as at May 14, 2010 and
should be read in conjunction with the interim consolidated financial
statements of the Company for the quarter ended March 31, 2010 and the notes
thereto.
The
information in this Management Discussion and Analysis is prepared in
accordance with U.S. generally accepted accounting principles and all amounts
herein are in US$ unless otherwise noted.
The
Soledad Mountain Project
The
Company is proposing to develop a gold-silver, open pit, heap leach operation
on its Soledad Mountain property ("Property"), located just outside
the town of Mojave in Kern County in southern California. Every element of
the Soledad Mountain Project ("Project") has been rethought and
reengineered in the past five years in an effort to find sound technical and
cost-effective solutions that will ensure a viable mining operation at
foreseeable gold and silver prices. The review has been supported and
complimented by a substantial amount of work done by independent engineers
and contractors. This phase of the technical work was completed toward the
end of 2008.
Permitting
Update
A detailed
review of approvals and permits required for the Project is provided in the
Company's latest Form 10-K filing with the SEC. The following is therefore
only a note on the supplemental Environmental Impact Report
("SEIR"), which has been prepared for the Project.
The
Company completed an Application for a revised Surface Mining and Reclamation
Plan, which was submitted to the Kern County Planning Department (the
"Planning Department") in April 2007. The Planning Department
completed its review of the Application and deemed the Application complete
as set out in July 2007. The Planning Department noted that changes proposed
for the Project constituted new information that required evaluation of
potential impacts and mitigation in a SEIR. The Planning Department issued a
Request for Proposal to prepare the SEIR to a total of 17 qualified
consultants in October 2007. The Chambers Group was awarded the contract to
prepare the SEIR. The Company signed an agreement with the Planning
Department in February 2008 and made a payment of $55,000 which was 50% of
the cost of preparing the SEIR. This agreement was approved by the Kern
County Board of Supervisors at its regular meeting on March 11, 2008.
The
kickoff meeting with the Chambers Group was held on the afternoon of March
12, 2008. The Chambers Group completed the initial review of information
provided by the Planning Department and issued a draft Notice of Preparation
by mid-June. The Planning Department then terminated the agreement with the
Chambers Group due to a conflict of interest related to another project. The
Planning Department mailed the Notice of Preparation and the supporting
reports to agencies on the mailing list on August 18 with a deadline for
responses by September 17. A total of 66 sets of information were mailed by
the Planning Department directly plus a further 15 sets were mailed by the
State Clearinghouse.
The Planning
Department held an SEIR scoping meeting in their offices in Bakersfield on
September 12, 2008 and there was only minimal attendance and no comments.
The State
Office of Mine Reclamation ("OMR") accompanied by the Planning Department
and H.L. Klingmann, the president of the Company,
held a due diligence review on site on September 16, 2008. The OMR indicated
that it would require additional time beyond the deadline for a response of
September 17 to prepare comments on the Project. A total of 9 responses had
been received by the Planning Department by September 17 and two additional
responses were received toward the end of September for a total of 11
responses.
A
consultant, RGP Planning and Development Services, was selected to continue
with the preparation of the SEIR and the agreement with the consultant was
approved by the Kern County Board of Supervisors at its regular meeting on
October 14, 2008. The cost of the work to be done by RGP Planning and
Development Services was $123,800 and the Planning Department requested that
the full amount be paid in a letter dated September 22, 2008 and this payment
was made on September 25, 2008.
A kickoff
meeting was held on site on October 29, 2008 attended by RGP Planning and
Development Services, the Planning Department, legal counsel for the Company
and H.L. Klingmann.
The
Company submitted responses to ten of the comment letters referred to above
to the Planning Department on November 27 and responses to the OMR's comment
letter on December 16, 2008.
The
Company's consulting engineers did extensive studies to confirm the
feasibility of backfilling mined-out phases of the open pit in early 2009.
The studies were presented to the Planning Department in a meeting in
Bakersfield on March 11. The Company subsequently revised the Project
Description to include the backfilling studies and the Application for the
revised Surface Mining and Reclamation Plan. A final revision of the Application
was in the hands of the Planning Department on May 25. The Company recognizes
that the reviews by the Planning Department have added to the overall quality
of the Application.
The
Planning Department requested that the Air Quality Assessment and Health Risk
Assessment for the Project be redone in February 2009 to provide current
information for the SEIR. This study was completed and in the hands of the
Planning Department and the Air Pollution Control District on July 21.
RGP
Planning and Development Services submitted the draft SEIR to the Planning
Department on September 9 and this was distributed by the Planning Department
as lead agency under the provisions of the California Environmental Quality
Act ("CEQA") on January 11, 2010 to approximately 430 recipients
with a notification of release to 985 recipients. This officially started the
45-day review period for the draft SEIR.
The 45-day
review period for the draft SEIR concluded at 5:00 p.m. on February 25, 2010.
As of the conclusion of the review period, the Planning Department had
received 26 responses, including letters supporting the project, letters with
project concerns, and letters from regulatory agencies designated as
responsible agencies under CEQA. Comments were also received from the State
of California on the reclamation plan provisions. The lead agency will
respond in writing to the comments received as of February 25, 2010, as part
of the final SEIR. The Company will support the lead agency's effort by
supplying any additional information that is requested. As required by CEQA,
the lead agency will provide written responses to those who commented no
later than 14 days prior to the project's consideration by the Kern County
Planning Commission.
The Kern
County Planning Commission formally considered the Project at a public
hearing held on April 8. At the hearing, the Planning Commission, consisting
of a panel of three commissioners, unanimously approved the Project. The
Planning Department subsequently received notice of two appeals of the April
8 decision. The appeals were filed by a regulatory agency of the State of
California relating to reclamation plan provisions and by a private
landholder. The Kern County Board of Supervisors is presently set to consider
the appeals at its regularly scheduled meeting on May 25. The Company is
actively working with the Planning Department to resolve outstanding items in
preparation for the hearing.
It is
important to note that the Bureau of Land Management has confirmed that its
Record of Decision approving the Plan of Operations under NEPA in November
1997 remains valid and that no additional reviews or approvals are required
before GQM can proceed with the Project.
Results of
Operations
Following
are the results of operations for the three months ended March 31, 2010 and
March 31, 2009.
The
Company had no revenue from operations.
The
Company incurred general and administrative expenses of $ 567,712 (2009 -
$497,360).
The
following significant costs were incurred during the quarter:
� $58,774 for ongoing work on the occurrence of
arsenic in groundwater, a review of the use of cyanide in heap leaching, a
study on the occurrence of mercury; review of the draft Waste Discharge
Requirements for the Project and general support required for the approvals
and permitting process;
� $160,879 for legal fees incurred
for ongoing work on the supplemental EIR. Additional legal fees in connection
with the SEIR are expected to be incurred in subsequent quarters;
� $110,177 for ongoing mine design
and drafting support;
Interest
income of $640 (2009 - $2,436) was lower by $1,796 as there was less cash on
deposit and interest rates remained low during the quarter. There was no interest
expense during the quarter.
|