QUEENSTAKE RESOURCES LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis has been prepared as at May 12, 2005 unless otherwise indicated, and it should be read in conjunction with the unaudited consolidated financial statements of Queenstake Resources Ltd. (“Queenstake” or the “Company”) as at March 31, 2005 and the notes thereto. Effective December 31, 2003, the Company’s reporting currency was changed from Canadian dollars to U.S. dollars. Accordingly, all dollar figures are in U.S. dollars, unless otherwise indicated.

INTRODUCTION

The Company engages in the mining, processing, production and sale of gold, as well as related activities including development and exploration. The Company’s principal asset and only current source of revenue is its 100% owned Jerritt Canyon Mine, 50 miles north of Elko, Nevada. The Jerritt Canyon Mine complex consists of four underground mines, which together with ore stockpiles feed ore to a 1.5 million ton per year capacity ore processing plant. Jerritt Canyon has extensive exploration potential, comprised of an approximately 100 square mile land position, together with a geological database compiled over the past 25 years.

The Company acquired the Jerritt Canyon Mine on June 30, 2003; prior to that date the Company was an exploration company and did not have commercial scale gold production. Consequently, comparisons of production and operating results to periods prior to June 30, 2003 are not meaningful.

RESULTS OF OPERATIONS

Gold production

The Company began commercial scale gold production from the Jerritt Canyon Mine, its only producing gold mine, on June 30, 2003. Gold production for the three-month period ended March 31, 2005 was 53,587 ounces compared to 48,632 ounces for same period in 2004. First quarter 2005 production is higher than the same period of 2004 principally due to the an increase in ore tons mined and processed, a decrease of ore processed from low grade stockpiles, an increase in the grade processed and an increase in the process recovery. Quarterly production and financial information provided as at March 31, 2005 is not indicative of 2005 annual production or financial results. Key quarterly production statistics are illustrated in Table 1 below.

Table 1 – Jerritt Canyon Production Statistics

	Three months ended
	March 31, 2005			December 31, 2004			September 30, 2004			June 30, 2004			March 31, 2004			December 31, 2003			September 30, 2003
Gold ounces produced	53,587			60,384			73,070			61,247			48,632			68,411			81,590
Gold ounces sold	50,850			64,723			71,210			63,983			45,735			72,932			73,891

Average sales price per ounce	$	427		$	432		$	402		$	395		$	406		$	391		$	365
Cash operating costs per ounce(1)	$	373		$	336		$	303		$	337		$	388		$	298		$	247

Ore tons mined	280,635			320,505			296,474			284,737			242,498			248,036			296,305
Tons processed	311,434			331,619			358,600			323,782			291,832			369,465			397,663
Grade processed (opt)	0.211			0.214			0.224			0.208			0.209			0.212			0.229
Process recovery	85.8		%	85.0		%	91.1		%	91.0		%	79.7		%	87.3		%	90.0		%

(1) The Company has adopted the Gold Institute Production Cost Standard (the “Standard”) to calculate and report cash operating costs per ounce of gold produced. This is a non-GAAP measure, intended to complement conventional GAAP reporting; accordingly these data should not be considered a substitute for GAAP measures. Management believes that cash operating costs per ounce is a useful indicator of a mine’s performance. Where GAAP operating costs are adjusted to calculate per ounce data consistent with the Standard, reconciliations to GAAP measures are provided, see Table 5 below.

Mining was limited to three mines during the first quarter of 2005 and included SSX, Smith and Murray. Mining of increased ore tonnage at SSX and increased grade at Smith was offset by lower than expected grades at SSX and Murray. Factors that affect production levels, such as the number of available working places in the mines, equipment availability and productivity are continuing to improve. Gold production for the first quarter in 2005 increased 11% relative to the first quarter in 2004. Production for the second quarter of 2005 is expected to meet the Company’s objective of producing approximately 45% of its 2005 expected production of 265,000 to 280,000 ounces in the first six months of the year.

Total cash operating costs per ounce were approximately 3% below expectations during the first quarter of 2005 and 4% lower than during the prior year. This improvement from the prior year is the result of efforts by Queenstake employees to decrease spending and improve efficiencies including lower labor and maintenance costs. These efforts have been offset by higher electricity and commodity prices than experienced during the first quarter of 2004. Cash operating costs on a per-ounce basis for the three-month period ended March 31, 2005, at $373, demonstrates progressive improvement from the cash operating costs for prior year period of $388, principally as a result of increasing gold production and improving operating efficiencies. A reconciliation of operating costs to cash operating costs per ounce is provided in Table 5 on page 5 below.

Statements of loss

The Company reported a net loss of $7.1 million ($0.02 per share) for the three-month period ended March 31, 2005. The principal components of these losses are: loss from operations of $6.8 million and $0.3 million from stock-base compensation and interest expense.

Loss from operations is illustrated in the Table 2 below.

Table 2

	Three months ended
	March 31,			March 31,
(In millions of U.S. Dollars)	2005			2004
	Unaudited			Unaudited
Gold sales	$	21.2		$	18.0
Costs and expenses
Operating costs	20.0			17.9
Depreciation, depletion and amortization	5.2			3.6
Exploration	0.5			0.5
General and administrative	2.3			0.6
	28.0			22.6
Loss from operations	$	(6.8	)	$	(4.6	)

First quarter revenues of $21.2 million were generated from the sale of 50,850 ounces of gold. The average gold price realized was $427 per ounce. Revenue is net of $0.5 million premium cost of gold put options, which expired during the quarter. Revenues for the same period in 2004 were $18.0 million generated from the sale of 45,735 ounces and an average realized price of $406.

Operating costs and depreciation, depletion and amortization (“DD&A”) costs are substantially all associated with the Jerritt Canyon Mine. A reconciliation of operating costs to cash operating costs per ounce is provided in Table 5 on page 5 below.

Operating costs of $20.0 million during the first quarter of 2005 increased from the same period in the prior year 2004 of $17.9 million. This increase is primarily attributed to the increase in ore tons mined and processed compared to the prior year. Higher power and commodity costs experienced during the latter half of 2004 have continued and also contributed to the higher costs.

DD&A of $5.2 million for the three-month period ended March 31, 2005 was higher than DD&A cost of $3.6 million for the same period in 2004. DD&A increased due to capital development additions amortized over current depletion of estimated proven and probable reserves.

Exploration expense for the three-month periods ended March 31, 2005 and March 31, 2004 was substantially the same and incurred for target generation and follow-up within the Jerritt Canyon District.

General and administrative costs are associated with the Company’s executive offices; the increase in costs incurred during the three-months ended March 31, 2005 compared to the same period in 2004 of $1.7 million result primarily from a one-time corporate reorganization cost of $1.0 million paid during the first quarter of 2005. The remainder of the increase results from increased general operating expenses of $0.5 million primarily in investor relations and financing activities and stock-based compensation expense of $0.1 million not experienced in the prior year.

The principal remaining components of the Company’s net loss are illustrated in Table 3 below.

Table 3

	Three months ended
	March 31,			March 31,
(In millions of U.S. Dollars)	2005			2004
	Unaudited			Unaudited
Other income, net of other expense	$	(0.1	)	$	(0.7	)
Stock-based compensation	0.1			—
Interest expense	0.1			2.6
Foreign exchange (gain) loss	0.2			0.1
	$	0.3		$	2.0

Other income, net of other expense of $0.1 million is primarily the result of interest earned during the first three months of 2005. Other income, net of other expense during the same period in 2004 includes a one-time gain of $0.6 million from the disposition of the Company’s wholly owned subsidiary Pangea Resources Inc., which owned 100% of the Magistral gold mine in Sinaloa, Mexico.

No material amount of interest was paid in cash during the three month period ended March 31, 2005. Interest costs of $2.6 million for the three-month period ended March 31, 2004 resulted principally from a non-cash component of $2.3 million from the amortization of costs incurred in arranging the term loan used to complete the acquisition of the Jerritt Canyon mine, as well as other notes and capital leases assumed in the Jerritt Canyon acquisition.

The trend in quarterly revenues and net loss is illustrated in Table 4 below.

Table 4 - Summary of Quarterly Results

	Three months ended (Unaudited)
(In millions of U.S. Dollars, except per share data)	Mar-31-05			Dec-31-04			Sep-30-04			Jun-30-04			Mar-31-04			Dec-31-03		Sep-30-03			Jun-30-03
Total revenues	$	21.2		$	27.2		$	28.0		$	24.7		$	18.0		$	28.5	$	26.4		$	—
Net income (loss)	(7.1		)	(4.6		)	(5.4		)	(5.6		)	(6.6		)	1.3		(6.0		)	(0.4		)
Net income (loss) per share - basic and diluted	(0.02		)	(0.01		)	(0.01		)	(0.02		)	(0.02		)	0.00		(0.02		)	(0.01		)

During the reporting periods, the Company reported no discontinued operations or extraordinary items.

The trend in total quarterly revenues illustrated above correlates with gold ounces sold and average sales price per ounce sold illustrated in Table 1. The Company sells its gold production at the spot price and has no forward sales commitments.

At March 31, 2005, the Company had 27,906 gold put options with a strike price of $330 per ounce and 147,500 gold put options with a strike price of $400 per ounce. The put options with a strike price of $330 were purchased as a condition of the term loan related to the Jerritt Canyon acquisition and will expire monthly with the balance of these options expiring at June 30, 2005. The cost of the puts is recognized as a reduction to sales revenue when the puts expire or are exercised, and totaled $0.5 million and $0.6 million during the three-months ended March 31, 2005 and March 31, 2004, respectively. The gold put options with a strike price of $400 expire monthly throughout 2005 and the first quarter of 2006 in correlation to the amount of put options purchased/expiring for each respective month. The purchase of gold put options provides the Company with downside price protection for future gold production sales and provides some assurance of future revenue cash flows for future production and other planning.

Development and exploration

Planned development and exploration during the first quarter of 2005 was delayed due to management’s strategy to optimize the use of capital resources for operations. The 2005 development and exploration program will continue to focus on both near-mine exploration, with the objective of short-term reserve replacement, and district-scale exploration with the objective of discovery of new ore bodies. A priority of district-scale exploration during 2005 is the Starvation Canyon deposit, where the Company announced the discovery of high-grade gold mineralization during 2004.

Development of two new reserve areas, Steer and Mahala, at Jerritt Canyon will continue during the remainder of 2005. Mineralization for the Steer and Mahala reserves are accessed via a new portal collared in April 2004 and from the Smith Mine, respectively. Both Steer and Mahala reserve development have progressed to the proximity of the underground ore zones and underground drilling has both expanded and added continuity to ore shapes.

Risks and uncertainties

The Company is subject to various financial and operational risks due to various factors outside of the control of the Company. Gold prices are affected by factors such as global supply and demand, expectations of the future rate of inflation, the strength of, and confidence in, the US dollar relative to other currencies, interest rates, and geopolitical events. Should the price of gold drop and the prices realized by the Company on gold sales were to decrease significantly and remain at such a level for any substantial period, the Company’s profitability and cash flow would be negatively affected.

Although the Company has carefully prepared its gold reserve and resource estimates, no assurance can be given that the indicated mining and processing recoveries of gold from the estimated reserves will be realized over the life of the mine.

The business of mining is generally subject to a number of risks including equipment failure, operational accidents, unstable ground conditions and severe weather.

The Company’s exploration work involves many risks and may be unsuccessful. Substantial expenditures are required to establish proven and probable reserves and to complete the related mine development. It may take several years from the initial phases of drilling until production is possible. As a result of these uncertainties, there is no assurance that current or future exploration programs will be successful and result in the expansion or replacement of current production with new reserves.

The validity of mining claims, which constitute most of the Company’s property holdings, can be uncertain and may be contested. Although the Company has attempted to acquire satisfactory title to its properties, some risk exists that some titles may be defective.

The Company seeks to minimize risks through the use of gold put options to provide a minimum price realizable for a substantial portion of its near-term gold production, through independent reviews of its gold reserve and resource estimates, careful operational planning, and transferring some of the risk through the purchase of insurance.

Reconciliation of non-GAAP measures

Table 5 below provides a reconciliation of cash operating costs per ounce, a non-GAAP measure, to operating costs as reported in the consolidated statements of loss.

Table 5

	Three months ended			Three months ended
(In millions of U.S. Dollars)	March 31, 2005			March 31, 2004
Operating costs per Consolidated Statements of Loss	$	20.0		$	17.9
Less: Royalty expense and production taxes included above	(1.0		)	(0.2		)
Effects of inventory and other adjustments	1.0			(0.2		)
Cash operating costs associated with ounces sold	$	20.0		$	17.5

Ounces produced	53,587			48,632

Cash operating costs per ounce	$	373		$	388

SELECTED ANNUAL INFORMATION

As a result of the acquisition of the Jerritt Canyon Mine on June 30, 2003, the Company began to report revenues from gold production in 2003, and significantly increased its assets and long-term financial liabilities.

Table 6 – Selected Annual Information

(In millions of U.S. Dollars, except per share data)	2004			2003			2002
Total revenues	$	97.8		$	54.9		$	—
Net loss	(22.1		)	(8.1		)	(1.1		)
Net loss per share - basic and diluted	(0.06		)	(0.04		)	(0.02		)
Total assets	87.9			97.9			4.6
Reclamation and mine closure obligations	25.8			25.8			—
Total long-term financial liabilities	1.0			6.5			—
Cash dividends declared	—			—			—

During the reporting periods, the Company reported no discontinued operations or extraordinary items.

Total assets decreased by approximately $10.0 million during the twelve months ended December 31, 2004. The principal components of the 2004 decrease in assets are the disposal of assets held for sale of $8.1 million, the expense of deferred financing costs of $3.3 million and a decrease in cash and cash equivalents of $3.4 million. During the year the Company added cash assets from common share issuance proceeds aggregating $15.2 million, which were used to pay out long-term liabilities and fund exploration, development and general and administrative activities in the aggregate of approximately $18.6 million. Consideration received for the disposal of assets was used to reduce the balance of the term loan which included an initial cash payment of $4.0 million, payments received for repayment of a $2.5 million note receivable and $1.5 million received from the sale of 2,000,000 shares received from of Nevada Pacific Gold (“NPG”) received on the sale of Magistral assets. These decreases were offset by increases of $0.2 million in inventories, $0.5 million in marketable securities and an increase of $4.3 million in mineral property, plant and equipment.

The principal components of the 2004 decrease in long-term liabilities are a $5.6 million payout of certain production payments relating to the Jerritt Canyon acquisition and the repayment of the oxygen plant note payable, which had a balance of $1.1 million at December 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

During the three-months ended March 31, 2005, the Company’s current assets increased $11.7 million to $28.5 million from $16.8 million as at March 31, 2004. The increase resulted primarily from completion of an equity financing on March 23, 2005 providing cash proceeds, net of financing costs, of approximately $23.4 million, described in more detail below, resulting in net cash and cash equivalents increasing by $11.3 million. Other increases to the Company’s current assets include $1.7 million in trade receivables, $0.8 million in inventories which have been offset by a $0.5 million decrease in marketable securities and $1.6 million from the amortization of prepaid expenses.

Current liabilities decreased $7.2 million as the addition of the cash proceeds received from the completed equity financing was offset by use of the cash proceeds for cash disbursements to vendors representing a decrease in accounts payable and other accrued liabilities of approximately $6.1 million. The remaining decrease can be attributed to the timing of trade invoicing and related accruals.

The Company used cash in operating activities, before changes in non-cash working capital, of $1.6 million from gold production and related gold sales at the Jerritt Canyon Mine during the three-months ended

March 31, 2005 as compared to cash used in operating activities, before changes in non-cash working capital, of $1.2 million during the three-months ended March 31, 2004. Gold production was approximately 11% higher than gold production during the same period in 2004. The higher use of cash during the first quarter 2005 as compared to the same period in 2004 can be attributed to higher cash operating costs from increased production and higher general and administrative costs as described in Results of Operations above.

The Company invested $4.0 million in the Jerritt Canyon Mine during the three-months ended March 31, 2005, principally in underground mine development and in purchasing and refurbishing plant and equipment. The Company anticipates investing additional capital in mine development, new mining equipment and in capitalized reserve expansion programs referred to under “Development and exploration” above. The Company anticipates funding these programs from cash generated from operating activities and equity and/or debt financing. The use of cash for mine development was offset by $0.4 million of cash provided from the sale of marketable securities and interest earned.

Cash provided by financing activities during the three-month period ending March 31, 2005 was $23.1 million as compared to cash used in financing activities of $5.6 million during the same period in 2004. The increase consists primarily of a completed equity financing on March 23, 2005 providing cash proceeds, net of financing costs, of approximately $23.4 million, as described in more detail below.

On March 23, 2005, the Company successfully closed an equity financing for Cdn $20 million (the “Offering”) through a syndicate of Agents (“Agents”). In addition the Agents exercised their over-allotment option, bringing the total gross proceeds to Cdn $30 million. The total Offering consisted of 100 million units (the “Units”) with each Unit consisting of one common share and one half of one common share purchase warrant at a price of Cdn $0.30 per Unit. Each whole common share purchase warrant (50 million warrants in total) can be exercised to acquire one additional common share at a price of Cdn $0.40 for a period of 24 months. The common share purchase warrants are subject to mandatory exercise with thirty days upon notice by the Company, or they will expire and no longer be valid, should the weighted average trading price exceed a specified threshold. The Agents received a 5% commission on the gross proceeds of the Offering.

During the three-month period ended March 31, 2005, approximately 50,000 warrants were exercised. The Company currently has approximately 83.1 million share purchase warrants outstanding, which, if exercised would provide the Company with an additional approximately $36.6 million in cash. None of the warrants outstanding are in-the money as of May 12, 2005 and there can be no assurance these warrants will be exercised.

At March 31, 2005, the Company had a positive working capital of $13.0 million, which, together with expected cash flow from operations, will be sufficient to satisfy current planned general and administrative activities, mining operations, capital expenditures and property obligations for the 2005 fiscal year.

The Company’s material contractual obligations at March 31, 2005 are illustrated in Table 7 below.

Table 7 – Material Contractual Obligations

	Payments due by period
			Less than 1						More than 5
(In millions of dollars)	Total		year		1 - 3 years		4 - 5 years		years
Capital lease obligations	$	2.1	$	1.0	$	1.1	$	—	$	—
Operating leases	0.6		0.2		0.4		—		—
Total Material Contractual Obligations	$	2.7	$	1.2	$	1.5	$	—	$	—

CRITICAL ACCOUNTING ESTIMATES AND CHANGES IN ACCOUNTING POLICIES

The preparation of its consolidated financial statements requires the Company to use estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The Company’s critical accounting estimates relate to depletion and amortization of property, plant and equipment and asset retirement obligations. The Company introduced many of these critical estimates in its December 31, 2003 consolidated financial statements, in conjunction with the acquisition of the Jerritt Canyon gold mine.

Effective December 31, 2003, the Company’s reporting currency was changed from Canadian dollars to U.S. dollars. The Company’s revenues are earned in U.S. dollars; substantially all of the Company’s costs and liabilities are incurred in U.S. dollars; and the Company’s executive offices are located in the U.S. The comparative financial statements from prior periods have been restated to reflect this change. For the restatement, the Company followed the method suggested by the Emerging Issues Committee (“EIC”) in release number EIC-130 dated July 24, 2002. The consensus of the EIC was that financial statements for all prior years should be translated using the current rate method. This method of translation results in the financial statements of prior years presented for comparison being translated as if the reporting currency used in the current year had been used for at least all periods shown.

The Company capitalized the Jerritt Canyon acquisition costs, valuing the related non-cash consideration at fair value. The Company’s policy is to capitalize mine development and reserve expansion program costs incurred within, or contiguous to, known gold ore reserves, consistent with sound mining and mine development practice. A significant portion of the Jerritt Canyon property, plant and equipment is amortized on a units-of-production basis. Under this method, amortization cost, and therefore net book values of property, plant and equipment, are directly affected by the Company’s estimate of proven and probable gold reserves at Jerritt Canyon. The Company engaged Pincock, Allen & Holt, an independent consulting firm, to review the Company’s reserve and resource estimates, and to prepare a technical report in conformance with Canadian National Instrument 43-101, which was filed on SEDAR on February 23, 2005. If this estimate proves inaccurate, or if the Company revises its mine plan at Jerritt Canyon due to changes in the market price of gold or significant changes in mine operating costs, and as a result the estimate of gold reserves is reduced, the Company would be required to write-down the book value of the Jerritt Canyon property, plant and equipment, and/or to increase the amount of amortization expense, both of which would reduce the Company’s earnings and net assets. The Company does not currently anticipate a material reduction in the Jerritt Canyon reserve estimate.

The Company also assesses Jerritt Canyon property, plant and equipment for impairment at the end of each accounting period. If prior estimates of future cash flows prove to be inaccurate, due to reductions in the price of gold, increases in the costs of production, and/or reductions in the amount of recoverable reserves, the Company would be required to write-down the recorded value of Jerritt Canyon property, plant and equipment, which would reduce the Company’s earnings and net assets.

The transitional rules of CICA Handbook section 3870, Stock-based Compensation and Other Stock-based Payments (“CICA 3870”), requires companies to commence recognizing and measuring compensation cost for stock-based employee compensation plans for fiscal years beginning January 1, 2004, based on the fair value of options granted. CICA 3870 is aligned with SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” As a result of the adoption of CICA 3870, the Company has restated the results of 2003 and 2002 by recognizing stock-based compensation expenses of $0.3 million and $0.1 million, respectively. In addition, the Company has reported a $0.5 million charge to earnings for the year ended December 31, 2004, and a charge of $0.1 million during the three-month period ending March 31, 2005, reflecting the cost related to the issuance and vesting of stock option grants during 2004. The effect of CICA 3870 on the Company’s future earnings will be directly related to future stock option grants and the extent to which alternative forms of compensation are introduced, neither of which can be reasonably estimated at this time.

The recommendations of CICA Handbook Section 3110, Asset Retirement Obligations (“CICA 3110”), became effective on January 1, 2004. This section requires the recognition of a legal liability for obligations relating to the retirement of property, plant and equipment and obligations arising from the acquisition, construction, development, or normal operation of those assets. Such asset retirement costs must be recognized at fair value, when a reasonable estimate of fair value can be estimated, in the period in which the liability is incurred, added to the carrying value of the asset and amortized into income on a systematic basis over its useful life.

The Company has an obligation to reclaim the Jerritt Canyon property after the minerals have been fully depleted, and has estimated the present value of the costs to comply with existing reclamation standards. The original $25.8 million estimate of the fair value of these costs was based on a present value analysis of the future asset retirement costs conducted by the American Insurance Group Environmental (“AIG”). As at March 31, 2005, management believes the total reclamation liability estimate has not materially changed.

The current asset retirement obligation has been fully funded by the Company by means of a Commutation Account established with AIG. The cash plus interest earned in the Commutation Account will be used to fund Jerritt Canyon’s ongoing reclamation and mine closure obligations.

FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS

The fair value of the Company’s current financial assets and liabilities approximate their carrying values, due to their short-term maturities.

The Company does not use gold forward sales contracts to fix future gold prices realized. At March 31, 2005, the Company had 27,906 gold put options with a strike price of $330 per ounce and 147,500 gold put options with a strike price of $400 per ounce. The put options with a strike price of $330 were purchased as a condition of the term loan related to the Jerritt Canyon acquisition and will expire monthly with the balance of these options expiring at June 30, 2005. The gold put options with a strike price of $400 expire monthly throughout 2005 and the first quarter of 2006 in correlation to the amount of put options purchased/expiring for each respective month.

Marketable securities, consisting of 25,000 shares of Nevada Pacific Gold, Ltd. a TSX Venture Exchange listed gold company, are carried at the lower of cost or market value.

OUTSTANDING SHARE DATA

The Company is authorized to issue an unlimited number of common shares. Outstanding share data are illustrated in Table 8 below.

Table 8

	As of March 31, 2005	Changes in April 2005		Changes in May 2005	As of May 12, 2005
	(000’s)	(000’s)		(000’s)	(000’s)
Common shares issued and outstanding	510,482	150		—	510,632
Common shares issuable upon exercise of warrants	81,396	(50	)	—	81,346
Common shares issuable upon exercise of stock options	8,692	(1,650	)	425	7,467
Common shares fully diluted	600,570	(1,550	)	425	599,445

INTERIM CONSOLIDATED BALANCE SHEETS

(In Thousands of U.S. Dollars)	March 31, 2005			December 31, 2004
	Unaudited
ASSETS
Current assets
Cash and cash equivalents	$	17,419		$	6,132
Trade and other receivables	1,818			117
Inventories - Note 4	5,871			5,084
Marketable securities - Note 5	20			500
Prepaid expenses - Note 6	3,388			4,965
Total current assets	28,516			16,798

Restricted cash - Note 9	26,498			26,379
Mineral property, plant and equipment, net - Note 10	40,280			42,514
Other assets - Note 11	1,914			2,240
Total assets	$	97,208		$	87,931

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	13,584		$	20,580
Other current liabilities - Note 13	1,884			2,126
Total current liabilities	15,468			22,706

Other long-term obligations - Note 14	1,060			1,093
Reclamation and mine closure - Note 15	25,898			25,766
Total liabilities	42,426			49,565

Shareholders’ equity
Common shares, no par value, unlimited number authorized
Issued and outstanding 510,482,127 (2004 - 410,404,627) - Note 16	123,554			100,139
Contributed surplus - Note 17	1,133			1,053
Convertible securities - Note 19	363			363
Deficit	(70,268		)	(63,189		)
Total shareholders’ equity	54,782			38,366
Total liabilities and shareholders’ equity	$	97,208		$	87,931

Approved on behalf of the Board:
/s/ Robert Zerga		/s/ Dorian Nicol
Director		Director

The accompanying notes form an integral part of these interim consolidated financial statements

INTERIM CONSOLIDATED STATEMENTS OF LOSS

UNAUDITED

	For the Three Months Ended March 31
(In Thousands of U.S. Dollars, except per share amounts)	2005			2004
				Restated -
				Note 3
Gold sales	$	21,184		$	17,958
Costs and expenses
Operating	19,962			17,847
Depreciation, depletion and amortization	5,161			3,629
Exploration	524			487
General and administrative	2,353			595
	28,000			22,558
Loss from operations	(6,816		)	(4,600		)

Interest expense - Note 20	47			2,595
Other (income) expense, net	(54		)	(697		)
Stock-based compensation - Note 18	88			42
Foreign exchange loss	182			66
	263			2,006
Net loss	$	(7,079	)	$	(6,606	)

Net loss per share - basic and diluted	$	(0.02	)	$	(0.02	)

Weighted average number of shares outstanding (000’s) - basic	419,318			364,621

INTERIM CONSOLIDATED STATEMENTS OF DEFICIT

UNAUDITED

	For the Three Months Ended March 31
(In Thousands of U.S. Dollars)	2005			2004
				Restated -
				Note 3
Deficit, beginning of period - as previously reported	$	(63,189	)	$	(40,623	)
Cumulative restatement for stock-based compensation - Note 3	—			(440		)
Deficit, beginning of period - as restated	(63,189		)	(41,063		)
Net loss	(7,079		)	(6,606		)
Deficit, end of period	$	(70,268	)	$	(47,669	)

The accompanying notes form an integral part of these interim consolidated financial statements

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

	For the Three Months Ended March 31
(In Thousands of U.S. Dollars)	2005			2004
OPERATING ACTIVITIES
Net loss	$	(7,079	)	$	(6,606	)
Non-cash items:
Depreciation, depletion and amortization	5,161			3,629
Interest accretion and deferred financing costs	—			2,327
Gain on disposal of assets to be disposed of by sale	—			(661		)
Stock-based compensation	88			42
Foreign exchange loss	182			66
Loss on sale of marketable securities	38			—
	(1,610		)	(1,203		)
Changes in non-cash working capital:
Inventories	(787		)	(1,862		)
Accounts receivable and prepaid accounts	203			73
Accounts payable and accruals	(6,067		)	2,068
Cash used in operating activities	(8,261		)	(924		)

INVESTING ACTIVITIES
Property, plant and equipment expenditures	(4,038		)	(3,176		)
Proceeds from sale of assets to be disposed of by sale - Note 8	—			4,252
Sale of marketable securities - Note 5	442			—
Restricted cash	13			—
Cash Provided by (used in) investing activities	(3,583		)	1,076

FINANCING ACTIVITIES
Common shares issued, net of costs - Note 16	23,407			1,327
Term loan - Note 12	—			(6,397		)
Notes payable and leases	(276		)	—
Other	—			(513		)
Cash provided by (used in) financing activities	23,131			(5,583		)

Net increase (decrease) in cash and cash equivalents	11,287			(5,431		)
Cash and cash equivalents, beginning of period	6,132			9,536
Cash and cash equivalents, end of period	$	17,419		$	4,105

Supplemental cash flow information - Note 21

The accompanying notes form an integral part of these interim consolidated financial statements

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

UNAUDITED – MARCH 31, 2005

(Tables expressed in thousands of U.S. dollars, except per share amounts)

1. General

These unaudited interim consolidated financial statements and the accompanying notes have been prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) for the preparation of interim financial information. Accordingly, they do not include all of the information and disclosure required by Canadian GAAP for annual consolidated financial statements. The accounting policies used in the preparation of these unaudited interim consolidated financial statements are the same as those described in the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2004. In the opinion of management, all of the adjustments necessary to fairly present the interim financial information set forth herein have been made. These adjustments are of a normal and recurring nature.

Operating results for the period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2005. These unaudited interim consolidated financial statements should be read in conjunction with the audited financial statements and related footnotes for the year ended December 31, 2004.

2. Basis of presentation and consolidation

(a) Basis of presentation

These unaudited interim consolidated financial statements of the Company and its subsidiaries (collectively, unless the context requires otherwise, referred to as the “Company”) and accompanying notes have been prepared in accordance with accounting principles generally accepted in Canada. The format and presentation of these financial statements have been altered from that used in previous periods to present the financial information on a basis that is consistent with the Company’s nature of operations.

(b) Basis of consolidation

These unaudited interim consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany transactions and balances have been eliminated. The Company’s subsidiaries and percentage of ownership at March 31, 2005, are as follows:

• Queenstake Resources U.S.A. Inc. (Delaware) – 100%

• Castle Exploration Inc. (Colorado) – 100%

3. Significant accounting policy changes

On January 1, 2004, the Company retroactively adopted the transitional rules of CICA Handbook section 3870, Stock-based Compensation and Other Stock-based Payments (“CICA 3870”). This requires the Company to: (a) for fiscal years beginning after January 1, 2004, commence recording in the accounts the cost of stock-based compensation, estimated using the fair-value method prescribed in CICA 3870; and (b) restate prior period financial statements to record the fair value of stock-based compensation for the years 2002 and 2003. Consistent with CICA 3870, the 2003 financial statements are restated for the fair value of stock-based compensation of $347,000 and $93,000 for the years 2003 and 2002, respectively.

4. Inventories

	March 31, 2005		December 31, 2004
Finished goods	$	1,274	$	59
Stockpiled ore	1,362		1,889
Work-in-process	415		286
Materials and supplies	2,820		2,850
	$	5,871	$	5,084

All inventories are associated with the Jerritt Canyon Mine.

5. Marketable securities

	Shares
Balance - December 31, 2004	669,485		$	500
Sale of NPG shares	(644,485	)	(442		)
Loss on sale of NPG Shares	—		(38		)
Balance - March 31, 2005	25,000		$	20

The 669,485 shares represent approximately 1% of the issued and outstanding shares of Nevada Pacific Gold (“NPG”) as at December 31, 2004.

During the three months ended March 31, 2005, the Company sold 644,485 shares of NPG for net proceeds of approximately $0.4 million with an insignificant realized loss.

6. Prepaid expenses

	March 31, 2005							December 31, 2004
	Current		Non-current		Total			Current		Non-current		Total
Put premiums	$	1,418	$	—	$	1,418	(1)	$	1,612	$	—	$	1,612
Prepaid royalties	1,035		—		1,035		(2)	1,903		—		1,903
Other	935		—		935			1,450		—		1,450
	$	3,388	$	—	$	3,388		$	4,965	$	—	$	4,965

	Inception		Additions		Amortization			Net
(1) Aggregate put premiums	$	4,820	$	328	$	(3,730	)	$	1,418
(2) Prepaid royalties	3,493		—		(2,458		)	1,035

As a condition of the Jerritt Canyon term loan (Note 12), the lender required the Company to purchase a total of 394,591 gold put options, with a carrying value of approximately $4.1 million, with a series of monthly expiries from July 2003 through June 2005, inclusive. The puts each have a strike price of $330 per ounce with a maximum settlement value of $40 per ounce. At March 31, 2005, 27,906 of the gold put options, with a carrying value of approximately $0.4 million, remained.

The Company has purchased 147,500 gold put options, with a carrying value at approximately $1.0 million, with a series of monthly expiries from April 2005 through March 2006 inclusive. The put options each have a strike price of $400 per ounce. Payments of the premiums for these put options are being deferred and will be settled each month based upon the respective number of put options expiring or exercised in that month.

Put options remaining for 2005 and 2006 are as follows:

	2005						2006
	Q2		Q3		Q4		Q1
Ounces	27,906		—		—		—
Strike price/ounce	$	330	$	—	$	—	$	—

Ounces	30,000		52,500		35,000		30,000
Strike price/ounce	$	400	$	400	$	400	$	400

7. Deferred financing costs

Direct costs incurred in arranging the Jerritt Canyon term loan were deferred and amortized in conjunction with the repayment of the term loan. On August 20, 2004, the term loan (Note 12) was paid in full and the balance of the deferred financing costs have been amortized accordingly. At March 31, 2005, the Company did not have any deferred financing costs.

8. Assets to be disposed of by sale

At December 31, 2003, the group of assets comprising the Company’s wholly owned subsidiary, Pangea Resources Inc. (“Pangea”), which owned 100% of the Magistral gold mine in Sinaloa, Mexico, was classified as “assets to be disposed of by sale”, a current asset.

On February 2, 2004, the sale of the assets to be disposed of by sale was completed, at which time the Company received $4.0 million in cash from the buyer, Nevada Pacific Gold Ltd. (“NPG”), 2,000,000 common shares of NPG and a $3.0 million note payable by NPG on August 2, 2004, secured by a general security agreement over all of NPG’s assets.

Fair value of the consideration received in the sale of the assets to be disposed of by sale, itemized in the table below, has been estimated at $8.7 million. The Company recognized a gain of $661,000 as a result of this transaction.

Cash received from NPG at closing	$	4,000
Note receivable from NPG	3,000
Fair value of 2,000,000 common shares of NPG (Note 5)	1,483
Other, net	252
Fair value of consideration received	8,735
Carrying value of assets to be disposed of by sale	8,074
Gain on disposal	$	661

9. Restricted cash

	March 31, 2005		December 31, 2004
Commutation Account	$	25,766	$	25,771
Interest earned	132		421
Reclamation costs incurred by Company	—		(426		)
	25,898		25,766
Workman’s compensation self-insurance	515		510
Other restricted cash	85		103
	$	26,498	$	26,379

As part of the consideration for the Jerritt Canyon mine, the Company assumed the liability for the asset retirement obligations of the mine. On June 30, 2003, the Company purchased from American Insurance Group (“AIG”) an environmental risk transfer program (the “ERTP”). As part of the ERTP, $25.8 million was deposited in an interest-bearing account with AIG (the “Commutation Account”). The Commutation Account principal plus interest earned on the principal will be used to fund the Jerritt Canyon mine’s ongoing reclamation and mine closure obligations.

The Company has assigned to Division of Insurance, State of Nevada a letter of credit for $0.5 million secured by a cash deposit of $0.5 million in connection with the State’s Workers Compensation program.

10. Property, plant and equipment, net

	March 31, 2005							December 31, 2004
			Accumulated							Accumulated
			depreciation &							depreciation &
	Cost		amortization			Net		Cost		amortization			Net
Mineral properties and deferred costs
Jerritt Canyon (Nevada)	$	48,278	$	(22,626	)	$	25,652	$	45,538	$	(19,044	)	$	26,494

Plant and equipment
Jerritt Canyon (Nevada)	$	22,230	(7,634		)	14,596		22,117		(6,128		)	15,989
Subtotal Jerritt Canyon(1)	$	70,508	(30,260		)	40,248		67,655		(25,172		)	42,483

Office equipment, U.S.A.	58		(26		)	32		54		(23		)	31
	$	70,566	$	(30,286	)	$	40,280	$	67,709	$	(25,195	)	$	42,514

(1) Jerritt Canyon cost basis

	Original cost		2003 additions		2004 additions		2005 additions		Cost basis

Mineral properties and deferred costs(2)	$	22,888	$	5,088	$	17,562	$	2,740	$	48,278
Plant and equipment	14,100		785		7,232		113		22,230
	$	36,988	$	5,873	$	24,794	$	2,853	$	70,508

(2) The original cost of the mineral properties and deferred costs includes the $25,767 of capitalized asset retirement costs (Note 15) less negative goodwill on the acquistion of Jerritt Canyon.

11. Other assets

	March 31, 2005							December 31, 2004
	Cost		Amortization			Net		Cost		Amortization			Net
Environmental risk transfer program	$	5,861	$	(3,947	)	$	1,914	$	5,861	$	(3,621	)	$	2,240
	$	5,861	$	(3,947	)	$	1,914	$	5,861	$	(3,621	)	$	2,240

12. Term loan

On July 8, 2003 the Company drew down a term loan of $20.0 million from Amaranth LLC (“Amaranth”) bearing interest at the U.S. prime rate of 7%, the proceeds of which were used to partially fund the acquisition of the Jerritt Canyon Mine. At December 31, 2003, the term loan balance was $10.0 million as a result of scheduled amortization, cash sweeps and voluntary prepayments. On February 3, 2004, $4.0 million, received in the sale of assets to be disposed of by sale (Note 8), were used to repay a portion of the term loan and accrued interest thereon, as required by the loan terms. On March 31, 2004

and June 30, 2004, the Company paid scheduled payments of $2.5 million on each date respectively, plus accrued interest, reducing the term loan to approximately $1.1 million. On July 29, 2004 and August 20, 2004, the Company paid $0.5 million and $0.6 million, respectively, paying the balance of the term loan in full.

13. Other current liabilities

	March 31, 2005		December 31, 2004
Current portion of insurance premium payable	$	—	$	425
Current portion of put option premiums payable (Note 14)	979		732
Current portion of capital leases (Note 14)	905		969
	$	1,884	$	2,126

14. Other long-term obligations

	March 31, 2005			December 31, 2004
Deferred put option premiums	$	979		$	732
Capital leases	1,965			2,062
	$	2,944		$	2,794
Less current portion:
• Deferred put option premiums	(979		)	(732		)
• Capital leases	(905		)	(969		)
	$	1,060		$	1,093

As a condition of the Jerritt Canyon term loan (Note 12) the lender required the Company to purchase a total of 394,591 gold put options, with a series of monthly expiries from July 2003 through June 2005. The puts each have a strike price of U.S. $330 per ounce with a maximum settlement value of $40 per ounce. Payment of the premium for these puts was deferred and were being settled each month based upon the respective number of puts expiring or exercised in that month. On August 30, 2004, the Company paid approximately $2.0 million to settle all deferred outstanding gold put option premiums.

15. Reclamation and mine closure

Federal, state and local laws and regulations concerning environmental protection affect the Company’s operations. Under current regulations, the Company is required to meet performance standards to minimize environmental impact from operations and to perform site restoration and other closure activities. The Company’s provisions for future site closure and reclamation costs are based on known requirements. It is not currently possible to estimate the impact on operating results, if any, of future legislative or regulatory developments.

The Company’s estimate of the present value of the obligation to reclaim the Jerritt Canyon property has been estimated based upon existing reclamation standards.

The following table sets out the activity for the Company’s reclamation and mine closure liabilities for the periods ending March 31, 2005 and December 31, 2004, respectively:

	March 31, 2005		December 31, 2004
Opening Balance	$	25,766	$	25,771
Accretion	132		421
Reclamation activities paid by Company	—		(426		)
Ending Balance	$	25,898	$	25,766

16. Common shares

During the three-months ended March 31, 2005, changes in share capital were as follows:

	Shares (000’s)
Balance, December 31, 2004	410,405	$	100,139
Issued for cash	100,000	24,812
Issued for cash on exercise of warrants	27	6
Issued for cash on exercise of incentive stock options	50	15
Fair value of stock options exercised	—	4
Equity issuance costs	—	(1,422		)
Activity for the year	100,077	23,415
Balance, March 31, 2005	510,482	$	123,554

The Company successfully closed an equity financing for Cdn $20 million (the “Offering”) through a syndicate of Agents (“Agents”) on March 23, 2005. In addition the Agents exercised their over-allotment option, bringing the total gross proceeds to Cdn $30 million. The total Offering consisted of 100 million units (the “Units”) with each Unit consisting of one common share and one half of one common share purchase warrant at a price of Cdn $0.30 per Unit. Each whole common share purchase warrant (50 million warrants in total) can be exercised to acquire one additional common share at a price of Cdn $0.40 for a period of 24 months. If at any time after six months from the closing of this Offering, the weighted average trading price of the common shares on the Toronto Stock Exchange (the “TSX”) (or such other exchange or trading market on which the common shares principally trade) is Cdn $0.52 or more per common share for a period of thirty consecutive trading days then, upon notice by the Company, the holders of such warrants must exercise their warrants within thirty days or they will expire and will no longer be valid. The Agents received a 5% commission on the gross proceeds of the Offering.

17. Contributed surplus

Balance, December 31, 2004	$	1,053
Fair value of stock-based compensation	84
Fair value of stock options exercised - transferred to share capital	(4		)
Balance, March 31, 2005	$	1,133

18. Stock options

			Weighted average
	Number		price per option
	(000’s)		Cdn $
Outstanding, December 31, 2004	11,145		$	0.47
Exercised	(50	)	0.39
Cancelled or expired	(2,403	)	0.49
Outstanding, March 31, 2005	8,692		$	0.57

Subsequent to March 31, 2005, 575,000 stock options were granted to employees with an exercise price of Cdn $0.23 with 50% of the options vesting and exercisable immediately and 50% vesting one year from the grant date and with an expiry date of May 2, 2010. Additionally, 1,650,000 stock options were cancelled or expired after March 31, 2005.

19. Convertible securities

For the three-months ended March 31, 2005, share purchase warrants exercised and outstanding were:

Outstanding at				Outstanding at
December 31,	Issued in	Exercised in		March 31,
2004	2005	2005		2005	Exercise price	Expiry
(000’s)	(000’s)	(000’s)		(000’s)	Cdn $
10,534	—	(28	)	10,506	0.25	06/25/05
2,000	—	—		2,000	1.00	12/15/05
17,127	—	—		17,127	0.65	02/10/06
1,713	—	—		1,713	0.50	08/10/05
—	50,000	—		50,000	0.40	03/23/07
31,374	50,000	(28	)	81,346

					Fair value of		Fair value of			Fair value of
	Warrants	Warrants		Warrants	warrants		warrants			warrants
	issued	exercised		outstanding	issued		exercised			outstanding
	(000’s)	(000’s)		(000’s)
Balance, December 31, 2004	148,779	(117,405	)	31,374	$	5,420	$	(5,057	)	$	363
Warrants issued in financings	50,000	(28	)	49,972	—		—			—
Balance, March 31, 2005	198,779	(117,433	)	81,346	$	5,420	$	(5,057	)	$	363

20. Interest expense

	March 31, 2005		March 31, 2004

Amortization of deferred financing costs, related to term loan	$	—	$	2,150
Amortization of deferred financing costs, related to put options financed	—		45
Accretion of production payment owing to Jerritt Canyon sellers	—		132
Oxygen plant note	—		31
Non-cash interest expense	—		2,358
Term loan	—		209
Capital leases	47		25
Other	—		3
	$	47	$	2,595

21. Supplemental cash flow disclosure

	March 31, 2005		March 31, 2004

Non-cash financing and investing activities
Consideration received in sale of assets disposed of by sale (Note 8)	$	—	$	4,483
Property, plant and equipment expenditures accrued	1,111		—

Operating activities include interest paid in cash	47		268

DOCUMENTS FILED:		Queenstake Resources First Quarter Financial Results
DESCRIPTION:		Queenstake Resources First Quarter Financial Results & MDA

		QUEENSTAKE RESOURCES LTD.
		(Registrant)

Date	May 17, 2005	By	“Dorian L. Nicol”“ (signed)
			(Signature)

			Dorian L. Nicol, President & CEO

Date: May 12, 2005


/s/ Eric Edwards
Chief Financial Officer

8. Assets to be disposed of by sale

11. Other assets

12. Term loan

13. Other current liabilities

14. Other long-term obligations

Form 52-109FT2 – Certification of Interim Filings during Transition Period