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Kingsgate is focused on, and has delivered on, five key areas:
- 1 Remaining a low cost gold producer;
- 2 Expanding the production of gold;
- 3 Increasing gold in Ore Reserves and Resources;
- 4 Increasing the earnings (and profit) per share; and
- 5 Continuing as a proven value creator.
Kingsgate’s Chatree gold mine, in Thailand, has maintained cash costsin the lowest 20% of the global gold miners while increasing gold production by more than 40% over the previous year (Source:company reports, GFMS). Ore Reserves increased 41% to 1.9 millionounces gold, extending the mine life substantially, and Mineral Resources increased over 30% to 4.3 million ounces of gold. Profit increased 125% to $73 million, Kingsgate’s highest ever profit and earnings per share. Dividend yield increased to 3.5%, the highest identified among substantial, listed, global gold producers. The Company’s better than 1100% capital return (before dividends) generated over the previous decade to the end of 2009 and Kingsgate’s share price as one of the best performers on the ASX-200 were acknowledged by the Australian Financial Review (AFR) in December 2009. The Company also maintained an exemplary safety record as the world’s safest gold mine (based on publicly available data), reflecting the skill and commitment of the operational team.
When the expanded processing plant is completed in 2011, gold production will increase, improving revenues and profit. Drilling within the mining leases at Chatree will continue to expand the reserves and determine the future limits of the planned open pits. Resource growth is targeted around current pits as new near-surface and underground targets, with a focus on near-term high grade material to augment the overall gold grade of the ore feed to the processing plant.
New Chatree feeder pits and stand-alone discoveries further away from the plant are being explored with initial success in the discovery of the Suwan Prospect.
Potential development projects in other countries are being reviewed and have the potential to generate substantial value if transactions can be completed.
Operations
The fiscal year to June 2010 was one of the most successful for the Chatree mine with new records set on ore extracted and processed. This was the first full year of production from the Chatree North mining leases granted in 2008.
The mining rate has increased to over 6 million tonnes per year, well in excess of the requirements of the future expanded processing plant. Lotus Hall, the Thai mining contractor, was able to utilise a new and
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larger mining fleet fully, with bigger equipment. A number of open pit working areas have been made available increasing the flexibility of the operation. The main A Pit at Chatree North has been, and will continue to be, the main source of ore feed which, when blended with ore from the smaller pits, improves the overall grade. Ore stockpiles have been increased to ensure maximum flexibility once the new processing plant is complete.
The plant processed a record 2.7 million tonnes of ore, substantially above its rated capacity, helping to reduce overall costs and improving efficiency. A planned major maintenance shutdown in the September quarter of 2010 ensured a continued strong performance in the future. Production was 132,628 ounces of gold for the year with a similar amount forecast for the fiscal year to June 2011.
A major expansion to the processing plant is under construction and this will increase the combined ore processing capacity to over 5 million tonnes per annum. Ausenco, the engineering firm which constructed the initial plant in 2000/01, is managing the new construction. The expanded plant is expected to be commissioned in the September quarter 2011 and will increase the gold production rate to 200,000 ounces per year when fully operational.
Low unit cash costs at Chatree have been maintained in spite of cost
pressures across the industry, especially related to fuel and reagents.
Unit costs were slightly lower during 2010 due to efficiencies
generated by the use of larger equipment and the use of a new
underpass between the main A Pit and the plant. Cash costs were US$335 per ounce of gold, made up of cash operating costs of US$257 per ounce plus Thai royalties (which increase with higher gold prices) of US$78 per ounce. Thai royalties will increase with higher gold prices. Good infrastructure, efficient mining and tight controls on processing costs have meant low costs can be maintained, keeping them in the lowest 20% of the global gold mining industry (GFMS 2010). |
