Summary
The Kingsgate Group underwent a major transformation in 2011 with
the successful acquisition of Dominion Mining Limited (Dominion), via
a Scheme of Arrangement, and acquiring 70% of Laguna Resources NL
(Laguna) through an off-market takeover. The Group also advanced the
Chatree North plant expansion through the year.
Earnings
The Group’s profi t after income tax for the year ended 30 June 2011
amounted to $20.9 million (2010: $73.1 million).
The average gold price for the current year strengthened to US$1,386
per ounce, which was 27% higher than last year. However revenue was
impacted adversely by the strength of the Australian dollar.
The Group sold 114,380 ounces (2010: 134,945 ounces) of gold in the
year generating gold sales revenue of $156.3 million (2010: $165.2
million).
The mining and processing costs increased to $99.5 million (2010:
$82.2 million). This was mainly a result of the addition of operating
expenses attributable to the Challenger mine, offset by lower costs at
Chatree mine.
The Group’s total cash costs, on a unit cost basis, were US$639/oz (2010:
US$335/oz) refl ecting the lower production at Chatree (US$479/oz) and
the higher costs associated with Challenger mine (US$968/oz).
Depreciation and amortisation expenses increased to $27.8 million
refl ecting an additional $18 million from Challenger, of which
$6 million relates to the fair value asset allocation required under
acquisition accounting.
Other signifi cant items included in the profi t before income tax are
costs of $4.8 million relating to the Dominion and Laguna acquisitions
and the net foreign exchange loss of $15.8 million. The comparison
between the stronger Australian dollar against the Thai Baht resulted
in a foreign exchange loss from the foreign currency denominated
intercompany loans and bank accounts.
Cash Flow
Cash on hand at the end of the fi nancial year totalled $35.9 million.
This cash position was driven by sales of gold into rising spot prices
which resulted in an operational cash fl ow of $34 million. Prior to
30 June 2011, the Group repaid $45 million towards the loan facility,
which reduced the net borrowings at year end to $89.2 million. The
proceeds of share options also provided $3.7 million additional funds
during the year. Cash outgoings were used primarily to pay dividends to
shareholders of $28.5 million as well as $124.6 million for investment in
property, plant and equipment, mine properties, exploration and land.
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Financing Arrangement
Revolving loan facility
Kingsgate has a three year secured revolving loan facility with Investec
Bank (Australia) Limited (Investec). As at 30 June 2011, the facility
limit increased to US$50 million (2010: US$30 million). A$15 million
(US$15.9 million equivalent) was drawn down prior to period end.
Convertible loan facility
Subsequent to year end, Kingsgate entered into a A$35 million fi ve year
convertible loan facility to fund the acquisition of the Bowdens Silver
Project. This facility was fully drawn down on 22 September 2011. In
addition, the US$50 million three year revolving facility was increased
to A$60 million.
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