Management Discussion
Sustainability is integral to Kingsgate’s business, both in its approach to business and as displayed by its actions. Sustainable development’s core aims are integrated into all activities of exploration and mining, especially health, safety and environment, together with community responsibilities and rural development.

Kingsgate developed its single mine operation at Chatree in central Thailand in 2000-01. The Company recognised that Thailand did not have a developed, modern, mining industry and therefore made a commitment to bring the mining industry’s world’s best practice to the mining sector in Thailand. Initially, specific policies were established for sustainability, environment and governance, among others, at a high level across the organisation. This approach developed into embedding sustainability parameters into the description of each job task and into the Key Performance Indicators of every worker, after gaining certification for world’s best practice in operational activities, including health and safety, environmental management, materials handling and labour agreements. Internal and external planning and reporting practices were improved to ensure that sustainability issues were integrated into the Company’s business.

Rural development has focused on developing new industries to support or provide services and manufacturing items for the operation, demonstrating the export potential of mining equipment and services. Local community programmes moved beyond training and jobs, infrastructure development, education and health to integrating development programmes with regional and provincial governments. In 2006, the Company divested a share in the company which operates the Chatree mine to Thai interests. In the future, the aim is to list the Thai operation on the Thai Stock Exchange and complete the integration process.

Separate Sustainability Reports were produced for each year from 2003 to 2006, however, regarded as core to our business and delivering superior outcomes for all stakeholders, the decision was again made to integrate Sustainability into the Company’s Annual Report as per the 2007 Annual Report.

Examples of the outcomes from this approach to Sustainability include: for more than 2,000 days, no employee was injured at work; there were no interruptions to the business through environmental incidents at any time; the Company increased operational efficiencies and experienced positive cooperation with local governments and communities. Positive interaction with local communities and provincial government was demonstrated through their support for the continuation of the mine and approval of new mining leases at Chatree North. Few mining companies have achieved this result. Greater financial returns will result as the mine expands at Chatree North and the plant expansion is completed.

The Company has a commitment to improved sustainability achievements and greater disclosure of sustainability progress. During the year, the delays in the granting of the new mining leases had constrained further development initiatives. Now that the operation has recently received government approval for a number of years of further mining, new projects can be initiated. The Company continues to report against the Global Reporting Initiative (GRI) Indices and provide additional information in the GRI format on the Company web site (www.kingsgate.com.au). This is an ongoing process.

Context and Performance
Kingsgate has experienced two tough years operating the Chatree mine with low grade ore feed and low levels of gold production – the last year being the mine’s lowest production since opening. Remnant ore was extracted from the open pits and supplemented with marginal grade stockpile ore, while maintaining effective cost controls in an environment of spiralling industry wide costs. Ore supplies were almost exhausted when the Chatree North mining leases were finally granted. Despite these limitations, the Company was able to benefit from higher gold prices, selling all gold produced into the spot gold market which, combined with asset sales, resulted in a profitable year.

Kingsgate continued to implement all its sustainability initiatives at a higher level than in the previous year, due to improved profitability, but was still constrained due to the lack of certainty of continued mine-life. The planned social and economic programmes around Chatree, which involve a partnership with local and provincial governments and community stakeholders, will progress now that new mining leases are granted. The direct partnering with the two provincial governments has improved relations and trust significantly, aided by the Thai investors. Community expenditures will increase during the new fiscal year 2008-09.

In July 2008, the Chatree North mining leases were granted. New areas will be progressively opened for mining with higher grade material ramping up production during the first 6 to 9 months of 2008-09 with a consequent increase in earnings. This will aid in putting various social development plans into action.