Unsolicited Takeover Offer
Kingsgate Consolidated (ASX:KCN) notes the conditional proportional takeover offer lodged today with the Australian Securities and Investment Commission for 50.1% of the issued shares in the Company by Northern Gulf Petroleum Pte Ltd at an offer price of 4.2 cents per share (“the Offer”). It is conditional only on Foreign Investment Review Board approval.
The Directors received no prior notification of the bid. It is being considered by the Board and advice will be provided to shareholders as soon as possible.
Your Directors recommend shareholders TAKE NO ACTION in relation to the Offer or any correspondence or document received from the Bidder until they receive further information from the Target Board.
Shareholders will have ample time to consider the recommendations of the Board and make a decision accordingly.
Yours sincerely,
Ross Coyle
Company Secretary
Appendix 4E and Annual Financial Statements for the year ended 30 June 2016
Operational performance
Kingsgate is a gold and silver mining, development and exploration company based in Sydney, Australia. Kingsgate owns and operates the Chatree Gold Mine in Thailand. In addition, the Company has an advanced development project; the Nueva Esperanza Gold/Silver Project, in the highly prospective Maricunga Gold/Silver Belt in Chile.
Group gold production for the year was 146,502 ounces with Chatree contributing 97,510 ounces and Challenger 48,992 ounces.
Kingsgate suffered a major setback during the year when the Thai Government announced on 10 May 2016, that the Chatree Gold Mine must cease operations by 31 December 2016. In effect, the Thai Government’s actions or lack of action over the past 12 months, and their inability to articulate a valid reason for the decision has now irrevocably damaged Kingsgate and its Thai subsidiary Akara Resources Public Company Limited’s (“Akara”), business and reputations.
Since the initial closure announcement in May, the Thai Government has also rescinded the original Cabinet resolution to close the mine and via a new Cabinet resolution empowered the Thai Industry Minister and other key government officials to oversee the closure of the mine by the end of the year.
The Thai Government has expressed that the closure is in no way a reflection of the way the mine is operated which validates Kingsgate’s view that the mine is and always has been a socially responsible, internationally accredited mining operation employing modern techniques. Chatree continues to comply with stringent health and environmental laws, and is one of the most heavily regulated mining operations in the world.
A great deal of uncertainty still remains in how Akara might continue to operate the mine until the end of the year, as the Thai Department of Primary Industries and Mines has issued various instructions in the wake of the 10 May decision only to revoke some less than a month later.
The Thai Industry Minister Atchaka Sibunruang, on 18 August 2016, once again told the media that governmental committees set up in October 2015 to investigate alleged health and environmental issues around the mine have found that there have been no problems caused by the mine. However, the Committee will not conclude its findings until the end of the year.
The Industry Ministry went on to say that the Cabinet’s 10 May 2016 resolution to shut down Akara was cancelled because the resolution did not comply with Thai law, and was further explained by saying the 10 May resolution could put the Cabinet at risk of legal action by Akara as cancelling a concession that has already been approved and still remains valid does in fact break the law.
Akara has however, in light of this ongoing uncertainty, implemented a revised mine plan up until 31 December 2016 that is expected to generate sufficient cash flow to cover all of Akara’s liabilities and obligations.
While Kingsgate is extremely disappointed with the situation it now finds itself in, the Company continues to vigorously pursue a range of potential remedies for the situation, which include both legal and diplomatic options.
Both the Kingsgate Board and Management are seeking compensation on behalf of shareholders for the material impact of the Thai Government’s decision, and as noted previously, it is appropriate that Kingsgate’s shares remain voluntarily suspended while these options are being pursued.
Kingsgate also appreciates that while the voluntary suspension may be frustrating for some shareholders, it is necessary to protect against volatility created by this uncertainty.
In other Thai specific matters, Kingsgate also sought clarification from the Thai Securities and Exchange Commission (“SEC”), with respect to the SEC’s announcement on 2 October 2015, in relation to the status of the Initial Public Offering (“IPO”) of Akara. The SEC suggested that they had rejected the IPO application. As far as Kingsgate was aware, the IPO application was still under consideration by the SEC. The Board of Kingsgate was in any event, as a result of market conditions at the time, considering making an application to the SEC for deferral of the IPO. Akara submitted an application to the SEC to defer the IPO in October 2015.
Given the events of 10 May 2016, and the Thai Government’s decision to close the Chatree Gold Mine prematurely, there will be no further consideration given to the IPO.
The National Anti-Corruption Commission (“NACC”) of Thailand contacted Akara Resources in November 2015 to inquire into facts and gather evidence in respect of allegations made against a number of parties, including Kingsgate and Akara Resources.
Kingsgate and Akara Resources are unaware of the details of the allegations, nor are they aware of any matters that would justify such an inquiry. Kingsgate has not been formally contacted to date. The NACC Committee established to oversee the matter has been reconstituted and a new Chairperson has been appointed, but there has been no further activity to date.
Kingsgate’s other operating asset, the Challenger Gold Mine, made a solid contribution to group production for the year before its sale to WPG/Diversified Minerals Pty Ltd in March 2016.
Challenger contributed 48,992 ounces at a total cash cost of US$763 per ounce, with underground mining ceasing in December 2015, and the remaining ore being sourced from the SEZ open pit.
Kingsgate’s after tax loss of $229.5 million for the year is primarily due to a non-cash impairment charge of $227.6 million against the carrying value of the Chatree Gold Mine.
As at 30 June 2016, the Group’s current liabilities exceeded its current assets by $36,855,000. This was largely a result of the reclassification of the external borrowings of Akara as current liabilities due to the Thai government’s decision that the Chatree Gold Mine must cease operation by 31 December 2016. As a result of this matter the independent auditor’s report refers to a material uncertainty regarding continuation of the Group as a going concern. A plan has been implemented to enable the Group to continue as a going concern. For further information refer to the going concern disclosure in Note 1 of the financial statements together with the auditor’s report.
June 2016 Quarterly Report
Significant Matters
- On 10 May 2016, the Thai Minister for Industry decided, following a Cabinet meeting, that the Metallurgical Licence for the Chatree Gold Mine would be extended only until the end of 2016, rather than for a further three to five year period as was expected.
- As the Metallurgical Licence is critical to the continued operation of the Chatree Gold Mine, all operations must cease by 31 December 2016.
- Due to ongoing uncertainty with respect to the remaining tenure of the Chatree Gold Mine, Kingsgate shares remain voluntarily suspended from trading.
- There is the potential for a substantial impairment to the carrying value of the Chatree Gold Mine, subject to a final review and audit that will be in the order of US$175 million, which highlights the magnitude of the impact of the Thai Government’s decision to prematurely close the mine.
- Kingsgate continues to push for clarity and remedies to the situation in Thailand.
- Kingsgate has a bright future in Chile being a jurisdiction that welcomes and respects foreign investment.
- Kingsgate is pushing ahead with its 100% owned Nueva Esperanza Project in Chile, and US$3 million has been committed to exploration in FY17.
- Completion of the sale of the Bowdens Silver Project for a total of A$25 million, of which A$20 million has now been received, with the remaining A$5 million to be paid by 30 September 2016.
- Cash and bullion/doré totaled A$55.2 million (March quarter: A$49.8 million), comprising cash of A$47.5 million (including restricted cash of A$11.2 million) and bullion/doré of A$7.7 million.
- Debt facilities of A$86 million comprise a A$10 million corporate facility and an A$76 million equivalent loan facility against Chatree.
Successful Completion of Transaction for Bowdens Silver Project
Kingsgate Consolidated (ASX:KCN) (“Kingsgate” or the “Company”) is pleased to announce that Silver Mines Limited has paid the remaining monies totalling A$18 million to complete the purchase of an 85% stake in the Bowdens Silver Project.
Kingsgate has received a total payment of A$20 million cash for an 85% interest in the project.
The $20 million was paid in three instalments:
- A$200,000 was paid by way of a non-refundable deposit in February 2016;
- a further A$1.8 million was paid in March 2016 at the successful completion of the due diligence period; and
- the remaining A$18 million has now been received which successfully completes the deal.
Kingsgate is also pleased to advise that an agreement has been reached for Silver Mines Limited to purchase the remaining 15% interest in the Bowdens Silver Project.
The Company has entered into a Deed of Variation with Silver Mines Limited whereby:
- the acquisition price for the 100% purchase of the Bowdens Silver Project is varied to A$25 million;
- Silver Mines Limited now owns 100% of the Bowdens Silver Project;
- Silver Mines Limited will pay the balance of A$5 million by 30 September 2016, or such other date as may be agreed; and
- should Silver Mines Limited not pay the final balance of A$5 million by 30 September 2016, the parties will form an unincorporated Joint Venture as originally contemplated under the Agreement.
Kingsgate Chief Executive Officer Mr Greg Foulis said “We are delighted to see this transaction through to completion, as it underpins our strategy to reposition Kingsgate by reinvesting these proceeds into the more advanced Nueva Esperanza Project in Chile to realise its future potential.”
Yours sincerely,
Greg Foulis
Chief Executive Officer
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KCN Request for Continuation of Voluntary Suspension of Trading – 16 June 2016
Kingsgate Consolidated Limited (Kingsgate) requests a continuation of the voluntary suspension of trading in the securities of Kingsgate (ASX Code: KCN) from the commencement of trading on Friday, 17 June 2016.
For the purposes of Listing Rule 17.2, Kingsgate provides the following information:
- On 10 June 2016, Kingsgate was advised that the Thai Cabinet Secretariat had issued an urgent order to overturn the 10 May 2016 resolution to only renew the metallurgical licence at the Chatree Gold Mine until 31 December 2016. This resolution had been made by the Cabinet following a brief video report by the Minister of Industry (“MOI”). The matter had then been reconsidered at a Cabinet meeting on 7 June 2016, as the original decision had been taken with no accompanying documentation. As a result of this, Cabinet ordered that the original ruling be overturned and replaced with the following resolutions:
- That the video presented to Cabinet by the MOI on 10 May 2016 is acknowledged, and that the MOI has been asked to continue the work being undertaken by the Environment and Health Committees established in 2015 to review the operations at Chatree Gold Mine and update the general public on these matters accordingly; and
- The Ministry of Industry and other related government departments are to take further action in accordance with appropriate laws and regulations.
- A spokesperson for the Office of the Thai Prime Minister, General Sansern Kaewkamnerd advised that the MOI had been given carriage of the matter and he also stated: “The fact is that the new ruling does not mean that the order to shut down Akara Resources Public Company Limited’s gold mine by the end of 2016 has been overturned despite widespread discussions otherwise in social media. Instead, it is simply a technical matter.
He further stated that the “Prime Minister and National Council of Peace and Order Chief General Prayut Chan-o-cha had previously appointed a committee to investigate the matter with representatives from the Ministries of Industry, Public Health, Natural Resources and Environment, and Science and Technology. This committee has full authority to shut down the mine, and the Cabinet does not have to issue any order. Only an acknowledgement of the committee’s proposal is needed.” - The Thai Ministry of Industry has also advised that the Cabinet’s original resolution was revoked so it can approach the issue in a more cautious manner to minimise the risk of any future legal action that may be taken against the government by Akara Resources and or Kingsgate Consolidated.
- Kingsgate has already in light of these developments, completed a revised mine plan for the period ending 31 December 2016, with a view to providing the optimum outcome for all stakeholders. However, this remains subject to uncertainty pending clarification of the basis on which the mine can continue to operate through to 31 December 2016. In addition, Kingsgate has not yet been able to meet with the Minister of Industry to seek further clarity.
- Accordingly, Kingsgate requests that the suspension remain in place until it is in a position to make an announcement to the market; and
- Kingsgate is not aware of any reason why the voluntary suspension should not be granted.
Yours sincerely,
Greg Foulis
Chief Executive Officer
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KCN Request for Continuation of Voluntary Suspension of Trading
Kingsgate Consolidated Limited (Kingsgate) requests a continuation of the voluntary suspension of trading in the securities of Kingsgate (ASX Code: KCN) from the commencement of trading tomorrow, 27 May 2016.
For the purposes of Listing Rule 17.2, Kingsgate provides the following information:
- The voluntary suspension is necessary as uncertainty still remains following a public announcement on 10 May 2016, from the Thai Minister of Industry concerning the tenure of the renewal of the licence for metallurgical operations at the Chatree Gold Mine in Thailand;
- Kingsgate can advise that it has received the renewal of the metallurgical licence for the Chatree Gold Mine in Thailand for the period ending 31 December 2016, and not the anticipated 5 years from the renewal date (13 May 2016) as has been the practice in the past. In addition, the Company understands that the metallurgical licence renewal will be subject to certain conditions which have not yet been provided to the Company;
- Kingsgate further advises that this decision was made by the Thai Prime Minister and Cabinet and a subsequent attempt by the Company to seek a copy of the order for the purposes of clarity has resulted in the Company being informed that the order has been classified and as such cannot be publicly disclosed. In addition, the Thai Minister of Industry has not met with the Company and has not provided any clarity as to the Company’s position;
- Kingsgate has in light of these developments, completed a revised mine plan for the period ending 31 December 2016, with a view to providing the optimum outcome for all stakeholders. However, this remains subject to uncertainty pending clarification of the basis on which the mine can continue to operate through to 31 December 2016;
- Accordingly, Kingsgate requests that the suspension remain in place until it is in a position to make an announcement to the market. It is anticipated that an announcement will be made prior to the commencement of normal trading on Friday 17 June 2016, and that the voluntary suspension will cease at that time; and
- Kingsgate is not aware of any reason why the voluntary suspension should not be granted.
Yours sincerely,
Greg Foulis
Chief Executive Officer