Kingsgate Consolidated Limited (ASX: KCN) wishes to advise that business is continuing as usual at its Chatree operations in Thailand following the move by the army to take control of the administration of the country on Wednesday 22 May. This followed the imposition of martial law on Tuesday 20 May 2014 which was implemented after several months of anti-government protests in Bangkok.
Kingsgate has been investing and operating in Thailand for over 15 years and the mine has not lost one day of production due to similar issues over that time. Travel to Thailand, including the capital Bangkok and the Chatree mine approximately 250km north of Bangkok, continues around the imposed curfew of 10.00pm to 5.00am.
Kingsgate would also like to confirm that the previously announced annual gold production guidance remains unchanged at 190,000 to 210,000 ounces, with both Chatree and Challenger performing inline with expectations.
Managing Director and CEO
Kingsgate Consolidated Limited
Kingsgate had a solid March quarter. Group gold production for the quarter of 48,725 ounces at a total cash cost of US$977/ounce was in-line with expectations, with production on track to achieve the guidance range for the year.
This result reflects continued focus on operating efficiencies and cost reduction initiatives given the current volatile operating environment for gold producers.
Gold sales for the quarter were 48,216 ounces at an average gold price received of US$1,274/ounce. The Group All-in Sustaining Cash Cost was US$1,126/ounce for the quarter.
- Solid Group operating performance with quarterly gold production in-line with expectations at 48,725 ounces.
- Strong June quarter expected to deliver full year guidance.??Chatree produced 31,609 ounces of gold at US$805/ounce and Challenger produced 17,116 ounces of gold at US$1,293/ounce for the quarter.
- Balance sheet strengthened with institutional placement and accelerated entitlement issue completed raising A$28.5 million (before costs). Retail component completed in April raising an additional A$30.9 million (before costs).
- The Definitive Feasibility Study (DFS) for Nueva Esperanza confirms robust project economics.
- CEO search well advanced.
The Board of Kingsgate Consolidated Limited ABN 42 000 837 472 (“Company”) has resolved to cancel the general meeting scheduled to be held on 9 May 2014 (“General Meeting”), in accordance with rule 9.7 of the constitution of the Company.
The General Meeting was called for shareholders to consider and approve the following 3 resolutions:
- Resolution 1 – to approve and ratify under ASX Listing Rule 7.4 a prior issue of 11,774,572 ordinary shares to Investec Bank (Australia) Limited on 19 December 2013;
- Resolution 2 – to approve and ratify under ASX Listing Rule 7.4 a prior issue of 14,661,220 ordinary shares to domestic and international institutional investors on 28 March 2014; and
- Resolution 3 – to approve, if necessary, the issue up to 11,100,000 ordinary shares to RCA VI GP Ltd (an entity which forms part of the Resource Capital Funds (“RCF”) group) in the event that RCF’s commitment to subscribe for ordinary shares in the Company was not fulfilled by RCF partially sub-underwriting the recent Retail Entitlement Offer.
The Board has determined that:
- due to the success of the recent capital raising, the Company does not need to refresh its placement capacity at this point in time, and accordingly it is not necessary to put Resolution 1 and Resolution 2 to shareholders; and
- as RCF’s commitment was fulfilled under its sub-underwriting of the Retail Entitlement Offer, it is not necessary to put Resolution 3 to shareholders.
Accordingly, the Board has determined that in order to avoid costs and disruption associated with holding the General Meeting, it is in the best interest of the Company and shareholders to cancel the General Meeting.
- Proved and Probable ore reserves total 17.1 million tonnes at 97 g/t silver and 0.27 g/t gold (113 g/t silver equivalent (AgEq) or 1.89 g/t gold equivalent (AuEq))
- Average annual production of 7,500,000 oz of AgEq (approximately 125,000 oz AuEq)
- Initial +6 year mine life with significant potential for extensions
- Capital costs of US$140 million including a US$10 million contingency
- Average cash operating costs of US$11.44/oz AgEq or US$687/oz AuEq (incl. royalties)
- First production is targeted in first half of 2016 calendar year
Kingsgate is currently working with its consultants to finalise environmental approvals. This process is well advanced and final approvals are expected within six months.
The DFS also provides the basis to assess the optimum financing strategy for the project. Discussions are underway with potential debt financiers with several financing options being considered.
Gavin Thomas, Kingsgate’s Managing Director and CEO said, “We are delighted by the results of the feasibility study, which support our long held belief in the underlying quality and inherent value of the Nueva Esperanza project.
The final Nueva Esperanza Definitive Feasibility Study is a result of over three years continuous evaluation and several iterations to determine the optimal process route delivering the most financially robust outcome.”
“We remain optimistic in the mineral endowment of the immediate vicinity, which has the potential to provide Kingsgate with a long, sustainable operating presence in this region.”
“The decision to begin construction is anticipated in the second half of this year and will put Kingsgate back on a growth path and validate the underlying value of the project acquisition”, he said.
Kingsgate Consolidated Limited (ASX: KCN) wishes to advise that Managing Director and Chief Executive Officer, Gavin Thomas, will be stepping down from that role, effective June 2014, after nearly ten years in the position, and after some recent health issues. The Company has commenced a succession process for the position of Chief Executive Officer.
To maintain a high level of corporate continuity, Mr Thomas will remain on the Board of Kingsgate as an Executive Director, to assist the transition to the new leadership.
The Chairman, Ross Smyth-Kirk said, “Gavin’s contribution to Kingsgate and the wider industry has been extraordinary, in both dedication and discovery. Gavin’s legacy to the mining industry goes well beyond his time at Kingsgate, with more than 40 years’ operating throughout the world.
Under Gavin’s leadership, Kingsgate has evolved from a single operation in Thailand into a geographically diversified asset base that is well placed to enable the Company to grow into the future.”
In addition, with the Nueva Esperanza Definitive Feasibility Study close to completion, it heralds an exciting new time for Kingsgate that allows a new Chief Executive Officer to be part of the development, construction and commissioning of this important project.
Mr Thomas said “The Company’s operating and development portfolio is well placed to support the ongoing success of Kingsgate, and preparations are underway on development timetables to maximise the underlying value of those assets.
I am confident that there will be a smooth transition in the Company leadership team, and I look forward to continuing to make a valuable contribution.”
Kingsgate has recorded the following financial performance for the half year to 31 December 2013:
- Revenue of $165.1 million.
- EBITDA* (before significant items) of $27.9 million.
- Statutory loss after tax of $4.9 million.
- Gross cashflow from operations for the half?year of $41.5 million.
- Higher gold sales (+19%) offset by lower gold price received.
- Investment and capital expenditure reduced by 62%.
- Corporate debt facilities restructured and a total of ~$17 million repaid
Gold sales for the half?year were up 19% to 108,610 ounces (1HFY13: 91,480 ounces) with higher production from both Chatree and Challenger. This was more than offset by the lower realised gold price of US$1,297 per ounce (1HFY13: US$1,663 per ounce). Gross operating cashflow for the half?year was $41.5 million despite the lower gold price. Investment and capital expenditure was reduced by 62% following the implementation of cost reduction initiatives following the volatility in the gold price.
During the half?year the Kingsgate Group repaid approximately A$17 million of its outstanding debt. At year end, Kingsgate had A$44 million outstanding under its current corporate facilities, down from A$55 million at the end of the September quarter. Kingsgate has completed the documentation for a restructure of its corporate debt facilities and following the satisfaction of Conditions Precedent, expected during the current quarter, Kingsgate’s corporate debt will reduce to A$40 million under one new corporate debt facility. In addition, approximately US$119 million is outstanding under the Kingsgate’s Thai operating subsidiary Akara Resources PCL (“Akara”) loan facility following the initial repayment of US$5.6 million in November.
The two development projects continued to advance during the year. For the Nueva Esperanza silver/gold project in Chile, the Definitive Feasibility Study (DFS) was well advanced during the half?year with completion of the DFS expected by the end of March 2014.
At the Bowdens silver project in New South Wales, the feasibility work will continue in 2014 in parallel with the preparation of the Environmental Impact Statement (EIS).
Kingsgate is on track to meet gold production guidance for the 2014 financial year following the strong first half. Group production guidance for the year remains at 190,000 to 210,000 ounces including 120,000 to 130,000 ounces from the Chatree gold mine in Thailand and 70,000 to 80,000 ounces from the Challenger gold mine in South Australia.
Kingsgate continues to pursue strategies to adapt to the volatile operating environment for gold producers with the focus to remain on operating efficiencies and cost saving initiatives in order to maximise shareholder returns. This may also include consideration of partners for development projects and potential rationalisation of the asset base.