March 2016 Quarterly Report
Highlights
- Group quarterly gold production of 32,472 ounces at a total cash cost of US$870/ounce.
- Chatree (Thailand) gold production of 23,053 ounces at a total cash cost of US$954/ounce was below trend due to fleet availability issues and reduced access to higher grade ore.
- Challenger (Australia) made a strong final contribution during the quarter with a quarterly gold production of 9,419 ounces at a total cash cost of US$662/ounce. The mine was placed on care and maintenance and the sale completed effective 15 March 2016.
- The Nueva Esperanza Project (Chile) has now moved into the Feasibility Study stage.
- Completion of the Optimisation Study at Nueva Esperanza to a Pre-Feasibility level confirms robust project economics with the potential to be one of the exciting emerging precious metals projects in South America.
- Systematic property scale exploration continued at Nueva Esperanza with the completion of a 485 hole basement geochemistry drilling program to help unlock the potential of the 50 kilometre2 alteration footprint and establish RC drill targeting.
- The sale of an 85% interest in the Bowdens Silver Project is on track for completion with an A$18 million final payment due by 30 June 2016.
- Cash and bullion/doré totalled A$49.8 million (December quarter: A$55.5 million), comprising cash of A$43.1 million and bullion/doré of A$6.7 million.
- Debt facilities of A$92 million comprising a A$10 million corporate facility and an A$82 million equivalent syndicated loan facility against Chatree.
- Debt reduction continued with Group Net Debt* down to A$49 million. (*Debt facilities less cash.)
Group Operating Summary
Operation | Production (ounces) |
Total Cash Costs (US$/ounce) |
---|---|---|
Chatree | 23,053 | 954 |
Challenger* | 9,419 | 662 |
Total | 32,472 | 870 |
Nueva Esperanza Pre-feasibility study confirms Kingsgate Growth Strategy
Experienced Pacific Rim gold producer, Kingsgate Consolidated Limited (Kingsgate or the Company) (ASX:KCN) is pleased to announce the completion of the Pre-Feasibility Study for the development of the 1.9 million ounce (Moz) gold equivalent (AuEq60) Mineral Resource in the Nueva Esperanza Project (the Project), located in the Atacama Region of Chile.
The PFS was developed as an optimisation of previous feasibility studies completed on the Project, incorporating an updated Ore Reserve, revised plant layout, and updated economic analysis.
Updated flowsheets, capital and operating costs completed in conjunction with engineering company Ausenco confirm the viability of an open pit operation with a 2 million tonne per annum agitated leach process plant, which for the first 5 years, can deliver an average 135,000oz AuEq60 per annum production at an average cash cost (including royalty) of US$633/oz.
Based on these encouraging PFS results, the company is progressing feasibility studies and permitting in calendar 2016. This will allow the consideration of development options in 2017. Kingsgate will be concurrently undertaking significant exploration drilling programs with the aim of increasing the mineral resource and improving the mill feed after year 6 in the mine plan.
Highlights
- Economics – The Pre-Feasibility Study (PFS) delivers positive economics, with a pre-tax NPV5%¹ of US$168 million and an IRR of 25% based on a US$1,200 per ounce gold price and US$19 per ounce silver price.
- Production – The Project delivers an average 91,000 ounces per annum AuEq60² for 11.6 years at a life of mine average cash cost (including royalties) of US$706 per ounce AuEq60 and an average All-in cost of US$913 per ounce.
- First Five Years – Mine plan optimisation delivers a three-year payback period and a strong first five years production with an average 135,000oz pa AuEQ60 at an average cash cost (including royalties) of US$633 per ounce.
- Reduced costs – The study confirms the potential for reductions in the order of 25% lower capital and processing costs versus 2012 estimates (from an un-published Feasibility Study) are achievable.
- Capital Costs³ – Capital cost estimate of US$206 million based on a fit-for-purpose approach.
- Operating costs – Operating cost estimates have seen significant reductions, with processing costs down 38% to ~US$16 per tonne compared to the previous study (October 2012). Substantial savings have been realised in power costs and consumables.
- Ore Reserve – has increased and now stands at 1.1 million ounces AuEq60, at a grade of 2.0 grams per tonne AuEq60 of oxidised mineralisation contained in three open pits.
- Resources – the total Mineral Resource base stands at 1.9 million ounces AuEq60, at a grade of 1.5 grams per tonne AuEq60 (See ASX:KCN release dated 13 April 2016, “Nueva Esperanza Mineral Resource Update”).
Greg Foulis
Chief Executive Officer
Notes:
- NPV5% = Net Present Value.
- Gold Equivalent: AuEq (g/t) = Au (g/t) + Ag (g/t) ÷ 60. Calculated from long term historical prices of US$1,200/oz for gold and US$19.00 for silver and combined life of mine average metallurgical recoveries of 80% Au and 84% Ag estimated from test work by Kingsgate. It is Kingsgate’s opinion that all elements included in the metal equivalents calculation have a reasonable potential to be recovered and sold. Although gold is not the dominant metal, gold equivalent values are reported to allow comparison with Kingsgate’s other projects. Nueva Esperanza silver equivalent: AgEq (g/t) = Ag (g/t) + Au (g/t) x 60.
- Capital cost estimate as at September Quarter 2015, accuracy level is -25% to +25%.
Nueva Esperanza Mineral Resource Update
Experienced Pacific Rim gold producer, Kingsgate Consolidated Limited (ASX:KCN) is pleased to provide an update on its 100% owned Nueva Esperanza Gold-Silver Project in the Chilean Atacama Region.
Mineral Resource estimates have been updated, although they have not materially changed from the previous release, “Chimberos Gold Discovery Adds Significantly to Mineral Resources in Chile” dated 15 July 2015.
The current Mineral Resources adopts a common estimation methodology for the three currently defined gold and silver deposits at Nueva Esperanza, and incorporates stockpiles from previous open pit mining at Chimberos that have not formerly been reported in resource estimates.
Mineral Resources – Combined Measured, Indicated and Inferred Mineral Resources at Nueva Esperanza stand at 39.4 million tonnes at 0.39g/t gold, 66g/t silver for 0.49 million ounces gold and 83.4 million ounces of silver or 1.88 million ounces of gold on a metal equivalence basis (AuEq60)¹.
Greg Foulis
Chief Executive Officer
- Gold Equivalent: AuEq (g/t) = Au (g/t) + Ag (g/t) ÷ 60. Calculated from long term historical prices of US$1,200/oz for gold and US$19.00 for silver and combined life of mine average metallurgical recoveries of 80% Au and 84% Ag estimated from test work by Kingsgate. It is Kingsgate’s opinion that all elements included in the metal equivalents calculation have a reasonable potential to be recovered and sold. Although gold is not the dominant metal, gold equivalent values are reported to allow comparison with Kingsgate’s other projects. Nueva Esperanza silver equivalent: AgEq (g/t) = Ag (g/t) + Au (g/t) x 60.
Chatree Gold Mine – Revised Mine Plan
Kingsgate Consolidated (ASX:KCN) (“Kingsgate”, “the Company”) has successfully operated its Chatree Gold Mine in Thailand through many changes of Thai Government since commissioning in 2001. The operation is now subject to bureaucratic delay and an investigative burden based on false accusations that are significantly constraining the operation, holding back investment, and creating significant operating inefficiencies.
Permitting delays have constrained access to various orebodies which has put undue pressure on an ageing mining fleet and impacted the mine plan. Therefore, FY16 gold production is now forecast in the range of 95,000 to 105,000 ounces (previously 125,000 to 135,000 ounces).
It is important to note that:
- It is anticipated that the deferred ounces from FY16 will be mined in FY17; and
- Kingsgate expects to generate positive cashflow from Chatree in FY16 and will continue to service its financial obligations.
Chatree is a large modern mining operation with a multitude of highly complex regulatory licences and compliance obligations. Kingsgate is working with Thai regulators to remove the impediments, and is seeking positive outcomes from the Thai Government.
Since operations commenced in 2001, Chatree has been a socially responsible, internationally accredited mining operation employing modern techniques. The mine complies with stringent health and environmental laws, and is one of the most heavily regulated mining operations in the world.
The operation has produced over 1.8 million ounces of gold and has made a significant social and economic contribution to local communities and the Kingdom of Thailand. The business has overcome hurdles in the past, and we are confident that we will continue to do so in the future.
Greg Foulis
Chief Executive Officer
Successful Completion of Due Diligence Period for Bowdens Silver Project
Kingsgate Consolidated (ASX:KCN) is pleased to announce that Silver Investment Holdings Australia Ltd (SIHA) has given formal notice that it has satisfactorily completed its due diligence for the Bowdens Silver Project, and will pay the deposit monies totalling A$1.8 million as contemplated under the Sale and Purchase Agreement.
By way of background the terms of the transaction are as follows:
- On completion of the acquisition, Kingsgate and SIHA will immediately be associated in an unincorporated Joint Venture with Kingsgate retaining an initial 15% Free Carried Interest (to the point that SIHA meets certain criteria including lodgement of an Environmental Impact Statement, exploration expenditure of A$4 million and completion of a Bankable Feasibility Study);
- Kingsgate will receive a total payment of A$20 million cash for the 85% interest in the project of which A$200,000 has been received by way of a non-refundable deposit;
- A further A$1.8 million will now be paid as the due diligence period has successfully been completed; and
- The remaining A$18 million will be paid by SIHA at deal completion, which is scheduled to occur by 30 June 2016.
Greg Foulis
Chief Executive Officer