Letter of Intent signed for A$69 million sale of Nueva Esperanza

Kingsgate Consolidated Limited (“Kingsgate” or the “Company”) is pleased to announce that it has signed a non-binding Letter of Intent (“LOI”) with TSXV listed TDG Gold Corp (“TDG”) outlining terms for the acquisition of the Company’s Nueva Esperanza advanced gold-silver exploration and development project, located in the Maricunga Belt of the Atacama Region of Northern Chile.

The transaction is subject to the parties entering into a legally binding agreement, as well as certain conditions being met. These conditions include board approval, due diligence, and completion by TDG of a financing of at least C$35 million. TDG is in the process of completing this financing, however, there can be no guarantee that the transaction will proceed.

The total value of the deal is approximately A$69.1 million¹ and is a combination of cash and equity, that will both strengthen Kingsgate’s balance sheet, and importantly retain ongoing exposure to the gold and silver markets. The key details of the deal are as follows:

• C$25 million² cash payable to Kingsgate upon completion of the transaction;
• Kingsgate will be issued 14.0% of TDG’s outstanding common shares calculated on a post-closing basis (inclusive of any shares issued in a concurrent financing and with an option to increase the holding up to 19.9%);
• C$6.25 million is payable to Kingsgate within 3 months of completion of a Definitive Feasibility Study;
• A payment of C$5 million or 10 million TDG shares at their discretion to be issued at the point of a construction decision;
• A payment of $C5 million or 10 million in TDG shares at their discretion at the one-year production anniversary;
• A payment of C$8.75 million at the 2-year production anniversary; and
• Kingsgate will have a representative on the TDG board.

The Executive Chairman of Kingsgate, Mr Ross Smyth-Kirk said “We are delighted with this opportunity to go into partnership with TDG, an exciting new Canadian gold and silver company.

We’ve worked very diligently over a long period of time to get the best deal on Nueva Esperanza, and we think this will represent excellent value for our shareholders”, he said.

About TDG

TDG is a major holder of mineral claims and mining leases in the historical Toodoggone Production Corridor of north-central British Columbia, Canada, with over 23,000 hectares of brownfield and greenfield exploration opportunities under direct ownership or earn-in agreement.

TDG’s flagship projects are the former producing, high-grade gold-silver Shasta, Baker and Mets mines which are all road accessible, produced intermittently between 1981-2012, and have over 65,000 metres of historical drilling.

In 2021, TDG proposes to advance the projects through compilation of historical data, new geological mapping, geochemical and geophysical surveys, and drill testing of the known mineralisation occurrences and their extensions. TDG currently has 64,423,459 common shares issued and outstanding. For more information see: TSXV:TDG or https://tdggold.com.

Transaction details

The value of the deal is approximately A$69.1 million and is a combination of cash and equity. Under the terms of the proposed transaction TDG will acquire all of the shares in Kingsgate’s Chilean subsidiary Laguna Resources Chile Limitada. Completion of the proposed acquisition would be subject to a number of conditions precedent, including completion of satisfactory due diligence, the negotiation and settlement of a binding definitive agreement, and receipt of regulatory approvals.

The LOI will be terminable by either party if the parties have not entered into a binding definitive agreement by 16 July 2021, or such other date as determined by the parties.

The LOI contemplates a date for completion of 31 August 2021, which date may be extended by the agreement of the parties.

Corporate Strategy

The completion of a successful transaction on Nueva Esperanza would ensure the financial security of Kingsgate going forward while still giving excellent exposure to the gold and silver markets through its holdings in TDG.

This is turn would provide excellent optionality around the ongoing negotiations with Thailand to achieve a negotiated settlement under TAFTA. This may include the use of proceeds from Nueva Esperanza to refurbish and restart the Chatree Gold Mine if a negotiated settlement can be achieved and all licences and permits granted.

If all the licences and permits are granted the Chatree Gold Mine would have an estimated JORC compliant resource of 3.4 million ounces of gold (4Mt at 0.65g/t Au and 5.59g/t Ag) and an ore reserve of 0.09 million ounces of gold (2.5Mt at 1.1g/t Au and 17.6g/t Ag) respectively. Please see ASX:KCN release titled “Kingsgate Mineral Resources and Ore Reserves 2020”, dated 2 September 2020. Kingsgate is currently in the process of costing the refurbishment and restart of the operation.

Kingsgate cannot guarantee reaching a negotiated settlement with the Thai Government. However, the TAFTA framework and claim to date remains in place in the event that a settlement cannot be reached.

Investment Forums

Kingsgate from time to time becomes aware of various comments made about the company on investment forums, social media or in the Thai media. As previously stated, Kingsgate would urge shareholders with concerns to contact the company directly for information and to refer to trusted sources such as the ASX platform or company website for updates.

Ross Smyth-Kirk

Executive Chairman
Kingsgate Consolidated Limited

Notes

1. Calculated on an AUD-CAD exchange rate of A$1:00 is equal to C$0.93 as at 29 June 2021.
2. Subject to balance sheet adjustments, which is a normal process under a transaction of this type.

Update on the Gold Sludge held at the Chatree Gold Mine

Kingsgate Consolidated Limited (ASX:KCN) (“Kingsgate” or the “Company”) is delighted to announce that its subsidiary, Akara Resources, has been granted permission by the Thai Government to sell the high value gold and silver “sludge,” which is secured at the Chatree Gold Mine, to a Thai refinery to be processed into fine gold and silver.

The sludge refers to material cleaned from the tanks and processing plant following the closure of the Chatree Gold Mine on 31 December 2016, and has always been, and acknowledged to be, the property of Akara Resources.

The sludge contains approximately 4,750 ounces of gold and 34,800 ounces of silver, and is valued at around A$14 million at a gold price of A$2,678 an ounce (as at 9 September 2020) before royalties, transportation and refining costs.

Akara Resources has agreed terms with a Thai refinery to process the sludge pursuant to new legislation requiring gold mined in Thailand to be refined in Thailand. Shipment of the sludge to the refinery has commenced.

Whilst this move is long overdue, Kingsgate sees it as a small but positive step, and seemingly as an act of good faith, indicating a new willingness by the Thai Government to pursue a negotiated settlement between the two parties, a process KCN has advocated for some considerable time.

Ross Smyth-Kirk

Executive Chairman
Kingsgate Consolidated Limited

Kingsgate settles Political Risk Insurance proceedings for more than A$82 million

Kingsgate Consolidated Limited (“Kingsgate” or the “Company”) is delighted to announce that it has settled proceedings against its Political Risk Insurers (“Insurers”) by entering into a legally binding Heads of Agreement (“HOA”).

Kingsgate Consolidated Limited (“Kingsgate” or the “Company”) is delighted to announce that it has settled proceedings against its Political Risk Insurers (“Insurers”) by entering into a legally binding Heads of Agreement (“HOA”).

Kingsgate had a Political Risk Insurance Policy in place at the time it is alleged that the Government of Thailand illegally expropriated its Chatree Gold Mine in May 2016. (“TAFTA Claim”)¹

The HOA provides for a settlement to Kingsgate worth more than A$82 million² comprising:

• A cash payment of US$55 million to be made to Kingsgate by mid-April 2019;
• A requirement for the Insurers to contribute up to US$3.5 million of future costs towards the TAFTA Arbitration. The Insurers funding contribution will be paid on a pro-rata basis with Kingsgate; and
• A sharing arrangement between Kingsgate and the Insurers for future distributions of TAFTA Claim proceeds.³

Executive Chairman of Kingsgate, Mr Ross Smyth-Kirk, today said “I realise that it has been a long recovery process for our loyal shareholders, but this settlement transaction provides material upside for our Company, namely:

• Sufficient funds to pay out in full the Corporate Debt Facility;
• Liquidity to give the Company time to maximise the value of the Nueva Esperanza project through further development or sale, and remain aspirational for other development opportunities;
• Kingsgate no longer requires litigation funding to pursue its PRI Claim nor its TAFTA Claim; and most importantly,
• The Insurers’ pro-rata funding commitment under the HOA means that Kingsgate and the Insurers will be working together to fully prosecute the TAFTA Claim.”

“I would also like to thank our dedicated legal team at Clifford Chance that helped deliver this excellent outcome, and especially Investec Australia Limited, whose rock solid support has enabled us to pursue both the PRI and TAFTA claims,” Mr Smyth-Kirk said.

 

Ross Smyth-Kirk

Executive Chairman
Kingsgate Consolidated Limited

Notes

1. The Australia – Thailand Free Trade Agreement (“TAFTA”);
2. A$82,000,000 is based on an AUD-USD exchange rate of 0.71, and includes an estimate of the insurer’s share of the TAFTA legal fees of US$3.5million; and
3. The Insurers are only entitled to the amount of their original financial contribution incl. interest – Kingsgate keeps any TAFTA Claim proceeds in excess of that contribution.