Funding underway for the restart of the Chatree Gold Mine
Funding underway for the restart of the Chatree Gold Mine
Kingsgate Consolidated Limited (ASX:KCN) (“Kingsgate or the Company”) is pleased to advise that it has mandated Taurus Mining Finance Fund No.2 L.P. (the “Lender”), to provide funding, and has received a credit approved term sheet for a secured Bridge Facility of US$15 million (A$20 million1) to support the refurbishment and restart of the Chatree Gold Mine.
The Bridge Facility will be available to finance:
- General working capital for the Kingsgate Group;
- Costs associated with the recommissioning of the Chatree Project including long lead items required for the mine, and costs associated with the recruitment of senior expatriate technical site personnel; and
- Chatree regional exploration programs.
Kingsgate anticipates that the first tranche of funds will be available for drawdown in April, subject to completion of certain conditions precedent including finalisation of the Lender’s due diligence and execution of legal documentation.
Whilst the full terms of the financing are confidential, the interest rate is 9% per annum with the Bridge Facility to be repaid the earlier of 12 months or refinancing.
To ensure that Kingsgate has adequate capital to fully fund the refurbishment and restart of Chatree, the Company is also concurrently negotiating a Project Facility of US$30 million (A$41 million2) with the Lender.
The Project Facility will be available to finance Kingsgate’s:
- Capital expenditures for the development and recommissioning of the Project, including capital costs, project and development expenses incurred in the design, engineering, procurement, construction, development and recommissioning of the Project;
- Fees, costs, expenses and capitalised interest due under the Bridge Facility or Project Facility;
- Working capital; and
- Repayment of the Bridge Facility.
Kingsgate can further advise that a Scoping Study has been prepared by an International engineering firm which focussed on the option of initially refurbishing and recommissioning Plant #2 as a priority.
Estimates from the study indicate that Plant #2 could be operating within 4-6 months from commencement of refurbishment. Subject to finalisation of the Project Facility, commissioning could be completed and the first gold pour achieved before the end of this calendar year.
This option initially processes ore from the Quartz Lease and low grade stockpiles to generate sufficient cash flow to fund the refurbishment of Plant #1, and to bring Chatree back up to its full operational capacity of 5 to 5.5 million tonnes per annum.
Kingsgate will be able to provide more details on the refurbishment and restart timeline as technical staff take up their duties in Thailand.
The Executive Chairman of Kingsgate, Ross Smyth-Kirk said “Attaining this finance will enable the Company to immediately start moving towards the restart of the Chatree Gold Mine as approved by the Thai Government, and it has been achieved without diluting shareholders.”
Ross Smyth-Kirk OAM
Executive Chairman
Kingsgate Consolidated Limited
Notes
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Licences Approved for Chatree Gold Mine Re-start
Licences now approved paving the way for a Chatree Gold Mine re-start
Kingsgate Consolidated Limited (ASX:KCN) is pleased to advise that it has now received from the Thai Government the 4 outstanding mining leases (MLs) required to operate the Chatree Gold Mine.
These leases comprise 3 Chatree South leases and the Quartz Lease, which has been pending approval since 2011 and is needed to fully optimize the A Pit. The MLs are referenced as such:
- Mining Lease: 26910/15365;
- Mining Lease: 26911/15366;
- Mining Lease: 26912/15367; and
- Mining Lease: 25528/14714.
Each of the leases is in force for a period of 10 years commencing 31 December 2021. Kingsgate can also advise that all the necessary steps for the renewal of the Metallurgical Processing Licence (MPL) are complete and approved. Akara officers are due to collect the MPL certificate from the Thai Government shortly.
These approvals now enable the Chatree Gold Mine to re-open as referenced in the ASX:KCN release titled “Chatree Gold Mine set to Re-Open” dated 27 October 2021, and work is being finalised on the CAPEX required for the re-start which is anticipated to include the refurbishment of both Plants 1 and 2, which together, will have a total annual throughput capacity of over 5 million tonnes. In addition, a specialist recruitment agency has been appointed to manage the appointment of the critical technical staff required to operate the mine.
Focus is also now being directed to upgrade and report Kingsgate’s Mineral Resources and Ore Reserves Statement. Following the approval of the MPL, an updated JORC compliant reserve statement is in the process of being finalised.
In addition, Kingsgate has been investigating possible financing options including dialogue with potential lenders to expedite the re-start of the mine.
Kingsgate acknowledges the cooperation and goodwill shown by the Thai Government via the issuance of these key licences, and the re-opening of an enhanced Chatree Gold Mine will provide high value growth opportunities for the Company, local communities, businesses, and the Thai economy. While some additional items are still under negotiation, the priority remains the re-opening of the mine.
Nueva Esperanza Update
Kingsgate has been advised by TDG Gold Corp (TSXV:TDG) that they are unable to proceed with the acquisition of the Nueva Esperanza Project in Chile, citing recent drilling successes at their Toodoggone Production Corridor. It is TDG’s intention to now focus their efforts on building that resource. (Please see TSXV:TDG release dated 18 January 2022).
Kingsgate can also advise that it has been approached by other parties that have expressed an interest in acquiring the project should the deal with TDG not proceed. These parties will be followed up in due course.
Kingsgate’s Executive Chairman Ross Smyth-Kirk said “the main focus remains on re-starting the Chatree Gold Mine as soon as possible. This also gives us options to consider with respect to Nueva Esperanza, as it remains a premier silver/gold exploration project in its own right”.
Ross Smyth-Kirk OAM
Executive Chairman
Kingsgate Consolidated Limited
Chatree Gold Mine set to Re-Open
Chatree Gold Mine set to Re-Open
Kingsgate Consolidated Limited (“Kingsgate” or the “Company”) is delighted to announce that by December 2021, the Company expects to be in a position to commence mobilization for the refurbishment of the Chatree Gold Mine with activation of the Metallurgical Processing Licence (“MPL”), and renewal of mining leases required for operations, including Mining Lease 25528/14714 (the “Quartz Lease”). The Quartz Lease is needed to fully optimize the A Pit and has been pending approval since 2011.
In this regard, Kingsgate and the Thai Government have jointly requested that the arbitral tribunal hold the award until 31 October 2021, to allow the parties a short extension to conclude their settlement negotiations.
Kingsgate is currently working to optimize the re-start process by assessing a number of options, one of which includes an initial refurbishment of Chatree North (Plant #2) to access the current low grade stockpiled ore for processing which has around 6.6 million tonnes of ore, and contains in the order of 73,000 ounces of gold and 780,000 ounces of silver.
It is anticipated that this could generate sufficient cash flow to fund various other works including the development of the Quartz Lease, the cut back of the A Pit, refurbishment of Plant #1, and implementation of an expanded exploration program focusing on resource to reserve delineation as well as regional grassroots exploration programs.
In addition to permitting, Kingsgate is pleased to update progress referenced in the ASX:KCN release dated 23 September 2021 pertaining to certain other steps taken as part of a negotiated settlement with the Thai Government which include but are not limited to:
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- Exploration licence applications to enable access to highly prospective areas.
Update: Exploration which includes rock chipping, soil sampling and RAB drilling has commenced on 22 of the 44 exploration areas granted in the Phetchabun region in November 2020. Kingsgate is currently reviewing the more strategic exploration areas with the Thai Government for suitability with Kingsgate’s timeframe and resource availability. - Improved processes around approvals of mining leases and mine plans.
Update: All processes will be undertaken in accordance with Thai laws and regulations in cooperation with the Thai Government so applications are processed in a timely manner so as not to impede mining operations. - Board of Investment incentives for the re-start and continuance of operations.
Update: Discussions are underway with the Board of Investment to work through various investment incentives to finalise ahead of the re-start of operations. - Development funding (if required) for plant refurbishment.
Update: Discussions are underway with banks in Thailand to ascertain lending terms as a basis for a decision to select the optimal funding solution for re-opening Chatree Gold Mine (Again only if required). - Developing a local Thai gold refinery with international accreditation.
Update: A local Thai refinery, subsequent to assessment and testing, has demonstrated that the required criteria including volume and purity are on par with previous refining partners for doré from the Chatree Gold Mine can be met. Kingsgate is considering negotiating a refining agreement with the local Thai refinery on commercial terms that may be slightly more favourable due to transportation cost savings. - Listing Akara Resources on the Thai Stock Exchange.
Update: Relevant Thai authorities responsible for the Thai Stock Exchange have affirmed that there is no additional legal limitation beyond normal listing criteria imposed by the Thai Government for Akara Resources. - The resolution of all outstanding local legal issues.
Update: Progress has been made in accordance with Thai judicial process towards resolving legal issues. Kingsgate reaffirms its continuing commitment to not only adhere to Thai laws and regulations but institute the highest standards of operations regarding safety, health, environment and respect for the Thai community and culture. - The examination by Kingsgate of options for the construction of a renewable energy plant at Chatree.
Update: Kingsgate will progress this issue once the re-start configuration is finalised. - A local COVID-19 vaccination hub to ensure the health of Chatree employees and local communities.
Update: All current Chatree Gold Mine employees as well as persons residing in the same households have been fully vaccinated for COVID-19 under a program supported by Kingsgate. Discussions are underway with local health authorities on cooperation to effectively implement a vaccination program for the wider community. - Kingsgate’s commitment to support local communities.
Update: Kingsgate stands by its commitment to Thailand to continue with the previous policies undertaken with regard to local employment and to improve local education, health and infrastructure programs.
- Exploration licence applications to enable access to highly prospective areas.
In order to give effect to the steps listed above, both Kingsgate and the Thai Government have jointly requested the arbitral tribunal further hold the award until 31 January 2022, to allow the parties sufficient time to judiciously draft these items in and ratify formal settlement documentation.
This effectively means that the TAFTA framework remains in place until such time as settlement documentation is completed. While there can be no guarantee that the settlement described above will be fully implemented, both Kingsgate and the Thai Government continue to work cooperatively together to achieve a negotiated outcome that provides the highest benefits for all stakeholders.
Ross Smyth-Kirk OAM
Executive Chairman
Kingsgate Consolidated Limited
Thailand Update – 23 September 2021
Thailand Update
Kingsgate Consolidated Limited (“Kingsgate” or the “Company”) is pleased to announce that negotiations between the Company and the Royal Thai Government are now entering the final stages. Kingsgate has also been advised that the arbitral tribunal is now ready to issue the award after a lengthy period of deliberations.
In this regard, Kingsgate and the Thai Government have jointly requested that the arbitral tribunal hold the award until 31 October 2021, to allow the parties a short extension to conclude their settlement negotiations.
As referenced in the ASX release dated 18 February 2021 titled “TAFTA Update”, Kingsgate has been negotiating with the Thai Government with a view to a settlement in which certain steps will be taken, including (but not limited to):
- The grant of all operating licences and permit applications required to re-start and operate the Chatree Gold Mine;
- The renewal/approval of key exploration licence applications to enable access to previously unavailable but highly prospective areas;
- The establishment of improved processes around expediting approvals of mining leases and mine plans;
- The issuance of Board of Investment incentives in relation to royalty and tax relief for the re-start and continuance of operations;
- The ability to access development funding (if required) for plant refurbishment/expansion;
- The examination by Kingsgate of the feasibility of developing a local Thai gold refinery with international accreditation;
- Support from the Thai Government for the potential listing of Akara Resources on the Thai Stock Exchange, which if implemented would give Thai investors the opportunity to participate in the re-invigorated gold industry;
- The successful resolution of all outstanding local legal issues;
- The examination by Kingsgate of options for the construction of a renewable energy plant at the Chatree Gold Mine;
- The establishment of a local COVID-19 vaccination hub by Kingsgate to ensure the health of Chatree employees and local communities; and
- The re-instatement of previous commitments by Kingsgate to continue supporting local communities through various education, health, and infrastructure programs.
Kingsgate can further advise that the Metallurgical Processing Licence (“MPL”) is now available for the Company to activate subject to payment of the relevant processing fees.
As reported in the Kingsgate Reserve and Resource Statement dated 2 September 2020 (See ASX release titled “Kingsgate Mineral Resources and Ore Reserves 2020”) the re-instatement of the MPL would equate to the ability to exploit Chatree’s Mineral Resources which were estimated at 3.4 million ounces of gold and 29 million ounces of silver, and the re-instatement of Chatree’s Mineral Reserves of approximately 900,000 ounces of gold, and 8 million ounces of silver which were based on a US$1,200 per ounce gold price.
In addition, Kingsgate commissioned an independent Life of Mine Plan (“LOM”) based on Chatree’s Mineral Resources. This LOM at a gold price of US$1,700 an ounce indicated the potential for a mining inventory (not yet to JORC standards) of more than double the current reserves, and involves a major expansion of the existing pits.
As previously advised in the June Quarterly Activities Report dated 29 July 2021, Kingsgate has also undertaken independent CAPEX studies to ascertain the refurbishment of the plant and re-start costs of Chatree. These studies indicate that, in the current market conditions, it would be feasible to re-start the mine, subject to the Thai Government completing the actions outlined above.
With the future operating certainty and exploration upside that could flow from a settlement on these terms, a successful re-start of the Chatree Gold Mine combined with the sustained rise in both the gold and silver prices could give Kingsgate significant optionality with the asset, and a path forward which may include continuing operations, selling the asset or listing Akara Resources on the Thai Stock Exchange.
While there can be no guarantee that a negotiated settlement will be reached, Kingsgate is comforted by its recent engagement with the Thai Government, and Kingsgate maintains it has excellent prospects of a successful arbitral outcome if these negotiations do not successfully conclude.
Kingsgate also appreciates that the period since the Chatree Gold Mine was closed and up until now has been frustrating at times for shareholders, and the Company would like to sincerely thank shareholders for their ongoing patience and support as we approach the final stages of the international dispute resolution process.
The Company would also like to state that at every turn, setback, and difficulty experienced over the last 5 years it has found a way forward without resorting to capital raisings or increasing debt, again in the interests of shareholders.
As a result of the Company’s exercise of its legal rights under the Australia-Thailand Free Trade Agreement, there is now the prospect of a negotiated outcome and a real opportunity to re-start the Chatree Gold Mine in the near term which will provide significant economic benefits to both the local and national Thai economies.
(Please note that Kingsgate and Akara Resources are subject to all applicable Thai Government mining laws and regulations as part of the negotiated settlement).
Nueva Esperanza – Chile
Kingsgate would also like to advise that work continues negotiating a Binding Agreement with TDG Gold Corp (TXSV:TDG) for the sale of Nueva Esperanza an advanced gold-silver exploration and development project, located in the Maricunga Belt of the Atacama Region of Northern Chile. The process is taking longer than anticipated in part due to the impact of COVID-19 and the cross jurisdictional nature of the transaction between Australia, Chile and Canada.
Ross Smyth-Kirk OAM
Executive Chairman
Kingsgate Consolidated Limited
LOI signed for A$69 million sale of Nueva Esperanza
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
- Calculated on an AUD-CAD exchange rate of A$1:00 is equal to C$0.93 as at 29 June 2021.
- Subject to balance sheet adjustments, which is a normal process under a transaction of this type.