Kingsgate – Patersons Broker Report
KINGSGATE CONSOLIDATED LIMITED
CLEAR VALUE IN CHILE, WITH THE BONUS OF POTENTIAL WINDFALL THROUGH CHATREE LITIGATION<
- Kingsgate Consolidated Limited (KCN) offers compelling value, with its Chilean project, Neuva Esperanza nearing the end of DFS, and our valuation based on PFS data (discounted by 25%) generating a valuation of $1.25 vs. KCN’s current share price of $0.43. We do not include Chatree in our base case valuation, but highlight the upside on the current insurance claim is $200m, or $0.89 per KCN share, with further potential upside through the current international arbitration with the Thai Government.
- Nueva Esperanza a world class asset. The silver-gold project, located in the highly prospective Maricunga Belt in Chile boasts 1.9Moz of gold equivalent resources (AuEq60 – meaning silver converted to gold on a ratio of 1 to 60), with the PFS released April 2016 showing average annual AuEq60 production of 91koz per annum, at AIC of $US913/oz. DFS is due for completion 1H18.
- Chatree the wild card. Since commencing production in 2001, the Chatree Gold Mine (Thailand) has produced approximately 1.8Moz gold and more than 8.6Moz silver, averaging 125-135koz gold per annum over recent years. In May 2016, the Thai Government announced all gold mines in Thailand (of which Chatree was the only one) were to be shut down by the end of 2016. KCN are currently pursuing the Kingdom of Thailand via The Australia Thailand Free Trade Agreement (TAFTA). In addition, the Company is pursuing a $200m claim under its political risk insurance (mediation set for March 2018). We haven’t assumed any value for this asset under our base case, but highlight the upside could be of the order of several $100m.
- Further exploration upside. KCN continues to enjoy exploration success in Chile, with the recent success at Cerro Blanco West. The Company holds 45km2 within the Maricunga Belt in Chile, the site of defined gold resources of over 100Moz of AuEq60, including mines such as Salares Norte and La Coipa.
- Current Board Challenge not expected to be successful. Metal Tiger PLC who owns 6.7% of KCN has requested a spill of the current board. Metal Tiger is an AIM listed Company capitalised at c£21m. We do not view their challenge as likely to succeed.
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Warning
The Directors of Kingsgate do not endorse the value statements or projections set out above, which may not be reliable in any event. This extract from the Patersons’ Report is referred to in order to reinforce the Kingsgate Board’s view that Kingsgate’s principal focus is Nueva Esperanza, with the PRI and TAFTA claims representing potential upside.
Kingsgate Consolidated Limited 2017 AGM Results
Kingsgate Consolidated Limited 2017 AGM Results
The Company advised that all the resolutions as set out in the Notice of Annual General Meeting and considered at the Annual General Meeting held on 23 November 2017 were passed on a poll. The Notice of Annual General Meeting was lodged with the Australian Securities Exchange on 18 October 2017.
In accordance with ASX Listing Rule 3.13.2 and Section 251AA of the Corporations Act, details of proxy votes and the votes cast on the poll for each resolution are attached.
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Chairman’s Address 2017
Chairman’s Address 2017
The year in review has been one that has seen great highs and lows for your Company, highlighted by the incredible job your Board and Management did in turning an $80m debt into a $38m cash balance over the final 7 months of operation of the Chatree Mine.
This has allowed us to stabilise the Company and develop a clear strategy:
- With respect to our corporate costs by continuing to make savings on expenses.
- Our approach to the risk versus the reward on our Political Risk Insurance claim and our claim under the Australia Thailand Free Trade Agreement.
- Our appointment of leading international law firm, Clifford Chance and Dr Andrew Bell S.C. to prosecute the Company’s interests under its PRI Policy and under TAFTA.
- Our continuation with our feasibility and exploration activities in Chile.
I’m proud of the relevant and diverse skills your Board possesses to successfully advance the critical issues which are now before it. Your Board has been working tirelessly to address a myriad of complex issues as they arise, and has been meeting on short notice at all hours of the day and night
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Board Spill
Board Spill
Kingsgate Consolidated Limited (ASX:KCN) (“Kingsgate” or the “Company”) advises that late yesterday it received a Notice from Metal Tiger PLC requisitioning a General Meeting of the Company for the purpose of removing Ross Smyth-Kirk, Sharon Skeggs and Peter Warren as directors of the Company (along with any additional director who might be appointed between now and the meeting), and electing Richard Warburton, David McNeilly, Terence Grammer, Mark Potter and Neville Bergin.
The meeting is required to be held within two months.
The current directors have extensive experience in Thailand and Chile and have been and continue to vigorously prosecute the interests of your Company. Neither Metal Tiger nor any of its nominees to the Board have articulated any alternative plans for the Company.
The Directors of Kingsgate will unanimously recommend that you vote against all resolutions proposed by Metal Tiger. Peter Alexander, who is not the subject of a spill resolution, advises that should Metal Tiger be successful in obtaining control of the Kingsgate board, he will resign as a Director.
Ross Smyth-Kirk
Executive Chairman
Kingsgate Consolidated Limited
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Update on Chatree Legal Proceedings – 10 November 2017
Update on Chatree Legal Proceedings
10 November 2017
Introduction
On 13 October 2017, Kingsgate Consolidated Limited (ASX:KCN) (“Kingsgate” or the “Company”) announced that it would be commencing proceedings in the Supreme Court of New South Wales against Zurich Australia Insurance Limited and other named insurers under a US$200 million Political Risk Insurance Policy (the “PRI Claim”).
On 2 November 2017, the Company announced that it would commence international arbitration proceedings against the Kingdom of Thailand (“Thailand” or the “State”) under the Australia Thailand Free Trade Agreement (“TAFTA”) to recover substantial losses resulting from the unlawful expropriation of the Chatree Gold Mine in 2016, and other unlawful measures taken against the Company’s covered investments in Thailand (the “TAFTA Claim”).
Both sets of proceedings have now been commenced.
Kingsgate has established a highly experienced and effective legal team to prosecute both sets of proceedings, and will be closely managing the team to ensure the optimum outcome for shareholders.
The purpose of this release is to introduce you to the team, and to briefly describe the two claims and the processes to be followed in prosecuting each claim.
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Commencement of arbitration against Thailand
Commencement of arbitration against Thailand
Kingsgate Consolidated Limited (ASX:KCN) (“Kingsgate” or the “Company”) advises that, despite its best efforts to do so, it has been unable to achieve any settlement of its claim against the Kingdom of Thailand for the unlawful expropriation of the Chatree Gold Mine.
Accordingly, it will commence arbitration proceedings against the Kingdom of Thailand under the Australia-Thailand Free Trade Agreement in order to recover the substantial losses that it has suffered, and continues to suffer, as a result of the measures taken by the Thai Government.
It will do so without any further delay, and has appointed leading international law firm Clifford Chance to represent it, and Dr Andrew Bell S.C. as Senior Counsel on the matter.
Such proceedings could take an undetermined time to resolve, and could involve significant expenditure by Kingsgate. As with any legal proceedings, the outcome cannot be guaranteed. It should be noted however, that the commencement of arbitration still allows both parties to engage in dialogue to settle the matter on mutually agreeable terms, at any point in the proceedings.
The Board of Kingsgate considers that the Company has excellent prospects of successfully recovering very substantial damages against the Kingdom of Thailand, and will vigorously prosecute its claim.
Ross Smyth-Kirk
Executive Chairman
Kingsgate Consolidated Limited
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