Step-out Drilling Expands New Silver Rich Zone at Nueva Esperanza, Chile

Kingsgate Consolidated (ASX:KCN) (“Kingsgate” or the “Company”) is pleased to report the results of seven step-out drill holes from the silver rich Cerro Blanco West Zone (“CBW”) at its 100% owned Nueva Esperanza precious metals project in Chile.

Nueva Esperanza is a feasibility-stage development project with a resource base of approximately 1.9 million ounces gold equivalent1.

Nine Reverse Circulation (“RC”) follow-up drill holes totalling 1,136 metres were completed on the Cerro Blanco West target in late 2017 (See Figure 1) following up on eight initial exploration holes previously reported (See Kingsgate ASX Release titled “New Silver Discovery at Nueva Esperanza, Chile” dated 17 July 2017).

The best holes were:

• KRCO66, intercepted 18 metres at 207.54g/t Ag;
• KRCO58, intercepted 42 metres at 41.58g/t Ag;
• KRCO59, intercepted 30 metres at 32.26g/t Ag;
• KRC063, intercepted 12 metres at 44.35g/t Ag; and
• KRCO65, intercepted 22 metres at 46.01g/t Ag.

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KINGSGATE CONSOLIDATED LIMITED

Dear Fellow Shareholders

Since I wrote to you on 1 December 2017 concerning the Board spill initiated by Metal Tiger PLC (“Metal Tiger”), Metal Tiger has made a number of inaccurate and misleading statements which I feel I need to correct so that you will be able to vote on your Company’s future on a properly informed basis.

1. Kingsgate’s Future

Metal Tiger states that Kingsgate’s future rests on the outcome of its legal proceedings against the Kingdom of Thailand under the Australia Thailand Free Trade Agreement and against the insurers in respect of your Company’s Political Risk Insurance Policy.

Nothing could be further from the truth.

Kingsgate’s future does not rest on the outcome of the legal proceedings. Kingsgate’s future rests on the development of Nueva Esperanza which Metal Tiger appears to have little interest in pursuing. The legal proceedings represent a major potential upside for shareholders.

Patersons’ recent Broker Report on Kingsgate, which may be viewed at https://www.kingsgate.com.au/kingsgate-patersons-broker-report/, or by registering with Patersons at https://secure.psl.com.au/publications/resources, emphasises the importance of Nueva Esperanza to your Company’s future, where they state that Nueva Esperanza offers compelling value, and highlight the upside on the current insurance claim, with further potential upside through the current international arbitration with the Thai Government.

2. Negotiations with the Thai Government

Metal Tiger claims that relationships between your Board and the Thai Government have been irreparably damaged and negotiations are unable to proceed. This is a central reason given by Metal Tiger for bringing on its Board spill.

However, this is a bald assertion for which Metal Tiger provides no supporting evidence and which is made even though Metal Tiger’s nominees for the Kingsgate Board have limited experience in Thailand.

There is ample evidence that negotiations remain feasible and that no bridges have been burned between your current Board and the Thai Government.

For example, the Head of the Government’s committee with responsibility for negotiating with Kingsgate has been appointed Assistant Minister for Industry for the purpose of continuing discussions with the Company.

In addition, the following appeared in the Thai press within days of Kingsgate announcing its intention to commence proceedings under TAFTA.

“Industry Minister Uttama Savanayana said yesterday that his ministry remained committed to further negotiations with the firm, even though the latter had submitted the dispute to the arbitration process under the Thai-Australian free trade agreement. There could still be further negotiations between the two parties.”*
*The Nation – 7 November 2017

“Government spokesperson Lt Gen Sansern Kaewkamnerd said Prime Minister General Prayut Chan-o-cha and the Cabinet had already been informed about Kingsgate’s decision to commence arbitration proceedings. He said the PM insisted there was nothing to worry about regarding the arbitration proceedings as there is still a chance to end the conflict through negotiation.”*
*The Nation – 8 November 2017

3. Metal Tiger’s “Due Diligence”

Metal Tiger has claimed that it has completed detailed technical and commercial due diligence on Chatree for an extended period of time.

Metal Tiger also claims to have reviewed the new Thai mining legislation, but has clearly not factored in the increased royalties on gold mining and the withdrawal of Thai Board of Investment incentives under the new Gold Policy.

Metal Tiger’s due diligence has been by way of publicly available information.

The publicly available information concerning Kingsgate and Chatree is sufficient to base investment decisions on. It is nowhere near sufficient to allow a totally new board to know how to run your Company.

4. My Position

I have made it clear throughout that if a majority of Metal Tiger nominees are elected to the Kingsgate Board, I will resign immediately.

Metal Tiger now say that if I confirm this they will appoint another un-named director to replace me. I can assure you that no confirmation of this is required from me, and it is disingenuous of Metal Tiger to suggest that there is.

This means that if you vote for Metal Tiger’s nominees to the Kingsgate Board, you will also be voting for another un-named, unknown director to be appointed to your Board following the meeting.

5. Other Misleading Statements by Metal Tiger

Metal Tiger has made a number of other misleading and inaccurate claims which are refuted in detail on the Company’s website at www.kingsgate.com.au.

In summary, the current action by Metal Tiger is no more than a last-minute poorly-considered opportunistic attempt by a random shareholder acting alone to take control of your Company by stealth.

Again, we seek your support to defeat this action by voting AGAINST ALL of Metal Tiger’s nine resolutions at the Company’s forthcoming General Meeting.

You can vote AGAINST ALL the resolutions by completing and returning the green proxy form which is enclosed with this letter for your convenience. Every single vote is important, no matter how many or how few shares you own, so please vote.

Yours sincerely and with best wishes for the festive season.

Peter Alexander
Independent Non-Executive Director
Kingsgate Consolidated Limited

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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