A great gold mine...., page-2

Breathing life back into one of the Pacific's great gold

mines

Misima - a glorious past...

The Misima gold mine in Papua New Guinea (PNG) was one of Placer Dome's best

performing operations in the 1990s, producing ~300kozpa at cash costs of <US$300/

oz over a +12-year life. At the time of KSN's acquisition in 2017, the project hosted a

NI-43 101 Resource of 2.8 Moz at 1.1 g/t. Combined with additional Resource potential,

significant infrastructure, a skilled workforce and a mining friendly jurisdiction, KSN has

a substantial base from which to progress development opportunities for the project, in

our view.

...and potential for a bright future:

KSN has been testing three key target areas on Misima for additional Resources and

potential "starter pit" material, which we think could partially offset the costs of reopening

the original Umuna pit and support an accelerated start to gold production.

Assays from drilling are expected in early 2020, but assuming exploration programs

are successful, we see potential for Misima to be developed into a 160-180kozpa

operation, with the large Resource base supporting a +10-year life, and relatively low

strip providing for AISC of ~A$1,230/oz. Subject to outcomes of drilling programs and

potential Resource updates, KSN plans to commence initial development studies in

mid-2020.

Livingstone - high-grade gold in WA:

The Livingstone gold project is located 60km west of Westgold's Fortnum operation

in the Bryah Basin region of Western Australia. Drilling has identified high-grade

mineralisation over a strike of 1km, with further infill/extensional drilling planned

for 2020. While earlier stage vs Misima, the high grades, large strike potential and

proximity to third-party processing options make Livingstone an interesting target, in

our view.

Gold development pipeline is thin; few projects with scale potential:

We note the relatively thin gold development pipeline on the ASX (Figure 2), with few

companies with advanced gold projects, and even fewer with projects of scale. KSN's

2.8Moz Resource makes it a standout in the peer group, and we believe its current

EV/Resource oz multiple of A$8/oz (vs peer-weighted average at A$40/oz) offers an

attractively priced entry point as Misima is de-risked in 2020.

Valuation & Recommendation

We value KSN using a combination of NPV12% (based on our assumed development/

production scenario for Misima including capex A$445m, 160-180kozpa at A$1,236/

oz AISC from 2023), and a Resource-based multiple applied against the current

2.8Moz Resource. The 30:70 blend results in an initial project valuation of A$124m,

which combined with a nominal value ascribed to the Livingstone project, plus other

adjustments, results in a diluted per share target price of A$0.60.

With +270% potential upside to our target price, we initiate coverage with a

SPECULATIVE BUY rating.