article in smh

Is there gold in them Thai hills for Kingsgate?

Jamie Freed
July 19, 2008


THE goldminer Kingsgate Consolidated could be close to securing long-awaited leases for its Chatree North deposit in Thailand.

The Sydney company entered a trading halt yesterday after receiving "unsupported information" that the Thai Minister of Industry had approved the mining leases.

But a religious holiday on Thursday and Friday meant Kingsgate was unable to confirm the information. It expects to update the market by the start of trading on Tuesday.

Kingsgate has been processing low-grade ore from its Chatree mine for nearly two years while awaiting approval of the leases, which was delayed after a coup in September 2006. If the leases are not granted soon it will have to cease its operations. In its March quarterly report Kingsgate said it would only have ore feed for its mill until August or September.

Analysts have long said that Kingsgate shares are likely to be re-rated after it receives approval to mine in its high-grade northern leases. It could be a takeover target, although the most oft-mentioned suitor, Oxiana, is now seen as out of the running since its merger with Zinifex.

Kingsgate employs nearly 1000 Thai workers - 80 per cent of whom are from the surrounding area - and only eight Western expatriates at its Chatree operation. It has the world's best safety record for a goldmine.

The granting of the leases would allow Kingsgate to expand to 300,000 ounces a year of low-cost gold production amid high prices, up from 65,000 to 80,000 ounces of higher-cost production this year.

It had cash costs of $US404 ($416) an ounce in the March quarter and said its operations were profitable, even though it was processing material with an average grade of only 1.1 grams in the tonne.

In May Kingsgate said it could double the size of its treatment plant by the middle of next year, depending on when it was granted the leases. That would allow it to produce 300,000 ounces in 2010, up from an expected 100,000 to 140,000 ounces next year.

The company, which has about $45 million cash and no debt, has ordered key components it needs to expand the plant.

A Merrill Lynch analyst, Anna Kassianos, yesterday said her revised gold price assumptions gave Kingsgate among the greatest appreciation in asset value of the goldminers she covered, assuming it was granted the Chatree North leases.

Kingsgate shares last traded at $4.69.