Thursday August 11, 2:33 PM INTERVIEW:Australia's Kingsgate Vows To Go It Alone
By James Attwood Of DOW JONES NEWSWIRES
SYDNEY (Dow Jones)--As takeover rumors continue to swirl around mid-sized resource companies in Australia, Kingsgate Consolidated Ltd. (KCN.AU) has vowed to stay independent until its share price reflects the gold miner's real value.
Managing Director Gavin Thomas said the Sydney-based, Thailand-focused miner has been approached by prospective suitors but has yet to receive a serious offer.
"We're trying to fend off other people," he told Dow Jones Newswires in an interview. "Obviously we're cheap and anyone looking at Kingsgate today would be quite opportunistic."
"We feel there's a lot more shareholder growth to be gained and before we allow ourselves to be taken over we'd like to try to get value into the company," Thomas said, without disclosing his idea of a fairer price.
Kingsgate shares closed Thursday at A$3.35, up 5% on the month.
"We're growing a resource base that's going to be far larger than what most people understand," Thomas said on the sidelines of this week's Diggers & Dealers conference in Kalgoorlie, Western Australia.
The company's sole cash generator is its Chatree mine in Thailand, which currently churns out about 135,000 ounces a year from plant throughout of 1.8 million tons.
That puts Kingsgate in fifth spot on the list of Australia's shrinking independent gold producers, behind Newcrest Mining Ltd. (NCM.AU) at 1 million-plus ounces, Lihir Gold Ltd. (LHG.AU) at 700,000 ounces, and Croesus Mining N.L. (CRS.AU) and Oxiana Ltd. (OXR.AU) each with around 200,000 ounces.
But Kingsgate plans to ramp up Chatree's throughput to 2.35 million tons from next year with the installation of a pebble crushing circuit, thereby taking output to 150,000 ounces.
And after finishing a scoping study the company is looking at the feasibility of installing either a new or second hand plant to take the quantum leap to between 300,000 ounces and 350,000 ounces a year.
The output target is based on an anticipated 50 million tons of reserves, which in turn is based on current resource growth rates, a 70% conversion rate to reserves and grades of between 2 grams and 2.5 grams a ton, Thomas said.
While acknowledging those numbers are just "geological speculation for now," he said the company has found 1.2 million ounces of gold in the last nine months "and clearly the system is well above 5 million ounces."
"Chatree's just going to be a world class gold province and when people truly understand it they'll say 'gosh that's come from nowhere," he said.
Kingsgate also has applications on some 1,400 square kilometers in the same central volcanic belt of Thailand, with hopes for additional discoveries of large deposits.
Another growth strategy is global diversification.
Kingsgate recently paid cash for a 20% "long-term, strategic" stake in Perth-based junior Goldstar Resources N.L. (GDR.AU) and is exploring in Argentina, Chile and Peru.
While maintaining its focus on realizing Chatree's potential, the company is also positioned for acquisitions of existing gold assets to gain more immediate scale, Thomas said.
"The company has around A$39 million cash on hand, is debt free and has banking facilities of about A$24 million, so certainly we're in a position should we find the right opportunity to be quite aggressive," he said.
Not afraid to crystal ball, Thomas said the company's 10-year vision is to have Chatree producing at 350,000 ounces a year, with at least 10 years of reserves ahead of it, another two mines in Thailand operating at 250,000 ounces each, as well as mines in South America and Australia, thereby becoming a million ounce-plus per year producer.
-By James Attwood, Dow Jones Newswires, 612 8235 2965, [email protected] -Edited by Paul Dekkers
KCN Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
(20min delay)