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Kingsgate floored by gold price nervousness

by: BARRY FITZGERALD
From: The Australian
August 30, 2013 12:00AM

KINGSGATE Consolidated had a day out on the market it would rather forget after its shares plunged 22 per cent yesterday in response to nervousness around gold's near-term direction and a confirmation of a heavy impairment charge on its Challenger goldmine in South Australia.

The previously flagged $291.3 million (non-cash) impairment charge for the struggling Challenger was the main factor in Kingsgate posting an annual loss after tax and significant items of $323.7m compared with a profit of $75m last year. There was no final dividend after paying 10c last year.

While the hit on Challenger was announced previously, shares in the Sydney-based Kingsgate dived 62c to $2.12. The stock nevertheless remains ahead of its June 28 low of $1.26 when sentiment towards gold stocks following the record gold price fall in April was at its worst.

Kingsgate's mainstay operation, the Chatree goldmine in Thailand, underpinned the group's earnings before interest, tax, depreciation and amortisation of $115.8m.

Profit before tax and significant items was $17.2m. Kingsgate said a lower realised gold price of $US1588 an ounce for the year ($US1663 an ounce previously), lower gold sales of 195,948 ounces (204,145 ounces previously), and industry-wide cost pressures had a negative impact on underlying earnings.

Gold fell to as low as $US1200 an ounce in late June but has recovered to as high as $US1425 an ounce earlier this week. But a price retreat in recent days has spooked investors in the sector. Kingsgate was the hardest hit of the producers yesterday but others also took heavy blows on the gold price nervousness. St Barbara shares fell 16 per cent and Perseus fell 11.2 per cent.

Kingsgate has responded to the lower gold price environment by taking remedial action at Challenger.

It is forecast to produce in the range of 70,000 to 80,000 ounces of gold next year.

The expanded plant at Chatree is forecast to deliver 120,000 to 130,000 ounces.

http://www.theaustralian.com.au/business/companies/kingsgate-floored-by-gold-price-nervousness/story-fn91v9q3-1226706993150