Kingsgate Consolidated Limited (ASX:KCN) Quarterly Report For The Period Ending 30 June 2010
Sydney, July 21, 2010 AEST (ABN Newswire) - Kingsgate Consolidated Limited (
ASX:KCN) (PINK:KSKGF) a low cost gold producer and a highly successful gold mining and exploration company, is pleased to provide a quarterly report for the period ending 30 June 2010.
OVERVIEW
Chatree Gold Mine
Gold production was 30,456 ounces gold in the June quarter, with a gold grade of 1.5 grams/tonne.
Production for the Financial Year July 2009 - June 2010 was 132,628 ounces gold, as forecast, from 2.7 million tonnes ore processed at 1.6 grams/tonne gold.
Total cash costs for the quarter were US$345/ounce (US$261/ounce cash operating costs before Thai royalties). Total cash costs for the Financial Year to end June 2010 were US$335/ounce (US$257/ounce before Thai royalties) with total production costs of US$408/ounce after depreciation and amortisation. This maintains Kingsgate's position in the lowest 20% of the global industry's cash costs and the lowest 10% on total production costs (GFMS 2010).
Plant Expansion
The expansion of ore processing capacity to 5 million tonnes per annum was approved in June after receiving approval for investment incentives from the Thai Board of Investment (BOI). Construction of the processing plant expansion has commenced. The initial contracts have been awarded and a 40-man team has been mobilised on site and is preparing to pour concrete. Ausenco, the engineering construction firm, are finalising sub-contracts and ordering all remaining equipment packages. Investec Bank (Australia) Limited has been awarded a mandate to arrange a US$100 million debt funding facility for the expansion.
Resource Development
Drilling results around and under the original pits at Chatree has confirmed the potential to re-open those pits in the future, with results including 17 metres at 4.7 grams per tonne gold. Geophysics and drilling have indicated the potential for high-grade targets beneath the current planned base of the A Pit. A potentially new high-grade zone has been identified further north, east of the Q Pits, with results including 14 metres at 5.9 grams per tonne gold. An updated resource/reserve statement is expected before the end of July.
Corporate
Total cash in bank and bullion on hand was A$51.5 million (US$44.1 million) as at 30 June 2010 with no debt and an undrawn US$30 million debt facility.
CHATREE GOLD MINE
OPERATIONAL PERFORMANCE
Gold production at Chatree for the quarter was 30,456 ounces at an average plant head grade of 1.5 grams/tonne gold. Silver production was 146,577 ounces.
Total cash costs were US$345/ounce gold (US$261/ounce cash operating costs before Thai royalties) for the quarter. Total production costs after tax, depreciation and amortisation were US$408/ounce.
Annual production for the Financial Year July 2009 - June 2010 was 132,628 ounces gold at 1.7 grams/tonne (g/t) gold from 2.7 million tonnes ore processed at total cash costs of US$335/ounce. Annual silver production was 549,522 ounces. Total production costs after tax, depreciation and amortisation were US$408/ounce. These costs continue to place the mine in the lowest 20% of global gold producers, with total production costs in the lowest 10% of gold producers (Source: GFMS 2010).
Ore feed was mainly sourced from two separate A Pits - across the top of the main A Hill and at the base of the hill - which will merge into a single enlarged A Pit by the end of 2011. Additional feed came from the K West Pit. During the quarter, mining concentrated on waste removal to open the northern section of the A Pit (North East).
Also during the quarter, the processing plant treated 690,092 tonnes of ore. Mining continues at a higher rate than ore processing to maintain a number of open pits that provide ore blending flexibility and a stockpile build, prior to an expanded plant being commissioned. Stockpiled ore at the end of June 2010 is now 5.6 million tonnes at a grade of 0.8 grams/tonne gold for 144,000 ounces gold.
An underpass below the highway between Chatree and Chatree North is being fully utilised allowing the haul trucks to transport ore directly from Chatree North to the ROM ore feed pad next to the processing plant.
The processing plant ran at its highest ever annual throughput rate of 2.7 million tonnes during the last financial year. During the year, the plant had zero unplanned mechanical stoppages. Of the 18 hours of unplanned non-mechanical stoppages, 11 were due to lightning strikes and 7 due to power shortages in the grid. Refurbishment and repair to the crushing circuit is scheduled for the September quarter 2010.
SAFETY, ENVIRONMENT AND LOCAL COMMUNITY
Chatree continues to be the world's safest gold mine, based on publicly available data, with 13.8 million hours worked (7 years) since the last and only Lost Time Injury (LTI) and over 15.9 million hours worked over ten years with one LTI since the commencement of mine construction in the year 2000. There have been no reportable environmental incidents during the life of the mine and it remains in compliance with all environmental regulations under the approved EIA.
FORECAST
Forecast production for the coming year to June 2011 is expected to be similar to the year to June 2010.
CHATREE NORTH PLANT EXPANSION PROPOSAL
The new Chatree North Processing Plant expansion has been approved by the Kingsgate Board and construction has commenced on the new plant which will increase annual processing capacity to a total of 5 million tonnes. Initial contracts have been awarded and preparations onsite are underway to pour concrete footings. The steel plate has been ordered for the 'tankage contract' which is one of the major initial contracts. The grinding mills (SAG & Ball mills and motors) are already on site. Ausenco is finalising all other subcontracts to order all remaining equipment and a definitive, fully costed construction contract is expected to be finalised in the September quarter 2010.
The new Chatree North Processing Plant will be a separate 2.7 million tonne per annum ore processing plant located beside the current 2.3 million tonnes per annum Chatree processing plant. This will result in a combined total ore processing capacity in excess of 5 million tonnes per year. When fully operational, gold production levels have the potential to increase to a rate of 200,000 to 250,000 ounces per year.
In June, The Thai Board of Investment ("BOI") announced that Kingsgate's Thai operating subsidiary, Akara Mining Limited, has been approved for generous investment incentives for a Zone 3 investment promotion package for the new Chatree North Processing Plant.
Akara Mining Limited has mandated Investec Bank (Australia) Limited to arrange a debt funding facility for approximately US$100 million necessary to complete the Chatree North Plant Expansion. Akara Mining will be the borrower and it is intended that Thai domiciled banks will provide the majority of the funding. Already, $25 million has been spent on long lead capital items and engineering design. Currently, the Company has approximately US$50 million in cash and bullion and an undrawn US$30 million working capital facility with Investec.
EXPLORATION - CHATREE
Resource Development Drilling
The Resource Development drilling program continued within the mining leases, aimed at better defining the ultimate extent of the mineralisation that may be contained within an open pit mining operation. More open pit targets are being identified using a higher US$950/ounce gold price. Current and past open pits are being re-evaluated using gold price assumptions of US$1050/ounce, US$1150/ounce and US$1250/ounce and will continue to be assessed using these assumptions in the future.
At the current gold prices, the possible open pits at Chatree show considerable potential to grow well beyond currently scheduled designs. The primary aim of the 2010 drilling programme at Chatree was to increase resources and to more fully understand the possible open pit potential of the mine, so that a fully integrated mine and waste dump program can be designed. As a result, the drilling focus has been more on determining the Resource potential of Chatree rather than increasing drill density and converting these Resources to Reserves. An updated resource/reserve statement is expected before the end of July.
Drilling has been focused on the original open pits at the Chatree Mine, which were predominantly mined when gold prices were US$350-600 per ounce. Initial testing was in the D Pit area and the focus has then moved to the H Pit and H West Pit areas. Recent drilling has also been carried out in the proposed Q-Pit areas to the north of Chatree, where resource definition drilling is currently being completed.
As previously reported, in an attempt to better understand the extent of deeper structures and possible feeder zones beneath the current workings, an orientation seismic survey was carried out in the Chatree Mine area. This survey was completed during the current quarter. Results to date on preliminary sections show an anticline of volcanics and faults associated with the Chatree mineralisation, particularly on Line 1803100N. Detailed processing is now being undertaken to remove surface seismic velocity irregularities. This will improve the seismic reflector and diffractor responses for detailed interpretation and comparison with geology. This work is expected to be completed during the next quarter.
The seismic work, along with a recently completed major reinterpretation of the geological, airborne and ground geophysical and geochemical data has been compared to observed alteration patterns that are evident at Chatree and several new conceptual targets have emerged for follow up. This work has indicated several new areas that have open pit potential as well as separate deeper areas with higher grade underground targets that may be associated with the original 'feeder zones' to the known mineralisation. These targets will be incorporated into the Financial Year 2011 drilling budget.
D & K-East Pit
As previously reported the Resource Development drilling program has identified new gold veins and extended gold zones beneath the previously closed D and K-East Pits at the Chatree Mining Leases. The final results of the current program were received early in this quarter and included 20.0m at 1.71 g/t gold (drillhole 7247RD).
Drilling in the D and K-East Pit areas is now complete and the new data will be included in the new resources estimation.
S Pit Area
During the current quarter, some drilling was also completed in the S Pit area where holes were aimed at extending mineralisation in a known high-grade structure beneath and to the north of the previously mined pit. Drilling was successful in intersecting a narrow, high-grade quartz vein in two holes, which returned assays of 2.0m at 9.38g/t gold (drillhole 7275RD) and 2.0m at 7.50g/t gold (drillhole 7362RC).
H Pit
Recent drilling to extend geological resources in the previously closed pits at the Chatree Mine has intersected new high-grade zones in the H Pit and H West Pit areas. Results have included 17m at 4.68g/t gold (drillhole 7262RC), 3.0m at 13.2g/t gold (drillhole 7263RC) and 3.8m at 8.23g/t gold (drillhole 7262RC).
The H Pit and H West Pit area drilling was aimed to test the down-dip westerly trend to gold mineralisation as shown on the attached sections. It demonstrated wide intervals of gold mineralisation down-dip of the shallow-dipping H Pit structure (Hole 7263RC) and confirmed the continuation at depth of the high-grade gold structure below the north end of H West Pit.
The high-grade intersection in 7262RC is deeper and on the same structure as that in 7263RC (3 metres at 13.2g/t gold). This confirms a structure that is continuous with variable grades and thicknesses.
The high-grade intersection in 7316RD (3.8 metres at 8.2g/t gold) is also associated with other high-grade intersections and falls within the current US$950/oz pit design that now extends beyond the current mining lease.
Proposed Q Pit Area
New high-grade gold mineralisation has been intersected to the east of the proposed Q Pits in the northern part of Chatree North as part of a drilling campaign to extend geological resources in the planned pit areas.
Best results from a new high-grade gold zone, 400 metres east of the proposed Q Pits, include 14.0m at 5.86g/t gold including 9.0m at 8.11g/t gold (drillhole 6517RC).
This Q East mineralisation, which has potential for underground mining, remains open along strike and at depth. The high-grade zones appear to be associated with a geophysical resistivity anomaly that extends north-south for approximately 1.5 kilometres. Another deeper high-grade intercept (11 metres at 3.5g/t gold), 380 metres to the south, appears to be correlated, indicating the potential for an extensive underground mineralised zone. At Chatree, the margins (edges) of geophysical resistivity anomalies have often been associated with higher grade gold intercepts and these margins have proved to be a successful targeting tool.
Around the proposed Q Pits, drilling continues to extend the known gold mineralisation with the potential to enlarge the size of the planned open pits, with best results including: 29.0m at 1.94g/t gold including 7.0m at 4.67g/t gold (drillhole 6505RC), 15.0m at 2.56g/t gold including 5.0m at 5.18g/t gold (drillhole 6519RC) and 10.0m at 2.94g/t gold (drillhole 7285RC).
Current activities are being focused on the proposed Q-Pit areas. The new Resource Model is being completed and will be used to determine where the best opportunities exist for increasing the resource base of the Chatree Gold Mine.
EXPLORATION - NEAR MINE & REGIONAL
EXPLORATION - NEAR MINE
A focus of the exploration-near mine effort, especially during the last year, has been to identify potential satellite open pit deposits, which could provide future supplementary ore feed to the Chatree operation. Such ore feed is initially being sought within a ten kilometre radius of Chatree, which is considered an economic trucking distance for ore of similar grade as Chatree.
Higher grade ore feed may be trucked from greater distances and current costings indicate that Akara can truck ore for over 100 kilometres for a cost of about one gram gold/tonne.
During the current quarter, some RC drilling was carried out in a number of near-mine prospects. The results are currently being compiled.
REGIONAL EXPLORATION - THAILAND
Chokdee Prospect
Exploration will not be undertaken at Chokdee for some time due to the wet season, access issues and a re-focus of the drilling program on the Chatree mine area.
Suwan Prospect
Exploration is planned to be expanded at Suwan in the coming months, after the wet season, with a view to upgrading the exploration effort in this area in the December quarter.
EXPLORATION - NEAR MINE & REGIONAL
REGIONAL EXPLORATION - AUSTRALIA
Queensland
An intrusive-related gold +/- copper target, with a large 3 x 2 kilometre alteration system, south of Charters Towers, was tested with 9 drillholes (1621 metres total). A pyrrhotite-rich core was identified with gold-copper mineralisation of low grade. Results were insufficient to continue under an option agreement with the private company that holds the lease.
The company regularly reviews exploration and advanced project farm-in opportunities within Australia and S E Asia.
CORPORATE
FINANCE
Total cash in bank was A$46.9 million (US$40.2 million) and bullion on hand was A$4.6 million (US$3.9 million) as at 30 June 2010 with no debt and an undrawn US$30 million working capital debt facility with Investec Bank (Australia) Limited.
GOLD SALES
Kingsgate is an unhedged gold producer. The average cash price received by Kingsgate for gold sales in the quarter was US$1196/ounce.
OPTIONS
Kingsgate's Managing Director, Gavin Thomas, converted 2.5 million unlisted options into shares on 30 June 2010 and 1 July 2010. Kingsgate's Board considers this an endorsement of the commitment and faith Mr. Thomas has in Kingsgate's robust future.
For the complete Kingsgate Consolidated Quarterly Report for the period ending 30 June 2010 including Tables and Figures, please refer to the following link:
http://www.abnnewswire.net/media/en/docs/63353-ASX-KCN-498170.pdf
About Kingsgate Consolidated Limited
Kingsgate Consolidated Limited (ASX:KCN) (OTCMKTS:KSKGF) is an experienced pacific rim gold producer and highly successful ASX listed gold company with significant expertise in gold exploration, development and mining.
Kingsgate owns and operates the Chatree Gold Mine in central Thailand and the Nueva Esperanza Development Project, located in the highly endowed Maricunga gold and silver belt of the Atacama Region of northern Chile.
The Chatree Gold Mine is a world class gold producing asset, with a proven operating history, with 1.8 million ounces of gold and 10 million ounces of silver produced between 2001-2016.
Chatree is a large scale, low-cost, open pit operation with a combined +5 Mtpa processing capacity across two plants, with existing Life of Mine supporting a ~9 year mine life based on 1.3m oz gold reserve.
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