15th September, 2023
The Insider: Meet the Fund Manager sessions are a great way to hear directly from leading fund managers. They share their approach to investing, favourite companies and their market view for the year ahead.
Kingston Resources (ASX: KSN) capped off a superb final quarter to FY23 with $14.4 million in revenue and $7.1 million in operating cash flow during the three month period. The company milled almost 150kt of ore at an average head grade of 1.63g/t Au, for total gold production of 4,944oz at an AISC of $1,493/oz. KSN sold 4,778oz at an average price of $2,968/oz, along with 5,494oz of silver.
50% net mine cash flow margins are an impressive feat for a production restart plan that began on the reprocessing of tailings, and KSN has managed to profitably get the wheels turning on their plans to become a long-term diversified copper, gold and silver producer.
It’s this aspect that got PURE Asset management’s Daniel Porter especially interested, as he stated: “What we’re really excited about is the copper that’s coming for this asset. It was underappreciated by previous owners, and there wasn’t a proper mine plan in place. Fortunately for us, Measured Group found that copper, which was a great find and meant that we were able to price a pretty good deal with Kingston.”
Daniel structured a senior secured loan of $10 million, with a 10% coupon, along with 70 million warrants that have strike prices of $0.12 and $0.20. KSN had fully drawn down this debt at the end of FY23, but also had a cash position of $18.2 million that will be used to fund the company’s growth plans. These plans were bolstered by a $6.5 million capital raising during the quarter that was used to refurbish the processing plant and underground development works.
Cash flow from the tailings project is expected to finish up around mid 2024, at which time Kingston should have made significant progress with underground resource to reserve drilling, and completed all refurbishment and underground re-access works.
Open-pit mining is projected to commence towards the end of this year and continue into 2025, but the real growth prospects stem from underground mining and processing plant expansion that could see Kingston extend operations well beyond the current mine life that currently finishes up in 2027.
The company is forecast to grow annual production to 30-35koz over the next year and then to over 50kozpa once underground ore becomes the dominant feed source for the mill. KSN has a 700ktpa Carbon-in-Leach (CIL) processing facility with a 350ktpa flotation plant, which they plan to boost to 500ktpa in the near future.
The first copper concentrate is forecast to be produced from underground ore in 2025, which will also include significant amounts of lead and silver. The company is adamant their tenements, all of which have granted mining leases and have Cobar style mineralisation, have significant exploration potential that is yet to be realised, and they also have set their sights on acquisition opportunities in the region to make full use of their processing infrastructure.
Significant high-grade gold results from their main open-pit prospect, Pearse North, were 39m @ 4.2g/t Au and 37g/t Ag from 37m, including 3m @ 26.7g/t Au, 27g/t Ag from 38m. There was also 10m @ 6.0g/t Au, 33g/t Ag from 72m, 3m @ 5.5g/t Au, 6g/t Ag from 31m, 11m @ 1.4g/t Au, 8g/t Ag from 136m including 4.3m @ 2.4g/t Au, 16g/t Ag from 142m.
The underground resource recently grew 114% in tonnage, with a 54% increase in gold and 64% increase in copper, to 3.8Mt @ 1.29g/t Au, 19g/t Ag, 0.9% Cu, 1.6% Pb and 1.4% Zn. Drilling highlights include 39m @ 1.1% Cu, 0.7% Pb, 0.8% Zn, 0.93g/t Au, 12g/t Ag from 161m, as well as 9.8m @ 4.22g/t Au, 0.7% Cu, 3.2% Pb, 3.2% Zn, 30g/t Ag from 166m.
Daniel was impressed with management’s ability to resume production in such an efficient and effective manner, and has a bright outlook for the future. He stated: “We should see phenomenal earnings growth in this company over the next two to three years as it really grows production”.
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Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets’ position. Any advice contained within this presentation is general advice and does not consider your personal circumstances, you should consider whether it is appropriate for you.
The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.
Past performance is not a reliable indicator of future performance.
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*Past performance is not a reliable indicator of future performance.
The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.
Any advice contained within this presentation is general advice and does not consider your personal circumstance, you should consider whether it’s appropriate for you.
The information we are giving you is for educational purposes only. “Investing is about understanding your risk” and every time you invest in the share market there is a risk of loss.