viewKin Mining NL

Kin Mining well funded as it drills Lewis prospect at Cardinia project near Leonora


The Sprott-backed company posted its quarterly activities and cashflow reports to market yesterday.

Leonora project location

Quick facts: Kin Mining NL

Price: 0.165 AUD

Market: ASX
Market Cap: $115.11 m

Kin Mining NL (ASX:KIN) (FRA:8KM) predicts it will spend $2.1 million on exploration and evaluation this quarter after starting phase II diamond drilling at the Lewis prospect at its flagship Cardinia Gold Project (CGP) near Leonora in Western Australia.

The second phase of diamond drilling began last month in a bid to identify broader zones of gold mineralisation over a 1,200-metre strike at the project also known as Cardinia Mertondale project.

Cardinia project represents the greater portion of the wider Leonora Gold Project (LGP).

Six holes were to be drilled at Lewis over the December-January period followed up with another five holes if the company found the mineralisation it expected to find at the prospect.

December quarter results

Explorer Kin released its cashflow report for December quarter 2018 yesterday, reporting it had directed $2.1 million to its operating activities in the last quarter of 2018.

The sum included $1.3 million spent on exploration and evaluation during the quarter.

During the three-month period ended December 31, the company directed $224,000 to investing activities, shelling out the cash on property, plant and equipment category.

READ: Kin Mining repays credit facility with Sprott as it advances the Leonora Gold Project

Kin pulled in $9.3 million from a partially-underwritten capital raising and share issues in the December quarter and repaid a significant $4.2 million sum in debt, directing $290,000 to transaction costs.

The company had opted to pay down $3 million of its senior secured credit facility with Sprott Private Resource Lending LP, leaving all but US$1 sum paid off as the company moves toward a development decision for its Leonora project in 2019.

Kin reported yesterday: “Repaying the facility in tranches allowed the company to utilise its cash in the most effective manner to progress additional drilling and metallurgical work programs at the Helens and Lewis deposits, undertake the water exploration and production bore drilling programs at Bummer Creek and Cardinia Creek and advance the project approvals all required to contribute to the board’s confidence to restart the construction phase of the CGP.

“Sprott has expressed a desire to remain involved in the project and has agreed to leave the credit facility structure in place while Kin completes its work programs.

“Progress on those programs is ongoing with management confident of satisfactory resolutions to the items being investigated or reviewed.”

The company’s net cash from financing activities in the December quarter was a positive $4.9 million.

Kin added $2.6 million, or 64%, to its cash and cash reserves during the December quarter to close the year with $6.7 million cash.


Kin’s DFS and reversed decision to mine

Leonora had been the subject of a definitive feasibility study released in October 2017 before then managing director Don Harper and director David Sproule departed the board.

The company’s incoming directors included chairman Jeremy Kirkwood, Brian Dawes and company’s managing director & CEO Andrew Munckton who joined last April.

Kin’s reconfigured board opted to curtail a December 2017 decision to mine the project which had a seven-year mine life and a $107.4 million pre-tax net present value (NPV8) at an 8% discount based on a $1,600 gold price.

The modelled gold price is a $200 discount to the $1,794.71 an ounce spot gold price two days ago.

Leonora project’s internal rate of return (IRR) was 77%, with a life-of-mine all-in-sustaining cost (AISC) of $1,038 an ounce, with up to 65,000 ounces mined a year.

The payback period for the mine was 11 months.

FLASHBACK: Kin Mining attracts funding from Sprott on pathway to gold production

Kin’s board opted to suspend development of the project in May 2018.

Since then its directors have spearheaded a strategy to add value to the project and have retained the Sprott funding facility to enable it to restart development of its project.

Chairman Jeremy Kirkwood explained the strategy in the company’s 2017-18 annual report released in October, writing “Our strategy is focused on adding value to the LGP by testing the depth extensions of known deposits, upgrading and expanding mineral resources, simplifying and de-risking ore, water and power supply and completing a robust cost estimate and schedule for development.”


An acquired project

Kin picked up Leonora project for $2.7 million from Navigator Resources in 2014 when the gold price was near the bottom of a gold cycle.

The then pre-feasibility study-level project had included the mining centres of Mertondale, Cardinia and Raeside modelled as feedstock for a carbon-in-leach (CIL) plant at Cardinia in Kin’s DFS.

Kin subsequently reconfirmed the mining centre's resources, adding inventory and ending up with a combined 22.52 million tonne resource at 1.46 g/t gold for 1.057 million ounces.

The Cardinia mining centre at the project is on care and maintenance and hosts the Lewis prospect.

An updated mineral resource is expected for the centre, featuring resources from the prospect.

Leonora project previously extended over about 241 square kilometres near the towns of Leonora and Laverton on the Mt Margaret Mineral Field.

Mt Margaret field is in the centre of the Eastern Goldfields, north of the drawcard mining city of Kalgoorlie-Boulder and about 800 kilometres east-northeast of Perth.

The Eastern Goldfields Province is the eastern-most subdivision of the Archaean Yilgarn Block.

Kin's mining centres near Leonora in Western Australia

March quarter milestones

Kin managing director & CEO Munckton spoke to Proactive Investors’ Stocktube video channel last month and acknowledged a failed bid to unseat the company’s directors last quarter had affected the company’s timelines.

Munckton said the company was now past the distraction, arguing “it’s time to get on with things and deliver this project.”

READ: Kin Mining shores up potential of Leonora Gold Project with broad gold intersections at Lewis prospect

He highlighted three major milestones were expected to be achieved by March quarter 2019.

“Firstly, the metallurgical test work coming out of the previous seven holes that were done (at Lewis) in September … should give us a very good indicator of exactly what modifications, if any, we need to make to the process plant design for construction.

“Secondly, the expansion of the Lewis drilling, the Lewis resource and confirmation of the reserves will be a key milestone — we’ll (likely) get a first sighter of that in … January.

“And thirdly, getting on with the infrastructure works starting … in early January for the tailings dam, the power supply and the water supply.”

Kin has previously tipped it expects to make a final investment decision on the Cardinia project in 2019.

Munckton told Stocktube “exploration was back in full swing” at the Lewis prospect.

“We released some results … that really gave us some strong development opportunities associated with the (prospect).

“The expectation now is that Lewis will develop into quite a sizeable open pit, in the form of the baseload of the project going forward and the exploration results indicated to us a number of new things.

READ: Kin Mining is derisking and optimising its +1M ounce Leonora Gold project

“Previously the expectation was that it was a gold-only project but it now seems to be a combination of precious metals and base metals.

“The precious metals are the dominant part of it but we’re certainly very interested to see there are some new and exciting opportunities associated with Lewis and the drilling.

“We’re really pushing forward with Lewis as becoming the cornerstone project associated with the Leonora Gold Project.

“We’re really looking forward to the results of the phase (II) of drilling that’s commenced (at Lewis).”

READ: Kin Mining's engineering and metallurgy analysis for Leonora Gold Project indicates no fatal flaws

Kin had released engineering and metallurgy reports produced by Como Engineers for the project in November.

These confirmed there were no fatal flaws with aspects of the project’s proposed operation and identified several opportunities to capture additional value and reduce risk.

The junior developer had shared it hoped to make a lower risk, higher quality development decision in the December half-year of 2019.

Top shareholders

Harmanis Holdings Pty Ltd is Kin’s largest shareholder with 12.4% of the company.

Also on the significant shareholder list are Delphi Unternehmensberatung Aktiengesellschaft, with 12.27%, followed by Mostia Dion Nominees Pty Ltd (9.31%), Michele Canci (7.94%) and Kamjoh Pty Limited (5.17%).

READ: Kin Mining secures $8 million through binding commitments

Harmanis, Delphi and Canci built up their substantial positions in December quarter, while Mostia added to its stake in November and Kamjoh established its holding in October.

— with Danielle Doporto, Berkay Erkan, Tharun George

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