Kingston Resources Ltd (ASX:KSN) has entered into a binding agreement with US-based Quintana MH Holding Co. LLC to acquire a 100% interest in the operating Mineral Hill Mine, 65 kilometres north of Condobolin in western New South Wales.
The company has agreed to pay Quintana a combination of upfront cash and shares, and deferred cash payments adding up to A$22.7 million along with a 2% royalty over production.
This acquisition represents a unique opportunity for Kingston to accelerate its transition from a gold explorer to an operating mining company.
Promisingly, Mineral Hill comes with a highly prospective regional tenement package and is strategically located within a resource-rich region with a skilled local workforce.
Fully-developed gold and copper project
Kingston managing director Andrew Corbett said: “The acquisition of Mineral Hill is a unique opportunity for Kingston shareholders.
“We are very excited to be able to acquire a fully-developed gold and copper project in a Tier-1 location that has recently restarted operations with immediate gold production.
“The attractive deal metrics, near-term cash-flow and significant gold and copper exposure make for a fantastic strategic fit with our cornerstone asset, the 3.8-million-ounce Misima Gold Project in PNG.
“Misima is a large-scale, long-life and low-cost development project which, combined with the near-term production profile and extensive exploration opportunities at Mineral Hill, provides Kingston with an ideal platform for growth.”
Terms of acquisition
Kingston intends to fund the transaction through a A$14 million placement and a A$4 million share purchase plan.
The proceeds of the equity raising, together with existing cash reserves of approximately A$5 million, will be used to complete the acquisition, fund associated transaction costs and environmental bonds, provide working capital to continue the ramp-up in gold production and fund a planned aggressive near-term exploration and development program.
Funds will also contribute to ongoing development activity at the company’s Misima Gold Project.
Immediate focus
Following completion of the transaction, which is expected to occur in mid-to-late January 2022, the immediate focus will be to complete the production ramp-up of the carbon-in-leach (CIL) circuit for the tailings re-processing.
Gold tailings on site are currently being processed through the CIL circuit, delivering immediate gold production for Kingston.
This is forecast to deliver gold production of 40,000 ounces at AISC of A$1,550-1650/ounce over 29 months, with positive free cash flow expected in early 2022.
Furthermore, reserves of 71,163 ounces of gold and a resource base of 469,217 ounces gold equivalent underpin Kingston’s intent to establish initial mine production following conclusion of the tailings project.
“Well-established mine plan”
Corbett adds: “Mineral Hill has a strong history of high-grade gold and copper production, a number of advanced brownfields exploration targets, an existing resource base and infrastructure which is expected to enable a low capital-intensity restart of existing development opportunities.
“The initial production will come from the re-processing of tailings on site, which is expected to be followed by a restart of both open pit and underground mining operations.
“The acquisition comes with an established operational team on-site and a well-established mine plan, which means we can move forward quickly and efficiently at Mineral Hill while still progressing the Misima Definitive Feasibility Study and approvals program."
Exploration potential
Kingston considers there is strong exploration potential with multiple targets within the mining licence hosting high-grade historic drilling results to be followed up.
The mine re-opening will provide local employment and business opportunities for the surrounding townships within the Lachlan Shire.
This acquisition is consistent with Kingston’s stated objective of becoming a substantial gold producer in the Asia-Pacific region. The transition to production and strengthened balance sheet will also enhance its ability to advance the Misima Gold Project.
Mineral Hill tenure.
“Mineral Hill - one of key pillars”
Corbett adds: “Mineral Hill successfully operated from 1989 to 2004, producing 396,000 ounces of gold and 33,000 tonnes of copper. Since the original mine closure in 2004, there has been limited exploration despite a number of outstanding drill results.
“We see exploration at Mineral Hill as one of the key pillars for our aspiration to become a leading diversified mid-tier gold and base metal producer in the Asia-Pacific region.
“Strategically, the processing plant is ideally located within the Cobar Basin to take advantage of both internal and external near-mine opportunities.”
“Mutually beneficial opportunity”
Quintana president and COO said: The Mineral Hill mine has had a significant operating history. Since 2018, when Quintana took over the property, our Australian operating team has accomplished excellent work to bring the mine back into operation in a staged manner with the CIL plant now fully refurbished and in commissioning to re-process on-site tailings with a high gold content.
"This same competent operating team, once the tailings re-processing is fully ramped up, will be capable of advancing to the next stage to capitalise on the significant mineral endowment of Mineral Hill by developing the known Pearce, Pearce North and Parker’s Hill open pits and various underground ore deposits, as well as exploring the site.
“Naturally for Quintana, being a US-based company with operations in North America, having the opportunity to partner with an Australian-based operating company like Kingston through the sale of Mineral Hill and continuing as a stakeholder, through shares and royalties, will see a mutually beneficial opportunity to realize the full upside and potential of the asset.”