Advanced gold project is a value driver for Kingston
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Kingston has been valued appreciably more than it is currently priced by Sydney-based MST Access thanks to its advanced 3.6Moz Misima gold project.
MST Access, which has initiated coverage of the company, valued Kingston Resources (ASX:KSN) at 52c per share, more than double its current share price of 23c.
It attributed this to providing an early stage investment opportunity that captures the benefit of what is effectively a “brownfield” gold project in Papua New Guinea along with a skilled, successful and experienced management team.
Misima has an ore reserve of 1.35Moz and features existing infrastructure such as ports, airstrip and power and original development sites such as pit, plant and camp.
All these provide Kingston with a significant head start for the project that could reduce construction time and capital costs.
In addition, the acquired knowledge of ore handling, plant operation, geotechnical and metallurgical properties from 15 years of historical production markedly reduce technical risk, while a substantial silver resource by-product credit is expected to reduce operating costs.
Gold giant Placer Dome produced 3.7Moz from the project between 1989 and 2004.
MST Access adds that there is substantial exploration upside at Misima as the current resource is open at depth and likely to increase with further exploration.
Five outstanding exploration options, including a 4km untested strike at Misima North, provide opportunities to add substantially to resources.
Kingston also benefits from having an experienced management with chairman Mick Wilkes being no stranger towards developing mines in PNG, and PNG itself being an established gold producing region.
MST outlined that further exploration success is one of the near-term catalysts that could drive share price growth.
Other catalysts include an update on reserves and resources; exploration at the Livingstone prospect and completion of the Definitive Feasibility Study.
The Misima gold mine is currently the subject of a pre-feasibility study completed in November 2020 outlining a technically robust, large-scale, long-life, low-cost operation delivering output of 130,000 ounces per annum of gold over a forecast 17-year mine life. All-in sustaining costs are just $1159 per ounce.
It projects life-of-mine revenue of almost $5 billion, free cashflow of $1.5 billion, a pre-tax net present value of $822 million and an internal rate of return of 33% based on a gold price of US$1600 per ounce.
The proposed mining operation is based on a conventional CIL plant, fed by the project’s cornerstone Umuna open pit, as well as a starter pit at the nearby Ewatinona deposit.
All this is underpinned by the existing ore reserve.
This article was developed in collaboration with Kingston Resources, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.