Kingston Resources is poised to become a gold producer with the acquisition of Mineral Hill. Pic: via Getty Images
Gold production the goal of Kingston’s Mineral Hill acquisition
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Kingston is skipping past all the steps in between and leaping straight into the ranks of gold producers with the move to acquire the producing Mineral Hill mine in NSW.
Less than a month from completing the sale of its Livingstone gold project, the company has reached a binding agreement to acquire the mine from US-based Quintana MH Holding Co for up to $22.7m in cash and shares.
Mineral Hill has extensive gold and copper resources and had previously produced 396,000oz of gold and 33,000t of copper before it was shut in mid-2016.
Current operations entail the reprocessing of gold tailings on site through a recently upgraded carbon-in-leach circuit with a capacity of 400,000 tonnes per annum with output currently ramping up following first gold pour in September.
This delivers immediate gold production for Kingston Resources (ASX:KSN) with the current tailings reprocessing operation forecast to deliver about 40,000oz of the precious metal over 29 months at an all-in sustaining cost of between $1,550 to $1,650 per oz.
It is expected to be cash-flow positive in early 2022.
The project also hosts a current reserve of 71,163oz of gold and broader resources of 469,217oz of gold that underpins the company’s plan to establish initial mined production once tailings reprocessing is completed.
There is also potential for further growth through exploration with multiple targets located within the Mining Licence that host high-grade historical drill results that require follow-up.
Kingston will fund the acquisition through an institutional placement raising $14m and a $4m share purchase plan.
“The acquisition of Mineral Hill is a unique opportunity for Kingston shareholders,” managing director Andrew Corbett said.
“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 3.8Moz 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.”
Mineral Hill gold mine
Mineral Hill is located 65km north of Condobolin and was originally mined by Triako Resources from 1989 to 2004, which treated 2.1 million tonnes of ore at an average grade of 6.4 grams per tonne (g/t) gold and 1.1% copper for 360,000oz of gold and 20,000t of copper.
It was subsequently acquired by KBL in 2009, which produced 12,498t of copper, 3,566t of lead, 1,472t of zinc, 34,507oz of gold and 615,160oz of silver between September 2011 and mid-2016.
Mining was halted due to a high debt burden and the mining operation being impacted by a pit wall failure and weather event at the Pearse open pit mine that led to KBL being placed into administration.
Quintana subsequently acquired the project in 2018 and has since brought the project back into production with the CIL plant now fully refurbished and in commissioning to re-process onsite tailings that feature high gold content.
Production ramp-up is expected to take four months with nameplate production expected in early 2022.
Kingston plans to carry out exploration drilling within two months of completing the acquisition.
This drilling will focus on the Pearse open pit targets and the Southern Ore Zone underground targets to define an updated resource base that will underpin mine feasibility work and approvals to ensure an immediate transition to open pit and/or underground feed at the completion of the tailings reprocessing.
Exploration potential
While Mineral Hill has been explored from surface and underground since the early 1960s, it remains highly under-explored.
The recent discoveries of Pearse and Red Terror have highlighted that significant shallow potential still exists within the Mining Licence with the average drill hole depth being just 90m.
Previous drilling at the Southern Ore Zone had returned results such as 37.7m grading 2.2g/t gold, 0.9% copper, 69.8g/t silver, 1.7% lead and 0.4% zinc from 12m.
Recommencing underground mining from this area is expected to contribute medium-term ore feed.
Other high-priority exploration targets include the Pearse Corridor, where previous drilling has returned hits such as 18m at 3.15g/t gold and 265.7g/t silver as well as 6m at 9.08g/t gold and 46.3g/t silver, Jacks Hut, Missing Link, Parkers Hill, and GD140.
Acquisition terms
Under the agreement, Kingston has agreed to pay Quintana an upfront payment of US$1m in cash and US$8m in share.
The company will also pay a further US$1.5m on production of 15,000oz of gold, US$2m on 22,500oz of gold, US$3.5m once 30,000oz of gold is produced and a final US$1m on the earlier of reaching 37,500oz of gold production or 31 December 2023.
Quintana will receive a 2% net smelter royalty over future mine production from the Mineral Hill area.
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.
