Insurers ‘really played hard ball’, but Kingsgate reckons it still got a good payout
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Kingsgate Consolidated’s (ASX:KCN) $82m insurance payout wasn’t quite as much as chairman Ross Smyth-Kirk was hoping for, but it solves the company’s money problems for a “considerable period”.
The company has been fighting the Thai government and its insurers over the premature closure of its Chatree gold mine.
Kingsgate’s political risk insurance policy with Zurich Insurance Australia, and other insurers, was worth $US200m ($282.5m).
The New South Wales Supreme Court case was due to be heard in early June.
But the pair reached a settlement that gives Kingsgate a cash payment of $US55m, an initial $US3.5m in funding for the case against the Thai government and future contributions towards legal costs.
“I’m a hard marker so I wanted more, I expected more, but everybody involved in the negotiations think we did a very good job,” Mr Smyth-Kirk told Stockhead.
“They’re insurance companies, they really played hard ball. We had our backs to the wall, and we were relying on funding from Investec, which has been very generous with us.
“We fought hard and we got a result that means we live to fight another day. We don’t have any problems with money now for a considerable period.”
Mr Smyth-Kirk said the alternative was to secure a deal with a litigation funder, which wouldn’t have provided such a favourable outcome.
One unnamed litigation funder was in the process of doing due diligence on the case and would have come to a decision “within a few weeks” about whether it would back the legal fight or not.
“If we didn’t do a deal now, the alternative is we’d do a deal with a litigation fund where you lose quite a lot of your upside, and it’s a question of solvency,” he said.
With its win against the insurers, Kingsgate is now even more confident it will be successful in its case against Thailand.
“We’ve got a very good asset there and a very good case against the Kingdom of Thailand,” Mr Smyth-Kirk said.
“It should make them more concerned. I think they’re very concerned anyway, they know they’ve got a very poor case and everybody that has seen it agrees with that.
“Certainly the insurance company suing it agree with that and they’ve joined us in the action. So let’s see what happens.”