Kin Mining is ‘killing the share price’, investor says
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Shareholders are not happy with Kin Mining’s sliding share price and have accused the junior explorer of destroying shareholder value.
Kin’s (ASX:KIN) share price has tumbled over 72 per cent since April to a 52-week low of 6.9c in mid-October. The price has recovered slightly to 8c.
One shareholder emailed Stockhead a copy of the “Fatal Flaw Analysis” engineering report that the new board commissioned to determine whether or not it would continue the development of its Leonora gold project (LGP) towards production.
The shareholder, Grahame Stephenson, said he received the report from another shareholder.
Mr Stephenson has been a shareholder for about three years.
In April, the new board revealed it was dialling back the construction works at the project in Western Australia because of an expected increase in the existing preproduction capital cost estimate.
Kin’s internal revised estimate of the pre-production capital cost for the LGP was about $45m and the company provided that to Como Engineers to assist with its study.
The Como Engineers report determined that preliminary indications were that the costs as provided by Kin were underestimated by 10 to 20 per cent.
The report stated that a more detailed investigation into the project cost estimate would need to be undertaken to formulate an accurate control budget for the project.
Como Engineers also stated there was a “high risk of slippage from the current schedule, given the lack of engineering design, lack of final approved design documents”, which it said would “make it difficult to tender the works with any confidence”.
The report identified potential cost overruns related to the dismantling and relocation of the Lawlers plant as well as the engineering, procurement, construction management, electrical, bulk earthworks, steel and pipework for the LGP processing plant.
“While the report does estimate an increase in costs, in my review it was not that extraordinary for a project of this nature,” Mr Stephenson told Stockhead.
“Another view I have is that one of the major shareholders has undertaken to deliberately devalue the company as the share price has gone from 25c per share to 7.6c per share in less than 6 months with a second raising by the incumbent board of another $10m after the $11m in July 2018.”
Mr Stephenson’s view is that Kin is “killing the share price”.
In October Kin received a “249D notice” calling for the removal of all of the five current directors and the appointment of David Sproule, Christopher Johnston and John Kamara as replacements.
Mr Sproule stepped down earlier this year after former chairman Terrence Grammer, along with former non-executive director Marvyn Fitton and Orbit Drilling, called for him to be ousted.
The push to have Mr Sproule evicted led to Don Harper quitting as managing director.
Mr Harper told Stockhead shortly after he tendered his resignation that he quit because he lost the support of the board while attempting to keep Mr Sproule from being booted out.
He said at the time that Mr Sproule’s removal would not be good for shareholders because he had gotten Kin to the point of having $40 million in the bank, being fully permitted and ready to start building the processing plant at its Leonora gold project.
Mr Stephenson told Stockhead he is not associated with Mr Sproule or the other shareholders looking to take control of the board.
But he has given the rebel shareholders his proxy (voting power) to exercise at the upcoming board spill meeting.
Kin said in an ASX announcement on Wednesday that it had become aware of the “unauthorised public release” of the Como Engineers report.
This prompted the company to make public the engineering report and an accompanying metallurgy report.
Kin said the engineering report confirmed no fatal flaws with the aspects of the LGP, but that it did identify “a number of opportunities to capture additional value and reduce risk for shareholders, which Kin has been pursuing for the past six months”.
Kin says it remains focused on advancing the LGP to a “lower risk, higher quality development decision” in the second half of 2019.
The company is also investigating how the engineering report was leaked.
Stockhead is seeking comment from Kin.