Kin shareholders say they are losing ‘substantial’ cash; demand answers
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Kin Mining shareholders are calling on the ASX to step in because they aren’t getting the answers they want from the troubled gold explorer.
One shareholder, Xuan Pham, has called on the local bourse to force Kin (ASX:KIN) to disclose why it needs to raise more cash to payback the $US3m it still owes Sprott Private Resource Lending after already raising $US11m in June.
Disgruntled shareholders have been demanding answers over Kin’s decision to suspend construction on its Leonora gold project earlier this year.
And they now want answers as to why the $US3m ($4.1m) is still outstanding and why there remains a 1.5 per cent royalty on the first 100,000 ounces of gold production secured against the project even after the loan is paid back.
Kin’s 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 7.6c.
Mr Pham, who along with several family members and friends owns 4 million shares — or about 0.9 per cent of Kin — told Stockhead he feels like the company is not being completely open and transparent with shareholders.
“Currently I, family and relatives, and friends are losing a substantial amount of money in our Kin investment,” he said.
Mr Pham estimates the losses to amount to “well over $200k”.
“Back in June 2018, Kin raised $AUD11.3 million (before cost) of which $AUD8.9 million was in the form of an underwritten rights issue,” Mr Pham said in an email to the ASX.
“In the company’s document disclosure the funds from this raising should have paid off the Sprott Facility.
“Now Kin is conducting another capital raising to pay the same facility. I asked [Kin managing director] Mr Andrew Munckton to explain this and to date there has been no reply.”
Mr Pham urged the ASX to order Kin to tell the market “where the money from the June capital raising went and why the company is raising more money to pay off the same credit facility”.
“It has only been 4.5 months since Kin raised $AUD11.3 million, of which the company disclosed the use of funds was to repay the Sprott Facility,” he said.
“I, family and friends whom subscribed to the June 2018 rights issue read the offer document and believed that the Sprott Facility should have been retired.
“I believe this is of material nature as mum and dad investors have to rely on public information to make their investment decision.”
In response to shareholder queries, Kin released the details of the Sprott facility on the ASX, saying it “has previously, on numerous occasions, disclosed the Sprott facility as being secured against the assets of the company”.
Kin also said that it advised on August 31 that it had only repaid $US2m of the $US5m outstanding on the Sprott facility as a result of the partial development of the Leonora gold project.
“Kin’s current intention is to repay the remaining $US3 million balance by 31 December 2018, subject to the outcome of the current entitlement offer which is scheduled to close on 14 November 2018,” the company said.
Kin added that it has been in talks with Sprott with respect to amending the security provisions but that no formal agreement had yet been reached.
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.
Shareholders say this information should have been released at the time Kin announced it was halting work on the Leonora project.
Another shareholder, Grahame Stephenson, has been rallying support from fellow shareholders to vote in favour of former director David Sproule taking back control of the company.
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.
“I have no affiliation with any of the current directors nor any of the ones seeking to takeover,” Mr Stephenson said in an email distributed to Kin shareholders.
“The only fact I am going on is the share price drop from 25c to 8c. I have control of only 100,000 plus shares but the loss is still significant for us.”
Kin has declined to comment further on the matter.