Kingsgate just won its $82m case over a closed Thai gold mine, shares soar 80pc
Shareholders have been patiently waiting for the day Kingsgate Consolidated (ASX:KCN) would tell them the company’s insurers had agreed to cough up for its cancelled Thai mine.
This morning Kingsgate gave shareholders the good news – insurers had agreed to an $82m payout. And shares were up nearly 87 per cent to a an intra-day peak of 28c just to after market open.
Kingsgate has been fighting the Thai government and its insurers over the premature closure of its Chatree gold mine.
The mine was closed after the government decided not to renew the metallurgical licence after 2016. Kingsgate’s lease for Chatree was due to run to 2028.
The decision was based on what Kingsgate claimed were unsubstantiated reports of environmental damage and public health impacts due to the operation.
Chatree was Thailand’s biggest gold mine, employing almost 1000 workers. The open-cut mine began production in 2001.
Kingsgate began legal action against its insurers in October 2017 over a $US200m ($282.5m) political risk insurance policy it was denied when Chatree was closed.
Chairman Ross Smyth-Kirk told Stockhead in February that Kingsgate was “very confident” of its case.
The New South Wales Supreme Court case against Zurich Insurance Australia, and other insurers, was due to be heard in early June.
But Kingsgate told investors it had now settled proceedings by entering a legally binding heads of agreement worth more than $82m.
Under the deal, the company will get a cash payment of $US55m, which will be paid by mid-April.
The insurers will also contribute up to $US3.5m to help Kingsgate fund its fight against the Thai government and share future costs relating to the legal battle.
“I realise that it has been a long recovery process for our loyal shareholders, but this settlement transaction provides material upside for our company,” Mr Smyth-Kirk said.
Kingsgate now has sufficient cash to pay of its debt, liquidity to give it time to either develop or sell its Nueva Esperanza mine, and it no longer needs funding to pursue its claims against its insurers and the government.
The junior miner had been in talks with an unnamed “international litigation financier” to help fund its legal fight against Thailand.
Stockhead is seeking further comment.