An ongoing saga over the premature closure of the Chatree gold mine in Thailand continues with owner Kingsgate taking legal action over a $US200 million ($255 million) insurance policy it was denied when the mine was closed.

Chatree was closed by the Thai government in 2016 following unsubstantiated reports of environmental damage and public health impacts as a result of the operation.

Kingsgate (ASX:KCN) made a claim under the political risk insurance policy it held with Zurich Australia Insurance and other insurers.

The policy had a maximum liability of $US200 million and covered Expropriatory Actions (a State taking over private property) in violation of the Thailand-Australia Free Trade Agreement.

However, Kingsgate revealed today coverage was denied by Zurich and other insurers under the policy without stating any reasons why.

Stockhead is seeking comment from Kingsgate.

Legal proceedings regarding the claim will now take place in the New South Wales Supreme Court.

“While the outcome of proceedings cannot be guaranteed, the board considers that the terms of the policy respond to the actions taken by the Government of Thailand against the company in 2016,” Kinsgate said today.

International law firm Clifford Chance has been appointed by Kingsgate.

Meantime, Kingsgate is progressing with a feasibility study and permitting at its wholly-owned Nueva Esperanza project in Chile. The company will submit an environmental impact assessment by end of December.

Kingsgate said it would now review options for the financing of Nueva Esperanza. The company has a $15 million standby loan facility with Investec Australia Finance if required.

Shares in Kingsgate were trading up 8 per cent to 33c in Friday lunchtime trade, capitalising the company at around $74 million.