Kingsgate's golden hope

The rising Australian dollar is bad news for many gold companies because it can wipe out improvements in the commodity price of gold. But Gavin Thomas, chief executive of Kingsgate Resources, has his operational costs in US dollars.

In today’s interview, Thomas tells Michael Pascoe that this small – but multinational – gold miner is now planning to double its annual production to capitalise on the improved prospects for gold.

With its key assets in Thailand, and long-term demand for its products emerging in China and India, Kingsgate stands out as one of the strongest exposures to the Asian gold mining sector.

The interview

Michael Pascoe: Your leverage to the gold price: is that something that gives you particular promise or concerns you at the present?

Gavin Thomas: Oh I think it’s a tremendous hope. My view is that gold is on an upward trend in the long term. You’ve seen tremendous growth in Thailand. The increases that we’ve had in the gold industry over the past five years have all been consumed by China and when you add on India and Thailand as well, which is the third-largest consumer of gold on a GDP basis, I just think that gold is on a general long term upward trend.

There is not a tendency for the Australian dollar to take away whatever the gold price delivers?

I think that that may be here in Australia. Our operating costs are US dollars and so we are mainly exposed to the US dollar gold price and so therefore it’s good news for us – where gold is heading. And I think that that’s going to far outstrip any rise in the Australian dollar. Historically, Australia has maxed out in the 80s. I see that gold is going to move. I don’t want to put a top price on it, but gold is going to move far more than where we are right now.

Mandy Rice-Davies would say, 'Of course, a gold miner would say that’. Looking specifically at your own project, you’re in an expansion stage but you have suffered some sovereign risk in Thailand.

I don’t know about sovereign risk. It’s Asia. I think if you go and look at Indonesia, Thailand, Malaysia, China – all of Asia doesn’t have a culture like us. Australia and Canada, we can set timetables. We meet those timetables. That’s why our mining industry is strong; driving our economies. Asia doesn’t have that same mentality. Look at all of our compatriots. All of our competitors. They’ve waited years to get their licences and I don’t see there’s political risk at all. I just see it as a different culture. It’s a place where junior miners like ourselves 10 years ago could go. Believe in a property and we are sitting on a gold province that will in my view, in five or 10 years time have many tens of millions of ounces of gold. So you take the risk/reward. I’ve been to Chile when it was '¦ in 1989. Fantastic place. It was the right decision. Asia is the right decision now.

But still a coup, some attempts to fiddle with the exchange rate'¦

That’s part and parcel. I’ve worked in seven post military coups and it’s not a problem. Mining is about long term. We don’t care about today. We care about the long term. Thailand long term has never expropriated a mine. Its currency moves up and down. It’s a safe place legally, yet has its challenges and its frustrations. There’s no denying that. Just like China, just like Indonesia.

And obtaining the leases that you require?

We will get them. We’re very clear on that. We believe that our environmental impact assessment is near. Maybe a week or so away, we’re not sure. I hate giving timeframes in Asia. Our mining lease will follow. It’s regulatory after the EIA. We would hope within months but again I don’t want to be prescriptive. It’s just impossible to tell in Asia.

I don’t want serve too much of a Dorothy Dixer up to you, but it is a promising project.

That’s an under-statement, Michael. I’ve been associated with gold mining throughout most of my life and been associated with some pretty good finds. What we have in Thailand is a remarkable gold asset. The asset we have is 4–5 million ounces today. I believe that within the mining leases we have huge upside. Somewhere between five and 10 million ounces of gold, and we are in a gold province that with exploration I believe will yield at least one if not two more Chatree-like mines. In other words, two or three more mines in the range of five to 10 million ounces of gold and several other projects. So I think we’re sitting on a province that is akin to the Norseman to Kalgoorlie gold. Whether it’s as big as that I don’t know, but it is a major gold province in the world that no one really understands.

Can you keep control of it?

That’s a challenge, isn’t it?

The miners in Australia are having a very difficult time getting machinery, materials and manpower. Is it even harder in the middle of Thailand?

It’s always difficult offshore, however what we do have is a great location, a great asset and a lot of people want to go there. We have many significant assets. We are the safest gold mine in the world. There’s a huge upside potential. We want to double the size of the plant to a five million ton per year operation. We want to give people a challenging workplace and we’re finding no real problems attracting offshore expatriates, but we don’t need many.

The really big significant fantastic thing about Thailand is its people. We have 1% expatriate workforce. We’ve gone into an under-educated rural area and today we have 1% expatriate workforce and in the 5½ years of operation we’ve only had one accident and that was a contractor coming on to site. One accident in 5½ years of operation is just stunning. And no one in Australia nor the world can come even close to those numbers.