Kingsrose goes to market. Again.

The Talang Santo mine was intended to replace declining production from the Way Linggo mine. Although Way Linggo has declined as expected – it produced just 800 ounces last quarter from stockpiles – its replacement has not yet begun as it awaits approvals from Indonesian authorities. That delay has been costly for Kingsrose Mining.

With just $4.2m left in the bank, the company will issue 22m shares at 35c to raise an additional $8m via a share placement. Way Linggo needs additional work before the company decides whether to continue the mine or abandon it. Talang Santo needs to prepare for imminent production. Haulage roads have to be built, equipment bought and ground leveled. The money raised will go towards these ventures.  

Kingsrose could've taken on more debt but, with gold prices experiencing a small revival, has opted to raise equity instead. Institutions have been keen to provide cash to one of the lowest cost miners in the world. Low costs are a powerful advantage, but only if the company ever gets on with mining. Delays have compounded for a year now and the company will not meet its production targets this year. Our patience with the business is wearing thin.

The Talang Santo mine, however, is a prize worth waiting for. Production rates of between 40,000-50,000 ounces of gold should be possible for years, generating operating profits of $28-$35m a year from this single mine. Kingsrose has more than a dozen sites with just as much potential. With a market capitalisation of just $125m, the company is not priced for production at Talang Santo, let alone any blue sky.  It remains part of the suggested portfolio outlined in AU, check out this gold portfolio (Speculative Buy - $0.40). The share price is up 5% since Gold portfolio takes a bath (Speculative Buy - $0.355) and, despite lowering the prices in our recommendation guide to account for the delays and share dilution, Kingsrose remains a SPECULATIVE BUY.