Mining resumes at Kingsrose
Recommendation
Mining has recommenced at Kingsrose Mining’s Talang Santo project in Indonesia. Although production rates will initially be low – just 1,000 ounces are expected in the December quarter – they will rise swiftly. By June next year the company should be producing 20,000 ounces of gold and by mid-2014, 40,000 ounces. Normality is returning to the wounded miner.
As exploration resumes, fresh drilling has revealed better than expected grades. One hole sunk into Talang Santo recorded 125 grams per tonne of gold, compared to a grade of 8gpt entering the mill. Not only does this suggest resource expansion, but it confirms that low costs can be sustained. We estimate the company should produce gold at a total cost of under $700 an ounce, among the lowest in the industry.
Kingsrose offers cheap production today with the promise of exploration growth in the future. Although the gold price will influence profits our investment case will turn on a successful return to production, and some exploration luck, rather than the gold price. Kingsrose’s share price has fallen marginally since 17 Sep 13 (Speculative Buy – $0.39) and it remains a SPECULATIVE BUY.