Survival fears for goldminer Kingsgate Consolidated

Kingsgate Consolidated has warned shareholders it may not survive a crisis surrounding its goldmine in Thailand.

Mixed gold and silver being poured into ingot moulds at Chatree.

One-time gold high-flyer Kingsgate Consolidated has warned its shareholders that it may struggle to survive the crisis surrounding its flagship goldmine in Thailand.

The annual accounts released late on Wednesday included a note from auditors PwC warning of “material uncertainty” around Kingsgate’s ability to continue as a going concern.

The auditors noted that Kingsgate’s ability to continue hinged on the continued support of its lenders and its ability to reap enough cash from its Chatree goldmine in Thailand ahead of its ordered closure on December 31.

Kingsgate revealed in the accounts that its lenders, who are owed $98.1 million that is secured against Chatree, had been briefed on a new mining plan that would maximise cash flow out of the project over its remaining months with a view to generating enough money to repay the debt.

“They have indicated at this time that they will support the adoption of the revised mine plan,” Kingsgate said.

On top of that, the company said its ability to continue as a going concern would also involve being successful in one or more of a range of measures, including a potential lawsuit against the Thai government or an equity raising.

Shares in Kingsgate — which were once worth more than $10 each, giving the group a market capitalisation of over $1 billion at the time — have been suspended at 41c each since May as it scrambles for clarity over the Thai situation.

The Thai government’s order for Kingsgate to close Chatree has been disputed by the company, which has pointed to positive results from health, environmental and community audits.

“While Kingsgate is extremely disappointed with the situation it now finds itself in, the company continues to vigorously pursue a range of potential remedies for the situation, which include both legal and diplo­matic options,” the company said.

“Both the Kingsgate board and management are seeking compensation on behalf of shareholders for the material impact of the Thai government’s decision, and as noted previously, it is appropriate that Kingsgate’s shares remain voluntarily suspended while these options are being pursued.”

Kingsgate reported a net loss of $229.4m for the 2016 financial year, following a loss of $147.6m in 2015. The result was exacerbated by a $227.6m writedown on the value of Chatree.

Copper miner Tiger Resources also warned that there was “significant doubt” about its ability to continue as a going concern, telling shareholders that its future hinged on a sustained improvement in the copper price and a tax refund from the Democratic Republic of Congo.

Tiger, which operates the Kipoi copper mine in the DRC, is owed $11.3m in value-added tax by the DRC government.