Kingston Resources takes big step to becoming low-cost, mid-tier gold producer with positive PFS for Misima in PNG

Kingston Resources Limited (ASX:KSN) (FRA:RZZ) has taken an important step towards becoming a low-cost, mid-tier gold producer in the Asia-Pacific region with the completion of a positive pre-feasibility study (PFS) for its flagship 100%-owned Misima Gold Project in Papua New Guinea. The PFS incorporates a 1.35-million-ounce ore reserve for a 10-year mine life within a mineral resource estimate, which has increased 2.5% to 3.6 million ounces from 3.2 million. In another key development move, the company has appointed highly regarded and experienced Mick Wilkes, who is a non-executive director, as non-executive chairman with effect from December 1, 2020. "Significant milestone" Kingston Resources managing director Andrew Corbett said: “We are extremely excited to be able to report such strong results from the pre-feasibility study, together with an impressive maiden 1.35 million ounces ore reserve and a further increase in our global mineral resource to 3.6 million ounces. “This is a significant milestone for all stakeholders in the Misima Gold Project and represents a meaningful step towards our goal of becoming a substantial new mid-tier Asia-Pacific gold producer. “The PFS confirms a robust, large-scale, long-life, low-cost operation delivering annual average production of 130,000 ounces at an extremely attractive average all-in sustaining cost of below A$1,200/oz. “The contained gold metal in the mine plan comprises 64% ore reserves and indicated resources, with the balance of 36% derived from inferred resources. “We also have confidence in our ability to convert these inferred ounces to the indicated category as drilling continues in parallel with the next stage of feasibility work. “Importantly, there was a high conversion of historic resources to reserves at Misima, which bodes well for the future performance of the operation." Shares have been as much as 16% higher to 29 cents intra-day. "One of best undeveloped projects" in region Corbett said: “Other key takeaways for investors include the relatively low capital intensity for a gold project of this scale and mine life, with forecast capital expenditure of A$283 million." It has a life-of-mine revenue of almost A$5 billion, free cash flow of A$1.5 billion, a pre-tax NPV of A$822 million using an 8% real discount rate and conservative A$1,600/ounce gold price, and an internal rate of return of 33%. These numbers jump to an NPV of A$1.28 billion and an IRR of 48% at the current spot gold price of US$1,900/ounce. “These are outstanding results that highlight Misima as one of the best undeveloped projects in the Asia Pacific region.“ Unlock further value “It is also a platform from which we will continue to unlock further value through the targeted drilling campaigns currently underway at Misima. “We are now planning a number of additional work programs which will feed into the DFS, which is anticipated to commence during Q2 of 2021,” Corbett added. 17-year mine life The PFS confirms the potential of delivering gold production of 130,000 ounces per annum at forecast life-of-mine (LOM) all-in sustaining costs (AISC) of A$1,159 per ounce over a forecast 17-year mine life. The PFS is based on the redevelopment of the brownfields site of the former Misima gold mine. Kingston plans to construct a new 5.5 million tonnes per annum carbon-in-leach treatment facility and modern infrastructure on the footprint of the historic mine, establishing a new standalone, long-life gold mining and processing operation. This will be underpinned by two major ore sources – a cut-back of the existing Umuna open pit and an expansion of the existing small pit at Ewatinona in the Quartz Mountain area. Exploration strategy Kingston has also identified Ewatinona as a 200,000 ounces starter pit for inclusion in the PFS. It has now identified a number of further target areas to continue to deliver on this strategy: ➢ Kulumalia – Targeting conversion of near-surface ounces from inferred to indicated and potential reserve status. It is now drilling in this area; ➢ Umuna East – Further drilling will target the expansion and upgrade of the inferred resource. As with Kulumalia, Umuna East is a possible target for adding higher-grade feed to early years production; ➢ Kobel/Maika – Kingston intends to replicate its strategy at Ewatinona at Kobel and Maika. Desktop work is underway assessing existing data ahead of developing a drill program at these targets; and ➢ Abi – Its proximity to Ewatinona and the proposed processing plant location make it an ideal, high-grade, near-surface exploration target. Next steps Kingston is now planning the following: ➢ Drilling activity underway at Misima is focused on the identification of further near-surface, higher-grade ounces for early years mill feed. First results from this program are expected to be reported in the first quarter of 2021; ➢ Existing environmental baseline work will expand to incorporate further elements for input into the environmental approvals process; ➢ Metallurgical and geotechnical test-work programs required to confirm and expand data for input into the definitive feasibility study (DFS) are underway or due to begin shortly; and ➢ Kingston expects to begin the DFS by mid-2021. New chairman Mick Wilkes, who has been a non-executive director of Kingston since July 2018, will succeed Anthony Wehby, who will remain on the board as a non-executive director. Wilkes, an experienced mining professional with over 35 years’ experience in the industry, was most recently the president and chief executive officer of OceanaGold Corporation (ASX:OGC) (OTCMKTS:OCANF) (FRA:RQQ), as well as a member of the board administration committee for the World Gold Council. He is currently a member of the Advisory Board for the Sustainable Minerals Institute at the University of Queensland.