Kingston Resources moves closer to restart of operations at Misima and Mineral Hill projects

Kingston Resources (ASX: KSN) has posted a June quarter of significant activity headlined by restart activities at the Misima gold project in Papua New Guinea and the Mineral Hill copper-gold mine in New South Wales.

The release of a definitive feasibility study for Misima confirmed the potential for a large-scale, long-life, low-cost open pit operation with forecast production of approximately 2.4 million ounces gold and 5.6Moz of silver over a 20-year mine life.

The development would have a pre-tax net present value of $956 million and life of mine revenue of $6.1 billion, with an all-in sustaining cost of A$1,217 per ounce.

An updated ore reserve jumped 28% on previous figures to 76 million tonnes grading 0.8 grams per tonne gold for 1.73Moz.

Big achievement

Managing director Andrew Corbett said the definitive feasibility study was a big achievement for the Misima project during the June quarter.

“It represents a tremendous milestone for us and reflects incredible work from our technical and operational teams who have exceeded project expectations,” he said.

“With all the necessary foundations now in place for a return to gold production at Misima, we look forward to advancing all the necessary approvals, strategic and funding options to bring the mine to production.”

Mineral Hill drilling

During the quarter, Kingston also made progress at its Mineral Hill copper-gold mine, delivering strong initial diamond and reverse circulation drilling results from the Pearse and Southern Ore Zone deposits.

An intersection of 39m at 4.19g/t gold and 37g/t silver from 37m at Pearse North confirmed the high-grade tenor of the deposit and indicated the presence of significant gold mineralisation outside of the existing ore reserve pit shell, which was determined using a US$1,300/oz gold price.

Results from other holes at Pearse North were also believed to be highly encouraging and included 10m at 6g/t gold and 33g/t silver from 72m.

High-grade base metal results

Work at Southern Ore Zone underground delivered high-grade base metal results with significant precious metals credits including 10m at 2.12% copper, 10.4% zinc, 10.3% lead, 0.5g/t gold and 81g/t silver from 150m.

Kingston said the initial hole reported “exceptional” results within a broader zone of mineralisation, with peak grades of 5.5% copper, 32% lead and 25% zinc.

The results are expected to contribute towards an updated mineral resource estimate for Southern Ore Zone before year end.

A review of existing geophysical data also identified 10 new and untested near-mine targets, within a short distance of the existing processing plant at Mineral Hill, which has been on care and maintenance since 2016.

The targets reflect along strike or down-dip (plunge) extensions, as well as potential offsets and replications of known mineralisation.

Mining restart

Kingston has commenced a work program to restart open pit and underground mining and associated processing at Mineral Hill.

An updated mineral resource estimate for the Pearse open pits is being prepared for release in the September quarter.

It will be followed by an updated estimate for Southern Ore Zone, mine design work, metallurgical testing to confirm the suitability of the historic flow sheet, and an update of reserves at both deposits.

Engineering studies kicked off during the quarter to establish a refurbishment strategy and work program for comminution and float circuits at the processing plant.

Preliminary discussions have also been held with a number of potential offtake partners.

Tailings storage sales

Processing operations at Mineral Hill’s tailings storage facility (TSF) continued to demonstrate improvements through the quarter resulting in the delivery of record sales in June.

While throughput for April and May was impacted by severe adverse weather conditions, the tonnes mined increased 12% on the March quarter with processing rates regularly at nameplate levels or above.

TSF reserve grades continued to reconcile well, with a variance of less than 1% on tonnes and 3% on grade for the areas mined to date.

Kingston is working to establish access to higher grade areas of the dam around its periphery, with lower-grade, higher-moisture material from the centre of the dam removed.

This contributed to a 20% increase in grade mined during the quarter.

June quarter recoveries improved 13% over March quarter levels and are expected to continue increasing as mining moves deeper into the TSF.

Cost pressures

Industry-wide cost pressures continued to challenge Mineral Hill’s reagant-intensive operations during the quarter.

The company’s on-site processing team identified opportunities to reduce reagent consumption rates however Kingston said it was unlikely these ideas would fully offset the increases.

All-in-sustaining-costs for the June quarter were $2,424/oz, which the company expects will improve in the current quarter with a normalisation in rainfall and ongoing benefits from improved grade and recoveries.

Financials

Kingston ended the quarter with a bank balance of $9.2 million, comprising $5.6 million in unrestricted cash and $3.6 million in restricted cash (environmental bonds).

Earlier this month, the company announced it had secured a $10 million debt facility with Pure Asset Management to support work programs required to re-establish mine production at Mineral Hill.

The first $5 million tranche of this facility has already been drawn and the second tranche will be available before end November on the achievement of certain milestones related to the restart.

Kingston’s total exploration and development expenditure for the quarter was $4.3 million, of which $2.2 million was spent on the Misima project and $2.1 million at Mineral Hill.

The company made payments of $150,394 to associates or related parties reflecting fees, wages and superannuation paid to directors.