August 14, 2002 BUSINESS AND INVESTING > THE SPECULATOR
SPECULATOR: BULLION RUN
Punters who followed me into Kingsgate Consolidated a mere three weeks ago would have scored a profit of between 15% and 20% after the gold miner confirmed a maiden 15¢ dividend would be paid, then announced a 59% boost to its gold resource. With brokers tipping the shares to go through $3, they should strengthen further if last week's sudden rally in the gold price holds, with a jump from around $US203/oz to above $US214/oz.
Previously (Golden opportunity, August 6), we noted that Kingsgate's shares had slipped in the previous week's jittery market to a low of $2.25. We bought at $2.31. On the day the magazine went on sale, readers could have bought for as low as $2.30, after the stock opened at $2.34, peaked early at $2.36, then sold down to $2.30 and closed at $2.33 for a turnover of almost 400,000 shares.
At the company's annual meeting on August 2, chairman Ross Smyth-Kirk announced a maiden dividend of 15¢ would be paid after Kingsgate earned a net profit of $30m (42¢ a share) for the year to June 30. (Payment will be on October 28 to shareholders registered by September 23.)
Better, the profit was derived from just seven months of production from the company's newly opened Chatree gold mine in Thailand, which yielded in that time 91,185oz of gold and 353,146oz of silver. The mine opened late last year based on a resource of 14.5 million tonnes of 2.6g/t gold and 12g/t silver. The company has now announced that further drilling at Prospect A, 1km north of the mine, has identified a new resource of 14 million tonnes of 1.6g/t gold and 20g/t silver. Drilling under way in the mine area is expected to increase reserves by mid-October.
Smyth-Kirk told shareholders that production in the current year should be 167,000oz of gold equivalent at the ultra-low cash cost of $US80/oz to produce a profit to June 30, 2003, of $US25m ($44m or 61.5¢ a share). Kingsgate opened its Chatree operation with 100% debt finance of $US35m from Macquarie Bank. At June 30, debt had been reduced to $US25m and by June 30, 2003, it will be $US12.5m.
Another of our portfolio stocks, Marlborough Resources, continues to be ignored, probably because it's seen as simply a tin miner, albeit a successful one (see Too good by half, June 25) that expects a positive $3m cash flow in the current year from its re-opened Ardlethan tin mine in the Riverina district of south-western NSW. But the company also has interests in tenements and licence applications covering some 6400 sq km over potential epithermal gold/copper prospects along the Connors Arch and Marlborough Fault in central Queensland, stretching 300km north-west of Rockhampton to beyond Proserpine.
Last week, the company announced a new joint venture over 640 sq km at the southern end of the Connors Arch including Mt Mackenzie. Over the past 20 years, Marlborough and its associates have spent more than $5m exploring this and nearby areas, and its present joint venturer SmartTrans (formerly Coolgardie Gold) another $2m. Marlborough holds 40% and SmartTrans (ASX code: SMA) 60%. Now Toowoomba property developer Clive Berghofer, through his private company Jeteld, will earn a 47% stake in the southern blocks by spending $2.5m on exploration. Berghofer is a former mayor of Toowoomba named as having a net worth of $115m in a recently published "rich list".
The area (freehold and granted titled land) is claimed to be one of the largest gold-bearing hydrothermal prospects in eastern Australia. I understand both MIM Holdings and Newcrest sought possible entry for the same scale of spending but both wanted a higher equity and control. SmartTrans director and geologist Jim Laurie will be manager. At least $500,000 will be spent this year.
Marlborough also has a 75% interest in a group of Lachlan foldbelt projects including the Lucky Draw gold mine, which under Renison management between 1988 and 1992 yielded net profits of $30m at cash cost of between $120/oz and $170/oz. Much potential is seen here. The 25% stakeholder, after a consolidation of their properties, is Michelago Resources, chaired by former Homestake director John Horan.
Marlborough, with 216.1 million shares on issue at 6¢, carries a market capitalisation of less than $13m and held $1.1m cash at June 30 with a positive cash flow established.
Punters keen on really low-priced counters might look at SmartTrans, capitalised at just $4.2m with its shares last traded at 2.2¢. Half its business is selling transport scheduling software that is yet to earn its keep but, in addition to the Jeteld expenditure on its ground, it also has signed BHP Billiton to spend $650,000 on a lead-zinc prospect north of Mt Isa.
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