Cashed up Kingston Ready to Drill WA Gold Project

Kingston Resources Limited (ASX:KSN) is set to start a ~5,000m resource definition Reverse Circulation drilling program at its 75%-owned Livingstone Gold Project.

Drilling will commence in the coming weeks at the Kingsley prospect at Livingstone, located 140km north-west of Meekatharra within the Bryah Basin of Western Australia.

News of the drilling comes just weeks after the company conducted a capital raising of up to $8.4 million to progress its key gold projects, the Livingstone Project and the Misima Gold Project located in Papua New Guinea (PNG).

Kingston recently announced that it had secured agreement to move to 100% ownership of its flagship 3.2 million ounce Misima Gold Project in PNG and had commenced its pre-feasibility study (PFS) on the project.

Kingston also launched a Share Purchase Plan (SPP) providing existing eligible shareholders with the opportunity to participate in this milestone capital raising on the same terms as the share placement.

The SPP closes this Friday.

Management noted that a number of new institutional shareholders are now on its register following the placement, and there was also strong support from existing shareholders.

Funds raised will be used to advance the Misima Gold Project and to accelerate exploration at the Livingstone Gold Project in Western Australia. Further cash was put in the coffers following the sale of an historical gold royalty established in 1992 over a number of tenements held by RNC Minerals within the Higginsville gold operations to Vox Royalty Corp.

The total consideration for the royalty is $650,000, of which $350,000 will be settled in cash and $300,000 in Vox Royalty shares, a group with a portfolio of 36 royalties and streaming assets, and one of the fastest-growing companies of its kind.

There is plenty of work going on at both projects with the cash to back them, so let’s see how far Kingston has progressed since we last caught up with the company six weeks ago.

Catching up with ...

Share Price: $0.17

Market Capitalisation: $37 million

Cash at hand: $2.0 million (as at 31 March 2020, prior to completion of the recent placement)

Here’s why I like KSN:

Upcoming drilling in WA

When we last caught up with Kingston Resources (ASX:KSN) in the article Kingston Increases Gold-Silver Resource: PFS Set to Start in June, the company had just announced a significant increase in the JORC Mineral Resource Estimate for its flagship 80% owned Misima Gold Project in Papua New Guinea.

Furthermore, with Western Australia’s internal travel restrictions being lifted, the company said it would resume work at its Livingstone Gold Project.

That work program is now just weeks away, with Kingston set to commence an upcoming Reverse Circulation drilling program, designed from knowledge gained from prior drilling and the structural review the company conducted over the wider Livingstone Project, including the Kingsley prospect, in late 2019.

This drilling will be undertaken following completion of the Resource definition program at Kingsley. Target zones are shown below:

The aim of the fully permitted program to be conducted in July this year, is to define shallow oxide mineralisation that will contribute towards an initial maiden JORC compliant resource estimation.

The company will test several holes for potential depth extensions to the known mineralisation.

Mobilisation and drilling is anticipated to commence by mid-July and conclude in August with final assays expected by September.

Kingston Resources Managing Director, Andrew Corbett said: “With the COVID-19 restrictions beginning to ease, we are really excited to get the team back out on the ground exploring and creating value for our shareholders. With this next round of drilling at Kingsley we are aiming to define a shallow oxide resource, as a base from which we can grow the project.

“We are also looking forward to drilling the conceptual Stanley Deeps target, for which we have been successful in securing co-funding through R21 of the WA Government Exploration Incentive Scheme. This is the third round of funding received by Kingston through this valued scheme.”

Misima continues to impress

Some of the biggest news to come out of the Kingston stable in recent weeks is the agreed and executed final terms with joint venture partner, Pan Pacific Copper Co Ltd (PPC), to acquire PPC’s 19% interest in the 3.2 million ounce Misima Gold Project in PNG.

As a result of the transaction, Kingston will move to 100% ownership of the project.

Kingston will pay a total consideration of $2 million for the acquisition in two tranches.

The first tranche of $350,000 was due on or before 30 June, 2020, with the second tranche of $1.65 million due on or before 28 February, 2021.

The PPC shares will transfer to Kingston upon receipt of PNG regulatory approval and payment of the second tranche.

Kingston’s managing director, Andrew Corbett, said, “We would like to thank PPC for their partnership at Misima and for their collaborative approach to this transaction.

“We are now looking forward to taking the next step at Misima, with a transaction that delivers 100% ownership of this outstanding gold development opportunity to the company as we move ahead with a prefeasibility study that is already well underway and on track for delivery in the December quarter of this year.”

Significant Resource increase

Kingston also reported a significant increase in the JORC 2012 Mineral Resource Estimate for its flagship Misima Gold Project, incorporating the results of recent successful drilling programs and updated gold price assumptions.

The updated Misima Resource delivered a 15% increase in total gold ounces and 30% increase in total silver ounces and now comprises an Indicated and Inferred Mineral Resource of 105.5 million tonnes at 0.93 g/t gold and 5.4 g/t silver for 3.2 million ounces gold and 18.2 million ounces silver.

There is substantial potential to further expand the mineral resource and upgraded additional inferred ounces outlined below.

The updated resource confirms the Misima project’s status as one of the most significant mid-tier gold development opportunities in the Asia-Pacific region.

Proposed starter pit

Early work at Misima highlighted that a starter pit would considerably enhance project economics.

The exploration strategy has thus focused on near-surface opportunities, with the company confirming the Ewatinona Deposit as the intended starter pit.

The Misima Resource update has focused on updating the geological model at Ewatinona while also revising project assumptions around cut-off grade and gold price inputs.

The Umuna Deposit is the other major focus.

Umuna currently contains 94% of the total resource ounces and is also expected to underpin the PFS work focusing on a large-scale, long-life open pit mining project.

The PFS is now underway, with Kingston appointing a dedicated Study Manager at Misima in early June, along with mining, geotechnical, metallurgical and environmental consultants. Engineering consultants have been short-listed with an appointment anticipated in early July.

Highlighting the significance of Ewatinona and Umuna, Kingston’s managing director Andrew Corbett said, “Looking ahead, there are considerable operational and economic benefits to be unlocked by focusing on Ewatinona and Umuna.

‘’Both areas leverage off previous mining access which remains in place as they have both been mined historically with a combined total of over 90 million tonnes of ore processed through a standard CIL (carbon in leach) plant.

‘’Kingston has considerable historical information on the mining, milling and geotechnical characteristics of these orebodies, as well as the historical processing plant configuration.

‘’As well as giving us confidence in the project’s future, this information will save time and costs in delivering the upcoming PFS.’’

Potential upgrades

Once a return to drilling at Misima is possible, Kingston’s primary focus for ongoing drilling will be on upgrading and potentially extending both the Umuna and Ewatinona Resource with a focus on near-surface opportunities.

Key growth opportunities at Umuna include a resource model update, follow-up drilling and extensions, including Tonowak and Padocol as indicated below.

Growth drivers at Ewatinona include resource drilling to upgrade and extend the resource, as well as the identification of extensional targets identified from recent field work outside of the current resource.

The follow-up drilling will include the promising Abi discovery which lies 600 metres south-east of Ewatinona.

The resource model update will include the final nine holes drilled at Ewatinona for which assays were received following the resource cut-off date.

Analysts upbeat

Given the work going on at Kingston’s Livingstone and Misima Projects, Cannacord analysts continue to remain upbeat.

Reg Spencer from Canaccord Genuity is particularly optimistic, recently reaffirming his speculative buy recommendation and price target of 85 cents per share.

This implies share price upside of more than 400% from the company’s current price of 16.5 cents.

While this may seem a stretch, the extensive newsflow that is imminent could provide plenty of near term catalysts for Kingston.

In particular, the PFS and reserve estimation work could be the foundation for a significant rerating.

Macroeconomic conditions are also working in Kingston’s favour.

The gold price is at near-record highs, and the volatile economic environment suggests there will be further support for the traditional safe haven precious metal.

Crunching the numbers, Spencer said, “Kingston’s enterprise value to resource multiple of A$9 per ounce is well below the peer group weighted average of $58 per ounce which we consider unwarranted given Misima’s (PNG project) scale and near-term development potential.

“A positive outlook for the gold price and relative dearth of advanced gold projects of scale on the ASX further supports our favourable view.”

There is certainly a lot to like about Kingston in this current climate.

With further news to come, including several milestones to consider, the $35.8 million capped Kingston has launched into FY2021 with a highly positive outlook.