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Yellow fever strikes Kingsgate shareholders

A DRAWN-OUT 15-year wait for dividends is over for WA-listed gold company Kingsgate Consolidated NL.

The gold mining and exploration company successfully commissioned the Chatree Gold Project in Thailand, 280 kilometres north of Bangkok, in December last year and is already operating at full production at an initial rate of one million tonnes per annum – and the money is pouring through the door.

Patient investors, led by National Nominees and Citicorp Nominees with a 6.8 per cent and 5.7 per cent respectively, have already been re-warded with a lift of 115 per cent in share prices from 70 cents in Sept-ember to a high of $1.70 late last month.

But stockbrokers are tipping for more to come.

A review of the company’s activities by Piers Reynolds puts the current net asset value of the shares at $1.86, based on a performance that will give shareholders a $21.5 million profit in the current year.

This is expected to double the following year to $42.5 million on sales of $80.8 million, turning the $2.4 million loss in the last financial year into just a distant bad memory.

DJ Carmichael senior analyst Peter Strachan is punting on even more upside to the share price.

In the short term, he is expecting the price to rise as high as $2, as the company takes advantage of low labour and production costs that comes with its low waste to ore ratio.

On a net present value basis, Mr Strachan puts the value of the company at around $140 million, with earning per share of around 20 cents.

Grange Securities is forecasting earnings per share of 30 cents in the current year, which will climb to 59.5 cents next year, based on recovery costs of $177/ounce and an average gold price of $551.

Mr Strachan said the company also had the strong backing of banks for the project, with the $US32 million capital cost for the mine funded by Macquarie Bank.

“They (Kingsgate) were actually able to project loan the whole thing, so the bankers must have been pretty happy with them to lend them the whole lot,” Mr Strachan said.

Already, the company appears well on the way to achieving its targets. Its second quarter report indicated that 88,025 tonnes were milled on a head grade of 4.58 grams of gold per tonne and a 94 per cent recovery rate.

Managing director Micheal Diemer said while the company had been criticised for putt-ing a new production plant at the site, he believed the cost was justified because brown field exploration in the area had the potential to increase the mine life beyond its current expected seven-year period.

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