KCN - Kingsgate Consolidated

[finicky]

Hi @barney, the US$55m was the settlement with Kingsgate's insurer, Zurich Australia Insurance over a disputed political risk policy that the insurer dragged through the courts trying to bankrupt Kingsgate into submission.

Kingsgate settles PRI Claim for more than A$82 million – www.kingsgate.com.au

www.kingsgate.com.au

To quote, March 2019:

"The HOA with Zurich provides for a settlement to Kingsgate worth more than AUD $82 million comprising:

A cash payment of US$55 million to be made to Kingsgate by mid-April 2019;

A requirement for the Insurers to contribute up to US$3.5 million of future costs towards the TAFTA Arbitration. The Insurers funding contribution will be paid on a pro-rata basis with Kingsgate; and

A sharing arrangement between Kingsgate and the Insurers for future distributions of TAFTA Claim proceeds.

Executive Chairman of Kingsgate, Mr Ross Smyth-Kirk, today said “I realise that it has been a long recovery process for our loyal shareholders, but this settlement transaction provides material upside for our Company, namely:

Sufficient funds to pay out in full the Corporate Debt Facility;

Liquidity to give the Company time to maximise the value of the Nueva Esperanza project through further development or sale, and remain aspirational for other development opportunities;

Kingsgate no longer requires litigation funding to pursue its PRI Claim nor its TAFTA Claim; and most importantly,

The Insurers’ pro-rata funding commitment under the HOA means that Kingsgate and the Insurers will be working together to fully prosecute the TAFTA Claim.”

“I would also like to thank our dedicated legal team at Clifford Chance .."

The arbitration hearing under TAFTA was a separate proceeding that followed the insurance decision and that proceeding concluded many months ago but we await the tribunal's considered judgement. Meanwhile there has been wrangling behind the scenes for a settlement between the two parties before a judgement is handed down. Kingsgate has been ordered by the court not to tell its shareholders what's going on while judgement is in abeyance.
If we win at judgement, or a preemptive settlement is reached, yes it's certain that the figure will be substantially higher than US$55m. To take the most informed and sobre prediction, densamer, whom I mentioned, said this on twitter yesterday,
"Look the way I read this news is the company already has an EV of more than -$250m, yes a negative EV."
Unless I have a cognitive issue, I think that implies a cash amount of more than $430m after the dust settles, being that the current market cap is about $180m. There are about 220m shares in KCN issued so that would be almost $2 cash per share, plus certainly, assuming this victory, a gold mine that is relicensed to operate and which already has newly awarded prospecting tenements.

 

[barney]

Thanks @finicky ...... So we can assume that if the judgement is positive (which looks very likely), the Company could be very well set both financially plus have a working gold mine to continue on with. Patience could be well rewarded.

 

[finicky]

Seems a pretty emphatic move above a congestion zone today, albeit the volume isn't that impressive. Could that be interpreted as less willing sellers? Consensus is that litigation resolution looms some time over the next 2 months. Last 3 candles taken together are bullish.

 

[barney]

Last 3 candles taken together are bullish.

Agree Finicky .... Don't hold but price action looks good ⬆

 

[sptrawler]

Yes Finicky, if it takes off, you deserve everything you get, you have been a true believer.
A mate of mine, who put me on to them, still holds and as you will probably hold long term.

 

[finicky]

Thankyou for the kind words @sptrawler
Kingsgate is almost one of those 'binary result', all or nothing situations and last time I entered one of those (Neon Energy) the cookie crumbled the wrong way - I lost $40k on a dud oil drilling result at sea, with costs mounting as the leased vessel became stranded in bad weather or something. The con artist management had to sell all our producing onshore assets to pay the vessel owner's bill. I could have sold for a bagger even after the fiirst bad result but held on till the death knell along with the rest of the duped herd. I believe you traded Kingsgate for a profit earlier and that is reasonable.

If the Kingsgate bet does come off I'd like to think I will learn a lesson from it, but likely I won't. That is - not to just write off my duds without going back at times to seriously reassess them. My first purchases in KCN were back in 2003-05 @ average ~$3. I only did reassess KCN and multiply my holding because of some very astute commentary from others elsewhere. Codan (CDA) is one I think of in this same frame. I just left my holding in CDA to rot after some very bad news when I had the chances in 2013 and again in 2016 to double my holding at well under a dollar for what was relatively low monetary risk. I couldn't look at it. I get jaded with my dud failures and don't look at them freshly, even when massively discounted and with the chart basing.

CDA Mthly

 

[finicky]

I made KCN my top pick for the 2021 stock picking game. The rationale being that I am very optimistic of a fruitful outcome from the Thai litigation case obviously, but also see this expected outcome as insulating the company somewhat from broader negative market events - in a nutshell, I fear a crash in 2021 and that is why two of my other picks are BBOZ and BBUS.
Here is a recent twitter summary of expected outcome scenarios from the always lucid and insightful densamer (den5amer)

den5amer
@den5amer
$kcn $kcn.ax

1. Settlement, mineral processing licence approval for Chatree ~130koz Au, 75koz Ag /year (cash cost ~US$850/oz) + ~$200m cash compensation/part sale
OR 2. TAFTA ruling, ~$500m-$750m legal claim
AND Nueva Esperanza ~4moz Ag, 75koz, 24koz Au /year (1/4)

2. Feb 2020, TAFTA hearing (ave. time to ruling post-hearing ~11 months), KCN reiterates post hearing “…the Company has excellent prospects for a successful outcome” Aug 2020, baseline blood samples collected by Thai Govt agency for mineral processing licence application (2/4)

3. Sept 2020, Thais release gold sludge 3 ½ years after closure Nov 2020, Thais grant 44 exploration licences highly prospective for Au and Ag (635 km^2) ~17 years after initial application (3/4)

4. “Based on the facts of the case, it’s pretty clear that the risk [of Thailand losing] is very high” Dr Kiratipong Neawmalee (PhD International Economic Law) MC $174m Cash $22m (incl. sludge) (4/4)

 

[finicky]

Here's a recent example of how it can happen.

The court, the 'International Center for Settlement of Investment Disputes' (ICSID), a World Bank-run arbitration tribunal, is the same court as the one that heard Kingsgate vs Thailand and is now sitting on its decision while pressure is applied to the Thais to reach a settlement. A favourable distinction to be made is that our case had the advantage of being heard under the strength of the Thailand Australia Free Trade Agreement (TAFTA) stipulations. See how a favourable ruling can be followed by moves to seize government assets abroad if the sovereign evades the award.

How Pakistan lost $6 billion on a gold mine
World Bank tribunal decision in favor of foreign miners could see seizure of Pakistan state property assets in US and France

How Pakistan lost $6 billion on a gold mine - Asia Times

PESHAWAR - Pakistan’s US and France based real estate assets are at risk of confiscation as a United Kingdom court moves to enforce an arbitration

asiatimes.com

 

[finicky]

"It's so obvious" 'The Seven Samurai' ☮

 

[finicky]

KCN is my February game pick, but not with much enthusiasm. February is the earliest expected resolution of the Chatree mine legal dispute and you don't assume these things to settle at the earliest.

The share price has been falling for four days and is down 16% in that time. The Dec Qtrly was not well received, same old same old, and the company spending millions in the Quarter while remaining idle. They've got $15m cash left in kitty but there's some griping from shareholders about $3.2m spent on corporate and admin during the Qtr. I would say a big chunk of that was for ongoing rapacious legal fees as 'our team' wrangles behind the curtain with the reps of the weasely Thai authorities. Noone knows what's going on so some speculators have acceptedly bailed with their profits.

Daily chart - messy but monthly still looks kosher

Monthly

 

[finicky]

Added 5,000 @ 0.92 - got bored.
KCN tragics were hoping the share price would catch alight on the silver excitement. KCN has the Nueva Esperanza advanced silver/gold project in Chile plus Chatree itself in Thailand produced more ozs of silver than gold. But crazy Monday barely moved the dial, they all want the scams that identify themselves as primary silver projects.

 

[brerwallabi]

I don’t think the Thai prime minister Prayut is in any hurry to settle and pay any compensation.
“How long has this been going on”
If Thailand do inherit a decision against them, there will be possibly further delay as Thailand deliberate who is responsible internally to pay.
Will it be the state who pays or the prime minister Prayut who took full responsibility for the closure when he used his special powers that he gave himself after the coup to cease activities at the mine.
Internally Prayut was not a state official when he assumed responsibility for closure as he was not an elected official, so the state is not responsible. Under The Thai constitution a prime minister can not be a state official. This means possibly Prayut is responsible personally.
I suspect Thailand will delay as usually they need formation of a special committee to determine who is responsible to pay and no doubt it will be state eventually.
Just my view.

 

[finicky]

Those issues seem internal to me. Who pays is entirely for the Thais to sort out and will be in a strict time frame, not Thai time. Our case under the TAFTA is against the kingdom of Thailand, not any individual. Our mooted victory in the case will fall upon the entity that is the country of Thailand. They can settle, which would be in their interest compared to the likely reasonable terms of an arbitral judgement if it comes to that. Or, if it comes down to a judgement of compensation and the Thai government prevaricates, then we go through the legal processes of claiming liquid assets of theirs abroad, e.g with New York banks. Been done before against recalcitrant governments, we don't live entirely in a jungle.

The time for a judgement to be concluded by the international centre for settlement of investment disputes (organ of the world bank) is already stretching out beyond the average resolution time we are told. Below is a clip of the scenario of what we do if they don't swiftly cough up.

By the way, I am not urging anyone else to risk money on this - it is a calculated gamble and in many cases, including mine, a project of revenge since many of us were KCN shareholders before the dictator, a minority of covetous locals and the jingoistic media unfairly crushed our investment.

 

[brerwallabi]

I wish you all the best however Thailand does not give chit about aliens, spend the money however you want, risk it in Thailand, we interpret laws differently every day.
Slave labour, corruption, prostitution does not exist.
Hope Kingsgate have paid the right person or persons.
The agenda might be state owned and stuff the peasants, then again I might be wrong.

 

[finicky]

Kingsgate ^up 8% so far today.
Page 2 of a release today, sounds like cat got out of the bag briefly in Thai parliament re advice from lawyers for the Thai case. Also, the release (page1, not shown) sounds unusually 'stern' in tone as to what qualifies as compo and what doesn't (mining and processing licenses, prospecting licenses). Heheh

 

[finicky]

Once again my monthly competition stock pick ?? I can really only make a Clayton's post today to validate my entry. Shareholders aren't privy to negotiations and everyone's just hanging out as far as an interest in Kingsgate goes - waiting for something to happen, because nothing manifest has happened in the past month. Not even any interesting posts or tweets elsewhere for me to purloin and pass on.

As attested above, I bought more in February at a higher price than today, but looking again at the monthly chart there is no lack of optimism in the stock considering its fortunes vastly rest on the outcome of a court case. An excellent multi-year shallow base under the $1 level with the price still hugging the rising Bollinger is what i see.

How's that for a contrived post spun out of nothing?

Decade Monthly

 

[finicky]

Bursting with news about KCN so here is the monthly chart.
I'm sure the case is brewing away at the Court for settlement of international commercial disputes.

 

[sptrawler]

Hey @finicky, have they received their payout from the Thai Government.

 

[finicky]

In again for the May comp.

Actually, do have a bit of gossip this time. A new $KCN guru has emerged on twitter. His handle is @unemon1 and as well as interesting speculative insights as to the proceedings against the Thais over Chatree he has advanced a very plausible sounding scenario about the future of the 'shovel ready' silver project in Chile - Nueva Esperanza. I have screenshot it but the gist is this:

Kinross, a USD$10B NYSE mining company, has reentered the Chilean scene by restarting a mine, La Coipa, that is only 25kms away from Nueva Esperanza. It is already connected with a 38kms road. They have announced that they are interested in acquiring adjacent assets because the mine life of La Coipa is only 2 years.

When KCN put NE on the sales block in 2018, prior to taking it back off market when they got their insurance settlement, it is rumoured that they had offers on the table for NE of AUD $40-50M. But the price of silver back then was USD $18/oz and is now $26/oz and Kinross would be in a position to make a generous offer because of synergies with their already owned mine as well as being a well cashed up company.

 

[finicky]

Still just reading water for this. One punter is getting so starved for an outcome that he said, "no news is a good sign"
Only scrap of goss is that @unemon1 on twitter showed a while back that all the relevant published meetings of the Thai Department of Primary Industry and Mines over the matter of Chatree (Kingsgate's mine) and litigation with Akara (Kingsgate's Thai subsidiary) have been depleted of lawyers over the recent 3 months. That is, no meetings titled 'litigation', whereas before there was a spate of them. Instead it's all environmental and 'planning strategy' meetings. He finds that highly suggestive that a settlement has already been decided upon. The primary researching ability of some people is amazing.

At least no fault can be found with KCN's long term monthly chart. It's still rock solid for a basing chart. Anyone who is getting impatient and bailing out is finding a willing buyer.