Kingsgate Thailand IPO to Fund New Projects, CEO Thomas Says

Kingsgate Consolidated Ltd. will seek to use proceeds from an initial public offering in Thailand of a unit that operates the country’s largest gold mine to identify and develop projects in the South East Asian nation, Chief Executive Officer Gavin Thomas said.

The Sydney-based gold producer, which forecasts producing 120,000 ounces to 130,000 ounces of gold at its Chatree mine in Thailand in the year to June 30, 2014, will submit a draft proposal this quarter to list 51 percent of the Akara Mining Ltd. unit on Thailand’s stock exchange. Kingsgate, which holds 48 percent of the unit, has management control.

“Whether we make it live or not, that will depend on the market conditions,” Thomas said today in an interview in Kalgoorlie, Western Australia, referring to the proposed initial share sale. “We committed to the process at $1,550, and if gold gets back to those sorts of levels we will look hard again.” Gold traded at $1,293.12 at 2:52 p.m. in Sydney.

The offering would give Kingsgate funds to locate and develop mines in Thailand, Thomas said, even as the producer and its competitors trim exploration budgets and reduce costs in response to the slump in the price of gold, which has declined 23 percent this year. Kingsgate has cut spending and executive pay and expects to take an impairment charge of about A$320 million ($287 million) to the carrying value of its Challenger mine in Australia.

“We want to be in Thailand for 50 years, not in a declining asset for 10 or 20 years,” Thomas said. “We see the upside in Thailand as being four or five gold mines.”

‘Fair Reward’

Thomas had said in 2007 that Kingsgate planned to sell shares in the unit within two years. He said today the company will remain cautious if gold prices don’t rebound. “It’s Kingsgate’s shareholders one and only opportunity to receive a fair reward for a lot of risk, and we are not going to give that away.”

As many as 69 IPOs, worth $1.74 billion, were announced in the mining industry in the 12 months to July 31, 51 percent lower than in the previous year, according to data compiled by Bloomberg.

Thomas declined to say how much Kingsgate hoped to raise from the IPO, saying it “would be several times our market capitalization today.” Kingsgate has a market capitalization of A$284 million ($255 million). The company’s shares fell 1.6 percent to $1.54 at the close in Sydney today.

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