#MTR – Gold mining in Thailand

Thailand currently only has one gold mine, operated by Australian gold miner Kingsgate Consolidated. Due to the Government refusing to extend Kingsgate’s licence the mine is due to stop operations in December 2016.

Kingsgate’s issues are believed to be;

  •  arsenic and manganese contamination (disputed by Kingsgate).
  • cyanide escaping from tailing ponds (disputed by Kingsgate).
  • disgruntled former employees.
  • not being able to deal with the issues.
  • not having access to the decision makers in the Government.
  • Kingsgate’s current liabilities exceeding its assets by $37 million
  • Shares suspended.
  • Will lenders lend more money if no viable strategy in place to reopen the mine?

Based on the above the outlook for Kingsgate is bleak and you would think the mine has no value as no licence.

 

So why has Northern Gulf Petroleum offered 4.2 cents per share for a 50.1 per cent stake in Kingsgate? This values the business at $9.4 million (see here).

 

 

Northern Gulf is run by a Thai national who clearly sees value in the business and believes he has the contacts, expertise and know how to cut through Thai red tape and get the mine licence granted.

Northern Gulf believe they can succeed when others have failed as they have the knowledge, contacts, and people to operate successfully in Thailand.

Metal Tiger in their RNS’s have mentioned on several occasions:

  • Respecting Thai culture.
  • The environmental / social issues. Hence the appointment of a CSR Manager.
  • Employment and opportunities for Thai nationals.
  • Local knowledge / contacts.

It’s how you do business that will dictate success or failure. Northern Gulf and Metal Tiger both believe mining in Thailand to be a potentially lucrative investment.

Both businesses have targeted businesses that have the infrastructure in place, thereby ensuring a fast track route to early profitability.

First movers make the largest returns whilst taking the greatest risks.

Metal Tiger have however substantially reduced the risk by having other opportunities such as Botswana and Spain in their portfolio.

Metal Tiger and their investors can see the bigger picture. Thailand looks to be an opportunity that whilst its value is currently not reflected in the share price, it will be the nearer the mine gets to the production stage.

image

Great potential with the associated risks  This could become the cash cow for Metal Tiger and its partners.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s