Kingston Resources Pivots to Drilling After Pearse South Ramp Failure

Kingston Resources (ASX: KSN) has halted underground development and delayed underground production at the Mineral Hill gold-copper project in New South Wales. The cause: a wall failure in the Pearse South open pit last week.

Crew members spotted tension cracks in the pit's sole access ramp. Mining stopped immediately. All equipment and staff were removed from site.

The cracks kept opening over the following days. Vertical slumping of the access ramp made it unsafe for use.

An intensive geotechnical assessment traced the instability to a soft graphitic shale recently uncovered in the base of the pit. That shale had interacted with structures and been worsened by rainfall.

Remediation options could take weeks. A ramp re-design could potentially sterilise a significant amount of the remaining ore. Kingston confirmed it would not resume mining at Pearse South.

“We have evaluated the potential restart of mining the Pearse South open pit and it is now evident that the risks and costs of regaining access outweigh the benefits of mining the remaining ore at this time,” the company said.

This is the second geotechnical incident in less than 12 months at Pearse South. The pit was originally scheduled to be mined for another four months, producing roughly 100,000 tonnes of ore before permanent closure.

The closure, related staff redundancies, and fleet demobilisations are estimated at $5 million. The estimated gross revenue reduction for the June quarter is about $39 million.

Kingston has $9.45 million in unrestricted cash at hand. It will receive a $10 million cash payment in July via deferred consideration from the early-2025 sale of the historical Misima gold project to Papua New Guinea's Ok Tedi Mining.

The board has announced a strategic pivot. It will pause underground development and delay the start of underground production. Instead, the company will focus on intensive resource and near-mine drilling.

The 25,000-metre campaign will use a full-time underground diamond rig with surface diamond and reverse circulation rigs. Targets include depth and strike extensions at the Southern Ore Zone (SOZ) and footwall, the Jack's Hut-Iodide Link Zone, the Jack's Hut-EOZ Link Zone, and the new Parker's Hill East target.

The data will inform measured and indicated resource updates at SOZ and Jack's Hut. It will also support an expansion of the processing plant to 700,000 tonnes per annum and the delivery of a larger ore reserve for underground mining.

Kingston managing director Andrew Corbett said that, despite the “disappointing circumstances”, the company was working to realise the full potential of Mineral Hill.

“Underground has always been the long-term future of this project and we are moving at speed to expand the resource, reserves and overall potential of the underground operations,” he said.

“We are confident this is the best strategy to build a stronger, more resilient Mineral Hill that delivers lasting value for our shareholders, our people and our local communities.”

“This new direction provides an opportunity to reset and realise the full potential of Mineral Hill through the drill-bit – we are undertaking the first large-scale exploration program since the 1980s, providing the pathway to materially increase our underground resource and reserve base and derisk the restart of an enlarged, long-life copper and gold focused operation at Mineral Hill.”

The pivot will be backed by an $11.6 million capital raising. That consists of a $2.55 million share placement to Kingston investors via 36.4 million new shares priced at $0.07 each, plus a $9.1 million entitlement offer on the basis of two new Kingston shares for every 13 shares held.

The issue price is a 19.5% discount to the last closing price of $0.087 and an 18.9% discount to the five-day volume weighted average price of $0.086.

Largest shareholder Farjoy has agreed to sub-underwrite the entitlement offer up to $8 million. Kingston chair Mick Wilkes and non-executive director Stuart Rechner have committed to take up their entitlements in full, representing 900,000 shares for $65,000.

Farjoy's current 17.6% equity in Kingston will increase to 19.7% after the placement. It could reach 28.5% if eligible shareholders do not take up their entitlements.

Funds from the capital raising will cover the drilling campaign, resource and ore reserve updates, redundancy and fleet demobilisation costs, care and maintenance costs, and general working capital.