30 RESOURCES RISING STARS H igh grades, low costs, fat margins and huge explora- tion upside. It’s no wonder the Indonesian miner’s new MD is so delighted with his role. In the mining industry, high prices hide any number of sins. As a result, many investors tend to pay less attention to costs at times of record prices. But while a company’s survival may not be of such concern against a backdrop of booming prices, margins and therefore profits are still heavily determined by its costs. The utopian combination of stunningly low costs and record prices has turned Kingsrose Mining into a cash cow. At its Way Linggo gold mine on the Indonesian Island of Sumatra, cash costs came in at just $25 an ounce in the March Quarter after allowing for the sale of its silver pro- duction. In the June Quarter, the “lumpy” nature of the operation meant they rose – and still reached only $145/oz after silver credits. Gold production totalled 8756oz – leaving Kingrose with a highly enviable kitty boasting $28 million in cash and bul- lion and no debt at June 30, 2011. Managing Director Chris Start, who took up the reins on July 1, says he was lured to the position by the combination of a phenomenal production story and huge exploration upside in an area known for its high grades. “I have been given a fantastic opportunity,” he told Resources Rising Stars. “The mine is small but high- grade and the exploration potential is sensational.” When it comes to measuring grade, it seems that Way Linggo is always way off. The mine’s resource is 636,000 tonnes at 8.8 grams of gold per tonne for 166,000oz of gold. After allowing for the silver, this is increased to 208,000oz of gold equiva- lent. But the head grade being mined is averaging a whopping 14.8gpt gold. Start explains that one explanation for the dif- ference is that the mineralised clay is being washed out of the core during drilling, resulting in lower assay grades. However, the narrow vein nature of the orebody means Way Linggo has no reserve estimate. “We mine the gold, we don’t mine the tonnes,” Start quips. “We use local miners working with old mining methods on the veins that run from half a metre wide to 8m wide with an average of 4.5m. We don’t employ heaps of expats and this local approach has enabled us to maintain a very good relationship with the local community.” The higher-than-expected grade has offset the processing problems associated with the clay, which restricted the crush- ing and screening parts of the process, therefore delaying the plant reaching its nameplate capacity of 140,000tpa. The plant is now approaching that number and a SAG Mill is currently being installed to overcome the clay handling issues as well as give it the ability to increase future capacity – and this is where the Kingrose growth story begins. Start says he is eyeing exploration suc- cess to augment ore supply and ultimately underwrite a plant expansion to more than 200,000tpa. “We have a cash cow so we are going to plough a portion of the money back into exploration,” he says. “We have a stockpile that will help keep the plant running at capacity for another three or four months, so there is an explo- ration push underway now.” And the concerted effort is already paying dividends. The Kingsrose team has made a discovery at Talang Santo, 7km north of Way Linggo, where multiple mineralized veins have been outlined over a 200km strike, remaining open along strike and at depth. Intersections include 1.1m at 46.9gpt gold and 87.9gpt silver from 176.6m and 4.35m at 10gpt gold and 25.2gpt silver from 195.8m. “This is potentially a large vein system and we Low-cost Kingsrose proves some ounces more equal than others “We already have what we believe could be a second mine. There is huge potential for find- ing more Way Linggos.” - Kingsrose MD Chris Start Talang Santo