What: Kingsgate Consolidated Limited (ASX: KCN) resumed trade on Monday morning after a month-and-a-half suspension from official quotation. The suspension was requested on 16 January after the company announced on 14 January that gold mining operations at the company's Chatree mine in Thailand would temporarily cease operations following the discovery of above-standard arsenic and manganese in the urine and blood of villagers nearby.
So what: In the media release, Kingsgate Executive Chairman Ross Smyth-Kirk reports that the company commissioned a "major environmental report by independent international and Thai scientific experts that confirmed that the Chatree Mining Operation was not the source or cause of the slightly elevated arsenic and manganese levels."
As a result of the report, mining operations resumed on Friday afternoon and Kingsgate's management believe that full-year gold production guidance of 195,000 to 215,000 ounces is still achievable.
What Now: At the time of writing, Kingsgate's share price is around 8% lower at 73 cents. The price has fallen nearly 40% over the last 12 months as a result of a lower gold price and operational issues at Chatree, however Kingsgate was able to deliver an after tax profit (excluding abnormals) of $7.9 million in the six months to 31 December 2014. Write-offs at the Bowdens Silver Project saw a net loss after significant items nearly double to $12.7 million from $7 million a year earlier.
The issue with mining stocks, as we continue to point out here at The Motley Fool, is that they are price-takers and hold no sustainable competitive advantage over peers (unless they can manipulate the price). Kingsgate is not a major producer, nor a particularly low cost one, and is therefore at the mercy of the global gold market when it comes to selling its product. Great investors like Warren Buffett steer clear of these types of companies as they have a habit of disappointing.
