RENAISSANCE OF MISIMA ISLAND’S

GOLDEN RICHES

ISS

N 1838-9511

FEBRUARY/MARCH 2019www.pngreport.com

• NEWS • MINING • ENERGY • OPINION • ACHIEVEMENT

Proudly printed in Papua New Guinea

COVER STORY BY BARRY AVERY

LED BY MANAGING director Andrew Corbett, Kingston has taken great pains to establish relations

and manage local expectations about what Misima could do in tandem for the people of the island and the company’s shareholders.

Corbett is a mining engineer who comes from the same distinguished

cohort at the Western Australian School of Mines which produced other successful mine developers David Flanagan and Ken Brinsden.

But one could be fooled into believing Corbett was a geologist before anything else, as the intensity with which he scrutinises the metres of interesting core coming from exploration on the island, which is

situated about 300km east of Port Moresby. During a mid-December site visit to the project, drilling and the preparation of drill pads was taking place relentlessly, and it continued through the holiday season without much let up. Global Drilling is the contractor doing the work for Kingston and is preparing to mobilise a second drill rig to the island.

Renaissance of Misima Island’s golden richesKingston Resources has taken a commendably sensible approach as it enters Papua New Guinea to redevelop the Misima Island gold project, which fell victim to the soft gold price era of the 1990s.

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At the Misima exploration camp are, from left, Schneider Yasi, Andrew Corbett, Kolbe Bare, Chis Drew and Charles Yobone

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Given the fact that mining has taken place on the island for more than 130 years, there is no shortage of Misima islanders who have the qualifications and experience to pick up and assist Kingston in its quest to redevelop an open pit and process plant at the project previously operated by Canada’s Placer.

Historical production at the mine, from 1989 to 2004, averaged 230,000 ounces per annum, peaking at 370,000oz in 1992. There remains a resource of 2.8 million ounces coming from 82.3 million tonnes of ore grading 1.1 gram per tonne and 5.3gpt of silver.

For Corbett and geologist colleagues, however, it is not what currently exists, but what there could be. And this is why Corbett and the substantial team of geologists led by executive director Andrew Paterson have a two-pronged focus right now: drilling and community engagement.

Corbett is particularly pleased that he has, on the ground at Misima, “a couple of quite charismatic young geologists” led by project manager Charles Yobone, himself a geologist.

These include Schneider Yasi, who interestingly was the winner of PNG’s Vocal Fusion Season in 2017 – winning himself a Toyota truck in the process. Schneider works alongside a host of offsiders and geological assistants, as they continue to build on the substantial inventory of core and drill results left by Placer and immediate previous owners, WCB Resources.

Yobone has all the ingredients and personality traits one could wish for in a project manager on an island in Papua New Guinea: he is well known, well liked, understands the island’s past and present, is familiar with the landowner groups and engages with them all constantly in a respectful and friendly manner.

“We have had a strategy over the past 12 months to work with the locals and be low profile and not make it about us, but make it about the project and what the project can do for everybody.

“Ultimately our shareholders benefit from that, but there are 20,000 people on Misima Island and the multiplier effect of getting this built again is very measurable for these 20,000 people.

Kingston is all about relationships, not least of which is that of Corbett and Paterson, who met in Kalgoorlie nearly 30 years ago “and here we are, putting Kingston together 25 years later” says Corbett, who adds that Andrew Corbett with Andrew Paterson in the company’s satellite office in Perth

Having a bush conference are, from left, Andrew Corbett, Schneider Yasi, Charles Yobone and Chris Drew

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despite his experience being largely in Australian gold and nickel, his time with explosives firm Orica took him global. He also has experience as a fund manager with Perpetual in Sydney.

This experience, combined with that of other members of the board, gave him the confidence to do the four transactions which Kingston has undertaken in its short life.

“We have effectively done four transactions, without advisers and no-one to structure the deals. Naturally we had to have lawyers, but with the experience of our board members and our chief financial officer Chris Drew as a former research analyst and stockbroker for RBC and UBS, we have a lot of market experience.”

Added to the board mix is non-executive lawyer-geologist Stuart Rechner and chairman Tony Wehby, a seasoned financial expert. The latest heavy hitter added to the board is respected mine developer Mick Wilkes, who managed the building of the copper-gold production trains for Owen Hegarty’s Oxiana Resources at Sepon in the Savannakhet Province of Laos.

Kingston has moved far from its roots back in 2016, when the reverse takeover raised $6.3 million on the strength of a group of lithium tenements. Soon after this it also acquired an option on the Livingstone

gold project in Western Australia. Kingston ultimately dropped the lithium tenements, selling out of those holdings in 2018.

“We are now completely out of lithium, ultimately that decision to exit coincided with the opportunity arising from the Misima transaction. Misima was owned by WCB Resources, a TSX-listed company and we did a scheme of arrangement for a merger, taking that company over in order to get 49% of Misima.”

This occurred on November 20, 2017, Kingston subsequently completed its earn-in on the project by the end of August 2018.

“So now we own 70% of the project, and our partner is Pan Pacific Copper which is controlled by Nippon and Mitsui. They are not free-carried and they have to contribute, but at the moment they are not contributing so we continue to build our equity ownership.

“We might be 75% by mid-2019, which we think is a great outcome for shareholders.”

Corbett is quick to add that Kingston would certainly be happy to have PPC as a partner on the project when the time came to rebuild the mine.

Corbett says 2019 will all be about drilling and beginning studies. “We think we have the foundations of a big project already. We like what is there, we like what we are seeing.

Project geologist Kolbe Bare

Project geologist Schneider Yasi

Inspecting core at the rig are, from left, Charles Yobone, Chirs Drew and Andrew Corbett

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“It is expected to be an open pit but we still have to get through all the stages of the studies to prove it is economic. So we are looking for some exploration success to deliver potential starter pits.”

Corbett says that while Placer processed around 90Mt Kingston still had 80Mt, which gave the project a combined total of 170Mt so far. “The objective now is to identify another 10Mt to front-end load the plant while Kingston does the work to get back into the big pit area.

“So that is our strategy at the moment – to focus on potential starter pits during 2019 and then hopefully kick off the prefeasibility. And then – with a bit of luck if all is positive – kick off the environmental studies and approval process.”

Reflecting on why Placer gave up on the huge opportunities which appear to exist on Misima, Corbett is full of praise about the way in which they managed the mine – and also the rehabilitation they did so well and the civil infrastructure they left when they departed.

Schools, a hospital, a harbour and most importantly a hydroelectric power station which has now faithfully served the island for the decades since Placer left.

“It was a very successful mine and the only reason Placer stopped was because of the falling gold price. I remember in Western Australia in the mid to late 1990s it was a terrible time.

Andy Kamagi chats to Andrew Corbett at the Misima core farm. Kamagi is a storeman for the project and was previously with Lihir gold mine for 18 years

Chris Drew, Andrew Corbett and Charles Yobone at the Port Maika dock built by Placer. Behind them is a diesel storage tank

Global Drilling has been contracted to do the exploration work for Kingston

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“And Placer was doing a great job with this project but they were due to make a decision on the next cutback … and the gold price was sub-$300. And now we are sitting here at almost $1300 and we could justify that cutback, and that is what we are looking at doing.

“We are looking at cutting back the pit and going back into the old areas. But we are also very confident around exploration and hopefully finding some new areas.”

Corbett is also grateful to Placer for keeping records of everything they did.

“We have got it got it all. There are 50 boxes in our Perth office and we have all the data from all the drill holes, all the feasibility documents, the approval documents and mining studies that were done and approved.

“We have hard copies on the shelf in Perth and also at our head office in Sydney. And they are also all on the shelves of PNG’s MRA (Mineral Resources Authority). For Kingston, it is a case of redoing it all again. We know where the mill was and that is where it will go again, we will have

the same haul road, waste dump, tailings, the camp will probably go back in the same spot.”

Corbett says that of the infrastructure set up by Placer, the airport, hospitals, schools, power and ports continue to benefit Misimans. The mine houses were sold off to local landowners and Kingston now rents three of them.

The presence of Kingston has already had a material impact on the island, as it spends money on exploration and employs locally.

So far, Kingston employs 77% of its workforce from the island, with 16% coming from PNG’s mainland, and the remaining 7% are Australian expatriates.

Corbett says that at its peak, Placer employed about 800 people and they averaged 78 or 79% local employment over 15 years.

“So one can work out exactly how many people benefited directly from a job, schooling, cadetships, apprenticeships and university scholarships. We are fortunate to have all these statistics as Placer documented it all.”

Team Misima gold project at the local office

Kelly Banian is a field technician for Kingston, from the village of Eiaus. He has been involved with the project since late 1997

Charles Yobone is Kingston’s project manager at Misima

‘Livingstone is our stepping stone and Misima is our priority. We look at Livingstone as potential for near-term cash flow or as an asset to build up. But Misima is our main focus’– ANDREW CORBETT, KINGSTON RESOURCES MANAGING DIRECTOR

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Corbett says that as a result of this, there are many highly educated people with deep skills who live on Misima, and are employed as fly-in, fly-out workers all over PNG at other mining operations such as Lihir, Ok Tedi and Porgera. It is naturally Corbett’s hope that some of these people would choose to work for Kingston – and live at home – when the Misima gold-silver project is reborn.

At the end of 2018, Corbett and colleagues were bursting with anticipation. “Quite honestly, we do not yet know how this thing is going to turn out. But there are just so many exploration targets. We are sitting with $5 million in cash, we have raised $11 million in 2½ years. We have paid $5 million in equity for two gold projects and that puts us in quite a strong position,” he said, adding that Kingston’s partner at Livingstone was free carried.

But Corbett is quite unequivocal about it: Misima is seen as the Kingston company maker: “Livingstone is our stepping stone and Misima is our priority. We look at Livingstone as potential for near-term cash flow or as an asset to build up. But Misima is our main focus.”

Corbett laughs, and says some of Kingston’s investors have said, “just hurry up with Misima and sell Livingstone”. But he adds that Livingstone is “far too interesting and far too exciting to sell”.

While chairman Wehby has an accounting background, he has experience of building a project during his time as chairman of YTC. Then there is the seasoned Wilkes who has built five mines in 15 years. Added to this is Misima exploration manager Mike Woodbury is a former Placer employee who was the an exploration geologist for that major in 1998 and 1999.

Corbett has operated gold mines but never built one, and for this reason he is grateful to have these strengths on the Kingston board.

Corbett regards project manager Charles Yobone as one of the keys to the company’s success in PNG. “He has been brilliant and done a great job with being in touch with everyone on Misima, determining who are the landowners, managing everyone from the drilling to managing the compensation issues. And on top of all that he is a geologist and helps with that side of it. He has been great

Finally, Corbett points to a map which shows the impeccable location of Misima Island, being along strike from Frieda River, Porgera, Mt

Misima Island is home to about 20,000 people

Lionel Emenoni was with Placer and Misima Mines from 1989 to 2005. Here, he stands next to the power board which he installed for the camp, just metres from the ocean

Some of the infrastructure built by Placer, such as this bridge, has fallen into disrepair

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Kare, Kainantu, Hidden Valley and Woodlark Island. To the north are Simberi, Lihir and Panguna.

“It is the right real estate, it is the right geology, Misima has a long history of gold mining and the consequent embedded culture. Metallurgy was excellent, with Placer recording recoveries of 91.7% – and we have all of this infrastructure on the island.”

Corbett is anxious that Kingston manages expectations of the local population. “We are just a little company and cannot go out and build schools and things like that. What we can do right now is offer employment and build upwards from there.”

Kingston’s well-presented website contains all the data on the exploration targets it is pursuing but in a nutshell, it is going for six targets which reside outside of the current resource.

And there have been some headline-grabbing results from assays published, most notably a hit of 40m at 3.1gpt towards the end of 2018.

“We are getting good numbers in all the holes we have drilled, but this 40m hit got the attention. It shows the potential that is still there below the old pit and we are getting good dirt in the hanging wall with economic grade. This will be a great help with the strip ratio when we go back in to do the cutback.”

Kingston has kicked off 2019 drilling the Ginamwamwa prospect. ‘Gina’ is a Kingston discovery, uncovered by its field crews shortly after they began work on the project in late 2017. The prospect is adjacent to the historic mill site.

A substantial amount of channel sampling was done in the area throughout 2018, delivering some impressive results such as 14m at 17.0gpt gold and 14m at 12.2gpt and 34m at 3.2gpt with the team of the view that it is now ready to drill.

Kingston hopes that Gina could prove to be a starter pit for the operation. After drilling Gina and other regional targets, Kingston hopes to move towards studies later in 2019.

Misima was once a very successful operation and Kingston is making a strong start down the path of seeing it come back after a 15-year hiatus.

A higher gold price certainly helps, as does the exploration success Kingston is having on the ground.

Kingston executives say they have the right people who understand that to succeed at Misima, working collaboratively with the islanders is key.

Kingston has plenty of work to do to achieve its aim of bringing back Misima, but there is an air of excitement on the island as activity has picked up.

This is the rehabilitated 3km long Misima open pit. The outline of benches may be seen at top right

CFO Chris Drew with a borrowed hard hat at one of the drill sites

Graham Leonard, left, is the man who keeps the hydroelectric power system maintained on Misima Island. Here he is with project geologist Schneider Yasi

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