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to a certain extent the particle-particle attraction. Normally, the solution is deposited on to a plain
silicon substrate that is covered by the native oxide layer only [34]. However, one may locally
change the wetting behaviour of the solvent by further oxidising the substrate [38]. By adding
excess thiol one can also vary the properties of the solvent [40].
Two different procedures are employed for the deposition of the solution on to the substrate: spin-
coating or a meniscus technique [61, 62]. The choice is important as it strongly influences the
evaporation rate and, as a result, the pattern formation process. When using spin-coating, one finds
that directly after deposition, evaporation competes with dewetting until all the solvent has evapo-
rated. The resulting deposits of nanoparticles are imaged by atomic force microscopy (AFM). For
spin-coated films, the evaporation rate is high and structuring is normally finished before the spin-
coater is stopped. Conversely, the solvent evaporation rate is strongly decreased when employing
the meniscus technique [61], i.e., by depositing a drop of solution on a Teflon ring that is wetted by
the solvent. This allows for a better control of the process and enables the use of contrast-enhanced
microscopy to observe the dewetting process in situ [40]. All pattern formation is confined to the
region of the receding contact line of toluene, silicon and air. With both techniques one may find
mono-modal or bi-modal polygonal networks [34], labyrinthine spinodal structures, or branched
patterns (see Fig. 1). The meniscus technique allows for the study of branched structures in a
more controlled manner. The work in Ref. [40] indicates that fingering strongly depends on the
interaction strength of the particles, i.e., on the chain length of the thiol molecules coating the gold
cores. For short chains (C 5 and C8) no formation of branched structures is observed. At similar
concentrations, well-developed branched structures are formed for longer chains (C 10 and C12).
For even longer chains (C 14), however, one again finds less branching. It also depends on the
amount of excess thiol in the solvent (for details see Ref. [40]).
When following the evolution of the branched patterns in situ (see the complementary video
material of Ref. [40]), one clearly observes that different processes occur on different lenght
scales. First, a macroscopic dewetting front recedes, leaving behind a seemingly dry substrate.
The macroscopic front can be transversely unstable resulting in large-scale ( > 100µm) strongly
anisotropic fingered structures. For fronts that move relatively quickly these macroscopic struc-
tures cover all the available substrate. However, when at a later stage the macroscopic front be-
comes slower, those fingers become scarce and ‘macroscopic fingering’ finally ceases. At this
stage it is possible to appreciate that the seemingly dry region left behind by the front is not at all
dry, but covered by an ultrathin ‘postcursor’ film that is itself unstable. The thickness of this film
6 | 5 | 5 | 1001.2669.pdf |
is similar to the size of the nanoparticles. At a certain distance from the macroscopic front, the
ultrathin film starts to evolve a locally isotropic pattern of holes. The holes themselves grow in an
unstable manner resulting in an array of isotropically branched structures as shown, e.g., above in
Fig. 1. This indicates that at least some of the patterns described in the literature may have arisen
from processes in similar ultrathin ‘postcursor’ films.
The existence of the ultrathin ‘postcursor’ film is an experimental finding that can be drawn on
when choosing a theoretical approach to account for the pattern formation (see below). Note how-
ever, that at the moment there exists no explanation for its existence. A possible hypothesis is
that the substrate strongly attracts the nanoparticles. As a result they form a dense suspension
layer having a thickness roughly equal to the diameter of the nanoparticles. The observed meso-
scopic dewetting front then actually correspond to an autophobic dewetting of a low concentration
suspension from the higher concentration suspension on the surface of the substrate.
III. MODELLING APPROACHES
Models of dewetting thin films of pure liquids or polymers are often based on thin film hydro-
dynamics. Starting from the Stokes equations, together with continuity and boundary conditions
at the substrate and free surface, one applies a long-wave approximation (assuming small surface
slopes and contact angles) [8, 63] and obtains a non-linear evolution equation for the film thickness
profile h(x,y,t ). In the case of volatile liquids one finds [55–58, 64]
∂th = ∇·
[
Qc∇δF
δh
]
−Qe
δF
δh, (1)
with the mobility functions Qc(h) = h3/3η ≥0 (assuming Poiseuille flow in the film and no slip
at the substrate; η is the dynamic viscosity) and Qe ≥0 for the convective and evaporative part
of the dynamics, respectively. Qe is a rate constant that can be obtained from gas kinetic theory
or from experiment [57]. Note that Eq. (1) only applies if the pressure in the vapour above the
film is close to the saturation pressure. For alternative expressions that are used to describe the
non-conserved evaporative dynamics see, e.g., Refs. [56, 57, 65–69]. Finally, ∇= (∂x,∂y), and
∂t, ∂x and ∂y denote partial derivatives w.r.t. time and the coordinates.
Focusing on the influence of capillarity and wettability only, the energy functional F[h] is given
by
F[h] =
∫
dx
∫
dy
[γ
2 (∇h)2 + f(h) −µh
]
(2)
7 | 6 | 6 | 1001.2669.pdf |
where γ is the liquid-gas surface tension and f(h) is a local free energy term that describes the
wettability of the surface. Since µcorresponds to a chemical potential, the termµhmay either bias
the system towards the liquid or towards the gas state. The variation ofF w.r.t.hgives the pressure.
It contains the curvature (Laplace) pressure −γ∆hand the disjoining pressure Π(h) = −∂hf(h).
Many different forms for the latter are in use (see, e.g., Refs. [4, 8, 63, 70–73]).
For the present system a thin film description using Eq. (1) is not appropriate because the nanopar-
ticles are not taken into account. However, under certain conditions one can augment equation (1)
for the evolution of the film thickness by coupling it to an equation for the evolution of the mean
particle concentration. The resulting model is able to describe the behaviour of an evaporating so-
lution on the meso- and macroscale. Such an approach is briefly discussed below in Section III C.
We should expect such a model to describe the mesoscopic dewetting front discussed above. How-
ever, the theory is less suited to a description of the dewetting dynamics of the ultrathin postcursor
film.
The dewetting of the ultrathin film of highly concentrated suspension may be described by a dis-
crete stochastic model such as, for instance, a kinetic Monte Carlo (KMC) model based solely on
evaporation/condensation dynamics of the solvent and diffusion of the solute [35, 39, 41]. The va-
lidity of this strong assumption regarding the relevant transport processes can be confirmed from
an estimate based on Eq. (1): The pressure p = δF/δh drives convection and evaporation. The
convective mobility is proportional toh3, i.e., it is large for thick films but decreases strongly with
reduced film thickness. The evaporative mobility, however, is a constant, implying that evapora-
tion will dominate below a certain (cross-over) thickness. For the parameter values of Ref. [57]
and a small contact angle ( ≈0.01), the cross-over thickness is in the range of 1-5 nanometers.
This estimate justifies the neglect of convective transport in a description of the postcursor film
and may explain why one has such good agreement between the experimentally observed patterns
and the patterns obtained from a purely two-dimensional (single layer) kinetic Monte Carlo model
[35]. We introduce the KMC model below in Section III A.
In several respects, however, the kinetic Monte Carlo model is rather simplistic, limiting its po-
tential applications. For instance, the thermodynamic chemical potential as well as any wetting
interaction of the solvent with the substrate are collected in a single parameter – an effective chem-
ical potential. This implies that any influence of a disjoining pressure is ‘smeared out’ over the
whole system and that no distinction between the short- and the long-range parts of the disjoining
pressure is possible. It is furthermore based on the assumption that evaporation/condensation is
8 | 7 | 7 | 1001.2669.pdf |
the dominant dynamic process, but does not allow one to probe this assumption. In Section III B
we show how one may develop a dynamical density functional theory (DDFT) that describes the
system at a similar level to the KMC. However, the DDFT may also be easily extended to include
other effects such as fluid diffusion, that the KMC does not incorporate.
A. Kinetic Monte Carlo model
The kinetic Monte Carlo model for two-dimensional dewetting nanofluids [33] was first proposed
in Ref. [35] and extended to include next-nearest neighbour interactions in [37]. The two key
assumptions used are: (i) the relevant processes can be mapped on to a two-dimensional lattice
gas model, thereby neglecting continuous changes in the thickness of the evaporating film, and (ii)
all relevant dynamics results from diffusing nanoparticles and evaporating/condensing solvent.
The model builds on an Ising-type model for the liquid-gas phase transition. The surface is divided
up into a regular array of lattice sites whose size is dictated by the nanoparticles. One then con-
siders each lattice site to be occupied either by a nanoparticle, liquid or vapour. This effectively
maps the system onto a two-dimensional two-component lattice gas having two fieldsnand l. The
resulting three possible states of a cell are: liquid ( l = 1 ,n = 0 ), nanoparticle ( l = 0 ,n = 1 ),
and vapour (l = 0,n = 0, i.e., cell empty). The energy of an overall configuration is given by the
hamiltonian
E = −εnn
2
∑
<ij>
ninj −εnl
2
∑
<ij>
nilj −εll
2
∑
<ij>
lilj −µ
∑
i
li (3)
where ∑
<ij> denotes a sum over nearest neighbour pairs andεll, εnn and εnl are the liquid-liquid,
particle-particle and liquid-particle interaction energies, respectively. Fixing the three interaction
strength parameters εll, εnn, εnl and the effective chemical potential µdetermines the equilibrium
state of the system. We choose εll as unit of energy – i.e. we set εll = 1.
The hamiltonian determines the equilibrium state and the energy landscape of the system. How-
ever, as the system ‘dries in’ during the course of the solvent evaporation, the final nanoparticle
configurations do not necessarily represent equilibrium structures. This implies that the system
dynamics is of paramount importance. It is determined by the possible Monte Carlo moves, their
relative frequencies, and the probabilities for their acceptance. Two types of moves are allowed: (i)
evaporation/condensation of liquid and (ii) diffusion of nanoparticles within the liquid. A mobility
M corresponds to the ratio of cycles of particle and solvent moves and reflects the physical ratio of
9 | 8 | 8 | 1001.2669.pdf |
time scales for evaporation and diffusion. A large mobilityM indicates fast diffusion as compared
to evaporation. A trial move is accepted with the probabilitypacc = min[1,exp(−∆E/kT)] where
kis the Boltzmann constant, T the temperature and ∆Eis the change in energy resulting from the
potential move. Note that particles are only allowed to move into wet areas of the substrate, i.e.,
onto cells with l= 1. This models zero diffusivity of the particles on a dry substrate. The replaced
liquid fills the site left by the nanoparticle.
Without nanoparticles, the behaviour of the model is well known as it reduces to the classical
two-dimensional Ising model [74]. For kT < kTc ≈0.567 liquid and vapour coexist when µ =
µcoex = −2. For µ >−2 [µ <−2] eventually the liquid [vapour] dominates. A straight liquid-
gas interface will recede [advance] for µ <−2 [µ >−2], i.e. one finds evaporative dewetting
[wetting] fronts. If one starts, however, with a substrate covered homogeneously by the liquid,
for µ <−2 the film will dewet via a nucleation or spinodal-like process. If the nanoparticles are
present, they form dried-in structures when all the liquid evaporates. The final structures do not
normally change any further – at least on short time scales. However, if the liquid wets the particles
(i.e. is attracted to the particles), over long times there might be a coarsening of the structures,
facilitated by the adsorbed liquid. The dried-in patterns depend on the particular pathway taken by
the evaporative dewetting process. They range from labyrinthine to polygonal network structures
or holes in a dense particle layer. Some typical patterns are displayed in Fig. 2, for cases when
the average surface coverage of the nanoparticles ρav
n = 0 .2. Panels (a) and (b) result from a
spinodal-like and nucleation and growth process, respectively. At first sight they look very similar
to the patterns seen for the pure solvent and one might argue that the particles solely act as passive
tracers and preserve the transient volatile dewetting structures of the solvent. This was suggested
in Refs. [26–28] for dewetting collagen solutions. However, panels (c) and (d) indicate that the
particles may at times play a rather more significant role. When the diffusion of the particles is
slow, the evaporative dewetting fronts become transversely unstable and may result in strongly
ramified patterns. This instability is caused by the nanoparticles. The lower their mobility, the
stronger the fingering effect, i.e., there are more fingers in (c) than in (d) because in the latter the
mobility is larger.
The front instability is intriguing as it results in strongly branched structures. As the dewetting
front moves, new branches are continuously created and existing branches merge at the moving
contact line. However, the mean finger number in the streamwise direction of the resulting ramified
pattern is a constant. This behaviour is in contrast to the front instabilities found for dewetting
10 | 9 | 9 | 1001.2669.pdf |
a
d
b
c
FIG. 2: Typical KMC results for the final dried-in nanoparticle structures resulting from the evaporative
dewetting processes of nanoparticle solutions (nanofluids) in the case of (a) a spinodal-like process at µ=
−2.55, (b) nucleation and growth of holes at µ = −2.3, (c) unstable fronts at µ = −2.3 and low mobility
M = 5, and (d) unstable fronts at µ= −2.3 and medium mobility M = 10. The starting configuration in
(a) and (b) is a homogeneous liquid film with uniformly distributed particles whereas in (c) and (d) a hole
at the center is nucleated ‘by hand’. The remaining parameters are (a,b) M = 50, ϵnl = 2.0, ϵnn = 1.5,
ρav
n = 0.2, kT = 0.3, MC steps= 500, domain size 1200 ×1200; (c,d) εnn = 2.0, ϵnl = 1.5, ρav
n = 0.2,
kT = 0.2, MC steps = 3000, domain size 1200 ×1200. Lattice sites occupied by particles are coloured
black, and the empty sites are coloured white.
11 | 10 | 10 | 1001.2669.pdf |
polymers which only result in fingers without side-branches [75] or fields of droplets left behind
[18].
A quantitative analysis shows that the mean number of fingers depends only very weakly on the av-
erage concentration of the nanoparticles ρav
n ; only the mean finger width increases with increasing
concentration. However, decreasing the mobility (i.e., decreasing the diffusivity of the particles)
leads to a much denser finger pattern and also causes the front instability to appear at an earlier
stage, i.e., when the front instability is in its initial linear regime, it has a higher growth rate and a
smaller characteristic wavelength (cf. Fig. 2(c) and (d)). Decreasing the effective chemical poten-
tial (increasing its absolute value) has a similar but less strong effect. For details see [41]. These
findings lead to the conclusion that the determining factor for the front instability is the ratio of
the time-scales of the different transport processes. In particular, the front becomes more unstable
when the velocity of the dewetting front increases as compared to the mean diffusion velocity of
the nanoparticles.
If the particle diffusivity is low, the front ‘collects’ the particles, resulting in a build up of the
particles at the front that itself is slowed down. This makes the front unstable and any fluctuation
along the front will trigger a transverse instability that results in an evolving fingering pattern. This
happens even when the particle-liquid and particle-particle attractive interactions do not favour
clustering (i.e. demixing of the liquid and the nanoparticles). In this regime, the instability is a
purely dynamic effect and energetics plays no role in determining the number of fingers. We call
this the ‘transport regime’.
To illustrate the influence of energetics (characterized by the interaction parametersεij) on finger-
ing in Fig. 3 we display the dependence of the mean finger number on particle-liquid interaction
strength εnl. For εnl ≥1.5 the mean finger number < f >is nearly constant; this is the trans-
port regime. However, on decreasing εnl below 1.5, we observe a marked increase in the value
of < f >, indicating that energy plays an important role in determining the number of fingers in
this regime. In this parameter range, demixing of particles and liquid occurs at the moving front
and increases its transverse instability. In this ‘demixing regime’, the wavelength of the fingering
instability is determined by the dynamics and the energetics of the system. Decreasing εnl further
(below 1.4 in Fig. 3) one first observes in regime (iii) a slight decrease in the average finger num-
ber. This is a geometric effect resulting from our one-dimensional finger counting routine: The
fingers increasingly break up and the dried-in pattern looks progressively isotropic. In regime (iv),
the measure ⟨f⟩does not represent a finger number but instead indicates a decrease in the typical
12 | 11 | 11 | 1001.2669.pdf |
distance between particle clusters resulting from the demixing process that occurs already in the
bulk liquid and is not related to the front instability at all. Note that one finds a similar sequence
of regimes (i) to (iv) when increasing the particle-particle interaction strengths for fixed εnl (see
Ref. [41]) for further details.
1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2
εnl
0
5
10
15
20
25<f>
(i)(ii)(iii)(iv)
FIG. 3: (Colour online) Dependence of the mean finger number left behind by the unstable dewetting
front on the particle-liquid interaction strength εnl. The regions marked (i) to (iv) are discussed in the
main text. The insets display typical snapshots obtained in the four different regions. Particles are black,
liquid is grey (green online) and the empty substrate is white. The remaining parameters are kT = 0 .2,
M = 20, µ = −2.2, ρav
n = 0.1, ϵnn = 2.0, domain size 1200 ×1200. For the insets, from left to right,
ϵnl = 1.2,1.4,1.45,1.8.
We note also that the fingering process may be viewed as self-optimising the front motion – i.e.
the front keeps its average velocity constant by expelling particles into the fingers. A similar effect
exists for dewetting polymer films [18], where liquid is expelled from the growing moving rim
which collects the dewetted polymer. There, the surplus liquid is left on the surface as a droplet
pattern.
The kinetic Monte Carlo model is a very useful tool that helps one to understand the pattern
formation in drying nanoparticle suspensions. One has, however, to keep in mind the restrictions
13 | 12 | 12 | 1001.2669.pdf |
on the model (see above). The purely two-dimensional character of the KMC was extended to
a ‘pseudo three-dimensional’ one by making the effective chemical potential dependent on the
mean liquid coverage [38]. As the latter is related to a mean film thickness, this corresponds to
the introduction of a ‘global’ thickness-dependent disjoining pressure into the evaporation term
without an explicit consideration of a film thickness. The amended model can reproduce bimodal
structures that are beyond the scope of the purely two-dimensional model [38, 39]. Fully three-
dimensional models are also discussed in the literature [76, 77].
B. Dynamical Density Functional theory
The limitations of the kinetic Monte Carlo model introduced in the previous Section are related
to its character as a two-dimensional lattice gas with only three states: gas, liquid or particle.
This implies that (i) no liquid can be transported to a site on the surface already filled with liquid,
i.e., diffusion of the liquid can not be incorporated in a sensible way and (ii) one is not able to
distinguish between the influence of the short- and the long-range parts of the interactions with the
substrate, as all such interactions are absorbed into the effective chemical potential.
However, using dynamical density functional theory (DDFT) [78–83] one can develop a model
for the processes in the ultrathin postcursor film without these limitations, although here we limit
ourselves to developing the theory at the level of the KMC and solely discuss how to extend it to
incorporate the influence of the liquid diffusion over the surface. Such a DDFT model describes
the coupled dynamics of the density fields of the liquid ρl and the nanoparticles ρn. The densities
ρl and ρn are defined as the probabilities of finding a given lattice site on the surface to be occupied
by a film of liquid or by a nanoparticle, respectively. Note that the probability densities correspond
to number densities as we use the lattice spacing σ= 1 as our unit of length.
To develop the DDFT, one must first derive the underlying free energy functional F[ρl,ρn], and
secondly, devise dynamical equations for both density fields that account for the conserved and the
non-conserved aspects of their dynamics, i.e., transport and phase change processes, respectively.
For a system governed by the hamiltonian (3), we may construct a mean-field (Bragg-Williams)
approximation for the free energy of the system [78, 84] which contains an entropic contribution
and contributions from the interactions between the different species (nanoparticles and liquid).
The free energy is a semi-grand free energy, since the liquid is treated grand canonically (it is
coupled to a reservoir with chemical potential µ), whereas the nanoparticles are treated in the
14 | 13 | 13 | 1001.2669.pdf |
canonical ensemble. The free energy functional is first defined on the original KMC lattice. How-
ever, after re-writing the interaction terms employing gradient operators [78] one finally obtains
the free energy functional for a continuous system
F[ρl,ρn] =
∫
dr
[
f(ρl,ρn) + εll
2 (∇ρl)2 + εnn
2 (∇ρn)2 + εnl(∇ρn) ·(∇ρl) −µρl
]
, (4)
where
f(ρl,ρn) = kT[ρl ln ρl + (1 −ρl) ln(1−ρl)]
+ kT[ρn ln ρn + (1 −ρn) ln(1−ρn)]
−2εllρ2
l −2εnnρ2
n −4εnlρnρl. (5)
Since the liquid may evaporate from the surface into the vapour above the surface, µis the (true)
chemical potential of this reservoir and determines the rate of evaporation [condensation] from
[to] the surface. Note that normally a free energy of the form in Eq. (4) is obtained by making a
gradient expansion of the free energy functional of a continuous system [84]. However, here we
have made the mapping from the free energy of the lattice KMC system.
The chemical potential for the nanoparticles may be determined from the functional derivative
µn = δF[ρn,ρl]/δρn(r). In equilibrium it is constant throughout the system, but it may vary
spatially in a non-equilibrium system, i.e., µn = µn(r,t). We assume that the dynamics of the
nanoparticles is governed by the thermodynamic force ∇µn – i.e. that the nanoparticle current
is j = −Mnρn∇µn, where Mn(ρl) is a mobility coefficient that depends on the local density of
the liquid. Combining this expression for the current with the continuity equation, we obtain the
following evolution equation for the nanoparticle density profile
∂ρn
∂t = ∇·
[
Mnρn∇δF[ρn,ρl]
δρn
]
. (6)
Note that this equation of motion may also be obtained by assuming that the nanoparticles have
over-damped stochastic equations of motion [80–83]. Here, we assume that Mn(ρl) = αΘs(ρl −
0.5), where Θs(x) is a continuous function that switches smoothly from the value 0 to the value
1 at x = 0 (i.e. it is essentially a smooth analogue of the Heaviside function). This ensures that
the nanoparticles are immobile when the local liquid density is small (dry substrate) and have a
mobility coefficient αwhen ρl is high (wet substrate).
For the evolution of the liquid density distribution we assume that the liquid is able to evaporate
from the surface into the vapour (reservoir) above the surface (non-conserved dynamics) and may
15 | 14 | 14 | 1001.2669.pdf |
FIG. 4: (Colour online) Density profiles for the situation where the substrate is covered by nanoparticles
with average density ρav
n = 0.3. The top row are the nanoparticle density profiles and the bottom row are
the corresponding liquid density profiles at the timest/tl = 8 (left) and 80 (right), where tl = 1/kTMnc
l σ2.
The parameters are kT/εll = 0.8, εnl/εll = 0.6, εnn = 0, α= 0.4Mnc
l σ4, Mc
l = 0, ρl(t= 0) = 0.9 ±ξ
(where ξrepresents white noise of amplitude 0.05) and (µ−µcoex)/kT = −0.88, where the liquid exhibits
spinodal decomposition-evaporation.
also diffuse over the substrate (conserved dynamics). The conserved part is treated along the lines
developed above for the nanoparticles. For the non-conserved part we assume a standard form
[85], i.e., the change in time of ρl is proportional to −(µsurf(r,t) −µ) = −δF[ρn,ρl]/δρl(r)
where µsurf(r,t) is the local chemical potential of the liquid at the point r on the surface at time t.
This gives the evolution equation for the liquid density
∂ρl
∂t = ∇·
[
Mc
l ρl∇δF[ρn,ρl]
δρl
]
−Mnc
l
δF[ρn,ρl]
δρl
, (7)
where we assume that the coefficients Mc
l and Mnc
l are constants.
16 | 15 | 15 | 1001.2669.pdf |
FIG. 5: (Colour online) Density profiles for the situation where the substrate is covered by nanoparticles
with average density ρav
n = 0.3 and with the liquid excluded from the region y <0. The top row shows
the nanoparticle density profiles and bottom row the corresponding liquid density profiles at the times
t/tl = 1000 (left), 10000 (middle) and 30000 (right), where tl = 1 /kTMnc
l σ2. The parameters are
kT/εll = 0.8, εnl/εll = 0.6, εnn = 0, α= 0.2Mnc
l σ4, Mc
l = 0, ρl(t= 0) = 0.9 ±ξ(where ξrepresents
white noise of amplitude 0.05) and (µ−µcoex)/kT = −0.78.
This theory allows us to study the time evolution of the evaporating film of nanoparticle suspension
without some of the restrictions of the kinetic Monte Carlo model. Here, however, we illustrate its
application in similar parameter regimes as used above for the KMC. We focus on two examples:
(i) the spinodal dewetting of a initially flat film of nanoparticle suspension characterised by con-
stant ρl and ρn (Fig. 4); and (ii) the retraction of a dewetting front that is unstable with respect to
a fingering instability (Fig. 5).
Fig. 4 presents two pairs of snapshots from a purely evaporative dewetting process deep inside the
parameter region of the phase diagram where spinodal dewetting occurs. For small times the film
becomes unstable showing a typical spinodal labyrinthine pattern with a typical wavelength. The
nanoparticles concentrate where the remaining liquid is situated. However, they are ‘slow’ in their
reaction: when ρl already takes values in the range 0.08 – 0.83, the nanoparticle concentration
has only deviated by about 25% from its initial value. The film thins strongly forming many
17 | 16 | 16 | 1001.2669.pdf |
small holes. The competition for space results in a fine-meshed polygonal network of nanoparticle
deposits. The concentration of particles is much higher at the network nodes – an effect that can
not been seen within the KMC model. As the particles attract the liquid there remains some liquid
on the substrate where the nanoparticles are.
Fig. 5 gives snapshots of the evolution of a fingering instability for a retracting dewetting front.
At early times the straight front shows a rather short-wave instability, about 16 wiggles can be
seen. However, they are only a transient: the finger pattern coarsens rapidly till only about 7
fingers remain. The fingering then becomes stationary, i.e., just as in the KMC, the mean finger
number remains constant, although new branches are continuously created and old branches join
each other. In general, the results on fingering agree well with results obtained using the KMC
model [41]. From this we conclude that jamming of discrete particles is not a necessary factor
for causing the instability, since the fingering is seen here in a continuum model with a diffusion
constant that is independent of the nanoparticle concentration. The DDFT is better suited than the
KMC for investigations of the early instability stages: they are more easy to discern without the
discrete background noise of the KMC. Furthermore, one may perform a linear stability analysis of
the one-dimensional undisturbed streamwise front profiles with respect to transverse perturbations
(in analogy to the approach used in Refs. [19, 86, 87]).
C. Thin film hydrodynamics
The previous two sections focused on two approaches to describe the experimentally observed
patterning dynamics in the ultrathin postcursor film left behind by a mesoscopic receding dewet-
ting front. Although both the kinetic Monte Carlo model and the dynamical density functional
theory are able to describe well the processes in the ultrathin film, they can not be employed to
describe mesoscale hydrodynamics. A relatively simple model for the latter can be derived in the
framework of a long-wave or lubrication equation [8, 63]. We will illustrate here the approach
by considering an isothermal situation where the nanoparticles are not surface active, i.e., they do
not act as surfactants. For a model incorporating the effects of latent heat generation and surface-
active particles resulting in thermal and solutal Marangoni stresses, see Ref. [88]. A description of
spreading particle solutions incorporating a structural disjoining pressure has also been considered
[89]. For related work on particle-laden film flow on an incline see Refs. [90, 91].
One starts from the Stokes equations, together with continuity, no-slip boundary conditions at the
18 | 17 | 17 | 1001.2669.pdf |
substrate and force equilibria at the free surface, and applies a long-wave approximation. Under
the assumption that concentrations equilibrate rapidly over the film thickness, we obtain coupled
non-linear evolution equations for the film thickness profileh(x,t) and the amount of nanoparticles
per unit length hp = φh, where φis the volume concentration of the nanoparticles. Note, that hp
corresponds to the local thickness of the nanoparticle layer when all the solvent is evaporated. The
resulting evolution equation for the film thickness is Eq. (1) above and focusing on the influence
of particle-independent capillarity and wettability only, the energy functional F[h] is given by
Eq. (2) above. Note that the viscosity η depends on the particle concentration. Following Refs.
[88, 89, 91, 92] we use the Quemada law for dense suspensions [93–95]
η(φ) = η0
(
1 −φ
φc
)−2
(8)
where φc = 0.64 corresponds to random close packing of spherical particles. For the nanoparticle
volume per length hp = φhone obtains the following evolution equation:
∂t(φh) = ∇·
[
φQc∇δF
δh
]
+ ∇·[D(φ)h∇φ] , (9)
where the particle concentration dependent diffusion coefficientD(φ) is related to the viscosity by
the Einstein relation D(φ) = kT/6πRη(φ), where Ris the radius of the nanoparticles [96].
We illustrate results obtained employing this thin film theory using the single example of a re-
ceding dewetting front for a partially wetting film. We use the disjoining pressure and material
constants for the liquid considered in Ref. [57], where the evaporative and convective dewetting
of a film of volatile liquid is studied. We add, however, the nanoparticles to the system. The
expression that we employ for the local free energy term in Eq. (2) is:
f(h) = SLW d2
0
h2 + SP exp
(d0 −h
l0
)
, (10)
where the parameters characterising the interaction between the liquid film and the surface are
the apolar and polar spreading coefficients SLW and SP , respectively, the Debye length l0 and the
Born repulsion length d0 [57]. The resulting disjoining pressure Π = −∂hf(h) allows for a stable
precursor film (thickness hprecursor) and also has a second (larger) thickness (h0) that corresponds
to a secondary minimum of the underlying energy functional. See Refs. [11, 97] for studies of
film and drop states for similar disjoining pressures. Our results are calculated for a system where
the profiles only vary in one Cartesian direction ( x), corresponding to a straight dewetting front.
However, our results may also be interpreted as applying to a circular flat drop whose front remains
19 | 18 | 18 | 1001.2669.pdf |
0.5
1
1.5
2
2.5
h
p
0
0.2 0.4 0.6 0.8 1 x/L
0.5
1
1.5
2
2.5
0
0.2 0.4 0.6 0.8 1 0.5
1
1.5
2
2.5
a
b
c
FIG. 6: Profiles of the final dried-in nanoparticle layer for the dewetting of a suspension of nanoparticles
in a volatile solvent that partially wets the substrate for (a) high ( Ω = 10−3), (b) medium (Ω = 2 ×10−6)
and (c) low (Ω = 0 .78 ×10−8) evaporation rates, for the case when χ = H/l0 = 1.09, the lateral length
scale is ℓ =
√
γ/κH with κ = (Sp/l0) exp(d0/l0)H being an energy scale related to wettability and the
vertical length scale is H =
√
2SLW /κd0. The remaining dimensionless parameters are the evaporation
number Ω = Qeη0ℓ2/H3, the diffusion number Γ = D(0)η0/Hκ = 10−4 and the dimensionless chemical
potential M = Hµ/κ = −0.0035. The system size is L= 19500ℓ. Film thickness and hp in the plots are
scaled by the precursor film thickness.
circular throughout the dewetting and evaporation process. In this case one should interprete the
coordinate xas the distance from the centre of the circular film.
We start with a film of heighth0 of finite length sitting on a precursor film and assume that the film
contains nanoparticles at constant concentration φ0. The chosen parameter values ensure that the
film of thickness h0 is linearly stable. As we do not incorporate noise, no nucleation of additional
holes can occur (even with noise the probability would be extremely low). Without evaporation the
film dewets ‘classically’ by a retraction of the initially step-like front. After a short time, surface
tension smoothes the profile of the receding front and a capillary rim forms that collects all the
20 | 19 | 19 | 1001.2669.pdf |
dewetted liquid. The front recedes until all liquid is collected in a central drop. Since no liquid
evaporates [Qnc = 0 in Eq. (1)], the particle concentration does not change during the process.
The situation changes when allowing for evaporation ( Qnc > 0). Now the front may retract
by convection and/or evaporation. Evaporation leads to the possibility of a strong increase in
the particle concentration at the contact line as evaporation is strongest there. Due to the strong
nonlinear dependence of the viscosity on the particle concentration, this may lead to a dramatic
decrease of the convective contribution to the front velocity. For moderate evaporation rates, this
may result in a (temporary) self-pinning of the front. Within the present basic model, the process
can (after complete dry-in) result in three different basic deposition patterns: (i) for very fast
evaporation rates, all other processes occur over time scales that are much larger. In particular, the
effects of convective redistribution of the liquid are neglectable. As a result one finds that a nearly
homogeneous film of nanoparticles of thicknesshp = φ0h0 is deposited (see Fig. 6(a)). Convection
only results in the small heap of material visible at the left hand side of Fig. 6(a). The decrease
in hp on the right side of Fig. 6(a) arises due to the diffusion of particles to the right of the initial
front position; (ii) for very low evaporation rates, the film dynamics is dominated by convective
dewetting as this process acts on a much shorter time scale than evaporation. As a result, all the
liquid is collected into a drop before evaporation slowly removes the remaining solvent. Under
these conditions most of the nanoparticles are deposited in a single heap (see Fig. 6(c)). Depending
on the diffusivity, the heap might be highest at the centre or show a depression there; (iii) at
intermediate evaporation rates, one may observe the deposition of a nanoparticle ring around a
region with a nanoparticle film of much lower height. At the centre deposition might increase
again (see Fig. 6(b)).
The most intriguing feature is the ring formation that has been observed experimentally for sus-
pensions of very different particle sizes ranging from nanometers [32, 36, 46, 47] to hundreds of
micrometers. Pinning of the contact line and thermal Marangoni effects are often mentioned as
necessary conditions for the ring formation. The contact line pinning is often assumed to result
from substrate heterogeneities. Film height and concentration profiles at various instants during
the dewetting process are displayed in Fig. 7. The profiles are from before, at and after self-pinning
of the contact line. In Fig. 8 we display a space-time plot for the complete process. At first, the
front recedes in the same manner as when there is no evaporation, but now driven by convection
and evaporation. A small capillary rim forms that collects all the dewetted liquid that does not
evaporate. The particle concentration slowly increases at the contact line (Fig. 7(a) and regime
21 | 20 | 20 | 1001.2669.pdf |
0
1
2
3
0
1
2
3
h, h
p
,
φ 0.6
0.65 0.7 0.75 x/L
0
1
2
3
a
b
c
FIG. 7: (Colour online) A sequence of profiles during a dewetting process with competing evaporation and
convection that leads to the dried-in ring structure of nanoparticles displayed in Fig. 6(b). Profiles are at (a)
before pinning (t = 0.08T), (b) at self-pinning ( t = 0.13T), and (c) after depinning ( t = 0.29T), where
T = 3 ×1010τ with τ = η0γH/κ2 (T is of order of 1s). The film thickness profiles hare the bold solid
lines, the nanoparticle concentrations φare the dotted lines and the nanoparticle layer height hp = hφare
the dashed lines. The remaining parameters and scalings are as in Fig. 6(b).
(i) in Fig. 8). The concentration increases further and when it approaches random close packing
φc, the viscosity diverges and the front pins itself. When pinned, further retraction only occurs
through evaporation (Fig. 7(b) and regime (ii) in Fig. 8). The front eventually depins and starts
to move again, leaving a nanoparticle ring behind (Fig. 7(c) and regime (iii) in Fig. 8). However,
the velocity is not as large as at the beginning, owing to the fact that the mean concentration of
particles has increased. The remaining particles are transported to the centre and are deposited
there when the remaining solvent evaporates (regime (iv) in Fig. 8).
The simple model used here shows, (i) that the contact line stops due to self-pinning by the de-
posited particles and (ii) the Marangoni effect is not necessary for the ring formation. The model
can easily be refined to account for solutal and/or thermal Marangoni effects [88] but self-pinning
22 | 21 | 21 | 1001.2669.pdf |
(iii)
(iv)
(ii)
(i)
FIG. 8: (Colour online) Space-time plots are given for (left) the film thicknesshand (right) the nanoparticle
layer height hp = hφ. The plot corresponds to the complete evolution resulting in the ring profile of
Fig. 6(b). In both panels bright [dark] parts denote high [low] regions. The prominent central dark-bright
border in the left panel indicates the change of the position of the contact line in time. Over time, four
regimes can be distinguished: (i) fast motion before pinning, (ii) nearly no front motion during self-pinning,
(iii) slow motion after depinning, and (iv) final evaporation from the center.
should also be investigated further in the simple case presented here.
IV . CONCLUSION
We have discussed recent work on pattern formation processes in films and drops of evaporating
suspensions/solutions of polymers and particles. After reviewing experiments on suspensions of
thiol-coated gold nanoparticles in toluene we have focused on the modelling of the transport and
phase change processes involved. A theoretical approach to the modelling of the hydrodynamics
on the mesoscale has been described as well as more microscopic models for the dynamics in the
observed nanoscopic ‘postcursor’ film. In particular, we have introduced (i) a microscopic kinetic
Monte Carlo model, (ii) a dynamical density functional theory and (iii) a hydrodynamic thin film
model.
The kinetic Monte Carlo model and the dynamical density functional theory can both be used to
investigate and understand the formation of polygonal networks, spinodal and branched structures
resulting from the dewetting of an ultrathin ‘postcursor’ film that remains behind the mesoscopic
dewetting front. They are, however, not capable of describing the dynamical processes in a meso-
23 | 22 | 22 | 1001.2669.pdf |
scopic film. We have seen that the KMC model is able to describe the interplay of solute diffusion
within the solvent and solvent evaporation/condensation. It also takes the liquid-liquid, liquid-
particle and particle-particle interactions into account and therefore allows us to distinguish differ-
ent regimes of the transverse (fingering) instability of the evaporative dewetting front: a transport
regime where the instability is almost completely independent of the interaction strengths and
a demixing regime where particles and liquid demix at the receding front thereby increasing its
transverse instability.
The dynamical density functional theory describes the coupled dynamics of the density fields of
the liquid and the nanoparticles. In the form described above (i.e. based on the two-dimensional
hamiltonian (3)) we obtain a simple theory that allows us to study the time evolution of the evapo-
rating ultrathin film and also to investigate the influence of processes such as surface diffusion by
the liquid, which are not incorporated in the KMC model. However, it is straightforward to extend
the theory to consider a fully three-dimensional fluid film, in which one can distinguish between
short- and long-range interactions of solvent and/or solute with the substrate. We have, however,
restricted the examples given here to situations that can also be described using the KMC model.
A further exploration will be presented elsewhere.
Finally, we have discussed a simple thin film model for the hydrodynamics on the mesoscale. It
results from a long-wave approximation and consists of coupled evolution equations for the film
thickness profile and the mean particle concentration. It has been used to discuss the self-pinning
of receding contact lines that is related to the formation of rings of dried-in particles (coffee-
stain effect) that frequently occurs when films or drops of solutions or suspensions dewet by the
combined effects of convection and evaporation.
One of the primary goals of researchers in this field, is the search for simple-to-use techniques
that allow one to produce hierarchically structured functional layers for a wide range of applica-
tions such as, e.g., organic solar cells [98]. This means that the experiments advance very rapidly
towards increasingly complex systems. For example, there have been investigations of the influ-
ence of the phase behaviour on the drying of droplets of a suspension of hard-sphere colloidal
particles and non-adsorbing polymer [99], of the instabilities and the formation of drops in evap-
orating thin films of binary solutions [100] that may lead to treelike patterns [101], of effects of
a secondary phase separation on evaporation-induced pattern formation in polymer films [102],
and of the influence of an imposed flow on decomposition and deposition processes in a sliding
ridge of evaporating solution of a binary polymer mixture [103] and of the influence of rather
24 | 23 | 23 | 1001.2669.pdf |
fast evaporation [104, 105]. These complex experimental systems all represent systems of high
practical interest that the theories presented here are not (yet) able to describe. Such experiments
do, however, provide a strong motivation for further work to extend the theories presented here, as
well as to develop new approaches.
Let us finally mention that several topics were entirely excluded from our discussion here. First, we
focused on a limited range of descriptions and did, for instance, not mention lattice Boltzmann,
molecular dynamics or dissipative particle dynamics approaches that may also be employed to
describe fluid suspensions [106–109]. Second, we have only discussed spatially homogeneous
substrates. Patterned substrates are widely used in dewetting experiments [38, 110–112]. Theoret-
ical descriptions are well developed for the dewetting of films of pure non-volatile liquids on such
substrates [68, 113–119]. However, in the case of volatile liquids on heterogeneous substrates,
much less work has been done. A third topic that we did not touch upon are possible continuum
thin film approaches to demixing dewetting suspensions. We believe it is feasible to extend the
diffuse interface theories such as model-H [120] to include the influence of evaporation in dewet-
ting nanoparticle suspensions. For instance, such models have already been adapted to describe
demixing free surface films of polymer blends [121–123].
Acknowledgments
AJA and MJR gratefully acknowledge RCUK and EPSRC, respectively, for financial support. We
acknowledge support by the European Union via the FP6 and FP7 Marie Curie schemes [Grants
MRTN-CT-2004005728 (PATTERNS) and PITN-GA-2008-214919 (MULTIFLOW)].
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33 | 32 | 32 | 1001.2669.pdf |
arXiv:1001.2670v1 [quant-ph] 15 Jan 2010
.
The Linewidth of Ramsey Laser with Bad Cavity
Y ang Li, Wei Zhuang, Jinbiao Chen, ∗ and Hong Guo †
CREAM Group, State Key Laboratory of Advanced Optical Commu nication
Systems and Networks (Peking University) and Institute of Q uantum Electronics,
School of Electronics Engineering and Computer Science,
and Center for Computational Science and Engineering (CCSE ), Peking University, Beijing 100871, P . R. China
(Dated: October 29, 2018)
We investigate a new laser scheme by using Ramsey separated- field technique with bad cavity. By studying
the linewidth of the stimulated-emission spectrum of this k ind of laser inside the cavity, we find its linewidth
is more than two orders of magnitude narrower than atomic nat ural linewidth, and it is far superior to that
of conventional optical Ramsey method and any other availab le subnatural linewidth spectroscopy at present.
Since any cavity related noise is reduced to cavity-pulling e ffect in bad cavity laser, this Ramsey laser provides
the possibility of precision subnatural linewidth spectro scopy, which is critical for the next generation of optical
clock and atom interferometers.
PACS numbers: 42.55.Ah, 42.50.Ar, 42.60.Da, 32.30.-r
Introduction: Since the invention of the separated-field
technique [1], it has played an important role in the field of
precision spectroscopy due to its linewidth narrowing effect
via multiple coherent interaction. Atomic clocks based on
this technique have greatly extended our ability for frequency
measurement, further, almost all the atom interferometers are
based on this technique [2].
Though, the natural linewidth of quantum transition was
regarded as the ultimate limit to high-resolution laser spe c-
troscopy [4], several methods of subnatural linewidth spec -
troscopy have been proposed to gain subnatural linewidth [3 –
10]. However, in all these e fforts, including optical Ramsey
spectroscopy, subnatural line is realized at the expense of a
quick reduction in signal-to-noise (SNR) ratio due to the ex -
ponential decaying of signal, thus all these schemes can onl y
get the linewidth several times narrower than the atomic nat -
ural linewidth. In the past three decades, this situation do es
not change in the field of the precision laser spectroscopy.
On the other hand, the thermal noise of the cavity mirrors is
the main obstacle for further linewidth reduction of a laser
[11, 12], and it is a challenge to substantially reduce this noise
further[13]. Recently, a new scheme, called active optical
clock [14–18], was proposed to substantially reduce the las er
linewidth. With lattice trapped atoms, it is possible to rea ch
mHz linewidth laser based on the mechanism of active optical
clock [14, 15, 19]. The principal mechanism of active optica l
clock is to directly extract light emitted from the ultranar row
atomic transition with a cavity mode linewidth much wider
than that of lasing. This bad cavity ensures that any frequen cy
shift due to cavity noise reduces to cavity-pulling e ffect [15–
17], then the thermal noise is not the major obstacle again fo r
reducing the linewidth. This means the bad cavity can play an
indispensable role in new subnatural linewidth spectroscopy.
In this Letter, we propose a new scheme called Ramsey
laser with bad cavity. Distinct from any previous applicati ons
of conventional Ramsey separated oscillating fields method
[1], which focuses on the absorption spectrum, we here fo-
cus on the stimulated emission spectrum via multiple coher-
ent interactions inside the cavity. We find this Ramsey laser
can provide a stimulated-emission spectrum with a linewidth
much narrower than that of any conventional optical Ramsey
seperated-field spectroscopy, which is commonly applied in
optical atomic clock. Our results also show that a subnatural
linewidth spectroscopy, superior to any other available su bnat-
ural spectroscopy technique at present [3–10], can be reach ed
by this kind of laser, if a suitable atomic level structure is cho-
sen. Thus, this method can provide an e ffective subnatural
spectroscopy, and the possibilities for the new optical clo ck
scheme [15] and atom interferometers [2].
Theoretical framework: We consider the case of a two-level
atomic beam interacting with a single-mode Ramsey cavity
of separated-oscillating-field resonators with the cavitymode
linewidth is much wider than the atomic gain linewidth. Thus
we call it bad-cavity Ramsey laser. All atoms are pumped
onto the upper lasing statea before entering the first cavity
of seperated field, and the lower lasing state is b . We assume
all the atoms have the same velocities υ, that means what we
consider here is a homogeneous laser system. And for the
sake of simplicity, we consider the two-standing waves line ar
optical Ramsey configuration with a grid as spatial selector
[20, 21]. Our treatment can be extended to other configura-
tions as in [22–24]. The length of each oscillating part isl,
and the length of the free drift region is L . The corresponding
Hamiltonian is
H = ℏωˆa †ˆa +ℏ
∑
j
[ ωj
a ( t) σj
a +ωj
b ( t) σj
b ]
+ ℏg
∑
j
Γj ( t)(ˆa † ˆσj
−e −i⃗k ·⃗r j + ˆσj
+ˆae i⃗k ·⃗r j ) , (1)
where ˆ a , ˆa † are the annihilation and creation operators of the
field mode inside the cavity, with the frequency ω, σj
a =
( |a ⟩⟨a |) j and σj
b = ( |b ⟩⟨b |) j are the projection operators for the
jth atom corresponding to the upper and lower lasing levels, | 0 | 0 | 1001.2670.pdf |
2
with frequency ωj
a and ωj
b , and σj
− = ( |b ⟩⟨a |) j is the “spin-
flip” operator for the jth atom, with its adjoint σj
+ = ( |a ⟩⟨b |) j .
The coupling constant g is given by g = µ√ω/2 ℏǫ0 V , where
µ is the magnitude of the atomic dipole moment, and V is the
e ffective volume of the cavity.
In order to denote the finite-time interaction between the
atoms and Ramsey separated field, we introduce the function
Γj ( t) = Θ( t −t j ) −Θ( t −t j −τ) +Θ( t −t j −τ−T ) −Θ( t −t j −2 τ−T ) ,
(2)
where Θ( t) is the Heaviside step function [ Θ( t) = 1 for t > 0,
Θ( t) = 1 /2 for t = 0, and Θ( t) = 0 for t < 0]. T is the free
drift time of the atoms, and τ is the interacting time between
the atom and one cavity.
By the standard way [25], we can get the Heisenberg-
Langevin equations of the motion for the single-atom and
filed operators. By introducing the macroscopic atomic oper -
ator, M ( t) = −i ∑
j Γj ( t) σj
−( t), N a ( t) = ∑
j Γj ( t) σj
aa ( t), N b ( t) =∑
j Γj ( t) σj
bb ( t), the dynamic equations for the field and macro-
scopic atomic operators yield
˙a ( t) = −κ
2 a ( t) +gM ( t) +F κ( t) , (3)
˙N a ( t) = R (1 −A 0 + A 1 −A 2 ) −( γa +γ′
a ) N a ( t)
− g [ M †( t) a ( t) +a †( t) M ( t)] +F a ( t) , (4)
˙N b ( t) = − R ( B 0 − B 1 + B 2 ) −γb N b ( t) +γ′
a N a ( t)
+ g [ a †( t) M ( t) + M †( t) a ( t)] +F b ( t) , (5)
˙M ( t) = − R ( C 0 −C 1 +C 2 ) −γab M ( t)
+ g [ N a ( t) −N b ( t)] a ( t) +F M ( t) , (6)
where the macroscopic noise operators are defined as
F a ( t) =
∑
j
˙Γj ( t) σj
a ( t) −R (1 −A 0 + A 1 −A 2 ) +
∑
j
Γj ( t) f j
a ( t) ,
F b ( t) =
∑
j
˙Γj ( t) σj
b ( t) +R ( B 0 − B 1 + B 2 ) +
∑
j
Γj ( t) f j
b ( t) ,
F M ( t) = −i
∑
j
˙Γj ( t) ˜σj
−( t) +R ( C 0 −C 1 +C 2 ) −i
∑
j
Γj ( t) f j
σ( t) ,
with A 0 =
⣨
σj
a ( t j +τ)
⟩
q , A 1 =
⣨
σj
a ( t j +τ+T )
⟩
q ,
A 2 =
⣨
σj
a ( t j +2 τ+T )
⟩
q , B 0 =
⣨
σj
b ( t j +τ)
⟩
q ,
B 1 =
⣨
σj
b ( t j +τ+T )
⟩
q , B 2 =
⣨
σj
b ( t j +2 τ+T )
⟩
q ,
C 0 =
⣨
−iσj
−( t j +τ)
⟩
q , C 1 =
⣨
−iσj
−( t j +τ+T )
⟩
q ,
C 2 =
⣨
−iσj
−( t j +2 τ+T )
⟩
q . R is the mean pumping
rate, which is defined in [26]. It is very easy to check that the
average values of the above Langevin forces are all zero.
By using the above definitions of the noise operators, we
find the correlation functions of macroscopic noise forces c an
be generally written in the form
⟨F k ( t) F l ( t′) ⟩
= D (0)
kl δ( t −t′) + D (1)
kl δ( t −t′ −τ)
+ D (2)
kl δ( t −t′ +τ) + D (3)
kl δ( t −t′ −τ−T )
+ D (4)
kl δ( t −t′ +τ+T ) +D (5)
kl δ( t −t′ −2 τ−T )
+ D (6)
kl δ( t −t′ +2 τ+T ) +D (7)
kl δ( t −t′ −T )
+ D (8)
kl δ( t −t′ +T ) , (7)
where D ( i)
kl ( k ,l = a ,b ,M ,M †; i = 0 ,1 ,2) are the quantum dif-
fusion coe fficients.
c-number correlation functions: By choosing some partic-
ular ordering for products of atomic and field operators, one
could derive the c-number stochastic Langevin equations from
the quantum Langevin equations derived above, and all of the
dynamic equations for c-number stochastic variables are th e
same as in [26]. The di fferences are from the correlation func-
tions. On the other hand, we convert the quantum noise oper-
ators into the c-number noise variables˜F k ( t)( k = a ,b ,M ,M †),
whose correlation functions are expressed as
⣨˜F k ( t) ˜F k ( t′)
⟩
= ˜D (0)
kl δ( t −t′) + ˜D (1)
kl δ( t −t′ −τ)
+ ˜D (2)
kl δ( t −t′ +τ) + ˜D (3)
kl δ( t −t′ −τ−T )
+ ˜D (4)
kl δ( t −t′ +τ+T ) + ˜D (5)
kl δ( t −t′ −2 τ−T )
+ ˜D (6)
kl δ( t −t′ +2 τ+T ) + ˜D (7)
kl δ( t −t′ −T )
+ ˜D (8)
kl δ( t −t′ +T ) , (8)
where ˜D ( i)
kl are the c-number Langevin di ffusion coe fficients,
related to quantum Langevin di ffusion coe fficients D ( i)
kl as in
[27].
Steady-state solutions: The steady-state solutions for the
mean values of the field and atomic variables for laser op-
eration are obtained by dropping the noise terms of the c-
number Langevin equations and setting the time derivatives
equal to zero. The analytical solutions are very complex, and
one could numerically solve the steady-state equations. In this
paper, we only care about the bad cavity limit γmax ≪ T −1 ≪
τ−1 ≪ κ/2. Since the atomic transit time is much shorter than
the damping times of atomic variables, one could ignore the
effect of the spontaneous emission of the atom. By the stan-
dard way [25], We get the following steady-state values:
⏐
⏐
⏐˜A ss
⏐
⏐
⏐2
= R (1 −A 0 + A 1 −A 2 )
κ = R ( B 0 − B 1 + B 2 )
κ ,
˜N ass = R τ
2
[
1 + C 0 −C 1 +C 2
g τ
√ κ
R ( B 0 − B 1 + B 2 )
]
, | 1 | 1 | 1001.2670.pdf |
3
˜N bss = R τ
2
[
1 − C 0 −C 1 +C 2
g τ
√ κ
R ( B 0 − B 1 + B 2 )
]
.
A detailed analysis about the stability of the steady-state can
be found such as in [28]. In this paper, we assume the steady-
state solution is stable.
Laser linwidth: Suppose the quantum fluctuation is small,
the evolution of the fluctuations can be obtained by making a
linearization of the c-number Langevin equations around th e
steady-state solution. Then the measured spectra of field flu c-
tuations will be directly related to these quantities. By Fo urier
transformations of the linearized equation, we get the ampl i-
tude and phase quadrature components δX ( ω) and δY ( ω) [26].
Well above threshold, one can neglect the amplitude fluctu-
ations, and the linewidth inside the cavity is related to the
phase-diffusion coe fficient [25]. For small fluctuation of laser
phase, the spectrum of phase fluctuations is simply related t o
the spectrum of the phase quadrature component of the field
fluctuations, namely,
( δϕ2 ) ω = 1
I 0
( δY 2 ) ω.
In the region γab ≪ T −1 ≪ τ−1 ≪ κ/2, as in the recently
proposed active optical clock [15] with atomic beam. The
phase quadrature component of the field fluctuations can be
expressed as
( δϕ2 ) ω
≈ ( κ/2 +γab ) 2
I 0 ω2 [( κ/2 +γab ) 2 +ω2 ]
g 2
4( κ/2 +γab ) 2 {4 γab ˜N ass
+ 2 R [( A 0 + B 0 ) +( A 2 + B 2 )]
+ Rp [( C 0 −C ∗
0 ) 2 +( C 1 −C ∗
1 ) 2 +( C 2 −C ∗
2 ) 2 ] }. (9)
Since the time τ and T is much shorter than the time scale
of the atomic dampings, we can neglect the dampings when
calculateA i , B i , C i . By using
A 0 = cos 2
( ΩR
2 τ
)
, A 1 = cos 2
( ΩR
2 τ
)
,
A 2 = 1 −sin 2 ( ΩR τ) cos 2
( ∆2
2 T
)
, B 0 = sin 2
( ΩR
2 τ
)
,
B 1 = sin 2
( ΩR
2 τ
)
, B 2 = sin 2 ( ΩR τ) cos 2
( ∆2 T
2
)
,
( C 0 −C ∗
0 ) 2 = 0 ,( C 1 −C ∗
1 ) 2 = −sin 2 ( ΩR τ) sin 2 ( ∆2 T ) ,
( C 2 −C ∗
2 ) 2 = −sin 2 ( ΩR τ) sin 2 ( ∆2 T ) ,
we get
( δϕ2 ) ω = ( κ/2 +γab ) 2
ω2 [( κ/2 +γab ) 2 +ω2 )]
γ2
ab
( κ/2 +γab ) 2 {D S T
+ D Ram [2 − p sin 2 ( ΩR τ) sin 2 ( ∆2 T )] }, (10)
where ΩR is the Rabi frequency on resonance,
D S T =g 2 ˜N ass /I 0 γab , D Ram = g 2 R /2 I 0 γ2
ab , and
∆2 = ω − ( ωa 2 − ωb 2 ) presents the detuning in the free
drift region. p is a parameter, which characterizes the pump-
ing statistics: a Poissonian excitation statistics corres ponds to
p = 0 , and for a regular statistics we have p = 1.
Then the linewidth of Ramsey laser with bad cavity is given
by
D = γ2
ab
( κ/2 +γab ) 2 {D S T + D Ram [2 − p sin 2 ( ΩR τ) sin 2 ( ∆2 T )] }.
(11)
Since D S T /D Ram ≪ 1 in our situation, and in the case of max-
imal photon number, the steady state value of ˜N ass is about
R τ/2. Then we get the
D ≈ 2 g 2
κ [2 − p sin 2 ( ΩR τ) sin 2 ( ∆2 T )] . (12)
From the expression above, we find that the pumping statis-
tic can influence the linewidth. For regular injection (p = 1),
the linewidth is the narrowest, while for Poissonian inject ion
( p = 0), the linewidth is the broadest. But even for regular
injection, the linewidth is larger than the case of one cavit y.
That means the mechanism of separated-field does not play
the role in reducing the linewidth as in the conventional opt i-
cal Ramsey method, which is counter-intuitive. However, th e
separated fields are indispensable for any phase detection l ike
atom interferometry. The details about the method of active
atom interferometry will appear elsewhere.
Our method of Ramsey laser is suitable for any atoms with
metastable energy level, as an example, we choose the tran-
sition from the metastable state 4s 4 p 3 P 1 to the ground state
4 s 2 1 S 0 of 40 Ca to check the striking feature of this laser: sub-
natural linewidth. As mentioned in [29], the corresponding
natural linewidth of the metastable state 4s 4 p 3 P 1 is 320Hz.
As in the recently proposed active optical clock with atomic
beam [15], the velocity of the atoms in thermal atomic beam is
about 500m/s, and the length of the interaction region is about
1mm, then the time for the atom to traverse each coherent-
interaction region is on the order of magnitude of 1µs. If
a bad cavity with κ is on the order of 10 7 Hz, the relation
κ/2 ≫ τ−1 is satisfied. Then when g is on the order of the
magnitude of kHz, which can be easily achieved for current
technique [30], from the linewidth expression of Eq.(16) th e
order of magnitude of linewidth is below 1 Hz. This means
the linewidth of a Ramsey laser can be more than two or-
ders of magnitude narrower than the atomic natural linewidth,
therefore our Ramsey method provides a new subnatural spec-
troscopy technique. And since it is stimulated-emission spec-
trum, it overcomes the di fficulty in other subnatural linewidth
spectroscopy schemes where the quick reduction of signal to
noise ratio is a formidable limit. We should point out that
this Ramsey laser does not escape the limitation of all active
optical clock: in order to pump atoms to the excited state ef-
fectively and to be stimulated emit photon during the lifetime
of a metastable state, this new method will only be applicabl e
to some special transitions [17]. | 2 | 2 | 1001.2670.pdf |
4
Conclusion: In summary, we propose a new subnatural
linewidth spectroscopy technique, which is a laser by us-
ing Ramsey seperated-field cavity to realize the output of
stimulated-emission radiation via multiple coherent interac-
tion with atomic beam. We find the linewidth of Ramsey laser
is subnatural if we choose an appropriate atomic level, and the
bad-cavity laser mechanism will dramatically reduce cavit y-
related noise as discussed in active optical clock [15–19]. Our
results show that this new subnatural linewidth spectrosco py
is superior to conventional optical Ramsey seperated-field
spectroscopy and any other available subnatural spectrosc opy
technique at present [3–10]. Considering one have to ap-
ply the separated-field method in any phase detection as in
Ramsey-Borde´interferometer [2], to investigate the e ffects of
phase di fferences between the two oscillating fields [31] in
this stimulated separated-field method with such subnatura l
linewidth will be our next research aim.
We acknowledge Yiqiu Wang and Deshui Y u for fruitful
discussions. This work is supported by MOST of China
(grant 2005CB724500, National Natural Science Foundation
of China (grant 60837004, 10874009), National Hi-Tech Re-
search and Development (863) Program.
∗ E-mail: [email protected]
† E-mail: [email protected].
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[2] B. Dubetsky and P . R. Berman, In Atom Interferometry , edited
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[5] P . L. Knight and P . E. Coleman, J. Phys. B: Atom. Molec. Phy s.
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[6] H. -W. Lee, P . Meystre, and M. O. Scully, Phys. Rev. A 24 , 1914
(1981).
[7] F. Shimizu, K. Shimizu, and H. Takuma, Phys. Rev. A 28 , 2248
(1983).
[8] W. Gawlik, J. Kowalski, F. Tr¨ ager, and M. V ollmer, Phys. Rev.
Lett. 48 , 871 (1982).
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[12] A. D. Ludlow et al. , Opt. Lett. 32 , 641 (2007).
[13] H. J. Kimble, B. L. Lev, and J. Ye, Phys. Rev. Lett. 101 , 260602
(2008).
[14] J. Chen, and X.Chen, In Proceedings of the 2005 IEEE Inter-
national Frequency Control Symposium and Exposition , (IEEE,
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[15] J. Chen, e-print arXiv:0512096 quant-ph; Chinese Scie nce Bul-
letin 54 , 348 (2009).
[16] D. Y u and J. Chen, Phys. Rev. A 78 , 013846 (2008).
[17] J. Chen, In Frequency Standards and Metrology: Proceedings
of the 7th Symposium , edited by Maleki Lute (World Scientific
Publishing Company, 2009).
[18] Y . Wang, Chinese Science Bulletin 54 , 347 (2009).
[19] D. Meiser, J. Ye, D. R. Carlson, and M. J. Holland, Phys. R ev.
Lett. 102 , 163601 (2009)
[20] F. Strumia, Metrologia 8 , 85 (1972).
[21] G. Kramer, J. Opt. Soc. Am. 68 , 1634 (1978).
[22] V . S. Letokhov and B. D. Pavlik, Opt. Spectrosc. USSR 32 , 455
(1972).
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159 (1977).
[25] L. Davidovich, Rev. Mod. Phys. 68 , 127 (1996).
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Phys. Rev. A 47 , 1431 (1993).
[27] M. Sargent III, M. O. Scully, and W. E. Lamb, Laser Physics
(Addition Wesley, Reading, MA, 1974).
[28] N. A. Abraham, P . Mandel, and L. M. Narducci, Dynamic In-
stabilities and Pulsations in Lasers , Progress in Optics XXV ,
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[29] L. Pasternack, D. M. Silver, D. R. Yarkony, and P . J. Dagd igian,
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[30] K. An and M. S. Feld, Phys. Rev. A 56 , 1662(1997).
[31] N. F. Ramsey and H. B. Silsbee, Phys. Rev. 84 , 506(1951). | 3 | 3 | 1001.2670.pdf |
arXiv:1002.2525v2 [hep-ph] 13 Feb 2010
HGU-CAP 002
Higgs portal dark matter in the minimal gaugedU(1)B−L model
Nobuchika Okada ∗
Department of Physics and Astronomy,
University of Alabama, Tuscaloosa, AL 35487, USA
Osamu Seto †
Department of Architecture and Building Engineering,
Hokkai-Gakuen University, Sapporo 062-8605, Japan
Abstract
We propose a scenario of the right-handed neutrino dark matter in the context of the minimal
gauged U(1)B−L model by introducing an additional parity which ensures thestability of dark
matter particle. The annihilation of this right-handed neutrino takes place dominantly through the
s-channel Higgs boson exchange, so that this model can be called Higgs portal dark matter model.
We show that the thermal relic abundance of the right-handedneutrino dark matter with help of
Higgs resonance can match the observed dark matter abundance. In addition we estimate the cross
section with nucleon and show that the next generation direct dark matter search experiments can
explore this model.
PACS numbers:
∗ Electronic address: [email protected]
†Electronic address: [email protected]
1 | 0 | 0 | 1002.2525.pdf |
I. INTRODUCTION
The nonvanishing neutrino masses have been confirmed by various n eutrino oscillation
phenomena and indicate the evidence of new physics beyond the Sta ndard Model. The most
attractive idea to naturally explain the tiny neutrino masses is the se esaw mechanism [1], in
which the right-handed (RH) neutrinos singlet under the SM gauge g roup are introduced.
The minimal gauged U(1)B−L model based on the gauge group SU(3)C × SU(2)L × U(1)Y ×
U(1)B−L [2] is an elegant and simple extension of the SM, in which the RH neutrino s of
three generations are necessarily introduced because of the gau ge and gravitational anomaly
cancellations. In addition, the mass of RH neutrinos arises associat ed with the U(1)B−L
gauge symmetry breaking.
Although the scale of the B−Lgauge symmetry breaking is basically arbitrary as long as
phenomenological constraints are satisfied, one interesting optio n is to take it to be the TeV
scale [3]. It has been recently pointed out [4] that when the classica l conformal invariance
is imposed on the minimal U(1)B−L model, the symmetry breaking scale appears to be the
TeV scale naturally. If this is the case, all new particles, the Z′ gauge boson, the B − L
Higgs boson H and the RH neutrinos appear at the TeV scale unless the U(1)B−L gauge
coupling is extremely small, and they can be discovered at Large Hadr on Collider [5–8].
Then we may be able to understand the relation between the gauge s ymmetry breaking and
the origin of neutrino masses.
Although such a TeV scale model is interesting and appealing, one migh t think that the
absence of dark matter (DM) candidate is a shortcoming of this mod el. A sterile RH neutrino
with mass of the order of MeV is one possibility [9]. In this paper, we pro pose a very simple
idea to introduce the DM candidate in the minimal gauged U(1)B−L model. We introduce
the Z2 parity into the model and impose one of three RH neutrinos to be odd , while the
others even. In this way, the Z2-odd RH neutrino becomes stable and the DM candidate.
Note that two RH neutrinos are enough to reconcile with the observ ed neutrino oscillation
data, with a prediction of one massless light neutrino. Therefore, w ithout introducing any
additional new dynamical degrees of freedom, the DM particle arise s in the minimal gauged
U(1)B−L model.
The paper is organized as follows. In the next section, we briefly des cribe our model. In
section III, we estimate the thermal relic density of the RH neutrin o and identify the model
2 | 1 | 1 | 1002.2525.pdf |
parameter to be consistent with the current observations. We als o calculate the scattering
cross section between the DM particle and nucleon and discuss the im plication for the direct
DM search experiments. We summarize our results in the section IV. Our notations and the
formulas used in our analysis are listed in Appendix.
II. THE MINIMAL GAUGEDU(1)B−L MODEL WITH Z2 PARITY
The model is based on the gauge group SU(3)C ×SU(2)L ×U(1)Y ×U(1)B−L. Additional
fields besides the standard model fields are a gauge field Z′
µ of the U(1)B−L, a SM singlet
B − L Higgs boson Ψ with two U(1)B−L charge, and three RH neutrinos Ni which are
necessary for the gauge and gravitational anomaly cancellations. In describing the RH
neutrinos, we use the four component representation of RH neut rino constructed from the
Weyl spinor νRi ,
Ni ≡
νRi
ǫν∗
Ri
, (1)
For the two RH neutrinos, N1 and N2, we assign Z2 parity even, while odd for N3, so that
the RH neutrino N3 is stable and, hence, the DM candidate.
Due to the additional gauge symmetry U(1)B−L, the covariant derivative for each fields
is given by
Dµ = D(SM )
µ − iqB−LgB−LZ′
µ , (2)
where D(SM )
µ is the covariant derivative in the SM, and qB−L is the charge of each fields
under the U(1)B−L with its gauge coupling gB−L.
Yukawa interactions relevant for the neutrino masses are given by
Lint =
3∑
α =1
2∑
i=1
yαi ¯Lα ˜Φ Ni − 1
2
3∑
i=1
λRi
¯NiΨ PRNi + h.c., (3)
where ˜Φ = −iτ2Φ ∗ for Φ being the SM Higgs doublet, and without loss of generality we hav e
worked out in the basis where the second term in the right-hand-sid e is in flavor diagonal
for RH neutrinos. Because of the Z2 parity, the DM candidate N3 has no Yukawa couplings
with the left-handed lepton doublets.
The general Higgs potential for the SU(2)L doublet Φ and a singlet B− L Higgs Ψ is
generally given by
V(Φ ,Ψ) = m2
1|Φ |2 + m2
2|Ψ |2 + λ1|Φ |4 + λ2|Ψ |4 + λ3|Φ |2|Ψ |2. (4)
3 | 2 | 2 | 1002.2525.pdf |
The Higgs fields φ and ψ are obtained by expanding Φ and Ψ as
Φ =
0
1
√
2 (v+ φ)
, (5)
Ψ = 1
√
2(v′ + ψ), (6)
around the true vacuum with the vacuum expectation values v and v′. These are related
with the mass eigenstates h and H through
h
H
=
cos θ − sin θ
sin θ cos θ
φ
ψ
, (7)
with θ being the mixing angle. Their masses are given by
M2
h = 2 λ1v2 cos2 θ+ 2λ2v′2 sin2 θ− 2λ3vv′ sin θcos θ, (8)
M2
H = 2 λ1v2 sin2 θ+ 2λ2v′2 cos2 θ+ 2λ3vv′ sin θcos θ. (9)
The mass of the new neutral gauge boson Z′ arises by the U(1)B−L gauge symmetry
breaking,
M2
Z′ = 4 g2
B−Lv′2. (10)
Associated with the U(1)B−L gauge symmetry breaking, the RH neutrinos Ni acquire masses
MNi = −λRi
v′
√
2. (11)
From LEP experiment, the current lower bound on the Z′ boson mass has been found to
be [10, 11]
MZ′
gB−L
= 2 v′ ≳ 6 − 7 TeV. (12)
Two Z2-even RH neutrinos N1 and N2 are responsible for light neutrino masses via the
seesaw mechanism,
mναβ = −
∑
i=1, 2
yαi yiβ
v2
2MNi
. (13)
Note that the rank of this mass matrix is two, so that the lightest ne utrino is massless.
III. RIGHT-HANDED NEUTRINO DARK MATTER
Due to the Z2 parity, one of RH neutrino N3 (we denote it as N hereafter) in our model
can be the DM candidate. We first estimate its relic abundance and ide ntify the model
4 | 3 | 3 | 1002.2525.pdf |
parameters to be consistent with the current observations. Nex t we calculate the scattering
cross section between the DM particle and a proton and discuss the implication for the direct
DM search experiments.
A. Thermal relic density
The DM RH neutrino interacts with the SM particles through couplingswith B − L
gauge and B− L Higgs bosons. Note that neutrino Dirac Yukawa interactions are ab sent
because of the Z2 parity. The most of annihilation of the RH neutrinos occurs via Z′,H and
h exchange processes in the s-channel. In practice, the dominant contributions come from
the Higgs ( h and H) exchange diagrams, because the Z′ exchange processes are suppressed
by the inverse square of the B−LHiggs VEV v′ ≳ 3 TeV. Thus, we obtain Higgs portal DM
of RH neutrino effectively. The relevant annihilation modes are the an nihilation into f ¯f,
W+W−, ZZ, and h(H)h(H). Since RH neutrino DM couples to only B− L Higgs Ψ while
a SM particle does to SM Higgs Φ, the DM annihilation occurs only throug h the mixing
between these two Higgs bosons. Although it is not so severe, the p recision electroweak
measurements [12] as well as the unitarity bound [13] give constra ints on the mixing angle
and mass spectrum of the Higgs bosons.
The thermal relic abundance of DM
Ω N h2 = 1 .1 × 109 mN /Td
√g∗MP ⟨σv⟩GeV−1, (14)
with the Planck mass MP , the thermal averaged product of the annihilation cross section
and the relative velocity ⟨σv⟩, the total number of relativistic degrees of freedom in the
thermal bath g∗, and the decoupling temperature Td, is evaluated by solving the Boltzmann
equation for the number density of RH neutrino nN ;
dnN
dt + 3HnN = −⟨σv⟩(n2
N− n2
EQ), (15)
and the Friedmann equation
H2 ≡
( ˙a
a
) 2
= 8π
3M2
P
ρ, (16)
with nEQ and a(t) being the equilibrium number density and the scale factor, under th e
radiation dominated Universe with the energy density ρ= ρrad [14].
5 | 4 | 4 | 1002.2525.pdf |
Fig. 1 shows the relic density Ω N h2 as a function of the DM mass mN for a set of
parameters: ( v′,Mh,MH ,MZ′ ,sin θ) = (4000 GeV ,120 GeV ,200 GeV ,1000 GeV ,0.7), for
example. Willkinson Microwave Anisotropy Probe measured the value o f DM abundance as
Ω DM h2 ≃ 0.1 [15]. The figure shows that a desired DM relic abundance can be obta ined for
only near Higgs resonances, mN ≈ Mh/2 or MH /2.
Fig. 2 shows the relic density Ω N h2 as a function of the DM mass mN for a smaller Higgs
mixing sin θ= 0 .3 (others are the same as in Fig. 1). Compared with Fig. 1, for mN ≲ MW
where the DM particles dominantly annihilate into f ¯f, the relic density further increases
because of the small mixing angle. When the DM is heavier, the annihilat ion mode into
Higgs boson pairs is opened and the relic density slightly deceases, bu t the reduction is not
enough to reach Ω N h2 ≃ 0.1.
0.001
0.01
0.1
1
10
100
1000
60 80 100 120 140 160 180 200
Ω N h 2
m N [GeV]
FIG. 1: The thermal relic density of RH neutrino DM as a function of its mass for a parameter
set: (v′, M h, M H , M Z′ , sin θ) = (3000 GeV, 120 GeV, 200 GeV, 1000 GeV, 0. 7).
Our model is quite analogous to the so-called gauge singlet scalar dar k matter [16–18].
Some recent studies can be found in Refs. [19, 20]. In the gauge sing let scalar DM model, the
thermal abundance is mainly controlled by the interactions between the SM Higgs boson and
the DM particle. In our model, B− LHiggs VEV v′ can play the same role for mN <MW ,
namely a larger v′ corresponds to weaker coupling between DM and Higgs for a fixed DM
mass. On the other hand, for mN > MW the difference appears. Even if the annihilation
6 | 5 | 5 | 1002.2525.pdf |
0.001
0.01
0.1
1
10
100
1000
60 80 100 120 140 160 180 200
Ω N h 2
m N [GeV]
FIG. 2: The same as Fig. 1 but for sinθ = 0. 3.
mode into W-boson pair becomes kinematically available, it is not possible to obtain t he
desired DM abundance without the Higgs resonant annihilation becau se the bound on v′
given by Eq. (12) is stringent.
B. Direct detection of dark matter
Our RH neutrino DM can elastically scatter off with nucleon, unlike another RH neutrino
DM model has been proposed by Krauss et. al. [21] and studied [22, 23]. The main process
is Higgs exchange and the resultant cross section for a proton is giv en by
σ(p)
SI = 4
π
( mpmN
mp + mN
) 2
f2
p , (17)
with the hadronic matrix element
fp
mp
=
∑
q=u,d,s
f(p)
T q
αq
mq
+ 2
27f(p)
T G
∑
c,b,t
αq
mq
, (18)
and the effective vertex (see Appendix for notations)
αq = −λN yq
( ∂Φ
∂h
1
M2
h
∂Ψ
∂h + ∂Φ
∂H
1
M2
H
∂Ψ
∂H
)
, (19)
where mq is a mass of a quark with a Yukawa coupling yq, and f(p)
T q and f(p)
T G are constants.
7 | 6 | 6 | 1002.2525.pdf |
From Eq. (19), one can see that σ(p)
SI ∝ (sin 2θ/v′)2 for a given DM mass mN . Fig. 3 shows
the spin-independent cross section of RH neutrino with a proton. T he resultant cross section
is found to be far below the current limits reported by XENON10 [24] and CDMSII [25]:
σSI ≲ 4 × 10−8 − 2 × 10−7 pb, for a DM mass of 100 GeV-1 TeV. Future experiments such
as XENON1T [26] can reach the cross section predicted in our model.
10 -10
10 -9
10 -8
60 80 100 120 140 160 180 200
σ p [pb]
m N [GeV]
FIG. 3: The spin independent scattering cross section with aproton. All parameters are same as
those used in the previous section. The upper and lower linescorrespond to sinθ = 0. 7 and 0. 3,
respectively.
IV. SUMMARY
We have proposed a scenario of the RH neutrino dark matter in the c ontext of the minimal
gauged U(1)B−L model. We have introduced a discrete Z2 parity in the model, so that one
RH neutrino assigned as Z2-odd can be stable and, hence, the DM candidate, while the other
two RH neutrinos account for neutrino masses and mixings through the seesaw mechanism.
No additional degrees of freedom are necessary to be added. We h ave evaluated the relic
density of the dark matter particle. The dominant annihilation modes are via the Higgs
boson exchange processes in the s-channel and thus, our model can be called Higgs portal
DM model. It has been found that the relic density consistent with th e current observation
8 | 7 | 7 | 1002.2525.pdf |
can be achieved only when the annihilation processes are enhanced b y Higgs resonances.
Therefore, the mass of the RH neutrino DM should be around a half o f Higgs boson masses.
We have also calculated the elastic scattering cross section betwee n the DM particle and a
proton and found it within the reach of future experiments for the direct DM search.
Appendix A: The Higgs sector
The Higgs potential (4) contains five parameters:m2
1,m2
2,λ1,λ2 and λ3. These parameters
can be rewritten in terms of two Higgs VEVs, two physical Higgs mass es and the mixing
angle between them. The stationary conditions are
m2
1+ λ1v2 + 1
2λ3v′2 = 0 , (A1)
m2
2+ λ2v2 + 1
2λ3v′2 = 0 . (A2)
The physical Higgs masses are given by Eqs. (8) and (9) with the mixin g angle that θsatisfies
tan 2θ= − λ3vv′
(λ1v2 − λ2v′2). (A3)
Higgs self interaction terms are expressed as
Lint = λ1vφ3 + λ2v′ψ3 + 1
2λ3(vφψ2 + v′ψφ2) + 1
4(λ1φ4 + λ2ψ4 + λ3φ2ψ2), (A4)
in terms of φ and ψ. With Eq. (7), these are rewritten in terms of h and H with θ as
Lint
=
[
λ1vcos3 θ− λ2v′ sin3 θ+ 1
2λ3(vcos θsin2 θ− v′ sin θcos2 θ)
]
hhh
+
[
3λ1vcos2 θsin θ+ 3λ2v′ sin2 θcos θ+ 1
2λ3(v(sin3 θ− 2 cos2 θsin θ)
+v′(cos3 θ− 2 sin2 θcos θ))
]
hhH
+
[
3λ1vcos θsin2 θ− 3λ2v′ sin θcos2 θ+ 1
2λ3(v(cos3 θ− 2 sin2 θcos θ)
+v′(− sin3 θ+ 2 sin θcos2 θ))
]
hHH
+
[
λ1vsin3 θ+ λ2v′ cos3 θ+ 1
2λ3(vsin θcos2 θ+ v′ sin2 θcos θ)
]
HHH
+four point interactions . (A5)
We can read off a Higgs three point vertex from Eq. (A5).
9 | 8 | 8 | 1002.2525.pdf |
In the expression of annihilation cross section, we used the following notations :
∂Φ
∂h = 1√
2 cos θ,
∂Φ
∂H = 1√
2
sin θ,
∂Ψ
∂h = − 1√
2 sin θ,
∂Ψ
∂H = 1√
2
cos θ. (A6)
Appendix B: Amplitude
We give explicit formulas of the invariant amplitude squared for the pair annihilation
processes of the RH neutrinos.
1. Annihilation into charged fermions
|M|2 =
32
⏐
⏐
⏐
⏐
g2
B−Lqf qN
s− M2
Z′ + iMZ′ ΓZ′
⏐
⏐
⏐
⏐
2
(s− 4m2
N)
( 3
8s− 1
2
( s
2 − m2
f
)
+ 1
2
( s
4 − m2
f
)
cos2 θ
)
+16λ2
N
⏐
⏐
⏐
⏐yf
( ∂Φ
∂h
i
s− M2
h + iMhΓh
∂Ψ
∂h + ∂Φ
∂H
i
s− M2
H + iMH ΓH
∂Ψ
∂H
) ⏐
⏐
⏐
⏐
2
(s− 4m2
N)
( s
4 − m2
f
)
. (B1)
2. Annihilation into neutrinos
a. Annihilation intoνa, ν a (light active-like neutrinos)
|M|2 =
32
⏐
⏐
⏐
⏐
g2
B−Lqf qN
s− M2
Z′ + iMZ′ ΓZ′
⏐
⏐
⏐
⏐
2
(s− 4m2
N)
( 3
8s− 1
2
( s
2 + m2
νa
)
+ 1
2
( s
4 + m2
νa
)
cos2 θ
)
.(B2)
10 | 9 | 9 | 1002.2525.pdf |
b. Annihilation into νs, ν s (heavy sterile-like neutrinos)
|M|2 =
32
⏐
⏐
⏐
⏐
g2
B−Lqf qN
s− M2
Z′ + iMZ′ ΓZ′
⏐
⏐
⏐
⏐
2
(s− 4m2
N)
( 3
8s− 1
2
( s
2 + m2
νs
)
+ 1
2
( s
4 + m2
νs
)
cos2 θ
)
+4λ2
Nλ2
νs
⏐
⏐
⏐
⏐
∂Ψ
∂h
i
s− M2
h + iMhΓh
∂Ψ
∂h + ∂Ψ
∂H
i
s− M2
H + iMH ΓH
∂Ψ
∂H
⏐
⏐
⏐
⏐
2
(s− 4m2
N)(s− 4m2
νs ).
(B3)
3. Annihilation into W +W −
|M|2 = 8 λ2
N
( 1
2g2v
) 2 ⏐
⏐
⏐
⏐
∂Ψ
∂h
1
s− M2
h + iMhΓh
∂φ
∂h + ∂Ψ
∂H
1
s− M2
H + iMH ΓH
∂φ
∂H
⏐
⏐
⏐
⏐
2
(s− 4m2
N)
(
1 + 1
2M4
W
( s
2 − M2
W
) 2)
. (B4)
4. Annihilation into ZZ
|M|2 = 8 λ2
N
( 1
4(g2 + g′2)v
) 2 ⏐
⏐
⏐
⏐
∂Ψ
∂h
1
s− M2
h + iMhΓh
∂φ
∂h + ∂Ψ
∂H
1
s− M2
H + iMH ΓH
∂φ
∂H
⏐
⏐
⏐
⏐
2
(s− 4m2
N)
(
1 + 1
2M4
Z
( s
2 − M2
Z
) 2)
. (B5)
5. Annihilation into hh
M1 denotes the amplitude by s-channel Higgs bosons hand H exchange, while M2 does
that for t(u)-channel N exchange diagram. The formulas for NN → hH and HH can be
obtained by appropriate replacement of the vertexes, e.g., λhhh → λhhH .
|M|2 = |M1 + M2|2, (B6)
|M1|2 = λ2
N
( s
2 − 2m2
N
)
⏐
⏐
⏐
⏐
∂Ψ
∂h
i
s− M2
h + iMhΓh
iλhhh + ∂Ψ
∂H
i
s− M2
H + iMH ΓH
iλHhh
⏐
⏐
⏐
⏐
2
, (B7)
11 | 10 | 10 | 1002.2525.pdf |
∫ dcos θ
2 |M2|2 = λ4
N
( ∂Ψ
∂h
) 4 (
−8 − I22 + J22 ln
⏐
⏐
⏐
⏐
A+ 2b
A− 2b
⏐
⏐
⏐
⏐
)
, (B8)
∫ dcos θ
2 M1M∗
2 = 4 mN λ3
N
( ∂Ψ
∂h
) 2 ( ∂Ψ
∂h
i
s− M2
h + iMhΓh
iλhhh + ∂Ψ
∂H
i
s− M2
H + iMH ΓH
iλHhh
)
(
−4 + s− 4m2
N+ A
2b ln
⏐
⏐
⏐
⏐
A+ 2b
A− 2b
⏐
⏐
⏐
⏐
)
, (B9)
where θ is the scattering angle in the center of mass frame. The auxiliary fun ctions appear
above are defined as
I22(s) ≡ 4(A+ 2a)2 − 2(s+ 4m2
N)A− s(A+ m2
N) − 3m2
N(s− 4m2
N)
A2 − 4b2 , (B10)
J22(s,mh) ≡ 1
Ab
(
2A(A+ 2a) − A(s+ 4m2
N) + A2 − 4a2 − (s− 2m2
N)(m2
N− m2
h)
+3m2
N(s− 4m2
N)
)
, (B11)
A(s,mh) ≡ − s
2 + m2
h, (B12)
b(s,mN ,mh) ≡
√
s
4 − m2
h
√
s
4 − m2
N. (B13)
Appendix C: Thermal averaged annihilation cross section
In partial wave expansion, the thermal averaged cross section isgiven by
⟨σv⟩ = 1
m2
N
[
w(s) − 3
2
(
2w(s) − 4m2
N
dw
ds
) T
mN
] ⏐
⏐
⏐
⏐
s=4m2
N
(C1)
= 6 dw
ds
⏐
⏐
⏐
⏐
s=4m2
N
T
mN
, (C2)
with
4w(s) ≡
∫
dLIPS
∑
|M|2 = 1
8π
√
s− 4m2
final
s
∫ dcos θ
2
∑
|M|2, (C3)
where mfinal is the mass of final state particle.
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13 | 12 | 12 | 1002.2525.pdf |
2013
Annual
Report
continued
u | 0 | 0 | ASX_KCN_2013.pdf |
THAI LAND
CHIL E
AUST RALIA
Kingsgate is a highly successful gold
mining, development and exploration
company with two operating gold mines
and two advanced development projects.
Shareholders can look forward to the
benefits of this strong operating and
development platform, where Kingsgate
aims to build value though operating,
earnings and dividend growth for
the benefit of all stakeholders.
www.kingsgate.com.au
| 1 | 1 | ASX_KCN_2013.pdf |
THAI LAND
CHIL E
AUST RALIA
1
Contents
Contents
Contents
Chairman’s Review . . . . . . . . . 2
Managing Director and CEO’s Report . . 3
Ten Year Summary . . . . . . . . . 6
Finance Report . . . . . . . . . . 8
Company Activities . . . . . . . . . 11
Operations Report . . . . . . . . . 12
Projects Report . . . . . . . . . . 26
Exploration Report . . . . . . . . . 30
Ore Reserves and Mineral Resources 32
Corporate Governance Statement . . . 34
Senior Management . . . . . . . . 39
Directors’ Report . . . . . . . . . 42
Remuneration Report . . . . . . . . . . 49
Auditor’s Independence Declaration . . 62
Financial Statements . . . . . . . . 63
Statement of Comprehensive Income . . . . . 64
Statement of Financial Position . . . . . . . 65
Statement of Changes in Equity . . . . . . . 66
Statement of Cash Flows . . . . . . . . . . 67
Notes to the Financial Statements . . . 68
Directors’ Declaration . . . . . . . . 111
Independent Auditor’s Report . . . . 112
Shareholder Information . . . . . . 114
Corporate Information . . . . . . . 116 | 2 | 2 | ASX_KCN_2013.pdf |
www.kingsgate.com.au
Chairman’s Review
2
The past twelve months has been another
challenging year for the resources industry
with weakening commodity prices and a cost
structure that more reflected boom times. The gold
price drifted lower during the year until April when
it underwent a major fall of around US$200 per
ounce and then continued to weaken through to
late June when it bottomed at a 34 month low at
around US$1,200 per ounce. Subsequently, there
has been a small recovery in the gold price that has
been helped by a weakening Australian dollar to
improve the position of Australian based gold
producers. Kingsgate is one of many resource
companies whose earnings and share price perfor-
mance has been affected by the weakening gold
price and the downturn in the global industry.
Kingsgate had a mixed year of transition in 2013
with the completion and final permitting of the
major expansion at Chatree in Thailand but also
undergoing a major restructure at the Challenger
mining operations, caused by the lower gold price
and ongoing price volatility. In the weak and
uncertain metal price environment, Kingsgate
moved quickly to reduce all non-essential expend-
iture on its operations and on the development
projects. Additionally, the Board and senior
management have participated in the cost
reduction initiatives through the implementation
of a 10 percent cut to Directors fees, and an
effective 20 percent cut to senior management
remuneration.
The lower metal prices and industry cost pressures
had a negative impact on the underlying earnings
of the Group of $17.2 million and also contributed
to non-cash impairments to the carrying value of
a number of Group assets, particularly assets
relating to the Challenger Gold Operations.
The impairments were the major contributor to
the after tax loss of $323.7 million for the year.
With lower earnings and the current uncertainty
and volatility in the metal markets the Board
decided not to pay a final dividend. Note that
your Company did pay an interim dividend of
5 cents per share following the first half of the
financial year.
Chatree had a strong year producing 133,681
ounces of gold. The good production performance
was achieved despite some operational hurdles
with slower than anticipated Government
approvals to allow full utilisation of the expanded
plant. The Chatree mine lease area is also
surrounded by highly prospective exploration
ground that is currently under application. Any
discoveries within these application areas should
substantially extend the mine life at Chatree.
Challenger gold production of 66,216 ounces was
24 percent lower than last year due to additional
dilution and depletion at Challenger Deeps and a
shortfall in planned development. Following the fall
in the gold price, a strategic review of Challenger
was implemented that has resulted in a new mine
plan to focus primarily on the higher grade
Challenger West orebody. The new mine plan will
be implemented during the first three months of
the 2014 financial year.
The development projects continued to advance
during the year. At Nueva Esperanza, the feasibility
work shifted to focus on identifying the lowest
cost and lowest power consumption development
alternatives. This included reviewing a heap leach
process option with on-site power generation.
Further work is expected to be completed in the
current financial year. At Bowdens, the feasibility
work has confirmed the optimum process route.
Completion of the technical feasibility study
including mine planning, infrastructure and metal-
lurgy, and lodging of the Environmental Impact
Statement (“EIS”) are scheduled for 2014.
The Board of Kingsgate is determined to re-
establish the path to building shareholder wealth
via profits and dividends despite a difficult
external environment. Shareholders can look
forward to a steady performance from Chatree
and a turn-around at Challenger coupled with the
completion of feasibility studies at the two major
development projects over the coming year.
I would also like to thank our Chief Executive
Officer and Managing Director, Gavin Thomas,
Kingsgate management and all of the Kingsgate,
Akara and Challenger personnel and the project
teams for their part in delivering the operational
performance during what was a difficult year for
your Company.
The Board
of Kingsgate is
determined to
re-establish the
path to building
shareholder wealth
via profits and
dividends...
Ross Smyth-Kirk
Director
Chairman’s
Review | 3 | 3 | ASX_KCN_2013.pdf |
Kingsgate had a solid year with gold production
of 199,897 ounces at a total cash cost of
US$888 per ounce (including royalties).
Chatree had a strong year following receipt of
the final approvals for the expansion plant and
the combined plant has been operating at a
steady rate of 6.2 million tonnes per annum,
24% above nameplate capacity.
Challenger had a difficult year and was severely
impacted by an unplanned dilution and deple-
tion at Challenger Deeps, that when coupled
with the lower gold price and ongoing metal
price uncertainty, led to a major restructure of
mining at Challenger to focus primarily on the
higher grade Challenger West orebody.
Kingsgate management and staff continue to
work towards realising the operational poten-
tial of the Company’s two gold mines and to
complete the feasibility studies currently
underway at Nueva Esperanza and Bowdens.
Operations
Chatree
Chatree continued as Kingsgate’s primary
production asset throughout the year, producing
133,681 ounces of gold and 1,000,569 ounces of
silver. The strong production performance was
achieved despite some operational hurdles with
slower than anticipated Government approvals
to allow full utilisation of the expanded plant.
The delay of 63 days in approval of Plant #2
Metallurgical License and lower than expected
availability of some of the mining contractors’
major mining equipment negatively impacted
production. However, near surface higher grades
in Q Prospect mitigated these difficulties
resulting in a strong final quarter for the year.
Total mill throughput for the year was 5.7 million
tonnes, 11.4% higher than 2012, despite the
impact of the 63 day delay during which the new
plant was not operating.
The overall plant availability of 98.1% was
slightly lower than the previous year’s 98.4%.
The expanded plant is operating around 24%
above the annual “nameplate” throughput rate
at 6.2 million tonnes per annum and this is
expected to continue.
Total cash costs for the year were US$767 per
ounce (US$620 per ounce exclusive of Thai
royalties). The average royalty paid to the Thai
Government was $US147 per ounce of gold.
Chatree continues to demonstrate world’s best
practice for safety and the environment with no
lost time incidents (“LTI”) or reportable environ-
mental incidents occurring at Chatree during
the year.
Challenger
The Challenger Mine had a difficult year and
produced 66,216 ounces of gold at a total cash
cost of US$1,135/oz. The grade of the processed
ore was 3.91 grams per tonne, which was lower
than expected due to a shortfall in ore supply
from the mine that was supplemented by low
grade ore from stockpiles. Higher dilution in
stopes at the base of the mine (Challenger
Deeps) and depletion on those levels, due to the
additional displacement of the ore horizons
following the identification of the ‘215 Shear’,
contributed to the lower than expected produc-
tion from the lower levels. A shortfall in under-
ground development also limited access to ore
sources.
Development and mining commenced at the
higher grade Challenger West orebody during
the year but was insufficient to offset the short-
fall from Challenger Deeps.
The transition to the new mine plan, focussing
primarily on the higher grade Challenger West
orebody, will take around three months before
the cost and operational benefits start to be
realised. These changes are complemented by
the changeover to a new mining contractor who
commenced operations on 1 August 2013.
Managing Director
and CEO’s Report
Gavin Thomas
Managing Director and CEO
Managing Director and CEO’s Report
3
continued
u
MD and CEO’s Report
Chatree's Total
mill throughput
for the year was
5.7 million tonnes,
1 1.4% higher
than 2012...
| 4 | 4 | ASX_KCN_2013.pdf |
4
Managing Director and CEO’s Report
www.kingsgate.com.au
Development Projects
Bowdens
The Bowdens Project continued to advance
during the year with field programs supporting
the ongoing feasibility and environmental
studies. Sterilisation drilling and additional
metallurgical sampling were undertaken with
the resource evaluation drilling completed in
October 2012.
During 2013, the process design and engineering
work for the Definitive Feasibility Study (“DFS”)
progressed to a point where the draft study was
close to completion as at 30 June 2013. The study
encompassed detailed process design based on
using the most recent metallurgical test results,
capital and operating cost estimates, project
water and power supply, infrastructure require-
ments and mine optimisation.
The preparation for lodgement of an Environ-
mental Impact Statement (“EIS”) to the NSW
Department of Planning continues. It is envis-
aged that the EIS will be completed and lodged
in 2014. Data for flora and fauna, surface water,
groundwater, meteorology, ambient noise and
dust levels are collected routinely. Further inves-
tigations of cultural heritage, social-economic
impact, traffic impact, soil type and agricultural
suitability have also been undertaken.
With the fall in metal prices in late 2013, work
and expenditure on the DFS and EIS have been
phased to coordinate and synchronise the
timing of the two programs with completion
and lodgement now not expected before
mid-2014.
Nueva Esperanza
The Nueva Esperanza Project was advanced
during the year with the completion of a draft
feasibility study. This study included a decision
to mine the Arqueros and Teterita portions of
Nueva Esperanza. The study demonstrated that
open pit mining at two million tonnes per year
and processing by milling and agitation leaching
in cyanide was technically feasible, although
high capital and power costs negatively
impacted project economic returns.
As a consequence, feasibility work has tran-
sitioned to assess a lower capital cost and lower
power requirement options, namely the poten-
tial for heap leach processing. Metallurgical
testwork recently completed demonstrated
that processing of mineralisation from all three
deposits by heap leaching has the potential to
be technically and economically feasible and as
a consequence may become the preferred
alternative for development.
Environmental approval for the original Arqueros
Project was granted in July 2013.
Financials
Kingsgate made an after tax loss of $323.7
million for the full year to 30 June 2013 compared
to an after tax profit of $75.0 million for the
previous corresponding year. The result for the
year reflected an impairment of $311.9 million
pre-tax ($291.3 million post-tax) against the
Challenger Mine and associated assets and an
impairment of $20.4 million against greenfield
exploration projects in Australia and Thailand.
Financial Summary
2013
$000
2012
$000
Total sales revenue 329,282 357,372
EBITDA before significant items 115,845 168,583
(Loss) / profit before tax (339,615) 91,277
Income tax benefit / (expense) 15,889 (16,271)
(Loss) / profit after income after tax (323,726) 75,006
Dividend declared (¢/share) 5 20 | 5 | 5 | ASX_KCN_2013.pdf |
5
Managing Director and CEO’s Report
Exploration
With the approvals of the Special Prospecting
Licence (“SPL”) applications in Thailand still
awaiting the Minister of Industry’s consent,
exploration attention over the past 12 months
has focused on new exploration opportunities
and Mineral Resource enhancement targets
within the Mining Leases. This exploration
formed part of a strategic exploration program
within the mining leases at Chatree that
commenced in late 2012. The program has
successfully defined several new areas of miner-
alisation within the Mining Lease, most notably
at Q and A North Prospects, and has also
upgraded several larger areas of Inferred
Resources to the Measured and Indicated
Mineral Resource category.
Looking Ahead
Over the current financial year and beyond,
Kingsgate remains focused on optimising
production within an uncertain metal price
environment, continuing to build resources
and reserves and advancing the development
project pipeline of Nueva Esperanza and
Bowdens. These initiatives are designed to
grow earnings per share for the benefit of all
shareholders.
In late September, Kingsgate’s Thai subsidiary,
Akara Resources Public Company Limited
(“Akara”) has submitted its listing application
and draft Prospectus to the Thai Securities
Exchange Commission (SEC) and the Stock
Exchange of Thailand (SET) for an initial public
offering of its shares on the SET.
The SEC and SET will review the draft Prospectus
in the coming months in order to approve the
listing of Akara. The decision to list Akara will
depend on market conditions and other factors
at the time of approval.
Group gold production for the full year to
30 June 2014 is expected to be in the range
of 190,000 to 210,000 ounces. This includes
120,000 to 130,000 ounces from Chatree and
70,000 to 80,000 ounces from Challenger.
MD and CEO’s Report | 6 | 6 | ASX_KCN_2013.pdf |
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
PRODUCTION – Chatree AIFRS AIFRS AIFRS AIFRS AIFRS AIFRS AIFRS AIFRS AIFRS AGAAP Ore mined (‘000 tonnes) 5
Ore mined (‘000 bank cubic metres) 2,709 1,947 2,352 2,699 1,674 375 546 734 588 801
Waste mined (‘000 bank cubic metres) 3,521 6,259 6,128 6,432 4,069 2,507 4,390 5,121 4,915 4,444
Waste to ore ratio 1.3 3.2 2.6 2.4 2.4 6.7 8.0 7.0 8.4 5.5
Ore mined (‘000 tonnes) 7,051 4,986 5,301 6,583 3,874 977 1,523 1,951 1,521 1,946
Ore treated (‘000 tonnes) 5,699 5,116 2,533 2,705 1,878 2,474 2,405 2,000 1,829 1,671
Head grade – Gold grams / tonne 0.9 0.9 1.1 1.7 1.7 1.1 1.2 2.4 2.4 3.1
Head grade – Silver grams / tonne 11.9 11.6 15.7 14.9 15.8 6.8 9.2 14.5 13.0 15.0
Gold recovery (%) 79.9% 84.4% 87.2% 90.4% 91.2% 88.4% 90.0% 90.1% 90.8% 91.2%
Gold poured (ounces) 133,681 121,372 76,248 132,628 93,002 74,137 85,994 140,071 126,550 149,979
Silver poured (ounces) 1,000,569 918,314 549,699 549,522 293,472 232,039 290,897 459,702 353,275 395,346
PRODUCTION – Challenger (5 months) Ore mined (‘000 tonnes) 5
Ore mined (‘000 tonnes) 502 607 232
Ore treated (‘000 tonnes) 557 645 289
Head grade – Gold grams / tonne 3.9 4.6 4.3
Gold recovery (%) 94.5% 92.4% 92.2%
Gold poured (ounces) 66,216 87 ,388 36,886
Silver poured (ounces) 3,466 4,971 2,581
PROFIT & LOSS (A$’000) Sales revenue 5
Sales revenue 329,282 357,372 172,356 175,480 113,015 74,285 52,044 72,782 64,299 84,410
Operating expenses (195,064) (171,505) (86,147) (74,305) (65,599) (55,743) (64,908) (47,761) (47,3 6 6) (34,343)
Administration expenses (15,515) (12,737) (11,304) (3,615) (4,595) (4,065) (2,264) (1,158) (1,404) (1,019)
Other (expenses) / income (23,693) (6,398) (28,424) 618 3,509 46,653 10,413 1,361 2,471 2,370
EBITDA 95,010 166,732 46,481 98,178 46,330 61,130 (4,715) 25,224 18,000 51,418
Impairment losses (332,808) – – – – – – – – –
Depreciation & amortisation (85,595) (67,553) (27,7 72) (14,004) (11,575) (9,284) (8,446) ( 7,805 ) (8,720) (11,323)
EBIT (323,393) 99,179 18,709 84,174 34,755 51,846 (13,161) 17,419 9,280 40,095
Net finance (costs) / income (16,222) ( 7,9 02) (922) (1,823) (1,698) (3,974) (2,544) (757) (889) (2,416)
Profit / (loss) before income tax (339,615) 91,277 17,787 82,351 33,057 47,872 (15,705) 16,662 8,391 37,679
Income tax (expense) / benefit 15,889 (16,271) 3,092 (9,285) (535) (11,675) 3,115 – – –
Net profit / (loss) after income tax (323,726) 75,006 20,879 73,066 32,522 36,197 (12,590) 16,662 8,391 37,679
Non–controlling interests – 153 269 – – – – – – –
Net profit attributable to owners of Kingsgate Consolidated Limited (323,726) 75,159 21,148 73,066 32,522 36,197 (12,590) 16,662 8,391 37,679
BALANCE SHEET (A$’000) Total assets 5
Current assets – cash 32,987 90,623 35,864 49,098 29,680 40,226 5,148 10,391 32,119 59,696
Current assets – other 109,575 103,433 70,280 54,203 27 ,848 16,397 13,756 10,805 12,162 14,162
Non–current assets 627,426 854,403 688,919 265,774 217,4 4 5 146,626 206,082 143,401 91,727 69,555
Total assets 769,988 1,048,459 795,063 369,075 274,973 203,249 224,986 164,597 136,008 143,413
Total borrowings 199,758 157,5 4 4 99,896 11,064 2,144 1,599 21,220 – – –
Other liabilities 96,270 115,102 88,243 41,968 27,789 20,637 19,532 36,589 14,779 8,367
Total liabilities 296,028 272,646 188,139 53,032 29,933 22,236 40,752 36,589 14,779 8,367
Shareholders’ equity 473,960 775,813 606,924 316,043 245,040 181,013 184,234 128,008 121,229 135,046
Non–controlling interests – – 7,10 9 – – – – – – –
Equity attributable to equity holders of Kingsgate Consolidated Limited 473,960 775,813 599,815 316,043 245,040 181,013 184,234 128,008 121,229 135,046
OTHER INFORMATION Average realised gold price on physical deliveries 5
Average realised gold price on physical deliveries (US$ / ounce) 1,588 1,663 1,386 1,091 904 824 417 355 401 385
Cash cost (US$ / ounce) 888 720 638 335 400 457 440 206 212 135
Total cost (US$ / ounce) 1,308 1,028 813 408 487 556 524 247 262 189
Operating cash flow (A$’000) 85,020 165,247 34,026 46,468 18,058 18,657 (19,888) 21,889 22,184 49,294
Dividends paid (Cash & DRP) (A$’000) 22,739 22,025 33,647 29,082 – – 4,513 8,669 11,973 17,6 31
Number of issued shares (‘000) – Ordinary 152,192 151,264 135,275 99,996 96,136 92,680 92,680 88,592 85,949 85,329
Basic earnings per share (A$ Cents) (213.3) 52.5 18.7 75.2 34.9 51.7 (17.3) 19.3 9.8 45.5
Dividends per share (A$ Cents) 5.0 20.0 15.0 35.0 15.0 – – 10.0 7.0 22.0
Ten Year Summary
for the year ended 30 June 2013 | 7 | 7 | ASX_KCN_2013.pdf |
2013 2012 2011 2010 2009 2008 2007 2006 2005 2004
PRODUCTION – Chatree AIFRS AIFRS AIFRS AIFRS AIFRS AIFRS AIFRS AIFRS AIFRS AGAAP Ore mined (‘000 tonnes) 5
Ore mined (‘000 bank cubic metres) 2,709 1,947 2,352 2,699 1,674 375 546 734 588 801
Waste mined (‘000 bank cubic metres) 3,521 6,259 6,128 6,432 4,069 2,507 4,390 5,121 4,915 4,444
Waste to ore ratio 1.3 3.2 2.6 2.4 2.4 6.7 8.0 7.0 8.4 5.5
Ore mined (‘000 tonnes) 7,051 4,986 5,301 6,583 3,874 977 1,523 1,951 1,521 1,946
Ore treated (‘000 tonnes) 5,699 5,116 2,533 2,705 1,878 2,474 2,405 2,000 1,829 1,671
Head grade – Gold grams / tonne 0.9 0.9 1.1 1.7 1.7 1.1 1.2 2.4 2.4 3.1
Head grade – Silver grams / tonne 11.9 11.6 15.7 14.9 15.8 6.8 9.2 14.5 13.0 15.0
Gold recovery (%) 79.9% 84.4% 87.2% 90.4% 91.2% 88.4% 90.0% 90.1% 90.8% 91.2%
Gold poured (ounces) 133,681 121,372 76,248 132,628 93,002 74,137 85,994 140,071 126,550 149,979
Silver poured (ounces) 1,000,569 918,314 549,699 549,522 293,472 232,039 290,897 459,702 353,275 395,346
PRODUCTION – Challenger (5 months) Ore mined (‘000 tonnes) 5
Ore mined (‘000 tonnes) 502 607 232
Ore treated (‘000 tonnes) 557 645 289
Head grade – Gold grams / tonne 3.9 4.6 4.3
Gold recovery (%) 94.5% 92.4% 92.2%
Gold poured (ounces) 66,216 87 ,388 36,886
Silver poured (ounces) 3,466 4,971 2,581
PROFIT & LOSS (A$’000) Sales revenue 5
Sales revenue 329,282 357,372 172,356 175,480 113,015 74,285 52,044 72,782 64,299 84,410
Operating expenses (195,064) (171,505) (86,147) (74,305) (65,599) (55,743) (64,908) (47,761) (47,3 6 6) (34,343)
Administration expenses (15,515) (12,737) (11,304) (3,615) (4,595) (4,065) (2,264) (1,158) (1,404) (1,019)
Other (expenses) / income (23,693) (6,398) (28,424) 618 3,509 46,653 10,413 1,361 2,471 2,370
EBITDA 95,010 166,732 46,481 98,178 46,330 61,130 (4,715) 25,224 18,000 51,418
Impairment losses (332,808) – – – – – – – – –
Depreciation & amortisation (85,595) (67,553) (27,7 72) (14,004) (11,575) (9,284) (8,446) ( 7,805 ) (8,720) (11,323)
EBIT (323,393) 99,179 18,709 84,174 34,755 51,846 (13,161) 17,419 9,280 40,095
Net finance (costs) / income (16,222) ( 7,9 02) (922) (1,823) (1,698) (3,974) (2,544) (757) (889) (2,416)
Profit / (loss) before income tax (339,615) 91,277 17,787 82,351 33,057 47,872 (15,705) 16,662 8,391 37,679
Income tax (expense) / benefit 15,889 (16,271) 3,092 (9,285) (535) (11,675) 3,115 – – –
Net profit / (loss) after income tax (323,726) 75,006 20,879 73,066 32,522 36,197 (12,590) 16,662 8,391 37,679
Non–controlling interests – 153 269 – – – – – – –
Net profit attributable to owners of Kingsgate Consolidated Limited (323,726) 75,159 21,148 73,066 32,522 36,197 (12,590) 16,662 8,391 37,679
BALANCE SHEET (A$’000) Total assets 5
Current assets – cash 32,987 90,623 35,864 49,098 29,680 40,226 5,148 10,391 32,119 59,696
Current assets – other 109,575 103,433 70,280 54,203 27 ,848 16,397 13,756 10,805 12,162 14,162
Non–current assets 627,426 854,403 688,919 265,774 217,4 4 5 146,626 206,082 143,401 91,727 69,555
Total assets 769,988 1,048,459 795,063 369,075 274,973 203,249 224,986 164,597 136,008 143,413
Total borrowings 199,758 157,5 4 4 99,896 11,064 2,144 1,599 21,220 – – –
Other liabilities 96,270 115,102 88,243 41,968 27,789 20,637 19,532 36,589 14,779 8,367
Total liabilities 296,028 272,646 188,139 53,032 29,933 22,236 40,752 36,589 14,779 8,367
Shareholders’ equity 473,960 775,813 606,924 316,043 245,040 181,013 184,234 128,008 121,229 135,046
Non–controlling interests – – 7,10 9 – – – – – – –
Equity attributable to equity holders of Kingsgate Consolidated Limited 473,960 775,813 599,815 316,043 245,040 181,013 184,234 128,008 121,229 135,046
OTHER INFORMATION Average realised gold price on physical deliveries 5
Average realised gold price on physical deliveries (US$ / ounce) 1,588 1,663 1,386 1,091 904 824 417 355 401 385
Cash cost (US$ / ounce) 888 720 638 335 400 457 440 206 212 135
Total cost (US$ / ounce) 1,308 1,028 813 408 487 556 524 247 262 189
Operating cash flow (A$’000) 85,020 165,247 34,026 46,468 18,058 18,657 (19,888) 21,889 22,184 49,294
Dividends paid (Cash & DRP) (A$’000) 22,739 22,025 33,647 29,082 – – 4,513 8,669 11,973 17,6 31
Number of issued shares (‘000) – Ordinary 152,192 151,264 135,275 99,996 96,136 92,680 92,680 88,592 85,949 85,329
Basic earnings per share (A$ Cents) (213.3) 52.5 18.7 75.2 34.9 51.7 (17.3) 19.3 9.8 45.5
Dividends per share (A$ Cents) 5.0 20.0 15.0 35.0 15.0 – – 10.0 7.0 22.0
Ten Year Summary
13 12 11 10 09 08 07 06 05 04
Ten Year Summary
7 | 8 | 8 | ASX_KCN_2013.pdf |
8
Finance Report
www.kingsgate.com.au
Finance
Report
Summary
Kingsgate has recorded the following financial
performance for the year to 30 June 2013:
〉〉 Revenue of $329.3 million.
〉〉 EBITDA (before significant items) of $115.8
million.
〉〉 Profit before tax and significant items of
$17.2 million.
〉〉 Loss after tax and significant items of $323.7
million. This includes a net tax benefit of
$20.6 million, relating to the Challenger Gold
Operations (“Challenger”) impairment.
〉〉 Non-cash asset impairments and other
significant items of $356.8 million pre-tax,
with $311.9 million principally relating to
Challenger ($291.3 million post-tax).
〉〉 No final dividend has been declared. An
interim dividend of 5 cents per share was
declared for the half year to 31 December
2012.
Earnings
The lower realised gold price of US$1,588 per
ounce (2012: US$1,663 per ounce), lower gold
sales of 195,948 ounces (2012: 204,145 ounces)
and industry wide cost pressures had a negative
impact on the underlying earnings of the Group.
The lower gold price and changes to mine oper-
ating plans also resulted in a major impairment
to the carrying value of a number of Group
assets, particularly the Challenger Mine. The
impairments were the major contributor to the
after tax loss of $323.7 million for the year.
The fall in gold sales reflected a 24% decrease in
production at Challenger compared to the prior
year due to lower grade and volume of ore
mined. The lower production at Challenger was
offset by a 10% increase in gold production at
the Chatree Gold Mine (“Chatree”), reflecting
increased throughput from the expanded
Chatree processing plant and higher grade ore
mined.
Cost of sales
Cost of sales before depreciation increased by
14% to $195.1 million compared to last year and
largely reflects increased throughput and
production from Chatree due to the first full
year of operation of Plant #2. The total unit cash
costs for Chatree for the year were US$767/oz
(US$620/oz excluding royalties), up from
US$618/oz in 2012. The total unit cash costs for
Challenger for the year were US$1,135/oz (2012:
US$862/oz), with the increase mainly due to the
lower throughput and lower production from
the Challenger Mine. On a unit cost basis, total
cash costs for the Group were US$888/oz, up
from US$720/oz last year.
Depreciation and amortisation
The increase in depreciation and amortisation to
$85.6 million (2012: $67.6 million) reflects
amortisation of the higher capitalised develop-
ment costs at the Challenger Mine, depreciation
of Plant #2 at Chatree and commencement of
amortising the capital cost of the Chatree
Tailings Storage Facility #2.
Impairment and write-downs
Following a strategic review of Challenger, a
new mine plan focussing mainly on the
Challenger West orebody was implemented
effective 1 July 2013.
Based on the revised plan Challenger is expected
to generate positive cash flows though, as a
result of this plan together with the continuing
low gold price environment, the estimated
future cash flows no longer supported the full
recovery of the carrying value. For this reason,
the Group has recorded a pre-tax impairment
charge of $311.9 million ($291.3 million post
tax) related to the carrying value of the prop-
erty, plant and equipment and mine properties
at Challenger so that the carrying value reflects
recoverable value.
A review of the carrying value of all regional
greenfield exploration projects was also
conducted which resulted in the write down of
$6.1 million, primarily against the Barton West
Mineral Sands project in South Australia and the
write down of $14.3 million against the carrying
value of exploration projects in Thailand that fall
outside the Chatree Mine area of influence.
The impairment and write-downs are non-cash
items and therefore have no impact on the
Company’s cash position. The written down
asset values do not create any concern with
regard to conditions around the Company’s debt
facilities.
| 9 | 9 | ASX_KCN_2013.pdf |
9
Finance Report
Finance Report
Finance costs
Finance costs increased to $18.8 million (2012:
$9.4 million). Finance costs comprise interest on
borrowings the Group has in place, unwinding of
discount on provisions as required by Accounting
Standards and amortisation of borrowings set-up
costs. The main contributor to the increase in
finance costs was accelerated amortisation of
borrowing costs required due to debt restruc-
tures undertaken during the year and planned for
the next financial year. Borrowing costs relating
to the previous finance facilities were expensed
in full prior to new facilities being put in place.
Income Tax
Kingsgate’s Thai subsidiary company, Akara
Resources Public Company Limited (“Akara”),
has received approval from The Royal Thai Board
of Investment (BOI) of the Office of the Prime
Minister for promotion of Chatree. Subject to
meeting the BOI conditions and based on an
annual production limit of 178,416 ounces of
gold and 583,733 ounces of silver, Akara’s
Chatree Gold Mine is entitled to:
a) an eight year full corporate tax holiday
commencing at first gold pour on metal
sales. The full tax holiday expired in
November 2009;
b) a further five years half tax holiday following
a) above; and
c) other benefits.
The start of the promotion period was
27 November 2001.
Akara also received on 18 June 2010 a BOI
promotion for the Chatree Plant #2. Based on
annual production limit from the new processing
plant of 185,200 ounces of gold and 1,080,400
ounces of silver, Akara is entitled to:
a) an eight year tax holiday on income derived
from the new processing plant with tax
savings limited to the capital cost of the new
treatment plant;
b) 25% investment allowance on the capital
cost of certain assets of the new processing
plant; and
c) other benefits.
The taxable loss from the Australian operations
has not been recognised as a deferred tax asset
though has been added to the Group’s brought
forward tax losses, leaving a balance of $212
million of taxable losses (unrecognised tax asset
of $63 million) to be carried forward to future
years.
Cash Flow
Net operating cash inflow was $85.0 million.
Investing cash outflow for property, plant,
equipment and exploration, evaluation and
development was $133.7 million. Net cash
outflows from financing activities was
$1.7 million, including a net drawdown (net
of transaction costs) of $36.7 million of the
multi-currency and syndicated loan facilities
following a loan restructure by the Group’s
Thai subsidiary, Akara, net repayment (net of
transaction costs) of $20.0 million corporate
loan facility, and $19.4 million dividends paid
during the year. Income tax paid increased to
$15.6 million due primarily to the timing of
tax payments in Thailand with a significant
amount of the prior year’s tax charge being paid
this year in addition to payment of the current
year’s tax charge.
-20 -14
19 37 18
-48
46
-32
Operating Cash Flow
2012/132006/07 2007/08 2008/09 2009/10 2010/11
34
-108
165
-221
85
-142
2011/12
Investing Cash Flow
-250
-300
-200
-150
-100A$ Million-50
0
50
100
150
200
250
120
-13 -20
36 19
73
46 25 33 18
Profit/(loss)
2006/07 2007/08 2008/09 2009/10 2010/11
21 34 28
75
165
19
-324
85
19
2011/12 2012/13
Operating Cash Flow Cash Dividend Paid
-40
-80
-120
-160
-200
-240
-280
-320
-360
0
40
A$ Million
80
160
200
240
Operating and Investing Cash Flow
Operating Profit and Cash Flow | 10 | 10 | ASX_KCN_2013.pdf |
10
Finance Report
www.kingsgate.com.au
Financing Arrangements
Corporate loan facility
Kingsgate has a three year secured loan facility
with Investec which was amended during the
year. The amended facility has a limit of $40
million (30 June 2012: $50 million), of which $20
million has been drawn down as at 30 June 2013
(30 June 2012: $40 million).
Convertible loan facility
Kingsgate has a five year A$35 million convert-
ible loan facility with Investec entered into in a
prior period to provide funding for the Bowdens
acquisition. Kingsgate has the option to make a
prepayment against the facility with an issue of
Kingsgate shares.
Restructure of corporate loan and
convertible loan facilities
As indicated previously in the Preliminary Final
report, at balance date it was the Group’s inten-
tion to restructure and amalgamate these
facilities in the next financial year. This relates to
the potential for completion of the Initial Public
Offering (“IPO”) of Akara on the Stock Exchange
of Thailand and the updated mine plan for
Challenger. Any restructure would optimise the
Group’s anticipated balance sheet liquidity and
operational cash flows. Accordingly, the Group
classified the total amount drawn down under
these facilities of $55 million as a current liability
at 30 June 2013.
Subsequent to the end of the financial year, the
Group received from its lenders a credit
approved term sheet (subject to formal docu-
mentation) for the restructure of the corporate
loan and convertible loan facilities. Following
completion of the restructure the total amount
outstanding will be reduced to $40 million. This
loan will be provided through a single senior
corporate facility which will consist of two
tranches:
〉〉 Tranche one will be a $25 million Akara Pre
IPO Bond with a maturity date of 31 July
2015. The current intention is for this
tranche to be repaid as part of the Akara IPO,
although at Kingsgate’s election repayment
can be made by either cash or in Kingsgate’s
shares.
〉〉 Tranche two is an amortising facility with $5
million to be repaid during the 2014 financial
year and the balance of $10 million repaid
during the 2015 financial year.
Convertible revolving credit facility
The Group also has a three year $25 million
Convertible Revolving Credit Facility available.
As at the date of this report the facility is
undrawn. Under the terms of this facility,
Kingsgate has the option of repaying any funds
drawn down under the facility through either
cash or by issuing ordinary shares. It is intended
that this facility will be utilised during the 2014
financial year for corporate and working capital
purposes. It is the current intention of the
company to repay any cash drawdown under the
facility by the issuance of fully paid ordinary
shares which would rank parri pasu with all
existing ordinary shares, although this position
will be reviewed at the appropriate time. The
number of shares has not yet been determined
and they will be issued at a 2.5% discount to
VWAP over a period by reference to the draw
down date. Shareholder approval is not required.
Multi-currency and syndicated
loan facilities
Kingsgate’s Thai operating subsidiary, Akara,
established a six year amortising multi-currency
loan facility equivalent to US$125 million (fully
drawn as at period end) and an additional Thai
Baht denominated working capital facility
equivalent to US$15 million (undrawn as at year
end) during the period. The proceeds from these
borrowings were used to fully repay the
outstanding balance on the US$100 million Baht
denominated syndicated loan facility in exist-
ence at the beginning of the period as well as to
repay part of the corporate loan facility noted
above.
Financial Position
Shareholders’ equity at 30 June 2013 was $474
million (2012: $776 million). The decrease of
$302 million reflects the year’s loss together
with dividends paid.
Dividends
No final dividend has been declared for the year
ended 30 June 2013.
An interim dividend declared for the half-year
ended 31 December 2012 of 5 cents per fully
paid share was paid on 12 April 2013.
A final dividend declared for the year ended 30
June 2012 of 10 cents per fully paid share was
paid on 1 October 2012.
| 11 | 11 | ASX_KCN_2013.pdf |
11
Operations Report 12
Chatree Gold Mine, Thailand . . . . . . . . . . . 12
Challenger Gold Mine, South Australia . . . . . . . . 20
Projects Report 26
Bowdens Silver Project, New South Wales . . . . . . 26
Nueva Esperanza Project, Chile . . . . . . . . . . 28
Exploration Report 30
Ore Reserves and Mineral Resources . . . . . . . . . 32
Competent Persons Statement . . . . . . . . . . . 33
Corporate Governance Statement 34
Senior Management 39
Company
Activities
for the year ended 30 June 2013
Company Activities
Company Activities | 12 | 12 | ASX_KCN_2013.pdf |
12
VIETNAM
THAILAND
LA OS
CAMBODIA
10°
100°
20°
LA OS
AM
CAMBODIA
10°
CHALLENGERCHALLENGER
30°
35°
140°
135°
130°
VIC
QLD
NSW
NT
WA
Adelaide
BOWDENS
SILVER
BOWDENS
SILVER
Newcastle
Sydney
Dubbo
Mudgee
30°
35°
150°
145°
QLD
TA S
VIC
SA
70°
50°
20°
30°
40°
3
COPIAPO
NUEVA
ESPERANZA
COPIAPO
NUEVA
ESPERANZA
Santiago
La Serena
Antofagasta
Chañaral
ARGENTINA
BOLIVIA
PERU
0 300100 200
Kilometres
Highway
Freeway
Power lines
Hydro power dam
Thermal power station
Khon Kaen
Kh
KhCHATREECHATREE
Chiang
Mai
Bangkok
Chumphon
Phuket
CHALLENGER
GOLD MINE
CHALLENGER
GOLD MINE
Labyrinth
Bulgunnia
Barton West
Cundeelee
(Tropicana Belt)
Blue Dam
Calingiri
Wongan Hills
Kukerin
Bullock Pool
Nanicup Bridge
Holleton West
Golden Point
Northling
Bryah
Perenjori
Yalla Burra
Barton Central
Tenements Area
www.kingsgate.com.au
Operations Report
Operations
Report
Chatree
Gold Mine
Thailand
Summary
Chatree continued as Kingsgate’s primary
production asset throughout the year,
producing 133,681 ounces of gold and over
1,000,569 ounces of silver. The strong
production performance was achieved despite
some operational difficulties with slower than
anticipated Government approvals to allow full
utilisation of the expanded plant.
The delay of 63 days in approval of our
Metallurgical License negatively impacted
on our production targets which were also
compounded by the Mining Contractor’s poor
equipment availability. Near surface higher
grades in Q Prospect mitigated these difficulties
resulting in a strong final quarter for the year.
Chatree continues to demonstrate world’s best
practice for safety. The mine has now operated
for 23.6 million man hours (10.5 years) without
a lost time injury (“LTI”).
u
| 13 | 13 | ASX_KCN_2013.pdf |
13
Operations Report
Operations Report
Production and Costs
Production for the year was 133,681 ounces
of gold and 1,000,569 ounces of silver.
Total mill throughput of 5.7 million tonnes was
11.4% higher than 2012 despite the 63 days that
the new plant was shut down during the process
for the granting of its Metallurgical License. The
overall plant availability was 98.1%.
Total cash costs for the year were $US767 per
ounce ($US620 per ounce exclusive of Thai
royalties). The average royalty paid to the Thai
Government was $US147 per ounce of gold. Total
production costs after depreciation and amorti-
sation were $US952 per ounce of gold produced.
At year end, 9.7 million tonnes of ore was stock-
piled with an average contained gold grade of
0.57 grams per tonne (g/t) representing 178,086
ounces of gold.
Operational Performance
During the year 7.1 million tonnes of ore was
mined, with a waste-to-ore strip ratio of 2.09:1.
The average grade of mined ore was 0.72 g/t
gold and 8.56 g/t silver.
Additional ore was generated by revising the
mining sequence in A Pit Stage 2 and accessing
near surface high grade oxide ore tonnes from
Q Prospect.
Total volume of material mined at Chatree for
the year was 8.4 million Bank Cubic Metres
("BCM") including 2.7 million BCM of ore.
An additional 566,000 BCM of laterite and
clay material was excavated and used for the
construction of the second lift of second tailings
storage facility (TSF#2).
Some 1.3 million loose cubic metres (LCM) of
ore was relocated from the Marginal Grade
Stockpiles to the primary crusher to supplement
ore from the mining pits.
Two areas were mined during the year:
〉〉 A Pit, where 8.3 million BCM of material was
mined (2.7 million BCM of ore) at a stripping
ratio of 2.09:1 waste to ore; and
〉〉 Q Prospect where 298 thousand BCM of
material was mined (143 thousand BCM of
ore) at a stripping ratio of 1.1:1 waste to ore.
The mechanical reliability and hence availability
of the major fleet items has been below expecta-
tions over the last few years.
continued
u
Gold Production
134
1001
2012/13
86
291
2006/07
74
232
2007/08
93
293
2008/09
1335502009/10
76
550
2010/11
1219182011/12
Silver Production
0
100
200
300 Ounces (‘000)400
500
600
700
800
900
1,000
1,100
Ore Mined
1,523
2,405
2006/07
977
2,474
2007/08
3,874
1,878
2008/09
6,5832,7052009/10
5,301
2,533
2010/11
4,9865,1162011/12
7,051
5,699
2012/13
Ore Treated Ore Grade
0
2,000
1,000
3,000
4,000Tonnes (‘000)
Ore Grade (grams/tonne gold)
5,000
6,000
7,000
8,000
0
2.0
1.0
3.0
4.0
5.0
6.0
7.0
8.0
84
440
2006/07
99
457
2007/08
87
401
2008/09
73
335
2009/10
102
479
2010/11
143
618
2011/12
185
767
2012/13
1,000
Cash Cost
(incl. Royalties)
Non Cash Cost
(incl. D&A)
Realised Gold Price
0
200
400
US$/ounce
600
1,200
1,400
1,600
1,800
800
Chatree – Production
Chatree – Ore Mined and Treated
Chatree – Cash Costs and Total Costs | 14 | 14 | ASX_KCN_2013.pdf |
www.kingsgate.com.au
Operations Report
14
For the 12 months to June 2013, the availability
of the RH90 fleet has been at 80%, with the
RH40 fleet at 78%. The target availabilities for
these fleets are 88% and 85% respectively.
Availability of the haul trucks was 85% versus a
target of 90% for the 777D fleet. A commit-
ment has been undertaken by the contractor to
address the under performance.
Approximately 2.5 days of production were lost
due to rainfall during the year. Total rainfall for
the year was 1.3 metres which is in line with the
long term average.
Mining operations continued on a 24 hour per
day basis throughout the year, with the excep-
tion of the development of Q prospect.
Due to the proximity of Q prospect to the
community and the local roads, development
began in March 2013 on a 5 day week basis
on day shift only. In April this was extended
to 7 days per week on day shift only.
Upon completion of mining of the C North
Cutback, it was backfilled to allow the reinstate-
ment of Highway 1301 as well as to improve
access for waste rock haulage to TSF#2. The
reinstatement of the section of Highway 1301
that passes through the C North area is still
pending final approval from the Department of
Highways in Bangkok and Phitchit.
The engineered fill for the second lift of TSF#2
was constructed from November 2012 to May
2013. This will provide an additional 10.4 million
tonnes of storage capacity. Waste rock from
A Pit is being continuously sent to TSF#2 at a
rate of approximately 7,000 BCM per day for the
construction of the downstream embankment.
During the year, a number of cost saving initia-
tives were identified and implemented. The
initiatives included trials using reduced explosive
powder factors and changing from blasting
6 metre benches to 9 metre benches, with
subsequent savings in bulk explosive and drilling
costs. Work was also undertaken to validate
increasing the size of the grade control drilling
pattern, without decreasing the accuracy of
grade estimation. This has resulted in a signifi-
cant saving in grade control drilling costs.
As part of the budget/life of mine planning cycle,
opportunities for improving project value were
identified through the fine tuning of pit designs
and sequencing of push backs within each of the
pits. This involved running optimisations on
individual ore bodies and targeting areas of high
value within the pit shells.
To test the robustness of the life of mine plan,
various scenarios were investigated at varying
gold prices. The result of this work highlighted
that A Pit was still very robust.
The new plant, Chatree North, continued to
operate in commissioning and optimisation
mode from the start of July 2012 until its
completion at the middle of August. The Plant
was shut down for a total of 63 days while
undertaking a drawn-out process for the
granting of a Metallurgical License. The Plant
resumed operation in October and quickly
exceeded design processing capacity with
throughput of 3.47 million tonnes per annum
(Mtpa) or 28% above the design rate of
2.7 Mtpa. The Plant performed extremely well
Physicals 2012/13 2011/12 % Change
Waste mined bcm 5,649,614 6,258,662 -44%
Ore mined bcm 2,708,634 1,9 47,275 39%
Waste:ore ratio 2.09* 3.2* -35%
Ore mined tonnes 7,051,4 8 8 4,986,173 41%
Ore treated tonnes 5,699,014 5,115,720 11%
Head grade (gold) Au g/t 0.9 0.9 0%
Head grade (silver) Ag g/t 11.9 11.6 2.6%
Gold recovery % 79.9 84.4 -5.3%
Gold poured ounces 133,681 121,372 10%
Silver poured ounces 1,000,569 918,314 9.3%
* After waste capitalised to TSF
Cost Category
2012/13
$US/oz Gold
Produced
2011/12
$US/oz Gold
Produced % Change
Cash operating cost 620 460 35%
By product credit** (180) (210) -14%
Depreciation / amortisation 185 143 29%
Total production cost 952 761 25%
** Net of silver royalties
| 15 | 15 | ASX_KCN_2013.pdf |
Operations Report
15
Operations Report
continued
u | 16 | 16 | ASX_KCN_2013.pdf |
with an availability of 98.2%. Works continued
throughout the year to eliminate processing
bottlenecks and maximise recoveries with the
conversion of the Leach/Carbon-In-Pulp circuit
to straight Carbon-In-Leach.
The older Plant #1 continues to perform very
well with an availability of 98.3% despite the
replacement of a mill trunnion bearing, the first
after 12 years of operation. Plant #1 achieved
record processing throughputs after the installa-
tion of a second set of cyclones and cyclone
feed pump upgrade. The original design was
2.3 Mtpa and it is currently operating at
2.9 Mtpa or 25% above design.
The combined plants are currently operating
at 27% above design. A study was completed
during the year that has identified the next best
expansion opportunities with minimum capital
expenditure. These opportunities are being
assessed with plant upgrades aimed to continue
to increase throughput into the future.
Safety
Chatree achieved an enviable 10.5 year period
representing 23.6 million man hours of opera-
tions and construction activity without a lost
time injury. Management continues to be
grateful to all of our employees and contractors
for the attention to safety and care for each
other - and without whom this notable achieve-
ment would not be possible.
In recognition of this achievement, and of our
safety standards and emergency response
preparedness, Chatree Mine received the
‘Thailand National Occupational Health and
Safety Award 2013’ on July 03, 2013 and also
received the ‘Thai Zero Accident Gold Award
2013’.
During the year the operation and the Sydney
office undertook a major incident exercise to
test the sites management and rescue teams’
ability to respond as well as to test the
Kingsgate corporate Crisis Management Plan.
www.kingsgate.com.au
Operations Report
16
| 17 | 17 | ASX_KCN_2013.pdf |
With the approvals of the Special Prospecting
Licence ("SPL") applications still awaiting the
Minister of Industry’s consent, exploration
attention over the past 12 months has focused
on new exploration opportunities and Mineral
Resource enhancement targets within the
Chatree Mining Leases. This exploration formed
part of a strategic exploration program within
the mining leases that commenced in late 2012
and was designed to investigate a number of
specific areas that had the potential to upgrade
both Mineral Resources and ore reserves at
Chatree and included:
〉〉 Upgrading Inferred Resources for optimal
long term mine planning;
〉〉 Targeting extensions to currently known
areas of mineralisation; and
〉〉 Exploring deeper higher grade structures
that may have the potential to extend the pit
deeper or potential for underground mining.
Highlights from this drilling program were most
notable at A Prospect and Q Prospect.
Exploration drilling within the Mining Lease
north of A Pit identified a new area of broad high
grade gold mineralisation confirming the contin-
uation of the A East Structure north of the
existing resource.
Significant results from these two holes include:
〉〉 07559DD – 49.4 m @ 4.3 g/t Au from 227 m
(including 29.8 m @ 6.25 g/t Au from
246 m); and
〉〉 07575RD – 35.8 m @ 5.3 g/t Au from 235 m
(including 3 m @ 45.30 Au g/t from 255 m).
At Q Prospect, immediately to the north of A Pit,
exploration drilling encountered broad high
grade gold mineralisation at surface that was
not identified in previous campaigns. Significant
results include:
〉〉 4715RC – 24.0 m @ 5.6 g/t Au from surface
(including 8 m @ 11.3 g/t Au from 14 m);
〉〉 4718RC – 34.0 m @ 1.7 g/t Au from surface;
〉〉 4720RC – 26.0 m @ 0.9 g/t Au from surface;
〉〉 4636DD – 7.4 m @ 5.5 g/t Au from 219 m;
and
〉〉 4732RC – 21.0 m @ 2.2 g/t Au from 111 m.
The success from this discovery of near surface
gold mineralisation at Q Prospect allowed for
commencement of mining activities in the area
which has in turn had a positive impact on the
Chatree operations in the latter half of the year.
Guided by this exploration strategy, drilling
activity has successfully defined several new
areas of mineralisation within the Mining Lease,
most notably at Q and A North Prospects, and
has also upgraded several larger areas of Inferred
Resources to the Measured and Indicated
Mineral Resource category. This activity sees an
additional 30,300 metres of reverse circulation
and diamond drilling included into the estima-
tion of a new Mineral Resource and Ore Reserve
at Chatree.
As at the end of April 2013, the Mineral Resource
estimate at Chatree using 0.30 g/t cut-off grade
totals 4.03 million ounces of gold and 32.8
million ounces silver in 188.3 million tonnes of
rock. The upgraded resource, including deple-
tion from production to the end of April 2013,
represents an increase of 356,000 ounces of
gold and 2,162,000 ounces of silver when
compared to the June 2012 Mineral Resource
estimate for Chatree at the same cut-off grade.
With the sharp fall in the gold price during April
2013, exploration drilling focus shifted to near
surface oxide gold targets within the mining
lease. Discovery of additional oxide gold miner-
alisation would have immediate benefits to the
operation. Longer term exploration targets were
temporarily suspended whilst the drilling
focused on shorter term oxide targets in the
early part of the new year.
Operations Report
17
continued
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Operations Report
CHATREE EXPLORATION
Chatree Geologist examining drill core | 18 | 18 | ASX_KCN_2013.pdf |
www.kingsgate.com.au
18
CHATREE SUSTAINABILITY
Chatree adheres to Kingsgate’s Sustainability
Policy, a copy of which may be obtained from
the Company’s website www.kingsgate.com.au.
The primary aim is to manage the Chatree asset
ethically, so the people of Thailand and the
Company prosper together, enjoying safe, fair
and rewarding working relationships and a
healthy living environment.
The following sustainability section is a summary
of a separate detailed document termed ‘The
2013 Akara Resources Public Company Limited
Sustainability Report’, which is published in both
English and Thai language.
Community
Chatree Gold Mine is located 280 kilometres
north of Bangkok on the provincial border
between Phichit and Phetchabun provinces.
The many villages around Chatree still lead a
predominantly agrarian lifestyle, with rice
growing as the main activity. It is important,
therefore, that Chatree is a good corporate
citizen for our immediate neighbours and in
Thailand generally. Chatree has as a primary
goal to minimise the impact of mining opera-
tions to those living and working nearby. We
seek to achieve this through regular meetings
and consultation with local government and
village groups and through assisting the
community in times of need.
Community Funds
Corporate social responsibility at Chatree is
a continual commitment by our business to
behave ethically and contribute to economic
development in the local area improving the
quality of life of our workforce and their families
as well as the local communities in which we
operate. There are four funds which have been
established. These are made up of an EIA Fund
for any environmental impact, an Or Bor Tor
Fund (sub-district Fund), a Village Fund and an
Akara for Communities Fund. Committees have
been formed to manage each fund which is
made up of government officials, village leaders,
and employees from Chatree to ensure transpar-
ency and diligent project management.
Employees
Chatree has been free of lost time injuries for the
tenth year in a row. This exemplary safety record
would be difficult to achieve without manage-
ment support. It is however, the employees and
contractors who have made a safe workplace a
reality by ensuring a safe environment for them-
selves and their workmates. Chatree employees
and contractors have excelled in this regard and
Kingsgate congratulates and thanks them for
their sustained efforts.
The Chatree workforce totalled 1,326 at the
end of the financial year comprising 381 Akara
employees, 740 with our mining contractor
LotusHall and 4 expatriates. Turnover for Akara
permanent employees during the financial year
was 5.9%.
Chatree has received its fourth Welfare and
Relations Award from the Department of Labour
Protection and Welfare, as well as the Ministry
of Labour and Best Employer Award from Aon
Hewitt and Sasin University in 2012. Chatree
has also maintained its certificate of TLS/
SA8000 since 2009.
Our business is really all about people. As a first
rate workforce is essential to our success, we
continue to ensure we have the right people in
the right role doing the right work at the right
time. Akara Mining Limited offers comprehensive
training in relevant safety and job-related areas
to all our people. We also assist our employees
to obtain tertiary education qualifications. Thus
far, 33 employees have been sponsored for
Masters level degrees, 10 employees for Bachelor
level degrees and eight employees for Diploma
Certificates.
Operations Report
| 19 | 19 | ASX_KCN_2013.pdf |
19
Water
While rainfall can occur year round, it is gener-
ally concentrated in the annual monsoon. The
responsible management of water is therefore of
utmost importance to Chatree Mine and to the
surrounding area. Chatree operates on a nil-
release basis, and all rain water on the mine lease
is harvested with no water leaving the site. This
requires continuous management of usage,
quality and storage. A total of 32 surface water
and 72 groundwater quality sampling sites have
been established, all of which are regularly
monitored and sampled. To date, no results
from any of these sites have caused concern.
To gauge any potential drawdown impact on
local groundwater, the mine regularly monitors
80 water table measuring stations, located on
the mine site and in surrounding villages. Water
levels rise and fall seasonally but no long term
adverse trends have been identified.
A total of 2,454,585 tonnes of water was used to
process 5,699,014 tonnes of ore during the finan-
cial year. Water usage was reduced onsite via
recycling of water from the Tailings Storage
Facility via the decant water return system. The
excess recycled water is stored in a number of the
historic mining pits for re-use in the process plant.
Environmental Audit
In December 2012 the eleventh annual Tailings
Storage Facility Audit was undertaken. Knight
Piésold found that the tailings facility continues
to be operated at best practice and that the
Processing Department demonstrates a good
understanding of the facility. Concern was
expressed about the steepness of two access
ramps which have since been remediated.
In February 2013, Environ Australia Pty Ltd under-
took the eleventh ‘whole of site’ environmental
audit of the Chatree Mine. The audit is designed
to assess compliance with conditions in the
Mining Leases, corporate commitments made in
the current Environmental Impact Assessment,
adherence to board environmental policy, obser-
vance of the Australian Minerals Industry Code for
Environmental Management and Enduring Value and
our environmental performance overall. The audit
concluded that, the operations of the Chatree
Gold Project comply with applicable statutory
requirements as well as voluntary environmental
commitments made by Akara Mining Limited. The
audit also indicates that the project operations
are being carried out in accordance with the
requirements of the Australian Minerals Industry
Code for Environmental Management, and that
the responsibilities of Kingsgate, as a Code
signatory, are being addressed.
Rehabilitation
No contaminated land issues arose during the
period. The rehabilitation program is ongoing with
areas contoured and planted as soon as is practi-
cable. Trials of various species are undertaken to
ensure the optimal results for each location. Many
species of trees and grass have been sown
successfully across the site. Some 26.2 hectares
were rehabilitated last year and 14.2 hectares of
rehabilitation is planned for the present year.
Cyanide Management
Chatree continues to meet all requirements of
the International Cyanide Code for Gold Mining
Operations. The Code mandates strict protocols
for the manufacture, transport, storage and use
of cyanide. As part of the plant expansion, the
operation will move to the use of solid cyanide
delivered and dispensed from sealed containers
(ISOtainers). This system improves the safety of
transportation and usage. The cyanide code
audit will be done in late 2013 to certify the new
processing plant and re-certify the old
processing plant.
Readings of discharge to the tailings storage
facility are taken every 60 minutes. Of the 8,760
readings taken during the year, a total of 99%
showed the discharge of cyanide did not exceed
the 20 mg/L CNTOT standard. The highest
monthly reading obtained was 12.0 mg/L CNTOT
with an annual average of 8.4 mg/L CNTOT.
Birds continue to nest and breed near the tail-
ings storage facility, confirming that our cyanide
discharge presents no environmental hazard.
Ongoing cyanide destruction is also assisted by
numerous introduced micro-organisms which
are able to degrade free cyanide to carbon
dioxide and ammonia.
Dust Management
Chatree’s aim is to produce minimal dust and
noise and thereby reduce neighbouring concerns
by maintaining all mine roadways in good order
through regular gravel sheeting and watering.
Effective noise bunds have been developed
around operations. In some circumstances,
operations have been restricted to daylight
hours. Dust monitoring stations have been
established in nine surrounding villages. All
results from the regular monitoring and
sampling program have been within required
quality standards.
Incident Reporting
There were 66 environmental events during the
year. All were minor and there were no report-
able incidents.
Operations Report
continued
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Operations Report
| 20 | 20 | ASX_KCN_2013.pdf |
VIETNAM
THAILAND
LA OS
CAMBODIA
10°
100°
20°
LA OS
AM
CAMBODIA
10°
CHALLENGERCHALLENGER
30°
35°
140°
135°
130°
VIC
QLD
NSW
NT
WA
Adelaide
BOWDENS
SILVER
BOWDENS
SILVER
Newcastle
Sydney
Dubbo
Mudgee
30°
35°
150°
145°
QLD
TA S
VIC
SA
70°
50°
20°
30°
40°
3
COPIAPO
NUEVA
ESPERANZA
COPIAPO
NUEVA
ESPERANZA
Santiago
La Serena
Antofagasta
Chañaral
ARGENTINA
BOLIVIA
PERU
0 300100 200
Kilometres
Highway
Freeway
Power lines
Hydro power dam
Thermal power station
Khon Kaen
Kh
KhCHATREECHATREE
Chiang
Mai
Bangkok
Chumphon
Phuket
CHALLENGER
GOLD MINE
CHALLENGER
GOLD MINE
Labyrinth
Bulgunnia
Barton West
Cundeelee
(Tropicana Belt)
Blue Dam
Calingiri
Wongan Hills
Kukerin
Bullock Pool
Nanicup Bridge
Holleton West
Golden Point
Northling
Bryah
Perenjori
Yalla Burra
Barton Central
Tenements Area
20
www.kingsgate.com.au
Challenger
Gold Mine
South Australia
Summary
The Challenger Mine produced 66,216 ounces
of gold for the year with an average milled grade
of 3.91 grams per tonne (g/t), and a total cash
cost of $1,107 per ounce. The grade was low due
to a shortfall in ore supply from the mine that was
supplemented by low grade ore from stockpiles.
Higher dilution in stopes at the base of the mine
and depletion on those levels due to the addi-
tional displacement of the ore horizons following
the identification of the ‘215 Shear’, contributed
to the lower than expected production from the
lower levels. A shortfall in underground develop-
ment also limited access to ore sources.
Development and mining commenced at the
higher grade Challenger West orebody during
the year but was insufficient to offset the short-
fall from the base of the mine.
Because of the poor ore recovery from the
bottom of the mine and the drop in the gold
price, a strategic review of the mine operation
was carried out. This resulted in a new plan that
focuses on the higher grade Challenger West as
the main ore supply.
Ongoing improvements in site communications
continued with the installation of a dedicated
microwave link to the site. This greatly improves
u
Operations Report
| 21 | 21 | ASX_KCN_2013.pdf |
21
business communications and also allows our
employees to communicate with their families
from the accommodation village.
Mine production for the year totalled 502,034
tonnes of ore at a reconciled grade of 4.17 g/t
for 67,307 ounces.
The M2 shoot ore source supplied 44% of total
ore production at an average grade of 3.7 g/t.
The M1 supplied 14% at 3.93 g/t and Challenger
West was 32% at 5.68 g/t.
Developing the high grade Challenger West
shoot has continued to be the primary focus for
the past and future 12 months whilst finishing
M1 / M2 lodes at the base of the mine on the
155 and 135 levels.
The year to date adjusted cash operating costs
were $1,107 per ounce of gold. Total site oper-
ating cash costs were $67.5 million. Total cash
expenditure including operating, capital and
exploration was $140 million.
Capitalised expenditure for the mine was $57.5
million which included the main decline, level
accesses, cross cuts, ventilation accesses,
stockpile bays, and diamond drill drives along
with electrical and dewatering stations.
A total of $6.3 million was spent on numerous
sustaining capital projects including a communi-
cations upgrade, excavator, various mill upgrades,
and airstrip and access road upgrades.
The mining contract with Leighton Contractors
Pty Ltd ended in 2013. Following a tendering
process, the new mining contract was awarded
to Byrnecut Australia Pty Ltd, with the new
mining contract commencing on 1 August 2013.
Operations Report
continued
Operations Report
Physicals 2012/13 2011/12 % Change
Ore mined tonnes 502,288 606,659 -17%
Ore treated tonnes 556,631 644,629 -14%
Head grade (gold) Au g/t 3.91 4.6 -15%
Gold recovery % 94.5 92.4 2%
Gold poured ounces 66,216 87 ,388 -24%
Cost Category
2012/13
$US/oz Gold
Produced
2011/12
$US/oz Gold
Produced
Total cash cost 1,135 864
By product credit* (2) (2)
Depreciation / amortisation – operating 695 535
Total production cost 2,030 1,397
* Net of silver royalties
Operational Performance
Significant geological milestones at Challenger
for the year include the identification of the ‘215
Shear’, confirmation of M2 lode mineralisation
below the ‘215’ Shear, and continued develop-
ment on the high grade Challenger West lode.
Development of the 215 level highlighted a
moderate angle ductile brecciated zone dipping
to the north west (termed the 215 Shear). This
structure, rather than the ‘79’ Fault, has resulted
in the offset in the lode system below the 215
level and this has been confirmed in re-examina-
tion of the drill core. Mining on various levels
above and below the structure revealed it
bisected the 79 Fault in a very similar position to
where the lodes were truncated on a number of
levels, and hence its significance wasn’t recog-
nised for some time. Due to the orientation and
moderate dip of the 215 Shear, the lodes were
offset more than previously expected, and the
immediate levels beneath, abutting the feature,
had greatly reduced stope size.
Development to test Challenger West orebody
has been highly successful on the 790 and 810
levels, showing that the structure, while narrow
and poddy, has good continuity along its strike
length. Additional development on the 890, 870
and 650 levels has highlighted the structural
variability of the lode down plunge. Considerable
drilling has been undertaken to better define the
Challenger West shoot and add to the resource. | 22 | 22 | ASX_KCN_2013.pdf |
www.kingsgate.com.au
22
Mine production for the year totalled 502,034
tonnes of ore at a reconciled grade of 4.17 g/t
comprising 356,009 tonnes at 5.26 g/t of high
grade ore and 146,025 tonnes @1.52 g/t of low
grade ore.
The main M2 Lode provided 44% of mined ounces
with 13% of ounces mined from M1. Compared to
the previous financial year, M2 contributed a
lower percentage of the total ounces mined due
to increased contributions from the Challenger
West. Challenger West Lode, which was mined
for the first time in 2012, contributed an encour-
aging 32% of the total ounces.
Ore production from the Main M2 and M1 lodes
during the year was strongly impacted by the
215 Shear due to its foreshortening of the lodes
in advance of the predicted ‘79’ fault. This
resulted in less ore above the ‘79’ fault.
Development
The current decline and mining front of the M1/
M2 orebodies has continued below the 215
Shear, with the establishment of the 205, 195,
175, 155 and 135 levels.
Stoping has been initiated on the 205, 195
and 175 levels where ground conditions in the
stopes have led to greater than planned dilution.
Poor ground conditions were noted in the levels
just above the 215 Shear and are thought to be
associated with the shear rather than with the
depth of the mine. In an effort to control the
dilution, stope dimensions, pillar placement and
cable bolting is being trialled. A combination of
these ground control methods has resulted in a
degree of success in reducing the dilution.
The mine schedule continued with a combined
focus of development and stoping on two
separate work areas being the high grade shoot
at Challenger West on the 790, 810, 890 and
870 levels, and the mining of high grade ore
pods below the 215 Shear on M1 and M2.
A total of 6,799 metres of development was
achieved for the year (exclusive of exploration).
The Challenger West orebody has proven
to have the highest grade in the mine and the
potential to extend from the surface to the base
of the current mine. Current diamond drilling is
targeting the upper and lower ore zones.
Challenger West is the primary target for the
next nine months to continue stoping and prove
up the identified ore lodes for the future
of the Challenger underground. Significant
development has set up two means of egress,
flow through vent and stoping in the past 12
months. Challenger West will form the founda-
tion of future mining activities at Challenger
into the foreseeable future.
Operations Report
The services provided by the OH & S team at
Challenger include on-site emergency and clinical
medical services for work related or private
injuries, illness and counselling support services.
Health programs delivered on site include health
assessments and lifestyle promotional programs.
The Health Centre has continued with the
remote health care clinic in conjunction with the
Royal Flying Doctor Service. This program has
provided advice to assist personnel in managing
private medical conditions and other health
related topics.
The site Emergency Management Team was
involved in a large-scale exercise during the year
that tested the team’s training and allowed the
opportunity to review the site emergency
management plan.
Occupational Health and Safety
In April 2013, Kingsgate was saddened to report
that an employee was fatally injured off site while
returning home from the Challenger Gold Mine.
It’s important to reflect for a moment to
acknowledge the important contribution this
individual made to his place of work but to also
recognise the loss this person’s family suffers.
Kingsgate is fully cognisant of the valuable
contribution and dedication shown by this indi-
vidual and will strive to ensure that his legacy is
respectfully remembered.
During 2013 there were four incidents resulting
in lost time injuries, three restricted work inju-
ries, and six medically treated injuries, an overall
reduction of 48 percent on the previous year’s
25 recordable injuries. Total injuries reported
have also decreased by 15 percent.
There were no air medical evacuations during
the year. | 23 | 23 | ASX_KCN_2013.pdf |
23
Operations Report
CHALLENGER EXPLORATION
Exploration expenditure totalled $8.8 million
during the year comprising $1.8 million of
resource development and exploration costs
delineating targets outside of the reserve and
$7.0 million on underground mining of lodes
outside of the reserve. The majority of the
mining exploration costs occurred in the first
quarter and included portions of 240 and 205
Aminus 2 and 670 Challenger West before they
were upgraded to the reserve.
South East Zone (SEZ)
The SEZ structure was evaluated from the
1100 level with three flat fans targeting 1080–
1120 mRL, as well as the 940, 280, 240 and 175
levels. A number of significant intersections
were returned but overall the strike length of
continuous high grade zones appeared limited.
Resource Development
Underground diamond drilling was employed as
the main medium for Resource Development of
the various Challenger lodes. The Challenger
West lode was a focus, as well as the ongoing
evaluation of the M1 and M2 shoot systems
beneath the 215 Shear.
M2 Shoot System below the 215 Shear
With the new mining fronts established below
the 215 Shear, development drilling of the
M1–M2 lodes on a level by level basis was facili-
tated. This revealed a number of significant
intersections in both lodes as well as continuity
of overall shoot geometry.
Challenger West
The Challenger West Shoot continued to be a
focus of development and resource develop-
ment drilling, and was targeted with programs
from the 800 level (targeting 770 mRL), 670
level (targeting 690–540 mRL), 640 level
(targeting 500–450 mRL), and 215 level
(targeting 170–50 mRL). In addition, the
deepest intersection to date of 0.5 metres @
59.7 g/t was returned from 119 mRL. Overall,
delineation of the lode and extension has been
successful to date, but targeting and representa-
tive challenges remain due to its narrow and
poddy nature.
Aminus Corridor
An intersection of 1.4 metres @ 15.0 g/t with
associated visible gold was returned in the
Aminus corridor as part of Challenger West
resource drilling. This lies to the south of
Challenger West OD1 and therefore a large
distance along strike of Aminus 2. Whilst
isolated, it demonstrates the potential along
multiple positions within the Challenger struc-
tural domains.
continued
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Operations Report
| 24 | 24 | ASX_KCN_2013.pdf |
www.kingsgate.com.au
24
Operations Report
CHALLENGER SUSTAINABILITY
Employees
The Challenger workforce totalled 272 at
the end of the financial year comprising 100
Kingsgate personnel (employees and casual
contractors to fill vacancies); and 172 contrac-
tors. Contractors on site include: Leighton with
154 personnel providing mining services;
Sodexo, 12 personnel providing catering and
cleaning services; Powerwest, 2 personnel for
power supply services; and AWG, 4 personnel
for air leg and rise mining services.
Turnover for Challenger permanent employees
during the financial year was 23%, with 23
terminations and 22 new starters. New
employees recruited on a casual basis with a
view to permanency accounted for 19 positions.
During the year Kingsgate have rebuilt the
Challenger management team improving the
depth of mining engineering experience. The
new management, combined with targeted
training has brought about a cultural change
with the emphasis now being on proper plan-
ning, appropriate contractor management,
accountability. To encourage staff retention,
there was a focus on improving the site facilities
with an upgrade to the mining office as well as
site communications to allow employees to
communicate with their families while on site.
Community
The remoteness of Challenger mine – 310 kilo-
metres by road from the nearest town at Coober
Pedy – reduces the capacity for local involve-
ment with surrounding communities. Challenger
continued to support its nearest communities
with local sponsorships including:
〉〉 The Umoona Community Council;
〉〉 Glendambo Pastoralists Ball;
〉〉 The Royal Flying Doctor Service; and
〉〉 The Coober Pedy Football Club.
Challenger is located within the Commonwealth
Government, Woomera Prohibitive Area (WPA).
The Department of Defence (DOD) continues to
utilise the area for rocket testing and other
commercial activities. In the last 10 years DOD
have not impacted on mine operations.
Challenger Mine has fostered strong relations
with the University of Adelaide over the past
nine years. Each year selected students from the
Schools of Geology and Mining Engineering
undertake field trips to Challenger, where they
experience a very detailed and hands-on intro-
duction to mining. Kingsgate offers academic
Bursaries and Prizes to students in both
disciplines.
Environment
Full details of all environmental monitoring
reports and a detailed review of all environ-
mental issues are contained within the 2013
Mining and Rehabilitation Compliance Report
(MARCR). The MARCR can be downloaded from
DMITRE’s website www.minerals.dmitre.sa.gov.
au and can be found using the search word
“Challenger”.
Water usage
A supplementary groundwater extraction bore
(Gusher 3) was commissioned at Challenger to
increase the supply of potable water made
available to the accommodation camp. A third
reverse osmosis plant was also commissioned to
accommodate the increase in volume of water
that needs to be filtered for potable use.
A total of 436,175 tonnes of water was used to
process 556,631 tonnes of ore during the finan-
cial year with a ratio of 0.78 tonnes of water to
one tonne of ore. Water usage was reduced
onsite via recycling of supernatant water from
Tailings Storage Facility (TSF) 2 via the decant
water return system. | 25 | 25 | ASX_KCN_2013.pdf |
Operations Report
25
Water Quality
The Annual Groundwater Review Report indi -
cated that analysis of groundwater samples
collected from the mine site groundwater moni-
toring network are generally below the relevant
guideline, and in many instances near or below
the Limit of Reporting (LOR).
Concentrations of CNWAD (cyanide weak acid
dissociable metals) analysed from groundwater
samples collected from monitoring bores
surrounding the tailings storage facility (TSF)
suggest the natural attenuation of cyanide is
occurring and containment measures in place
for process water and tailings slurry are perform-
ing as designed.
Incident Reporting
Challenger’s online incident reporting system
was upgraded from Skytrust to QHSE Data
Manager during the 2012/13 financial year. The
updated reporting commitments approved in
March 2012 have lead to an increase in the
number of reported incidents during 2012 and
2013. A total of three environmental incidents
were reported to government regulators in the
2012/13 financial year with the incidents
assessed as low to moderate risk. All incidents
were investigated and were closed out before
the end of the financial year.
Environmental Audit
An independent environmental compliance
audit was undertaken by specialist consultants
Outback Ecology in March, 2013. The compli-
ance report was submitted to DMITRE as part
of the annual MARCR in April, 2013. The compli-
ance audit identified action tasks which have
now been completed.
Cyanide Management
At Challenger tailings are stored in an integrated
waste landform (IWL). This is essentially the
same as a traditional tailings storage facility
but is built to blend into the waste dumps.
Groundwater monitoring bores located around
the Integrated Waste Landform (IWL) were
sampled quarterly in line with Challenger’s
approved Program for Environment Protection
and Rehabilitation. The supernatant pool water
was well managed throughout the year with the
cyanide concentration remaining below the
adopted guideline limit of 0.5 milligrams per litre
(mg/L), within the TSF. To date cyanide ground-
water quality has remained below the revised
reporting limit of 0.08 mg/L.
Rehabilitation
Ecosystem Function Analysis (EFA) was
conducted on five previously established moni-
toring sites and two new monitoring sites at
Challenger in August 2012. Natural Acacia and
Chenopod sites located within the mining lease
were monitored and compared with the eastern
and western Integrated Waste Landform (IWL)
monitoring sites.
Some progressive rehabilitation was undertaken
throughout the 2012-2013 financial year. More
than half of TSF1 has been capped with fresh
waste rock and will continue into the next
reporting period. A decision has not yet been
made if TSF1 will be raised any further as per
approvals, however fresh rock capping will
remain until this is determined.
Fresh waste rock armouring of the crest bund
around the western and eastern landforms has
commenced. The eastern crest bund was
armoured with 0.5 metres of fresh rock. This
crest armouring is proposed to continue into the
next reporting period with topsoil added and
seeded with local province seed.
Previously disturbed areas around production
bore four CPW04 were lightly ripped; contoured
and seeded with local province seed. Disturbed
areas around other production and gusher bores
were lightly ripped and then contoured by a
grader for future seeding.
Dust Monitoring
The triennial noise and hygiene survey was
conducted in 2012 and comments on dust survey
results. All respirable dust results were below the
set exposure standards for atmospheric contami-
nates. Higher than limit inhalable dust results
were recorded from the lab technician and
crusher operator, who wear a P2 dust musk as
personal protective equipment to reduce the limit
of dust inhaled. Underground dust results were
all below the recommended limits.
Operations Report | 26 | 26 | ASX_KCN_2013.pdf |
VIETNAM
THAILAND
LA OS
CAMBODIA
10°
100°
20°
LA OS
AM
CAMBODIA
10°
CHALLENGERCHALLENGER
30°
35°
140°
135°
130°
VIC
QLD
NSW
NT
WA
Adelaide
BOWDENS
SILVER
BOWDENS
SILVER
Newcastle
Sydney
Dubbo
Mudgee
30°
35°
150°
145°
QLD
TA S
VIC
SA
70°
50°
20°
30°
40°
3
COPIAPO
NUEVA
ESPERANZA
COPIAPO
NUEVA
ESPERANZA
Santiago
La Serena
Antofagasta
Chañaral
ARGENTINA
BOLIVIA
PERU
0 300100 200
Kilometres
Highway
Freeway
Power lines
Hydro power dam
Thermal power station
Khon Kaen
Kh
KhCHATREECHATREE
Chiang
Mai
Bangkok
Chumphon
Phuket
CHALLENGER
GOLD MINE
CHALLENGER
GOLD MINE
Labyrinth
Bulgunnia
Barton West
Cundeelee
(Tropicana Belt)
Blue Dam
Calingiri
Wongan Hills
Kukerin
Bullock Pool
Nanicup Bridge
Holleton West
Golden Point
Northling
Bryah
Perenjori
Yalla Burra
Barton Central
Tenements Area
26
www.kingsgate.com.au
Projects Report
Projects
Report
Bowdens
Silver Project
NSW, Australia
Summary
Kingsgate Bowdens Pty Limited holds four
Exploration Licences ("ELs") located in the Lue/
Rylstone area of central western NSW. EL 5920
is divided into two separate areas, one contain-
ing the Bowdens Project, is adjacent to the
village of Lue and the second to the west of the
town of Rylstone.
Silver mineralisation was discovered at Bowdens
in the mid 1980s. Programs of geophysical and
geochemical exploration had also been under-
taken. During 2012 Kingsgate completed 124
drill holes for 13,527 metres as a part of resource
definition program. The new resource estimate
comprising a total of 567 drill holes for 63,088
metres was completed in November 2012.
During the year a comprehensive metallurgical
testwork program was completed as a part of a
Definitive Feasibility Study (DFS).
Geology
The Bowdens Silver Project is situated on the
north-eastern margin of the Lachlan Fold Belt.
Bowdens is hosted by flat-lying Early Permian
Rylstone Volcanics. The Rylstone Volcanics are
partially overlain by a sequence of marine sedi-
ments of the Sydney Basin (Shoalhaven Group).
The Rylstone Volcanics range from 10 to 200
metres thick and are dominated by silica rich
volcanically derived rocks.
The silver mineralisation occurs as flat-lying to
moderately dipping zones of disseminations and
silicic fracture-filling and is closely associated
with sulphides of iron, arsenic, lead and zinc.
High grade silver mineralisation is also hosted in
steeply-dipping fracture zones which host
banded sulphide veins.
u
| 27 | 27 | ASX_KCN_2013.pdf |
27
Projects Report
continued
u
Projects Report
Resource
MPR Geological Consultants Pty Ltd (MPR) has
estimated Mineral Resources for the Bowdens
silver lead zinc deposit and reviewed the quality
of sampling and assaying for Kingsgate’s 2012
drilling.
Estimated resources include silver, lead and zinc
grades and are reported above silver equivalent
cut off grades. The silver equivalence formula
is based on commodity prices and recoveries
provided by Kingsgate, which give the following
function.
Ag equivalent (g/t) = Ag (g/t) + 27.5 x Pb (%) +
22.8 x Zn (%)
The study database comprises 567 RAB, aircore,
Reverse Circulation hammer (RC), and diamond
drill holes completed by Kingsgate and previous
explorers since 1989 for a combined 63,088
metres of drilling.
A JORC-compliant resource estimate was
completed in October 2012 and the current total
measured, indicated and inferred resource (at a 30
grams per tonne silver equivalent (AgEq) lower
cut-off grade) is 182 million ounces of AgEq.
Feasibility Study
During 2013, the process design and engi-
neering work for the Definitive Feasibility Study
(DFS) progressed to a point where the draft
study was close to completion as at 30 June
2013. The study encompassed detailed process
design based on using the most recent metal-
lurgical test results, capital and operating cost
estimates, project water and power supply,
infrastructure requirements and mine
optimisation.
A specialist water supply and engineering firm
was engaged to determine the project options
for supply, ground and surface water manage-
ment. Separate specialist consulting firms were
engaged to prepare the design and costing of
the tailings storage facility and power supply for
the Bowdens project.
A geo-technical drilling program was largely
completed and the results utilised in deter-
mining preliminary mine design and costing for
an open pit mine for Bowdens including pit wall
angles for the mine optimisation.
A geo-metallurgical test program was completed
using core samples prepared from the major
lithology types at the Bowdens silver project.
The geo-metallurgical programme was success-
ful in providing important information related to
the physical characteristics and flotation
recovery of mineralisation from the dominant
lithology types. This included providing confir -
mation of milling circuit parameters and overall
improved metallurgical recovery.
Testing of the long term geochemical stability
of the ore and waste for potentially acid forming
properties is ongoing, with initial weathering
columns nearing completion. The geochemical
characterisation results will form an important
input to the Environmental Impact Statement
(EIS).
EIS, Community and Project
Approval Process
Kingsgate submitted an application for the
Director General’s Requirements (DGRs) in
December 2012. Following a planning focus
meeting with various NSW government depart-
ments and agencies in February 2013, the DGR’s
were issued in late February 2013. The DGR
document combines the elements of the
conceptual project development plan (CPDP)
and sets out environmental assessment require-
ments for the proposed project development.
The preparation for lodgement of an
Environmental Impact Statement (EIS) to the
NSW Department of Planning (“Planning”)
continues. It is envisaged that the EIS will be
completed and lodged in 2014. Data for flora
and fauna, surface water, groundwater, meteor-
ology, ambient noise and dust levels are
collected routinely. Further investigations of
cultural heritage, social-economic impact, traffic
impact, soil type and agricultural suitability have
also been undertaken on site.
There have been no serious safety incidents
reported to date. At the end of June there were
over 600 days Lost Time Injury free since
Kingsgate exploration and pre-development
activities began on site.
Environmental, regulatory and NSW Govern-
ment approvals remain the key determinants to
the timing of project development at Bowdens.
Of particular note were two recent NSW Land
and Environment Court decisions relating to the
overturning of existing mining approvals that will
require extra diligence and consideration as the
Bowdens Project moves forward. Community
relations was undertaken throughout the year
utilising a variety of techniques including:
letters, telephone calls, attendance at trade
shows, industry presentations, site tours,
Community Liaison Group meetings, govern-
mental meetings and two open days.
The open days were highly successful in
engaging with the community with more than
200 local people providing feedback on a range
of topics. Sentiment capture and management
remains an important aspect for the project as
part of the ongoing community relations
program, and a full time Community and
Government Relations Manager has been
engaged on that basis.
| 28 | 28 | ASX_KCN_2013.pdf |
VIETNAM
THAILAND
LA OS
CAMBODIA
10°
100°
20°
LA OS
AM
CAMBODIA
10°
CHALLENGERCHALLENGER
30°
35°
140°
135°
130°
VIC
QLD
NSW
NT
WA
Adelaide
BOWDENS
SILVER
BOWDENS
SILVER
Newcastle
Sydney
Dubbo
Mudgee
30°
35°
150°
145°
QLD
TA S
VIC
SA
70°
50°
20°
30°
40°
3
COPIAPO
NUEVA
ESPERANZA
COPIAPO
NUEVA
ESPERANZA
Santiago
La Serena
Antofagasta
Chañaral
ARGENTINA
BOLIVIA
PERU
0 300100 200
Kilometres
Highway
Freeway
Power lines
Hydro power dam
Thermal power station
Khon Kaen
Kh
KhCHATREECHATREE
Chiang
Mai
Bangkok
Chumphon
Phuket
CHALLENGER
GOLD MINE
CHALLENGER
GOLD MINE
Labyrinth
Bulgunnia
Barton West
Cundeelee
(Tropicana Belt)
Blue Dam
Calingiri
Wongan Hills
Kukerin
Bullock Pool
Nanicup Bridge
Holleton West
Golden Point
Northling
Bryah
Perenjori
Yalla Burra
Barton Central
Tenements Area
28
www.kingsgate.com.au
Projects Report
Nueva Esperanza
Project
Chile
Summary
The Nueva Esperanza Project is 100% owned
by Kingsgate since February 2012. Nueva
Esperanza is located in the Maricunga Gold Belt
near Copiapó, a regional mining centre in
Northern Chile. The silver-rich mineralisation is
hosted by the Esperanza high-sulphidation
epithermal alteration system associated with
the Cerros Bravos volcanic complex.
The project consists of three well-defined miner -
alised deposits and a number of undeveloped
exploration targets. The main deposits are
Arqueros, Chimberos and Teterita. Arqueros was
previously mined on a limited scale by under-
ground methods and Chimberos was exploited
as an open pit mine, delivering about 40 million
ounces of silver in 1998/99. All three deposits
currently have a combined Mineral Resources of
about 93 million ounces of silver equivalent or
1.6 million ounces of gold equivalent (EQ60)1.
A feasibility study for a decision to mine the
Arqueros portion of Nueva Esperanza was
completed in late 2012, demonstrating that open
pit mining at two million tonnes per year and
processing by milling and agitation leaching in
cyanide was technically feasible. Work remained
to integrate the Teterita and Chimberos deposits
into the project, as well as to test lower cost
options for processing. Continued metallurgical
testwork has shown that mineralisation from all
three deposits by heap leaching is technically and
economically feasible and the preferred alterna-
tive for development.
Environmental approvals to commence
construction and mining at Nueva Esperanza
were granted in July 2013 for the original
Arqueros project. Work is underway to modify
and update the environmental assessment to
incorporate the heap leach process.
u
1 Equivalence is based on gold/silver price ratio
of 60. Gold equivalence = gold content plus
(silver content divided by 60), whereas Silver
equivalent silver content plus (gold content
multiplied by 60). | 29 | 29 | ASX_KCN_2013.pdf |
29
Projects Report
Geology
The silver and gold mineralisation is hosted
within tertiary-aged volcanic units at Arqueros
and Teterita, and in Paleozoic sediments at
Chimberos. The alteration and mineralisation
are all Miocene in age and associated with the
Cerros Bravos paleovolcano.
Mineralisation comprises two main compo -
nents. Silver-rich horizontal units termed
‘mantos’ (Spanish for blanket) and a series of
near-vertical, cross-cutting gold-rich structures.
The mantos silver mineralisation is hosted by
vuggy silica within dacitic lapilli tuff. Mantos
occurs at Arqueros and Teterita where the
mineralising process has replaced horizontal
porous tuffs. At Chimberos, silver mineralisation
is hosted in vuggy silica hydrothermal breccia
superimposed on folded Paleozoic sediments.
The vertical gold-rich mineralisation, also charac -
terised by vuggy silica, is well-developed at
Arqueros. It has been interpreted as feeders for
mineralising fluids. Nonetheless, this style of
mineralisation has not yet been observed at
Teterita and is poorly preserved at Chimberos.
Resource
Kingsgate has updated the project resource
base to incorporate the recent drilling on the
Chimberos project and using the current gold/
silver ratio of 60 (previously 45) for its gold
equivalent (AuEq60) and silver equivalent
(AgEq60) calculations.The combined Measured,
Indicated and Inferred mineral resource for the
Nueva Esperanza Project is based on resource
block modelling of Arqueros, Chimberos and
Teterita, and has been estimated at a cut-off
grade of 0.5 grams per tonne (g/t), gold equiva-
lent (AuEq60) to be 28.9 million tonnes at
0.27 g/t gold and 84 g/t silver.
This represents about 250,000 ounces of gold
and 78.5 million ounces of silver.
The Measured, Indicated and Inferred resource
may be expressed in gold or silver equivalent
ounces as:
〉〉 Gold equivalent ounces (AuEQ60): 1.6
million ounces at 1.7 g/t gold equivalent; and
〉〉 Silver equivalent ounces (AgEQ60): 93.5
million ounces at 100 g/t silver equivalent.
Feasibility Study
A Definitive Feasibility Study commenced on the
project at the end of May 2011 with the focus
on Arqueros, and open pit mining of that deposit
with processing by traditional mill and agiitation
leaching in cyanide. Subsequent acquisition of
the Teterita and Chimberos deposits resulted in
an expansion of the feasibility study to incorpo-
rate their resources.
In late 2012, a decision was taken to examine
lower cost options for processing using heap
leaching. With major engineering already done,
technical studies focussed on metallurgical
testwork and heap leach design. It has been
established that the mineralisation from the
three deposits can be processed by HPGR (High
Pressure Grinding Rolls) crushing and heap
leaching with silver and gold recoveries of the
order of 70% to 75% for silver and 65% to 70%
for gold. The project development plan is now
focussed on a 3 million tonne per annum heap
leach operation with an initial mine life of over 6
years. Annualised production levels (post ramp-
up) are estimated at 6.0–8.0 million ounces of
silver and 18,000–22,000 ounces of gold, at an
indicative start-up capital cost between
US$130–150 million (inclusive of 25%
contingency).
These project parameters are based on prelimi-
nary results only and are insufficient to provide
assurance as to the economic development of
the project at this stage and these parameters
may also change following completion of the
Definitive Feasibility Study.
With the technical and economical feasibility of
heap leaching being established, the project will
now move into the final feasibility and design
stage with results expected to be available
during the March quarter 2014.
The environmental permitting process for the
original Arqueros project has been completed,
with approval to commence construction and
mining granted by the Chilean authorities.
A modification of the environmental assessment
is being prepared to have the approvals modified
for heap leaching and on-site power generation.
Extensive community consultation has been
undertaken with positive outcomes, and rela -
tionships with indigenous rural and urban
communities remain a priority.
Projects Report
| 30 | 30 | ASX_KCN_2013.pdf |
www.kingsgate.com.au
30
Exploration Report
www.kingsgate.com.au
Exploration
Report
Summary
Kingsgate has a portfolio of exploration tene -
ments and applications in Thailand, Chile and Lao
PDR. Following the sale of exploration tenements
to Caravel Minerals, exploration in Australia is
currently only conducted in the vicinity of the
Challenger Mine in South Australia and the
Bowdens Silver Project in New South Wales.
Kingsgate’s South East Asian exploration team
continued their exploration activities on Thailand
and surrounding countries. Strategically the
team has turned the majority of their attention
to projects which have the capacity to add value
to the Company through exploration drilling
subsequent resource expansion. These projects
include the granted Mining Leases at Chatree
and the granted Sayabouly Concession in the
Lao PDR.
Outside of these active areas, the South East
Asian exploration team continues to review new
opportunities throughout Thailand, Laos and
their neighbouring countries.
| 31 | 31 | ASX_KCN_2013.pdf |
31
Exploration Report
Exploration Report
continued
u
Sayabouly Project – Lao PDR
With the grant of the prospecting and explora-
tion permit in early 2012, exploration activity
focused on the definition of an extensive copper
(Cu), platinum (Pt), chromium (Cr), nickel (Ni)
stream sediment anomaly within the permit
area. Surface geochemistry and mapping has
defined an extensive multi-element soil anomaly
over 16 kilometres in length and 700 metres
width with peak values of 829ppm copper (Cu),
1.05% nickel (Ni), 1.54 ppm platinum (Pt), and
0.27% cobalt (Co) and 0.57 ppm palladium (Pd).
The style of mineralisation is thought to be
similar to Cu, Platinum Group Element deposits
such as the Great Dyke (Zimbabwe) Deposits.
Three broad spaced trenches were completed
with another two trenched partially completed
up until the commencement of the wet season
with results 2.0m @ 1.73 ppm Pt and a broad
zone nickel mineralisation including 51 m (853–
904 m) @ 0.96% Ni. In addition to this prospect,
several gold occurrences are beginning to take
shape and recent high grade rockchip samples
(96.0 g/t Au, 82.7 g/t Au, 53.3 g/t Au, 44.7 g/t
Au, 30.0 g/t Au and 18.8 g/t Au) in several adja-
cent creeks appear to be defining a gold target
that will also require drilling at the end of the
wet season. | 32 | 32 | ASX_KCN_2013.pdf |
* Chatree data as at 30 April 2013 Detailed individual Mineral Resources and Ore Reserve reports for each project are available on the company website.
www.kingsgate.com.au
32
Ore Reserves and Mineral Resources
www.kingsgate.com.au
Source Category
Tonnes
(Million)
Grade Contained Metal
Gold
(g/t)
Silver
(g/t)
Lead
(%)
Zinc
(%)
Au Equiv
(g/t)
Ag Equiv
(g/t)
Gold
(M oz)
Silver
(M oz)
Au Equiv
(M oz)
Ag Equiv
(M oz)
Challenger Proved 0.25 5.52 – – – 5.52 315 0.04 – 0.04 2.5
Probable 0.22 8.30 – – – 8.30 473 0.06 – 0.06 3.3
Total 0.47 6.82 – – – 6.82 389 0.10 – 0.10 5.9
Chatree Proved 54.7 0.82 8.1 – – 0.90 94.2 1.44 14.17 1.58 166
Probable 14.8 0.78 6.0 – – 0.84 87.9 0.37 2.86 0.40 41.8
Total 69.5 0.81 7.6 – – 0.88 92.9 1.82 17.04 1.98 208
Total Ore Reserves 70.0 0.85 7.6 – – 0.92 94.9 1.92 17.0 2.08 213
Source Category
Tonnes
(Million)
Grade Contained Metal
Gold
(g/t)
Silver
(g/t)
Lead
(%)
Zinc
(%)
Au Equiv
(g/t)
Ag Equiv
(g/t)
Gold
(M oz)
Silver
(M oz)
Au Equiv
(M oz)
Ag Equiv
(M oz)
Challenger Measured 0.44 8.97 – – – 9.0 511 0.13 – 0.13 7.2
Indicated 1.04 10.6 – – – 10.6 604 0.35 – 0.35 20.2
Inferred 0.68 12.1 – – – 12.1 690 0.26 – 0.26 15.1
Total 2.16 10.7 – – – 10.7 612 0.75 – 0.75 42.5
Chatree Measured 92.8 0.72 6.60 – – 0.78 82.2 2.15 19.7 2.34 245
Indicated 49.8 0.64 4.69 – – 0.68 71.9 1.02 7.5 1.10 115
Inferred 45.7 0.58 3.81 – – 0.62 64.7 0.85 5.6 0.91 95.1
Total 188.3 0.66 5.42 – – 0.72 75.2 4.03 32.8 4.34 455
Total Mineral Resources 190.5 0.78 5.36 – – 0.83 81.3 4.77 32.8 5.08 498
Source Category
Tonnes
(Million)
Grade Contained Metal
Gold
(g/t)
Silver
(g/t)
Lead
(%)
Zinc
(%)
Au Equiv
(g/t)
Ag Equiv
(g/t)
Gold
(M oz)
Silver
(M oz)
Au Equiv
(M oz)
Ag Equiv
(M oz)
Nueva Esperanza Measured 1.5 0.01 101 – – 1.69 102 0.00 4.9 0.08 4.9
Indicated 21.3 0.28 88 – – 1.75 105 0.19 60.3 1.20 71.8
Inferred 6.1 0.3 68 – – 1.43 86 0.06 13.3 0.28 16.9
Total 28.9 0.27 84 – – 1.68 101 0.25 78.5 1.56 93.5
Bowdens Measured 23.6 – 56.6 0.31 0.41 1.64 74.5 – 43.0 1.25 57.0
Indicated 28.4 – 48.0 0.27 0.36 1.40 63.6 – 43.8 1.28 58.0
Inferred 36.0 – 41.0 0.30 0.40 1.27 58.0 – 47.5 1.47 68.0
Total 88.0 – 47.4 0.29 0.39 1.41 64.4 – 134.1 4.00 182
Total Mineral Resources 116.9 0.07 57 – – 1.48 73 0.25 213 5.56 276
Group Total Mineral Resources 307.4 – – – – – – 5.02 246 10.64 774
Challenger and Chatree* Ore Reserves
Challenger and Chatree* Mineral Resources (inclusive of Ore Reserves)
Nueva Esperanza and Bowdens Mineral Resources
Ore Reserves and Mineral Resources
as at 30 June 2013 | 33 | 33 | ASX_KCN_2013.pdf |
33
Ore Reserves and Mineral Resources
Ore Reserves and Mineral Resources
Notes to the Ore Reserves and Mineral
Resources Table:
Some rounding of figures may cause numbers
to not add correctly.
(1) Nueva Esperanza equivalent factors:
• Silver equivalent: AgEq (g/t) = Ag (g/t)
+ Au(g/t) x 60;
• Gold Equivalent: AuEq (g/t) = Au (g/t)
+ Ag (g/t) / 60;
• Calculated from prices of US$1,380/
oz Au and US$21.50/oz Ag, and
metallurgical recoveries of 70% Au
and 75% Ag estimated from test work
by Kingsgate, and metallurgical
recoveries of 85% Au and 78% Ag
estimated from test work by
Kingsgate and Laguna.
(2) Bowdens equivalent factors:
• Silver equivalent: AgEq (g/t) = Ag (g/t)
+ 22.4 x Pb (%) + 25.5 x Zn (%);
• Gold equivalent: AuEq (g/t) = AgEq
(g/t) /45 ;
• Calculated from prices of US$28/oz
Ag, US$1250/oz Au, US$2200/t Pb,
US$2200/t Zn and metallurgical
recoveries of 81% Ag, 73% Pb, and
83% Zn estimated from test work by
Silver Standard, and assuming
consistent metallurgical recoveries for
gold and silver of 81%.
(3) Chatree equivalent factors:
• Chatree gold equivalent: AuEq/t = Au
(g/t) + Ag (g/t) /105;
• Silver equivalent: AgEq g/t = Au (g/t)
x 105 + Ag g/t;
• Calculated from prices of US$1480/oz
Au and US$26/oz Ag and metallur-
gical recoveries of 80.5% Au and
43.6% silver based on metallurgical
testwork and plant performance.
(4) Challenger equivalent factors:
• Silver equivalent: AgEq/t = Au (g/t)
x 57;
• Calculated from prices of US$1480/oz
Au and US$26/oz Ag and consistent
metallurgical recoveries for gold and
silver.
(5) Cut-off grade for Chatree is 0.35g/t Au;
Nueva Esperanza is 0.5g/t AuEq;
Bowdens is 30g/t AgEq. For Challenger it
is 1.5 Au g/t for open cut resources, and
5.0 g/t for undeground resources.
(6) It is the Company's opinion that all the
elements included in the metal equiva-
lents calculation have a reasonable
potential to be recovered.
In this report, information concerning Thailand
operations relates to Exploration Results,
Mineral Resources and Ore Reserve estimates
and is based on and fairly represents information
compiled by the following Competent Persons:
Ron James, Brendan Bradley, Kevin Woodward
and Suphanit Suphananthi who are employees
of the Kingsgate Group – all except Brendan
Bradley are members of The Australasian
Institute of Mining and Metallurgy. Brendan
Bradley is a member of the Australian Institute
of Geoscientists. These people qualify as
Competent Persons as defined in the
‘Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves’
(the JORC Code, 2012 edition) and possess
relevant experience in relation to the mineralisa-
tion being reported herein as Exploration
Results, Mineral Resources and Ore Reserves.
Each Competent Person has consented to the
public reporting of these statements and the
inclusion of the material in the form and context
in which it appears.
In this report, the information concerning
Challenger operations that relates to Exploration
Results, Mineral Resources and Ore Reserves
estimates is based on and fairly represents
information compiled by Stuart Hampton and
Luke Phelps who are full-time employees of the
Kingsgate Group. Both are members of The
Australasian Institute of Mining and Metallurgy.
These persons have sufficient experience that is
relevant to the mineralisation and type of
deposit under consideration and to the activity
that they are undertaking to qualify as
Competent Persons as defined in the 2012
Edition of the ‘Australasian Code for Reporting
of Exploration Results, Mineral Resources and
Ore Reserves’. Stuart Hampton and Luke Phelps
consent to the inclusion in the report of the
matters based on their information in the form
in which it appears.
The information in this report that relates to
Bowdens Mineral Resource estimation is based
on and fairly represents work completed by
Jonathon Abbott who is a full-time employee of
MPR Geological Consultants and a member of
the Australasian Institute of Geoscientists, and
Ron James, who is a member of The Australasian
Institute of Mining and Metallurgy. Mr Abbott
and Mr James have sufficient experience that is
relevant to the style of mineralisation and type
of deposit under consideration and to the
activity that they are undertaking to qualify
as a Competent Person as defined in the 2012
Edition of the ‘Australasian Code for Reporting
of Exploration Results, Mineral Resources and
Ore Reserves’. Mr Abbott and Mr James consent
to the inclusion in the report of the matters
based on their information in the form and
context in which it appears.
The information in this report that relates to
Nueva Esperanza Mineral Resource estimation is
based on and fairly represents work completed
by Jonathon Abbott, Ron James and Maria
Muñoz. These people qualify as Competent
Persons as defined in the ‘Australasian Code for
Reporting of Exploration Results and Mineral
Resources’(the JORC Code, 2012 edition) and
possess relevant experience in relation to the
mineralisation being reported herein as
‘Exploration Results, Mineral Resources and Ore
Reserves’. Mr Abbott, Mr James and Ms Muñoz
consent to the inclusion in the report of the
matters based on their information in the form
and context in which it appears.
Competent Persons
Statement | 34 | 34 | ASX_KCN_2013.pdf |
34
www.kingsgate.com.au
Corporate Governance Practices
This statement provides an outline of the main
corporate governance policies and practices
that the Company had in place during the
financial year.
The Board places considerable importance on
high standards of ethical behaviour, governance
and accountability. The Board is committed to
ensuring its corporate governance policies
adhere, as much as is practicable, to the ASX
Corporate Governance Council’s Corporate
Governance Principles and Recommendations.
The Board has recognised the need for the
continual development of the Company’s
corporate governance policies and practices,
particularly in view of the Australian Securities
Exchange Corporate Governance Principles and
Recommendations with 2010 Amendments.
Roles and Responsibilities
of the Board
The Board of Directors is accountable to share-
holders for the proper and prudent investment
and preservation of shareholder funds.
The Board is responsible for:
〉〉 overseeing the Company, including its
control and accountability systems;
〉〉 providing leadership of the Company within
a framework of prudent and effective
controls which enable risks to be assessed
and managed;
〉〉 providing input into and final approval of
management’s development of corporate
strategy and performance objectives;
〉〉 reviewing, ratifying and monitoring systems
of risk management and internal control,
codes of conduct and legal compliance;
〉〉 setting the Company’s direction, strategies
and financial objectives;
〉〉 ensuring compliance with regulatory and
ethical standards;
〉〉 approving and monitoring the progress of
major capital expenditure, capital manage-
ment and acquisitions and divestitures;
〉〉 approving and monitoring financial and other
reporting;
〉〉 appointing, terminating and reviewing the
performance of the Managing Director;
〉〉 ratifying the appointment and the termina -
tion of senior executives;
〉〉 monitoring senior executives’ performance
and implementation of strategy; and
〉〉 ensuring appropriate resources are available
to senior executives.
Responsibility for the day-to-day management
of the Company is delegated to the Managing
Director and the senior executives.
In carrying out its duties the Board meets
formally at least nine times per year. Additional
meetings are held to address specific issues or
are held as the need arises. Directors also partici-
pate in meetings of various Board committees.
In the financial year ending 30 June 2013, the
Board met eleven times and there were four
Committee meetings.
Composition of the Board
The Board may, in accordance with the
Company’s constitution, be comprised of a
minimum of three and a maximum of ten
Directors.
The roles of the Non-Executive Chairman and
the Managing Director / Chief Executive Officer
are exercised by different individuals.
During the 2013 financial year there were five
Directors. Details of the Directors who held
office during the 2013 financial year, including
their qualifications, experience and the period
for which each Director has held office are set
out on page 48 of this Report.
At each Annual General Meeting of the Company,
one third of the Directors (or the number nearest
one-third) must retire from office. In addition any
other Director who has held office (without
re-election) for three years or more must also
retire from office. The Directors to retire at any
Annual General Meeting must be those who have
been in office the longest since their last election.
The retirement of Directors who were elected on
the same day, must be determined by lot (unless
they agree otherwise between themselves).
A retiring Director is eligible for re-election.
A Director appointed to fill a casual vacancy or
as an addition to the existing Directors will hold
office until the next Annual General Meeting at
which he or she may be re-elected.
The Managing Director is not subject to retire-
ment by rotation and along with any Director
appointed as an additional or casual Director, is
not to be taken into account in determining the
number of Directors required to retire by rotation.
Director Independence
The Board considers that independence from
management and non-alignment with other
interests or relationships with the Company is
essential for impartial decision making and
effective governance.
Directors are deemed to be independent if they
are independent of management and have no
material business or other relationship with the
Company that could materially impede their
objectivity or the exercise of independent judge-
ment or materially influence their ability to act in
the best interests of the Company.
For the 2013 financial year, four of the Company’s
five Directors (including the Non-Executive
Chairman) were considered by the Board to be
independent throughout the year. Those Directors
were Mr Ross Smyth-Kirk, Mr Peter McAleer,
Mr Craig Carracher and Mr Peter Alexander.
In assessing independence, the Board has regard
to whether any Director:
〉〉 is a substantial shareholder of the Company
or an officer of, or otherwise associated
directly with, a substantial shareholder of the
Company;
Corporate Governance
Statement
Corporate Governance Statement | 35 | 35 | ASX_KCN_2013.pdf |
35
〉〉 is employed, or has previously been
employed in an executive capacity by the
Company, and there has not been a period of
at least three years between ceasing such
employment and serving on the Board;
〉〉 has within the last three years been a prin-
cipal of a material professional adviser or a
material consultant to the Company, or an
employee materially associated with the
above mentioned adviser / consultant;
〉〉 is a material supplier or customer of the
Company, or an officer of or otherwise
associated directly or indirectly with a
material supplier or customer; and
〉〉 has a material contractual relationship with
the Company other than as a Director.
The concept of ‘materiality’ is considered from
both the Company and the individual Director
perspective. The determination of materiality
requires consideration of both quantitative and
qualitative elements. An item is presumed to be
quantitatively immaterial if it is equal or less
than 5% of the appropriate base amount. It is
presumed to be material (unless there is qualita-
tive evidence to the contrary) if it is equal to or
greater than 10% of the appropriate base
amount. Qualitative factors considered include
whether a relationship is strategically impor-
tant, the competitive landscape, the nature of
the relationship and the contractual or other
arrange ments governing it and other factors.
Appointment of Directors
Nominations of new Directors, recommended by
the Nomination Committee, are considered by
the full Board.
The Nomination Committee employs external
consultants to access a wide base of potential
Directors, considering their range of skills and
experience required in light of the:
〉〉 current composition of the Board;
〉〉 need for independence;
〉〉 the Company’s Diversity Policy;
〉〉 strategic direction and progress of the
Company; and
〉〉 nature of the Company’s business.
The Board assesses nominated Directors against
a range of criteria including experience, profes-
sional expertise, personal qualities, potential
conflicts of interest and their capacity to
commit themselves to the Board’s activities.
Performance Review of the
Board and Senior Executives
Each year the Board receives reports from
management detailing interactions with and
outlining the expressed views of the Company’s
shareholders. The Nomination Committee is
responsible for evaluation of the Board, its
committees and its key executives.
Performance evaluations of the Board, its
committees, the individual Directors and key
executives were undertaken in the 2013 finan-
cial year in accordance with the above
processes.
The Managing Director undertakes an annual
review of the performance of each Senior
Executive against individual tasks and
objectives.
Independent Professional Advice
Directors are able to access members of the
management team at any time to request rele-
vant information.
It is also Board policy that Directors may seek
independent advice at the Company’s expense.
Board Committees
To assist the Board in fulfilling its responsibili-
ties, the Board has established three commit-
tees to consider certain issues and functions.
These committees are as follows:
〉〉 Audit Committee;
〉〉 Remuneration Committee; and
〉〉 Nomination Committee.
Each committee operates under its own charter.
Audit Committee
The members of the Audit Committee as at the
date of this Report are:
〉〉 Mr Craig Carracher (Chairman of Audit
Committee);
〉〉 Mr Ross Smyth-Kirk; and
〉〉 Mr Peter McAleer.
The Committee has appropriate financial exper-
tise. All members of the Committee are financially
literate and have an appropriate under standing of
the industry in which the Company operates.
The Audit Committee’s role is to assist the Board
to fulfil its responsibilities associated with the
Company’s accounts, its external financial
reporting, its internal control structure, risk
management systems and audit function. The
primary functions of the Audit Committee are to:
〉〉 review the financial information provided by
the Board to shareholders and other parties
ensuring that it is true and fair and complies
with relevant accounting standards;
〉〉 ensure that corporate risk management
policies and internal controls are in place and
are maintained in accordance with appro-
priate standards and statutory
requirements;
〉〉 oversee and evaluate the quality of the
audits conducted by the external auditors;
〉〉 provide for open communication between
the external auditors and the Board for the
exchange of views and information; and
〉〉 recommend to the Board the nomination and
remuneration of the external auditors and
ensure their independence and integrity.
In fulfilling its responsibilities, the Audit
Committee has rights of access to management
and to auditors (external and internal) without
management present and may seek explanations
and additional information.
The Audit Committee met twice during the 2013
financial year.
The Audit Committee operates in accordance
with a charter published in the ‘Corporate
Governance’ section of the Company’s website.
Auditor Independence
and Engagement
The charter adopted by the Audit Committee
confirms its role in assisting the Board in respect
of the appointment, compensation, retention
and oversight of the Company’s external audi-
tors. The external auditors are required to
confirm that they have maintained their inde-
pendence in accordance with the Corporations
Ac t 2001 (Cth) and the rules of professional
accounting bodies.
The performance of the external auditor is
reviewed annually and applications for tender of
external audit services are requested when
deemed appropriate, taking into consideration
assessment of performance, existing value and
tender costs.
An analysis of fees paid to the external auditors,
including a breakdown of fees for non-audit
services, is provided in the Directors’ Report. It is
the policy of the external auditors to provide an
annual declaration of their independence to the
Audit Committee.
Corporate Governance Statement
Corporate Governance Statement
continued
u | 36 | 36 | ASX_KCN_2013.pdf |
36
www.kingsgate.com.au
Corporate Governance Statement
The external auditor is requested to attend the
Company’s Annual General Meeting and be
available to answer shareholder questions about
the conduct of the audit and the preparation
and content of the Audit Report.
PricewaterhouseCoopers was appointed as
external auditor of the Company for the 2013
financial year.
Risk Oversight and Management
The Board, through the Audit Committee, is
responsible for ensuring that there are adequate
policies in place in relation to risk management,
compliance and internal control systems.
Kingsgate has a systematic and structured risk
oversight and management program that
involves a detailed analysis of material risks to
the business and operates at various levels
underpinned by specific systems and procedures.
Risk monitoring, managing, mitigating and
reporting is conducted regularly and includes
the following:
〉〉 regular internal management reporting;
〉〉 reporting at Board and Committee meetings
by relevant managers;
〉〉 site visits by the Board and senior
management;
〉〉 internal and external audits; and
〉〉 training, procedural manuals and meetings.
The Board has received assurance from the
Managing Director and the Chief Financial Officer
that the solvency declaration provided in accord-
ance with section 295A of the Corporations Act
2001 (Cth) is founded on a sound system of risk
management and internal control and that the
system is operating effectively in all material
respects in relation to financial reporting risks.
A summary of the Company’s Risk Oversight and
Management Policy is published in the ‘Corporate
Governance’ section of the Company’s website.
Remuneration Committee
The members of the Remuneration Committee
as at the date of this Report are:
〉〉 Mr Ross Smyth-Kirk (Chairman of
Remuneration Committee);
〉〉 Mr Peter McAleer;
〉〉 Mr Craig Carracher; and
〉〉 Mr Peter Alexander.
The Remuneration Committee’s role is to oversee
the Company’s remuneration and compensation
plans.
To ensure that the review of remuneration
practices and strategies on which decision
making is based is objective and well founded,
the Remuneration Committee engages external
remuneration consultants.
The Remuneration Committee supports and
advises the Board in fulfilling its responsibilities
to shareholders by:
〉〉 ensuring shareholder and employee interests
are aligned;
〉〉 ensuring the Company is able to attract,
develop and retain talented employees;
〉〉 recommending to the Board, with the
Managing Director, an appropriate executive
remuneration policy;
〉〉 determining the remuneration of Directors;
〉〉 having regard to the Company’s Diversity
Policy, including issues relating to remunera-
tion by gender;
〉〉 reviewing and approving the remuneration of
those reporting directly to the Managing
Director and other senior executives, as
appropriate; and
〉〉 reviewing all equity based plans for approval
by the Board.
The Remuneration Committee operates in
accordance with the Company’s Remuneration
Policy. The policy is designed so that it moti-
vates senior executives to pursue the long-term
growth and success of the Company and demon-
strates a clear relationship between senior
executives’ performance and remuneration.
The Remuneration Committee met one time
during the 2013 financial year.
The Remuneration Committee operates in
accordance with a charter published in the
‘Corporate Governance’ section of the
Company’s website.
Nomination Committee
The members of the Nomination Committee as
at the date of this Report are:
〉〉 Mr Ross Smyth-Kirk (Chairman of
Nomination Committee);
〉〉 Mr Peter McAleer; and
〉〉 Mr Craig Carracher.
The role of the Nomination Committee supports
and advises the Board in fulfilling its responsi-
bility to ensure that it comprises individuals who
are best able to discharge the responsibilities of
the Directors, having regard to the law and the
highest standards of governance, by:
〉〉 assessing the skills required on the Board;
〉〉 reviewing the structure, size and composi-
tion of the Board;
〉〉 from time to time assessing the extent to
which the required skills are represented on
the Board and ensuring an appropriate
succession planning is in place;
〉〉 establishing processes for the review of the
performance of individual Directors and the
Board as a whole, its committees and key
executives; and
〉〉 establishing processes for the identification
of suitable candidates for appointment to
the Board.
To ensure that the Board has an appropriate mix
of skills and experience, the Nomination
Committee will consider men and women from
diverse backgrounds for Board membership who
have demonstrated high levels of integrity and
performance in improving shareholder returns,
and who can apply such skills and experience to
the benefit of the Company.
The Nomination Committee met once during
the 2013 financial year.
The Nomination Committee operates in accord-
ance with a charter published in the ‘Corporate
Governance’ section of the Company’s website.
Ethical Standards and Code
of Conduct
The Board and the Company’s employees are
expected to maintain the highest level of corpo-
rate ethics and personal behaviour.
The Company has established a Code of
Conduct which provides an ethical and legal
framework for all employees in the conduct of
its business. The Code of Conduct defines how
the Company relates to its employees, share-
holders and the community in which the
Company operates.
The core values of the Code of Conduct are:
〉〉 honesty and integrity;
〉〉 fairness and respect; and
〉〉 trust and openness.
The Code of Conduct provides clear directions on
conducting business internationally, interacting
with governments, communities, business
partners and general workplace behaviour having
regard to the best practice corporate governance
models. The Code of Conduct sets out a behav-
ioural framework for all employees in the context
of a wide range of ethical and legal issues.
The Code of Conduct is published in the
‘Corporate Governance’ section of the
Company’s website. | 37 | 37 | ASX_KCN_2013.pdf |
37
Corporate Governance Statement
Corporate Governance Statement
Diversity
The Company has a policy to improve the diver-
sity of its workforce over time by identifying
women and individuals from under-represented
backgrounds for recruitment, and by rewarding
and promoting employees on the basis of
performance.
However, at this stage of its development, the
Company has a small Board of Directors, and a
small management team which is geographically
dispersed and because of the industry in which
the Company operates, the Board does not
consider it to be practicable to set measurable
objectives to achieve greater gender diversity at
this time.
In addition, the Board acknowledges the bene-
fits of seeking to improve gender diversity at all
levels in the Company over time and will keep
this issue under review.
The Company aims to foster continuous improve-
ment in the area of diversity; building on achieve-
ment realised through the implementation of
historical diversity initiatives, by applying princi-
ples successfully used at our leading operation in
this area, to other parts of the business.
Our flagship ‘Chatree’ Mine in Thailand boasts
the enviable statistic of having equal representa-
tion by women on the senior management team.
Recruitment, training and promotion principles
employed at Chatree are currently being applied
to our ‘Challenger’ Mine in Australia, where we
currently have 14% representation of women
across the senior management and professional
categories and to other parts of the business.
There is currently no representation by women
on our Board of Directors. Whilst this is in part
reflective of the relatively small size of the Board
and stage of development of key elements of
the business, it forms part of an overall business
review process to consider the issue of gender
diversity at this level and will be the subject of
ongoing review.
The Company considers that it will benefit from
its ongoing commitment to promote a diverse
workforce with treatment of employees and
future employees on the basis of merit, abilities
and potential, regardless of gender, colour,
ethnic or national origin, race, disability, age,
sexual orientation, gender reassignment, socio-
economic background, religious or political
belief, non / trade union membership, family
circumstances or other irrelevant distinction.
The Company has set various criteria and proce-
dures in order to support equality and diversity
in the workforce and applies these principles to:
〉〉 Provide fair access to workplace opportuni-
ties and benefits, including internal promo -
tion, leadership development, flexible work
practices and fair and comparable wages;
〉〉 Attracting and retaining a skilled and diverse
workforce;
〉〉 Creating an inclusive workplace culture where
discriminatory behaviour is unacceptable; and
〉〉 Providing an effective grievance mechanism
for employees.
Current Proportion of
Women Employees
Board 0.0%
Senior Executives 0.0%
Senior Managers 1.8%
Managers 1.0%
Professionals 8.6%
Non-professionals 6.4%
Total Workforce 17.8%
Share Trading Policy
In the interests of shareholder confidence
and compliance with insider trading laws, the
Company has formal policies governing the
trading of the Company’s securities by Directors,
officers and employees. Details of Directors’
shareholdings are disclosed in the Directors’
Report.
The policy prohibits Directors and employees
from engaging in short-term trading of any of
the Company’s securities and buying or selling
the Company’s securities if they possess unpub-
lished, price-sensitive information.
Directors and senior management may buy or
sell Company securities in the four week period
following significant announcements by the
Company, including the release of the quarterly
report, half-yearly results, the preliminary annual
results and the lodgement of the Company’s
Annual Report (subject to the prohibition of
dealing in the Company’s securities if they
possess unpublished price sensitive information).
Directors and senior management must also
receive approval from the Chairman before
buying or selling Company securities.
The Company’s Share Trading Policy is available
in the ‘Corporate Governance’ section of the
Company’s website.
Communication with
Shareholders and Continuous
Disclosure
The Company is committed to providing relevant
and timely information to its shareholders in
accordance with its continuous disclosure
obligations under the ASX Listing Rules and the
Corporations Act 2001 (Cth).
Information is communicated to shareholders
through the distribution of the Company’s
Annual Report and other communications. All
releases are posted on the Company’s website
and released to the ASX in a timely manner.
The Company has practices in place throughout
the year governing who may authorise and make
disclosures and the method by which the market
is to be informed of any price sensitive
information.
The Company Secretary is responsible for
communications with the ASX and ensuring that
the Company meets its continuous disclosure
obligations.
The Company’s Continuous Disclosure is avail-
able in the ‘Corporate Governance’ section of
the Company’s website.
Annual General Meeting
All shareholders are encouraged to attend and
participate in the Company’s Annual General
Meeting. Shareholders may attend in person or
send a proxy as their representative.
The Company’s external auditor is routinely
invited to and attends the Annual General
Meeting in order to respond to questions raised
by shareholders relating to the content and
conduct of the audit and accounting policies
adopted by the Company in relation to the
preparation of the financial statements.
Corporate Governance
Disclosure
The Company’s governance policies and proce-
dures comply in all substantial respects with the
Australian Securities Exchange Corporate
Governance Principles and Recommendations
with 2010 Amendments. The following table
compares the ASX Recommendations and the
Company’s corporate governance policies and
practices.
continued
u | 38 | 38 | ASX_KCN_2013.pdf |
38
www.kingsgate.com.au
Corporate Governance Statement
1.1 Companies should establish the functions reserved to the Board and those delegated to senior executives and disclose those functions. √
1.2 Companies should disclose the process for evaluating the performance of senior executives. √
1.3 Companies should provide the information indicated in the Guide to reporting on Principle 1. √
2.1 A majority of the Board should be independent Directors. √
2.2 The Chair should be an independent Director. √
2.3 The roles of Chair and Chief Executive Officer should not be exercised by the same individual. √
2.4 The Board should establish a Nomination Committee. √
2.5 Companies should disclose the process for evaluating the performance of the Board, its committees and individual Directors. √
2.6 Companies should provide the information indicated in the Guide to reporting on Principle 2. √
3.1 Companies should establish a code of conduct and disclose the code or a summary of the code as to:
〉 the practices necessary to maintain confidence in the Company’s integrity;
〉 the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders; and
〉 the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
√
3.2 Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the
Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress in achieving them.
√
*
3.3 Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the Board in accordance with the diversity
policy and progress towards achieving them.*
3.4 Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and
women on the Board.√
3.5 Companies should provide the information indicated in the Guide to reporting on Principle 3. √
4.1 The Board should establish an Audit Committee. √
4.2 The Audit Committee should be structured so that it:
〉 consists only of Non-Executive Directors;
〉 consists of a majority of independent Directors;
〉 is chaired by an independent Chair, who is not Chair of the Board; and
〉 has at least three members.
√
4.3 The Audit Committee should have a formal charter. √
4.4 Companies should provide the information indicated in the Guide to reporting on Principle 4. √
5.1 Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at
senior executive level for that compliance and disclose those policies or a summary of those policies.√
5.2 Companies should provide the information indicated in the Guide to reporting on Principle 5. √
6.1 Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general
meetings and disclose their policy or a summary of that policy.√
6.2 Companies should provide the information indicated in the Guide to reporting on Principle 6. √
7.1 Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies. √
7.2 The Board should require management to design and implement the risk management and internal control system to manage the Company’s material busi -
ness risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the
effectiveness of the Company’s management of its material business risks.
√
7.3 The Board should disclose whether it has received assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent)
that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control
and that the system is operating effectively in all material respects in relation to financial reporting risks.
√
7.4 Companies should provide the information indicated in the Guide to reporting on Principle 7. √
8.1 The Board should establish a Remuneration Committee. √
8.2 The Remuneration Committee should be structured so that it:
〉 consists of a majority of independent Directors;
〉 is chaired by an independent Chair; and
〉 has at least three members.
√
8.3 Companies should clearly distinguish the structure of Non-Executive Directors’ remuneration from that of Executive Directors and senior executives. √
8.4 Companies should provide the information indicated in the Guide to reporting on Principle 8. √
* As the Company, at this stage of its development, has a small Board of Directors, and a small management team which is geographically dispersed and because of the
industry in which the Company operates, the Board does not consider it to be practicable to set measurable objectives to achieve greater gender diversity at this time.
However, the Board acknowledges the benefits of seeking to improve gender diversity at all levels in the Company over time and will continue to keep this issue under review. | 39 | 39 | ASX_KCN_2013.pdf |
39
Senior Management
Senior Management
Kingsgate’s executives have a comprehensive
range of skills and experience including mine
development and operations, exploration, finance
and administration. They are supported by highly
qualified specialists, whose backgrounds cover
the full scope of mining resources activities.
Senior members of Kingsgate’s management
team are:
Gavin Thomas
BSc (Geology), FAusIMM
Managing Director and Chief Executive Officer
Gavin Thomas was appointed Chief Executive
Officer of Kingsgate in 2004 and joined the
Kingsgate Board on 16th November 2007. Gavin
has had a successful career in developing mining
companies from the exploration phase into
mid-tier gold or copper producers. He has over
42 years of international experience in exploring
for, evaluating, developing, operating and
reclaiming mines in North and South America,
Australia, the Southwest Pacific, Asia and
Europe. Amongst Gavin’s credits is the discovery
of “Lihir” in Papua New Guinea, one of the
largest gold deposits in the world. In particular,
he has extensive experience in Thailand and
South America.
Duane Woodbury
BEc (Hons)
Chief Financial Officer
Duane Woodbury was appointed Chief Financial
Officer of Kingsgate on 1 September 2011.
Duane has a BEc (Hons) Degree and has worked
in various financial, accounting and advisory
roles during his career in a number of locations,
including London, New York and Singapore. He
has been assisting Kingsgate in its business
development initiatives since August 2007 and
brings over 20 years of experience in financial
markets and corporate finance transactions,
principally with the Macquarie Group.
Tim Benfield
Dip CSM (mining), MBA, MAusIMM
Chief Operating Officer
Tim Benfield joined Kingsgate in February 2012
as Chief Operating Officer. Tim is a mining
engineer with over 21 years underground and
open pit experience in the mining industry in
both operational and corporate roles. He has
operational and project development experience
in Australia, Africa and Saudi Arabia. This
includes 10 years with Barrick Gold of Australia
where he provided support to four operating
mines and two development projects. Tim was
most recently General Manager of the Pajingo
Gold mine in Queensland for Evolution Mining
Limited.
Ross Coyle
BA, FCPA, FCIS
General Manager Finance and Administration
Company Secretary
Ross Coyle joined Kingsgate in March 2011
following the Company’s acquisition of Dominion
Mining Limited and was with the Dominion
group for over 25 years. He is a qualified
accountant and has over 30 years experience in
finance and accounting within the resource
industry. He was Finance Director of Dominion
from 1996. Ross was appointed Kingsgate’s
Company Secretary in September 2011.
Joel Forwood
Bsc (Hons) FFin
General Manager Corporate and Markets
Joel Forwood joined Kingsgate in November
2010 and has over 27 years experience in the
resource and investment industries covering
investor relations, funds management and
exploration. For over 12 years, he has been
leading investor relations at a number of listed
companies, most recently for Lihir Gold Limited.
Prior to this he was a fund manager with
Queensland Investment Corporation (QIC)
following his early career in mineral exploration
with BHP and corporate development with RGC.
Ronald James
BSc (Geology), MAusIMM, MAIG
General Manager Exploration and Resource
Development
Ron James has 30 years of experience in explora-
tion and mining at management level inclusive
of setting up gold mines and exploration
projects from their earliest stages through to
development and sustainability. Before joining
Kingsgate, he was Chief Mine Geologist at the
Gold Ridge Mine in the Solomon Islands and
later Group Exploration Manager for Ross Mining
NL. Ron is familiar with the technical and oper-
ating requirements for emerging projects in a
variety of terrains and environments and has a
strong focus on maximising returns from ore
bodies through optimum waste and ore classifi-
cation as well as increasing reserves from near-
mine resource development.
Senior
Management
continued
u | 40 | 40 | ASX_KCN_2013.pdf |
40
www.kingsgate.com.au
Senior Management
Brett Dunstone
Dip. Catering and Hotel Management – William
Angliss College, B.Bus. Victoria University (part
complete)
General Manager – Human Resources
Brett Dunstone joined Kingsgate in December
2012 and has over 25 years experience in senior
human resource management roles across a
diverse industry portfolio. Brett was formerly
head of Human Resources for Crown Casino,
Melbourne, the Myer group, key Village
Roadshow entities and head of Employee
Relations for the Coles Myer group. Brett has
experience in supporting both large and
emerging resource company development
projects locally and overseas (BHP Billiton,
Woodside, Equinox Minerals and Chalice Gold).
Michael Monaghan
Dip Eng (Mining) Dip Business MAusIMM MAICD
SME
Chief Operating Officer and General Manager
– Akara Resources PCL
Mike Monaghan joined Kingsgate as the General
Manager of Chatree Gold Mine in October 2012.
He is a mining engineer with 28 years of manage-
ment experience in both underground and open
cut opeartions across a number of commodities
as well as commissioning, mine management,
turnaround management and environmental and
safety compliance in Australia, Africa and
Europe. Mike was most recently Mining Manager
at Geita Gold mine in Tanzania for AngloGold
Ashanti Limited. Prior to that he held General
Manager and Mining Manager positions at
Etruscan Resources Youga Gold Mine in Burkina
Faso and Red back Mining’s Chirano Gold Mine
in Ghana.
Pakorn Sukhum
BSc (Hons) University of London, UK
MBA Sasin Graduate Institute of Business Admin-
istration Thailand
Chief Executive Officer –
Akara Resources PCL
Pakorn Sukhum joined the management team of
Akara Resources PCL as Chief Executive Officer
at the end of 2009. He brings to Akara over 24
years of industrial commercial managerial experi-
ence in various industries such as metallurgy,
chemicals and ceramics in international and
domestic markets of Thailand, having held
senior management positions in both Thai and
Multinational joint venture companies such as
Basell Poyolefins, Bayer AG as well as Padeang
Industry of Thailand. His major contributions
and responsibilities have ranged from project
management, commercial marketing and sales
to business development. | 41 | 41 | ASX_KCN_2013.pdf |
Directors’
Report
for the year ended 30 June 2013
Directors’ Report
Directors’ Report
41
Directors' Report 42
Remuneration Report . . . . . . . . . . . . . . 49
Auditor's Independence Declaration 62 | 42 | 42 | ASX_KCN_2013.pdf |
Directors’ Report
42
www.kingsgate.com.au
Your Directors present their report on the Group consisting of Kingsgate Consolidated Limited and the entities it controlled at the end of,
or during, the year ended 30 June 2013.
Directors
The following persons were Directors of
Kingsgate Consolidated Limited during the
whole of the financial year and up to the date of
this report.
〉〉 Ross Smyth-Kirk Chairman
〉〉 Peter Alexander Non-Executive Director
〉〉 Craig Carracher Non-Executive Director
〉〉 Peter McAleer Non-Executive Director
〉〉 Gavin Thomas Executive Director
Principal activities
The principal activities of Kingsgate
Consolidated Limited are mining and mineral
exploration in Australia, South East Asia and
South America.
Dividends
Dividends paid to members during the financial
year were as follows:
2013
$’000
2012
$’000
Final dividend declared for the year ended 30 June 2012 of
10 cents per fully paid share paid on 1 October 2012
15,148 6,829
Interim dividend declared for the year ended 30 June 2013 of
5 cents per fully paid share paid on 12 April 2013
7,591 15,196
Total dividends 22,739 22,025
Review of operations
and results
Operational performance
Kingsgate is a gold mining, development and
exploration company based in Sydney, Australia.
Kingsgate owns and operates two gold mines,
the world class Chatree Mine in Thailand and the
underground Challenger Mine in South Australia.
In addition, the Company has two advanced
development projects, the Nueva Esperanza
Silver / Gold Project, in the highly prospective
Maricunga Gold / Silver Belt in Chile, and the
Bowdens Silver Project in New South Wales,
Australia. From this operating and development
platform, Kingsgate aims to build value for all
shareholders.
Group gold production was 199,897 ounces, a
decrease of 4% on the previous corresponding
year. The contribution from Chatree was
133,681 ounces with 66,216 ounces from
Challenger.
Chatree gold production was 10% higher than
the previous corresponding period as a result of
an increase in throughput from the expanded
Chatree process plant and access to higher
grade oxide ore from Q Prospect.
Challenger gold production was 24% lower than
the previous corresponding year given additional
dilution and depletion at Challenger Deeps and a
shortfall in planned development. This resulted
in lower ore tonnes from the mine that was
supplemented by low grade stockpiled ore.
Following the fall in the gold price a strategic
review of Challenger was implemented that has
resulted in a new mine plan to focus primarily on
the higher grade Challenger West orebody. The
new mine plan will be implemented during the
first three months of the 2014 financial year.
A lower gold price and industry wide cost pres-
sures had a negative impact on the underlying
earnings of the Group which contributed to a
major impairment to the carrying value of a
number of Group assets, particularly assets
relating to the Challenger Gold Operations.
Impairments totalling $332,808,000 were the
major contributor to the after tax loss of
$323,726,000 for the year.
The development projects continued to advance
during the year. At Nueva Esperanza, the feasi-
bility work shifted to focus on identifying the
lowest cost and lowest power consumption
development alternatives. This included
reviewing a heap leach process option with
on-site power generation. Further work is
expected to be completed in the December
quarter 2013. At Bowdens, the feasibility work
has confirmed the optimum process route.
Completion of the technical feasibility study
including mine planning, infrastructure and
metallurgy, and lodging of the Environmental
Impact Statement (“EIS”) are scheduled for
2014.
Directors’
Report | 43 | 43 | ASX_KCN_2013.pdf |
Directors’ Report
43
Directors’ Report
During the year Kingsgate sold its exploration
assets in Western Australia and Queensland
through the sale of shares in its subsidiary
company, Quadrio Resources Limited, to Caravel
Minerals Limited (“Caravel”), an Australian
company listed on the ASX. (Kingsgate received
a 35.54% interest in Caravel and 20,000,000
unlisted options to acquire Caravel shares
exercisable at 10 cents on or before three years
from the date of issue. Kingsgate’s holding was
reduced to 27.04% following a rights issue by
Caravel post year-end).
Chatree
Chatree continued as Kingsgate’s primary
production asset throughout the year,
producing 133,681 ounces of gold and
1,000,569 ounces of silver. The strong produc-
tion performance was achieved despite some
operational hurdles with slower than anticipated
Government approvals, to allow full utilisation of
the expanded plant.
The delay of 63 days in approval of the Plant #2
Metallurgical License and lower than expected
availability of some of the mining contractor’s
major mining equipment negatively impacted
the production targets. However, near surface
higher grades in Q Prospect mitigated these
difficulties resulting in a strong final quarter for
the year.
Total mill throughput for the year was 5.7 million
tonnes, 11.4% higher than 2012, despite the
impact of the 63 day delay during which Plant #2
was not operating. The overall plant availability
of 98.1% was slightly lower than the previous
year’s 98.4%. The expanded plant is operating
around 24% above the annual “nameplate”
throughput rate at 6.2 million tonnes per annum
and this is expected to continue.
Total cash costs for the year were US$767 per
ounce (US$620 per ounce exclusive of Thai
royalties). The average royalty paid to the Thai
Government was $US147 per ounce of gold.
Total production costs after depreciation and
amortisation were US$952 per ounce of gold
produced.
At year end, 9.7 million tonnes of ore was stock-
piled with an average contained gold grade of
0.57 g/t representing 178,086 ounces of gold.
Challenger
The Challenger Mine produced 66,216 ounces of
gold for the year with an average milled grade of
3.91 g/t and a total cash cost of US$1,135/oz.
The grade was lower than expected due to a
shortfall in ore supply from the mine that was
supplemented by low grade ore from stockpiles.
Higher dilution in stopes at the base of the mine
(Challenger Deeps) and depletion on those levels
due to the additional displacement of the ore
horizons following the identification of the “215
Shear”, contributed to the lower than expected
production from the lower levels. A shortfall in
underground development also limited access to
ore sources.
Development and mining commenced at the
higher grade Challenger West orebody during
the year but was insufficient to offset the short-
fall from Challenger Deeps.
With the completion of the current mining
contract scheduled for the end of July 2013,
a tender was completed and a new upgraded
contract was awarded to Byrnecut which
commenced on 1 August 2013.
Following the fall in the gold price a strategic
review of the Challenger Mine was completed.
This resulted in the decision to implement a new
mine plan to focus primarily on the higher grade
Challenger West orebody. This plan will be
implemented over the first quarter of the 2014
financial year.
Nueva Esperanza Silver / Gold Project
The Nueva Esperanza Silver / Gold Project
advanced during the year with an initial scoping
study for a decision to mine the Arqueros and
Teterita portions of Nueva Esperanza completed
in late 2012. The study demonstrated that open
pit mining at two million tonnes per year and
processing by milling and agitation leaching in
cyanide was technically feasible although high
capital and power costs negatively impacted
project economic returns.
As a consequence, feasibility work has transi-
tioned to assess a lower capital cost and lower
power requirement option, namely the potential
for heap leach processing. Recently completed
metallurgical testwork demonstrated that
processing of mineralisation from all three
deposits by heap leaching has the potential to
be technically and economically feasible and, as
a consequence, may become the preferred
alternative for development.
Environmental approval for the original Arqueros
Project was granted in July 2013.
Bowdens Silver Project
The Bowdens Project continued to advance
during the year with field programs supporting
the feasibility and environmental studies
ongoing. Sterilisation drilling and additional
metallurgical sampling were undertaken with
the resource evaluation drilling completed in
October 2012.
During 2013, the process design and engi-
neering work for the Definitive Feasibility Study
(“DFS”) progressed to a point where the study
was close to draft completion as at 30 June
2013. The study encompassed detailed process
design based on using the most recent metal-
lurgical test results, capital and operating cost
estimates, project water and power supply,
infrastructure requirements and mine
optimisation.
The preparation for lodgement of an EIS to the
NSW Department of Planning continues. It is
envisaged that the EIS will be completed and
lodged in 2014. Data for flora and fauna, surface
water, groundwater, meteorology, ambient
noise and dust levels are collected routinely.
Further investigations of cultural heritage,
social-economic impact, traffic impact, soil
type and agricultural suitability have also been
undertaken.
With the fall in metal prices in late 2013, work
and expenditure on the DFS and EIS have been
phased to coordinate the two programs with
completion and submission now not expected
before mid-2014.
Exploration
The Group has a portfolio of exploration tene-
ments and applications in Thailand, Chile and
Lao PDR. Following the sale of exploration
tenements to Caravel (refer below), exploration
in Australia is currently only conducted in the
vicinity of the Challenger Mine in South Australia
and the Bowdens Silver Project in New South
Wales.
Sale of Exploration Assets
On 28 March 2013, the Group sold its explora-
tion assets in Western Australia and Queensland
through the sale of shares in its subsidiary
company, Quadrio Resources Limited, to Caravel
Minerals Limited (“Caravel”), an Australian
company listed on the ASX.
Kingsgate received 135,000,000 fully paid
ordinary shares in the issued capital of Caravel
and 20,000,000 unlisted options to acquire
Caravel shares exercisable at 10 cents on or
before three years from the date of issue.
Subsequent to the sale, Kingsgate became the
largest shareholder in Caravel with 35.54% held
at 30 June 2013. Kingsgate’s holding in Caravel
reduced to 27.04% post 30 June 2013 following
a rights issue by Caravel that Kingsgate did not
participate in.
continued
u | 44 | 44 | ASX_KCN_2013.pdf |
Directors’ Report
44
www.kingsgate.com.au
Financial results
Kingsgate made an after tax loss of $323.7 million for the full year to 30 June 2013 compared to an after tax profit of $75.0 million for the
previous corresponding year. The result for the year reflected an impairment of $311.9 million pre-tax ($291.3 million post-tax) against the
Challenger Mine and associated assets and an impairment of $20.4 million against greenfield exploration projects in Australia and Thailand.
2013 2012 2011 2010 2009
Net (loss) / profit after tax ($’000) (323,726) 75,006 20,879 73,066 32,522
Dividends paid (Cash and DRP) ($’000) 22,739 22,026 33,647 29,082 –
Share price 30 June ($) 1.27 4.85 8.00 9.47 6.70
Basic (loss) / earnings per share (Cents) (213.3) 52.5 18.7 75.2 34.9
Diluted (loss) / earnings per share (Cents) (213.3) 52.5 18.6 74.5 34.9
EBITDA before significant items
Before pre-tax significant items, the pre-tax profit of the Group was $17.2 million. Pre-tax significant items are detailed below.
EBITDA before significant items was $115.8 million down from $168.6 million in the previous year.
Consolidated
2013
$’000
2012
$’000
(Loss) / Profit before tax (339,615) 91,277
Significant items (pre-tax)
Foreign exchange (gain) / loss 745 (1,268)
Dominion acquisition costs – 964
Write off of capitalised borrowing fees 5,722 –
Change in fair value of undesignated gold contracts held for trading (1,414) 425
Change in fair value of available-for-sale financial assets 855 260
Share of loss in associate 1,353 –
Loss on sale of exploration assets (Quadrio Resources Limited) 16,709 –
Impairment Challenger Gold Project 311,850 –
Impairment of capitalised exploration 20,421 –
Impairment of associate 537 –
Profit before tax and significant items 17,163 91,658
Finance costs 13,087 9,372
Depreciation and amortisation 85,595 67,553
EBITDA before significant items 115,845 168,583
EBITDA before significant items is a financial measure which is not prescribed by International Financial Reporting Standards (“IFRS”) and
represents the profit under IFRS adjusted for specific significant items. The table above summarises key items between statutory profit
before tax and EBITDA before significant items. The EBITDA before significant items has not been subject to any specific auditor review
procedures by our auditor but has been extracted from the accompanying audited financial statements. | 45 | 45 | ASX_KCN_2013.pdf |
Directors’ Report
45
Directors’ Report
Revenue
Total revenue for the Group for the year was
$329,282,000 down 8% from the previous year.
Gold revenue decreased by 8% to $302,996,000
and silver revenue decreased by 5% to
$26,286,000.
The decrease in gold revenue reflects a lower
gold price and a decrease in gold production
from Challenger partially offset by an increase
in gold production from the Chatree Mine.
The average US$ gold price received was
US$1,588 (2012: US$1,663). The decrease
in silver revenue reflects a lower silver price
received of US$28/oz (2012: US$32/oz).
Costs
The overall increase in cost of sales to
$195,064,000 including royalties and before
depreciation and amortisation largely reflects
increased throughput and production from the
Chatree Mine due to the expanded Chatree
process plant. On a unit cost basis, total cash
costs for the Group were US$888/oz up from
$US720/oz in the previous year. The total unit
cash costs for Challenger for the year were
US$1,135/oz (2012: US$862/oz), with the
increase mainly due to lower throughput and
production from the Challenger Mine. The total
unit cash costs for Chatree for the year were
US$767/oz up from US$618/oz in 2012.
Impairment of assets
Following a strategic review of the Challenger
Gold Operations a new mine plan focussing
mainly on the Challenger West orebody was
implemented effective 1 July 2013.
As a result of the new mine plan together with
the continuing low gold price environment, an
assessment was conducted as at 30 June 2013
of the carrying value of the Challenger Gold
Operations and associated assets. This assess-
ment resulted in a pre-tax impairment of
$311,850,000 ($291,259,000 post-tax).
A review of the carrying value of all regional
greenfield exploration projects was also
conducted which resulted in the write down of
$6,141,000 primarily against the Barton West
Mineral Sands project in South Australia and the
write down of $14,280,000 against the carrying
value of exploration projects in Thailand that fall
outside the Chatree Mine area of influence.
Depreciation and amortisation
The increase in depreciation and amortisation to
$85,595,000 reflects amortisation of the higher
capitalised development costs at the Challenger
Mine, depreciation of the second plant at
Chatree and commencement of amortising the
capital cost of the Chatree Tailings Storage
Facility #2.
Exploration
Exploration expense was $675,000 and relates
to exploration licences in Chile that were relin-
quished or disposed of during the year.
Cash flow
Operating cash inflow was $85,020,000. Net
investing cash outflow was $142,425,000. Net
cash outflows from financing activities was
$1,691,000, including a drawdown (net of
transaction costs) of $36,700,000 of the multi-
currency and syndicated loan facilities following
a loan restructure by Kingsgate’s Thai subsidiary
Akara Resources Public Company Limited
(“Akara”), net repayment (net of transaction
costs) of $20,000,000 of the corporate loan
facility, and $19,409,000 dividends paid during
the year.
Material business risks
The Group uses a range of assumptions and
forecasts in determining estimates of produc-
tion and financial performance. There is uncer-
tainty associated with these assumptions that
could result in actual performance differing from
expected outcomes.
The material business risks that may have an
impact on the operating and financial prospects
of the Group are:
Revenue
Revenue, and hence operating margins, are
exposed to fluctuations including currency in
the gold price and to a degree in the silver price.
Management continually monitors operating
margins and responds to changes to commodity
prices as necessary to address this risk, including
reviewing mine plans and entering into forward
gold sale contracts.
Changes in the gold and silver price also impact
assessments of the feasibility of exploration and
the Group’s two development projects, Nueva
Esperanza and Bowdens.
Mineral reserves and resources
Ore reserves and mineral resources are esti-
mates. These estimates are substantially based
on interpretations of geological data obtained
from drill holes and other sampling techniques.
Actual mineralisation or geological conditions
may be different from those predicted and, as a
consequence, there is a risk that any part or all
of mineral resources will not be converted into
reserves.
Market price fluctuations of gold and silver, as
well as increased production and capital costs,
may render ore reserves unprofitable to develop
at a particular site for periods of time.
Replacement of depleted reserves
The Group aims to continually replace reserves
depleted by production to maintain production
levels over the long term. Reserves can be
replaced by expanding known ore bodies,
locating new deposits or making acquisitions.
As a result, there is a risk that depletion of
reserves will not be offset by discoveries or
acquisitions. The mineral base may decline if
reserves are mined without adequate replace-
ment and as a consequence the Group may not
be able to sustain production beyond the
current mine lives, based on current production
rates.
Mining risks and insurance risks
The mining industry is subject to significant
risks and hazards, including environmental
hazards, industrial accidents, unusual or unex-
pected geological conditions, unavailability of
materials and unplanned equipment failures.
These risks and hazards could result in signifi-
cant costs or delays that could have a material
adverse impact on the Group’s financial perfor-
mance and position.
The Group maintains insurance to cover some of
these risks and hazards at levels that are
believed to be appropriate for the circumstances
surrounding each identified risk, however there
remains the possibility that the level of insur-
ance may not provide sufficient coverage for
losses related to specific loss events.
continued
u | 46 | 46 | ASX_KCN_2013.pdf |
Directors’ Report
46
www.kingsgate.com.au
Production and cost estimates
The Group prepares estimates of future produc-
tion, cash costs and capital costs of production
for each operation though there is a risk that
such estimates will not be achieved. Failure to
achieve production or cost estimates or material
increases in costs could have an adverse impact
on future cash flows, profitability, results of
operations and financial position.
Environmental, health and safety
regulations
The Group’s mining and processing operations
and exploration activities are subject to exten -
sive laws and regulations. Delays in obtaining
or failure to obtain government permits and
approvals may adversely affect operations,
including the ability to continue operations.
Community relations
The Group has established community relations
functions that have developed a community
engagement framework, including a set of
principles, policies and procedures designed to
provide a structured and consistent approach
to community activities.
A failure to appropriately manage local commu-
nity stakeholder expectations may lead to
disruptions in production and exploration
activities.
Risk management
The Group manage the risks listed above, and
other day-to-day risks, through an established
management framework. The Group has policies
in place to manage risk in the areas of health and
safety, environment and equal employment
opportunity.
Management and the Board regularly review the
risk portfolio of the business and the effective -
ness of the Group’s management of those risks.
Finance
Corporate loan and convertible loan
facilities
The Group has a three year secured loan facility
with a limit of A$40,000,000 (30 June 2012:
A$50,000,000), of which A$20,000,000 has
been drawn down as at 30 June 2013 (30 June
2012: A$40,000,000).
The Group also has a five year A$35,000,000
convertible loan facility entered into in a prior
period to provide funding for the Bowdens
acquisition. Kingsgate has the option to make a
prepayment against the facility with an issue of
Kingsgate shares.
As indicated previously in the Preliminary Final
report, at balance date it was the Group’s inten-
tion to restructure and amalgamate these
facilities in the next financial year. This relates to
the potential for completion of the Initial Public
Offering (“IPO”) of Akara on the Stock Exchange
of Thailand and the updated mine plan for
Challenger. Any restructure would optimise the
Group’s anticipated balance sheet liquidity and
operational cash flows. Accordingly, the Group
classified the total amount drawn down under
these facilities of $55,000,000 as a current
liability at 30 June 2013. In addition as a result of
the intended restructure, $3,900,000 of previ-
ously capitalised borrowing costs relating to the
convertible loan and corporate loan facilities has
been expensed at year end.
Subsequent to the end of the financial year, the
Group has received from its lenders a credit
approved term sheet (subject to formal docu-
mentation) for the restructure of the corporate
loan and convertible loan facilities. Following
completion of the restructure the total amount
outstanding will be reduced to $40,000,000.
This loan will be provided through a single senior
corporate facility which will consist of two
tranches:
〉〉 Tranche one will be a $25,000,000 Akara
Pre IPO Bond with a maturity date of 31 July
2015. The current intention is for this
tranche to be repaid as part of the Akara IPO
although at Kingsgate’s election repayment
can be made by either cash or in Kingsgate’s
shares.
〉〉 Tranche two is an amortising facility with
$5,000,000 to be repaid during the 2014
financial year and the balance of
$10,000,000 repaid during the 2015
financial year.
Convertible revolving credit facility
The Group also has a three year $25,000,000
Convertible Revolving Credit Facility available.
At the date of this report the facility is undrawn.
Under the terms of this facility, Kingsgate has
the option of repaying any funds drawn down
under the facility through either cash or by
issuing ordinary shares. It is intended that this
facility will be utilised during the 2014 financial
year for corporate and working capital purposes.
It is the current intention of the Company to
repay any cash drawdown under the facility by
the issuance of fully paid ordinary shares which
would rank parri pasu with all existing ordinary
shares, although this position will be reviewed at
the appropriate time. The number of shares has
not yet been determined and they will be issued
at a 2.5% discount to VWAP over a period by
reference to the draw down date. Shareholder
approval is not required.
Multi-currency and syndicated
loan facilities
Kingsgate’s Thai operating subsidiary, Akara,
established a six year amortising multi-currency
loan facility equivalent to US$125,000,000
(fully drawn as at year end) and an additional
Thai Baht denominated working capital facility
equivalent to US$15,000,000 (undrawn as at
year end) during the period. The proceeds from
these borrowings were used to fully repay the
outstanding balance on the US$100,000,000
Baht denominated syndicated loan facility in
existence at the beginning of the year as well as
to repay part of the corporate loan facility noted
above. Finance costs include the write off of the
balance of capitalised borrowing fees of
$1,800,000 following the Akara refinancing.
Significant change in
the state of affairs
There were no significant changes in the state
of affairs of the Group that occurred during the
financial year not otherwise disclosed in this
report or the consolidated financial statements.
Matters subsequent to
the end of the financial year
Kingsgate has received from its lender a credit
approved term sheet (subject to formal docu-
mentation) for the restructure of the existing
corporate loan facility which is drawn to
$20,000,000 and the existing convertible loan
facility which is drawn to $35,000,000.
Subsequent to the end of the financial year,
the Group has received from its lenders a credit
approved term sheet (subject to formal docu-
mentation) for the restructure of the corporate
loan and convertible loan facilities. Following
completion of the restructure the total amount
outstanding will be reduced to $40,000,000.
This loan will be provided through a single senior
corporate facility which will consist of two
tranches: | 47 | 47 | ASX_KCN_2013.pdf |
Directors’ Report
47
Directors’ Report
〉〉 Tranche one will be a $25,000,000 Akara Pre
IPO Bond with a maturity date of 31 July
2015. The current intention is for this
tranche to be repaid as part of the Akara IPO
although at Kingsgate’s election repayment
can be made by either cash or in Kingsgate’s
shares.
〉〉 Tranche two is an amortising facility with
$5,000,000 to be repaid during the 2014
financial year and the balance of
$10,000,000 repaid during the 2015
financial year.
Subsequent to year-end the Group forward sold
50,000 ounces of gold over a 12 month period at
an average price of A$1,435 per ounce to manage
Australian gold price risk associated with fore-
cast production from the Challenger Mine.
Kingsgate’s Thai subsidiary, Akara Resources
Public Company Limited (“Akara”) has
submitted its listing application and draft
Prospectus to the Thai Securities Exchange
Commission (SEC) and the Stock Exchange of
Thailand (SET) for an initial public offering of its
shares on the SET.
The SEC and SET will review the draft Prospectus
in the coming months in order to approve the
listing of Akara. The decision to list Akara will
depend on market conditions and other factors
at the time of approval.
No other matter or circumstance has arisen
since 30 June 2013 that has significantly
affected, or may significantly affect:
〉〉 the Group’s operations in future financial
years;
〉〉 the results of those operations in future
financial years; or
〉〉 the Group’s state of affairs in future financial
years.
Likely developments and
expected results of operations
The outlook for the Group in fiscal year 2014
is for gold production to be in the range of
190,000 to 210,000 ounces. At the Chatree
Mine in Thailand, the expanded plant will result
in gold production of between 120,000 to
130,000 ounces and at the Challenger Mine in
South Australia, following the implementation
of the new mine plan, production for the year is
expected to be in the range of 70,000 ounces to
80,000 ounces of gold.
continued
u
Significant progress has been made at Nueva
Esperanza in Chile. The feasibility work shifted
to focus on identifying a lower cost and power
consumption development alternative. This
included assessing a heap leach process option
and on-site power generation. Further work is
expected to be undertaken in the December
quarter 2013.
The DFS for the Bowdens Silver Project in
New South Wales is currently expected to be
completed during the 2014 financial year and,
in addition, it is also currently anticipated an EIS
will be lodged shortly thereafter.
Environmental regulation
The Group is subject to environmental regula-
tion in respect to its gold mining operations and
exploration activities in Australia, Thailand,
Argentina, Chile, Peru and PDR Laos. For the year
ended 30 June 2013, the Group has operated
within all environmental laws.
Directors’ meetings
The numbers of meetings of the Company’s
Board of Directors and of each Board Committee
held during the year ended 30 June 2013, and
the numbers of meetings attended by each
Director were:
Director
Board
Meetings
Audit Committee
Meetings
Nomination
Committee
Meetings
Remuneration
Committee
Meetings
A B A B A B A B
R Smyth-Kirk 11 11 2 2 1 1 1 1
P Alexander 11 10 - - - - 1 1
C Carracher 11 11 2 2 1 1 1 1
P McAleer 11 11 2 2 1 1 1 1
G Thomas 11 11 – – – – – –
A: Number of meetings held while in office
B: Meetings attended | 48 | 48 | ASX_KCN_2013.pdf |
Directors’ Report
48
www.kingsgate.com.au
Information on Directors
Ross Smyth-Kirk
B Com, CPA, F Fin
Chairman – Non-Executive
Ross Smyth-Kirk was a founding Director of
the former leading investment management
company, Clayton Robard Management Limited
and has had extensive experience over a number
of years in investment management including a
close involvement with the minerals and mining
sectors. He has been a Director of a number of
companies over the past 33 years in Australia
and the UK. Mr Smyth-Kirk was previously
Chairman of the Australian Jockey Club Limited
and retired in May 2013 as a Director of Argent
Minerals Limited.
Responsibilities:
Chairman of the Board, member of the Audit
Committee and Chairman of the Remuneration
Committee and Nomination Committee.
Peter McAleer
B Com (Hons), B L (Kings Inn – Dublin, Ireland)
Non-Executive Director
Peter McAleer was until the end of May 2013 the
Senior Independent Director and Chairman of
the Audit Committee of Kenmare Resources PLC
(Ireland). He is now a member of the Advisory
Panel to the Board of Kenmare. Previously, he
was Chairman of Latin Gold Limited, Director
and Chief Executive Officer of Equatorial Mining
Limited and was a Director of Minera El Tesoro
(Chile).
Responsibilities:
Member of the Audit Committee, Remuneration
Committee and Nomination Committee.
Craig Carracher
LLB (Sydney), BCL (Oxford)
Non-Executive Director
Craig Carracher graduated from Sydney
University Law School with an LLB (First Class
Honours) (1991) and the University Medal and
also graduated on a Commonwealth Scholarship
with a BCL Law Degree from Magdalen College,
Oxford University (First Class Honours) (1993).
He has considerable commercial experience in
Asia and was managing partner of an interna-
tional law firm based in Thailand for many years.
Mr Carracher has held numerous directorships of
listed and private groups throughout Asia. He
was previously Group General Counsel with
Consolidated Press Holdings Limited, Managing
Director of Asian private equity firm Arctic
Capital based in Hong Kong, Special Advisor to
the Chairman of the Australian Securities and
Investment Commission and Associate to the
former Chief Justice of the Supreme Court of
New South Wales. Mr Carracher is Managing
Director of Telopea Capital Partners, an Asia-
focussed private equity group based in Sydney.
Mr Carracher is also a Non-Executive Director
of ASX listed Sunland Group Limited.
Responsibilities:
Chairman of the Audit Committee, member of
the Nomination and Remuneration Committees.
Peter Alexander
Ass. Appl. Geol
Non-Executive Director
Peter Alexander has had 40 years experience in
the Australian and off-shore mining and explora-
tion industry. He was Managing Director of
Dominion Mining Limited for 10 years prior to
his retirement in January 2008. Mr Alexander
was appointed a Non-Executive Director of
Dominion Mining Limited in February 2008 and
resigned on 21 February 2011. Mr Alexander is
Chairman of the ASX listed company Doray
Minerals Limited, a Director of ASX listed compa-
nies Fortunis Resources Limited and Caravel
Minerals Limited.
Responsibilities:
Member of the Remuneration Committee.
Gavin Thomas
BSc FAusIMM
Managing Director
Gavin Thomas has had a successful career in
developing mining companies from the explora-
tion phase into mid-tier gold and / or copper
production entities. He has over 42 years of
international experience in exploring for, evalu-
ating, developing, operating and reclaiming
mines in North America, South America,
Australia, the Southwest Pacific, Asia and
Europe. Amongst other things he was credited
with the discovery of the Lihir gold deposit in
Papua New Guinea, one of the largest gold
deposits in the world. In particular he has exten-
sive experience in Thailand, south-west Pacific
and South America. Mr Thomas was previously
Chairman of the TSX listed company Mercator
Minerals and Chairman of the formerly ASX
listed company Laguna Resources NL.
Responsibilities:
Managing Director and Chief Executive Officer.
Company Secretary
Ross Coyle
BA, FCPA, FCIS
Before joining Kingsgate Consolidated Limited
Mr Coyle was Company Secretary of Dominion
Mining Limited. | 49 | 49 | ASX_KCN_2013.pdf |
Directors’ Report
49
Directors’ Report
Remuneration Report
Dear Shareholder
I am pleased to present our Remuneration Report for 2013.
As you would be aware, at last year’s Annual General Meeting (“AGM”) 30% of the votes cast in respect of the resolution to adopt
the 2012 Remuneration Report voted ‘against’ the resolution. As this was greater than the 25% threshold under the executive
remuneration legislation, we received what is referred to as a ‘first strike.’ Our formal response to issues raised by shareholders at
the AGM with respect to the 2012 Remuneration Report is set out on page 50 of this Report.
Voting at AGMs is not compulsory and results of the 2012 AGM reflected this with only 59% of issued shares that were eligible to
vote on the resolution to adopt the Remuneration Report doing so, meaning the ‘against’ vote represented 18% of eligible issued
shares.
While we believe our remuneration practices are sound and demonstrate a clear link between executive and shareholder returns,
we have taken the first strike seriously and have undertaken an extensive review of the remuneration principles for Key
Management Personnel.
The changes that the Board have implemented as a result of this review include:
〉〉 A structural review of the Company resulting in the appointment in December 2012 of a senior human resources specialist as
a direct report to the Managing Director and Executive Committee member;
〉〉 Fees / base salary packages for Directors and Key Management Personnel were frozen from 1 July 2012;
〉〉 Directors and Key Management Personnel have agreed to a 10% reduction in fees and remuneration;
〉〉 The Managing Director and Key Management Personnel agreed to not accept any of their entitled Short Term Incentive (“STI”)
equivalent to a minimum of 10% of their base salary for the 2013 financial year;
〉〉 A revised Performance Management System, including ‘at risk’ remuneration, has been introduced at all levels in corporate and
site based operations including at risk remuneration for Key Management Personnel in the form of short term and long term
incentive programs described in detail in this report; and
〉〉 A broadening of the remuneration benchmarking processes for Directors and Key Management Personnel.
Further details on each of the changes outlined above are provided in specific sections of this Remuneration Report. We believe
that these changes will be welcomed by our shareholders.
We will continue to review our remuneration polices and framework in consideration of a changing industry environment and
your feedback.
Thank you for your interest in this report.
Ross Smyth-Kirk
Chairman
Remuneration Committee
continued
u
| 50 | 50 | ASX_KCN_2013.pdf |
Directors’ Report
50
www.kingsgate.com.au
Introduction
This Remuneration Report forms part of the
Directors’ Report. It outlines the Remuneration
Policy and framework applied by the Company
as well as details of the remuneration paid to
Key Management Personnel. Key Management
Personnel are defined as those persons having
the authority and responsibility for planning,
directing and controlling the activities of the
Company, directly or indirectly, including
Directors and members of the Executive
Management group.
The information provided in this report has been
prepared in accordance with s300A and audited
as required by section 308 (3c) of the
Corporations Act 2001.
The objective of the Company’s remuneration
philosophy is to ensure that Directors and senior
staff are remunerated fairly and responsibly at a
level that is competitive, reasonable and appro-
priate, in order to attract and retain suitably
skilled and experienced people.
During the year the Company introduced a STI
Plan that is based on Key Management Personnel
individual performance measures and a Long-
Term Incentive (“LTI”) Executive Rights Plan that
provides performance-based remuneration to
members of management through the issue of
Deferred Rights and Performance Rights vesting
over a period of three years. These new plans are
discussed in further detail later in this report.
Voting and comments made at
the Company’s 2012 AGM
The table below provides a summary of the
Board’s action and / or comments in response to
concerns raised by shareholders at the 2012
AGM in relation to remuneration.
Remuneration Policy
The Remuneration Policy has been designed to
align the interests of shareholders, Directors,
and employees. This is achieved by setting a
framework to:
〉〉 help ensure an applicable balance of fixed
and at-risk remuneration, with the at-risk
component linking incentive and perfor-
mance measures to both Group and indi-
vidual performance;
〉〉 provide an appropriate reward for Directors
and Executive Management to manage and
lead the business successfully and to drive
strong, long-term growth in line with the
Company’s strategy and business objectives;
〉〉 encourage executives to strive for superior
performance;
〉〉 facilitate transparency and fairness in execu-
tive remuneration policy and practices;
〉〉 be competitive and cost effective in the
current employment market; and
〉〉 contribute to appropriate attraction and
retention strategies for Directors and
executives.
In consultation with external remuneration
consultants, the Group has structured an execu-
tive remuneration framework that is market
competitive and complimentary to the business
strategy of the organisation.
The framework is intended to provide a mix of
fixed and variable remuneration, with a blend of
short and long-term incentives as appropriate.
As executives gain seniority within the Group,
the balance of this mix shifts to a higher propor-
tion of “at risk” rewards (refer to chart –
Remuneration Reward Mix on the following
page).
Remuneration Governance
Role of the Remuneration Committee
The Remuneration Committee is a committee
of the Board and has responsibility for setting
policy for determining the nature and amount
of emoluments of Board members and senior
executives. The Committee makes recommenda-
tions to the Board concerning:
〉〉 Non-Executive Director fees;
〉〉 remuneration levels of Executive Directors
and other Key Management Personnel;
〉〉 the executive remuneration framework and
operation of the incentive plan; and
〉〉 key performance indicators and performance
hurdles for the executive team.
In forming its recommendations the Committee
takes into consideration the Group’s stage of
development, remuneration in the industry and
performance. The Corporate Governance
Statement provides further information on
the role of this committee.
Remuneration Consultants
The Group engages the services of independent
and specialist remuneration consultants from
time to time. Under the Corporations Act 2001,
remuneration consultants must be engaged by
the Non-Executive Directors and reporting of
any remuneration recommendations must be
made directly to the Remuneration Committee.
Concern Action or Comment
Key issues raised were:
〉〉 the granting of deferred rights;
〉〉 definition of what compromises ‘fixed pay’; and
〉〉 a lack of understanding of the TSR Alpha™ concept
recommended as the LTI performance assessment
process.
The Company has benchmarked the issuing of LTIs to the Managing Director and other Key Management
Personnel against all companies of comparable market position as part of a broader remuneration
comparison using AON Hewitt / McDonald, a review of survey data from the Egan and Associates “The KMP
Report” and validation from Godfrey’s Remuneration Group. The findings confirm the level of remuneration,
inclusive of performance rights, to be comparable to similarly experienced Managing Directors and other Key
Management Personnel with companies of comparable market positioning within the industry.
The Company has sought to discuss key elements contained in the Remuneration Report with shareholders,
shareholder representative groups and proxy advisory groups. Further details regarding the TSR Alpha™
benchmarking methodology are included in the LTI section of this Report.
Deferred rights for the Managing Director were transitional with eligibility for performance rights only in the
future.
Details of the STI and LTI Plans are provided later in this Report. | 51 | 51 | ASX_KCN_2013.pdf |
Directors’ Report
51
Directors’ Report
The Remuneration Committee engaged the
services of the Godfrey Remuneration Group Pty
Ltd during 2012 to review its remuneration prac-
tice revisions and to provide further validation in
respect of both the executive short-term and
long-term incentive plan design and standards.
These recommendations covered the remunera-
tion treatment of the Group’s Non-Executive
Directors and Key Management Personnel.
Under the terms of the engagement, the
Godfrey Remuneration Group Pty Ltd provided
remuneration recommendations as defined in
section 9B of the Corporations Act 2001 and was
paid $76,520 in financial year 2012 for these
services. The Company did not pay Godfrey
Remuneration Group Pty Ltd any further fees
this financial year in relation to other services.
The Godfrey Remuneration Group Pty Ltd has
confirmed that the above recommendations
have been made free from undue influence by
members of the Group’s Key Management
Personnel.
The following arrangements were implemented
by the Remuneration Committee to ensure that
the remuneration recommendations were free
from undue influence:
〉〉 The Godfrey Remuneration Group Pty Ltd was
engaged by, and reported directly to, the Chair
of the Remuneration Committee. The agree-
ment for the provision of remuneration
consulting services was executed by the Chair
of the Remuneration Committee under dele-
gated authority on behalf of the Board; and
〉〉 Any remuneration recommendations by the
Godfrey Remuneration Group Pty Ltd were
made directly to the Chair of the
Remuneration Committee.
As a consequence, the Board is satisfied that the
recommendations were made free from undue
influence from any members of the Group’s Key
Management Personnel.
Executive director and
key management personnel
remuneration
The executive pay and reward framework is
comprised of three components:
〉〉 fixed remuneration including
superannuation;
〉〉 short-term performance incentives; and
〉〉 long-term incentives through participation in
the Executive Rights Plan.
Reward Mix
The above chart represents the remuneration
reward mix for the various Key Management
Personnel based on achievement of all stretch
targets.
Fixed remuneration
Total fixed remuneration (“TFR”) is structured
as a total employment cost package, including
base pay and superannuation. Base pay may be
delivered as a mix of cash, statutory and salary
sacrificed superannuation, and prescribed
non-financial benefits, at the executive’s
discretion.
Executives are offered a competitive base pay.
Base pay for senior executives is reviewed annu-
ally to ensure the executive’s pay is competitive
with the market. An executive’s pay is also
reviewed on promotion.
In addition to using the AON Hewitt / McDonald
Survey (resources industry) Remuneration
Report as an annual benchmarking tool and the
Egan and Associates ‘The KMP Report’; external
remuneration consultants provide analysis and
advice to ensure base pay is set to reflect the
market for a comparable role. The 5th Edition of
Egan and Associates ‘The KMP Report’ (August
2013) shows overall Non-Executive Directors’
remuneration for Kingsgate to be below the
average for ASX 101 – 200 peer group compa-
nies. Significantly, average Non-Executive
Directors fee increases of 8.7% for the ASX 101
– 200 and 6.5% for the ASX 201 – 300 groups
over the period compares to no increase in fees
for Kingsgate Non – Executive Directors.
The Board annually reviews and determines the
fixed remuneration for the CEO / Managing
Director. The CEO / Managing Director does the
same for his direct reports. The Executive
Management group reviews and recommends
fixed remuneration for other senior manage-
ment, for the CEO / Managing Director’s
approval.
There are no guaranteed increases to fixed
remuneration incorporated into any senior
executives’ agreements.
Total Fixed Remuneration (TFR)
Base salary and superannuation
MD/CEO
Short Term
Incentive (STI)
Long Term
Incentive (LTI)
COO/CFO
Other Direct Reports to MD/CEO
60% 25% 15%
57% 29% 14%
49% 29% 22%
Remuneration Reward Mix (based on the achievement of STI / LTI targets)
continued
u | 52 | 52 | ASX_KCN_2013.pdf |
Directors’ Report
52
www.kingsgate.com.au
The following summarises the performance of the Group over the last five years:
2009 2010 2011 2012 2013
Revenue (‘000s) 113,015 175,480 172,356 357,372 329,282
Net profit / (loss) after income tax (‘000s) 32,522 73,066 20,879 75,006 (323,726)
Share price at year end ($ / share) 6.70 9.47 8.00 4.85 1.265
Dividends paid (cent / share) 15.0 35.0 15.0 20.0 5.0
KMP short term employee benefits 3,882 2,943 4,459 4,456 4,671
Short-Term Incentives
Effective from 1 July 2012, the Group implemented an STI Plan. The objectives of the STI Plan are to link the remuneration of certain executives to their
performance and the performance of the Group. The Board set key performance measures and indicators for individual executives on an annual basis that
reinforce the Group’s business plan and targets for the year.
Key features of the STI Plan are outlined in the following table.
Overview of the STI Plan
What is the STI plan and
who participates?
The STI Plan is a potential annual reward for eligible executive key management personnel for achievement of predetermined individual
key performance indicators (KPIs) aligned to the achievement of business objectives for the assessment period (financial year
commencing 1 July).
How much can the
executives earn under
the STI Plan?
Threshold – Represents the minimum acceptable level of performance that needs to be achieved before any Individual Award would be
payable in relation to that Performance Measure.
Managing Director / CEO – up to 15% of TFR, COO & CFO – up to 12.5% of TFR, Other Key Management Personnel – up to 10% of TFR.
Target – Represents a challenging but achievable level of performance relative to past and otherwise expected achievements. It will
normally be the budget level for financial and other quantitative performance objectives.
Managing Director / CEO – up to 30% of TFR, COO & CFO – up to 25% of TFR, Other Key Management Personnel – up to 20% of TFR.
Stretch (Maximum) – Represents a clearly outstanding level of performance which is evident to all as a very high level of achievement.
Managing Director / CEO – up to 60% of TFR, COO & CFO – up to 50% of TFR, Other Key Management Personnel – up to 40% of TFR.
(TFR - Total Fixed Remuneration)
What are the
performance conditions?
For Key Management Personnel between 70% – 80% of potential STI weighting (dependent upon role) is assessed against specific
predetermined KPIs by role with 20% – 30% being based on company performance indicators.
How are performance
targets set and
assessed?
Individual performance targets are set by the identification of key achievements required by role in order to meet business objectives
determined for the upcoming assessment period in advance. The criteria for Key Management Personnel are recommended by the
Managing Director/CEO for sign off by the Remuneration Committee and in the case of the Managing Director/CEO, are recommended
by the Chairman by sign off by the Remuneration Committee.
The relative achievement at the end of the financial period is determined by the above authorities with final sign off by the Remuneration
Committee after confirmation of financial results and individual/company performance against established criteria.
The Remuneration Committee is responsible for assessing whether the KPIs are met. To assist in this assessment, the committee
receives detailed reports on performance from management which are verified by independent remuneration consultants if required.
The committee has the discretion to adjust STIs in light of unexpected or unintended circumstances.
How is the STI delivered? STIs are paid in cash after the conclusion of the assessment period and confirmation of financial results/individual performance and
subject to tax in accordance with prevailing Australian tax laws.
What happens in the
event of cessation of
employment?
Unvested rights are forfeited on dismissal for cause. In all other termination circumstances any unvested rights granted in the year of the
cessation of employment are forfeited in the proportion that the remainder of the year bears to a full year. Unvested rights that are not
forfeited are retained by the participant and are subsequently tested for vesting at the end of the vesting period. | 53 | 53 | ASX_KCN_2013.pdf |
Directors’ Report
53
Directors’ Report
Long-term incentives
Effective from 1 July 2012, the Group implemented an LTI Plan, also referred to as the Executive Rights Plan. The objectives of the LTI Plan are to retain key
executives and to align an at-risk component of certain executives’ remuneration with shareholder returns.
Key features of the LTI Plan are outlined in the table as follows:
Overview of the LTI Plan
What is the LTI Plan and
who participates?
In general, executives can be granted Kingsgate Consolidated Limited rights each year, although an award of rights does not
confer any entitlement to receive any subsequent awards. In awarding rights the Board takes into account such matters as
the position of the eligible person, the role they play in the Company, their current level of fixed remuneration, the nature of
the terms of employment and the contribution they make to the Group. Currently only members of the Executive
Management group and key site based operational senior management are eligible to participate in the LTI plan.
How much can the executives
earn under the LTI Plan?
Managing Director / CEO – up to 45% of TFR as Performance Rights.
COO / CFO / Executive Management – up to 12.5% of TFR as Deferred Rights and additionally, up to 12.5% of TFR as
Performance Rights.
What is awarded under the
LTI Plan?
Two types of rights are offered under the LTI Plan: Deferred Rights and Performance Rights.
Is there a cost to participate? The rights are issued for nil consideration and are granted in accordance with performance guidelines established by the
Remuneration Committee and approved by the Board.
What are the performance
and vesting conditions?
Deferred Rights - vesting is time based.
Performance Rights – refer to Vesting Schedule for Performance Rights below.
What is the performance /
vesting period?
Deferred Rights are subject to three year vesting periods. There are no performance conditions attached to the Deferred
Rights.
Performance Rights are subject to a three year performance measurement period from 1 July in the year when the grant
occurs.
How does the LTI vest? Performance Rights vest subject to the achievement of a hurdle based on total shareholder return. Further information on the
vesting scale is below.
Is the LTI subject to
retesting?
There is no retesting of either the Deferred Rights or Performance Rights.
Who assesses performance? Performance is assessed against a TSR Alpha™ measure prescribed in the Vesting Schedule for Performance Rights below.
The Remuneration Committee signs off performance assessment based on recommendations by the Managing Director/CEO
with advice from Godfrey Remuneration Group Pty Ltd in terms of TSR Alpha™ relative performance.
How is the LTI delivered? On vesting the first $1,000 value of each of the Deferred Rights and Performance Rights awards is paid in cash, e.g. if both
Deferred and Performance Rights vested at the same time then the participant would receive two x $1,000 with the
remaining value of the award received as shares in the Company as per below.
Number of shares = (number of vested rights x share price on vesting date – $2,000) ÷ share price on vesting date.
What happens in the event
of bonus shares, rights
issues or other capital
reconstructions?
If between the grant date and the date of conversion of vested rights into cash and restricted shares there are bonus shares,
rights issues or other capital reconstructions that affect the value of Kingsgate Consolidated shares, the Board may subject
to the ASX Listing Rules make adjustments to the number of Rights and / or the vesting entitlements to ensure that holders
of rights are neither advantaged or disadvantaged by those changes.
Takeover or Scheme
of Arrangement?
Unvested rights vest in the proportion that the share price has increased since the beginning of the vesting period. All vested
rights need to be exercised within three months of the takeover.
What happens in the event
of cessation of employment?
Unvested rights are forfeited on dismissal for cause. In all other termination circumstances any unvested rights granted in
the year of the cessation of employment are forfeited in the proportion that the remainder of the year bears to a full year.
Unvested rights that are not forfeited are retained by the participant and are subsequently tested for vesting at the end of the
vesting period.
continued
u | 54 | 54 | ASX_KCN_2013.pdf |
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