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.