There were few major surprises in the interim earnings result of Kingsgate Consolidated ((KCN)), as underlying earnings of $33.8 million were only slightly below market expectations due primarily to higher costs during the period.
Kingsgate posted a positive production result, featuring improvement at Chatree, solid production at Challenger and progress on development projects, the broker notes. Guidance was reiterated and the balance sheet has improved slightly. The increased share count leads to an 8% fall in forecast earnings and the target falls to $1.00 from $1.40.
Kingsgate has embarked on a take-over spree, announcing its second acquisition target in as many weeks and with management suggesting a third one might not be far off. RBS analysts comment the bid for Chilean junior explorer Laguna Resources is immaterial but if successful the longer term upside could be "appealing".
The broker had been anticipating a reserve increase from Kingsgate to provide a 60% increase in mine life, but the actual announcement gives the broker more confidence in its figures. The broker sees further expansion ahead.