Kingston Resources stops mining at Pearse South after a second geotechnical failure, pivoting to a major underground drilling program and launching a $11.6 million capital raise to underpin a long-term expansion at Mineral Hill.
- Pearse South open pit mining ceased due to ramp failure and poor ore recovery
- Company pivots to 25,000m underground and near-mine drilling program
- Approximately 120 redundancies and contractor losses announced
- Capital raising of $11.6 million at 19% discount to fund exploration and costs
- Argonaut underwrites entitlement offer with major shareholder Farjoy sub-underwriting
Geotechnical Failure Forces Pearse South Pit Closure
Kingston Resources Limited (ASX:KSN) has halted mining operations at its Pearse South open pit following a significant geotechnical incident detected on 1 June 2026. Visible tension cracks and subsequent vertical slumping of the sole access ramp rendered the pit unsafe, prompting an immediate suspension of mining activities and evacuation of personnel and equipment. This marks the second such incident at Pearse South, with a previous failure recorded in late 2025.
The instability is attributed to a soft graphitic shale layer recently exposed at the pit base, which has interacted with geological structures and been exacerbated by rainfall. Remediation options involving ramp stabilisation and redesign are projected to take several weeks and would sterilise a material portion of the remaining ore, estimated at around 100,000 tonnes slated for extraction over the next four months. Metallurgical recoveries from this shale have also been poor during the recent quarter.
Strategic Pivot to Underground Exploration and Resource Growth
In response to the Pearse South closure and its cashflow implications, Kingston’s board has elected to pause underground development and defer production commencement. Instead, the company will embark on an intensive 25,000-metre drilling campaign targeting resource expansion around the Southern Ore Zone (SOZ), Jack’s Hut, and other near-mine targets. This program will deploy underground diamond, surface diamond, and reverse circulation rigs to test extensions and new targets, aiming to grow Measured and Indicated Resources and Ore Reserves.
This shift aligns with Mineral Hill’s long-term value proposition centred on its fully permitted polymetallic underground deposits and processing plant in the Cobar basin. Kingston plans to study plant expansion options to support a potential throughput increase to 700ktpa, underpinning a larger, longer-life operation.
Workforce Reductions and Financial Impact
The operational pivot will significantly reshape Kingston’s workforce, with about 120 redundancies and the loss of 18 contractors announced, retaining approximately 24 site personnel during the transition. The company commits to paying all entitlements and supporting affected employees through an assistance program.
Financially, the Pearse South closure and associated fleet demobilisation and redundancy costs are estimated at $5 million over the coming months. The cessation of open pit mining is expected to reduce gross revenue by approximately $39 million from June through September. Kingston currently holds $9.45 million in unrestricted cash and anticipates a $10 million deferred payment in July from the Misima Gold Project sale. Restricted cash for environmental bonds stands at $7.4 million.
$11.6 Million Capital Raising at 19% Discount
To fund the drilling program, resource updates, care and maintenance, redundancies, and working capital, Kingston is undertaking a capital raising of approximately $11.6 million before costs. This comprises a $2.55 million placement to investors including major shareholder Farjoy, and a fully underwritten $9.1 million non-renounceable entitlement offer priced at $0.07 per share, representing a 19.5% discount to the last close on 1 June 2026.
The entitlement offer allows eligible shareholders to subscribe for two new shares for every thirteen held, with eligibility limited to shareholders in Australia, New Zealand, the European Union (excluding Austria), Hong Kong, and Singapore. Argonaut Corporate Finance is underwriting the entitlement offer, with Farjoy sub-underwriting up to $8 million. Post-placement, Farjoy’s stake would rise from approximately 17.6% to 19.7%, with potential to increase to 28.5% if it takes up the maximum shortfall.
Mineral Resource and Ore Reserve Base
Kingston’s Mineral Hill boasts a combined Mineral Resource of nearly 10 million tonnes grading 0.93 g/t gold, 0.97% copper, 1.42% lead, and 0.98% zinc, with significant silver credits. The Ore Reserve currently stands at 700,000 tonnes at 1.4 g/t gold and 0.8% copper among other metals, all classified as probable. The company’s immediate drilling campaign targets growing these figures to support underground mining and a processing plant restart.
CEO Emphasises Commitment Despite Setbacks
Managing Director Andrew Corbett acknowledged the disappointment but underscored safety as paramount. He emphasised the strategic decision to protect shareholder value and build a resilient, long-life mining operation through resource expansion and plant capacity growth. The company plans to leverage the first large-scale exploration program at Mineral Hill since the 1980s to unlock additional underground potential and derisk future production.
Bottom Line?
Kingston’s pivot from open pit mining to a capital-intensive underground drilling campaign marks a critical juncture, with success hinging on resource growth and capital raise execution amid significant operational and workforce upheaval.
Questions in the middle?
- Will the 25,000m drilling program materially expand Mineral Hill’s underground resources and reserves as planned?
- How will the market respond to the 19% discounted capital raising amid operational setbacks?
- What is the timeline and cost risk associated with potential plant expansion to 700ktpa following resource upgrades?