Announcement PDF www.kingstonresources.com.au ACN 009 148 529 30 July 2015 Company Announcements Office Australian Securities Exchange ASX Ltd Level 40, Central Park 152-158 St Georges Terrace PERTH WA 6000 RIGHTS ISSUE PROSPECTUS Please find attached Kingston Resources Limited (“Company”) Prospectus lodged with ASIC today for a pro rata offer of four (4) for five (5) non-renounceable pro rata entitlement offer at an issue price of 2.0 cents per share, with one (1) free attaching option exercisable at 4.0 cents each on or before 30 June 2019 for every two (2) shares issued to raise approximately $2,349,783 before expenses (Offer). The funds raised will be used to underpin the next phase of exploration and evaluation of the exciting Six Mile Hill Project in South Australia, to undertake drilling at the Cootanoorina project and further evaluate the Hiltaba project as well as for costs of the Offer and for general working capital purposes. Yours Faithfully Kingston Resources Limited Mathew Whyte Company Secretary 25 - 27 Jewell Parade, North Fremantle, Western Australia 6159 +61 8 9336 6619 info@kingstonresources.com.au 1 ACN 009 148 529 Rights Issue Prospectus For the non-renounceable pro rata offer of four (4) New Shares for every five (5) Shares held by Shareholders registered at 5.00pm Perth time on the Record Date at an issue price of 2.0 cents per New Share, with one (1) free attaching Option exercisable at 4.0 cents each on or before 30 June 2019 for every two (2) New Shares issued to raise approximately $2,349,783 before costs (Offer), and for the offer of the Shortfall to the Offer (Shortfall Offer) The Offer opens on 12 August 2015 and closes at 3.00pm Perth time on 24 August 2015. Valid Applications must be received by the Closing Date. Lead Manager Alignment Capital Pty Ltd Important Notice This document contains important information about the Offer. You should read the entire document. Please read the instructions in this document and the accompanying Entitlement and Acceptance Form regarding your Rights. If you have any questions about the Offer or this Prospectus, you should speak to your professional adviser. The securities offered by this Prospectus should be considered speculative. Important information Prospectus Publicly available information This Prospectus is dated 30 July 2015 and was lodged with ASIC on that date. Neither ASIC, ASX nor their officers take any responsibility for the contents of this Prospectus or the merits of the investment to which this Prospectus relates. Information about the Company is publicly available and can be obtained from ASIC and ASX (including ASX’s website www.asx.com.au). The contents of any website or ASIC or ASX filing by the Company are not incorporated into this Prospectus and do not constitute part of the Offer. This Prospectus is intended to be read in conjunction with the publicly available information in relation to the Company which has been notified to ASX. Investors should therefore have regard to the other publicly available information in relation to the Company before making a decision whether or not to invest in New Securities or the Company. This Prospectus is a transaction specific prospectus for an offer of continuously quoted securities (as defined in the Corporations Act) and has been prepared in accordance with section 713 of the Corporations Act. It does not contain the same level as disclosure as an initial public offering prospectus. In making representations in this Prospectus regard has been had to the fact that the Company is a disclosing entity for the purposes of the Corporations Act and certain matters may reasonably be expected to be known to investors and professional advisers whom potential investors may consult. No Shares will be issued on the basis of this Prospectus later than 13 months after the date of this Prospectus. Application for quotation of the New Securities will be made to ASX within seven days after the date of this Prospectus. Electronic prospectus This Prospectus may be viewed in electronic form at www.kingstonresources.com.au by Australian investors only. The electronic version of this Prospectus is provided for information purposes only. A paper copy of the Prospectus may be obtained free of charge on request during the Offer period by contacting the Company. The information on www.kingstonresources.com.au does not form part of this Prospectus. Risk factors Potential investors should be aware that subscribing for Shares in the Company involves a number of risks. The key risk factors are set out in Section 5 of this Prospectus. These risks together with other general risks applicable to all investments in quoted securities not specifically referred to, may affect the value of the Shares in the future. An investment in the Company should be considered speculative. Investors should consider these risk factors in light of personal circumstances and should consider consulting their professional advisers before deciding whether to apply for Shares pursuant to this Prospectus. Overseas Shareholders No offer is being made to Shareholders with a registered address outside Australia or New Zealand. The distribution of this Prospectus and the Entitlement and Acceptance Form (including electronic copies) outside Australia or New Zealand may be restricted by law. If you come into possession of these documents, you should observe such restrictions and should seek your own advice about such restrictions. Please refer to Section 3.9 for more information. No person is authorised to give any information or make any representation in connection with the Offer that is not contained in this Prospectus. Any information or representation not so contained may not be relied upon as having been authorised by the Company in connection with this Prospectus. Forward looking statements This Prospectus may contain forward-looking statements that have been based on current expectations about future acts, events and circumstances. Any forward-looking statements are subject to risks, uncertainties and assumptions that could cause those acts, events and circumstances to differ materially from the expectations described in such forward-looking statements. Accepting the Offer Applications for New Securities offered by this Prospectus can only be made by an original Entitlement and Acceptance Form. The Entitlement and Acceptance Form sets out the entitlement of an Eligible Shareholder to participate in the Offer. Please read the instructions in this Prospectus and on the accompanying Entitlement and Acceptance Form regarding the acceptance of your Rights. By returning an Entitlement and Acceptance Form or lodging an Entitlement and Acceptance Form with your stockbroker or otherwise arranging for payment for your New Securities in accordance with the instructions on the Entitlement and Acceptance Form, you acknowledge that you have received and read this Prospectus, you have acted in accordance with the terms of the Offer detailed in this Prospectus and you agree to all of the terms and conditions as detailed in this Prospectus. Defined terms Certain terms and other terms used in this Prospectus are defined in the Glossary of defined terms in Section 9. Currency All references in this Prospectus to “$”, “AUD” or “dollar” are references to Australian currency unless otherwise indicated. Reference to time All references in this document to time relate to the time in Perth, Western Australia. page i Contents Important information ............................................................................................................ i Contents ................................................................................................................................ ii Timetable ............................................................................................................................... ii Corporate Directory ............................................................................................................. iii Chairman’s letter .................................................................................................................. iv 1. Investment Overview .................................................................................................... 1 2. Details of the Offer ........................................................................................................ 8 3. Accepting the Offer ..................................................................................................... 11 4. Effect of the Offer ........................................................................................................ 16 5. Risk factors.................................................................................................................. 22 6. Rights and liabilities attaching to New Shares ........................................................ 29 7. Additional information ................................................................................................ 32 8. Directors’ responsibility statement and consent ..................................................... 41 9. Glossary of Terms....................................................................................................... 42 Timetable Event Announcement of Offer Thursday, 30 July 2015 Prospectus lodged with ASIC and ASX (Appendix 3B lodged with ASX) Thursday, 30 July 2015 Notices sent to Securityholders Monday, 3 August 2015 Ex-date (date from which Shares begin trading without the Rights to participate in the Offer) Thursday, 6 August 2015 Record Date (to identify Shareholders entitled to participate in the Offer) Monday, 10 August 2015 Prospectus and Entitlement and Acceptance Forms sent to Eligible Shareholders Wednesday, 12 August 2015 Offer opens (Opening Date) Wednesday, 12 August 2015 Last day to extend the Closing Date* Wednesday, 19 August 2015 Offer closes (Closing Date)* 3.00pm Perth time Monday, 24 August 2015 New Securities quoted on a deferred settlement basis Tuesday, 25 August 2015 Notice to ASX of Shortfall New Securities issued and despatch of holding statements Quotation of New Securities on ASX commences * Date Wednesday, 26 August 2015 Monday, 31 August 2015 Wednesday, 2 September 2015 The above dates are indicative only and may be subject to change. The Directors may vary these dates subject to any applicable requirements of the Corporations Act or the Listing Rules. The Directors may extend the Closing Date by giving at least three Business Days notice to ASX before the Closing Date. page ii Corporate Directory Directors Auditor (for information purposes only) Jonathan Davies Non-Executive Chairman Grant Thornton Audit Pty Ltd Chartered Accountants Level 1 10 Kings Park Road WEST PERTH WA 6005 Stuart Rechner Executive Director Barry Bourne Non-Executive Director Yafeng Cai Non-Executive Director Lead Manager Alignment Capital Pty Ltd 205/207 Bourke Street DOCKLANDS VIC 3008 Company secretary Mathew Whyte Registered office 25-27 Jewell Parade NORTH FREMANTLE WA 6159 Tel: Fax: Underwriter* Pinnacle Equities Pty Ltd AFSL 300776 Level 9 171 La Trobe Street MELBOURNE VIC 3000 +61 8 9336 6619 +61 8 9335 3565 Share Registry Solicitors to the Offer Jackson McDonald Level 17 225 St Georges Terrace PERTH WA 6000 Computershare Investor Services Pty Limited Level 2 45 St Georges Terrace PERTH WA 6000 Tel: Fax: 1300 850 505 or +61 8 9415 4000 +61 8 9323 2033 Securities exchange Australian Securities Exchange ASX code – KSN * As at the date of this Prospectus, the underwriting of the Offer is conditional on the Underwriter procuring sub-underwriters for all of the securities offered by this Prospectus. Refer to Sections 2.6 and 7.4 for further details. page iii Chairman’s letter Dear Shareholder On behalf of the board of Kingston Resources Limited, I am pleased to invite you to invest in the ongoing fortunes of Kingston Resources Limited as we continue exploration for copper in South Australia. This Prospectus aims to raise a maximum of approximately $2,349,783 to fund ongoing exploration activities by a pro-rata non-renounceable rights issue of New Shares to Eligible Shareholders on the basis of four New Shares for every five Shares held by Shareholders on the Record Date at an issue price of 2.0 cents per New Share, together with one free attaching New Option for every two New Shares subscribed for and issued. Capital raised will fund the significant drill programs planned for our key South Australian projects at Six Mile Hill, near Port Augusta, and Cootanoorina, near Oodnadatta. Funds will also be applied to continue to generate new project opportunities and for working capital. The Company’s strong technical capabilities have been significantly boosted by the appointment to the Board of accomplished geophysicist Barry Bourne as Non-Executive Director. Mr Bourne’s expertise in geophysics is well respected and his working knowledge offers the Company a unique opportunity to maximise its prospects at priority targets. The Directors are pleased with the cost efficient execution of exploration to date. In particular, the Company succeeded in winning significant funds from the Government of South Australia which provides leverage to our exploration activities and has enabled us, as a junior explorer to explore like a major. Of course, before deciding whether or not to accept your Rights it is important for you to read this Prospectus carefully and seek professional advice if required. The Company maintains a system of continuous disclosure and we encourage you to read, absorb and continue to follow our announcements to the ASX as work progresses. These announcements are also available on our website. We look forward to updating you on the progress of our work as our results unfold. Yours faithfully Jonathan Davies Chairman page iv 1. Investment Overview The information in this Section is a selective overview only. Investors should read the Prospectus in full, including the announcements of the Company, before deciding whether to invest in Shares. The goal of Kingston Resources Limited (Kingston) is to discover an economic copper deposit in Australia and so add value to the investment of shareholders. Kingston intends to achieve this goal by exploring its tenements and drill testing targets. In order to maximise the chance of discovery, Kingston strives for the highest levels of technical proficiency and the most efficient and cost effective methods of exploration. 1.1 Kingston’s Exploration Projects Kingston’s exploration are focused on the ancient Gawler Craton in South Australia in both the world class Olympic Copper-Gold province and the emerging mineral province of the northern Eyre Peninsula. Figure 1: The Company’s projects and major IOCG mines and deposits of the Gawler Craton, South Australia. Note Hiltaba is covered by ELA 2015/00063. The exploration licence has been applied for but has not yet been granted. page 1 Kingston holds eight wholly owned tenements and four in joint venture arrangements. Tenement State Project Km2 Ownership EL 5626 SA Six Mile Hill 296 100% EL 5498 SA Six Mile Hill East 540 100% EL 5591 SA Six Mile Hill North 131 100% EL 5625 SA Cootanoorina 508 100% EL 5487 SA Cootanoorina East 311 100% EL 5599 SA Cootanoorina North 24 100% EL 5309 SA Cootanoorina Central 36 Earning in EL 5379 SA Sunset Hill 160 100% EL 5011 SA Myall Creek 381 50% EL 5010 SA Spencer 321 25% EL 4915 SA Mt Eba 237 100% ELA 2015/00063 SA Hiltaba 427 0% (Applied for 1/6/2015; grant of licence pending) EL 4933 VIC Orbost 341 Earning in Figure 2: Tenement Schedule. Six Mile Hill project Kingston’s flagship exploration project is the Six Mile Hill copper-gold exploration project. Six Mile Hill consists of three exploration licences with a total area of 967km2 located northwest of Port Augusta. The Six Mile Hill project area lies on the eastern margin of the Gawler Craton and straddles the boundary between the Olympic Domain (part of the Olympic CopperGold province) and the Spencer Domain (part of the emerging mineral province of the northern Eyre Peninsula). The Olympic Copper-Gold Province has long been recognised as highly prospective for Iron Oxide Copper Gold (IOCG) mineralisation. IOCG mineralisation on the Gawler Craton is related to the Mesoproterozoic ~1590 Ma thermal magmatic event which produced the Hiltaba Granite Suite and co-magmatic Gawler Range Volcanics. In late 2014, the Six Mile Hill project was selected for the South Australian Government Mineral Systems Drilling Program. The program includes significant cash and in-kind contributions from the Department of State Development and the Deep Exploration Technologies Cooperative Research Centre. page 2 Figure 3: Six Mile Hill project area in relation to mineral provinces and known deposits Figure 4: Six Mile Hill planned drillholes for the Mineral Systems Drilling Program 2015 page 3 Cootanoorina project The Cootanoorina project consists of four exploration licences with a total area of 879km2 located to the south of Oodnadatta on the eastern edge of the Gawler Craton. Three of the tenements are wholly held by Kingston and one (EL 5309) is subject to a joint venture arrangement. The primary geological feature in the area is the Peake and Denison Inliers, a series of outcropping Proterozoic basement rocks. The outcropping basement rocks host numerous historic mines and mineral occurrences – copper mining occurred during the late 1890s and early 1900s. Figure 5: Cootanoorina Project surface geology and historic mineral occurrences. Geophysical modeling by Kingston identified an elongate NW trending gravity feature with a magnetic shell lying to the west of the Peake and Denison Inliers, beneath younger sedimentary cover. In 2014, Kingston conducted detailed ground gravity collection over the project area and identified several gravity features that warranted further investigation. These features were modelled via 3D inversion and priority drill targets have been identified. In April 2015, the Cootanoorina project has awarded $70,000 in PACE Discovery Drilling co-founding from the Government of South Australia. Kingston intends to test our best drill targets at Cootanoorina following completion of our upcoming drilling campaign at Six Mile Hill. Competent Person’s statement The information in this document that relates to Exploration Results is based on, and fairly represents information and supporting documentation compiled by Mr Barry Bourne, a director of the Company. Mr Bourne is a fellow of the Australian Institute of Geoscientists and a member of the Australian Society of Exploration Geophysicists and has sufficient experience of relevance to the styles of mineralisation and the types of deposits under consideration, and activities undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the Joint Ore reserves Committee (JORC) Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Bourne consents to the inclusion in the report of matters based on information in the form and context in which it appears. page 4 1.2 Purpose of the Offer The purpose of the Offer is to raise funds up to $2,349,783 (based on the number of Shares on issue at the date of this Prospectus). No funds will be raised from the issue of the New Options. The funds raised from the Offer are planned to be used over the next 18 months in accordance with the table set out below: Use of funds Exploration expenditure Full Subscription ($) % 1,568,650 67% Corporate and administration costs 460,955 20% Costs of the Offer 190,000 8% Contingency working capital 130,178 6% $2,349,783 100% Total Notes: 1. The table assumes that none of the existing Option holders exercise their Options before the Record Date and participate in the Offer. 2. Refer to section 7.11 of this Prospectus for further details relating to the estimated expenses of the Offer. 3. Corporate and administration costs may be applied to general corporate operational expenses including but not limited to directors’ fees, company secretarial and accounting fees, ASX and share registry fees, legal, tax and audit fees, insurance, travel costs and other corporate compliance costs. Exploration expenditure includes drilling and assays at both the Six Mile Hill and Cootanoorina projects; geophysical surveys at Mt Eba and Hiltaba; mapping and geochemical sampling at Orbost; and Kingston’s joint venture contributions to exploration at the Myall Creek and Spencer project. The information in this table is a statement of present intention as at the date of this Prospectus. The exact amount of funds spent by the Company will depend on many factors that cannot be ascertained at this time. The Board reserves the right to alter the way funds are applied on this basis. On completion of the Offer the Board believes the Company will have sufficient funds to achieve these objectives. However, to the extent the Offer is not fully subscribed, the Company will make appropriate scale backs to the above allocation of funds and will apply the funds that are raised firstly, towards the expenses of the Offer, and then towards each other item, which will be scaled back on a pro-rata basis once the costs of the Offer have been met. 1.3 Key risks The New Securities offered under this Prospectus are considered highly speculative. An investment in the Company is not risk free and the Directors strongly recommend potential investors to consider the risk factors described below, together with the information contained elsewhere in this Prospectus and to consult their professional advisers before deciding whether to apply for New Securities pursuant to this Prospectus. The following risks have been identified as being key risks specific to an investment in the Company. These risks have the potential to have a significant adverse impact page 5 on the Company and may affect the Company’s financial position, prospects and price of its listed securities. (a) Reliance on key personnel The Company’s success depends to a significant extent upon its key management personnel, as well as other management and technical personnel including sub-contractors. The Company has a small management team and the loss of and of their services could have an adverse effect on the Company at this stage of its development. (b) Liquidity & volatility The Company is a small company in terms of its market capitalisation. Investment in its securities will be regarded as speculative and the Company will have a narrow shareholder base. As a consequence of such, there is a risk, particularly in times of share market turbulence or negative investor sentiment, that there will not be a highly liquid market for the Company’s securities or that the price of the Company’s securities may decrease considerably. There may be relatively few buyers or sellers of securities on ASX at any given time and the market price may by highly volatile. This may result in Shareholders wishing to sell their securities in the Company in circumstances where they may receive considerably less than the price paid under the Offer (where applicable). (c) Future capital requirements The Company’s ongoing activities are likely to require substantial further financing in the future for its business activities, in addition to amounts raised pursuant to the Offer. Any additional equity financing may be dilutive to Shareholders, may be undertaken at lower prices than the issue price under this Offer or may involve restrictive covenants which limit the Company’s operations and business strategy. Although the Directors believe that additional capital can be obtained, there can be no assurance that appropriate capital or funding, if and when needed, will be available on terms favourable to the Company or at all. If the Company is unable to obtain additional financing as needed, it may be required to reduce, delay or suspend its operations and which may result in a material adverse affect on the Company’s activities and its ability to continue as a going concern. (d) Potential for significant dilution Upon implementation of the Offer, assuming all Entitlements are accepted and no Options are exercised prior to the Record Date, the number of Shares in the Company will increase by 117,489,128 shares to 264,350,539 Shares. This means that each Share will represent a significantly lower proportion of the ownership of the Company. (e) Access to Defence Training Area The ability for the Company and Strategic Energy Resources (Joint Venture partners) to access the Spencer Project and to conduct exploration activities is governed by the Deed of Access with the Commonwealth of Australia (Commonwealth). This deed has a limited initial term which will expire on 12 September 2016. Further, the deed may be terminated by the Commonwealth at any time by written notice. The Company does not have any reason to page 6 believe that the Commonwealth will summarily terminate the deed or will refuse an extension of its term. However, the Company cannot guarantee that that such will not occur and both events would have an adverse effect on the Company’s operations. Further, the Company will be required to enter into a Deed of Access with the Commonwealth to access the Mount Eba Project area which encroach within the Woomera Prohibited Area. Specifically, the Mount Eba Project is subject to the Defence Periodic Zone 1. Whilst the Commonwealth implemented a standard procedure in 2011 to provide greater access to these areas for mineral exploration and production, including the implementation of a standard form Deed of Access, the Company cannot provide any assurance that the Deed of Access will be granted by the Commonwealth, and if so, when. In addition, the Spencer Project area may contain unexploded military ordinances. Accordingly, the Joint Venture partners will put in place appropriate safety precautions and procedures for its personnel and contractors accessing the site. However, there is a risk that those persons engaged by the Company to perform services on the Spencer Project area may suffer physical injury and/or damage to property from these ordinances. In addition to risks specific to the Company as described above, an investment in the Company is subject to mining industry specific and general investment risks as described in Sections 5.3 and 5.4. 1.4 The Board The Board comprises: Jonathan Davies – Non-Executive Chairman Stuart Rechner – Executive Director Barry Bourne – Non-Executive Director Yafeng Cai – Non-Executive Director page 7 2. Details of the Offer 2.1 The Offer The Company is making a non-renounceable pro rata offer of New Securities to Eligible Shareholders. Eligible Shareholders are entitled apply for four (4) New Shares for every five (5) Shares held at 5.00pm Perth time on the Record Date at an issue price of 2.0 cents per New Share, with one (1) free attaching Option exercisable at 4 cents each on or before 30 June 2019 for every two (2) New Shares subscribed for and issued. The issue price is payable in full on application. The Company presently has 146,861,411 Shares and 54,327,269 Options on issue. Based on the number of Shares on issue at the date of this Prospectus, a maximum of 117,489,129 New Shares and 58,744,564 New Options are offered under the Offer to raise up to approximately $2,349,783 (before costs). The Company’s option holders may participate in the Offer if they exercise their Options and become the registered holders of Shares before the Record Date. If any of the Options are exercised before the Record Date then the number of New Shares that may be issued under the Offer could increase. However, as the exercise price of the Options on issue are considerably above the current market price of the Shares, the Company does not expect to issue further Shares pursuant to exercise of Options before the Record Date. The purpose of the Offer and the intended use of the funds raised is set out in Section 4. Information about how to accept your Rights and apply for the New Securities is set out in Section 3. 2.2 Non-renounceable offer The Offer is non-renounceable. Accordingly, an Eligible Shareholder may not sell or transfer all or part of its Rights under this Offer. 2.3 Entitlement and eligibility The Offer is made to Eligible Shareholders only. All Shareholders with a registered address in Australia or New Zealand and who are registered as the holder of Shares at 5.00pm Perth time on the Record Date are Eligible Shareholders. The entitlement to participate is determined on the Record Date. The number of New Shares that an Eligible Shareholder may apply for is shown in the personalised Entitlement and Acceptance Form which accompanies this Prospectus. Fractional Rights will be rounded down to the nearest whole New Share. To apply for New Securities under the Offer, you must complete your Entitlement and Acceptance Form and lodge it with payment for the New Shares by no later than 3.00pm Perth time on the Closing Date. Please see Section 3 for further information about accepting the Offer. Your rights to participate in the Offer will lapse if you do not accept your Rights by the Closing Date. Any New Shares not applied for will form part of the Shortfall. page 8 2.4 Opening Date and Closing Date The Offer will open on 12 August 2015 and will close at 3.00pm Perth time on 24 August 2015. Subject to compliance with the Listing Rules and the Corporations Act (as relevant), the Company reserves the right to close the Offer early or to extend the Closing Date. 2.5 No minimum subscription There is no minimum subscription. 2.6 Underwriting and