To read all the latest announcements on the NZX website - Click here


King Solomon Mines AGM addresses

New Zealand Exchange Limited 
P.O. Box 2959 

29 July 2009 

Dear Sir, 

King Solomon Mines AGM addresses 

China based King Solomon Mines (“KSO”) is one of Widespread’s cornerstone investments, and represents 11% of our total assets at its present market value of AUD 5 cents a share. We are the largest individual shareholder in KSO with a holding of 11%.    

KSO has just released the following AGM addresses to the ASX.

For and on behalf of the Board,

Chris D Castle

Wellington, 29 July 2009

King Solomon Mines Limited


Ladies and Gentlemen

Since we last met some 12 months ago we have experienced the continuation of one of the greatest and most profound economic upheavals that the world has seen. Stock markets, having suffered extraordinary crashes, are now showing some fledgling signs of recovery. Great and famous corporate names, such as Lehman Brothers and Merrill Lynch, have collapsed and others such as the General Motors Corporation have survived by the skin of their teeth and only with substantial US Government assistance. Economic growth through much of the Western World has evaporated and may take many years to recover. The question being asked around most Board rooms is “How should this company respond to these circumstances?”.

Mining companies have not been immune from the cold winds. Metal prices, which saw amazing growth in the early years of this century, have retreated. Along with metal prices so too have gone mining company share prices. We saw BHP’s price drop from nearly $49 per share to under $22 in just six months during last year. RIO fared even worse falling from $156 to a low of $32 in a similar period. Of course, RIO had some particular issues to answer for at that time.

When investors were deserting major blue chips like BHP it is no wonder that market support for smaller exploration groups like King Solomon was devastated. This reaction, while disappointing, is not unique. I have seen similar responses several times over my career.

The collapse of investor confidence in mining companies appears to me to be overdone. As I mentioned earlier metal prices have come off their highs but are still, with a few exceptions, trading at levels which would have been gleefully embraced as recently a five years ago. Of particular relevance to King Solomon is the performance of copper and gold, which are our main target commodities. Copper is now trading at $2.50/lb. Five years ago it was struggling to trade at $1.25/lb. Gold closed on Friday last near $950/oz. Five years ago it was lucky to break $400/oz. My point is that current metal prices are hardly cause for despair and will support very handsome profits from world class mines.

For mineral explorers, such as King Solomon, the key strategic consideration is where the value of the commodities they seek may go in future. I look to two major indicators to provide guidance.

On the demand side, can we reasonably expect demand for metal to support or even enhance prices in future? I take great heart from the fact that metal demand from the most rapidly growing economies in the world; economies which have weathered the recent economic upheaval best; continues to be strong. China is the obvious bell weather. While Western economies are experiencing negative growth, China is powering ahead with GDP growth for the 2010 year expected to exceed 7%. China, and the other strongly growing economies of Asia and the Sub-Continent need metal to sustain their development. Accordingly I expect strong demand to underwrite attractive metal prices into the future.

On the supply side there have been very few major new base or precious metal mines committed to or brought into production in recent years. As it takes many years to discover, evaluate, permit, finance and develop a mineral deposit, there is no reason to believe that surplus supply will emerge for a very long time. This is particularly so for gold for which I see a very encouraging outlook based on both the demand/supply fundamentals and the likely pressure on the US dollar.

It is for these reasons that I remain confident that King Solomon is on the right track with its focus on copper and gold and that its shareholders will be rewarded by our efforts should we achieve our objective of discovering a world class mineral deposit in China.

King Solomon is now well into the third field season’s exploration in Inner Mongolia since the IPO in April 2007. Work on the Company’s prinicipal exploration tenements continue to provide sound reasons for maintaining their assessment. Additionally, as indicated earlier, the Company is actively seeking out other attractive exploration opportunities in the highly mineralised Inner Mongolia region.

The base metal targets at Marmot Ridge and Bu Dun Hua exhibit key indicators which causes me to believe that we are dealing with well mineralised and large systems. We have recently had an encouraging endorsement of this view from one of the world’s pre-eminent experts in intrusive geology.

Work on the gold targets at Naogaoshandu is progressing well and we are actively seeking to add to our gold prospect portfolio.

Some shareholders may be surprised to learn that China is now the largest producer of gold in the world. Interestingly China’s gold output is overwhelmingly achieved through the aggregation of a very large number of artisnal size workings. It has very few of the large mines which provide the bulk of production in the traditional mining countries of South Africa, the USA and Australia. My experience suggests that this phenomenon reflects a lack of modern exploration rather than any geological aberration.

Notwithstanding China’s pivotal position in the gold production table, it does not currently attract a proportional amount of the major gold miners attention. This situation must change, but in the interim, the few experienced foreigngroups, like King Solomon, which are active in China have a strategic advantage.

The region around Sonid Zuoqi looks to be particularly attractive for the discovery of a major gold deposit. The evidence, we call it smoke, in the form of the Sino Gold’s Beyinhar project, the Shadui Mine and other artisnal workings as well as King Solomon’s recent discoveries have already outlined a highly anomalous district covering several hundred square kilometres. Surely there must be some fire within.

Discovery of large scale mineral deposits takes persistence and the application of appropriate geological tools, particularly where there is limited outcrop. Large parts of the company’s properties are covered by sand (Gobi desert). This represents both a challenge and an opportunity, much like the opportunity which led to the great period of gold discovery in Western Australia in the 1980’s and 1990’s.

I believe that we have made good progress in our quest to discover a valuable mineral deposit, but I am very aware that we need to demonstrate tangible results to see our work reflected in the Company’s share price. If we can achieve our goal I am confident that success will be reflected in a materially improved share price irrespective of the current difficult economic climate which has disproportionately affected the market for exploration companies such as King Solomon.


Ladies and Gentlemen

Over the past 12 months KSO has continued to pursue an aggressive exploration program in China. The company undertook scout drilling at 4 prospects as well as following up on the discovery of molybdenum at Marmot Ridge. It also continued the process of generating new drill targets. The emergence of South Ridge at Naogaoshandu as a potential drill target is one result.

Over the year, the company completed just over 7,600 metres of mainly diamond drilling on its projects.

At Marmot Ridge, a substantial molybdenum deposit was discovered. However, the molybdenum grade was sub-economic. To the south of the Mo deposit, a skarn copper target zone has been identified. Within this sits a large magnetic anomaly which the company plans to drill later this year. Initial drilling at the Lao Ping Tong prospect at Bu Dun Hua has revealed the likely proximity of a near surface porphyry copper target. A drilling rig has been secured and drilling is expected to start in early August.  King Solomon remains committed to the goal of discovering a world class mineral deposit.