K92 Mining Inc. (“
K92” or
the “
Company”) (TSX-V
: KNT;
OTCQX
: KNTNF) is pleased to announce production in
the fourth quarter (“
Q4”) exceeded budget by 30%,
with 23,646 oz AuEq produced for the quarter at its Kainantu Gold
Mine in Papua New Guinea.
During Q4, K92 produced 23,096 ounces of gold,
216,656 pounds of copper and 5,243 ounces of silver or 23,646 AuEq
oz (based on a gold price of US$1,300/oz; silver price of
US$16.50/oz; copper price of US$2.90/lb). Production for 2019 was a
record of 79,838 oz of gold or 82,256 AuEq oz, compared to
production of 47,237 oz AuEq for 2018. Production for 2019 exceeded
the top end of upgraded production guidance of 72,000 to 80,000
AuEq oz, which was originally 68,000 to 75,000 AuEq oz (see August
15, 2019 press release – K92 Mining Inc. Releases 2019 Q2 Financial
Results, Increases Production Guidance and Decreases 2019 Cost
Guidance) by 2,256 AuEq oz.
Mining operations in Q4 continued to focus on
Kora North and comprised cut and fill stope mining from the K1 vein
at the 1170, 1205 and 1225 mRL level as well as development tonnes
from the K2 vein on the 1225 mRL level.
The blend of primarily K1 material provided an
average head grade to the process plant for Q4 of 25.22 g/t Au and
0.35% Cu. The gold head grade was above and the copper grade below
the anticipated long-term average grades. The above average gold
grades are the result of a combination of lower dilution being
achieved in the stope and development mining combined with a higher
proportion of K1 treated during the quarter, while the below budget
copper grades are the result of treating a higher proportion of
K1.
Importantly, the above budget production was
achieved despite a number of interruptions to underground mine
operations due to upgrading of underground infrastructure,
including commissioning of the new underground power reticulation
system and the new main ventilation fans. The plant was also
impacted by stoppages to install the new larger secondary crusher
as well as various other crusher upgrades.
Financial details will be available in the
Company’s upcoming Annual Financial Statements. Annual production
guidance for 2020 will be reported in the first half of Q1.
Table 1 – Q4 & 2019 and 2018 Annual Production
Data
|
|
2018 Total |
Q1 2019 |
Q2 2019 |
Q3 2019 |
Q4 2019 |
2019 |
|
Tonnes Processed |
T |
79,487 |
|
26,846 |
|
37,913 |
|
32,094 |
|
30,336 |
|
127,190 |
|
Feed Grade Au |
g/t |
19.1 |
|
23.6 |
|
16.7 |
|
19.2 |
|
25.2 |
|
20.8 |
|
Feed Grade Cu |
% |
0.38% |
|
0.48% |
|
0.34% |
|
0.32% |
|
0.35% |
|
0.37% |
|
Recovery (%) Au |
% |
93.7% |
|
93.7% |
|
93.2% |
|
94.1% |
|
93.9% |
|
93.7% |
|
Recovery (%) Cu |
% |
92.9% |
|
93.9% |
|
92.5% |
|
92.1% |
|
93.7% |
|
92.8% |
|
Metal in Conc Prod Au |
Oz |
45,810 |
|
19,125 |
|
18,980 |
|
18,636 |
|
23,632 |
|
79,838 |
|
Metal in Conc Prod Cu |
T |
277.27 |
|
120 |
|
119 |
|
95 |
|
98 |
|
432 |
|
Metal in Conc Prod Ag |
Oz |
10,069 |
|
5,564 |
|
6,894 |
|
5,284 |
|
5,243 |
|
22,984 |
|
Gold Equivalent Production |
Oz |
47,237 |
|
19,788 |
|
19,652 |
|
19,170 |
|
23,646 |
|
82,256 |
|
|
August 15, 2019 Upgraded Guidance |
72-80,000 |
|
Original Guidance |
68-75,000 |
Note - Gold equivalent for 2018 and 2019 based
on the following metal prices: gold $1,300 per ounce; silver $16.50
per ounce; and copper $2.90 per pound.
John Lewins, K92 Chief Executive Officer and
Director, stated, “The production results for the fourth quarter
and the year have again exceeded expectations which is a testament
to the quality of not only the Kora North deposit but also the
entire team at Kainantu. This record production of 23,646 ozs AuEq
was delivered during a quarter in which there were significant
interruptions to underground operations resulting from the ongoing
upgrading of key infrastructure as well as interruptions to plant
operations associated with the installation of new equipment.
Importantly, underground development has
significantly ramped up over the course of the year, with total
tonnes mined, increasing from under 60,000 tonnes in Q1 to 120,000
tonnes in Q4. This increased development activity reflects the
impact of additional equipment and personnel following the decision
to go ahead with the expansion project during the first quarter of
2019. The initial focus of the expanded underground activity has
been in waste development necessary to establish increased access
to the deposit to allow the ramp up production to 400,000 tonnes
per annum by the end of 2020.
In addition, the Company continued to work on
the expansion of the Kora/Kora North Resource, with a further 26
holes completed during the quarter. Results reported included
KMDD0147A which recorded one the highest grade drill intersections
at Kora to date of 13 metres at 288.73 g/t Au, 104 g/t Ag and 0.77%
Cu (291.34 g/t AuEq (calculated using copper price of US$2.90/lb,
silver price of US$16.5/oz and gold price of US$1,300/oz).”
During Q1, the Company announced the
commencement of the expansion of the Kainantu Gold Mine in Papua
New Guinea, with a goal of doubling current capacity to 400,000
tonnes per annum and increasing annual production to an average of
120,000 AuEq oz.
Based on the preliminary economic assessment
(“PEA”) published in January 2019, the major results from the
decision to expand production include:
- Total capital expenditure for 2019 is projected to be US$30
million, comprising US$12 million in expansion capital, US$8
million in sustaining capital and US$10 million in capital
development;
- Production was projected to be 68-75,000 oz AuEq in 2019 and is
projected to be 115-125,000 oz AuEq in 2020;
- Cash costs are expected to be between US$580 and US$620 per oz
AuEq, and all in sustaining costs (“AISC”) are expected to be
US$780 to US$820 per oz AuEq in 2019, dropping to cash costs below
US$500 per oz AuEq and AISC below US$700 per oz AuEq in
2020;
- Number of employees is expected to increase from the current
650 to 750 at the end of 2019, and to 800 by the end of 2020, with
over 96% of all positions in-site being filled by PNG
Nationals;
- Based on the results of the PEA:
- Total production over the next 13 years would be 1.33 million
oz gold and 130 million lbs copper;
- Total revenue for the period would be over US$2
billion;
- Royalty payments for the period would be US$50
million;
- Tax paid to PNG Government for the period, from payroll and
corporate tax, would total US$300 million;
- Total sustaining capital of US$202 million would be required
over the 13-year period; and
- Net cashflow would be US$1.03 billion, the net present value
(“NPV5”) would be US$710 million pre-tax, or US$559 million after
tax, and the internal rate of return (“IRR”) would be in excess of
350%.
The PEA is preliminary in nature and includes
inferred mineral resources that are considered too speculative
geologically to have the economic considerations applied to them
that would enable them to be categorized as mineral reserves, and
there is no certainty that the PEA will be realized. Mineral
Resources that are not Mineral Reserves do not have demonstrated
economic viability. The Company’s decision to expand production is
not based on a feasibility study of mineral reserves demonstrating
the economic and technical viability of the expansion. As a result,
there is increased uncertainty of the economic and technical risks
of failure associated with the decision.
K92 engaged H and S Consultants Pty Ltd to
complete a Mineral Resource Estimate for the Kora North Deposit
(Table 2). This resource together with the previously reported Kora
Mineral Resource Estimate dated March 2017 (Table 3) provide the
resource base for the updated PEA.
K92 engaged Mincore Pty Ltd (“Mincore”) to
complete the PEA for the expansion of the existing processing plant
to double its capacity to approximately 400,000 tonnes per annum.
The study found that the current crushing, milling and concentrate
handling circuits have sufficient capacity to treat the Kora mine
material at a rate of 400,000 tpa, subject to upgrading the
crushing and flotation circuits and plant services. The
estimated total cost of such expansion and upgrading would be
US$3.7 million, including EPC and commissioning with a contingency
of 10%.
The technical report containing the PEA, titled,
“Independent Technical Report, Mineral Resources Estimate Update
and Preliminary Economic Assessment of Kora North and Kora Gold
Deposits, Kainantu Project, Papua New Guinea” with an effective
date of September 30, 2018 (the “Technical Report”) was prepared by
Anthony Woodward BSc (Hons.), M.Sc., MAIG, Simon Tear BSc (Hons),
EurGeol, PGeo IGI, EurGeol, Christopher Desoe BE (Min)(Hons),
FAusIMM, RPEQ, MMICA, Lisa J. Park, BEng (Chem), GAICD, FAusIMM.
Refer to the Company’s news release dated January 8, 2018 for a
summary of the Technical Report and results of the PEA. The PEA
Technical Report can be found under the Company’s profile on
SEDAR.
The Company engaged Australian Mine and
Development Pty Ltd (“AMDAD”) to undertake the PEA mine plan for
Kora and Kora North, which involved:
- applying financial and processing parameters to determine
cut-off grades for stope design;
- generating three-dimensional stope shapes and mining inventory
using the CAE Mineable Shape Optimizer (“MSO”) program;
- creating a conceptual development layout to suit the MSO
inventory;
- producing a project cash-flow model; and
- producing a simple mining schedule as input to the cashflow
model.
The key results from the PEA for the combined
Kora North and Kora deposits are as follows:
- Could have a 13-year operating life
and treat 4.9 million tonnes @ 9.0 g/t Au, 20 g/t Ag & 1.3% Cu
(11.0 g/t Au Eq*);
- Could achieve an estimated pre-tax
NPV of US$710 million (US$559 million after-tax) using
current metal prices, exchange rate and a 5% discount rate;
- Initial capital cost estimated to
be US$13.6 million, including US$3.7 million for the plant upgrade
identified in the Mincore Scoping Study;
- The additional combined development
and sustaining capital cost is estimated at US$202 million spent
over the life of mine;
- Operating cost per tonne estimated
to be US$163/tonne for the first five years and US$153/tonne
thereafter;
- Cash cost estimated to be US$429/oz
Au Eq (inclusive of a 2.5% Net Smelter Return Royalty) and AISC of
US$615/oz Au Eq;
- Production of an estimated 135,000
Au oz and 2,100 Cu tonnes over a 5-year period from 2019 through to
2023, with average production of 90,000 Au oz and 6,500 Cu tonnes
for the balance of the life of mine; and
- Current metal prices used were: Au
- US$1,300/oz; Ag – US$15/oz; Cu – US$2.90/lb.
*AuEq used in PEA calculated on above Current
Metal Prices.
The Kora North resource estimate was defined
after just twelve months of underground exploration drilling.
Table 2 - Kora North Mineral Resource
Estimate
Global Mineral Resources Kora North Gold-Copper Mine -
October 2018 |
Category |
Tonnes |
Gold |
Silver |
Copper |
AuEq |
|
Mt |
g/t |
Mozs |
g/t |
Mozs |
% |
Mlbs |
g/t |
Mozs |
Measured |
0.15 |
18.7 |
0.09 |
8.9 |
0.04 |
0.5 |
1.6 |
19.6 |
0.09 |
Indicated |
0.69 |
11.6 |
0.26 |
14.1 |
0.31 |
0.8 |
11.8 |
12.9 |
0.29 |
Total M & I |
0.85 |
12.9 |
0.35 |
13.1 |
0.36 |
0.7 |
13.3 |
14.1 |
0.39 |
Inferred Total |
1.92 |
10.7 |
0.66 |
13.3 |
0.82 |
0.7 |
29.5 |
11.9 |
0.74 |
M in table is
millions.
The Mineral Resource estimate was prepared and
verified by Simon Tear (PGEO), consultant to the Company and a
director of independent consultancy of H & S Consultants Pty.
Ltd., Sydney, Australia (October 2018).
Key Assumptions and Parameters of Kora
and Kora North Resource Estimate
Mineralization comprises two parallel, steeply
west dipping, N-S striking quartz-sulphide vein systems, K1 &
K2, within an encompassing dilatant structural zone hosted by
phyllite. An additional structure, the Kora Link, has also
been defined and provides a possible link between the two main vein
systems.
Underground drilling consists of diamond core
for a range of core sizes depending on length of hole and expected
ground conditions. Sampling is sawn half core under geological
control and generally ranges between 0.5m and 1m. Underground
face sampling is completed for every fired round and is to industry
standard.
QAQC data indicated no significant issues with
the accuracy of the on-site analysis.
Core recovery of the mineral zone was initially
90%, this has improved to >95%. There is no relationship between
core recovery and gold grade. Geological logging is consistent and
is based on a full set of logging codes covering lithology,
alteration and mineralization.
The geological interpretation of the vein
systems is represented as 3D wireframe solids snapped to a
combination of diamond drillhole data and underground face
sampling. Definition of the wireframes is based on identified gold
mineralisation in drillcore nominally at a 0.2g/t Au cut off in
conjunction with geological control/sense and current mining
widths.
Gold Equivalent (AuEq) g/t was calculated using
the formula Au g/t +(Cu% x 1.53) + Ag g/t x 0.0127. (No account of
metal recoveries through the plant have been used in calculating
the metal equivalent grade. However, production is currently
achieving 93% metal recovery for both gold and copper and gold is
currently providing 95% and copper 5% of the total revenue of the
mine).
Gold price US$1,300/oz; Silver US$16.5/oz;
Copper US$2.90/lb.
The mineral resource estimate for the Kora
deposit is based on the technical report prepared in accordance
with National Instrument 43-101 – Standards of Disclosure for
Mineral Projects (“NI 43-101”), and titled, “Mineral Resource
Update and Preliminary Economic Assessment of Irumafimpa and Kora
Gold Deposits, Kainantu Project, Papua New Guinea," with an
effective date of March 2, 2017. This provides additional
information on the geology of the deposits, drilling and sampling
procedures, lab analysis, and quality assurance/quality control for
the project, and additional details on the resource estimates.
Mineral Resources that are not Mineral Reserves do not have
demonstrated economic viability.
Table 3 – Irumafimpa and Kora/Eutompi Resource
Estimates
Resource by Deposit and Category |
Deposit |
Resource Category |
Tonnes |
Gold |
Silver |
Copper |
Gold Equiv |
Mt |
g/t |
Moz |
g/t |
Moz |
% |
Mlb |
g/t |
Moz |
Irumafimpa |
Indicated |
0.56 |
12.8 |
0.23 |
9 |
0.16 |
0.28 |
37 |
13.4 |
0.24 |
Inferred |
0.53 |
10.9 |
0.19 |
9 |
0.16 |
0.27 |
74 |
11.5 |
0.20 |
Kora/Eutompi |
Inferred |
4.36 |
7.3 |
1.02 |
35 |
4.9 |
2.23 |
215 |
11.2 |
1.57 |
Total Indicated |
0.56 |
12.8 |
0.23 |
9 |
0.16 |
0.3 |
4.0 |
13.4 |
0.24 |
Total Inferred |
4.89 |
7.7 |
1.21 |
32 |
5.06 |
2.0 |
218 |
11.2 |
1.76 |
M
in table is millions. Reported tonnage and grade
figures are rounded from raw estimates to reflect the order of
accuracy of the estimate. Minor variations may occur during the
addition of rounded numbers. Gold equivalents are calculated as
AuEq = Au g/t + Cu%*1.52+ Ag g/t*0.0141.
K92 Mine Geology Manager and Mine Exploration
Manager, Mr. Andrew Kohler, PGeo, a Qualified Person under the
meaning of NI 43-101, has reviewed and is responsible for the
technical content of this news release. Data verification by Mr.
Kohler includes significant time onsite reviewing drill core, face
sampling, underground workings and discussing work programs and
results with geology and mining personnel.
About K92
K92 Mining Inc. is engaged in the production of
gold, copper and silver from the Kora and Kora North deposits of
the Kainantu Gold Mine in the Eastern Highlands province of Papua
New Guinea, as well as exploration and development of mineral
deposits in the immediate vicinity of the mine. The Company
declared commercial production from Kainantu in February 2018 and
has commenced an expansion of the mine. An updated Preliminary
Economic Assessment on the property was published in January 2019.
K92 is operated by a team of mining company professionals with
extensive international mine-building and operational
experience.
ON BEHALF OF THE COMPANY,
John Lewins, Chief Executive Officer and
Director
For further information, please contact David Medilek at
+1-604-687-7130.
www.k92mining.com
NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION
SERVICES PROVIDER (AS THAT TERM IS DEFINED IN POLICIES OF THE TSX
VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR
ACCURACY OF THIS RELEASE.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION:
This news release includes certain
“forward-looking statements” under applicable Canadian securities
legislation. Forward-looking statements are necessarily based upon
a number of estimates and assumptions regarding K92 Mining Inc.’s
future financial or operating performance that, while considered
reasonable, are subject to known and unknown risks, uncertainties,
and other factors which may cause the actual results and future
events to differ materially from those expressed or implied by such
forward-looking statements. All forward-looking statements in this
news release are based on the opinions and estimates of management
as of the date such statements are made and are subject to
important risk factors and uncertainties, many of which are beyond
the Company’s ability to control or predict. All statements that
address future plans, activities, events, or developments that the
Company believes, expects or anticipates will or may occur are
forward-looking information, including statements regarding: the
realization of the preliminary economic analysis for the Kainantu
Gold Mine; the generation of further drilling results; expectations
of future cash flows; expectations of future production results;
expected success of the proposed plant expansion; potential
expansion of resources; any which may or may not occur.
Forward-looking statements and information contained herein are
based on certain factors and assumptions regarding, among other
things: there being no significant disruptions affecting the
Company’s operations; political and legal developments in Papua New
Guinea being consistent with the Company’s current expectations;
the accuracy of K92’s current mineral reserve and mineral resource
estimates; the exchange rate between the Canadian dollar and U.S.
dollar, and the Papua New Guinea Kina, being approximately
consistent with current levels; prices for fuel, electricity
and other key supplies being approximately consistent with current
levels; equipment, labour and materials costs increasing on a basis
consistent with K92’s current expectations; all required permits,
licenses and authorizations being obtained from the relevant
governments and other relevant stakeholders within the expected
timelines and the absence of material negative comments during the
applicable regulatory processes; the market price of the Company’s
securities; metal price; taxation; the estimation, timing and
amount of future exploration and development; capital and operating
costs; the availability of financing; the receipt of regulatory
approvals; environmental risks; title disputes; failure of plant,
equipment or processes to operate as anticipated; accidents; labour
disputes; claims and limitations on insurance coverage and other
risks of the mining industry; changes in national and local
government regulation of mining operations; and regulations and
other matters.
There can be no assurance that such statements
will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on
forward-looking statements. The Company disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law.
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