K92 Mining (KNT) - Self-Funded Growth toward 300,000oz Gold Production

K92 Mining Inc. is a mineral exploration and development company that owns and operates the Kainantu Gold Mine in Papua, New Guinea. This mine is a high-grade, low-cost underground mine located in a region known for tier 1 deposits. The company is operated by an experienced team of mining professionals who have been collectively involved in building over 20 mines and $5bn in buyouts. 

We met with John Lewins, CEO and Director, K92 Mining. John has over 35 years of experience in the mining industry. He has served as an Executive General Manager, Director, and CEO at a number of mining companies including First Dynasty Mines, Platinum Australia, MIM Holdings, and African Thunder Platinum. He also serves as the Chairperson for the K92 Health and Safety Committee. 

Company Overview

K92 Mining is a gold, silver, and copper mining company founded in 2010, headquartered in Vancouver, British Columbia. The company is listed on the Toronto Stock Exchange (TSX: KNT) and the OTC Markets (OTCQX: KNTNF). K92 mining was recognized among the best 50 companies on the OTCQX in 2021. Their flagship asset is the Kainantu Gold Mine, located in the Eastern Highlands province of Papua, New Guinea, which was acquired in 2014 from Barrick Gold.  

K92 Mining has a current market cap of $1.8Bn USD with $60M in cash reserves. The company's operation is self-funded and features a high-grade supply. Their production cost is the lowest in the world at $600 and sub-$700 for long-term production. 

The company spent a major part of early 2021 focused on opening up the mine. They have been able to manage 20% higher plant throughputs on a daily basis. Since their mill is at spare capacity, the company is looking to expand its supply from the original 400,000t/year to 500,000t/year. They have a second filter press at the site and have also ordered an additional crusher to handle concentrates. The company is ramping up its underground production and development and has doubled its capacity compared to the previous year. 

The Kainantu Gold Mine

The Kainantu Gold Mine was acquired by K92 mining in 2014 and restarted in 2016. The company has transformed the mine into a rapidly expanding project with a high-grade supply at a low production cost. This land package is spread across a land area of 725 square kilometers and is under planning expansion to 925 square kilometers. This property is a Tier 1 gold asset with multiple highly prospective vein field and porphyry targets. This asset is one of the highest-grade mines in the world with an average range between 10g/t - 17g/t. The company output a 100,000oz gold supply in 2020 and is looking to grow it by 10%-30%. 

K92 Mining is currently in stage 3 of expansion where they plan to reach a supply of 250,000oz by 2024, and 350,000oz by 2025. The company is focused on underground and surface exploration. They recently reported an additional 43 holes at the Kora deposit, all of which feature mineralization. 20% of these holes have a grading of 20g/t, while 40% had 10g/t grading. 

Twin Incline Construction

To support the stage 3 expansion, the company has developed a new twin incline which supports the increase in supply. The twin incline construction commenced last year and so far, the company has managed to construct 450m of this incline utilizing their own workforce instead of contractors. 

For stage 3 of the operation, the company required 1.2Mt/year capacity for the twin incline, however, they are building a 3Mt/year capacity keeping stage 4 of the operations in mind. The company's twin incline will provide a deeper platform 300m below the existing incline. 

Operational Challenges Due to Covid

Despite the covid restrictions, K92 Mining has been able to grow its production supply from 200,000t/year to 400,000t/year. They were able to increase their throughput by 40% in 2020, significantly adding to their overall ounces. 

The company has 1,000 employees in Papua, New Guinea (PNG), out of which 60% are locals and 4% are expats. The company has an agreement with the Australian and the PNG government to operate a weekly charter between the two destinations. The mining operations are being carried out in a bubble where mandatory quarantine measures and testing are being followed. 

As the mining industry accounts for more than 40% of the GDP and 85% of exports in Papua, New Guinea. Given the stringent protocols being followed, the company has garnered significant support from the PNG government. 

K92 Mining is carrying out regular testing for its staff and is working with the local government to facilitate vaccine rollout. Even though the company is listed in Canada, they see themselves as a PNG company as a major portion of their workforce are locals. 

The Kora and Judd Deposits

The first hole at the Kora deposit was drilled in May 2017, where the company took its first bulk sample in October and declared commercial production in January 2018. The company also plans to bring the Jaden site into production in 2021. 

K92 Mining has also brought additional stopes under operation, focused on development. Their main focus is on the 2 vein systems, K1 and K2. This twin vein system is being mined at multiple levels over a 1,000m x 1,000m resource. 

Located 200m to the east, the company has the Judd vein system which is currently being drilled. The company has drilled 16 holes so far with 300m of development averaging 3-3.5m at an average grade of 10g/t. 

They plan to start production from the first stope by the end of 2021. It features an unexplored vein system with good intersections. The Judd deposit intersections rank among the top 5 in the world. The company is prioritizing the testing of this site and is looking to quickly move into production. 

This stope is high grade with average deposits around 12g/t. The company also has the Kora deposit in its portfolio which has a 4Moz resource. The company's feasibility study is based on K1, K2, and the Kora resource which has a potential of 1.2Mt/annum, 350,000 supply. Based on the bulk samples collected from the Judd deposit, there are strong metallurgical indications with 90% recoveries in high-grade deposits. 

K92 Mining has already drilled an area of 1,000m x 1,000m at Kora from the surface. There's another 1,000m area planned for exploration in the south. They have started expanding the resource outside their mining lease while simultaneously expanding the holes, which led to the discovery of strong intersections. Although mineralization was found during exploration, the depth of these indications remains to be determined. 

The Judd deposit runs parallel to Kora and features a similar strike length. The resource indications at Judd were 3m at 270g/t, located 100m below the surface. At 600m depth, the company found 5m deposits at 500g/t. 

At the Kora deposit, the company currently has 40 drill holes. K92 Mining has employed 4 surface drills along with 5 underground drills to support their exploration program. They plan to further increase the number of underground rigs by factoring in the aspects including infrastructure, ventilation, and power. 

Planned PEA and DFS

K92 Mining has a complete Feasibility Study underway which is scheduled to complete by Q1 2022. Although the study was planned to conclude by 2021 end of 2021. This timeline factors in any unforeseen delays caused by the pandemic. 

Once this study is in place, the company will immediately move to the development phase. The company already has PEA (Pre-Economic Assessment) in place and has a DFS (Detailed Feasibility Study) planned. The DFS will majorly focus on the measured and indicated resources. 

The company also has a resource update planned to increase its overall supply. Their previous resource stood at 1.1Moz measured and indicated with 3.7Moz inferred. To qualify for the feasibility study, the company is looking for a 2Moz measured and indicated resource. The majority of the company's drilling is infill with a strong focus on resource expansion.

During the phase 3 expansion, the company has cost projections in the $1,500/oz range, further increasing their cash position. The company plans to spend $60M in CapEx (Capital Expenditure) accounting for $30M in expansion and $30M towards sustenance. In 2021, the company is looking to pay an estimated $30M in taxes. The projected cash reserves towards the end of 2021 are estimated at $60M-$70M. 

The company has a 700 square kilometers area of ground that surrounds the mine with 5 leases of exploration and 2 additional leases granted. The Blue Lake deposit, a porphyry target, is currently being drilled and results are expected to come out by Q3 2021. 

CSR (Corporate Social Responsibility) Initiatives

K92 Mining has a strong local workforce with expats only accounting for 4% of the total employees in Papua, New Guinea. They are helping the local population develop the skills, knowledge, and expertise which provide them with employment opportunities. The company also serves as a major sponsor at the university, providing more than 50 scholarships with the community kids for higher education. The company is a major taxpayer in the region and has taken measures to ensure ethical land expansion. The company has taken measures to ensure that the sentiments and culture of the local tribes are respected. 

K92 Mining is focused on self-funded growth with a strong cash flow and massive expansion planned in the years that follow. The company's Kora North deposit received the PDAC Discovery of the Year award. The company has also been awarded the prestigious Thayer Lindsley Award. They have a strong working relationship with the government, the local communities in Papua, New Guinea.

To find out more, go to the K92 Mining Website