Q1 2019 Production highlights include:
•Q1 production of 19,125 oz of gold, 264,114 lbs copper and 5,564 oz silver for a total of 19,778 gold equivalent (“AuEq”) oz
•Record tonnage of 26,846 tonnes treated in process plant, at average grade of 23.6 g/t gold and 0.48% copper, achieving recoveries of 93.7% for gold and 93.9% for copper
•No lost time injuries (LTI’s) recorded
VANCOUVER, British Columbia — K92 Mining Inc. (“K92” or the “Company”) (TSX-V: KNT; OTCQX: KNTNF) is pleased to announce record production of 19,778 oz AuEq for first quarter of 2019 (“Q1”) at its Kainantu Gold Mine in Papua New Guinea.
During Q1, K92 produced 19,125 oz of gold, 264,114 pounds of copper and 5,564 oz of silver or 19,778 AuEq oz (based on a gold price of US$1,300/oz; silver US$16.5/oz; copper US$2.90/lb). Q1 production represents a new record for the Kainantu Gold Mine, being almost 20% higher than the previous record production of 16,451 AuEq oz achieved in Q4 2018. Recoveries for Q1 averaged 93.7% for gold and 93.9% copper.
Mining operations in Q1 continued to focus on Kora North and comprised cut and fill stope mining from the K1 vein from the 1185 mRL level as well as development tonnes from the K2 vein on the 1170 mRL level and K1 on the 1205 mRL level.
The blend of primarily K1 material with some and K2 material provided an average head grade to the process plant for Q1 of 23.6 g/t Au and 0.48% Cu. The gold head grade was above and the copper grade below the anticipated long-term average grades due to the higher proportion of K1 treated during the quarter.
Further financial details regarding Q1 and annual production for 2019 will be available in the Company’s upcoming annual financial statements.
able 1 – Q1 2019 and 2018 Annual Production Data
Q4 2018 2018 Total Q1 2019
Tonnes Processed t 24,806 79,487 26,846
Feed Grade Au g/t 21.77 19.13 23.6
Feed Grade Cu % 0.33% 0.38% 0.48%
Recovery (%) Au % 94.76% 93.68% 93.7%
Recovery (%) Cu % 93.57% 92.98% 93.9%
Metal in Conc Prod Au Oz 16,451 45,810 19,125
Metal in Conc Prod Cu t 77,460 277.27 119.78
Metal in Conc Prod Ag Oz 3,095 10,069 5,564
Gold Equivalent Production Oz 16,844 47,237 19,788
John Lewins, K92 Chief Executive Officer and Director, stated, “The production results for the first quarter are significantly above budget with an almost 20% increase in gold production in comparison to the best previous quarter. Importantly, tonnes processed during the quarter also increased by almost 10%, despite the process plant being shut down for over a week during March to allow for annual maintenance of all major components to be completed.
During the quarter, the Company commissioned the new underground dewatering system which is an extremely important part of our infrastructure. The installation of the pipework for this system extending the entire length of the incline from Kora North to surface was a significant undertaking which resulted in some disruption to operations. It was therefore pleasing that new production records could be achieved during this period.
With a formal commitment to our expansion during the quarter, an additional mobile plant was ordered and some equipment already in transit we look forward to continuing to build our production capacity during the balance of 2019.”
During Q1 the Company announced that a 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 ounces of gold equivalent (oz AuEq).
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 is projected to be 68-75,000 oz AuEq in 2019 and 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;
•Employment is expected to increase from the current 650 to 750 by 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;
?Total 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 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 1). This resource together with the previously reported Kora Mineral Resource Estimate dated March 2017 (Table 2) provide the resource base for the updated PEA.
K92 engaged Mincore Pty Ltd (“Mincore”) to complete a 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 results of the PEA. The PEA 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 Optimiser (MSO) program.
•creating a conceptual development layout to suit the MSO inventory.
•producing a project cash-flow model.
•producing a simple mining schedule as input to the cash-flow 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 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 – 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
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 Resources 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
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 (Au Eq) 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 Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects, 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.
On Behalf of the Company,
John Lewins, Chief Executive Officer and Director