K92 Mining Inc. (“
K92” or the
“
Company”) (TSX
: KNT;
OTCQX
: KNTNF) is pleased to announce financial
results for the three and twelve months ended December 31, 2022.
Safety
- Strong focus on safety with zero
Lost Time Injuries (“LTI”) during the quarter and
one of the best safety records in the Australasia region since
commencement of operations.
- Proactive and focused management of
COVID-19. K92 has continuously operated throughout the COVID-19
pandemic, and has strong preventative and response plans in
place.
ProductionFourth Quarter
2022
- Record quarterly ore processed of
121,686 tonnes or 1,323 tonnes per day (“tpd”),
significantly exceeding the Stage 2 Expansion run-rate and a 22%
increase from Q4 2021.
- Record monthly ore processed
achieved in November, averaging 1,382 tpd, above the Stage 2A
Expansion run-rate of 1,370 tpd. Record daily mill tonnes processed
achieved on December 25, of 1,714 tonnes. Importantly, the records
were achieved prior to commissioning of a major Stage 2A Expansion
plant upgrade, the flotation expansion, with commissioning planned
for Q2 2023.
- Record total material mined (ore
plus waste) of 287,446 tonnes mined during the quarter, an increase
of 28% from Q4 2021.
- Strong quarterly production, the
second highest on record, of 35,538 oz gold equivalent
(“AuEq”), or 31,204 oz gold, 1,827,085 lbs copper
and 40,517 oz silver (1) (2).
- Cash costs of US$512/oz gold and
all-in sustaining costs (“AISC”) of US$870/oz gold
(2).
Full Year 2022
- Record annual production,
increasing 18% year over year, of 122,806 oz AuEq or 107,546 oz
gold, 6,247,950 lbs copper and 126,043 oz silver, achieving the
guidance range of 115,000 to 140,000 oz AuEq.
- Cash costs of US$538/oz gold and
AISC of US$864/oz gold, beating the guidance range for cash cost of
$560 to $640/oz gold, and AISC of $890 to $970/oz gold (2).
- Record annual ore processed of
448,087 tonnes, a 33% increase from 2021.
- Record ore mined of 448,079 tonnes
and total material mined (ore plus waste) of 994,175 during the
year, increases of 40% and 25% from 2021, respectively.
Financials
Fourth Quarter 2022
- Record cash position of US$109.9
million as of December 31, 2022 while remaining debt-free.
- Record quarterly revenue of US$62.0
million, an increase of 15% from Q4 2021.
- Net income of US$13.3 million or
$0.06 per share.
- Sales of 35,212 oz gold, 1,923,116
lbs copper and 44,828 oz of silver. Gold concentrate and doré
inventory of 3,612 oz as of December 31, 2022, a decrease over the
prior quarter of 3,183 oz.
- Operating cash flow (before working
capital adjustments) for the three months ended December 31, 2022,
of US$26.6 million or US$0.11 per share, and earnings before
interest, taxes, depreciation and amortization
(“EBITDA”) (2) of US$30.5 million or US$0.13 per
share.
Full Year 2022
- Record annual revenue of US$188.2
million, an increase of 22% from 2021.
- Annual net income of US$35.5
million or $0.16 per share, the second highest on record.
- Record sales of 110,654 oz gold,
6,072,879 lbs copper and 125,155 oz of silver.
- Operating cash flow (before working
capital adjustments) for the twelve months ended December 31, 2022,
of US$72.5 million or US$0.32 per share, and earnings before
interest, taxes, depreciation and amortization of US$82.2 million
or US$0.36 per share (2).
Growth
- Announced the extension to Mining
Lease 150 for an additional 10 years to June 2034, by the
Government of Papua New Guinea. The renewal was well in advance of
the original renewal date of June 2024, highlighting the strong
support from all levels of Government and stakeholders for the
Kainantu Gold Mine. Concurrently, the Board of Directors of K92
approved the Stage 3 and 4 Expansions, increasing the annual
processing throughput to 1.2 mtpa and 1.7 mtpa, respectively. This
represents a 140% increase and 240% increase, respectively, from
the Stage 2A processing capacity of 500,000 tonnes per annum
(“tpa”) (see December 6, 2022 press release).
- The Stage 2A Expansion to 500,000
tpa continued to progress during the quarter, the new filter press
and the additional TC-1000 crusher is operational, with the final
major remaining expansion item, the new rougher flotation tanks,
planned to be commissioned in 2Q 2023. Additional mining equipment
arrived on site during Q4, including a new loader. Subsequent to
year end, multiple pieces of equipment arrived at site, including a
new jumbo, loader, two integrated tool carriers, Normet explosive
charging machine, cement agitator truck and very recently a new
long hole drill rig. During the remainder of the first half of
2023, two underground trucks and one jumbo are scheduled for
delivery. The arrivals of equipment are to both replace existing
equipment and expand the fleet. The performance of the process
plant to date continues to demonstrate the potential to ultimately
exceed the Stage 2A Expansion run-rate.
- Strong results from 93 diamond
drill holes were reported from underground and surface at Kora,
Kora South, Judd, Judd South and Northern Deeps. The results
considerably extended the known drilled deposit strike length of
both the Kora-Kora South and Judd-Judd South veins systems by ~600
metres to the South. In addition, the second hole drilled at the
Northern Deeps target ~700 m north of the Kora Resource intersected
3.08 metres (2.15 m true width) at 7.18 g/t AuEq. The drilled
deposit strike length of the Kora-Kora South Vein system has now
been established to be over 2.65 km. Additionally, drilling at Kora
South and Judd South both intersected potential dilatant zone
mineralization, including Kora South underground drill hole
KMDD0495 recording multiple intersections including 30.55 m (11.80
m true width) at 12.82 g/t AuEq or 4.15 g/t Au, 78 g/t Ag and 4.79%
Cu from the K2 Vein. The hole ended in mineralization as it was
terminated early due to ground conditions and is situated more than
400 metres down-dip from the previously reported hole KUDD0002,
that intersected a dilatant zone, recording 35.90 m (23.34 m true
width) at 5.98 g/t AuEq (see October 18, 2022 press release).
- Subsequent to year end, results
from 89 diamond drill holes were reported from underground and
surface at Kora, Kora South, Judd, Judd South and Northern Deeps,
including 5 dilatant zone intersections plus multiple high-grade
results. The dilatant intersections from surface drilling include:-
KUDD0035 recording 50.05 m at 5.25 g/t AuEq from the K1 Vein,-
KUDD0033 recording 27.90 m at 10.48 g/t AuEq from the K2 Vein,-
KUDD0038 recording 14.00 m at 5.49 g/t AuEq from the K1 Vein at
Kora South,- KUDD0032 recording 30.30 m at 6.13 g/t AuEq from the
J1 Vein, and- KUDD0038 recording 28.70 m at 4.53 g/t AuEq from the
J1 Vein at Judd South.Other highlights include:- Judd surface hole
KODD0026 recording 5.40 m at 56.76 g/t AuEq from the J1 Vein, and-
Kora underground hole KMDD0504 recording 6.12 m at 88.44 g/t AuEq
from the K1 Vein (see February 21, 2023 press release).
- Significant advance of the twin
incline in Q4, with incline #2 (6m x 6.5m) advanced to 1,843 metres
and #3 (5m x 5.5m) advanced to 1,811 metres as of December 31,
2022. Overall mine development during the fourth quarter was 2,221
metres, an increase of 45% from Q4 2021 and a quarterly
record.
2023 Operational Outlook
During the first quarter the operation
experienced challenges at the process plant and the underground
mine. The process plant experienced two notable unplanned
maintenance events, with one of the mill trunnion bearings failing
and requiring immediate replacement resulting in 2 days downtime,
and a limited electrical fire in a cable tray resulting in damage
to a number of cables feeding the wet section of the process plant
for 6 days downtime. The total combined impact was 8 days of
unplanned downtime for the process plant during the first quarter.
(See February 27, 2023 press release).
The process plant has performed well after the
completion of the unplanned maintenance, achieving multiple new
daily throughput records including 1,726 tonnes processed on
February 26, 1,773 tonnes processed on February 28, 1,802 tonnes
processed on March 3 and 1,815 tonnes processed on March 11. This
is significantly higher throughput than the Stage 2A Expansion
average daily throughput rate of approximately 1,370 tonnes per
day. Additionally, we see further upside to overall process plant
performance upon commissioning of the rougher flotation cells to
double capacity in 2Q 2023.
During the second half of the first quarter,
underground mining encountered an area with more challenging ground
conditions than expected, which impacted our production stoping
rates and access to higher grade material. Generally, in this
situation, mill feed would be supplemented by mining from
additional mining fronts as we mine through the impacted area more
slowly. However, due to development rates being below budget for
several quarters during the COVID-19 pandemic, many of the
alternative mining areas were not yet developed, therefore
supplementing from our low-grade stockpile was required.
Development is a major focus as we emerge from
the pandemic environment, with record development advance achieved
in Q4 2022, development advance proceeding well year-to-date and
multiple new equipment arrivals this quarter and scheduled for
delivery in Q2 to increase our advance rates further. Furthermore,
we expect a substantial increase to our underground mining
operational flexibility near-term with two new sublevels currently
being established, and importantly, an entirely new mining front at
depth from the twin incline in the second half of this year.
As a result, we expect the first quarter to be
notably below budget, the second quarter to be moderately below
budget and annual production to be within the bottom half of the
guidance range. As noted in our operational guidance previously, we
expect the second half of the year to be our strongest in terms of
production.
The Company’s annual consolidated financial
statements and associated management’s discussion and analysis for
the year ended December 31, 2022 are available for download on the
Company’s website and under the Company’s profile on SEDAR
(www.sedar.com). All amounts are in U.S. dollars unless otherwise
indicated.
See Figure 1: Quarterly Production and AISC
ChartSee Figure 2: Quarterly Total Ore Processed, Development
Metres Advanced and Total Mined Material ChartSee Figure 3: Ore
Processed Daily Records Chart
John Lewins, K92 Chief Executive Officer and
Director, stated, “In 2022, Kainantu took another major step
forward, achieving significant growth financially, operationally,
in our resource base and from exploration in general. Financially,
the Company ended the year stronger than ever, with $110 million of
cash and no debt. Operationally, in 2022 we achieved record
production, ore tonnes processed, ore tonnes mined and underground
development. Our resource base expanded considerably, with measured
and indicated resources increasing by 92% and inferred by 251%,
driven by our updated resource estimate at Kora, maiden resource at
Judd and maiden resource at Blue Lake. Exploration outside of our
resource base has made significant progress, with record thickness
intersections recorded via dilatant zones that were first
discovered in early 2022 at Kora South and Judd South, in addition
to significant strike extensions from step-out drilling at
Kora-Kora South and Judd-Judd South. Drilling has now defined a
known drilled strike length at Kora-Kora South of over 2.65 km, and
both Kora-Kora South and Judd-Judd South are open in multiple
directions.
Importantly, in December 2022, the Government of
Papua New Guinea approved the extension of Mining Lease 150 to June
2034 with the Board of Directors of K92 concurrently approving the
Stage 3 and 4 Expansions. This is a major milestone for the Company
and all of our stakeholders as the Stage 3 and 4 Expansions plan to
transform Kainantu into one of the industry’s next world class gold
mines, with the Integrated Development Plan Stage 4 PEA case
outlining peak annual production of 500 koz gold equivalent. The
tender process is making considerable progress, and we will provide
an update once this has been completed.
Looking ahead at 2023, there is tremendous
excitement within the Company. On vein field exploration, a large
majority of our drill rigs are focused on resource growth and have
delivered strong results, including an increasing hit-rate of
dilatant zone intersections plus many high-grade intersections (see
February 21, 2023 press release). Significantly, over the next few
months, underground development plans to establish access to
multiple highly prospective exploration fronts at depth,
particularly at Kora South, Judd South, Kora Deeps and Judd
Deeps.
Operationally, we expect the second half of the
year to be our strongest in terms of production. This is driven by
the arrival of plant and equipment which has been considerably
slower than expected due to supply chain constraints, commissioning
of the Stage 2A Expansion rougher flotation cells planned for Q2
and increased underground development rates to establish new
sublevels, plus an entirely new mining front around the twin
incline. This is expected to provide a considerable increase to our
operational flexibility.
And lastly, I am very pleased to announce that
we have commenced drilling our first hole at the A1 copper-gold
porphyry target. The drill program has leveraged data from our
extensive soil geochemical program and advanced MobileMT airborne
geophysics. The initial program is targeting a depth of
approximately 500 metres to defined vectors for deeper targeted
drilling. We look forward to providing an update on A1 in due
course.”
Mine Operating Activities
|
Three months ended December 31, 2022 |
Twelve months endedDecember 31, 2022 |
Operating data |
|
|
Head grade (Au g/t) |
8.8 |
|
8.3 |
|
Gold recovery (%)
|
91.2% |
|
90.4% |
|
Gold ounces produced |
31,204 |
|
107,546 |
|
Gold ounces equivalent produced (1) (2) |
35,538 |
|
122,806 |
|
Tonnes of copper produced |
829 |
|
2,834 |
|
Silver ounces produced |
40,517 |
|
126,043 |
|
|
|
|
Financial data (in thousands of dollars) |
|
|
Gold ounces sold |
35,212 |
|
110,654 |
|
Revenues from concentrate and doré sales |
US$61,980 |
US$188,186 |
Mine operating expenses |
US$10,344 |
US$36,908 |
Other mine expenses |
US$13,120 |
US$38,914 |
Depreciation and depletion |
US$6,320 |
US$20,450 |
|
|
|
Statistics (in dollars) |
|
|
Average realized selling price per ounce, net |
US$1,652 |
US$1,711 |
Cash cost per ounce (2) |
US$512 |
US$538 |
All-in sustaining cost per ounce (2) |
US$870 |
US$864 |
Notes:
|
(1) |
Gold equivalent in 2022 is calculated based on: gold $1,793 per
ounce; silver $22 per ounce; and copper $3.95 per pound. Gold
equivalent in Q4 2022 is calculated based on: gold $1,728 per
ounce; silver $21 per ounce; and copper $3.63 per pound. |
|
|
|
|
(2) |
The
Company provides some non-international financial reporting
standard measures as supplementary information that management
believes may be useful to investors to explain the Company’s
financial results. Please refer to non-IFRS financial
performance measures in the Company’s management’s discussion and
analysis dated March 29, 2023, available on SEDAR or the Company’s
website, for reconciliation of these measures. |
K92 has not based its production decisions on
mineral reserve estimates or feasibility studies, and historically
such projects have increased uncertainty and risk of failure.
Mineral resources that are not mineral reserves do not have
demonstrated economic viability.
Conference Call and Webcast to Present
Results
K92 will host a conference call and webcast to
present the 2022 fourth quarter and annual financial results at
8:30 am (EDT) on Thursday, March 30, 2023.
- Listeners may access the conference
call by dialing toll-free to 1-800-319-4610 within North America or
+1-604-638-5340 from international locations.
The conference call will also be broadcast live (webcast) and
may be accessed via the following link:
https://services.choruscall.ca/links/k92mining2022q4.html
Qualified Person
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.
About K92
K92 Mining Inc. is engaged in the production of
gold, copper and silver at 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, is in a strong financial position. A maiden resource
estimate on the Blue Lake copper-gold porphyry project was
completed in August 2022. 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, P.Eng., CFA, President at +1-604-416-4445
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION: This news release includes certain “forward-looking
statements” under applicable Canadian securities legislation. Such
forward-looking statements include, without limitation: (i) the
results of the Kainantu Project Definitive Feasibility Study, and
the Kainantu 2022 Preliminary Economic Assessment, including the
Stage 3 Expansion, a new standalone 1.2 mtpa process plant and
supporting infrastructure; (ii) statements regarding the expansion
of the mine and development of any of the deposits; and (iii) the
Kainantu Stage 4 Expansion, operating two standalone process
plants, larger surface infrastructure and mining throughputs.
All statements in this news release that address
events or developments that we expect to occur in the future are
forward-looking statements. Forward-looking statements are
statements that are not historical facts and are generally,
although not always, identified by words such as “expect”, “plan”,
“anticipate”, “project”, “target”, “potential”, “schedule”,
“forecast”, “budget”, “estimate”, “intend” or “believe” and similar
expressions or their negative connotations, or that events or
conditions “will”, “would”, “may”, “could”, “should” or “might”
occur. All such forward-looking statements are based on the
opinions and estimates of management as of the date such statements
are made. Forward-looking statements are necessarily based on
estimates and assumptions that are inherently subject to known and
unknown risks, uncertainties and other factors, many of which are
beyond our ability to control, that may cause our actual results,
level of activity, performance or achievements to be materially
different from those expressed or implied by such forward-looking
information. Such factors include, without limitation, Public
Health Crises, including the COVID-19 Pandemic; changes in the
price of gold, silver, copper and other metals in the world
markets; fluctuations in the price and availability of
infrastructure and energy and other commodities; fluctuations in
foreign currency exchange rates; volatility in price of our common
shares; inherent risks associated with the mining industry,
including problems related to weather and climate in remote areas
in which certain of the Company’s operations are located; failure
to achieve production, cost and other estimates; risks and
uncertainties associated with exploration and development;
uncertainties relating to estimates of mineral resources including
uncertainty that mineral resources may never be converted into
mineral reserves; the Company’s ability to carry on current and
future operations, including development and exploration
activities; the timing, extent, duration and economic viability of
such operations, including any mineral resources or reserves
identified thereby; the accuracy and reliability of estimates,
projections, forecasts, studies and assessments; the Company’s
ability to meet or achieve estimates, projections and forecasts;
the availability and cost of inputs; the availability and costs of
achieving the Stage 3 Expansion or the Stage 4 Expansion; the
ability of the Company to achieve the inputs the price and market
for outputs, including gold, silver and copper; inability of the
Company to identify appropriate acquisition targets or complete
desirable acquisitions; failures of information systems or
information security threats; political, economic and other risks
associated with the Company’s foreign operations; geopolitical
events and other uncertainties, such as the conflict in Ukraine;
compliance with various laws and regulatory requirements to which
the Company is subject to, including taxation; the ability to
obtain timely financing on reasonable terms when required; the
current and future social, economic and political conditions,
including relationship with the communities in Papua New Guinea and
other jurisdictions it operates; other assumptions and factors
generally associated with the mining industry; and the risks,
uncertainties and other factors referred to in the Company’s Annual
Information Form under the heading “Risk Factors”.
Estimates of mineral resources are also
forward-looking statements because they constitute projections,
based on certain estimates and assumptions, regarding the amount of
minerals that may be encountered in the future and/or the
anticipated economics of production. The estimation of mineral
resources and mineral reserves is inherently uncertain and involves
subjective judgments about many relevant factors. Mineral resources
that are not mineral reserves do not have demonstrated economic
viability. The accuracy of any such estimates is a function of the
quantity and quality of available data, and of the assumptions made
and judgments used in engineering and geological interpretation,
Forward-looking statements are not a guarantee of future
performance, and actual results and future events could materially
differ from those anticipated in such statements. Although we have
attempted to identify important factors that could cause actual
results to differ materially from those contained in the
forward-looking statements, there may be other factors that cause
actual results to differ materially from those that are
anticipated, estimated, or intended. 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.
Figure 1: Quarterly Production and AISC
Chart
https://www.globenewswire.com/NewsRoom/AttachmentNg/c0916200-6b30-4af2-aba4-7bf85fc1a3a2
Figure 2: Quarterly Total Ore Processed,
Development Metres Advanced and Total Mined Material Chart
https://www.globenewswire.com/NewsRoom/AttachmentNg/59809690-2a30-4476-8a69-9273627550bb
Figure 3: Ore Processed Daily Records Chart
https://www.globenewswire.com/NewsRoom/AttachmentNg/e8ef7e9d-7e54-4fea-ba2d-f6009e088a82
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