K92 Mining Inc. (TSX: KNT) (OTCQX: KNTNF) is pleased to announce financial results for the three and nine months ended September 30, 2024.

Production

• Record quarterly production of 44,304 ounces gold equivalent or 41,702 oz gold, 1,278,492 lbs copper and 37,613 oz silver ⁽¹⁾. With over 80% of AuEq production for the lower end of annual guidance delivered in the first 9 months of the year, the Company is well positioned to meet its 2024 operational production guidance.
• Cash costs of $584/oz gold and all-in sustaining costs of $941/oz gold⁽³⁾, significantly better than our 2024 operating guidance of $820/oz to $880/oz cash costs and $1,440/oz to $1,540/oz gold all-in sustaining costs.
• Record metallurgical recoveries in Q3 of 95.3% for gold and near-record recoveries of 95.1% copper, with September achieving record monthly gold recoveries of 96.5% and copper recoveries of 95.9%, both exceeding the recovery parameters from the Updated Integrated Development Plan, of 93% and 94%, respectively (see October 16, 2024 press release).
• Quarterly ore processed of 104,992 tonnes and total ore mined of 112,333 tonnes, with long hole open stoping performing to design, and 2,190 metres of total mine development.
• Head grade of 13.8 grams per tonne AuEq or 13.0 g/t gold, 0.58% copper and 13.0 g/t silver. AuEq head grade in Q3 was the highest since Q4 2020 and above budget, benefiting from higher grade stopes in Q2 reporting to Q3, in addition to a moderate positive gold grade reconciliation versus the latest independent mineral resource estimate (effective date of September 12, 2023 for Kora and Judd) for both gold and copper.

Financials

• Strong cash and cash equivalent position of $120.3 million, which excludes restricted cash of $20.3 million⁽⁴⁾. Under the terms of the Trafigura loan, the Company has the ability to convert restricted cash to cash and cash equivalents on January 1, 2025. During the quarter, the Company completed a drawdown of $20 million of unrestricted cash and has $60 million of unrestricted cash available to draw anytime. Unrestricted cash and cash equivalents during the quarter increased by $49.5 million.
• Subsequent to quarter end, K92 purchased put contracts for $2.2 million covering, 12,500 oz Au per month for 9 months at $2,400/oz, to protect against commodity price risk during the Stage 3 Expansion construction. K92 maintains full exposure to commodity price upside.
• Record quarterly revenue of $122.7 million.
• Record quarterly net income of $46.5 million or $0.20 per share.
• Record operating cash flow (before working capital adjustments) for the three months ended September 30, 2024, of $61.0 million or $0.26 per share, and record earnings before interest, taxes, depreciation and amortization ⁽³⁾ of $78.9 million or $0.33 per share.
• Sales of 45,248 oz gold, 1,615,185 lbs copper and 46,062 oz silver. Gold concentrate and doré inventory of 1,887 oz as of September 30, 2024, a decrease of 3,082 oz over the prior quarter.

Growth

• On the Stage 3 and 4 Expansions, 63% of growth capital has been either spent or committed as of September 30, 2024. K92 has completed handover to GR Engineering Services (GRES) for the construction of the 1.2 million tpa Stage 3 Expansion Process Plant, with commissioning of the Stage 3 Expansion Process Plant targeting the second half of Q2 2025. Majority of the long-lead time items have arrived on site for the process plant with construction most advanced at the grinding circuit (SAG + Ball), which is the critical path for the mill construction schedule. Underground, the two raise bore rigs are operational, with reaming of the first raise (5 m diameter) completed to upgrade ventilation to the main mine. The first waste/ore pass is currently being developed. Subsequent to quarter end, K92 awarded the river crossing construction contract. This contract was awarded largely on a lump sum fixed price basis and as of October 31, 2024, 69% of growth capital has been either spent or committed.
• Subsequent to quarter end, K92 announced results of its Updated Integrated Development Plan for the Kainantu Gold Mine, with an effective date of January 1, 2024, that comprises two scenarios: 1) Kainantu Stage 3 Expansion Definitive Feasibility Study Case; and 2) Kainantu Stage 4 Expansion Preliminary Economic Assessment Case.

• • Stage 3 Expansion DFS Case Highlights:
    • Evaluates the Stage 3 Expansion to 1.2 million tpa, representing a 100% throughput increase from the 600,000 tpa Stage 2A Expansion throughput
    • Involves a new standalone 1.2 mtpa process plant, which is currently under construction
    • After-tax NPV5% of $680 million at $1,900 per ounce gold, rising to an after-tax NPV5% of $1.2 billion at $2,600 per ounce gold
    • Average annual run-rate production of 303,288 ounces AuEq per annum and a peak annual production of 319,360 ounces AuEq in 2027
    • Life of Mine average cash costs of $380 per gold ounce or $694 per AuEq ounce and AISC of $665 per gold ounce or $920 per AuEq ounce over a 7-year mine life
    • Growth capital of $194 million and life of mine sustaining capital of $337 million
  • Stage 4 Expansion PEA Case Highlights:
    • Evaluates two-stages of expansions to a run-rate throughput of 1.8 mtpa, a 200% increase from the 600,000 tpa Stage 2A Expansion throughput
    • Involves running the new 1.2 Mtpa process plant in conjunction with the current 600,000 tpa Stage 2A process plant
    • After-tax NPV5% of $2.3 billion at $1,900 per ounce gold, rising to an after-tax NPV5% of $3.5 billion at $2,600 per ounce gold
    • Average annual run-rate production of 413,593 ounces AuEq per annum and a peak annual production of 484,692 ounces AuEq in 2034
    • Life of Mine average cash costs of $174 per gold ounce or $633 per AuEq ounce and AISC $432 per gold ounce or $822 per AuEq ounce over a 14-year mine life
    • Growth capital of $201 million and life of mine sustaining capital of $900 million

See the Company’s new release dated October 16, 2024 for additional details.

• Subsequent to quarter end, results from the third set of holes were reported from K92’s maiden drill program at the Arakompa project. Between the high-grade lodes, the tonalite to dioritic host rock is overprinted with porphyry style mineralization increasing the potential for bulk mining. The target size of Arakompa is very large, with mineralization demonstrated from drill holes, rock samples and surface workings for at least 1.7 km of strike, hosted within a ~150-225 m wide mineralized intense phyllic altered package, and exhibits a vertical extent of +500 m. Arakompa is sparsely drilled, with K92’s maiden drill results representing the first drilling on the project completed in 32 years. Exploration has ramped up from 1 rig in Q1 2024 to 4 rigs currently operating. K92 is targeting a maiden mineral resource estimate for Arakompa by Q1 2025. Highlights from the third set of drill results include:
  • Potential thick high-grade zone discovered from two holes stepping out 250 metres along strike to the south, encountering both high-grade and bulk mineralized zones:
    • KARDD0029: 20.60 m at 9.87 g/t AuEq, including 10.70 m at 14.97 g/t AuEq
    • Located ~60 metres up-dip, KARDD0025 recording 23.60 m at 6.57 g/t AuEq, including 12.00 m at 11.16 g/t AuEq
  • Significant extension of bulk tonnage strike by ~250 metres to the south to a total interpreted strike now exceeding 750 metres, with bulk tonnage intersections reported to date recording an average true thickness of 56 meters and mineralization reaching a vertical depth of up to 350 meters, with highlights including:
    • KARDD0025 (~250 m southern step-out along strike): 100.80 m at 1.92 g/t AuEq
    • KARDD0030 (~125 m southern step-out along strike): 111.62 m at 1.53 g/t AuEq
    • KARDD0018: 57.0 m at 1.58 g/t AuEq
    • KARDD0028: 45.9 m at 1.88 g/t AuEq
  • Other high-grade intersections include:
    • KARDD0018: 1.30 m at 35.72 g/t AuEq and 4.00 m at 6.59 g/t AuEq
    • KARDD0030: 5.40 m at 5.88 g/t AuEq and 1.62 m at 33.52 g/t AuEq
    • KARDD0013: 7.10 m at 5.69 g/t AuEq
    • KARDD0023: 2.00 m at 14.60 g/t AuEq

See the Company’s news release dated October 22, 2024 for additional details.

The Company’s interim consolidated financial statements and associated management’s discussion and analysis for the three and nine months ended September 30, 2024 are available for download on the Company’s website and under the Company’s profile on SEDAR+ (www.sedarplus.ca). All amounts are in U.S. dollars unless otherwise indicated.

See Figure 1: Quarterly Production, Cash Cost and AISC Chart

John Lewins, K92 Chief Executive Officer and Director, stated, “The third quarter delivered our strongest quarter to date, achieving multiple records and importantly, a significant strengthening to our net cash position while concurrently progressing construction and development for the Stage 3 and 4 Expansions. Our financial position is strong – at quarter end, the cash balance has grown to $120 million, plus multiple other liquidity sources including $20 million of restricted cash that K92 has the ability to convert to cash and equivalents on January 1, 2025; $60 million in undrawn credit facilities; another $30 million of credit available through an accordion feature, and; cash flow from operations with $2,400/oz put contracts in place until June 2025 to protect commodity price downside while retaining full upside exposure to the record gold price environment.

As at October 31, 2024, 69% of growth capital has been either spent or committed, several major contracts have been awarded on a majority lump sum / fixed price basis de-risking capital costs, and with less than 7 months to the planned commissioning of our Stage 3 Process Plant, there is a tremendous amount of excitement within the organization, as it will mark the transition of K92 to a Tier 1 Mid-Tier Producer.”

Mineral resources that are not mineral reserves do not have demonstrated economic viability.

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 and is working to become a Tier 1, mid-tier producer through ongoing expansions. 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.