K92 Mining Inc. (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 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.

Production
Fourth Quarter 2022

• Record quarterly ore processed of 121,686 tonnes or 1,323 tonnes per day 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, 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 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 ⁽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 (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 Chart
See Figure 2: Quarterly Total Ore Processed, Development Metres Advanced and Total Mined Material Chart
See 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

Notes:

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.

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.

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