K92 Mining Inc. (TSX: KNT) (OTCQX: KNTNF) is pleased to announce financial results for the three months and nine months ended September 30, 2023.

Production

• Quarterly production of 26,225 ounces gold equivalent ⁽¹⁾⁽²⁾ or 22,227 oz gold, 1,784,009 lbs copper and 40,233 oz silver.
• Cash costs of US$684/oz gold ⁽²⁾ and all-in sustaining costs of US$1,300/oz gold ⁽²⁾.
• Multiple processing throughput records set in Q3, including a monthly record in September averaging 1,542 tonnes per day and a new daily record on September 28 of 1,867 tpd, 13% and 36% above the Stage 2A Expansion annual average run-rate of 1,370 tpd ⁽³⁾, respectively. Subsequent to quarter end, new daily records of 1,902, 1,921 and 2,027 tonnes processed were achieved on October 6, 8 and 10, respectively. Quarterly ore processed was 121,201 tonnes or 1,317 tpd.
• Strong metallurgical recoveries of 92.0% for gold and 93.0% for copper, significantly higher than the 2022 average of 90.4% for gold and 90.5% for copper, following the successful completion of the final upgrade for the Stage 2A Plant Expansion in May.
• The average mill head grade in Q3 was 7.32 g/t AuEq or 6.20 g/t gold, 0.72% copper and 12.84 g/t silver. Quarterly ore tonnes mined of 124,236 tonnes and 305,506 tonnes of total material mined (ore plus waste).

Financials

• Cash position of US$79.9 million as of September 30, 2023. During the quarter, the Company entered into a US$100 million senior secured loan and amended offtake agreement with Trafigura Pte Ltd, further strengthening K92’s financial position and future metals payabilities. K92 expects the first drawdown to occur in Q4 2023.
• Quarterly revenue of US$32.8 million.
• Net loss in the quarter of US$0.6 million or ($0.00) per share.
• Quarterly sales of 18,339 oz gold, 1,255,291 lbs copper and 30,484 oz silver. Gold concentrate and doré inventory of 6,066 oz as of September 30, 2023, an increase of 3,668 oz over the prior quarter.
• Operating cash flow (before working capital adjustments) for the three months ended September 30, 2023, of US$10.9 million or US$0.05 per share, and earnings before interest, taxes, depreciation and amortization ⁽²⁾ of US$7.0 million or US$0.03 per share.

Growth

• Following the completion of the Stage 2A Plant Expansion to 500,000 tonnes per annum in May, the process plant has continued to perform well, delivering a significant increase to metallurgical recoveries. In September, a new recovery record of 93.7% for copper was achieved. As mentioned above, Q3 recoveries averaged 92.0% for gold and 93.0% for copper, significantly higher than the 2022 averages of 90.4% for gold and 90.5% for copper. Optimization efforts are ongoing, including to increase throughput that we believe has the potential to be materially greater than its nameplate design.
• During the quarter, K92 announced that the Board of Directors authorized the award of the US$81 million lump sum engineering, procurement, construction and commissioning Lump Sum Contract for the 1.2 million tonnes per annum Stage 3 Expansion Process Plant to GR Engineering Services Limited following a tender process, significantly de-risking potential cost increases to K92. In addition, all process plant long-lead item contracts have already been awarded on a fixed price basis (excluding freight). Following the award of the EPC Lump Sum Contract and the placement of orders for the long lead items, the forecast cost of the 1.2 mtpa Stage 3 Process Plant is within 10% of the capital cost outlined in the Kainantu Integrated Development Plan Definitive Feasibility and Preliminary Economic Assessment cases (see September 12, 2022 press release – K92 Mining Inc Announces Robust Kainantu Gold Mine Integrated Development Plan), and importantly, approximately 94% of the forecast capital cost has been fixed. This significantly mitigates K92’s cost inflation risk for the largest growth capital cost item for the Stage 3 Expansion (the 1.2 mtpa Stage 3 Process Plant), representing over half of the forecast growth capital (inclusive of attributable EPC costs) as outlined in the IDP.
• In the second half of September, the Company announced that the first ore tonnes were mined from the twin incline area, two months earlier than expected, when thick Judd mineralization was encountered while developing the first waste pass access drive, in an area sparsely drilled and previously interpreted to be waste. Two ore drives recorded multiple high-grade faces from channel samples including: Southern Drive – 4.6 m at 14.89 g/t AuEq and 6.8 m at 11.77 g/t AuEq; and Northern Drive – 4.3 m at 7.19 g/t AuEq ⁽⁴⁾. Targeted diamond drilling of this area has recently commenced, and mining Kora via the twin incline is planned to commence in December. We anticipate a strong boost to mine flexibility and productivity as this second mining front is developed.
• Strong results from 56 diamond drill holes were reported from underground and surface at Kora, Kora South, Judd, and Judd South deposits in addition to Kora and Judd Northern Deeps. The results demonstrated multiple high-grade areas, including a potential high-grade zone along the J1 Vein at the sparsely-drilled Northern Deeps area, with multiple intersections recorded at:
  • K92DD0018 recording 5.05 m at 12.51 g/t AuEq from the J1 Vein,
  • K92DD0021 recording 2.00 m at 6.94 g/t AuEq from the J1 Vein, and 3.80 m at 15.64 g/t AuEq from the K1 Footwall Vein,
  • K92DD0019 recording 1.47 m at 11.70 g/t AuEq from the J1 Vein.
• Highlights from the J1 Vein include:
  • JDD0185 recording 8.83 m at 38.08 g/t AuEq,
  • JDD0204 recording 7.50 m at 38.26 g/t AuEq, and
  • JDD0206 recording 7.67 m at 36.31 g/t AuEq.
• Highlights from the K1 and K2 Vein include:
  • K2 Vein high-grade bulge in thickness recorded from 3 holes over ~100 metre vertical:
    • KMDD0565 recording 28.05 m at 15.45 g/t AuEq,
    • KMDD0576 recording 10.60 m at 15.67 g/t AuEq, and
    • KMDD0564 recording 15.07 m at 10.47 g/t AuEq.
  • KMDD0570A recording 4.44 m at 21.42 g/t AuEq from the K1 Vein, and
  • KMDD0528 recording 1.80 m at 61.66 g/t AuEq from the K1 Vein.
• Significant advance of the twin incline in Q3 with incline #2 (6m x 6.5m) advanced to 2,639 metres and #3 (5m x 5.5m) advanced to 2,660 metres as of September 30, 2023. Overall mine development totaled 2,227 metres, an increase of 18% from Q3 2022.

The Company’s interim consolidated financial statements and associated management’s discussion and analysis for the three and nine months ended September 30, 2023 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.

Figure 1: Quarterly Production and AISC Chart

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Figure 2: Quarterly Total Ore Processed, Development Metres Advanced and Total Mined Material Chart

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Figure 3: Process Plant Throughput Performance and Daily Records

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Figure 4: Overview of Mine Infrastructure Upgrades

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Figure 5: Comparison of 800 Portal Incline and Twin Incline Infrastructure

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Figure 6: Mining Front Location Longsection

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John Lewins, K92 Chief Executive Officer and Director, stated, “During the third quarter, the Company saw a significant strengthening to its financial position, with a strong cash balance of $79.9 million, a quarter end inventory of 6,066 ounces gold equivalent subsequently sold in October and on September 26, 2023 a senior secured loan with Trafigura was announced for $100 million, financially well positioning the Company to deliver its Stage 3 and 4 Expansions while also enabling an expansion to exploration activities. Importantly, during the first nine months of the year, the Company also invested $69.4 million on property, plant and equipment and $15.3 million on exploration.

Year to date, a notable amount of progress has been made on the Stage 3 and 4 Expansions. On July 24, 2023, a major de-risking milestone was achieved, with the award of the Lump Sum Fixed Price contract for the design and construction of the 1.2 mtpa Stage 3 Process Plant to GR Engineering Services Limited. Combined with the award of various long-lead time items, approximately 94% of the forecast capital cost for the Process Plant, which represents over half of the total growth capital as outlined in the Integrated Development Plan, has been significantly de-risked on a fixed price basis. Clearing and completion of the contractor staging area is nearly complete for the process plant, contractor mobilization is scheduled for January and plant commissioning remains unchanged for the end of Q1 2025.

Various other works for Stage 3 have also made significant progress. The Front End Engineering and Design (FEED) for the Paste Fill Plant is well advanced, with the ordering of long-lead time items expected in January. The tailings storage facility lift 1C is now over 78% complete, while construction of the camp expansion to meet the workforce requirements for Stage 4 and the interim power station are also well advanced.

The underground mine is also progressing multiple infrastructure projects, including but not limited to: i) the twin incline, now over 93% complete, ii) interim ventilation fan upgrade targeting completion by year end, iii) Puma vent incline targeting completion mid-2024, iv) ore pass system for highly efficient material movements targeting completion Q3 2024, v) Pastefill system targeting soon after commissioning of the Stage 3 process plant, and, vi) underground development tripling the number of mining fronts through 2024 (see Figure 4 to 6).

These infrastructure upgrades, both underground and on surface, are expected to transform Kainantu and the business into a Mid-Tier, Tier 1 gold producer.

On operations, we continue to see the fourth quarter as the strongest for the year and re-iterate our updated guidance. The performance of the process plant has been exceptional, delivering a flurry of daily throughput records in early October including 2,027 tonnes processed ⁽³⁾ on October 10, well above the Stage 2A Plant design of 1,370 tonnes per day (see Figure 3). Development has also seen a significant step up in October, achieving a monthly record of 903 metres. Multiple initiatives are underway to increase development considerably over the next few months.

Lastly, on exploration, as previously announced, we are very pleased to have increased our exploration budget for 2023 with plans to expand the program to drill multiple new high priority targets in addition to our existing primary targets.”

Notes:

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.

Technical Report

The Integrated Development Plan for the Kainantu Gold Mine Project in Papua New Guinea is included in a Technical Report, titled “Independent Technical Report, Kainantu Gold Mine Integrated Development Plan, Kainantu Project, Papua New Guinea” dated October 26, 2022, with an effective date of January 1, 2022.

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 and 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.