K92 extends PNG mine lease, greenlights ‘transformational’ expansions

K92 Mining (TSX: KNT; US-OTC: KNTNF) announced on Tuesday two major developments for its Kainantu gold-copper-silver mine in Papua New Guinea, the first being an extension of the mine lease by 10 years to June 2034, followed by the board’s approval for the mine’s Stage 3 and 4 expansions.

The staged expansions would increase Kainantu’s annual processing throughput to 1.2 million tonnes per year and then to 1.7 million tonnes per year. This represents a 140% increase and 240% increase, respectively, from the current processing capacity.

The current run-rate throughput of 500,000 tonnes per year has already been achieved, with the last major process plant upgrade, the installation of flotation cells to double rougher capacity, expected in early 2023.

According to K92, the expansions are expected to be “transformational” for Kainantu, as demonstrated in its Stage 4 preliminary economic assessment. The study outlines a peak annual production of 500,192 gold-equivalent oz. in 2027, with a life-of-mine average all-in sustaining costs of US$687 per oz. (co-product) or US$444 per oz. net of byproduct credits.

Importantly, as detailed in a Sept. 12 news release, the growth capital cost of US$187 million, sustaining capital cost until operating both process plants of US$60 million per year, and life-of-mine sustaining capital of US$429 million are all expected to be funded from mine cash flow at US$1,600 per oz. The company has already started the tendering process for long-lead time items for the expansion.

“When we acquired the Kainantu gold mine in 2015, it was under care and maintenance and had a designed throughput of 150,000 (tonnes per year). The Stage 4 expansion targets throughput of 1.7 million tonnes per annum, a more than 11-fold increase,” John Lewins, CEO and director of K92, commented.

Since restarting the mine in late 2016, the company has transformed Kainantu into a rapidly expanding both producer and mineral resources. In May 2017, a near-mine discovery of Kora North was made. This discovery ultimately combined the Kora, Eutompi and Kora North deposits into what is now known as the Kora deposit.

The project’s Stage 2 expansion run-rate was achieved in late 2021, with the Stage 2A expansion nearing completion.

“Beyond the mine expansion, as we approach 2023, we are very excited about our exploration programs at Kainantu. We plan to expand the number of drill rigs in 2023 from the 11 currently operating, with a focus on resource expansion of our vein fields and porphyries,” Lewins added.

The Kainantu property comprises an 830-sq.-km land package in Eastern Highlands province, hosting several highly prospective vein field and porphyry targets that are already being drill tested.

In February 2022, following extensive underground drilling focused on upgrading the resources, K92 announced an updated Kora resource estimate of 2.1 million gold-equivalent oz. in 7.2 million measured and indicated tonnes grading 9.2 grams gold equivalent per tonne, and 2.5 million oz. in 8.1 million tonnes grading 9.5 grams gold equivalent.

Shares of K92 Mining jumped 4.3% by 12:25 p.m. ET following the latest update. The company has a market capitalization of $1.9 billion.