K92 Mining surpasses Covid-19 challenges to meet 2021 gold production goal

K92 Mining (TSX:KNT) met its reduced 2021 gold production target thanks to a strong fourth quarter and first production from the Judd vein at its Kainantu gold mine in Papua New Guinea, the company said.  

The company produced  36,145 oz. gold-equivalent in the fourth quarter— the highest quarterly output in 2021— which pushed its annual production to 104,196 gold-equivalent ounces.  

The company had reduced its annual guidance in November to between 96,000 and 102,000 gold-equivalent oz., down from its earlier guidance of 115,000 to 135,000 oz. gold-equivalent due to staff shortages from quarantine requirements and absenteeism due to Covid-19.   

“The fourth quarter delivered our strongest quarter to date at the Kainantu gold mine with record production,” John Lewins, the company’s CEO, said in a news release, adding that K92 Mining also got off to an “excellent start” in stoping at Judd, the company’s “new mining frontier.”  

“Covid-19 was certainly a factor in Q4, with a record surge of cases during the first two months driven by the Delta variant in Papua New Guinea,” Lewins stated. “Our Covid-19 control measures on site held up very well, although there were impacts from absenteeism.” 

So far K92 says over 65% of its workforce has been vaccinated with at least one dose. 

The company saw recovery rates of 92.8% and 92.9% for gold and copper, respectively, in the fourth quarter, the highest recoveries recorded last year. 

While the company was focused on infill drilling at its Kora deposit to upgrade its inferred resources to measured and indicated in 2021 for its upcoming feasibility study and updated preliminary economic assessment, in 2022, it aims to work on more exploration activities and expand its resources. 

“The resource growth vein drilling is focused on Kora, Judd, Judd South, and Kora South. Of these targets, the greatest focus in on Judd, with a majority of the underground drill rigs already targeting it. The focus is on expanding the existing known mineralized area up-dip, down-dip, and along strike to the north and south,” David Medilek, the company’s Vice President, Development and Investor Relations, told The Northern Miner. 

“These targets represent approximately 1 km strike extension of Judd and Kora… importantly, this is the first time that these targets have ever been drilled and there currently is one drill rig operating with plans to add a second drill rig shortly.” 

Medilek further said that K92 is targeting the Blue Lake porphyry, the site’s “highest priority copper-gold porphyry.”

“Over the past two years an extensive shallow surface vector drilling program was completed and we are now undertaking deeper targeted drilling, targeting the potentially higher-grade potassic core,” said Medilek.  

BMO analyst Andrew Mikitchook, who follows K92, said that the company’s fourth quarter production results “beat our expectations of 29,000 oz. gold-equivalent.”  

“Q4’s results indicated strong results at Judd where mining began in the quarter, as well as record mining tonnage and processing throughput,” he wrote in a research note to clients. “KNT is also advancing its Stage 2A expansion that will increase production 25% by year-end.”  

Mikitchook added that the company had the “benefit of having multiple mining areas.”  

“Judd opens up a new mining area at Kainantu in addition to mining at the Kora deposit, and adds operational flexibility and the opportunity to increase mining production as it ramps up,” Mikitchook noted. 

The BMO analyst expects the company’s Stage 2A expansion to increase throughput by 25% to 1,370 tonnes per day by the end of 2022. He also expects Kainantu to produce 149,000 oz. gold-equivalent this year, a 43% increase from 2021.  

“During Q4 the first stope of [the] Judd #1 vein was mined, contributing to record throughput of 99,700 tonnes at the plant (versus 89.7kt est), higher grades of 11.2 grams gold per tonne (versus 10.5 grams gold per tonne est), and strong recoveries of 92.8% (versus 90.5% est),” Ovais Habib, an analyst who covers the company for Scotiabank stated in a research note.  

Located in the Eastern Highlands province, K92 bought the 86,000-hectare Kainantu mine from Barrick Gold (TSX: ABX; NYSE: GOLD) in 2014. According to K92, the property hosts many highly prospective vein field and porphyry targets, and the company is testing multiple targets at the same time. 

At presstime, K2 Mining was trading at $7.32 per share within a 52-week trading range of $5.75 and $9.36.  The company has 221.9 million common shares outstanding for a market cap of $1.63 billion.