KNT.TO · 2019-04-08 12:00:00

K92 MINING ANNOUNCES FIRST QUARTER RECORD PRODUCTION FROM KAINANTU GOLD MINE Q1 2019 Production highlights include:

Production Results

Suite 488 – 1090 West Georgia Street

Vancouver, British Columbia

Canada V6E 3V7

Telephone: +1 (604) 687-7130

Facsimile: +1 (604) 608-9110

www.k92mining.com

NEWS RELEASE

K92 MINING ANNOUNCES FIRST QUARTER RECORD PRODUCTION FROM

KAINANTU GOLD MINE

Q1 2019 Production highlights include:

• Q1 production of 19,125 oz of gold, 264,114 lbs copper and 5,564 oz silver for a total

of 19,778 gold equivalent (“AuEq”) oz

• Record tonnage of 26,846 tonnes treated in process plant, at average grade of 23.6 g/t

gold and 0.48% copper, achieving recoveries of 93.7% for gold and 93.9% for copper

• No lost time injuries (LTI’s) recorded

Vancouver, BC, April 8, 2019 - K92 Mining Inc. (“K92” or the “Company”) (TSX-V: KNT;

OTCQX: KNTNF) is pleased to announce record production of 19,778 oz AuEq for first quarter

of 2019 (“Q1”) at its Kainantu Gold Mine in Papua New Guinea.

During Q1, K92 produced 19,125 oz of gold, 264,114 pounds of copper and 5,564 oz of silver or

19,778 AuEq oz (based on a gold price of US$1,300/oz; silver US$16.5/oz; copper US$2.90/lb).

Q1 production represents a new record for the Kainantu Gold Mine, being almost 20% higher than

the previous record production of 16,451 AuEq oz achieved in Q4 2018 . Recoveries for Q 1

averaged 93.7% for gold and 93.9% copper.

Mining operations in Q1 continued to focus on Kora North and comprised cut and fill stope mining

from the K1 vein from the 1185 mRL level as well as development tonnes from the K2 vein on

the 1170 mRL level and K1 on the 1205 mRL level.

The blend of primarily K1 material with some and K2 material provided an average head grade to

the process plant for Q 1 of 23.6 g/t Au and 0. 48% Cu. The gold head grade was above and the

copper grade below the anticipated long-term average grades due to the higher proportion of K1

treated during the quarter.

Further financial details regarding Q 1 and annual production for 2019 will be available in the

Company’s upcoming annual financial statements.

Table 1 - Q1 2019 and 2018 Annual Production Data

Q4 2018 2018 Total Q1 2019

Tonnes Processed t 24,806 79,487 26,846

Feed Grade Au g/t 21.77 19.13 23.6

Feed Grade Cu % 0.33% 0.38% 0.48%

Recovery (%) Au % 94.76% 93.68% 93.7%

Recovery (%) Cu % 93.57% 92.98% 93.9%

Metal in Conc Prod Au Oz 16,451 45,810 19,125

Metal in Conc Prod Cu t 77,460 277.27 119.78

Metal in Conc Prod Ag Oz 3,095 10,069 5,564

Gold Equivalent Production Oz 16,844 47,237 19,788

John Lewins, K92 Chief Executive Officer and Director, state d, “The production results for the

first quarter are significantly above budget with an almost 20 % increase in gold production in

comparison to the best previous quarter . Importantly, tonnes processed during the quarter also

increased by almost 10%, despite the process plant being shut down for over a week during March

to allow for annual maintenance of all major components to be completed.

During the quarter, the Company commissioned the new underground dewatering system which

is an extremely important part of our infrastructure . The installation of the pipework for this

system extending the entire length of the incline from Kora North to surface was a signifi cant

undertaking which resulted in some disruption to operations. It was therefore pleasing that new

production records could be achieved during this period.

With a formal commitment to our expansion during the quarter, an additional mobile plant was

ordered and some equipment already in transit we look forward to continuing to build our

production capacity during the balance of 2019.”

During Q1 the Company announced that a commencement of the expansion of the Kainantu Gold

Mine in Papua New Guinea, with a goal of doubling current capacity to 400,000 tonnes per annum

and increasing annual production to an average of 120,000 ounces of gold equivalent (oz AuEq).

Based on the preliminary economic assessment (“ PEA”) published in January 2019 , the major

results from the decision to expand production include:

• Total Capital Expenditure for 2019 is projected to be US$30 million, comprising US$12

million in expansion capital, US$8 million in sustaining capital and US$10 million in

capital development;

• Production is projected to be 68 -75,000 oz AuEq in 2019 and 115 -125,000 oz AuEq in

2020;

• Cash Costs are expected to be between US$580 and US$620 per oz AuEq, and All In

Sustaining Costs (“AISC”) are expected to be US$780 to US$820 per oz AuEq in 2019,

dropping to Cash Costs below US$500 per oz AuEq and AISC below US$700 per oz AuEq

in 2020;

• Employment is expected to increase from the current 650 to 750 by the end of 2019, and

to 800 by the end of 2020, with over 96% of all positions in -site being filled by P NG

Nationals;

• Based on the results of the PEA:

o Total production over the next 13 years would be 1.33 million oz Gold and 130

million lbs Copper;

o Total Revenue for the period would be over US$2 billion;

o Royalty payments for the period would be US$50 million;

o Total tax paid to PNG Government for the period, from payroll and corporate tax,

would total US$300 million;

o Total sustaining capital of US$202 million would be required over the period; and

o Net Cashflow would be US $1.03 billion, the Net Present Value (“ NPV5”) would

be US$710 million pre-tax, or US$559 million after tax, and the Internal Rate of

Return (“IRR”) would be in excess of 350%.

The PEA is preliminary in nature and includes inferred mineral resources that are considered too

speculative geologically to have the economic considerations applied to them that would enable

them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized.

Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

The Company’s decision to expand production is not based on a feasibility study of mineral

reserves demonstrating the economic and technical viability of the expansion. As a result, there is

increased uncertainty of the economic and technical risks of failure associated with the decision.

K92 engaged H and S Consultants Pty Ltd to complete a Mineral Resource Estimate for the Kora

North Deposit (Table 1). This resource toge ther with the previously reported Kora Mineral

Resource Estimate dated March 2017 (Table 2) provide the resource base for the updated PEA.

K92 engaged Mincore Pty Ltd (“Mincore”) to complete a PEA for the expansion of the existing

processing plant to dou ble its capacity to approximately 400,000 tonnes per annum. The study

found that the current crushing, milling and concentrate handling circuits have sufficient capacity

to treat the Kora mine material at a rate of 400,000 tpa, subject to upgrading the cru shing and

flotation circuits and plant services. The estimated total cost of such expansion and upgrading

would be US$3.7 million, including EPC and commissioning with a contingency of 10%.

The technical report containing the PEA, titled, “Independent T echnical Report, Mineral

Resources Estimate Update and Preliminary Economic Assessment of Kora North and Kora Gold

Deposits, Kainantu Project, Papua New Guinea” with an effective date of September 30, 2018 (the

“Technical Report”) was prepared by Anthony W oodward BSc (Hons.), M.Sc., MAIG, Simon

Tear BSc (Hons), EurGeol, PGeo IGI, EurGeol, Christopher Desoe BE (Min)(Hons), FAusIMM,

RPEQ, MMICA, Lisa J. Park, BEng (Chem), GAICD, FAusIMM. Refer to the Company’s news

release dated January 8, 2018 for a summary of the results of the PEA. The PEA can be found

under the Company’s profile on SEDAR.

The Company engaged Australian Mine and Development Pty Ltd (“AMDAD”) to undertake the

PEA mine plan for Kora and Kora North, which involved:

• applying financial and processing parameters to determine cut-off grades for stope design.

• generating three-dimensional stope shapes and mining inventory using the CAE Mineable

Shape Optimiser (MSO) program.

• creating a conceptual development layout to suit the MSO inventory.

• producing a project cash-flow model.

• producing a simple mining schedule as input to the cash-flow model.

The key results from the PEA for the combined Kora North and Kora deposits are as follows:

• Could have a 13-year operating life and treat 4.9 million tonnes @ 9.0 g/t Au, 20 g/t Ag &

1.3% Cu (11.0 g/t Au Eq*);

• Could achieve an estimated pre-tax NPV of US$710 million (US$559 million after -tax)

using current metal prices, exchange rate and a 5% discount rate;

• Initial capital cost estimated to be US$13.6 million, including US$3.7 million for the plant

upgrade identified in the Mincore Scoping Study;

• The additional combined development and sustaining capital cost is estimated at US$202

million spent over the life of mine;

• Operating cost per tonne estimated to be US$163/tonne for the first five years and

US$153/tonne thereafter;

• Cash cost estimated to be US$429/oz Au Eq (inclusive of a 2.5% Net Smelter Royalty) and

AISC of US$615/oz Au Eq;

• Production of an estimated 135,000 Au oz and 2,100 Cu tonnes over a 5-year period from

2019 through to 2023, with average production of 90,000 Au o z and 6,500 Cu tonnes for

the balance of the life of mine; and

• Current metal prices used were: Au - US$1,300/oz; Ag – US$15/oz; Cu – US$2.90/lb.

*AuEq – calculated on above Current Metal Prices.

The Kora North resource estimate was defined after just twelve months of underground exploration

drilling.

Table 2 - Kora North Mineral Resource Estimate

Global Mineral Resources Kora North Gold-Copper Mine - October 2018

Category Tonnes Gold Silver Copper AuEq

Mt g/t Mozs g/t Mozs % Mlbs g/t Mozs

Measured 0.15 18.7 0.09 8.9 0.04 0.5 1.6 19.6 0.09

Indicated 0.69 11.6 0.26 14.1 0.31 0.8 11.8 12.9 0.29

Total M & I 0.85 12.9 0.35 13.1 0.36 0.7 13.3 14.1 0.39

Inferred Total 1.92 10.7 0.66 13.3 0.82 0.7 29.5 11.9 0.74

M in table is millions.

The Mineral Resources estimate was prepared and verified by Simon Tear (PGEO), consultant to

the Company and a director of independent consultancy of H & S Consultants Pty. Ltd., Sydney,

Australia (October 2018).

Key Assumptions and Parameters

Mineralization comprises two parallel, steeply west dipping, N -S striking quartz -sulphide vein

systems, K1 & K2, within an encompassing dilatant structural zone hosted by phyllite. An

additional structure, the Kora Link, has also been defined and provides a possible link between the

two main vein systems.

Underground drilling consists of diamond core for a range of core sizes depending on length of

hole and expected ground conditions. Sampling is sawn half core under geological control and

generally ranges between 0.5m and 1m. Underground face sampling is completed for every fired

round and is to industry standard.

QAQC data indicated no significant issues with the accuracy of the on-site analysis.

Core recovery of the mineral zone was initially 90%, this has improved to >95%. There is no

relationship between core recovery and gold grade. Geological logging is consistent and is based

on a full set of logging codes covering lithology, alteration and mineralization.

The geological interpretation of the vein systems is represented as 3D wireframe solids snapped

to a combination of diamond drillhole data and underground face sampling. Definition of the

wireframes is based on identified gold mineralisation in drillcore nominally at a 0.2g/t Au cut off

in conjunction with geological control/sense and current mining widths.

Gold Equivalent (Au Eq) g/t was calculated using the formula Au g/t +(Cu% x 1.53) + Ag g/t x

0.0127. (No account of metal recoveries through the plant have been used in calculating the metal

equivalent grade. However, production is currently achieving 93% metal recovery for both gold

and copper and gold is currently providing 95% and copper 5% of the total revenue of the mine).

Gold price US$1,300/oz; Silver US$16.5/oz; Copper US$2.90/lb.

The mineral resource estimate for the Kora deposit is based on the technical report prepared in

accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI

43-101”), and titled, “ Mineral Resource Update and Preliminary Economic Assessment of

Irumafimpa and Kora Gold Deposits, Kainantu Project, Papua New Guinea," with an effective date

of March 2, 2017. This provides additional information on the geology of the deposits, drilling and

sampling procedures, lab analysis, and quality assurance/quality control for the project, and

additional details on the resource estimates. Mineral Resources that are not Mineral Reserves do

not have demonstrated economic viability.

Table 3 – Irumafimpa and Kora/Eutompi Resource Estimates

Resource by Deposit and Category

Deposit Resource