KNT.TO · 2019-10-08 12:00:00

K92 MINING ANNOUNCES THIRD QUARTER RESULTS FROM THE KAINANTU GOLD MINE WITH GOLD EQUIVALENT PRODUCTION 14% ABOVE BUDGET Third Quarter (“Q3”) 2019 Production highlights include:

Production Results Financials

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 THIRD QUARTER RESULTS FROM THE KAINANTU

GOLD MINE WITH GOLD EQUIVALENT PRODUCTION 14% ABOVE BUDGET

Third Quarter (“Q3”) 2019 Production highlights include:

• Q3 production of 18,636 oz of gold, 209,287 lbs copper and 5,284 oz silver for a total

of 19,170 gold equivalent (“AuEq”) oz.

• Tonnage treated through the process plant was 32,094 tonnes, at an average grade of

19.19 g/t gold and 0.32% copper, achieving recoveries of 9 4.1% for gold and 9 2.1%

for copper.

• Kainantu Mine a dded another quarter without a ny lost time injuries (LTI’s) ,

increasing the record to 1,216 LTI free days.

• Production for the first three quarters of 2019 is a record of 56,741 oz of gold, 735,160

lbs copper and 17,742 oz silver for a total of 58,610 AuEq oz.

• Q3 AuEq production exceeded budget by 14% despite a number of interruptions

necessary for the completion of key upgrades for the current expansion project. These

include mine infrastructure , installation of gravit y circuit and the main incline

debottlenecking program consisting of three bypasses. The se upgrades have well

positioned Kainantu through year-end.

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

OTCQX: KNTNF) is pleased to announce production in the third quarter (“Q3”) exceeded budget

by 14%, with 19,170 oz AuEq produced for the quarter at its Kainantu Gold Mine in Papua New

Guinea.

During Q3, K92 produced 18,636 oz of gold, 209,287 pounds of copper and 5,284 oz of silver or

19,170 AuEq oz (based on a gold price of US$1,300/oz; silver price of US$16.50/oz; copper price

of US$2.90/lb). Production for the first three quarters of 2019 is a record of 56,741 oz of gold or

58,610 AuEq oz, compared to production of 47,237 for the entire year in 2018. Recoveries for the

first three quarters of 2019 averaged 93.7% for gold and 92.8% copper.

Mining operations in Q3 continued to focus on Kora North and comprised cut and fill stope mining

from the K1 vein at the 1,185 and 1,205 mRL level as well as development tonnes from the K1

vein on the 1,170 mRL level.

The blend of primarily K1 material provided an average head grade to the process plant for Q3 of

19.2 g/t Au and 0. 32% Cu. The gold head grade was above and the copper grade below the

anticipated long-term average grades. The above average gold grades are the result of a

combination of lower dilution being achieved in the stope and development mining combined with

a higher proportion of K1 treated during the quarter, while the below budget copper grades are the

result of treating a higher proportion of K1.

Importantly, the above budget production was achieved despite a number of interruptions to

underground mine operations due to upgrading of underground infrastructure and mining of three

bypasses in the main incline associated with the expansion project. Some interruption in plant

operations was also experienced during the quarter due to installation and commissioning of the

gravity circuit.

Financial details and a potential update of the annual production guidance for 2019 will be

available in the Company’s upcoming Q3 Financial Report.

Table 1 – Q3 & YTD 2019 and 2018 Annual Production Data

2018 Total Q1 2019 Q2 2019 Q3 2019 2019 YTD

Tonnes Processed T 79,487 26,846 37,913 32,094 96,854

Feed Grade Au g/t 19.1 23.6 16.7 19.2 19.5

Feed Grade Cu % 0.38% 0.48% 0.34% 0.32% 0.37%

Recovery (%) Au % 93.7% 93.7% 93.2% 94.1% 93.7%

Recovery (%) Cu % 92.9% 93.9% 92.5% 92.1% 92.8%

Metal in Conc Prod Au Oz 45,810 19,125 18,980 18,636 56,741

Metal in Conc Prod Cu T 277.27 119.78 118.73 94.94 333.45

Metal in Conc Prod Ag Oz 10,069 5,564 6,894 5,284 17,742

Gold Equivalent Production* Oz 47,237 19,788 19,652 19,170 58,610

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

third quarter reflect the robustness of the Kora North deposit and the ability of the team at

Kainantu to deliver on operational performance, while also focusing on major capital and

infrastructure projects for the expansion. The plant treated 32,094 tonnes at a head grade of 19.2

g/t Au, resulting in production of 19,170 oz AuEq, which was 14% above budget. The mine has

now produced 58,610 oz AuEq in the first three quarters of 2019, surpassing the 47,237 oz AuEq

for the entire 2018, and is well on target to meet our increased guidance of 72,000 to 80,000 oz

AuEq for 2019.

The Company continued to work on the expansion of the Kora/Kora North Resource, with the two

surface and three underground rigs operating on the mine lease and 30 holes completed during

the quarter.

I am also extremely pleased to report that there were no lost time injur ies during the quarter ,

extending our period without a lost time injury to 40 months.”

During Q1 the Company announced the 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 AuE q, 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 t he end of 2019, and

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

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 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 13-year

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 Kor a

North Deposit (Table 1). This resource together 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 the PEA for the expansion of the existing

processing plant to double 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 ra te of 400,000 tpa, subject to upgrading the crushing 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 re port containing the PEA, titled, “Independent Technical 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 Woodward 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 ne ws

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; and

• 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 oz 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 of Kora and Kora North Resource Estimate

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 (AuEq) 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