K92 Mining Inc Announces Robust Kora Stage 3 Expansion PEA
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 INC ANNOUNCES ROBUST KORA STAGE 3 EXPANSION PEA
Vancouver, British Columbia, July 27, 2020 - K92 Mining Inc . (“K92” or the “ Company”)
(TSX-V: KNT; OTCQX: KNTNF) is pleased to announce the results of the Preliminary
Economic Assessment (“PEA”) on its Kora gold deposit (“Kora”), which together with its
Irumafimpa gold deposit (“Irumafimpa”) comprise the Kainantu Gold Mine Project (the “Kainantu
Project”) in Papua New Guinea. Based on the results of the study, the Company is proceeding to
a Definitive Feasibility Study (“DFS”) for the Kora Stage 3 Expansion.
Stage 3 Expansion PEA Study Highlights
• After-tax NPV5% of US$1.5 billion at US$1,500 per ounce gold, increasing to an after-
tax NPV5% of US$2.0 billion at US$1,900 per ounce gold.
• Average annual expansion run-rate production of 318,000 ounces gold equivalent
(“AuEq”)(1) per annum at 1.0Mtpa, commencing in late-2023, representing a 165%
increase from Stage 2 Expansion Life of Mine (“LOM”) average annual production.
• LOM average cash costs of US$353 per AuEq ounce and AISC(2) of US$489 per AuEq
ounce.
• Low cash costs of US$202 per gold ounce and AISC costs of US$362 per gold ounce
net of by-product credits.
• Initial pre-expansion capital cost of US$125 million and life of mine sustaining capital
cost of US$341 million with all capital costs fully funded by existing Stage 2 Kainantu
mine cash flow.
• Mine life of 12 years, including ~3 years of Stage 2 production (2021 to late-2023).
1. AuEq – calculated on the following metal prices: Au – US$1,500/oz, Ag – US$18.00/oz, Cu – US$3.00/lb.
Note that gold equivalence factors for the production estimates are different to th ose used for reporting the
Mineral Resource estimate.
2. AISC – All-In Sustaining Costs include cash costs plus estimated corporate G&A, sustaining costs and
accretion.
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.
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John Lewins , K92 Chief Executive Officer and Director, state d, “Over the past three years,
Kainantu has delivered tremendous production and exploration growth and we are very pleased
to report the results for the next major growth plan - Stage 3 Expansion. The PEA economics are
robust, with run-rate production of ~318,000 oz AuEq per annum; low average all-in sustaining
costs net of by-product credits of $362/oz gold which benefitted from higher copper grades and
economies of scale, and; an after-tax NPV5% of US$1.5 billion at US$1,500/oz. Importantly, the
Stage 3 Expansion is a low capital intensity project and within our ability to self -fund from
scheduled mine cash flow.
As a result, we are initiating a Definitive Feasibility Study (“DFS”) for Stage 3, targeting mid -
2021. Work on the new twin incline is underway and we currently have four diamond drill rigs
operational underground focused on upgrading the resource for the DFS and expanding the known
resource to the south and at depth. Surface exploration is also rapidly expanding, from the current
3 diamond drill rigs to 5 drill rigs by year -end, adding even greater focus on resource growth
near-mine and regionally.”
PEA Overview
The Kora Stage 3 Expansion PEA considers an expansion to underground mining with on -site
treatment of mine material by conventional milling, gravity and flotation recovery through a
standalone 1-million-tonne-per annum (“ Mtpa”) process plant. The PEA is derived from the
Company’s Mineral Resource Estimate for Kora (effective date of April 2, 2020) and does not
incorporate post resource drilling results.
An updated technical report prepared in accordance with National Instrument 43-101 – Standards
of Disclosure f or Mineral Projects (“NI 43 -101”), titled , “NI 43 -101 Independent Technical
Report and Preliminary Economic Assessment for Expansion of the Kainantu Project to treat 1
Mtpa from the Kora Gold Deposit, Kainantu, Papua New Guinea”, which will include the results
of the PEA discussed in this news release together with an updated Mineral Resource Estimate for
the Kora Deposit, will be filed on SEDAR at www.sedar.com under the Company’s profile by July
31, 2020.
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Table 1: Kainantu Stage 3 Expansion - Preliminary Economic Assessment Highlights
US Dollars unless otherwise stated
Life of Mine
(starting January 2021)
Post Stage 3 Completion
(2024 onwards)
Production
Mine life (years) 12 years
Total mill feed (000s tonnes) 9,788
Average mill throughput (tonnes per annum) 816 ktpa 1.0 Mtpa (run-rate)(1)
Total Metal Production
AuEq (000s ounces) 3,096 2,639
Gold (000s ounces) 2,642 2,229
Copper (mlbs) 195 177
Silver (000s ounces) 4,248 3,833
Average Annual Metal Production
AuEq (000s ounces per annum) 258 318 (run-rate)(1)
Gold (000s ounces per annum) 220 270 (run-rate)(1)
Copper (mlbs per annum) 16 21 (run-rate)(1)
Silver (000s ounces per annum) 354 450 (run-rate)(1)
Average Grade
AuEq grade (g/t) 10.4 g/t
Gold grade (g/t) 8.84 g/t
Copper grade (%) 1.0%
Silver grade (g/t) 18 g/t
Average Recovery
Gold Recovery (%) 95%
Copper Recovery (%) 95%
Silver Recovery (%) 77%
Costs
Mining cost per tonne (US$/t) $41.41 $40.18
Processing cost per tonne (US$/t) $25.20 $24.77
G&A cost per tonne (US$/t) $27.01 $23.84
Total operating cost per tonne of mill feed (US$/t) $93.62 $88.79
Sustaining capital per tonne of mill feed (US$/t) $34.63 $24.84
Total cost per tonne of mill feed (US$/t) $128.26 $113.63
Initial pre-expansion capital expenditure ($m) $125
Sustaining capital expenditure ($m) $341
Total capital expenditure ($m) $466
Cash cost per ounce AuEq ($/oz)(2)
All-in sustaining cost per ounce AuEq ($/oz)(3)
Cash cost per ounce gold ($/oz)(2)
$353
$489
$202
$341
$445
$177
All-in sustaining cost per ounce gold ($/oz) (3) $362 $301
Base Case Economic Analysis at US$1,500/oz Gold, US$3.00/lb Copper and US$18.00/oz Silver
After-tax NPV0% $2.0 billion
After-tax NPV5% $1.5 billion
IRR (%) and Payback Period (years) N/A (Self-Funded)
Economic Analysis at $1,900/oz Gold, US$3.00/lb Copper and US$18.00/oz Silver
After-tax NPV0% $2.7 billion
After-tax NPV5% $2.0 billion
IRR (%) and Payback Period (years) N/A (Self-Funded)
1. Run-rate excludes the final partial calendar year of production
2. Cash costs are net of by-product credits and are inclusive of mining costs, processing costs, site G&A and refining charges and royalties.
3. AISC includes cash costs plus estimated corporate G&A, sustaining costs and accretion.
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Kora Mineral Resource Estimate
The Company’s current Mineral Resource Estimate for Kora (effective date of April 2, 2020) was
completed by H & S Consultants Pty. Ltd. (Table 2). The Kora resource estimate provides the
resource base for the PEA, while the Irumafimpa deposit was not included in the PEA.
Table 2 – Global Kora Mineral Resource (Effective Date April 2, 2020, 1 g/t gold cut-off)
Tonnes Gold Copper Copper AuEq
(Mt) (g/t) (Moz) (g/t) (Moz) (%) (kt) (g/t) (Moz)
Measured 0.66 13.34 0.28 11.6 0.25 0.51 3.4 14.14 0.3
Indicated 2.47 8.44 0.67 16.3 1.29 0.63 15.6 9.46 0.8
Total M&I 3.13 9.47 0.95 15.3 1.54 0.61 19 10.45 1.1
Inferred 12.67 7.32 2.98 19.9 8.11 1.1 139.4 9.01 3.7
• The Independent and Qualified Person responsible for the Mineral Resource Estimate is
Simon Tear, P.Geo. of H & S Consultants Pty. Ltd., Sydney, Australia.
• Mineral Resources are not Mineral Reserves and do not have demonstrated economic
viability.
• Resources were compiled at 1,2,3,4,5,6,7,8,9 and 10 g/t gold cut-off grades.
• Density (t/m3) is on a per zone basis, K1 and Kora Link: 2.84 t/m3; K2: 2.93 t/m3; Waste:
2.8 t/m3.
• Reported tonnage and grade figures are rounded from raw estimates to reflect the order
of accuracy of the estimate.
• Minor variations may occur during the addition of rounded numbers.
• Calculations used metric units (metres, tonnes and g/t).
• Gold equivalents are calculated as AuEq = Au g/t + ((0.923 x Cu%)* 1.38)+ ((0.77 x Ag
g/t*0.0115). Gold price US$1,400/oz; Silver US$16.05/oz; Copper US$3.05/lb. Metal
payabilities and recoveries are incorporated into the AuEq formula. Recoveries of 92.3%
for copper and 77% for silver.
• Note that these gold equivalence fac tors for resource reporting are different to those
applied for the mine plan and production estimates.
Mining Operations
The Company engaged Australian Mine and Development Pty. Ltd. (“AMDAD”) to undertake the
PEA mine plan for Kora, 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 based on a mining schedule prepared by a third party
consultant engaged by K92.
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The Stage 3 Expansion mine plan is designed as an incline access operation with a series of ore
passes for efficient gravity material movement amongst sublevels and ultimately to the twin incline
for material transport to surface. Life of mine tonnage from the PEA mine plan is approximately
80% from long hole open stoping and 20% from cut and fill mining methods. Both mining methods
have already been successfully applied at the Kora deposit, with long hole stoping utilizing the
AVOCA and modified AVOCA meth ods. The AVOCA methods involve backfilling from the
overcut sublevel while the long hole stope is advanced from the undercut sublevel to limit the
strike length of the open stope. By limiting the strike length of the open stope the method is
designed to maintain stability of the stope walls and backs and increase the ultimate strike length
extracted. The application of c ut and fill mining is greate st during the earlier parts of the mine
plan until the paste fill plant is constructed in 2022. Prior to the i mplementation of the paste fill
plant, fill is exclusively unconsolidated waste backfill. Once the paste fill plant is commissioned,
the AVOCA method will be replaced by longhole stoping with cemented fill.
Stopes were identified for the mine plan based on the CAE Mineable Shape Optimiser (MSO)
program at an elevated cut-off grade of 5.5 g/t AuEq . An elevated cut-off grade was selected as
this provided the greatest discounted cash flow while resulting in only a moderate reduction in
gold equivalent ounces produced. Stope shapes with uneconomic development access were
excluded. Dilution was estimated based on a 0.5m dilution skin for both the footwall and hanging
wall using the MSO program for a minimum stope width of 3.0 metres . An additional dilution
factor of 8% (12% for K1 ) was then applied to account for external dilution from backfill and
additional falloff. The overall dilution range is 21% to 41%, with K1 and K2 averaging 31% and
26% dilution, respectively. A simple mining recovery factor of 90% was applied. The life of mine
average head grade is 8.84 g/t Au, 1.0 % Cu and 18 g/t Ag or 10.4 g/t AuEq.
The mine plan involves operating at the Stage 2 400,000 -tonnes-per-annum throughput rate until
late-2023 when the Stage 3 Expansion is online. In 2024 to the end of the mine life, the designed
throughput rate is 1 Mtpa. See Table 5 for a material movement summary as part of the simplified
economic model.
See Figure 1 for a long-section of the life of mine plan lateral and vertical development.
See Figure 2 for the Mineable Shape Optimiser (MSO) shapes at 5.5g/t AuEq cut-off long-section.
Mineral Processing, Tailings and Infrastructure
K92 engaged Mincore Pty. Ltd. to complete the PEA for the expansion of Kainantu through the
design of a standalone 1 Mtpa processing plant and supporting infrastructure. The new plant is
adjacent to the existing process plant, which has a designed throughp ut of 400,000 tonnes per
annum. The existing plant will be placed on care and maintenance upon the ramp-up of the Stage
3 Process Plant.
Run-of-mine (ROM) material is trucked ~6km from the 800 Portal to the Kainantu Process Plant,
where it is either stock piled or direct tipped. The 1 Mtpa processing plant design flowsheet
incorporates a conventional single stage jaw crushing (200tph) with direct feed SAG milling circuit
(125tph), mill that includes flash flotation and a gravity circuit to capture free gold to produce gold
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dore, followed by conventional sulphide flotation, thickening, filtering and drying for concentrate.
This circuit is based on simple conventional technology, with the flow-sheet largely similar to the
existing Kainantu processing circuit . The key differences being the Stage 3 Process Plant
implementing one-stage crush circuit (vs two -stage crushing circuit ) and SAG milling (vs ball
milling).
Tailings management upgrades are part of the Stage 3 Expansion, through the construction of a
paste fill plant to mitigate surface tailings deposition. Thickened tailings at the process plant are
designed to be pumped to the paste fill plant at the 800 Portal, with the final paste fill product
pumped underground to void stopes for fill. Residual thickened tailings report to the tailings
impoundment on surface. To support the increased processing capacity and implementation of the
paste fill plant, a new 13MW centralized standby power station will be constructed, in addition to
22kV switchyard and 11kV substation, 11kV power reticulation and 11kV overhead power line to
the 800 Portal.
See Figure 3 for the 1.0Mtpa Process Plant Flowsheet.
See Figure 4 for the location of the 1.0Mtpa Standalone Processing Plant.
Capital and Operating Costs
The initial capital cost estimate include s an overall 25% contingency and the major items are
outlined in Table 3.
Table 3: Capital Cost Estimates
US Dollars unless otherwise stated
Camp Upgrade $4.1m
Process Plant 1Mtpa $46.3m
Power Station $16.0m
Office Facilities $0.8m
Mining Fleet $25.9m
Paste fill Plant & Electricals $20.3m
Freight $11.3m
Initial Pre-Expansion Capital $124.6m
Total Life of Mine Sustaining Capital $341.3m
Totals may differ due to rounding
Table 4: Operating Cost Estimates (Life of Mine Average)
US Dollars unless otherwise stated
Mining Cost ($/t) $41.41
Processing Cost ($/t) $25.20
G&A Cost ($/t) $27.01
Total Cost Per Tonne Processed ($/t) $93.62
Totals may differ due to rounding
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Economic Analysis
In addition to preparation of mine plan schedules, AMDAD prepared a pre-tax conceptual
cashflow and discounted cashflow derived from the schedule. Tax calculations for the after-tax
cashflow and discounted cashflow were prepared by K92. A summary is shown in Table 5 and a
sensitivity analysis to gold price is shown in Table 6.
Table 5: Simplified Financial Model at US$1,500/oz Au, US$3.00/lb Cu, US$18.00/oz Ag
Year 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Mill Throughput (ktpa) 396 401 542 872 985 1,002 1,004 992 1,001 1,000 1,000 593
Gold Grade 10.97 10.77 9.02 7.38 9.50 9.12 10.17 9.24 8.57 9.20 8.65 3.71
Copper Grade 0.56% 0.57% 0.78% 0.91% 0.93% 0.85% 0.82% 1.17% 1.15% 1.16% 1.06% 0.89%
Silver Grade 11.4 12.0 13.8 13.7 17.7 17.4 16.3 18.1 23.9 20.5 19.9 15.8
AuEq Grade 11.88 11.71 10.28 8.80 10.99 10.50 11.50 11.08 10.43 11.03 10.33 5.10
Gold Production (000s oz) 133 132 149 197 286 279 312 280 262 281 264 67
Copper Production (m lbs) 4.6 4.8 8.9 16.6 19.2 17.8 17.2 24.4 24.0 24.3 22.2 11.0
Silver Production (000s oz) 111 119 185 296 433 432 405 445 592 507 493 232
AuEq Production (000s oz) 144 143 170 234 331 321 353 336 319 337 315 92
Net Revenue (US$m)(1) $198 $198 $233 $320 $454 $441 $485 $458 $434 $460 $432 $124
Total OPEX (US$m)(1) $50 $54 $62 $82 $88 $90 $90 $86 $87 $90 $87 $50
Growth Capital (US$m) $18 $39 $54 $11 $3 $0 $0 $0 $0 $0 $0 $0
Sustaining Capital (US$m) $44 $43 $42 $32 $34 $38 $27 $25 $24 $14 $10 $6
Pre-Tax Net Cashflow
(US$m) $86 $62 $76 $196 $329 $313 $367 $348 $323 $356 $334 $68
After-tax Net Cashflow
(US$m) $54 $35 $45 $144 $238 $222 $261 $247 $229 $254 $238 $52
1. Net revenue in summary model includes the impact of royalty payments.
Table 6: After-Tax NPV5% Sensitivity to Gold Price
Gold Price After-Tax NPV5% (US$B)
$1,400 $1.3 billion
$1,500 $1.5 billion
$1,600 $1.6 billion
$1,700 $1.7 billion
$1,800 $1.8 billion
$1,900 $2.0 billion
Conference Call and Webcast to Present Results
K92 will host a conference call and webcast to present the Stage 3 Kainantu Expansion PEA at
8:30 am (EDT) on Tuesday, July 28, 2020.
• Listeners may access the conference call by dialing toll -free to 1-800-319-4610 within
North America or +1-604-638-5340 from international locations.
o The conference call will also be broadcast live (webcast) and may be accessed via
the following link: http://services.choruscall.ca/links/k92mining20200728.html
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Qualified Person
K92 Mine Geology Manager and Mine Exploration Manager, Mr. Andrew Kohler, PGeo, a
Qualified Person under the meaning of NI 43-101 has reviewed and approved the technical content
of this news release. Data verification by Mr. Kohler includes significant tim e onsite reviewing
drill core, face sampling, underground workings and discussing work programs and results with
geology and mining personnel.
On Behalf of the Company,
John Lewins, Chief Executive Officer and Director
For further information, please contact David Medilek, P.Eng., CFA at +1-604-687-7130.
NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT
TERM IS DEFINED IN POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS
RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
Non-GAAP Financial Measures
In this press release, we use the terms “cash costs" and "all-in sustaining costs ". These should be
considered as non-GAAP financial measures as defined in applicable Canadian securities laws and
should not be considered in i solation or as a substitute for measures of performance prepared in
accordance with GAAP.
Cash costs per ounce is a non-GAAP term typically used by gold mining companies to assess the
level of gross margin available to the Company by subtracting these costs from the unit price
realized during the period. This non -GAAP term is also used to assess the ability of a mining
company to generate cash flow from operations. Cash costs per ounce includes mining and
processing costs plus applicable royalties, and net of by -product revenue and net realizable value
adjustments. Total cash costs per ounce is exclusive of exploration costs.
Cash costs per ounce is intended to provide additional information only and does not have any
standardized meaning under IFRS and may not be comparable to similar measures presented by
other mining companies. It should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. The measure is not necessarily indicative of cash
flow from operations under IFRS or operating costs presented under IFRS.
The Company adopted an "all-in sustaining costs per ounce" non-GAAP performance measure in
accordance with the World Gold Council published in June 2013. The Company believes the
measure more fully defines the total costs associated with producing gold; however, this
performance measure has no standardized meaning. Accordingly, there may be some variation in
the method of computation of "all-in sustaining costs " as determined by the Company compared
with other mining companies. In this context, "all -in sustaining costs" for the co nsolidated
Company reflects total mining and processing costs, corporate and administrative costs,
exploration costs, sustaining capital, and other operating costs.