KNT.TO · 2018-09-30 12:00:00

K92 MINING TO EXPAND KAINANTU GOLD MINE, PNG K92 Mining announces formal decision to double capacity at its Kainantu Gold Mine to 400,000 tonnes per annum , increasing production an average of 120,000 ozs AuEq per annum.

Corporate Updates

Suite 488 – 1090 West Georgia Street

Vancouver, British Columbia

Canada V6E 3V7

Telephone: (604) 687-7130

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NEWS RELEASE

K92 MINING TO EXPAND KAINANTU GOLD MINE, PNG

K92 Mining announces formal decision to double capacity at its Kainantu Gold Mine to

400,000 tonnes per annum , increasing production an average of 120,000 ozs AuEq per

annum.

The key aspects of the expansion include:

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

in 2020;

 Plant processing capacity is expected to be increased to 400,000 tonnes per annum

(“tpa”) by end of Q4 2019;

 Mine underground production increasing over an 18 -month period to achieve the

design capacity of 400,000 tpa by Q3 2020;

 Capital Cost for the expansion is estimated to be US$15 million spent over a 12 -

month period;

 The Preliminary Economic Assessment* (“PEA”) on the expansion estimated:

o The expansion would achieve an NPV5 of US$710 million pre-tax, or US$559

million after tax, and a total Internal Rate of Return (“IRR”) of 350%; and

o Average production of over 120,000 oz AuEq* per annum with cash costs of

US$429/oz AuEq* and all-in sustaining costs (“AISC”) of US$615/oz AuEq**

over a 13 year life;

* As reported in the “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”). Refer to the Company’s news release dated January 8, 2018 for a

summary of the results of the PEA.

**Au Eq – calculated on above Current Metal Prices of Au - US$1,300/oz; Ag –

US$15/oz; Cu – US$2.90/lb.

Vancouver, B.C. March 13, 2019 - K92 Mining Inc. (“K92” or the “ Company”) (TSXV: KNT;

OTCQB: KNTNF) is pleased to announce the commencement of the expansion of the Kainantu

Gold Mine in Papua New Guinea, to double current capacity to 400,000 tonnes per annum ,

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

Based on the PEA, the major outcomes resulting 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 ozs AuEq in 2019 and 1 15-125,000 ozs AuEq in

2020;

 Cash Costs are expected to be between US$580 and US$620 per oz AuEq , and AISC are

expected to 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 PNG

Nationals;

 Based on the outcomes of the PEA:

o Total production over the next 13 years would be 1.33 million ozs 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%.

As part of the expansion , the Company has recently purchased two Caterpillar AD45 Low

Profile trucks for underground operations, with the first truck expected on site before the end of

March and the second shortly thereafter.

John Lewins, K92 Chief Executive Officer, states, “I am extremely pleased to report that today ,

the Company is formally announcing that it has committed to the expansion of the Kainantu

Gold Mine. This expansion will double plant and mining capacity and increase production to an

average of over 120,000 ozs AuEq per annum over the next 13 years , with potentially more to

come as we ramp up our exploration efforts.

This decision follows the completion of the PEA in January, which showed a robust project

capable of producing almost 650,000 ozs Au and 10,000 tonnes of copper over the next five

years and over 1.3 million ozs and 60,000 tonnes of copper over a 13 -year life. With cash costs

of only $429/oz AuEq and AISC of $615/oz AuEq.

The Company sees this expansion as another step in developing the Kainantu Gold Mine into a

world class operation with costs potentially in the lowest quartile . The Company is committed to

a major program of exploration with three diamond drill rigs operating u nderground and major

development focused on expanding the Kora/Kora North resource with a target of 5 million ozs

by the end of 2019. With the Kora deposit open along strike and at depth , this target is

considered realistic with the current 2019 drilling p rogram scheduled to double the number of

metres drilled underground to 20,000 from less than 10,000 in 2018.

The Company has already spent almost US$3 million on mobile plant, fixed plant and the camp

in Q1 2019, all of which is part of the initial capita l expenditure required for the expansion. The

Company will continue to fund expansion capital and sustaining capital from cash flow from

production. However, it is anticipated that negotiations on a possible debt financing will be

completed by the end of Q1 2019 to ensure that the timeframe for the expansion is met.

This ability to restart operations at Kainantu, move to profitable operations and then initiate a

significant expansion of production in just over two years has been made possible in no smal l

part by the support and assistance of the PNG Mineral Resources Authority (“MRA”), the Office

of the Mining Minister and all levels of Government in PNG. Most important, however, has been

the support of our Local Landowners for the operation ; they are no t only some of our most

important stakeholders, but also make up the largest group of employees and are partners in

many aspects of the operation.

We look forward to working with all of the stakeholders in the Kainantu Gold Mine to

successfully complete this stage of development and move forward to the next”

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 t o 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 feasib ility 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 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 a 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 rate 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 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% N et Smelter Royalty)

and AISC of US$615/oz Au Eq;

 Production of an estimated 135,000 Au ozs and 2,100 Cu tonnes over a 5 -year period

from 2019 through to 2023 , with average production of 90,000 Au ozs 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 1 - 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 recoverie s 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 deposi ts,

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 2 – Irumafimpa and Kora/Eutompi Resource Estimates

Resource by Deposit and Category

Deposit Resource