K92 Mining Inc. announces production results for the third quarter of 2023 at its Kainantu Gold Mine in Papua New Guinea, of 26,225 oz AuEq or 22,227 oz gold, 1,784,009 lbs copper and 40,233 oz silver. Sales during the quarter were 18,339 oz gold, 1,255,291 lbs copper and 30,484 oz silver.
Production for the quarter was impacted from the safety incident on June 28 (see June 28, 2023 press release - K92 Mining Reports Mine Accident Resulting in Two Fatalities and July 6, 2023 press release – K92 Mining Resumes Mining Operations at Kainantu Gold Mine), which resulted in the suspension of underground mining for 9 days, delaying high-grade stoping tonnes that was originally sequenced to be mined in September, to Q4, and scheduled maintenance of the process plant for 4.5 days in mid-July. Fourth quarter production is expected to be the strongest for the year, driven by a higher grade stoping and ore development mining sequence.
K92 is pleased to announce that in the second half of September, the first ore tonnes were mined from the twin incline, approximately 2 months earlier than expected, after thick Judd mineralization was encountered while developing the first waste pass access drive, in an area sparsely drilled and previously interpreted to be waste. Two ore drives advanced ~7 metres to the south and north, with multiple high-grade faces from channel samples recorded, including: Southern Drive – 4.6 m at 14.89 g/t AuEq (7.16 g/t Au, 161 g/t Ag, 3.56% Cu) and 6.8 m at 11.77 g/t AuEq (6.53 g/t Au, 2.35% Cu, 117 g/t Ag), and; Northern Drive – 4.3 m at 7.19 g/t AuEq (2.77 g/t Au, 2.25% Cu, 64 g/t Ag) (see figures 6-7). A diamond drill rig is planned to commence drilling shortly in this area to assess its potential and to determine which Judd vein the drive corresponds to (i.e. J1, J2 or potentially a splay of the J1 vein). Mining of Kora via the twin incline is expected to commence in December, and as this second mining front is developed, we anticipate a strong boost to mine flexibility and productivity, leveraging the large and highly efficient twin incline infrastructure.
During the quarter, the process plant set multiple daily processing throughput records, including a new monthly record in September of 1,542 tpd and a new daily record on September 28 of 1,867 tonnes processed ( 3 ) , representing rates that are 13% and 36% above the Stage 2A Expansion annual average run-rate of 1,370 tpd, respectively. Subsequent to quarter end, new daily records of 1,902, 1,921 and 2,027 tonnes processed ( 3 ) were achieved on October 6, 8 and 10, respectively, highlighting the significant throughput potential of the Stage 2A process plant (see figure 2). Quarterly ore processed was 121,201 tonnes, or an average of 1,317 tpd, which is the second highest on record, even with the 4.5 days of shutdown due to scheduled mill maintenance in mid-July.
Following the commissioning of the Stage 2A Plant Expansion in May, the process plant has continued to record a significant increase in metallurgical recoveries for gold and copper. Recoveries for Q3 averaged 92.0% for gold and 93.0% for copper, significantly higher than the 2022 average of 90.4% for gold and 90.5% for copper. In the month of September, a new recovery record of 93.7% for copper was achieved. Optimization efforts are ongoing, including to increase throughput that we believe has the potential to be materially greater than its nameplate design, as shown in the paragraph above.
In the third quarter, the mine delivered yet another material movement record despite operations being impacted in July due to the safety incident, with 124,236 tonnes of ore mined and 305,506 tonnes of total material mined (ore plus waste). During the quarter, 11 levels were mined, and the mill head grade averaged 7.32 g/t AuEq or 6.20 g/t gold, 0.72% copper and 12.84 g/t silver, head grade was impacted by significantly more than budgeted processing of lower grade stockpiles following the safety incident on June 28, that suspended mining operations for 9 days. Mining on Kora was conducted on the 1110, 1130, 1150, 1170, 1185, 1265, 1285, 1305 and 1325 levels, and Judd on the 840, 1225, 1285, 1305 and 1325 levels.
Overall mine development totaled 2,227 metres, an increase of 18% from Q3 2022, and significant advancement of the twin incline in Q3, with incline #2 (6m x 6.5m) advanced to 2,639 metres and #3 (5m x 5.5m) advanced to 2,660 metres as of September 30, 2023. The twin incline is over 90% complete.
See Figure 1: Quarterly Total Ore Processed, Development Metres Advanced and Total Mined Material Chart
See Figure 2: Process Plant Throughput Performance and Daily Records
See Figure 3: Overview of Mine Infrastructure Upgrades
See Figure 4: Comparison of 800 Portal Incline and Twin Incline Infrastructure
See Figure 5: Mining Front Location Longsection
See Figure 6: Long Section with Judd 840 Level Development Location
See Figure 7: Judd 840 Level Southern Drive
Operational Guidance
As a result of the unexpectedly challenging first quarter and the impacts of the safety incident on June 28, 2023, the Company is updating its production guidance to 111,000 to 116,000 oz AuEq (originally 120,000 to 140,000 oz). Cash cost and all-in sustaining cost guidance remains unchanged at $620 to $680 per ounce gold and all-in sustaining costs at $1,180 to $1,300 per ounce gold. Exploration, driven by the very promising results to date from our vein and porphyry drill programs has been increased to $20 million (originally $13 million to $16 million).
Looking ahead, we see multiple positive near-term outcomes, including:
- Strong production forecasted for Q4, expected to be the strongest of the year, driven by the mining sequence delivering higher grades.
- Demonstrated additional process plant throughput capacity following the Stage 2A Expansion, with September monthly throughput exceeding the annual run-rate average throughput of 1,370 tpd, by 13%, and multiple daily records set in late-September and early-October of between 1,867 to 2,027 tonnes processed ( 3 ) .
- Transformation of underground mine productivity underway, driven by significant investment in mine infrastructure (see figures 3-4), including:
- Twin incline (>90% complete; completion targeting year-end 2023).
- Ore and waste pass system connecting the main mine with the twin incline (targeting completion Q3 2024).
- Puma vent incline (targeting completion mid-2024).
- Interim vent fan upgrade to increase main mine flowrates by 30% (targeting completion year-end 2023).
- Stage 3 internal vent rise upgrade (targeting completion mid-2024).
- Significant boost to mine flexibility and production potential through tripling the number of mining fronts in 2024 (from one currently at Kora and Judd in the main mine area), with the twin incline mining front, supported by large and highly-productive infrastructure beginning to come online in Q4 2023, followed by mining between the twin incline and main mine area in 2024 (see figure 5). These mining fronts will be supported by significantly upgraded infrastructure as noted above.
- Significant focus on resource growth and expansion from vein field and porphyry exploration, including an expanded exploration program in 2023 (increased to $20 million from $13 million to $16 million).
John Lewins, K92 Chief Executive Officer and Director, stated, “Having just completed a site visit at the Kainantu Gold Mine a few days ago, there is a tremendous amount of enthusiasm within the Company for the near, medium and long-term, while certainly taking on board lessons learned from the first nine months of 2023 to make the operation stronger going forward.
On production, we expect the fourth quarter to be the strongest of the year, benefitting from a higher grade stoping sequence. Going forward, a major positive is the significant demonstrated available capacity of the process plant, which continues to exceed expectations and has provided the Company with considerable optionality. In September, the mill set a new monthly throughput record 13% greater than the 1,370 tpd annual average throughput (500,000 tpa), and recently the mill delivered a flurry of new daily records including 2,027 tonnes processed ( 3 ) on October 10.
Progressively over the next 12 months, the infrastructure upgrades made to the underground mine are expected to be transformational, providing a significant boost to mine flexibility and productivity, which in conjunction with a tripling of mining fronts in 2024, is projected to materially boost the production capacity of the underground mine. The Stage 3 Expansion surface infrastructure upgrades including the new standalone 1.2 mtpa process plant, in conjunction with the underground infrastructure upgrades, over the next 18 months, are expected to fundamentally transform the business into a high-grade, low-cost Tier 1 producer as outlined in the Integrated Development Plan (“IDP”, see September 12, 2022 press release). Importantly, the growth capital as outlined in the IDP is fully funded after announcing the $100 million senior secured loan (see September 26, 2023 press release).
Given K92’s strong liquidity position for the Stage 3 and 4 Expansions and the positive reported exploration results to date, we are pleased to be increasing our exploration expenditures for 2023 to $20 million from $13 to $16 million originally planned. Exploration is significantly progressing at both our vein and porphyry targets, and in addition to progressing our existing programs, we expect to expand the number of high-priority targets drilled concurrently in the near-term.”
Figure 1: Quarterly Total Ore Processed, Development Metres Advanced and Total Mined Material Chart
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Figure 2: Process Plant Throughput Performance and Daily Records
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Figure 3: Overview of Mine Infrastructure Upgrades
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Figure 4: Comparison of 800 Portal Incline and Twin Incline Infrastructure
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Figure 5: Mining Front Location Longsection
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Figure 6: Long Section with Judd 840 Level Development Location. Note: Drilling is planned to commence shortly to determine the mineralization potential around the Judd 840 Level in addition to which Judd vein the drive corresponds to (i.e. J1, J2 or potentially a splay of the J1 vein).
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Figure 7: Judd 840 Level Southern Drive. Face highlights from this ~7 m drive include 4.6 m at 14.89 g/t AuEq (7.16 g/t Au, 161 g/t Ag, 3.56% Cu) and 6.8 m at 11.77 g/t AuEq (6.53 g/t Au, 2.35% Cu, 117 g/t Ag).
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