The Kainantu Mine

K92 Mining Inc is focused on advancing the Kainantu Gold Mine, located in the Eastern Highlands province of Papua New Guinea, towards production.  The Kainantu property covers a total area of approx. 410km2 and was previously mined by Highlands Pacific and Barrick Gold from 2006-2009.

After being commissioned in 2006, the processing facilities operated for a cumulative total of approximately 7000 hours (292 days) before being put on care and maintenance by Barrick Gold, who continued this care and maintenance of the mill until the sale of the project to K92.

About Papua New Guinea

  • Land of large mines
  • Commonwealth country
  • Democratic government with the Prime Minister as Head of Government
  • Population of approximately 7 million people over a land area of 462,840 km2
  • Mining a major source of economic activity with multiple major mining companies operating large mines
  • Mining and petroleum industry contributes over one third of government tax revenue
  • Competitive tax and regulatory environment
  • Mining licenses issued under the terms of the Mining Act 1992

I think the Kainantu project is one of the most prospective in Papua New Guinea.  The strength of the structures and veins are most impressive. And they contain significant high grade gold!

ALEX DAVIDSON, K92 Mining Advisor & Former Executive Vice President Barrick Gold Corporation

Location & Infrastructure

The Kainantu property covers a total area of 410 km2 and is located in the Eastern Highlands Province of Papua New Guinea, approximately 180 km west-northwest of Lae.

The Kora mine is located within ML150 and the main Kainantu exploration camp and processing plant are located within LMP78 which is located within EL693. The Property includes all mine infrastructure, exploration camps, exploration data and diamond drill core.

The property is well supported by regional infrastructure, and contains nearly all the necessary site infrastructure to recommence mining operations. Elements of the infrastructure require upgrade or servicing, and these have been identified during the transition of ownership from Barrick to K92 and will now be completed.

The following descriptions are summarised from Barrick (2014).

The Kainantu project is located in a world class Cu-Au province as evidenced by the underlying geology and presence of nearby major mining projects operated by global majors Barrick, Newcrest and Harmony.

– Independent Technical Report and Resource Estimate on the Kainantu Project, Papua New Guinea

Power

Power is supplied to the Property from two sources. The primary source is the PNG Power national grid from the Ramu sub-station, located 20 km from the processing plant site. The electrical energy for Kainantu operations is delivered by PNG Power from the nearby Yonki Dam Hydroelectric Plant. In early 2010, back-up power capacity was reduced to one 530 kVa containerised 415V generator at the plant site only. Power from the national grid services both the plant area and is available up to the lower portal of the underground mine. Power reticulation is 11kV.

Processing Plant

The Kainantu processing plant is located approximately 7 km from the opening of the 800 portal which accesses the Irumafimpa Mine. The plant has been on care and maintenance since December 2008. Simple processing technology was used and following crushing, screening and grinding, sulphide bearing material was separated from non-mineralized host rock by flotation.

Water

Water for potable use is drawn from a bore well and treated at an on-site treatment plant. Raw water for use in the process plant is provided primarily from diverted discharge from the underground mine, backed up by additional capacity from bore wells and the option to draw water from Baupa Creek. Make-up water can also be supplemented by decant water from the TSF.

Office Site

Additional infrastructure at the property includes an accommodation camp at Kunian, administration offices, warehouses, equipment workshops, exploration area and an assay laboratory (Figure 3).

At the exploration area the office is accompanied by a core processing shed with extensive roller-racking for core logging. A warehouse facility provides secure locked storage for all exploration equipment and consumables, and a container laydown provides further storage for equipment and sulfidic core which would otherwise be susceptible to weather. A palletised core farm contains all available core from the history of the Project.

Mine

Underground mining at Kainantu operated from 2004 to 2008. All infrastructure has been removed from the mine.

The Irumafimpa Underground Mine comprises: the Lower 800 Portal and workshop, Upper 1300 Portal, Puma manway Portal, and various escape ways. It consists of a 6 km (5m x 5m) incline from the 840 portal to the switchback at the Kora turnoff, where breakthrough of the decline from the working levels occurred. The upper section of the incline from the switchback is 4m x 4m. Working levels 16 to 23,were each developed with a footwall drive, ore development drives, and ancillary crosscuts and stoping development. The working levels are developed at 3m x 3.5m. Two ore passes drop from the upper levels to the lower section of the incline.

Tailings Storage

A tailing storage facility (TSF) is located downstream of the process plant adjacent to the Kumian Creek, which flows into the Baupa River. Tailings were predominantly a reject from the flotation circuit used to separate gold-bearing sulfide minerals from the host rock.

Maps

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NI 43-101 Report

View K92 Mining’s Independent Technical Report & Resource Estimate on the Kainantu Project.

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Within ML150 this includes the Kora lodes which are strongly mineralised at the limit of drilling and open in all directions, as well as the Judd, Karempe and other unnamed mineralised lodes parallel to defined resources which have potentially economically grade….

– Independent Technical Report and Resource Estimate on the Kainantu Project, Papua New Guinea

Photos

History

Gold was discovered in the area in 1928 in the Kainantu alluvial gold areas on current EL1341, however modern exploration did not commence until the early 1980’s. After the discovery of Irumafimpa, Highlands Pacific Limited (“HPL”) focused on the high grade Au telluride mineralization with little work conducted on the porphyry Cu Au targets. Highlands Pacific Limited (“HPL”) commenced mining operations on the Irumafimpa deposit in 2005. Barrick (Kainantu) Limited (“Barrick”) purchased the tenement package from HPL in late 2007 and concentrated on increasing the resource at ML150 and discovering economic porphyry Cu Au mineralization. There has been a significant amount of exploration on the property by various owners. The operations history of the Kainantu ML150 Gold Mine is summarised in the table below.

The operation has been on care and maintenance since January 2009.

Resources & Reserves

   Deposit
Category
Mining
Method
Cut Off
Tonnes
Gold
Silver
Copper
Gold Equivalent
g/t Au
Mt
g/t
Moz
g/t
Moz
%
Mlb
g/t
Moz
Kora / eutompi
Inferred Mechanical 5 & 6 3.36 7.1 0.77 32.9 3.55 2.2 161 11.5 1.24
Hand 5 & 6 1.06 7.2 0.25 40.0 1.37 2.3 55 12.0 0.41
Irumafimpa
Indicated Mechanical 6 0.01 11.5 0.00 2.2 0.00 0.3 0 12.1 0.00
Hand 6 0.56 12.6 0.23 8.9 0.16 0.3 3 13.3 0.24
Inferred Mechanical 6 0.07 7.2 0.02 7.4 0.02 0.2 0 7.7 0.02
Hand 6 0.45 11.3 0.16 9.6 0.14 0.3 3 12.0 0.17

M in Table is millions. Reported tonnage and grade figures have been rounded from raw estimates to reflect the order of accuracy of the estimate. Minor variations may occur during the addition of rounded numbers. There have been no assumptions made as to metal prices or recoveries in this mineral resource estimate other than gold equivalents that are calculated for AuEq = Au g/t + Cu%*1.7308 + Ag g/t*0.0185.

  1. The current sample exploration database was supplied by Barrick in MS Access format.
  2. Estimation undertaken in Surpac™, using ordinary kriging (“OK”) in unfolded space.
  3. The estimation block size was 10m in Y and 10m in Z with width estimated in unfolded space as a variable. Grade was interpolated by domain using OK estimation with parameters based on directional variography by domain. Thickness of the vein was also estimated by OK estimation.
  4. Results validated against drill data and Inverse Distance Squared, Nearest Neighbour, Gram M Accumulation estimates and Ordinary Krige uncapped estimates.
  5. Minimum mining width of 1.2 m horizontal. Grade was diluted to account for minimum width.
  6. This mineral resource estimate is based on 78,935 metres of drilling from 767 holes, and 18,312 metres of assayed intervals across all lodes. A single vein composite was used for each drill intercept on each lode – cut-off for selection was 3 mgms Au Equivalent. There are a total of 2,003 vein composites across 19 veins, including 349 face composites.
  7. A mined out area representing the extent of current mining projected across all lodes were removed from the final model as the exact location of individual stopes is not clear.
  8. Top caps were applied to the composites for each vein.       Grade caps were selected to restrict the influence of outliers where drilling was sparse, and varied by vein.
  9. A minimum of 2 samples and maximum of 12 samples were used for each block. Search distances varied by lode and reflect the variogram ranges of 100-200 m, maximum projection beyond last drill-hole is 50 m.
  10. The volume for each vein was defined by a wireframe in 3D space and is used to constrain the resource blocks.

Project History

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Geology

The Kainantu property is located within the New Guinea Thrust Belt, close to its northern contact with the Finisterre Terrane. The property area is underlain by metamorphosed sedimentary rocks of the Early Miocene Bena Bena Formation, unconformably overlain by Miocene age sedimentary and intermediate volcanic rocks of the Omaura and Yaveufa Formations. These formations were intruded in the mid-Miocene by the Akuna Intrusive Complex, which comprised multiple phases of mafic to felsic magma. Late Miocene age Elandora Porphyry dykes formed small high level crowded feldspar porphyry dykes and diatreme breccias.

Mineralization on the property includes gold, silver and copper occurring in epithermal Au telluride veins and Au Cu Ag sulphide veins of Intrusion Related Gold Copper (“IRGC”) affinity and also less explored porphyry Cu Au systems; and alluvial gold. The Irumafimpa-Kora vein deposit is the most advanced project at Kainantu with current defined resources and past modern mining activity in the Irumafimpa area. The deposit occurs in the centre of a large mineralized system approximately 5 km x 5 km in area that has been partly delineated by drilling and comprises several individual zones of IRGC and porphyry style mineralization. The current resources occupy a broad northwest trending mineralized zone more than 2.5 km long and up to 60m wide in which individual veins vary from less than one metre wide that pinch and swell over short distances (Au telluride lodes) to more continuous veins up to several metres wide (Au Cu Ag sulphide lodes). The Kora veins average 3.1m true width; which is the entire extent of the known veins before cutoff grades are applied. The Mill veins at Irumafimpa average 1.2m true width, which is the entire extent of the known veins before cutoff grades are applied, and also the minimum width used during resource estimation

Exploration

The Kainantu project is located in an established Cu-Au province as evidenced by the underlying geology and presence of nearby major projects operated by global majors Barrick, Newcrest and Harmony. Nolidan concludes that based on a review of historical exploration and the identified mineralization within the Kainantu Project package there remain a significant number of major untested and early stage targets. Within ML150 this includes the Kora lodes which are strongly mineralized at the limit of drilling and open in all directions, as well as the Judd, Karempe and other unnamed mineralized lodes parallel to defined resources which have potentially economic grade surface and/or drill values from very limited work to date. Outside the ML there are continuations of the lodes listed above, as well as the strongly mineralized Mati-Mesoan, Arakompa and Maniape lodes proximal to the mining lease. A major porphyry Cu-Au target is evident at shallow depth in the A1/Tempe/Tankuanan area to the southeast of ML150. Further away there is substantial mineralization at the Aifunka and Kathnel deposits on EL1341 in a separate mineralization centre

Nolidan notes that Barrick originally purchased the Kainantu Project for the porphyry Cu-Au potential and internal reports rank the project very highly on a global scale. The decision to divest the project was made for corporate rationalisation reasons based on global competition for exploration expenditure rather than geological prospectivity reasons. This combined with the challenging land access meant that field work and drilling was not optimally conducted (e.g. at the A1 area). Within the four EL’s surrounding the mine area there are numerous high quality epithermal Cu-Au and porphyry prospects which were not available for land access until late in Barrick’s tenure. Nolidan notes that Barrick’s minimum target criterion was a nominal 5 million ounces, which includes all of the Kainantu vein targets. It is the view of Nolidan that all exploration targets in the Project remain untested or under-tested by modern exploration and that, based on the size of the identified system such a target size could indeed be possible following further work.

Nolidan recommends a complete review and prioritisation of exploration activities early in the operational phase. Exploration philosophy and expenditure should be based on a risk-reward approach (aligned with company strategy and timeframes). In particular, time to project realisation should be considered with opportunities for resource additions on the current ML150 given priority, and aspects including target size, likelihood of success and proximity to mining infrastructure and metallurgical compatibility being key ranking factors off the current mining lease. Prospect prioritisation for expenditure could be improved by a combination of:

  1. District scale targeting over the whole Kainantu project tenement package facilitated by 3D integration of available topographic, geological, structural, geochemical, geophysical and geochronological data.
  2. Benchmarking of the above against similar projects either in the same area or of similar geological setting.
  3. Economic target considerations of size, grade, mining concept and development costs vs expected exploration expenditure requirements.
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