K92 Mining PEA Results
VANCOUVER, British Columbia, Jan. 08, 2019 — K92 Mining announces positive results of the updated Preliminary Economic Assessment (PEA)
The key outcomes from the PEA were:
- Mining production and plant processing capacity could be increased to 400,000 tonnes per annum over a period of approximately 12 months;
- Could achieve an NPV5 of US$710 million pre-tax, or US$559 million after tax, and an Internal Rate of Return (IRR) of 350%;
- Over a 13-year period, the plant would treat 4.9 million tonnes averaging 9.0 g/t Au. 20 g/t Ag and 1.3% Cu;
- 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* ;
- During the first five years, average production of over 145,000 oz AuEq* per annum; and
- Initial Capital Cost of US$13.6 million for the expansion.
*Au Eq – calculated on above Current Metal Prices of Au – US$1,300/oz; Ag – US$15/oz; Cu – US$2.90/lb.
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.
K92 Mining Inc. (TSXV: KNT; OTCQX: KNTNF) (“K92” or “the Company”) is pleased to announce the results of the updated Preliminary Economic Assessment (“PEA”) on its Kora and Kora North gold deposits (“Kora”), which together with its Irumafimpa gold deposit (“Irumafimpa”) comprise the Kainantu Gold Project (the “Kainantu Project”) in Papua New Guinea.
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 tonnes per annum (“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.
John Lewins, K92 Chief Executive Officer, states, “The results of the PEA show 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 Mozs 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 PEA indicates a project pre-tax NPV5 of almost US$400 million in the first five years and over US$700 million over the life of the project.
Importantly, the PEA is not for the proposed development of a new project, but for an expansion of our producing Kainantu operation which produced over 45,000 ozs AuEq in 2018 at a cash cost of below US$600/oz AuEq. The operation is expected to produce in excess of 60,000 ozs AuEq in 2019 assuming no expansion, or over 80,000 ozs AuEq with the expansion envisaged in the PEA.
The initial capital cost for the expansion is estimated at less than US$14 million and can be met entirely from cash flow from existing production. The Company has already commenced some preparatory work for this expansion, including significant capital expenditure on a gravity circuit for the process plant, a camp expansion and the ordering of additional mobile and fixed plant for the underground mine.
In addition, K92 has established a strong operations team of mining professionals on the ground in PNG which has seen the Kainantu Mine declare Commercial Production on Kora North on February 1, 2018, just four months after treating the first bulk sample from the deposit. The Company has been enhancing this team to ensure that the necessary personnel are available to take the next step in the development of the Kainantu Mine.”
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% NSR) 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.*Au Eq – 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|
|Total M & I||0.85||12.9||0.35||13.1||0.36||0.7||13.3||14.1||0.39|
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 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 2 – Irumafimpa and Kora/Eutompi Resource Estimates
|Resource by Deposit and Category|
M in table is millions. 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. Gold equivalents are calculated as AuEq = Au g/t + Cu%*1.52+ Ag g/t*0.0141.
An updated technical report prepared in accordance with NI 43-101 in respect of the Kora Project, which will include the results of the PEA discussed in this news release together with an updated Mineral Resource Estimate for the Kora North Deposit, will be filed on SEDAR at www.sedar.com under the Company’s profile within 45 days of the date of this news release.
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 is responsible for the technical content of this news release. Data verification by Mr. Kohler includes significant time onsite reviewing drill core, face sampling, underground workings and discussing work programs and results with geology and mining personnel.
ON BEHALF OF THE COMPANY,
Chief Executive Officer and Director
For further information, please contact the Company 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 isolation 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 consolidated Company reflects total mining and processing costs, corporate and administrative costs, exploration costs, sustaining capital, and other operating costs.
All-in sustaining costs per gold 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.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain “forward-looking statements” under applicable Canadian securities legislation. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. All statements that address future plans, activities, events, or developments that the Company believes, expects, or anticipates will or may occur are forward-looking information, including statements regarding the realization of the preliminary economic analysis for the Kainantu Project, expectations of future cash flows, the proposed plant expansion, potential expansion of resources and the generation of further drilling results which may or may not occur. Forward-looking statements and information contained herein are based on certain factors and assumptions regarding, among other things, the market price of the Company’s securities, metal prices, exchange rates, taxation, the estimation, timing and amount of future exploration and development, capital and operating costs, the availability of financing, the receipt of regulatory approvals, environmental risks, title disputes, failure of plant, equipment or processes to operate as anticipated, accidents, labour disputes, claims and limitations on insurance coverage and other risks of the mining industry, changes in national and local government regulation of mining operations, and regulations and other matters.. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.