K92 Mining Announces Strong 2022 Q4 and Annual Financial Results – Record Cash Balance, Revenue, Ore Mined and Ore Processed; Cash Cost and AISC Better Than Guidance
K92 Mining Inc. announced its financial results for Q4 and full year 2022, achieving record production and revenue. Key highlights include:
- Record quarterly revenue of US$62.0 million, up 15% year-over-year.
- Annual revenue of US$188.2 million, a 22% increase.
- Record annual production of 122,806 oz AuEq, increasing 18% year-over-year.
- Net income of US$35.5 million, or $0.16 per share.
- Debt-free cash position of US$109.9 million as of December 31, 2022.
The company also secured a 10-year extension of Mining Lease 150 and initiated multi-phase expansions to boost processing capacity significantly, underscoring operational growth.
- Record Q4 revenue of US$62.0 million, up 15% from Q4 2021.
- Annual revenue reached US$188.2 million, a 22% increase year-over-year.
- Record annual production of 122,806 oz AuEq, achieving guidance of 115,000 to 140,000 oz AuEq.
- Cash costs of US$538/oz gold, below guidance of US$560 to US$640/oz.
- Debt-free with a cash position of US$109.9 million.
- Production challenges in Q1 2023 due to unplanned maintenance events causing 8 days of downtime.
- Expectations for Q1 production to be notably below budget and annual production to be in the lower half of guidance.
VANCOUVER, British Columbia, March 30, 2023 (GLOBE NEWSWIRE) -- K92 Mining Inc. (“K92” or the “Company”) (TSX: KNT; OTCQX: KNTNF) is pleased to announce financial results for the three and twelve months ended December 31, 2022.
Safety
- Strong focus on safety with zero Lost Time Injuries (“LTI”) during the quarter and one of the best safety records in the Australasia region since commencement of operations.
- Proactive and focused management of COVID-19. K92 has continuously operated throughout the COVID-19 pandemic, and has strong preventative and response plans in place.
Production
Fourth Quarter 2022
- Record quarterly ore processed of 121,686 tonnes or 1,323 tonnes per day (“tpd”), significantly exceeding the Stage 2 Expansion run-rate and a
22% increase from Q4 2021. - Record monthly ore processed achieved in November, averaging 1,382 tpd, above the Stage 2A Expansion run-rate of 1,370 tpd. Record daily mill tonnes processed achieved on December 25, of 1,714 tonnes. Importantly, the records were achieved prior to commissioning of a major Stage 2A Expansion plant upgrade, the flotation expansion, with commissioning planned for Q2 2023.
- Record total material mined (ore plus waste) of 287,446 tonnes mined during the quarter, an increase of
28% from Q4 2021. - Strong quarterly production, the second highest on record, of 35,538 oz gold equivalent (“AuEq”), or 31,204 oz gold, 1,827,085 lbs copper and 40,517 oz silver (1) (2).
- Cash costs of US
$512 /oz gold and all-in sustaining costs (“AISC”) of US$870 /oz gold (2).
Full Year 2022
- Record annual production, increasing
18% year over year, of 122,806 oz AuEq or 107,546 oz gold, 6,247,950 lbs copper and 126,043 oz silver, achieving the guidance range of 115,000 to 140,000 oz AuEq. - Cash costs of US
$538 /oz gold and AISC of US$864 /oz gold, beating the guidance range for cash cost of$560 t o$640 /oz gold, and AISC of$890 t o$970 /oz gold (2). - Record annual ore processed of 448,087 tonnes, a
33% increase from 2021. - Record ore mined of 448,079 tonnes and total material mined (ore plus waste) of 994,175 during the year, increases of
40% and25% from 2021, respectively.
Financials
Fourth Quarter 2022
- Record cash position of US
$109.9 million as of December 31, 2022 while remaining debt-free. - Record quarterly revenue of US
$62.0 million , an increase of15% from Q4 2021. - Net income of US
$13.3 million or$0.06 per share. - Sales of 35,212 oz gold, 1,923,116 lbs copper and 44,828 oz of silver. Gold concentrate and doré inventory of 3,612 oz as of December 31, 2022, a decrease over the prior quarter of 3,183 oz.
- Operating cash flow (before working capital adjustments) for the three months ended December 31, 2022, of US
$26.6 million or US$0.11 per share, and earnings before interest, taxes, depreciation and amortization (“EBITDA”) (2) of US$30.5 million or US$0.13 per share.
Full Year 2022
- Record annual revenue of US
$188.2 million , an increase of22% from 2021. - Annual net income of US
$35.5 million or$0.16 per share, the second highest on record. - Record sales of 110,654 oz gold, 6,072,879 lbs copper and 125,155 oz of silver.
- Operating cash flow (before working capital adjustments) for the twelve months ended December 31, 2022, of US
$72.5 million or US$0.32 per share, and earnings before interest, taxes, depreciation and amortization of US$82.2 million or US$0.36 per share (2).
Growth
- Announced the extension to Mining Lease 150 for an additional 10 years to June 2034, by the Government of Papua New Guinea. The renewal was well in advance of the original renewal date of June 2024, highlighting the strong support from all levels of Government and stakeholders for the Kainantu Gold Mine. Concurrently, the Board of Directors of K92 approved the Stage 3 and 4 Expansions, increasing the annual processing throughput to 1.2 mtpa and 1.7 mtpa, respectively. This represents a
140% increase and240% increase, respectively, from the Stage 2A processing capacity of 500,000 tonnes per annum (“tpa”) (see December 6, 2022 press release). - The Stage 2A Expansion to 500,000 tpa continued to progress during the quarter, the new filter press and the additional TC-1000 crusher is operational, with the final major remaining expansion item, the new rougher flotation tanks, planned to be commissioned in 2Q 2023. Additional mining equipment arrived on site during Q4, including a new loader. Subsequent to year end, multiple pieces of equipment arrived at site, including a new jumbo, loader, two integrated tool carriers, Normet explosive charging machine, cement agitator truck and very recently a new long hole drill rig. During the remainder of the first half of 2023, two underground trucks and one jumbo are scheduled for delivery. The arrivals of equipment are to both replace existing equipment and expand the fleet. The performance of the process plant to date continues to demonstrate the potential to ultimately exceed the Stage 2A Expansion run-rate.
- Strong results from 93 diamond drill holes were reported from underground and surface at Kora, Kora South, Judd, Judd South and Northern Deeps. The results considerably extended the known drilled deposit strike length of both the Kora-Kora South and Judd-Judd South veins systems by ~600 metres to the South. In addition, the second hole drilled at the Northern Deeps target ~700 m north of the Kora Resource intersected 3.08 metres (2.15 m true width) at 7.18 g/t AuEq. The drilled deposit strike length of the Kora-Kora South Vein system has now been established to be over 2.65 km. Additionally, drilling at Kora South and Judd South both intersected potential dilatant zone mineralization, including Kora South underground drill hole KMDD0495 recording multiple intersections including 30.55 m (11.80 m true width) at 12.82 g/t AuEq or 4.15 g/t Au, 78 g/t Ag and
4.79% Cu from the K2 Vein. The hole ended in mineralization as it was terminated early due to ground conditions and is situated more than 400 metres down-dip from the previously reported hole KUDD0002, that intersected a dilatant zone, recording 35.90 m (23.34 m true width) at 5.98 g/t AuEq (see October 18, 2022 press release). - Subsequent to year end, results from 89 diamond drill holes were reported from underground and surface at Kora, Kora South, Judd, Judd South and Northern Deeps, including 5 dilatant zone intersections plus multiple high-grade results. The dilatant intersections from surface drilling include:
- KUDD0035 recording 50.05 m at 5.25 g/t AuEq from the K1 Vein,
- KUDD0033 recording 27.90 m at 10.48 g/t AuEq from the K2 Vein,
- KUDD0038 recording 14.00 m at 5.49 g/t AuEq from the K1 Vein at Kora South,
- KUDD0032 recording 30.30 m at 6.13 g/t AuEq from the J1 Vein, and
- KUDD0038 recording 28.70 m at 4.53 g/t AuEq from the J1 Vein at Judd South.
Other highlights include:
- Judd surface hole KODD0026 recording 5.40 m at 56.76 g/t AuEq from the J1 Vein, and
- Kora underground hole KMDD0504 recording 6.12 m at 88.44 g/t AuEq from the K1 Vein (see February 21, 2023 press release). - Significant advance of the twin incline in Q4, with incline #2 (6m x 6.5m) advanced to 1,843 metres and #3 (5m x 5.5m) advanced to 1,811 metres as of December 31, 2022. Overall mine development during the fourth quarter was 2,221 metres, an increase of
45% from Q4 2021 and a quarterly record.
2023 Operational Outlook
During the first quarter the operation experienced challenges at the process plant and the underground mine. The process plant experienced two notable unplanned maintenance events, with one of the mill trunnion bearings failing and requiring immediate replacement resulting in 2 days downtime, and a limited electrical fire in a cable tray resulting in damage to a number of cables feeding the wet section of the process plant for 6 days downtime. The total combined impact was 8 days of unplanned downtime for the process plant during the first quarter. (See February 27, 2023 press release).
The process plant has performed well after the completion of the unplanned maintenance, achieving multiple new daily throughput records including 1,726 tonnes processed on February 26, 1,773 tonnes processed on February 28, 1,802 tonnes processed on March 3 and 1,815 tonnes processed on March 11. This is significantly higher throughput than the Stage 2A Expansion average daily throughput rate of approximately 1,370 tonnes per day. Additionally, we see further upside to overall process plant performance upon commissioning of the rougher flotation cells to double capacity in 2Q 2023.
During the second half of the first quarter, underground mining encountered an area with more challenging ground conditions than expected, which impacted our production stoping rates and access to higher grade material. Generally, in this situation, mill feed would be supplemented by mining from additional mining fronts as we mine through the impacted area more slowly. However, due to development rates being below budget for several quarters during the COVID-19 pandemic, many of the alternative mining areas were not yet developed, therefore supplementing from our low-grade stockpile was required.
Development is a major focus as we emerge from the pandemic environment, with record development advance achieved in Q4 2022, development advance proceeding well year-to-date and multiple new equipment arrivals this quarter and scheduled for delivery in Q2 to increase our advance rates further. Furthermore, we expect a substantial increase to our underground mining operational flexibility near-term with two new sublevels currently being established, and importantly, an entirely new mining front at depth from the twin incline in the second half of this year.
As a result, we expect the first quarter to be notably below budget, the second quarter to be moderately below budget and annual production to be within the bottom half of the guidance range. As noted in our operational guidance previously, we expect the second half of the year to be our strongest in terms of production.
The Company’s annual consolidated financial statements and associated management’s discussion and analysis for the year ended December 31, 2022 are available for download on the Company’s website and under the Company’s profile on SEDAR (www.sedar.com). All amounts are in U.S. dollars unless otherwise indicated.
See Figure 1: Quarterly Production and AISC Chart
See Figure 2: Quarterly Total Ore Processed, Development Metres Advanced and Total Mined Material Chart
See Figure 3: Ore Processed Daily Records Chart
John Lewins, K92 Chief Executive Officer and Director, stated, “In 2022, Kainantu took another major step forward, achieving significant growth financially, operationally, in our resource base and from exploration in general. Financially, the Company ended the year stronger than ever, with
Importantly, in December 2022, the Government of Papua New Guinea approved the extension of Mining Lease 150 to June 2034 with the Board of Directors of K92 concurrently approving the Stage 3 and 4 Expansions. This is a major milestone for the Company and all of our stakeholders as the Stage 3 and 4 Expansions plan to transform Kainantu into one of the industry’s next world class gold mines, with the Integrated Development Plan Stage 4 PEA case outlining peak annual production of 500 koz gold equivalent. The tender process is making considerable progress, and we will provide an update once this has been completed.
Looking ahead at 2023, there is tremendous excitement within the Company. On vein field exploration, a large majority of our drill rigs are focused on resource growth and have delivered strong results, including an increasing hit-rate of dilatant zone intersections plus many high-grade intersections (see February 21, 2023 press release). Significantly, over the next few months, underground development plans to establish access to multiple highly prospective exploration fronts at depth, particularly at Kora South, Judd South, Kora Deeps and Judd Deeps.
Operationally, we expect the second half of the year to be our strongest in terms of production. This is driven by the arrival of plant and equipment which has been considerably slower than expected due to supply chain constraints, commissioning of the Stage 2A Expansion rougher flotation cells planned for Q2 and increased underground development rates to establish new sublevels, plus an entirely new mining front around the twin incline. This is expected to provide a considerable increase to our operational flexibility.
And lastly, I am very pleased to announce that we have commenced drilling our first hole at the A1 copper-gold porphyry target. The drill program has leveraged data from our extensive soil geochemical program and advanced MobileMT airborne geophysics. The initial program is targeting a depth of approximately 500 metres to defined vectors for deeper targeted drilling. We look forward to providing an update on A1 in due course.”
Mine Operating Activities
| Three months ended December 31, 2022 | Twelve months ended December 31, 2022 | |||
| Operating data | ||||
| Head grade (Au g/t) | 8.8 | 8.3 | ||
| Gold recovery (%) | ||||
| Gold ounces produced | 31,204 | 107,546 | ||
| Gold ounces equivalent produced (1) (2) | 35,538 | 122,806 | ||
| Tonnes of copper produced | 829 | 2,834 | ||
| Silver ounces produced | 40,517 | 126,043 | ||
| Financial data (in thousands of dollars) | ||||
| Gold ounces sold | 35,212 | 110,654 | ||
| Revenues from concentrate and doré sales | US | US | ||
| Mine operating expenses | US | US | ||
| Other mine expenses | US | US | ||
| Depreciation and depletion | US | US | ||
| Statistics (in dollars) | ||||
| Average realized selling price per ounce, net | US | US | ||
| Cash cost per ounce (2) | US | US | ||
| All-in sustaining cost per ounce (2) | US | US | ||
Notes:
| (1) | Gold equivalent in 2022 is calculated based on: gold | |
| (2) | The Company provides some non-international financial reporting standard measures as supplementary information that management believes may be useful to investors to explain the Company’s financial results. Please refer to non-IFRS financial performance measures in the Company’s management’s discussion and analysis dated March 29, 2023, available on SEDAR or the Company’s website, for reconciliation of these measures. |
K92 has not based its production decisions on mineral reserve estimates or feasibility studies, and historically such projects have increased uncertainty and risk of failure. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Conference Call and Webcast to Present Results
K92 will host a conference call and webcast to present the 2022 fourth quarter and annual financial results at 8:30 am (EDT) on Thursday, March 30, 2023.
- 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.
The conference call will also be broadcast live (webcast) and may be accessed via the following link: https://services.choruscall.ca/links/k92mining2022q4.html
Qualified Person
K92 Mine Geology Manager and Mine Exploration Manager, Mr. Andrew Kohler, PGeo, a qualified person under the meaning of Canadian National Instrument 43-101 – Standards of Disclosure for Mineral Projects, has reviewed and is responsible for the technical content of this news release.
About K92
K92 Mining Inc. is engaged in the production of gold, copper and silver at the Kainantu Gold Mine in the Eastern Highlands province of Papua New Guinea, as well as exploration and development of mineral deposits in the immediate vicinity of the mine. The Company declared commercial production from Kainantu in February 2018, is in a strong financial position. A maiden resource estimate on the Blue Lake copper-gold porphyry project was completed in August 2022. K92 is operated by a team of mining company professionals with extensive international mine-building and operational experience.
On Behalf of the Company,
John Lewins, Chief Executive Officer and Director
For further information, please contact David Medilek, P.Eng., CFA, President at +1-604-416-4445
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain “forward-looking statements” under applicable Canadian securities legislation. Such forward-looking statements include, without limitation: (i) the results of the Kainantu Project Definitive Feasibility Study, and the Kainantu 2022 Preliminary Economic Assessment, including the Stage 3 Expansion, a new standalone 1.2 mtpa process plant and supporting infrastructure; (ii) statements regarding the expansion of the mine and development of any of the deposits; and (iii) the Kainantu Stage 4 Expansion, operating two standalone process plants, larger surface infrastructure and mining throughputs.
All statements in this news release that address events or developments that we expect to occur in the future are forward-looking statements. Forward-looking statements are statements that are not historical facts and are generally, although not always, identified by words such as “expect”, “plan”, “anticipate”, “project”, “target”, “potential”, “schedule”, “forecast”, “budget”, “estimate”, “intend” or “believe” and similar expressions or their negative connotations, or that events or conditions “will”, “would”, “may”, “could”, “should” or “might” occur. All such forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to known and unknown risks, uncertainties and other factors, many of which are beyond our ability to control, that may cause our actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information. Such factors include, without limitation, Public Health Crises, including the COVID-19 Pandemic; changes in the price of gold, silver, copper and other metals in the world markets; fluctuations in the price and availability of infrastructure and energy and other commodities; fluctuations in foreign currency exchange rates; volatility in price of our common shares; inherent risks associated with the mining industry, including problems related to weather and climate in remote areas in which certain of the Company’s operations are located; failure to achieve production, cost and other estimates; risks and uncertainties associated with exploration and development; uncertainties relating to estimates of mineral resources including uncertainty that mineral resources may never be converted into mineral reserves; the Company’s ability to carry on current and future operations, including development and exploration activities; the timing, extent, duration and economic viability of such operations, including any mineral resources or reserves identified thereby; the accuracy and reliability of estimates, projections, forecasts, studies and assessments; the Company’s ability to meet or achieve estimates, projections and forecasts; the availability and cost of inputs; the availability and costs of achieving the Stage 3 Expansion or the Stage 4 Expansion; the ability of the Company to achieve the inputs the price and market for outputs, including gold, silver and copper; inability of the Company to identify appropriate acquisition targets or complete desirable acquisitions; failures of information systems or information security threats; political, economic and other risks associated with the Company’s foreign operations; geopolitical events and other uncertainties, such as the conflict in Ukraine; compliance with various laws and regulatory requirements to which the Company is subject to, including taxation; the ability to obtain timely financing on reasonable terms when required; the current and future social, economic and political conditions, including relationship with the communities in Papua New Guinea and other jurisdictions it operates; other assumptions and factors generally associated with the mining industry; and the risks, uncertainties and other factors referred to in the Company’s Annual Information Form under the heading “Risk Factors”.
Estimates of mineral resources are also forward-looking statements because they constitute projections, based on certain estimates and assumptions, regarding the amount of minerals that may be encountered in the future and/or the anticipated economics of production. The estimation of mineral resources and mineral reserves is inherently uncertain and involves subjective judgments about many relevant factors. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The accuracy of any such estimates is a function of the quantity and quality of available data, and of the assumptions made and judgments used in engineering and geological interpretation, Forward-looking statements are not a guarantee of future performance, and actual results and future events could materially differ from those anticipated in such statements. Although we have attempted to identify important factors that could cause actual results to differ materially from those contained in the forward-looking statements, there may be other factors that cause actual results to differ materially from those that are anticipated, estimated, or intended. 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.
Figure 1: Quarterly Production and AISC Chart
https://www.globenewswire.com/NewsRoom/AttachmentNg/c0916200-6b30-4af2-aba4-7bf85fc1a3a2
Figure 2: Quarterly Total Ore Processed, Development Metres Advanced and Total Mined Material Chart
https://www.globenewswire.com/NewsRoom/AttachmentNg/59809690-2a30-4476-8a69-9273627550bb
Figure 3: Ore Processed Daily Records Chart
https://www.globenewswire.com/NewsRoom/AttachmentNg/e8ef7e9d-7e54-4fea-ba2d-f6009e088a82
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