K92 Mining’s Kainantu expansion pours first gold

[Ben Graham]

K92 Mining (TSX: KNT) has produced the first commercial gold-copper-silver concentrate and poured 458 oz. of doré at the new Kainantu third-stage expansion in Papua New Guinea (PNG).

The third-stage expansion targets producing about 300,000 oz. gold-equivalent per year at all-in sustaining costs of about $920 per oz., with a fourth expansion to lift the run-rate to 400,000-plus oz. by late 2027. The production start at the 1.2-million-tonnes-per-year plant clears the way for concentrate shipments in parallel with doré pours.

PNG Prime Minister, James Marape, attended the on-site inauguration on Thursday.

K92 enters the expanded plant commissioning that cost $194 million “from a position of strength,” BMO Capital Markets analyst Andrew Mikitchook said in a note Thursday. The company completed construction of the expanded plant with about 5,000 oz. gold-equivalent stockpiled for commissioning. “We see room for share revaluation as mining rates increase and the company builds a track record of consistency,” he wrote.

Over the years, PNG has attracted major producers like Newmont (TSX: NGT; NYSE: NEM) which operates the Lihir gold mine and holds 50% of the Wafi-Golpu copper-gold joint venture with Harmony Gold (JSE: HAR; NYSE: HMY); Barrick Mining (TSX: ABX; NYSE: B) and Zijin Mining co-own the restarted Porgera site; St Barbara (ASX: SBM) runs Simberi; Metallurgical Corporation of China operates the Ramu nickel-cobalt mine; and Ok Tedi Mining (state-owned) continues upgrades at the namesake copper-gold site.

K92 shares trading in Toronto gained 4% by midday Thursday in Toronto to C$21.06, adding to a 136% gain over the past 12 months. It has a market capitalization of C$5.1 billion.

Growth oriented

Kainantu’s geology features high-grade quartz-sulphide gold-copper-silver veins at Kora–Judd. It also includes low-sulphidation epithermal veins on a district scale. Plus, there’s a porphyry copper-gold system at Blue Lake/A1 that adds to the area’s significance.

The expansion sets up a step-change in scale and costs. “This achievement is the result of the tireless efforts and collaboration of our workforce, contractors and partners,” CEO John Lewins said in a release. “Bringing this major project online safely, efficiently and under budget marks an exciting chapter as K92 advances toward Tier-1, mid-tier producer status.”

The plant expansion – the budget’s largest item – came in below estimates.

By the end of last month, the company had spent or committed about 90% of the total capital needed for the fourth expansion.

Commissioning of the new plant is slated to finish in the first half of the current quarter, following the ramp-up. Recent mine-side upgrades aim to boost throughput. These include a completed high-speed twin incline, designed for over 5 million tonnes per year. The first ore/waste pass is now in service. Ventilation upgrades are also in place. Additionally, a paste-fill system is moving toward commissioning, expected around the first quarter of next year.

Position of strength

K92 reported production of 44,323 gold-equivalent oz. in the third quarter ended Sept. 30, bringing year-to-date output to 126,956 oz., about three-quarters of the midpoint of guidance. Management has reiterated full-year guidance and BMO models production near the top of the company’s 160,000-185,000-oz. range as the expanded plant ramps up.

At the inauguration, PNG government and community leaders stood the company and landowner associations. This partnership is key to K92’s long-term growth and success in Kainantu.