ANOTHER important milestone in PNG’s colourful mining history has been achieved with Canada’s K92 Mining Inc. giving the go-ahead to significantly expand production at the historic Kainantu gold mine.
The expansion will double current capacity at Kainantu to 400,000 tonnes per annum, increasing annual production to an average of 120,000 ounces of gold equivalent.
Based on a recently completed preliminary economic assessment (PEA) for Kainantu, the major outcomes resulting from the decision to expand production include:
- Total Capital Expenditure for 2019 is projected to be US$30 million, comprising US$12 million in expansion capital, US$8 million in sustaining capital and US$10 million in capital development;
- Production is projected to be 68-75,000 ozs AuEq in 2019 and 115-125,000 ozs AuEq in 2020;
- Cash Costs are expected to be between US$580 and US$620 per oz AuEq, and AISC are expected to US$780 to US$820 per oz AuEq in 2019, dropping to Cash Costs below US$500 per oz AuEq and AISC below US$700 per oz AuEq in 2020;
- Employment is expected to increase from the current 650, to 750 by the end of 2019, and to 800 by the end of 2020, with over 96% of all positions in site being filled by PNG Nationals;
- Based on the outcomes of the PEA:
— Total production over the next 13 years would be 1.33 million ozs Gold and 130 million lbs Copper;
— Total Revenue for the period would be over US$2 billion;
— Royalty payments for the period would be US$50 million;
— Total tax paid to PNG Government for the period, from payroll and corporate tax, would total US$300 million;
— Total sustaining capital of US$202 million would be required over the period; and
— Net Cashflow would be US$1.03 billion, the Net Present Value (“NPV5”) would be US$710 million pre-tax, or US$559 million after tax, and the Internal Rate of Return (“IRR”) would be in excess of 350%.
As part of the expansion, K92 has recently purchased two Caterpillar AD45 Low Profile trucks for underground operations, with the first truck expected on site before the end of March and the second shortly thereafter.
K92 CEO John Lewins that there was the potential to expand production even further through new exploration activities.
Mr Lewins said the decision to expand production at Kainantu came on the back of the robust PEA, completed in January, which showed 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 million ozs 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 company sees this expansion as another step in developing the Kainantu Gold Mine into a world class operation with costs potentially in the lowest quartile,” Mr Lewins said.
“The company is committed to a major programme of exploration with three diamond drill rigs operating underground and major development focused on expanding the Kora/Kora North resource with a target of 5 million ozs by the end of 2019. With the Kora deposit open along strike and at depth, this target is considered realistic with the current 2019 drilling program scheduled to double the number of metres drilled underground to 20,000 from less than 10,000 in 2018.
“The company has already spent almost US$3 million on mobile plant, fixed plant and the camp in Q1 2019, all of which is part of the initial capital expenditure required for the expansion. The company will continue to fund expansion capital and sustaining capital from cash flow from production. However, it is anticipated that negotiations on a possible debt financing will be completed by the end of Q1 2019 to ensure that the timeframe for the expansion is met.
“This ability to restart operations at Kainantu, move to profitable operations and then initiate a significant expansion of production in just over two years has been made possible in no small part by the support and assistance of the PNG Mineral Resources Authority (MRA), the Office of the Mining Minister and all levels of Government in PNG. Most important, however, has been the support of our Local Landowners for the operation; they are not only some of our most important stakeholders, but also make up the largest group of employees and are partners in many aspects of the operation.
“We look forward to working with all of the stakeholders in the Kainantu Gold Mine to successfully complete this stage of development and move forward to the next.”