K92 Mining shares soar on record production

K92 Mining (TSE: KNT) shares surged 16% Wednesday after the company announced record production last year and a Kainantu mine expansion update.

The miner’s December-quarter output rose 37% year-on-year to 51,371 oz. gold, or 53,401 oz. gold-equivalent, a 21% rise from the previous record set in the three months to Sept. 30.

For the full year, K92 produced 139,123 oz. gold, or 149,515 oz. gold-equivalent, a 27% improvement over 2023 and more than the full-year guidance range of 120,000-140,000 oz. gold equivalent.

K92 shares closed at $10.03 on Wednesday in Toronto, giving the miner a market capitalization of $2.4 billion.

Canaccord Genuity mining analyst Peter Bell had a positive take on the production figures. He pointed out that the company had gone from milling 7.5 grams gold-equivalent per tonne in the second quarter to 13 grams per tonne in the next quarter and now 17.3 grams per tonne in the years’s final period.

“This is a very strong result,” he said in a note on Wednesday. “The additional metal sales resulting from this will strengthen the balance sheet.”

Tier One expansion

Boosted by the improved operating performance, K92 is focused on completing the new 1.2-million-tonne per year stage three processing plant by June at its flagship Kainantu gold mine in Papua New Guinea’s Eastern Highlands province. According to the company, construction is progressing well, with about 70% of growth capital either spent or committed as of December.

The expansion is designed to transform Kainantu into a mid-Tier One producer, K92 CEO John Lewins said in a release.

However, Raymond James mining analyst Craig Stanley suggested that development might be behind schedule.

Management had released the updated integrated development plan for the project in October, which involved a stage three definitive feasibility study (DFS) case and a stage four expansion preliminary economic assessment (PEA) case, Stanley said. 

Improved guidance

The plan forecast 2025 production of 179,000 gold-equivalent oz. at all-in sustained costs (AISC) of US$1,128 per oz. gold-equivalent in the DFS case and 182,000 oz. gold-equivalent at AISC of US$1,264 per oz. in the PEA case.

“Development in the first three quarters of 2024 was 5,810 metres, whereas the technical report (DFS case) has lateral development of 10,091 metres and vertical development of 1,065 metres.

The mining method is to transition to long-hole open stoping after building the paste-fill plant by September. The existing plant will then be placed on care and maintenance in the fourth quarter, a year behind the schedule outlined in 2022.

Kainantu hosts measured and indicated resources of 8.7 million tonnes at 10.2 grams of gold-equivalent per tonne, totalling 2.9 million ounces. Inferred resources stand at 17.1 million tonnes at 8.6 grams per tonne, or 4.7 million ounces.