Pat McKeough recent replies to a Member of his Inner Circle who wanted his advice on a Canadian junior with a gold mine in Papua New Guinea.
K92 Mining began production at the mine in February 2018, after two previous owners (including Barrick Gold) had invested over $350 million in exploration and development. The company aims to produce 108,000 ounces of gold per year for 10 years from one deposit alone. K92 benefits from experienced leadership, says Pat, and it operates in a nation that is normally mining-friendly. But the venture still carries above-average political risk, he adds, and it must continue to increase production.
Q: Hi,Pat. Please, can I get your advice on K92 Mining and its new mine? Thanks.
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A: K92 MINING, (symbol KNT on the Toronto Venture Exchange; www.k92mining.com), is focused on its Kainantu gold mine located in the Eastern Highlands province of Papua New Guinea. The site is a two-hours’ drive north, on paved road, from Papua New Guinea’s second-largest city, Port of Lae.
Kainantu was previously mined by Highlands Pacific Limited and Barrick Gold Corporation from 2006 to 2009. K92 bought the mine from Barrick in early 2015 for $2.0 million U.S. plus future payments of up to $60 million. Those payments are based on K92 meeting certain milestones, including the production of more than 1 million ounces of gold at Kainantu.
Barrick had already invested $282.8 million in exploration and development of the mine. The previous owners spent $80 million U.S.
Kainantu may hold over two million ounces of gold. It also has lots of room to expand reserves through exploration.
K92 began commercial production at the mine on February 1, 2018. It focused on the Kora/Irumafimpa deposit. The company now aims to produce 108,000 ounces per year for ten years from that deposit alone.
Mining stocks: Veteran CEO gives way to successor with 35 years of mining experience
Mining veteran Ian Stalker served as the company’s CEO from May 2016 to August 2017. He guided the mine’s production and now sits on the board of directors.
Stalker has about 40 years of experience in mine development and operations in Europe, Africa and Australia. Before joining K92, he was CEO of uranium company UraMin Inc. until its $2.5-billion U.S. acquisition by AREVA Resources in August 2007. He also served as vice-president of Gold Fields between 2001 and 2005 and as the managing director of Ashanti Goldfields. That particular outfit grew from a gold miner producing less than 200,000 ounces of gold a year to one producing over 1.5 million ounces annually.
John Lewis has now taken over as K92’s CEO. He previously served under Stalker as a senior executive. Lewis has 35 years of mining experience.
Generally, international mining companies find Papua New Guinea’s laws and industry regulations inviting. However, operating in the country does carry above-average political risk for K92. At the same time, it must ramp up the mine’s output to meet its revenue and earnings objectives.
TSI Network recommendation: K92 Mining is okay to hold, but only for highly aggressive investors.
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