Re-furbished gold mine cranks up in Papua New Guinea

Last month’s US budget deficit was $107 billion — about $80 for every federal taxpayer. The current total US debt limit of $20 trillion will be exceeded in March, 2017.

“Just two months after the next president and Congress are sworn in, they will be running a government that is up against its legal borrowing limit,” confirmed Shai Akabas, at the Bipartisan Policy Center.

The fiscal irresponsibility of democratic governments around the world is causing a flood of investment dollars to gold — an unrenewable hard asset.

The Gold Miners ETF (NYSE-GDX) is up 71% year-to-date. The Junior Gold Miners ETF (NYSE-GDXJ) is up 96% year-to-date.

The Holy Grail for junior investors is to find a small gold company capable of funding its own exploration with profits from production.

K92 Mining Inc. (TSX.V: KNT) (OTCQB: KNTNF) fits this profile. The company has just announced that it has commenced gold production at their Irumafimpa deposit, targeting 52,000 ounces of gold in year one and then followed that news up by announcing the results of a Preliminary Economic Assessment (“PEA”) on the Kora Deposit which is a mere 700m away.

This PEA estimates all-in sustaining costs of US $619 / oz Au Eq with annual production over a 9 year mine life of 108,000 ounces. The NPV5, at Kora, came in at an impressive US $417 million.

K92 is operating the Kainantu Gold Mine, in the Eastern Highlands province of Papua New Guinea. The project is fully permitted, with the mining leases recently renewed for 10 years, and the environmental permit valid has 40 years remaining.

“Getting production started at Irumafimpa is big news for K92 shareholders and allows us to target free cash flow that can then be used for expansion and exploration work, without share dilution,” stated K92 President and Director Bryan Slusarchuk in an exclusive interview. “To follow that production start-up with the Kora PEA results is a testament to the great work the team onsite is doing”

The acquisition background is informative. In 2014, Barrick was trying to sell Australasian mining assets as part of a mandate to trim $13 billion in debt. At this time there was a small pool of investors, worldwide who were looking to buy mineral assets. The K92 group entered early in Barrick’s divestiture process. They purchased the asset when gold was unfashionable.

“Barrick purchased this asset in 2007 for $141 million and then invested in excess of $100 million into the project,” confirms Slusarchuk. “There was the existing gold mine on the property, but Barrick was focused on elephant sized porphyry targets. For K92, our focus has instead been on the re-start of production which has now occurred and the significant expansion potential in and around the Kora and Irumafimpa deposits.”

The team that was assembled to acquire this project has deep engineering and operational expertise.

The Chairman, Tookie Angus, is a mining legend who has financed dozens of global projects and is well known for being involved in multiple billion dollar plus merger and acquisition transactions.  He was a founding director of companies such as Ventana Gold and also acts as the Chairman of Nevsun Resources. The CEO, Ian Stalker is the former VP of Gold Fields and was the CEO of Uramin when it grew from a microcap into a company which sold for $2.5 billion in the span of three years. Mr. Slusarchuk has structured complex debt and equity financing transactions in the United States, Canada and Europe with multiple top tier banks.

“K92 Mining has a good shot at generating positive cash flow at the Kainantu mine,” stated Thibaut Lepouttre, CEO of the Caesars Report. “Barrick could regret having sold the asset for cents on the dollar.”

Papua New Guinea is a mature mining jurisdiction in a rapidly emerging economy. About 70% of the country’s GDP is derived from mining and oil & gas. The country is starting to gain more prominence on the world stage, evidenced by events such as the FIFA U-20 Women’s World Cup that will take place in November, the hosting of the first ever PGA Golf Tournament earlier this year and the selection to hold the 2018 APEC event where world leaders from 21 countries, such as the United States and Canada will attend.

When it began trading publicly on the TSX.V on May 25th, 2016, K92 was fully funded to restart production at the Irumafimpa Deposit. Since then, the company has raised $26 million in additional capital through private placements and the exercise of previously granted warrants.

The initial resource estimate for the Kainantu Project is 1.84 million inferred ounces at 11.6 g/t gold equivalent and 240,000 indicated ounces at 13.3 g/t gold equivalent, based on 78,935 metres of drilling.

Currently, K92 has 2 diamond drilling rigs on the property.

One is drilling out the Irumafimpa orebody for grade control and mine planning. The second unit is drilling the Judd Vein System (JVS) targeting expansion. The JVS has a strike length of 2,500 meters, running parallel to the Irumafimpa and Kora Deposits. Previously reported drilling results from JVS include 3 meters @ 278.2 g/t of gold and 9 meters @ 8.32 g/t of gold.

"K92 has attracted one of the smartest precious metals investors in the world in Ross Beaty, who put $2 million CAD into the company,” stated Jeb Handwerger, CEO of Gold Stock Trades. “Mr. Beaty is Founder and Chairman of Pan American Silver, a dividend paying producer with seven operating mines and 7, 000 employees. Mr. Beaty has a knack for acquiring assets at cheap valuations in bear markets and seeing large returns.”

With the money printing presses working overtime, the value of paper currency is in long term decline. According to the World Gold Council, China now owns 1,828 tons of gold; Chinese government holdings are up 450% in the last 15 years.