K92 Mining Inc (KNTNF)

[MemoryLeaks]

From seekingalpha article on best 20 mines for 2018


K92 Mining is an emerging mid-tier gold producer in Papua New Guinea. They purchased a past producing mine (2006 to 2009) from Barrick Gold for $2 million, plus $60 million in future payments. The Kainantu mine has about 1.5 million oz at 7 gpt, with extensive exploration potential and an additional 1.3 million oz of historical resources. Once they reach 1 million oz of production, or M&I resources, they have to pay Barrick $20 million (they currently have 250,000 oz M&I). Then they have to pay another $40 million as resources increase in size ($5 million increments for every 250,000 oz). I spoke with them and this will not likely get triggered for at least 7 years. Plus, the agreement expires after 10 years. ??They began production in Q4 2016 at Irumafimpa. The CEO said he expects their cash costs to be about $600 per oz, with all-in costs (free cash flow) around $1000 per oz. They raised about $20 million to resume production. About half is debt, about 1/3 is a gold loan for 20,000 oz (paid over the first 36 months of the mine life), and the rest in equity financing. ??They planned to reach full commercial production of 50,000 annual production in September 2017. However, this has been delayed 30-60 days due to vandalism. This caused their share price to drop. ??In addition to their Irumafimpa mine and mill, which has about a 7-year mine life, they have a second deposit. Kora is already 1 million oz at 7 gpt. They plan to add Kora production of about 100,000 annually to their Irmafimpa mill in 2018. That will take production to 150,000 oz. Plus, they recently found a step out discovery at Kora that is 500 meters away. If that vein connects to Kora, then they just found a lot of gold to expand the mine life. ??Kainantu is a large property (100,000 acres) with a lot of exploration potential. The CEO thinks they could find 8 million oz. If they find half that much, this stock should do really well. They have a solid team and with just a little bit of luck they will be able to grow. The risk/reward looks very good. ??They have a strong board and will likely be successful. The key is going to be exploration and production growth, as well as higher gold prices. Plus, they need to hit their guidance targets for costs and production.