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spk00: Thank you, Operator, and thanks everyone for attending K92 Mining's second quarter 2023 results conference call. We hope you and your families are doing well. In addition to myself, we have on the line John Lewins, Chief Executive Officer and Director, and Justin Blanchett, Chief Financial Officer. I would also like to remind everyone that after the remarks from management, the call will be followed by a Q&A session. As we will be making forward-looking statements during the call, please refer to the cautionary notes and risk disclosure in our MD&A. and slide two of the webcast presentation. Also, please bear in mind that all dollar amounts mentioned in the conference call are in United States dollars unless otherwise noted. Now, I'll turn it over to John to provide you with an overview.
spk11: Thank you, David, and welcome, everyone. In the second quarter, Cananto delivered strong operating performance, increasing gold equivalent production by 43% from the first quarter, 18% from Q2 2023. Cash costs, all in sustaining costs, for the quarter was significantly lower than our annual guidance range. Our cash balance notably strengthened during the quarter, even after near-record capital spend and expiration spend. We also made considerable progress on multiple growth initiatives, including the completion of the Stage 2a plant expansion, the discovery of a high-grade zone at the J2 vein at Judd South, potentially outlining yet another productive vein within the Cora, Cora South, Chad, Chad South vein systems. And subsequent to quarter end, the board of directors approved the award of stage three expansion process plant lump sum EPCM contract, which significantly de-risks the majority of our growth capital for the expansion. We look forward to discussing all of this in more further detail in the course of the presentation. They were very proud of the company's performance highlighted in the 2022 sustainability report, which was released in late July. The report details our key sustainability initiatives, demonstrating our commitment to socially responsible mining. K92 has a workforce of approximately 1,500 people with a major focus on local hiring. Approximately 94% of our workforce is from Papua New Guinea and the majority from our local communities with a large focus, obviously, on training development. Enantu has a low environmental footprint with a traditional tailings environment, no cyanide and low greenhouse gas emissions profile. We're currently focused on multiple long-term social and economic development initiatives in Papua New Guinea through joint ventures, education, infrastructure, service programs, agricultural programs, and investing in female empowerment programs, among many others. K92 has been recognized by ISS as having peer-leading corporate governance, and we are the second largest corporate taxpayer in Papua New Guinea's mining industry. We encourage you to read the report, which is available on our website. While the report covers the 2022 fiscal year, we are deeply saddened to report two tragedy incidents which resulted in multiple fatalities during the quarter, as previously disclosed via press release. The health and safety of our workforce has been and always will be our highest priority, and we are committed to providing further disclosures on these incidents and the steps we've taken to reinforce our safety culture in our 2023 sustainability report. In June, K92 was very pleased to announce our 2030 greenhouse gas emissions target to reduce our scope one and two emissions by 25% on a business-as-usual basis. K92 is already one of the lower emission gold mines globally, and we're committed to further improving our energy and GHG emissions performance.
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spk09: Hi, I'm Sam Jordan, Director of Humanitarian Action for the International Rescue Committee. Conflict and constraints on humanitarian aid delivery are causing a massive crisis in Gaza and humanitarian conditions are rapidly deteriorating as people no longer have access to food, fuel, water or electricity. A refugee camp was recently struck. Hospitals are struggling to cope with the level of injuries and the shortage of supplies and doctors and nurses are becoming powerless to treat the sick, injured and wounded as fuel runs out. The IRC is mobilising an emergency response to support the activities of actors already operating in Gaza. We will focus on areas of greatest need and urgent priorities, including health, medical supplies, children's and women's safety and psychological support. Robust monitoring and due diligence will help ensure the aid gets where it's needed. We stand on the side of civilians affected by conflict who must be protected and provided with the assistance they need. You can find out more at rescue.org.
spk11: We believe that we are well positioned with a clear path to achieve this target through enhancing access to hydropower from a local grid combined with other reduction initiatives. I'd like to make the point that we've already taken action to improve our greenhouse gas emissions this year with a dedicated power line completed from the Ramu substation to site. The power line was installed to increase reliability of hydroelectric power from the distribution grid. so that we can reduce usage of standby diesel gensets. Through our partnership with P&G, we're assessing further opportunities to maximize utilization of hydropower. Moving on to operational performance. During the quarter, the Kanantu mine produced 30,794 ounces gold equivalent, 112,471 tons processed at a head grade of 9.2 grams per ton gold equivalent. Compared with Q1 2023, and Q2 2022, production increased by 43% and 18% respectively, and long-haul sloping during the quarter performed to design. Cash costs were $597 an ounce, and all in sustaining costs, $975 an ounce, notably lower than the annual guidance range of $620 to $680 for cash costs, and $1180 to $1300 for all in sustaining costs. In terms of our key operational quarterly Physicals, Enantu delivered within 5 to 10% of our record ore tons processed, total material mined and developed, and that despite the impacts of the safety incidents in the case of processing tons, work involved with the Stage 2 mine commission. As noted in previous conference calls, increasing our development rates continues to remain a major focus as we catch up on development that was impacted due to the COVID-19 pandemic. And I'm pleased to report that a new jumbo arrived on site during July. A major positive in the second quarter has been the performance of the process plant, with recoveries having considerably increased after completing the commissioning of the new rougher flotation cells, which have doubled rougher flotation capacity. And that was the final part of the stage 2a plant expansion that was completed in May. In the second quarter, we achieved the highest recoveries for both gold and copper since Q4 2021. And in June, gold recoveries achieved the integrated development plan parameters of 93%. Now that that initial commissioning is complete, optimization work to further boost throughput and recovery is underway. I'll now turn our call over to Chief Financial Officer Justin Blanchet to discuss our financial results for the second quarter. Thank you, Justin.
spk08: Thank you, John. And hello, everyone. During Q2 2023, we had revenue of 51.8 million, a 39% increase from prior year. We sold 28,141 gold ounces at an average selling price of 1,883 compared to 23,674 gold ounces at an average selling price of 1,783 in the prior year. As at June 30th, 2023, there was 2,398 gold ounces in inventory including both Concentrate and Dore, a decrease of 895 gold ounces when compared to March 31st due to timing of sales. In Q2 2023, cash flow from operating activities before changes in working capital was 16.2 million compared to 10.5 million in the same period prior year. As at June 30th, 2023, We had $95.6 million in cash and cash equivalents. As at June 30th, K92 had one of its strongest reported working capital balances of $112.5 million, even after expenditure of $22 million for property, plant, and equipment during the quarter. The company has no debt on the balance sheet. The increase in cash and cash equivalents when compared to March 31st is primarily due to increased production and total metals sold while still spending $15.9 million on expansion capital. In Q2 2023, cost of sales was $29.2 million compared to $23.2 million in the prior year or $21.8 million compared to $18.5 million when excluding non-cash items. Despite an overall increase in cost of sales, the company achieved better economies of scale and lower unit costs when measured for each ton of ore produced, attributable to the successful ramp-up of the Stage 2 expansion, with ore and waste tons mined increasing 17% to 266,613 from 227,673 in Q2 2022. As John mentioned, during the second quarter, the Kinantu Gold Operations produced 27,405 ounces of gold, 1,526,547 pounds of copper, and 34,001 silver ounces, or 30,794 ounces of gold equivalent. We sold 28,141 ounces of gold. 1,657,115 pounds of copper, and 36,253 ounces of silver. We incurred a cash cost of $597 and an all-in sustaining cost of $975 per ounce of gold, which was significantly below our realized gold selling price of $1,883 per ounce. Our Q2 2023 cash cost per ounce of gold decreased to $597 from $617 in Q2 2022. The decrease in cash cost was primarily due to the increase in production as compared to prior year. Our Q2 all in sustaining cost per ounce of gold increased to $975 from $893 in Q2 2022. The increase in cost per ounce can be attributed to spending $8.3 million on sustaining capital as compared to $4.9 in the same period prior year. The increase in sustaining capital is primarily due to replacing some equipment during the quarter. I will now turn the call back to John to continue with the rest of the presentation.
spk11: Thank you, Justin. So for the exploration and growth section, we begin with a short video clip of the now completed stage to a plant expansion. starting from the crashes flying towards the mill, flotation circuit, gravity circuit, and filter press building. As previously noted, the final item, which was a doubling of the rapid flotation capacity, was commissioned in May 2023. Post-commissioning, the plant performance in terms of recovery and throughput has been strong, and we're continuing to optimize the plant towards realizing its ultimate recovery and throughput potential, whatever that may actually be. I'd also like to take a moment to acknowledge the team on site who delivered both Stage 2 and Stage 2A plant expansions. This team has more than tripled the throughput rate from the end of 2019 to today. Much of that expansion work was completed during the pandemic.
spk07: And then I switched to Liberty Mutual and saved hundreds. I know, exactly.
spk11: In terms of the Kinanti Mine Strategy growth pipeline, Stage 2A as noted earlier, is now completed. On Stage 3, we've now made considerable progress in multiple areas of the expansion. On July 24th, the Board of Directors authorized the award of the Engineering Procurement Construction lump sum contract for Stage 3 expansion process plant to GR Engineering Services. The contract award amount is US$81 million and is a lump sum fixed price arrangement. We also announced at the same time that the main process plan long lead items have now been ordered. For the Stage 3A expansion process plan, approximately 94% of the total capital cost has been fixed. This represents over half of the total growth capital cost for Stage 3A expansion based on the integrated development plan and significantly de-risks potential growth capital cost increases for the expansion. And as previously announced, the commissioning of the process plan is targeting the end of Q1 2025. Forecast cost is within 10% of the Conanto integrated development plan DFS and PEA case. And as noted earlier, growth capital cost increases have been significantly de-risked. We are extremely pleased with this outcome. Stage 3A expansion also made notable progress in multiple other areas. As shown in the picture on the right, the turning stand lift 1C is well underway and approximately 60% complete with completion targeting the end of 2023. Our accommodation facilities continue to expand with capacity due to exceed 1500 by the end of 2023, which is the capacity required for the stage three operations. Pastoral plant front end engineering design is proceeding and we expect to award the final contract in Q4. And the process continues to advance for various underground surface infrastructure packages, including vertical development, power and transportation. On the twin incline, the furthest incline has now advanced 2,539 meters as of the end of July and is over 80% complete. In Q4, we plan to commence mining the lower portion of core resource from the twin incline ahead of schedule. progressively providing significant boost to our operational flexibility in 2024 as we establish the new mining front at depth. The twin incline also provides a very useful drilling platform for exploration. As I think many are aware, the twin incline is sized for up to 5 million ton per annum with conveyors, which is multiples larger than the stage three and stage four expansion throughput. We did this simply because we don't know how big the system is and will be, and how many stages of expansion that are potentially in front of us. Based on what we've seen from exploration, be fair to say we're pleased that we have oversized the twin inclines. In terms of near-mine drilling, we're currently drilling Cora, Cora deeps, Cora south, Chad south, targets from either underground or surface. Targets such as Maniapi, Atacompa, and Karempi a very high potential, and we expect to commence drilling in due course. Looking at a long section of Kora, Kora South vein system, there are three key points that I'd like to make. Firstly, there's been a significant amount of drilling outside of the resource since the last estimate shown with various pierce points annotated. and which now covers a non-drill strike length of up to 2.65 kilometers. Secondly, Drilling to the South has discovered dilatant zones with two zones interpreted today as annotated in the blue lines, the double arrows as you see there, delivering record intersections, including 27.9 meters at 10.5 grams per ton gold equivalent and 50 meters at 5.2 grams per ton gold equivalent. Now, these zones appear to have limited strike length, but significant potential vertically. And our understanding is continuing to advance as we execute our drill program in this area. Third point, we see drilling from underground entering an exciting phase with both Cora deeps and Cora south now underway at depth, as highlighted with the two blue ellipses that you can see for the south and at depth. In addition to drilling cora size from the surface as well with the third ellipse, these are all high potential areas. Now looking at the long section of Judd South Bain system, there are four key points I think I'd like to make here. Firstly, we've significantly expanded the coverage of drilling of the Judd resource, delivering a very strong hit rate and some very high grade results. Secondly, Judd, like cora, as a dilatant zone with two zones interpreted today, again, looking at the . Thirdly, we announced in the third quarter discovery of high-grade zone to the south in a second vein at Judd, J2, recording 2.4 meters at 345 grams per ton, which I'll discuss in the next slide. And then lastly, by Cora, we see an exciting period for underground drilling at both Judd deeps and Judd south. On May the 25th, we announced 62 drill holes from Cora, Cora South and Chad South. The results were highlighted by the discovery of the high grade zone at the J2 vein to the south as outlined with the ellipse here. And that included, as I mentioned before, 2.4 meters and 345.36 grams per tonne gold equivalent. Proximal to other high-grade intersections, including KUDD0045, which recorded 11.2 meters at 12.69 grams per ton gold equivalent, and KUDD0043, which recorded 3.8 at 10.19 grams per ton gold equivalent. Importantly, the J2 vein is not included in the current resource estimate. is open in multiple direction and has recorded a hit rate to date of 46% of intersections exceeding 5 grams per tonne gold equivalent. At the J1 vein, the results are highlighted by surface stepper drilling KODD0036, recording 5 metres at 161 grams per tonne gold equivalent. targeting a substantial underdrilled target area between the Judd resource estimate and surface within ML150 and KUDD0040 intersecting a dilated zone, recording 22 metres at 5 grams per tonne gold equivalent with a substantial 57.8 metres at 2.73 in the broader intersection. As shown in the long section, GA1 is open in multiple directions and has delivered a strong hit rate to date. Gerling expanded multiple areas of non-high-grade mineralization at Cora Cora South, with highlights at the K1 vein, including KMDD 0485, recording 5.94 meters at 15.96 grams per ton gold equivalent, and KMDD 0545, recording 7.98 meters at 12.14 grams per ton gold equivalent. Highlights in the K2 vein included KMDD0535, 10.3 meters at 12 grams per ton gold equivalent, and KMDD0525, recording 5.65 meters at 9.08 grams per ton gold equivalent. On porphyry exploration, we continue to progress at A1 porphyry, recording multiple porphyry vectors from drilling and look forward to providing an update to the market in due course. With that, operator, we'd like to commence the Q&A question session. Thank you.
spk04: Thank you. We will now begin the question-answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two. We will pause for a moment as callers join the queue. The first question comes from Obais Habib with Scotiabank. Please go ahead.
spk02: Thanks, operator. Hi, John, and can I just a couple of questions from me to start off? Number one, sustaining capital was about just calculating about 26% less than Q1. and I believe you're looking to accelerate development going into the second half. Do you have all the equipment and people needed to spend the development budget allocated for this year, or do you see kind of spillover into 2024? Okay.
spk10: Thanks, Oase. Look, in terms of
spk11: capital, it does, as you know, it goes up and down a little quarter to quarter. In terms of equipment, yes, we do have the equipment that we needed to have by this point in time in the year. And in fact, I think subsequent to the quarter, we had another twin boomer arrive on site. So we've had a couple of trucks arrive. We've had a long-haul drill. additional jumbo, an additional loader, charge up machines and a whole lot of other equipment arrive on site. We are definitely ramping up the number of people. And in fact, by the end of the year, the camp, for instance, will actually be at the capacity that's required for stage three. So we're actually ahead in some of our capital that we're actually spending on some of the expansion that we're doing. But at this point in time, we have the people and the equipment that we need to achieve the numbers in terms of sustaining capital.
spk02: Perfect. Thanks for the color, John. And then just in regards to You know, in Q4, you're looking to, I believe this is just the Cora zone that you're looking to mine in Q4 that's not in budget. Any kind of color that you can provide in terms of, you know, how many tons or what kind of grade can we expect on that front and, you know, going into 2024 as well?
spk11: I honestly have to say not at this point in time. We don't expect it to be a lot of tons because we're going to be doing a bit of development on ore. So we don't expect to get a lot of tons out of there. But it is obviously the start. There'll be no stopping down on the 900 level. It'll be some development, a long strike on Cora.
spk02: Okay. Thanks for that, John. And maybe I'll leave it there. And, you know, and thanks. By the way, I'm looking forward to coming down to site as well next week.
spk11: Yeah, well, you know, I'm here making sure that the beds are made and, you know, all that sort of stuff.
spk04: The next question comes from Alex Tarantew with Stiefel. Steve, go ahead.
spk13: Hey, good morning, guys. A couple questions. The first one, just to kind of related to what Obeas was asking there. But with Barrick and the group making some progress, basically looking to restart that, has that changed the labor or cost situation at all in the country or for your project in any way over the past, I guess, couple months?
spk11: Yeah. Thanks, Alex. That's a fair question. We obviously benefited from the only other underground mine. maintenance um i i think fair to say that we have we do have some people that we have uh skilled people i'm talking about unskilled underground people that have come in from pauper and we certainly expect to lose those people back to pauper um simply because they're coming down from the AC bus or fly them down from there. We don't see it as a major issue for us, simply because we did operate with both them and ourselves previously. And we've actually put a fair bit of focus on actually developing skills of our local people. And that's intentional. um if the local people uh from here in our communities then they will tend to stay with the mind they will not be looking to go up to uh up to pauper um and i think from an operating environment we um we offer a uh what i would say is a better operating environment than than you have uh up at port so mean that we won't have one or two shortages if people leave with little notice. But I mean, overall, we're ramping up our numbers and looking to get ahead of the curve in terms of numbers. And I note in terms of expats in key things like twin boom jumbo operators and what have you, we haven't found any significant issues in being able to recruit those people.
spk13: Okay, great. And I guess, I mean, obviously, since you guys are well underway and on this phase three, so you've got probably, I would imagine, a bit of the upper hand in keeping those people. Great. So my second question, great to see the expiration budget jump up this quarter. I know you spoke about a lot of targets. And I guess my question is, have you, I guess, officially raised your expiration budget this year? I mean, your past guidance was $13 to $16 million. And you have a lot of targets, obviously, that you can put your money to advance. But what areas are you I guess most really focusing on, and when do you expect the next resource update to come out?
spk11: Okay. Well, the focus from the underground perspective has been on JAD within the mining lease, and then JAD South primarily from surface, also a bit from underground. And then Cora, closing out a couple of the areas to the north, and a couple of areas within the mining lease. And then Cora to the south, both from surface and underground. Sorry, and Judd also from surface. I should have made that point within the mining lease. And those are the ones that are primarily focused on expansion of the resource. And we're looking at October to get a new minimal resource estimate released. Other areas right now that we're drilling, this is the A1 porphyry. We've got one rig operating. And depending on the closeout of some of the drilling at Judd Cora from the surface, we would be looking to perhaps get a rig over to Atacompa, Maniapi. And Alex, you may recall that they are two historical resources, Arakompa sitting around 800,000 ounces, Maniapi a bit under 560,000 ounces. They haven't been drilled for 20 odd years. They're just a couple of kilometers away from Cora. They're actually closer to the plant than Cora is. And certainly they're something that we're pretty excited to get in and start doing some drilling. We consider, let's say, Arakompa, almost 800,000 ounces, 9 gram per ton. of 300 meters and hasn't been drilled for over 20 odd years that's the sort of opportunity that png and more particularly the canto region offer to this and and i guess why we've always been excited by the exploration potential of uh not just cora and job but the uh but the areas around that okay great yeah i guess uh having so many targets is a
spk12: is a good problem to have in deciding where to pick to drill next.
spk11: Yeah, that means you have to have more exploration strategy meetings than you normally would.
spk12: Yeah. Okay, great. Thank you.
spk04: And the next question comes from Ralph Perfini with Eight Capital. Please go ahead.
spk03: Thanks, operator. Good morning, John. So I want to come back to the first ore at core deeps coming into play in Q4. And just wondering if we think about sort of Q4 and into the early parts of 2024, just wondering how the veining works in terms of what's going to be, you know, initially targeted. And then maybe secondly, just sort of on the mining method and how you're thinking about the deeper areas, sort of, you know, a VOCA, you know, eventually transferring into long hole.
spk11: Okay, so we're busy with the detailed mine plan and budget for 2024 right now.
spk10: So I can't give you a lot of detail on that simply because we're busy with it.
spk04: Pardon the interruption. This is the operator. John Lewin's connection is disconnected. Please stand by as we reconnect him.
spk10: Sorry, can you hear me? Hello? Yeah, I can hear you, Ben.
spk11: Oh, I'm back again. All good. Sorry about that. I'm not sure how much you got of that, but current operating level, which is 1200, which is actually going from about 1130 up to 1280, actually. um will be the primary focus balance of this year and next year and that is a combination of judd k1 and k2 as we mentioned we'll be looking to get into that area 900 um in primarily cora and it will just be development we will not get stopping until I would think Q2 next year at the earliest. And there is also the potential to pull out some Judd from that as well relatively early. In fact, we've gone through Judd in some of our development for the first ore waste pass that we're we're putting in, which we develop out to the west. So going out some funds from CHADS down at the 900 is also a potential. In terms of our mining method, it'll continue with a Volca until 2025 when we commission the PACE rule.
spk03: Got you. Thanks, John. As a second question, when you think about sort of the mining areas that are planned into the second half and considering how that flows to ore throughput, are you confident that you're not seeing any sort of localized geotechnical challenges that those have been addressed and that sort of development that is planned is ahead of levels of mining that kind of, you know, where you're sort of happy and confident?
spk11: Look, I'd say we're pretty happy with where we're sitting right now in terms of access to mining areas. In terms of localized geotechnical issues, underground mining, you're always going to find some localized geotechnical issues. We think we have a good handle on what we're looking at in terms of those areas and an ability to manage any interaction with those areas. But underground mine, I haven't worked in any underground mine yet where you don't get localized geotechnical areas and issues. And it's an ongoing management thereof. In our case, we use a lot of shotcrete in our support system as well as a fairly comprehensive bolting and meshing, but those are things that we continue to look at and evaluate And certainly one of the projects we've got going, for instance, is evaluation of how we can mine the guide zone and realize additional answers currently in the DFS to the PEA.
spk03: That's excellent. Glad to hear. Appreciate the color, John. Thank you.
spk10: Thanks, Rob.
spk04: The next question comes from Arun Lambo with TD Securities. Please go ahead.
spk14: Hey, John. Just quickly, like I don't normally ask just kind of accounting questions, but can you just remind me how we should think about kind of the revenue coming in, like just looking at the loss on receivables at fair value, so revenue came in a little bit less. based on your reporting. Can you just remind how we should think about that going forward?
spk05: Pardon the interaction. This is the operator. John, your line is open. Pardon the interruption. This is the operator and we have John Lewins back on the line.
spk06: John, your line is now open. You may proceed.
spk05: Pardon the interruption. This is the operator again.
spk04: Please stand by as we try and reconnect John Lewin.
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