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.