Sarah Byrne | Business Advantage PNG | 7 February 2017
After eight years in mothballs, Papua New Guinea’s Kainantu gold mine is preparing to export gold concentrate again. K92 Mining’s Chief Operating Officer, John Lewins, tells Business Advantage PNG the company plans to ramp up to full production around April this year.
The Canadian company has spent in excess of C$10 million (K24 million) in refurbishment and rehabilitation costs to bring the operation back into production.
‘It had been sitting for eight years,’ says Lewins. ‘There was a fair amount of capital required for refurbishment and rehabilitation of the mine.’
Kainantu gold mine, located in the Eastern Highlands of Papua New Guinea, had been on care and maintenance since 2008, when Barrick Gold acquired the operation from Highlands Pacific.
When Barrick Gold decided to sell Kainantu it provided an opportunity for K92 Mining, Lewins explains.
‘We had a couple of people on board with K92 Mining who were ex-Barrick and thought this was a fantastic project, so we acquired it,’ Lewins says.
K92 Mining expects to achieve positive cash flow in March or April this year.
Positive cash flow will provide the company with revenue to pay for future exploration activity, which Lewins says is critical in today’s market conditions.
K92 Mining’s original plan to fund the operation went out the window when the market went downhill in 2015, Lewins explains.
As a result, the mining company secured initial funding from New York private equity firm Cartesian Capital, before going ahead with its listing three months later.
Negative sentiment in the market is an ongoing challenge for any junior mining company, Lewins comments.
‘That market for raising funds isn’t necessarily there, so you’ve really got to focus on cash flow and generating positive cash flow to use for exploration.’
Self-funding exploration is critical, Lewins says.
In terms of cash flow for exploration activity, Lewins says the company must work within its means.
‘I personally believe the market will change towards the second half of the year, but right now it’s a difficult market for junior mining companies,’ Lewins explains.
Kainantu’s current resource is over two million ounces, which includes the Irumafimpa area and Kora deposit. According to K92 Mining, two million ounces is only a small part of Kainantu’s potential resource.
With no previous drilling in the area between Irumafimpa and Kora, Lewins says the area has significant potential for the company.
‘It’s one of the most exciting bits of ground that I’ve seen, and one of the most exciting projects that I’ve been involved in—and that’s having spent almost 40 years in the industry.’
K92 Mining aims to ramp Irumafimpa up to full production by April this year and to commence production from the Kora deposit towards the end of this year, or early next year.
In an effort to step up production activity, there are two diamond drill rigs currently working on the ground, and a third rig ready to commence work at Kora in the coming weeks.
Exploration between Irumafimpa and Kora is a focus for the company, but Lewins says there is great potential for exploration outside the mining lease. In January, K92 Mining reached an agreement with local tribal group, the Pomasi, and it has since commenced exploration in this area that spans two of the company’s exploration leases.
With connections to grid power and access to the main highway, Lewins says from a location and infrastructure perspective ‘this [Kainantu] is about as good as it gets in Papua New Guinea.’
Many areas of Papua New Guinea have limited infrastructure, but according to Lewins there are areas like Kainantu that have the benefit of road access and remain underexplored.
‘If it was in Australia, it would be overrun. Papua New Guinea is an incredibly well endowed and a massively underexplored area of the world.’