K92 slashes Q1 costs amid continued PNG expansion

PNG-focused K92 slashes costs in Q1 to beat 2022 guidance range and analyst expectations

K92 slashes Q1 costs amid continued PNG expansion

"Financially, the company has never been stronger, with a record cash balance of US$79.9 million, increasing by $8.6 million during the quarter," K92's CEO and director John Lewins said.

"All-in sustaining costs and cash costs were also very strong, at $788/ounce and $536/oz, respectively, and we are pleased to see the continued compression of unit operating costs driven by economies of scale and overall increased efficiencies as COVID restrictions are progressively eased," he said.

K92's flagship project is the Kainantu gold mine in the eastern Papuan Mobile Belt.

The AISC was down 24% year on year while cash costs shed 28%. The ASIC was $102/oz below the low end of K92's 2022 guidance of $890-$970/z and cash costs were $24/oz below the low end of $560-$640/oz.

Canaccord Genuity Capital Markets analyst Michael Fairbairn said K92's Q1 AISC and cash costs beat CG's forecasts by 17% and 18%, respectively.

"K92 continues to gain momentum with the recently commissioned ‘Stage 2' process plant upgrade to 1,100 tonnes per day, which has demonstrated expanded economies of scale, driving a cash cost beat in Q1/22," he said.

 "After a strong Q1, cash costs and AISC are tracking well relative to guidance. Notably, sustaining capital is expected to increase as the year progresses to support the ‘stage 2A' expansion to 1,370tpd," he added.

CG expects full-year AISC and cash costs will rise to $942/oz and $585/oz, respectively.

K92's net income for Q1 was $14.1 million, or $0.06 per share, which was broadly in line with CG's estimate of $0.07 per share.

Fairbairn noted that the lower-than-expected cash costs helped to drive K92's adjusted EBITDA of $27.3 million above CG's estimate of $25.7 million.

K92's share price was quoted as C$8.16 (US$6.36) on May 16, giving the company a market capitalization of C$1.82 billion.

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