K92 Mining Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 10, 2023

There are 10 speakers on the call.

Operator

Thank you for standing by. This is the conference operator. Welcome to the 2023 Second Quarter Financial Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.

Operator

I would now like to turn the conference over to David Medelek, President. Please go ahead.

Speaker 1

Thank you, operator, and thanks everyone for attending K92 Mining's 2nd 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 Blanchard, Chief Financial Officer. I would also like to remind everyone that after the remarks from management, the call will be followed by and 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 and A and Slide 2 of the webcast presentation.

Speaker 1

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.

Speaker 2

Thank you, David, and welcome, everyone. In the Q2, CananTu delivered strong operating performance, Increasing gold equivalent production by 43% from the Q1, 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 exploration 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 Jut South Potentially outlining yet another productive vein within the core at Chora South, Judd South vein systems.

Speaker 2

And subsequent to quarter end, the Board of Directors The award of Stage 3 expansion process plant lump sum EPCM contract would significantly derisk 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. Now we're 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 1500 people with a major focus on local hiring.

Speaker 2

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 impairment, no cyanide and low greenhouse 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 2nd 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 2 transient 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.

Speaker 2

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 2,030 greenhouse gas emissions target to reduce our Scope 1 and 2 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 profile. 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 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.

Speaker 2

Through our partnership with PNG, we're assessing further opportunities to maximize Moving on to operational performance. During the quarter, the Cananci mine produced 30,794 ounces gold equivalent, 112,471 tonnes processed at a hedge rate of 9.2 grams per tonne gold equivalent Compared with Q1 2023 and Q2 2022, production increased by 43% 18% respectively and long haul scoping during the quarter performed to design. Cash costs were $5.97 an ounce and all in sustaining cost Cost $9.75 a month, notably lower than the annual guidance range of $6.20 to $6.80 for cash costs and $11.80 to $1300 for all in sustaining costs. In terms of our key operational quarterly physicals, Enantou delivered within 5% to 10% of our record ore tonnes processed, total material mined and developed And that despite the impacts of the safety incidents in the case of processing tonnes, work involved with the Stage 2 and Plant 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-nineteen pandemic, I'm pleased to report that a new jumbo arrived on-site during July.

Speaker 2

A major positive in the second quarter has been the performance 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 this H2A 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 Justin Blanche to discuss our financial results for the Q2. Thank you, Justin.

Speaker 3

Thank you, John, and hello, everyone. During quarter 2, 2023, we had revenue of $51,800,000 a 39% increase from prior year. We sold 28,141 gold ounces at an average selling price of 1883 compared to 23,674 gold ounces at an average selling price of 1783 in the prior year. As at June 30, 2023, there was 2,398 gold ounces in inventory, including both concentrate and dore, A decrease of 895 gold ounces when compared to March 31 due to timing of sales. In Q2, 2023, cash flow from operating activities before changes in working capital was $16,200,000 compared to $10,500,000 in the same period prior year.

Speaker 3

As at June 30, 2023, we had $95,600,000 in cash and cash equivalents. As at June 30th, K92 had one of its strongest reported working capital balances of $112,500,000 Even after expenditure of $22,000,000 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 31 is primarily due to increased production and total metals sold while still spending $15,900,000 on expansion capital. In Q2 2023, cost of sales was $29,200,000 compared to $23,200,000 in the prior year or $21,800,000 compared to $18,500,000 when excluding non cash items.

Speaker 3

Despite an overall increase in cost of sales, the Company achieved better economies of scale and lower unit costs when measured for each tonne 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 Q2, the Kinantu Gold Operations produced 27,405 ounces of gold, £1,526,547 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 $5.97 and an all in sustaining cost of $9.75 per ounce of gold, which was significantly below our realized gold selling price of $18.83 per ounce. Our Q2 2023 cash cost per ounce of gold decreased to $5.97 from $6.17 in Q2 2022.

Speaker 3

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 $9.75 from $8.93 in Q2 2022. The increase in cost per ounce can be attributed to Spending $8,300,000 on sustaining capital as compared to $4,900,000 in the same period prior year. The increase in Stating 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.

Speaker 2

Thank you, Justin. So for the exploration and growth section, we begin with a short video clip of the 9 completed Stage 2a plant expansion Starting from the crushers flying towards the mill, flotation circuit, gravity circuit and filter press building. As previously noted, the final item, which was a doubling of the rubber 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 proof of potential whatever that may actually be. I'd also like to take a moment to acknowledge the team on-site We delivered both Stage 2 and Stage 2a plant expansions.

Speaker 2

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. In terms of the Kinanci Mine Strategy Growth Pipeline, Stage 2a and 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 authorized the award of the engineering procurement construction lump sum contract for Stage 3 expansion process plant to GR Engineering Services.

Speaker 2

The contract at Water mines is US81 $1,000,000 and is a lump sum fixed price arrangement. We also announced at the same time that the main process plant long lead items have now been ordered. For the Stage 3A expansion process plant approximately 94% of the total capital cost has been fixed. This represents over half of the total growth capital cost Stage 3A expansion based on the integrated development plan and significantly derisk potential growth capital cost increases for the expansion. And as previously announced, commissioning of the process plan is targeting the end of Q1 2025.

Speaker 2

Forecast cost is within 10% of the Canantu Integrated Development Plan, DFS and PEA case. And as noted earlier, growth capital cost increases have been significantly deleverage. 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 Teningsdam Lift 1C is well underway and approximately 60% complete with completion targeting the end of 2023.

Speaker 2

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 3 operations. Pestrel plant Front end engineering design is proceeding and we expect to award the final contract in Q4. Pender 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.

Speaker 2

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 5,000,000 tonne per annum with conveyors, which is multiples larger than the Stage 3 and Stage 4 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, it'd be fair to say we're pleased that we have oversized the 20 clients. In terms of near mine drilling, we're currently drilling Kora, Cora Deep's Cora South, Jug South targets from either underground or surface.

Speaker 2

Targets such as Maniapi, Atacampa and Kurempi A very high potential and we expect to commence drilling in due course. Looking at a long section of Cora, Cortisol vein system, there are 3 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 Sean with various peer 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 2 zones interpreted today as annotated in the blue lines, The double IRR, this is Yoshida, delivering record intersections including 27.9 meters at 10.5 grams per tonne gold equivalent and 50 meters of 5.2 grams per tonne 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.

Speaker 2

3rd point, We see drilling from underground entering an exciting phase with both core Adeeps and core South now underway at depth As highlighted with the 2 blue ellipses that you can see to the site and at depth, in addition to drilling ore sites from the surface as well with the Certainly, these are all high potential areas. Now looking at the long section of JAD, JAD South vein system, There are 4 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 2 zones interpreted today, again, looking at the blinds there. Thirdly, We announced in the Q3 discovery of high grade zone to the south in a second vein at JAD, J2, Recording 2.4 meters at 3.45 grams per tonne, which I'll discuss in the next slide.

Speaker 2

And then lastly, Like Cora, we see an exciting period for underground drilling at both JAD Deeps and JAD South. On May 25th, we announced 60 2 drill holes from Cora, Cora South and Jat South. The results were highlighted by the discovery of the high grade zone at the J2 vein To the south, sidelined with the ellipse here. And that included, as I mentioned before, 2.4 meters at 345.36 grams per tonne gold equivalent. Proximal to other high grade intersections including KUDD forty five which recorded 11.2 meters at 12.69 grams per tonne gold equivalent and KUDD043 which Recorded 3.8 grams and 10.19 grams per tonne gold equivalent.

Speaker 2

Importantly, J2 vein is not included in the current resource estimate, is open in multiple directions and has recorded a hit rate to date of 46% of intersections exceeding 5 grams per tonne gold equivalent. Now for J1 vein, the results are highlighted by surface step out drilling KODD-thirty six Recording 5 meters at 161 grams per tonne gold equivalent, targeting a substantial under drilled target area between the Chud Resource estimate and surface within NL150 and KUDD-forty intersecting a dilatant zone Recording 22 meters at 5 grams per tonne gold equivalent with a substantial 57.8 meters at 2.73 in the broader intersection. As shown in the long section, J1 is open in multiple directions and has delivered a strong hit rate to date. Drilling expanded multiple areas of non high grade mineralization at Coracora South with highlights At the K1 vein, including KM DD-four eighty five recording 5.94 meters at 15.96 grams per tonne gold equivalent and KNDD-five forty five recording 7.98 meters and 12.14 grams per tonne gold equivalent. Highlights in the K2 vein included KNDD-five thirty five, 10.3 meters at 12 grams per tonne gold equivalent and KN DD 0525 recording 5.65 meters at 9.0 8 grams per tonne gold equivalent.

Speaker 2

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 and A question session. Thank you.

Operator

Thank you. We will now begin the question and answer session. We will pause for a moment as callers join the queue. The first question comes from Obase Habib with Scotiabank. Please go ahead.

Speaker 4

Thanks, operator. Hi, John and Canari, the 2 team. Just a couple of questions from me To start off, number 1, 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 The development budget allocated for this year or do you see kind of spillover into 2024?

Speaker 5

Okay. Thanks, Oase. Look, in terms

Speaker 6

of capital,

Speaker 5

Look, 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 Trymbooma arrived on-site. So we've had a couple of trucks arrive. We've had long haul drill, Additional jumbo, an additional, loader, charge up machines and a whole lot of Other equipment arrive on-site.

Speaker 5

We are definitely ramping up the number of people. And in fact, by the end of the year, the camp for instance will actually At the capacity that's required for Stage 3, so we're actually ahead in some of our capital that we're Spending on some of the expansion that we're doing. But at this point in time, we have The people on the equipment that we need to achieve The numbers in terms of sustaining capital.

Speaker 4

Perfect. Thanks for the color, John. And then just in regards to in Q4, you're looking to I believe this is just a core 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 how many tons or what kind of grade can we expect on that front and going into 2024 as well?

Speaker 5

Honestly, I have to say not at this point in time. We don't expect it to be a lot of tonnes you're going to be doing a bit of development on ore. So we don't expect to get a lot of tonnes out of there. But it is obviously the start. There'll be no stopping down on the 900 level.

Speaker 5

It will be some development along strike On Cora.

Speaker 4

Okay. Thanks for that, And maybe I'll leave it there. And thanks for taking my question. By the way, looking forward to coming down to site as well next week.

Speaker 5

Yes. Well, I'm here making sure that the beds are made and all that sort of stuff.

Operator

The next question comes from Alex Tarantoe with Stifel. Please go ahead.

Speaker 7

Hey, good morning, guys. A couple of questions. The first one, just kind of related to what Ovejes was asking there. But with Barrick and The group had progress, 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 of months.

Speaker 5

Alex, that's a fair question. Actually, we obviously benefited from the only other underground mine Maintenance. I think fair to say that we have we do have some people that we have Skilled people, I'm talking about unskilled underground people that have come in from Porger. And we certainly expect to move those people back to Porber Simply because they're coming down from there. We actually we pass or fly them down from there.

Speaker 5

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 If the local people from here in our communities, then they will And to stay with the mind they will not be looking to go up to CORBA. And I think from an operating We offer a what I would say is a better I mean that we won't have 1 or 2 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 then, Lotte, in terms of expats in key things like Twin and Jump operators and what have you, We haven't found any significant issues in being able to recruit those people.

Speaker 7

Okay, great. And I guess, I mean, obviously, since you guys are well underway and on this Phase 3, so you've got probably, I would imagine, A bit of the upper hand in keeping those people, but great. So my second question, great to see The expiration budget jumped 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?

Speaker 7

I mean, your past guidance was $13,000,000 to $16,000,000 and you have a lot of targets, obviously, that you can Putting money to advance. So but what areas are you, I guess, most really focusing on? And when could we when do you expect the next resource update to come out?

Speaker 5

Okay. Well, the focus from the underground perspective has been on JAD within the mining lease And then, Judge South from primarily from surface, also a bit from underground. And then Cora, closing out a couple of the areas to the north, 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.

Speaker 5

And we're looking at October to get a new mineral result estimate released. Other areas right now that we're drilling is the A1 porphyry. We've got 1 rig operating. And depending on the closeout of some of the drilling at Jadkora from the surface, We would be looking to perhaps get a rig over to Adacampa Maniapi. And Alex, you may recall that there are 2 historical resources, Aracompa, single line 800,000 ounces, Many of you have been under $580,000 I think it was actually.

Speaker 5

And 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, there is something that we're pretty excited to get in and start doing some drilling. We consider, let's say, Aerocompos almost 800,000 ounces, 9 grams per tonne, That is 300 meters and hasn't been drilled for over 20 odd years.

Speaker 5

That's the sort of opportunity that PNG and more particularly the Caninto region offer And I guess why we've always been excited by the exploration potential of I'll just call it and jump with the areas around that.

Speaker 7

Okay, great. I guess having so many targets is a good problem to have and deciding where to pick to drill next.

Speaker 5

Yes. It means you have to have more exploration strategy meetings than you normally would.

Speaker 7

Yes. Okay, great. Thank you.

Operator

The next question comes from Ralph Profiti with 8 Capital. Please go ahead.

Speaker 8

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 initially targeted? And then maybe secondly, just Sort of on the mining method and how you're thinking about the deeper areas sort of Avoca eventually transferring into long haul?

Speaker 5

Okay. So We're busy with the detailed mine plan and budget for 2024 right now. So, I can't give you A lot of detail on that simply because we're busy with it.

Operator

Pardon the interruption. The operator, John Lewin's connection is disconnected. Please stand by as we reconnect him.

Speaker 5

Sorry, can you hear me? Hello.

Speaker 6

Yes, I can hear you, Dan.

Speaker 5

Oh, I'm back again. All good. Sorry about that. So I'm not sure how much you got of that, but current operating level, which is 1200, which is actually going from about 11.30 up to 12.80 actually, will be the primary focus Balance of this year and next year, and that is a combination of JUD, K1 and K2. As we mentioned, we'll be looking to get into that area 900 in primarily Cora and it will just be development.

Speaker 5

We will not get stopping until I would think Q2 next year at the earliest. And the results of the potential to pull out some Judd From that, it was relatively early. In fact, we've gone through Judd In some of our development for the 1st, ore waste pass that we're putting in, which we develop out To the West. So pulling out some tonnes from Chad $900,000,000 is also a potential. In terms of our mining method, It will continue with the Volcker until 2025 when we commission the pace

Speaker 8

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 where you're sort of happy and confident?

Speaker 5

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 Mine, 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. You don't get localized geotechnical areas and Issues. And it's an ongoing management thereof.

Speaker 5

In an error 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 guides on and realize additional answers Currently in the DFS and the PEA.

Speaker 8

Excellent. Glad to hear. Appreciate the color, John. Thank you.

Speaker 5

Thanks.

Operator

The next Question comes from Arun Lambo with TD Securities. Please go ahead.

Speaker 9

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

Speaker 6

Based on your reporting, can

Speaker 9

you just remind how to think how we should think about

Operator

Pardon the interruption, this is the operator. John, your line is open. Regarding the interruption, this is the operator for attending. We have John Lewings back on the line. John, your line is now open.

Operator

You may proceed.

Speaker 9

Yes, I can hear you now, John.

Speaker 5

Sorry about that. Did David answer the question?

Speaker 9

I didn't hear anything, but I'll just quickly again ask you Just how to think about kind of the revenues coming in, came in a bit like Sales and production is pre released and came in a little bit less based on, I guess, some of the agreements you have. Can you just You mentioned how to think about it. I've seen this happen in the quarter before.

Speaker 5

Well, I think we saw in terms of our gold revenue, I think from start to end, gold revenue was down $50,000,000 $67 I think from start to end. So there's obviously an adjustment coming in there. We also have an adjustment coming in from 31st March to June, which was also down around 5%, I think. So we had adjustments coming in from both of those. And then We also had from our provisional invoicing to our final invoicing in terms of Moisture content and assays, I think we had a couple of percent points adjustment there.

Speaker 5

That tends to be around about where we get obviously gold varies from quarter to quarter and

Speaker 9

That's perfect. Thanks, John. And then just one quick one for me. Just thinking on the BOLF case of this expansion on the PA, the mill both mills would do probably 1,700,000 tonnes per annum. Assuming the mill can do a little bit above design, will you guys have the infrastructure in place, ramp, etcetera?

Speaker 9

And will the mine be able to support potentially if the mill can do 1,800,000, 1,900,000 tons per annum in kind of a boiler case scenario?

Speaker 5

That's a good question. I mean, obviously, we flagged from early days that The Twin incline has been specifically designed to handle Stage 3, Stage 4, Stage 5 and potentially Stage 6. So certainly infrastructure in that context, yes, in the infrastructure in terms of ventilation, Power, etcetera, etcetera are all positive on that. In terms of The tonnage and being able to get your tonnes per vertical meter, etcetera, etcetera, We would certainly look at going forward seeing, We think a significant addition to the resource coming in October would certainly indicate that we'd be able to support Being able to get 10%, 20% more on an annualized basis in terms of tonnage. And yes, as you rightly say, I mean, right now, we already see that the existing plant can Comfortably do 5% to 10% more than perhaps the nameplate we have for 500,000.

Speaker 5

And when you look at standard solid design for plants, Mills are obviously normally your bottleneck. And generally with a new plant such as Arras, You're designing on 85% bond index. In other words, you're allowing to be able to get your Nominal early throughput, where effectively your hardness is significantly above The average for the ore body. And so that generally means that your Capacity of the plants that you put in overall tends to be higher than the normal Capacity, that nameplate capacity. It's a way metal are just making themselves look good.

Speaker 5

And then you can get on that.

Speaker 9

Great. That's it for me. Thanks a lot, John.

Speaker 5

Thanks for that.

Operator

The next question comes from John DeMarco with National Bank Financial. Please go ahead.

Speaker 6

Thank you, operator, and good morning, John and team. A few questions. First of all, great to see the strong rebound lower in all in sustaining costs. Clearly, the higher grades helped. But now I'm looking at year to date AISC is around 11.80 versus the guidance range that puts Right at the bottom of the guidance range.

Speaker 6

And we're heading into sort of a potentially stronger back half of the year. Can you just comment on where you see AISC headed in the last couple of quarters? Sustaining CapEx year to date $20,000,000 Are you expecting sustaining CapEx to increase? I think O'Dae said, had touched on this a little bit. Maybe if you could just expand on

Speaker 5

I think in general, we'd be saying that, yes, we expect to see the sustaining capital Higher in the second half of the year. With that additional rig that's coming, we're looking for More development meters. So that's obviously one of the drivers for all in sustaining costs, But there are a number of other drivers that will come in and be part of that. So yes, we are expecting to see higher expenditure on all in sustaining cost second half of the year And we still very much expect it to come in, as per guidance, so within that guidance range.

Speaker 6

Okay. Thanks for that. Maybe looking at the mine development meters, we saw The pace is increasing quarter over quarter last year. It's moderated a little bit this year. How many meters per quarter should we expect in the And next few

Speaker 5

quarters. Okay. Well, we dropped some meters this last The end of last quarter, beginning of this quarter, obviously with our safety incident. And so we're a little bit tight on where we wanted to be for the quarter. Generally speaking, we're looking for $2,200,000 $2,400 per quarter And certainly north of 2,400 for the final quarter.

Speaker 6

Okay. Thanks for that. So encouraged to see the positive free cash flow during Q2, congratulations and cash balance edge higher. With this, Maybe the RCF just continues to be kind of a lower priority item, but if you could just give us an update on the timing of the RCF or any discussions That are underway

Speaker 5

at the moment. We expect to have that Completed in this quarter.

Speaker 6

Excellent. Okay. Thanks so much. And yes, look forward to seeing you next week and Good luck with

Speaker 5

Q3. Thanks,

Operator

As there are no further questions, this concludes the question and answer session. I would like to turn the conference back over to John Lewins for any closing remarks.

Speaker 5

Thanks, operator, and thanks, everyone, for joining us. Apologies for the slight technical issues coming to you from Canentu. I think it would be fair to say that when we look at the numbers in the second quarter, We're pretty happy with the final numbers in terms of production, in terms of costs and whatever else. As a company, however, we've gone through what would be the Toughest quarter, I think, we've ever faced with our safety incident. And that's something that as a company, we're going to be working very Glad to make sure that we never had anything quite like this again.

Speaker 5

This For the entire team at Canvento has really been something Exceptional in unfortunately the wrong sort of way As a company, however, we've refocused both on our safety and on our operations. And so we'll certainly be So I would just like to Recognize the passing of our teammates. And secondly, the efforts of all of our people here in Kamanu in the success that the company has achieved over the last few years and the last few quarters and that ongoing commitment to the company. So thank you for that and I look forward to seeing some of the people on the call here on-site next week. Thank you very much.

Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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Earnings Conference Call
K92 Mining Q2 2023
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