Q2 2024 K92 Mining Inc Earnings Call
Speaker Change: Thank you for standing by. This is the conference operator. Welcome to the K-92 Mining 2024 second quarter financial results conference call.
Speaker Change: As a reminder, all participants are in lesson only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions.
Speaker Change: To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then 0.
Speaker Change: I would now like to turn the conference over to David Medilek, President and CEO. Please, go ahead.
David Medilek: Thank you, Operator, and thanks everyone for attending K92 Mining's 2024 Second Quarter 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 Blanchet, Chief Financial Officer.
Speaker Change: I would also like to remind everyone that after the remarks from management, the call will be followed by a Q&A session.
Speaker Change: 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 2 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.
John: Thank you, David, and welcome, everyone.
John: We begin with safety, K92's number one priority.
John: At the end of the second quarter, K-92 marked a major achievement with zero lost time injuries recorded over the last 12 months.
Speaker Change: Over this period, two independent safety audits were conducted. From these audits, a number of actions were identified, and many actions have been taken and completed.
Speaker Change: Safety technology on site has been enhanced, including the introduction of in-cab monitoring and a proximity and collision avoidance system, with more systems planned for the future.
Speaker Change: Culturally, there's also been multiple positive leading indicators. For several consecutive quarters, there has been a significant increase in job safety assessments to reinforce our safety mindset and the number of safety warnings from our in-cab monitoring system has actually significantly reduced.
Speaker Change: Changes to personnel have been made where required. Resources have been and are being expanded for safety and training.
Speaker Change: As stated on previous conference calls, we take the increased lost term injury frequency rate in 2023 very seriously, while also noting that historically K92 has operated with one of the best safety records in Papua New Guinea and the broader Australasia region, as shown in the chart.
Speaker Change: I'd like to reiterate that K92 relentlessly pursues our goal of achieving zero harm amongst our workforce.
Speaker Change: K92 is extremely pleased to have announced its 2023 Sustainability Report in June.
Speaker Change: The report builds on previous versions, enhancing our AST reporting disclosure and our alignment with the global frameworks of SASB and TCFD.
Speaker Change: The report highlights K92's strong commitment to ESG and to the people and the country of Papua New Guinea. And this includes a focus on hiring and developing local content.
Speaker Change: with approximately 94% of our workforce Papua New Guinean nationals, including a majority from our local communities. Our strong commitment to supporting the local economy, including $24.5 million of expenditure to local support joint ventures.
Speaker Change: and procurement of 105 million incurred in Papua New Guinea, representing 56% of our total procurement for the mine.
Speaker Change: Our delivery of significant benefits to the country with $26.8 million of taxes and royalties paid plus $0.8 million in direct community investment. Our commitment to combating climate change with emission reduction targets set for 2030.
Speaker Change: So, K92 is extremely proud of the positive impact it's having on the prosperity and development of Papua New Guinea. We encourage you to read our report found at www.k92mining.com.
Speaker Change: In May 2024, K-92 achieved a major milestone with the commencement of its inaugural Infrastructure Tax Credit Scheme project to upgrade the Konkur-Bilomoyer Road.
Speaker Change: The $6.6 million project, inclusive of $0.5 million of general administration for the project itself and for other ITCS projects, is expected to be transformational for many of our communities, enabling reliable and efficient sealed road access.
Operator: to the K92 Mining 2024 second quarter financial results conference call. As a reminder, all participants are in lesson only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press start and want on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing start and zero.
Speaker Change: to the main road network. This also opens up many opportunities for our community, including increased trade and business development.
Speaker Change: The picture on the right is a groundbreaking ceremony attended by the Honourable Simon Sear, Governor of Eastern Highlands Province and K92's VP, Government and Community Affairs, Philip Samar.
Speaker Change: Funding for the project is through a tax credit scheme with up to 2% of assessable income to be allocated by K92 for government-approved community projects and deducted from future corporate tax payable.
David Medilek: I would now like to turn the conference over to David Medilek, president and CEO, please go ahead. Thank you operator and thanks even for attending K92 Mining's 2024 second quarter 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 Blanchet, 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.
Speaker Change: It's an excellent program. We're proud to be part of it and we look forward to positively transforming the infrastructure of our local communities through this and many other projects to come.
Speaker Change: Moving on to operational performance.
Speaker Change: During the quarter, the Canantu gold mine produced 24,347 ounces gold equivalent.
David Medilek: As we will be making forward-looking statements during the call, please refer to the cautionary notes and risk disclosure in our MDNA and slide to 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.
Speaker Change: As previously announced, production for the quarter was impacted by the temporary suspension of underground operations for approximately a month starting in mid-March as a result of a Form 29 issued by the Mineral Resources Authority of Papua New Guinea for a non-industrial fatal incident which occurred on site.
John Lewins: Now, I'll turn it over to John to provide you with an overview.
John Lewins: Thank you David and welcome everyone. We begin with safety, K92's number one priority. At the end of the second quarter, K92 marked a major achievement with zero lost time injuries recorded over the last 12 months. Over this period, two independent safety audits were conducted. From these audits, a number of actions were identified, and many actions have been taken and completed. Safety technology on site has been enhanced, including the introduction of in-cap monitoring and proximity and collision avoidance system with more systems planned for the future.
Speaker Change: and this significantly impacted March and also April production, as underground operations needed to be re-ramped up and processing stockpiles needed to be rebuilt from scratch.
Speaker Change: During the quarter, a total of 95,582 tons were processed at a head grade of 8.5 grams per ton, with a cash cost of $919 an ounce and an all-in sustaining cost of $1,510 an ounce.
Speaker Change: As annotated on the chart, all in sustaining costs have been elevated for the past few quarters as the company continues to make a considerable investment in the Stage 3 expansion, particularly in 2024, with costs expected to decline considerably after delivering the expansion.
John Lewins: Culturally, there's also been multiple positive leading indicators. For several consecutive quarters, there has been a significant increase in job safety assessments to reinforce our safety mindset. And the number of safety warnings from our in-cap monitoring system has actually significantly reduced. Changes to personnel have been made were required, resources have been and are being expanded for safety and training. I stated on previous conference calls, we take the increased loss term injury frequency rate in 2023 very seriously, while also noting that historically, K92 has operated with one of the best safety records in Papua New Guinea. And the broader Australasia region has shown in the chart. I'd like to reiterate that K92 relentlessly pursues our goal of achieving zero harm amongst our workforce.
Speaker Change: I think it's important to highlight that prior to the non-industrial incident, Q1 was actually on track to be one of our strongest quarters on record, and a lot of positives can be taken from that going forward.
Speaker Change: Operational performance in May and June was strong and as outlined in our operational guidance earlier in the year, the second half of the year is expected to be our strongest. We reiterate our 2024 operational guidance.
Speaker Change: In terms of key operational quarterly physicals, K-92 has demonstrated the ability to sequentially expand the operation for several years, with physicals in the first half of the year clearly impacted by the temporary suspension of underground operations that impacted that March and then in April.
John Lewins: K92 is extremely pleased to have announced its 2023 sustainability report in June. The report builds on previous versions, enhancing our ASG reporting disclosure and our alignment with the global frameworks of SASB and TCFD. The report highlights K92 strong commitment to ESG and to the people in the country of Papua New Guinea. And this includes a focus on hiring and developing local content with approximately 94% of our workforce Papua New Guinea nationals, including a majority from our local communities.
Speaker Change: During the first half of the year, the process plant has continued to be a major operational positive.
Speaker Change: In the first quarter, the process plant set multiple monthly, weekly, and daily throughput records, exceeding the 2A throughput by 35%, 57%, and 75% respectively.
Speaker Change: clearly demonstrating that with pounds in front of it from the mine, it is extremely capable and provides significant optionality going forward.
Speaker Change: The records also highlight the potential that the Stage 3 process plan, which was designed on the same throughput parameters as the Stage 2a process plan, is much more capable than its 1.2 million tonnes per annum nameplate design.
John Lewins: A strong commitment to supporting the local economy, including 24.5 million of expenditure to local support joint ventures. And procurement of 105 million incurred in Papua New Guinea, representing 56% of our total procurement for the mine. A delivery of significant benefits to the country with 26.8 million of taxes and royalties paid plus 0.8 million in direct community investment. A commitment to combating climate change with a mission reduction target set for 2030. So K92 is extremely proud of the positive impact it's having on the prosperity and development of Papua New Guinea. We encourage you to read our report find at www.k92mining.com.
Speaker Change: In the second quarter, the process plan set records in terms of metallurgical recoveries. As shown in the bar charts, gold and copper recoveries were significantly higher than both 2023 and Q1 2024, and importantly higher than our integrated development plan assumptions.
Speaker Change: We see additional upside to recoveries on delivery of the Stage 3 process plan under construction, which is a more optimal plan design. I will now turn over to our Chief Financial Officer to discuss our financial results.
John Lewins: In May 2024, K92 achieved a major milestone with a commencement of its inaugural infrastructure tax credit scheme project to upgrade the Concours Bill and Maya Road. The 6.6 million project inclusive of 0.5 million of general administration for the project itself and for other ITCS projects is expected to be transformational from many of our communities enabling reliable and efficient steel road access to the main road network. This also opens up many opportunities for our community including increased trade and business development.
Speaker Change: Thank you, John, and hello everyone.
John: During the second quarter of 2024, we had revenue of $47.8 million. We sold 19,064 gold ounces at an average selling price of $2,246, compared to 28,141 ounces at an average selling price of $1,883 in the prior year.
Speaker Change: As at June 30th, 2024, there was 4,968 gold ounces in inventory, including both concentrate and dore, an increase of 3,291 gold ounces when compared to March 31st due to timing of sales.
John Lewins: The picture on the right is a grand breaking ceremony attended by the Honourable Simon Seah, Governor of Eastern Ireland's province and K92's V.T. Government and Community Affairs Philip Samar. Funding for the project is through a tax credit scheme with up to 2% of accessible income to be allocated by K92 for government approved community projects and deducted from future corporate tax payable. It's an excellent program. We're proud to be part of it and we look forward positively transforming the infrastructure of our local communities through this and many other projects to come.
Speaker Change: During the second quarter of 2024, cost of sales was $27.7 million compared to $29.2 million in the prior year, or $19.4 million compared to $21.8 million when excluding non-cash items.
Speaker Change: Cost of sales is lowered primarily due to reduced variable costs, including consumables and haulage, associated with throughput, which decreased when compared to 2023.
Speaker Change: Q2 2024 cash flow from operating activities before changes in working capital was $17.3 million, compared to $16.2 million in the prior year.
Speaker Change: As of June 30, 2024, we had $71.1 million in cash and cash equivalents, spending $29.8 million in expansion capital in the quarter.
John Lewins: Moving on to operational performance. During the quarter, the K92 gold mine produced 24,347 ounces gold equivalent.
Speaker Change: We had a working capital balance of $91.7 million and had a net debt balance of $38.9 million on the balance sheet.
John Lewins: As previously announced, production for the quarter was impacted by the temporary suspension of underground operations for approximately a month starting in mid-March as a result of a form 29 issued by the mineral resources authority of Papua New Guinea for a non-industrial fatal incident which occurred on site and this significantly impacted March and also April production as underground operations needed to be re-ramped up and processing stockpiles needed to be rebuilt from scratch. During the quarter, a total of 95,582 tons were processed at a head rate of 8.5 grams per tonne, with a cash cost of $919 an all in sustaining cost of $1,510 an ounce.
Speaker Change: In June, K-92 established two credit facilities with Trafigura, referred to as a loan in the financial statements, to borrow up to $120 million.
Speaker Change: with an accordion feature that allows for an increase to $150 million. As of June 30th, K92 has drawn $40 million from the loan and has since drawn an additional $20 million or $60 million in total. There are no restrictions on the remaining $60 million that may be drawn from the loan.
Speaker Change: Further, the $20 million of restricted cash shown on the balance as security for the loan can become unrestricted on January 1st, 2025, meaning we have access to an additional $80 million.
John Lewins: As annotated on the chart, all in sustaining costs have been elevated for the past few quarters as the company continues to make a considerable investment in the state's expansion, particularly in 2024, with costs expected to decline considerably after delivering the expansion.
Speaker Change: As John mentioned, during the second quarter, the Kanantu gold operations produced 21,661 ounces of gold, 1,246,639 pounds of copper, and 26,754 ounces of silver, or 24,347 ounces of gold equivalent.
John Lewins: I think it's important to highlight the prior to the non-industrial incident, Q1 was actually on track to be one of our strongest quarters on record and a lot of positives can be taken from that going forward. Operational performance in May and June was strong and is outlined in our operational guidance earlier in the year, the second half of the year is expected to be our strongest. We reiterate our 2024 operational In terms of key operational quarterly physicals, K92 has demonstrated the ability to sequentially expand the operation for several years, with physicals in the first half of the year clearly impacted by the temporary suspension of undergoing operations that impacted that March and in April.
John: We sold 19,064 ounces of gold, 898,578 pounds of copper, and 18,467 ounces of silver.
John: We incurred a cash cost of $919 and an all-in sustaining cost of $1,510 per ounce of gold, which was significantly below our selling price of $2,246 per ounce.
John: Our second quarter cash cost per ounce increased to $919 from $597.
John: in 2023.
John: The increase was due to the higher cost of sales from expenditures incurred during the temporary suspension, which were expense directly to cost of sales, lower amounts of development, and a lower amount of by-product credits.
John Lewins: During the first half of the year, the process plant has continued to be a major operational positive. In the first quarter, the process plant set multiple monthly, weekly, and daily throughput records exceeding the 2A throughput by 35%, 57% and 75% respectively, clearly demonstrating that with pounds in front of it from the mind, it is extremely capable and provides significant optionality going forward. The records also highlight the potential that the Stage 3 process plant, which was designed on the same throughput parameters as the Stage 2A process plant, is much more capable than its 1.2 million tons of random nameplate design.
John: It is important to note that we will see downward pressure on costs via economies of scale as operations ramp up and the Stage 3 expansion is complete. I will now turn the call back to John to continue with the rest of the presentation.
John: Thank you, Justin.
John: The Exploration and Growth section, we begin with an update of the Stage 3 and 4 expansions, which will fundamentally transform K92 into a Tier 1 mid-tier producer through sequentially increasing production to 300,000 ounces per annum and then 470,000 ounces gold equivalent per annum.
John: Importantly, this transformation is happening near-term, with the commissioning of the Stage 3 process planned for Q2 2025. The delivery of Stage 4 expansion remains on track, targeting late 2026.
John Lewins: In the second quarter, the process plant set records in terms of metallurgical recoveries, as shown in the bar charts, golden copper recoveries were significantly higher than both 2023 and Q1 2024, and importantly higher than our integrated development plan assumptions.
John: As at the end of July, 57% of Stage 3 and 4 growth capital has been either spent or committed.
John: And as a reminder, the process plant is the largest growth capital package, and that was awarded in July 2023 on a lump-sum fixed-price basis, which significantly de-risked the project for K92.
John Lewins: We see additional upside to recoveries on delivery of the Stage 3 process plant under construction, which is a more optimal plan designed.
Justin Blanchet: I will now turn over to our chief financial officer to discuss our financial results.
John: Both the Stage 3 and 4 expansions are fully financed from existing cash, cash flow and credit facilities.
Justin Blanchet: Thank you, John, and hello, everyone. During the second quarter of 2024, we had revenue of 47.8 million. We sold 19,064 gold ounces at an average selling price of $2,246 compared to 28,141 ounces at an average selling price of $1,883 in a prior year. As at June 30 of 2024, there was 4,968 gold ounces in inventory, including both Concentrate and Dore. An increase of 3,291 gold ounces when compared to March 31, due to timing of sales.
John: In June, we announced the establishment of 120 million credit facilities with Trafigura.
John: upsizing from the previously announced 100 million.
John: In addition to this, there's an accordion feature to increase the aggregate amount under the credit facilities to $150 million.
John: well positioned in K92 with not only significant liquidity for stage 3 and 4 expansions, but also enabling the potential
John: to add significant value through exploration during this construction period, which I'll discuss later in the presentation. As Justin noted, we've drawn $40 million from these facilities as at the end of the second quarter and subsequent to quarter end, an additional $20 million.
Justin Blanchet: During the second quarter of 2024, cost of sales was 27.7 million compared to 29.2 million in a prior year, or 19.4 million compared to 21.8 million when excluding non-cash items. Cost of sales is lower primarily due to reduce variable costs, including consumables in college, associated with throughput, which decreased when compared to 2023. Q2, 2024 cash flow from operating activities before changes in working capital was 17.3 million compared to 16.2 million in a prior year.
John: There are no restrictions on the remaining $60 million that currently can be drawn from the loan. Plus, there is an additional $20 million of restricted cash that can become available from January 1, 2025, for a total of $80 million of available liquidity.
John: Now, concurrent with the credit facility closing, we also closed our new offtake agreement with Trafigura, who have been our offtake partner since the start of operations. The new offtake and upsized credit facilities reinforce our strong long-term relationship with Trafigura.
Justin Blanchet: As at June 30 of 2024, we had 71.1 million in cash and cash equivalents, spending 29.8 million in expansion capital in the quarter. We had a working capital balance of 91.7 million and had a net debt balance of 38.9 million on the balance sheet.
John: The offtake is accretive, securing competitive terms on metal spot prices, attractive payment arrangements and improved metal payabilities.
John: Later this year, we plan to upgrade our integrated development plan to reflect these enhanced off-date terms and also our substantially larger mineral resorts, which increased by almost 50% when factoring in depletion from the last economic study.
Justin Blanchet: In June, can-92 established two credit facilities with Trafigura, referred to as a loan in the financial statements to borrow up to $120 million with an accordion feature that allows for an increase to $150 million. As at June 30, can-92 has drawn $40 million from the loan and has since drawn an additional $20 million or $60 million in total. There are no restrictions on the remaining $60 million that may be drawn from the loan.
John: In terms of the Stage 3 construction, we'll begin with a 3D animation flyover of the process plan design, looking at the entire circuit.
John: with the dry end of the circuit in the distance and the wet end in the foreground.
John: The circuit is a conventional single-stage crush.
John: SAG-BOL arrangement with gravity and flotation recovery to produce dore and a gold-copper concentrate.
Justin Blanchet: Further, the $20 million of restricted cash, shown on a balance, as security for the loan can become unrestricted on January 1, 2025, meaning we have access to an additional $80 million. As John mentioned, during the second quarter, they command to gold operations produce 21,661 ounces of gold, 1,246,639 pounds of copper, and 26,754 ounces of silver, or 24,347 ounces of gold equivalent. We sold 19,064 ounces of gold, 898,578 pounds of copper, and 18,467 ounces of silver.
John: We now move much closer to the plant, starting with our single-stage jaw crusher. Crushed product then reports to the sewage bin, with an additional ore stockpile reporting to a dead stockpile.
John: reclaimed crushed oil end reports first to the sag mill and then discharged from that reporting to the ball mill.
John: The mill product undergoes gravity and flotation recovery, producing dore from the gravity and a copper-gold-silver concentrate from the flotation.
John: The recovery method is the same proven methodology that we use in the Stage 2a expansion, but with a more optimized design, which includes inline analysis.
Justin Blanchet: We incurred a cash cost of $919, and an all-in sustaining cost of $1,510 per ounce of gold, which was significantly below our selling price of $2,246 per ounce. Our second quarter cash cost per ounce increased to $919 from $597 in 2023. The increase was due to the higher cost of sales from expenditures incurred during the temporary suspension, which were expense directly to cost of sales, lower amounts of development, and a lower amount of by-product credits. It is important to note that we will see downward pressure on cost the economies of scale as operations ramp up, and the stage three expansion is complete.
John: which we expect will deliver better methodological recoveries.
John: based on the performance of the Stage 2A plan, significantly outperforming the throughput model.
John: We have designed this new plant to be expandable.
John: able to add additional flotation, filtering capacity, for instance, which provides sufficient room to make cost-effective upgrades and increase the throughput.
Speaker Change: will now pivot to recent drawn footage of the construction site.
Speaker Change: For those of you who were on the last webcast conference call which was in May, you'll certainly appreciate considerable progress that has been made. Over 50% of the civil works are now completed and the mechanical installation is due to start in September.
John Lewins: I will now turn the call back to John to continue with the rest of the presentation. Thank you, Justin. The expiration and growth section, we begin with an update of the stage three in four expansions, which will fundamentally transform K92 into a tier one mid-tier producer, through sequentially increasing production to 300,000 ounces per annum, and then 470,000 ounces of gold equivalent per annum.
Speaker Change: Starting with the primary crusher area, the raft foundation for the jaw crusher is in and work is underway on the walls.
Speaker Change: The workers on the right are setting up steel panels to support erecting the walls in various concrete lifts.
Speaker Change: Crusher is significantly oversized which is important for future expansions.
Speaker Change: For the Crush or Stockpile Reclaim area, the RAF Foundation is in and the walls are being set up.
John Lewins: Importantly, this transformation is happening near term with the commissioning of the stage three process plan planned for Q2 2025. The delivery of stage four expansion remains on track targeting late 2026. As at the end of July, 57% of stage three and four growth capital has been either spent or committed, and as a reminder, the process plan is the largest growth capital package, and that was awarded in July 2023 on a lump sum fixed price basis, which significantly de-risk the project for K92.
Speaker Change: In the grinding area, you'll notice that this area has progressed the most as the other areas are lower priority based on our construction schedule. On the far side is where the ball mill will be installed with the pedestal for the feed end and jacking cradles complete.
Speaker Change: Concrete work is currently forming the motor end of the bearing.
Speaker Change: Closest to us is where the SAGMU will be installed.
Speaker Change: The raft foundation is poured and formwork is underway for the mill. On the right side, concrete will be poured for the Cyclone Tower raft foundation imminently. On the left side, excavations for the mill discharge hopper have also been completed.
John Lewins: Both the stage three and four expansions are fully financed from existing cash flow and credit facilities. In June, we announced the establishment of 120 million credit facilities with Trafigura, up sizing from the previously announced 100 million. In addition to this, there's an accordion feature to increase the aggregate amount under the credit facilities to 150 million, well positioned in K92 with not only significant liquidity for stage three and four expansions, but also enabling the potential to add significant value through expiration during this construction period, which I'll discuss later in the presentation.
Speaker Change: For the flotation circuit, the raft has been poured and pedestals lifted. The first layer of backfill and compaction have been completed.
Speaker Change: At the tailing thickener, an extensive amount of work has been done. All pedestals have been poured and the team is in the process of removing formwork. The concentrate thickener footings have been poured, the pedestals have been poured and we're at the backfilling stage.
Speaker Change: The final part of the circuit is the lowest priority with work on wall footings underway for the concentrate, flotation, and storage sheds.
Speaker Change: Earlier this month, we marked a major milestone with the arrival of the SAG and ball mills to site. The photo on the left is the ball mill shell and ends and the SAG mill ends. The SAG mill shell is in country and will be transported to site imminently.
John Lewins: Adjust and notice, we've drawn 40 million from these facilities as at the end of the second quarter and subsequent to quarter end in additional 20 million. The no restrictions on the remaining 60 million that currently can be drawn from the long plus there is an additional 20 million of restricted cash that can become available from January the 1st, 2025 for a total of 80 million available liquidity. Now concurrent with the credit facility closing, we also closed our new offtake agreement with Trafigura, who have been our offtake partner since the start of operations. The new offtake and upsized credit facilities reinforce our strong long-term relationship with Trafigura. The offtake is accredited, securing competitive terms on metal spot prices, attractive payment arrangements and improved metal pay abilities.
Speaker Change: Many other process plant longead items are also now on site as shown in the photo including the float cells, concentrate thickener, tailing thickener, ball mill feed chute, mill girth gears, mill components such as the mortars.
Speaker Change: Long-lead items for the process plant are tracking ahead of the construction schedule. We're very excited with the increased process plant construction activity, which is gaining significant momentum and look forward to providing further updates on the process plant construction in due course.
John Lewins: Later this year, we plan to upgrade our integrated development plan to reflect these enhanced offtake terms and also our substantially larger mineral resorts, which increase by almost 50% when factoring in depletion from the last economic study.
Speaker Change: On the paste-fill plant, we've made significant progress. The front-end engineering design is effectively completed. Many of the long-lead items are ordered, including the live bottom feeders, paste mixers, filter presses, and pumps.
Speaker Change: Work towards the award of the construction contract is well advanced. Work on other ancillary construction packages, such as the power station, haul road upgrades, camp upgrades, warehouse, maintenance facilities, etc. are also making good progress.
John Lewins: In terms of the Stage 3 construction, we'll begin with a 3D animation flyover of the process planned design, looking at the entire circuit, with the dry end of the circuit in the distance and the wet end in the foreground. The circuit is a conventional single-stage crush, SAG, BOL arrangement, with gravity and flotation recovery to produce Dore and a gold copper concentrate. We now move much closer to the plant, starting with our single-stage jaw crusher, crushed product then reports to a surge bin with an additional or stockpile reporting to a dead stopper, reclaimed crushed or then reports first to the SAG mill, and then discharged from that reporting to the ball mill.
Speaker Change: Beyond the Stage 3 and 4 expansion surface works, multiple near-term major infrastructure upgrades that will fundamentally transform the underground mine are being put in place.
Speaker Change: The twin incliner shown on the image on the right is effectively complete. It's capable of operating trucks that are four times the speed and approximately 50% larger than what we're currently using. It will also eliminate double handling at the mine portal and allow us to haul material directly to the process plant.
Speaker Change: As part of the expansion, we're also putting in place a series of ore and waste passes to efficiently leverage gravity to connect the main plant to the highly productive twin incline infrastructure.
John Lewins: The mill product undergoes gravity and flotation recovery producing Dore from the gravity and a copper gold silver concentrate from the flotation. The recovery method is the same proven methodology that we use in the Stage 2A expansion, but with a more optimized design which includes inline analysis, which we expect will deliver better metallurgical recoveries. Based on the performance of the Stage 2A plant significantly outperforming the throughput model, we have designed this new plant to be expandable, able to add additional flotation, filtering capacity for instance, which provides sufficient room to make cost effective upgrades and increase the throughput.
Speaker Change: Now, as shown in this video, the raised bore rig is operational. It's currently boring a five-meter diameter raise to upgrade ventilation in the main mine.
Speaker Change: The raised bore vertical development advance rates have been faster than budgeted, which is very encouraging, and the raise is almost complete, marking yet another milestone as we transform the infrastructure of the underground mine for the Stage 3 and 4 expansions.
Speaker Change: The second raised plan will be for the waste and oil pass system.
Speaker Change: Now, these various infrastructure upgrades combined with the tripling of the mining fronts in 2024, as shown on this slide, are set to fundamentally transform the mine and business into a Tier 1 mid-tier producer near term.
Speaker Change: In terms of exploration, we're drilling the Cora-Cora-Scythe-Jud-Jud-Scythe vein systems plus the Aracompa vein system.
John Lewins: We will now pivot to recent drawn footage of the construction site. For those of you are on the last webcast conference call, which was in May, you'll certainly appreciate considerable progress that has been made. Over 50% of the civil works are now completed and the mechanical installations due to the start and September. Starting with their primary crusher area, the rap foundation for the jaw crusher is in and work is underway on the walls.
Speaker Change: On the 6th of May, K9-2 reported a total of 140 holes at Cora-Cora-South-Jud-Jud-South. These results continue to demonstrate that this is a world-class deposit with significant upside for future growth.
John Lewins: The workers on the right are setting up steel panels to support erecting the walls in various concrete lifts. Crusher is significantly oversized, which is important for future expansions. For the crusher or stock car reclaim area, the rap foundation is in and the walls are being set up. In the grinding area, you'll notice that this area has progressed the most as the other areas are lower priority based on our construction schedule. On the far side is where the ballman will be installed with the pedestal for the feed end and jacking cradle's complete.
Speaker Change: The results at Cora discovered a new potential dilatant zone to the south beyond the resource, expanded and upgraded a large zone of high-grade as demarcated by the large ellipse with the dashed black line above the mine workings, and expanded high-grade mineralization to the south from underground step-out drilling.
Speaker Change: It's an important highlight that exploration to the south continues to intersect high-grade copper, as annotated on the K2 long section, with multiple significant step out intersections approaching 4% copper in addition to recording high gold.
John Lewins: Concrete work is currently forming the motor end of the bearing. Both as to us is where the sackman will be installed. The rap foundation is poured and formwork is underway for the mill. On the right side, concrete will be poured for the cyclone tower rap foundation imminently. On the left side, excavations for the mill discharge hopper have also been completed. For the flotation circuit, the rap has been poured and pedestals lifted.
Speaker Change: These intersections have extended the high-grade copper zone further to the south and continue to confirm our thesis for high and potentially increasing copper grades as we drill further to the south towards the A1 porphyry.
Speaker Change: Judd has also delivered some impressive drilling results, including expanding vertically a high-grade zone at the J1 vein, as demarcated with the large dashed black line ellipse, with multiple plus-one-ounce-per-ton intersections.
John Lewins: The first layer of backfill and compaction have been completed. At the tailing thickener, an extensive amount of work has been done. All pedestals have been poured and the team is in the process of removing formwork. The concentrate thickener footings have been poured, the pedestals have been poured and we're at the backfilling stage.
Speaker Change: Like Cora, these results are particularly significant as they are immediately above the main mine workings.
Speaker Change: setting ourselves up well to mine that area in the near-to-medium term for the Stage 3 expansion.
John Lewins: The final part of the circuit is the lowest priority with work on wall footings underway for the concentrate, flotation and storage sheds.
Speaker Change: The results of Judd also intersected high-grid mineralization in a step-out drilling 300 meters to the north in an area with effectively no drilling, highlighted by our KODD 0055 recording 9.85 meters at 7.85 gram per ton gold equivalent near surface.
John Lewins: Earlier this month, we marked a major milestone with the arrival of the sagging ball mills to site. The photo on the left is the ball mill shell and ends and the sag mill ends. The sag mill shell is in-country and will be transported to site imminently. Many other process plant-longed items are also now on site as shown in the photo, including the float cells, concentrates, thickener, tailings, thickener, ball-milk-featured, mill-gurth-gears, mill components such as the mortars. Longed items for the process plant are tracking ahead of the construction schedule.
Speaker Change: Now, on the 10th of June, K92 announced its second set of drilling results at Arakompa, reporting nine holes. Arakompa, as shown on the map on the right, is located approximately four, four-and-a-half kilometers from the process plant, which is closer than Cora and Judd.
Speaker Change: Historically, Aricompa has recorded limited drilling with only 18 holes, largely shallow, having been drilled for a total of only 1.8 kilometers drilled.
Speaker Change: Our initial drilling results were outstanding, and the second set of results were exceptional. A significant amount of high grade was intersected, including KARDD 0011 recording 3.7 metres at 42.35 grams per tonne gold equivalent, KARDD 0009 recording 6.7 metres at 14.35 grams per tonne gold equivalent, and KARDD 0006 recording 12.6 metres at 19.87 grams per tonne gold equivalent.
John Lewins: We're very excited with the increased process plant construction activity which is gaining significant momentum and look forward to providing further updates on the process plant construction in due course.
John Lewins: On the paste fill plant we've made significant progress. The front end engineering design is effectively completed. Many of the long lead items are ordered including the light bottom feeders, paste mixes, filter presses and pumps. Work towards the award of the construction contractors while advanced work on other unciilary construction packages such as the power station, hall road, uproarage, camp upgrades, warehouses, maintenance facilities etc are also making good progress.
Speaker Change: The hybrid loads are hosted within a wide mineralized corridor overprinted by porphyry style mineralization. This has delivered multiple bulk intersection and average reported true thickness of 67 meters. Highlights included KARDD0006 recording 94.4 meters at 3.14, KARDD0011 recording 86.6 meters at 2.12, and KARD0010 recording 66 meters at 2.1 gram per ton gold equivalent, which also ended early in mineralization.
John Lewins: Beyond the stage three and four expansion surface works multiple near-term major infrastructure upgrades that will fundamentally transform the underground mine are being put in place. The twin end kind of shown on the image on the right is effectively complete. It's capable of operating trucks that are four times the speed and approximately 50 percent larger than what we're currently using. It will also eliminate double handling at the mine portal and allow us to haul material directly to the process plant. As part of the expansion we're also putting in place a series of ore and waste passes to efficiently leverage gravity to connect the main plant to the highly productive twin incline infrastructure.
Speaker Change: Importantly, as shown on the image on the right, the target size of Aricompa is very large.
Speaker Change: Today, we've defined a strike length of over 400 meters and only 20% of the 150 to 225 meter wide corridor strike length drill tested by K92.
Speaker Change: In addition to growing the deposit along strike, Aracompa has significant potential at depth, as shown in the long section image on the left, and also significant potential within the 150 to 225 metre corridor, where the full width of the corridor has not yet been drill tested, as shown in the cross section on the right.
John Lewins: Now, as shown in this video the RAISE bore rig is operational. It's currently boring a five meter diameter RAISE to upgrade ventilation in the main mine. The RAISE bore vertical development advance rates have been faster than budgeted which is very encouraging and the RAISE is almost complete marking yet another milestone as we transform the infrastructure of the underground mine for the stage three and four expansions. The second RAISE plan will be for the waste and ore pass system.
Speaker Change: We're pleased to report that exploration at Aricompa continues to accelerate. As shown in the very recent drawn footage, there are now four drill rigs operating at Aricompa.
Speaker Change: At the beginning of the year, we had one drill rig. When we hosted our Q1 conference, we had two drill rigs drilling, and driven by the strong results that we've seen, or very strong results, in fact, we've now got four rigs drilling. The rig we've zoomed in to is our fourth drill rig operating.
John Lewins: Now, these various infrastructure upgrades combined with the tripling of the mining fronts in 2024 has shown on this slide are set to fundamentally transform the mine and business into a tier one mid tier producer near term.
Speaker Change: It's situated more towards the east than the other paths, providing us with some different vantage point to target that very wide mineralized corridor. Conditions at Arakompo for drilling have been good. The rock is competent. Penetration rates continue to be productive, even faster than we see at Cora and Judd.
John Lewins: In terms of exploration, we're drilling the Cora Cora side Judge side vein systems plus the Ara Compa vein system. On the 6th of May, K92 reported a total of 140 holes at Cora Cora side Judge side. These results continue to demonstrate that this is a world-class deposit with significant upside for future growth. The results at Cora discovered a new potential dilating zone to the south beyond the resource, expanded and upgrade a large zone of hydrate as demarcated by the large lips with the dashed blackline above the mine workings and expanded hydrate mineralization to the south from underground step out drilling.
Speaker Change: We plan to announce a maiden resource at ARACOMPA by Q1 2025 and look forward to providing updates at ARACOMPA in the near term. With that, operator, we'd like to commence the Q&A section. Thank you.
Speaker Change: Thank you. We will now begin the question and answer session.
John Lewins: It's an important highlight that exploration to the south continues to intersect high-grade copper as annotated on the K2 long section with multiple significant step out intersections approaching 4% copper in addition to recording high gold. These intersections have extended the high-grade copper zone further to the south and continue to confirm our thesis for high and potentially increasing copper grades as we drill further to the south towards the A1 porphyry. Jordan has also delivered some impressive drilling results, including expanding vertically a high-grade zone at the J1 vein, as demarcated with the large dashed black line alips with multiple plus one-ounce proton intersections.
Speaker Change: To join the question queue, you may press star then 1 on your telephone keypad. You'll hear a tone acknowledging your request.
Speaker Change: If you're using a speakerphone, please pick up your handset before pressing any keys.
Speaker Change: to which are your questions. Please press star then choose.
Speaker Change: We'll pause for a moment as callers join the queue.
Speaker Change: Michael Gray, Ovais Habib,
Speaker Change: The first question comes from Oved Habib with Scotiabank. Please go ahead.
Oved Habib: Hi John and K92, my team. Congrats on a good quarter and really good to see things are progressing well on the expansion as well.
John Lewins: Like Cora, these results are particularly significant as they are immediately above the main mind-workings, setting ourselves up well to line that area in the near-to-medium term for the Stage 3 expansion. The results at J1 also intersected high-grade mineralization in a step out drilling 300 meters to the north, in an area with effectively no drilling, highlighted by our K-O-GD 0055 recording 9.85 meters in 7.85 gram per tonne. Goldical and near-surface.
Oved Habib: A couple of questions from me, John. Number one, second half is expected to be significantly better than the first half. What is going to be driving that? Is that basically grade or throughput or both? Any color you can provide on that would be great.
Speaker Change: Thanks, Yves. So if we look at the second quarter...
Speaker Change: I think our, sorry, second half. Our first half, although we, as we've noted, we had some significant challenges, was still, I think, our equal
John Lewins: Now on the 10th of June, K92 announced its second set of drilling results at Aracompa, reporting 9 holes. Aracompa, as shown on the map on the right, is located approximately 4.4 or 5 kilometers from the process plant, which is closer than Cora and Giard. Historically, Aracompa has recorded limited drilling with only 18 holes largely shallow, having been drilled for a total of only 1.8 kilometers drilled. Our initial drilling results were outstanding, and the second set of results were exceptional.
Speaker Change: second best ever first half of the year. In fact the first quarter was marginally above budget.
Speaker Change: Second half of the year, we expect to see a significant increase in throughput.
Speaker Change: as the mine itself ramps up.
John Lewins: A significant amount of hybrid was intersected, including K-RDD 0011 recording 3.7 meters of 42.35 grams per tonne gold equivalent, K-RDD 009 recording 6.7 meters of 14.35 grams per tonne gold equivalent, and K-RDD 006 recording 12.6 meters at 19.87 grams per tonne gold equivalent. The hybrid loads are hosted within a wide mineralized corridor, overprinted by porphyry style mineralization. This has delivered multiple bulk intersection and average reported true thickness of 67 meters. Highlighting included K-RDD 006 recording 94.4 meters of 3.14.
Speaker Change: So, it will primarily be driven by an increase in tons processed through the plant, but there is, I think, a marginal increase as well in the grades.
Speaker Change: Okay, got it. And then just on that front, in terms of increasing the mining rates, obviously your ventilation rates have started to progress.
Speaker Change: where does that stand in terms of completion and and I'm assuming that's what's going to generate your accelerated development and mining rates?
Speaker Change: Yeah, look, Emesh, you're quite correct. Ventilation is a key for us in stepping up on the ground.
John Lewins: K-RDD 0011 recording 86.6 meters at 2.12, and K-RDD 0010 recording 66 meters at 2.1 grams per tonne gold equivalent, which also ended early mineralization. Importantly, as shown on the image on the right, the target size of Aracompa is very large. Today, we've defined a straight length of over 400 meters, and only 20 percent of the 150 to 225 meter wide corridor straight length drill tested by K-92. In addition to growing the deposit along strike, Aracompa has significant potential at depth, as shown in the long section image on the left, and also significant potential within the 150 to 225 meter corridor, where the full width of the corridor has not yet been drilled tested as shown in the cross-section on the right.
Speaker Change: The raised boar is due to break through
Speaker Change: I think early in September. So that will be our first rays, almost 300 meters, 5 meter diameter.
Speaker Change: Generally speaking, the...
Speaker Change: progress on that. We got more meters per day than we budgeted, so we're pretty happy with that.
Speaker Change: And so that end of the quarter, we'll have that new ventilation, that interim ventilation because it is an interim step, should be up and running by end of quarter, early next quarter.
Speaker Change: and...
Speaker Change: As you know, we've got a site visit coming up in October and the people actually, those who are coming along will be able to see and hopefully feel that as well, being undergrads.
John Lewins: We're pleased to report that expiration of Aracompa continues to accelerate. As shown in the very recent drone footage, there are now four drill rigs operating at Aracompa. At the beginning of the year, we had one drill rig. When we hosted our Q1 conference, we had two drill rigs drilling, and driven by the strong results that we see, or very strong results. In fact, we've nighed off four rigs drilling. The rig we've assumed is our fourth drill rig operating.
Speaker Change: That's great, that's great. And so, John, I mean, in terms of the ventilation, I mean, this essentially was expected to be completed by the end of Q4, so things are progressing extremely well on the start, as well as how fast you're expecting it to be completed.
Speaker Change: This is the interim step. We've still got a further step, which is the Puma incline.
John Lewins: It situated more towards the east and the other parts providing us with some different vantage point to target that very wide mineralized corridor. Conditions at Aracompa for drilling have been good. The rock is competent, penetration rates continue to be productive, even faster than we see it, Chora and Judd.
John: That's right. And that's scheduled to break down, sorry, to break through in late Q4, early Q1 and be operational in Q1 next year.
Speaker Change: Now that is our long-term ventilation, that's where we're putting in two of two megawatt fans, variable speed, and that ventilation basically is life of mine as it currently stands.
John Lewins: We plan to announce a maiden resorts at Arakompa by Q1 2025 and look forward to providing updates at Arakompa in the near term.
Operator: With that operator, we'd like to commence the Q&A section. Thank you. We'll now begin the question and answer your question.
Speaker Change: Perfect, perfect. Thanks for the clarity on that. And yeah, that's it for me, John. Thanks for taking my questions.
John: Thanks so much.
John: The next question comes from Stephen Sook with Stifel. Please go ahead.
Operator: To join the question, Q, you may press star then one on your telephone feedback. You'll share a tone and knowledge in your request. If you're using a speaker phone, please pick up your hands up if you're pressing any keys.
Stephen Sook: Hi John and team, echo of ace, congrats on a strong quarter despite a rocky start but great results.
Stephen Sook: My question is more on the plant construction side. If you could just maybe shed a little more light on what's critical path on the plant construction. I know it's a fixed package, but obviously timelines are important there.
Operator: To which are your questions, please press star then two. We'll pause for a moment as colors are in the queue.
Stephen Sook: What needs to be done to make sure that's online for the end of Q2 for it to be fully operational through Q3 next year. Thanks.
Ovais Habib: The first question comes from Ovais Habib with Scotia Banks. Please go ahead. Hi, you're on and K92, my team. Congrats on a good quarter and really good to see things are progressing well on the expansion as well. A couple of questions from me, John. Number one, second and a half is expected to be significantly better than the first step. What is going to be driving that? Is that basically grade or throughput or both?
Speaker Change: So the critical path was is primarily the Sagan ball mill as is
Speaker Change: generally the case, not always, but generally the case when you're doing plants.
Speaker Change: Lead times for...
Speaker Change: The mills
Speaker Change: The meal package was the longest lead time, and as you saw in the presentation,
Ovais Habib: Any color you can provide on that at the rate? Well, thanks, Ovais. If you look at the second quarter, I think our first half, although as we've noted, we had some significant challenges for still. I think our equal second best ever first half of the year. In fact, the first quarter was marginally about budget. Second half of the year, we expect to see a significant increase in throughput as the mine itself ramps up.
Speaker Change: The mills are on site, apart from the shell for the SAG mill, which will be transported up from the Port of Ley to site later this month.
Speaker Change: That is our critical path.
Speaker Change: Right now we're on track to see that completed and able to start commissioning by the end of the second quarter.
Speaker Change: That would be followed by probably the flotation.
Speaker Change: as the next sort of critical area.
Ovais Habib: So, it will primarily be driven by an increase in tons processed through the plant, but there is a think of marginal increase as well in the grades. Okay, got it. And then just on that front, in terms of increasing the mining rates, obviously, your ventilation raise has started to progress. Where does that stand in terms of completion, and assuming that's what's going to generate your accelerated development and mining rates? Yeah, it is quite correct.
Speaker Change: Right now, I guess we're pretty comfortable with what we're seeing there.
Speaker Change: obviously steel work, a lot of steel work is starting to come in as well.
Speaker Change: having finalized designs etc. etc.
Speaker Change: and then of course it's it's it's obviously ramping up ramping up the underground
Speaker Change: And the other side of it that was flagged is right now we're seeing our existing plant able to do a lot more tons than the 600,000 tons per annum, and that's a big positive in terms of the new plant as well.
Ovais Habib: The ventilation is a key for us in stepping up on the ground. The raise bore is due to break through, I think early in September, so that'll be our first raise, almost 300 meters, five meter diameter. Generally speaking, the progress on that, we got more meters per day than we then we budgeted, so we're pretty happy with that. And so that end of the quarter, we'll have that new ventilation, that interim ventilation because it is an interim set should be up and running by the end of quarter, early next quarter.
Speaker Change: Got it. Great to see everything on track there and arriving apace on everything that is critical path. That's it for me. I'll turn the line over to someone else.
Speaker Change: Thanks.
Speaker Change: The next question comes from Andrew McChook with BMO Capital Markets. Please go ahead.
Andrew McChook: Just a couple of quick questions. That video, I think, was quite instructive to show the progress at the plant site. Is it fair to say that the excavations are all done, more or less, or the majority of them, so the kind of civil...
Ovais Habib: And as you know, we've got a side visit coming up in October and the people who they see, those who are coming along, we'll be able to see and hopefully feel that as well, being undergrad. That's great, that's great. And so John, I mean in terms of the ventilation, I mean, this essentially was expected to be compared by the end of quarter, so things like progressing extremely well on the start as well as how fast you're expecting to be completed then.
Speaker Change: Excavations or that timeline risk and surprises are behind you?
Speaker Change: That's correct, Andrew, and that's a.
Speaker Change: That's a very good point to focus on because it can give you surprises and what have you. So yes, that's all being completed and that includes piling, where we've needed to do some piling, et cetera, et cetera.
Ovais Habib: This is the interim set, we've still got a further set which is the Puma incline. That's scheduled to break down, sorry, break down to break through in a lake queue for early Q1 and the operational in Q1 next year. That is our long term ventilation, that's where we're putting in two or two megawatt fans, variable speed. And that ventilation basically is life of mine as it currently stands. Perfect, perfect, thanks for the clarity on that. And yeah, that's it for me, John. Thanks for taking my questions. Thanks a lot.
Speaker Change: And then I think the wording in the press release was to the effect that the contractor has completed mobilization and
Speaker Change: I think the actual wording that you handed over the site to them, so that also is an important timeline that they're there and they have their people and they're committed to do all this, right?
Speaker Change: Correct. It becomes a key day of handover of site.
Speaker Change: So, right now, they're on site, their civil subcontractor is on site, the steelworks subcontractor is due to start mobilizing, I think, by the end of this month and start erection in September.
Stephen Suk: The next question comes from Stephen Suk, which default, please go ahead. Hi John, and team Echo of Ace congrats on a strong quarter, displayed a rocky start, but great results. My question is more on the plant construction side. If you could just maybe shed a little more light on what's what's critical path on the plant construction. I know it's a fixed package but obviously timelines are important there, so you know what's what needs to be done to make sure that's online for for the end of Q2 for it to be fully operational through Q3 next year.
Speaker Change: And then just last question. I didn't write fast enough, John, when you were talking, responding to an earlier question about the...
Speaker Change: taste backfill plant. Can you just go over the timeline there and because I think that would be one of the big components and going from
Speaker Change: 57% completed and committed to a much larger number once that's locked in so you just walk us through that one more time please
Speaker Change: Okay, so the base fill plant is a bit over 50 million US, so it's a very significant portion, as you quite rightly identified, of our overall capital.
Speaker Change: We have
Stephen Suk: Thanks. Oh, thanks Tim. So the critical path was is primarily the sag and ball meal as is generally the case, not always be generally the case in when you're doing plants. Lead times for the mills, the mill package was the longest lead time. And as you saw in the presentation, the mills are on site apart from the shell for the sag mill, which will be transported up from the port of lead to site later this month.
Speaker Change: We placed orders for long-lead items in relation to that, such as filters,
Speaker Change: pumps, mixes, etc.
Speaker Change: We're just finalising the tender documents to go out on tender for the actual construction and that is...
Speaker Change: That includes, obviously, the contractor that's building the process plant, but there are others as well who will be tendering on that.
Speaker Change: Start a commissioning of that isn't until the third quarter
Speaker Change: next year.
Speaker Change: You basically want to have your process plant reasonably stable before you start trying to commission your paste fill, otherwise you've got instability leading into your production.
Stephen Suk: That is our critical path. And right now we're on track to see that completed and able to start commissioning at the end of the year by the end of the second quarter. That would be followed by probably the flotation as the next sort of critical area. I guess we're pretty comfortable with what we're seeing there. Obviously steel work, a lot of steel work is starting to come in as well, having finalized designs, et cetera, et cetera.
Speaker Change: Your paste fill, which is not ideal, because as you know, paste fill requires stability in order to perform optimally.
Speaker Change: having said that the design that we have does actually...
Speaker Change: allow better flexibility than you would see in a standard plant in as much as
Speaker Change: We're producing a filtered product which we take underground and repulp, and therefore you have more flexibility between the two plants.
Stephen Suk: And then, of course, it's obviously ramping up the underground. I guess the other side of it, I appreciate that. Yeah, and the other side of it was flagged is right now where we're seeing our existing plant able to do a lot more tons than the 600,000 tons front of them, and that's a big positive in terms of the new plant as well. Got it. Great, no, great to see everything on tractor and arriving a piece on everything that is critical, but that's it for me.
Speaker Change: And then just in terms of timeline, like...
Speaker Change: We expect before year-end to see this move from...
Speaker Change: tendering to lock 10. Is that a reasonable expectation? Oh, absolutely.
Speaker Change: We expect to award the contract next quarter.
Speaker Change: it
Speaker Change: early
Speaker Change: Thank you for listening.
Speaker Change: Once again, if you have a question, please press star and 1.
Operator: I'll turn the line over to someone else. Thanks.
Speaker Change: The next question comes from Alex Terentu with Benson Financial. Please, go ahead.
Andrew Mikitchook: The next question comes from Andrew Mikitchook with NMO capital markets. Please go ahead. Just a couple of quick questions that CEO, I think, was quite instructive to show the progress at the plant site. Is it fair to say that the excavations are all done more or less with the majority of them, so the civil excavations are at that timeline risk and surprises are behind you? That's correct, Andrew, and that's a very good point to focus on because it can give you surprises and what have you.
Alex Terentu: Hi everybody. It's great to see some good progress being made at AeroComp. Obviously you guys have four, as you said there, four drills now running so you're quite excited about that and you've got a maiden resource coming out.
Alex Terentu: but
Speaker Change: I guess my question is, can you give me a bit of color on the steps then with regards to permitting and mining a license, to put one in place to get ore from Orocomba into the mill? I mean, obviously, you're highlighting it as a very prospective target. So the sooner you can get that into a potential mine plan, I would imagine the better. So can you just kind of walk me through what that process would be like?
Andrew Mikitchook: Yes, that's all being completed, and that includes piling where we've needed to do some piling, et cetera, et cetera. And then I think the wording in the press release was to the effect that the contractor has completed mobilization, and I think the actual wording that you have handed over the site to them, so that that also is an important timeline that they're there, and they have their people, and they're committed to do all this, right?
Speaker Change: [inaudible]
Speaker Change: Yep. Thanks, Alex.
Speaker Change: Right now, obviously, it's in our EL.
Andrew Mikitchook: Correct. It becomes a key day of handover of site. So right now they're on site, they're a civil subcontractor who's on site. The steelwork subcontractor is due to the start mobilizing, I think, by the end of this month, and start erection in September. And then just last question, I didn't write fast enough, John, when you were talking, responding to an earlier question about the paste backfill plant. Can you just go over the timeline there, and I think that would be one of the big components in going from 57% completed and committed to a much larger number, once that's locked in, so you can just walk us through that one more time, please.
Speaker Change: At this point in time, it's our intent to put an application in for a mining license next year.
Speaker Change: covering
Speaker Change: Aricompa, Maniappi, Matti
Speaker Change: and also the Cora and Judd South where they extend beyond the existing mining lease.
Speaker Change: The total area you can have as a mining lease, I think, is about 60 square kilometres.
Speaker Change: and we've got a layout already, a design already of what the mining list that we want which fits in with that requirement.
Speaker Change: and we've already had started our discussions with the MRA and in fact with with government in relation to
Andrew Mikitchook: Okay, so the paste fill plant is a bit over 50 million US, so it's a very significant portion, as you quite rightly identified, of our overall capital. We have placed orders for long lead items in relation to that, such as filter Hans Mixers, et cetera. We're just finalizing the tender documents to go out on tender for the actual construction and that includes obviously the contractor that's building the process plant, but there are others as well who will be tendering on that.
Speaker Change: to putting that application in.
Speaker Change: We've started work such as mapping of communities and people.
Speaker Change: because that's an important part of the process as well. The communities generally that we would be engaged with in relation to an extended mining lease are already part of the existing mining lease.
Speaker Change: Maybe a few additional people, but in the main part, there will be some additionals as well.
Speaker Change: It's a mining lease application. It is not a special mining lease.
Speaker Change: It's not an expansion of the mining lease because under the current legislation, there is no ability to expand a mining lease.
Speaker Change: I note having said that, that as recently as last week
Speaker Change: the MD of the MRA highlighted that the government, it is the intent of the government
Speaker Change: to modify the Act to allow for mining leases actually to be expanded.
Andrew Mikitchook: Start a commissioning of that isn't until the third quarter, next year. You basically want to have your process plant reasonably stable before you start trying to commission your paceful, otherwise you've got instability leading into your paceful, which is not ideal because as you know, paceful requires stability in order to perform optimally. Having said that, the design that we have does actually allow better flexibility than you would see in a standard plant in as much as we're producing a filtered product, which we take on the ground and repulp and therefore you have more flexibility between the two plants.
Speaker Change: If that occurs before we put the application in, then we would actually look at expanding the mining lease rather than putting a new application in. But we're working on the premise right now that it would be a new mining lease.
Speaker Change: From the perspective of information there's not a huge amount of difference but there is a view that expanding a mining lease would be quicker than getting a new mining lease in place.
Speaker Change: Realistically, putting it in 2025, you would be expecting a mining lease issued late 2026-2027.
Speaker Change: and you really wouldn't be in a position to start mining until that point anyway because as it stands right now you know we spoke about four or five hundred meters of strike length of Aracompa
Speaker Change: But on the surface, we've mapped this for about 1.7 kilometers.
Andrew Mikitchook: And then just in terms of timeline, like we expect before you're in to see this move from tendering to lock 10, is that a reasonable expectation? Oh, absolutely. We'd expect to award the contract next quarter. Thank you for. Once again, if you have a question, please press star then one.
Speaker Change: We don't, at this point in time, know what sort of depth extent that we're looking at. And, you know, we'll gradually be drilling deeper and deeper as well as along strike, and obviously we are putting significant risks on this too.
Speaker Change: to, as quickly as possible, get ourselves a real view of what we have. But I'd sort of point out, if you look at CORA,
Speaker Change: and remembering we had underground access to Cora. We've been at Cora now.
John Lewins: The next question comes from Alex Terrento with Ben some financial. Please go ahead. Hi everybody. Great to see some good progress being made at Eric Comba. Obviously you guys have four users said they're four drills now running, so you're quite excited about that and you've got a maiden resource coming out. But I guess my question is, can you give me a bit of color on the steps then in regards to permitting and mining a license at the point when in place to get or from Eric Comba into the mill?
Speaker Change: for seven years.
Speaker Change: we've
Speaker Change: I can't remember now, it's 600 holes or something. There's an enormous number of holes that have been drilled in order to get us to the sort of resource that we have now and I think...
Speaker Change: We're sitting at 2.4 million of terabytes in measured and indicated and another
Speaker Change: [inaudible]
John: In inferred and overall I think the total number is close on 8 million ounces when you take into account what we've already mined.
John Lewins: I mean, obviously you're highlighting it as a very prospective target. So the sooner you can get that into the potential mine plan, you know, I would imagine the better. So can you just kind of walk me through what that process would be like?
John: So, it will be, we think, multiple year drilling out of this deposit and
John Lewins: Yep, thanks Alex. So right now obviously it's in our EL. At this point in time, it's our intent to put an application in for a mining license next year, covering Eric Comba, Maniapi, Matti, and also the Cora and Judd South where they extend beyond the existing mining lease. The total area you can have is a mining lease, I think is about 60 square kilometers and we've got a layout already, a design already of what the mining lease that we want which fits in with our requirement.
Speaker Change: We certainly see it has similar strike length to what we see at Cora and Judd, or similar potential strike length that we see at Cora and Judd.
Speaker Change: And so there'll be a heck of a lot of drilling, and there'll be a lot of drilling from underground.
Speaker Change: potential access is similar to the Cora type model in that you're coming in the side of a mountain and
Speaker Change: Realistically, I think the earliest you could probably look at it is 27.
Speaker Change: And that's where the capacity of the new plant and the potential for the new plant to achieve stage 4 without restarting the existing plant becomes important because...
Speaker Change: obviously that means that you've got a spare plant sitting there with a capacity of 600,000 tonnes per annum, whatever that number is, that you could use for something like Aricompa.
John Lewins: And we've already started our discussions with the MRA and in fact with government in relation to putting that application in, we've started work such as mapping of communities and people because that's an important part of the process as well. The communities generally that we would be engaged with in relation to an extended mining lease are already part of the existing mining lease, maybe a few additional people, but in the main part there are those people that will be some additional as well.
Speaker Change: Sorry, long answer, we haven't given it since a lot of thought I can assure you have.
Speaker Change: Well, that's great. It's an important part of the next leg, so I appreciate the clarity.
Speaker Change: Once again, if you have a question, please press star, then one.
Speaker Change: Michael Gray, Ovais Habib, Ralph
Speaker Change: There are no further questions in the queue and this concludes the question-and-answer session. I would like to turn the conference back over to John Lewins for any closing remarks.
John Lewins: It's a mining lease application, it is not a special mining lease, it's not an expansion of the mining lease because under the current legislation there is no ability to expand a mining lease. I note having said that that is recently is last week, the MD of the MRA highlighted that the government, it is the intent of the government to modify the act to allow for mining leases actually to be expanded. If that occurs before we put the application in then we would actually look at expanding the mining lease rather than putting a new application in but we're working on the premise right now that it would be a new mining lease.
John Lewins: Well, thanks for that, Brenda.
John Lewins: Thanks for joining us today.
Speaker Change: latest quarterly update.
Speaker Change: In many ways, I think we believe this is possibly the most important quarterly
Speaker Change: results presentation that we've had.
Speaker Change: in that we are now very much advanced in our transformation.
Speaker Change: of the Kinentu mine with the implementation of stage 3 and moving it very much into delivering what we've achieved.
John Lewins: From the perspective of information there's not a huge amount of difference but there is a view that expanding a mining lease would be quicker than getting a new mining lease in place. Realistically, in putting it in 25 you would be expecting mining lease issued late 26, 27 and you really wouldn't be in a position to start mining until that point anyway because as it stands right now, we spoke about 400 metres of strike length of outer compa but on the surface we've mapped this for about 1.7 kilometres.
Speaker Change: We've, I guess, been identifying and promising for a number of years which is moving it into a tier one status producing mine, long life mine.
Speaker Change: When you're on-site, and some people will be on-site in October, you'll see...
Speaker Change: massive progress towards achieving that both underground and on the surface and and we see progress daily. It's really exciting to see.
Speaker Change: I've just presented at the P&G Investment Conference in Brisbane, something that...
Speaker Change: David Blanchet, John Lewins, David Medilek
John Lewins: We don't at this point in time know what sort of depth extent that we're looking at and we'll gradually be drilling deeper as well as along strike and obviously we are putting significant rates on this to as quickly as possible get ourselves a real view of what we have but I'd sort of point out if you look at Cora and remembering we had underground access to Cora. We've been at Cora now for seven years.
Speaker Change: They have really good operations.
Speaker Change: You know, this first half of the year undoubtedly was challenging.
Speaker Change: And despite that,
Speaker Change: We actually produced, I think, equal second-best first half of the year that we've achieved. And we are well set up, well positioned for achieving plus 70,000 ounces second half of the year.
Speaker Change: We're sitting in a, obviously, a very positive price environment.
John Lewins: We drilled a 600 holes or something. There's an enormous number of holes that have been drilled in order to get us to the sort of resource we have now. I think we're sitting 2.4 million out thereabouts in measures indicated in another 4.7, 4.7 I think in inferred and overall I think the total number is close on 8 million answers when you take into account what we've already mind. So it will be we think multiple year drilling out of this deposit and we so we see it has similar strike length to what we see at Cora and Judd or similar potential strike length we see at Cora and Judd and so there will be a heck of a lot of drilling and there will be a lot of drilling from underground potential access is similar to the Cora type model in that you're coming in the side of a mountain and and going up into your into your deposit so you know realistically I think the earliest you could probably look at it is 27 and that's where the the capacity of the new plant and the potential for the new plant to achieve stage 4 without restarting the existing plant becomes important because obviously that means that you've got a you've got a spare plant sitting there with a capacity of 600,000 tons around it whatever that number is that that you could use for something like Arakompa.
Speaker Change: and we're in that positive price environment while we're constructing, which is really positive for us in terms of our cash flow.
Speaker Change: and obviously in terms of ramping up that production, perfect timing in terms of seeing that strong price environment.
Speaker Change: Looking at our exploration, we're obviously extremely excited by Arrokompa. We started off the year with one rig there, we've now got four.
Speaker Change: We'll have more results out soon, but as you can, as you will have seen from the first set of results, first two sets of results that we put out,
Speaker Change: It's a really exciting prospect.
Speaker Change: and and it's
Speaker Change: It's one of a number of high-grade prospects that we intend to be drilling over the next couple of years. We spoke about Maniapi, which is just next to Aracompa, and certainly next year we see a cell starting to drill at Maniapi and potentially Mati.
Speaker Change: as well.
Speaker Change: So...
Speaker Change: We are also looking at first quarter of next year to bring out that first resource in Aricopa and again for us you know very exciting times.
Speaker Change: We're looking forward to sharing.
Speaker Change: The operations results.
Speaker Change: that we're seeing and having people able to see it, see what's happening on our construction of the stage three and see what's happening on the exploration with the site visit that we've got planned in October and then obviously...
John Lewins: Sorry long answer we have a lot of thought I can issue you. Well it's great it's an important part of the next leg so that I appreciate the clarity. Once again if you have a question please press star then one.
Speaker Change: sharing that in our next quarterly results.
Speaker Change: So, thanks again everyone for joining us in this call.
Speaker Change: and we look forward to the next one.
Speaker Change: Thank you very much.
Speaker Change: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Operator: There are no further questions in the queue and this concludes the question and answer session.
Speaker Change: Thank you for watching!
John Lewins: I would like to turn the conference back over to John Lewis for any closing remarks. Well thanks for that Brenda. Thanks for joining us today on our latest quarterly update.
Speaker Change: [inaudible]
John Lewins: In many ways I think we believe this is possibly the most important quarterly results presentation that we've had in that we are now very much advanced in our transformation of the Canento Mine with the implementation of stage 3 and moving it very much into delivering what we've I guess been identifying and promising for a number of years which is moving it into a tier one stage is producing mine, long life mine. When you're on site and some people will be on site in October you will see massive progress towards achieving that both underground and on the surface and we see progress daily.
John Lewins: It's really exciting to see. I've just presented at the P&D Investment Conference in Brisbane, something that the government actually wanted us to do because currently, we're the biggest investor in Papua New Guinea and so we get a lot of, to this and a lot of support from government for that. If we look at operations, this first half of the year undoubtedly was challenging and despite that, we actually produced, I think, equal second best first half of the year that we've achieved and we are well set up, well positioned for achieving plus 70,000 answers second half of the year.
John Lewins: We're sitting in a obviously a very positive price environment and we're doing, we're in that positive price environment while we're constructing, which is a really positive for us in terms of our cash flow and obviously in terms of ramping up our production, perfect timing in terms of seeing that strong price environment. Looking at our exploration, we're obviously extremely excited by Aracompa. We started off the year with one rig there with now about four.
John Lewins: We'll have more results outside soon but as you can, as you will have seen from that first set of results, first two sets of results that we put out, it's a really exciting prospect and it's one of a number of high-grade prospects that we intend to be drilling over the next couple of years. We spoke about Maniapi which is just next to Aracompa and certainly next year. We see ourselves starting to drill at Maniapi and potentially Mati as well.
John Lewins: We are also looking at first quarter next year to bring out that first resource in Aracompa and again, for us very exciting times. We're looking forward to sharing the operations results we were seeing and having people able to see it, see what's happening on our construction of the Stage 3 and see what's happening on the exploration with the Cypher that we've got plans in October and then obviously sharing that in our next quarterly results. So thanks again everyone for joining us in this call and we look forward to the next one. 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. Thanks, Ben. Michael Gray, Ovais Habib, John Lewins, Justin Blanchetook, Alexander Terentiew, John Lewins, Justin Blanchet Michael Gray, Ovais Habib, John Lewins, Justin Blanchetook, Alexander Terentiew, John Lewins, Justin Blanchetook, Alexander Terentiew, John Lewins