Q2 2025 K92 Mining Inc Earnings Call
Speaker #4: Thank you for standing by. This is the conference operator. Welcome to the K92 Mining 2025 second quarter financial results conference call. As a reminder, today all participants are in a listen-only mode, and the conference is being recorded.
Speaker #4: After today's presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad.
Speaker #4: Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to David Medilek, President and COO.
Speaker #4: Please proceed, sir.
Speaker #5: Thank you, operator, thanks everyone for attending K92 Mining's 2025 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 #5: I would also like to remind everyone that after the remarks from management, the call will be followed by a Q&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&A and slide two of the webcast presentation.
Speaker #5: 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 #6: Well, thank you, David, and welcome, everyone. We begin with safety. K92's number one priority is always I'm pleased to report that there have been no lost-time injuries recorded in the second quarter, marking yet another major safety milestone with eight consecutive LTI free quarters.
Speaker #6: This achievement is particularly significant, as it was achieved during a notable increase in total man-hours worked, as construction and delivery of the Stage Three expansion progressed.
Speaker #6: Field-level risk assessments, hazard identification, and safety observations have significantly increased over the past two years, which are positive leading indicators for safety. As the operation expands, we have continued to increase the capacity and capabilities of our occupational health and safety team, and also the training team.
Speaker #6: Systems continue to be enhanced, safety technologies introduced, and additional technologies are planned to be introduced in the near future. Safety always is one of K92's core values, and I'd like to reiterate that K92 relentlessly pursues our goal of achieving zero harm among our workforce.
Speaker #6: We're remely pleased to have released our 2024 sustainability report in June. The report builds on previous versions maintaining alignment with the SASB metals and mining standard for the six consecutive years, and demonstrating continued progress towards alignment with the TCFD framework.
Speaker #6: The report highlights K92's ongoing commitment to ESG and to the people and country of Papua New Guinea. This includes our focus on hiring and developing local content, with approximately 92 to 93 percent of our workforce being PNG nationals, including a majority from our local communities.
Speaker #6: Our strong commitment to supporting the local economy, including 28 million of expenditure to support our local joint ventures and procurement of 96 million dollars incurred in Papua New Guinea, representing a 42 percent of our total procurement for the mine.
Speaker #6: Our delivery of significant benefits to the country includes $62.6 million in taxes and royalties paid in 2024. That's a 134 percent increase over 2023. I'd also like to highlight that the year to date in 2025 has eclipsed 2024 in terms of corporate tax paid, with approximately $70 million paid as of the end of July.
Speaker #6: And this has gained significant positive coverage from the media in Papua New Guinea. $6.6 million was allocated for K92's first PNG Infrastructure Tax Credit Scheme project for the 11.7 kilometers Concua-Bilimaya local road upgrade, which will connect many of our communities to the main road network and ultimately lead to significant opportunities for increased trade and business development.
Speaker #6: K92's ongoing success with its adult literacy program in partnership with local communities. We expect to enroll over 500 local community members in the program in 2025.
Speaker #6: And our commitment to combating climate change includes an emissions reduction target set for 2030. K92 is extremely proud of the positive impact it is having on the prosperity and development of Papua New Guinea, and we encourage you to read our report, which you can find at www.k92mining.com.
Speaker #6: In terms of the operations, during the course of the K92 gold mine produced 34,869 ounces of gold equivalent. The cash cost of 786 dollars per ounce gold, all in sustaining cost of 14.08 per ounce gold.
Speaker #6: On a co-product basis, cash costs were 907 dollars per ounce gold equivalent, and all in sustaining costs 14.89 per ounce gold equivalent. Gold equivalent production increased 43 percent from Q2 2024.
Speaker #6: As annotated on the chart, all-in sustaining costs have been notably higher than cash costs since the beginning of 2023, due to K92's significant investment in that Stage Three expansion. Costs are expected to decline considerably after delivering the Stage Three expansion, which will be discussed later in the presentation.
Speaker #6: We'll put for Q2 totaled 130,337 tons, in line with our budget, with a head grade of 8.9 grams per ton gold equivalent. With 82,633 ounces gold equivalent produced in the first six months of 2025, we've ceeded budget so far.
Speaker #6: And the second half is forecast to be stronger, so we reiterate our 2025 operational production guidance of 160,000 to 185,000 ounces of gold equivalent. In terms of our key operational quarterly physicals, Q2 delivered the second highest total material movement.
Speaker #6: That's all plus waste, on record. And another solid quarter of mine development with 2,466 meters achieved, despite a cumulative five days of disruption of underground operations from the Stage Three expansion electrical commissioning activities that we undertook.
Speaker #6: The team remains focused on ramping up development rates, completing key projects underground, and building out stopping capacity for the Stage Three expansion. With several projects and initiatives either recently completed or nearing completion, we expect development and mine physicals to continue to increase as the year progresses.
Speaker #6: Mining activities during the quarter took place across 13 levels at Kora and Judd, with long-haul stopping executed to design. Process grades were largely in line with the latest independent mineral resource estimate.
Speaker #6: The Stage Two A process plan continues to perform well, exceeding the updated DFS recoveries for the fourth consecutive quarter, achieving 93.3% recovery for gold and 94.9% for copper.
Speaker #6: And that compares with recoveries of 92.6% for gold and 94.2% for copper in the updated DFS. I will now turn the call over to our Chief Financial Officer, Justin Blanchet, to discuss our financial results for the second quarter.
Speaker #7: Thank ou, John, and hello, everyone. During the second quarter of 2025, K92 had quarterly revenue of 96.3 million, an increase of 102 percent from the same period prior year.
Speaker #7: We sold 28,864 gold ounces at an average selling price of $3,166 compared 19,064 ounces at an average selling price of $2,246 in the prior year.
Speaker #7: As of June 30, 2025, there were 8,413 gold ounces in inventory, including both concentrate and doré, an increase of 3,988 gold ounces compared to March 31, 2025, due to the timing of sales.
Speaker #7: During the second quarter of 2025, K92 had quarterly cost of sales of $32.4 million, compared to $27.7 million in the prior year, or $26.2 million compared to $19.4 million when excluding non-cash items.
Speaker #7: The increase in cost of sales was primarily due to an increase in tons mined and processed, including an increase in capital development tons mined that resulted in an increase to capitalized development costs in property, plant, and equipment.
Speaker #7: Q2 2025 cash flow from operating activities before changes in working capital was 47 million, compared to 17.3 million in the prior year. As at June 30th, 2025, K92 had a record 182.9 million dollars in cash and cash equivalents.
Speaker #7: We had a record working capital balance of $189.3 million, and we had a record net cash balance position of $123.8 million. The company does have a loan balance of $60 million.
Speaker #7: Importantly, the stage three and four expansion projects are fully funded and our financial position is strong. We also have access to significant amounts of liquidity through undrawn credit facilities, with 60 million available to draw down on demand, plus an additional 30 million of liquidity through an accordion feature.
Speaker #7: We would also like to highlight that our commodity price downside is protected through the cost-effective purchase of put option contracts, which extend until the end of 2025.
Speaker #7: Allowing for 15,000 ounces of gold per month at a strike price of $3,000 per ounce. To be clear, this is not a hedge. We will sell at spot if it is higher than $3,000 per ounce.
Speaker #7: This is insurance, and we retain full exposure to the upside in commodity prices. As John mentioned, during the second quarter, the K92 gold operations produced 32,375 ounces of gold, 1,536,505 pounds of copper, and 42,824 ounces of silver, or 34,816 ounces of gold equivalent.
Speaker #7: We sold 28,864 ounces of gold, 1,275,176 pounds of copper, and 34,532 ounces of silver. On a byproduct basis, we incurred a cash cost of $786 per ounce.
Speaker #7: Down from $999 in the corresponding period last year. And an all-in sustaining cost of $1,488 per ounce down from $1,5810 per ounce in the prior year.
Speaker #7: Our all-in sustaining cost in Q2 was significantly below our realized selling price of $3,166 per ounce. Our second quarter cash cost per ounce of gold, net of byproduct credits, decreased to $786 from $999 in Q2 2024.
Speaker #7: The decrease was due to an increase in gold ounces sold and our fixed costs charged accordingly, as well as higher byproduct credits. It is important to note that we will see downward pressure on costs via economies of scale as operations ramp up and the Stage Three expansion is complete.
Speaker #7: I will now turn the call back to John to discuss exploration and growth.
Speaker #6: Well, thank you, Justin. So, turning to growth and exploration, we begin with an update on the stage three and stage four expansions, which are expected to fundamentally transform K92 into a tier-one mid-tier gold producer.
Speaker #6: The Stage Three expansion process plan commissioning commenced in June, supporting the planned ramp-up to over 300,000 ounces of gold equivalent per year. Stage Four is expected to further increase production at a very low capital cost to over 400,000 ounces of gold equivalent per year, with commissioning targeted for the second half of 2027.
Speaker #6: So, we'll now provide an update on the construction progress of the Stage Three expansion. As of July 31, 2025, 87 percent of growth capital has been spent or committed, and the expansion remains on budget.
Speaker #6: Progress into major underground infrastructure upgrades: the Twin Incline is complete. Earlier this month, we marked a major milestone with the first material conveyed down the ore waste pass, which we also refer to as the material pass.
Speaker #6: The video shown is taken on the 1,245 level, so at the top of the material pass. It's approximately 350 meters long and connects the main mine with the Twin Incline.
Speaker #6: The material pass enables trucks to get loaded within the main mine hollow over a short distance and then tip the rock down the material pass. The top of the material pass, as you'll see, has a grizzly installed, which prevents oversized material from traveling down the pass.
Speaker #6: And of course, that mitigates the risk of blockages and improves material handling at the Twin Incline truck-loading pocket at the bottom. Multiple safety systems have been incorporated in our material pass design, including engineered truck stops, signage, lighting, training procedures, and obviously, a grizzly capable of supporting large loads.
Speaker #6: The grizzly, as you'll see, is positioned at an angle to encourage oversized to roll off. Not all of that oversized rolls off, as you can see in the video there.
Speaker #6: In this instance, secondary breakage of oversized material is dealt with by using a rock breaker and loader, which are on the other side of the material pass—the side where we’re filming from, effectively.
Speaker #6: So importantly, this means that the bulk of material handling shifts from the existing smaller more congested incline that has serviced the main mine since we started commercial production, as shown on that image on the left, to the highly productive Twin Incline as shown in the image on the right.
Speaker #6: And that can run trucks that are 50 percent larger; they travel at far faster speeds, and importantly also, by trucking from underground to the plant, we eliminate rehandling at the portal.
Speaker #6: So, workers are well underway for additional passes, and to provide even greater efficiencies, obviously. On ventilation, Puma Incline is approximately 120 meters from the breakthrough, and we expect that to occur in early Q4.
Speaker #6: At slight revision from late Q3, and in the main part due to the modifications that we've made to the portal breakthrough location, which was based on geotech probe drilling that we carried out last quarter.
Speaker #6: Shorter development rounds are also required for this final stage as we approach surface to better control that incline breakthrough. Our company-owned raised borer is currently drilling a two-leg fresh air rise, with the first leg completed.
Speaker #6: The second leg is scheduled for completion in late Q3. Upon completion of the Puma breakthrough and those ventilation raises, each of those two is expected to contribute an additional approximately 50 cubic meters per second of airflow to our circuit.
Speaker #6: And that represents a combined 60% increase to airflow from the current levels to an estimated primary airflow of around 260 cubic meters per second.
Speaker #6: Due to the previously conservative modeled mine resistance factors, we now expect to not need the primary vent fans to meet Stage Three vent requirements, or not be required until very late in the piece.
Speaker #6: That said, we're continuing to advance the fan chamber from the stage three expansion. And as shown in the photo, the fan chamber is very substantial.
Speaker #6: It's capable of delivering airflow up to four times of our current rate. And we plan to opportunistically complete the project in first half of 2026.
Speaker #6: So, in addition to completing the various infrastructure enablers for expansion, mine development continues to open up two new fronts: the Twin Incline and Lower Kora.
Speaker #6: With four and two new sublevels being opened up, respectively, both these fronts are planned to be notable contributors to production, stopping in 2026. Currently, we're also introducing technology to maximize our productivities.
Speaker #6: This video shows our recently commissioned surface-operated teleremote loaders being operated from just outside the portal in our office area. The system was commissioned in late July, leveraging our underground fiber optic system to continuously operate our production-stopping loaders during shift change and at blast reentry.
Speaker #6: Thereby maximizing the amount of productive hours we get per 24-hour period. Multiple pieces of new equipment are also arriving on site. This image shows our new Epiroc EtherL raised borer rig, which arrived on site in late July and is currently being commissioned.
Speaker #6: The EtherL rig is capable of drilling blind raises for our stopped slots to help de-risk the production blasting and also to accelerate drilling of our paste fill holes.
Speaker #6: As part of the ramp-up to Stage Three and Four, throughput rates were also expecting the arrival of several underground mobile mining fleet equipment. That includes a new cable bolter, shock reader, algae, four low-profile underground loaders—two of which are replacements and two of which are additional—along with additional trucks and a high-profile loader for the Twin Incline.
Speaker #6: They'll all be coming in the next few months. We now move on to the latest drone footage, taken just a few days ago, of the new 1.2 million-ton-per-annum Stage Three process plant.
Speaker #6: Which, as we noted, commenced commissioning in late June. Starting at the ROM stockpile, we're pleased to report that the stockpile build is tracking ahead of schedule, now totaling over 20,000, almost 25,000 tons.
Speaker #6: Commissioning of the crusher is well advanced, with a dedicated crusher commissioning stockpile established nearby. First plans have already gone through the crusher, as shown in the video, with the ore feeder loading it.
Speaker #6: Going through the rest of the circuit, transfer conveyor stacking conveyors reclaim are all complete. Moving on to the grinding area, bore mill lining is complete, sag mill lining is a bit over 50 percent complete.
Speaker #6: The mills are supported by a dedicated liner handler as annotated in the video there. First material through the mill is scheduled for early September.
Speaker #6: The admin building, gold room, are substantially complete. Gravity circuit is complete. Flotation circuit is practically complete. With the team going through final checks ahead of wet commissioning planned for early September.
Speaker #6: Both the tailings and the concentrate thickeners are complete. And the multi-stream analyzer is going through its final checks. Builder press is also complete and going through final checks.
Speaker #6: Lastly, all high voltage MCCs and infrastructure are complete and have been commissioned. We remain on track to complete the commissioning and hand over the process plan to operations the first half of Q4.
Speaker #6: In terms ancillary buildings, the interim power plant and warehouse are complete. The new Cumion Creek camp is complete, adding an extra 160 on-suite rooms.
Speaker #6: The camp is initially being used for excess capacity during construction and will then be repurposed for accommodation for our Stage Four expansion. The primary power plant is nearing completion.
Speaker #6: With commissioning commencing in the coming weeks, this project will add an immediate 8.8 megawatt generating capacity, increasing to 10.6 by, I think, the end of the year.
Speaker #6: And the next phase of expansion, which will take that up to over 15 megawatts, is already underway, with orders already placed to complete this stage in 2026.
Speaker #6: In terms of the new maintenance facilities, all structural steel and buildings are on site. The main workshop is progressing well, with the foundations and footing support as shown in the image.
Speaker #6: Civil works have also progressed at the tire and weld shop and the mine rebuild center buildings. Completion of all three workshops is targeted for late 2025.
Speaker #6: Now, in Q2 2025, significant progress was also made with the award of the EPCM contract for the paste fill filtration plant and the EPC contract for the storage facility.
Speaker #6: While the underground paste fill package was self-awarded earlier in the quarter, all background paste fill plant long lead items have been ordered. Front end engineering design work is complete.
Speaker #6: Detailed engineering work and design by GR Engineering is complete, and the quarter engineering is nearing completion. Underground development of the various large paste fill infrastructure excavations is progressing well.
Speaker #6: Earthworks are also progressing well for the surface storage area. Near the portal and the tailings filtration plant, the work near the Stage Three process plant is complete.
Speaker #6: Commissioning of all three facilities is expected to commence in Q1 2026, with practical completion and full paste fill circuit remaining on schedule for mid 2026.
Speaker #6: On August 8th, we were honored to host the Honorable Rainbow Paiter, Minister for Mining, along with the government delegation for a site visit.
Speaker #6: The visit received significant media coverage and also included tourists of the underground, new stage three expansion process plant, and a helicopter tour of our exploration areas and our new infrastructure tax credit scheme road.
Speaker #6: These visits also underscore our strong commitment to transparent stakeholder engagement and responsible mining. Moving on to exploration, we are now drilling the Kora Kora site.
Speaker #6: Judd site vein systems from underground. Plus, drilling the Ara Compa vein system from surface. Earlier stage exploration work programs are focused on the Mate Mesuin and also the Wira Henkai prospects.
Speaker #6: In June, we reported 19 diamond drill holes from Kora Kora site, Judd Judd site, with the results further reinforcing the significant potential for high-grade resource growth.
Speaker #6: The K2 vein drilling expanded the dilatant zone, recording 12.8 meters at 31.89 gram per ton gold equivalent and also 10.10 at 16.29 gold equivalent.
Speaker #6: The results are especially significant as there are near mine infrastructure located only 100 meters from existing mine workings. And that provides the potential for near-term bulk mining support stage three expansion ramp-up once our paste fill system is complete.
Speaker #6: Results also continue to extend high-grade mineralization up to at K1 and K2, as shown on the the right black ellipses. And delineated a substantial high-grade copper zone at K2, as shown in the left black ellipse.
Speaker #6: Importantly, the drilling has also commenced at Kora Deeps, targeting over the next 12 months a substantial area of 400 meters below the Twin Incline down to around 500 meter RL.
Speaker #6: As shown in the shaded light green rectangle. After multiple years of focusing on infill drilling ahead of stage three expansion, we're fairly excited to now be targeting this area for some of our step-out drilling.
Speaker #6: As noted earlier, the results of delineated a substantial high-grade copper zone to the south, Magenta represents grades exceeding 4 percent copper and the consistency of the high-grade copper drilling hit rates is very encouraging.
Speaker #6: As shown in the long section here, at Judd, drill results continue to extend high-grade mineralization up to the main mine, as indicated in the top black ellipse and below the main mine workings.
Speaker #6: Multiple high-grade results outside of the resource have also been recorded. Like Kora Deeps, Judd Deeps drilling has also commenced, initially targeting down to that 500-meter RL.
Speaker #6: And that very much over the next 12 months. And as again, as shown in the light green shaded rectangle. From the initial Judd Deep results, which have been reported, the structure appears to remain robust at depth with hole KMDD 0809, which was located approximately 300 meters below the Twin Incline, recording 12.9 meters at 4.3 grams per ton gold equivalent from Judd Link and 14.15 meters at 3.97 grams per ton gold equivalent from J1.
Speaker #6: And obviously, we're looking forward to providing the next set of results in due course. Exploration activity at the Ara Compa vein system, located approximately four and a half kilometers from the process plant, is progressing with up to five rigs active.
Speaker #6: As shown in the image, the deposit is rapidly growing, and so is our conviction by adding more rigs. The results reported today have delineated two significant high-grade veins: AR1 and AR2.
Speaker #6: The veins recorded an average true thickness of approximately three meters over strike lengths of approximately 675 and 775 meters, respectively. The veins are also high-grade, with previously reported drilling results recording a hit rate of plus five grams per ton gold equivalent of 50 percent to AR1 and 42 percent to AR2, and plus 10 grams per ton gold equivalent of 28 percent to AR1 and 21 percent to AR2.
Speaker #6: Ara Compa also features a large lower grade bulk zone, which is open in multiple directions, as shown in the plan view here. With the addition of the new compact heli-portable rig, drilling of the northern strike extension of Ara Compa, as shown in the ellipse on the far right image, will be an increased focus.
Speaker #6: The area is highly prospective. Featuring strong vectors from artisanal workings. We plan to announce our next set of drilling ults at Ara Compa later this quarter.
Speaker #6: And we're targeting a maiden resource late 2025 to early 2026. Lastly, we'd like to highlight the significant pipeline of highly prospective exploration targets that we have.
Speaker #6: The colored icons indicate the current exploration focus, and the black icons indicate where we plan to be drilling within the next 24 months. Upon delivery of the Stage 3 expansion, we expect to see not only a major inflection in our production and free cash flow, but also a significant ramp-up in our exploration budget, aiming to target many of these highly prospective targets concurrently.
Speaker #6: Two additional surface rigs have been ordered recently, and they will assist with that future ramp-up. So, in summary, Q2 2025 was another strong quarter for K92.
Speaker #6: From an operational, financial, safety perspective, we're fully funded through the expansion via our record and net cash balance and mine cash flow. And we're tracking well to our 2025 operational guidance and continue to execute on a number of key stage three expansion projects, including achieving the major milestone, the start-up commissioning of the new 1.2 million ton per annum process plan during the quarter.
Speaker #6: We're confident that we will continue this positive momentum into the second half of the year and we expect to see the benefit to mine physicals from the delivery of a number of key underground infrastructure and operational improvement projects including the material pass.
Speaker #6: With that operator, we'd like to now commence the Q&A session. Thank you.
Speaker #7: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad.
Speaker #7: You will hear a tone to acknowledge your request. If you are using a speakerphone, please pick up your headset before pressing the keys.
Speaker #7: To address your question, please press star, then two. We will pause momentarily to assemble our... Today's first question comes from Harrison Reynolds with RBC.
Speaker #7: Please proceed.
Speaker #8: Hey, good ning, everyone, and congratulations on a good quarter, K92 team. one question from my end is, could you k about your confidence and comfort level on progress made in the underground development to reach the run rates required for stage three?
Speaker #8: I imagine more progress will be made with the material pass system up and running and the additional ventilation, but is there anything else we should be thinking about here?
Speaker #8: Is kind of the, 2,500 meters what you ected for the quarter, or were there any challenges that came up?
Speaker #6: Well, thanks. Thanks, Harrison, for the question. In relation to the development meters, I would say it's one one area within the within the quarter that we didn't really achieve what we wanted.
Speaker #6: We were certainly looking for higher than that, 2,700, 2,800. The what we did have that we hadn't really factored in was that if we look at our underground development of infrastructure, we had about a five, six day delay where because of the because of the installation of electrical infrastructure underground, we we basically had five, six days of delays in the in development.
Speaker #6: And if you look at that in the context of achieving around 30 to 40 meters a day, that basically drops you a couple of 150 to 200 meters. So we did drop that during the quarter.
Speaker #6: You're correct in that the commissioning of the ore pass is is quite not quite, it's a very significant contributor to enable us to achieve the meters that we're looking to do.
Speaker #6: As you ow, as it currently stands, we've got more activity, I think, than we actually recognize we would have in the construction period. So that's adding to the congestion that we see in our single incline.
Speaker #6: So we've got the one right up until the end of the quarter. We've been running basically all of our waste, all of our ore coming in, sorry, going out on that one existing incline.
Speaker #6: But in addition to that, we've got, for instance, multiple concrete loads moving up for the construction of our underground infrastructure. So, the ore pass itself, all the work that we've been doing on the vent chamber, the concrete that comes in, all the steel work that's come in for those and continues to come in for those—all of that, I think, had more impact than perhaps we'd realized it would.
Speaker #6: There's a huge amount of work being done there. And obviously, we've also got the work that we're doing on the paste fill underground, the excavations for the paste fill underground, which also add to that.
Speaker #6: So certainly, the ore pass and ore waste pass in our view is going to a very significant contributor to improving our performance in terms of development meters.
Speaker #6: I think the other point you would have seen is that we do have additional equipment coming in. I think our first loader is due in September or October—our first new loader.
Speaker #6: So there are also additional pieces of equipment that will be coming in, which you'll be able to also utilize that improved access.
Speaker #8: Great. No, thank you. That's incredible color and yeah, looking forward to continued progress. Thanks, everyone.
Speaker #6: Thanks, Harris.
Speaker #9: And the next question will come from Alex Tarentu with National Bank. Please proceed.
Speaker #10: Yeah. Hi, guys. Thanks for taking my question. And congrats on getting everything coming along, moving along nicely. It's good to see both the underground and the in-the-mill progressing well.
Speaker #10: A question on that. You note first half Q4 to complete commissioning. I'm just trying to understand and make sure I understand kind of you're defining that.
Speaker #10: Is that an incidence with declaring commercial production as well, or what kind of metrics are you looking for to complete commissioning?
Speaker #9: Okay. Well, I guess first off, commercial production per se, we don't really use simply because we're already in commercial production. So we'd be declaring something we're ready doing.
Speaker #10: Yeah, no, that's true. Good point.
Speaker #9: Yeah. No, no. It's a discussion we've had internally, actually. So it's not an incorrect question in that I understand what you mean. What we anticipate is that by the end of the quarter, we will effectively have the plant able to operate at its design capacity.
Speaker #9: Now, we’d also expect that we should be able to achieve our design recoveries by that point. So, we’re really looking at the plant effectively operating at its design.
Speaker #10: Okay. No, that's pful. And another question on grades. You know, obviously, the past, I guess, even three or four quarters, you guys have been mining some pretty good grades, above plan.
Speaker #10: How should we think about grades for the next couple of quarters? Q2 obviously came down, but still was probably, I think, a little bit higher than long term.
Speaker #10: But what do you any guidance you can kind of give us to prepare for the next couple of quarters and what to expect?
Speaker #9: In terms of grade, you should expect pretty much what is the long term. If things grade in Q4, I would expect to be lower simply because we will be commissioning with lower grade material.
Speaker #9: Into the plant. So it will have a a bias towards lower grade.
Speaker #10: Yeah. Yeah, that makes sense. Okay. And then the last question, maybe just on your balance sheet. Obviously, very strong at $183 million. You know, free cash flow is obviously going to start to pick up even more next year.
Speaker #10: What's our plan? You've 60 million in debt outstanding. I would assume that gets kind , you know, the easy one to repay first, or I'm just trying to understand, make sure I understand, you ow, your plans for your for your good free cash flow you're going to be generating next year.
Speaker #9: So certainly, the repayment of debt is something that will be prioritized. However, it'll fit into an overall picture of what we're doing as a company.
Speaker #9: We don't have a high level of debt. As I think was noted, we're certainly not in a position where we need to repay that debt in order to meet any requirements or anything else.
Speaker #9: As you say, depending on gold prices, which we would obviously like to see sitting where they are for some time going into the future, we will be generating a large amount of free cash flow going forward.
Speaker #9: Basically, as you say, all of next year and going beyond then. We've got the whole thing of dividends and buybacks, etc., etc., which is something that, as a company, we are in the process of discussing internally.
Speaker #10: Okay, no, it's good to hear. All right, that's it for me. Thank you.
Speaker #9: Thanks for that.
Speaker #7: As a reminder, if you do have question, please press star then one. And our xt question comes from Andrew Mikichuk with BMO Capital Markets.
Speaker #7: Please proceed.
And just overall, the trajectory and the timeline are preserved to.
you know, to be blunt to fill the the stage 3, you know, once this thing is turned on
uh, yes, I mean if you look at
I'm trying to think where, uh, I think the...
the uh,
The IDP has something like a million tons.
Being mined and processed next year. At this point in time, we're comfortable with the numbers that are in the IDP.
Okay. Uh that uh runs me any other questions? Thank you and congrats again.
Thanks Andrew.
The next question is from Michael Gray with Agentis Capital. Please proceed.
Good morning, John and team. It's exciting. K92 is going to be...
Tested below the twin incline. Uh, John, you said 450 meters, uh, below. Can you give us a little bit of color on scope of drilling? Spacing and drilling at this point? If you can
uh,
Good night, Mike. Thanks for that. Um, yeah, this is, it's obviously uh, early days at this point in time.
So, um, we're at the first stage of that, which is drilling very much from existing development.
We do intend, longer term, to put a couple of development drives.
For the right from where we are, so we can get a better angle into Kora and Jude.
Um, at that.
So we're limited to those those 2 sort of boxes as the area that we can reasonably access for that uh without coming in that to a to a certain angle.
Generally speaking when we when we've been looking at these areas we we've been Drilling in the 50 to 1 0 0, m. I
Initial drilling that we're doing.
Um,
We've got, uh, we've got 1 rig currently drilling there. I don't see.
As getting heavily into that foot, more heavily focused into that, and until, uh, until next year.
Um,
We can't do any, uh, we don't really want to do any additional development to set up. Um,
A better drill cutters.
For that area.
Um,
At this point in time because all of our focus on that on the development need, this is obviously, uh, in the upper part of the mind opening the mind, right? Not. Um, it'll really be, I would say second half of next year, before we see that program pick up to where I personally would like to see it. Um, I'm I'm I'm pretty excited by what we've seen. For instance in that uh, in that chart deep.
Hole. So that's, uh, and I think for me, it's really exciting.
Okay, thanks so much. Congratulations on the progress. This quarter.
Thanks a lot.
And this concludes today's question-and-answer session. I would now like to turn the conference back over to you, John Lewins, for any closing remarks.
Uh, thanks for that Chris.
Well, thanks everyone for joining us. Uh,
for, for this conference call.
um,
it's uh,
approaching.
Uh, 11:15 here. I'm in, uh, Papua New Guinea. As, uh, some would have seen.
Um, I was, uh, hosting the Mining Minister on site on, uh, Friday. Um, we made the local news and media here, uh, including, uh, video from underground.
with our Minister and Minister
Um, one of the things that we got from the minister was that, um, he was excited by...
Not only the, but also what he was, what the project is, and the production that we have. The fact that we've paid 300 million Kina in tax this year.
But the sheer scale of what he saw underground, for instance, in the vent fan chamber.
Um, the new plant, especially when he could compare it to the old plant and realize that the old plant had produced 150,000 ounces a year. In fact, he made comments, "Surely, John, if that little plant could make 150,000, you're going to make a lot more than 300,000 with this plant."
Um, which I call serrated into our our stage 4.
um, the other thing that impressed him was that we we took him up in the chopper and took him around, showing him our expiration activities, and our exploration, uh, areas,
and uh, again, um
Being the largest explorer in the country, we’ve been commended for our investment in the future of not only K92, but also as he saw it.
PNG. Um,
and I think those those
thoughts and those those statements are um reflective of where we're sitting at this point in time we have a
Relatively old, smallish plant, which last year produced 150,000 oz. And we got this.
This phenomenal new plant, which is going to take us to an entirely different level.
Um, underground. You can see the massive amount of work that's gone in.
Um, both in the context of the infrastructure.
Connect with your office in Vancouver and receive an email, send a photograph, etc. Um,
And that you could operate equipment from the surface while it was effectively No. 1 Underground.
All of those things have happened.
In the last, uh, in the last 12 months and a lot of them are now coming to a an incredible culmination towards uh the end of this year. Um, and as I think many of you would be aware in watching K92, it's also coming to a culmination just as the
The country itself is celebrating its 50th.
Anniversary of Independence next month.
so, um,
This really is.
Uh, incredibly transformative. I mean, it is.
It is a statement we use on our slides on the first page of those slides, but...
I,
Continue to see that. As the one is how things are happening. Right now, every time that I, uh, every time that I go to the site,
So, this is an exciting time for K92. It's not without its challenges. Anybody who's ever built a mine, commissioned a plant, or whatever else will obviously attest to the fact that it is also a challenging time. But with challenges come opportunities.
um,
We will be having, uh, an analyst investor.
Tour. Um,
Early in, in Q4. And so some of you at least will have an opportunity to see things, uh, on the ground and I think
Especially, I know that we've got some people who have been out before. I think you're going to be incredibly impressed with the changes that have occurred, both on the surface and underground.
So, with that, I’d just like to say, uh, thank you all for.
for attending early in the morning, your case later in the evening, in, in mine,
um,
And, uh, thank you for your continued interest in the company and what we're trying to achieve.
Thanks everyone.
This concludes today's conference call.
If you may now disconnect your lines, thank you for participating, and have a pleasant day.