K92 Mining Inc. (KNT) Earnings Call Transcript & Summary

Good afternoon and welcome to the Annual General Meeting of K92 Mining Inc. I would like to introduce Anne Giardini, Chair of the company, Ms. Giardini, the floor is yours.

Thank you. Good afternoon. It's now 12:00 p.m., the scheduled start time of the meeting. My name is Anne Giardini, Chair of K92 Mining Inc., and I will chair today's meeting. I welcome you to the company's Annual General Meeting of Shareholders. We are pleased to host the meeting in person in Vancouver and through a virtual meeting platform accessible to all of our shareholders regardless of physical location to participate, submit questions and vote. I officially call the meeting now to order, and I appoint Nancy La Couvee, Corporate Secretary of the company, to act as secretary of the meeting; and Deanna Guilfoyle, of TSX Trust Company to act as the scrutineer of the meeting. Only registered shareholders who held shares in their name as of April 23, 2025, and the record date of the meeting, or their validly appointed proxy holders are entitled to vote at this meeting. To expedite the meeting, we will deal with the formal business of the meeting first. And afterwards, I will invite David Medilek, K92's President and Chief Operating Officer, to give you a presentation. David will be available to answer any questions that you may have. I will now commence the formal business of the meeting. On May 9, 2025, the notice of meeting, notification of notice and access form of proxy and request for annual and interim financial statements of the company were mailed to all of the shareholders of record as of the close of business on April 23, 2025. The affidavit as to such mailing was prepared by TSX Trust Company and is available for inspection by any interested party. In view of this having been done, unless there is an objection, I will dispense with the calling for reading of the notice, and I will take the notice of meeting as read. The declaration as to mailing will be filed with the minutes of this meeting and will be retained by the secretary with the records of this meeting. As such, proper notice of the meeting has been given. I'm going to talk about voting procedures. If you voted before the meeting by proxy, you do not need to cast your vote at this meeting unless you wish to change your vote. As specified in the notice of the meeting, the items of business for the meeting are: to receive the audited financial statements of the company for the year ended December 31, 2024, to fix the number of directors at 6; to elect 6 directors for the ensuing year; to appoint the auditor for the ensuing year and to authorize the directors to fix the auditor's remuneration; and to approve a nonbinding advisory resolution accepting the company's approach to executive compensation. All resolutions must be approved by a simple majority of votes cast either in person or by proxy as ordinary resolutions. We will conduct the votes on each of the matters by a poll. On a poll, every shareholder entitled to vote on the matter has 1 vote in respect of each share entitled to be voted on the matter and held by that shareholder. The poll will be opened for all resolutions at the same time. This will allow you to vote on each resolution immediately or you can choose to wait until the conclusion of discussion on each resolution before casting your vote. Registered shareholders and their duly appointed proxy holders who attend the meeting virtually will have the ability to vote at the meeting if they have not voted by proxy or to change their vote if they have voted by proxy. Once voting has been declared open, please click the voting button the left of your screen. The text and voting choices will be displayed on the pop-up window. To vote, simply select your voting direction and click submit to cast your vote. If you have already submitted your votes by proxy and don't wish to change your votes, again, no further action is required. For registered shareholders and their duly appointed proxies only, there will be an opportunity to ask questions by text for each resolution in turn. [Operator Instructions]. Once discussion on all items of business have concluded, I will give you a short period of time to enter your votes online and then declare voting closed on all resolutions. Preliminary voting results will be provided during the meeting, and final detailed voting results will be provided after conclusion of the meeting. The final results of the meeting will be announced in a news release and will also be available on our website after the meeting. We will run through each of the items on the agenda in turn, responding to questions on that item of business while it is before the meeting. In order to expedite the formal business of today's meeting, I will make all motions, a seconder is not required. I now declare the polls open to all resolutions. I was advised by our scrutineer that there is a quorum present, being 2 persons present or represented by proxy who in the aggregate hold at least 25% of the issued shares of the company. I direct the final report of scrutineer be filed with the minutes of this meeting. The notice of the meeting [ has ] been given as required by the articles and by the Business Corporations Act British Columbia and a quorum being present, I declare this meeting to be both duly called and constituted for the transaction of business. The last meeting of shareholders was held on June 27, 2024. I confirm that the minutes from the 2024 Annual General and Special Meeting reflect a true record of the proceedings. The minutes of that meeting are available for review by any shareholder. Unless anyone wishes to have them read, I will dispense with the reading of the minutes of the last Annual General and Special Meeting, and the minutes will be taken as read and approved and adopted as tabled. The initial item of business today is consideration of the audited financial statements of the company and the report of the auditor. It is customary to have the meeting acknowledge receipt of the financial statements. A copy of the financial statements and auditors' report for the year ended December 31, 2024, is available on the company's website and the SEDAR website as well by request to the company, if any shareholder wishes to see them. Therefore, the audited financial statements of the company for the year ended December 31, 2024, and the auditor's report on those statements will be acknowledged as having been received. Is there any discussion? Hearing no discussion, I acknowledge the financial statements as having been received. I will turn to the setting up a number of directors. The first item of business is the approval of an ordinary resolution setting the number of directors of the company at 6 for the forthcoming year. I now move that the number of directors for the ensuing year be fixed at 6. Is there any [ discussion ]? As I see no questions, I ask that you please cast your votes on item 1 by hitting the voting button before we move on to item 2. Please vote now. [Voting]

The second item of business is the election of directors of the company. The directors elected at this meeting will hold office until their successors are elected or appointed, subject to the company's articles and the Business Corporations Act at British Columbia. Each of Mark Eaton, Anne Giardini, Saurabh Handa, Cyndi Laval, Nan Lee and John Lewins have informed the company that they will stand for election at this meeting and they are management's nominees for election to the Board for the forthcoming year. I therefore nominate the following individuals as directors of the company to hold office until the next annual meeting of the company or until their successors are duly elected or appointed, subject to the provisions of the company's articles. Mark Eaton, Anne Giardini, Saurabh Handa, Cyndi Laval, Nan Lee and John D. Lewins. Are there any other nominations for directors? Seeing no further nominations, I move that the nominations be closed. Are there any questions on the motion? As there are no questions, I ask that you kindly cast your votes on item 2 before we move on to item 3. Please vote now. [Voting]

I am advised that a majority of the votes cast is in favor of election of the nominees. And accordingly, I declare the motion carried and the persons nominated are elected as directors of the company by acclamation to hold office until the next Annual General Meeting of the company subject to the articles of the company and the Business Corporations at British Columbia. I will now turn to the appointment of our auditor. The third item of business is the appointment of the auditor of the company for the ensuing year and authorization of the company's directors to fix the remuneration for the auditor. I now move that PricewaterhouseCoopers LLP chartered professional accountants be appointed as the auditor of the company for the ensuing year and that the directors of the company be authorized to fix the remuneration of the auditor still appointed. Is there any discussion? There are no discussion and no questions, I ask that you please cast your votes on item 3 before we move on to item 4. Please vote now. [Voting]

The fourth item of business is to approve an advisory resolution on the company's approach to executive compensation as more particularly set out in the company's management information circular for the meeting. The text of the resolution to approve the company's approach to executive compensation is set out on Page 21, the Management Information Circular. I now move that the nonbinding advisory resolution on executive compensation set out on Page 21 of the information circular be approved, which, unless a shareholder present desires the reading of that I will not repeat. Is there any discussion or questions? Seeing no discussion or questions, I ask that you cast your votes on item 4. Please vote now. [Voting]

For those who have not yet voted on all of the resolutions, which are open for voting, I ask that you do so now if you intend to vote as we will shortly close the poll. I will close the polls on all resolutions after another 30 seconds to allow any online viewers to catch up and make their elections. [Voting]

I confirm that the polls are now closed. I ask that the scrutineers provide their preliminary report on the results of voting. I ask the secretary to confirm receipt of the scrutineer's report and confirm that all resolutions are carried.

I confirm receipt, Anne.

It appears that all resolutions are passed. That note will be put on the online screen. And as I said, those matters will be reported fully in a press release and on our website. On the matter of setting the number of directors, I am advised that greater than a majority of the votes cast have been voted in favor of setting the number of directors at 6. Therefore, I declare that this motion is carried. On the matter of election of directors, I am advised by the scrutineer that greater than a majority of the votes cast have been voted in favor of the election of all of the nominees, being: Mark Eaton, Anne Giardini, Saurabh Handa, Cyndi Laval, Nan Lee and John Lewins, Therefore, I declare that this motion is carried. On the matter of appointment of auditors, I am advised by the scrutineer that greater than a majority of the votes cast have been voted in favor of the appointment of PricewaterhouseCoopers LLP, chartered professional accountants. Therefore, I declare that this motion is carried. On the matter of approval of the advisory resolution on executive compensation, I'm advised by the scrutineer that greater than a majority of votes cast have been voted in favor of the advisory resolution. Therefore, I declare that this motion is carried. A news release disclosing the voting results will be issued and filed online on the SEDAR website and will be available on our own website shortly. This is now a conclusion of the formal business of the meeting. Is there any other business that anyone in attendance wishes to bring to the attention of the meeting? If there's no other business to be brought before the meeting, I declare that the formal part of this meeting is concluded. I would like to introduce you to David Medilek, President and CEO of K92 who will now give a corporate update presentation. Following this, David will be available to answer any questions you may have. [Operator Instructions]. David.

Thank you, Anne. Just bear with me. I'm just in the process of screen sharing the presentation. Okay. Thank you. Can everyone hear me and can they see the screen? I just want to do a sound check. Can everyone hear me?

Yes, David, we can hear you. Go ahead.

Okay. Thank you, Anne. I will proceed. Thank you, Anne, and thank you, everyone, for joining us for our Annual General Meeting and presentation. As always, we ask you refer to our forward-looking and cautionary statements as shown, which can be found on our website in the latest corporate presentation. On Slide 3, we provide an overview of the unique Tier 1 precious metals investment opportunity that is K92. The company has achieved and is continuing to achieve a path of rapid growth and value creation in terms of both production, as shown on the chart on the bottom right, and mineral resources, as shown on the bottom left chart. This growth has been mostly self-funded through reinvesting our cash flow. And importantly, we are now on the cusp of our biggest expansion yet, the Stage 3 expansion, which plans to increase production to 300,000 ounces of gold equivalent per annum commissioning of the new process plant is scheduled to start this month. The Board of Directors has also approved the low CapEx stage 4 expansion to increase throughput a further 50% and which plans to increase production to over 400,000 ounces of gold equivalent per annum. The vein system we mine is high grade, is thick and is effectively mined and processed, making K92 a low-cost producer operating at one of the higher grades in the mining industry. With this combination of large-scale production and low cost, K92 is poised to become a Tier 1 mid-tier gold producer. We also hold a large 830-kilometer square land package. Papua New Guinea is known for its phenomenal geology with several world-class deposits, including ours, and we see the potential for additional elephant systems on our property. The team at K92 has experience with a proven track record, including extensive experience in Papua New Guinea, where we've been operating for some time now. On our corporate structure, the balance sheet is strong, ending Q1 with $182 million in cash, cash equivalents and term deposits. $60 million of debt drawn and up to $90 million of additional liquidity from our credit facilities. We are actively covered by 12 analysts and have a very strong institutional share register. This slide presented has been provided to us by BMO, highlighting that K92 has one of the best growth profiles over the next few years. In addition to trading at a very attractive valuation for rerating, which has been starting to materialize in our recent share price performance. Last week, K92 was proud to announce our 2024 sustainability report. At the end of the year, at Kainantu, we had a total workforce of over 1,800 people, of which approximately 92% are from PNG, with a large portion from our local communities. This is contemplated -- I'm sorry, this is complemented by a strong focus on training and skills development. Our community programs are impactful, and we were honored to be awarded for the third consecutive year in industry ESG awarded by PNG CORE. Kainantu has a low environmental footprint with a traditional tailings impoundment, no cyanide and a low greenhouse gas emissions profile. Our focus on safety is relentless. And at the end of Q1 2025, we recorded 643 consecutive days lost time injury free. Q2 is also a proud taxpayer in PNG, paying $62.6 million in corporate tax and royalties in 2024, which made us the second highest payer of corporate tax in PNG's mining industry. We encourage you to visit our website at k92mining.com to view the latest sustainability report. The company's strategy for Kainantu has been and continues to be expand, expand and expand. We've delivered the Stage II and Stage III expansions and are on the cusp of our most transformative expansion to date, Stage III. Commissioning of the Stage III process plant is scheduled for this month, a brand-new stand-alone 1.2 million tonne per annum plant, providing capacity for production to approximately 300,000 ounces for equivalent per annum. The plan has also been designed to be expandable. And following Stage III, we plan to complete low capital cost upgrades to the back end of the plant to increase throughput to 1.8 million tonnes per annum and production to over 400,000 ounces of gold equivalent per annum. This is called Stage IV. In terms of recent operating performance, 2024 delivered record production of 150,000 ounces or equivalent, exceeding the top end of the production guidance range by 7%. We also delivered production at an all-in sustaining cost of $1,066 per ounce, well below the bottom end of our guidance range of $1,440 per ounce. Our production guidance for 2025 is $160,000 to $185 -- sorry, $185,000 ounces for equivalent and an all-in sustaining cost of $1,490 to $1,590 ounces fold equivalent or $1,460 to $1,560 ounces gold on a net of byproduct credit basis. As shown on the bar chart, we have had a strong start to 2025, producing 48,000 ounces gold equivalent in Q1. Our second highest quarterly production on record and our highest Q1 on record. This has been driven by very strong grades. And as noted on our Q1 conference call, we expect normalized grades in Q2 was production to be the strongest in the second half of the year, benefiting from higher throughput rates. We will now provide an update on the construction progress for the Stage 3 expansion, starting with the underground. The two is complete. The first ore pass has been developed and is expected to be fully operational in Q3. The Puma Incline breakthrough planned for late Q3. Upon breakthrough of the Puma, we expect an additional 50 meters cube per second of airflow with a further 15 meters per second of air float forecasted upon development of the next ventilation raises, representing a combined 60% increase in airflow from current levels. Due to the previously conservatively modeled mine resistance factors, we now expect to not only need the primary event fans to meet the Stage III event requirements. These fans are needed for Stage 4, with plans to opportunistically install them in 2026 to minimize disruptions. On pastefill commissioning is targeting commencing in late 2024. And while the infrastructure is being transformed, so is the number of mining fronts with a significant increase underway to drive the ramp-up. In terms of surface construction works, as shown in the photo taken last week, the Stage 3 expansion process plant is nearly complete in terms of the construction and commissioning is planned to commence imminently. In terms of ancillary buildings, the interim power station and warehouse are complete. The new 160 En-suite room Kumian Creek Camp is complete and occupation has already begun. The final outstanding project is the kitchen and dining facilities which are scheduled for completion later this month. The primary power station is progressing well. Stage 1 commissioning is planned for June. 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 footings poured as shown in the image. On the [ Pastefill ] project -- on the pastefill plant project, all long lead time items have been awarded. The underground paste construction contract has been self-awarded the tailings filtration plant and circuit storage system construction contracts are being finalized and planned for awards shortly. On surface, tailings filtration plant and surface storage system earthworks are progressing and being completed by K92. This is ahead of handover to the construction contractor as shown in the 2 images. In the first quarter, we were honored to host delegations from the Morobian Eastern Highlands provincial governments where our various licenses and leases are located. In February, we welcomed the delegation by the Governor of Morobe Province, the Honorable Luther Wenge as shown on the left. And in March, a delegation led by the Governor of Eastern Highlands province, the honorable Simon Sia, shown on the right. Both received strong media coverage and included tumors of the underground process plant stage construction and helicopter tour of our exploration areas. These businesses also underscore our strong commitment to transparent stakeholder engagement and responsible mining. In terms of exploration, we are drilling the Kora, Kora South and Judd, Judd South Vein Systems from underground plus the Air comp advance system from surface. Last week, we announced drilling results at Kora and Judd totaling 90 holes with all holes intersecting mineralization and highlights from the release include: number one, significantly expanding and interpreted dilution on updip, returning broad, high-grade intercepts in areas previously interpreted as [indiscernible] vein including 12.8 meters true thickness at 32 grams per tonne gold equivalent and 10 meters true thickness at 16 grams per tonne gold equivalent. Importantly, this tile zone is located near mine infrastructure offering meaningful near-term bulk mine potential to support the Stage 3 expansion wrap-up. Number two, continuing to expand high-grade updip of the main mine at the K1 and K2 veins; and number three, delineating a significant copper zone in 2 over a 300-meter vertical extent as shown in the far left ellipse. Copper zone at K2 to the south is substantial, as shown in this long section. Magenta represents over 4% copper grades and the high-grade copper zone remains open to the south. At Judd, drilling has continued to extend high-grade mineralization up dip above the main mine and also down dip. Judd has delivered exceptional grades during the last 3 quarters. So extending these high-grade areas is particularly impactful. For the second half of this year, drilling below the resources at both Judd and Kora will become a larger focus, which we are particularly excited about. The big exploration story for 2024 for the company certainly was Arakompa. In late 2023, we commenced drilling the deposit for the first time in 32 years. Previous drilling was limited. Only 1.8 kilometers over 18 holes and mostly shallow drilling. Our drilling uncovered multiple high-grade veins in a bulk system. We started our program with 1 rig. And in the next few weeks, we plan to have 5 rigs operating. We believe Arakompa has significant potential. Results from 43 holes reported by K92 to date have confirmed 2 significant high-grade veins, AR1 and AR2, which recorded a considerable average true thickness of approximately 3 meters. Over large strike lengths up over 675 and 775 meters for AR1 and AR2, respectively. The vans have a strong high-grade drilling hit rate, plus 5-gram per tonne gold equivalent of 50% for AR1 and 42% for AR2 and plus 10-gram per tonne gold equivalent of 28% for AR1 and 21% for AR2. To date, step out drilling has focused towards the South, and we are nearing a major milestone in our exploration capabilities with the arrival of a compact [ heli ] portable rig this month. This rig will enable drilling the Northern Extension Arakompa, which is shown in the ellipse is large, highly prospective target area that also features a strong vector from [indiscernible] workings. We see high potential for underground mining at Arakompa. Drilling results reported to date have defined an interpreted bulk tonnage zone with a total strike length of 900 meters. vertical depth of 650 meters and average true thickness recorded from drilling of 48 meters. The bulk zone remains open in multiple directions and will also be targeted from our Northern extensional drilling as shown in the ellipse. We view it as a longer-dated project with a high grade of the priority for near-term mining. Arakompa's growth over the past year has been exceptional. The image on the far left shows drilling as of February 2024, while the far right highlights our latest reported results, just 1 year later. Lastly, we highlight the significant pipeline of highly prospective exploration targets. The colored icons indicate where we are currently drilling and the black icons indicate where we plan to drill in the next 24 months. Upon delivery of the Stage III expansion. We expect not only a major inflection in terms of 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, and recently, we ordered an additional 2 surface rigs. Thank you for attending our AGM presentation. I will now turn it over for any questions. As there are no questions asked, this concludes the presentation. Thank you.

Thank you for attending the 2025 AGM of K92 Mining. The meeting is now terminated.

Ladies and gentlemen, thank you for attending today's meeting. You may now disconnect.