K92 Mining Announces Significant De-Risking Milestone - Awarding Lump Sum Fixed Price Contract for the Design and Construction of the 1.2 mtpa Stage 3 Process Plant

By: PNG Business News July 31, 2023

K92 Mining Inc. is pleased to announce that the Board of Directors has authorized the Company’s award of the engineering, procurement, construction and commissioning (“ EPC ”) Lump Sum Contract for the 1.2 million-tonnes-per-annum (“ mtpa ”) Stage 3 Expansion Process Plant to GR Engineering Services Limited (“ GRES ”) following a tender process.

The EPC Lump Sum Contract award amount is US$81 million and is fixed price / lump sum, significantly de-risking potential cost increases to K92. In addition to the award of the contract, all process plant long-lead item contracts have already been awarded on a fixed price (excluding freight), to CITIC HIC Australia Pty Ltd for the SAG and ball mills, Jord International Pty Ltd for the filter press, and Metso Outotec Australia Limited for the tank flotation cells, flash flotation cells and high-rate thickeners.

Following the award of the EPC Lump Sum Contract and the placement of orders for the long lead items, the forecast cost of the 1.2 mtpa Stage 3 Process Plant is within 10% of the capital cost outlined in the Kainantu Integrated Development Plan (“ IDP ”) Definitive Feasibility and Preliminary Economic Assessment cases ( see September 12, 2022 press release – K92 Mining Inc Announces Robust Kainantu Gold Mine Integrated Development Plan ), and importantly approximately 94% of the forecast capital cost has been fixed. This significantly mitigates K92’s cost inflation risk for the largest growth capital cost item for the Stage 3 Expansion (the 1.2 mtpa Stage 3 Process Plant), representing over half of the forecast growth capital (inclusive of attributable EPCM costs) as outlined in the IDP. Approximately 6% of the remaining unfixed price capital cost is for projects led by K92, including bulk earthworks and long-lead item freight logistics. The mitigation of the Process Plant’s inflation risk as noted above has notably strengthened the Company’s self-funding position for the Stage 3 Expansion.

With the award of the long-lead items and the EPC contract, commissioning of the 1.2 mtpa Stage 3 Expansion Process Plant is targeting the end of Q1 2025. The mobilization of the construction contractor is forecasted for early 2024, with bulk process plant earthworks to be completed prior. The EPC contract with GRES is expected to be executed by the end of August. The multi-year growth capital estimate for the Stage 3 Expansion project is planned to be provided at the end of the 3 rd Quarter.

John Lewins, K92 Chief Executive Officer and Director, stated, “The award of the EPC contract for the 1.2 mtpa Stage 3 Expansion Process Plant is a major milestone and de-risking event for the Company. Combined with the long-lead items, the Company has awarded approximately 94% of the process plant capital cost, our largest growth capital item for the expansion, forecasted to represent over half of the growth capital, on a fixed price basis, significantly mitigating potential capital cost increases. Importantly, the forecasted cost of the process plant has tracked well with the Integrated Development Plan and the mitigation of the Process Plant’s capital inflation risk strengthens our position to self-fund the Stage 3 Expansion.

We are also very pleased to be working with GRES, a world-class engineering and contracting firm. GRES brings not only significant expertise in the design and construction of process plants but also extensive experience in Papua New Guinea.”

Stage 3 Expansion Activities Update

In addition to the 1.2 mtpa Process Plant, multiple activities are progressing considerably for the Stage 3 Expansion including, but not limited to:

  • Pastefill Plant Front End Engineering and Design (“ FEED ”) proceeding this quarter, with final contract to be awarded in the Q4 2023;
  • Tailings dam lift 1C well underway (60% complete) and targeting completion by end of 2023;
  • Tender process underway for various underground and surface infrastructure packages including vertical development, power and transportation; and
  • Ongoing expansion of accommodation facilities.

About GR Engineering Services Limited

GRES is a leading Australian engineering consulting and contracting company, that specializes in providing fixed price engineering design and construction services to the global resources and mineral processing industries. GRES has a proven track record of delivering integrated project solutions in over 20 countries across all major commodity types, including extensive experience in Papua New Guinea. As a group, GRES employs more than 500 professional, technical and support staff throughout Australia and internationally, in addition to a direct construction workforce and subcontracted personnel.

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