KNTNF - K92 Mining Inc. (KNTNF) Q2 2023 Earnings Call Transcript

2023-08-10 15:49:05 ET

K92 Mining, Inc. (KNTNF)

Q2 2023 Earnings Conference Call

August 10, 2023 8:30 AM ET

Company Participants

David Medilek - President

John Lewins - CEO & Director

Justin Blanchet - CFO

Conference Call Participants

Ovais Habib - Scotiabank

Alex Terentiew - Stifel Nicolaus

Ralph Profiti - Eight Capital

Arun Lamba - TD Securities

Don DeMarco - National Bank Financial

Presentation

Operator

Thank you for standing by. This is the conference operator. Welcome to the 2023 Second Quarter Financial Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to David Medilek, President. Please go ahead.

David Medilek

Thank you, operator, and thanks everyone for attending K92 Mining's Second Quarter 2023 Results Conference Call. We hope you and your families are doing well. In addition to myself, we have on the line, John Lewins, Chief Executive Officer and Director; and Justin 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. 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 Lewins

Well, thank you, David. And welcome, everyone. In the second quarter, K92 delivered strong operating performance increasing gold-equivalent production by 43% from the first quarter 18% from Q2 2022. Cash costs, all-in sustaining costs for the quarter was significantly lower than our annual guidance range. Our cash balance notably strengthened during the quarter even after near-record capital spend and expiration spend.

We also made considerable progress on multiple growth initiatives, including the completion of the stage, 2A plant expansion, the discovery of a high-grade zone the J2 vein at Judd South, potentially outlining, yet another productive vein within the Kora South Judd, Judd South vein systems and subsequent to quarter end, the Board of Directors approved the award of Stage 3 expansion process planned lump sum EPC contract which significantly derisks the majority of our growth capital for the expansion.

We look forward to discussing all of this in more further detail in the course of the presentation. We are very proud of the company's performance highlighted in the 2022, sustainability report, which was released in late July. The report details our key sustainability initiatives, demonstrating our commitment to socially responsible mining. K92 has a workforce of approximately 1,500 people with a major focus on local hiring, approximately 94% of our workforce is from Papua New Guinea and the majority from our local communities with a large focus obviously on training and development.

K92 has a low environmental footprint with a traditional tailings impoundment no cyanide and low greenhouse gas emissions profile.

We are currently focused on multiple long-term social and economic development initiatives in Papua New Guinea through joint ventures, education, infrastructure, service programs, agricultural programs and investing in female empowerment programs among many others. K92 has been recognized by ISS as having peer leading corporate governance and we are the second largest corporate tax payer in Papua. New Guinea's mining industry. We encourage you to read the report which is available on our website.

While the report covers the 2022 fiscal year, we are deeply saddened to report two tragedy incidents, which resulted in multiple fatalities during the quarter. That’s previously disclosed via press release. The health and safety of our workforce has been and always will be our highest priority and we are committed to providing further disclosures on these incidents and the steps we've taken to reinforce our safety culture in our 2023 sustainability report.

In June, K92 is very pleased to announce our 2030 Greenhouse gas emissions target to reduce our scope one, and two emissions by 25%, when business as usual basis. K92 is already one of the lower emission goal mines globally and we're committed to further improving our energy and GHD emission platform. We believe that we are well-positioned with a clear path to achieve this target through enhancing access to hydropower from the local grid combined with other reduction initiatives.

I'd like to make the point that we've already taken action to improve our greenhouse gas emissions this year with a dedicated power line completed from the Ramoo substations beside. The power line was installed to increase reliability of hydroelectric power from the distribution grid so that we can reduce usage of standby diesel gensets.

Through our partnership with PNG, we are assessing further opportunities to maximize utilization of hydropower.

Moving on to operational performance. During the quarter, the Kainantu mine produced 30,794 ounces of gold equivalent, 112,471 tons of process at a head grade 9.2 grams per ton gold equivalent, compared with Q1 2023, and Q2 2022 production increased by 43% and 18% respectively and long hole stoping during the quarter performed to design.

Cash costs were $597 an ounce and all-in sustaining cost $975 an ounce notably lower than the annual guidance range of $622, $684 for cash costs and $1,180 to $1,300 for all-in sustaining cost. In terms of our key operational quarterly physicals Kainantu delivered within 5% to 10% of our record ore tons processed, total material mined and developed and that despite the impacts of the safety incidents in the case of processing tons, work involved with the Stage 2 mine commissioning.

As noted in previous conference calls, increasing our development rates continues to remain a major focus as we catch up on development that was impacted due to COVID-19 pandemic. And I'm pleased to report that a new jumbo arrived on site during July. A major positive in the second quarter has been the performance of the process front with recoveries having considerably increased after concluding the commissioning of the new rougher flotation cells which have doubled rougher flotation capacity and that was in the final part of the Stage 2A plant expansion that was completed in May.

In the second quarter we achieved the highest recoveries for both gold and copper since Q4 2021 and in June gold recoveries achieved the integrated development plan parameters of 93%. Now that that initial commissioning is complete, optimization work to further boosted and recovery is underway.

I’ll now turn our call over to Chief Financial Officer, Justin Blanchet to discuss our financial results for the second quarter. Thank you, Justin.

Justin Blanchet

Thank you, John, and hello, everyone. During quarter two 2023, we had revenue of $51.8 million, a 39% increase from prior year. We sold 28,141 gold ounces at an average selling price of $1,883, compared to 23,674 gold ounces at an average selling price of 1$,783 in the prior year.

As at June 30th 2023, there was 2,398, gold ounces in inventory, including both concentrate and doré a, a decrease of 895 gold ounces, when compared To March 31st due to timing of sales.

In Q2 2023, cash flow from operating activities before changes in working capital was $16.2 million, compared to $10.5 million in the same period prior year. As at June 30th 2023, we had $95.6 million in cash and cash equivalents. As at June 30th K92 had one of its strongest reported working capital balances of a $112.5 million even after expenditure of $22 million for property plant and equipment during the quarter.

The company has no debt on the balance sheet. The increase in cash and cash equivalents, when compared to March 31st is primarily due to increased production and total metals sold while still spending $15.9 million on expansion capital. In Q 2023, cost of sales was $29.2 million, compared to $23.2 million in the prior year or $21.8 million, compared to $18.5 million when excluding non-cash items.

Despite an overall increase in cost of sales, the company achieved better economies of scale and lower unit cost, when measured for each ton of ore produced attributable to the successful ramp up of the stage 2 expansion with ore and waste tons mined increasing 17% to 266,613 from 227,673 in Q2 2022.

As John mentioned, during the second quarter, the Kainantu Gold operations produced 27,405 ounces of gold, 1,526,547 pounds of copper and 34,001 silver ounces or 30,794 ounces of gold equivalent. We sold 28,141 ounces of gold 1,657,115 pounds of copper and 36,253 ounces of silver. We incurred a cash cost of $597 and an all-in sustaining cost of $975 per ounce of gold, which was significantly below our realized gold selling price of $1,883 per ounce.

Our Q2 2023 cash cost per ounce of gold decreased to $597 from $617 in Q2 2022. The decrease in cash cost was primarily due to the increase in production as compared to prior year. Our Q2 ounce ascending cost per ounce of gold increased to $975 from $893 in Q2 2022. The increase in cost per ounce can be attributed to spending $8.3 million on sustaining capital as compared to $4.9 million in the same period prior year. The increase in sustaining capital is primarily due to replacing some equipment during the quarter.

I will now turn the call back to John to continue with the rest of the presentation.

John Lewins

Well, thank you, Justin. For the exploration growth section we begin with a short video clip of the May completed stage 2A plant expansion starting from crushers, flying towards the mill, flotation circuit, gravity circuit and press buildings. As previously noted, the final item, which was a doubling of the wrapper flotation capacity was commissioned in May 2023. Post commissioning the plant performance in terms of recovery and throughput has been strong and we're continuing to optimize the plant towards realizing it's ultimate recovery and throughput potential whatever that may actually be.

I'd also like to take a moment to acknowledge the team on-site who delivered both Stage 2, and Stage 2A plant expansions. This team has more than tripled the throughput rate from the end of 2019 to today and much of that expansion work was completed during the pandemic. In terms of the Kainantu mine strategy growth pipeline Stage 2A and as noted earlier is now completed. On stage 3, we've now made considerable progress in multiple areas of the expansion.

On July 24th the Board of Directors authorized the award of the engineering procurement construction lump sum contract for Stage 3 expansion process plant to GRR Engineering Services. The contract award amount is $81 million U.S. dollars and is a lump sum fixed price arrangement. We also announced at the same time, that the main process plant long lead items have now been ordered.

On the Stage 3A expansion process plant approximately 94% of the total capital cost has been fixed. This represents over half of the total growth capital cost stage three expansion based on the integrated development plant and significantly derisks potential growth capital cost increases for the expansion. And as previously announced the commissioning of the process plant is targeting, the end of Q1 2025, forecast cost is within 10% of the Kainantu integrated development DFSMPA case.

And as noted earlier, growth capital cost increases have been significantly derisked. We are extremely pleased with this outcome.

Stage 3A expansion also made novel progress in multiple other areas. As shown in the picture on the right, the attaining lift 1C is well underway and approximately 60% complete with completion targeting the end of 2023. Our accommodation facilities continue to expand with capacity due to exceed 1,500 by the end of 2023, which is the capacity required for the Stage 3 operations.

Paste Fill plant front-end engineering design is proceeding and we expect to award the final contract in Q4 and the process continues to advance from various on the ground surface infrastructure packages including vertical development power and transportation. On the treating front, the twin incline has been narrowed by 2,539 meters as of the end of July and is over 80% complete.

In Q4, we plan to commence mining the lower portion of the core resource from the twin incline ahead of schedule progressively providing significant boost to our operational flexibility in 2024 as we establish the new mining front at depth. The twin incline also provide a very useful drilling platform for exploration.

As I think many are aware of the twin incline is sized for up to 5 million ton per annum with conveyors, which is multiple for larger than the Stage 3 and stage 4 expansion throughput. We did this simply because we don't know how big the system is and will be and how many stages of expansion that are potentially in front of us.

Based on what we've seen from exploration, be fair to say, we're pleased that we have oversized the twin inclines.

In terms of near mine drilling, we're currently drilling Kora, Kora Deeps, Kora South, Judd South targets from either underground, or surface targets, such as Maniape, and Arakompa and Karempe are very high potential and we expect to commence securing in due course.

Looking the long section of Kora, Kora South Vein system, there are three key points that I'd like to make. Firstly there's been a significant amount of drilling outside of the resource since the last estimate shown with various points annotated and which now covers a non-drill straight lengths of up to 2.65 kilometers.

Secondly, drilling to the side has discovered by latent zones with two zones interpreted today as annotated in the blue lines, the double arrows as you see there delivering record intersections including 27.9 meters at 10.5 grams per tonne gold equivalent and 50 meters of 5.2 grams per tonne gold equivalent. Now these zones appear to have limited straight length with significant potential, vertically and our understanding is continuing to advance as we execute our drill program in this area.

Third point, we see drilling from underground entering an exciting phase with both Kora Deeps and Kora South now underway at depths as highlighted with the two blue ellipse that you can see for the site and depths. In addition to drilling Kora South from the surface as well with the third ellipse, these are all high potential areas.

Now looking at the long section of Judd, Judd South vein system, there are four key points I think I'd like to make here. Firstly, we’ve significantly expanded the coverage of drilling of the Judd resource, delivering a very strong hit rate and some very high grade results. Secondly, Judd, like Kora has latent zone with two zones interpreted today, again, looking in the [Indiscernible]

Thirdly, we announced in the third quarter, discovery of high grade zone to the sides in a second vein at Judd J2 recording 2.4 meters at 345 grams per tonne, which I'll discuss in the next slide. And then lastly, like Kora, we see an exciting period for underground drilling at both Judd Deeps and Judd South. On May 25 ^th , we announced six two drill holes from Kora, Kora South.

The result was highlighted by the discovery of the high-grade zone at the J2 vein to the South side lined with the ellipse here. And that included, as I mentioned before, 2.4 meters and 345.36 grams per tonne gold equivalent. Other high grade intersections, including KUDD0045, which recorded 11.2 meters or 12.169 grams per tonne gold, equivalent and KUDD0043 which recorded 3.8 and 10.19 grams per tonne gold equivalent.

Importantly the J2 vein is not included in the current resource estimate is opening multiple directions and has recorded a hit rate to-date of 46% of intersections exceeding 5 grams per tonne gold, equivalent. At the K1 vein, the results are highlighted by surface drilling KODD0036 recording five meters at 161 grams per tonne gold equivalent targeting a substantial under drilled target area between the Judd resource estimate and surface within ML150 and KUDD0040 intersecting at our latent zone recording 22 meters 5 grams per tonne gold equivalent with a substantial 57.8 meters at 2.73 in a broader intersection. As shown on the long section J1 is opening multiple directions and has delivered strong hit rates to-date

Drilling expanded in multiple areas of known high grade mineralization at Kora Kora South which highlights at the K1 vein including KNDD0485 recording, 5.94 meters at 15.96 grams per tonne gold equivalent and KNDD0545 recording 7.98 meters and 12.14 grams per tonne gold equivalent. Highlights in K2 vein included KNDD0535, 10.3 meters at 12 grams per tonne gold equivalent and KNDD0525, recording 5.65 meters at 9.08 grams per tonne gold equivalent.

On post exploration we continue to progress at A143 recording multiple porphyry vectors from drilling, and look forward to providing an update to the market in due course.

With that, operator, we’d like to commence the Q&A session. Thank you.

Question-And-Answer Session

Operator

Thank you. [Operator Instructions] The first question comes from Ovais Habib with Scotiabank. Please go ahead.

Ovais Habib

Thanks, operator. Hi, Jordan. K92 team. Just got a couple of questions for me to start off. Number one, sustaining capital was about just talking about 26% less than Q1. And I believe you were looking to accelerate development going into the second half. Do you have all the equipment and people needed to spend the development budget, allocated for this year? Or do you see kind of spill over into 2024?

John Lewins

Okay. Thanks, Ovais. Look in terms of capital, it goes up and down little quarter-to-quarter. In terms of equipment, yes, we do have the equipment that we needed to have by this point in time in the year. And in fact, I think subsequent to the quarter we had another transformer arrived on site. So we've had a couple of arrived at long hole drill. Additional jumbo and additional loader charge up machines and a whole lot of other equipment arrived on site. We are definitely ramping up a number of people. And in fact, by the end of the year, the CAT for instance, will actually be at the capacity that's required for Stage 3. So we're actually ahead in some of our capital – we are actually spending and some of the expansion that we're doing. But at this point in time, we have the people on the equipment that we need to achieve the numbers in terms of sustaining capital.

Ovais Habib

Perfect. Thanks with the color drawn. And then just in regards to, in Q4, you're looking to - I believe this is just the Kora zone that you're looking to mine in Q4, that's not in budget. Any kind of color that you can provide in terms of, how many tons or what kind of grade can we expect on that front? And going into 2024 as well?

John Lewins

Honestly, I have to say not at this point in time. We don't expect it to be a lot of tonnes because there aren't going to be doing a bit of developments on ore. So we don't expect to get a lot of tonnes out of there. But it is obviously the south will be no stoping down on the 911 recent developments along strike on Kora.

Ovais Habib

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

John Lewins

Yeah, well, I'm here making sure that the - are made and all that sort of stuff.

Operator

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

Alex Terentiew

Hey, good morning guys. Couple questions. The first one, just kind of related to what Ovais was asking that. But with Barrack and the group program making some progress basically, looking to restart that, has that changed the labor or cost situation at all in the country or for your projects in any way over the past in I guess, couple of months?

John Lewins

Thanks, Alex. That’s a fair question. We obviously benefited from the only other underground mine incidence. I think fair to say that we have, we do have some people that we have - skilled people I am talking about unskilled underground people that are coming from all over. And we certainly expect to move those people back to power, simply because they're coming down from the SEM bus or fly them down from there.

We don't see it as a major issue for us, simply because we did operate with ourselves previously and we've actually put a fair bit of focus on actually developing skills of our local people and that's intentional if the people from here in our communities, then they will tend to stay with the mine they will not be looking to go up to up to Kora. And I think from an operating. But we offer a what I would say is a better operating environment than we have at the top. So, we know we want to have one or two shortages people leave with little modest, but I mean, overall we're ramping up numbers and looking to get ahead of the curve in terms of - in terms of the numbers and then ultimately, in terms of experts in key things like [Indiscernible] and jumbo operators and what have you? We haven't found any significant issues in being able to recruit those people.

Alex Terentiew

Okay. Great. And I guess, we're obviously since you guys are well underway and on the stage 3 so you've got probably I would imagine a bit of the upper hand in keeping those people. But great, so my second question, great to see the exploration budget jump up this quarter this quarter. I know you spoke about a lot of targets. And I guess my question is, have you, I guess, officially revised your exploration budget this year? I mean your past guidance was 13 million to 16 million bucks and you have a lot of targets, obviously that you can put your money to advance.

So but what areas are you, I guess, most really focusing on? And when could we - when do you expect the next resource update to come out?

John Lewins

Okay. Well, the focus from the underground perspective has been on Judd within the mining lease. And in Judd south from early from surface a bit from underground. And then Kora, closing out a couple of the areas to the north, couple of areas within the mining lease and then Kora to the South, both from surface and underground. I am sorry, and Judd also from surface to make that point, within the mining lease. And those are the ones that we are primarily focused on expansion of the resource and we're looking at October to get a new MMO result estimate released. Other areas right now that we're drilling is which is A1. We've got one rig operating and it depending on close out of some of the drilling at Judd Kora from the surface we would be looking to get a rig over Arakompa, Maniape. And Alex, you may recall they are two historical resources Arakompa sitting around 800,000 ounces, Maniape a bit under 580,000 ounces 560 I think it was actually.

And they haven't been drilled for 20 odd years, just a couple of kilometers away from Kora. They're actually closer to plant and Kora is and certainly there are something that we're pretty excited to get in start doing some drilling we consider stay Arakompa say 1,00,000 ounces and 9 grams a tonne, down at 300 meters and it hasn’t been drilled for over 20 odd years.

That's the sort of opportunity at PNG and more particularly the Kanto region offer to us and I guess why we've always been excited by the exploration potential of just Kora and Judd with the areas around that.

Alex Terentiew

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

John Lewins

Yeah. It means you have more exploration strategy than you normally would.

Alex Terentiew

Yeah. Okay, great. Thank you.

Operator

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

Ralph Profiti

Thanks operator. Good morning, John. So I want to come back to the first or at Kora Deeps coming into play in Q4. And just wondering if we think about sort of Q4 and into the early parts of 2024, just wondering how the veining works in terms of what's going to be initially targeting - targeted and then maybe secondly, just sort of on the mining method and how you're thinking about the deeper areas, sort of Volga eventually transferring into long hole?

John Lewins

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

Operator

Pardon. The interruption this is the operator. John Lewins the connection is disconnected. Please standby so we connect in.

John Lewins

Sorry. Can you hear me? Hello.

Ralph Profiti

Yes. I can hear you, John.

John Lewins

Come back again. Okay. Sorry about that. Sorry much about that. But current operating level, which is 1200, which is actually going from 1,130 up to 12 – 1,280 actually will be the primary focus balance of this year and next year and that is a combination of Judd K1 and K2. As we mentioned, we will be looking to get into that area of 900 in primarily Kora and it will just be development in the markets stoping until I would think, Q2 next year at the earliest.

And there is also potential of call out some Judd from that as well relatively early. In fact, we've gone through Judd in some of our developments for our - the first or waste pass it. We are putting in which we develop to the West. So, going out some funds from Judd kind of 900-ish is also a potential. In terms of our mining method it will continue with the Volca until 2025, when we commission the phase 2.

Ralph Profiti

Gotcha. Thanks, John. As a second question when you think about sort of the mining areas that are planned into the second half and considering how their flows to ore throughput, are you confident that that you're not seeing any sort of localized geotechnical challenges that those have been addressed and that sort of development that is planned is ahead of levels of mining that kind of where you're sort of happy and confident?

John Lewins

Look I’d say, we're pretty happy with where we're sitting right now in terms of access to mining areas, in terms of geotechnical issues, underground mining. We are always going to find some localized geotechnical issue. We think we have a good handle on what we're what we're looking at in terms of those areas and an ability to manage any interaction into those areas, but underground mine works any underground mine yet, but you don't get localized geotechnical areas and issues. And it's an ongoing, it’s an ongoing management thereof. And in our case, we use a lot of shotcrete in our support system as well as a fairly comprehensive bolting and meshing. But those are things that we continue to look at and evaluate and certainly one of the projects we've got going for instance is evaluation and how we can, we can mine the Guy Solomon and realize additional ounces currently in the rest of the PA.

Ralph Profiti

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

John Lewins

Thanks, Ralph.

Operator

The next question comes from Arun Lamba with TD Securities. Please go ahead.

Arun Lamba

Hey, John. Just quickly, like I normally ask just kind of accounting questions. But can you just remind me how we should think about kind of the revenue coming in like just looking at the loss on receivables at fair value. So revenue came in a little bit less based on your reporting. Can you just remind how to think how we should think about that going forward?

Operator

Pardon me for the interruption. This is the operator. John, your line is open. John, your line is open. You may proceed. [Operator Instructions]

John Lewins

Arun, the line was interrupted. Can you hear me?

Arun Lamba

Yeah, I can hear you now, John.

John Lewins

Sorry about that. Did David answer the questions?

Arun Lamba

I didn’t hear anything, but, I’ll just quickly again ask you if just in case you didn’t hear.

So there's obviously an adjustment coming in there. We also had an adjustment coming in from 31st March to June, which was also down around 5%, I think. So we had adjustments coming in from both of those.

And then we also had from our provisional invoicing to our final invoicing in terms of moisture content and assays, I think, we had a couple of percent points adjustment there. That tends to be around about where we get, obviously, gold varies from quarter-to-quarter and copper varies from quarter-to-quarter.

Arun Lamba

No, that's perfect. Thanks, John. And then just one quick one for me. Just thinking on the boll case of this expansion on the PA, the mill, both mills, we do probably 1.7 million tons per annum. Assuming the mill can do a little bit above design. Will you guys have the infrastructure in place, ramp, et cetera? And will the mine be able to support potentially if the mill can do 1.8 million, 1.9 million tons per annum, in kind of a boll case scenario?

John Lewins

That's a good question. I mean, obviously, we flagged from early days that the twin incline has been specifically designed to handle Stage 3, Stage 4, Stage 5, and potentially Stage 6. So, certainly, infrastructure in that context, yes, in the infrastructure in terms of ventilation, power, et cetera, et cetera are all positive on that.

In terms of the tonnage and being able to get your tons for vertical meter, et cetera, et cetera, we would certainly look at going forward seeing, we think a significant addition to the resource coming in October would certainly indicate that we’d be able to support, being able to get 10%, 20% more on an annualized basis in terms of tonnage.

And, yes, as you quite rightly say. I mean, right now, we already see that the existing plant can comfortably do 5% to 10% more than perhaps the nameplate we have for 500,000. And when you look at standard silver design for plants, mills are obviously, your – normally your debottleneck and generally with a new plant such as ours, you're designing on the 85% bond index, in other words, you're allowing to be able to get your nominal hourly throughput, where effectively your hardness is significantly above the average for the ore body.

And so that generally means that your capacity that you put in overall tends to be higher than the non-capacity, that nameplate capacity. It's a way of metal or just making themselves look good and they need all the help they can get on that.

Arun Lamba

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

John Lewins

Thanks a lot.

Operator

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

Don DeMarco

Thank you, operator, and good morning, John and team. A few questions. First of all, great to see the strong rebound lower in all-in sustaining costs. Clearly the higher grades helped, but now I'm looking at year-to-date AISC is around 11.80 versus the guidance range that, that puts it right at the bottom of the guidance range, and we're heading into sort of a potentially a stronger back half of the year.

Can you just comment on where you see AISC headed in the last couple of quarters? Sustaining CapEx year-to-date, $20 million. Are you expecting sustaining CapEx to increase? I think [45:40] had touched on this a little bit. Maybe if you could just expand on the outlook for sustaining CapEx and AISC at year-end next couple of quarters?

John Lewins

I think in general, we'd be saying that yes, we expect to see the sustaining capital higher in the second half of the year with that additional rig that's coming, we're looking for more development meters. So that's obviously one of the drivers for all-in sustaining costs, but there are a number of other drivers that'll come in and be part of that.

So, yes, we are expecting to see higher expenditure in all-in sustaining cost second half of the year and we still very much expect it to come in as per guidance, so within that guidance range.

Don DeMarco

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

John Lewins

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

Don DeMarco

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

John Lewins

We expect to have that completed in this quarter.

Don DeMarco

Excellent. Okay. Thanks so much. And, yes, look forward to seeing you next week and good luck with Q3.

John Lewins

Thanks, Don.

Operator

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

John Lewins

Well, thanks, operator, and thanks, everyone, for joining us. Apologies for the slight technical issues coming to you from Kainantu. I think it would be fair to say that when we look at the numbers in the second quarter, we're pretty happy with the final numbers in terms of production, in terms of costs and whatever else.

As a company, however, we – we've gone through, what would be the toughest quarter, I think, we've ever faced with our safety incidents. And that's something that as a company, we're going to be working very hard to make sure that we never had anything quite like this. Again, this for the entire team that Kainantu has really been something exceptional in, unfortunately, the wrong sort of way as a company.

However, we've refocused both on our safety and on our operations. And so we'll certainly be focused on that going forward. So I would just like to recognize the, a, the passing of our teammates. And secondly, the efforts of all of our people here in Kainantu in the successes that the company has achieved over the last few years and in the last few quarters and that ongoing commitment to the company.

So thank you for that. And I look forward to seeing some of the people on the call here onsite next week. Thank you very much.

Operator

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

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K92 Mining, Inc. (KNTNF) Q2 2023 Earnings Call Transcript