In a July 22 research note, Haywood Securities analyst Geordie Mark reported that K92 Mining Inc. (KNT:TSX.V) just announced a positive drilling update on underground drilling at Kora.
"The consistency in hitting gold mineralization at Kora is impressive. . .stepouts continue to show growth potential within bounds," Mark wrote about the results. With its efforts, K92 aimed to increase drill density over up-down orientations and toward the south. Ultimately, the objective was to convert and expand the existing resource.
The analyst explained why the results are positive. For one, the width of the intersections encountered bode well for converting the resource and, in certain areas, boosting the grade. The average thickness hit in the K1 vein was 2.64 meters (2.64m) and in the K2 vein, 3.94m.
Two, stepout holes, testing the K2 hanging wall vein beyond the existing resource boundary, showed that high grade mineralization extended into that area. For instance, stepout hole KMDD0343 demonstrated 17.4m of 10.2 g/t Au eq.
Three, the high grades of the intersections encountered were equivalent to those of the existing Measured & Indicated resource, 10.45 grams per ton gold equivalent (10.45 g/t Au eq). The grade of more than half of the reported intersections was greater than 10 g/t Au eq. These new grades should also positively affect the existing resource grade.
High grades are evident in some of the drill result highlights, which Mark provided. Intercepts from K1 included 71.64 g/t Au eq over 3m (hole KMDD0286) and 17.4m of 10.2 g/t Au eq (hole KMDD0292). In K2, hole KMDD0286 returned 12.75 g/t Au eq over 2.9m.
Mark pointed out that the resource update might support a larger operation than the one outlined in the preliminary economic assessment, which has a 1,000,000 tons per annum nameplate capacity. The 400,000 tons per day latent capacity from the stage two plant "could be integrated into a combined processing plan, implying the potential to exploit more ore from Kora," he purported. The definitive feasibility study for a stage three expansion is anticipated in H1/22.
Haywood has a Buy rating on K92 Mining, which remains one of its Top Picks. At about CA$8.53 per share, the stock is trading today at "an attractive valuation," Mark wrote, but warrants "a premium valuation in the upper range of its respective peer group." Given its growing production base at Kainantu and resource expansion opportunities at Kora, Judd, Blue Lake and Karempe, this precious metals producer has rerating potential. Haywood's target price on K92 is CA$11 per share.
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