Coverage Initiated on Mining Triple Threat: Explorer, Developer, Producer

The basis of Haywood’s investment thesis for this Canadian company is shared in a recent report.

In a Nov. 28 research note, analyst Mick Carew reported that Haywood initiated coverage on K92 Mining Inc. (KNT:TSX.V) with a Buy rating and a CA$4.75 per share target price. The current stock price is CA$2.62 per share.

“We like K92 as it represents one of the few companies implementing exploration, development and production concurrently and is set to increase capacity to 400,000 tons per annum next year,” commented Carew. The company funds its exploration and development programs with monies it generates from mining.

Carew presented the highlights of the K92 Mining story. One is the company successfully “juggling it all,” he wrote, referring to all mining stages. Evidence of this is the 179% year-to-date rise in K92’s share price and the company’s Q3/19 production exceeding guidance by 14%. K92 is mining gold from the Kora deposit, part of its Kainantu project in Papua New Guinea.

Another positive to K92, Carew noted, is that the Kora resource “should expand significantly,” to the estimated 5 million ounces of gold equivalent and, thus, warrant a larger mining operation. This is because the gold-copper mineralization there remains open along strike and at depth to the K1 and K2 veins. Additionally, high-grade linkage structures are present.

Further, Carew added, the company’s management and technical teams, with CEO John Lewins at the helm, are “strong.” Lewins has experience developing and operating many gold mines, in Asia, Africa, Australia and the Middle East.

In addition, K2 has an extensive land package with potential for epithermal and porphyry-style deposits, including the Judd vein and the Blue Lake porphyry project that “suggests district potential,” Carew pointed out.

The Blue Lake region will be further explored by K92 in the near term. Also, the company intends to continue drilling, with three underground and two surface diamond drill rigs, the Kora and Kora North deposits to expand the resource. Finally, K92 will continue working toward achieving its goal of a 400,000 ton per annum mine capacity and annual production of 120,000 gold equivalent ounces.

Carew pointed out that the market is undervaluing the progress made thus far at K92’s Kainantu project. “With an updated resource expected in Q1/20, along with doubling of capacity at its production facility by Q3/20, we believe there are significant events that could demonstrate material advancement for this well-managed company,” he added.

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Disclosures from Haywood Securities, K92 Mining Inc., Initiating Coverage, November 28, 2019

Analyst Certification: I, Mick Carew, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.

Important Disclosures
Of the companies included in the report the following Important Disclosures apply:
▪ As of the end of the month immediately preceding this publication either Haywood Securities, Inc., one of its subsidiaries, its officers or directors beneficially owned 1% or more of Equinox Gold Corp. (EQX-V).
▪Haywood Securities, Inc. has reviewed lead projects of Barrick Gold Corp. (ABX-T), Equinox Gold Corp. (EQX-V), Roxgold Inc. (ROXG-T), K92 Mining Inc. (KNT-T) and a portion of the expenses for this travel may have been reimbursed by the issuer.
▪ Haywood Securities Inc. or an Affiliate has managed or co-managed or participated as selling group in a public offering of securities for K92 Mining Inc. (KNT-T) in the past 12 months.
▪ Haywood Securities Inc. or an Affiliate has received compensation for investment banking services from Equinox Gold Corp. (EQX-V) in the past 12 months.
Other material conflict of interest of the research analyst of which the research analyst or Haywood Securities Inc. knows or has reason to know at the time of publication or at the time of public appearance: n/a.

Research policy is available here.

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