RE:RE:Knt.to Summary and price target ath 15-18 month
K92 Mining had a solid quarter in Q4, and while it came up shy of its FY2023 guidance, the company has struggled since the pandemic due to having to catch up on development rates, as well as several one-time issues that have derailed production (shortage of bulk emulsion explosives in 2021, incident involving underground loader, restriction on travel for its expat FIFO workforce from Australia). That said, the twin incline is now ~99% complete, development rates are at record levels and will improve further with the addition of new equipment, and the company will be much better positioned to deal with any hiccups by year-end 2024 with a large stockpile in place to draw from starting in 2025. Meanwhile, the plant continues to shatter records and perform well above the nameplate, suggesting the potential for higher production levels if the company can process closer to ~590,000 tonnes this year vs. nameplate capacity of the Stage 2A plant of ~500,000 tonnes.
K92 Mining Operations - Company Website
From a bigger picture standpoint, K92 Mining may look fully valued from a trailing cash flow standpoint (~$43 million in cash flow in first nine months of 2023) based on its current production profile, but it's on the eve of a transformation that will increase production by ~150% vs. 2023 levels (Stage 3) and over 4x to peak years in its Stage 4 Expansion, with growth from ~118,000 GEOs to ~500,000 GEOs. Meanwhile, the company already is one of the best stories sector-wide from an exploration standpoint, with it being the only sub $1.5 billion producer I'm aware of with a Tier-1 scale mine with costs set to be over 40% below the industry average (~$750/oz vs. ~$1,450/oz FY2025 estimates). In fact, its closest comparison post-2025 is Lundin Gold, a miner currently trading at a market cap of ~$2.8 billion and 1.0x P/NAV.
In summary, with K92 Mining trading below 0.50x P/NAV and with a path to generating upwards of $450 million in free cash flow at peak production levels, I continue to see K92 Mining as a buy on dips, and one of the best ways to get exposure to the gold price.