Woodlark Gold Project Moving Towards Production
THE INSIDE STORY: Geopacific Resources (ASX: GPR) is implementing an aggressive development program at the company’s Woodlark gold project having negotiated a project development extension of 2.5 years with the Papua New Guinea Government. By Ron Berryman
Woodlark Island is located approximately 600 kilometres east of Port Moresby and is about 75 kilometres in length and 25 kilometres in width.
Historically the project has had US$150 million spent on exploration and studies, including 275,000 metres of drilling.
Previous owner, Kula Gold completed a scoping study as well as pre-feasibility and definitive feasibility studies with an expectation to commence production in late 2013 subject to completing necessary regulatory approvals and the availability of financing.
In July, 2016, Geopacific Resources entered into a three-tranche earn-in Joint Venture agreement with Kula Gold, which would give it up to an 80 percent interest in the Woodlark gold project.
Geopacific holds five per cent of the project, having completed the first tranche of the earn-in and is progressing in the second.
In July 2017 Geopacific made an off-market takeover bid offer for all ordinary shares of Kula Gold with a pre-bid acceptance of the offer from Franklin Advisers, a 17 percent shareholder in Kula Gold.
On 26 July 2017 Kula Gold Limited (Kula) released a letter from their
major shareholder, Pacific Road (collectively including the holdings of
Pacific Road Capital Management GP Limited, Pacific Road Holdings
SARL, Pacific Road Capital A Limited, Pacific Road Capital B Limited),
stating that they will accept an unconditional, increased offer. Read the announcement here
“It’s important to remember that we already have the Joint Venture over the Woodlark project,” Geopacific managing director Ron Heeks told The Resources Roadhouse.
“This means Geopacific has the right to earn up to 80 per cent of Kula’s only project, which puts us in a comfortable position.
“We see this as a low-risk takeover underpinned by the existing Joint Venture.
“The key rationale for pursuing the takeover is to simplify the ownership structure of the Woodlark gold project.
“The single ownership structure will provide greater clarity for both Geopacific and Kula shareholders and is expected to be more attractive to investors.
“Kula has already recognised the strength of Geopacific’s offering, by selecting us as their Joint Venture partner.
“Geopacific has a strong management team with significant experience in developing mineral projects and we are in the enviable position of enjoying strong financial support from major industry players.
“We believe our offer is compelling – providing shareholders of both Kula and Geopacific the opportunity to realise the benefits that a merged entity and clarity of ownership will provide.
“The regulation on this kind of corporate activity limits what we can say, as you’d expect there is a bit going on behind the scenes.”
Geopacific is focused on bringing the project into production and is currently operating under the JV undertaking all work necessary to present the project as a robust and attractive proposition to development financiers.
The company has received encouraging results from its development drilling program, validating its strategy to add mineralisation to the reserve inventory from areas surrounding 2012 pit designs and todevelop Woodlark into a robust project.
Geopacific is conducting an extensive drilling program with three drill rigs in operation.
Results have identified broad, high-grade mineralisation surrounding 2012 pit designs at the Kulumadau and Busai deposits
In July Geopacific announced that focussed drilling confirmed depth extensions with broad zones of gold mineralisation below the pit designs of both deposits.
Recent intersections include:
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Kulumada
8 metres at 10.29 grams per tonne gold from 231m;
22m at 2.78g/t gold from 53m;
3m at 63.44g/t gold from 212m at; and
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Busai
40m at 2.04g/t gold from 121m; and
18m at 5.55g/t gold from 178m.
Other drilling focussed on improving confidence of the resource classification and a discovery intersection north of Kulumadau East where positive results from surface continue in line with the Kulumadau East deposit and within 80 to 100 metres of the 2012 pit design.
“Our focus has been development-orientated to make the project more real, more robust and to move it forward,” Geopacific executive director corporate Philippa Leggat explained.
“We want something that is bankable and attractive to investors.
“As part of our assessment process we have undertaken a like-for-like comparison on the original processing plant design, which was completed in 2012 at the height of the boom.
“The intention behind the study was to validate that it’s possible to build a plant more cost effectively now than was possible in 2012.
“The quantum of the cost saving being around 27 per cent is something that people in the industry seem comfortable with.
“We are working through all aspects of the feasibility, applying rigor to the process to make sure we are doing everything necessary to present a robust DFS.
“In the process, we’ve identified several opportunities for optimisation which have the potential for capital and operational savings.
“Optimising both is important to ensure that we have a robust project and that remains our focus.
“Remember that US$150 million has been spent on the project.
“The fact that so much work was done in the past is what allows us to run optimisation work concurrent with a drilling program.
“It is something of a luxury to have the time to work through aspects like the metallurgy, engineering, capital and operating costs.
“We are focussed on getting this project right and we are using the time to deliver a robust outcome.”
Kula Gold’s original mining licence for the project had a condition to complete construction and commissioning of the project by July 4, 2017.
Geopacific realised this was clearly not possible so, after taking over management of the project in late 2016, it approached the PNG Government.
“We were confident the PNG authorities would form a favourable view of the plan for our experienced and financially supported team to move Woodlark forward, and that our strategy stood the best chance of delivering an economic outcome for PNG Authorities and local communities,” Leggat said.
“We are pleased that we have built a good relationship with the PNG authorities during this process.”
The extension approval grants an additional 2.5 years to develop the project within a 20-year mining lease, including a 12-month period to vary the technical aspects resulting from Geopacific’s definitive feasibility study.
The PNG Government’s extension to the mining lease is a critical element in the company’s plan to deliver Woodlark into production.
Geopacific recently released positive drill results confirming the increasing value of the Woodlark gold project.
The current drilling campaign at Woodlark identified broad zones of high-grade mineralisation at both the Kulumandau West and Busai deposits, while the area north of Kulumadau East also produced positive results from surface, in line with the Kulumadau deposit.
Focused drilling assessing depth extensions at Kulumadau and Busai confirmed broad gold mineralisation below 2012 pit designs, including
Kulumadau:
18m at 10.29g/t gold from 231m;
22m at 2.78g/t gold from 53m; and
3m at 63.44g/t gold from 212m.
Busai:
40m at 2.04g/t gold from 121m; and
18m at 5.55g/t gold from 178m.
“Depth extensions at the Kulumandau West and Busai deposits have been identified, demonstrating positive potential for Woodlark,” Heeks remarked.
“The trend continues across all three areas with broad intersections of mineralisation identified at Kulumandu West, Busai and Kulumandau East.”
These drilling results followed on from previous positive results, achieved during the ongoing drilling campaign.
The company will continue to upgrade its JORC resources with the view to releasing updated resource and reserve statements in the next few months.
Geopacific Resources LTD (ASX: GPR)
…The Short Story
HEAD OFFICE
Level 1
278 Stirling Highway
Claremont, WA 6010,
Phone: +61 8 6143 1820
Email: info@geopacific.com.au
Web: www.geopacific.com.au
DIRECTORS
Milan Jerkovic, Ron Heeks, Phillipa Leggat, Mark Bojanjac, Ian Clyne