Sophisticated investors have agreed to sink $40m into ASX-listed Geopacific Resources to help develop its Woodlark Gold Project in PNG. Ordinary shareholders will also get the chance to stock up at the same price to the tune of a further $5m with a $30k limit per subscriber. The 1-million-ounce reserve Woodlark gold project looks like generating a pre-tax net cash flow of at least $754m before upside.
Papua New Guinea-focussed gold developer, Geopacific Resources, has taken a huge step towards production at its flagship Woodlark project, this week revealing that sophisticated investors have agreed to plough $40m into its share placement to underpin the mine’s start-up development activities.
In addition, the company said it had initiated a share purchase plan to raise a further $5m on the same terms from ordinary shareholders.
Geopacific management said the proceeds of the raisings would provide for the commencement of front-end engineering designs and project civil construction works, relocation of the Kulumadau village, Woodlark mine camp upgrades, project financing costs and other working capital required in the short-term
The company said this first phase of development is expected to de-risk the project’s execution, in preparation for the construction of a gold processing plant and formal completion of financing.
The $40m placement will come via two tranches before the end of the year, with the issue of 1,600 million fully paid shares at 2.5 cents a share.
The board then proposes a 1 for 25 share consolidation, subject to shareholder approval, which will leave a post-consolidation position of about 174 million shares on issue.
Geopacific Managing Director Ron Heeks said: “The capital raising has provided an excellent result, with shareholders demonstrating their commitment to moving Woodlark into production. All shareholders, new and existing, clearly understand the tasks and rewards ahead and we are delighted and appreciative of their strong support to begin the process of producing gold.”
“The raising will allow the company to commence early site works in preparation for process plant construction which will enable gold production to be reached in a shorter timeframe.”
Last month, the company strengthened its board, with the appointment of former Gold Road Resources Managing Director Ian Murray as a non-executive director.
Mr Murray has previously held numerous senior leadership positions with mining companies in the past 25 years and has substantial financial, corporate, project development and operational experience.
He was instrumental in taking Gold Road’s Gruyere project from an exploration play through to a fully funded 8.2 million tonne per annum gold operation that is set to produce 300,000 ounces of gold per annum in JV with Gold Fields.
Under the terms of its mining license in PNG, Geopacific has up to the 5th of July 2022 to complete the construction and commissioning of the processing facility at Woodlark.
The Woodlark gold project holds an ore reserve of nearly 29 million tonnes grading 1.12g/t gold for 1.04 million ounces of gold, contained within a broader JORC-compliant mineral resource estimate of 1.57 million gold ounces.
The project presents as a low stripping ratio, high-margin, fully permitted open-pit mining operation, with a processing facility capable of pumping out 100,000 ounces of gold per annum.
At a gold price of AUD$2,000 per ounce, the mining operation that has an initial mine life of some 13 years, generates a pre-tax net cash flow of $754m at an impressive internal rate of return of 49%.
Gold was sitting just above AUD$2,170 per ounce this week.
The total capital establishment costs for the Woodlark gold project come in at just under $200m, with a third of those monies required to construct the processing plant.
At currently elevated gold prices, payback on the project is estimated at just 1.6 years.
Whilst it has been a long haul for Geopacific in PNG, this week’s outcome is the news the company has been waiting for, as it looks to achieve its ultimate goal of churning out some gold at Woodlark.
The company is also looking to divest its non-core assets in Cambodia and Fiji, to fully focus on the development and financing of Woodlark, which also has considerable blue-sky exploration upside well beyond its existing gold resources and reserves.
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