The Claremont, Australia-based Geopacific Resources Ltd (ASX: GPR) explores and develops gold and copper deposits in Cambodia, Fiji and Papua New Guinea. The company holds interest in a couple of projects comprising the Woodlark gold project in Papua New Guinea; the Kou Sa project in northern Cambodia; as well as five projects in Fiji.
On March 8th, 2019, the company announced the final decision to acquire all the rights and interests of Kula Gold Ltd in the Woodlark Gold Project, consolidating 100% ownership of the same project the agreement signed on March 6th, 2019, setting out the terms and conditions.
The project now has a simplified ownership structure that will smoothen its development pathway and attract potential investors. As the estimated revenues and other costs are denominated in the Australian dollar, the gold project is now positioned to derive benefits from the growing AUD margin.
The development has occurred at a time when the gold price is trending at a record high, much above the Definitive Feasibility Study’s (DFS) pricing assumption of AUD 1,650/oz.
However, the agreement is still subject to necessary approvals from shareholders of both Kula and Geopacific. When this task is accomplished, Geopacific will obtain 100% ownership in lieu of issuing around 150 million of its shares (consideration shares) and paying an estimated cash price of AUD 0.7 million to Kula parallelly, cancelling all of its existing 85% stake in Kula. Kula will then utilise the cash received to repay its then-estimated AUD 0.68 million loan from Geopacific. Consequently, once issued, none of the Consideration Shares will be restricted from trading on the ASX.
SRK Consulting (SRK) was appointed as the Independent Technical Expert (ITE) to evaluate the technical aspects of the project. The ITE then presented an initial Fatal Flaws Review in late 2018 stating no flaws detected.
The DFS of the Woodlark gold project was completed back in November 2018 following which Geopacific commenced the preparatory works like seeking financiers and negotiating with engineering firms to provide a turnkey solution for the plant and infrastructure build. As per the DFS, the project has a long life with mining permits in order. It is expected to generate high margins and upfront operating cash flows of AUD 626 million due to low all-in sustaining costs (AISC) at AUD 866/oz in the first five years. The project payback period is also estimated to be 2.2 years.
As per the company’s quarterly cash flow report for the period ended December 31st, 2018, the company recorded net cash outflows of AUD 2.78 million from operating activities comprising around AUD 2.76 million of payments for exploration & evaluation, staff costs, as well as administration and corporate costs. Besides, there was a small amount of net cash outflow from investments into property, plant and equipment at ~ AUD 5K. No financing activities were undertaken during the period. The net cash and cash equivalents at the end amounted to AUD 3.19 million.
GPR has a market cap of AUD 24.98 million with ~ 2.08 billion outstanding shares. With the close of trading on March 8th, the stock’s last sell-off price stood at AUD 0.012, with no intra-day change.
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