Geopacific Resources has entered into an agreement with Kula Gold to acquire an interest in the Woodlark Island Gold Project in Papua New Guinea.

Geopacific can earn a 75% interest in the project at a cost of US$20 per reserve ounce of gold, with potential to increase this to 80% by raising development finance.

There are no vendor payments under the arrangement with all funds used to advance the project, which has a 2.1 million ounce gold resource, including a reserve of 766,000 ounces.

The immediate goal for Geopacific is to increase the reserve base to 1.2 million ounces by converting the existing resources. It aims to convert between 450,000 and 500,000 ounces from the resource into the reserve category.

A 1.2 million ounce reserve base will provide sufficient scale and longevity to attract development funding, within the framework of Woodlark’s current permits.

As an advanced gold asset, Woodlark Island adds considerable value to Geopacific’s portfolio, which includes the Kou Sa project in Cambodia and a number of gold projects in Fiji.

Geopacific’s team has significant experience in developing assets from exploration through to production. The success and experience of the team has attracted strong financial support with the likes of Resource Capital Funds and Tembo Capital represented on the share register.

Geopacific undertook a gap analysis which highlighted the potential to increase the reserve-life of Woodlark and enhance its economics to allow the project to be funded into production. It says this is a simple task which can be achieved by re-basing the project’s CAPEX and OPEX and conducting a selected drilling program to move existing inferred and indicated resources into the proven and probable categories.

The CAPEX costs for the Woodlark DFS were estimated at the height of the mining boom and there is considerable potential to re-base these costs.

Geopacific will undertake cost studies to reduce the CAPEX with the aim of achieving a total that can be repaid in less than 18 months.

The transaction is structured as a project level earn-in with an incentive target to be followed by a contributing joint venture. The project is wholly-owned by Kula’s PNG subsidiary Woodlark Mining Limited (WML).

Geopacific will spend up to $18.65 million over three tranches in order to earn an interest of up to75% in WML with Kula retaining a 25% interest. Work in Cambodia and Fiji will continue in tandem with the Woodlark project.

The company’s managing director Ron Heeks said, “This is a game changer for Geopacific. Earning into Woodlark on these terms allows Geopacific to gain an immediate, achievable path to production with a modest outlay and considerable potential rewards. The timing couldn’t be better – with the gold price achieving record highs.”

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