Woodlark Gold Project

Geopacific Limited

Geopacific is focussed on developing the multi-million-ounce Woodlark Gold Project on an expedited path to gold production.

Project Information Summary

Woodlark Island Gold Project information summary
Name Woodlark Gold Project (Woodlark).
Location Woodlark Island, 600 km east of Port Moresby in the Milne Bay Province of PNG.
Ownership 100% by Kula Gold Limited (ASX:KGD) through its subsidiary Woodlark Mining Limited (WML). The PNG Government has agreed to a 5% participating interest, which is yet to be assigned.
Mineralisation Epithermal gold.
JORC Resource of 2.1Moz Au at 1.5g/t, including a reserve of 766Koz Au at 2.2g/t.
DFS (completed 2012) 1.8Mtpa gravity and carbon in leach plant to produce 100koz Au/pa.

Fully permitted – Mining Lease and Environmental Permit granted.

Historic spend Circa $150M prior to transaction with Geopacific.

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Woodlark Island is located 600km east of Port Moresby in the Milne Bay Province of PNG.

Papua

The Project is in good company, surrounded  by multi-million ounce gold deposits and mines.

Geopacific’s Roadmap to Deliver

GPR roadmap

Managing Director Ron Heeks said: “Woodlark is a development project with significant exploration upside. Our immediate task is simple – to convert an additional ~500,000 ounces from existing resources into reserves and rebase the CAPEX and OPEX costs to move towards production.”

Geopacific is assessing the current resources at Woodlark to establish which areas hold the best potential to convert a further 500,000 ounces of gold from resources into reserves. This will deliver an overall reserve of 1.2 million ounces in accordance with the earn-in transaction to acquire up to 80% of the project from Kula Gold Limited (Kula).

The ongoing assessment began with a detailed evaluation of the Kulumadau resource area and followed with the nearby Busai deposit.

Next steps

Geopacific’s focus is to maximise the development potential of Woodlark in the shortest possible timeframe.

Work undertaken to date is encouraging, highlighting substantial potential to increase reserves at all deposits. The advanced stage of this work includes a clear development plan to maximise resource conversion and achieve the 1.2 million ounce reserve target required to progress the earn-in agreement.  Geopacific will complete the development plan and announce the decision to proceed to Tranche 2 of the earn-in transaction before the end of 2016.

Development plan

Geopacific’s development plan will include clear milestones to improve economics and pit designs along with a drilling program to move existing Inferred resources into the Measured and Indicated (M&I) categories with selective infill drilling.

Exploration potential

The exploration potential of Woodlark is being assessed simultaneous to the development plan.  Scout drilling, geophysics and airborne magnetics have all successfully identified numerous targets that require follow-up exploration.  These areas will be prioritised and developed as the project progresses.

Indications are that Woodlark has the potential to be a greater than five million ounce goldfield.

Potential to convert Inferred resources to Indicated and Measured status effectively

The drilling inventory at Woodlark is enormous for a junior company, with over 220,000 metres of RC and 45,000 metres of diamond drilling.

Drilling density in the areas of the current reserves is high, with drillhole spacing regularly as close as seven metres. This adds greatly to the confidence of the reserve estimation, particularly in high-grade areas.

In spite of the high density, drilling in the areas of the reserves accounts for less than half of the overall drilling at Woodlark. This has resulted in many areas being drilled only to Inferred status with wide spaced drill patterns.

Geopacific’s development plan will include a drilling program targeting the areas which Geopacific has identified as having the highest potential to be upgraded.

Potential to increase current resources effectively

The majority of the Inferred resources are situated within and surrounding the original pits designs. This mineralisation remains open along strike and at depth in most cases.

Geopacific’s development plan will include selected drilling to increase resources surrounding the current reserves.  Mineralisation has already been identified in these areas but the drill spacing was too wide to allow for its inclusion in the resource.

Potential to improve economics

The original DFS was undertaken in 2012, at the height of the mining boom. The high CAPEX and OPEX costs used in the DFS were commensurate with the environment.

These costs resulted in the average cut-off grade for current resources being ~1g/t (Woodlark Island Gold Project Mineral Resources Increases, 31 July 2012) which is considerably higher than current industry standards.

The change in the economic environment and mining industry cycle provides Geopacific with a clear opportunity to re-base the CAPEX and OPEX costs of the project.

Current permitting for Woodlark supports the development of a 1.8 million tonne per annum plant. Industry average in-pit cut-off grades appropriate with a plant of this scale are in the range of 0.5 to 0.6 grams/tonne.

Geopacific’s aims to achieve a cut-off grade within the standard industry range.

Kulumadau Deposit

The first area of assessment for Woodlark is the resource conversion potential at the Kulumadau deposit.

The Kulumadau area currently covers two pits located on opposite sides of a circular geological structure. The mineralisation is derived from the same source at depth.  Wide spaced drilling between the pits indicates the continuity of mineralisation and suggests that the current pits could be joined with infill drilling.

Open-cut pit shells were designed around the current M&I (red). Numerous zones of inferred mineralisation exist outside the current pit shells (4 million tonnes at 2.9g/t gold for 397,000 ounces of gold at 0.5g/t lower cut-off grade) making them readily amenable to conversion to M&I with infill drilling.

Resource conversion potential is demonstrated in Figure 1 below, where the resource is currently 910,000oz of gold at 0.5g/t lower cut (Woodlark Island Gold Project Mineral Resources Increases, 31 July 2012).  Original economics and pit designs allowed for only 282,000oz Au at 1.0g/t Au lower cut to be converted to reserves.

It is now clear that the Kulumadau mineralisation has formed within a ring structure created by an intrusive at depth. The Kulumadau West and Kulumadau East deposits are on opposite sides of this structure, with the Adelaide zone on the northern margin. It is evident that the mineralisation forms circular zones around the outside of the ring structure.  The internal breccia zone is also clearly mineralised.  The drillhole traces detailed below show the southern margin has only been lightly drilled and largely at the wrong orientation. From the current resource model below it is clear that there are numerous zones of gold mineralisation between the existing pits as well as high-grade extensions of the mineralisation below the pits. Potential to add to the resource also exists along strike from the known mineralisation (around the margins of the ring structure) where a low drilling density and non-optimal orientation means many zones have not been effectively tested.

Kulumadau - OBM - Class Plan (0.8gpt) v2

 Figure 1 :Resources at the Kulumadau area of the Woodlark Island Gold Project

Geopacific aims to undertake infill drilling, limited to selected areas, with a view to moving existing inferred resources into the measured and indicated categories.  These areas will be selected according to Geopacific’s optimisation studies, which are being used to highlight the areas that hold the greatest potential to effectively upgrade inferred resources.  These will be included in the development plan milestones.

Existing areas of measured and Indicated resources fall outside current pit designs, clearly demonstrated in Figure 2. Rebasing the OPEX costs will allow the pit shells to be redesigned with the aim being to capture an increased proportion of the measured and indicated resource and converting it into reserves.

The positioning of the M&I and Inferred resources in relation to the current pit designs can clearly be seen in the 3D model below.

Kulumadau - OBM - Class (1.0gpt)

 Figure 2: Both M&I and inferred resource falls outside current pit shells

The resource model shows high-grade gold zones with areas greater than 5 g/t gold (magenta) which fall outside the current pit designs (M&I and inferred). The majority of this mineralisation falls in the inferred category and remains open to depth.  Infill drilling will allow some of these areas to be upgraded to M&I so that improved economics will allow them to be added to the reserve base.

Kulumadau - OBM - Grade (1.0gpt)

Figure 3: 3D mineralisation showing high-grade zones currently falling outside the pit shells

The potential to increase the resource is demonstrated in the section (below) of the Kulumadau West pit in Figure 4. The in-pit ore zone extends to depth.  A lack of drilling below the base of pit resulted in the  mineralisation being assigned to inferred status.  Selected drilling has the potential to allow mineralisation such as this to be upgraded to M&I.  Areas of the eastern and western margins of the current pits have not been drilled to determine whether other mineralisation is present.

Kalamadua long selection

Figure 4 : A section from Kulumadau pit showing extensions to known in-pit reserves at shallow depth

Busai Deposit

Drilling density in the pit area at Busai is high, with most of the near pit resources currently being M&I and a lower proportion being inferred. At Munasi the drilling is wider spaced and all of the mineralisation is inferred, it also includes a central high-grade core.  The aim of Geopacific’s modelling has been to determine what effect the inclusion of these resources would have on increasing overall resources and reserves, once Geopacific has rebased costs and re-optimised pits designs.

The Busai deposit currently contains one large pit that covers several parallel zones of mineralisation (Figure 1). The pit is located at the northern end of a zone of mineralisation, which is over three kilometres long.  At the southern end of the zone is the Munasi area, which has an inferred resource of over 100,000 ounces of gold.  Between the two areas, wide spaced scout drilling has indicated that the mineralised zone is continuous between the pits (Figure 3).  The current in-pit reserve at Busai is open in all directions and particularly along strike.

There is a large proportion of M&I mineralisation within the pit that is below the current lower cut-off. With rebased costs a good proportion will be able to be moved into reserves. A lower cost base will also allow inclusion of the extensive M&I directly below the current pits.

The entire Busai zone, including Munasi has some 600,000 ounces of gold in resources outside the current reserves. Geopacific will initially focus on upgrading this mineralisation to increase M&I resources and then use rebased costs to convert these into reserves.

Resources at Busai

Figure 1:  Resources at the Busai area of the Woodlark Island Gold Project

3d mineralisation busai

Figure 2: 3D mineralisation showing high-grade zones currently falling outside the pit shells

Open-cut pit shells were designed around the current M&I (red). The greatest immediate chance to increase reserves at Busai is by rebasing the project economics to reduce the OPEX costs.  The high OPEX costs used led to an in-pit cut-off that is considerably higher than industry standards.  It is expected that revised costs commensurate with current industry standards will produce a considerably lower in-pit cut-off, which will allow a larger proportion of the existing in-pit M&I mineralisation as well as that immediately below the current pit (Figure 3) to be converted into reserves. This will substantially decrease the ore to waste ratio and provide improved project economics.

The Munasi mineralisation is currently drilled at a 50m by 20m spacing, infilling this zone and extending holes to depth will allow this mineralisation to be upgraded to M&I for future conversion into the reserve base.

3D mineralisation busai 2

Figure 3:  3D mineralisation showing high-grade zones currently falling outside the pit shells

Resource conversion potential is demonstrated in Figure 3 above, where the resource is currently 1.04 million oz of gold at 0.5g/t lower cut (Woodlark Island Gold Project Mineral Resources Increases, 31 July 2012).  Original economics and pit designs allowed for only 408,000oz Au to be converted to reserves.

As the Busai in-pit ore zone is also open at depth It should be possible to extend the pits, which are generally shallow, in order to access this mineralisation. The potential to extend the ore zones below the bottom of the current pit to access known resources is evident in Figure 3 above.

busai sections showing extension

Figure 4: A section from Busai pit showing extensions to known in-pit reserves at shallow depth

The potential to increase the resource is clearly demonstrated in the section above (Figure 4) of the Busai pit. The in-pit ore zone zone clearly extends to depth.  A lack of drilling below the base of of the pit resulted in the the mineralisation being assigned to inferred status and therefore unable to be converted into reserves.  Selective drilling has the potential to allow this type of mineralisation to be upgraded to M&I.

busai 5

Figure 5: Busai to Munasi, a 3km long zone of continuous mineralisation

In Figure 4 (above) the zone of mineralisation, which runs between the Busai and Munasi resources is over 3km long. The central zone is lightly drilled but demonstrates that the mineralisation is continuous between the resources that are defined at each end.  This zone holds great exploration potential for increasing resources and will be investigated further in the future.

Exploration Upside

Woodlark Island - Exploration Targets

The Woodlark Gold project has had more than 265,000m of exploration drilling, much of which is in areas outside the current resource area. This drilling has highlighted the large extent of the mineralising system and the potential for it to produce a multi-million ounce goldfield.

Numerous satellite targets have been identified as a result of drilling across the project area. These hold potential to significantly increase the resource base of the project and require follow-up drilling.  Examples of these are included as yellow stars in the figure above.

A recent aeromagnetic geophysical survey has greatly assisted with the understanding of the geology of the Woodlark Island, identifying many targets on the project. This technique has provided a solution to identifying targets that lie under the thin coral veneer, which covers a portion of the island.

Deal Structure - Project level earn in

GPR deal structure

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 100% PNG subsidiary, Woodlark Mining Limited (WML) which holds all the Project assets, including in particular the mining lease and exploration licences.  WML will therefore become the joint venture company.

Geopacific will spend up to $18.65 million over three Tranches in order to earn an interest of up to 75% in WML, with Kula retaining a 25% interest. Prior to the transaction, the PNG Government agreed to take a 5% participating interest in WML, which it will purchase for a proportionate share of the sunk costs.  As this 5% interest will be assigned from Kula’s interest, Kula will receive the amount payable for it.  Kula has the right to raise its share of Project development finance.  Should this not happen, Geopacific has the right to arrange Kula’s share of the Project development finance, allowing it to earn a further 5% and taking Geopacific’s total interest in WML to 80%.

All amounts below are in Australian dollars.

Tranche 1:Geopacific will spend up to $650,000 in less than six months to complete due diligence and establish the optimal work program required to deliver the incentive target of an aggregate Ore Reserve for the Project of 1.2Moz gold.

  • For completing this work and committing to proceed to Tranche 2, Geopacific will earn a 5% interest in WML (Kula will hold 95% including 5% for the PNG Government).

Tranche 2:Geopacific will spend up to $8 million in 24 months undertaking the work program developed in Tranche 1:

  • If Geopacific spends the full $8 million within the 24 months without achieving the incentive target of a 1.2Moz gold reserve for the Project, it will earn an additional 35% interest in WML giving it a total of 40% (Kula will hold 60% including 5% for the PNG Government);

or alternatively —

  • If Geopacific achieves the incentive target of a 1.2Moz gold reserve for the Project within the allocated spend and time frame, Geopacific will earn an additional 46% interest in WML giving it a total of 51% (Kula will hold 49% including 5% for the PNG Government).

Tranche 3:Geopacific will spend up to $10 million undertaking the work program developed in Tranche 1, which it aims to do in 12 months:

  • If Geopacific reaches the full spend without attaining the incentive target of a 1.2Moz gold reserve for the Project and without achieving ‘bankable’ status for the Project, it will earn an additional 20% interest in WML giving it a total of 60%  (Kula will hold 40% including 5% for the PNG Government);

or alternatively —

  • If Geopacific achieves the incentive target of a 1.2Moz gold reserve for the Project and achieves ‘bankable’ status for the Project within the allocated spend, it will earn an additional 15% interest in WML giving it a total of 75% (Kula will hold 25% including 5% for the PNG Government).

‘Bankable’ status means that economic, engineering and geotechnical inputs to the Project have been completed to a degree sufficient so that the Project can secure the required development capital and achieve financial close.

Once the ‘bankable’ status is reached, Kula has the right to raise its share of the development finance proportionate to its interest in Woodlark. Should Kula be unable to, or elect not to, raise its share of development finance then Geopacific will have the right to arrange Kula’s share of the development finance and thereby earn an additional 5% interest in WML, taking its total interest to 80%.

Videos

Busai Deposit Flythrough

Kulumadau Deposit Flythrough

Woodlark Gold Project

Investor Presentation

Competent Person’s Statement

The information that relates to exploration results is based on information compiled by or under the supervision of Ron Heeks, a Competent Person who is a Member of The Australasian Institute of Mining and Metallurgy and Managing Director of Geopacific. Mr Heeks has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and the activity he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Heeks consents to the inclusion in the announcement of the matters based on his information in the form and context in which it appears.

The information that relates to the Mineral Resource estimates for Kulumadau, Busai and Woodlark King is based on information compiled by Mr. John Doepel, Principal Geologist for Continental Resource Management Pty Limited (Resource Report, Woodlark Island). CRM has acted as independent consulting geologist to WML since 2005 and has undertaken several visits to the island and to the sample preparation facilities. Mr. Doepel is a Member of The Australasian Institute of Mining and Metallurgy and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ’Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Doepel consents to the inclusion in the announcement of the matters based on his information in the form and context in which it appears.

Forward Looking Statements

All statements other than statements of historical fact included in this announcement including, without limitation, statements regarding future plans and objectives of Geopacific Resources Limited are forward-looking statements. When used in this announcement, forward-looking statements can be identified by words such as ‘may’, ‘could’, ‘believes’, ‘estimates’, ‘targets’, ‘expects’ or ‘intends’ and other similar words that involve risks and uncertainties.

These statements are based on an assessment of present economic and operating conditions, and on a number of assumptions regarding future events and actions that, as at the date of this announcement, are expected to take place. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the company, its directors and management of Geopacific Resources Ltd that could cause Geopacific Resources Limited’s actual results to differ materially from the results expressed or anticipated in these statements.

Geopacific Resources Ltd cannot and does not give any assurance that the results, performance or achievements expressed or implied by the forward-looking statements contained in this announcement will actually occur and investors are cautioned not to place undue reliance on these forward-looking statements. Geopacific Resources Ltd does not undertake to update or revise forward-looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this announcement, except where required by applicable law and stock exchange listing requirements.  Woodlark is permitted by the PNG Government, subject to meeting the conditions of the licence.