Geopacific gets complete control over 1m oz gold project… but then shares slump 17pc
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Explorer Geopacific Resources (ASX:GPR) will buy Kula Gold’s (ASX:KGD) remaining interest in the advanced 1 million ounce Woodlark gold project to streamline its development.
Right now, Geopacific owns 85 per cent of Kula (and over 90 per cent of Woodlark in Papua New Guinea) following a hostile takeover bid in 2017.
But after Geopacific becomes sole owner, Kula will cease to be a subsidiary and be free to “pursue new opportunities”, Geopacific says.
Subject to shareholder approval, Geopacific will issue 150 million shares and about $700,000 cash to Kula (which is pointless, because Kula will hand this money straight back to repay a loan).
The response from investors was mixed; Kula shares jumped 15 per cent, while Geopacific slumped 17 per cent in early trade.
But having 100 per cent control of Woodlark was positive for the project’s development, Geopacific managing director Ron Heeks says.
“The simplified ownership structure enhances its attractiveness to potential financiers and positions it to take advantage of the growing A$ margin, as projected revenues and most costs are to be in Australian dollars.
“Ownership consolidation takes place as the gold price moves well above the DFS pricing assumption of A$1,650/oz.”
A December 2018 definitive feasibility study shows the initial 13-year, 100,000 ounces a year project would cost about $200 million to build and generate about $626 million cashflow.
The company also reckons it could have very low all-in sustaining costs (AISC) of $866 per ounce over the first five years of operation. Here’s some of the key outcomes of the DFS, in one handy graphic: