Geopacific Resources Ltd (ASX:GPR) has retained its buy recommendation and a price target of 90 cents from Shaw and Partners as it moves toward first gold pour by the end of CY22 at its Woodlark Gold Project in Papua New Guinea.
The company is one of the cheapest gold developers on the ASX, according to Shaw and Partners.
Once in production, Woodlark will be producing 100,000 ounces of gold at an AISC of around A$1,200/ounce and at current gold prices will generate cash flow of ~A$150 million per annum.
The following is an extract from Shaw and Partners’ research update:
Event
Geopacific has commenced a 60,000m drilling program on Woodlark Island to delineate and refine the existing resource and to explore for additional resources. The company now has full access to the ground above the planned Kulumadau pit post the relocation of the local housing. The existing resource of 1.6Moz is likely to be materially extended by the end of 2022 as the mine comes into production. This will either extend the 13 year mine-life, and/or allow the company to expand the planned 100kozpa operation.
Construction and development of the project is continuing and Geopacific is on track for first gold pour towards the end of CY22.
Highlights
- The first phase of the drilling program is 20,000m of grade control and near pit extension drilling to be completed by the end of CY2021. All three of the planned pits are open laterally and at depth and this will be the first drilling program since 2018 to test the existing resource. A successful program could add resources, reduce the already low strip ratio (3.9x) and increase the mine life.
- The old village was located immediately above the planned Kulumadau pit and has limited the company’s ability to fully test the resource. The village has now been successfully relocated into modern housing and drilling under the old village footprint is likely to extend the resource.
- Post the completion of the grade control drilling, the RC drill rig will move into exploration drilling with an anticipated 40,000m of exploration drilling budgeted on a phased basis through until Q4 2022.
- There is significant exploration upside. Woodlark has a resource of 47Mt at 1.04g/t for 1.57Moz gold and reserve of 28.9Mt @ 1.12g/t for 1.04Moz gold. The exploration will initially focus on near pit extensions, before testing a number of prospective targets within the Mining Lease.
- The Woodlark Gold Project on Woodlark Island in Papua New Guinea is fully permitted, fully financed and construction has commenced. Early works include;
- Early works contract signed with Contract Power Australia for the procurement of long lead time items associated with the development of the Project power station
- Letter of Intent issued to support the placement of order for first phase of mining equipment.
- An order has been placed by GR Engineering Services (GRES) with CITIC Heavy Industries for procurement of the SAG and ball mills.
- The engineering and construction contractor GRES has been mobilised to site and site preparation and detailed design works are well advanced.
- Development of Woodlark is relatively low risk. Woodlark will be a standard and simple open cut mining operation and CIL processing plant which will produce ~100koz of gold per annum over a 13 year mine life. Costs are very low due to the low strip ratio (3.9x life of mine, and less than 3x in the early years). GPR estimates all-in sustaining costs at A$1,239/oz (life of mine).
Recommendation
We retain our Buy recommendation and Price Target of 90c. Once in production Woodlark will be producing 100koz of gold at an AISC of around A$1,200/oz and at current gold prices will generate cash flow of ~$150mpa. GPR is of the cheapest gold developers on the ASX – in our view concerns over the risk of operating in PNG look overdone.