St Barbara eyes strategic stake in Geopacific as Woodlark Project gains momentum

Deal to make St Barbara a major shareholder of Geopacific Resources came ahead of the release of encouraging exploration results from its Woodlark Project in PNG.

Pic: Getty Images

• Mid-tier miner St Barbara set to become major shareholder at Geopacific Resources

• Geopacific’s releases more highly encouraging exploration results from the Woodlark Gold Project

• The proposed deal strengthens Geopacific’s profile while allowing it access to valuable local insights as it advances Woodlark

Special Report: Mid-tier gold producer St Barbara is set to take a substantial shareholding in Geopacific Resources, as the junior releases more encouraging exploration news and a positive analyst report from its flagship Woodlark Project.

Under the terms of the proposed transaction Patronus Resources will transfer 458,565,351 Geopacific Resources (ASX:GPR) shares to St Barbara, and in return St Barbara will sell back 158,125,983 Patronus shares via a selective buy-back, which is subject to shareholder approval.

The $330m-capped St Barbara will then emerge with a ~14.4% holding in Geopacific.

It’s the latest deal to emerge from the ASX gold scene, where recent corporate action has been almost as hot as the yellow metal’s price.

The transaction aligns St Barbara’s experience as a PNG gold producer with Geopacific’s development of its 100%-owned Woodlark gold project, which has a current resource of 1.67Moz and scope to grow via a major exploration program set to kick off in June.

Woodlark is just 160km north of and in the same geological setting as the Misima project, which has just been sold by Kingston (ASX:KSN) to PNG state-backed miner Ok Tedi for $95 million.

Strategic move

GPR’s new relationship with the operator of the Simberi gold mine boosts the junior’s profile as it moves ahead in developing the asset, where key licences are already in place and plant engineering is more than 90% complete.

GPR is targeting the release of a definitive feasibility study for Woodlark by the end of this year. This will build on last year’s scoping study, which outlined the robust economics of the shallow deposit.

A newly released Independent Investment Research report points out that the scoping study used a gold price of only A$2900/oz, but it’s now almost double that at ~A$5120/oz.

IIR says a gold price of even A$4000/oz results in a pre-tax net present value for Woodlark of A$1.5 billion – almost 2.5x that in the study’s economic model.

This update to the gold price underscores Woodlark’s significant potential value upside and strong leverage to the commodity.

The report also draws attention to GPR’s strong cash position, especially after a recent A$40 million rights issue, plus Woodlark’s low strip ratio and the straightforward, ‘vanilla’ nature of the planned operations.

Spreading wings

The SBM deal additionally provides access to deep local knowledge as GPR aims to get Woodlark closer in size to its larger-resourced neighbours. They include Newmont’s Lihir mine, which has estimated reserves of 45Moz, and the copper-gold Wafi-Golpu project held by Newmont and Harmony Gold.

The recent identification of significant copper-gold porphyry potential at Woodlark has opened up a new phase of district-scale exploration at the project.

News of the proposed deal came in before the release of auger results that have extended surface gold zones at priority satellite deposit Wayai Creek and the Little Mackenzie prospect, each with a strike extent of at least 1km.

Confirming what the GPR team has interpreted as the project’s significant potential for resource expansion, surface auger sampling has returned multiple zones grading at more than 1 gram per tonne of gold, with some individual assays up to 20g/t, and a peak assay of 63.6g/t Au at the northernmost auger line at Little Mackenzie.

Trenching is now underway to support drilling, which is expected to start this month, with equipment currently being mobilised to site.

A major reverse circulation and diamond drilling program of 30,000m is planned to extend the known gold mineralisation and test new targets with the view to increasing mineral resources.

CEO James Fox said about the latest assays: “These results confirm the strong prospectivity of the southern Woodlark King area, with high-grade auger results and extensive surface anomalies extending known mineralisation.

“The Little MacKenzie and Wayai Creek targets are shaping up as compelling additions to our pipeline and with a major 30,000 metre drill program set to commence this month, we’re excited by the potential to build on our 1.67Moz resource base.”

This article was developed in collaboration with Geopacific Resources, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.