Geopacific gets a shot in the arm with St Barbara backing

Geopacific Resources has a busy six months ahead with extensive drilling and a DFS for its Woodlark Island gold project in PNG.

Geopacific Resources is attracting plenty of attention with its Woodlark Island gold project in PNG. Pic: Supplied/Stockhead

One of Australia’s top mining journalists, Kristie Batten, writes for Stockhead every week in her regular column placing a watchful eye on the movers and shakers of the small cap resources scene.

Geopacific Resources (ASX:GPR) has got a busy six months ahead as it firms up the development plans for its Woodlark Island gold project in Papua New Guinea.

The company is well-funded to complete the definitive feasibility study, having raised $40 million at the start of the year, which represented one of the biggest raisings by a junior in an otherwise bleak March quarter for fundraisings.

The company will also complete a further 30,000m of reverse circulation and diamond drilling with the aim of growing the resource, which stands at 45.56 million tonnes at 1.07 grams per tonne gold for 1.56 million ounces.

“The intent of that is really to position ourselves by the end of this year, early into next year, so that we've obviously got a much better idea of the project economics and it's been de-risked, and we're also having more advanced discussions with either financiers or other mid-tier miners that see the same value that we do,” Geopacific CEO James Fox told Stockhead.

“We haven't decided exactly which way we want to go, whether or not we develop it ourselves, or whether we partner up with a group – I don't think they're mutually exclusive.”

New major shareholder

Geopacific’s largest shareholder with 46.1% is Germany’s Deutsche Balaton and Delphi, which are active investors in Australia’s resources space.

Another company backed by the German group, Patronus Resources (ASX:PTN) , sub-underwrote Geopacific’s $40 million raising, acquiring a 15.7% stake.

Earlier this month, Patronus agreed to swap its stake in Geopacific with St Barbara (ASX:SBM) , buying back St Barbara’s stake in Patronus. 

St Barbara, which operates the Simberi mine in PNG, now holds 14.4% of Geopacific.

Geopacific shares had been flat all year but are up 20% this month.

Fox said he’d been in contact with St Barbara managing director Andrew Strelein in the past.

“We’re figuring out how Geopacific and Woodlark can leverage off St Barbara's position in PNG, in terms of expertise, in terms of personnel, in terms of insights and whether or not there are any opportunities for us to collaborate, whether it be on a project or obviously, on a company wide basis,” he said. 

“I think it'd be great to get some of their exploration team over to our project whilst we're drilling, obviously to have a look at some of the porphyry potential that we've been looking at, as well as the general program that we're currently working on.”

While the political system in PNG is stable under Prime Minister James Marape, the government is looking to update the country’s mining code later this year.

“Given that are operating there, it does allow us to leverage off some of their experience, in terms of negotiating with the state as well,” Fox said.

Woodlark refresh

A previous management team of Geopacific had pushed the button on a $225 million mine but halted construction in 2021 after spending $100 million, due to inflation, bad weather and the pandemic.

Under Fox, who joined in late 2023, the company spent the first six months of last year applying the lessons learned from previous construction and preparing a new scoping study.

The study, released in July 2024, outlined $326 million to produce 95,000 ounces of gold per annum at all-in sustaining costs of $1534 per ounce and all-in costs of $1820/oz over 12 years.

Undiscounted life of mine revenue was forecast at $3.3 billion, while pre-tax net cashflow was estimated to be $1.3 billion.

The study returned a post-tax net present value of $501 million, an internal rate of return of 37.7% and 18-month payback period.

However, the study used a gold price of just $2900/oz, around 45% lower than today’s spot price.

“Because the gold price has moved so much, so quickly, there's a huge amount of catch-up to play,” Fox said.

“And of course, what that does for us, and lots of prospective gold companies, it allows you to have a sort of a more critical look at your project and focus on the areas that are more profitable and the economics are better than just volume.

“It's not necessarily about producing as much gold as we can. It’s about producing the most gold at the best cost.”

The DFS will also look at increasing the throughput rate beyond the 2.9Mt per annum envisaged in the scoping study given more than 400,000oz of the resource was not included.

“It's much better for us to increase the throughput rate to maintain the same mine life, then bring the cashflow forward in terms of the project economics,” Fox said.

“If we do that, then we’re up to almost a $1 billion worth of pre-tax NPV and an IRR of over 50%.”

Originally published as Geopacific gets a shot in the arm with St Barbara backing