Gold and Silver Investor Hub: Kula’s board put out a Target’s Statement with a recommendation to reject Geopacific’s offer. What can you tell us about the takeover?

Ron Heeks: It’s important to remember that we already have the joint venture over the Woodlark gold project.  This means Geopacific has the right to earn up to 80% of Kula’s only project, which puts us in a comfortable position.  We see this as a low-risk takeover underpinned by the existing joint venture.

The key rationale for pursuing the takeover is to simplify the ownership structure of the Woodlark gold project.  The single ownership structure will provide greater clarity for both Geopacific and Kula shareholders and is expected to be more attractive to investors. 

Kula has already recognised the strength of Geopacific’s offering, by selecting us as their joint venture partner of choice.  Geopacific has a strong management team with significant experience in developing mineral projects and we are in the enviable position of enjoying strong financial support from major industry players.

We believe our offer is compelling – providing shareholders of both Kula and Geopacific the opportunity to realise the benefits that a merged entity and clarity of ownership will provide.  

The regulation on this kind of corporate activity limits what we can say, as you’d expect there is a bit going on behind the scenes. 

Gold and Silver Investor Hub: What impact does the takeover have on the project?

Ron Heeks: Geopacific is focused on bringing the Woodlark Gold Project into production.  We are currently operating under the joint venture and undertaking all work necessary to present the project as a robust and attractive proposition to development financiers.

Our development drilling program continues and we’ve had some good results which validate our strategy to add mineralisation to the reserve inventory from areas surrounding the 2012 pit designs.  Work on the engineering and economics is also progressing with positive results.  So, work on the project continues without impact from the corporate activity.

Gold and Silver Investor Hub: Moving on to the project, one of the major achievements of the March quarter must be the result of economic studies which validated a US$25 million or 27% capital expenditure saving on Woodlark’s proposed processing plant and tailings costs. Is this saving in line with expectations and how will it be achieved?

Ron Heeks: As part of our assessment process we have undertaken a like-for-like comparison on the original processing plant design, which was completed in 2012 at the height of the boom.  The intention behind the study was to validate that it’s possible to build a plant more cost effectively now than was possible in 2012.  The quantum of the cost saving being around 27% is something that people in the industry seem comfortable with.

We are working through all aspects of the feasibility, applying rigor to the process to make sure that we are doing everything necessary to present a robust DFS.  In the process, we’ve identified several opportunities for optimisation which have the potential for capital and operational savings.  Optimising both is important to ensure that we have a robust project and that remains our focus.  

Remember that A$150 million has been spent on the project.  The fact that so much work was done in the past is what allows us to run optimisation work concurrent with a drilling program.  It is something of a luxury to have the time to work through aspects like the metallurgy, engineering, capital and operating costs.  We are focussed on getting this project right and we are using the time to deliver a robust outcome.

Gold and Silver Investor Hub: Continuing exploration has produced numerous high-grade results in recent months, including 23m at 4.82g/t gold from 102m, 11m at 6.56g/t gold from 71m and visible gold at 114m depth. What do these highlights demonstrate about the project?

Ron Heeks: Woodlark is located alongside some of the world’s largest gold mines in one of the most highly prospective gold regions in the world.

The results provide a level of confidence in our infill drilling program and take us a step closer to achieving our objective of establishing continuity between known zones of mineralisation. The project already has a 2.1-million-ounce resource, which is a strong start. The overarching aim is to move inferred mineralisation to measured and indicated to allow its inclusion in an updated reserve calculation.

Our drilling results are encouraging with strong gold mineralisation near-surface.

The potential to extend the known mineralisation in the areas of the deposits is strong. The system is typical of porphyry/epithermal style of mineralisation and appears to be quite large. Our immediate focus remains on reaching production. Once that’s done we will turn our focus to the exploration potential of the project. There are over 275,000 metres of historic drilling on the project with a substantial proportion of these having identified gold in areas outside the known deposits. We look forward to expanding the project’s potential.

Gold and Silver Investor Hub: Another interesting aspect to Geopacific’s exploration is your decision to analyse all the core that wasn’t assayed during drilling for Kula’s 2012 definitive feasibility study at Woodlark. How is this analysis of previous drill holes adding value?

Ron Heeks: The core that has been analysed specifically relates to the geotechnical drill holes, which are used to determine the wall-angles of the mine design.

As we worked through the technical information, we discovered that several geotechnical holes had not been assayed. This followed the discovery that certain geotechnical readings used for 2012 designs were based on results located in mineralised material. The mineralised material is known to be very soft and broken-up when compared to the harder, more competent wallrock.

This indicates the potential to steepen the wall angles, which could dramatically reduce the amount of waste mined, while allowing extraction of the same amount of ore.

Should this prove correct, the potential exists to substantially reduce the strip ratio and operational costs, resulting in increased ore reserves in future calculations.

We have engaged independent specialists to review the information and assist us to determine optimal results.

Gold and Silver Investor Hub: Geopacific has three rigs working at Woodlark, and your aim is to increase confidence in the existing 2.1-million-ounce resource at 1.5g/t gold, established by Kula. When do you hope to achieve this goal and, with A$7.9 million in cash and equivalents at the end of the March quarter, is your exploration fully funded?

Ron Heeks: Our current focus is on completing the second tranche of the JV Agreement. That task is simply to prove up the reserve base and increase the life of the mine.  Under the terms of the JV agreement, Geopacific is required to spend a maximum of A$8 million to earn up to 51% of the Woodlark Gold project. We are working hard to complete current works as efficiently as possible.  

A$8 million was allocated to reach this milestone and we have sufficient funding to ensure that occurs. We have an experienced and proven board and management team with considerable experience in the region and a proven track record of delivering mines into production.

We are also lucky enough to have the backing of long-term shareholders and we will continue to focus on what needs to be done to bring the project to development in the most cost-effective manner.