geopacific resources limited · 2018. 3. 16. · 1.42g/t au for contained gold of 1.12m ounce. the...
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Research Note
RESEARCH NOTE – PATERSONS SECURITIES LIMITED 1
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof.
GEOPACIFIC RESOURCES LIMITED
PFS CONFIRMS WOODLARK AS A ROBUST PROJECT
Geopacific Resources Limited (GPR) recently completed the PFS on its Woodlark project in PNG. The PFS results confirm the robustness of the project, with strong early cashflow resulting in a payback within 2.2 years after tax, using a gold price assumption $A1,650/oz.
The PFS focusses on the Kulumadau, Busai and Woodlark King Deposits, all of which are located on the existing Mining Lease. The PFS sees a two stage development, the 1m ounce reserve grading a low 0.99g/t au combined with inclusion of 51k ounce of the inferred resource and upgraded to 24.5mt at 1.42g/t Au for contained gold of 1.12m ounce. The upgrade occurs through simple gravity techniques. Upgrade ore is stockpiled for the first 3.5 years, after which it is fed into a simple gravity upgrade plant to produce mill feed product grading 1.84g/t Au.
Apart from the upgrade, the processing route is very much conventional. A 2.4mtpa operation is developed with estimated capital expenditure of A$180m, with an additional A$17m for the upgrade plant. The project delivers annual production of 100Koz over a 10-year mine life for 1.01Moz Au. Strip ratio averages 3.1:1 over the mine life, with 2.5:1 strip ratio over the first 5 years. Recoveries average 90% over LOM, with a 92% recovery over the bulk of the mine life, and lower recoveries in latter years.. Discrete areas of the Busai deposit have been found to have increased levels of arsenic, with a recovery of 77% used for this ore (scheduled for processing in years 10 and 11 of the project). Due to the limited availability of contract mining in PNG, owner operated mining has been assumed. The project is forecast to generate low AISC averaging A$1,110/oz gold over the LOM, and $A990/oz gold over the first 5 years of the project.
We visited Woodlark Island in late 2017. The project already has excellent infrastructure, with good roads, and a camp already established. Topography is relatively flat, with the island experiencing low to moderate winds and little seismic activity. The local population is typically very supportive of development of the mine. Mining and environmental permits are already granted, with the GPR board giving approval to finalise a DFS, expected Q3 2018. Exploration leases cover 580 km2, with numerous defined exploration targets currently being assessed ahead of planned drill testing.
We retain our SPECULATIVE BUY recommendation with a price target of $0.06 (full diluted assuming 50% equity funding), with the project progressively derisked through completion of the PFS, and offering competitive AISC and IRR returns.
15 March 2018
12mth Rating Spec BUY
Price A$ 0.03
Target Price A$ 0.06
12mth Total Return % 95.7
RIC: GPR.AX BBG: GPR AU
Shares o/s m 1771.6
Free Float % 100.0
Market Cap. A$m 54.9
Net Debt (Cash) A$m -10.3
Net Debt/Equity % na
3mth Av. D. T’over A$m 0.03
52wk High/Low A$ 0.04/0.02
2yr adj. beta 0.76
Valuation:
Methodology DCF
Value per share A$ 0.06
Analyst: Cathy Moises
Phone: ( +61) 3 9242 4030
Email: [email protected]
12 Month Share Price Performance
Performance % 1mth 3mth 12mth
Absolute 19.2
10.7
-20.5 Rel. S&P/ASX 300 18.9 3.1
-29.5
15 March 2018 Geopacific Resources Limited
RESEARCH NOTE – PATERSONS SECURITIES LIMITED 2
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof.
Figure 1: GPR’s forecast on cumulative pre-tax mine Cashflow
Source: Geopacific Resources Limited
Figure 2: Processing route for Woodlark
Source: Geopacific Resources Limited
15 March 2018 Geopacific Resources Limited
RESEARCH NOTE – PATERSONS SECURITIES LIMITED 3
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof.
Figure 3: Key Mining Metrics
Source: Geopacific Resources Limited
Figure 4: Annual Mining Schedule
Source: Geopacific Resources Limited
Figure 5: Annual Processing Schedule
Source: Geopacific Resources Limited
Figure 6: Capital Cost Estimates
Source: Geopacific Resources Limited
15 March 2018 Geopacific Resources Limited
RESEARCH NOTE – PATERSONS SECURITIES LIMITED 4
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof.
Figure 7: Kulumadau long section showing clear upside at depth
Source: Geopacific Resources Limited
Figure 7 above highlights the further exploration potential at Kulumadau, with strong upside potential for further
reserve extension in a number of areas including: 1. At depth extensions to the high grade Kulumadau resource 2. Boscalo has no depth extensional drilling undertaken 3. There are defined inferred blocks in the “hump” between Kulumadau East and West. This material,
whilst lower grade, should be amenable to processing in the upgrade facility 4. Beyond extensional drilling, high priority targets include Great Northern and the structural continuation off
the Great Northern Zone under cover
Figure 8: Life of Mine forecasts
Source: Patersons Securities Limited
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
PRODUCTION
Ore Milled (k t) 0 0 0 0 0 0 2,107 2,400 2,400 2,444 2,494 2,487 2,487 2,487 2,487 2,365 342
Head Grade - Au (g/t) 0.0 0.0 0.0 0.0 0.0 0.0 1.6 1.5 1.4 1.4 1.5 1.4 1.4 1.4 1.4 1.3 0.9
Recovery - Au (%) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 92.0% 86.0% 79.0% ####
Production - Au (k Oz) 0 0 0 0 0 0 102 109 102 102 107 102 103 106 96 76 8
Cash Cost ($/t) 0 0 0 0 0 0 34 33 36 36 39 45 45 44 38 35 23
Cash Cost ($A/Oz) 0 0 0 0 0 0 707 725 857 873 916 1091 1098 1023 990 1073 1012
AISC ($A/Oz) 0 0 0 0 0 0 813 832 1134 983 1027 1203 1211 1136 1104 1221 1161
PROFIT AND LOSS
Revenue (A$ M) 0 0 0 0 0 0 190 209 198 203 217 208 212 219 200 159 16
Operating Costs (A$ M) 0 0 0 0 0 0 72 79 87 89 98 111 113 108 95 82 8
Royalty (A$ M) 0 0 0 0 0 0 9 10 9 10 10 10 10 10 9 7 1
Operating Profit (A$ M) 0 0 0 0 0 0 109 120 102 104 109 87 89 100 95 69 7
Net Profit (A$ M) 0 0 0 0 0 0 69 75 63 65 67 52 53 61 58 42 5
Net Cash Flow (A$ M) 0 -4 0 0 -54 -108 85 93 62 81 85 69 70 78 74 52 6
WOODLARK OPERATIONAL
15 March 2018 Geopacific Resources Limited
RESEARCH NOTE – PATERSONS SECURITIES LIMITED 5
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof.
15 March 2018 Geopacific Resources Limited
RESEARCH NOTE – PATERSONS SECURITIES LIMITED 6
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof.
Recommendation History
Stock recommendations: Investment ratings are a function of Patersons expectation of total return (forecast price appreciation plus dividend yield) within the next 12 months. The investment ratings are Buy (expected total return of 10% or more), Hold (-10% to +10% total return) and Sell (> 10% negative total return). In addition we have a Speculative Buy rating covering higher risk stocks that may not be of investment grade due to low market capitalisation, high debt levels, or significant risks in the business model. Investment ratings are determined at the time of initiation of coverage, or a change in target price. At other times the expected total return may fall outside of these ranges because of price movements and/or volatility. Such interim deviations from specified ranges will be permitted but will become subject to review by Research Management. This Document is not to be passed on to any third party without our prior written consent.
15 March 2018 Geopacific Resources Limited
RESEARCH NOTE – PATERSONS SECURITIES LIMITED 7
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof.
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Patersons Securities Limited Disclosure of Interest
Patersons Securities Corporate Relationship Disclosure
88E Patersons Securities have acted for 88 Energy Limited (88E) within the past year and have received fees for these services.
AGRPatersons Securities have acted for Aguia Resources Limited (AGR) within the past year and have received fees for these
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15 March 2018 Geopacific Resources Limited
RESEARCH NOTE – PATERSONS SECURITIES LIMITED 8
All information and advice is confidential and for the private information of the person to whom it is provided and is provided without any responsibility or liability on any account whatsoever on the part of this firm or any member or employee thereof.
1300 582 256
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ResearchCathy Moises - Head of Research Phone: (+61 3) 9242 4030 Email: [email protected]
Hira Sakrani - Associate Analyst Phone: (+61 3) 9242 4052 Email: [email protected]
James Farr - Research Assistant Phone: (+61 8) 9263 1215 Email: [email protected]
Strategy & EconomicsTony Farnham - Economic Strategist / Analyst Phone: (+61 2) 9258 8973 Email: [email protected]
Greg Galton - Private Wealth, Analyst Phone: (+61 8) 9263 1612 Email: [email protected]
CommoditiesCam Hardie - Analyst Phone: (+61 3) 9242 4153 Email: [email protected]
Simon Tonkin - Senior Analyst Phone: (+61 8) 9225 2816 Email: [email protected]
Xavier Braud - Analyst Phone: (+61 8) 9225 2813 Email: [email protected]
Nic Matich - Analyst Phone: (+61 8) 9225 2819 Email: [email protected]
IndustrialsMartyn Jacobs - Analyst Phone: (+61 3) 9242 4153 Email: [email protected]
Jon Scholtz - Analyst Phone: (+61 8) 9225 2836 Email: [email protected]
Nic Matich - Analyst Phone: (+61 8) 9225 2819 Email: [email protected]
Institutional DealingDan Bahen Phone: (+61 8) 9263 1274 Email: [email protected]
Michael Brindal Phone: (+61 8) 9263 1186 Email: [email protected]
Artie Damaa Phone: (+61 2) 8238 6215 Email: [email protected]
Paul Doherty Phone: (+61 3) 8803 0108 Email: [email protected]
Chris Kelly Phone: (+61 3) 9242 4078 Email: [email protected]
Jeremy Nugara Phone: (+61 3) 8803 0166 Email: [email protected]
Phil Schofield Phone: (+61 2) 8238 6223 Email: [email protected]
Sandy Wylie Phone: (+61 8) 9263 1232 Email: [email protected]
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Stock recommendations: Investment ratings are a function of Patersons expectation of total return (forecast price appreciation plus dividend yield) within the next 12 months. The investment
ratings are Buy (expected total return of 10% or more), Hold (-10% to +10% total return) and Sell (> 10% negative total return). In addition we have a Speculative Buy rating covering higher risk
stocks that may no be of investment frage due to low market capitalisation, high debt levels, or significant risks in the business model. Investment ratings are determined at the time of initiation of
coverage, or a change in target price. At other times the expected total return may fall outside these ranges because of price movements and/or volatility. Such interim deviations from specified
rnages will be permitted but will become subject to review by Research Management. This Document is not to be passed to any third party without prior written consent.