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A Clear Path to Production

Woodlark Island Gold Project – A Clear Path to Gold Production

  • Kula Gold’s JV partner Geopacific (ASX:GPR) aims to:
    • develop the Project as a >150,000oz gold per annum producer;
    • increase the mine life to > 10 years;
    • have a short development time.
  • Geopacific plans to achieve this by:
    • increasing reserves from 766,000oz gold to >1.2Moz gold;
    • rebasing the Definitive Feasibility Study ; and then
    • moving into production.

Kula Gold and Geopacific recently entered into a binding term sheet for an earn-in and joint venture transaction on the Woodlark Island Gold Project, as reported on 11 July 2016.  After developing its plan and opting to proceed within six months, Geopacific will commit to spend $8 million within 24 months, including a minimum of 15,000 metres of diamond drilling.  Geopacific’s target is to increase the Ore Reserves of the Project to >1.2Moz of gold.

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Earn-in Agreement with Geopacific Resources Limited

Woodlark Island Gold Project Earn-in and Joint Venture with Geopacific Resources Limited (ASX:GPR)
• Geopacific option to fund $18.65 million over 3.5 years to earn up to a 75% corporate interest in the Woodlark Island Gold Project;
• Geopacific targeting increasing Woodlark Island Gold Project Ore Reserves to >1.2 million ounces of gold;
• The fully-permitted Woodlark Island Gold Project contains a Mineral Resource of 2.1 million ounces of gold and an Ore Reserve of 766,000 ounces of gold following the completion of the feasibility study in 2012;
• Geopacific full funding option for Kula through to production; and
• Geopacific has international resource funds as major shareholders -Resource Capital Funds and Tembo Capital.

 

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Chairman’s Address to Shareholders at the AGM

KULA GOLD

2016 ANNUAL GENERAL MEETING

CHAIRMAN’S ADDRESS

 

My fellow shareholders,

During 2015, the gold price fell from a high of US$1,300 to a low of US$1,050. This has made it very difficult for your Company to initiate the development of its Woodlark Island Gold Project. The Company’s efforts during 2015 were directed at ways to optimise and advance the Project notwithstanding this significant fall in the gold price. At the same time, the Company’s wholly owned subsidiary, Woodlark Mining Limited (referred to as WML), continued its presence and low cost exploration activities on Woodlark Island.

Your Board is endeavouring to find a co-participant, either as a partner to advance the Woodlark Island Gold Project or as a joint venture to do further exploration on Woodlark Island.

As a result of the Company’s work during the year, it has identified that:

  1. additional gold reserves in the order of 300,000–500,000 ounces will increase the Project’s financial robustness, even at lower gold prices; and
  2. there are a number of resource extension opportunities recently identified within WML’s tenements and mostly contained within the Mining Lease already granted – these opportunities are within trucking distance to the proposed plant.

In particular, the Kulumadau area, in the vicinity of one of the mine pits proposed by the feasibility study, has not been fully explored. The potential here is indicated by the following facts:

  • the Kulumadau West deposit is still open down plunge and to the south;
  • the Adelaide Zone within the Kulumadau deposit is open down plunge and to the north-west on strike;
  • approximately 400,000 ounces of Inferred Resources peripheral to Ore Reserves in the Eastern Zone and Adelaide Zone could fall into an enlarged open pit; and
  • only two-thirds of the potential mineralised zone has been covered by drilling.

As part of its further exploration strategy, WML has also undertaken a regional drainage sampling program to identify exploration and potential resource targets within trucking distance of the plant site selected in the feasibility study. The initial phase of this program was focused on the area surrounding the Watou Prospect where the Company’s trenching has intersected vein and breccia hosted mineralisation with gold tenor currently averaging higher grades than the global resources for the Project.

In December 2015, a significant milestone was achieved in the Project with the initialling by all parties of the Memorandum of Agreement, which details the benefit-sharing arrangements between the local people in the mining area, the local-level government on Woodlark Island, the Milne Bay Provincial Government and the National Government.

The Company (through WML) continued during the year to manage community and social issues through its community relations department on Woodlark Island. WML continues to maintain excellent relations with the local communities. Key areas of activities within the local communities during 2015 included:

  • Health clinic – WML donated a building and water tank to establish a clinic in the village at Kulumadau and continued supplying drugs to the clinic to supplement those drugs supplied by the Provincial Government Health Department.
  • Employment – WML continued to employ personnel from the local communities and, where possible, to provide a fair and reasonable spread of employment opportunities across the whole of Woodlark Island.
  • Training – WML continued training programs for employees and landowners

In mid-2015, the Company was able to raise A$2.22 million from existing institutional and sophisticated shareholders through a share placement. More recently, in the first half of 2016, the Company has raised an additional A$298,000 from its shareholders through a share purchase plan, and has offered a placement of shares to the Pacific Road Resources Funds for an additionalA$207,700 which is subject to shareholder approval at this meeting.

The Board has cut further costs at the corporate level and on Woodlark Island. As part of the saving of costs at corporate level, the Board regrets that it was necessary for our Chief Executive Officer, Stuart Pether, to step down, although he remains as a director of WML and is assisting the Company in that capacity. The Board thanks Stuart for his enthusiastic leadership of the Company as CEO over two and a half years. Garry Perotti as CFO has taken over responsibility for day-to-day operations.

The Board is strongly of the view that significant value can be realised from the Woodlark Island Gold Project. This may require further exploration to increase the resources and reserves available for the Project, or a review of the costs in the feasibility study, or both. There is considerable empirical evidence that costs of many of the inputs into mining projects have come down in price significantly, and therefore a cost review (which has commenced) may substantially reduce both the capital cost and the operating costs for the Project. These two avenues to add value to the Project will continue to be pursued. They should enhance the Company’s ability to justify and attract development capital for the Project

The Board expresses its thanks to all of the Woodlark Island employees for their efforts during the year. We thank the Woodlark Island local government, the Milne Bay Provincial Government, the Minister for Mining and the leaders and people of Woodlark Island for their continued support during this difficult economic period, and re-assure them all that the Company is committed to the development of the Project as soon as we can secure the necessary finance on commercial terms.

David Frecker

Chairman

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March Quarterly and Appendix 5B

• Successful Share Purchase Plan raises approximately $300,000
• Placement with major shareholders expected to raise approximately $200,000
• MOU with Misima Gold Project – 1.7moz Gold Resource
• Six new gold targets identified on Woodlark
• Kulumadau Gold Deposit part of Larger System
• March 31 cash position A$0.47 Million, excluding SPP and placement raisings

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Results of Share Purchase Plan

The company reports the success of the SPP in raising $298,000, for the allotment of 9,612,896 shares, which will fund further detailed analysis of the significant database accumulated over 10 years of exploration and feasibility study work.

The focus will continue to be on significant gold resource expansion opportunities within and proximal to the existing Feasibility Study pits, as well as prospects within trucking distance to the proposed plant site.
Prioritisation and ranking of all of the gold resource expansion targets identified will follow, as a precursor to costing and implementing drilling programs.