Pathway to Production
In July 2014, Kula was granted the Mining Lease for the proposed development and operation of the Woodlark Island Gold Project. The Mining Lease ensures Woodlark Island is fully permitted and allows for the development of a 1.8Mtpa gold mining operation.
The granting of the Mining Lease was issued following a comprehensive review of Kula’s Definitive Feasibility Study by the PNG Mineral Resources Authority. The review confirmed the Project delivers favourable returns, with Reserves established at a gold price of US$1,200 per ounce.
The Mining Lease will be for a term of 20 years and under the Mining Act will be capable of being extended for a further period not exceeding 10 years. The Mining Lease contains specific conditions outlined in the 7 July 2014 ASX announcement.
Significantly, the Company has now achieved all necessary regulatory approvals to commence the development phase of the Woodlark Island Gold Project.
In September 2014, the Government of Papua New Guinea confirmed its decision to acquire a 5% participating interest in the Woodlark Island Gold Project. The 5% interest is achieved through the payment of 5% of the sunk costs and is further evidence of the strong support Kula is receiving from the Government and local communities.
In accordance with the conditions of all exploration licences issued under the current Mining Act, the State has the option to acquire a participating interest of up to 30% by the payment of sunk costs and contributing to construction capital costs on a basis pro rata to the percentage of the Project acquired. The State has exercised this option to acquire a 5% interest at this stage, which will be shared between the local landowners and the Milne Bay Provincial Government. The PNG Government has also indicated potential interest in a further acquisition of up to 25% on commercial terms through the State’s nominee, Petromin PNG Holdings Limited. Any acquisition by Petromin will be negotiated with Kula at the appropriate time.
In early 2014, the Company received the Environment Permit for the development of the Woodlark Island Gold Project. The assessment of the Environmental Impact Statement and the granting of the Environment Permit was a strong confirmation of the quality of the Project’s environmental credentials.
The Environment Permit was issued after the completion of an Environmental Impact Statement which was submitted to the Department of Environment and Conservation in January 2013. The assessment of Woodlark Island included an independent technical review, a public consultation process, presentations to the PNG Environmental Council and final recommendation by the Council to the Environment Minister to grant the Project Environment Permit.
The Company expects to achieve Project funding through a combination of debt and equity from existing and new shareholders and the State of PNG’s Equity contributions. A funding advisor has been appointed to assist the Company on identifying additional funding options for the development of the Woodlark Island Project. Foster Stockbroking Pty Ltd and Cormark Securities Inc. have been appointed as strategic advisors in Australia and North America respectively, to assist with negotiations around the future funding and development of the fully permitted project. The Company is looking to position itself to respond quickly to changes in gold prices and market conditions.