banks like it

From PNG Industry News:

DESPITE a tough lending climate, Papua New Guinean explorer Kula Gold says it has received “very positive responses” from a group of financial institutions to its Woodlark project bankable feasibility study.


“Indicative terms sheets have been received from a number of institutions with strong credentials in both financing gold projects and lending into PNG,” Kula said.

“Preparation of a consensus term sheet and shortlisting is to be undertaken.

“The support has been equally spread among Australian and international banks giving the company confidence that between 50% and 70% of project development costs can be financed by debt, with the final level dependent on detailed due diligence, the gold price and the extent to which gold hedging is undertaken.”

The mining lease was first lodged in October and passed the first step in January with a successful Mining Warden hearing, with Kula subsequently lodging its environmental impact statement.

The explorer said PNG’s Environment Department had “committed to a fast-tracked process” and already appointed independent consultants to review the EIS.

In another sweetener of its project update, Kula said studies were underway to potentially start mining sooner than envisioned in the feasibility study, which was targeting first production in the first half of 2015.

While the PNG government has already decided to exercise its option to buy up 30% of the project, there may be some delays as the mineral division of the state-owned enterprise taking care of it, Petromin, will be transferred to a new SOE, with the enabling legislation to be tabled in Parliament in September.

On the government financing front, Kula said PNG’s country risk premiums were at “historically low levels”.

The FS completed in September found the proposed open pit operation could produce 813,000 gold ounces over a nine-year mine life.

With estimated cash costs of $US730 per ounce over the first six years, the project was estimated to earn enough to pay back its life-of-mine capital cost of $212 million within 2.6 years, based on a $1600/oz gold price.