After EO79, Philex delays Silangan mine operations to 2017

MANILA, Philippines – After President Aquino issued the government’s policy on mining, another firm has decided to delay the start of operations of a project in the pipeline.

Philex Mining Corp, the country’s biggest gold producer, quietly announced through a stock market disclosure of its parent firm, Hong Kong-based First Pacific Co. Ltd., that the start of production at its gold-copper Silangan project in Surigao del Norte has been moved to 2017.

The Silangan project — which Philex expects to eventually replace its flagship Padcal mine in Benguet province — was initially set to start production in 2015, then moved to 2016.

“An integrated development plan and pre-feasibility study are expected to be completed by the end of 2012.” First Pacific said. “Development of the Silangan project continues with the build-out of infrastructure aiming for production to begin in 2017.”

Philex’s decision comes after Swiss global Miner Xstrata and local partner Sagittarius Mines Inc will push its target for commercial operations at its Tampakan mine in South Cotabato to 2018 from 2016.

The investors were supposed to pour a massive US$5.9 billion in investments in the Tampakan, which is considered to have one of the world’s largest underdeveloped copper-gold deposits.

Both gold-copper mining projects were set back after Aquino’s Executive Order No. 79, which stops the grant of new mining contracts pending an amendment to the Mining Act’s provision on the revenue scheme between the government and mining companies.

Philex chair Manuel V. Pangilinan has commented previously that EO79 put the industry at a “standstill.” This is particularly true for the Silangan project where Bayugo, one of the two properties in Surigao, only has an exploration permit and is yet to be granted a Mineral Production Sharing Agreement), which allows them to extract.

Silangan to replace Padcal

First Pacific, which owns about 46% of Philex, said in its disclosure that its Silangan investments will amount to $1.2 billion mainly from 2014 to 2016.

“Philex continues development of the Silangan Project while exploration continues in several other areas as its Padcal operation works to return to mining operations and its business development team continues to search for investments in existing mining operations,” First Pacific said.

Philex is banking on its Silangan project to sustain operations and profitability since its only operating mine — Padcal mine in Benguet — is nearing the end of its mine life. The gold-copper reserves are expect to be exhausted by 2020.

Philex has been operating the Padcal Mine since 1958 and was the first operator of an underground block cave mine in the Far East. It has a work force of about 2,747 in Padcal and total reserves stood at 80.8 million tonnes as of June 30, according to the disclosure of First Pacific.

Already, production at Padcal has been declining. Gold production fell 19% to 58,681 ounces in January to June, while copper production declined 2% to 18.3 million pounds.

Offsetting this was the 16% increase in average realized price for gold to US$1,618 per ounce during the period. This was not enough, however. Philex reported earlier that first-half “core” net income fell 26% to P2.11 billion,

With these, Philex’s contribution to total First Pacific’s bottom-line decreased 23.3% to US$16.1 million in the first half.

Since operations at Padcal were suspended following a series of leaks at its only operating tailings pond, the start of Silangan project operations becomes more urgent since no other new mine acquisitions have been completed. – Rappler.com

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