LITERATURE REVIEW — Philex picks up more Philippine ground

Philex Gold (PGI-T) has acquired, through a royalty agreement, a gold property in the historic Bicol gold district of Luzon Island, Philippines.

The Balce property consists of 42 claims acquired from locally owned Prenza Mining & Industrial. The claims are in six separate blocks with a total area of 3,402 ha. At least six historic gold prospects are known to lie within the claims: Pangono North, Pangono South, Tumbaga, Paracale d’Oro Mine, Tabas and Bulawan Creek.

All the prospects exhibit the same general mineralization, characterized by gold-bearing quartz or quartz-calcite veins, and veinlets with minor lead, copper and zinc sulphides. Surface showings are intermittently mined by local artisanal miners.

Tumbaga, Pangono South and Paracale d’Oro were small-scale underground gold mines operated before the Second World War.

n Pangono North contains several quartz vein outcrops exposed along a 3-km-long, northwest-trending belt of altered volcanic wackes, siltstone and trachyte tuff.

n Pangono South covers a strong silica-pyrite-clay alteration zone.

n Tumbaga contains pre-war tunnels which were driven on multiple veins reported to be traceable for hundreds of metres. The tunnels have collapsed, but mineralized material from the mine dumps has been found to contain quartz, pyrite, galena and chalcopyrite.

n Paracale d’Oro, another pre-war, small-scale gold mine, is now totally inaccessible underground. The mine reportedly followed a quartz vein with associated minor galena, sphalerite, chalcopyrite and visible native gold.

Local artisanal miners sporadically work the surface.

n Tabas exhibits widespread anomalous gold values in soils and weathered rock.

n Finally, the Bulawan Creek prospect is a 200-metre-long zone of argillized and pyritized rocks associated with the contact between diorite and sedimentary rocks. Gold has been panned in this area from the local creek gravels.

Historic district

The gold prospects are all within the Bicol gold district, where underground gold mining has been recorded as early as the 16th century. In the late 1930s, there were at least 12 producing gold mines and one iron mine in the Bicol district. At present, only three are active, all of which are underground mines following gold-quartz veins. One of them, Benguet-Parcale, has followed one of several veins for as much as 2.4 km. This vein is 1.2 metres wide and 500 metres deep with an average grade of 7 grams gold per tonne.

Philex plans to mobilize an exploration crew shortly to assess the company’s claims and determine priorities for further detailed exploration.

In the black

On the financial front, Philex reported a net income for the second quarter ended June 30, 1997, of US$1.9 million (or 5 cents per share) based on revenue of US$11.2 million. In the comparable period of 1996, the company earned US$4.6 million (12 cents per share) on US$11 million.

The average realized price of gold for the quarter was US$351 per oz., compared with US$390 in 1996.

For the six months ended June 30, 1997, net income was US$4.5 million (11 cents per share) on revenue of US$23.8 million, compared with US$5.7 million (15 cents per share) on revenue of US$16.9 million in the year-ago period.

Operating cash flow for the 6-month period was US$8.6 million (22 cents per share), compared with US$4.8 million (13 cents per share) a year earlier.

Gold production for the second quarter was 32,619 oz. at an average cash operating cost of US$149 per oz., compared with 25,921 oz. produced in the comparable period in 1996 at an average cash operating cost of US$158 per oz.

Gold production for the quarter fell short of expectations, owing to the slower-than-expected buildup of underground tonnage from the Bulawan mine on Negros Island. Production levels were also impeded by commissioning issues at the Sibutad mine on Mindanao Island, where open-pit, heap-leach production began in April.

Gold production for the first six months of 1997 totalled 68,820 oz., compared with 40,465 oz. in 1996.

The Bulawan open pit was closed in May, and the source of production for the carbon-in-leach (CIL) plant is now primarily from underground. A small quantity of milling ore was obtained from the nearby Korokan open pit during the second quarter.

Dump points

Philex reports that production in the second quarter was hampered by the lack of sufficient underground mobile equipment, which has now largely been remedied. Additional dump points are also being installed. A second dump point is under construction and will soon be operational, with a third to follow later in the year. The expansion of the CIL plant, to 4,000 from 3,100 tonnes per day, was 90% complete by the end of the second quarter and is expected to be brought on-stream by the end of the third quarter.

In the absence of high-grade tonnage from the bottom benches of the open pit, the average grade of ore milled declined to 4.05 grams gold per tonne during the second quarter from 4.7 grams in the first. As a result, metal recoveries decreased to 90.6% from 93.8%.

Heap-leach operations at the Bulawan mine resulted in gold production of 2,997 oz. for the quarter. The output was lower than planned, owing to a month-long series of repairs to the agglomerator.

Although results from the Bulawan mine for this quarter fell short of Philex’s expectations, the company reports that production from the underground operation is building up strongly. Given the additional plant capacity, to be commissioned shortly, an improvement in production in the second half of the year is expected, and a full year’s production of 155,000 oz. is forecast.

Sibutad producing

Sibutad commenced gold production on schedule early in the past quarter.

Mining, crushing, agglomerating and stacking have been contracted out, and commercial production will likely be reached before the end of the third quarter. Mining is being carried out at the Larayan pit and will move to the higher-grade West Lalab deposit later this year, once erosion control structures are in place. Expansion of the leach pad is under way and a further expansion to a total capacity of 10 million tonnes is planned for the second quarter of 1998.

Based on the need to provide additional time to complete the amendment of the mining permit at higher production levels and to acquire land to expand the current leach pad, mining rates at Sibutad have been reduced until the middle of 1998. The revised gold production targets for 1997 and 1998 are forecast at 17,500 and 65,000 oz., respectively.

Philex accelerated its exploration and property acquisition activities during the quarter, completing 28,846 metres of diamond and reverse-circulation drilling on the Sibutad, Sanfran, Bulawan and North properties. Twenty drill rigs are now active — nine are at Sibutad, seven at Sanfran, three at Bulawan and one at North. Updated gold reserve and resource figures will be announced once drill results have been received.

Drilling of the North-South vein zone of the Lalab deposit at Sibutad is scheduled to begin shortly. The relocation of the remaining small-scale miners and completion of the necessary land acquisition are under way.

The Exciban property in the Bicol gold district, acquired during the quarter, is undergoing final due diligence. Active exploration is expected to begin there shortly.