Philippine Metals blazes trail on Luzon

You could say Philippine Metals (PHI-V) has Bre-X Minerals to thank for its good fortune.

The chill in mining exploration that swept Southeast Asia in the aftermath of the Bre-X scandal shuttered the offices of many majors active in the region, who subsequently let some of their property claims lapse.

One contractor with 14 drill rigs in Indonesia, the Philippines and Australia, who had watched his lucrative drilling business evaporate overnight, decided there could be a way to profit from the situation.

He started pouring over property submissions in the Baguio offices of the Philippines’ Mines Bureau and identified 19 projects that looked promising. He then tracked the contracts and when the majors and other companies involved started defaulting on their property payments, the contractor negotiated to acquire them for a reasonable price.

Since then, three public mining companies have been created out of some of those assets including Metals Exploration (MTL-L), Mindoro Resources (MOI-V), and Philippine Metals. The latter recently completed a reverse takeover of New Meridian Mining Corp. and listed on April 17.

Marshall Farris, president and a director of Philippine Metals, believes any of the three projects in the junior’s portfolio could become a company maker. Most intriguing to geologists, Farris says, is the Malitao project on the northern tip of Luzon Island, a large, near-surface, stratabound massive sulphide target.

Malitao is a 10-sq.-km land package where massive sulfide boulder fields are exposed on surface. The area has a zone of phyllic alteration running 2-40 metres in width, 277 metres in length and 100 metres in elevation. (Phyllic alteration is a common style of alteration in porphyry base-metal systems around a central zone of potassic alteration.)

“The boulders are in a zone of phyllic alteration, which indicates to us that we may be close to a porphyry system,” Farris says, adding the company’s chief geologist believes the Malitao zone of outcrop is a stratabound manto massive sulphide deposit.

“Within the 277 metres there’s a large kill zone where the ground is so mineralized that vegetation won’t grow on it and within that kill zone there are massive sulfide boulders that appear to have visible chalcopyrite. . . This is the most exciting project I’ve seen in my twenty-year career in the mining business.”

The property has been unexplored for the last 40 years. The last work done in the area was in 1969 when Philex Mining drilled and reported intersections of massive sulphide between six and 20 metres.

Philex’s work also identified an 800-metre by 400-metre copper soil anomaly, which remains untested. Sampling by Philex returned a continuous section of 93 metres grading 3.5% copper and 0.57 gram gold per tonne. Grab samples of outcropping sulphide beds contained up to 32.74% copper, 8.84% zinc and 2 grams gold.

“When we sent our consulting geologist in to examine the project, they mapped this 277 metres of outcrop,” Farris says. “Grab samples came back with average grades of 34% copper, 3% zinc, 544 grams per tonne silver and 1.2 grams gold.”

Farris believes the company will receive an exploration permit for Malitao within the next few weeks, which “will dramatically affect the valuation of our company.”

Adding to the attractiveness of Malitao, Farris says, is that under Philippine President Gloria Arroyo, a massive road-building exercise in northern Luzon was undertaken in 2007 with the purpose of enabling farmers to get their crops to the market. These roads have made the project very accessible and today Malitao is about a half-day drive north of Laoag City. (Philex Mining reportedly gave up the project partly due to its remote location.)

In addition, the island of Luzon is the largest and most economically important island in the Philippines. (Luzon is one of three island groups in the country, along with Visayas and Mindanao.)

In the near-term, Philippine Metals is pushing forward its Taurus project on Leyte Island, north and west of the city of Tacloban in the Philippines’ Leyte province. Taurus is situated in a range of low-lying mountains of up to 530 metres, which form a ridge west and north of the city. The property incorporates a 17.6-km mountain range that is home to six high-grade past-producing copper mines.

Philippine Metals is earning a 100% interest in the project and is focusing its exploration dollars on two of the six mines in the first phase of its $1.8-million exploration program. Drilling is scheduled to start in about six weeks and currently the company is conducting ground-based magnetic, IP and electromagnetic surveying as well as geological mapping, sampling and trenching.

The Taurus property covers about 100 sq. km and features an ophiolite-hosted massive sulphide belt and a consolidated historic mining belt.

Between 1969 and 1970, Minero Chemical Corp. and Taurus Minerals & Oils Corp. explored the area by trenching, pitting and aditing.

In 1970, Taurus Minerals & Oils applied for a listing on the Philippine Stock Exchange with a historic resource of 4.5 million tonnes grading 2.26% copper. In 1974 Leyte Base Metal Corp. applied for a listing with a historic resource of 2 million tonnes grading 2-3% copper.

Both of the listing attempts failed, however, due to low copper prices. In the early 1970s copper was running at US28¢ per lb. and the threshold for an economic copper project at the time was a deposit running 3% copper.

Today Philippine Metals is banking on a 25-million-tonne copper deposit grading 2-3% copper based on current known mineralized zones, but Farris believes modern-day mining techniques could double that to 50 million tonnes.

“In 1964, they strip-mined right off the top of Palo,” he says of one of the targets. “They got 50,000 tonnes of greater than 5% right off the top of this hillside. And 200 metres below we have got assessment tunnels all over the bloody place and massive sulphide mineralization outcropping on surface. It’s a pretty interesting target.”

Back on the island of Luzon, Philippine Metals’ third project is its Dilong property, a porphyry discovery made by Benguet Mining (BENGB-O) in 1970. Eighteen months ago, Philippine Metals bought the entire drill data set from Benguet, which cost an estimated $2 million to generate, for just $30,000, and is now in the process of digitizing the results.

In 1980, Hale and Associates used the same data to string together a historic resource for Dilong of 40 million tonnes grading 0.5% copper and 0.5 gram gold. That estimate was based on 27 drill holes and a 0.25% cutoff grade for copper.

Farris says it’s unlikely the company will get exploration permits for Dilong for another 12-18 months.

Meanwhile, the company is focusing on community relations and charity work, including bringing together unemployed men in the area with a South Korean shipping company that needed to hire welders. Other activities involve medical and dental missions, eye surgeries and donating recycled prescription eyeglasses.

Vancouver-based Farris, whose wife is an operating room nurse from the Philippines, is a big booster of the country. Not only does it permit 100% foreign ownership of mining assets and exploration permits, but it also has a well-defined permitting process and is situated close to the resource-hungry nations of China, India, South Korea and Japan.

It also happens to be relatively unexplored. “You go to Mexico and everything has been picked at thirty times and the property has been owned by nineteen different owners in the last 100 years,” he says. “You go to the Philippines and you get opportunities like the ones we’re looking at. . . Yeah, you may have to take on a little political risk but you’re clearly elephant hunting and it gives a junior opportunities to find multi-billion dollar assets. It’s hard to do that in Peru,
or Argentina, or Mexico.”

Farris also argues that the Philippines, with proper foreign investment, has the potential to become the “Saudi Arabia of Southeast Asia.”

“It’s one of the most mineral-rich countries in the world,” he explains. “Saudi Arabia was a desert sixty years ago. Now it’s one of the wealthiest republics in the world.”

For Farris it boils down to thinking outside the box. Already the company has “a number of signed confidentiality agreements with some eyebrow-raising companies” and has metals traders and major mining companies “waiting for us to get our Malitao permit” to advance that project.

“You can sit around and wait until I get my exploration permit at Malitao and Dilong or you can act now and accumulate an interest in our company now or a potential other route would be to invest $20 million and take a board seat and be a partner in steering this company forward,” he says. “Or you can sit on the sidelines and wait until we have a major discovery and then you can wait in line with everyone else.”

The company has $5.3 million cash in hand and is looking at acquiring six or seven other copper-gold projects in the country. Farris, who is a principal at Ascenta Capital Partners in Vancouver, is also seeking a new president for Philippine Metals to take the company to the next level.

At presstime, the Vancouverbased junior’s shares were 37¢, trading within a 52-week window of 31¢- 55¢ since listing in April. It has 43.8 million shares outstanding.