Miner ends gold and silver project, shifts to zinc and copper

ZAMBOANGA CITY, Philippines - Canadian-backed mining firm TVI Resource Development Philippines, Inc. has ended its $25-million Canatuan gold and silver project, having depleted the gold in the area after four years of extraction. The company is now focusing on extracting zinc and copper from the same pit, as it expects $3 million in monthly cash flow in the next four years, the company said in a statement last week. "At exactly 6:40 a.m. on April 9, the two ball mills of the Canatuan gold-silver project... which had been grinding ore continuously for nearly four years, stopped turning," TVI said. In 1996, TVI obtained a 25-year mineral production sharing agreement with the Philippine government. The deal gives the miner exclusive rights to explore gold, silver, copper, zinc and other minerals within a 508-hectare area. Based on TVI’s 2007 financial report, it had to write down $1.3 million for the assets it had used at its gold and silver mine on Mt. Canatuan in Siocon town, Zamboanga del Norte. Revenues also went down by about $5.3 million in 2007 after production was affected by declining ore grades, increased rain and major equipment breakdown. Gold and silver ore supplied to the mill went up to 740,099 dry metric tons (dmt) in 2007 from 591,180 dmt a year earlier. But 2007 also saw the downtrend in gold production, with only 33,078 ounces produced, from 45,210 ounces in 2006. The production of silver, however, remained stable at 653,278 ounces from 608,507 ounces in 2006. "During 2007, TVI Resource suffered from decreasing ore grades, recovery rates and production volumes. The company expects that the gossan mineral reserves will be depleted by April 2008," TVI said. TVI started its silver and gold mine in Siocon in 2005, and it was a year later when gold and silver production hit a record level, generating a cash flow of more than $17 million, up by more than a third. The mine achieved record production of 56,880 ounces, based on an average 1,620 dry metric tons of ore milled per day, for a total of 591,180 metric tons during the year. Revenues reached more than $39 million, and the Canatuan project’s contribution to net income amounted to almost $11 million, or about a quarter. TVI said its $3-million cash flow projection for its $23-million zinc and copper is a conservative forecast based on an initial rate of about 20,000 tons of extracted copper and 6,000 tons of zinc per year. "The construction of the sulphide plant will immediately begin after the remaining gold and silver ore is processed and decommissioning activities for the gossan phase have been completed," the company said. Yulo E. Perez, TVI vice-president for Philippine operations, said the sulphide project should be in full operation by yearend or within the first quarter of 2009. TVI earlier entered into an agreement with Hong Kong firms LIM Asia Arbitrage Fund, Inc. and LIM Asia Special Situations Master Fund Ltd. for a $15-million bridge financing facility for the $23-million sulphide project. The Canatuan sulphide project is more than 80% complete, officials said earlier. The mining company targets roughly 64 million ounces of copper, 21,000 tons of zinc and 31 ounces of gold and silver in the next six years. TVI is targeting several markets for its copper and zinc production, including China, South Korea and Japan. TVI bought the Canatuan property from Benguet Corp. in 1995. Rocky G. Dimaculangan, TVI’s director for public affairs, said they are scouting for gold and silver within a 508-hectare property. Aside from Canatuan, TVI also has a mining deal with Zamboanga Minerals Corp. to operate a gold and silver production in the municipality of Balabag in Zamboanga del Sur. TVI said that the Balabag property can become a second production center for the company. - Darwin T. Wee, BusinessWorld