Earlier this week OceanaGold (OCG-T, OGC-A) declared that the first concentrate from its Didipio open-pit mine in the Philippines was en route to Japan.
Another 5,000 tonnes of the concentrate is expected to be shipped out before the end of April and the company believes the gold-copper project will start commercial production in the second quarter of this year—“a major catalyst as our transformation continues”—remarks Sam Pazuki, the company’s investor relations manager in Toronto.
OceanaGold is commissioning the open-pit mine in northern Luzon, about 270 km north of Manila, and forecasts average production of 100,000 ounces of gold and 14,000 tonnes of copper in concentrate annually over a mine life of 16 years.
Cash costs net of byproduct copper credits using US$3.00 per lb. copper will work out to US$372 per. oz. gold over the life of the mine, but will be negative US$(79) per oz. gold in the first six years of operation. OceanaGold acquired the deposit through its merger in 2006 with Climax Mining.
All of the concentrate produced at Didipio will be sold to commodities trader Trafigura for at least the first five years, and it will be responsible for transporting the concentrate from the mine to smelters.
OceanaGold also expects to resume drilling at Didipio in 2013 after the government of the Philippines recently lifted a moratorium it had imposed on granting new exploration drilling and mining permits a year and a half ago. The moratorium was called so that the government could undertake a thorough review of the industry and its mining legislation, Pazuki explains.
“The government sees a lot of value in developing the mining sector so they took the opportunity to review the policy on mining to bring about increased transparency and address the concerns of its stakeholders that are opposed to mining,” Pazuki says. “They wanted to make sure the mining industry adopted best practices and that there were sound environmental methods being employed.”
One sign that the Philippines is pro-mining, he adds, is that about one month ago the national government approved the Glencore/Xstrata Copper’s environmental compliance certificate for its massive Tampakan copper-gold project in south Mindanao, about 65 km north of General Santos City. “It was a major milestone and it spoke volumes about their support of mining,” Pazuki says. “The provincial government had previously said that no open-pit mining would be allowed in that area. By issuing the ECC, it would appear the National government had done their due diligence, demonstrated their intention to develop the mining sector and reinforce an objective of the new mining policy which was to align local issuances to the Constitution and National law.”
In the meantime, the Philippines, with the help of the International Monetary Fund, is currently reviewing its royalty rates, which stand at about 2%. Pazuki says a decision will be made in the coming months and based on government announcements, the effective royalty rate could increase to about 5% for all new mining projects. Existing projects will be grandfathered, he notes.
During the moratorium on granting exploration drill permits, OceanaGold got busy with geochemical soil sampling and received good results, Pazuki adds. “This country is highly mineralized with a number of prospective areas,” he says, “we have already selected drill targets and organized drill pads.”
Meanwhile at its Blackwater underground target on the South Island of New Zealand, a narrow-vein, high-grade quartz deposit, 20 km south of its producing Reefton mine, the company has increased inferred resources by 350,000 ounces of gold to 600,000 ounces gold. Subject to technical studies, it could be possible that ounces from Blackwater replace ounces from Reefton, which has a current mine life that expires in early 2017.
The Blackwater project is situated on the historic Blackwater goldfield, which was mined from 1907 until the shaft closed in 1951. The historic mine produced about 740,000 oz. gold at an average grade of 14.6 grams gold per tonne.
In November 2011 OceanaGold started a deep-drilling program there to test the continuity of mineralisation below the level of the historic workings and successfully intersected the Birthday Reef about 430 metres vertically below the lowest mined level of the historic mine in April 2012. The drilling confirmed that the Birthday Reef continues for at least 680 vertical metres below the last worked level of the Blackwater historic mine.
After four rounds of deep drilling, the company was able to increase the deposit’s inferred resource to 900,000 tonnes grading 21 grams gold per tonne for 600,000 oz. gold.
Highlights from some of the latest drilling include intersections of 0.45 metres grading 31.80 grams gold; 0.41 metres of 62.40 grams gold; and 0.71 metres of 134 grams gold.
OceanaGold expects to complete a prefeasibility study for an underground mine at Blackwater in the fourth quarter of this year.
At presstime in Toronto the company was trading at $2.42 per share within a 52-week range of $1.70-3.70.
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