Anglo ups stake in Boyongan

Vancouver — Saddled with a US$14-million debt on its soon-to-be- closed Bulawan mine, Philex Gold (PGI-V) has inked a deal to sell a 10% equity stake in the promising Boyongan copper-gold project and surrounding ground in the Philippines.

Anglo American (AAUK-Q) acquired the interest in return for payment of US$20 million. Additional payments of up to US$5 million will be required should the metal content of this or any surrounding deposit contain more than 8 billion lbs. copper-equivalent.

Anglo American discovered the deposit in August 2001 when hole 6 returned 1.9 grams gold per tonne and 0.81% copper over 365 metres. The initial 10,000 metres of diamond drilling planned for this year have been increased to 13,000 metres. Next year, Philex expects to complete 15,000 metres of definition drilling, along with 3,000 metres of reconnaissance drilling on the surrounding properties.

The deal is expected to close early in the new year, at which point Philex and Anglo American will each own half of the project. The major can then increase its ownership to 80% by completing a bankable feasibility study.

Philex will use proceeds from the Anglo deal to repay the US$14 million it owes to Philippine banks and pay closure costs associated with the Bulawan mine.

“The situation at the Bulawan mine makes it important for us to raise funds to pay our liabilities and move ahead,” says Philex Chief Executive Officer Gerard Brimo. “The terms of the agreement are reasonable given the early stage of the project, while our current low share price precludes alternatives.”

Situated on the island of Negros, the Bulawan mine has been in the red during the past two years, reflecting low gold prices. At the end of the third quarter, Philex elected to take a US$40-million writedown, which will be charged in the fourth quarter.

Says Brimo: “We have struggled for some time with the mine, which has been marginal, especially in relation to a gold price that stubbornly refuses to increase. While the decision is disappointing, it will ensure no further deterioration of our financial condition and allow us to focus on the important joint venture with Anglo American.”

In the quarter ended Sept. 30, the junior incurred a loss of US$3.8 million (or 10 per share), compared with a loss of US$2.1 million (5 per share) in the corresponding period of the previous year. Cash flow from the Bulawan mine was negative US$1.4 million (4 per share), compared with a year-ago deficit of US$2.1 million (5 per share). The company poured 14,392 oz. gold at a cash operating cost of US$198 per oz., significantly more than the 6,257 oz. produced at US$245 per oz. in the third quarter of 2000. For the first nine months of the year, the company posted a loss of US$6.7 million (17 per share), compared with a loss of US$8 million (20 per share) in the year-earlier period.