Lower production costs offset lower realized gold prices for
Toronto-based Philex lost US$1.5 million (or US4 cents per share) in the three months ended Sept. 30. In the corresponding period of 1998, the company suffered a US$3.3-million loss (US8 cents per share). Revenues of US$4.6 million were down only fractionally from last year.
For the 9-month period ended Sept. 30, Philex showed a loss of US$2.2 million (US6 cents per share) on revenues of US$18 million. In the first nine months of 1998, Philex had lost US$7.7 million on revenues of US$15.5 million.
During the first nine months of 1999, production from Philex’s Bulawan and Sibutad gold mines reached 63,717 oz., substantially higher than the 50,018 oz. produced by the quarter-pole in 1998. Cash costs over the first nine months of 1999 were US$186 per oz. — a big improvement over US$299 in the first nine months of 1998.
Gold production in the first three quarters at Bulawan, the company’s wheelhorse, is about 7,000 oz. higher than the year before, thanks to higher grades and larger volumes put through the mill. Bulawan’s carbon-in-leach plant was fed 977,872 tonnes of ore in the first nine months, up from 853,500 at the end of September 1998, and the millhead grade was 2.2 grams, up from 1.7 grams in the prior year.
Still, the operation struggled in the third quarter, as heavy rains — the worst in three years — hampered production in the open pit and caused increased groundwater flows in the underground mine. The groundwater problems permitted waste rock to mix with ore in some of the underground draw points, pulling the average millhead grade down to 1.9 grams per tonne from a 2.3-gram average in the second quarter.
Lower mill throughput, lower grades, and resulting lower production all pushed third-quarter cash costs at Bulawan up to US$232 per oz., an increase over the US$171 per oz. reported for the second quarter. Still, cash costs have fallen substantially, compared with last year’s third quarter, when it cost US$280 to produce an ounce of gold.
Philex is expecting the end of the monsoon season to ease Bulawan’s water problems and permit better production and grade control. Ore from the deposit’s higher-grade Central Block, currently under development, is scheduled to begin moving this month, and should provide feed with an average grade of 3 grams per tonne once it is in full production.
Underground exploration at Bulawan has indicated another 100,000 tonnes grading 3 grams gold per tonne in an extension of the Central Block, and Philex is currently developing a mining plan for the new mineralization. Philex will be drilling extensions of the Central Block at depth, and will then turn its attention to the deposit’s North Block.
The Sibutad heap-leach operation has been suspended, and Philex is now looking for joint-venture partners to take the property on as an exploration play. Leaching of stacked ore was completed in the third quarter, with production of 152 oz. bringing the operation’s 1999 total to 2,527 oz.
The company also concluded an agreement with local small-scale miners. In exchange for Philex’s agreement not to evict, the miners have recognized the company’s right to mine, have agreed not to encroach on Philex’s workings, and will turn over 42% of their production to Philex.
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