Philippine peso drop helps Philex Gold

An operating loss at the Philippine operations of Philex Gold (PGI-T) was erased by the devaluation of that country’s currency.

For the third quarter, Philex reported earnings of US$55,000 (a negligible amount per share) on revenue of US$8.3 million. By comparison, earnings in the corresponding period last year amounted to US$1.2 million (3cents per share). Cash flow between the two periods dropped to US$1.2 million from US$4.1 million.

For the first nine months of 1997, the company earned US$4.5 million (11cents per share) on revenue of US$32.1 million, compared with US$6.9 million (19cents per share) on US$24.5 million a year earlier. Cash flow between the two 9-month periods increased to US$9.9 million from $8.8 million.

In recent months, the Philippine peso, in line with currencies of other major East Asian nations, has lost about 30% of its value against the U.S.

dollar. Philex has benefited from this turn of events, because the company’s production is exported in foreign currency, while about 60% of total cash operating costs are peso-based. In the end, the benefit that stemmed from the peso devaluation wiped away the detrimental effect the low gold price has had on Philex’s cash flow.

Overall cash production costs in the recent third quarter were US$216 per oz. gold, compared with US$196 per oz. in the third quarter of 1996 and US$149 per oz. in the second quarter of the current year. The average realized gold price for the 3-month period ended Sept. 30, 1997, was US$343 per oz., compared with US$385 per oz. in the year-ago quarter and US$351 per oz. in the second quarter of 1997.

Philex produced 24,648 oz. gold in the recent third quarter, down from 32,619 oz. gold in the previous 3-month period. This was mostly a result of the closure of the Bulawan pit, 570 km south of Manila; the lost ounces were only partially compensated by a 38% increase in production at the adjacent underground operation. The average head grade of 3.9 grams gold was 25% lower than in the previous quarter.

Development of Bulawan’s South Block is on schedule for mining in the first quarter of 1998, which will provide an additional source of ore.

Also, a second underground dump point was commissioned in September, resulting in increased ore delivery to surface.

In the recent third quarter, Philex’s carbon-in-leach plant treated 233,533 tonnes of ore at an average grade of 3.52 grams gold, compared with 251,451 tonnes of 4.04 grams in the previous quarter.

Crushing problems

At the nearby Korokan pit, the company experienced problems related to heavy rainfall and the high clay content of near-surface ore.

Consequently, crushing and agglomeration were slowed down, hampering production rates. However, these problems are not expected in the next rainy season, as the clay does not continue at depth.

The bulk of the tonnage heap-leached during the quarter came from the low-grade stockpile mined from the Bulawan pit. Leaching operations during the rainy season proceeded satisfactorily once a plastic liner was placed over the portion of the leach pad not being stacked. This proved adequate to protect against dilution of the gold-bearing solution from rainfall.

Gold production at the Sibutad project, 700 km south of Manila, amounted to 3,723 oz. in the third quarter, and 5,715 oz. since startup in April.

Because the operation is still in the pre-commissioning stage, these figures have not been included in the company’s production figures or plan.

Gold recovery at Sibutad was 45% lower than forecast, again because of the high clay content of the near-surface ore. As at Korokan, the clay does not continue at depth, though the buildup of tonnage will be slower than expected. To increase tonnage, an extension pad will be put into place by year-end. Also, further environmental studies have been requested by the government.

Philex continued drilling at the Bulawan, Sibutad, Sanfran and North projects during the third quarter. A total of 25,074 metres of reverse-circulation and 5,346 metres of diamond drilling were completed. In addition, an airborne magnetic and radiometric survey was flown over the Sibutad and Sanfran claims.

The main focus at Sibutad continued to be the Lalab deposit, which has now attained a strike length of 1,100 metres and a width of up to 700 metres.

At Bulawan, operators are looking for extensions of the known deposits, while, at Sanfran, seven new gold targets have been identified.