The road to production has not been easy for TVI Pacific (TVI-T, TVIPF-O), which began production at its most advanced asset, the Canatuan mine in the Philippines, in mid-2004. Opposition from environmental and social activists and gun-toting Islamic and communist militants made for tough going in the initial years, but Canatuan is now generating profits for the company, including record earnings of $1.6 million in the latest quarter ended June 30.
Canatuan is producing gold and silver dor from a gossan-oxide zone currently being mined at a throughput rate of 1,700 tonnes per day. Production in the second quarter totalled 12,613 oz. gold and 154,838 oz. silver, up dramatically from 2,938 oz. gold and 82,984 oz. silver during the same period in 2005.
The open-pit mine’s improved performance allowed the company to post record earnings of $1.6 million for its latest quarter, compared to a loss of $1.54 million a year earlier. Total revenue climbed to $13.49 million from $3.12 million over the same periods.
For the first half of 2006, Canatuan produced 21,760 oz. gold and 295,565 oz. silver, compared with 7,593 oz. gold and 125,193 oz. silver during the same period in 2005. Net income for the 6-month period reached $2.17 million, compared to a loss of $2.2 million for the comparable period in 2005.
The company reduced cash costs to US$295 per gold-equivalent oz. (calculated using a 57:1 silver to gold ratio) in the latest quarter from US$326.18 per oz. a year earlier. Total costs were US$436.43 per equivalent oz., compared with US$420.75 a year earlier.
President Cliff James attributed the improved performance to strong commodity prices and operational enhancements to the processing plant, initiated in 2005, that boosted average daily throughput to 1,426 tonnes per day in the second quarter from about 360 tonnes per day in the corresponding period of 2005. James also stated that he expects financial and operating results to improve throughout the remainder of the year now that daily throughput has increased to 1,700 tonnes and is on target to reach 1,800 tonnes shortly.
The company expects to have an updated resource estimate for the gossan-oxide zone at Canatuan by the third quarter of this year. Meanwhile, an exploration program aimed at defining mineralization near the current open pit is under way, with the goal being to increase reserves and resources and extend the long-term life of the mine plan.
The gossan-oxide zone overlies a gold-copper-zinc volcanogenic massive sulphide (VMS) deposit that was the subject of a recent feasibility study for a potential standalone sulphide operation. The study was based on mineral reserves of 3.1 million tonnes averaging 1.55% copper, 1.16% zinc, 0.84 gram gold and 43.82 grams silver per tonne.
The study concluded that the project would be economically and technically feasible, under a “base case” operating scenario for a mine capable of producing 84.4 million lbs. copper, 21,400 tonnes zinc, 51,600 oz. gold and 3 million oz. silver over the 6.5-year mine life. Capital costs were estimated at $23.3 million. Initial studies suggest that production of copper and zinc concentrates from the sulphide deposit could begin as early as the second quarter of 2007.
TVI has also begun an optimization study for the combined sulphide and gossan operations. The company is examining the feasibility study to determine the best course of action to advance the sulphide project and expand operations and production at Canatuan.
On the social front, TVI appears to have made substantial inroads securing the support of local residents, including indigenous populations near its mine site on the island of Mindanao. A local indigenous group recently threatened to sue non-governmental organizations and church-based anti-mining organizations for allegedly violating their “human rights” by endless lobbying against mining in the region.
The Canatuan project has generated 650 direct jobs in the region, including more than 325 for indigenous peoples. The company also contributes to the local economy and well-being of the community through various co-operative social development programs.
On the environmental front, the company has cleaned up areas contaminated by mercury/cyanide-laced tails from small-scale mining, and has launched reforestation programs to help restore the natural environment.
TVI has other exploration and development projects in the Philippines, and holds a 2.5% net smelter return royalty on the Rapu Rapu gold project operated by an Australian company.
It is active in China through a wholly owned subsidiary that is focused on gold exploration in the Golden Triangle, a prospective gold district encompassing parts of the provinces of Guizhou, Yunnan and Guangxi Autonomous Region, and on copper-gold exploration in Yunnan province and in the Tibet Autonomous Region.
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