Philex allots $500 million for copper-gold mine site

MANILA, Philippines - Philex Mining Corp, the country’s largest miner, will spend up to $500 million to develop its Boyongan copper-gold mine site in Surigao, the company’s top official said. At the sidelines of the company’s special shareholders meeting yesterday, Philex chairman Walter Brown said the development of the mine could take between two to three years.

Philex acquired full control of the Boyongan copper-gold property after buying out its foreign partner Anglo American Exploration for $55 million last year.

Brown said funding for the project will come from internally-generated cash. “The company is sitting on a lot of cash. We don’t see the immediate need to tap the equities or debt market,” he said.

As of end 2008, Philex had a cash reserve of P10.7 billion, which could be sufficient to fund the firm’s capital expenditures for a year and a half.

A pre-feasibility study conducted by Philex showed that the Boyongan copper-gold mine would have a positive net present value of $150 million and a payback of 3 ¹/2 years, using long-term metal prices of $2.75 per pound for copper and $700/ounce for gold.

Based on the pre-feasibility study, the mine life could extend up to 14 years at a constant millfeed rate of five million metric tons of ore a year.

Philex is eyeing a net profit of as much as P4 billion this year on the assumption that copper prices would reach $2.5 per pound and gold at $1,000 per ounce.

But should current prices stay, Philex’s net earnings are forecast to reach P2.8 billion, the same as last year’s level.

Philex posted a net profit of P2.8 billion last year, down 78.6 percent from the previous year’s record high of P5 billion. The decline was attributed to higher taxes and royalties and general administrative expenses, as well as mark-to-market losses amounting to P470.1 million.

Philex has alloted P2 billion for its capital expenditures this year, P885 million of which will go to exploration projects.

The company is looking at other possible mining investments in Asia Pacific like Indonesia and Australia.

Brown added that the company is still exploring local prospects although there are “very few opportunities” at the moment.