Red Mountain Mining

Filipino gold


ASX-listed explorer and project acquisition company Red Mountain Mining has struck gold in the Philippines with the high-grade, low capital cost Batangas Project.
 
Incorporated in May 2006 to seek out gold mining opportunities in Asia, Red Mountain Mining (ASX: RMX) really hit its stride in October 2012 with the acquisition of the Batangas Project from Mindoro Resources (ASX: MDO). Located on the south coast of Luzon Island in the Philippines, the Batangas gold-copper deposit contains an existing JORC resource exceeding 500,000 ounces, most of which is at-surface and relatively easy to mine. Recent trenching work has revealed shallow, high-grade intersects exceeding 1 ounce of gold per tonne of ore.
 
The Batangas acquisition secured not only the project, but also the experienced team of geologists working on it. Among them was Jon Dugdale, who on 1 April 2013 became Red Mountain’s Managing Director. Dugdale’s 27 years of mining and investment experience includes his direct involvement in the 1 million ounce Golden Gift discovery at Stawell in Victoria, Australia, for which he jointly received the Joe Harmes Medal for excellence in mineral exploration and contributions to the discovery of ore deposits.
 
In becoming a full-time member of Red Mountain in 2013, Dugdale joined a Board comprising Chair Neil Warburton, former Chief Executive of large underground mining contractor Barminco Limited, and Director Michael Wolley, a processing engineer who has held top positions in BlueScope Steel and Lynas Corporation among others. They’re a well-appointed team for developing the highly prospective Batangas Project into a profitable gold mine.
 
The Philippines is not one of Asia’s more obvious mining destinations, but attracted Red Mountain’s attention for a few very good reasons.
 
“First, it’s extremely prospective from an exploration point of view; second, since its mining laws and regulations were reinforced in 2004, a number of mines have gone into production – it’s become somewhere that mining developments can progress and succeed, yet hasn’t been explored thoroughly yet,” says Dugdale.
 
“This means that you can still discover high-grade gold deposits at surface, which is effectively what we’re doing. The third is the Philippines is a very Westernised country, with skilled mine workers and good infrastructure generally. For a developing country, it’s well-endowed with good-quality mining professionals, finance and infrastructure.”
 
Batangas
 
The Batangas Project is particularly well-located, with good connections via both land and sea. The site lies approximately 20km west of Batangas City, which Dugdale says is one of the country’s major centres of power generation and engineering. “So we’ve got access to cheap power, as well as very good engineering services locally,” he adds.
 
“These factors give us a head start in terms of infrastructure.”
 
Red Mountain also has a ‘head start’ in terms of permits, as Batangas’ two main resources areas have already been granted Mineral Production Sharing Agreements (MPSAs), a form of mining lease. While the company will need additional permits before commencing production, having these mining leases in place saves significant time. Geologically, the project has Indicated and Inferred Mineral Resources of 5.8 million tonnes (Mt) at 2.2 grams per tonne (g/t) Au and 3.3g/t Ag, for 408,000oz of gold and 606,000oz of silver (0.85g/t Au cut off).
 
Recent exploration work identified an exceptionally high-grade surface trenching intersection at the Lobo Prospect, of 2 metres at 31.1g/t (1oz/t) Au, including 1 metre at 60.2g/t Au. A further 200 metres along strike, surface sampling of vein boulders produced assays of up to 33.5g/t Au extending the Southwest Breccia Japanese Tunnel zone to 500m strike length.
 
“The rich gold grades of the new, at surface, lode discoveries – more than an ounce to the tonne – highlight the potential for additional high-grade gold shoots within this mineralised corridor, which may be similar or better than the high grade Southwest Breccia resource,” Dugdale comments.
 
“These results demonstrate our ability to add additional high-grade ounces to our defined resource very quickly, which gives us a real advantage.”
 
After location and geology, the Batangas Project’s third advantage is that it could potentially be developed at a relatively low capital cost, as a small but high-margin project.
 
“The mineralisation in these high-grade areas we’re testing is very close to the surface – we’ll only need to remove a metre and a half of overburden to expose it,” says Dugdale.
 
“We expect to have capital costs in the order of $20-30 million, as well as low operating costs – particularly for the first few years, when we’re mining the higher grade material. There’s potential for us to sustain a low-cost mining operation as we define further high-grade resources.”
 
Next steps
 
In keeping with that opportunity, Red Mountain seeks to “flesh out” the high grade zone it has identified. The company’s next step will be to do more trenching to extend the definition of what might be a 100m zone of high-grade mineralisation at surface, before moving on to define other areas it has identified using the same methodology. The company will then look into drill testing those surface targets.
 
At the same time, Red Mountain will be progressing through the Batangas Project’s Feasibility Study. The Scoping Study is currently under way and expected to be finished this year, with the results being published in 2014.
 
“We feel that the scoping study, defining the value of our project and the capital and operating costs, and the exploration results, identifying these very high-grade lode systems with potential to start drilling next year, will be two key milestones that will help us get going in 2014,” says Dugdale.
 
“The next step beyond that will be to move the project into full permitting and feasibility, which we will do over the subsequent six to nine months. If we can get the financing all sorted out before the end of next year, we’ll then be able to start building the project in 2015.”
 
Red Mountain intends to remain focused on the Batangas Project for the foreseeable future, having withdrawn its majority interest from the early-stage Taipan San Francisco copper-gold property on the Philippines island of Mindanao. The company is, however, looking at development options for the other copper-gold targets in the Batangas area besides the Lobos Prospect. These include the El Paso Prospect, which has an intersection of 50 metres at 0.5% copper.
 
Because these permits would incur higher costs to explore, Red Mountain is keen to bring in a Joint Venture partner to farm into them. Dugdale says the company is in “active discussions” with one party who could go on to earn a majority stake in one of these copper-gold porphyry targets.
 
Progressing the Batangas Project through to production, while continuing to grow its resource base, is Red Mountain’s number one priority. After that, the company intends to look for other opportunities in Asia and do it all over again.
 
“Long term, we’d like to take multiple gold mines through from exploration to production in several locations,” says Dugdale. “These will all be smaller, but high-margin and low-cost, operations in the Asian region, to build a strong gold mining business.”  

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