In a report to the Securities and Exchange Commission, Philex said its board of directors has approved management’s recommendation to "terminate all work at the Bulawan operation."
The impending closure of the Bulawan minesite will result in the write-down of its 81.8 percent subsidiary Philex Gold an estimated $40 million worth of mine assets and deferred exploration costs.
"A re-evaluation of the economic feasibility of continuing development of the remainder of the production lines and related draw points indicate that in light of the expensive ground system required as a result of poor ground conditions, coupled with a continuing low gold price, the financial returns would at best be marginal," Philex said in the report.
Philex Gold, a listed company at the Toronto Stock Exchange, operates the Bulawan minesite. Since starting commercial production in January 1996, total gold production had amounted to 12 million grams or 400,000 ounces up to yearend 1999.
In nine months of operations this year, gold production at the Bulawan site reached 45,062 oz, higher as compared to the 26,869 oz output during the same period last year. However, the average realized price of gold reached only $271 per oz this year, down from $296 per oz in 2000.
In mid-July last year, the Bulawan milling operations were suspended for two months as the company worked to accelerate the rehabilitation of a production line in the central block due to very poor ground conditions.
"The suspension accounted for the low output last year and a correspondingly high cash operating cost per ounce," Philex said.
As a result, Philex Gold still ended with a net loss of $6.7 million, from an $8-million loss in the previous period.
Despite this setback, Philex Gold is pinning its hopes on a major discovery in Boyongan, Surigao del Norte, a joint venture project with Anglo-American Exploration (Philippines), Inc.
As a whole, parent company Philex Mining has been doing well notwithstanding the equity loss in Philex Gold. Last year, it turned around from a net loss of P198 million in 1999 to post a P302 million net income, largely on account of improved production at its Padcal copper-gold mine in Benguet province.