Philex to spend $224 million to start Silangan mine developement

MANILA, Philippines — Listed Philex Mining Corp. is set to begin the development of the first phase of the Silangan copper-gold mine by next year, even without foreign investors.

It will initially spend $224 million for the development of a starter mine that will process 2,000 tons of ore a day under phase 1 of the project.

In a virtual media briefing yesterday, Philex chief finance officer and treasurer Romeo Bachoco said  the Silangan project would be developed in stages under its in-phase development plan.

The wholly owned subsidiary Silangan Mindanao Mining Co. will operate the mine and gradually develop the project until it reaches 12,000 tons a day or four million tons a year.

Phase 1 of the Silangan project, which covers the Boyongan deposit, has a long mine life of 28 years and will take two and a half years to develop beginning the second quarter of  2022.

The mine is targeted to commence commercial operations in the first quarter of 2025. It is expected to produce 2.8 million ounces of gold and 993 million pounds of copper during its mine life.

Bachoco said the $224 million funding would be financed by a combination of capital infusion from Philex, equity via stock rights offer (SRO) and debt.

“The SRO will contribute approximately P3.1 billion or $61 million. Philex, out of its cash surplus from its current operations will infuse between P2.5 billion and  P3 billion into the Silangan project.”

“Any balance that will be left from the SRO and cash infusion through Philex, will be raised through debts,” he said.

Philex has already filed with the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE) its application to raise as much as P3.15 billion through an SRO of up to 842 million common shares.

BDO Capital and Investment  Corp. has been tapped as issue manager and lead underwriter.

Prior to the implementation of an in-phase development plan for the Silangan project, Philex was seeking $750 million to jumpstart the project as it looked for foreign investors.

Philex president and chief executive officer Eulalio Austin, however, emphasized that potential investors raised issues regarding the country’s regulatory environment as well as the expiration of the minerals production sharing agreement (MPSA).

“That’s why the concept of in-phase development came about because we could hardly get investors outside,” Austin said.

“Foreign investors, as of the moment, we are not getting some good news from them – that’s why we are tapping the local market to finance our $224 million cash requirements,”he added.

Austin emphasized the need to begin the operations of the Silangan mine, even with a small capacity, given that its Padcal mine in Benguet is expected to be mined out by the end of 2024.

“Because we are running out of time, considering Padcal will be expected to be mined out in 2024, we need to start the mine even on a small capacity,” he said.

Phase 1 of the Silangan project has an estimated 81 million tons of mineable ore containing 0.67 percent copper and 1.13 grams of gold per ton. Annual production could increase to 6.5 million tons once the Bayugo deposit is mined as phase 2.

“The copper and gold grades in Silangan are twice as high than the current grades of Padcal, which for decades has been the life blood of Philex but is now approaching the end of its mine life,” said Austin, who is also the president of Silangan Mindanao Mining Co.

Silangan has an estimated mineral resources of 571 million tons, with 0.52 percent copper and 0.64 percent gold. These numbers  are higher compared to the upcoming mining projects, according to Philex.

Austin said  the company has secured all the necessary clearances and permits from relevant government units to pursue the Silangan project, which it started more than 15 years ago.

“Silangan will be a major exporter of metallic minerals for the Philippines, generating in the future, much needed foreign receipts of the country that will augment and increase the country’s foreign currency reserves that can improve the country’s ability to settle foreign currency requirements for economic recovery post COVID-19 pandemic,” said Silangan Mining COO Michael Toledo.