SILANGAN PROJECT

The Silangan Project, located in Surigao del Norte, consists of two deposits –  Boyongan and Bayugo.  The Project is registered with the Board of Investments (BOI) as a non-pioneer project entitled to four years of income tax holiday beginning 2017, extendable for another two years subject to certain conditions. In October 2016, the Project filed a request with the BOI on the movement of the start of the income tax holiday to the beginning of 2021. This request is currently pending with the BOI.

The Boyongan and Bayugo copper-gold porphyry deposits are located in the Surigao Mineral District at the north-eastern tip of Mindanao Island in the Philippines, approximately 750 km southeast of Manila. The deposits, occurring in one intrusive complex, are the two major assets of Silangan Mindanao Mining Co. Inc. (“SMMCI”), a subsidiary of Philex and is referred to as the Silangan project.  

 

The Boyongan deposit lies within tenement MPSA 149-99-XIII of SMMCI while the Bayugo deposit is divided into Bayugo deposit-Silangan and Bayugo deposit-Kalayaan. The Bayugo deposit-Silangan lies within tenements: EP13-XIII and MPSA 149-99-XIII of SMMCI, while the Bayugo depositKalayaan lies within tenement EP14B-XIII of Kalayaan Copper Gold Resources Inc. (“KCGRI”), a joint venture between Manila Mining Corp. (“MMC”; 95%) and Philex (5%). The Bayugo deposit-Kalayaan is under a Farm-in Agreement among Philex, MMC and KCGRI, where Philex has the option to increase its stake from 5% to 60%, subject to conditions provided under the Farm-in Agreement. The Boyongan deposit is the subject of the on-going definitive feasibility studies (“DFS”) and the planned filing for the Declaration of Mining Project Feasibility (“DMPF”) this year under MPSA 149-99- XIII of SMMCI.  

 

The mineral resources at both Boyongan and Bayugo have been classified as Measured, Indicated and Inferred Resources in accordance with the PMRC. The Competent Person is Noel C. Oliveros. The mining method for both deposits is by underground mining for the entire deposit. To meet the requirement of “reasonable prospects of eventual economic extraction” provision in order to declare the Boyongan and Bayugo MRE under the PMRC, the MRE was reported based on a cut-off grade assumption of 0.5% CuEq, which assumes a large-scale operation using underground caving methods.  

 

The copper equivalent calculations derived by SMMCI for the Boyongan and Bayugo MRE are CuEq % = Cu % + 0.686 x Au g/t based on SMMCI’s estimated copper price for the Silangan and Kalayaan Projects of US$3.20/lb and gold price of US$1,342/oz and recoveries based on the average result from the two processing routes defined for the different material types in the deposit 


Boyongan-Silangan MRE at 0.5%CuEq  (within MPSA-149-99-XIII)

Bayugo-Kalayaan MRE at 0.5%CuEq (Within EP14B-XIII)

Total Boyongan and Bayugo deposits (combined) MRE at 0.5%CuEq

Boyongan and Bayugo Deposits
The updated Boyongan and Bayugo MRE is based on drilling data and additional geological information interpreted by SMMCI as of March 2015. A total of 435 verified diamond drill holes drilled in the deposit were used in the resource estimation. Copper and gold have been estimated using ordinary kriging. The exploration program on Silangan and Kalayaan Projects is professionally managed and the database is acceptable for use in mineral resource estimation. 

Robust geological and resource domains of the Boyongan and Bayugo deposits are defined and found suitable for a reliable mineral resource estimate. There is an excellent continuity for both the copper and gold grades within the established domains with low nugget effects and large ranges. The QA-QC programs and core logging procedures follow the best industry practice and generally exceed commonly accepted standards. The mineral resource assumes a non-selective mining approach and the majority of the material within the mineralized domains is above the anticipated mining cut-off. The Competent Person believes that the methodology used in the MRE is appropriate and that the result will have accuracy suitable for the intended mining method. The Technical Report will be published in the Company’s website and in the Philippine Stocks Exchange (“PSE”) website. 

Under the supervision of lead consultant AECOM, a total of 100+ tons of bulk ore samples were prepared and shipped to various laboratories in Australia for bench and pilot metallurgical tests. This would be used for the development of the pilot plant. Meanwhile, the process flow design of the pilot plant, which produced copper cathodes, would be a significant input to the Definitive Feasibility Study (DFS).

Value-engineering studies on the project was undertaken by AUSENCO, an independent engineering firm based in Brisbane, Australia in early 2016. The study progressed into a full Definitive Feasibility Study and is expected to be completed in 2017.

The project’s amended ECC for the surface mining method was approved in May 2016 following the approval of the amended Mining Project Feasibility Study in connection with the approved Declaration of Mining Project Feasibility.

The total expenditure related to the project as of December 31, 2016 amounted to P16.840 billion, including the P1.438 billion incurred prior to 2009, when the project was under Anglo. The figure does not include the fair value adjustment amounting to P5.552 billion.

Kalayaan Project
In May 2011, the Company executed a Farm-In Agreement with Manila Mining Corporation (MMC), which involved the purchase of a 5% equity interest in Kalayaan Gold-Copper Resources Inc. (KGCRI), a subsidiary of MMC that assigns the right to explore the Kalayaan properties covering 286 hectares under EP-XIII-014B. This area is adjacent to EP-XIII-013 and forms part of the overall Bayugo deposit.

Under the agreement, the Company was to conduct exploration activities in the property for three (3) years but was extended for an additional three years. Exploration of the area is currently on hold pending the approval of the Third Renewal of the Exploration Period. In the event the Company declares commercial feasibility of the area within the period, it will have the right to increase its holdings in KGCRI to 60% by subscribing to an additional 55% of KGCRI’s outstanding capital stock for a minimal amount and will become an integral part of the Silangan Project.

The Company commenced drilling in December 2011 after ground preparations, environmental mitigating measures and community-relations initiatives had been conducted. This transpired for about seven (7) months after the signing of the Farm-In Agreement.  By September 2013, a total of 73,520 meters had been drilled, of which 66,486 meters were for resource definition and 7,034 meters for scout drilling.

In 2014, detailed logging of 57 definition drill holes of East and West Bayugo, totaling 26,104.64 meters, was completed. This activity increased the confidence in the understanding of the mineralization. In addition, magnetotellurics (MT) survey from the surface was conducted, which provided preliminary data on the hydrologic model of the Boyongan and Bayugo deposits. These drilling results will be the basis of the Mineral Resource Estimation (MRE) which is necessary to advance the project to pre-feasibility and feasibility study stages.

SMMCI invest heavily in environmental care and maintenance activities. These investments cover the costs for ambient air and water monitoring, soil erosion control and prevention, the establishment of new tree plantations, as well as the maintenance and protection of established reforestation areas within the project site. The environmental care and maintenance programs of the project was submitted and approved by the Mines and Geosciences Bureau (MGB) of the DENR in lieu of the AEPEP while the project is not operational. 

Water Clean-up Drive in SMMCI 
In connection with DENR-EMB’s Adopt a Estero/Water Body Program (AEWBP), SMMCI has adopted two water bodies in the area. Regular quarterly river clean-up are conducted in these water bodies with the participation of SMMCI employees, security personnel, and Barangay officials and community. 

Progressive Tree Plantation and Nursery 
The nursery is used as a major source of planting materials for the reforestation projects of various government agencies and private organizations. As a practice, the Company actively participates in tree planting and other re-greening activities of various groups in the province. 

In terms of land management, particularly with respect to soil movement, engineered silt traps are constructed at strategic points to help control downstream sedimentation.

Water quality monitoring is also a standard practice by in-house personnel for both surface and drinking water sources in the project areas.

As a result of aggressive and continuous effort for sound Environmental Management, Philex has been a consistent winner of various awards such as the prestigious Adopt-A-Mountain, Adopt-A-Mining Forest Program of the government, as well as the Presidential Mineral Industry Environmental Awards (PMIEA). As of December 2020, SMMCI has planted a total of 185.24 hectares with 395,545 seedlings of different tree species planted. In addition, SMMCI established a one (1) hectare bamboo plantation is San Pedro, Sison to support the government’s initiative in promoting the planting and use of bamboo. Establishment of new bamboo plantation is part of the yearly commitment of SMMCI.

The immediate and progressive rehabilitation of disturbed areas, erosion control, water monitoring and waste segregation is a standard environmental practice of the Company.