Name of the Project
Siana underground gold project, Philippines.

Location
The Philippines.

Client
Red 5 Limited.

Project Description
A feasibility study on the project includes a maiden ore reserve estimate for the Siana underground mine of 3.01-million tonnes grading 4.1 g/t of gold, underpinning the proposed development of an underground mine directly below the existing openpit to extract 504 000 t/y of ore.

The mine will use a conservative short up-hole retreat mining method, with cemented paste-fill for the majority of the orebody.

Ore from the underground operation will be processed at the existing 1.1-million-tonne-a-year gravity and carbon-in-leach processing facility at Siana.

The underground project is expected to produce an estimated 60 000 oz/y over an eight-year production mine life.

There is considerable potential to extend the mine life through resource extension and further exploration of near-mine targets.

Jobs to be Created
Not stated.

Net Present Value/Internal Rate of Return
The project has a pretax net present value, at a 10% discount rate, of $50-million and an internal rate of return of 22%, assuming a gold price from $1 200/oz.

Value
The preproduction capital cost for the underground mine development, including infrastructure, paste plant and development, is estimated at $60-million.

Red 5 believes that it will be able to fund the underground mine development at Siana using the cash flow generated by the existing openpit operation over the next 18 months,  and accelerate initial underground development through a short-term loan facility provided by Metropolitan Bank & Trust Company of the Philippines. This will allow for the operation to transition to underground mining, following the completion of the openpit, by the end of calendar year 2017.

Duration
The positive results from the feasibility study paves the way for the start of underground mine development, with a projected 12-month timeline to access first underground ore.

Latest Developments
Red 5 will be forced to implement a revised operational strategy and openpit mine plan for its Siana gold mine after delays in obtaining regulatory approvals for amendments to its environmental compliance certificate (ECC).

The approved ECC is required for the construction of a long-term tailing storage facility (TSF) for the openpit operation.

The company submitted an application for the amendments to the ECC in July; however, the company has noted that over the past six months, the Philippines Department of Environment and Natural Resources’ focus has been on completing an audit of operating mining companies.

Earlier this month, Red 5 was informed that the Mines and Geosciences Bureau had recommended that the ECC amendments be progressed by the Environmental Management Bureau.

As a result of the delays in approvals, the company has decided to temporarily place the Siana processing plant on standby from the end of January.

The existing TSF can accommodate the operational needs of the openpit mine until the end of March, with Red 5 having hoped to start construction of the new long-term TSF by January, subject to the receipt of the required regulatory approvals.

In light of the change in timing for the long-term TSF, commitments for major capital items for the underground development, such as the paste-fill plant and power plant upgrades, will also be deferred until early 2018.

However, underground development will continue throughout 2017, using the lower-cost hand-held air-leg mining techniques.

The miner has told shareholders that this is an “appropriate measure” in the current circumstances to protect its balance sheet, with first underground ore planned for March 2018, and steady-state production planned start in about December 2018.

The deferment of major capital items will be progressively monitored, and might be brought forward, depending on the operational performance of the openpit, and all necessary regulatory approvals being in place.

Based on the current gold price, and the receipt of approval for the construction of the long-term TSF within the coming months, the plan remains to fund the development of the underground operation from funding generated in house.

Meanwhile, a revised mining strategy for the Siana openpit will also be implemented, given the regulatory delay and pit wall stability concerns.

The revised strategy will result in an extension of the East wall cut-back, which is designed to optimise remaining openpit gold production and cash flows, while minimising operational risks and regulatory uncertainties.

As a result of the new mine plan, and the temporary suspension of processing, Red 5 has said that gold sales for the March quarter will be in the range of between 5 000 oz to 7 000 oz.

Subject to the receipt of the ECC amendment approval, and Red 5’s gaining access to higher-grade ore from the Eastern section of the openpit, the Siana processing plant will restart processing ore in the June quarter. A further 55 000 oz to 60 000 oz expected to be processed from the openpit to the end of the current calendar year, at a forecast all-in sustaining costs of between $700/oz and $760/oz.

Openpit mining will be completed in about November, in line with the original timetable.

Technical studies are under way to assess the potential to extract a portion of the remaining openpit mineral resource and ore reserves from the future underground mining operation.

Key Contracts and Suppliers
Mining One (updated feasibility study).

On Budget and on Time?
Not stated.

Contact Details for Project Information
Red 5 Limited, tel +61 8 9322 4455 or fax +61 8 9481 5950.
Mining One, tel +61 3 9600 3588, fax +61 3 9600 3944or email Info@miningone.com.au.