TORONTO (miningweekly.com) – The development of a substantial new copper/gold project on the Philippine island of Mindanao could, together with the development of other projects on the island, herald a new age of socio-economic growth for the local population, project developer St Augustine CEO Andrew Russell told Mining Weekly Online on Monday.

He believes the King-king project could be the first new substantial “out-of-the-box” project from the Philippines in many years, with the potential to change investor perceptions of the developing country.

“With its substantial mineral resources, the development of the King-king project could place the Philippines solidly on the global mining scene, which would be to the benefit of the local population. The social impact of the project, combined with that of Xstrata’s Tampakan copper/gold project is huge, and once they are in production, could open a floodgate of investment to the region,” he said.

Russell said he believed the mining industry would give rise to unprecedented growth and economic prosperity for the island’s capital city, Davao, and the areas located within the mining corridors that stretch from the north and south of the island.

St Augustine, a subsidiary of Russell Mining and Minerals, is currently undertaking a bankable feasibility study for the King-king project, which is expected to be completed by the third quarter of 2013, by which time Russell expects the applicable permits for the project would have been granted and received.

“In the meantime we are focusing on developing the relationships that we need to successfully see the project through to operation by about 2016/17,” Russell said.

He pointed out it was critical for the company to navigate a jurisdictional minefield successfully, and get the locals onboard.

CONFLICTING REGULATIONS

Recent media reports suggested conflicting regulations and a freeze on new mine deals in the Philippines were strangling the development of its rich mineral resources, with mining investment over the next four years at risk of being less than half the $12-billion hoped for by the government.

The South-East Asian nation has huge mineral reserves, estimated to be worth $850-billion, ranking third in the world in gold, fourth in copper and fifth in nickel, according to the Philippine Mines and Geosciences Bureau.

But conflict between national and local rules, a strong anti-mining lobby and a recent bid to raise mining royalties were potentially scaring off foreign investors.

However, Russell said St Augustine had done its homework by consulting with local communities at length and had secured the endorsement of local government units and indigenous peoples.

He said it was unlikely that what happened to the Tampakan project would happen with the King-king project.

The uncertain future of the $5.9-billion Tampakan project, one of the world's biggest copper/gold deposits, led by global miners Xstrata and Indophil Resources, underlined the risks foreign investors faced in the Philippines.

Sagittarius Mines, the Philippine unit of Xstrata and Indophil, recently said it doubted it would be able to start commercial production at the undeveloped Tampakan mine, in South Cotabato province, by 2016 as originally slated owing to local regulations.

The province imposed a ban in 2010 on openpit mining, the proposed mining method to be used at Tampakan, in contravention of national laws, under which such methods are permitted.

SOCIAL BENEFIT

“We took a close look at the social problems encountered by fellow miners and came up with a social-centric development strategy,” Russell explained.

In terms of St Augustine’s development strategy, the company would place significant focus on supporting the local community and allowing them to reap the benefits of having a large mine in the community.

Russell said a significant number of local high-paying jobs would be created, including about 4 000 jobs during mine construction and about 2 000 careers during operation, with tax and royalty revenue for the government and indigenous people.

The company also undertook to buy the bulk of goods and services for the mine locally.

Further, St Augustine would contribute to training locals to work at the mine through a partnership with the Philippine Technical and Education and Skills Development Authority.

Russell also pointed out the hours spent canvassing locals had resulted in St Augustine resolving to use dry stacking of the mine’s tailings, to assuage local fears of a potential tailings dam failure. The company also used great oversight in locating its infrastructure and facilities around the local community, in an effort to reduce the impact on what has historically been an agriculture-oriented community.

SIGNIFICANT RESOURCE

The King-king project had been listed as a top-three-priority project by the Philippine government. The project’s size possibly accounting for the urgency in successfully seeing it through the permitting process.

The latest updated National Instrument 43-101-compliant resource estimate endowed the project with a measured and indicated copper/gold-equivalent resource of 962.3-million tons grading 0.66 g/t gold equivalent, for 5.4-billion pounds of copper and 10.3-million ounces of gold.

The inferred resource held another 3.6-million gold-equivalent ounces, grading 188.8-million tons at 0.21% copper and 0.26 g/t gold.

Initial planning saw the mine operating at a 100 000 t/d capacity, entailing a 40 000 t/d heap leach operation and a 60 000 t/d milling operation, with potential expansion to a 120 000 t/d when heap leaching comes to an end. The mine is expected to produce about 242-million pounds a year of the red metal and 319 600 oz of gold a year for the first five years of operation.

The company’s Toronto-listed shares closed up 2.74% at 37.5 Canadian cents apiece on Monday.