Red Mountain Mining (ASX: RMX) is planning to take its recently acquired gold and copper-gold assets in the Philippines, a jurisdiction where operating costs are a lot lower than Australia, from acquisition to development in around three years.
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Neil Warburton, executive chairman of Red Mountain Mining, told investors at the recent "Stars in 2012" One2One Investor Forum in Sydney the cost issue in Australia is a real issue for producers, with some low grade gold assets much more viable in the Philippines.
“When you look at the cost structure, a typical underground mine or even an open pit mine in Australia – the wage component is somewhere between 30 and 35 per cent of your operating costs, in the Philippines it’s 9 per cent.”
Power costs are also around half as much in the Philippines at $0.11 to $0.14 per kilowatt hour, compared to about $0.22 to $0.24 per kilowatt hour in Western Australia at projects like Sunrise Dam.
“Power makes up around about 10% of your total operating costs. Capital costs in the Philippines are very cheap too,” Warburton said.
“It’s a very good place to do business. The infrastructure is very good.”
Red Mountain is hoping to reach the construction phase in around three years, with drilling currently underway at its Batangas Project, which already has an Indicated JORC Resource of 393,000 gold ounces and 1.4 million silver ounces, and Inferred Resources of 108,000 gold ounces and 210,000 silver ounces.
“What we’re looking at is probably, realistically, a three year program – from now in three years converting those low grade resources to high grade resources, doing more underground or deeper drilling, then going through the permitting stage and then construction,” Warburton told investors.
“The construction phase is not that hard, especially where we are. There is good access and there are good areas where we can actually put a mill.”
Warburton said a mill in the Philippines would cost around $60 million for a 500,000 tonne per annum mill with infrastructure compared to around $100 to $150 million plus in Australia.
Red Mountain is expecting to have more results from drilling the high feeder zones on the Archangel prospect this week, where it has two drill rigs operating.
Highlighting the potential of Archangel, high grade intercepts below the prospect’s resource include 61 metres at 5.1 grams per tonne (g/t) gold, 64 metres at 3.5g/t gold, 52 metres at 11.5g/t gold and 26 metres at 4.03g/t gold.
Red Mountain plans to begin drilling the Lobo prospect in early 2013.
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