CGA Mining Masbate Gold Mine , Philippines

The project is on the island of Masbate, about 350km south of the Philippines capital, Manila. It is a brownfield site with established infrastructure including an airstrip, dedicated jetty, roads, accommodation, offices, clubhouse, workshops, assay laboratory and bunker fuel tanks, all of which require various degrees of rehabilitation.

CGA acquired the mine in March 2007 and owns it indirectly through its 100% ownership of Philippine Gold Ltd, 40% of Filminera and 100% of Philippine Gold Processing & Refining Corp (PGPRC). The remaining 60% of Filminera is owned by a Philippines-registered company, Zoom Mineral Holdings Inc, in which CGA has a 40% interest.

PGPRC will develop and own the process plant, and will be responsible for the sale of all gold.

The existing infrastructure has allowed construction to start more quickly and with lower capital expenditure – US$92.8m – than for an equivalent greenfield site.

Construction of the tailings dam and water dam began during the last quarter of 2007; CGA says open-pit mining is due to start in the second quarter of 2008, the tailings dam is expected to be commissioned by the end of November 2008 and commissioning of the mine plant should follow in the fourth quarter. As of early April 2008, the project was reported to be four weeks ahead of schedule.

Life of the mine is quoted at 9.5 years, with a payback period of 6.8 years.

GEOLOGY

The Masbate gold deposits are centred on a northwest-to-southeast mineralised volcanic belt, 5–7km wide, which is bounded by two northwest-trending fault zones, the Pinanaan Fault to the east and the Malubi-Lanang-Balete Fault to the west. The volcanic belt occurs along the western flank of an earlier diorite intrusive. Gold is associated with the volcanic belt while copper is reported to occur within the diorite intrusive.

The principal host rock to the gold mineralisation is a fractured andesitic-dacitic, tuffaceous agglomerate. Mineralisation occurs in quartz veins within the agglomerate, and also within associated altered and quartz stockworked wall rocks and breccias. The gold is generally finely distributed, with a suggested grain size of 5–20 microns.

RESERVES

Probable reserves are 37.4Mt (1.65g/t), containing about 2Moz. These figures reflect a conversion rate of 63% of the total indicated resource estimate (excluding the low-grade dumps) at the 0.7g/t cut-off.

Indicated resources at Masbate are calculated at 59.3Mt (at 1.55g/t), containing 3Moz, and the inferred resources are 33.7Mt (at 1.63g/t), containing 1.8Moz. The resource includes 18.65Mt of low-grade stockpiles (at 0.61g/t, containing 0.4Moz).

PRODUCTION

Production is expected to start in the first quarter of 2009. Average annual gold production over the first eight years of the mine's life is forecast at 206,000oz plus silver credits at a cash operating cost of US$306/oz.

The total material movement requirement averages 16.5Mt over the life of the mine, with a maximum of just over 21Mt in year three and a minimum requirement of just under 12Mt in year five. To achieve this target the company says a peak mining fleet of three hydraulic excavators and 20 dump trucks will be needed.

PROCESSING

The process plant will be a conventional carbon-in-leach (CIL) type facility consisting of primary crushing, two-stage grinding, leaching, adsorption and thickening process stages; elution, electrowinning and smelting gold recovery stages; and a cyanide detoxification stage treating process plant tails before disposal in a new tailings storage facility being built 3km from the plant.

The mine is being built by Leighton Contractors (Philippines) Inc, a wholly-owned subsidiary of Leighton Holdings Ltd of Australia. CGA has a six-year agreement with Leighton that covers the supply of all mining and earth-moving equipment, maintenance and personnel to mine the ore and associated waste material.

Power will be supplied by three Sulzer units to provide a 32MW capacity on site. They’ve been chosen for reasons of lower operating costs (due to the efficiencies of the equipment) and to retain ownership of power supply from the start of operations. In the longer term the company plans to build a coal-fired power station on the site.

Reclaim water recycled from the tailings storage facility will provide the bulk of the process plant water supply. When this is not available, raw water will be pumped from the existing Guinobatan River dam for general process use. Potable water will be drawn from existing and new deep-well bores next to the river.