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Far Southeast, Philippines

Far Southeast – 40% attributable to GFI

Gold and copper deposit in the Philippines

Mineral Resources

of 19.8Moz gold and 9,921Mlb copper


LOCATION

The Far Southeast Project (FSE) is located in the well-known mining district of Mankayan in the Cordillera region of Northern Luzon, approximately 250km north of Manila.

Project ownership and capex

The project is held by Far Southeast Gold Resources Inc. (FSGRI), a JV company of Lepanto Consolidated Mining Company (LCMC) and Gold Fields. To date, Gold Fields has acquired 40% of FSGRI for payments of US$230M and has the option to acquire a further 20% by paying an additional US$110M and incurring initial development costs totalling US$165M.

Regional geology

The Mankayan district is underlain by a basement of pre-middle Miocene volcanic and intrusive rocks overlain by an extensive cover sequence of Pleistocene dacitic tuffs and breccias, the eruption of which was accompanied by the intrusion of diorite and dacite stocks and domes. Major north-trending strike-slip faults of the Philippine Fault system dominate the structure of the district and have exerted fundamental controls on igneous activity and mineralisation. The district-scale mineralisation is characterised by intermediate sulphidation veins and fault-controlled high-sulphidation enargite-uzonite deposits that have been mined for precious and base metals principally by the Victoria and Lepanto mines. A number of copper-gold porphyry prospects also exist, which principally include the FSE porphyry deposit itself.

Deposit Geology

The FSE copper-gold porphyry is a deeply concealed deposit associated with a Pleistocene diorite-dacite intrusion complex intruded into Eocene basaltic country rocks. The intrusion complex is cross-cut by several phreatomagmatic breccia pipes which are pre-, syn- and post-mineralisation. The mineralisation is mostly hosted in the intrusion complex and to a lesser extent the basaltic country rocks and is characterised by disseminated sulphides and multi-phase sulphidebearing quartz and quartz-anhydrite vein sets and stock works.

No exploration or additional conceptual mine design studies were conducted on the FSE project during 2018 and no further updates have been made to the geology and/or Resources model.

Social licence to operate

For Gold Fields to obtain a further 20% interest in the project, a Financial or Technical Assistance Agreement (FTAA) will be required from the Philippines government. This is dependent on obtaining the free, prior and informed consent (FPIC) of the local Kankana-ey Indigenous People. In mid-2013, the Kankana-ey Indigenous People voted in favour of the project and a Memorandum of Agreement was signed with the Council of Elders in February 2015. The agreement, together with supporting documentation, is currently being considered by the National Commission on Indigenous Peoples before issuance of a formal certification precondition, which will complete the FPIC process.

In June 2014, LCMC and FSGRI jointly applied for the renewal of Mineral Production Sharing Agreement 001 (MPSA 001), which is the mineral tenement jointly held by the two companies in which most of the FSE deposit occurs. The initial 25-year term of MPSA 001 was due to expire in March 2015.

In February 2015, LCMC and FSGRI commenced arbitration proceedings against the Philippine government regarding whether FPIC is also required for the renewal of the MPSA. In November 2015, the arbitration panel issued an award that FPIC may not be imposed as a requirement for the renewal of MPSA 001 and that the MPSA should be renewed under the same terms and conditions.

In December 2015, the Republic of the Philippines filed a petition to vacate the arbitral award with the court. The court rendered a decision in May 2016 to vacate the arbitral award. After the court denied a motion for reconsideration, LCMC and FSGRI subsequently filed a petition for review with the Court of Appeals in July 2016.

The Court of Appeals ruled in favour of MPSA 001 renewal without need for FPIC in May 2018, and in response the government filed a motion for reconsideration (MR). The MR was denied by the Court of Appeals on 14 January 2019. The government is currently seeking to appeal this decision to the Supreme Court, which is likely to be ongoing during 2019.

Following a review of the country’s 40 metallic mines by the Environment and Natural Resources Department in 2016, operations at several mines were suspended due to environmental violations. The Closure Orders on 12 mines, by the former anti-mining Environment Secretary, were reviewed and largely reversed in 2018. Only three Closure Orders were upheld for proven environmental violations. This indicates that the administrative regulations and processes are working in the project jurisdiction.

The current view and perspective on the Philippines is that matters in the country have not deteriorated relative to 2017, and there were some positive updates in 2018 as outlined above.

Mineral Resources

The historical Inferred Mineral Resource for the FSE deposit, first declared in August 2012, is 891.7Mt at 0.7g/t gold and 0.5% copper for 19.8Moz of gold and 9,921Mlb of copper, has been maintained for the 2018 reporting. The Resource was reported inside a mining constraint, which assumed an eventual nonselective, bulk underground mining method. The classification of Inferred Resource was applied based on drill hole spacing, estimation quality, geological continuity and geological understanding of the deposit in early 2012, supported by a view on reasonable prospects for eventual economic extraction which are viewed as being relevant today. The Inferred Resource has a lower confidence than an Indicated Resource and cannot be converted to a Mineral Reserve.

Resource classification Tonnes
(Mt)
Grade
(Au g/t)
Metal
(Au Moz)
Grade
(Cu %)
Metal
(Cu Mlb)
 
Inferred 891.7 0.7 19.8 0.5 9,921  
Total 891.7 0.7 19.8 0.5 9,921  

FSE Mineral Resources effective from and unchanged since 31 August 2012

Notes:

  • These Mineral Resources are not Mineral Reserves as an assessment to a minimum of a PFS is required
  • There has been no further technical work or economic assessments in 2018 to update previous input or commodity prices
  • The Mineral Resource is reported in accordance with the SAMREC Code
  • The Mineral Resource is reported within an optimised underground bulk mining shell that is derived using scoping study mining, processing and cost parameters, and commodity prices of US$1,650/oz gold and US$8,600/t copper. All Inferred Resource material within the shell is reported
  • The Mineral Resource is reported without dilution and ore loss parameters
  • Rounding-off of figures may result in minor computational discrepancies. Where this happens, it is not deemed significant
  • LCMC holds a 60% interest, while Gold Fields holds a 40% interest in the FSE. Attributable metal is 11.9Moz gold and 5,953Mlb copper to Lepanto and 7.9Moz gold and 3,968Mlb copper to Gold Fields

Outlook

The main focus of the FSE project is to ensure that it can be advanced subject to technical and economic constraints once the permitting issues are resolved and once the socio-political environment becomes more conducive to mining licence approvals or new mine development. Thus, the project is assisting its joint venture partner to obtain renewal of MPSA 001 and is completing the process to obtain the FTAA. Community projects, stakeholder engagement, environmental and social baseline data gathering and studies will continue to support the permitting process.

Plan Far Southeast, Philippines

Far Southeast