Issue 2, May - July 2012

Otto and GalocContinue to Grow

Philippine ResourcesMining, Petroleum & Energy Journal Issue 2 2012, May - July

DOE Helps Light Up Boni Tunnel

GOLD FIELDS Likes

Far Southeast

Site Group Identifies

Philippines Hub

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Headlines in this issue

Current Resources

Resources Commentary

8 Revised Free and Prior Informed Consent Rules

12 The long and winding road

16 Ready Willing and Able on Human Rights

Resources Training

20 Company’s “site” set on solving training shortage issue

Oil & Gas Resources

24 Gas2Grid acqires rig for Cebu drilling

28 Good news continues to flow at Galoc

31 Viking enters Philippines oil and gas scene

8

20

Front cover photo shows the re-instatement of the Galoc oil field Float Production, Storage and

Offloading off the Philippines coast. Otto Energy and its Galoc partners have had

a string of successes in recent months as

they look to extend the important field’s producing life. See

story page 28.

Mineral Resources

37 CDC hits good copper intersections at Basay Project

40 ENK looking to sell Berong Nickel interest

41 DOE receives strong interest in coal mining offering

Energy Event

52 Philippine Resources to participate at Manila event

4 Philippine Resources

May - July 2012www.philippine-resources.com

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PublisherElizabeth GaluraCharismatic (WA) Pty Limited

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ContributorsMars BuanPatricia A.O. BunyeFernando Penarroyo___

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Resources Viewpoint

PhilippineResources

Mining, Petroleum& Energy Journal

Issue 2 2012May - July 2012

Vale - Simon W. Halley

Philippine Resources regrets to report the passing of its Editor, Simon W. Halley in Auckland New Zealand, after his battle with cancer.

Simon played a critical role in the development and growth of this publication and his dedication to his position at this magazine, to the Philippines and to the resources sector in particular, helped

the magazine gain the repect of the industry.

However, it was not only his work with Philippine Resources that Simon was known for around the country.

Simon was also the editor and driving force behind myPH: My Philippines, an online magazine/forum about living in, doing business, working, enjoying and exploring the Philippines.

A friend and supporter of many, Simon will be remembered for his honesty, courage and most of all for his love for his adopted country and home - the Philippines.

To all his family and friends, our condolences. We at Philippine Resources will miss him dearly.

Simon Halley - RIP.



T he National Commission on Indigenous Peoples (“NCIP”) is currently revising the rules on

the Free and Prior Informed Consent (“FPIC”) Guidelines of 2006 - also known as NCIP Administrative Order 1, Series of 2006 in accordance with the

Indigenous Peoples Rights Act of 1997 (“IPRA”).

In drafting the new guidelines, the NCIP is reportedly being assisted by an anti-mining interest group. Without the ben-efit of consultations between the NCIP and private industry, the proposed re-vised FPIC guidelines are basically part of the three-pronged strategy of anti-mining advocates to block mining with the amendment of the Philippine Mining Act of 1995 and empowering local gov-ernment units to assert their autonomy and veto mining operations in their ter-ritorial jurisdiction.

Initially identified new provisions under the draft FPIC guidelines will definitely be bothersome not only to mining indus-try but to other resource developers as well.

The definition of large-scale activities that need to go through an FPIC process has been expanded to include: explora-tion, development, exploitation, utilisa-tion of land, covering energy, mineral, forest, water, marine, air, and other natu-ral resources requiring permits, licenses, leases, contracts, concession, or agree-ments e.g. production-sharing agree-ments, from the appropriate national or local government agencies, including feasibility studies related thereto; and thre issuance of land tenure instrument or resource use instrument by any gov-ernment agency and related activities.

A new provision concerning areas closed to FPIC applications has been included and these areas are to be unilaterally identified by indigenous peoples (“IPs”).

To process FPIC applications, the pro-ponent is required to submit among

Revised Free and Prior Informed Consent Rules – New Obstacles for Resource DevelopersBy Fernando Penarroyo

Continued on page 10 >


Fernando “Ronnie” Penarroyo (photo taken at the summit of Mt. Pulag, Benguet) is the Managing Partner of Puno and Penarroyo Law Offices (www.punopenalaw.com). He specialises in Energy and Resources Law, Project Finance and Business Development.




others, documents like budget and lat-est audited financial statements. During the pre-FPIC conference, the applicant must also submit an undertaking that it shall commit itself to full disclosure of records and information relevant to the plan, program, project or activity, that would allow the community full access to records, documents, material informa-tion and facilities.

Most importantly, at a very early stage in exploration, the applicant will be re-quired to submit an Environmental and Socio-cultural Impact Statement (“EIS”) detailing all the possible impact of the plan, program, project or activity upon the ecological, economic, social and cul-tural aspect of the community as a whole.

Submitting an EIS during the early stag-es of an exploration application is clearly impractical. Also there are major prob-lems in communicating scientific studies and financial information to communi-ties where people are not highly edu-cated and where their understandings of their natural environment may not be commensurate with scientific and eco-nomic explanations.

I also see very contentious provisions re-lated to IP community dynamics, which will practically prevent the FPIC process from proceeding. Representatives of the IPs are already part of the initial field-based investigation (“FBI”) team. When the area applied for has an existing boundary conflict with another domain, as determined by the FBI team, the FPIC Process shall be suspended in the con-flict area until the boundary conflict is settled or resolved with finality.

A group or a community of IPs occupy-ing a portion of public domain, whether as a result of a resettlement or relocation project of the government, or as a result of displacement, has the right not to be treated as migrants and can likewise exercise their right to FPIC. While the identification of the group that will give

consent is defined in terms of residential status, customary rights and legally rec-ognised rights according to the national law or genealogical connection to the original customary owners, the resource developers have to wait for the outcome of these contentious issues before even commencing their FPIC process. Thus, unnecessary delays are brought about by the failure of IPs to settle leadership and boundary disputes which can be exploit-ed by anti-development groups to pre-vent IPs giving their consent to natural resources projects, in effect closing the area to resource development

Notwithstanding that a Certificate of Non-Overlap has been issued, the appli-cant shall execute an undertaking for the conduct of FPIC should it be discovered later that there is, in fact, an overlap with an ancestral domain.

A provision was likewise added that the content of the Memorandum of Un-derstanding (“MOA”) between the IPs and the applicant must include a clause on the non-transferability of the MOA. Thus, the concerned IPs shall require another FPIC to be conducted in case of merger, reorganisation, transfer of rights, and acquisition by another entity, or joint venture.

The proposed rules also call for a deposit of cash or surety bond by the applicant unless the IPs allow a notarised under-taking in writing by the applicant to an-swer for damages which the former may suffer on account of the plan, program, project or activity in substitute to said bond.

The proposed rules also states that Cor-porate Social Responsibility or Social Development and Management Projects required under existing laws shall not be considered as part of benefits given to IPs. Complaints involving the imple-mentation of the FPIC process or the interpretation or implementation of the MOA shall be resolved using traditional conflict resolution process and all con-flicts shall be under the exclusive juris-

diction of the NCIP Hearing Officer.

The provisions mentioned are tanta-mount to exercise by the IPs of own-ership over natural resources within ancestral domains, which the Supreme Court declared in Cruz v Secretary of Environment and Natural Resources, et al. [2000], IPRA does not confer or rec-ognize. The Supreme Court further held that the rights given to the IPs regarding the exploitation of natural resources un-der IPRA only amplified what has been granted to them under existing laws but the State retains full control over the ex-ploration, development and utilization of natural resources.

Any provision in the proposed FPIC guidelines that will give veto powers to IPs infringes upon the State’s ownership over natural resources within the ances-tral domains.

The rights given to the IPs are limited only to the following: ‘to manage and conserve natural resources within ter-ritories and uphold it for future genera-tions; to benefit and share the profits from allocation and utilisation of the natural resources found therein; to nego-tiate the terms and conditions for the ex-ploration of natural resources in the are-as for the purpose of ensuring ecological, environmental protection and the con-servation measures, pursuant to national and customary laws; to an informed and intelligent participation in the formula-tion and implementation of any project, government or private, that will affect or impact upon the ancestral domains and to receive just and fair compensation for any damages which may sustain as a result of the project, and the right to effective measures by the government to prevent any interference with, alienation and encroachment of these rights.’

The Court interpreted IPRA as only granting to IPs ‘priority rights’ in the uti-lisation of natural resources, not abso-lute ownership nor exclusive rights but

< Continued from page 8





As this column is being written, the much vaunted national mining policy is in the process of being

finalised and released.

Originally expected to be issued as a comprehensive Executive Order, it now appears that the national mining policy will be released as a policy statement which identifies a six-point agenda with corresponding action items.

Considering that, within the next few weeks and before the end of May 2012, the Mining Policy Study Group tasked to make recommendations to the President will still undertake consultations with national government agencies and the Chamber of Mines of the Philippines/large-scale mining companies, particu-larly on the fair, adequate, and equitably shared economic benefits from mining, it is possible that the national mining poli-cy as currently drafted will still undergo further refinement before it is presented to the Cabinet Clusters on Economic De-velopment and Climate Change.

These Cabinet Clusters will, in turn, con-duct a final review before the proposed policy is submitted to the Executive Sec-

retary, who shall then submit it to the President for approval.

In any event, the policy statement is ex-pected to emphasize, among others:

• theutilisationofmineralresourceshas the potential to improve the econo-my and uplift the lives of many Filipinos

• theGovernmentneeds the supportof various stakeholders, including the private sector, civil society, vulnerable and marginalized sectors, indigenous peoples and local government units (LGUs) to develop and utilize these re-sources

• theecologicalrichnessofthePhilip-pines must be properly valued and pro-tected

• responsiblemineralresourcedevel-opment, both large and small scale, has a role in sustainable development

• miningmustbedevelopedtoensureeconomic and social growth both at the national and local levels

• government shall endeavor to pro-vide a good business environment for mining investors

The six-point agenda is as follows:

1. Ensure mining’s contribution to the country’s sustainable development (i.e. economic and social growth and envi-ronmental protection);

2. Adopt international best practices and promote good governance and in-tegrity in the sector;

3. Ensure the protection of the envi-ronment by adopting technically and scientifically sound and generally ac-cepted methods as well as indigenous best practices;

4. Enforce the primacy of national laws over local issuances and harmonise

laws, policies, and regulations;

5. Ensure a fair, adequate, and equi-tably shared economic benefit for the country and the people; and

6. Deliver efficient and effective man-agement of the mining sector.

The action items corresponding to each of the six point agenda items are pro-posed to be implemented by means of both an Executive Order, with specific tasks being assigned to the relevant gov-ernment agencies such as DENR, DOF, DBM, DILG, DA, DOT, DOJ, NEDA and others, and the filing within one year of the issuance of the national mining poli-cy of bills covering additional proposed legislation.

Some of these action items include:

Agenda 1:

• Create an inter-agency council onmining and ensure participation and transparency in the mining industry to be modeled on the former Minerals De-velopment Council

• Conductpublicbidding/publicauc-tion of mining rights/tenements (aban-don “first come, first serve” policy) for areas with known mineral resources, i.e., areas already explored and with value.

Agenda 2/Agenda 6:

• CreationofaTaskForceAgainstIl-legal Mining

• Implement a ‘One-Stop-Shop’ pro-cess for mining applications The ‘One-Stop-Shop’ process for mining applica-tions, which will involve the clustering of similar activities

• Determineindividualrolesofagen-cies concerned and fix overlapping tasks and functions (i.e., MGB v. NCIP, MGB,

By Patricia A. O. Bunye

Patricia A. O. Bunye is a senior partner at Villaraza Cruz Marcelo & Angangco (website www.cvclaw.com). Her areas of specialization are mining and natural resources, power and energy and intellectual property (particularly IP commercialization). She may be reached at [email protected].


The long and winding road



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v. LGUs, etc.). There will be a strong push to create Department of Environ-ment separate from Department of Nat-ural Resources, through legislation.

Agenda 3:

• Identify additional areas closed tomining (i.e., prime agricultural lands as determined by the Depart of Agriculture, priority eco-tourism sites as determined by the National Ecotourism Council, crit-ical areas and island ecosystems, among others). These additional areas include 78 ecotourism sites, whose polygons have been identified, but whose bound-aries have not been determined. This identification will be subject to separate consultations.

• Adopt Programmatic and SectoralEnvironmental Impact Assessment (EIA) in the Philippine Environmental Impact Statement System. In this connection, it appears that the DENR has re-imposed the provision that social acceptability

shall be a requirement for ECC approval.

• Use the geo-hazard maps/multi-hazard maps for the country and forecast of climate change impacts to determine “go” and “no-go” areas for mining based on areas reserved by law and executive issuances

Agenda 4:

The DENR/MGB have admittedly not proposed or adopted clear and specific measures to implement Agenda 4, “En-force the primacy of national laws over local issuances and harmonize laws, policies, and regulation”, notwithstand-ing that challenges to the primacy of na-tional laws strike at the very heart of our Constitution, which provides the frame-work for the Mining Act, and the Mining Act itself.

Agenda 5:

• Ensure inter-agency coordinationrelative to Government share in mining revenues

• StudyhowLGUscangetdirectac-cess to their share (similar to PEZA)

Based on the presentation recently made by MGB Director Leo Jasareno to the Philippine Mineral Exploration Associa-tion, there are many proposals related to Agenda 5, such as declaring mine sites as the head offices of mining companies and pursuing the Domogan Bill (on the on the direct remittance of LGUs’ shares in mining taxes), to ensure that benefits for LGUs are immediately enjoyed. With respect to mineral reservations which were originally proposed to be declared in earlier versions of the mining policy, Director Jasareno confirmed that these would only apply prospectively and ex-isting FTAA/MPSA will be respected. The declaration of mineral reservations will also be subject to consultations on this matter.

Agenda 6:

• Establish a public, accessible, andcomprehensible database which con-solidates all relevant data from all con-


only the right of preference or first consideration in the award of privileges provided by existing laws and regulations, with due regard to the needs and welfare of indigenous peoples living in the area.

There is also an added provision in the proposed rules to undertake a new FPIC process in case of mining activities after the ex-ploration stage. However, the Supreme Court in Cruz v Secretary of Environment and Natural Resources noted that the right to negotiate terms and conditions granted under IPRA pertains only to the exploration of natural resources, which is merely a pre-liminary activity and cannot be equated with the entire process of ‘exploration, development and utilisation’ of natural resources which under the Constitution belong to the State.

‘Free and prior informed consent’ in all legal jurisdictions is often very hard to implement faithfully. Needless to say, the implica-tions of a commitment to FPIC are financially costly for the resources company. Providing information is always an expensive operation and assessing whether consent has been given will be similarly difficult and costly.

The legal repercussions of the proposed amendments are clear – indigenous communities will now effectively have veto power over resources project design and implementation.

Could it be that this proposed amendments are nothing but an unreasonable regulation that would effectively kill the resources industry? Where then is the so-called “systematic, rational, transparent, participatory and fair decision-making process that will result in everyone winning” if the private industry is not allowed to be engaged in the drafting of these new rules.

Having been involved in numerous FPIC process for resource companies, I am of the opinion that the proposed rules are im-practical and unworkable. Philippine Resources will continue to keep its readers updated on new developments related to these proposed FPIC rules. ■

Continued from page 10 >




Resources TrainingResources Commentary

The Voluntary Principles on Security and Human Rights (VPSHR) is the only set of security

and human rights guidelines designed specifically for extractive companies. The VPSHR recognizes the importance of the promotion and protection of human rights across the globe, alongside the constructive role the business sector and civil society play in achieving these goals.

Through the VPSHR, companies in the extractive industries are able to maintain

the safety and security of their business within an operating framework that en-sures respect for human rights and fun-damental freedoms of the communities where they operate.

Since the launch of the VPSHR in De-cember 2000, more and more companies, governments, nongovernment organiza-tions, financial institutions, and develop-ment agencies have joined the initiative and committed to apply the VPSHR as their global conduct and performance standard for operations. The VPSHR,

however, can be quite challenging to imple-ment, especially for companies that want to apply the guide-lines but are not part of the initiative; as well as for companies knowledgeable of the VPSHR but are op-erating in high-risk environments with weak governance.

Implementation Guidance Tools

Through the support and guidance of the International Finance Corporation (IFC), International Council on Mining and Metals (ICMM), the International Petroleum Industry Environmental Con-servation Association (IPIECA), and In-ternational Committee of the Red Cross (ICRC), a team of VPSHR consultants led by Stratos and supported by Pacific Strategies and Assessments (PSA), the VPSHR Implementation Guidance Tools was officially released in 2011.

cerned stakeholders and sources (which includes maps under the proposed one-map system for government of mining areas, protected areas, ancestral lands and domains, among others

With respect to the proposed legislative agenda for mining, the bills to be filed are expected to cover the:

• EnactmentofaComprehensiveMineralCodetocovertheminingsector

• CraftingadefinitionofMediumScaleMiningandtherulesthatwillgovernitsoperations

• Amendment of provisions of the Mining Act on incentives for the mining industry in light of alleged abuses by some mining companies

Once the national mining policy is finally approved, the MGB, with the approval of the President, is expected to lift the mora-torium on the processing and approval of exploration permits. Considering that the moratorium has been in place since 2010 and in light of the reported decrease in mining investments due to the negative signal sent by the moratorium to existing and prospective investors, its lifting is at least one of the anticipated positive effects of the impending issuance of the policy. ■

Continued from page 14 >

Ready, Willing, and Able to Uphold Human Rights through VPSHRBy Mars Buan, Business Intelligence Manager and Senior Analyst for Pacific Strategies and Assessments (www.psagroup.com), based in Manila.





Small-scale mining accounts for 68% of the Philippines’ total gold production. Small-scale mining across the Philippines, however, is largely unregulated, al-lowing for the proliferation of illegal and destructive small-scale mining opera-tions. Although there are existing Philippine laws defining the conduct of small-scale mining activities, these are not being properly implemented due to the government’s lack to monitor and enforce these laws and regulations.

The Philippines has an estimated 300,000 small-scale miners operating in 30 of the 70 provinces in the Philippines. The Mines and Geosciences Bureau, how-ever, admitted that almost 80% of the country’s small-scale miners are operating illegally. A number of these illegal mining operators are well financed, use heavy equipment and illegal explosives, operate in medium-scale, and are protected by armed goons. There are allegations that some unscrupulous politicians, military officials, and businessmen are protecting these illegal mining operations.

Unregulated and illegal small-scale mining activity in the Philippines has been largely responsible for landslides, local conflict, pollution, and mercury poison-ing in many mining communities. Due to the considerable number of small-scale miners, these issues have contributed to the overall negative perception of the mining industry in the Philippines. ■

Philippines Small-Scale MinersSource: PSA Research

The reference-guidebook aims to help companies, staff, partners, and contrac-tors ensure that operations are under-taken in a manner that respects human rights and freedoms by providing them with a range of different modules and tools as guidance in decision-making as they operate in various sites across the globe.

The TVI Experience

On February 11, 2012, 40 managers and officers of Canadian mining firm TVI Philippines’ Balabag project site partici-pated in a VPSHR Seminar-Workshop conducted by Pacific Strategies and As-sessments (PSA) in Buug, Zamboanga Sibugay Province. TVI participants in-cluded geologists, community relations officers, pre-development managers, and mine site security officers. Team lead-

ers of the Philippine military’s Special Citizen Armed Force Geographical Unit Active Auxiliary (SCAA) unit deployed at the project site were also in attendance.

TVI’s Balabag project, which covers 52 square kilometers of land, is currently on the pre-development stage. VPSHR training is crucial for the Balabag pro-ject staff as the site is located in a high-risk area in western Mindanao amid the threat of kidnapping and insurgency. There is likewise rampant illegal small-scale mining in the area, the financiers and operators of which feel threatened by the entry of a large-scale mining com-pany such as TVI.

The daylong activity included a seminar on the VPSHR and specific discussions on the four modules comprising the VP-SHR Implementation Guidance Tools: stakeholder engagement; risk assess-ment; public security providers; and pri-vate security providers.

PSA discussed the importance of es-tablishing a transparent, cooperative, and two-way working relationship with identified stakeholders of the project site. The participants were also taught to identify and assess risks based on proba-bility and impact; and more importantly, on how to map out appropriate response and risk mitigation measures.

In the Philippines, government security forces, particularly the military’s SCAA units, have become part of the defense structure of a number of mining firms operating in the country due to unrelent-ing NPA attacks. As such, the seminar included discussions on the processes and plans for engagement with govern-ment security forces helping protect the project site.

The group also tackled ways on how to asses and address gaps arising from the limitations of public security providers in addressing the security requirements of a private entity. In line with this, PSA discussed the guidelines for deployment and conduct of government security forces to ensure that security measures in place do not violate local and interna-tional human rights protocols. ■

Resources TrainingResources Commentary

Continued from page 16>



Resources Training

Continued on page 22>

Site Group identified the old Expo site at Clark as the ideal location for its Philippines campus.

Company’s “Site” set on solving future training shortagesIn today’s competitive global market, it

is a case of survival of the fittest. You need to be a visionary- and Australian

company Site Group International has just that vision.

It is that vision which saw the company identify the potential in the former Phil-ippines Expo site at Clark and turn it into a state-of-the-art training facility in the Philippines.

It is that vision that saw Site Group rec-ognise the Philippines as an ideal hub location to service the training needs of the booming resource industries of the South East Asia Pacific regions.

Clark Training Complex

Site Group International took a 25+25 year lease over the former Philippine Expo site in 2009 and invested A$10 mil-lion transforming the 300,000 sq.m site into a Vocational Education Training (VET) campus with all inclusive on-site living facilities including kitchens, res-

taurant and bar, dining facilities, 24/7 health clinic and library.

Site Group registered its first intake of students in mid-2012, with students stud-ying courses covering; Air Conditioning and Refrigeration, HSE, IELTs (English), Camp Services, Welding and Boiler Mak-ing, and Auto/Heavy Diesel fitting.

The facility can cater for up to 1,300 students at a time. The campus has the capacity to be expanded to house 15,000 students.

Site Group International also recently entered an agreement with Monark Foundation allowing full access to the Monark Caterpillar (CAT) heavy ma-chinery fleet to be based at Clark for op-erator and mechanical training.

Under the proposed arrangement, the Clark facility has built the required ad-ditional workshops and facilities to pro-vide relevant training and equipment in partnership with industry.

The visionaries of Site Group Interna-tional have already begun working to-wards a viable skills training solution for the global shortage of trainees and op-erators in the heavy machinery sectors and is establishing a Heavy Machinery facility -in partnership with Monark- at Clark.

Now, building on the quality Vocational Training reputation it has built up at its Philippines base, Site Group Interna-tional is progressing into one of the big-gest growth areas in the global market at present- specialist oil and gas training.

Site Group has recognised the oppor-tunity in the global shortage of skilled oil and gas workers, particularly in the booming LNG projects powered by the Australian market.

CybaServices Acquisition

Site Group has recently built further on its Philippines offerings with the acqui-sition of the recruitment specialist Cy-baServices.

Site believes the combination of the two companies will create an increase in cus-tomer demand through increased access to appropriately skilled international candidates from jurisdictions such as India, Indonesia, Korea, China, Malaysia and the Philippines, who can be assessed and upskilled through Clark.

The Site Group campus can currently cater for 1300 students at a time.




Resources Training

Further Growth Opportunity

The acquisition of CybaServices comes hot on the heels of Site Group’s recent-ly completed acquisition of Sun Coast Training and Accreditation- a leading

Registered Training Organisation (RTO) on Australia’s East Coast.

Mr Vern Wills, Site Group International’s CEO said that the Clark Freeport Zone was an ideal location for the company’s training facility.

“This site offered low political risk, cost competitiveness and proximity to labour markets in Asia,” he said.

“We are also available to access experi-enced local trades personnel to assist Australian instructors to provide Aus-tralian and International quality assess-ment and gap training.”

Site Group International has additional Australian facilities in Perth, Gladstone, Landsborough and Darwin.

Site Group International is well placed to lead the workforce planning strategies and training initiatives to assist in pro-viding industry solutions. ■

BG Group has agreed to sell its 40% eq-uity interest in two gas-fired power gen-eration plants in the Philippines to its partner in the facilities, First Gen Corpo-ration, for net cash proceeds of US$360 million.

The sale and purchase agreement, com-pleted on signing, covers the 1000 mega-watt Santa Rita power plant and the 500 megawatt San Lorenzo power plant, both on the island of Luzon.

BG Group Chief Executive Sir Frank Chapman said: “The sale of our inter-est in these power generation plants in the Philippines is another step to realis-ing the planned release of $5 billion of capital in the next two years. This deal, along with strategic divestments already announced this year, will release some $3.6 billion from BG Group’s balance sheet.” ■

BG Group sells Philippines power plants

Heavy machinery training is considered a significant growth opportunity.



Philippines oil and gas explorer Gas2Grid has reported that it has secured its own rig to help it

overcome issues related to its onshore Cebu exploration program.

The company said it is taking advantage of the extensive drilling and rig manage-ment experience of its Chairman David Munns and drilling engineers Roger Swisher and Jerry Friesen to manage the rig and the ongoing drillng program.

Rig acquisition

Gas2Grid reported to shareholders that it has experienced extensive delays and cost overruns in Cebu using third party contractors and their equipment and in order to control operations and costs and to avoid unnecessary delays, it has purchased an 800 HP drilling rig (located in Taiwan) with the capacity to drill to 2,750 metres with 114 mm drillpipe. Rig

crews will be sourced locally in the Phil-ippines.

The company has estimated that the total cost for this rig, including refurbishment, will equate to the total cost of engaging an external contractor to drill the 3 ex-ploration wells it has planned on Cebu.

In addition, Gas2Grid has acquired a workover rig in the Philippines capable of setting surface conductor and surface casing as well as completing wells for production and conducting and worko-vers. This rig will be used for the Malo-los-1 workover and testing program.

Gas2Grid said it will now own two good drilling rigs, worth more than their ac-tual cost. It said this will prove extremely beneficial for appraisal and develop-ment drilling of oil/gas discoveries using equipment owned and operated by the company. In addition these rigs can also

be used for any other drilling opportuni-ties that may arise.

The company’s plan to drill three new exploration wells are at an advanced stage with the first well expected to spud by July 2012. The Philippine Department of Energy (DOE) has granted approval to drill the Jacob-1 well with the two other drilling applications (Gumamela-1 and Ilang-1) currently being processed. Landholder access agreements have been reached and will be signed imminently. A local contractor has been selected for civil works including access roads and site preparations.

Gas2Grid said that once site prepara-tions are complete the company plans on mobilising the workover rig to each site in order to set surface conductor and drill and set surface casing immediately prior to the company’s larger rig being mobilised to drill the wells to the deeper levels.

Workover

Workover opeations at Malolos-1 were suspended late last year when “junk” was encountered at the bottom of the hole precluding testing of the main oil bearing sandstone intervals.

The forward plan is to perforate and flow test the lower oil bearing sandstone intervals followed by the shallower sand-stone reservoir intervals that have been interpreted as being gas bearing, based on both the cased-hole and open-hole wireline logs. The company said the flow test results will not in any way influence either the well locations or the likely suc-cess of the its proposed three explora-tion wells. It said these three new wells are targeting different play types and the well locations have been determined based on good seismic control. ■

Oil & Gas Resources

Gas2Grid has acquired its own rig to undertake work on its oil and gas activities on the island of Cebu.

Gas2Grid takes Cebu drilling campaign into its own hands



Mineral Resources

Advertise in the Philippine Resources Journal,the country’s petroleum & mining magazine

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Good news continues to flowfor Galoc oil field partners

Oil & Gas Resources

The good news just continued to flow for Otto Energy and its JV partners in the Galoc oil field off

the Philippines coast during the second quarter of 2012.

Otto’s wholly owned subsidiary, Ga-loc Production Company, operator of the Galoc oil field offshore Palawan, announced on April 2 that production had restarted from the field following a planned shutdown for refurbishment of the Floating Production Storage and Of-floading vessel (FPSO).

The “Rubicon Intrepid” FPSO had un-dergone planned re-certification, mainte-nance, inspection and turret installation work during the shut-down period, with the most significant upgrade the installa-tion of a bow mounted, non-disconnecta-ble turret mooring system to replace the previous disconnectable system.

The upgrade of the FPSO mooring sys-tem is expected to increase the reliability and uptime of the FPSO and is a crucial component of infrastructure to enable the Galoc Joint Venture to move ahead

with a potential Phase II development of the field.

The Galoc joint venture commenced en-gineering design work in late 2011 for the extension of activities at Galoc and Otto says that work remains on schedule for the Final Investment Decision (FID) around mid-2012.

The scope of FEED work, to be under-taken prior to FID, includes detailed subsurface modeling of the reservoir, drilling and completion design, subsea engineering and tie-back design for new wells as well as joint venture financing considerations.

The FEED work is being undertaken in Perth, Western Australia, primarily, with support from Otto Energy’s Manila-based Galoc Production Company per-sonnel.

Acquisition of 3D Seismic

In addition to engineering and design works, another critical component of the work to add to Galoc’s field life is the ac-

quisition of 184 km2 of new 3D seismic data, which was completed in late 2011, covering the Galoc field and adjacent Ga-loc North exploration prospect.

The new 3D seismic will support the placement of Phase II wells in the res-ervoir and de-risk this major capital ex-penditure. In addition, it will also allow full evaluation of the Galoc North explo-ration prospect, which may realise fur-ther development opportunities for the Galoc field.

According to Otto’s Chief Executive Of-ficer, Gregor McNab, the recommence-ment of production at Galoc was a sig-nificant milestone for the field.

“Our congratulations to all Otto and Galoc Production Company staff for their countless hours in supporting this achievement, our thanks to all the con-tractors and their staff and also to the Philippines Department of Energy for their steadfast support.”

The refurbishment of the Galoc Floating Production, Storage and Offloading (FPSO) vessel is expected to provide future benefits.

Continued on page 30>



In mid May, Otto reported on further good Galoc news when it announced that new studies had led to an important in-crease in the Economic Ultimate Recov-ery (EUR) reserves for Galoc.

The 19.7% jump in Galoic’s Proven (1P) and a 3.5 per cent hikie in Proven and Probable (2P) reserves is seen as a sig-nificant benefit in Galoc Production Company’s plans for the Phase II devel-opment of the Galoc oil field.

The reserves upgrade came out of an annual review of Galoc’s remaining oil reserves conducted by independent con-sulting firm, RISC.

RISC attributed the increases in reserves to better than expected reservoir perfor-mance to date and an extension of field life due to higher prevailing oil prices. The Galoc oil field is expected to remain in production until approximately 2016

to 2018 on the basis of the existing two wells alone.

Otto Energy estimates Contingent Re-sources of 1.49 million barrels of oil equivalent (MMboe) (Otto share) at 2C level attributable to the Galoc Phase II development.

Mr McNab said the Galoc oil field con-tinues to be a key asset for Otto Energy, delivering valuable cashflow to fund fu-ture growth opportunities.

“These upgrades to our 1P and 2P re-serves confirm our ability to maintain production for several years to come and comes ahead of the anticipated approval for Galoc Phase II around the middle of this year.”

SC55 update

Otto Energy also had some good news to report on its SC 55 project area, in which it is in partnership with the world’s big-gest resources company, BHP Billiton.

Otto reported in late May that the Philip-pines Department of Energy (DOE) had approved an extension to the current Exploration Sub-Phase 4 of SC55 by 12 months.

BHP Billiton, Otto’s joint venture part-ner in and Operator of SC55, requested the extension in order to secure an ap-propriate ultra deepwater rig with spe-cialised well control equipment that will promote safe drilling operations on the proposed Cinco prospect within SC55. With ultra deepwater rigs in geat de-mand at present and hard to come by, it was felt an extension was necessary.

Otto said the timing of the commence-ment of drilling operations in SC55 is on hold until a rig has been secured.

It said it maintains its longstanding view that SC55 holds significant hydrocarbon potential and the company looks for-ward to seeing the drilling programme executed as soon as is safely possible. ■

Oil & Gas Resources


T

Brunel loc FP

Geothermal energy risk managementBy Fernando Penarroyo

Renewable Resources


November 2011 - January 2012www.philippine-resources.com

Philippine Resources 31

government and private sector. In other awards for 2011, safest mine awards went to TVI Resource D e v e l o p m e n t s for surface op-eration, Repub-lic Cement Bu-lacan for cement plant opera-tion, Apo Land and Quarry for quarry opera-tion, FCF Miner-als for explora-tion (category A), MRL Gold Surigao-Agusan for exploration (category B), Repub-lic Cement Norzagaray for mineral processing (cement category), TVI Resource Development for mineral processing (concentrator category), Apex Mining for mineral processing (extraction category) and Philippine

Mining Service for mineral process-ing (crushing plant category). Carmen Copper was cited for safest combined operation, Northern Cement for most improved safety per-formance and TVI Resource Develop-ment for safest mining operation. Awardees for the best mining for-

est program are Philex Mining’s Padcal opera-tions in the me-tallic category, Holcim La Union plant in the non-metallic catego-ry, MRL Gold’s Surigao-Agusan projects in the exploration cat-egory, with spe-cial awards for Apex Mining and Rio Tuba Nickel Mining for best nursery and best reha-

bilitation strategy respectively. PMSEA’s Pasasalamat Award was conferred upon former Mines and Geosciences Bureau director and De-partment of Environment and Natural Resources undersecretary Jerry Do-lino for his contributions to uplifting the Philippine mining industry. ■

Brunel Ovs FP

Mineral Resources

TVI Resource Development, represented by its president Eugene Mateo (second from right) and chief operating officer John Ridsdel (far right), won the award for the safest mining operation as well as safest mine awards for surface operation and mineral processing (concentrator categories). They received the awards from PMSEA president Louie Sarmiento (far left) and Mines and Geosciences Bureau director Leo Jasareno (second from left), with awards committee member Lita Lee (center) of Rapid City Realty and Development Corporation.

February - April 2012www.philippine-resources.com


Brunel Ovs FP

Renewable Resources

■


Fernando “Ronnie” Penarroyo is the managing partner at Puno and Penarroyo Law Offices (www.punopenalaw.com). He specializes in energy and resources law, project finance and business development.


Philippine Resources 33 30 Philippine Resources


2nd Page of BRUNEL

DPS 1/2 page AD

An interesting new player has entered the Philippines oil and gas explopration scene with the

news that little known company, the Viking Energy Group, is farming into the prospective SC54A offshore licence.

Fellow Australian company Kairiki Ener-gy announced recently that its subsidiary Yilgarn Petroleum Philippines Pty Ltd and SC54A Joint Venture partners, Nido Petroleum Philippines Pty Ltd, Trafigura Ventures III B.V. and TG World B.V.I Corporation had signed a Memorandum of Agreement (MoA) with Viking Energy to develop three oil fields in SC 54A. The MoA is subject to negotiation and execu-tion of a formal agreement between the parties.

The MoA outlines key commercial terms upon which a Farm-in Agreement will be subsequently negotiated by the end of June. The SC54A JV Participants have agreed to collectively assign a 60% equity in the permit in return for Viking Energy assuming Operatorship and carrying the Participants in three oil field develop-ments up until first oil.

Key commercial terms agreed under the MoA with Viking Energy include.:

* Viking to earn 60% equity interest in SC54 and assume operatorship.

* Viking to finance all expenditure to bring the Yakal, Tindalo and Nido 1X1 undeveloped oil fields into production.

* Production commencement target Q2 2013.

* Definitive Farm-in Agreement current-ly being negotiated.

* Viking financing of all required expend-iture associated with bringing the Yakal, Tindalo, and Nido 1X1 undeveloped oil fields into production will include the drilling of one well in each field;

* The final investment amount will be agreed between Viking and the Partici-pants on selection of the most appropri-ate technical and commercial solution; and

Oil & Gas Resources

Viking makes foray into the Philippines with SC54A farm-in


T

Brunel loc FP

Geothermal energy risk managementBy Fernando Penarroyo

Renewable Resources




government and private sector. In other awards for 2011, safest mine awards went to TVI Resource D e v e l o p m e n t s for surface op-eration, Repub-lic Cement Bu-lacan for cement plant opera-tion, Apo Land and Quarry for quarry opera-tion, FCF Miner-als for explora-tion (category A), MRL Gold Surigao-Agusan for exploration (category B), Repub-lic Cement Norzagaray for mineral processing (cement category), TVI Resource Development for mineral processing (concentrator category), Apex Mining for mineral processing (extraction category) and Philippine

Mining Service for mineral process-ing (crushing plant category). Carmen Copper was cited for safest combined operation, Northern Cement for most improved safety per-formance and TVI Resource Develop-ment for safest mining operation. Awardees for the best mining for-

est program are Philex Mining’s Padcal opera-tions in the me-tallic category, Holcim La Union plant in the non-metallic catego-ry, MRL Gold’s Surigao-Agusan projects in the exploration cat-egory, with spe-cial awards for Apex Mining and Rio Tuba Nickel Mining for best nursery and best reha-

bilitation strategy respectively. PMSEA’s Pasasalamat Award was conferred upon former Mines and Geosciences Bureau director and De-partment of Environment and Natural Resources undersecretary Jerry Do-lino for his contributions to uplifting the Philippine mining industry. ■

Brunel Ovs FP

Mineral Resources

TVI Resource Development, represented by its president Eugene Mateo (second from right) and chief operating officer John Ridsdel (far right), won the award for the safest mining operation as well as safest mine awards for surface operation and mineral processing (concentrator categories). They received the awards from PMSEA president Louie Sarmiento (far left) and Mines and Geosciences Bureau director Leo Jasareno (second from left), with awards committee member Lita Lee (center) of Rapid City Realty and Development Corporation.



Brunel Ovs FP

Renewable Resources

■


Fernando “Ronnie” Penarroyo is the managing partner at Puno and Penarroyo Law Offices (www.punopenalaw.com). He specializes in energy and resources law, project finance and business development.





The Philippines’ Department of Energy (DOE) has moved to assure the public, especially the citizens of Luzon, that there will be no impending brownouts in the said region given the scheduled shutdown of the Malampaya gas plant for seven-day main-tenance in July.

The DOE has met with the National Power Corporation, National Grid Corporation of the Philippines, and power generators to set up contingency plans that will not affect the power supply situation in Luzon as the plants running on Malampaya gas can also run on alternate fuels.

The DOE also started that the shutdown is scheduled in a month when power demand is expected to be at its lowest and other baseload facilities would have already completed their annual maintenance work.

The DOE said it is closely monitoring the situation to ensure that power supply will not be affected during the maintenance.

The DOE has welcomed the support provided by the Grid Management Committee under the Energy Regulatory Commission, the National Grid Corporation of the Philippines, and all power plants and distribution utilities that have heeded the DOE’s call to come together to establish the annual Grid Operation and Maintenance Program which allows for better coordination and timing for regular maintenance works to ensure continued power supply. This program ensures that there is proper scheduling of all planned activities in generation or transmission guided by practices and structures set by industry players. ■

*Viking will receive a preferential pro-portion of the net cash flow generated from SC54A until such time as it has re-covered in full its capital expenditure in the project.

DEVELOPMENT STRATEGY

Kairiki announced that Viking is plan-ning to bring the Yakal and Tindalo discoveries into production in the first instance followed by Nido 1X1 at a later stage.

Viking plans to utilise cost-effective off-shore production and storage facilities consisting of a mobile offshore produc-tion unit (“MOPU”) and a FSO/Storage Tanker moored to a CALM Buoy to com-mercialise the three oil fields.

The SC54A JV Participants and Viking will work in collaboration with Off-shore Production Solutions (“OPS”) and Thome Oil & Gas (“TOG”) on the project, whereby OPS will provide offshore pro-duction facilities under bareboat charter arrangements on competitive market terms to be agreed; and TOG will provide operation and maintenance services for the offshore production facilities under an operation and maintenance agree-ment on competitive market terms to be agreed.

It is anticipated that the first field will be brought into production by the sec-ond quarter of 2013, subject to relevant approvals from third parties, and the Department of Energy of the Republic of the Philippines; and the availability of rig and production facilities.

Viking Energy

Viking Energy Group is a private E&P Company focusing on the development and monetisation of offshore oil and gas fields in Africa and Asia using cost-ef-fective offshore production and storage facilities developed and operated in col-laboration with the Thome Group.

The Viking Energy Group currently has operated interests in two oil fields that will be brought into production at 24,000 bbl/d during 2013.

Viking Energy Group is seeking to ex-pand its portfolio of assets with the ob-jective to reach a net production of 50,000 bbl/d in the next three to five years. ■

Contingency Plan in Place During Malampaya Maintenance


Oil & Gas Resources



Forum raises funds and receives update for SC72 programUK-headquartered Forum Energy plc’s subidiary Philippines Holdings Limited has reached an agreed on an increase in its existing loan facility agreement with Philex Mining Corporation to help fund new work in its SC 72 oil and gas licence.

The Facility has been increased from US$10 million to US$15 million and will assist in funding Forum’s working capital requirements, in particular in the planning stages of the second sub-phase of the work programme for SC72, the company’s principal asset.

Philex Mining Corporation is the par-ent company of Forum’s two principal shareholders, Philex Petroleum Corpo-ration and FEC Resources Inc, and is therefore a related party of the company.

Forum’s Executive Director, Andrew Mullins, said the increase in the Facility to US$15 million was set on the same at-tractive terms as the original Facility an-nounced on 24 November 2010,.

“The Facility will enable the Company to move forward with planning the SC72 drilling programme. As previously an-

Oil & Gas Resources

nounced, we will continue discussions with our major shareholders, our joint venture partner and our advisors to de-termine how the full SC72 drilling pro-gramme will be funded. We look forward to releasing further updates as appropri-ate,” Mr Mullins said.

Forum Energy plc’s wotk program for Service Contract 72 licence area includes studies on previously acquired seismic data.

The company recently reported it had received a report by Weatherford Petro-leum Consultants on the interpretation of new 3D and 2D data acquired over SC72 in 2011.

During 2011, 2,202 Line-Km of 2D seismic data were acquired over SC72 in order to further define additional leads already identified, and 565 Km2 of 3D seismic data were acquired over the Sampaguita Gas Field in SC72.

Better understanding

Forum said Weatherford’s interpretation of these surveys has given its directors a better understanding of the Sampaguita Gas Field and identified a prospect in the North Bank which is located to the north of Sampaguita within SC72. In addition, the report has identified a number of po-tential drilling locations.

The company’s chairman, Robin Ni-cholson, said the Weatherford Report shows an improvement in the resources previously known and supports the case to proceed with the SC72 drilling pro-gramme.

“We will continue discussions with our major shareholders, our joint venture partner and our advisors to determine how the SC72 drilling programme, which we anticipate will cost a total of US$75 million, will be funded.” ■



PHILIPPINE MINING CLUB FP

BHP deal and Galoc keeping Otto busy

Oil & Gas Resources

BHP Billiton has sealed a deal to ac-quire a 60 percent stake in an oil prospect offshore Palawan from

Otto Energy. The giant takes over as operator of Service Contract 55, which covers 9,000 square ki-lometers in the southwest Palawan basin. The US$7.3 million deal finalizes the earlier decision by BHP Billiton to exercise its farm-in option on the block. Otto Energy’s stake falls to 33 percent from the original 85 percent. Trans-Asia Oil and Energy Develop-ment has 7 percent of the service contract. The consortium plans to dig an explo-ration well in the area by April next year. “2012 is an exciting year for Otto Ener-gy shareholders as we prepare for drilling of the Cinco prospect in service contract 55 during the second quarter,” said Otto En-ergy chief executive Gregor McNab. “More importantly, there is a depth of opportunity beyond this first well in our acreage portfo-lio that provides ongoing exploration and development potential,” McNab said.

The Cinco prospect has an estimated oil and gas potential of 7.4 million barrels of oil. Otto Energy and its partners are also eyeing another area in service contract 55, the Hawkeye prospect. Drilling costs for the Hawkeye prospect will also be shoul-dered by BHP Billiton. Overall, SC55 is estimated to have a potential of 19 trillion cubic feet of gas and 670 million barrels of oil. McNab said the area “has seen little historical offshore exploration drilling, and no deepwater offshore drilling has oc-curred to date. This is an exciting new fron-tier that has significant scale and potential sitting between proven oil and gas fields.” Otto Energy’s Galoc Production, operator of the Galoc oil field off Palawan, anticipates a substantial rise in production there after a three-month upgrade of the floating, production, storage and off-load-ing vessel deployed in the area. “The upgrade... is expected to substan-

tially increase the reliability and uptime of the FPSO and is a crucial component of in-frastructure to enable the Galoc joint ven-ture to move ahead with a potential Phase II development program,” said a Galoc Pro-duction statement. The vessel, with a storage capacity in excess of 400,000 barrels, is being upgraded in Singapore and will return to the Philippines towards the end of the first quarter of 2012. Production at Galoc will resume after the ves-sel’s return and reconnection. The field has estimated reserves of about 10 million barrels. Galoc started producing crude oil in October 2008 at 18,000 barrels per day to become the first major field since the 1990s to come onstream in the under-explored Philippines. It suffered a number of disruptions, some of them triggered by bad weather. The field life is expected to range from two to six years from 2008, depending on the reservoir performance. ■



Environmental Resources

■

Lake Caliraya, a man-made lake built in 1940s to supply water to the Caliraya Hydroelectric Plant, now hosts a number of resorts.



MRL

HP HORIZONTAL AD

Copper Development Corporation (CDC) has reported some significant new high grade

intersections from drilling at its Basay Southeast Deposit within its Basay Project area on Negros Island.

CDC said that assay results from drill holes BSM047 to BSM050 at the Basay Project are extending areas of known mineralisation at depth, and particular-ly along strike to the east of the major Southeast deposit.

The company reported that Hole BSM047 was drilled on section 16925mE toward the south to test the western ex-

tension of the high grade zone within the Southeast deposit at a shallow plunge. The hole intersected 174 metres at 0.62% Cu from 156 metres.

The company believes this hole confirms that the high grade zone encountered in previous hole BSM041 located 75 metres to the east, that intersected 271 metres at 1.0% Cu from 357 metres (0.25% Cu cut-off) is likely to extend to the west and below BSM047.

CDC said this high grade shoot lies at the intersection of the northwest strik-ing Northwest-Central mineralised zone and the ENE striking Southeast mineral-

ised zone and is sub-vertical. The shoot is largely composed of intensely stock worked hypothermal quartz veins host-ed by potassic biotite altered andesite in-truded by mineralised diorite dykes. Fur-ther drilling will be required underneath and down dip of BSM047 to investigate this high grade shoot.

CDC also reported that Hole BSM050 was drilled from north to south beyond the eastern most section of the main Southeast ENE striking mineralised zone to investigate a north-eastern offset of the Southeast deposit. The hole inter-sected 111 metres at 0.51% Cu from 51

Mineral Resources

CDC hits good copper intersections at Basay Project


BHP deal and Galoc keeping Otto busy

Oil & Gas Resources

BHP Billiton has sealed a deal to ac-quire a 60 percent stake in an oil prospect offshore Palawan from

Otto Energy. The giant takes over as operator of Service Contract 55, which covers 9,000 square ki-lometers in the southwest Palawan basin. The US$7.3 million deal finalizes the earlier decision by BHP Billiton to exercise its farm-in option on the block. Otto Energy’s stake falls to 33 percent from the original 85 percent. Trans-Asia Oil and Energy Develop-ment has 7 percent of the service contract. The consortium plans to dig an explo-ration well in the area by April next year. “2012 is an exciting year for Otto Ener-gy shareholders as we prepare for drilling of the Cinco prospect in service contract 55 during the second quarter,” said Otto En-ergy chief executive Gregor McNab. “More importantly, there is a depth of opportunity beyond this first well in our acreage portfo-lio that provides ongoing exploration and development potential,” McNab said.

The Cinco prospect has an estimated oil and gas potential of 7.4 million barrels of oil. Otto Energy and its partners are also eyeing another area in service contract 55, the Hawkeye prospect. Drilling costs for the Hawkeye prospect will also be shoul-dered by BHP Billiton. Overall, SC55 is estimated to have a potential of 19 trillion cubic feet of gas and 670 million barrels of oil. McNab said the area “has seen little historical offshore exploration drilling, and no deepwater offshore drilling has oc-curred to date. This is an exciting new fron-tier that has significant scale and potential sitting between proven oil and gas fields.” Otto Energy’s Galoc Production, operator of the Galoc oil field off Palawan, anticipates a substantial rise in production there after a three-month upgrade of the floating, production, storage and off-load-ing vessel deployed in the area. “The upgrade... is expected to substan-

tially increase the reliability and uptime of the FPSO and is a crucial component of in-frastructure to enable the Galoc joint ven-ture to move ahead with a potential Phase II development program,” said a Galoc Pro-duction statement. The vessel, with a storage capacity in excess of 400,000 barrels, is being upgraded in Singapore and will return to the Philippines towards the end of the first quarter of 2012. Production at Galoc will resume after the ves-sel’s return and reconnection. The field has estimated reserves of about 10 million barrels. Galoc started producing crude oil in October 2008 at 18,000 barrels per day to become the first major field since the 1990s to come onstream in the under-explored Philippines. It suffered a number of disruptions, some of them triggered by bad weather. The field life is expected to range from two to six years from 2008, depending on the reservoir performance. ■



Environmental Resources

■

Lake Caliraya, a man-made lake built in 1940s to supply water to the Caliraya Hydroelectric Plant, now hosts a number of resorts.





Mineral Resources

metres depth, from a shallow plunging drill-hole. Previous drilling and further recent mapping in this area indicated that a north-south striking fault has off-set the Southeast deposit.

The company said this hole has intersect-ed significant mineralisation east of the truncating fault and establishes the pres-ence of a new extension of the deposit. Further drilling is now planned to cover the area to the east which may extend for at least 750 metres, based on analysis of the ground magnetic survey.

CDC said the drilled portion of the Southeast mineralised zone is now one kilometre in length and remains open at depth and to the west and east. Four drill rigs are now drilling the extensions and depths of the Southeast deposit, which looks highly prospective.

“Hole 50 is highly significant, as it is a new discovery of the eastern extension of the Southeast Deposit in an area that had never been previously drilled,” Mitch Al-land, CDC’s Executive Chairman stated.

“This extension, based on magnetic sig-nature, has the potential to double the resource at the Southeast Deposit. Also, Hole 47 at the Southeast Deposit, with its long, high grade intersection of 0.62% copper, is an important demonstration of the previously unknown extension of this deposit at depth along its west-ern edge, which has the potential to add more substantial tonnage to our resourc-es at Basay. “

Central Deposit

However, CDC had far less success at its Central Deposit where Drill hole BSM048 was drilled from north to south in the shallowest part of the Central de-posit and failed to intersect any signifi-cant mineralisation thus closing off the upper part of the mineralised zone.

The company is considering a new in-terpretation has been developed for the Central deposit which suggests that there is likely to be more mineralisa-

tion in the deeper parts of the Central deposit, particularly to the east and sub-parallel to the Southeast deposit. Further deep drilling has been designed to test at depth this outcropping area of broad phyllic alteration and low grade miner-alisation.

Northwest Deposit

CDC has also reported that additional results have been received for drill hole BSM049, which was drilled in the North-west deposit.

Drill hole BSM049 was drilled within the Northwest mineralised corridor and intersected 150 metres at 0.16% Cu from 207 metres, which appears to close off the significant mineralisation to the northwest in the Northwest deposit. The company said further interpretation of these results is required in context of the widespread phyllic alteration.

Ongoing Exploration Programme

The company announced it has designed a new step out and exploration drill-ing programme, within the scope of the 44,000 metres of drilling planned at Ba-say for 2012, to test several co-incident geochemical and geophysical anomalies, as well as the depth and strike exten-sions of the known mineralisation. In addition, the company said it intends to twin several shallow historic holes in the Bunkville area, which intersected super-gene copper mineralisation, with a view to establishing a resource in this area. The following immediate drill targets have been identified:

1. Northeast Extension - This is the ex-tension of the Southeast deposit, which has been confirmed by the intersection from drill hole BSM050. Initially two step out holes are planned to test the strike extension for another 300 metres.

2. Pipe Target - This prominent IP anom-aly, which is coincident with a strong structure identified by magnetic surveys, occurs beneath lateritic cover, which is anomalous in copper and molybdenum, and is located near the most south east-ern point of the Southeast deposit. This

is a well-defined, pipe-shaped structure as determined by the IP anomaly and is a priority target for the discovery of previ-ously unknown mineralisation.

3. South Bunkville - This is another prominent IP anomaly similar in shape and size to the Pipe Target and it also occurs under lateritic cover. This target is also coincident with a copper and mo-lybdenum soil anomaly. The target will be tested initially with one diamond drill hole.

4. Bunkville Laterite - Historic drill-ing at Bunkville encountered several intersections of shallow supergene cop-per mineralisation, some of which was mined during previous operations. The Company intends to twin these historic holes using reverse circulation (RC) drill-ing methods to determine rapidly the vi-ability of this supergene copper deposit. If the initial holes are successful then the lateritic cover will be grid drilled at 200 metres spacing in hopes of developing an additional supergene copper resource at relatively low cost.

5. Northwest Extension and other Geo-chemical Targets - The Company current-ly has a team of mappers and samplers who are conducting ground verification of the large areas of anomalous copper and molybdenum, particularly the area along strike of the Northwest deposit. Any areas found to contain significant mineralisation or alteration may be drilled in the future.

6. Southeast Depth Extension - The highly successful drill hole BSM041 con-tains the best and deepest intersection to date at the Southeast deposit and the Company’s strategy is to target this ex-tension as it is the most likely to deliver large tonnages of high grade resources. The mineralisation is still largely con-tained within potassic altered andesite and narrow quartz diorite dykes. The tar-get is the source intrusive at depth, which feeds the system currently being drilled. Several deep drill holes up to or exceed-ing 1 kilometre in depth are planned. In addition, the Southeast deposit remains open to the west and this extension will also be targeted at depth.




7. Nabore Depth Extension - The Nabore deposit, which was previously tested by the highly successful drill hole BSM015, encountering 131 metres of 0.95% Cu including 14.3 metres of 5.47% Cu, is still open at depth and to the east and several drill holes are planned to test the extensions of this resource.

“Overall, we have completed an in depth review of all new geo-logical information and have used sophisticated techniques to identify new drill targets that show promise to be major exten-sions at depth and on strike of known resources,” Mr Alland said.

“In addition, areas of known supergene copper mineralisa-tion are targeted which may potentially add easily mineable resources to the overall project. With these new targets and ongoing growing knowledge of the geology of Basay, we feel that the next two months of drilling will be highly productive in our goal of realising these deposits as a major, world class copper project.” ■

ENK plc has announced the sale of its 5.01% interest in London AIM listed Toledo Mining Corporation (TMC) for US$698,000 in cash and the conditional sale of its

18.7% interest in Berong Nickel Corporation (‘BNC’) for $6,552,000 in cash to World Fund Pte Limited. Both assets were considered non-core by the Directors. The Company’s interest in BNC was held in the accounts at $3.48 million.

The total proceeds from the sale of $7,250,000 will further strengthen the Company’s working capital position.

The sale of the BNC shares is conditional upon the other share-holders of BNC, being TMC and Atlas Consolidated Mining Corporation (‘Atlas’) not exercising their pre-emption rights. In the event TMC or Atlas decide to exercise their pre-emption right they have to match the price offered by World Fund Pte Limited. Atlas and TMC have 60 days to exercise their pre-emp-tion rights.

Berong Nickel Corporation owns the Berong mining tenement on the island of Palawan, Philippines. It has a JORC resource estimate compiled in June 2007 of 9.92 m. tonnes of laterite ore at a 1.55% nickel grade. The estimate includes ore mined and shipped since the resource was calculated. ■


ENK looking to sell Berong Nickel Interest

MIneral Resources



The Philippines’ Department of Energy (DOE) has received strong interest in a new bidding round

with 69 bids received for 38 coal areas across the country.

Headed by the Chairman of the DOE Re-view and Evaluation Committee (REC), Undersecretary Jay Layug, the DOE opened 69 bids from various compa-nies who expressed interest in investing in coal exploration in the nation in the fourth Philippine Energy Contracting Round (PECR4) for coal that was com-pleted on 30 March 2012.

The DOE said the opening of new bids has clearly shown increased private com-

panies’ interest to invest in exploration and development of indigenous coal re-sources in the Philippines from the pre-vious years. This development will, once commercial production occurs, further reduce the country’s dependence on im-ported coal and will consequently result in dollar savings arising from decreased coal importation.

The DOE reported there were multiple bids in certain coal areas, particularly Ar-eas 18-A and 18-B in Bislig and Lingig, Surigao del Sur, which the DOE considers as the most prospective in coal resources.

The Department said areas that did not receive any bids in PECR 4 will be offered in the next contracting round.

Mineral Resources

Some old and new players have submit-ted applications including PNOC Ex-ploration Corporation, Semirara Min-ing Corporation, Benguet Corporation, Blackstone Mineral Resources, Inc., Altu-ra Mining Phils. Inc., South Peak Coal Resources, Inc., Superfine Mines and Minerals, Inc., Empire Asia Mining Corp. The DOE expects to award the winning bidders their coal operating contracts within 150 days from the opening of the applications.

“The number of applicants is overwhelm-ing and is obviously a testament to the confidence of investors in the Aquino administration,” Undersecretary Layug said.

DOE receives strong interest in coal mining offering


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Monark boosts support for mining Brunel, Site Works team up

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“We look forward to harnessing our indigenous coal resources to reduce our reli-ance on imports.”

Currently, the country imports 70% of its coal requirements and only 30% comes from local sources. Coal accounts for 25% of the country’s energy mix. It is per-ceived that the continuous conduct PECR will optimise the exploration and devel-opment of local coal that will contribute to the attainment of the country’s pursuit of 60% energy self-sufficiency.

The Philippine government has been encouraging the private sector to participate in its energy independence program that aims to increase the country’s self-suffi-ciency level to 60%. Through intensive coal exploration, the DOE hopes to find additional reserves to meet growing energy demand. ■

Australian based miner Mindoro Resources Ltd is planning a major restructure of its Philippines

assets, including the spin-out of its key Philipinnes gold and copper-gold assets.

Mindoro’s Batangas gold projects, in-cluding Archangel and Lobo, and the Tapian San Francisco (TSF) copper-gold properties near Surigao, will come under the control of ASX listed Red Mountain Mining Ltd. The parties have signed a non-binding, conditional term sheet in relation to these aspects. The considera-tion for the sale of the assets is shares in Red Mountain payable to Mindoro in two tranches as follows:

i) 100 million initially non-voting shares at nominal A$0.10 per share on comple-tion of the transaction; and

ii) 50 million “Performance Shares” at a nominal A$0.10 per share to convert to non-voting shares based on upgrading the Indicated Resource at Batangas to 600,000 ounces of gold and completing a scoping study that demonstrates a vi-able gold project based on over 50% of the indicated resource within 12 months of completing the transaction, which the parties will use their best endeavors to achieve. The Performance Shares are cancelled after 12 months if the above objectives are not achieved.

Mindoro President and CEO, Jon Dug-dale, said the separation of the key gold and copper-gold assets of the company from the advanced Agata nickel project provides the opportunity for optimal val-ue recognition of these assets in today’s equity marketplace.

“This is why the Board and Management of Mindoro supports this proposed spin-out of the Batangas and TSF gold and copper-gold projects into the gold min-

ing and exploration focused Red Moun-tain. Red Mountain’s mining expertise and funding with the Mindoro team’s exploration and community engagement track record, is a great combination.”

Red Mountain had approximately A$5 million in working capital at the end of March 2012.

Upon completion of the transaction Mindoro President and CEO Jon Dug-dale will become an Executive Director of Red Mountain and Mindoro’s Vice Chairman Howard Walker will become a non-executive Director of Red Moun-tain. Red Mountain and Mindoro con-template that within nine months of completion of the transaction Jon Dug-dale will transition to the role of Manag-ing Director of Red Mountain and that Neil Warburton will become a Non-Ex-ecutive Chairman. It is anticipated that Mindoro will have made the transition to a nickel development company within this nine month period.

As part of the transaction Red Moun-tain will provide a secured draw-down facility for up to A$1 million to enable

Mindoro to commence drilling, focused on delineating the high-grade “feeder” structures below the Kay Tanda resource at Archangel, Batangas.

Mindoro and Red Mountain are continu-ing with a due diligence period and an-ticipate signing a binding agreement on or before June 15th, 2012


Mineral Resources

Mindoro unveils spin-out of golden Philippines assets



The sale of the Batangas and TSF pro-jects to Red Mountain will require ap-proval by Mindoro shareholders. Ma-terials have been dispatched regarding the sale for consideration and vote at the Mindoro Annual General Meeting, to be held June 27th, 2012 in Calgary, Canada, and to be video-linked from Melbourne on June 28th. Red Mountain shareholder approval for the transaction will also be required in addition to various regulato-ry approvals including by the TSX Ven-ture Exchange.

Agata Nickel Project Strategic Partnership

Mindoro said it believes the spin-out of Mindoro’s key gold and copper-gold assets will allow the company to focus

on completing the Agata Nickel Project (ANP) strategic partnership to advance the project to development and produc-tion in two stages.

The ANP includes a 42Mt @ 1.01% Ni (430,000t Ni) Measured and Indicated Resource and a 35.4Mt @ 1.03% Ni (365,000t Ni) Proved and Probable Re-serve.

The company said it is aiming to es-tablish a strategic funding partnership to accelerate a two-stage development strategy including stage 1 direct ship-ping ore (DSO) production and stage 2 hydro-metallurgical processing to defini-tive feasibility study (DFS).

The company said it is in advanced dis-cussions with a group aiming to secure a strategic stake in the ANP through providing funding to establish DSO pro-

Leading global miner Gold Fields Limit-ed has announced it has exercised its 40% option in the gold-copper Far Southeast Project in the Philippines after recently making a US$110-million payment.

On 20 September 2010 Gold Fields en-tered into two option agreements with Lepanto Consolidated Mining Company

(Lepanto), 60% owner of Far Southeast, and Liberty Express Assets (Liberty), 40% owner of Far Southeast, granting Gold Fields an option to acquire a 60% interest in Far Southeast for a total con-sideration of US$340-million.

After making two down-payments of US$44-million and US$66-million in Sep-tember 2010 and September 2011 respec-tively, Gold Fields has decided to bring forward half of the remaining US$220-million payment to acquire Liberty’s 40% interest in Far Southeast.

Gold Fields said it continues to hold its option to acquire an additional 20% stake in Far Southeast from Lepanto for a fur-ther US$110-million, which, if exercised, would increase its total interest in Far Southeast to 60%.

The Liberty and Lepanto options were initially granted to Gold Fields for the

later of 18 months from signature in Sep-tember 2010 or the date of receiving a Financial or Technical Assistance Agree-ment (FTAA) for the project. A FTAA licence allows a foreign corporation to control a majority interest in a Philip-pine mining project.

Notwithstanding this provision, Gold Fields has the discretion to exercise ei-ther option prior to the FTAA being granted. Gold Fields has decided to exer-cise the Liberty option earlier than origi-nally planned due to the fact that:

Gold Fields’ Chief Executive Officer, Nick Holland, said the due diligence results to date are positive and demon-strate significant upside to the resource potential.

The company also stated that by acquir-ing ownership of 40% it demonstrates its

duction and complete pilot testing and a DFS into a hydrometallurgical acid–leach processing operation.

Mindoro said it believes the demand for nickel laterite DSO from the Philippines has been positively impacted since Indo-nesia has moved to restrict direct ship-ping of unprocessed nickel laterite ore from 2013.

The Agata DSO scoping study will be up-graded to a feasibility study and permit-ting will be upgraded from the current Environmental Compliance Certificate (ECC) to Declaration of Mining Project Feasibility once strategic partner financ-ing and offtake agreements are finalised.

Mindoro is working with its financial advisor,Deloitte Corporate Finance Pty Ltd with the objective of reaching pre-liminary agreement in the near future. ■


Gold Fields takes up option on Far Southeast

Gold Fields CEO, Nick Holland. Continued from page 46>

Mineral Resources



commitment to the project and formalises its partnership with Lepanto and that the early exercise of the Liberty option does not affect the remaining 20% Lepanto option, which continues to be exercisable in accordance with the terms of the agreement.

The FTAA application for the Far Southeast project was filed in November 2011 and based on the date of the filing Gold Fields expects it could be granted in the second half of 2012. Gold Fields also expects to have a maiden Resource statement for Far Southeast and commence a pre-feasibility study later this year.

“We are extremely pleased that we now own a 40% interest in Far Southeast, not just an option. The positive drilling results have given us the confidence to show our commitment to the project and the Philippines,” Mr Holland said.

Far Southeast is located in the northern part of Luzon Island. The project is situated in an existing mining camp in close prox-imity to two other mines historically operated by Lepanto, one

Continued from page 44>of which is currently in production. Far Southeast has ready access to established infrastructure, including roads, tailings facilities, power and water. The existing workforce on the doorstep of Far Southeast is part of a community established around mining over the past 70 years.

FAR SOUTHEAST

An intensive underground grid drilling program of a total of 75 drill holes equivalent to 38 kilometers was undertaken un-til 1986. In addition, underground level drives covering 7.6 kilometers were accomplished for exploration. The results defined the gold-rich porphyry copper deposit. During the same period, extensive metallurgical tests were conducted on the diamond drill core samples. Rock mechanics, hydrogeo-logical and geothermal studies were accomplished. The open-ing of a test stope was also undertaken.

In 1987, the Far Southeast Gold Resources, Inc. was organised as a joint venture company of Lepanto Consolidated Mining Co. and Galactic Resources Ltd. to develop the FSE deposit.

A feasibility study by J.S. Redpath Corporation and Kilborn Engineering was completed in March 1988 which yielded positive results. Several updates were done during the suc-ceeding years. However, due to depressed metal prices in the early 1990s, the project did not proceed.

An additional 39 holes were drilled from 1987 to 1994 which is equivalent to 14 kilometers of drilling to enhance the mineral resource and ore reserve of the deposit bringing the holes drilled to 114 or an equivalent of 52 kilometers.

The Lepanto mine site is located in the municipality of Man-kayan, Province of Benguet, in the island of Luzon. It is ap-proximately100 km by road north of Baguio City. ■

Mineral Resources



The Philippine Mining Club’s February luncheon featured a special presentation from the head of OceanaGold.

Mick Wilkes, the company’s Managing Director and CEO, flew in to Manila from Auckland, New Zealand to speak at the Philippine Mining Club Luncheon about OceanaGold’s gold/copper project at Didipio.

In June 2011 OceanaGold commenced construction of the high grade gold copper Didipio Project located in Luzon, northern Philippines. The project is expected to be commissioned in Q4 2012. The February 10th Luncheon attracted 280 people to hear first hand Mr Wilkes description of the progress of the Didipio project. ■

Gil Maglague of OceanaGold Corp and Ian Lewis of QED.Mining Club Luncheon Key Note speaker, Mick Wilkes, MD & CEO of OceanaGold.

Ian Porter, Country Manager of Cardno with the Mining Engineer students that Cardno Sponsor to the Luncheon.

OceanaGold MD flies in for Luncheon

MIneral Resources



Mineral Resources



The Philippine Mining Club had a record crowd of 360 in attendance at its April 20th Luncheon when Brett Mattison, President and CEO of Gold Fields Philippines Corporation presented an excellent talk and presentation on the companies JV with Local miner Lepanto Mining corporation.

The JV’s the project, Far Southeast, is located in the northern part of Luzon, the largest island in the Philippines. The project is situated in an existing mining camp in close proximity to two other mines historically operated by Lepanto, one of which is cur-rently in production. Far Southeast has ready access to established infrastructure, including roads, tailings facilities, power and water. The existing workforce on the doorstep of Far Southeast is part of a community established around mining over the past 70 years. ■

Record crowd hears Far Southeast update from Gold Fields ceo

Brett Mattison provided an interesting update on Gold Fields’ activities.

Freddie Carlson, Scania, Cecilia Pa-mular of Philppines Resources.

Ian of Cardno, Gavan Collery, VP Indophil and Johan Raadsma of CGA.

Rocky, Ronald (COMP), Former Amb. Delia Albert, Agnes, Nyamande-Pito South Africa Ambassadot and Redempta of Philex and friends.

The ladies get on stage with the Ambassador.

Taguig City Motorists are benfitting from the latest in modern, solar-powered light-ing technology following the completion of a major Department of Energy (DOE) supported project at the Boni Tunnel.

The Department of Energy recently led the inauguration of the installation of so-lar-powered light emitting diodes (LEDs) along the Boni Tunnel, in a development which is expected to ease the travel of motorists going to and from Boni Av-enue via Boni Tunnel.

Boni Tunnel is a 297.20 meter-long tun-nel that traverses EDSA in Mandaluyong City along Boni Avenue. The area’s old lighting system is composed of a mix of tubular fluorescent lights (T12) and high pressure sodium (HPS) lamps. This was not only dim but also poses security risks to public and private vehicles. It is ex-pected the new lighting system will nmay reduce the utility cost, averaging about PhP 570,640 per annum, and a total pow-er demand of 6.58kW.

In declaring that it was high time that the lights in the area were changed, the DOE said the new LEDs are ideal for illuminating roadways inside the tunnel due to their optical efficiency, distributing light in areas where it is most needed, providing an effec-tive tool to eliminate socio-economic hazards such as criminality and vehicular accidents.

The service life of the LED Master Lamps is about 30,000 hours and can save up to P240,000 a year in electricity expenditure for Mandaluyong City. The grid-interactive photovoltaic system with a capacity of 6,400 Wp will power the 188 tubular LEDs along Boni Tunnel.

Energy Secretary, Jose Rene D. Almendras, said the use of energy efficient lighting systems (EELs) in the local government units (LGUs) created savings on electricity expenditure.

“It is very important for us to continuously moderate electricity consumption. In reducing consumption, we also lessen our car-bon footprints effectively contributing to the solutions towards the issue of climate change,” he said.

In May 2011, a Memorandum of Agreement (MOA) was signed by and among the DOE, Department of Public Works and High-ways (DPWH), Metropolitan Manila Development Authority (MMDA), Mandaluyong City LGU, PNOC Renewables Corporation (PNOC RC), and Philips Electronics and Lighting, Inc. (Philips) to showcase a public-private partnership model where the cost and responsibilities for implementation were shared among the partners.

The Asian Development Bank (ADB) provided the lithium batteries and other accessories for the solar power assembly. ■

Solar Powered LEDs To Light Boni Tunnel

Inauguration and Turnover Ceremonies: Boni Tunnel Solar-Powered LED Lighting. New Horizon Hotel, Mandaluyong City). Department of Energy Secretary Jose Rene D. Almendras hands in the Deed of Donation to Mayor Benjamin C. Abalos, Jr. to formally transfer the ownership, maintenance, and administration of the First Solar-Powered LED Lighting System located along the Boni Tunnel, Boni Avenue corner EDSA, to the Local Government of Man-daluyong City.

Mineral ResourcesMay - July 2012www.philippine-resources.com


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Philippine Mining Club Luncheon 49


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Philippine Resources at PEEF event in Manila

Philippine Resources will be reprsented by Cecilia Pamular at the PEEF event in Manila.

Philippines Resources will be participating as an exhibitor at the 3rd Philippine Energy Ef-ficiency Forum (PEEF) when it is staged at the SMX Convention Centre in Manila on 10th of July 2012.

Organisers are forecasting that PEEF will at-tract at least 500 delegates with upwards of 70 booths showcasing energy efficient technolo-gies and solutions. The 3rd Philippine Energy Efficiency Forum

(PEEF) will have a central theme that aims to address the challenges of energy security and climate change via energy savings and decar-bonisation of electricity supply. Efficiency improvements in the electricity sector have the potential for big savings in total power use and large reductions in Green House Gas (GHG) emissions. However, improvements in energy efficiency can be hindered by: lack of knowhow to recognize and achieve potential savings; low priority relative to other costs for many users; significant upfront cost subsidies and un-priced externalities such as climate change.

The 3rd PEEF in Manila will discuss topics on energy efficiency technologies, energy policies and consumer education that need to be integrated across the electric power sector value chain to improve energy security, enhance global competitiveness and accelerate economic growth. The forum gathers business leaders, energy experts and policy makers to share in their insights on the potential as well as identify the key drivers for energy efficiency within the electric power sector value chain- generation, grids, commercial, residential and industrial use of electricity.

Now on its third year, PEEF aims to sustain energy efficiency initiatives and activities started during its first two runs, spearheaded by the European Chamber of Com-merce of the Philippines (ECCP) together with its partner - the International Finance Corporation (IFC) and founding sponsors Schneider Electric Philippines, Pilipinas Shell Petroleum Corporation, Philips Electronics & Lighting, Inc., First Gen Corpora-tion and Manila Electric Company (Meralco) among others. The format for the PEEF 2012 is designed to be compact and comprehensive, to cover various topics in energy efficiency. It has the following components:

Plenary Sessions

Energy Efficiency in the Power Generation Sector (Bringing Power Cost Down)Energy Efficiency in the Transmission and Distribution SectorsEnergy Efficiency in the Industrial / Commercial SectorCreating and Enabling Environment for Energy Efficiency. ■

Philippine Resources will be representedby Ma.Cecilia Pamular at the PEEF event inManila.

Philippine Resources - part of the community



Issue 2, May - July 2012

Documents

Transcript of Issue 2, May - July 2012