Australian junior Red Mountain Mining is driving a fresh path to unlock under-developed resources in Greater Asia.
Some 100 kilometres south of the Philippines capital, Manila, a drill rig located high up in the coastal ranges of the main island of Luzon overlooks the azure waters of Tayabas Bay and the Verde Island Passages. It is an example of what many equity market analysts globally are now starting to recognise as a renaissance by Australian explorers and miners ‘returning’ to the mineral potential of the broader Asian region.
Among the wave of new players is one of Australia’s newest listed explorers and project developers – Red Mountain Mining (ASX: RMX). In just a few short months, Red Mountain has settled its first acquisition in the region under its purely Asian growth focus; got on the ground drilling intensively; and started generating high-grade gold and copper intercepts. Significantly, all of this action is close to mining-friendly infrastructure.
The early successes are a good omen for Red Mountain’s executive chairman, Neil Warburton, most recently chief executive officer of the international and well-respected Barminco underground mine contracting group.
Warburton recognises the stability and potential the Philippines offers as it sets about realigning its mining legislation, global investment appeal and status as a Top 10 producer in the world for some minerals.
He has also underpinned the management skillsets needed for Red Mountain’s maiden foray into Asia – attracting Jon Dugdale as the company’s new managing director from early in 2013. Dugdale is a 26-year mining and resources investment veteran, and, most recently, the president and chief executive officer of the listed Mindoro Resources, from which Red Mountain acquired its Philippines assets. The terms of the acquisition saw Mindoro emerge as a 56% shareholder in the Perth-based Australian, which issued Mindoro with 100 million fully paid ordinary RMX shares, escrowed for 12 months, together with 50 million performance shares.
The performance shares will convert to full voting shares once Red Mountain upgrades the Indicated Resource at one of the Philippines assets, Batangas, to 600,000oz of gold and completes a scoping study that demonstrates a viable gold mining project based on more than 50% of the Indicated Resource converting to Mineral Reserve or equivalent by October 2013.
Listing on the ASX in September 2011, Red Mountain’s charter is to embrace opportunities to nurture under-developed gold and polymetallic projects in Asia through applying well-proven Australian mining methods and technology. The company completed its first deal, the $10 million acquisition of Mindoro Resources’ Batangas gold (known resource) and Tapian San Francisco copper-gold projects in the Philippines, in October last year. Warburton’s growth strategy for Red Mountain is simple but effective:
Convert low grade high-tonnage gold resources into higher grade near surface-mineable reserves; Use existing infrastructure to fast track development; and
Further explore the company’s large landholdings and test multiple gold targets to establish long mine life.
What has made Red Mountain stand out is that since completion of the October acquisition, the company’s drill programs have intersected substantial high grades of gold at Batangas’ Archangel and Lobo deposits, reflecting the calibre of the due diligence undertaken on the Mindoro assets. The results are lending confidence to Red Mountain’s objectives for 2013 of continuing the resource drilling in the Philippines; achieving a significant increase in Batangas’ gold resource; delivering an upgraded resource estimate; and initiating a scoping study for a viable Philippines gold project by the September quarter.
In the interim, the company continues its due diligence on other potential Asian resources acquisitions.
Gold-rich assets
The Philippines projects comprise three Mineral Production Sharing Agreements (MPSAs), 10 Exploration Permits (EPs) and six Exploration Permits Applications (EPAs).
The 100% owned Batangas project covers 270km² and already contains a total Inferred Resource of 3,020,000t at an average 2.1 g/t Au for a contained 200,000oz of gold and 125,000oz of silver at an average 1.3 g/t Ag, in addition to a total Indicated Resource of 2,760,000t at an average 2.3 g/t Au for a contained 208,000oz of gold and 481,000oz of silver averaging 5.4 g/t Ag.
Using a 0.85g/t Au cut-off, this delivers Batangas a total Inferred and Indicated Resource estimate of 5,780,000t for 408,000oz of gold at an average 2.2g/t Au, and 606,000oz of contained silver at an average 3.3g/t Ag.
The company intends to use a higher gold cut-off grade for future evaluation purposes and is expecting this will convert to less tonnage but higher-quality gold ounces.
More than 43,000m of drilling has already been undertaken on Batangas – some 27,000m of that at the Archangel-Kay Tanda prospect on the tenement’s southeastern sector, and where Red Mountain initiated a 3,000m drilling program in the second half of 2012 on its higher-grade gold zones. Archangel hosts the bulk of Batangas’ current known resource. The prospect to date has yielded high-grade intersects of 2.2m at 36.53g/t gold – an intersection also hosting 1.2m at 62.09g/t Au – within suites of multiple long intervals commonly ranging between 5-10g/t Au.
Batangas’ other flagship target is the Lobo prospect on the project’s western boundary. There, the potential for extensions to the known resource and additional high-grade mineralisation has been identified within Lobo’s more than 10km strike length of epithermal vein-breccia structures. New work by Red Mountain has since confirmed Lobo as a second high-grade gold system within Batangas.
In January, Red Mountain added a second drill rig at Lobo to increase the work pace on a planned 10-hole program on the epithermal-based prospect’s West Drift structure. Results from the company’s diamond drilling beneath the historic Lobo copper mine – last worked as a near surface stopping operation in the late 1960s – and focused mainly on the West Drift structure hosting the old mine, include intersections of 4.6m at 5.83g/t Au and 4.11% Cu from 152.8m depth downhole, including 2.8m at 7.79g/t Au and 6.55% Cu.
Red Mountain is confident of potentially converting West Drift’s gold mineralisation to resource inventory, having confirmed it increases its gold grade with depth. Lobo’s high-grade South West Breccia gold structure, running parallel to West Drift just to its southeast, has yielded, in surface sampling high-grade gold zones of up to 9.50m at 13.53g/t Au including 1m at 41.80g/t Au and 6m at 23.55g/t Au including 1m at 30.79g/t Au.
Follow-up trench channel sampling delivered 5m at 10.43g/t Au, including 1m at 25.14g/t Au and 2m at 18.12g/t Au including 1m at 28.69g/t Au. Additional rock chips results taken 150m south of the structure returned 4.00m at 12.23g/t Au – highlighting the potential for extensions of this structure.
Batangas also hosts currently the El Peso, Calo and Talahib copper-gold targets. Warburton believes Lobo’s mineralisation is comparable in style to similar “gold footprints” in South East Asia, but particularly the Cracow and Pajingo gold mines in northern Queensland. His hopes for Batangas remain focused on delivering a significant resource upgrade by 3Q 2013, and commencing a feasibility study for first gold production.
Internal studies on delivering higher grade and less tonnage through a standard CIL treatment facility have reinforced Batangas’ potential for strong commercial outcomes.
Further south, Red Mountain has acquired a 75% stake in the small 37km² Tapian San Francisco copper-gold project (no defined resource) near Surigao in the northern region of Mindanao Island. Home to the Canaga prospect, the project hosts extensive porphyry-related alteration, copper-gold showings and IP geophysical anomalies.
Why Asia?
Warburton is a strong believer in Australia’s resources sector re-engaging with South East Asia – a region where it once boasted strong exploration and mining links – and especially in new-era ‘mining friendly’ countries such as the Philippines.
“We can achieve a ‘first mover renaissance’ as the Asian corridor cements its world economic powerhouse credentials over the next decade,” Warburton says. “It is fair to say that 20 years ago, Australia’s international mineral overtures were primarily Asian focused if somewhat of relatively small scale.
“Since then, as well as the Australian resources boom, we have tended to direct our international mining forays into the African continent, Latin America, selected North American ventures and of late, even dabbling in Europe and destinations such as Mongolia. However, there are significant market and economic indicators pointing to not only the future strength of the Asian economic corridor but the fresh opportunities for Australia’s mining practices to be exported there.”
Warburton highlights four key market developments to support his view:
US President Obama’s decision to prioritise the Asia Pacific for that country’s future global political, military and economic aspirations
The 2012 Australian Government’s “Australia In the Asian Century White Paper” which cites mining and resource related sectors as a primary opportunity as the region’s continued economic development drives demand for energy and mineral resources
Fresh 2013 negotiations for a new Trans Pacific Partnership (a proposed regional free-trade agreement being negotiated by Australia, the US, Asia Pacific nations, Canada, Mexico and Vietnam)
The new Chinese leadership which has been given a clear mandate for economic reform
Warburton notes that the Philippines has been a regional leader in attracting new foreign investment in resources. “The Philippine Government’s proposed new mining regulations under Executive Order 79 create a foreign investment climate for Australian resources plays that is not only superior within the Asian footprint, but comparable to or better than other well-trod international mining jurisdictions, some of which are under severe resource nationalism pressures,” Warburton says.
For Warburton, Dugdale and Red Mountain, the Philippines and their new assets are potentially company transforming.
www.redmm.com.au
RMX Price at posting:
2.2¢ Sentiment: None Disclosure: Held
(20min delay)