BRIEFING ON THE PHILIPPINE

MINING INDUSTRY FOR TRADING

PARTICIPANTS

Philippine Stock Exchange

October 28, 2005

Artemio F. Disini
President NRMDC
PRESENTATION OUTLINE

• EXPLORATION STAGE

• DEVELOPMENT AND MINING

STAGE
PROJECT DEVELOPMENT
STAGES OF PROJECT DEVELOPMENT

1. Preliminary Evaluations 6-8 months

2. Feasibility Studies 1-2 years

3. Engineering and Design 1 year

4. Development/ Construction 2 years

5. Mining Operations
 PROJECT DEVELOPMENT
STAGES OF PROJECT DEVELOPMENT

1. Preliminary Evaluations Project team

2. Feasibility Studies Project team/

Eng’g firm

3. Engineering and Design Eng’g firm

4. Development/ Construction Const. firms

5. Mining Operations Mine

organization
PRELIMINARY EVALUATION
1. Preliminary Evaluation

A. Rough-Cut Study

Often called a back-of-the-envelope

study, it is an order-of-magnitude study
primarily to determine the economic
viability of a project. Cost estimates
are taken from known operations of
the same size and same process.
PRELIMINARY EVALUATION
Rough-Cut Study basic information:

1. Process plant capacity

2. Ore reserve estimate

3. Average grade of the deposit

4. Process flow sheet

5. Metal recoveries

6. Current typical smelting/ refining schedule

PRELIMINARY EVALUATION
• For a rough cut study, a 10-yr mine life is
normally used.

• A 30% contingency is normally added to the

capital and operating cost estimates for
unknown conditions due to lack of
geotechnical, hydrological, environmental,
etc.
 FEASIBILITY STUDIES
B. PRE-FEASIBILITY STUDY

• A positive rough-cut study is normally

followed by a pre-feasibility study. The
assumptions in the rough-cut study are
verified by undertaking the necessary
tests or studies.

• A more accurate geological mining and

metallurgical data are required to
improve the accuracy of the production as
well as the capital and operating cost
estimates.

• The cost of the study should be from

$1.0-2.0m.
 FEASIBILITY STUDIES
C. FEASIBILITY STUDY

1. A full-blown, bankable feasibility study

is undertaken only after a positive pre-
feasibility study.

2. The study must pass the scrutiny or due

diligence of the lending institutions.

3. Engineering companies/ consultants are

engaged to do the review.
 FEASIBILITY STUDIES
4. Cost of a full blown feasibility study may
cost up to $5m depending upon the
reliability of the existing available data.

5. Majority of the work in this study is the

verification of data used in the pre-
feasibility study.
 FEASIBILITY STUDIES
6. The major expenditures are:

a. In-fill drilling and geological modeling to

validate the ore reserve estimate

b. Metallurgical investigation including pilot

plant testing, to validate the metallurgy

c. Geotechnical studies to validate the pit

slope, foundation and tailings dam
design, etc.
 FEASIBILITY STUDIES
When the reliability of the data
have met engineering standards:
1. The mining plan is finalized

2. The flowsheet is frozen

3. More accurate capital and operating cash

estimates are generated

4. Cash flow analyses are made to determine

the rate of return and payback period of the
project.
 FEASIBILITY STUDIES
4. This study is examined for risk using the
Monte Carlo method or other method to
ensure that there are no fatal flaws in the
feasibility study.

5. Factors such as political stability,

environmental regulations, taxation, etc. are
taken into account in addition to the usual
factors of ore reserve grade, metal
recoveries, metal prices, capital and
operating costs
 FEASIBILITY STUDIES
A full-blown feasibility study consists of 6
separate studies in 7 separate volumes:

Volume 1 – Executive Summary

Volume 2 - Geology

Volume 3 - Mining

Volume 4 - Metallurgy

Volume 5 - Capital Cost Estimate

Volume 6 - General Matters – market, environment

Volume 7 - Financial and Risk Analysis

 FEASIBILITY STUDIES

A Project is recommended for

development if the cash flows, rate
of return, payback period, etc. meet
or exceed the minimum investment
criteria of the Company.
 FEASIBILITY STUDIES
Example (for large companies):

• Cash flows must be at least $50m/yr

• Rate of return of minimum 15%

• Payback period of 5 years

• Mine life of at least 20 years

ENGINEERING AND DESIGN

MINE
1. Mining methods
A. Open Pit
B. Underground
i. Block Caving
ii. Sublevel Stoping
iii. Cut and Fill
2. Development
3. Operations
OREBODY MODELLING
OPEN PIT
OPEN PIT BENCHING
OPEN PIT DEVELOPMENT
OPEN PIT
HUNDRED-TONNER TRUCKS
STRIP MINING
SHAFT
SHAFT
OREBODY GEOMETRY
 UNDEGROUND MINE
DEVELOPMENT (DECLINE)
DECLINE
Nayak Twin Declines
DECLINE
UNDERGROUND
RAMP & SHAFT
BLOCK CAVING
Sub-level stoping-will give us 2000 TPD
SUB LEVEL STOPING
RAMP MINING
 LHD
LHD
(LOAD-HAUL-DUMP)
UP-HOLE DRILLING
ENGINEERING AND DESIGN
MILL
1. Flowsheet Selection

2. Crushing

3. Grinding

4. Flotation or Carbon in Pulp (CIL)

5. Dewatering/ Thickening
PROCESS PLANT
 ENGINEERING AND DESIGN
SURFACE INFRASTRUCTURE

1. Tailings dam

2. Roads, bridges, airstrip

3. Electrical layouts of substations, power lines

and telecommunications

4. Campsite includes housing, educational,

recreational, medical facilities, etc.
TAILINGS DAM
TAILINGS DAM
TAILINGS DAM
PRELIMINARY EVALUATION

Example of a 2000 TPD

Underground Mining
Operations
 Mining Method
Sub-Level Stoping

SUB-
SUB-LEVEL STOPING
 Mining Method
Sub-Level Stoping

SUB-
SUB-LEVEL STOPING
 Mining Method
Sub-Level Stoping

SUB-
SUB-LEVEL STOPING
 Mining Method
Sub-Level Stoping

SUB-
SUB-LEVEL STOPING
 Mining Method
Sub-Level Stoping

SUB-
SUB-LEVEL STOPING
 Mining Method
Sub-Level Stopingp

SUB-
SUB-LEVEL STOPING
 Mining Method
Sub-Level Stoping

SUB-
SUB-LEVEL STOPING
 Mining Method
Sub-Level Stoping

SUB-
SUB-LEVEL STOPING
 Mining Method
Sub-Level Stoping

SUB-
SUB-LEVEL STOPING
 Mining Method
Sub-Level Stoping

SUB-
SUB-LEVEL STOPING
 Mining Method
Sub-Level Stoping

SUB-
SUB-LEVEL STOPING
 Mining Method
Sub-Level Stoping

SUB-
SUB-LEVEL STOPING
CIP PLANT
 NATURAL RESOURCES MINING DEVELOPMENT
CORPORATION ESTIMATED TIMELINE OF ACTIVITIES
Y E A R

0 1 2 3 4 5
ACTIVITY
EXPLORATION
Core Drilling
Development
FEASIBILITY STUDY
INITIAL PUBLIC OFFERING
(IPO) at PSE
UNDERGROUND
DEVELOPMENT
CONSTRUCTION
- Mill Facility
- Mine Equipment
- Tailings Dam
- Surface Facilities

1,500 2,000 2,000

OPERATIONS
tons per day
 Capital Expenditures
2,000 tpd

• Mine Development/ equipment P700m

• Mill Equipment 500m
• Surface Infrastructure 400m
• Tailings Dam 250m
• Pre-operating Interest 150m

Total P2,000m
($36.0 M)
 Operating Cost
2,000 tpd
• Mining Php 600/t
• Milling 450/t
• Admin/O’head 25m/mo
• Depletion ] 40m/mo
• Depreciation ]
• Production tax 84m/yr
• Interest 120m/yr
 PROJECTED INCOME
STATEMENT 2,000 TPD
(million pesos)
• GROSS REVENUE P 3,360
• OPERATING EXPENSES
• Mining P 430
• Milling P 350
• Depreciation /Depletion P 360
• Production Tax P 84
• Overhead / Admin P 300
• Interest P 120
TOTAL P 1,644
• OPERATING PROFIT P 1,716
• NET INCOME P 1,716
 ANNUAL
PRODUCTION/REVENUES
Grade Oz Gold Revenues Net Income
(@ $400/0z)

• 6 g/t 128,000 $ 51.0m P 1,212 B

• 7 g/t 150,000 60.0m P 1,716 B
• 8 g/t 171,000 68.0m P 2,186 B
• 9 g/t 192,000 77.0m P 2,668 B
• 10 g/t 213,000 85.0m P 3,116 B
MARAMING
SALAMAT!