Red Mountain opts out of the Philippines

PERTH (miningweekly.com) – ASX-listed Red Mountain Mining has struck a deal with its joint venture partner Bluebird Merchant Ventures over its 75% interest in the Batangas gold project, in the Philippines.

Under the terms of the agreement, Bluebird will acquire Red Mountain’s share in the project in exchange for 1.25-million fully paid ordinary shares and a perpetual 1% net smelter production royalty.

Should Bluebird sell 50% or more of the gold project within 12 months of the agreement, it will share the net proceeds of the sale with Red Mountain on a 50:50 basis.

“The current climate for mining in the Philippines has made it challenging for foreign-based explorers to develop their projects,” said Red Mountain director Jeremy King.

“The Batangas gold project is promising, but it is located in a biologically diverse environment and has regulatory hurdles ahead of it. Our view is that these hurdles are best managed by local groups.”

King said given the difficulties foreign miners were facing in the Philippines, the optimal form of ongoing leverage was for Red River to gain a production royalty.

The news comes as newswire Reuters reported on Friday that the Philippine government would suspend more mines in a fight against environmental degradation.

Meanwhile, King noted that the divestment of the asset removed a cost centre for Red Mountain, and freed the company to focus its efforts on exploration and development of the Red Valley lithium brines project, in the US, while also continuing to hunt for opportunities in both the new energy metals and gold sectors.

A previously completed prefeasibility study into the Batangas project estimated that the project would generate A$46-million in free cash flow during the first seven years of production at a gold price of A$1 700/oz. This would be generated by the low operating costs of $735/oz, at an all-in cost of $914/oz. Further, the low upfront capital cost of $16-million would include a new carbon-in-leach processing plant.