St Augustine Gold & Copper has restructured its interest in the $2 billion King-king copper-gold project in southern Philippines, one of South East Asia’s biggest undeveloped mines, in a bid to kick-start funding.
St Augustine hopes to begin construction next year, though it faces similar problems to those hounding other mining ventures in the highly mineralized country, including tax issues and regulatory hurdles, and regional security concerns.
Nonetheless King-king, on the west end of southern Mindanao, has vast potential and could produce up to 3.2 billion pounds of copper, 5.4 million gold ounces and 11.7 million silver ounces, based on St Augustine’s 22-year mine plan.
Under the restructure with 50-50 joint venture (JV) partner Nationwide Development Corp (Nadecor), St Augustine will own King-king’s ore milling company and 40% of the mining concession. Nadecor will hold the remainder and take a 40% stake in St Augustine.
“This restructuring agreement puts St Augustine and Nadecor in the position to advance the King-king project,” St Augustine’s country manager Clyde Gillespie says, adding that St Augustine would take responsibility for fundraising.
St Augustine’s CEO Andrew J Russell says, “Simplifying the joint venture fully aligns the interests of Nadecor, St Augustine and their respective shareholders. Secondly, the new structure increases the attractiveness (to) potential partners supportive of bringing King-king into production as soon as possible.”
Clyde Gillespie says St Augustine, with a market capitalization of $98.5 million, seeks listing on the Philippine Stock Exchange by the second half of 2014 and to bring in another foreign partner to help fund the project.
The restive Mindanao region, home to Islamic insurgents, is also the site of Glencore Xstrata and Indophil Resources’ $5.9 billion Tampakan copper-gold project, whose future is in doubt. In August, the Swiss-based giant Glencore announced plans to eliminate 920 jobs and slash spending at Tampakan, which faced a provincial ban on open-pit mining, public opposition and difficulty in winning regulatory approval.
Clyde Gillespie said King-king would face similar issues, but has had successes in working closely with the local community. “Security is a challenge – we’re on Mindanao island,” he said. “But what we’ve found is that as we work closely with the community in the area, we have fewer challenges from the security perspective.”
But perhaps the biggest challenge of all, he says, is legislation from Manila which, by increasing the government’s share of mining revenues, could make the project unviable.
Under the restructuring, St Augustine would also hold 100% of Milling Co, which would be responsible for the milling and processing of all ore produced from the project.