Medusa Mining, through Philippine operating company, Philsaga Mining Corporation (PMC), has signed contracts with the Department of Energy for 9000 hectares of Coal Operating Contracts (COCs) containing well-defined coal measures immediately to the east of the company’s Co-O gold mining and milling operations.

Medusa has also formed a strategic alliance with Swan Energy of Perth, Western Australia, to own, finance, build and operate a 30MW power station and be the exclusive supplier of power to the company’s operations.

Based on current usage, which may change in future years, all power in excess of approximately 10MW will be transmitted to the local grid which will assist in providing electricity for regional and local communities and businesses.

Mindanao Island has a shortage of available power and despite new power stations coming on line. This shortage, which results in power outages at the company’s operations, is predicted to continue into the future due to rapid regional growth.

The company identified the opportunity to control its own future power sources several years ago and has been working towards the granting of these COCs which are subject to a bidding process conducted every three years by the Department of Energy.

The first step towards ensuring a reliable power supply for the long term operations of the company is the granting of these COCs. The second step is to develop a strategic alliance to construct and operate a power station, and to achieve this, the company has completed a Heads of Agreement with Swan Energy to build, own and operate a 30MW power station as the exclusive power supplier to the company’s operations.

The key terms of the HoA are:

• PMC will undertake the exploration, feasibility studies and mining operations on the COCs. PMC has the option to transfer the COCs to a new qualified corporation to undertake these activities, subject to approval by the Department of Energy;
• The COCs will be required to produce the coal required to feed a 30MW power station which will be owned, financed, built and operated by Swan;
• The power station will be of the Circulating Fluidized Bed (CFB) boiler type which is a clean, efficient, reliable and fuel-flexible solution, and which will produce ash in a form suitable for use as fertilizer by local farming communities.
• Reliable power will be supplied to the company’s operations for initially 10 years at a fixed cost per Kwh;
• Reliable power will be supplied to local communities at a reduced tariff:
• Excess power will be sold to the grid by Swan; and
• The company will be paid a royalty for any coal exported from the COCs.

 

The coal measures have been scout drilled by at least five diamond holes, test pitted in four locations and outcrop sampled in numerous locations by previous explorers. As the coal seams outcrop, it is anticipated that sufficient volumes of open pittable material will be available for the duration of the initial power supply agreement.

Medusa’s CEO Geoff Davis says, “This is another strategic step in building a long term future for the company’s long life operations by planning for power supply security. We are very pleased to have the relationship with Swan Energy which has strong associations with international power station technology and construction companies.”