MVP says Philex mine accident 'fairly serious'

By Erik dela Cruz, Reuters

Posted at Aug 03 2012 07:05 PM | Updated as of Aug 04 2012 07:52 PM

Losses at Padcal mine estimated at P30-P40M a day

MANILA - The Philippines' biggest gold and copper producer Philex Mining Corp said on Friday it is unlikely to resume shipments next month after it closed its main mine north of Manila following leaks in its tailings pond.

The accident at the Padcal mine in Benguet province was "fairly serious" and the company will not restart operations until it is satisfied that it has fixed the leaks caused by two weeks of heavy rain, company chairman Manuel Pangilinan said.

The state regulator ordered Philex to cease operations at the mine until it ensures the safety of its tailings pond. The company said the water and sediment leaking out of the pond were non-toxic and that there were no casualties from the incident.

"We will not commence operation until after we are satisfied that the tailings pond can hold the deposits. That might involve several days or weeks because after the pond is fixed we have to assess the condition of the pond," Pangilinan told reporters.

"It's unlikely we can have shipments in September," he said, adding that August shipments would not be affected.

Philex shares fell as much as 8.1 percent to a near 11-month low after the company's announcement. The broader main index closed 0.14 percent lower.

Philex estimates its daily losses from the closed mine at around P30 to P40 million, or as much as P1 billion a month ($24 million). It closed Padcal mine, its main source of revenue and one of the country's oldest, on Wednesday.

"I would say it was fairly serious. We mill about 26,000 tonnes of ore each day. Clearly, we were distressed because it's an accident that we don't want to happen," said Pangilinan.

Philex, controlled by Hong Kong-listed conglomerate First Pacific Co Ltd, sells about 60 percent of Padcal's output to Japan's biggest copper smelter, Pan Pacific Copper, part of JX Holdings Inc. The rest is sold to smelters in South Korea and China.

Padcal's gold output of 4,358 kg (4.358 tonnes) last year accounted for about 15 percent of total gold production in the Philippines, according to government data. The mine's output last year was valued at P9.2 billion ($219.8 million).

Pangilinan said the leaks from the pond were flowing into two rivers, including the chief water source of three major hydroelectric plants that power the main Luzon island. The last time a similar leak occurred at the mine was in the early 1990s.

Safety and environment concerns are among the issues fuelling strong anti-mining sentiment in the Philippines, which has largely untapped metallic mineral resources estimated to be worth about $1 trillion.

President Benigno Aquino recently issued a new set of rules governing mine operations and investments. 

Philex is exploring ways to extend production at Padcal beyond 2020 - the estimated end of its mine life. It expects to launch commercial production at a new $1-billion mine in southern Surigao del Norte province by 2016. 

Philex posted a 37 percent decline in net profit in the first half this year to P2.04 billion, with revenue slipping from last year's record levels due to lower gold grade and output from Padcal.