Oriental Peninsula unit to start exploration at Palawan site early 2009

By JUDITH BALEA, abs-cbnNEWS.com

Posted at Nov 16 2008 09:41 PM | Updated as of Nov 17 2008 09:02 PM

The unit of publicly-listed Oriental Peninsula Resources Group will start exploration works at a mine site in Palawan early next year, but only if metal prices stabilize, according to a company official.

Oriental Peninsula president Caroline Tanchay said necessary infrastructure such as roads and bridges are already in place at the Pulot mine in the town of Española where Citinickel Mines and Development Corp. is set to conduct large-scale mining after securing permits recently. The company's plan to begin exploration comes amid an ongoing legal battle with rival Platinum Group Metals Corp. (PGMC) over the right to operate the Pulot mine and another site in nearby Narra town.

The nickel-rich sites in the two towns comprise an aggregate 2,176 hectares of land covered by the Mineral Production Sharing Agreement (MPSA) of Citinickel. Of the total area, 1,408 hectares are located in Española while 768 hectares are in Narra.

"The row with PGMC really does not weigh on our operations. We are the rightful MPSA holder. Right now, low metal prices are our concern," Tanchay told abs-cbnNEWS.com.

"We want to start operations by February, since we're already over 95 percent finished with the infrastructure, but that still depends on the stability of metal prices. We don't want to operate if we're just going to sell cheap, or if it would just be breakeven for us," she added.

Tanchay said nickel prices have fallen from their high of over $50,000 per ton last year to current levels of about $10,000 as the global economic downturn slows demand.

Alexandrie Amadeo, president of Global Consult Inc., the firm tapped by Oriental Peninsula to design and manage its mine sites, said they would explore the remaining 1,000 hectares of the Pulot mine. "Some 400 hectares were already explored. So we are starting with the remaining larger piece of the land," he said.

"We're hoping the weather would be good when we start so we don't face anymore delays," he added.

At its initial public offering (IPO) last December, Oriental Peninsula promised investors that Citinickel would start mining operations in Palawan in the first quarter of 2008 and nickel ore production by the first half. The company was also supposed to ship its first 600,000 metric tons of nickel this year. But the targets hit a snag as court cases with PGMC dragged.

PGMC was also reportedly barring Citinickel from entering the Toronto mine site in Narra. PGMC have questioned the other firm's MPSA and claimed it had the exclusive right to operate the Palawan sites under a 25-year operating agreement with landowner Olympic Mines and Development Corp. in 2003. This operating agreement was earlier canceled by Olympic Mines, but the cancellation had no finality, said PGMC, since there are still pending cases before the Supreme Court on the matter.

Asked what they plan to do in case the court upholds PGMC's operating agreement, Tanchay said, "then we would cancel it again. We're the MPSA holder, we get to decide who's going to operate the sites."

Oriental Peninsula's IPO earned about P840 million, of which P651 million was already spent for infrastructure works and purchase of equipment at the Palawan sites, the company said.

New claims

Oriental Peninsula is increasing its authorized capital stock from the current P1.5 billion to P5 billion in line with its plan to diversify into gold and coal mining, Tanchay said.

"We have no final details yet as to the capitalization increase but we intend to issue new shares to existing shareholders first, then possibly to new investors," she noted.

"We are looking at mine areas in Surigao and Quezon for gold, and Cebu for coal."

For nickel, she said they are eyeing Japan, China and Australia as markets.

"We have received offers. However, we don't want to enter into supply contracts yet because we want metal prices to stabilize first."