TVI

by Yulo E. Perez, TVIRD Vice President for Philippine Operations

 

(See accompanying PowerPoint presentation here)

It’s always nice to go back to your roots. Some three decades ago, I learned the ropes of my profession as a mining engineer from this university. It was during that time that I joined the UP 49ers. I thus consider it a great honor to be invited to this special double occasion – the Centennial Celebration of the UP College of Engineering and the 55th Anniversary Celebration of the UP Mining, Metallurgical and Materials Engineering Association. A homecoming like this, for me, means coming home to what is in your heart. Thank you so much. Please allow me to convey, in behalf of TVI Resource Development Philippines Incorporated – the company that I represent – our congratulations and best wishes for the continued success of both the College and the Association.

To the students who have been required by your teachers and professors to listen to me, I will try my best to make your stay here worthwhile – and educational. I know for a fact that a great majority who study here are smart. Of course, I studied here! Some may even be geniuses. But all of you will agree that – to paraphrase the great American patriot Benjamin Franklin – “Genius without education is like gold in the mine.” As gold requires mining, so, too, does genius require education if it is to serve a higher purpose for mankind.

I will also try to be faithful to the theme of this celebration: “Green is the New Gold. UP 49ers. Legacy. Excellence. Virtuosity.” (I like the word “Virtuosity” because it means “Genius”. So geniuses, listen) I will try to be faithful to the theme by, first – for the benefit of those who are curious why the Association is called “49ers” – providing you a brief background on the California Gold Rush of 1849. Second, I will tell you about my company and its activities. And third, I will discuss what have remained and what have changed in the mining industry, as exemplified by my company, since 1849.

The American Dream

In the early 19th century, the United States was an overwhelmingly agrarian society. The American Dream then was not to win fabulous wealth, but rather to achieve "competency” – which meant that independence came from owning enough land to support a large family, free from debt or dependency on wage labor for sustenance. Industriousness, prudence, and frugality were the traits that would allow a man to achieve his competency, maintain it, and pass it on to his children.

Throughout the early 19th century, this American Dream of the farmer became harder and harder to achieve. Rapid population growth, rising land costs, the industrial revolution, and the expansion of banking and the cash economy combined to draw more and more erstwhile independent farmers into dependence on the market. Many Americans, fearful that wage labor would never allow them to escape dependency upon their employers, denounced the emerging economic regime as "wage slavery" and sought to restore the old agrarian order. They migrated thousands of miles to the western frontier, where free land allowed them to recreate old-fashioned agricultural communities.

The California Gold Rush was fueled by the same hostility towards wage labor, but it offered a new and dramatically different alternative. The Forty-Niners – the original ones – swarmed west in 1849 dreaming of an escape from wage slavery achieved not through agrarian competency but through instant, dazzling wealth. Their values were not thrift, prudence, and industriousness, but instead swashbuckling enterprise and good fortune. Historian H.W. Brands argued: "California presented to people a new model for the American dream – one where the emphasis was on the ability to take risks, the willingness to gamble on the future."

Who we are

Now let me tell you about my company – TVI Resource Development Philippines, Incorporated or TVIRD.

TVIRD is the Philippine affiliate of TVI Pacific Inc., a publicly-listed Canadian mining company focused on the exploration and production of precious and base metals from district scale large system, high margin projects located in the Philippines.

Our company is a domestic corporation operating a mining project in Canatuan, Siocon, Zamboanga del Norte. We operate by virtue of our Mineral Production Sharing Agreement or MPSA with the Philippine Government. The MPSA grants TVIRD the “exclusive right to explore, develop, and utilize for commercial purposes gold, silver, copper, zinc and other minerals existing within the contract area.”

TVIRD’s Canatuan Mine began mining and milling operations in mid-2004 producing gold and silver doré, thus making Canatuan the first foreign-invested mine in the Philippines to reach production stage after the passage of the Philippine Mining Act of 1995. The project covers a mining concession wholly owned by TVIRD consisting of over 508 hectares that encompass a polymetallic sulphide deposit, incidentally falling within the Ancestral Domain of the Subanon Indigenous People.

On a gold equivalent basis, the Canatuan mine produced roughly 140,000 ounces of gold from 2005 to early 2008. We started decommissioning our gold and silver project in April 2008.

TVIRD began construction activities for its copper and zinc production and support facilities, including a warehouse in Sta. Maria Port, Siocon, in June 2008, and commissioning activities for this second phase of the company’s Canatuan operations on November 15, 2008. The company made its first copper concentrate shipment in March 2009. Last August, we made our sixth shipment of concentrates, increasing our total exports to 29,705 dry metric tonnes since March. The sixth shipment brings the company’s total estimated gross revenue for copper concentrates to over 34 million dollars for 2009.

We take (and manage) risks

We in TVIRD would like to think that we would not have gone this far in our operations if we have not demonstrated in Canatuan the more admirable traits of the original 49ers during the California Gold Rush. The most notable of these traits is the ability to take (and manage) risks.

From the late 1980s to the late 1990s, small-scale mining activities illegally occupied Canatuan. TVIRD worked on offering a better alternative to the Subanons (the IPs), the local and national government and even the small scale miners in managing the resource, environmentally and socio-economically. TVIRD & the Department of Environment and Natural Resources, in partnership with the Subanon community, dismantled the mercury amalgamation plants. TVIRD implemented a year-long environmental cleanup, undertaking to remove toxic pollutants including cyanide and mercury. In 2004, TVIRD also initiated a relocation program for the small-scale miner community.

The Subanons, realizing that resource development is their passport to progress, sought the assistance of the Armed Forces of the Philippines in an effort to secure Canatuan from criminal elements. In response, the AFP formed a security unit composed mostly of Subanons who have since demonstrated their ability to keep the peace and ensure the continuation of the progress begun by TVIRD in their community. Progress came in the form of employment, education through better schools, infrastructure through bridges and electricity, clinics, and livelihood, among others. Allow me to dwell more on these later.

But while the values of the California 49ers were swashbuckling enterprise and good fortune, the men and women of TVIRD have held on to the values of thrift, prudence, and industriousness of the pre-Gold Rush years.

Two Thousand and Eight, particularly in the months after the decommissioning of our Gold-Silver Project, was perhaps the most challenging year for our company. We were not producing anymore and, therefore, did not have funds to build the plant and support facilities for our next project, copper concentrate production. We managed to get bridge financing in trickles. But towards the end of the year, in September to be exact, Wall Street crashed and talk about another Great Depression was rife. It was, arguably, the most difficult time in 2,000 years to get funding as financial institutions worldwide fell by the wayside one by one. But thanks to what we believe is the reputation we built on account of the operational expertise we have gained during our Gold-Silver Project, a Hong Kong-based lending firm agreed to bankroll the remainder of what we were constructing.

As I mentioned earlier, we began construction activities for our Copper Project in June 2008, and started commissioning in November of the same year – six months in all. We managed to complete the project on time and under budget! Then, 10 months later in March 2009, we began commercial operations with our first copper concentrate shipment. Next week, we will make our seventh shipment, in keeping with our four to five week shipping schedule.

 

Triple Bottom Line

Our enterprise, clearly, is anchored on the promise of wealth, as sought by the Forty-Niners of 1849. But the way we do business is tremendously different. We subscribe to a business principle that can be summed up in a phrase coined in 1994. It’s called the “Triple Bottom Line”. In practical terms, triple bottom line accounting means expanding the traditional reporting framework to take into account ecological and social performance in addition to financial performance. While the Forty-Niners sought only one bottom line: profit, we seek the Triple Bottom Line of the “Ninety-Fourers”: People, Planet, Profit.

We’d like to think that we’re faring pretty well in all fronts. In the “Profit” front, we just announced last week during the Mining Philippines 2009 Conference the encouraging results of our operations for August.

 

Profit

Our Canatuan operations have achieved increased levels of copper concentrate output with declining production costs. Last month, we produced an average of 198 tonnes per day of copper concentrates, 60% higher than the year-to-date average of 124 tonnes per day. Our average daily throughput rose to 1,804 tonnes, or 47% higher than the year-to-date average of 1,228. Copper concentrate recovery was in excess of 90% as the Sulphide Plant attained a stable state of 95% availability. As a result of our increased throughputs and higher efficiencies, average cash costs per pound of copper equivalent produced decreased to 47 US cents or 23% lower than the year-to-date average of 61 cents.

All these translate to our ability to ship within four to five weeks, which, in turn, translates to revenues. TVIRD’s improved cash position resulting from our operational successes provides us with the financial resources to execute a portion of our growth plans.
These plans include providing funds for the Zinc Circuit and Power Line components of the Sulphide Project, as well as accelerated exploration of near-mine tenements and other projects identified for priority follow up by management.

A good percentage of our profit goes to the other two bottom line fronts: People and Planet. And here you’ll see the big difference vis-à-vis 1849.

 

People

By 1870, the native American Indian population in California has dwindled to about one-fifth of the size before 1849, many dying from disease introduced by the original Forty-Niners, or systematically chased off their lands, or marched to missions and reservations, or enslaved, or even brutally massacred. Over 4,000 Native American children were sold.

In Canatuan, the Subanon population has more than doubled to over 2,000, many of them gainfully employed in our operations and enjoying salaries and benefits that are higher than their counterparts in Western Mindanao. They have improved houses in settlement areas within their ancestral land that TVIRD designed and planned with them. All of them have access to the company clinic, manned 24/7 by competent medical personnel. Their children now have better schools that TVIRD helped build, taught by teachers, many of whose salaries are paid for by the company. Some of them are company scholars, too. These children are brought to and from their schools by a company school bus – perhaps the only one of its kind in Mindanao. They now have access to better roads, to electricity, to potable water, and to proper toilets. The adults get to attend alternative learning systems, to learn livelihood skills and training that provide them lifelong employability, and to form self-help groups for microfinance programs.

The programs under our Social Development and Management Plan are focused on what we call the “Quadrants of Development”: Responsive Education, Health and Sanitation, Livelihood, and Infrastructure. In each Quadrant, our company is guided by the United Nations Millennium Development Goals in identifying specific projects.

 

Planet

The original Forty-Niners dug up 12 billion tons of earth - excavating riverbeds and blasting apart hillsides. In addition, they used mercury to extract gold from the ore, losing 7,600 tons of the toxic chemical into local rivers and lakes. The amount of mercury required to violate health standards today would be equivalent to one gram in a small lake.

When TVIRD produced gold and silver in Canatuan, we used cyanide to extract these metals from the ore. The tailings containing cyanide were contained in an impoundment facility called the Gossan Dam, for which we spent over 170 million pesos to build. This dam was decommissioned after we stopped our gold and silver operations in April last year. You see, cyanide is destroyed when it is exposed to sunlight and turns into nitrogen. The tailings in the Gossan Dam are now drying up. Depending on what our Subanon hosts want to do with it, it surely can be a good area for planting trees like abaca or rubber tree within the next year or so.

For our Copper-Zinc Project, we have built another dam, which we call Sulphide Tailings Dam. As in the Gossan Dam, top, specialized engineering firms are in charge of the design and construction management of the Sulphide Dam. The two dams were designed for the Maximum Credible Earthquake and Probable Maximum Flood. This means the dams can withstand an intensity 8.5 earthquake or can handle water from rains that could happen every once in 100 years.

Tailings Management, as exemplified by our Gossan and Sulphide dams, is just one component of our efforts to manage and protect the environment in Canatuan. The other three components are Soil Loss and Erosion Management, Reclamation and Rehabilitation, and Water Quality Monitoring.

For our Soil Loss and Erosion Management initiatives, restoration and protection measures are implemented for both the disturbed and non disturbed areas within the mining operations areas.

Under Reclamation and Rehabilitation, we conduct tree, shrub and grass planting activities to assist the natural reforestation process. Approximately 60,000 trees have been planted within and around the MPSA area. Approximately 50 hectares within the MPSA area have been replanted and are undergoing active reforestation.

And finally, we conduct daily, weekly and quarterly Water Quality Monitoring of the tailings impoundments, streams and rivers continues on an ongoing basis. Seventeen long-term monitoring stations are sampled on a quarterly basis by a multi-partite monitoring team headed by the Mines and Geosciences Bureau. Results of the sampling and laboratory testing programs indicate that the water quality continues to meet the regulatory and permit conditions.

 

Beyond Canatuan

As with TVIRD’s previous gold and silver operations at the same site, the cash generating operations at Canatuan copper and zinc project will serve as the continuing platform for the development and exploration of other projects within the company’s operational sphere. This will include continuing exploration efforts on the surrounding Canatuan tenements to develop one of the many previously identified prospects into a defined orebody, the feed from which could be trucked to the newly constructed plant to extend the mine life at Canatuan.

TVIRD is now looking beyond the development of the Canatuan sulphide plant to its second development-stage property and planned production center at the Balabag Gold and Silver Project in Bayog, Zamboanga del Sur.
Our exploration personnel will also continue examining the significant potential of its largely unexplored land position in other areas in the Zamboanga Peninsula. This extensive portfolio of properties represents the forward opportunities for the company.
Never lose the lessons of 1849

Indeed, mining, as you’ve seen from TVIRD’s operations in Canatuan, has come a long way since 1849. The technology and equipment used to develop earth’s resources have changed, the way the industry views and deals with its various stakeholders have improved, and the laws governing the industry have become more humane and conscious of people’s rights. To those who still view mining with a suspicious eye, we in TVIRD employ communications as the basis of understanding and engagement. Our continued, comprehensive, stakeholder-oriented communication program called “This Mine is Yours” espouses transparency and open door policy. This program has resulted in growing positive interest and support from national and local government agencies, media organizations, and business groups.

Some of you may ask: “Considering the many unpleasant things associated with the Gold Rush of 1849, why should the UP Mining, Metallurgical and Materials Engineering Association continue to refer to its members as ‘49ers’?” As I mentioned earlier in my speech, genius – or “Virtuosity”, as our theme aptly declares – requires education, that is, learning. The past is a wellspring for learning. And 1849 – and the original Forty-Niners – teach us many lessons. Some good, some bad. Some winning. Some losing. But as somebody put it, in any situation, win or lose, never lose the lessons.

The original Forty-Niners still continue to teach us valuable lessons. And the mining industry continues to learn from those lessons. We in TVIRD would like to think that we are putting to good use those lessons. And we are reaping the rewards. Margaret Fairless Barber, in The Roadmender, said it best: “To look backward for a while is to refresh the eye, to restore it, and to render it the more fit for its prime function of looking forward.”

To the students, thank you for listening. To the organizers of this forum, thank you for giving us the opportunity to share with you the TVIRD experience.

Maraming salamat at magandang araw po sa inyong lahat.