Maco Gold Mine - Philippines

Project description and location

Crew Gold’s principal gold asset in the Philippines is the Maco Gold Mine (previously known as Masara Gold Mine) in south-eastern Mindanao Island. Maco Mine is a gold, silver and copper mineral property located in Maco Municipality, in Compostela Valley Province, Mindanao in southern Philippines. Gold mining in Maco dates back to before the Second World War.

Ownership and history

Apex Mining Company Incorporated (Apex) only acquired the property in 1973 and pursued its mining and milling activities in the early l980s. In 1991 it was forced to stop operation due to a labour dispute and prolonged weakness in gold prices. In the 1990s Apex conducted limited operations until 2000, when it fully suspended mining and leased out the various parts of its property to sub-contractors in exchange for royalty and rental payments. These contractors operated on a small-scale basis on selected parts of the property.

The Apex-owned processing plant located near the mine site was also leased to sub-contractors, was in a deteriorated condition when Crew Gold acquired it and has been refurbished for the 500 tonnes-per-day capacity operation. Crew gained control of the mining property of Maco through its acquisition, with its associated Philippine partner, of approximately 72.91% of the shares in Apex, which owns the Maco Mine. Apex is listed on the Philippine Stock Exchange.

Geology

The Maco property lies west within the vicinity of the Philippine Fault System, a major tectonic lineament that has been active from the Miocene to recent times. The fault system and its many splays can be traced passing from south-southeast to north-northwest across the Philippine archipelago through an island arc assemblage of Cretaceous to Pliocene pelagic sediments, volcanic and volcaniclastic rocks, and hypabyssal intrusives. Numerous porphyry-copper-gold deposits and epithermal gold vein systems are spatially aligned with the Philippine Fault System throughout most of the archipelago.

A simplified stratigraphy of the Maco property area consists of a Cretaceous to Lower Miocene sequence of pelagic sediments and volcanic and volcaniclastic rocks intruded by Middle Miocene dioritic and quartz-dioritic plutonic rocks, Upper Miocene to Lower Pliocene dioritic and andesitic plugs and dykes. A number of porphyry-copper systems containing significant amounts of co-products of gold are found around the Maco property peripheral to the epithermal gold deposits. Pliocene to Pleistocene andesitic to dacitic flows, flow domes, plugs and pyroclastic rocks appear to be associated with the most intense period of gold, silver and related base metal mineralization.

The porphyry-copper-gold in quartz-sulphide stockwork-style mineralization is associated with the Middle Miocene dioritic intrusions located in the western part of the Maco property. The mineralized veins are NW-SE to WNW-ESE striking, moderately to steeply dipping and have been structurally interpreted as tension gashes developed in a left-lateral shear stress field associated with the Philippine Fault System.

The central vein system at Maco comprises the following sub-systems:

• Masara (Masara-Lumanggang-Hitch-Manganese Jessie-Sandy veins)
• Masarita (Masarita-Wagas-Don Calixto)
• Don Alberto
• Don Fernando (Don Fernando- Don Mario- Don Joaquin-Maria Inez)
• St Francis (St Francis-St George-St Vincent-St Rafael).

These vein deposits have been empirically classified into either ‘clean ore’ or ‘complex ore’. Clean ore is characterized by low sulphide content and occurs in generally clean-walled tensional structures. Clean ore is characteristic of the veins Don Fernando, Don Joaquin, Don Mario, St. Vincent, Don Calixto and St. Benedict. Complex ore, on the other hand, has higher sulphide content and often occurs in wider and deeper shear structures. Complex ore characterizes the veins along the main Masara trend and include Maria Inez, Sandy, Masara, Bonanza, Manganese and St. Francis veins. Pyrite, chalcopyrite, sphalerite and galena are the predominant sulphide minerals and the mineralization is often associated with appreciable amounts of manganese.

Crew Gold has, for some time, been evaluating the copper-gold porphyry potential of the Maco property and has had discussions with a limited number of major international mining companies relating to exploration and possible development of the copper-gold porphyry resources that exist on the concession. However, with the decline in copper prices this interest has also declined and no further work has been carried out on the deposits.

Updated Resources

The ore resource estimate for the Maco Mine was updated in May 2009 and showed a marginal increase in indicated ore resource tonnage and a substantial decrease in inferred resource tonnage compared to the previously published estimates released in February 2007.

• The Inferred Resource category decreased from 9.6 million tonnes at 6.0 g/t Au to 1.3 million tonnes at 4.8 g/t Au.
• The Indicated Resource category increased from 1.46 million tonnes at 6.5 g/t Au to 1.51 million tonnes at 6.6 g/t Au.

This updated resource estimate has been reviewed for technical correctness by Mr. Tomas D. Malihan, a registered Competent Person with the Geological Society of the Philippines.  Mr. Malihan, who has extensive experience in epithermal gold vein systems, and who shares the cautious approach adopted by the Geological Staff and confirms the validity and soundness of this estimate.  Mr Malihan is also a ‘Qualified Person’ within the meaning of Canadian National Instrument 43-101, ‘Standards of Disclosure for Mineral Projects’.

Operations

Development of ore drives in the vein systems at the Masara, Bonanza and Sandy veins has improved the level of confidence in the mineral resource. With these developments, the result has been higher-grade ore delivery than projected delivery grades. Production volumes were, however, affected by low availability of underground equipment, partly due to long delivery time of spare parts. Ore from stopes in fully developed sub-levels at the Bonanza main vein and Sandy main vein contributed 70% of the tonnes delivered to the mill during the second quarter.

Ore mined in the quarter ended June 30, 2009 was 40,123 tonnes at an average grade of 5.4 g/t (quarter ended June 30, 2008 – 50,098 tonnes at 5.1 g/t). Ore mined in the six months to June 30, 2009 was 70,921tonnes at an average grade of 5.6 g/t (six months ended June 30, 2008 – 77,471 tonnes at an average grade of 5.0 g/t).

The Maco plant processed 37,813 tonnes at 5.1 g/t in the quarter ended June 30, 2009 (quarter ended June 30, 2008 – 45,292 tonnes at 4.3 g/t). Total ore processed in the six months to June 30, 2009 was 65,881 tonnes at an average grade of 5.0 g/t (six months ended June 30, 2008 – 84,764 tonnes at an average grade of 4.3 g/t).

Gold produced in the quarter ended June 30, 2009 was 5,447 oz (quarter ended June 30, 2008 – 5,181 oz) and for the six months to June was 9,205 oz (six months to June 30, 2008 – 10,211 oz). Gold production in 2009 has been adversely affected by a flash flood that hit the mine in mid-January, partly flooding the underground workings and reducing production due to the unavailability of workplaces.

Gold sold in the quarter ended June 30, 2009 was 5,188 oz (quarter ended June 30, 2008 – 5,795 oz). Year-to-date total gold sold was 8,523 oz (six months ended June 30, 2008 – 10,038 oz).

Maco also produced a total 27,599 oz of silver in the six months ended June 30, 2009 (six months ended June 30, 2008 – 34,781 oz).

Plant and infrastructure

During 2007 and the early part of 2008 the 500 tpd pilot plant operated on development ore while the technical review of the mill expansion and mine plan continued. The plant has shown that it can operate at rates of up to 700 tpd, but not on a sustainable basis at the moment. The ramp up to 700 tpd has been delayed to 2010. A production rate of 1,000 tpd to 1,500 tpd was considered achievable in 2007 based on normal expectations regarding the confidence in resources and the physical mining conditions. This expectation has been downgraded further based on disappointing results from the most recent review of the resources.

Flotation studies were originally started to reduce the amount of cyanacides in the ore including, copper, lead and zinc. Tests, however, have shown that saleable concentrates of these base metals can be obtained that could potentially double the value of the ore. Poor current base metal prices and concerns over the market for these concentrates have meant that this project has been deferred for the time being.

The new starter dam and first phase of the tailings management facility was completed in 2008. The first phase of the facility will allow for production through 2009. The second phase is scheduled to start in late 2009, with the timing of the third phase dependent upon the tailings consumed in the mine backfilling process.

Staff training continues to be a major focus at Maco, with transfer of professional Philippine staff occurring between Crew operations to expand their experience and provide properly trained staff in a difficult labour market. An expatriate training manager has been appointed and nationally accredited training programs have commenced on the mine with emphasis on the training of trainers. This focus on training has instilled an enthusiasm and a degree of responsibility in the work force and major advances have been made in streamlining the organisational structure with both cost reductions and improved productivity.

Exploration and underground development

Surface mapping activities, as well as desk studies of past open pit mining and drill hole data, are also being conducted to identify new vein systems for correlation with the known ones.In Sagaysagay, the new exploration area surfaced rock-chip samples and channel samples have been collected to help delineate the surface potential of this resource. This work was supplemented by further exploration, trail mining and bulk sampling in Q3 2008 when the 3 kilometer logging road was upgraded to accept road trucks.