TVI Pacific Inc.
TSX : TVI

TVI Pacific Inc.

November 07, 2006 10:46 ET

TVI Pacific Provides Operations and Exploration Review

- 304% Increase in Q3 2006 Canatuan Mine Cash Flow From Operations - 436% Increase in Q3 2006 Canatuan Mine Net Income - On-going Exploration at Canatuan Expected to Increase Mine Life -- New Gossan Reserve Defined So Far Provides 2 Year Mine Life - Initial Delineation Drilling Program at Balabag Expected to be Completed by Q1 2007; Resource Estimate by Q2 2007 - 24 Exploration License Applications in China Cleared by Regulatory Authorities and Military; Granting of Exploration Licenses Expected Before Year-end

CALGARY, ALBERTA--(CCNMatthews - Nov. 7, 2006) - TVI Pacific Inc. (the "Company") (TSX:TVI) is pleased to provide an Operations and Exploration review for the third quarter and first nine months of 2006. (All dollar amounts set out in this news release are expressed in Canadian currency unless otherwise noted.) This release should be read in conjunction with the release issued on November 6, "TVI Pacific Announces Record Financial Results for Nine Month Period".

"We are pleased with TVI's strong operating performance in the latest period," said Cliff James, TVI's President and CEO. Daily throughput and recoveries have increased at the Canatuan Mine, in spite of lower head grade material being processed from the addition of lower grade rubbly gossan ore, resulting in slightly higher metal production compared to that in Q2. Work is progressing well on the Canatuan Sulphide Project and we expect to announce a construction start in the near future. The Company's exploration activity increased significantly during the quarter. An aggressive exploration program continues at the Canatuan mine, which is focused mainly on adding additional gossan and sulphide resources to increase mine life. During the quarter, a new NI 43-101 compliant mineral resource estimate was released for both the gossan and sulphide resources which showed a substantial increase over that released in 2004, the last time a formal resource estimate was released. An accelerated exploration program is also underway on the Balabag property (utilizing the services of our wholly-owned Drilling Division) which continues to show encouraging results. Our goal is to complete the current drilling program by Q1 2007 and to produce an initial resource estimate by the end of the Q2 2007. Revenues, cash flow and income generated from the Drilling Division have grown substantially year-over-year as illustrated in the third quarter and nine-month periods. In China we expect to see the issuance of at least two Exploration Licenses before year-end, a major milestone for your Company. We continue to evaluate a number of promising advanced-stage development projects with the objective of acquiring one or more of these in the near term. These projects, if acquired, could become new mining projects for your Company."

Review of Operations

Canatuan Mine

Substantial increases in revenue and cash flow were experienced at the Canatuan Mine, when compared to comparable periods a year ago. These are attributable to improvements in milling operations at the Canatuan processing plant and overall improved commodity prices. The operational enhancements have significantly increased daily throughput capacity at the mine and have improved metal recoveries. Average daily throughput increased 240% to 1,798 dry metric tonnes ("DMT") in the third quarter of 2006, from approximately 529 DMT per day for Q3 2005.



Certain Canatuan operating highlights are set out in the following table.

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Three Three Nine Nine
months months months months
ended ended ended ended
Sept 30, Sept 30, Sept 30, Sept 30,
2006 2005 2006 2005
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Dry metric tonnes (DMT)
processed 165,394 46,594 409,351 117,765
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Average mill throughput
(DMT per day) 1,798 529 1,499 439
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Feed grade (grams per tonne)
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Gold 2.68 3.51 3.02 3.72
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Silver 42.85 211.41 56.79 180.48
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Gold (Au) ozs produced 12,730 4,512 34,490 12,105
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Silver (Ag) ozs produced 157,550 177,455 453,115 302,648
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Gold (Au) Equivalent oz
produced 15,698 7,361 42,976 17,029
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Recoveries
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Gold 89.45% 89.84% 86.81% 87.47%
----------------------------------------- ----------------------------------
Silver 69.14% 58.16% 60.63% 45.27%
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Average price received per oz
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Gold $ 699.88 $ 522.11 $ 682.14 $ 532.22
($ 621.11 US) ($441.09 US)($607.22 US)($432.76 US)
---------------------------------------------------------------------------
Silver $ 13.07 $ 8.37 $ 12.68 $ 8.57
($11.61 US) ($7.07 US) ($11.28 US) ($7.08 US)
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Cash cost per equivalent
gold oz $ 349.93 $ 348.28 $ 340.36 $ 356.03
($310.89 US) ($293.42 US)($302.67 US)($293.38 US)
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Total cost per equivalent
gold oz $ 465.25 $ 463.03 $ 490.76 $ 466.97
($413.21 US) ($390.44 US)($436.23 US)($385.10 US)
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Cash flow from operations $ 5,105,387 $ 1,263,089 $14,273,398 $ 2,800,503
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Mine Operating Net income
(loss) $ 3,879,791 $ 723,861 $ 8,664,528 $ 956,625
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Gold equivalent values were calculated based on actual Ag and Au prices
received in the respective periods.



Further improvements in operating results are expected over the remainder of the year as the Company continues to test and implement strategies to enhance mine throughput and metal recovery levels and lower operating costs. TVI is currently operating at throughput levels over 1,800 DMT per day.

As previously reported (in the Company's August 21, 2006 news release), an independent technical review of the gossan mineral resource at Canatuan was completed by Geostat Systems International Inc.("Geostat") in Q3, 2006. The National Instrument 43-101 ("NI 43-101") technical report generated by Geostat has been filed with certain securities regulatory authorities in Canada and is available on the SEDAR website at www.sedar.com. The technical report resulted in a substantial increase in the reported gossan mineral resource at Canatuan, which was estimated at 2.55 million tonnes at the end of April 2006. The updated mineral reserves were estimated at 1.29 million tonnes at the end of April 2006. To help put this in perspective, Canatuan's gossan mineral reserves as shown in Norwest Corporation's ("Norwest") initial May 2004 technical report (which is filed on SEDAR), was estimated at 1.02 million tonnes. Although several assumptions, including the cut-off grade and throughput, cannot be compared to the most recent technical report (eg. The 2004 technical report assumed a graduated throughput schedule over 1.5 years starting from 125 tpd to 800 tpd) consideration must be given to the amount of gossan ore that has been processed for more than a two year period prior to the updated estimated mineral reserves shown in the latest technical report. Assuming a sustainable mining throughput rate of 1,800 tonnes per day, which Canatuan is currently achieving on a steady-state basis, management estimates that the gossan mineral reserves at Canatuan could be mined over the next two years.

In combination with the significant increases in the prices for gold and silver as well as the increased throughput capacity at the mine over the past several months, management achieved a decrease in cut-off grade for the ore that can be processed at Canatuan, thereby increasing estimated ore reserves, the estimated mine life of the gossan phase and the estimated total ounces of gold and silver that may ultimately be produced. Near mine exploration and definition of "Rubbly Gossan" also contributed to the lengthening of the estimated mine life. This material is gossan that has eroded from the Canatuan hilltop and surrounds the open pit. Rubbly Gossan contains less gold and silver metal content compared to Massive Gossan and must be blended with Massive Gossan in order to maximize plant throughput and recoveries. The NI 43-101 compliant report by Geostat determined that Rubbly Gossan accounts for about half of the remaining gossan mineral reserve and it has therefore been decided that the remaining mill feed will consist of a 50% / 50% blend of the two types of gossan. The impact of this processing strategy is that the overall mill feed grades will be less than historic grades when only Massive Gossan was processed. In terms of gold and silver production, the decrease in grade is somewhat offset by the higher plant throughput tonnage and recoveries that TVI has been able to achieve in recent months.

In Q3 2006, TVI also filed a NI 43-101 report, prepared by Norwest, relating to the Canatuan Sulphide Project. The report sets out information relating to the estimated commercial potential of the copper-zinc bearing massive sulphide zone of the deposit. The Norwest report has been filed with certain securities regulatory authorities in Canada and is available on the SEDAR web site at www.sedar.com.

Based on the Norwest study and the Company's own analysis, management of TVI believes that the commercial potential of the Sulphide Project justifies further development activity and a positive plant construction decision is anticipated in the near future, subject to the completion of additional project optimization work. The Norwest feasibility study was conducted on a stand alone basis without taking into account the overlying gossan deposit that is currently producing gold and silver. An optimization study combining the sulphide and gossan operations is well underway. Management of TVI Pacific expects that the optimization study will suggest enhanced project economics. The Company also anticipates that both the capital and operating costs of the Sulphide Project (as presented in the Norwest feasibility study) will decrease when an appropriate allocation is made between the existing gossan operation and the potential sulphide operation. Initial analysis suggests that production of copper and zinc concentrates from the Sulphide Project may commence in mid-2007.

Exploration

Philippines - Canatuan Near Mine

An exploration program is ongoing to define the mineralization surrounding the current Canatuan open pit with the aim of ultimately increasing Canatuan's reserves/resources and extending the long-term life of mine plan. Several promising near mine targets that were previously identified are scheduled for further testing to determine whether commercial quantities of minerals are present.

TVI's current exploration and optimization programs involve the following:

- Infill drilling program consisting of reverse circulation ("RC") drill holes ("DHs") as well as diamond drill holes ("DDHs") - to further define mineral resources and for further metallurgical test work (sulphides)

- Additional RC DHs - to test the extension of gossan (and sulphides) along the west and north fringes of the deposits

- Additional testpits - to test the extension of gossan to the northeast between zones of rubbly gossan

- On-going selective mining, stockpiling and blending of rubbly gossan material with the current massive gossan mill feed

- Hired chief database manager and chief mine geologist to complete the Technical Services Team

- Adopted & integrated GEMS mine modeling platform to standardize operational procedures, mine/mill reconciliation, grade control and database management

As previously described (included in the Company's 2005 Annual Report), TVI's Canatuan deposit is classified as a Volcanogenic Massive Sulphide ("VMS") - a deposit type that is mined to a high degree of operational and financial success in many parts of the world. VMS deposits are typically sources of copper and zinc, and frequently contain gold and silver, which is consistent with the composition of the Canatuan deposit. One of the common characteristics of VMS deposits that occur in a greenstone belt is that the individual deposits occur in clusters and together form a mining camp. Such deposits tend to be readily identified within a favourable host rock horizon. Exploration activities at the Canatuan minesite are ongoing in an effort to determine whether additional deposits are present in the area.

Philippines - Balabag

Management of TVI considers the recent drilling results obtained from the exploration program at Balabag to be encouraging. Accordingly, the Company continues to pursue an accelerated exploration drilling program at Balabag, as described in the Company's October 10, 2006 news release. A total of 47 drill holes have been completed, with a total aggregate meterage of 5,176 metres, as of October 31, 2006.

Data collected to date indicates that the Tinago vein is the largest and most strongly mineralized structure at Balabag. The mineralization remains strong from the central section 4E to 4W (some 400m along strike) where the vein swell is greatest but decreases progressively further west. The Tinago vein remains open to the east. The Miswi-Lalab twin vein system is smaller and thinner and appears somewhat like a leaner version of the Tinago vein. Two more vein occurrences have been uncovered progressing further east where the mineralized area and vein system remain open and under explored. Systematic mapping of the area is being carried out along with the drilling at 50 meter spacing of the Tinago vein and other identified structures.

Data collected at Balabag suggests that some, if not all of the vein structures remain largely open either on strike and/or at depth. Systematic drilling at 50 meter spacing is planned to determine whether the veins have a minimum continuity for resource estimation and potential mine development (as management believes to be the case). The current drilling campaign is designed to delineate the local vein system and is scheduled to be completed by the first quarter 2007 to enable a preliminary resource estimate (NI 43-101 compliant) and scoping study on the project by the end of the second quarter of 2007.

China

In 2005, Hunan Pacific Geological Exploration Inc. ("HPGEI"), TVI's wholly owned Chinese subsidiary, applied for 20 exploration licenses ("ELs") in China (including 4 in the Tibet A.R.). In June 2006, six additional EL applications (all in the Tibet A.R.) were filed. All current EL applications have now been cleared by the Ministry of Land and Resources ("MLR") and the Chinese military. All current applications except two in Yunnan have been cleared by the Provincial Bureaus of Land and Resources ("PBLR"). The processing of the applications by the MLR continues, and the Company expects that some ELs will be formally granted before year-end, which will represent a major milestone for TVI. All EL applications were filed under HPGEI's unique Wholly Owned Foreign Enterprise ("WOFE") structure.

HPGEI is currently the only WOFE approved by the central government for mineral exploration in China. HPGEI is also the only WOFE with a Qualified Explorer License.

Work in China has been completed on copper properties which TVI negotiated to explore in conjunction with Phelps Dodge Exploration Corporation ("PDEC"). Earlier in the year, TVI and PDEC entered into a letter agreement under which TVI agreed to acquire, collate and interpret geologic and geophysical data covering certain properties in Yunnan Province, China. As this work pursuant to the letter agreement has been concluded, plans are being made internally for a potential second stage of the exploration alliance.

TVI also continues to have discussions with select operators regarding advanced and existing projects within China. The Company hopes to screen and evaluate advanced stage properties to evaluate whether TVI could enter into joint ventures, acquire management control and further develop assets. Those discussions currently involve several gold projects in the Golden Triangle and a number of copper projects in Yunnan province.

Drilling Division

Revenues from the Company's Drilling Division increased substantially in both Q3 and in the first nine months of 2006, as compared to prior periods. During the nine months ended September 30, 2006, the Drilling Division drilled a total of 40,290 meters, compared to 9,929 meters in the same period of 2005. The complete review and management reorganization of the Drilling Division, which was initiated in early 2005, has resulted in a highly capable and experienced team overseeing the operations of the division. The new management team has effectively improved fleet maintenance and the restocking of parts inventory, initiated programs to rebuild existing rigs, improved operational and financial controls and reporting, and improved client relations. In the first nine months of 2006, the Drilling Division completed 12,275 meters of drilling for TVI's own projects, which is included in the total meters drilled in 2006. The revenues associated with drilling undertaken for TVI have been eliminated for consolidation purposes.

Rapu Rapu

The Company owns a 2.5% net smelter return ("NSR") royalty in the Rapu Rapu polymetallic mine located in Albay Province, Philippines. The mine is operated by Lafayette Mining Limited, an Australian publicly traded company. Lafayette completed construction and commissioning of the Mine and Mill on the Ungay Malobago property in 2005 and began initial shipments of gold and silver, resulting in royalty payments to TVI. The mine then experienced two unauthorized discharges of wastewater. The discharges resulted in an order by the Government to shut down the plant while repairs were made. In July 2006, Lafayette was granted a Temporary Lifting Order ("TLO") which allowed operations to recommence under a test-run. Subsequently, Lafayette applied for a 60-day extension of the test-run to further verify the remedial environment measures required by all government bodies of the Philippines. On October 26, 2006, Lafayette announced its intention to seek a Permanent Lifting Order and achieve reliable production of commercial grade concentrates. TVI expects to receive royalty payments to resume once commercial operations are fully re-established.

Outlook

The Company's financial position has improved significantly during the year. Record cash flows, net income and revenues for the last three quarters have resulted in the elimination of the Company's working capital deficiency. The Canatuan mine has achieved increased throughput and improved recoveries, which, when combined with enhanced metal prices, has produced higher cash flows. Metal and mineral prices have recently been subject to a degree of volatility, but remain near record highs. A new NI 43-101 technical report resulted in a substantial increase in the reported gossan mineral resource at Canatuan and an increase in the estimated life of the mine. A feasibility study demonstrating robust economics for the Sulphide Project has been released, with an NI 43-101 report filed on SEDAR. Planning for construction of the Sulphide Project at Canatuan is nearly complete and a positive plant production decision is anticipated in the near future after further project optimization work has been completed. Exploration on existing properties has been expanded and the current drill program for Balabag is expected to be complete by Q1 of 2007. The financial results and operations of the Drilling Division improved dramatically following the complete reorganization starting in early 2005. Revenues, cash flow and income generated from the Drilling Division have grown substantially year-over-year and again in the most recentQ3 and nine-month period. In China, all but two of HPGEI's EL applications have been cleared by the Chinese regulatory bodies and the Company expects to be formally granted some ELs by the end of the year which will represent a significant milestone. Based on the positive results of the first three quarters, as well as continued progress in operations and exploration, management expects that 2006 will be a record year for TVI.

About TVI Pacific Inc. (TSX:TVI)

TVI Pacific Inc. is a publicly-listed Canadian mining company focused on exploring for and producing precious and base metals within district scale systems in Asia.

In the Philippines, TVI's most advanced project, the Canatuan Mine, (the first foreign-invested, new, mining project in the Philippines in nearly four decades) began mining and milling operations in mid-2004, producing gold and silver dore. Mill throughput is currently over 1,800 dmtpd, generating approximately 160 AuEqOz per day from a gossan/oxide zone. TVI has received a completed NI 43-101 feasibility study on the Canatuan Sulphide project prepared by Norwest Corporation (which has been filed with certain securities regulatory authorities in Canada and is available at the SEDAR website.) The Norwest study addresses the copper-zinc bearing massive sulphide zone, or lower portion of the Canatuan Deposit. Planning for construction of the Sulphide Project at Canatuan is nearly complete and a positive plant production decision is anticipated in the near future, after further project optimization work has been completed. In addition, TVI holds a 2.5% NSR on the Philippine-based Rapu Rapu project (operated by Lafayette Mining Ltd.). Exploration in the Philippines is being conducted at Canatuan, in an effort to expand TVI's resource base and to find new deposits, and at Balabag, Tamarok and Tapisa, which management of TVI view as compelling exploration properties.

In China, TVI's wholly-owned Chinese subsidiary, Hunan Pacific Geological Exploration Inc., is the first and only foreign mining company to be granted both WOFE status and a Qualified Explorer License. The exploration program in China is focused primarily within the Golden Triangle area, a highly prospective metallogenic region in China's south-western provinces of Yunnan, Guizhou and Guangxi Autonomous Region and prospective areas in the Tibet Autonomous Region. HPGEI has 2,394 sq kms of land under application in China in the Golden Triangle and in the Tibet A.R.

TVI also has a Drilling Division consisting of Exploration Drilling Corporation ("EDCO"), a wholly-owned subsidiary of TVI Pacific Inc. based in the Philippines, and Hunan Pacific Drilling ("HPD"), a division of HPGEI based in China, which generates revenue from contract drilling.

The statements set out in this News Release that are not historical facts are forward-looking statements. Forward-looking statements (often, but not always, identified by the use of words such as "expect", "may", "anticipate" or "will" and similar expressions) may include plans, expectations, opinions, or guidance that are not statements of fact. Forward-looking statements are based upon the opinions, expectations and estimates of management as at the date the statements are made and, in certain cases, information received from or disseminated by third parties, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. These factors include such things as the volatility of prices for precious metals and base metals, commodity supply and demand, fluctuations in currency and interest rates, inherent risks associated with the exploration and development of mining properties, ultimate recoverability of reserves, timing, results and costs of exploration and development activities, availability of financial resources or third-party financing, new laws (domestic or foreign), changes in administrative practices and changes in exploration plans or budgets. Forward-looking information respecting anticipated improvements in processing capacity at the Canatuan mine are based upon enhancements in processing capacity achieved in response to initiatives undertaken earlier in 2006 and the current budget, development plans and overall strategy of TVI, all of which are subject to change. Forward-looking information respecting expansion plans at the Canatuan mine, the pace of mining of the gossan reserve at Canatuan, timing of anticipated commencement of production of copper and zinc concentrates from the Sulphide Project at Canatuan, exploration throughout the Philippines, and exploration in China are based upon the current budget, development plans and overall strategy of TVI, all of which are subject to change. Forward-looking information concerning the Rapu Rapu property and timing of royalty payments to the Company in respect of production at Rapu Rapu are based upon public statements made by the operator of the Rapu Rapu property.

Forward-looking information relating to the anticipated construction of a sulphide processing plant and related infrastructure at Canatuan is subject to the completion of additional project optimization work and is based upon current development plans, which are, in turn, premised on such things as the prices for precious metals and base metals, commodity supply and demand, currency and interest rates, recoverability of reserves, timing, results and costs of development activities, availability of financial resources or third-party financing, applicable laws (domestic or foreign) and development budgets. Forward-looking information respecting timing of receipt of certain approvals required to undertake exploration activities in China are based upon advice received from departmental officials and TVI's advisers in China. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The forward-looking statements of TVI Pacific Inc. contained in this News Release are expressly qualified, in their entirety, by this cautionary statement. Various risks associated with the Company's exploration activities are described in detail in TVI's Annual Information Form, filed by TVI on SEDAR on March 30, 2006, which is available at www.SEDAR.com. Readers are cautioned that the letter agreement entered into between TVI Pacific and Phelps Dodge Exploration Corporation (PDEC) for copper exploration in China, does not obligate TVI or PDEC to enter into further definitive agreements respecting joint exploration of mineral properties in Yunnan Province, China and no assurance can be given that such definitive agreements will be successfully negotiated, executed and delivered by the parties.


The Toronto Stock Exchange has neither approved nor disapproved of the information contained herein.

Contact Information

  • TVI Pacific Inc.
    Clifford M. James
    President and CEO
    (403) 265-4356
    (403) 264-7028 (FAX)
    or
    TVI Pacific Inc.
    Paul Moon
    Director, Corporate Communications
    (403) 265-4356
    (403) 264-7028 (FAX)
    Email: tvi-info@tvipacific.com
    Website: www.tvipacific.com