INDOPHIL RESOURCES NL 
By indophil resources nl
acn 076 318 173
Quarterly Report
For the three months ending 30 September 2013
Fax: +613 8620 5888
Indophil Services International Pty Ltd Level 3, 107 Aguirre Street Legaspi VillageMakati City 1229
The Philippines
Tel: +632 752 1440
Fax: +632 752 1146
www.indophil.com
• Resetting the agenda to take the Tampakan Copper-Gold Project through project approvals and into development . . . • SMI has dramatically revised the work plan and reduced expenditure. • The Philippine Government has put in place a specialist inter- agency working group to tackle key project challenges and help clear pathways to progress. • Indophil's share price implies a market value of $20-30m below cash backing.
The key driver of project level activity during the quarter has been the decision by Sagittarius Mines Inc., (SMI - a Glencore Xstrata and Indophil joint venture) to lodge and implement a Revised Work Plan.
The focus and goal of this plan are threefold - define the pathways to resolve a provincial ban on open pit mining, finalise the local community resettlement program and obtain the remaining approvals to commit to development.
Glencore Xstrata is Indophil's new Joint Venture partner, with a different approach to Xstrata. Glencore has clearly articulated its corporate vision. It has outlined its plan to deliver growth through the development of brownfields projects and its preference to avoid greenfields projects. That, together with the possibility that Glencore Xstrata may be forced to divest its stake in Tampakan as a result of the commitments
made to the Chinese Government's MOFCOM to secure approval of its merger with Xstrata, has created uncertainty in the market as to the immediate progress and future ownership of
Tampakan. Indophil's responsible reaction in the light of this uncertainty was to impair the value
of its stake in Tampakan by $107.5 million in the half-year accounts.
Glencore Xstrata holds a 62.5% economic interest in the Tampakan Project through its shareholding in SMI. It is also the Manager of the Tampakan Project Joint Venture. It has strong views on how it can add value by engaging
both the project stakeholders and the Philippine Government to focus on securing the approvals required to move forward.
The effectiveness of Glencore Xstrata's approach and its impact on the Project's FTAA (our investment agreement with the Philippine Government) will no doubt be determined in the future. However, Indophil and its in-country
alliance partners remain committed to vigorously protecting the FTAA and moving the project into development
The status quo is:
• Indophil's share price implies a market
value of $20-30 million below cash backing.
• Glencore Xstrata is a holder of a 62.5% economic interest in the Tampakan Project, the beneficial owner of 62.5% of SMI and it has a 13.1% shareholding in Indophil.
• Indophil has a pre-emptive right over
Glencore Xstrata's stake in Tampakan.
• Indophil and Glencore Xstrata are in a range of discussions.
Meanwhile, the Philippine Government's Mining Industry Coordinating Council (MICC) has established a specialist inter-agency working group to liaise with SMI to help resolve the major issues and challenges facing the project and its pathways to progress. As part of that process, the working group has been charged with
prioritising planning for resolution of major issues and hurdles by 30 November 2013.
Richard Laufmann
CEO & MD
31 October 2013
On 12 August 2013, Indophil advised that it had received from Glencore Xstrata, the Manager of the Tampakan Copper-Gold Project (through Sagittarius Mines Inc., SMI, the holder of the Tampakan Project FTAA), a Revised Work Plan (RWP). The RWP was issued after a review of the development plan and schedule for the project.
The goal of the RWP is to secure crucial government support in the Philippines on key bottleneck issues prior to proceeding. These bottleneck issues are:
• Securing a definition of the pathways to project approvals from all levels of government in the Philippines;
• Resolution of the South Cotabato provincial government open pit ban (an action that the national government deems contrary to national laws); and
• The gaining of consent and the resettlement of impacted communities.
Implementation of the RWP has resulted in a significant reduction in the work program, expenditure and employment. For detailed information, see Indophil's announcement to the Australian Securities Exchange (ASX) of 12 August 2013.
Following implementation of the Tampakan RWP, SMI submitted a letter to the co-chairs of the Philippine Government's Mining Industry Coordinating Council (MICC) to confirm that implementation of the RWP had commenced. In doing so, SMI detailed the major issues and challenges to take the Tampakan Project forward, and requested that the
MICC create a specialist inter-agency working group to play a lead role in resolving the issues and challenges.
At the August meeting of the MICC, SMI's request was discussed and favourably considered. This resulted in the MICC creating the Tampakan Project inter-agency working group. The mandate of the working group is to prioritise resolution of major issues by 30 November 2013. These issues include definition of the Free and Prior Informed Consent processes with the local Indigenous Peoples and resolving the South Cotabato provincial government open pit mining ban.
The working group is comprised of the Department of Environment and Natural Resources (DENR) and Department of Trade and Industry (DTI) as co-chairs, with the Departments of the Interior and Local Government, Agrarian Reform, National Defence, the Office of the Solicitor General, the National Commission on Indigenous Peoples and the Union
of Local Authorities of the Philippines holding working group seats.
On 20 June 2013, Indophil advised shareholders of proceedings having been issued in the Supreme Court of Queensland by Xstrata Queensland (part of Glencore
Xstrata since 2 May 2013), seeking the issuance of the Share Certificate to enable it to become registered as the legal holder of shares in SMI that it acquired from Indophil in 2007.
Glencore Xstrata is seeking to perfect its title to the shares. Glencore Xstrata, and before it Xstrata, has held the beneficial interest in the Tampakan Project since 2007 and is the Manager of the Tampakan Project Joint Venture.
A Supreme Court hearing date has provisionally been set down to commence 9 December 2013.
On 9 September 2013, Indophil lodged with the ASX its
Interim Financial Report for the Half-Year ended 30 June 2013. A key development announced at that time was the decision by the Indophil Board of Directors to reassess the carrying value of the Company's Tampakan asset in the form of an impairment charge. In doing so, your Board considered:
• The uncertainty of Glencore Xstrata's future plans and ownership in respect of the Tampakan Project;
• The Revised Work Plan; and
• Market valuation placed on the Company, which for 12 months has traded below its Net Asset Value.
Given these circumstances, the Indophil Board considered these indicators of impairment and assessed the carrying value of the Company's share in SMI as $174.7 million. This resulted in an impairment charge of $107.5 million.
Expectations regarding future approvals and risks to
the project can change significantly as uncertainties are removed which, in turn, can have a significant impact on the assessment of the carrying value of the Tampakan investment.
The Tampakan copper and gold deposit, discovered in
1992, is one of the largest-known undeveloped copper-gold deposits in the world. Tampakan is a 2.94 billion tonne mineral resource at 0.51% copper when measured at a 0.2% copper cut-off grade. It is estimated to contain 15 million tonnes of copper and almost 18 million ounces of gold, with potential
for growth.
The Tampakan Mine Project Feasibility Study outlines a proposed mining operation that involves:
• An initial 17 year life-of-mine, with potential for extension;
• A start-up mining and milling capacity of 66 million tonnes per annum;
• Annual copper production of 450,000 tonnes and annual gold production of 435,000 ounces over the first five years of operation;
• An average life-of-mine copper production rate of
375,000 tonnes per year;
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• An average life-of-mine gold production rate of 360,000 ounces per year; and
• A development cost of US$5.9 billion, including the provision of US$900 million for a power station.
Indophil holds a strategic 37.5% stake in the Tampakan Project while Glencore Xstrata holds the balance. In turn, as the holder of the Tampakan Project Financial and Technical Assistance Agreement (FTAA), SMI acts as a contractor to the Philippine Government on behalf of the people of the Philippines.
Indophil's cash balance at the end of the September 2013 quarter was $217.8 million (previously $223.6 million). Interest earned from cash-at-hand during the quarter was $2.3 million. The Company's main expenditure commitment for the quarter - approximately $4.7 million - was to the Tampakan Project.
There was no field activity at Indophil's Itogon Gold Project in Northern Luzon during the quarter. A program to assist in obtaining Free Prior Informed Consent (FPIC) from the local community continued in support of title renewal. Following analysis of the recent drilling program and the title issues, Indophil is reviewing its participation in the project.
In Eastern Mindanao, Indophil holds an interest in the Manat Gold Project. The Declaration of Mining Project Feasibility (DMF) has been submitted to the Philippine Government. On
9 January 2013, the DMF successfully passed through the regional Mines and Geosciences Bureau (MGB) process and was referred to the MGB Central Office in Manila. This has been provisionally approved. The Company's consultants, Axeltechs, are discussing the additional data that the MGB requires to
be submitted.
ASX listed code IRN
Total listed shares 1,203,146,194
Unlisted options 3,374,750
Share price trading range for the September 2013 quarter: High 27c
Low 16.5c
Current 15c
All currencies in Australian dollars unless stated otherwise.
Directors
Non-Executive Chairman Brian Phillips
CEO and Managing Director Richard Laufmann
Executive Director Tony Robbins
Non-Executive Director Kyle Wightman Non-Executive Director David Carland Non-Executive Director Nicasio Alcantara
Non-Executive Director Frederic DyBuncio
Company Secretary Kay Donehue
Chief Financial Officer Anita Addorisio (nee Krauser)
Gavan Collery
Manager Corporate Affairs
Indophil Resources NL
Email: gavan.collery@indophil.com
Office: +61 (03) 8620 5800
Mobile: +61 (0) 419 372 210
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www.indophil.com
Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report
