Mining Series > PX, LC, MA

 

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p. 1

da market securities corporate update mining series px lc ma recommendation buy px mining and px petroleum corp with interest in extraction production and exploration of mineral resources primarily gold and copper 53 of revenues come from gold and 40 from copper the remaining 7 from silver coal and petroleum 1 px is the biggest gold and copper producer in the country from 1958 ­ 2010 it has extracted and processed about 5.5m oz of gold 2.1bn lbs of copper and 6m oz of silver with silangan operations to commence in 2016 the company will retain its top producer spot 2 the company is posting higher revenue net income on the back of higher metal production better ore grade and higher commodity prices 1q 2010 1q 2011 1h 2010 1h 2011 financials revenue 1.1b 2.1b 4.86b 8.15b net income 520m 1.3b 3.22b p965m output gold 24,555 37,003 51,256 72,784 copper 8.10m 9.11m 15.84m 18.37m price gold $1,003 $1,315 $1,054 $1,398 copper $3.37 $4.13 $3.04 $4.09 grade gold g/t 0.477 0.613 0.476 0.591 copper 0.216 0.221 0.221 0.228 full-year 2010 px generated net income of p3.9bn in 2010 on revenue of p13.4bn vs p2.7b in 2009 on revenue of p9b px lists the average prices for commodities for 2010 as ff copper $3.37/lb gold $1,003/oz q1 2010 vs q1 2011

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p. 2

as of q1 2011 the company doubled revenue p1.1bn to p2.1bn net income rose by 106 to p1.3bn from p520mn yoy px lists the average prices for commodities for q1 2011 as ff copper $4.13/lb gold $1,315/oz in q1 2011 ore milled averaged a grade of 0.613 for gold vs 0.477 in 2010 likewise copper grade was 0.221 vs 0.216 in 2010 better ore and higher milling tonnage produced more concentrates at 16,792 dry metric tons dmt for the 1q vs 14,893 dmt in q1 2010 this was equivalent to 37,003 oz of gold 9.11m lbs copper in 2011 vs 24,555 oz of gold and 8.10m lbs of copper in 2010 h1 2010 vs h1 2011 px is on its way to potentially generating record earnings for the year ­ mvp as of h1 2011 revenues were up 68 to p8.15b vs 4.86b strong metal prices metal output and oil revenues generated record earnings extraordinary gain of p523.7m due to restatement of investment in pitkin petroleum plc to fair value interim dividend at p0.14/share pay-out ratio of 25 of core net income for h1 net income was up 234 at p3.22b highest h1 earnings in px history vs p965m yoy ore milled was up 7 to 4.66m from 4.36m tonnes average realized prices at $1,398 per ounce gold and $4.09 per pound copper versus $1,054 per ounce and $3.04 per pound in previous year metal production for gold rose 42 from 51,256 to 72,784 oz copper rose 16 from 15.84m to 18.37m tonnes likewise grade was higher for gold 0.476 to 0.591 and copper 0.221 to 0.228 q2 results outpaced expectations in price of gold $1,350 and copper $3.30 vs actual gold $1,398 and copper $4.09 grade of gold 0.517g/t and copper 0.219 vs actual .591 and .228 and output of 30,000 oz gold and 9m lbs of copper vs actual 35,781 and 9.26m lbs 3 continuity ensured transition from padcal to silangan by 2016 393m tonnes ­ 9m oz gold 5bn lbs of copper over 20-year mine life with higher grade of gold 0.74 g/t and 0.65 g/t and ore 0.54 and 0.65 padcal silangan est proven reserves tonnes 65m 393m tonnes/day 30,000 30,000 gold oz 123,800 165,000 copper lbs 38.29m 107m gold grade g/t 0.55 0.65 0.74 copper grade 0.24 0.54 0.65

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p. 3

annual revenue p21b 6-year average padcal benguet province has 65m tonnes left and may be retired in 6 years 2017 operating at 30,000 tonnes day for the past 6 years 8.9m tonnes were milled annually producing an average of 123,800 oz gold and 38.29m pounds copper ave gold ore grade of 0.55g/t and copper ore grade at 0.24 higher metal prices are encouraging px to extend another 3 years to 2020 in the padcal mine life previously the mine life was extended from 2011 to 2014 and to its current 2017 the extension program would cost between p700 ­ p1m mostly for waste handling silangan surigao del norte has 2 deposits boyongan and bayugo of gold and copper with roughly 393m tonnes with about 9m oz of gold and 5bn lbs of copper silangan is expected to produce 30,000 tonnes/day with target annual production of 107m lbs of copper and 165,000 oz of gold for the next 20 years estimated annual revenue is $489m p21b significantly higher grade from padcal average gold ore grade is at 0.74g t and 0.65g/t while average copper ore grade is at 0.54 and 0.65 from boyongan and bayugo respectively padcal s ave gold ore grade is 0.55g/t and copper ore grade is 0.24 development program is expected to start by 2012 will start operations in 2016 requiring a pre-operating capex of us$600m and a maintenance capex of us$800m 4 petroleum unit posts 183 higher revenues of p328.9m 154.6 higher income of p98.8m a turnaround from last year s loss the company is taking significant steps in enhancing the status of its petroleum energy assets petroleum unit revenues 116.1m 328.9m net income 54.6m 98.8m revenue from petroleum principally from forum energy plc 64.45 controlled through px petroleum corp ppc was p328.9 million 183 higher from p116.1m yoy net earnings were p98.8m a turnaround from loss of p54.6m in 2010.

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p. 4

seismic acquisition in sc72 northwest palawan was completed in q1 2011 pitkin petroleum 18.46 owned associate of ppc announced encouraging results from ongoing drilling activities in the ca rong do red emperor and appraisal well in block 07/03 in offshore vietnam the recent approval by the sec of the property component of the dividend declared by the board of directors in may 2011 should lead to the eventual listing of philex petroleum corporation ppc after the dividend comprising its shares as well as cash are eventually approved for registration and listing by the sec and the pse the listing will attract more investor interest and unlock the value ppc s oil and coal assets 5 growth outlook financials 2007 2008 2009 2010 2011e 2012e ebitda 6,639.10 4,460.00 3,101.70 7,094.30 8,159.80 8,317.20 net income 5,005 2,892.90 2,830.30 3,963.20 5,036.50 5,168.40 eps 1.04 0.67 0.58 0.81 1.02 1.05 p/e p/e just 36 short of full-year income targets as of h1 2011 px has achieved p3.22b in net income and 0.64 eps developments 1 silangan ­ bayugo kalayaan copper and gold project the mineral resources of the bayugo deposit silangan may be further enhanced as philex engages in a farm-in agreement with manila mining corporation regarding the latter s kalayaan mining tenement px and ma confirmed that they have agreed to explore and jointly develop the kalayaan copper and gold project placer surigao del norte the project is covered by an exploration permit issued to ma s unit kalayaan copper gold resources px has bought 125,000 shares of kalayaan copper for $25m 5 stake px will get an additional 55 interest in kalayaan when it pays for all pre development expenses including a final feasibility study the 280 ha kalayaan property aka bayugo has already been drilled by anglo american and is contiguous to the boyongan property which px has already drilled further advanced exploration activities and pre-feasibility work are being done in the nearby boyongan ore body which will be developed separately.

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p. 5

2 px acquired a 5 stake in lc for p1.43b giving it an indirect interest in the far southeast gold project in the northern province of benguet where lc has 40 stake in lc also has 20 stake in ma 6 px drivers of growth 1 operate at economies of scale with production at capacity improved grades and market prices of products 2 acquire new mining tenements 3 while sales have not diversified from 2008 ­ 2010 were generated from only 1 market ­ japan the company can tap growing demand for gold and copper from india and china 4 improve cost efficiency by producing gold and copper by-products which contribute to total revenues 5 expand into oil business on lc/b lc posted q1 net income of 28m eps 0.00071 in vs net loss of 110.9m on higher output the co targets p100m net income 25,000 oz gold output eps 0.0039 vs net loss of p21m eps -0.00067 expansion on production in the next 2 years on victoria ore body with higher grade and gold reserves of 400,000 oz lc posted a net income of 29m in q1 2011 attributed to high gold prices and improved output from its victoria mine in benguet ­ a turnaround from a net loss of p110.9m in 2010 lc produced 7,000 oz of gold and 12,000 oz of silver in q1 2011 vs 6,176 oz of gold and 10,278 oz of silver lc expects to produce 25,000 oz of gold for full year 2011 translating to a net income of 100m vs a loss of 21m in 2010 upcoming expansion by lc on production for the next 2 years on the upper levels of the victoria ore body which has given better gold grades than the lower levels the mine has remaining gold reserves of 400,000 oz lc has budgeted p700m on mine development and capital expenditure for 2011 using proceeds from its stock rights offering and operating revenue.

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