Henry Sy's SM buys stake in Atlas for $142-M


Posted at Jul 01 2011 05:15 PM | Updated as of Jul 03 2011 08:27 AM

MANILA, Philippines (2nd UPDATE) - SM Investments Corp., the holding firm of the country's richest man, Henry Sy, announced Friday it will acquire a substantial stake in Atlas Consolidated Mining and Development Corp., marking its entry into the mining sector.

SM Investments' board has approved the purchase of 17.9% of the expanded outstanding capital of Atlas for $142.2 million.

SM said the buy-in will allow it to take advantage of rising metal prices.

"Atlas is one of the top 20 copper mining companies in the world. It is very well-positioned to take full advantage of its mine site’s significant resources to serve its major markets like China and Korea, which have a close proximity to the Philippines," said SM president Harley Sy.

Atlas is controlled by Fred Ramos, son of National Bookstore founder Socorro Ramos.

The stake sale is part of Atlas' plan to raise $390 million to do two things: boost production at Atlas' Carmen Copper unit and buy out its partners in Carmen so it keeps all the benefits of the expansion.

Atlas climbed about 20% last week on speculation of a buy-in, prompting it to call a two-day trading halt.

At the same time, Philex Mining Corp., headed by Manny Pangilinan, jumped 22% on speculation it was the buyer.

The Atlas-SM transaction follows Pangilinan's moves in June, buying 5% of Lepanto Mining and joining Manila Mining in its Kalayaan project.

Atlas' Carmen Copper already produces more copper than Philex, though Philex tops it in revenue because it also has gold.

Semirara Mining, controlled by the Consunji family's DMCI Holdings, beats both but it produces lower-margin coal.

SM said it was investing in Atlas as a bet that copper prices would continue to remain high due to demand from China and other growing Asian economies. - by Coco Alcuaz, ANC

Biggest miners in 2010

  Metal production Value
Semirara 7.1 million tons coal P14.2 billion

35.6 million pounds copper

133,516 ounces gold

P13.4 billion
Atlas 58.3 million pounds copper P8.2 billion
Semirara coal 9.95 million metric tons coal P14.2 billion

“The price of copper, a base metal, has recovered very strongly in recent years and is expected to remain buoyant in the near future owing to the very strong demand from major Asian economies," added SM executive vice president and chief finance officer Jose Sio.

Proceeds of the investment will be used by Atlas to buy out its Singapore-based partners in gold and copper subsidiary, Carmen Copper Corp., SM said.

Atlas share, notes sale

Atlas earlier said it was seeking to raise $390 million via a four-phase share and convertible notes issue to fund its takeover of Carmen Copper.

The company plans to sell more than 700 million shares, about 33% of its fully diluted capital stock to buy 45.54% of Carmen Copper held by CASOP Atlas Corp. and CASOP Atlas BV.

The sale to the SM group is the first of the fund-raising tranches.

Atlas also plans to sale another block of 111.2 million shares to its shareholder Alakor Corp. for $50 million. Alakor currently holds around 21% of Atlas.

Aside from the share sales, Atlas will issue one- and five-year notes to Banco de Oro Unibank Inc., a unit of SM Investments and the Philippines' largest lender by assets, to raise $197.8 million.

The $122.8-million one-year notes to BDO will be convertible into 273.1 million Atlas shares, but no terms have been announced yet. On the other hand, the remaining $75 million five-year notes may also be converted into Atlas shares in the event of default.

Copper unit

Carmen Copper operates the 1,674-hectare Toledo mine in Cebu province. The site is estimated to contain about 1.5 billion tons of ore or about 5 million tons of copper.

The Atlas unit plans to spend $200 million to double its annual capacity to 100,000 tons of copper concentrates in two to three years from the current 42,000 tons.

Atlas shares closed up 2.7% at P21.25 apiece in the market on Friday.