Philex income lower due to lack of one-time gains


Posted at Aug 05 2010 03:08 PM | Updated as of Aug 06 2010 01:51 AM

MANILA, Philippines - Copper-gold producer Philex Mining Corp.'s net income for the first half of the year fell to P965 million from P1.126 billion in the same period last year due to the absence of extraordinary gains.

However, core net income of the company rose 3.8% to P983.9 million from P948.3 million as earnings from oil production and higher metal prices offset lower ore grades at its Padcal mine in Benguet province.

Last year, Philex benefited from a non-recurring gain of P330 million from currency hedging transactions.

Consolidated revenues went up 10.1% to P4.86 billion in the first 6 months of 2010 from P4.4 billion a year ago as copper revenues rose 27.7% to P2.3 billion. Gold revenues fell 6% to P2.457 billion as lower ore quality offset the rise in gold prices.
Consolidated revenues this year included petroleum revenues of P116.1 million, up nearly 12 times from P9.7 million a year earlier, contributed by Forum Energy PLC, a 51.95% owned subsidiary. Coal revenues of P14.1 million from wholly-owned subsidiary Brixton Energy & Mining Corp. also contributed to total revenues.
Forum Energy’s revenues came primarily from its share of production from the Galoc oil field offshore from northwest Palawan Island. Brixton Energy’s revenues were derived from the sale of its coal purchases.
“While ore grades were disappointing in the first half of the year, we are confident that the second half of the year will be boosted by higher metal prices and better-quality ore which we are already mining now, as well as by the continuing greater contribution from our energy operations,” said Manuel Pangilinan, Chairman and Chief Executive Officer of Philex. “The board shares my confidence, today we have approved an interim dividend of 5 centavos per share, representing about a quarter of our recurrent earnings.”
The average copper price is currently above $3.30 per pound, while the price of gold is currently above $1,180 per troy ounce.
Core earnings per share rose to 20.04 centavos in the first half of the year from 19.48 centavos a year earlier.  Reported EPS fell 17.4% to 19.84 centavos versus 24.03 centavos a year earlier.
Earnings before interest, tax, depreciation and amortization before extraordinary and non-recurring items rose 13% to P1.831 billion versus P1.621 billion.
“With respect to production from the Padcal mine for the remaining 6 months of 2010, we expect to have both greater volume and greater quality of ore than in the first half of the year,” said Jose Ernesto Villaluna, Jr., President and Chief Operating Officer of Philex.  “We are opening up new draw points which promise to deliver higher-quality ore in greater volumes.”
Ore milled in the first semester had an average grade of 0.208% copper and 0.476 grams of gold per ton compared with 0.239% copper and 0.624 grams of gold per ton a year earlier.  As a result of the lower grade, the amount of concentrate produced by Philex fell 10.1% in the first half to 29,376 dry metric tons from 32,662 DMT even as the amount of ore milled rose 7.7% to 4.36 million DMT from 4.05 million DMT.
Philex benefitted from a stronger realized price per pound of $3.04 in the first half of 2010 compared with $2.18 in the first half of 2009. However, the lower ore quality pushed copper production down 8.4% to 16.15 million pounds in the first 6 months of the year from 17.62 million pounds in the same period last year.
The increase in copper revenues was slightly offset by the lower revenues from gold as production volume fell 21.7% to 51,122 ounces from 65,269 ounces in 2009 despite the stronger realized gold price of $1,054 per ounce, compared with $881 per ounce a year earlier.
Higher revenues offset increases in marketing charges and operating costs, pushing income from operations up 11.8% to P1.445 billion this year compared to P1.292 billion last year.
“Looking forward, The Silangan Project is driving full steam ahead and we aim to start the development phase of this mine by next year,” Pangilinan said. “Silangan will play a key role in building a bright future for Philex.”
The Silangan copper-gold mine in Surigao del Sur Province is estimated to hold much higher resources than Philex’s Padcal Mine, which has been in operation for half a century.