First Pacific still keen on mining assets

By Miguel R. Camus, Business Mirror

Posted at Aug 18 2009 11:26 PM | Updated as of Aug 19 2009 07:26 AM

HONG KONG - Conglomerate First Pacific Co. Ltd. remains interested in the mining assets of businessman Felipe Yap although any future deal may only involve the purchase of select Surigao del Norte mining rights of either Lepanto Consolidated Mining Co. and its affiliate Manila Mining Corp.—instead of an equity investment.

In a briefing, First Pacific managing director Manuel V. Pangilinan said the foreign conglomerate’s primary concern is to strengthen Philex Mining Corp., assigned as its main mining vehicle in the Philippines.

This includes propping up Philex’s latest copper-gold prospects in Bayugo and Boyongan. The sites are said to replace the company’s premier Padcal mine in the northern province of Benguet, which is seen to exhaust gold, copper and silver reserves by 2017.

“In the first instance, the interest of Philex is in an adjacent mining property owned by Lepanto and Manila Mining—beside the Bayugo property,” said Pangilinan, who was named chairman of Philex in June this year. “Philex is interested in this property so it can be developed as one single mine.”

Pangilinan explained that having a bigger tenement for Philex’s Surigao del Norte location will allow economies of scale and will also contribute to Bayugo’s mining life.

“So setting aside who owns which, if Philex owns both [properties], it will be better from a Philex standpoint and if due diligence corroborates that position then we have to negotiate with Lepanto and Manila Mining,” he said.

Whether First Pacific will buy a stake in either of Yap’s mining companies, or if it will just acquire certain portions of the business has not been decided at this point, he said. “Nothing is definitive. I think so far, discussions are open to what [Felipe Yap] likes and what we like,” said Pangilinan.

Meanwhile, Pangilinan is keen on ensuring Bayugo’s successful operations, the improvement of which may pave the way for First Pacific to increase its stake in Philex. During the Philex shareholder’s meeting in June, Pangilinan said First Pacific owns 22 percent in the miner and that the conglomerate would like to increase this stake to at least 51 percent.

“The new mine appears to be promising. So in the next two to three years, significant [capital spending] has to be devoted. [This,] assuming the mineralization continues to be positive,” said Pangilinan. He noted that Philex may need to raise new funds, the details of which will be determined in the “next few months.”

The businessman said any equity issue will likely be done through a rights offering, but said this will depend on other shareholders, of which as many as 30 percent are missing. “But whether this is enough to build to 51 percent is another matter,” he said, hence the need to target the large bloc holders, in particular, the estimated 22-percent stake held by pension fund Social Security System (SSS).

Recently San Miguel Corp. president Ramon Ang said he is personally interested in acquiring the SSS stake, worth as much as P10.5 billion as of Tuesday’s close. Speculation over a possible bidding war—similar to what is happening with Manila Electric Co.—drove up the share price of Philex to a record high of P11.25 on August 13.

For his part, SSS president Romulo Neri said the agency’s assets are always for sale at the right price but noted there are no formals talks at this time.