2003
FIRST QUARTER REPORT
BENGUET CORPORATION
AND SUBSIDIARIES
For the first quarter of 2003, Benguet Corporation
reports improved performance in the operation of the
Masinloc Chromite Operation, the Acupan Contract Mining
Project, the Irisan Lime Project, the BMC Foundry, and
the Benguet Mines Tourism Village. During the quarter,
your Company continued to monitor the Baguio Water
Districts preparation to bid out the bulk water supply
project in Baguio City, and has adjusted its studies to
cover various technical scenarios. Your Company has
also welcomed Marubeni Corporations expression of
interest and recommendation to initially develop the
Kingking prospect under a limited scope.
CONSOLIDATED RESULTS
Consolidated net loss this quarter amounted to
P76,800,000 (US$1,434,000) or P0.67 (US$0.013) per
share, slightly higher than the loss of P74,200,000
(US$1,451,000) or P0.65 (US$0.013) per share in the
same quarter of 2002. The positive turnaround of
the Masinloc Chromite Operation (MCO) was not enough
to offset the higher foreign exchange losses and
caretakership/suspension expenses this quarter,
compared to last years first quarter.
Operating revenues increased to P78,400,000
(US$1,465,000) this quarter from P32,700,000
(US$639,000) for the same quarter in 2002.
MINING OPERATIONS
The Masinloc Chromite Operation (MCO)
generated net earnings of P3,100,000 (US$58,000)
this quarter, compared with the net loss of
P1,200,000 (US$23,000) for the same quarter in
2002. Shipment volume for the quarter aggregated
4,840 tonnes, higher than the 1,519 tonnes for
the same quarter last year. After an 8-month
suspension, MCO resumed operation in March 2003
upon exhaustion of its inventory of chromite
concentrate, with an improved tonnage forecast
resulting from the marketing effort initiated
last year. For the second quarter, your Company
is projecting to export 7,000 tonnes of
concentrate.
The Acupan Contract Mining Project (ACMP)
reported a cash flow from operations of
P2,840,000 (US$53,000) this quarter (excluding
inventory worth P2,120,000, or (US$40,000).
The first mining contracts implemented last
year that started on royalty-basis and shifted
to production sharing after a quarter, ended
last February 2003. On March 14, 2003, ACMP had
its second contract bidding for a two (2)-year
mining program, with seven (7) accredited mining
cooperatives winning fourteen (14) mining areas.
An incentive bonus scheme was added into the
new contract package. Your Company is currently
evaluating the commercial viability of the
remaining underground gold resource in the Antamok
and Kelly Mines for possible reopening in a
manner similar to ACMP.
Your Companys Irisan Lime Project (ILP)
reported revenues of P2,900,000 million for the
quarter, 129% better than the same period last
year. It generated a pre-tax income of P296,000,
a reversal from the loss of P82,000 for the same
period last year. The turnaround of Irisan is
attributable to its twice-renewed supply agreement
with Lepanto Consolidated Mining Company for a
minimum of 400mt per month. In Alaminos, Pangasinan,
your Company completed the transfer of the crushing
plant from its limestone property in Barangay
Pocal-Pocal to the nearby property of Gulf Estates
Mining Corporation (GEMCOR) in Barangay Sabangan.
The availability of an all-weather access road has
improved hauling operations, thus ensuring the
continuous supply of limestone to the Mirant Sual
coal-fired power plant.
EXPLORATION, RESEARCH AND DEVELOPMENT
Marubeni Corporation has expressed interest
in the Kingking prospect. It has recommended that
your Company study mining 50 million tonnes of
copper oxide ore as a stand-alone project. Since
this limited scope departs from your Companys plan
to develop Kingking on a large scale with a $ 500
million capital expenditure requirement, this new
approach will have to be relayed to the Mines and
Geosciences Bureau (MGB). Your Company agrees
that this option is worth considering and will
embark on a one-year oxide study.
At the Pantingan gold prospect in Bataan,
your Company has complied with all the requirements
of the Mineral Production Sharing Agreement (MPSA)
with the government. A drilling program has been
prepared but drilling activities have been postponed
due to an outside pending application to declare
the area into a watershed, which may prevent future
mining operation even if your Company has delineated
an economic ore reserve. Your Company plans to take
up this issue with the Department of Environment and
Natural Resources (DENR) and the MGB for resolution.
Foreign mining companies have approached your
Company to be their local partner in developing their
properties. Two such prospects are the copper porphyry
in Didipio, Nueva Vizcaya and the poly-metallic
Rapu-Rapu reserve in Bicol. Your Company is awaiting
development from Climax-Arimco about partnering
parameters on the Didipio project. This project will
allow use of your Companys BAGO mill as equity. On
the other hand, talks with Lafayette Mining are ongoing
regarding your Companys 25% option on the Rapu-Rapu
claim. Your Company is offering the BGO mill for its
equity share. The Rapu-Rapu mine has obtained an
Environmental Compliance Certificate (ECC) and is the
closest to development and production among the various
mineral properties in the country.
WATER RESOURCE DEVELOPMENT
The Baguio Water District (BWD) is set to complete
by June 2003, its terms of reference for a bulk water
supply bidding under the Build-Operate-Transfer (BOT)
Law. In view of Baguio Citys urgent need for water
and the fact that BOT is a lengthy process, BWD is
considering at the same time an alternative Joint
Venture approach that promises a shorter route. In
the meantime, your Company is finalizing its 50- and
75-MLD (million liters per day) technical options for
BWDs immediate water requirement, but is capable of
and ready to propose 100 to 200 MLD supply, if necessary,
for the long term. Your Company is now completing its
team of consultants, particularly in the fields of
environmental compliance, financial analysis and
projections, project development and packaging, fund
sourcing, and legal matters, to help move its proposal
forward. As part of the Companys program to obtain
an ECC for the project, it has conducted perception
surveys on residents of direct-impact barangays
(Loacan, Ucab, and Tuding), as well as a project
presentation to the Itogon Sangguniang Bayan, both
with favorable results.
For the Bukidnon Water Project, your Company is
awaiting the comments of the Development Bank of the
Philippines and approval of the Sangguniang Bayan
regarding your Companys final proposal on the Amended
Lease Agreement for the operation of the Kalilangan
water system. Based on your Companys terms, the 15-year
operation is projected to be modestly profitable,
but more importantly, will allow your Company to showcase
its capabilities to the municipalities of Manolo Fortich,
Lantapan and maybe Malaybalay City and other neighboring
towns. In April 2003, your Company started additional
well development activities in the Cabanglasan water
project.
LAND DEVELOPMENT
Your Companys Benguet Mines Tourism Village
(BMTV) in Balatoc reported revenues of P759,000 or a
60% increase from the same period last year. It
generated a total of 4,861 visitors, representing a
62% increase from previous years volume of 3,000
during the same period.
In March 2003, BMTV was nationally projected
through its participation at the Grand Cordillera
Festival in Intramuros, in line with the Department of
Tourisms Visit Philippines 2003 program. During the
2-week event, the BMTV booth was a popular stop for
visitors from schools and colleges, government agencies,
families, tourists and top personalities such as DOT
Secretary Richard Gordon and Her Majesty, Queen Sofia
of Spain. Promotional materials were distributed and
one-on-one meetings were held with various tour operators
and tri-media representatives, as well as with
representatives from 40 schools and colleges in Metro
Manila. Live interviews were held with TV Channel Net 25,
DZEC, CBN Asian and Lakbay TV. The booth was also shown
over ABS-CBNs TV Patrol and GMAs Unang Hirit Sa
Umaga. As a result of this tremendous publicity generated
last March, BMTV has been receiving new visitors to Balatoc.
BENGUET MANAGEMENT CORPORATION
Benguet Management Corporation (BMC), a 100% owned
subsidiary, and its subsidiaries reported a consolidated
net loss of P11,500,000 (US$215,000) this quarter,
from a loss of P9,900,000 (US$194,000) in the same
quarter last year. Its subsidiaries, Arrow Forwarding
Corporation and Agua de Oro reported higher losses
this quarter. The Foundry Division sold higher tonnage
this year and reduced its loss to P9,300,000 this
quarter, from P16,200,000 in the first quarter last year.
ASSET DISPOSAL
Your Companys asset disposal activities this
quarter generated P2,300,000 from sale of non-performing
assets in the form of equipment, materials and supplies,
and scrap materials.
DEBT REPAYMENT PLAN
On June 11, 1999, your Company reached an agreement
with its creditor-banks on the repayment of its outstanding
loans. A Term Sheet was signed extending the maturity
of your Companys loan up to June 30, 2000, with automatic
renewal every anniversary up to the year 2002, upon payment
of annual interest. Your Company was able to settle major
portions of the interest due on June 30, 2000 through a
combination of cash and Tax Credit Certificate (TCCs).
For June 30, 2001 and June 30, 2002, your Company wrote
the banks and offered to settle the annual interest due
via TCCs. A majority of the banks indicated their acceptance
but your Company deferred payment of the
maturing principal due on June 30, 2002. In its letter
to the banks dated October 3, 2002, your Company requested
for additional time to settle its obligations pending its
formal entry into the Baguio Water Project.
As of March 31, 2003, your Companys loans subject
to the repayment plan amount to P1.6 billion (US$31 million),
plus interest.
VALUE ADDED TAX CLAIMS
The Bureau of Internal Revenue and Department of
Finance have so far favorably granted your Company tax
credit certificates of P578 million for direct export
shipments and gold sold to the Bangko Sentral Ng Pilipinas
(BSP). As of March 31, 2003, the balance of your Companys
claims awaiting administrative and judicial review for
direct exports and gold sold to the BSP amount to P54
million and P203 million, respectively, or a total of
P257 million.
OUTLOOK
For the second quarter of 2003, your Company
anticipates even better performance from MCO in terms
of higher shipment tonnage of chromite concentrate.
This and further improvement in the operation of the
Acupan Contract Mining Project will provide dependable
cash flow. Your Company will push to finalize the Amended
Lease Agreement with the Kalilangan LGU and start the
15-year operation of the latters water system by the
3rd quarter of this year. Finally, your Company will
continue to monitor developments in the preparatory
activities for the Baguio bulk water bidding, and fine-tune
its proposal to ensure that it submits the best bid.
BENJAMIN PHILIP G. ROMUALDEZ
President & Chief Executive Officer
BENGUET CORPORATION
AND SUBSIDIARIES
Consolidated Results of Operations
In Thousands (Except Per Share Data)
(Unaudited)
THREE MONTHS ENDED
MARCH 31
PHILIPPINE PESOS 2003 2002
Operating Revenue P78,400 P32,700
Operating Profit (Loss) (6,800) (10,900)
Other Income (Expenses) - Net (70,000) (63,300)
Net Income (Loss) (76,800) (74,200)
Earnings (Loss) Per Share (a) (P0.67) (P0.65)
US DOLLARS (b)
Operating Revenue $1,465 $639
Operating Profit (Loss) (126) (214)
Other Income (Expenses) - Net (1,308) (1,237)
Net Income (Loss) (1,434) (1,451)
Earnings (Loss) Per Share (a) ($0.013) ($0.013)
Earnings per share are based on the weighted average
number of common shares outstanding of 114,112,535 in
2003 and 2002.
Benguet is a Philippine corporation and its books of
accounts are kept in Philippine pesos. US Dollar figures
are shown purely for convenience and were computed based
on the interbank guiding rate at March 31 of P53.532 to
US$1.00 in 2003 (P51.148 to US$1.00 in 2002).
BenguetCorp
314: 2003 FIRST
315: QUARTER
316: REPORT