Lepanto loses P40M in Q1 due to drop in gold output

Lepanto Consolidated Mining Co., one of the oldest mining firms in the country, incurred a net loss of P40 million in the first quarter due to a drop in its gold production, a top company official said.

At the company’s stockholders meeting the other day, Lepanto president Bryan U. Yap said the mining firm produced only 17,000 ounces of gold in the first quarter, 15 percent lower than in the previous level.

"The lower first quarter results were not entirely unexpected due to changes in the geology which impacted the mine grade," Yap said.

Heavy losses from the company’s hedging contracts also contributed to the losses incurred by the company. Lepanto had executed loan and hedging facilities agreement with NM Rothschild and Sons and Dresdner Kleinwort Wasserstein.

While the company had settled a $30-million long-term loan from these banks, Lepanto has yet to settle its hedged position involving an undelivered volume of 169,000 ounces of gold.

Yap, however, expects Lepanto to bounce back in the remainder of the year with a new business plan in place. It is looking at net income of P150 million by yearend or an increase of 72 percent from P12.92 million in 2004.

The plan, which complies with international standards and reflects the current physical layout and economics of the company’s mine, involves the greater use of mining technologies that Lepanto has been developing over the years, which will result into higher grade of mine products.

Yap said the company expects to produce between 22,000 and 25,500 ounces of gold per quarter through the new mine plan.

Yap said the company entered into a hedging agreement because it is a condition of a long-term loan it secured in 1998. "Until position is closed the liability is not yet certain. Since we’ve recognized that this is a huge loss to the company, we have been very busy in discussing with senior banks about restructuring the hedging contract," he said.

Lepanto chairman Felipe Yap added that the company is scouting for foreign investors to jumpstart the development of its mines.

"We have always been looking for foreign investors. Since I became chair of this company, I have always been realistic in saying that no mining investments in the country can become of any significance if we don’t have foreign investors. Aside from the money they put in, they have expertise and we don’t have that. We may eventually have it. But we have to be sure we have a foreign partner to back us," Yap said.