Philex Mining demands ouster of Neri from board

Philex Mining Corp. reiterated its demand for the ouster of Social Security System (SSS) president Romulo Neri from its board of directors for allegedly violating his “fiduciary duties” to the detriment of the publicly-listed mining firm.

In a letter to SSS chairman Thelmo Cunanan dated Dec. 11, 2008, Philex chairman and chief executive officer Walter Brown insisted that Neri’s move, questioning the sale of 20 percent of the mining company to Hong Kong-based First Pacific Co. Ltd., has cost Philex at least P35.7 million.

Brown said while the deal between Philex and First Pacific went through, the top Philippine gold and copper producer claimed that it lost P31.08 million in interest cost alone and incurred over P4 million in expenses “due to Neri’s actions.”

“Clearly, the actions of Mr. Neri jeopardized a transaction that is beneficial to the corporation and its stockholders, in violation of his fiduciary duties,” Brown said.

Neri, who was caught in the ZTE-National Broadband controversy prior to his transfer to the SSS, had opposed First Pacific’s purchase of 778.44 million of Philex’s common shares, saying the shares should have been offered first to the SSS as a major stockholder owning 18 percent of the mining firm. Neri is a representative of the SSS to the Philex board.

“It is ironic that Mr. Neri’s insistence on exercising the “pre-emptive right” in order to protect SSS members is in fact prejudicial to the SSS and its members. At the time Mr. Neri made his demand, the shares were trading at P7. Today, Philex shares are trading at about P5. The SSS would thus have bought shares at a price way above market and clearly wasting SSS money amounting to more than P700 million,” Brown said on behalf of Philex’s board of directors.

On Nov. 28, First Pacific completed its acquisition of a fifth of Philex for P6.17 billion through a block sale on the Philippine Stock Exchange.

Proceeds from the sale will be used by Philex to fund exploration and development projects, including the acquisition of Anglo-American’s share in the Boyongan property in Surigao del Norte. 

Neri earlier said his actions were in accordance with the instructions from the Social Security Commission, which is the pension fund’s highest policymaking body. He said his mandate was to ensure the protection of the value of the investments, which were taken from the contributions of SSS’s 27 million members.