San Miguel fortifies presence in mining with acquisition of 2 Mindanao coal mines

MANILA, Philippines - Diversifying conglomerate San Miguel Corp. is fortifying its presence in the mining industry with the purchase of two more coal mining companies with rights over rich coal deposits in Sultan Kudarat and South Cotabato in Mindanao.

San Miguel president and chief operating officer Ramon S. Ang said the group, through its power arm San Miguel Energy Corp., has concluded talks for the acquisition of Sultan Energy Philippines and Bonanza Energy Resources at a still undisclosed amount.

“We have signed a confidentiality agreement with the owners of these two companies. All I can say for now is that it’s a done deal,” Ang told reporters on the sidelines of Manila Electric Co.’s annual shareholders meeting yesterday. Ang is vice-chairman of the country’s largest power utility firm.

The purchase would be in addition to the recently acquired Daguma Agro, which has mining rights over the Daguma coal reserves in South Cotabato, from businessman Ben Guingona and in line with its continued expansion in Mindanao which is facing a power shortage.

Ang said all three coal mines will be enough to power up a 1,200-megawatt plant. San Miguel was originally looking at building a 150-MW to 300-MW mine-mouth coal plant in Mindandao.

“We’re in the process of consolidating all the coal mines in the area so that we will be able to know the exact deposit of these coal deposits. Once we know the volume, we can start with the mine mouth,” he said.

Analysts said local coal is preferred over imported coal as buyers can save on shipping costs, import duties and value-added tax payments. Electricity from coal plants cost P2 per kilowatt-hour compared with other sources like natural gas-fed plants.

Sultan Energy’s parent company, Sultan Mining and Energy Development Corp., owns the Bislig mine, which has estimated coal reserves of 62 million tons and about 30 million MT of mineable deposits. Initial exploration and drilling had shown 55 million MT of mineable reserves in 526 hectares of its 7,000-hectare coal property.

Bonanza Energy, which is also owned by Guingona, operates the nearby coal concession also in the Daguma area.

Ang said the group will continue to be on the lookout for more acquisitions in Mindanao to further fuel growth.

San Miguel owns the 620-MW Limay diesel power plant and is the administrator of the contracted capacity of the Sual coal and the San Roque hydropower plants.

Meanwhile, Ang said San Miguel expects to close a deal with respect to its 49 percent stake in food unit San Miguel Purefoods Co. Inc. in a month’s time. From a total of eight companies, SMPF’s prospective buyers are now down to five, which include local and foreign groups.

He declined to name the interested parties and reiterated that the group can sell to anyone.

Ang said SMPF might just sell shares through a secondary offering should it fail to get an acceptable offer from the interested parties.

San Miguel is trimming its stake in its food and packaging units to fund its diversification into more high-growth industries like power, telecommunications and infrastructure.