Philex income declines 14.3% to P965 million in first half

MANILA, Philippines - Philex Mining Corp., the country’s most profitable miner, said its net income fell 14.3 percent in the first half this year mainly due to lower ore grades at its gold and copper mine in Padcal, Benguet.

In a financial report submitted to the Philippine Stock Exchange, Philex said its net earnings slid to P965 million from P1.13 billion in 2009, which then included a non-recurring gain of P330 million from currency hedging transactions.

Meantime, core net income (net of exceptional items) amounted to P983.9 million, up 3.8 percent from P948.3 million a year earlier while earnings before interest, tax, depreciation and amortization (EBITDA) before extraordinary and non-recurring items went up 13 percent to P1.83 billion from P1.62 billion.

Consolidated revenues, on the other hand, rose 10.1 percent to P4.86 billion as copper revenues grew 27.7 percent to P2.23 billion. Gold revenues declined six percent to P2.46 billion owing largely to lower revenues from gold as production volume dipped 21.7 percent to 51,122 ounces.

Revenues also included petroleum operations which accounted for P116.1 million or nearly 12 times from P9.7 million a year earlier, contributed by Forum Energy PLC (FEP), a 51.95-percent-owned subsidiary, as well as coal revenues of P14.1 million from wholly-owned subsidiary Brixton Energy & Mining Corp. which is seen to commence commercial operations in the fourth quarter this year.

Forum Energy’s revenues came primarily from its share of production from the Galoc oil field in northwest Palawan. Brixton Energy’s revenues were derived from the sale of its coal purchases.

“While ore grades were disappointing in the first half of the year, we are confident that the second half of the year will be boosted by higher metal prices and better-quality ore which we are already mining now, as well as by the continuing greater contribution from our energy operations,” said Manuel V. Pangilinan, chairman and chief executive officer of Philex.

The average copper price is currently above $3.30 per pound, while the price of gold is currently above $1,180 per troy ounce.

Philex president and chief operating officer Jose Ernesto Villaluna Jr. said he is confident the company will report greater volume and quality of ore in the remaining six months of the year.

Philex benefitted from a stronger realized price per pound of $3.04 in the first half. However, the lower ore quality pushed copper production down 8.4 percent to 16.15 million pounds.

Pangilinan reported that the Silangan copper gold mine in Surigao del Sur, which is estimated to hold much higher resources than Philex’s Padcal mine, would play a “key role in building a bright future for Philex.

“Looking forward, the Silangan project is driving full steam ahead and we aim to start the development phase of this mine by next year,” he said.

As for its its oil and gas exploration interests, six exploration and appraisal wells are currently expected to be drilled across Pitkin Petroleum’s (Philex 21 percent) existing interests by the end of 2011. This includes the appraisal of the Ca Rong Do (Red Emperor) discovery made in Vietnam in June 2009, and the redevelopment of a previously producing offshore oil field in the Philippines with the potential for first oil in 2013.