Lepanto allots P700 million for capex this year

MANILA, Philippines - Lepanto Consolidated Mining Co. Inc. has earmarked P700 million for its capital expenditures this year, 50.7 percent higher than what it spent in 2010.

In a filing with securities regulators, Lepanto said it would embark on an aggressive development program of the upper levels of the Victoria mine in Mankayan, Benguet where production for the year will be concentrated.

The development of the Victoria reserve is expected to result in the expansion of the company’s gold production to 40,000 ounces this year.

“Internal ramps and stop developments of over 16 kilometers will be prepared to dully delineate the production panels way ahead of extraction thereby making mining operations more efficient,” Lepanto said.

Lepanto said funding for its capital expenditure program will come from proceeds of a recent stock rights offering, which raised around P3 billion for the company.

Controlled by the family of stockbroker-businessman Felipe Yap, Lepanto offered a total of 10.05 billion common shares to its stockholders at a ratio of one new common share for every 3.3 common shares at 30 centavos apiece.

Aside from mine development, Lepanto has set aside part of the proceeds from the rights issue to for the settlement of a substantial portion of its debts, which is expected to result in a reduction in interest expenses.

Lepanto resumed copper operations in 2008, which it suspended in the fourth quarter of that year due to sharp decline in copper prices.

Lepanto also owns 60 percent of Far Southeast Gold Resources Inc., another mining company with resources in Mankayan, Benguet. Last month, Lepanto granted South Africa-based Gold Fields Switzerland Holdings AG (GFS) an 18-month option to acquire one-third of its stake in Far Southeast.

GFS, a wholly-owned subsidiary of Gold Fields Ltd., plans to acquire a total of 60-percent interest in Far Southeast from major shareholders Lepanto and Liberty Express for $340 million. The option requires GFS to solely fund pre-development expenses, including exploration and a feasibility study, of the project and contribute $110 million into Far Southeast Gold.