Atlas to complete buyout of Carmen Copper in July

MANILA, Philippines - Atlas Consolidated Mining & Development Co. Inc. expects to complete its fund-raising program in July mainly to cover the $368-million acquisition of the entire 45.5 percent stake held by its Singapore-based partner Crescent Asia Special Opportunities Portfolio (CASOP) in subsidiary Carmen Copper Corp.

Industry observers are speculating that the group of retail magnate Henry Sy will likely emerge as Atlas’ white knight for Carmen Copper. The group, through Banco de Oro Unibank (BDO), provided a $10-million convertible loan.

Sources said the investor group will not only acquire Atlas shares from the private placement to be undertaken by the company but lend money also through convertible loans.

BDO Capital & Investment Corp., a unit of Banco de Oro, and Evercore Partners were tapped as financial advisers and deal arrangers.

To pay for the acquisition, Atlas will raise equity and debt financing amounting to $390 million. Around $315 million will come from the issuance of 700.5 million new shares at P19.56 each and $75 million from the issuance of a five-year note that carries a seven percent coupon. The shares to be issued constitute approximately 33 percent of the fully-diluted capital stock of Atlas.

Carmen Copper, which operates the 1,674-hectare Toledo copper mine complex in central Cebu province, is a major income contributor to Atlas.

Abacus Securities said the deal, which will increase Atlas’s ownership in Carmen Copper to 100 percent, will significantly enhance shareholder value.

“This means that Atlas will report 82 percent greater earnings in exchange for issuing 50 percent more shares (based on current fully diluted shares of 1.4 billion). Even accounting for the additional interest expense, Atlas will, going forward, enjoy EPS enhancement of around 20 percent,“ Abacus Securities said.

Abacus Securities said the buyout would also ensure the smooth operations of Carmen Copper and allow it to go full blast on its exploration and mining activities.

“The buyout of the CASOP block eliminates the intra-corporate wrangling that had been going on at the Carmen Copper level for years. Atlas and CASOP had often been at odds on major corporate decisions, resulting in delays that could have been avoided if Carment Copper had been fully owned. Going forward, the decision making process

will be smoother and goals and targets are likely to be reached faster,” Abacus Securities said.

Carmen Copper reported a turnaround in its financial performance last year, posting a net income of P670 million as against a net loss of P1.66 billion in 2009. Core net earnings reached P1.248 billion.

Shipments from Carmen Copper jumped 60 percent from 36.6 million pounds in 2009 to more than 58.7 million pounds in 2010, resulting in a 96 percent year-on-year increase in gross revenue from P4.52 billion to P8.85 billion.

For this year, Carmen Copper will invest in improving its throughput and average grade, while lowering its costs. The main areas of investment are accessing the higher-grade ore body through an open pit, which was begun in the first quarter of 2011, as well as upgrading key mill components.