Lepanto profit down 14% in Q1

MANILA, Philippines - Lepanto Consolidated Mining Co. reported yesterday a 14 percent drop in net profit for the first quarter of the year from a year ago due to higher production costs.

Lepanto said in its quarterly report to the local bourse that its net income for the first quarter of the year amounted to P26.4 million, lower than last year’s P30.7 million.

It said that while it saw an increase in its revenues for the quarter compared to the previous year, its production costs also rose.

The miner’s consolidated revenues reached P572 million this year, 20 percent up from the P478.5 million in the same period last year.

Lepanto said its costs and expenses climbed 28 percent to P502.9 million this year from last year’s P394.1 million.

It said the rise in the firm’s costs and expenses was “due primarily to increases in milling, depreciation and depletion costs but partially offset by decreases in mining and administration costs.”

Lepanto noted that its total milling costs went up to P87.4 million this year from P55.9 million a year ago as its power cost increased on account of increased tonnage.

Lepanto produced 7,109 ounces of gold as of the first quarter of this year, higher than the previous year’s 6,985 ounces.

Costs also went up as the firm purchased new mining equipment and rehabilitated old equipment in the mine site.

Last month, Lepanto president and chief operating officer Bryan Yap said that the firm expects its net income to reach P300 million this year due to higher gold output.

He said gold production is expected to increase to 1,500 tons per day for the rest of the year from the average of 1,300 tons produced per day in the first quarter.

Full-year gold output, he said, is projected to reach 37,000 ounces this year.

Last year, Lepanto suspended operations at the Victoria mine in Benguet for five months in order to develop the mine and increase its gold output.

Apart from the Victoria mine, Lepanto also holds the mining permit for the Far Southeast project in Benguet.

South African miner Gold Fields Ltd. is looking to buy 60 percent of the Far Southeast project as it entered into option agreements with Liberty Express Assets and Lepanto for the acquisition of the stake for a total consideration of $340 million in September 2010.

Liberty owns 40 percent of the Far Southeast project, while the rest is held by Lepanto.

Last month, Gold Fields acquired 40 percent of the Far Southeast project through the payment of $110 million to Liberty.

Gold Fields had earlier paid $10 million worth of option fees to Lepanto and $44 million to Liberty as the first downpayment for the acquisition, while a second downpayment of $66 million was made in September last year.

Gold Fields also said it is looking to exercise its option to acquire another 20 percent in the Far Southeast project once the financial or technical assistance agreement (FTAA) application for the project is approved.

The FTAA is a license which allows a foreign corporation to legally own and control a majority stake in mining projects in the Philippines.

Lepanto filed an application for the grant of a FTAA for the Far Southeast project in November last year.