2017 Annual Report

ANNUAL REPORT 2017 ABOUT THE COVER The word “Harmony” perfectly encapsulates Philex Mining Corporation’s (PMC’s) performance year-in and year-out. The visual symmetry that frames the seemingly opposite or contrary forces of nature, community, and mining operations represent the symbiotic relationship the Company has with its key stakeholders. As an advocate of right and principled mining in the Philippines, PMC constantly strives to work harmoniously with its host communities and the environment to create the best value for all its stakeholders. PMC’s proactive environmental management goes beyond mere regulatory compliance and promotes the equitable, efficient, and conscientious use of natural resources, which, in turn, stimulates the Company’s long-term sustainable growth, the host communities’ continuing progress, and the environment’s responsible management. CONTENTS CORPORATE PROFILE FINANCIAL AND OperatiNG PERFORMANCE 4 Business Background 43 Results of Operations 6 Business Overview 50 Joint Audit and Board Risk Committees’ Statement 7 Financial Highlights 51 Statement of Management’s Responsibility 8 2017 at a Glance 52 Financial Statements 10 Key Performance Indicators 12 Corporate Objectives 61 CORPORATE GOVERNANCE MESSAGES 83 AWARDS AND RECOGNITION 14 Chairman’s Message 84 HUMAN RESOURCES 16 President’s Report 87 OFFICERS AND STAFF Directors AND OFFICERS 88 CORPORATE DIRECTORY 20 Board of Directors 26 Officers OperatioNS 28 Mining Properties and Exploration Activities 33 Environmental Stewardship 37 Social Development 40 Corporate Social Responsibility BUSINESS BACKGROUND PHILEX MINING CORPORATION hilex Mining Corporation (“PMC” or the “Company”) and its SMECI, through SMMCI, owns the Silangan project covering Psubsidiaries had been originally organized into two main the Boyongan and Bayugo deposits in Surigao del Norte. The business groupings: the mining business, which is directly project has secured and currently maintains all major permits under PMC, Silangan Mindanao Mining Co., Inc. (SMMCI), from the Department of Environment and Natural Resources and Philex Gold Philippines, Inc. (PGPI), and the energy and (“DENR”), including environmental compliance certification hydrocarbon business under PXP Energy Corporation (PXP), (“ECC”), a tree-cutting permit, and approved Declaration of CORPORATE formerly Philex Petroleum Corporation. However, since Mining Project Feasibility. Silangan is envisioned to be an 4 July 15, 2016, the Group has focused on its core mining business underground mine with a (1) starter mine to initially extract the ANNUAL REPORT 2017 REPORT ANNUAL PROFILE when PXP and its subsidiaries ceased to be subsidiaries near-surface ore and improve the groundwater condition, and of PMC as a result of loss of control through property (2) a main mine to extract most of the ore for the planned mine dividend distribution. life. These studies are being advanced to include more details to support the requirements for project financing. The project The Company was incorporated in the Philippines in 1955, and has not yet commenced development. has been listed in the Philippine Stock Exchange (PSE) since November 23, 1956. PMC, Silangan Mindanao Exploration Meanwhile, community development and environmental Co., Inc. (SMECI, a wholly-owned subsidiary incorporated enhancement programs are sustained in compliance with the in the Philippines) and its subsidiary, SMMCI, and PGPI (a ECC conditions and the environmental, social, and governance wholly-owned subsidiary incorporated in the Philippines), are (“ESG”) commitments to the local communities. primarily engaged in large-scale exploration, development, and utilization of mineral resources. DENR Administrative Order (“DAO”) No. 2017-10, which bans the use of open-pit mining in the Philippines has been issued. PMC has been operating the Padcal mine in Benguet for the Under the Philippine Mining Act of 1995, surface mining, such past 60 years using the underground block-cave method, with as the open-pit mining practiced in advanced economies a starter mine in 1958. It is one of the longest operating mines like Canada, Australia, and the United States, is allowed in in the country and provides PMC its main source of revenue. the country. The Boyongan copper-gold porphyry deposit in Surigao del HARMONY Norte was discovered in August 2000 under SMMCI, a joint venture with Anglo American Exploration Plc (Anglo). On February 6, 2009, the Company acquired Anglo’s 50% interest in the Silangan project under SMMCI for a cash consideration of USD55 million, thereby owning 100% of the Silangan project. Adjacent to the Silangan project is the Kalayaan project, which is under a Farm-in Agreement with Kalayaan Gold & Copper 5 Resources, Inc., a subsidiary of Manila Mining Corporation. OF PHILEX’S BUSINESS AND VALUES STORY PGPI, on the other hand, used to operate the Bulawan Mine in Negros Occidental until 2002. PGPI’s tenements include the Vista Alegre, Cayas, and Bulog projects. Other assets include the Sibutad Project in Zamboanga del Norte and Lascogon project in Surigao del Norte. The Company also has a 20% equity investment in and advances to its energy and hydrocarbon affiliate PXP Energy Corporation. BUSINESS OVERVIEW VISION MISSION PHILEX MINING CORPORATION “Our vision is to be a highly respected, world-class natural We are a responsible mining corporation that discovers resource company, committed to adhere to international and processes minerals and energy resources for the use standards in mining operations and environmental conservation of society. and deliver excellent value to our partner communities, investors, employees and other stakeholders.” BUSINESS STRUCTURE 6 ANNUAL REPORT 2017 REPORT ANNUAL Padcal Mine Silangan Project Other Projects Other Projects • Boyongan • Bulawan • Southwest • Bayugo • Sibutad • Bumolo • Kalayaan • Vista Alegre • Clifton • Lascogon • Sanfran/Tambis • Cayas • Other Projects The Company has a 20% equity investment in and advances to affiliate PXP Energy Corp. FINANCIAL HIGHLIGHTS PROFIT AND LOSS (P Millions) 2017 2016 2015 2014 2013 PRICE AND COSTS 2017 2016 2015 2014 2013 Revenue Gold Gold 5,432 6,209 5,670 5,889 5,582 Realized Price / oz (US$) 1,273 1,254 1,147 1,270 1,297 Copper 4,475 3,976 3,450 4,615 4,580 Operating Cost / oz (US$) 929 919 933 977 858 Silver 77 86 70 82 92 Copper Total 9,985 10,272 9,189 10,587 10,253 Realized Price / lb (US$) 2.96 2.35 2.29 2.98 3.27 HARMONY Smelting Charges 842 893 837 850 660 Operating Cost / lb (US$) 2.16 1.72 1.86 2.29 2.16 Costs and Expenses 6,778 6,900 7,011 7,989 7,036 FINANCIAL RATIOS Income from Operations 2,365 2,478 1,341 1,748 2,557 Net Profit Margin 18.1% 16.7% 9.3% 7.2% 3.3% Other Income (charges) 2 (213) (55) (191) (1,371) Return on Assets 4.2% 3.8% 1.8% 1.7% 0.9% Net Income 1,658 1,567 776 703 312 Return on Equity 6.9% 6.2% 2.9% 2.7% 1.3% Attributable to Philex Shareholders 1,658 1,589 896 1,006 342 Asset-to-equity Ratio 1.6 1.7 1.6 1.7 1.5 7 EBITDA 3,977 3,854 2,779 3,320 3,920 OTHER INFORMATION Core Net Income 1,686 1,657 905 1,122 1,508 Cash Dividend Yield 1.3% 0.8% 0.5% 1.0% N/A OF PHILEX’S BUSINESS AND VALUES STORY Earnings per Share 0.336 0.322 0.181 0.204 0.069 Cash Dividend Payout Ratio 24.0% 20.9% 28.0% 25.0% N/A Cash Dividends per Share 0.08 0.07 0.02 0.08 N/A Number of Shareholders 44,072 44,219 44,296 44,386 44,533 FINANCIAL CONDITION (P Millions) Number of Employees 2,119 1,982 2,007 2,063 2,438 Property, Plant and Equipment 6,721 6,736 6,828 7,139 6,880 * Excluded the Company’s energy and hydrocarbon business capex from 2013 - 2017. Deferred Exploration Costs 23,361 23,072 29,197 25,367 22,050 Total Assets 39,679 38,662 43,527 44,597 39,899 5-year Highlights (2013-2017) Total Liabilities 14,947 15,263 16,243 17,555 13,982 Total Equity 24,732 23,399 27,284 27,042 25,917 P1.66B P0.336/share P1.69B Capital Expenditures* 2,438 2,360 3,878 5,764 5,695 2017 Net Income 2017 Earnings 2017 Core Net Book Value per Share 5.00 4.74 5.52 5.47 5.25 per Share Income Revenues (P Billions) Earnings Before Interest, Taxes, Depreciation and Amortization (P Billions) EBITDA EBITDA Margin 10.587 10.253 10.272 3.977 9.985 3.920 3.854 9.189 PHILEX MINING CORPORATION 3.320 40% 2.779 38% 37% 2017 30% 30% AT A 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 8 Net Income (P Millions) Core Net Income (P Millions) ANNUAL REPORT 2017 REPORT ANNUAL 1,686 GLANCE 1,657 1,658 1,567 1,508 1,122 776 703 905 312 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Debt to Equity Ratio Market Capitalization and Share Price Copper Output (Million lbs.) 65% 65% Market Cap (P Billions) Share Price (P) 60% 60% 35.4 35.0 54% 42.5 34.1 39.1 32.5 37.8 30.1 8.6 29.9 7.9 7.7 21.7 6.1 4.4 HARMONY 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 9 Net Debt to EBITDA (x) Tonnes Milled (Millions) Gold Output (‘000 ozs.) 3.8 OF PHILEX’S BUSINESS AND VALUES STORY 3.6 107.9 105.0 103.3 3.1 9.5 9.4 99.8 9.2 2.5 2.4 8.7 84.6 7.7 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2017 PHILEX MINING CORPORATION SAFETY PERFORMANCE EXploration ACTIVITIES Safety performance in the workplace means having an environment free from injury and Exploration is an intermittent endeavor, and mineral exploration and mining operations hazards.

Load more