Stock Pick: Semirara Mining Corp.

Recommendation: BUY/ ACCUMULATE

Semirara Mining Corp. December 23, 2008 = 100
Share Price	51
High (past 52 weeks)	51
Low (past 52 weeks)	22.25
Market Cap. (M)	14,156.21
Price-Earnings Ratio	10.98
Earnings Per Share	2.87
Source: Technistock

INVESTORS are advised to accumulate shares of coal producer Semirara Mining Corp. as the stock remains relatively cheaper than any other mining stock, AB Capital Securities, Inc. said.

“The stock is cheaper at a price-earnings ratio of 10x and this makes Semirara shares a good buy,” said Prince Anthony A. Yeung, an analyst at the brokerage firm.

Mr. Yeung also said a possible pullback in the Philippine Stock Exchange index (PSEi), which already broke the 3,000 level this year, is likely so that investors should start accumulating at this time.

Among others, Semirara has shown consistency in its business growth. Coal revenues in the nine months to September reached P9.2 billion surpassing 2008’s full-year sales of P8.5 billion. Its strong sales were due to increases in production volume and better selling prices.

“This trend has actually been observed for the last four years, where the company’s financial performance always equal or even breach its total sales for the previous year,” Mr. Yeung said.

An expanded market, higher volume of sales and an improvement in the quality of its products are contributing to Semirara’s growth.

Mr. Yeung estimates Semirara’s coal revenues to top P11 billion by yearend, translating to a net income of P1 billion.

While most of listed mining firms recorded net losses for the third quarter, Semirara bucked the trend by profiting P580.6 million during the July to September period, more than triple last year’s P172.8 million.

On Wednesday last week, shares of Semirara closed at its intraday high of P51 apiece, extending a rally for the third straight trading day.

Semirara shares have gained by 43.7% so far this year from just P35.50 apiece at the first trading day of January. The stock price, however, is 1.9% off its 52-week high of P52 recorded on Dec. 1.

Semirara is also set to mine an additional 7,200 hectares in Caluya and Sibay Islands in Antique, after the Department of Energy (DoE) approved its application to amend its coal operating contract (COC) last week.

In a Dec. 21 disclosure to the stock exchange, the DMCI Holdings, Inc. unit said the DoE had approved the amendment of the company’s COC No. 5 to add 3,000 hectares in Caluya Island and another 4,200 hectares in Sibay Island, both in Antique.

DOE okays Semirara coal project in Antique

By Donnabelle L. Gatdula (The Philippine Star) Updated December 22, 2009 12:00 AM Comments (0)

MANILA, Philippines - The Department of Energy (DOE) has allowed Semirara  Mining Corp., owned by the Consunji family, to mine and develop coal in Caluya and Sibay Islands in Antique. In a disclosure to the Philippine Stock Exchange, Semi-rara said it would explore 24 areas, covering the second  amendment of its coal operating contract (COC) No. 5  which  includes a land area of  3,000 and 4,200 hectares in  Caluya and Sibay Islands, respectively.
Based on Semirara’s original coal contract, it could develop only about 5,500 hectares in Semirara Island.
“The request for amendment of COC 5 contract area is the result of the operator’s geophysical and reconnaissance evaluation of the presence of coal occurences in Sibay and Caluya Islands,”
the amended agreement said. The DOE said it found Semirara’s request for amendment as “meritorious” and directed the company to pay P400,000 in two tranches “in consideration of the  amendment to the contract.”
Earlier, the DOE also approved the extension of Semirara’s contract in Antique by another 15 years from July 13, 2012 up to July 24, 2027. The contract covers 13 blocks in Semirara Island.
Semirara is the country’s largest local coal company in the country. It is mainly engaged in the exploration,  mining, development and sale of coal resources.
Semirara started to supply coal to power the 600-megawatt Calaca coal plant in Batangas, now also owned by the Consunji Group. Currently, Semirara is one of the four major business interests of DMCI Holdings Inc., the investment vehicle which consolidates all construction business, construction component companies and related interests of the Consunji Family.
The other major DMCI units are D.M. Consunji Inc., DMCI Project Developers Inc. and Atlantic Gulf and Pacific Co. of Manila Inc. (AG&P).

Gov’t expands Semirara Mining’s coal contract

By Amy R. Remo
Philippine Daily Inquirer
First Posted 22:20:00 12/21/2009

Filed Under: Government, Mining and quarrying, Energy

THE DEPARTMENT OF ENERGY HAS expanded the coal operating contract of Semirara Mining Corp. to include some 7,200 hectares of prospective coal-rich areas on the Sibay and Caluya Islands.
In a disclosure to the Philippine Stock Exchange, Semirara said the amendment to COC No. 5 was the “result of the (company’s) geophysical and geological reconnaissance evaluation of the presence of coal occurrences in Sibay and Caluya Islands.”
The amendment also brought the total land area under Semirara’s COC No. 5 to 12,700 hectares.
In June, the energy department granted Semirara a coal reconnaissance permit covering 24 coal blocks on Sibay and Caluya Islands in Antique. After two months, Semirara requested the DOE to amend its COC to include the additional coal areas.
The DOE amended the contract to cover 5,500 hectares (14 coal blocks) on Semirara Island; 3,000 hectares (nine coal blocks) on Caluya Island, and 4,200 hectares (12 coal blocks) in Sibay Island.
“In view of the amendment, the operator will provide P400,000 in assistance in-kind to the DOE to be paid in two equal tranches,” document showed.
Last year, the DOE had extended the company’s contract by another 15 years, giving it the exclusive right to explore, develop and mine for coal on Semirara Island until 2027.
The government, through the now-defunct Energy Development Board, awarded a 35-year contract to another company in July 1977. This was later assigned to Semirara.
Recently, Semirara Mining, through its wholly owned subsidiary, paid Power Sector Assets and Liabilities Management Corp. $150.8 million, representing the down payment for the 600-megawatt Calaca coal power plant.

BPI allots P5 billion for sustainable energy-related projects

By Ted P. Torres (The Philippine Star) Updated November 07, 2009 12:00 AM

MANILA, Philippines - The Bank of the Philippine Islands (BPI) is prepared to extend to P5 billion in loans to sustainable energy-related activities.

The amount, which forms part of a risk sharing agreement with the International Finance Corp. (IFC), is the second tranche of an energy conservation program accord signed early this year.

The IFC is the private investment arm of the World Bank, has been increasing its assistance to activities related to sustainable energy and renewable energy. Its latest thrust is to tie up with domestic financial institutions for risk sharing activities.

So far, BPI has provided P1.2 billion in loans to renewable energy, sustainable energy and energy efficiency-related projects.

“It has been raised to P2 billion, but we are willing to go up to P5 billion,” Aurelio R. Montinola III, BPI president, said during the formal launching of the bank’s 2008 Sustainability Report. BPI is the first commercial bank in the Philippines to release report based on the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines.

It was learned that one borrower spent up to P300 million to improve its energy and energy-related facility for manufacturing.

Montinola said BPI, which is a member of the Ayala Group of Companies, has invested P100 million on energy efficient equipment for its head office and its 865 branches, business centers and remittance centers.

BPI plans to reduce the energy and water consumption of its head office by five percent.

It consumes roughly 34,909,398 kilowatthours (kWh) of electricity and 766,987 cubic meters of water yearly. This translates to roughly 16,225 tons of carbon emissions.

BPI has outlined 16 indicators for sustainability guided by its four strategic themes: total customer experience, reduction of environmental footprints, market expansion and employee engagement.

The bank is also looking at the transformation of all its branches to minimize its carbon footprint, to forge more partnerships with energy and environment conservation advocates such as the WorldWildLife Fund (WWF) and the IFC, as well as increase its involvement in microlending.

The joint venture is called BPI Globe Bangko, a savings bank (Bangko), it will service microfinance institutions (MFIs) for wholesale lending. It will not open branches, often referred to as bricks-and-mortar, but instead rely on mobile banking and the existing infrastructure of Globe to issue loans and receive deposits.

“BPI chose to embark on sustainability reporting in order to show its various stakeholders the bank’s commitment towards sustainability and corporate responsibility,” Montinola said.
He added that BPI would issue annual sustainability reports other than its annual financial reports “adding new quantifiable metrics to be able to progress to a higher level of application.”

DMCI nears completion of Calaca rehabilitation plan

By Donnabelle L. Gatdula (The Philippine Star) Updated September 01, 2009 12:00 AM Comments (0)

MANILA, Philippines - DMCI Holdings Inc., the investment arm of the Consunji group, is nearing the completion of a rehabilitation plan for its newly-acquired 600-megawatt (MW) Calaca coal-fired power plant.
DMCI Power Corp. president Nestor Dadivas said they are now in the final stages of coming up with a rehab program.
The group is awaiting the-turn over of the power plant from the government before they could proceed with the rehabilitation of the facility.
Discussions with the Power Sector Assets and Liabilities Management Corp. (PSALM), a government entity created to handle the sale of National Power Corp.’s assets, are ongoing, he said.
Dadivas said the rehabilitation of Calaca is necessary to maximize the capacity of the plant. Calaca has two units and are currently running at combined capacity of 350 MW.
The Calaca power plant consists of two 300-MW generating units and is primarily designed to run as a base-load plant. It is also designed to utilize local coal from Semirara Mining Corp., a subsidiary of DMCI Holdings.
“We’re studying the plant and we’re finalizing the rehabilitation program because now the plant is running at only around 350 MW,” Dadivas said.
The DMCI official said the group is currently raising the downpayment for the power facility. “We plan to finance it (down–payment) from internally-generated funds,” he said.


DMCI Holdings should be able to pay 40 percent of its bid price of $361.7 million to pave the way for the plant’s turnover.
“We have 270 days to pay the downpayment but PSALM has indicated that we do it sooner so we’re negotiating. Our target is March or April 2010 for the turnover,” Dadivas said.
Earlier, DMCI Holdings president Isidro Consunji said the company is likely to borrow from Banco de Oro to finance a portion of the acquisition price.
DMCI Holdings consolidates all construction business, construction component companies, and related interests of the Consunji family. Its core businesses include construction, real estate and coal mining.
It owns 56 percent of Semirara Mining Corp., which has exclusive rights to explore, mine and develop the coal resources on Semirara Island in Caluya, Antique.
The Calaca facility has been allocated a substantial 287-MW power supply contract, or about 48 percent of the plant’s rated capacity. This will provide DMCI a ready market for the electricity that the power plant will generate.
The Manila Electric Co. will assume the biggest portion of the contracted energy, which is equivalent to 169 MW.

DMCI wanted to solely operate the 600MW Calaca plant

MANILA, July 20 (PNA) — Consunji-owned DMCI Holdings has no plans to look for a partner in operating the 600 megawatt (MW) Calaca coal- fired power plant.

Isidro Consunji, DMCI president said that while they wanted to team-up with other firm, he explained that they are concern on any possible “internal arguments” in the future.

“We want to [get a partner]. But the problem is, if we entertain a new partner today then we might be having internal arguments on how to go forward, as our price is based on a certain strategy (i.e. we don’t intend to run it at 600-MW want to down it for the meantime to be able to rehabilitate what needs to be fixed). We also don’t want to run the plant at the maximum capacity as the plant is already and the wear might be accelerated. And if we get a new partner then we might have problems. Before entertain a partner, perhaps we need to assess where our directions,” Consunji said.

He added the main purpose of the acquiring the Calaca plant was primarily to complement the continued operations of the Semirara Mining Corp., which supplies the coal requirement of Calaca plant.

“Our strategy was defensive, why we had to bid. Prior to last year, we already expanded the Semirara’s capacity. Now we’re geared to 4 to 5 million tons a year. And Calaca represents 1.6 million tons of market. So if another wins then where do the 1.6 million tons go, and thus we will be forced to export,” he said.

He added “export price is lower than local price and will make our profitability suffer.”

During Semirara’s initial operation, Consunji said “99 percent of Semirara’s coal goes to Calaca and now we were able to bring it down to 20 percent.”

Likewise, Consunji said they are also not keen on utilizing the entire 600-MW capacity of Calaca which has a dependable capacity of 470MW even after rehabilitating and upgrading it.

According to Mr. Consunji, they are now in talks with various financial institution in particular the Banco de Oro to fund the US$ 361.7 million acquisition.

“BDO is one of the banks talking with us. We plan that it will be shared by Semirara and DMCI, but bulk of the equity would be Semirara since they are the biggest beneficiary,” he said.

DMCIHI has 56 percent stake in Semirara, which has exclusive rights to explore, mine and develop the coal resources on Semirara Island in Caluya, Antique.

DMCI’s offer defeated Thailand-based firm Banpu Power Limited.

Established in 1995, DMCIHI is engaged in construction business, construction component companies, and related interests of the Consunji family. Its core businesses include construction, real estate and coal mining.

Consunji said they expect the Power Sector and Assets Liabilities Management Corp. (PSALM) to issue the notice of award this week and in the next 270 days, the company will pay the 40 percent upfront payment.

National Power Corp. has attached around 287-MW supply contract to Calaca or an equivalent of 48 percent of the plant’s rated capacity.

Meanwhile, Consunji said once they have completed the acquisition of Calaca, they will enter the wholesale electricity spot market (WESM).

“We will participate in the WESM. And with the privatization of Calaca,” he said.

Last week, PSALM declared DMCIHI as the highest bidder for the Calaca plant and once the verification process is completed, they will be declared as the winning bidder. (PNA)

Semirara mercury safe, says coal firm

By Nestor P. Burgos Jr.
Inquirer Visayas
First Posted 01:06:00 06/17/2009

Filed Under: Environmental Issues, Pollution, Mining and quarrying

ILOILO CITY -- Semirara Mining Co. (SMC) has disputed findings of University of the Philippines scientists showing toxic levels of mercury in areas on Semirara Island in Antique.
Juniper Barroquillo, SMC administrative manager, said the company’s own studies had shown that mercury levels were within tolerable and safe levels.
Deadly element
“Their findings are wrong. We have already conducted monitoring on the mercury levels,” Barroquillo told the Philippine Daily Inquirer in a telephone interview on Monday.
Scientists and researchers from UP Visayas (UPV) said last week that soil samples taken from areas near the mining operations showed that the mercury content reached “moderate toxicity” level, which was safe to animals and humans.
Mercury poisoning could cause damage to the nervous system and permanently damage the brain, kidneys and fetuses, according to the scientists.
The samples, which were analyzed at the Research and Analytical Services Laboratory of the Natural Sciences Research Institute and the National Institute of Geological Sciences in UP Diliman, also showed high concentrations of coal in the soil especially at the mouth of the Suja Creek in Barangay Semirara, one of the three villages of the 5,500-hectare island.
Environmental groups and some islanders have blamed decades of coal mining operations for the massive siltation that has destroyed their coastal and marine resources, including mangroves.
Denied allegations
But SMC, which took over the mining operations from the government-owned Semirara Coal Corp. (SCC) in 1999, has repeatedly denied the allegations and pointed at old stockpiles of SCC as the cause of siltation.
The Department of Environment and Natural Resources (DENR) in Western Visayas issued conflicting reports on allegations of pollution on the island.
A report of its Community Environment Officer (Cenro) has belied allegations of siltation and death of mangroves.
But on February 15, the Environment and Management Bureau (EMB) of the DENR regional office recommended to the Pollution and Adjudication Board the issuance of a cease-and-desist order for SMC to close its coal washing plant.
‘Prima facie evidence’
The memo, issued by then regional director Bienvenido Lipayon, cited “prima facie evidence” that SMC was disposing of coal wastes into the Suja Creek and the sea.
The EMB has not reacted to the findings of the UP scientists. Oscar Cabanayan, EMB regional director, did not respond to repeated calls and text messages from the Inquirer.
Prevention
Barroquillo said SMC had taken steps to prevent further siltation from old coal stockpiles.
He said the company had also transferred its coal washing plant to the Panian mining pit at the cost of P200 million. It would be operational before the end of the month.

DMCI may pull the plug on new Visayas plant

DESPITE an impending supply shortage in the Visayas, DMCI Power Corp. may cancel a plan to put up a coal-fired facility in the Western part of the region, according to the operator of the country's wholesale electricity spot market (WESM).

"The indications point to a withdrawal," Melinda Ocampo, acting president of the Philippine Electricity Market Corp. (PEMC) and a consultant to the Department of Energy, said, citing DMCI Power's failure so far to sign supply deals with potential offtakers.

DMCI Power is the power generation arm of DMCI Holdings Inc., a local conglomerate engaged in construction, real-estate development and coal mining. The company earlier proposed to put up a 100-megawatt coal plant in Conception, Iloilo on Panay Island at a cost of about P7 billion.

The coal facility would use circulating fluidized bed technology-or "clean coal technology"-and would tap coal from Semirara Mining Corp., another DMCI unit based in Antique.

DMCI Power was already in talks with several banks for financing the coal plant but negotiations failed to move because of the firm's inability to sign a supply agreement with the island's electric cooperatives.

The plant was scheduled to come online in two years to help address the Visayas grid's critical power supply, which has already caused outages in the region.

"We're expecting DMCI Power to come in by 2012, 2011. Unfortunately their problem is more on the offtaker," Ocampo said.

DMCI Power last year offered to supply 90 megawatts to electric cooperatives in Panay but sources said that most of the distribution utilities in the Visayas were keen on renewable energy sources.

Despite this, Ocampo said the energy department has yet to receive a notice from the company if it would drop the project.

"I don't know whether they will still push through with it but when it comes to the department, we have not yet received any formal or official notice from them that they are withdrawing," she said.-- Euan Paulo C. Añonuevo

DENR issues CDO vs Semirara coal washing plant

By Nestor P. Burgos Jr.
The Department of Environment and Natural Resources (DENR) in Western Visayas has recommended the issuance of a cease and desist order (CDO) on the coal washing plant of the Semirara Mining Corp. for allegedly polluting Semirara Island's waters and mangroves.
In a memorandum issued by its Environmental Management Bureau (EMB) to the Pollution and Adjudication Board endorsing the complaint of residents against the alleged pollution, the DENR said there was “prima facie evidence” against the company on the “disposal of coal material and tailings into the Suja Creek and to the sea.”
The memorandum dated February 15 and issued by DENR-EMB Regional Director Bienvenido Lipayon also recommended that the company be required to institute interim and long-term measures to prevent a recurrence of the problem.
Residents of Sitio Bigo in Barangay Alegria, one of three villages of the island, had earlier filed a complaint alleging that coastal resources including mangroves have died or have been contaminated by wastes coming from the coal washing plant of SMC.
Semirara is one of the nine islands comprising Caluya town in Antique at the northern end of Panay Island. It is considered one of the richest fishing grounds in the area.
The residents alleged in their petition that silt has covered their coastline and mangroves as waste coming from the company's coal washing plant goes directly to the sea because the siltation pond has not been operational for a long time.
The company, which has been operating one of the biggest coal mines in Asia on the 5,500-hectare island, has repeatedly denied that the company's siltation pond has been non-functional.
It said that the siltation was caused by several typhoons that have affected the island which have triggered runoffs from old coal blending stockpiles.
The company also said that it has implemented corrective measures including the construction of a wall along the stockpile to prevent the erosion of coal towards the shoreline. It also said that its coal tailings pond has undergone maintenance and improvement to contain the tailings from the coal washing plant.
But the EMB said the discharged of coal materials from the coal blending stockpile and tailings from the coal washing plant violated Section 27 of the Clean Water Act (Republic Act 9275) which prohibits the discharging or depositing of materials into bodies of water that could cause pollution or obstruct the natural flow of water.
“The respondent (SMC) failed to provide the necessary barrier or catchment to prevent the coal blending stockpile from being washout by runoff to the receiving water body and likewise operating improperly the tailings pond serving the coal washing plant thereby discharging black silt materials to the water body,” Lipayon said in his memorandum.
The EMB has also recommended that DENR issue a fine of P45,000 against the SMC for violating three conditions of its environmental certificate of compliance (ECC).
The EMB said a study should be conducted to determine the extent of damage and destruction of seagrasses and aquatic resources. An inventory and rehabilitation of mangroves should also be conducted.
The Multi-Partite Monitoring Team (MMT), headed by the Department of Environment and Natural Resources is set hold a meeting and field investigation in Semirara on April 16-18 to further investigate the allegations.
A separate and parallel investigation will also be conducted by environmental groups and scientists upon the request of the complainants.