It may be too early to tell but diversifying conglomerate San Miguel Corp. has a legitimate chance of becoming the country’s biggest mining company in the medium-term period.
San Miguel’s mining exposure so far is limited to the rich Daguma coal reserves in South Cotabato and an initial 10-percent equity in Australia’s Indophil Resources NL, owner of a 37.5-percent stake in Tampakan mine, considered the largest untapped gold and copper deposit in Southeast Asia.
San Miguel could take full control of Indophil through a tender offer to acquire all the Australian company’s shares. San Miguel is about to conduct a due diligence on Indophil’s books.
Indophil earlier agreed to a binding exclusivity period until Jan. 10, 2011 with San Miguel, in which the food and beverage giant will complete a due diligence on Indophil and decide whether to submit a control proposal.
Taking over Indophil will give San Miguel a 37.5-percent stake in the Tampakan copper-gold project in the same South Cotabato province, where it owns the Daguma coal mines. The Tampakan project, controlled by Anglo-Swiss miner Xstrata PLC, contains an estimated 2.4 billion metric tons, with a grade of 0.6 percent copper and 0.2 percent grams per ton of gold.
San Miguel will likely make an aggressive bid to acquire Indophil lock, stock and barrel as part of its plan to go into non-core businesses with higher investment returns. It has the money to finance the $5.2-billion development cost of Tampakan, which is touted to become the Philippines’ biggest mining project.
The Tampakan mine, when fully developed, will make San Miguel a major mining company in the class of Philex Mining Corp. and Atlas Consolidated Mining & Development Corp., the no. 1 and no. 2 metal producers in the Philippines, respectively.
Problematic control
San Miguel faces a bumpy road in gaining a stake in the Tampakan mine. Indophil in a statement Wednesday said other companies were free to try to beat San Miguel’s planned purchase. A bidding war for Indophil’s control is likely but San Miguel president Ramon Ang seems ready for it, given the conglomerate’s huge war chest.
China’s Zijin Mining Group Co. early this year attempted to buy out Indophil with a $500-million offer. Zijin, however, terminated the talks in June after it failed to convince the Chinese government to approve the deal. A ban in the open-pit mining method in South Cotabato helped in the collapse of the takeover talks.
Hong Kong-based conglomerate First Pacific Co Ltd. is another company that could challenge San Miguel. First Pacific, which has engaged San Miguel and businessman Joselito “Butch” Campos earlier in a bidding war to acquire Del Monte Pacific Ltd., has expressed interest in the Tampakan project through Indophil.
San Miguel’s mining foray started with its acquisition of Daguma Agro, an upstart mining company that has rights over one of the country’s richest coal deposits. San Miguel now plans to put up a 150-megawatt to 300-MW mine-mouth power plant in General Santos City in South Cotabato.
Ang had gushed over the potential coal reserves of Daguma Agro’s concession area, which is close to picturesque Lake Sebu. The company’s coal deposits are so huge that it could fuel a 2,000-megawatt power plant.
Initial drillings had established that the coal deposits in the two blocks owned by Daguma Agro were in the magnitude of 50 million MT. Semirara Coal Corp., the biggest coal exploration company in the Philippines, started with estimated reserves of 20 million MT. Semirara is now annually producing about 2 million MT from 1.5 million MT in its first few years of operation.
E-mail: rayenano@yahoo.com or extrastory2000@yahoo.com
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