Philex turns around, posts P409.1-M income in 2005

Philex turns around, posts P409.1-M income in 2005
By Rocel C. Felix
The Philippine Star 04/19/2006

Higher sales and rising metal prices in the world market allowed Philex Mining Corp. to post a consolidated net income of P409.1 million in 2005, reversing its net loss of P15.8 million the previous year.

Philex reported to the Philippine Stock Exchange that its consolidated operating revenue totaled P5.395 billion last year, compared with P3.6 billion in 2004 and P3.7 billion in 2003.

The company attributed the increase in revenue to higher volume of metals sold which was bolstered by improved metal prices.

Last year, strong demand for metals and minerals led by China and India saw gold prices averaging $430 per ounce, rising significantly from $385 per ounce in 2004 and $336 per ounce in 2003.

Moreover, copper prices also went up, averaging $1.76 per pound in 2005, higher than $1.18 per pound in 2004 and $0.83 per pound in 2003.

Philex said that to protect part of its future production from unfavorable metal price fluctuations, the company entered into metals and currency hedging transactions in the form of forward sales, call or put options.

Last year, it incurred hedging losses of P124.5 million, a substantial reduction from hedging losses of P433.3 million in 2004 and P120.5 million in 2003. The losses were reflected as reduction in the company’s revenue.

Last year, Philex had no outstanding hedge position. In 2004 and 2003, the company forged gold forward contracts for 21,600 and 43,200 ounces with average forward price of $310 per ounce. In copper, it has an existing European-type copper call option contracts for 4,800 metric tons with a strike price of $1,700 per metric ton.

On the other hand, Philex’s current liabilities increased slightly to P2.4 billion in 2005 from P2.3 billion in 2004, but these included provisions for losses of P282 million, mainly for probable claims against the company on certain legal and regulatory matters.

The company’s total liabilities were also higher at P4.3 billion in 2005 compared to P3.9 billion in 2004 and P2.4 billion in 2003.

Philex said the increase in total liabilities was due to its availment of loans amounting to $8.5 million from a syndicate of local banks in 2005, and $15 million from Pan-Pacific Copper Plc in 2004 which it used to fund the upgrading of its Padcal mines in Tuba, Benguet.

Also contributing to its higher liabilities is the buildup of the estimated rehabilitation costs of the Padcal mine, amounting to P12.9 million in 2005 and P161.8 million in 2004.