Wednesday, April 23, 2008 Production of Toledo mine seen to equal yield of Benguet facility
A MINING analyst considers Atlas Consolidated Mining and Development Corp. mine in Toledo City as possibly “the next Philex.”
Although it is yet to issue a valuation on the company, ATR Kim Eng Securities Inc. was impressed with ACMDC’s infrastructure and facilities.
Robin Sarmiento, mining analyst for ATR Kim Eng, visited the ACMDC compound last week and observed that employees there are already “busy.”
He said this is a good indicator that ACMDC would be able to go in production soon.
With the Toledo mine capable of P5 billion in revenues, Sarmiento observed that ACMDC is comparable to Philex Mining Corp. in terms of production.
Philex Mining has been operating a copper-gold-silver mine in Padcal, Tuba in Benguet Province for 49 years. Philex mined a total of 314 million tons of ore at the end of 2006, with metal production of about 1.9 billion pounds of copper concentrate, 153 million grams of gold and 169.26 million grams of silver in concentrate and bullion form.
Copper concentrate
Early this month, Philex Mining reported to the Philippine Stock Exchange that it produced a total of 5,025 dry metric tons of copper concentrates worth P727 million.
Sarmiento expects Philex to post a dividend yield of 7.6 percent this year.
With proven reserves, Sarmiento also considers the world-class copper facility of ACMDC as a factor in his forecast.
ACMDC was also able to retain 30 percent of its original workforce.
Although Sarmiento still deems investing in ACMDC as high-risk, he believes it will still provide excellent returns should production ramp up in 2008, as expected.
Based on an internal feasibility study conducted by ACMDC, Sarmiento said the company has put up conservative assumptions, pricing copper at $2 and gold at $600 based on a foreign exchange rate of P40 to a dollar.
ACMDC is expected to run a mine life of 12 years and pegs copper and gold at 80 percent and 11 percent of sales, respectively.
The mining sector outlook for this year, according to ATR Kim Eng’s observations, will be driven by the demand for metals softening with the United States economy still in recession and China’s economic growth slowing down as well.
The US and China consume roughly 30 percent of copper produced globally.
As soon as the US economy bounces back, demand for metals is expected to go up. In the US, copper is mainly used for home-building and electronics.
Gold is currently used as a hedge against inflation as its price rises with the weakening of the US dollar.
Although it is the largest consumer of gold at 20 percent of global demand, India only produces two percent of the global supply as it depends mainly on imports.
“Importing will lead to a sustainable demand,” said Sarmiento during his presentation at the ATR Kim Eng economic briefing. (DME)
