Monday, May 12, 2008 Surigao coal-mining firm to conduct IPO
LOCAL coal mining firm Sultan Mining & Energy Development Corporation (SMEDC) is set to undertake a P480-million initial public offering (IPO) this quarter.
The public offering aims to raise funds to finance its exploration activities and the ramping up of current production from its Surigao del Sur mine site.
The company has tapped Asian Alliance Investment Corporation to be the lead underwriter for the IPO.
SMEDC shareholder Maxinvent Trading Corporation has also granted Asian Alliance an option to purchase or place up to P48 million worth of SMEDC shares for the purpose of covering over-allotments.
SMEDC, through wholly owned subsidiary MG Mining and Energy Corporation (MGMEC), holds or exercises rights over Coal Operating Contracts (COCs) with the Department of Energy (DOE).
These COCs cover fully explored coal bearing areas in Bislig and Lingig, Surigao del Sur.
MGMEC also has a 12.96 percent interest in Sultan Energy Philippines Corporation which is the owner of a concession area of approximately 7,000 hectares within the Daguma coal deposit in the provinces of South Cotabato and Sultan Kudarat in Mindanao.
Apart from exploiting its open pit reserves, SMEDC expects to begin the development of its underground mines at Bislig with the first underground mine starting commercial operations by late 2010.
On the other hand, SMEDC and other local coal firms are benefiting from the high cost of bunker fuel as manufacturers in Mindanao such as tuna canneries, paper and textile firms have shifted to coal.
Michael Morales, Sultan vice president for sales revealed that many manufacturers in Mindanao are now refitting their power plants to burn coal instead of bunker fuel because bunker fuel is now three times more expensive than local coal.
"They spend an initial P25 million to P30 million to buy new coal-fired boilers but are able to recoup this investment in less than a year from savings due to the huge difference between the costs of coal and bunker oil," he said.
He added that this new non-traditional market for coal is providing SMEDC with a strong base for growth on top of its traditional customers in the power generation and cement industries.
SMEDC is currently supplying PHILBEST Canning Corporation, General Tuna Corporation, and Picop Resources, Inc. with coal from its open pit mine in Bislig, Surigao.
Morales said the non-traditional market continues to grow as rising oil prices make the shift to local coal more viable.
He said two more canneries in General Santos City are expected to start using coal later this year and another two are in the process of shifting and should start consuming coal by next year.
Aside from General Santos City's tuna canneries, Morales said SMEDC is also looking at the sardine canneries in Zamboanga City. Since its coal mine is the biggest in Mindanao, SMEDC is in the best position to supply the coal requirements on manufacturing plants in the South.
Local coal is preferred over imported coal since buyers save on shipping costs, import duties value added tax (VAT) payments. (MSN/Sunnex)
