Bourse preaches prudence amid sell-off
THE PHILIPPINE Stock Exchange (PSE) has stepped in to preach caution among investors following the sell-off in mining stocks in light of the government’s intensified mining crackdown, as miners move to defend their right to due process and their respective contracts.
In a notice on its Web site on Wednesday, the PSE ordered all 20 mining companies listed on the stock exchange to issue clarifications and comments on how they will be affected by the decision of Environment Secretary Regina Paz L. Lopez on Feb. 14 to “cancel” the mineral production sharing agreements (MPSA) of 75 undeveloped mines nationwide for being located in watersheds.
The bourse also reminded the investing public “to exercise prudence in making investment decisions given the various relevant information that has
been released to the public since Feb. 2, 2017.”
The mining and oil index is the weakest performer for the year, up by a marginal 0.35% to 11,899.66. The counter has lost more than two percent since Feb. 2, when the Department of Environment and Natural Resources (DENR) announced it was cancelling the permits of 23 of the country’s 41 operational metal mines and suspending those of five others for various infractions.
Sought for comment, PSE Chief Operating Officer Roel A. Refran said in a mobile phone message that the bourse came out with the “necessary” notice “to ensure that the public is apprised of the developments in light of the headline news.”
“While the headlines highlight a ‘ cancellation,’ it appears that the regulatory agency has commenced the show-cause process and final regulatory action remains pending based on the news reports,” Mr. Refran said.
The exchange is likewise closely coordinating with the DENR regarding the matter.
The move to issue a notice came in the wake of news reports quoting PSE President and Chief Executive Officer Hans B. Sicat as saying in a Feb. 10 briefing hosted by the Philippine Chamber of Commerce and Industry (PCCI) that DENR’s failure to notify the affected mining companies in advance was an “irresponsible move” that led not only to “wealth loss” but also “misdirection in one level from the financial market viewpoint.”
“In the near term, there are a lot of headwinds in light of the closures. They just want to see which ones will come out unscathed. They are reducing exposure right now,” Victor F. Felix, equity analyst at AB Capital Securities, Inc., said in a telephone interview.
The Philippines is the world’s largest producer of nickel and China’s main supplier of the metal, and the mine shutdown is expected to drive a sustained recovery in global prices.
The suspended mines alone account for 17% of worldwide production, and — together with the shuttered mines — account for 70% global supply, said Luis A. Limlingan, business development head at Regina Capital Development Corp., citing estimates.
“For those that will be cleared of violations, they will be able to take advantage of the global imbalance experienced by the supply-side shocks,” he said.
Following the PSE directive, seven companies — Abra Mining and Industrial Corp.; Apex Mining Co., Inc.; Marcventures Holdings, Inc.; NiHAO Mineral Resources International, Inc.; Omico Corp.; Semirara Mining and Power Corp. and Philex Mining Corp. — separately disclosed yesterday that they could be exposed to the new DENR order.
Marcventures said indirect subsidiaries “Alumina Mining Philippines, Inc. and Bauxite Resources, Inc. are not located in a declared watershed and are in fact located in a mineral reservation in which mining is encouraged.”
“As to BrightGreen Resources Corp, while it is located in a watershed, it has prior legal rights considering that its MPSA was approved in 1993 which is prior to the issuance of the watershed declaration in 2009,” Marcventures added.
NiHAO, which has yet to receive an official notification from the DENR about the cancellation, said it “is prepared to avail and exhaust the legal and administrative remedies to defend the MPSA of Mina Tierra Gracia, Inc.”
Abra Mining said its key shareholder Jabel Corp. — owner of the MPSAs — has yet to receive any show cause order “so that any closure or cancellation order necessarily violates the due process clause of our Constitution.”
“For the meantime, [Abra Mining] shall continue to conduct the already programmed activities,” the company said.
Likewise, Apex said DENR’s announcement last Tuesday “has no bearing whatsoever on [ its] present operations and/or financial conditions,” adding that it plans to resume the operation of the Suyoc mine “in the medium term” after the Mines and Geosciences Bureau approved its exploration program this month.
Semirara said it was in the process of acquiring South Davao Development Company, Inc.’s MPSA, but “recent developments” prompted the matter to be submitted for “management’s deliberation.”
Omico, on the other hand, retains a three percent interest in Macawiwili Gold Mining and Development Company, Inc. valued at P50 million even after the former terminated an operating agreement with the latter on Aug. 2012.
The $ 1.2- billion copper- gold project in Surigao del Norte of Philex Mining subsidiary Silangan Mindanao Mining Company, Inc., as well as four tenements elsewhere in Mindanao of another Philex Mining unit, Philex Gold Philippines, Inc. were also tagged by the DENR.
“While the DENR, as regulator, has the right, if not also the duty, to enforce faithfully all mining laws, and to act against erring mining companies, it must do so within the bounds of the Constitutionally-mandated due process,” Philex Mining said.
In a statement, the PCCI said the new DENR order will hurt the country’s image as an attractive investment destination.
“Due process and multi-stakeholder reviews were guaranteed by DENR Secretary Lopez herself and other (Mining Industry Coordinating Council, or MICC) members just days before the new cancellations orders,” said PCCI president George T. Barcelon. “She herself signed the MICC resolution and now it is not followed.”
The head of the country’s largest business group was referring to last Thursday’s MICC meeting, co-chaired by Environment Sec. Lopez and Finance Secretary Carlos G. Dominguez III, which resolved to ensure due process is observed in reviewing affected miners’ appeals against sanctions, among other things.
“How can a company risk stockholders’ money in projects if the investment rules are unclear and uncertain?” Mr. Barcelon said.
“Business needs confidence that rulemakers would honor contracts,” he added.
“We hope the President could consider moving on this issue of due process quickly because investors could put on hold their investments decisions.”