OceanaGold Philippines drops 6% on market debut

OCEANAGOLD Philippines, Inc. (OGP) made a dismal stock market debut on Monday, as its stock price closed 6% lower than its initial public offering (IPO) price.

The subsidiary of Toronto-listed Oceana Gold Corp. listed 20% of its outstanding common shares or 456 million stocks worth P6.08 billion on the Philippine Stock Exchange (PSE).

Shares in OceanaGold Philippines opened at P13.34 each, slightly above its IPO price of P13.33. Its shares closed at P12.50 each, down 82 centavos or 6.16%.

This was the first IPO on the local bourse this year, and the first market debut by a mining company in 12 years or since Coal Asia Holdings, Inc. in October 2012.

“The PSE adds a leading mining firm to its roster of publicly listed companies. OGP’s IPO listing comes at a time when prospects for the mining sector are favorable,” PSE President and Chief Executive Officer Ramon S. Monzon said during the listing ceremony.

“The government is looking to revitalize the mining industry to boost its potential contribution to the economy. The local mining sector certainly has a vast potential that can fuel economic growth,” he added.

OGP operates the Didipio gold and copper underground mine in Northern Luzon. It renewed its Financial or Technical Assistance Agreement (FTAA) with the Philippine government in July 2021 for another 25-year period, which started in June 2019.

The public listing is part of the company’s requirement under the renewed FTAA.

“We expect our mining operations to provide substantial dividend returns to our shareholders and most importantly to continue to give benefits to the government and the communities, ensuring that we realize our purpose of mining gold and copper for a better future,” OGP President Joan D. Adaci-Cattiling said at the listing ceremony.

The drop in OGP’s stock price is reflective of “tough market conditions,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

“The negative first-day performance of the stock shows that equity market conditions remain tough for IPOs. Not even a substantially discounted IPO price could stop the heavy selling,” he said.

“This might make investors more cautious about IPOs if market sentiment does not improve,” he added.

AP Securities, Inc. Research Head Alfred Benjamin R. Garcia said in a Viber message that OGP’s offering of secondary shares had made it “unattractive” to investors.

“The offering was composed of all secondary shares, which means that the proceeds from the IPO would go to the selling party, as opposed to primary share sales where the proceeds would go to the company itself to fund future projects and expansion,” he said.

“In the near term, we expect it to remain around these levels since there’s still price stabilization activities. The downward momentum might strengthen after the price stabilization period expires after 30 days,” he added.

Mr. Garcia also said the share price declined because investors are wary of the risks surrounding the mining company.

“There’s also some risk in the fact that OGP’s mine has been operating for a while and has a remaining mine life of a little less than 10 years, with no clear plan yet for extension or expansion. The company is also facing some legal challenges from the local community where it operates,” he said.

Meanwhile, Chamber of Mines of the Philippines Chairman Michael T. Toledo said in a Viber message that OGP’s listing signals the “industry’s growing trust and confidence in the country’s business environment and the government’s positive policy direction on mining.”

He added that more mining IPOs are expected as the overall mining policy and competitiveness improve.

“Listings such as OGP’s provide the mineral industry the opportunity to involve the public to invest in the mining enterprise, given the Philippines’ rich mineral endowment,” he said.

“Apart from access to capital, listed mining companies also are encouraged to further enhance their governance structure,” he added.