Indophil looks to PH partners to improve value of SMI sharesBy Edwin Espejo May 24, 2014 9:46AM UTC
Australian exploration firm Indophil Resources NL is looking to improve the value of its shares at the beleaguered Sagittarius Mines Inc, holder of the Tampakan Copper and Gold Project, as market uncertainties and government regulations continue to stymie the production target of the US$5.9-billion mining project.
“We realize that Indophil must look to, and if necessary engineer, solutions and outcomes that will crystalize the value of our Tampakan equity,” Indophil chairman Brian Phillips reported during the Annual General Meeting of the company held in Australia last Thursday, May 22.
Glencore controls majority of the shares of SMI at 62.5 per cent.
Indophil Resources owns the remaining 37.5 per cent of SMI, valued at A$185.34 million (US$171.18 million).
Filipino companies, in turn, own 30 percent of Indophil’s exposure at SMI.
The Alsons Group and Henry Sy’s BDO Unibank are among Indophil’s Filipino partners although Philippine food giant San Miguel Coporation and the Pangilinan-led Philex Mining also owns minority shares at the SMI partner.
Phillips said Filipino shareholders could play vital role in the future of SMI.
“This alliance is critical not just to where we sit today, but to where we go and what we do next in the process of securing value from the world class Tampakan asset,” Phillips described the situation.
As minority partner, Indophil holds the preemptive right should Glencore decide to sell its stakes at SMI.
Phillips said Indophil will use this “valuable advantage should Glencore wish to exit or sell down its equity in SMI.”
Indophil is in better financial position with A$210M ‘cash at hand.’ Its shares listed at the Australian Stock Exchange have a par value of A$192 million.
“We acknowledge that Glencore is well-documented as being wary of ‘greenfield’ projects, and Tampakan is a big ‘greenfiled’ project,” Phillips explained.
Greenfield projects refer to business ventures not yet on commercial or already in production stage (brownfield). Last year, Glencore sold its ‘greenfield’ Frieda River Cooper-Gold Project in Papua New Guinea to PanAust Limited.
Glencore likewise has completed the sale of its Las Bambas Copper Project in Peru, one of the conditions set forth by the Chinese Ministry of Finance and Commerce (MOFCOM) before it approves the Glencore-Xstrata merger.
SMI has considerably scaled down its operations.
The company laid off at least 930 employees, representing 85 per cent of its total workforce, last year and reduced its quarterly budget this year to just over US$1 million, down from US$10 million every quarter before SMI announced its downsizing decision.
Indophil President Richard Lauffman earlier said Glencore was looking to unload its stakes at SMI.
Glencore this week dropped Xstrata from its name, retaining only its original corporate name.
In 2012, Glencore and Xstrata merged to form the world’s 4th largest diversified mining company.
SMI however is facing difficulties not only in securing the go ahead of the provincial government of South Cotabato which passed an ordinance banning open pit mining in the province.
The communist New People’s Army has repeatedly attacked its facilities. On Monday, the NPAs burned its abandoned office facilities in Kimlawis, Kiblawan in Davao del Sur.
The Diocese of Marbel, led by now retired Bishop Dinualdo Gutierrez, is also opposed to the SMI mining project.