Lepanto Consolidated Mining Co. (PSE: LC) (PSE: LCB)

Business Profile

Lepanto was incorporated in 1936 and shifted to gold bullion production in 1997 through its Victoria Project. Lepanto continues to produce gold from its Victoria and Teresa operations, both located in Mankayan, Benguet.

The Company sells gold bars to Haraeus Ltd. in Hong Kong under a contract that is renewable annually.

The following schedule indicates the percentage of sales and net income contributed by foreign sales in the last three years:

The Company’s subsidiaries and affiliates and its percentage of ownership are as follows:

Diamond Drilling Corporation of the Philippines (DDPC)

DDCP was incorporated and registered with the SEC on August 8, 1971 primarily to provide technical, engineering and management services for the purpose of engaging in mining, mineral or oil exploration construction or other business activity, particularly but not limited to drilling, boring and sinking holes for the purpose of mineral exploration.
DDCP primarily provides drilling services to the parent company and Manila mining Corporation (MMC), an associate.

Shipside, Incorporated (SI)

SI was incorporated on November 12, 1958 primarily to engage in handling all kinds of materials, products and supplies in bulk and maintaining and operating terminal facilities such as pier and warehouses.

Lepanto Investment and Development Corporation (LIDC)

LIDC was incorporated and registered with the SEC on April 8, 1969 and is in the insurane business, It owns 23.14% of Philippine Fire and Marine Insurance Corporation (Philfire) and 100% of DBPI. Its income principally is from Philfire and does not contribute more than 10% of total revenues.

Far Southeast Gold Resources, Inc. (FSGRI)

FSGRI was incorporated and registered with the SEC on July 20, 1988 primarily to operate mines and prospect, explore, mine and deal with all kinds of ores, metals and minerals. LC has 60% interest in the Company through LIDC.
On September 20, 2010, the Company approved an Option on Shareholder’s Agreement (Agreement) with Gold Fields Switzerland Holding AG (GFS), a wholly owned subsidiary of Gold Fields Limited, for a non-refundable option fee of $ 10 million.

The Agreement requires GFS to:
i.   Fund the exploration and feasibility study of the FSGRI mining project
ii.   Contribute $110 million into FSGRI
iii.   Contribute proportionate share of the development cost

The Agreement grants GFS an eighteen-month option to subscribe to new shares of stock of FSGRI representing 20% interest in FSGRI.  If the option is exercised the Company’s interest in will be reduced from 60% to 40%.

As at March 19, 2012, FSGRI is still in the pre-operating stage.

Diamant Boart Philippines, Inc. (DBPI)

DBPI was registered and incorporated in September 7, 1972 and is primarily engaged in manufacturing of industrial diamond tools for mining exploration, marble cutting and the construction industry. Most of its raw materials are imported from an affiliate, Diaboart Brussels, and are readily available. LIDC owns 100% of DBPI.

Comments

The company forecasts their 2012 earnings to reach P300 million which I believe is very achievable due to the substantial reduction of finance costs or interests paid on loans. However, even if the company achieve an earnings of P400 million, LC will still be trading at 155x PE ratio.

A potential revenue stream for the Company will be the commercial operation of FSGRI which makes LC a company to watch for.

Advertisements

One thought on “Lepanto Consolidated Mining Co. (PSE: LC) (PSE: LCB)

  1. Pingback: My Lepanto (LC) Bet | Fundamental Enthusiast

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s