Philex sees lower earnings as Padcal closed indefinitely

Posted at 08/09/2012 11:58 AM | Updated as of 08/09/2012 5:18 PM

MANILA, Philippines - Philex Mining Corp. on Thursday said its full-year earnings for 2012 will be lower as a result of the indefinite suspension of operations at its Padcal mine in Benguet province.

Philex, the country's largest gold and copper producer, said the continued suspension of the mine operations is expected to result in losses of P220 million a month.

The company stopped operations at the Padcal mine on August 1 after water and sediment were accidentally discharged from an underground tunnel. Operations will remain indefinitely suspended, pending an investigation of the tailings pond breach.

"The Board of Directors have taken the prudential but painful step of maintaining the suspension of the company’s operations until such time as the appropriate rehabilitation and restoration plans have been composed and approved. Shareholders should be aware that the full-year earnings of Philex will be materially impacted," Manuel V. Pangilinan, chairman of Philex Mining, said.

The final impact on earnings will be known after Philex develops a plan to rehabilitate Padcal's tailings disposal system, which the company said could take some time.

"We have stopped mining operations since 1st August and they will remain suspended while we investigate the cause of the accident and rectify damage to our tailings pond. We expect this will take some time to accomplish, but we will move forward with all deliberate speed," said Philex president and chief operating officer Eulalio B. Austin Jr.

Philex has tapped domestic and foreign consultants to develop a rehabilitation plan to ensure the safety of the tailings pond facility, and an program to address the environmental impact of the incident.

The company said it has insurance that will offset the loss of revenues from the mine's suspension, as well as the cost of addressing any environmental impact.

Despite the losses, Philex remained confident it has the financial resources to assess and repair Padcal's tailings pond. In the first half of 2012, Philex reported its consolidated net income in the first six months of the year fell 37%  to P2.04 billion.

As a "precautionary measure", Philex is unwinding its hedges due to the suspension of mining operations. "The company will realize a gain of approximately $6.1 million from unwinding these hedges. As soon as operations resume, Philex will enter into new hedging arrangements," the company said.