1. business and industrial
2. company
3. annual report

SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
COVER SHEET
1 2 9 4 2
SEC Registration Number
M A R C V E N T U R E S
H O L D I N G S ,
I N C .
A N D
S U B S I D I A R Y
( F O R M E R L Y :
A J O . N E T
H O L D I N G S ,
I N C .)
(Company’s Full Name)
U N I T
1 6 A
1 6 T H
F L R .
C I T I T O W E R
C O N D O M I N I U M
8 7 4 1
P A S E O
D E
RO X A S
MA K A T I
C I T Y
(Business Address: No. Street City/Town/Province)
ATTY. ANA MARIA A. KATIGBAK
817-6791
(Contact Person)
1 2
Month
(Company Telephone Number)
3 1
1 7 - A
(Form Type)
Day
Month
(Calendar Year)
Day
(Annual Meeting)
N/A
(Secondary License Type, If Applicable)
N/A
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders
Domestic
Foreign
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
1
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
SECURITIES AND EXCHANGE COMMISSION
File Number: ______
SEC Number: 12942
SEC FORM 17-A
ANNUAL REPORT PURSUANT TO SECTION 17
OF THE SECURITIES REGULATION CODE AND SECTION 141
OF THE CORPORATION CODE OF THE PHILIPPINES
For the calendar year ended
December 31, 2012
Industry Classification Code:
(SEC Use Only)
MARCVENTURES HOLDINGS INC.
(Company Name)
Philippines
(Province, country or other jurisdiction of
incorporation or organization)
470-000-104-320
(BIR Tax Identification No.)
Unit 16A 16th Floor Citibank Tower 8741 Paseo de Roxas, Makati City
(Zip Code)
(Company’s Address)
Registrant’s telephone numbers, including area code:
(632) 836-86-09
Securities registered pursuant to Sections 4 and 8 of the RSA:
Title of each Class
Number of Shares of Common
Stock Outstanding and Amount of
Debt Outstanding
Name of each stock exchange in
which securities are listed
Common Stock (P1.00 par value)
1,735,676,781 common shares
Philippine Stock Exchange
Total debt outstanding
₱149,800,000.00
N/A
Indicate whether the registrant has filed all reports required to be filed by Section 11 of the Revised
Securities Act (RSA) and RSA Rule 11 (a)-1 thereunder and Sections 26 and 141 of the Corporation
Code of the Philippines, during the preceding 12 months (or for such shorter period the registrant
was required to file such reports). Yes
Indicate whether the registrant has been subject to such filing requirements for the past 90 days.
Yes
The aggregate market value of voting stock held by non-affiliates amounted to ₱1,077,611,307.50
based on the closing price at the Philippine Stock Exchange as of April 15, 2013
2
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
TABLE OF CONTENTS
Page No.
PART I - BUSINESS AND GENERAL INFORMATION
Item 1
Item 2
Item 3
Business
Legal Proceedings
Submission of Matters to a Vote of Security Holders
4
7
7
PART II - OPERATIONAL AND FINANCIAL INFORMATION
Item 4
Item 5
Item 6
Item 7
Market for Registrant’s Common Equity and Related
Stockholder Matters
Management’s Discussion and Analysis of Financial
Condition & Results of Operations
Financial Statements
Information on Independent Accountant and Other
Related Matters
8
10
15
15
PART III - CONTROL AND COMPENSATION INFORMATION
Item 8
Item 9
Item 10
Item 11
Directors and Executive Officers of the Registrant
Executive Compensation
Security Ownership of Certain Beneficial Owners and
Management
Certain Relationships and Related Transactions
PART IV – CORPORATE GOVERNANCE
16
19
19
21
21
PART V - EXHIBITS AND SCHEDULES
Item 12
SIGNATURES
Exhibits
Statement of Management’s Responsibility for Financial Statements
22
23
24
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SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
PART I - BUSINESS AND GENERAL INFORMATION
ITEM 1.
BUSINESS
Background
Marcventures Holdings, Inc. (Formerly: AJO.net Holdings, Inc.), the Parent Company (or Company), was
incorporated and registered with the Securities and Exchange Commission (SEC) on August 7, 1957, with a
primary purpose to acquire by purchase, exchange, assignment, gift or otherwise, and to hold, own and use
for investment or otherwise, and to sell, assign, transfer, exchange, lease, let, develop, mortgage, pledge,
traffic, deal in, and with, and otherwise operate, manage, enjoy and dispose of, any and all properties of every
kind and description and wherever situated, including land as and to the extent permitted by law, including but
not limited to, buildings, tenements, warehouses, factories, edifices and structures and other improvements
and bonds, debentures, promissory notes, shares of stock, or other securities or obligations, created,
negotiated or issued by any corporation, association or other entity, foreign or domestic and while the owner,
holder or possessors thereof, to exercise all rights, powers and privileges of ownership or any other interest
therein, including the right to receive, collect and dispose of, any and all rentals, dividends, interest and
income derived therefrom, and the right to vote on any proprietary or other interest, on any shares of the
capital stock, and upon any bonds, debentures or other securities having voting power, so owned or held; and
provided it shall not engage in the business of an open-end or close-end investment company as defined in
the Investment Company Act (Republic Act 2629), or act as a securities broker or dealer.
On December 15, 2009, the Parent Company entered into a Memorandum of Agreement (MOA) between the
shareholders of Marcventures Mining & Development Corporation (Investor Group) and their partners to
exchange their ownership of MMDC for a total value of ₱1.3 billion consisting of: (i) new Parent Company
shares worth ₱100 million representing the full payment of the balance for the subscription to the increase in
authorized capital stock; (ii) additional Parent Company shares worth ₱1.15 billion to be issued from the
authorized capital stock as increased, and the new par value of the Parent Company after its corporate
restructuring; and (iii) 488 membership certificates of The Metropolitan Club, Inc. (Metroclub Certificates) with
an agreed net value of 50 million together with the Parent Company’s rights, obligation and interests. The
consolidated financial statements assumed June 30, 2010 as the acquisition date.
In March 2010, the Company reduced the par value of its capital stock from ₱0.10 to ₱0.01, which resulted in
a reduction in its issued and outstanding capital stock in the amount of ₱459 million and in a corresponding
increase in its Additional Paid-in Capital account. Subsequently, the Company issued 5 billion new shares
(par value of Php0.01) at a price of ₱0.02, which resulted in additional paid-in capital of ₱50 million. The
Company also transferred the amount of ₱441 million from its Additional Paid-in Capital to reduce its Deficit
account.
On, September 30, 2010, the Securities and Exchange Commission approved the change in the par value of
its capital stock from ₱0.01 to ₱1.00
Marcventures Mining & Development Corporation (MMDC), a wholly-owned Subsidiary of the Parent
Company, and incorporated in the Philippines is engaged primarily to carry on the business of mining,
smelting, extracting, smelting mineral ores such as, but not limited to nickel, chromites, copper, gold,
manganese and other similar ores and/natural metallic or non-metallic resource from the earth. To operate,
manage and/or engage in the business of smelting, and/or operate smelting plant, to refine and/or convert
metals, ore, and other precious metals into finished products within the commerce of man. On July 19, 2010
the Subsidiary was registered with the Board of Investments (BOI) in accordance with the provisions of the
Omnibus Investments Code of 1987, as amended, as a New Producer of Nickel Laterite Ore. As a BOI
registered entity, the Subsidiary is entitled to an Income Tax Holiday (ITH) for four (4) years from July 2010 or
actual start of commercial operations, whichever is earlier but in no case earlier than the date of registration.
The consolidated financial statements include those of the Parent Company and its wholly-owned subsidiary,
Marcventures Mining & Development Corporation (MMDC).
The Parent Company’s current registered office is located at Unit 16A, 16th Flr. Cititower Condominium 8741
Paseo de Roxas, Makati City.
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SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
Products/Sales
The principal market for nickel ore production from the Philippines is currently China. In 2007, Philippine nickel
ore shipments accounted for around 50% of China’s total imports of nickel ore. The proximity of the
Philippines to China results in lower freight costs, thus the preference by Chinese companies of Philippinesourced nickel ore. China relies highly on imported nickel ore as its domestic supplies are not sufficient.
Sources and availability of Raw Materials
MMDC’s nickel ore is extracted from its MPSA No. 016-93-XIII in Surigao del Sur.
Equipment, spare parts, and other operating supplies are readily available both locally and abroad.
Mining Properties
MMDC has been granted by the DENR of the Philippine National Government a Mineral Production Sharing
Agreement (MPSA) No. 016-93-XIII covering an area of approximately 4,799 hectares located in Cantilan
Surigao Del Sur. As the holder of the said MPSA, MMDC has the exclusive right to conduct and develop
mining operations within the mineral property over a period of 25 years from July 1, 1993. MMDC has
identified Nickel Ore as the primary mineral that will be extracted and sold to third parties due to the
abundance and favorable characteristics of nickel within the mineral property.
The MPSA was originally granted to Ventura Timber Corporation on July 1, 1993. In January 1995, a deed of
assignment (Deed) was executed, wherein Ventura assigned to MMDC all its rights, title and interest in and to
MPSA No. 016-93-XIII. The Deed was duly registered with the Mines and Geosciences Bureau (MGB)
Regional Office (RO) No. XIII on February 9, 1995, and was subsequently approved on January 15, 2008,
making the Subsidiary the official contractor of the mineral property.
Government Approvals; Effect of Existing or Probable Government Regulations on the
Business
Government regulations’ effects on the Company are primarily on the costs of compliance which are
appropriately reflected in the books either as an expense or as a capital asset under the GAAP.
Determination of the effect of probable government regulations cannot be known until specific provisions are
made clear.
Costs and Effects of Compliance with Environmental Laws
The Company is strongly committed to its policy of protecting and enhancing the environment. It spent
₱26.18M on its environmental and enhancement program (EPEP) in 2012. For 2013, the Company has
budgeted ₱ 32.97M for its EPEP and ₱1.63M for its mine rehabilitation program.
Business Transactions with Related Parties
The Company obtained non-interest bearing advances from stockholders which are payable on demand. As
of December 31, 2012, such advances from stockholders amounted to ₱41.71 million.
Employees
Parent Company
The Company currently has a total of 9 employees, consisting of 4 executive /managerial position,2 in
accounting/clerical, 2 in administrative, 1 messenger personnel. For the ensuing 12 months, the Company
anticipates it will have the same number of employees. There is no employees’ union and neither is there a
collective bargaining agreement with the employees. There has not been a strike by the employees in the
Company’s history. The Company believes relations with the employees are good.
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SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
Marcventures Mining & Development Corporation:
As of December 31, 2012, MMDC employs 1168 employees. Of this amount, 315 are regular, 174 are
probationary, and the balance are contractual. 25 perform administrative work and the balance are involved
directly in mine site operations.
There is no employees’ union nor is there a collective bargaining agreement with the employees. There has
not been a strike in MMDC’s history.
Mineral Properties
The Company, through its subsidiary Marcventures Mining & Development Corporation, holds Mineral
Production Sharing Agreement No. 016-93-XIII which covers 4,799 hectares in the province of Surigao Del
Sur. It is physiologically located within the Diwata Mountain Range.
Estimates of the MPSA’s mineral resources and reserves are as follows:
RESOURCES
Volume
Measured & Indicated
Saprolite:
2.88 million WMT at 1.9%
Nickel, 11.81% Iron
Limonite
15.99 million WMT at 1.08%
Nickel and 44.48% Iron
Inferred
Saprolite:
4.49 million WMT at 1.73% and
13.08% Iron
Limonite:
21.96 million WMT at 1.00%
Nickel and 47.93% Iron
These estimates were prepared by Mr. Radegundo de Luna, a Competent Person in Geology, to study the
exploration data on the mineral property and verify its nickel resources.
Volume
RESERVES
11.6 million WMT laterite ore
Ore Grade
Average 1.5% Ni grade
Area
120 hectares
These estimates were prepared by Engr. Orlando S. Cruz, a Competent Person – Mining Engineer.
Please see attached report entitled:
TECHNICAL REPORT ECONOMIC ASSESSMENT AND ORE RESERVE ESTIMATION ON THEMARCVENTURES
MINING& DEVELOPMENT CORPORATION NICKEL PROJECT, CABANGAHAN, CANTILAN, SURIGAO DEL SUR
FORMARCVENTURES MINING & DEVELOPMENT CORPORATION
[MPSA–Exploration No. 016–93–XIII]
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SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
ITEM 2.
LEGAL PROCEEDINGS
The Parent Company is not a party to any legal proceedings. It is not involved in any pending legal
proceedings with respect to any of its properties. It is not involved in any claims or lawsuits involving
damages that may materially affect it or its subsidiaries.
Marcventures Mining & Development Corporation (MMDC), a wholly-owned subsidiary, is currently involved in
three [3] pending issues:
Petition filed by Cantilan Irrigation System Federation of Irrigators Association [CISFIA] Surigao del Sur
Irrigators Federation Association [SURIF] Cabcant Irrigators Association, Inc., Buyaan Irrigators Association,
Inc., CarCanMadCarLan Baywatch Foundation, Inc. [CBFI], Lovers of Nature Foundation, Inc. before the
Office of the Secretary, Department of Environment and Natural Resources. Atty. Anselmo C. Abungan, OIC,
Asst. Secretary, Office of the Secretary, DENR, dismissed this Petition on 17 December 2012, per Decision
we received on 14 January 2013. The Petitioners filed a Motion For Reconsideration.
Case filed by Jaime “Datu Dagsaan” Bat-ao, Liquisa Irrigators Association represented by Peter William Olan,
Nagkahugpong Managatay Para sa Kalambuan [NAGMAKAAYO] represented by Crisologo E. Aniono, Sr.;
Lydia L. Lascano and Nick Matthew Q. Irriberi, a minor represented by his father, Vicente Cirilo Irriberi, before
the Regional Trial Court, Branch 41, Cantilan, Surigao del Sur, docketed as Civil Case No. 224. The newly
designated Presiding Judge, Rufo U. Naragas, voluntarily inhibited from handling the case per Order dated 14
February 2013.
Opposition filed by the Cantilan Irrigation System Federation of Irrigators Association [CISFIA] before the
National Water Resources Board [NWRB] docketed as WPA No. XIII-SDS=2009-02-036 relative to the
application of Marcventures Mining and Development Corporation for water rights. This opposition has nothing
to do with the present mining activities of MMDC. We were just notified of an opposition of MMDC’s
application for water rights. As of today, it is still pending neither did we receive any order form the Board or
pleadings from the Oppositor.
ITEM 3.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during
the year.
7
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
PART II – OPERATIONAL AND FINANCIAL INFORMATION
MARKET PRICE OF AND DIVIDENDS ON REGISTRANT’S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
ITEM 4.
Market Information
The principal market for the registrant’s common stock is the Philippine Stock Exchange (“PSE”). The
Company’s stock symbol is “MARC”
Stock Prices – Common Shares
The following table sets forth the high and low closing sales prices per share of the Common Shares listed on
the PSE during the respective periods indicated as per published financial sources.
Price per Share (In Pesos)**
High
Low
2010
January – March
April – June
July – September
October – December
5.00
4.20
2.60
2.40
3.80
3.20
1.80
1.85
2011
January – March
April – June
July – September
October – December
2.21
2.00
2.57
2.25
1.86
1.73
1.73
1.80
2012
January – March
April – June
July - September
October to December
3.50
3.82
2.75
2.35
1.80
2.35
2.17
1.71
**Note: On, September 30, 2010, the Securities and Exchange Commission approved the change in par value of
its capital stock from ₱0.01 to ₱1.00 which resulted in a corresponding adjustment in the total number of shares
Issued and outstanding. Hence, prices from January 2010 to September 2010 have been adjusted for the
aforesaid change in par value.
Latest Market Price
On December 28, 2012 trading date, the closing market price of the Company’s common stock was ₱1.85 per
share.).
Stockholders
The number of shareholders of record as of December 31, 2012 was 2,170. The outstanding shares as
December 31, 2012 are 1,735,676,781 common shares, 98.07% of which are owned by Filipinos.
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SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
The top 20 registered common stockholders as of December 31, 2012, are as follows:
The Company has no other class of registered securities outstanding aside from common shares.
Dividends
The Company has not declared any dividends for the last two (2) fiscal years on account of its deficit.
Sales of Securities
There was no sale in the past three years of any unregistered securities of the Company.
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SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
ITEM 5. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
RESULTS OF OPERATION
CONDITION AND
Results of operations
December 31,
2012
2011
(one year)
(1 year)
REVENUES:
Sales - Ore
Cost of Sales
Gross Profit
₱ 697,491,039 ₱ 842,901,957 ₱ -­‐
484,807,547
532,979,157
-­‐
212,683,492
309,922,800
EXPENSES:
Administrative & Operating expenses
59,936,373
42,817,363
NET PROFIT
152,747,119
267,105,437
Add:( Less ) Other Income (Expenses)
(16,169,372)
1,237,521
COMPREHENSIVE INCOME ( LOSS) FOR THE PERIOD
136,577,747
268,342,958
859,128
90,447
PROVISION FOR INCOME TAX-Deferred
COMPREHENSIVE INCOME -NET OF TAX
June 30
2010
(6 months)
-­‐
Increased ( Decreased)
%
2011 vs. 2010
2012 vs. 2011
₱ (145,410,918)
(48,171,610)
-­‐17.25% ₱ 842,901,957.00
-­‐9.04%
532,979,157.00
(97,239,308)
-­‐31.38%
46,943,000
17,119,010
39.98%
(4,125,637.00)
(46,943,000)
314,048,437.00
(9,272,668)
(114,358,318) #DIV/0!
-­‐42.81%
(17,406,893) -­‐1406.59%
(56,215,668)
(131,765,211)
-­‐49.10%
324,558,626.00
(510,200)
768,681
849.87%
600,647.00
₱ 137,436,875
₱ 268,433,405 ₱ (55,705,468) ₱ (130,996,530)
309,922,800.00
10,510,189.00
-­‐48.80% ₱ 324,138,873.00
2012
The total shipments made by MMDC for the year ended December 31, 2012 was 637,932.82 WMT of nickel
ore, resulting in sales of ₱697.41 million and a consolidated net income of ₱137.44 million. In the previous
year, it shipped 628,098 WMT thus recording a revenue of ₱842.90 million and a consolidated net profit of
₱268.43 million. Due to the dramatic decline in nickel prices, revenues and net profit dropped by 17.25% and
48.80% respectively, despite a slight increase in volume shipped.
Furthermore, the income generating activities by its subsidiary resulted in total consolidated assets amounting
to ₱2,697.11 million, equivalent to an increase of 5.16% or an additional ₱132.37 million increase from
₱2,564.74 million as of December 31, 2011.
Total Liabilities of the Company decreased by 6.54% from ₱555.94 million for the period December 31, 2011
to ₱519.60 million for the period December 31, 2011.
The stockholders’ equity increased by 8.4% to ₱2,177.52 million as of December 31, 2012 or an additional
₱137.44 million from ₱2008.80 million as of December 31, 2011.
2011
Marcventures Mining and Development Corp. “ MMDC” ( the subsidiary), a 100% owned corporation of
Marventures Holdings Inc. “MHI” (the Company), is engaged in nickel-mining in Surigao Del Sur. MMDC
made its first shipment last August 2011 and a total of 12 shipments for the year. As a result, MMDC was
able to sell 628,098 WMT of nickel ore in 2011, resulting to sales of ₱842.90 million and a net income of
₱283.02 million This redounded to a complete turnaround for MHI’s recorded deficit of ₱73.87 million for the
period June 30, 2011 to retained earnings of ₱194,564 million for December 2011.
Furthermore, the income generating activities by its subsidiary resulted to a total consolidated assets
amounting to ₱2,564.74 million equivalent to an increase of 18.89% or an additional ₱407.47 million increase
from ₱2,157.28 million as of June 30, 2011.
Total Liabilities of the Company increased from ₱461.91 million for the period June 30, 2011 to ₱555.94
million for the period December 31, 2011 . The increase was from a loan availed from Philippine Veterans
Bank in the amount of ₱75 million.
The stockholders’ equity increased by 18.49% to ₱2,008.80 million as of December 31, 2011 or an additional
₱313.43 million from ₱1,695.37 million as of June 30, 2011. The increase was due to income generated by
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SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
its subsidiary amounting to ₱283.02 million which resulted in the company’s retained earnings in the amount
of ₱194.56 million as of December 31, 2011 or an increase of ₱268.43 million from a deficit of ₱73.87 million
as of June 30, 2011. Furthermore, investors who opted to convert their private placement into equity resulted
in an increase in Capital Stock to ₱1,721.46 million and due to the Additional Paid- In Capital of ₱92.78
million.
2010
The Company has no income generation from projects. Its mining subsidiary, Marcventures Mining and
Development Corporation, is still in its development phase and will officially begin commercial operations in
2011. Total revenues for 2010 amounting to ₱ 19,770,434 were generated from the sale of available-for-sale
securities, sale of property, dividend income, and interest income. Total loss for the Period stood at ₱
14,188,191. The Company’s Basic Loss Per Share amounted to ₱0.0008
Consolidated Balance Sheet
December 31,
2012
2011
(one year)
(one year)
Current Assets
Non Current Assets
June 30
2010
(six months)
2012 vs. 2011
Horizontal Analysis
Increased ( Decreased)
%
2011 vs. 2010
₱ 76,904,967 ₱ 443,649,126 ₱ 176,723,918 ₱ (366,744,159)
2,620,207,714
2,121,093,159
1,980,553,022
499,114,555
-­‐82.67% ₱ 266,925,208
23.53%
140,540,137
Total Assets
2,697,112,681
2,564,742,285
2,157,276,940
132,370,396
5.16%
Current Liabilities
Non Current Liabilities
Total Stockholders' Equity
330,251,728
189,345,239
2,177,515,714
383,317,037
172,621,405
2,008,803,843
266,195,217
195,711,284
1,695,370,439
(53,065,309)
16,723,834
168,711,871
-­‐13.84%
9.69%
8.40%
Total Liabilities and Stockholders' Equity ₱ 2,697,112,681 ₱ 2,564,742,285
₱ 2,157,276,940
₱ 132,370,396
5.16%
%
151.04%
7.10%
407,465,345
18.89%
#DIV/0!
117,121,820
44.00%
(23,089,879) -­‐11.80%
-­‐
18.49%
313,433,404
₱ 407,465,345
18.89%
2012
Assets
As of December 31, 2012, the consolidated total assets of the Company increased to ₱2,697.11 million from
₱2,564.74 million as of December 31, 2011. The 5.16% increase was mainly due to the increase in property
and equipment from ₱725.09 million to ₱1,176.23 million, or equivalent to a 62.22% increase. The increase
in Property and Equipment was due to the acquisition of various equipment amounting to ₱243.43 million and
cost of matting amounting to ₱207.71 million which is charged to mine development cost as these were
utilized in the major expansion of MMDC’s various stockyards in the form of matting – a layer of nickel ore
several meters thick blanketing the ground that prevents dilution of the ore stockpile currently being stored or
beneficiated. The increase in total assets is also attributable to the increase in other current asset amounting
to ₱12.24 million or equivalent to 53.17% arising from an increase in advances to suppliers and contractors
and prepayments (which pertain to advance payments made to contractors for mining related services) and
Inventories consisting of spare parts supplies, lubricants, electrical and laboratory supplies. On the other
hand, non current assets increased by ₱47.98 million or equivalent to 47.39%, due to an increase in
accumulated Input tax amounting to ₱46.78 million.
Liabilities
As of December 31, 2012, the total liabilities of the Company amounted to ₱519.60 million which is 6.54%
lower than ₱555.9 million as of December 31, 2011. The decrease was due to the full settlement of interest
bearing loan to Philippine Veterans Bank and Asian Alliance Investment Corp. amounting to ₱97.3 million.
The decrease is also attributable to the decrease in Notes Payable by ₱26.3 million due to the conversion of
certain investors of their convertible loan into equity. Furthermore, an increase in related party transactions
of ₱22.55 million or 118.49% largely refer to the advances made from the stockholders.
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MARCVENTURES HOLDINGS, INC.
An increase of 9.69% in total non current liabilities was due to the increase in interest bearing loan of ₱39.42
million which is 73.68% higher than ₱ 22.70 million of the same period last year.
Equity
The stockholders’ equity amounting to ₱2,177.52 million is higher by 8.4% or ₱168.71 million from ₱2,008.8
million in December 31, 2011. The increase was on the account of income generated from the sale of nickel
ore by its subsidiary. The total comprehensive income for the year amounting to ₱137.44 million resulted in
an increase in the Company’s Retained Earnings to ₱332.00 million. Some investors opted to convert their
convertible loans into equity which resulted in an increase in Capital Stock to ₱1,735.7 million and an
increased in Additional Paid- In Capital account to ₱109.8 million.
2011
The current assets of the Company increased to ₱443.65 as of Dec.31,2011 from ₱176.72 as of June 30,
2011. The increase is attributable to the inventory which consist of nickel ore stockpile amounting to ₱234.40
million and trade and other receivables in the amount of ₱22.09 million . Property and equipment increased
to ₱725.1 million in December 31,2011 from ₱656.15 million in June 30, 2011, mainly due to
site of the
causeway. purchases of mining equipment, service vehicles and laboratory equipment which caused the
Property and Equipment to increase by 10.5% as compared to June 30, 2011.
Total Liabilities of the Company increased from ₱461.91 million for the period June 30, 2011 to ₱555.94
million for the period December 31, 2011 . The increase was from loan availed from Philippine Veterans
Bank in the amount of ₱75 million.
The stockholders’ equity increased by 18.49% to ₱2,008.80 million as of December 31, 2011 or an additional
₱313.43 million from ₱1,695.37 million as of June 30, 2011. The increase was due to income generated by
its subsidiary amounting to ₱283.02 million which resulted in the company’s retained earnings in the
amount of ₱194.56 million as of December 31, 2011 or an increase of ₱268.43 million from a deficit of
₱73.87 million as of June 30, 2011. Furthermore, investors who opted to convert their private placement into
equity resulted in an increase in Capital Stock to ₱1,721.46 million and Additional Paid- In Capital of ₱92.78
million.
2010
Total assets of the Company increased to ₱1,778.55 million from ₱92.672 million. This was largely brought
about by the business combination of the Company and the investor group, Marcventures Mining &
Development Corporation. Explored mineral resources are valued at ₱1,294.77 million. Advances to MMDC
amount to ₱ 408.50 million. Property, Plant, and Equipment likewise increased to ₱56.99 million from ₱0.21
million last year.
Total Liabilities stood at ₱16.22 million, comprised mainly of accrued expenses of MMDC.
Stockholders Equity has increased to ₱1,800.89 million brought about by the business combination with
MMDC.
12
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
Consolidated Cash Flow
December 31,
2012
2011
(one year)
(one year)
Cash provided by (used in) operating activities
₱ 146,607,446.00 ₱
Cash used in investing activities
(290,546,768.00)
Cash provided by (used in ) financing activities
(7,074,162.00)
Net Increase (Decrease) in Cash and cash equivalent
(151,013,484.00)
Cash and cash equivalent - beginning of the period
164,141,034.00
Cash and cash equivalent - end of the period
₱ 13,127,550.00 ₱
345,294,419.00 ₱
(424,581,339.00)
197,620,875.00
118,333,955.00
45,807,079.00
164,141,034.00 ₱
June 30
2010
(six months)
(7,548,231.00)
(240,351,864.00)
256,111,940.00
8,211,845.00
40,833,733.00
49,045,578.00
2012
Statement of Cash Flows
The net cash flows generated from operating activities, particularly the sale of nickel ore and interest income
amounted to ₱146.61 million in 2012 as compared to ₱263.18 million in 2011 and ₱ 7.55 million used in
2010. The decrease in cash was due to decrease in sale of nickel ore and payment of interest expense.
Net cash used for investing activities amounted to ₱290.55 million, ₱190.30 million and ₱240.35 million for the
year 2012, 2011 and 2010 respectively. Investing activities for the most part include the acquisition of
property and equipment and the corresponding VAT input on the purchases of property and equipment.
Net cash used in financing activities amounting to ₱7.07 million in 2012 pertains to the settlement of interest
bearing loans and notes payable. Net cash provided by financing activities amounting to ₱42.22 million in
December 31, 2011 was from loan availed from Philippine Veterans Bank and ₱256.11 million in 2010 was
largely due to the receipts from the issuance of capital stock from the conversion of debt to equity.
The foregoing investing and financing activities resulted in the December 31, 2012, 2011 and 2010 cash and
cash equivalent to amount to ₱13.13 million, 164.14 million, and 45.81 million respectively.
2011
The proceeds generated from the convertible loans amounting to ₱249.8 million obtained by the company
was used for land acquisition in view of the planned Carrascal Causeway where several hectares of coastal
property were purchased for the purpose of road right of way and the construction site of the causeway. The
company also purchased mining equipment, service vehicles and laboratory equipment and also used for
working capital and capital expenditures of MMDC.
2010
The proceeds from the issuance of common stock were used to fund the continuing exploration, development,
and mining operations of its subsidiary, MMDC. The Company ended its fiscal year with ₱40,833,733 in cash.
Key Performance Indicators (KPI’s)
Marcventures Holdings Inc.’s management uses the following KPIs for Marcventures Holdings Inc. and its
subsidiaries: a) revenues, b) net income/loss after tax, c) debt-to-equity ratio (computed as total liabilities
divided by total Stockholders’ Equity), d) current ratio (computed as total current assets divided by total
current liabilities), and e) Return on Assets (computed as net income divided by the book value of assets).
a) Revenues - These cover income receipts from all sources. See discussion on Revenues at
“Management Discussion and Analysis ---- Results of Operations” section.
13
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
b) Net Income/Loss After Tax – is the earnings/loss of the company after income tax expense and
minority interest.
c) Debt-to-equity ratio - gives an indication of the extent of financial leverage of the company. This
ratio takes into account total liabilities in relation to Stockholders’ Equity as reflected in the Balance
Sheet.
d) Current ratio –is an indicator of the company’s ability to repay its short-term debt. This ratio is
based on the level of Current Assets and Current Liabilities as reported in the Balance Sheet.
e) Return / (Loss) on Assets – This is calculated by dividing its company’s net income (loss) by its
total assets.
Comparative figures of the Top Five key performance indicators (KPI) for the fiscal years
ended December 31, 2012 and December 31, 2011
December 31, 2012
December 31, 2011
₱137,436,875
₱240,339,316
76,904,967
443,649,126
Current Liabilities
330,251,728
383,317,037
Total Liabilities
519,596,968
555,938,443
2,177,515,713
2,008,803,843
Net Income
Current assets
Stockholder’s equity
Outstanding number of shares
1,735,676,781 shares
December 31, 2012
1,721,460,874
shares
December 31, 2011
Current ratio 1
0.23:1
1.16:1
Book value per share 2
Debt to equity 3
1.25
1.17
0.24:1
0.28:1
Profit per share 4
0.079
0.140
Return on Asset 5
5.2%
10.73%
Note: 1.
2.
3.
4.
5.
Current assets / current liabilities Stockholder’s Equity / Total outstanding number of shares Total Liabilities / Stockholder’s Equity Net Income ( Loss ) / Total outstanding number of shares Net income / average total assets 14
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
Other Information
Other material events and uncertainties known to management that would address the past and would have
an impact on the Company’s future operations are discussed below.
1. Except as disclosed in the management discussion and notes to the financial statements, there are no
other known events that will trigger direct or contingent financial obligation that is material to the company,
including any default or acceleration of an obligation.
2. Except as disclosed in the management discussion and notes to the financial statements, there are no
other known trends, events or uncertainties that have had or that are reasonably expected to have a material
favorable or unfavorable impact on revenues or income from operations.
3. All significant elements of income or loss from continuing operations are already discussed in the
management discussion and notes to financial statements. Likewise any significant elements of income or
loss that did not arise from the registrant’s continuing operations are disclosed either in the management
discussion or notes to financial statements.
4. There is no material off-balance sheet transaction, arrangement, obligation, and other relationship of the
company with unconsolidated entities or other persons created during the reporting period.
5. The company does not expect any liquidity or cash problem within the next twelve months.
ITEM 6. FINANCIAL STATEMENTS
The consolidated financial statements and schedules listed in the accompanying Index to Financial
Statements and Supplementary Schedules are filed as part of this Form 17-A. The management is not aware
of any significant or material events or transactions not included nor disclosed in the consolidated financial
statements in compliance with the SRC Rule 68.
ITEM 7. INFORMATION ON INDEPENDENT ACCOUNTANT AND OTHER RELATED MATTERS
External Audit Fees and Services
Audit Fees
Audit-Related Fees
Tax Fees
Total
Year Ended December
Year Ended December
31, 2012
31, 2011
₱180,000.00
₱150,000.00
0
₱180,000.00
₱ 150,000.00
Audit Fees.
Represents professional fees of the external auditor for the audit services rendered on
Company’s Annual Financial Statements for the year 2012.
Audit-Related Fees. Represents the out of pocket expenses of the individuals who will perform the audit, it
also includes postage and reproduction of Financial Statements as billed by the external auditor.
Tax Fees. Represents professional fees for tax advisory/consultation services rendered.
Audit services provided to the Company by external auditor have been pre-approved by the Audit Committee.
The Audit Committee has reviewed the magnitude and nature of these services to ensure that they are
compatible with maintaining the independence of the external auditor.
15
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
Changes in and disagreements with Accountants on Accounting and financial Disclosure
There was no event in the past years where the external auditor and the Registrant had any disagreements
with regard to any matter relating to accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
PART III – CONTROL AND COMPENSATION INFORMATION
ITEM 8. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Board of Directors and Executive Officers
The names, ages, citizenship, position and business experience of all directors and executive officers held for
the past five (5) years (except those years stated otherwise) are as follows:
Name
Age
Citizenship
Position
Mario G. Vijungco
Ramon A. Recto
Dy Chi Hing
Joel A. Bañares
Rafael Yaptinchay
Raul Ma. Anonas
Roberto Atendido
Carlos C. Syquia
Andres A. del Rosario
Roberto V. San Jose
Ana A. Katigbak
62
80
67
55
62
50
65
71
49
71
43
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
Chairman
President
Director
Independent Director
Independent Director
Director
Director
Treasurer
Asst. Treasurer
Corporate Secretary
Asst. Corporate Secretary
Mario G. Vijungco was elected Chairman in March 2010. In the past 5 years, Mario G. Vijungco has been a
prominent entrepreneur with previous various business interests in logging, prawn culture, copra trading, and
retail/wholesale of heavy equipment spare parts. He owned and operated a logging concession under Ventura
Timber Corporation, the original owner of MPSA 016-93-XI.
Ramon A. Recto was elected President in March 2010. In the past 5 years, Mr. Recto has been director of
Crown Equities and Premiere Horizon Alliance Corp.(formerly Premiere Entertainment Philippines). He is also
Chairman and President of CME Technologies, Inc. He was formerly the President of Lepanto Consolidated
Mining Corporation..
Dy Chi Hing was elected Director in March 2010. In the past 5 years, Mr. Dy Chi Hing has been Chairman
and CEO of So-Nice International Corporation, and has been in the import and trading business since 1968.
He is an honorary member and financial consultant of the Filipino-Chinese Chamber of Commerce and
Industry, and is an active member and one of the co-founders of the Meat Importer Traders Association
(MITA).
Joel A. Bañares was elected Independent Director in February 2010. Mr. Banares is currently a director of
Palm Thermal Consolidated Holdings Corp., a subsidiary of A Brown Company Inc. involved in power
generation, Managing Director of St. Arnold Development Corp., and consultant to other power and
infrastructure ventures. Apart from his current positions, he is also a Fellow of the Institute of Corporate
Directors (ICD). Mr. Banares served as Undersecretary of Finance from 1998 to 2001 and Chief Finance
Officer of the National Grid Corporation of the Philippines from 2009 to 2010.
Rafael Yaptinchay was elected Independent Director in March 2010. In the past 5 years, Mr. Yaptinchay has
been President and Director of the Meridien Properties Group of Companies where he has been connected
since 1988. He is also Treasurer of the Century Properties Group of Companies.
16
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
Raul Ma. Anonas was elected Director in August 2010. In the past 5 years, Mr. Anonas has been President
of Rajawali Resources Holdings Inc.(formerly Rajawali Distributors Inc.). He is currently Director and Chief
Financial Officer of Premiere Horizon Alliance Corp.(formerly Premiere Entertainment Philippines) and
Digiwave Solutions Inc. (a 100% owned subsidiary of PHAC). He is also a director of the following
companies: First Ardent Development Corp., New Marketlink Pharmaceutical Corp, Megavia Motor Company,
Megavia Corporation, Humabon Distributors Inc Mr. Anonas was previously employed at Citibank Philippines
as Vice President of Corporate Finance.
Roberto Atendido Mr. Atendido has the distinction of being a former President of the Investment House
Association of the Philippines. He is concurrently President of Asian Alliance Investment Corp. and Asian
Alliance Holdings & Development Corp., Chairman of Carac-An Development Corporation, Vice
Chairman/Director of Sinag Energy Philippines, Inc. (formerly Energy Management & Conservation Corp.),
and President/Chairman of Myka Advisory & Consultancy Services, Inc. He is currently Director of Paxys Inc.,
PICOP Resources, Inc., GEM Communications Holdings Corporation, Zest Air, Inc., Marcventures Holdings,
Inc., and Beneficial Life Insurance Co., Inc. . He was previously the President of Insular Investment & Trust
Corporation, Managing Director of Asian Oceanic Holdings (Phils.) Inc., Managing Director of PT Duta
Perkasa Chandra Inti Leasing (Indonesia), Vice President of PCI Capital Asia Ltd. (Hong Kong) and Bancom
International, Ltd. (Hong Kong). Mr. Atendido holds a Masters Degree in Business Management from the
Asian Institute of Management.
Andres del Rosario was appointed as Assistant Treasurer in May 4, 2011. In the past 5 years, he has been
connected with Asian Alliance Investment Corporation. He was formerly employed with Worldsec
International Securities Philippines Inc. and Citibank N.A. He received his Bachelor of Arts degree from
Ateneo de Manila University.
Carlos C. Syquia was elected Treasurer of the Company in November 2000. Mr. Syquia is Chairman of the
Board of Trustee of the Metropolitan Club, Inc.and Director of ATC Securities Inc. He holds a BS degree in
Commerce from De La Salle University and an MBA degree from the Wharton School of Business, University
of Pennsylvania.
Ana Maria Margarita A. Katigbak was elected Assistant Corporate Secretary in November 2000. In the
past 5 years she has acted and continues to act as assistant corporate secretary in other public companies
such as, Mabuhay Holdings Corporation, Minerales Industrias Corporation, Metropolitan Club, Paxys Inc.,
Energy Development Corporation, Premiere Horizon Alliance Corporation, Solid Group Inc., Vulcan Industrial
and Mining Corporation, Ms. Katigbak is a partner in the Castillo Laman Tan Pantaleon & San Jose Law
Offices.
5. Independent Directors
As of the date of this Information Statement, the Board of Directors has received and approved the
nominations of the following for independent directors of the Company:
1. Joel A. Bañares
Mr. Bañares possessed all the qualifications and none of the disqualifications as independent director
since his election in the year 2011.
2. Rafael Yaptinchay
Mr. Yaptinchay possessed all the qualifications and none of the disqualifications as independent director
since his election in the year 2011.
Both were nominated by Mr. Ramon Recto.
The nominator is not related to the persons he has nominated for independent director.
17
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
Period in Which Directors and Executive Officers Should Serve
The directors and executive officers should serve for a period of one (1) year.
Terms of Office of a Director
The seven (7) directors shall be stockholders and shall be elected annually by the stockholders owning
majority of the outstanding capital stock for a term of one (1) year and shall serve until the election and
qualification of their successors.
Any vacancy in the board of directors other than removal or expiration of term may be filled by a majority vote
of the remaining members thereof at a meeting called for that purpose if they still constitute a quorum, and the
director or directors so chosen shall serve for the unexpired term.
Significant Employees
The Registrant considers the contribution of every employee important to the fulfillment of its goals.
Family Relationships
There are no family relationships either by consanguinity or affinity among the above named directors and
executive officers.
Certain Relationships and Related Transactions
The Company retains the law firm of Castillo Laman Tan Pantaleon & San Jose Law Offices (CLTPS) where
the corporate secretary, Atty. Roberto V. San Jose, is a senior partner. During the last fiscal year, the
Company paid CLTPS legal fees which the Company believes to be reasonable.
The Company has no parent company. However, as of June 30, 2011, Mr. Mario G. Vijungco, who is currently
the Chairman, holds 679,999,999 shares or 39.976%, of the Company’s outstanding capital stock.
Resignation or Refusal to Stand for Re-election by Members of the Board of Directors
The board of directors accepted the resignation of Mr. Cristino Panlilio when he was appointed as
Undersecretary of the Dept. of Trade and Industry / Managing Head of the Board of Investments as disclosed
in the Company’s 17L Report in August 2011.
Involvement in Certain Legal Proceedings
To the knowledge and/or information of Marcventures Holdings Inc., none of its nominees for election as
directors, its present members of the Board of Directors or its executive officers, is presently or during the last
five (5) years been involved in any material legal proceeding in any court or government agency on the
Philippines or elsewhere which would put to question their ability and integrity to serve Marcventures Holdings
Inc. and its stockholders.
The Company is not aware of: (a) any bankruptcy petition filed by or against any business of which a director
or executive officer or person nominated to be become a director or executive officer was a general partner or
executive officer either at the time of the bankruptcy or within two years prior to that time; (b) any conviction by
final judgment, including the nature of the offense, in a criminal proceeding, excluding traffic violations and
other minor offenses; (c) being subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities,
commodities or banking activities; and (d) being found by a domestic or foreign court of competent jurisdiction
(in a civil action), the Commission or comparable foreign body, or a domestic or foreign Exchange or other
organized trading market or self regulatory organization, to have violated a securities or commodities law or
regulation and the judgment has not been reversed, suspended, or vacated.
18
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
ITEM 9. EXECUTIVE COMPENSATION
The following table summarizes certain information regarding compensation paid or accrued during the last
three fiscal years and to be paid in the ensuing fiscal year to the Company’s President and each of the
Company’s three other most highly compensated executive officers:
SUMMARY OF COMPENSATION TABLE
SALARY
BONUS
OTHER
COMPENSATION
2012
₱5,490,000
₱150,000
₱390,000
2013
Estimated
2014
Estimated
2012
2013
Estimated
2014
Estimated
₱8,000.000
.
₱8,000.000
.
₱5,490,000
₱8000,000
₱200,000
₱ 500,000
₱200,000
₱ 500,000
₱500,000.
₱500,000
₱560,000
₱700,000
₱8,000,000
.
₱500,000
₱ 700,000
TOP FIVE HIGHLY
COMPENSATED EXECUTIVES:
Mario Vijungco – Chairman
Ramon Recto – President
Alfredo Lozano Jr. – Asst. to the
chairman
Carlos Syquia – Treasurer
Andres del Rosario – Asst.
treasurer
All above named officers as a
group
All officers and directors as
group unnamed
ITEM 10. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security ownership of certain record (“r”) and beneficial (“b”) owners of five percent (5%) or more of the
outstanding capital stock of the Registrant as of December 31, 2012:
Title of
Class
Name , address
of record owner
and relationship
with Issuer
Common
PCD Nominee
Corporation
(Filipino)
Name of
Beneficial
Owner &
Relationship
with Record
Owner
The Company
has no
knowledge of
other persons
with lodged
shares who are
Citizenship
No. of Shares
Held
Percent
Filipino
1,700,045,368
97.95%
19
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
the beneficial
owners of more
than 5% of its
outstanding
capital stock.
PCD authorizes
its trading
participants to
vote the shares
registered in
their name.
Common
Mario G. Vijungco.
Chairman
Common
Common
Common
Common
Dy Chi Hing
Erlinda D. Vijungco
Sonia T. Techico
Arturo L. Tiu
Mr. Vijungco is
currently the
Chairman of
Marcventures
Holdings, Inc.
Filipino
600,000,000
34.57%
218,500,000
45,000,000
130,000,000
98,929,000
12.59%
2.59%
7.49%
5.70%
Security Ownership of Management – Record “r” and Beneficial “b” (direct/indirect) owners as of December
31, 2012:
Title of
Class
Common
Name of Beneficial
Owner
Mario G. Vijungco.
Chairman
Amount and nature of
ownership (Indicate
record (“r”) and/or
beneficial (“b”)
600,000,000– “r” (direct)
Citizenship Percent of
Class
Filipino
34.57%
45,000,000 –“r” (indirect) thru
Erlinda Vijungco)
Common
Ramon A. RectoPresident
1 – “r” (direct)
Filipino
2.59%
0.00%
Common
Joel A. Banares Director
1 – “r” (direct)
Filipino
0.00%
Common
Dy Chi Hing Director
218,500,000 - “r” (direct)–
Filipino
12.59%
Common
Raul Ma F. AnonasDirector
Common
Roberto A. Atendido
Director
130,000,000 – (indirect thru
Sonia T. Techico)
5,405,001– “r” (direct)
1 – “r” (direct)
453,000 “b”(indirect thru AOB
Management Corp.)
7.49%
Filipino
0.31%
Filipino
0.00%
0.03%
1.22%
21,143,605 “b”(indirect thru
20
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
Asian Alliance) Investment
Corp.)
Common
Common
Common
Common
Rafael Yaptinchay
Director
Carlos C. Syquia
Treasurer
Roberto V. San Jose
Corporate Secretary
Ana Katigbak
Asst. Corporate Secretary
TOTAL
568,182 – “r”
0.03%
(direct)
100,100 – “r”
Filipino
0.01%
-0-
Filipino
0.00%
-0-
Filipino
0.00%
(direct)
999,573,286
21,596,605
”r”
“b”
%
%
Voting trust holders of 5% or more
No person holds more than five per centum (5%) of a class under a voting trust agreement or similar
arrangement.
Public float as of December 31, 2012 is 35.47%
ITEM 11. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than the foregoing, there has been no transaction outside of the ordinary course of business during the
last two years, nor is any transaction presently proposed, to which the Company was or is to be a party in
which any director or executive officer of the Company, or owner of more than 10% of the Company’s voting
securities or any member of the immediate family of any of the foregoing persons had or is to have a direct or
indirect material interest. In the ordinary and regular course of business, the Company had or may have had
transactions with other companies in which some of the foregoing persons may have an interest.
PART IV – CORPORATE GOVERNANCE
The Board of Directors of Marcventures Holdings Inc. at its meeting last August 9, 2002 approved and
adopted the Corporation’s Corporate Governance Manual, a copy of which was submitted to the Securities
and Exchange Commission (SEC) and Philippine Stock Exchange (PSE) on the same date. The Manual
was disseminated to its directors, officers and employees.
To measure the extent of compliance with the Manual, the Corporation conducted self-assessment and
submitted its first Governance Self Rating to SEC and PSE last September 18, 2009 which reported no
significant deviation.
April 14, 2010, the Corporation amended its Manual to comply with the SEC Revised Code of Corporate
Governance.
21
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
PART V - EXHIBITS AND SCHEDULES
ITEM 12. EXHIBITS AND REPORTS ON SEC FORM 17-C
DATE
January 20, 2012
February 14, 2012
February 21, 2012
May 08, 2012
June 28, 2012
July 29, 2012
October 5, 2012; Amended
December 3, 2012
October 10 , 2012
ITEMS REPORTED
SEC Form MCG - 2002
BIR approval change in accounting period from fiscal year (July 1
to June 30) to calendar year.
Clarification of news article “Marcventures Turns Around, Earns
P267M” in the February 21,2012 issue of the Manila Bulletin”
Update on Operations
Glossy annual report to be distributed to the stockholders in
addition to the prescribed Definitive Information starement
Election of Directors and Officers
Assessment of the Performance of Audit Comm SEC
Memorandum Circulat No. 4
SEC approval of the amendment of the By-laws of Marcventures
Holdings, Inc.
22
SEC FORM 17-A
MARCVENTURES HOLDINGS, INC.
23
COVER SHEET
1 2 9 4 2
SEC Registration Number
M A R C V E N T U R E S
H O L D I N G S ,
I N C .
A N D
S U B S I D I A R Y
( F O R M E R L Y :
A J O . N E T
H O L D I N G S ,
I N C .)
(Company’s Full Name)
U N I T
6 F ,
8 1 0 1
P E A R L
P A S I G
6 T H
F L R .
D R I V E ,
P E A R L
P L A Z A
O R T I G A S
C T R .
C I T Y
(Business Address: No. Street City/Town/Province)
ATTY. ANA MARIA A. KATIGBAK
817-6791
(Contact Person)
(Company Telephone Number)
0 6
Month
3 0
A A F S
Day
Month
(Form Type)
(Fiscal Year)
Day
(Annual Meeting)
N/A
(Secondary License Type, If Applicable)
N/A
Dept. Requiring this Doc.
Amended Articles Number/Section
Total Amount of Borrowings
Total No. of Stockholders
Domestic
To be accomplished by SEC Personnel concerned
File Number
LCU
Document ID
Cashier
STAMPS
Remarks: Please use BLACK ink for scanning purposes.
Foreign
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MARCVENTURES HOLDINGS, INC. AND SUBSIDIARY
(Formerly: AJO.net Holdings, Inc.)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31
2012
2011
ASSETS
Current Assets
Cash and cash equivalents (Note 6)
Trade and other receivables - net (Note 7)
Inventory (Note 8)
Other current assets - net (Note 10)
Total Current Assets
Noncurrent Assets
Property, plant and equipment - net (Note 11)
Explored mineral resources - net (Notes 4 and 5)
Other noncurrent assets (Note 13)
Total Noncurrent Assets
P13,127,549
=
13,629,849
14,898,292
35,249,277
76,904,967
=164,141,033
P
22,090,819
234,403,818
23,013,456
443,649,126
1,176,231,407
1,294,766,157
149,210,150
2,620,207,714
=2,697,112,681
P
725,093,051
1,294,766,157
101,233,951
2,121,093,159
=2,564,742,285
P
=263,161,743
P
25,501,911
−
41,588,074
330,251,728
=261,154,059
P
76,808,572
26,320,000
19,034,406
383,317,037
149,800,000
149,800,000
39,422,676
122,563
189,345,239
22,698,842
122,563
172,621,405
1,735,676,782
109,837,311
332,001,621
2,177,515,714
=2,697,112,681
P
1,721,460,874
92,778,223
194,564,746
2,008,803,843
=2,564,742,285
P
LIABILITIES AND EQUITY
Current Liabilities
Trade and other payables (Note 16)
Interest-bearing loans (Note 15)
Notes payable (Note 14)
Related party payable (Note 17)
Total Current Liabilities
Noncurrent Liabilities
Notes payable - net of current portion (Note 14)
Interest-bearing loans - net of current portion
(Note 15)
Related party payables (Note 17)
Total Noncurrent Liabilities
Equity
Capital stock (Note 18)
Additional paid-in capital (Note 18)
Retained earnings
Total Equity
See accompanying Notes to Consolidated Financial Statements.
MARCVENTURES HOLDINGS, INC. AND SUBSIDIARY
(Formerly: AJO.net Holdings, Inc.)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2012
(With comparative figures for the years ended December 31, 2011, June 30, 2011 and 2010)
December 31
2012
REVENUES
Sale of ore
Miscellaneous income
Dividend income
COST AND EXPENSES
Cost of sales (Note 19)
Shipping and loading (Note 20)
Excise and other taxes
Royalties
Social development and management
program
General and administrative (Note 21)
INCOME (LOSS) FROM OPERATIONS
OTHER INCOME (EXPENSE) NET (Note 23)
INCOME (LOSS) BEFORE TAXES
PROVISION FOR INCOME
TAX - DEFERRED (Note 26 )
NET INCOME (LOSS)
June 30
2011
2010
P
=697,491,039
−
−
P
=697,491,039
=842,901,957
P
−
−
=842,901,957
P
=−
P
60,836
−
60,836
=−
P
−
422,000
422,000
377,162,684
81,553,291
17,735,149
6,974,910
394,840,651
104,628,874
18,972,405
8,429,020
−
−
−
−
−
−
−
−
1,381,513
59,936,373
6,108,207
44,539,108
−
46,943,000
−
33,704,096
544,743,920
577,518,265
46,943,000
33,704,096
152,747,119
265,383,692
(46,882,164)
(33,282,096)
(25,162,640)
(9,333,504)
19,006,250
136,577,747
240,221,052
(56,215,668)
(14,275,846)
859,128
118,264
137,436,875
240,339,316
−
−
(16,169,372)
COMPREHENSIVE LOSS
Fair value loss
TOTAL COMPREHENSIVE
INCOME (LOSS)
2011
P
= 137,436,875
510,200
(55,705,468)
−
87,655
(14,188,191)
(633,013)
=240,339,316
P
(P
=55,705,468)
(P
=14,821,204)
Basic earnings (loss) per share (Note 24)
=0.079
P
=
P0.140
(P
=0.033)
(P
=0.049)
Diluted earnings (loss) per share (Note 24)
=0.075
P
=
P0.132
(P
=0.030)
(P
=0.049)
MARCVENTURES HOLDINGS, INC. AND SUBSIDIARY
(Formerly: AJO.net Holdings, Inc.)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED DECEMBER 31, 2012
(With comparative figures for the years ended December 31, 2011, June 30, 2011 and 2010)
Balance at June 30, 2009
Refund of deposits
Balance before capital restructuring
Effect of decrease in par value
Effect of quasi-reorganization
Issuance of new shares
Minority interest
Total comprehensive loss for the year
Balance at June 30, 2010
Decrease in minority interest
Full payment of subscription receivable
Total comprehensive loss for the year
Balance at June 30, 2011
Balance at December 31, 2010
Conversion of private placements
Net loss for the year
Decrease in non-controlling interest
Balance at December 31, 2011
Conversion of private placements
Exercise of underlying warrants
Net income for the year
See accompanying Notes to Consolidated Financial Statements.
Capital Stock
(Note 18)
=509,879,811
P
−
509,879,811
(459,056,968)
−
1,650,000,000
−
−
1,700,822,843
183,486
−
1,701,006,329
1,701,006,330
20,454,544
−
−
1,721,460,874
8,009,090
6,206,818
−
=1,735,676,782
P
Additional
Paid-in
Capital
=273,037
P
−
273,037
459,056,968
(441,097,236)
50,000,000
−
−
68,232,769
−
−
68,232,769
68,232,769
24,545,454
−
−
92,778,223
−
17,059,088
=109,837,311
P
Deficit
=−
P
−
−
−
−
−
50,000,000
−
50,000,000
(50,000,000)
−
−
−
(45,774,570)
−
240,339,316
−
194,564,746
−
−
137,436,875
=332,001,621
P
Minority
Interests
=7,500,000
P
(7,500,000)
−
−
−
−
−
−
−
−
−
−
−
49,573,953
(49,573,953)
−
−
−
−
=−
P
Total
(P
=444,439,223)
−
(444,439,223)
−
441,097,236
−
−
(14,821,204)
(18,163,191)
−
−
(55,705,468)
(73,868,659)
1,773,038,482
44,999,998
240,339,316
(49,573,953)
2,008,803,843
8,009,090
23,265,906
137,436,875
=2,177,515,714
P
-7-
MARCVENTURES HOLDINGS, INC. AND SUBSIDIARY
(Formerly: AJO.net Holdings, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2012
(With comparative figures for the years ended December 31, 2011, June 30, 2011 and 2010)
December 31
2012
June 30
2011
2010
CASH FLOWS FROM OPERATING ACTIVITIES
P
= 136,577,747
=240,221,052
P
25,833,206
17,066,333
−
−
−
9,791,793
Depreciation (Note 21)
6,549,845
3,606,336
2,490,544
113,741
Provision for retirement benefits (Note 21)
1,768,238
602,978
1,909,432
−
Income (loss) before income tax
(P
=56,215,668)
(P
=14,275,846)
Adjustments for:
Interest expense (Note 23)
Impairment loss
50,000
−
Provision for mine site rehabilitation
(Note 23)
Interest income (Note 23)
1,628,000
(325,502)
−
(278,941)
−
(238,821)
−
(128,301)
Fair value loss
−
−
Gain on sale of property, plant and equipment
(Note 23)
Gain on sale of available for sale securities
−
−
−
9,527,081
(32,857)
9,527,081
(2,961,522)
(16,258,611)
172,031,534
270,744,839
(32,768,496)
(34,093,552)
3,232,931
Operating income (loss) before working capital
−
(633,013)
changes
Working capital changes:
Decrease (increase) in:
Trade and other receivables (Note 7)
Inventory (Note 8)
Other current assets (Note 10)
Increase (decrease) in trade and other
payables (Note 16)
Net cash provided by (used in) operations
Interest received
Interest paid
Income tax paid
8,460,970
(11,513,202)
(2,902,127)
5,247,021
(131,516,466)
(80,833,656)
(4,727,175)
(37,520,262)
(12,235,821)
(1,388,554)
172,115,150
325,502
(25,833,206)
245,377,200
368,365,196
278,941
(23,349,718)
147,229,885
−
(4,940,265)
14,730,218
(6,794,656)
362,805
(21,070,668)
128,301
(913,215)
(50,000)
−
−
(79,181)
(299,072)
146,607,446
345,294,419
(7,548,231)
(21,291,439)
Available for sale securities
−
−
−
17,655,946
Property, plant and equipment
−
−
1,270,000
3,045,816
(1,454,764)
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Proceed from sale of available for sale of:
Decrease (increase) in :
Other noncurrent assets (Note 13)
Available for sale securities
Deferred mine exploration cost
Investment and advances in subsidiary
Additions to property, plant and
equipment (Note 11)
Disposal of investment
Effect of acquisition of subsidiary
(47,117,072)
−
−
−
(94,234,684)
(9,524,956)
−
−
(3,636,239)
−
−
−
(43,829,103)
11,586,415
(243,429,696)
−
−
(320,821,699)
−
−
(237,985,625)
−
−
(23,739,741)
(3,048,316)
(4,798,140)
Net cash used in investing activities
(290,546,768)
(424,581,339)
(240,351,864)
(44,581,887)
(forwarded)
-1(continued)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (payments of):
Interest bearing loans (Note 15)
Notes payable (Note 14)
Related party transactions
Issuance of subscription receivable
Increase (decrease) in advances from Philtown
Collection of subscription receivable
Refund of deposit for future subscription
Net cash provided by (used in) financing activities
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END
OF YEAR (Note 6)
(34,582,827)
4,954,996
22,553,669
(7,074,162)
197,620,875
544,054
249,800,000
5,584,400
−
−
183,486
−
256,111,940
(151,013,484)
118,333,954
8,211,845
11,707,775
164,141,033
45,807,079
40,833,733
29,125,958
P
=13,127,549
=164,141,033
P
=49,045,578
P
=40,833,733
P
−
−
See accompanying Notes to Consolidated Financial Statements.
75,631,056
121,119,998
18,369,821
(17,500,000)
−
(204,420,687)
−
(161,498,212)
450,000,000
1,000,000
−
(7,500,000)
77,581,101
MARCVENTURES HOLDINGS, INC. AND SUBSIDIARY
(Formerly: AJO.net Holdings, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
Marcventures Holdings, Inc. (Formerly: AJO.net Holdings, Inc.), the Parent Company, was
incorporated and registered with the Securities and Exchange Commission (SEC) on August 7, 1957,
with a primary purpose to acquire by purchase, exchange, assignment, gift or otherwise, and to hold,
own and use for investment or otherwise, and to sell, assign, transfer, exchange, lease, let, develop,
mortgage, pledge, traffic, deal in, and with, and otherwise operate, manage, enjoy and dispose of, any
and all properties of every kind and description and wherever situated, including land as and to the
extent permitted by law, including but not limited to, buildings, tenements, warehouses, factories,
edifices and structures and other improvements and bonds, debentures, promissory notes, shares of
stock, or other securities or obligations, created, negotiated or issued by any corporation, association
or other entity, foreign or domestic and while the owner, holder or possessors thereof, to exercise all
rights, powers and privileges of ownership or any other interest therein, including the right to receive,
collect and dispose of, any and all rentals, dividends, interest and income derived therefrom, and the
right to vote on any proprietary or other interest, on any shares of the capital stock, and upon any
bonds, debentures or other securities having voting power, so owned or held; and provided it shall not
engage in the business of an open-end or close-end investment company as defined in the Investment
Company Act (Republic Act 2629), or act as a securities broker or dealer.
Marcventures Mining & Development Corporation (MMDC), a wholly-owned Subsidiary of the
Parent Company and incorporated in the Philippines, is engaged primarily to carry on the business of
mining, smelting, extracting, smelting mineral ores such as, but not limited to nickel, chromites,
copper, gold, manganese and other similar ores and/natural metallic or non-metallic resource from
the earth, to operate, manage and/or engage in the business of smelting, and/or operate smelting
plant, to refine and/or convert metals, ore, and other precious metals into finished products within the
commerce of man.
On March 30, 2010, the SEC approved the Parent Company’s change in name from AJO.net
Holdings, Inc. to Marcventures Holdings, Inc. and further approved the Parent Company’s change in
primary purpose to include land ownership.
On July 19, 2010, the Subsidiary was registered with the Board of Investments (BOI) in accordance
with the provisions of the Omnibus Investments Code of 1987, as amended, as a New Producer of
Nickel Laterite Ore. As a BOI registered entity, the Subsidiary is entitled to an Income Tax Holiday
(ITH) for four (4) years from July 2010 or actual start of commercial operations, whichever is earlier
but in no case earlier than the date of registration.
Mining Claims and Properties
MMDC has been granted by the Department of Environmental and Natural Resources (DENR) of
the Philippine National Government a Mineral Production Sharing Agreement (MPSA) No. 016-93XIII covering an area of approximately 4,799 hectares located in Cantilan Surigao Del Sur. As the
holder of the said MPSA, MMDC has the exclusive right to conduct and develop mining operations
within the mineral property over a period of 25 years from July 1, 1993. MMDC has identified
Nickel Ore as the primary mineral that will be extracted and sold to third parties due to the
abundance and favorable characteristics of nickel within the mineral property.
-2The MPSA was originally granted to Ventura Timber Corporation on July 1, 1993. In January 1995,
a deed of assignment (Deed) was executed, wherein Ventura assigned to MMDC all its rights, title
and interest in and to MPSA No. 016-93-XIII. The Deed was duly registered with the Mines and
Geosciences Bureau (MGB) Regional Office (RO) No. XIII on February 9, 1995, and was
subsequently approved on January 15, 2008, making the Subsidiary the official contractor of the
mineral property.
On October 23, 2009 the Partial Declaration of Mining Feasibility of the Subsidiary in connection
with the MPSA No. 016-93-XIII was approved by the Director of MGB and the Subsidiary is
henceforth authorized to proceed to the Development and Operating Periods of MPSA No. 016-93XIII, including the extraction and commercial disposition of nickel ore and associated minerals within
the 300-hectare portion of the contract area subject to certain conditions.
The Parent Company’s registered office is located at 16th floor Citybank Tower, 8741 Paseo
de Roxas, Makati City.
On March 2, 2011, the SEC approved the Parent Company’s application for the change of financial
year from fiscal year June 30 to calendar year December 31.
The consolidated financial statements as at December 31, 2012 and 2011 were approved and
authorized for issue by the Board of Directors on April 11, 2013.
2. Summary of Significant Accounting Policies
The significant accounting policies that have been used in the preparation of the consolidated
financial statements are summarized below. These policies have been consistently applied to all years
presented, unless otherwise stated.
Basis of Preparation of Consolidated Financial Statements
The consolidated financial statements of the Group have been prepared in accordance with Philippine
Financial Reporting Standards (PFRS). PFRS are adopted by the Financial Reporting Standards
Council (FRSC) from the pronouncements issued by the International Accounting Standards Board
(IASB).
The consolidated financial statements have been prepared on the historical cost basis, except for the
revaluation of certain financial assets and explored mineral resources that have been measured at a
certain valuation method. The measurement bases are more fully described in the accounting policies
that follow.
Presentation of Financial Statements
The consolidated financial statements are presented in accordance with PAS 1 (Revised 2007),
Presentation of Financial Statements. The Group presents all items of income and expenses in a
single statement of comprehensive income. Two comparative periods are presented for the statements
of financial position when the Group applies an accounting policy retrospectively, make a
retrospective restatement of items in its financial statements, or reclassifies items in the financial
statements.
-3Functional and Presentation Currency
These consolidated financial statements are presented in Philippine pesos, the Group’s functional
presentation currency, and all values represent absolute amounts except when otherwise indicated.
New Accounting Policies Adopted
The Group adopted the following new revisions and amendments to PFRS that are relevant to the
Group and either effective or early adopted for financial statements for the annual period beginning
on or before December 31, 2012:
PAS 24 (Revised 2009)
PAS 27 (Revised 2011)
PFRS 10 (Revised 2011)
PFRS 12
PFRS 13 (Revised 2011)
Various Standards
Related Party Disclosures
Separate Financial Statements
Consolidated Financial Statements
Disclosure of Interest in other Entities
Fair Value Measurement
2011 Annual Improvements to PFRS
Discussed below are the effects on the financial statements of the new and amended standards.
PAS 24 (Revised 2009), “Related Party Disclosures”, amends the requirements of the previous
version of IAS 24 to (a) provide a partial exemption from related party disclosure requirements for
government-related entities, (b) clarify the definition of a related party and (c) include an explicit
requirement to disclose commitments involving related parties. The revision of this standard does not
have any significant effect in the 2012 and 2011 consolidated financial statements.
PAS 27 (Revised 2011), “Separate Financial Statements”, amended version of PAS 27 which now
only deals with the requirements for separate financial statements, which have been carried over
largely unamended from PAS 27 Consolidated and Separate Financial Statements. Requirements for
consolidated financial statements are now contained in PFRS 10 Consolidated Financial Statements.
The standard requires that when an entity prepares separate financial statements, investments in
subsidiaries, associates, and jointly controlled entities are accounted for either at cost, or in
accordance with PFRS 9, Financial Instruments.
The standard also deals with the recognition of dividends, certain group reorganisations and includes
a number of disclosure requirements. The revision of this standard does not have any significant
effect in the 2012 and 2011 consolidated financial statements.
PFRS 10 (Revised 2010), “Consolidated Financial Statements”, requires a parent to present
consolidated financial statements as those of a single economic entity, replacing the requirements
previously contained in PAS 27 Consolidated and Separate Financial Statements and SIC-12
Consolidation - Special Purpose Entities.
The standard identifies the principles of control, determines how to identify whether an investor
controls an investee and therefore must consolidate the investee, and sets out the principles for the
preparation of consolidated financial statements.
-4The standard introduces a single consolidation model for all entities based on control, irrespective of
the nature of the investee (i.e. whether an entity is controlled through voting rights of investors or
through other contractual arrangements as is common in 'special purpose entities'). Under PFRS 10,
control is based on whether an investor has (a) power over the investee, (b) exposure, or rights, to
variable returns from its involvement with the investee, and (c) the ability to use its power over the
investee to affect the amount of the returns. The revision of this standard does not have any
significant effect in the 2012 and 2011 consolidated financial statements.
PFRS 12, “Disclosure of Interests in Other Entities”, requires the extensive disclosure of information
that enables users of financial statements to evaluate the nature of, and risks associated with,
interests in other entities and the effects of those interests on its financial position, financial
performance and cash flows.
In high-level terms, the required disclosures are grouped into the following broad categories:
 Significant judgements and assumptions - such as how control, joint control, significant
influence has been determined;
 Interests in subsidiaries - including details of the structure of the group, risks associated with
structured entities, changes in control, and so on;
 Interests in joint arrangements and associates - the nature, extent and financial effects of
interests in joint arrangements and associates (including names, details and summarised
financial information);
 Interests in unconsolidated structured entities - information to allow an understanding of the
nature and extent of interests in unconsolidated structured entities and to evaluate the nature
of, and changes in, the risks associated with its interests in unconsolidated structured entities.
The Group’s adoption of PFRS 12 do not result in any material adjustment in its financial statements
as the change in accounting policy only affects presentations aspects.
PFRS 13, “Fair Value Measurement”, replaces the guidance on fair value measurement in existing
IFRS accounting literature with a single standard.
The PFRS is the result of joint efforts by the IASB and FASB to develop a converged fair value
framework. The IFRS defines fair value, provides guidance on how to determine fair value and
requires disclosures about fair value measurements. However, PFRS 13 does not change the
requirements regarding which items should be measured or disclosed at fair value.
PFRS 13 applies when another PFRS requires or permits fair value measurements or disclosures
about fair value measurements (and measurements, such as fair value less costs to sell, based on fair
value or disclosures about those measurements). With some exceptions, the standard requires entities
to classify these measurements into a 'fair value hierarchy' based on the nature of the inputs:
 Level 1 - quoted prices in active markets for identical assets or liabilities that the entity can
access at the measurement date
 Level 2 - inputs other than quoted market prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly
 Level 3 - unobservable inputs for the asset or liability
-5Entities are required to make various disclosures depending upon the nature of the fair value
measurement (e.g. whether it is recognised in the financial statements or merely disclosed) and the
level in which it is classified.
Annual improvements
PAS 12
PAS 19 (Revised 2011)
Income Taxes
Employee Benefits
PAS 12, “Income Taxes”, amends IAS 12 Income Taxes to provide a presumption that recovery of
the carrying amount of an asset measured using the fair value model in IAS 40 Investment Property
will, normally, be through sale.
As a result of the amendments, SIC-21 Income Taxes - Recovery of Revalued Non-Depreciable
Assets would no longer apply to investment properties carried at fair value. The amendments also
incorporate into IAS 12 the remaining guidance previously contained in SIC-21, which is accordingly
withdrawn.
PAS 19, “Employee Benefit”, an amended version of IAS 19 Employee Benefits with revised
requirements for pensions and other postretirement benefits, termination benefits and other changes.
The key amendments include:




Requiring the recognition of changes in the net defined benefit liability (asset) including
immediate recognition of defined benefit cost, disaggregation of defined benefit cost into
components, recognition of remeasurements in other comprehensive income, plan
amendments, curtailments and settlements (eliminating the 'corridor approach' permitted by
the existing PAS 19)
Introducing enhanced disclosures about defined benefit plans
Modifying accounting for termination benefits, including distinguishing benefits provided in
exchange for service and benefits provided in exchange for the termination of employment
and affect the recognition and measurement of termination benefits
Clarifying various miscellaneous issues, including the classification of employee benefits,
current estimates of mortality rates, tax and administration costs and risk-sharing and
conditional indexation features
Standards effective in 2012 but not relevant to the Group
The following amendments, interpretations and improvements to published standards are mandatory
for accounting periods beginning on or after January 1, 2013 but not adopted and relevant to Group’s
consolidated financial statements:
PAS 28 (Revised 2011), “Investments in Associates and Joint Ventures” this Standard supersedes
PAS 28 Investments in Associates and prescribes the accounting for investments in associates and
sets out the requirements for the application of the equity method when accounting for investments in
associates and joint ventures.
-6The standard defines 'significant influence' and provides guidance on how the equity method of
accounting is to be applied (including exemptions from applying the equity method in some cases). It
also prescribes how investments in associates and joint ventures should be tested for impairment.
The significant accounting policies and practices of the Group are set forth to facilitate the
understanding of the consolidated financial statements:
Basis of Consolidation
The consolidated financial statements include the financial statements of the Parent Company and its
subsidiary, MMDC. The consolidated financial statements as of December 31, 2012 and
2011 comprise the financial statement with the same reporting period for the Parent Company and
Subsidiary. These statements are prepared using uniform accounting policies for like transactions
and other events in similar circumstances. All significant intercompany accounts, transactions and
balances are eliminated in these consolidated financial statements. The subsidiary is consolidated
from the date on which control is transferred to the Parent Company and ceases to be consolidated
from the date on which control is transferred out of the Parent Company.
The significant accounting policies and practices of the Group are set forth to facilitate the
understanding of the consolidated financial statements:
Cash and Cash Equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid
investments readily convertible to known amounts of cash and which are subject to insignificant risk
of changes in value.
Business Combinations
The consolidated financial statements accounted business combination by applying the purchase
method. This involves recognizing identifiable assets (including previously unrecognized
intangible assets) and liabilities (including contingent liabilities and excluding future restructuring) of
acquired business at fair value, including assets and liabilities not previously recognized in the
Subsidiary or acquiree’s financial statements. Any excess of the cost over the acquirer’s interest in
the net fair value of the identifiable assets, liabilities and contingent liabilities so recognized was
accounted for as “explored mineral resources” in the statement of consolidated financial position, as
this asset meets the definition of an intangible asset that is controlled and provides economic benefits,
separate and arises from its mineral property rights and claims, and its fair value was measured
reasonably.
If the initial accounting for business combination can be determined only provisionally by the end of
the period by which the combination is effected because either the fair values to be assigned to the
acquiree’s identifiable assets , liabilities or contingent liabilities or the cost of combination can be
determined only provisionally, the Parent Company accounts the combination using provisional
values. Adjustments to those provisional values as a result of completing the initial accounting shall
be made within twelve (12) months from the acquisition date. The carrying amount of an identifiable
asset, liability or contingent liability that is recognized as a result of completing the initial accounting
shall be calculated as if its fair value at the acquisition date had been recognized from that date and
explored mineral resources or any gain recognized shall be adjusted from the acquisition date of the
identifiable asset, liability or contingent liability being recognized or adjusted. All acquisition-related
costs on the business combination are expensed.
Explored Mineral Resources
-7The Subsidiary’s financial statement did not recognize in its books the mineral resources from its
mineral property right but was recognized in the business combination with the Parent Company and
conforms to the PFRS 3.
This requires the Parent Company to use recognition and measurement practices that are part of
those accounting policies in PFRS 6, Exploration for and Evaluation of Mineral Resources and PAS
38, Intangible Assets. The measurement and recognition of explored mineral resource is based
on an independent valuation over the mineral property of MMDC as supported by the Mineral
Production Sharing Agreement (MPSA) and the expected value of the mineable ore reserve in the
explored area if the Mineral Property (see Note 5 for the discussion of the valuation of this intangible
asset). MPSA can be transferred for value and the mineable mineral ore reserve identified in the
explored area of the Mineral Property can be extracted, produced and sold.
Measurement after recognition of Explored Mineral Resources
After initial recognition, the explored mineral resources shall be carried at its cost less any
accumulated impairment losses.
Impairment of Explored Mineral Resources
The Parent Company’s financial statements recognized exploration and evaluation assets to perform
an impairment test on those assets when facts and circumstances suggest that the carrying amount of
the assets may exceed their recoverable amounts. It varies the recognition of impairment from that in
PAS 36, but measures the impairment in accordance with this standard once the impairment is
identified.
For purposes of explored mineral resources, when identifying exploration and evaluation assets that
may be impaired, one or more of the following facts and circumstances indicate that the parent
company should test its assets for impairment.




The period for which the entity has the right to explore in the specific areas has expired
during the period or will expire in the near future, and is not expected to be renewed.
Substantive expenditure on further exploration for and evaluation of mineral resources in the
specific area is neither budgeted nor planned.
Exploration for the evaluation of mineral resources in the specific area have not led to the
discovery of commercially viable quantities of mineral resources and the entity has decided
to discontinue such activities in the specific area; and
Sufficient data exist to indicate that, although a development in the specific area is likely to
proceed, the carrying amount of the exploration and evaluation asset is unlikely to be
recovered in full from successful development or by sale. Management believes that there is
significant reason not to recognize impairment in this asset.
Details of impairment testing on explored mineral resources are discussed in Note 5.
Financial Assets
Financial assets, which are recognized when the Group becomes a party to the contractual terms of
the financial instruments, include cash and other financial instruments. Financial assets, other than
hedging instruments, are classified into the following categories: financial assets at fair value through
profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial
-8assets. Financial assets are assigned to the different categories by management on initial recognition,
depending on the purpose for which the investments were acquired. The designation of financial
assets is re-valued at every reporting period at which date a choice of classification or accounting
treatment is available, subject to compliance with specific provisions of applicable accounting
standards.
Regular purchases and sales of financial assets are recognized on their trade date. All financial assets
that are not classified as at fair value through profit or loss are initially recognized at fair value plus
any directly attributable transaction costs. All financial assets carried at fair value through profit or
losses are initially recorded at fair value and transaction costs related to it are recognized in profit or
loss.
A more detailed description of the four categories of financial assets are as follows:
(a) Financial Assets At Fair Value through Profit or Loss
This category include financial assets that are either classified as held for trading or are
designated by the entity to be carried at fair value through profit or loss upon initial recognition.
All derivatives fall into this category, except for those designated and effective as hedging
instruments. Assets in this category are classified as current if they are either held for trading or
are expected to be realized within 12 months from the end of the reporting period.
Financial assets at fair value through profit or loss are measured at fair value, and changes
therein are recognized in profit or loss. Financial assets (except derivatives and financial
instruments originally designated as financial assets at fair value through profit or loss) may be
reclassified out of fair value through profit or loss category if they are no longer held for the
purpose of being sold or repurchased in the near term.
(b) Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They arise when the Group provides money, goods or
services directly to a debtor with no intention of trading the receivables. They are included in
current assets, except for maturities greater than 12 months after the reporting period which are
classified as non-current assets.
Loans and receivables are subsequently measured at amortized cost using the effective interest
method, less impairment loss, if any. Any change in their value is recognized in profit or loss.
Impairment loss is provided when there is objective evidence that the Group will not be able to
collect all amounts due to it in accordance with the original terms of the receivables. The amount
of the impairment loss is determined as the difference between the assets’ carrying amount and
the present value of estimated cash flows.
(c) Held-to-maturity Investments
This category includes non-derivative financial assets with fixed or determinable payments and a
fixed date of maturity that the Group has the positive intention and ability to hold to maturity.
Investments intended to be held for an undefined period are not included in this classification.
Held-to-maturity investments are included in non-current assets under Financial Assets account
-9in the statement of financial position, except those maturing within 12 months from the reporting
period, which are presented as part of current assets.
Subsequent to initial recognition, the investments are measured at amortized cost using the
effective interest method, less impairment losses, if any. Impairment loss, which is the difference
between the carrying value and the present value of estimated cash flows of the investment, is
recognized when there is objective evidence that the investment has been impaired. Any changes
to the carrying amount of the investment, including impairment loss, are recognized in profit or
loss.
(d) Available-for-sale Financial Assets
This category includes non-derivative financial assets that are either designated to this category
or do not qualify for inclusion in any of the other categories of financial assets. They are included
in non-current assets under the Financial Assets account in the statement of financial position
unless management intends to dispose of the investment within 12 months from the reporting
period.
All available-for-sale financial assets are measured at fair value, unless otherwise disclosed, with
changes in value recognized in other comprehensive income, net of any effects arising from
income taxes. When the asset is disposed of or is determined to be impaired the cumulative gain
or loss recognized in other comprehensive income is reclassified from revaluation reserve to
profit or loss and presented as a reclassification adjustment within other comprehensive income.
All income and expenses, including impairment losses, relating to financial assets that are recognized
in profit or loss are presented as part of Finance Costs or Finance Income in the consolidated
statement of comprehensive income.
Non-compounding interest, dividend income and other cash flows resulting from holding financial
assets are recognized in profit or loss when earned, regardless of how the related carrying amount of
financial assets is measured.
Reversal of impairment loss is recognized in other comprehensive income, except for financial assets
that are debt securities which are recognized in profit or loss only if the reversal can be objectively
related to an event occurring after the impairment loss was recognized.
Determination of Fair Value
The fair value for financial instruments that are actively traded in organized financial markets is
determined by reference to quoted market bid prices at the close of business on the consolidated
statement of financial position date. For investments and all others financial instruments where there
is no active market, fair value is determined using generally acceptable valuation technique. Such
techniques include using arm’s length market transactions; reference to the current market value of
another instrument, which are substantially the same; discounted cash flow analysis and other
valuation models.
Fair value measurements are disclosed by source of inputs using three-level hierarchy for each class
of financial instrument. Fair value measurement under Level 1 is based on quoted prices in active
markets for identical financial assets or financial liabilities; Level 2 is based on inputs other than
quoted prices included in Level 1 that are observable for the financial asset or financial liability that
are not based on observable market data.
- 10 -
- 11 ‘Day 1’ Profit
Where the transaction price in a non-active market is different from the fair value of the other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from observable market, the Group recognizes the difference
between the transaction price and fair value (a ‘Day 1’ profit) in profit or loss unless it qualifies for
recognition as some other type of asset. In cases where use is made of data which are not observable,
the difference between the transaction price and model value is only recognized in profit or loss when
the inputs become observable or when the instrument is derecognized. For each transaction, the
Group determines the appropriate method of recognizing the ‘Day 1’ profit amount.
Inventory
Mine products inventory, which consists of nickel ore is stated at the lower of cost, determined using
the weighted average method or net realizable value (NRV). NRV for the mine products is the selling
price in the ordinary courses of the business, less the estimated cost necessary to make the sale.
Mine products inventory are valued using the weighted average method.
Input Tax Recoverable
Input tax recoverable is stated at 12% starting February 2006 of the applicable purchase of cost of
goods and services, net of output tax liabilities and allowance for probable losses. Input tax
recoverable represents the value-added tax (VAT) paid on purchases of goods and services, which
can be recovered as a tax credit against future tax liabilities of the Group upon approval by the
Bureau of Internal revenue (BIR) and/or the Philippine Bureau of Customs.
Prepayments
Prepayments include expenses already paid but not yet incurred. These are measured at cost less
impairment loss, if any.
Deferred Mine Exploration Cost
Expenditures for exploration works on mining properties (i.e., acquisition of rights to explore,
topographical, geological, and geophysical studies, exploratory drilling, trenching, sampling, and
activities in relation to evaluating the technical feasibility and commercial viability of extracting a
mineral resource) are deferred as incurred and included under “Deferred Mine Exploration Cost”
account in the statement of financial position. If and when recoverable reserves are determined to be
present in commercially producible quantities, the deferred exploration expenditures and subsequent
mine development costs are capitalized as part of the mine and mining properties account classified
under property and equipment and are stated at cost less accumulated depletion and impairment loss,
if any.
A valuation allowance is provided for unrecoverable deferred mine exploration costs based on the
Parent Company’s assessment of the future prospects of the exploration project. Full provision is
made for the impairment unless it is probable that such costs are expected to be recouped through
successful exploration and development of the area of interest, or alternatively, by its sale. If the
project does not prove to be viable, all revocable cost associated with the project and the related
impairment provisions are written off. When a project is abandoned, the related deferred mine
exploration costs are written off.
- 12 Property, Plant and Equipment
Property, plant and equipment are carried at cost, excluding the costs of day-to-day servicing, less
accumulated depreciation and impairment losses, if any. Cost of an item of property, plant and
equipment comprises of its purchase price and any cost attributable in bringing the asset to its
intended location and working condition. Cost also includes any asset retirement obligation and
interest on borrowed funds used.
Subsequent costs are capitalized as part of the property, plant and equipment account, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of
the item can be measured reliably. All other repairs and maintenance are charged against current
operations as incurred.
Foreign exchange differentials arising from the acquisition of property, plant and equipment are
charged against current operations and are no longer capitalized.
Depreciation commences once the property, plant and equipment are available for use and is
computed on the straight line basis over the following estimated useful lives of the assets regardless
of utilization. The useful life of each of the property, plant and equipment is estimated based on
period over which the asset is expected to be available for use. Such estimation is based on collective
assessment of industry practice and experience with similar assets.
The carrying value of property, plant and equipment are reviewed for impairment when events or
changes in circumstances indicate that the carrying value may not be recovered.
Depletion of mine site development costs are calculated using the unit-of- production method based
on the estimated recoverable reserves. The estimated recoverable reserves, useful lives, and
depreciation and amortization methods are reviewed periodically to ensure that the estimated
recoverable reserves, residual values period and methods of depletion and depreciation are consistent
with the expected pattern of economic benefits from the item of property and equipment. The assets
residual values is reviewed and adjusted, if appropriate, at each reporting date.
Construction in-progress is included in property, plant and equipment and stated at cost which
includes cost of construction and other direct costs. Construction in-progress is not depreciated until
such time the relevant assets are ready for operational use.
An item of property, plant and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset)
is included in the consolidated statement of comprehensive income in the year the asset is
derecognized.
The asset’s residual values, useful lives and methods are reviewed, and adjusted if appropriate, at
each financial year end.
Mine Site Development Cost
Cost incurred for exploration and development of mining properties are deferred as incurred. These
deferred costs are charged to expense when the results of the exploration are determined to be
negative or not commercially viable. When exploration results are positive or commercially viable,
these deferred costs are capitalized as part of mine development cost account classified under
- 13 property, plant and equipment and are stated at cost less accumulated depletion and impairment loss,
if any.
Depletion of mine site development cost is computed based on ore extraction over the estimated
volume of proved and probable ore reserved as estimated by the Subsidiary’s geologist.
Mine development costs are derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the assets. Any gain or loss arising on the derecognition
of the asset (calculated as the difference between the net disposal proceeds and the carrying amount
of the asset) is included in profit or loss in the year the item is derecognized.
Mine site development cost also includes the estimated costs of rehabilitating the mine site, for which
the Subsidiary is legally and constructively liable. These costs, included as part of mine site
development costs, are amortized using the unit-of-production method based on the estimated
recoverable reserves.
Subsequent to the business combination and acquisition date, the Parent Company recognizes based
on the business combination to MMDC relating to the fair value of property, plant and equipment
determined at the date of acquisition rather than the carrying amount in the books of MMDC prior to
the date of acquisition.
Impairment of Nonfinancial Assets other than Explored Mineral Resources
The Subsidiary’s property, plant and equipment, deferred mine development cost, and other assets
are subject to impairment testing. Individual assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable.
For purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units). As a result, assets are tested for
impairment either individually or at the cash-generating unit level.
Impairment loss is recognized for the amount by which the asset’s or cash-generating unit’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting
market conditions less costs to sell, and value in use, based on an internal evaluation of discounted
cash flow. Impairment loss is charged pro-rata to other assets in the cash-generating unit.
All assets are subsequently reassessed for indications that an impairment loss previously recognized
may no longer exist and the carrying amount of the asset is adjusted to the recoverable amount
resulting in the reversal of the impairment loss.
Rental Deposits
Rental deposits are measured at cost less any impairment loss, if any.
Financial Liabilities
Financial liabilities are initially recognized at fair value. Financial liabilities include interest-bearing
loans and borrowing, trade and other payables and finance lease liabilities, due to related parties and
other non-current liabilities, which are measured at amortized cost using the effective interest rate
method. Short term financial liabilities with no stated interest rate are measured at the original
amount if the effect of discounting is immaterial.
- 14 Financial liabilities are recognized when the Group becomes a party to the contractual terms of the
instrument. All interest-related charges are recognized as an expense in profit or loss under the
caption Finance Costs in the consolidated statement comprehensive of income.
Interest-bearing loans and borrowings are raised for support of long-term funding of operations.
They are recognized at proceeds received, net of direct issue costs.
Trade payables are initially recognized at their fair value and subsequently measured at amortized
cost.
Dividend distributions to shareholders are recognized as financial liabilities upon declaration by the
Parent Company.
Impairment of Financial Assets
The Group assesses at each reporting date whether there is objective evidence that a financial asset or
group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be
impaired if, and only if, there is objective evidence of impairment as a result of one or more events
that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event
(or events) has an impact on the estimated future cash flows of the financial asset or the group of
financial assets that can be reliably estimated. Evidence of impairment may include indications that
the borrower or a group of borrowers is experiencing significant financial difficulty, default or
delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganization and where observable data indicate that there is measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is recognized in the consolidated statements of comprehensive income, to
the extent that the carrying value of the asset does not exceed its amortized cost at the reversal date.
Derecognition of Financial Assets and Financial Liabilities
Financial asset
A financial asset (or, where applicable a part of a financial asset or part of a group of financial
assets) is derecognized where:



the right to receive cash flows from the asset has expired;
the Group retains the right to receive cash flows from the asset, but has assumed as
obligation to pay them in full without material delay to a third party under a “pass-through”
arrangement; or
the Group has transferred its right to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of the asset, or (b) has neither transferred
nor retained the risk and rewards of the asset but has transferred the control of the asset.
Where the Group has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, and has neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the
Group’s continuing involvement in the asset. Continuing involvement that takes the form of a
- 15 guarantee over the transferred asset is measured at the lower of the original carrying amount of the
asset and the maximum amount of consideration that the Group could be required to repay.
Financial liability
A financial liability is derecognized when the obligation under the liability is discharged, cancelled, or
has expired. Where an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the original liability and the recognition of a
new liability, and the difference in the respective carrying amounts is recognized in the consolidated
statement of comprehensive income.
Offsetting Financial Instrument
Financial assets and financial liabilities are set off and the net amount is reported in the consolidated
statements of financial position if, and only if, there is a currently enforceable legal right to offset the
recognized amount and there is an intention to settle on a net basis, or to realize the asset and settle
the liability simultaneously. This is not generally the case with master netting agreements, and the
related assets and liabilities are presented gross in the consolidated statement of financial position.
Capital Stock
Capital stock is determined using the par value of shares that have been issued.
Retained Earnings (deficit)
Retained earnings (deficit) include all current and prior period results as disclosed in the consolidated
statements of comprehensive income.
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured. The following specific recognition criteria must
also be met before revenue is recognized.




Sale of minerals - revenue amount from the sale of minerals such as ores, metals
minerals, hydrocarbons, acids and chemicals is recognized in the consolidated statement
of comprehensive income on the date that minerals are delivered to the customer. Revenue
is the fair value of the consideration received or receivable from gross inflow of economic
benefits during the period arising from the course of the ordinary activities of the entity
and it is shown net of taxes such as value added tax (if applicable), estimated returns,
discounts and volume rebates.
Interest income - interest is recognized on a time proportion basis using effective interest rate
that takes into account the effective yield on the asset.
Dividend income - dividend is recognized when the right to receive the payment is
established.
Miscellaneous income - revenue is recognized when earned.
Cost and Expense
Cost and expense are decreases in economic benefits during the accounting period in the form of
outflows or decreases of assets or incurrence of liabilities that result in decrease in equity, other than
those relating to distributions to equity participants. Operating expenses are recognized in the
consolidated statement of comprehensive income in the period these are incurred.
- 16 Short-term Employee Benefits
The Group recognizes a liability net of amounts already paid and an expense for services rendered by
employees during the accounting period. Short-term benefits given by the Group to its employees
include salaries and wages, social security, health insurance and housing contributions, short-term
compensated absences, bonuses and other non-monetary benefits.
Pension Cost
Pension cost is actuarially determined using the projected unit credit method. This method reflects
services rendered by employees up to the date of valuation and incorporates assumptions concerning
employees’ projected salaries. Actuarial valuations are conducted with sufficient regularity, with
option to accelerate when significant changes to underlying assumptions occur. Pension cost includes
current service cost, interest cost, expected return on any plan assets, actuarial gains and losses, past
service cost and the effect of any curtailment or settlement.
The liability recognized by the Group in respect of the defined benefit pension plan is the present
value of the defined benefit obligation at the reporting date less the fair value of the plan assets,
together with adjustments for unrecognized actuarial gains or losses and past service costs that shall
be recognized in later periods. The defined benefit obligation is calculated by independent actuary
using the projected unit credit method. The present value of the defined benefit obligation is
determined by discounting the estimated future cash outflows using risk-free interest rates of
government bonds that have terms to maturity approximating the terms of the related pension
liabilities.
The past service cost is recognized as an expense on a straight-line basis over the average period
until the benefits become vested. If the benefits are already vested immediately following the
introduction of, or changes to, a pension plan, past service cost is recognized immediately.
Borrowing Costs
Borrowing costs are expensed in the consolidated statement of comprehensive income in the period in
which they are incurred, except to the extent that they are capitalized as being directly attributable to
the acquisition or construction of an asset which necessarily takes a substantial period of time to get
ready for its intended use.
The capitalization of borrowing costs as part of the qualifying asset commences when expenditures
for the asset are being incurred, borrowing costs are being incurred and activities that are necessary
to prepare the asset for its intended use are in progress. Capitalization of borrowing costs is
suspended or ceased when substantially all the activities necessary to prepare the qualifying asset for
its intended use are interrupted or completed.
Foreign Currency Transaction
Items included in the consolidated financial statements are measured using the currency of the
primary economic environment in which the Group operates (‘the functional presentation currency’)
which is the Philippine Peso. Monetary assets and monetary liabilities denominated in foreign
currency are translated at the exchange rate prevailing at the end of the reporting period. Exchange
gains and losses arising from foreign currency transactions are credited or changed to current
operations. Non-monetary items that are measured in terms of historical cost in a foreign currency
are translated using the exchange rates at the dates of initial transactions.
Provisions and Contingencies
- 17 Provisions are recognized when the Group has a present legal or constructive obligation as a result of
a past event, it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the
effect of the time value of money is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessment of the time value of money
and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in
the provision due to the passage of time is recognized as an interest expense.
Contingent liabilities are not recognized in the consolidated financial statements. These are disclosed
unless the possibility of an outflow of resources embodying economic benefits is remote. Contingent
assets are not recognized in the consolidated financial statements but disclosed when an inflow of
economic benefits is probable.
Income Taxes
Current income tax
Current income tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted at the end of the reporting
period.
Deferred income tax
Deferred income tax is provided, using the liability method, on all temporary differences at the end of
the reporting period between the tax base of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred income
tax assets are recognized for all deductible temporary differences, and carryforward benefits of the
excess of minimum corporate income tax (MCIT) over the regular corporate income tax (RCIT) and
net operating loss carryover (NOLCO), to the extent that it is probable that future taxable profit will
be available against which the deductible temporary differences, excess MCIT and NOLCO can be
utilized.
Deferred income tax liabilities are not provided on non-taxable temporary differences associated with
investments in domestic subsidiaries, associates and interest in joint ventures. With respect to
investments in other subsidiaries, associates and interests in joint ventures, deferred income tax
liabilities are recognized except when the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred income tax assets is reviewed at end of each reporting period and
reduced to the extent that it is no longer probable that sufficient future taxable profit will be available
to allow all or part of the deferred income tax assets to be utilized.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to
the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) in
effect at the end of the reporting period.
Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the
arrangement at inception date or whether the fulfilment of the arrangement is dependent on the use of
- 18 a specific asset or assets or the arrangement conveys a right to use the asset. A reassessment is made
after the inception of the lease only if one of the following applies:
a. There is a change in contractual terms, other than a renewal or extension of the arrangement;
b. A renewal option is exercised or extension granted, unless the term of the renewal or
extension was initially included in the lease term;
c. There is a change in the determination of whether fulfilment is dependent on a specified
asset; or
d. There is a substantial change to the asset.
Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for scenarios a, c or d and at the date of
renewal or extension period for scenario b.
Group as a Lessee
Operating lease payments are recognized as an expense in the statement of consolidated
comprehensive income on a straight line basis over the term of the lease.
Related Parties
Parties were considered to be related if one party has the ability, directly or indirectly, to control the
other party or exercise significant influence over the other party making financial and operating
decisions. Parties were also considered to be related if they are subject to common control or common
significant influence. Related parties may be individuals or corporate entities. Transactions between
related parties are based on terms similar to those offered to non-related parties.
Earnings (loss) per Share
Basic earnings (loss) per share is calculated by dividing the net income (loss) for the year attributable
to the common shareholders of the Group by the weighted average number of common shares
outstanding during the year, after considering the retroactive effect of stock dividend declaration, if
any.
Diluted earnings (loss) Per Share
Diluted earnings (loss) per share amounts are calculated by dividing the net income (loss) for the year
attributable to the common stockholders of the Group by the weighted average number of common
shares outstanding during the year plus the weighted average number of common shares that would
be issued on the conversion of all dilutive potential ordinary shares into ordinary shares.
Events after the Reporting Period
Post year-end events that provide additional information about the Group’s position at the end of the
reporting period (adjusting events) are reflected in the consolidated financial statements when
material. Post year- end events that are not adjusting events are disclosed in the notes when material.
3. Significant Accounting Judgments and Estimates
The preparation of the financial statements in accordance with PFRS requires the Group to exercise
judgment, make accounting estimates and use assumptions that affect the reported amounts of assets,
liabilities, income and expenses and disclosure of contingent assets and contingent liabilities. Future
events may occur which will cause the assumptions used in arriving at the accounting estimates to
- 19 change. The effects of any change in accounting estimates are reflected in the consolidated financial
statements as they become reasonably determinable.
Accounting estimates and judgments are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
Judgments
In the process of applying the Group’s accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effects on
amounts recognized in the consolidated financial statements:
Determining Functional Currency
Based on the economic substance of the underlying circumstances relevant to the Group, the
functional currency of the Group has been determined to be the Philippine peso. The Philippine peso
is the currency of the primary economic environment in which the Group operates.
Deferred Tax Assets and Liabilities
The Group reviews its deferred tax assets and liabilities at end of each reporting period and reduces
the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilized. As at December 31, 2012 and
2011, the group’s deferred tax assets recognized in the consolidated financial statements amounted to
=2,026,822 and P
P
=1,073,921, respectively (See Note 26).
Provisions and Contingencies
Judgment is exercised by management to distinguish between provisions and contingencies. Policies
on recognition and disclosure of provision and disclosure of contingencies are discussed in Note 2.
Accounting Estimates and Assumptions
The key assumptions concerning the future and other key sources of estimation uncertainties at the
end of the reporting period, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are as follows:
Impairment of financial assets
The Group reviews its trade and other receivable at each reporting date to assess whether an
allowance for impairment should be recorded in the Group’s consolidated statements of
comprehensive income. In particular, judgment by management is required in the estimation of
amount and timing of future cash flows when determining the level of allowance required.
Such estimates are based on assumptions about a number of factors and actual results may differ,
resulting in future changes to the allowance.
The level of this allowance is evaluated by management on the basis of factors that affect the
collectivity of the accounts. These factors include, but are not limited to age of balances, financial
status of counterparties, payment behavior, legal opinion on recoverability in case of legal disputes
and known market factors. The Group reviews the age and status of legal disputes and known
factors. The Group reviews the age and status of receivables, and identifies accounts that are to be
provided with allowance on a regular basis.
- 20 In addition to specific allowance against individual significant trade and other receivables, the Group
also makes a collective impairment allowance against exposures which, although not specifically
identified as requiring a specific allowance, have a greater risk of default than when originally
granted. This collective allowance is generally based on the age and status of the accounts.
The amount and timing of recorded expenses for any period would differ if the Group made different
judgments or utilized different estimates. An increase in allowance for impairment losses would
increase recorded expenses and decrease in net income. Total carrying value of trade and other
receivables amounted to P
=13,629,849 and P
=22,090,819 as at December 31, 2012 and 2011,
respectively. Allowance for impairment on financial assets recognized in the consolidated financial
statements as at December 31, 2012 and 2011 amounted to P
=8,235,423 (See Note 7).
Impairment of Inventory
The Subsidiary recognizes impairment on inventories whenever net realizable value of inventories
become lower than cost due to damage, physical deterioration, obsolescence, changes in price levels
or other causes. The impairment is reviewed on a monthly basis to reflect the accurate valuation in
the financial records. The carrying value of inventories in the consolidated financial statements
amounted to P
=14,898,292 and P
=234,403,818 as at December 31, 2012 and 2011
(See Note 8).
Estimated Useful Lives of Property, Plant and Equipment
The Group estimates the useful lives of property, plant and equipment based on the period over
which the property, plant and equipment are expected to be available for use. The estimated useful
lives of the property, plant and equipment are reviewed periodically and are updated if expectations
differ from previous estimates due to physical wear and tear, technical or commercial obsolescence
and legal or other limits on the use of the property, plant and equipment. In addition, the estimation
of the useful lives of property, plant and equipment is based on the collective assessment of industry
practice, internal technical evaluation and experience with similar assets. It is possible; however, that
future financial performance could be materially affected by changes in the estimates brought about
by changes in factors mentioned above. The amounts and timing of recorded expenses for any period
would be affected by changes in these factors and circumstances. The carrying value of property,
plant
and
equipment
in
the
consolidated
financial
statements
as
at
December 31, 2012 and 2011 amounted to P
=1,176,231,407 and P
=725,093,051, respectively
(See Note 11).
A reduction in the estimated useful lives of the property, plant and equipment would increase the
recorded expenses and decrease the noncurrent assets.
The estimated useful lives are as follows:
Building
Heavy and Mobile Equipment
Equipment, Furniture and Fixture
5-10 years
5-7 years
3 years
The carrying amounts of property, plant and equipment are analyzed in Note 11. Based on
management assessment as at December 31, 2012 and 2011, there is no change in the estimated
useful lives of property, plant and equipment. Actual results, however, may vary due to change in
estimates brought about by changes in factors mentioned above.
- 21 Recoverability and Estimates of Explored Mineral Resources
Mineral reserves and resources estimates for development projects are, to a large extent, based on the
interpretation of geological dates obtained from drill holes and other sampling techniques and
feasibility studies which derive estimates of costs based on anticipated tonnage and grades of ores to
be mined and processed, the configuration of the ore body, expected recovery rates from the ore,
estimating operating costs, estimated climatic condition and other factors. Proven reserves estimates
are attributed to future development projects only where there is a significant commitment to project
funding and extractions and for which applicable governmental and regulatory approvals have been
secured or are reasonably certain to be secured. All proven reserve estimates are subject to revision,
either upward or downward, based on new information, such as block grading and production
activities or from changes in economic factors including product prices, contract terms or
development plans. The subsidiary’s depletion expense is measured using units of production method.
Estimates of reserves for underdeveloped or partially developed area are subject to greater
uncertainty over their future life than estimates of reserves for areas that are substantially developed
and depleted. As an area goes into production, the amount of proven reserves will be subject to future
revision once additional information becomes available. As those areas are further developed, new
information may lead to revisions. The subsidiary’s provision for minesite development cost
amounted to P
=1,628,000 for the year ended December 31, 2012 (See Note 23).
Estimating Impairment of Non-Financial Assets
The Group assess at each reporting period whether there is an indication that the carrying amount of
all non-financial assets maybe impaired or that previously recognized impairment losses may no
longer exist or may have decreased. If any such indication exists, or when annual impairment testing
for an asset is required, the Group makes an estimate of the asset’s recoverable amount. There was
no impairment loss on non-financial assets recognized during the year, except for the Parent
Company’s input taxes where a valuation allowance was provided amounting to P
=607,636 as at
December 31, 2012 and 2011 (See Note 13).
Realizability of Deferred Tax Assets
Deferred tax assets are established for tax benefits related to deductible temporary differences, carry
forward of unused MCIT and NOLCO. These assets are periodically reviewed for realization.
Periodic reviews covered the nature and amount of deferred income and expense items, expected
timing when assets will be used or liabilities will be required to be reported, reliability of historical
profitability of businesses expected to provide future earning and tax planning strategies which can
be utilized to increase the likelihood that tax assets will be realized. As of December 31, 2012 and
2011, the Group did not recognize the deferred tax effect of NOLCO in the consolidated financial
statements. The tax effect of MCIT of the Parent Company recognized in the consolidated financial
statements amounted to P
=385,619 as at December 31, 2012 and 2011 (See Note 26).
Estimating Contingencies
The Group evaluates legal and administrative proceedings to which it is involved based on analysis of
potential results. Management and its legal counsels do not believe that any current proceedings will
have material adverse effects on its financial positions and results of operation. It is possible,
however, that future results of operation could be materially affected by changes in the estimates or
in the effectiveness of strategies relating to these proceedings.
- 22 4. Explored Mineral Resources
The explored mineral resources reported in the consolidated financial statements of financial position
amounting to P
=1,294,766,157 as at December 31, 2012 and 2011 represent the excess of shares
issued by the Parent Company to acquire 100% ownership in MMDC which meets the definition of
an intangible asset that is controlled and provide economic benefits, separable and arises from
mineral property rights and claims for which fair value was measured reasonably.
Valuation of intangible assets arising on combination
Valuation of explored mineral resources on acquisition of MMDC’s 100% ownership is primarily
attached on the target commencement of MMDC’s mine production activities by the 2 nd quarter of
2010 which will in turn start the cash flow generation of the initial explored area of about 120
hectares which is 2.5% of the area covered by the MPSA. Cost from the exploration permits are
substantially immaterial and charged to operation. In addition, this valuation does not include any
assignment to the Parent Company and/or MMDC of operating agreement an additional mining
tenement that may contain other minerals.
The Parent Company commissioned Multinational Investment Bancorporation (MIB) to prepare a
third party fairness opinion for the acquisition of 100% of MMDC and to issue its opinion regarding
a fair and reasonable value for MMDC. The transaction value of P
=1.3 billion has a 13% discount to
the fair value of P
=1.49 billion as contained in the third party fairness opinion dated February 3, 2010.
In the said report, MIB used the discounted cash flow method based on a 10-year projection period
with the following assumptions: (i) discount rate of 25%; (ii) constant nickel price of US$ 11,000 per
metric over the 10-year projection period which is at a 57% discount to the prevailing nickel price of
US$25,635 per MT as of May 4, 2010; (iii) no terminal value was assumed at the end of the 10year projection period; (iv) total production volume of 11.6 million wet MT based on a mining plan
approved by the Mines and Geosciences Bureau covering 120 hectares.
In the books of the Parent Company, the intangible asset arising from combination is recognized as
“explored mineral resources” as this asset meets the definition of an intangible asset that is controlled
and provides economic benefits, separable and arises from its mineral property right and claims, and
its fair value was measured reasonably.
5. Impairment Testing of Explored Mineral Resources
The Group recognizes explored mineral resources and performs an impairment test on those assets
when facts and circumstances suggest that the carrying amount of the assets may exceed their
recoverable amounts. It varies the recognition of impairment from that in PAS 36, but measures the
impairment in accordance with the standard once the impairment is identified. On top of those
mentioned in PFRS 6, impairment tests are performed with the key indications as discussed below:
 Uncertainty in estimation of mineral resources - technical, geologic and market date on the
Mineral Resources are estimates and there is no assurance that the anticipated tonnages and
grades will be achieved, neither is it ascertained that the indicated recovery rate will be realized.
 Discounted cash flow method - For the purposes of computing net present value using discounted
cash flow method, the valuation of intangible assets involves the extraction of non-replaceable
resource, a terminal value was not assigned to represent cash flows to be earned beyond the
projected period.
- 23 -
Market risk - There are risks arising from the possibility that the value of an investment will decrease
due to movement in market factors. The standard market risk factors relevant to the valuation of the
intangible assets are: (a) commodity risk, or risk commodity prices will change. Current surplus
demand for the commodity has caused nickel prices to reach record levels in the past few months, and
is currently in a reversion/ correction phase. Any sustained decrease in nickel prices may decrease
revenues and earnings, and (b) currency risk, or the risk that foreign exchange rates will change. The
subsidiary’s revenues are dominated in US dollar. Any sustained Peso appreciation may decrease
revenues and earnings.
Management believes that there is a significant reason not to recognize impairment in this asset as at
December 31, 2012 and 2011.
6. Cash and Cash Equivalents
This account consists of:
Cash in bank
Cash on hand
Petty cash
2012
=13,022,668
P
82,881
22,000
=13,127,549
P
2011
=164,084,330
P
34,703
22,000
=164,141,033
P
Cash with banks earns interest at the respective bank deposit rates amounting to P
=325,502 and
=278,941 for the years ended December 31, 2012 and 2011, respectively (See Note 23). Short-term
P
investments are made for varying periods up to three months depending on the immediate cash
requirements of the Group and earn interest at the respective short-term deposit rates.
Foreign exchange gain recognized for the years ended December 31, 2012 and 2011 amounted to
=10,989,235 and P
P
=1,090,997, respectively (See Note 23).
- 24 7. Trade and Other Receivables
This account consists of:
Accounts receivable - trade
Advances to related parties (Note 17)
Accounts receivable - employees
Accounts receivables - others
Less allowance for impairment losses
Cash advance for liquidation
Cash advance - others
2012
P9,254,835
=
7,887,885
3,247,163
80,782
20,470,665
8,235,423
12,235,242
852,563
542,044
=13,629,849
P
2011
=18,582,380
P
6,877,477
3,115,554
7,666
28,583,077
8,235,423
20,347,654
1,231,121
512,044
=22,090,819
P
There were no assets under this category that were used as a collateral or pledge on any loans or
advances as at December 31, 2012 and 2011.
As at December 31, 2012 and 2011, the aging analysis of trade receivables is as follows:
Current
Past due
Less than 30
1 to 30
31 to 60
61 to 90
120+
days current days past due days past due days past due days past due Total
=
P
=
P’000
=
P’000
=
P’000
=
P’000
=
P’000
’000
=−
P
P7,369
=
=−
P
=−
P
P1,886
=
=9,255
P
Current
Past due
Less than 30
1 to 30
31 to 60
61 to 90
120+
days current days past due days past due days past due days past due Total
=
P
=
P’000
=
P’000
=
P’000
=
P’000
=
P’000
’000
=−
P
=18,582
P
=−
P
=−
P
=−
P
=18,582
P
The carrying amount of trade and other receivables, which are expected to be settled within the next
12 months from reporting period, is a reasonable approximation of fair value
(See Note 28).
Movements of allowance for impairment losses as at December 31, 2012 and 2011 are as follows:
2012
Balance at January 1
Provisions for the year
Balance at December 31
2011
Balance at January 1
Provisions for the year
Balance at December 31
Trade
=−
P
−
=−
P
Trade
Others
=8,235,423
P
−
=8,235,423
P
Others
Total
=8,235,423
P
−
=8,235,423
P
Total
=−
P
−
=−
P
=8,235,423
P
−
=8,235,423
P
=8,235,423
P
−
=8,235,423
P
- 25 -
8. Inventory
As at December 31, 2012 and 2011, the Subsidiary’s finished goods inventory consists of nickel ore
stockpile amounting to P
=14,898,292 and P
=234,403,818, respectively. The inventory are carried at
cost.
Movements of inventory are as follows:
Balance at beginning of year
Additions during the period
Inventory available for sale
Cost of sales (Note 19)
Balance at end of year
2012
P234,403,818
=
157,657,158
392,060,976
377,162,684
=14,898,292
P
2011
P96,409,802
=
532,834,667
629,244,469
394,840,651
=234,403,818
P
There were no items under this category that was used as a pledge or security to any loans or
advances.
9. Available-for-Sale Securities
This account consists of:
Metroclub
On March 9, 2004, a “Share Purchase Agreement” was executed between the Parent Company and
the Philippine Townships, Inc. (“Philtown”). The said agreement covered the sale of the Parent
Company’s 488 regular membership shares of Metroclub to Philtown. Subsequently, the Parent
Company agreed to assign the aforementioned 488 membership shares of Metroclub to certain
shareholders in exchange for shares in MMDC under a Memorandum of Agreement dated December
15, 2009.
In June 2011, the Parent Company assigned the said Metro club shares valued at P
=67.5 Million in
exchange for 769,231 shares of MMDC valued at P
=50 Million and the assumption by the assignee of
the Parent Company’s liability to Philtown in the amount of P
=17.5 Million. The transaction resulted
to a net loss of P
=9.525 Million.
- 26 10. Other Current Assets
This account consists of:
2012
=11,902,937
P
24,512,158
385,619
4,933
36,805,647
1,556,370
=35,249,277
P
Advances to suppliers and contractor
Prepaid expenses and others
Deferred tax asset - MCIT (Note 26)
Prepaid tax
Less allowance for impairment losses
2011
=15,709,401
P
7,969,873
385,619
504,933
24,569,826
1,556,370
=23,013,456
P
Movements of allowance for impairment losses as at December 31, 2012 and 2011 are as follows:
2012
=1,556,370
P
−
=1,556,370
P
Balance at January 1
Provisions
Balance at December 31
2011
=1,556,370
P
−
=1,556,370
P
11. Property, Plant and Equipment
This account consists of the following:
Mine Site
Equipment
Heavy and
Development
and Furniture
transportation
Construction-
Total
cost
Land
Building
and Fixture
Equipment
in-progress
2012
=406,313,792
P
=20,473,993
P
=11,613,245
P
=22,231,795
P
=307,224,698
P
=36,751,003
P
= 804,608,526
P
14,405,500
6,223,164
4,381,843
13,177,710
192,099,140
13,142,344
243,429,701
reclassification
322,381,605
−
−
−
−
−
322,381,605
End of year
743,100,897
26,697,157
15,995,088
35,409,505
=499,323,838
P
49,893,347
1,370,419,832
23,086,925
−
1,101,822
7,359,398
47,967,330
−
79,515,475
20,506,399
−
1,424,159
8,037,720
84,704,671
−
114,672,949
43,593,324
−
2,525,981
15,397,118
132,672,001
−
194,188,424
=699,507,573
P
=26,697,157
P
=13,469,107
P
=20,013,387
P
=366,651,837
P
=49,893,347
P
= 1,172,607,704
P
Cost
Beginning of year
Acquisition
Accumulated depletion and
depreciation
Beginning of year
Depletion and
Depreciation
End of year
Net book value
- 27 -
Mine Site
Development
cost
Land
Equipment and
Heavy and
Building and
Furniture and
transportation
Construction-
December 31,
Total
improvements
Fixture
Equipment
in-progress
2011
Cost
Beginning of year
=407,409,972
P
=15,078,405
P
=1,689,493
P
=11,595,985
P
=228,520,276
P
=21,520,658
P
=685,814,789
P
−
4,299,408
7,018,752
10,635,810
78,704,422
15,230,345
115,888,737
1,096,180
2,904,999
−
−
−
2,904,999
406,313,792
20,473,993
11,613,245
22,231,795
307,224,698
36,751,003
804,608,526
1,656,771
−
427,337
4,830,794
22,748,524
−
29,663,426
21,430,154
−
674,485
2,528,604
25,218,806
−
49,852,049
Acquisition
Reclassification
End of year
(1,096,180)
Accumulated depletion
and Depreciation
Beginning of year
Depletion and
depreciation
End of year
Net book value
23,086,925
−
1,101,822
7,359,398
47,967,330
−
79,515,475
=383,226,867
P
=20,473,993
P
=10,511,424
P
=14,872,397
P
=259,257,368
P
=36,751,003
P
=725,093,051
P
There were no assets under property, plant and equipment that were used as securities to any loan
except for heavy equipments that were mortgaged with loan from UCPB obtained in 2012 and
transportation equipments that were obtained through United Coconut Planters Bank (UCPB) in
2010 (See Note 15). The carrying value of the mortgaged heavy and transportation equipment
amounted to P
=14,248,088 and P
=4,855,206 as at December 31, 2012 and 2011, respectively.
Depletion and depreciation expense amounting to P
=114,672,949 and P
=49,852,049 for 2012 and
2011, respectively were distributed as follows:
Operating expenses
Inventory
2012
=6,549,845
P
108,123,104
=114,672,949
P
2011
=3,606,336
P
46,245,713
=49,852,049
P
12. Deferred Mine Exploration Cost
Deferred mine exploration costs relate to mining projects that are currently on-going. The recovery of
these costs depends upon the success of exploration activities and future development of the
corresponding mining properties producible in commercial quantities. Allowances will be provided
for those deferred costs that are specifically identified to be unrecoverable.
Deferred mine exploration cost includes capitalized borrowing costs amounting to P
=0.223 million as
at June 30, 2011 and depreciation amounting to P
=2.246 million as at June 30, 2011. The
capitalization rates used to determine the amount of borrowing costs eligible for capitalization ranges
from 6.25% to 7.5% in 2011.
The Subsidiary’s deferred mine exploration cost amounted to P
=407,409,972 as at
December 31, 2010. These were reclassified to property, plant and equipment on the same date
(See Note 11).
- 28 13. Other Noncurrent Assets
This account consists of:
Input value-added tax - net
Mine rehabilitation fund
Deferred tax asset (Note 26)
Rental deposit
Monitoring trust fund
Foreign tax credit
Others
2012
=140,247,386
P
5,204,379
1,641,203
317,250
159,894
16,955
1,623,083
=149,210,150
P
2011
=93,470,187
P
5,000,000
688,302
317,250
150,000
16,955
1,591,257
=101,233,951
P
The Parent Company’s input tax amounting to P
=5,607,244 and P
=5,127,369 as at December 31, 2012
and 2011, respectively, is net of a valuation allowance amounting to P
=607,636.
Mine rehabilitation Fund
Mine rehabilitation fund (MRF) is a fund designated to ensure compliance with the approved
rehabilitation activities and schedules for specific mining project phase, including research programs
as defined in the Environmental Protection and Enhancement Program (EPEP). The RCF shall be
equivalent to 10% of the total amount needed to implement the EPEP or Five Million
(P
=5,000,000) whichever is lower. In the event of withdrawals from the RCF, the Subsidiary shall
annually replenish the RCF so as to maintain the minimum required amount thereof.
Monitoring Trust Fund
Monitoring Trust Fund (MTF) is a fund exclusively used in the monitoring program approved by the
Mine Rehabilitation Fund (MRF) Committee. It shall be in cash and in amount to be determined by
the MRF Committee which shall not be less than P
=150,000. Replenishment of the amount shall be
done monthly to correspond to the expenses incurred by the monitoring team for the month.
Others
Others primarily pertain to diesel fuel deposits of the subsidiary and rental, utility and office
renovation deposits of the Parent Company.
- 29 14. Notes Payable
This account consists of:
United Coconut Planters Life Insurance (UCPLI)
Wealth Securities
Asian Alliance Investment Corp. (AAIC)
Other private placements
Less current portion
2012
=100,000,000
P
30,000,000
19,800,000
−
149,800,000
−
=149,800,000
P
2011
=100,000,000
P
30,000,000
19,800,000
26,320,000
176,120,000
26,320,000
=149,800,000
P
All of the Parent Company’s unsecured notes as at December 31, 2012 and 2011 amounting to
=149.8 and P
P
=176.2, respectively have annual interest rates ranging from 10% to 12% and with
maturities of 2 years from the date of drawdown, payable in full upon maturity.
All of the above notes have the option to convert all or a portion of the principal amount of the loan
into fully paid shares of stock priced at P
=2.20 per share of MHI at any time prior to the maturity of
the loan. Upon converting all or portion of the loan, the lender shall be entitled to a warrant to
subscribe to one (1) Parent Company share, for every four (4) converted shares at a price of P
=2.20
per share. The warrants are subject to a two (2) year exercise period.
As of June 30, 2011, the Parent Company has applied the conversion of the private placements
amounting to P
=100 million into 45,454,545 shares of the Parent Company with the SEC and is
waiting for its approval.
In August 2011, the SEC approved the conversion of 20,454,545 shares of the Parent Company
pertaining to private placements amounting to P
=45,000,000.
In January 2012, the SEC approved the conversion to 8,009,090 shares of the Company pertaining to
convertible loan private placement amounting to P
=18,820,000 and conversion to 6,206,817 shares of
the Company pertaining to exercise of stock warrants.
Interest expense charged to operations amounted to P
=16,341,822 and P
=17,066,333 for the year ended
December 31, 2012 and 2011, respectively.
- 30 15. Interest-bearing Loans
The Company’s interest-bearing loans are as follows:
United Coconut Planters Bank (UCPB)
Orix Metro
Philippine Veterans Bank (PVB)
Asian Alliance Investment Corporation (AAIC)
Less: current portion
2012
P38,109,089
=
26,815,498
−
−
64,924,587
25,501,911
=39,422,676
P
2011
=2,412,453
P
−
75,000,000
22,094,961
99,507,414
76,808,572
=22,698,842
P
On December 2012 the Subsidiary obtained a loan from UCPB Leasing and finance Corporation
amounting to 17.8M intended for working capital requirement with an annual interest of 11.81%
maturing on November 2014. This loan is secured with the Company’s heavy equipment with the net
book value of P
=25,441,418 as of December 31, 2012.
The Subsidiary’s loan from UCPB amounting to P
=2,432,047 was intended for the acquisition of
transportation equipments in June 2010 payable in two (2) years starting June 2010 which was fully
paid on June 1, 2012 (Note 8).
The Subsidiary’s loan from Orix Metro amounting to P
=26,815,498 was intended for the acquisition
of transportation equipment with an interest of 2% maturing on October 2013.
The Subsidiary’s unsecured loan from PVB as at December 31, 2011 amounted to
=75,000,000 with annual interest of 4.9579% and with maturity date of March 1, 2012.
P
This was intended for working capital requirements. This loan was fully paid on
February 13, 2012.
The Subsidiary’s unsecured loans from AAIC as at December 31, 2011 intended for working capital
requirements amounted to P
=22,094,961 with annual average interest rate of 5% above the 360-day Tbill rate. As at December 31, 2012 and 2011 no interest was charged to the Company. The loan from
AAIC is unsecured and has no fixed payment terms. This loan was fully paid on July 26, 2012.
Interest expense charged to operations amounted to P
=9,491,384 and P
=6,283,385 for the year ended
December 31, 2012 and 2011, respectively.
- 31 16. Trade and Other Payables
This account consists of:
Trade payables
Deposits payable
Accrued retirement (Note 25)
SSS/PHIC/HDMF payable
Accrued expenses and other payables
2012
P54,964,153
=
193,482,201
3,979,159
780,493
9,955,737
=263,161,743
P
2011
=143,340,648
P
101,515,855
2,210,921
683,573
13,403,062
=261,154,059
P
Trade payables include payables to contractors and are noninterest-bearing and have different credit
terms. Other payables include withholding taxes and other accruals pertaining to recurring expenses.
Deposits payable pertain to advance payment made by various customers for the purchase and
shipment of the Subsidiary’s nickel products.
As at December 31, 2012 and 2011, the aging analysis of trade payables is as follows:
Current
Past due
Less than 30
1 to 30
31 to 60
61 to 90
120+
days current days past due days past due days past due days past due
=
P’000
=
P’000
=
P’000
=
P’000
=
P’000
=−
P
P19,291
=
P15,853
=
P14,229
=
P5,591
=
Total
=
P’000
=54,964
P
Current
Past due
Less than 30
1 to 30
31 to 60
61 to 90
120+
days current days past due days past due days past due days past due
=
P’000
=
P’000
=
P’000
=
P’000
=
P’000
=−
P
=143,295
P
=39
P
=7
P
=−
P
Total
=
P’000
=143,341
P
The carrying amount of accounts payable and other payables, which are expected to be settled within
the next 12 months from reporting period, is a reasonable approximation of fair value
(see Note
28).
17. Related Party Transactions
This represents non-interest bearing advances to and from the stockholders and its related parties for
working capital requirements. Such advances are payable on demand with no guarantees attached
and with no fixed payment terms.
- 32 Significant transactions with related parties include the following:
Year Classification
Marcventures Mineral
Holdings Inc.
(MMHI)
2012
Advances to
related
parties
2011
Carac - an Develompent
Corp.
(Carac)
2012
Advances to
related
parties
2011
Marcventures
Resources
Holdings Inc.
(MRHI)
2012
Marcventures Minerals
Holdings Inc.
(MMHI)
2012
Related
party
payables
2011
Related
party
payables
2011
Mario Vijungco
2012
2011
Related
party
payables
Terms and
condition
Unsecured
,
noninterest
bearing
and with
no fixed
repayment
term.
Unsecured
,
noninterest
bearing
and with
no fixed
repayment
term.
Unsecured
,
noninterest
bearing
and with
no fixed
repayment
term.
Unsecured
,
noninterest
bearing
and with
no fixed
repayment
term.
Unsecured
,
noninterest
bearing
and with
no fixed
repayment
term.
Bad debts
for the year
Amount of
transaction
Outstanding
Balance
=−
P
=−
P
=6,596,294
P
6,596,294
−
6,596,294
−
1,010,40
8
1,291,591
−
281,183
254,424
−
−
105,209
−
−
105,209
−
−
17,354
−
−
17,354
−
25,678,62
2
41,558,074
−
19,034,452
62,965
Advances to MMHI and Carac pertain to ventures entered into by the Subsidiary and has been
discontinued. These advances are deemed to be worthless and the Subsidiary has already provided an
allowance for impairment losses in full (See Note 7).
Advances to MRHI pertain to ventures entered into by the Subsidiary and has been discontinued.
- 33 Advances from stockholder represent cash advances made to the Group by Mario J. Vijungco, a
majority stockholder of the Parent Company.
Salaries paid to key management personnel amounted to P
=7,386,000 and P
=4,470,000 for the years
ended December 31, 2012 and 2011, respectively.
Intercompany advances eliminated on the consolidated statement of financial position amounted to P
=
402,945,017 and P
=434,445,017 as of December 31, 2012 and 2011, respectively.
18. Equity
Capital Stock
Details of the Parent Company’s capital stock are as follows:
December 31,
2012
Common Stock - P
=1 par value
Authorized:
Balance at beginning of year
Increase in authorized capital stock
Balance at end of year
2,000,000,000
−
2,000,000,000
Number of shares
December 31,
2011
2,000,000,000
−
2,000,000,000
June 30,
2011
June 30,
2010
2,000,000,000
−
2,000,000,000
2,000,000,000
−
2,000,000,000
Number of shares
December 31,
2012
Issued and outstanding:
Balance at beginning of year
Full payment of subscription receivable
Conversion of private placements
Exercise of underlying warrants
Increase in par value from P
=0.01 to P
=1.00
Issuance of new shares
Balance at end of year
1,721,460,874
−
8,009,090
6,206,818
−
−
1,735,676,782
2011
June 30,
2011
2010
1,701,006,329 170,100,632,980
5,100,632,980
−
183,846
−
20,454,545
−
−
−
−
−
− (168,399,626,651)−
−
−
− 165,000,000,000
1,721,460,874
1,701,006,329
170,100,632,980
Movements of additional paid-in capital:
Balance at beginning year
Decrease in par value from P
=0.10 to P
=0.01
Effect of quasi reorganization
Issuance of new shares
Additions
Balance at end of year
December 31,
2011
2012
=68,232,769
P
P
= 92,778,223
−
−
−
−
−
−
24,545,454
17,059,088
=92,778,223
P
P
= 109,837,311
June 30,
2011
2010
=68,232,769
P
=273,037
P
− 459,056,968
− (441,097,236)
50,000,000
−
−
−
=68,232,769 P
P
=68,232,769
On February 10, 2010, the Board of Directors approved the decrease in authorized capital stock from
=2.0 billion to P
P
=200 million by reducing the par value of the common shares from P
=0.10 to P
=0.01.
- 34 Moreover, the Board of Directors approved the increase in authorized capital stock from
million to P
=2.0 billion divided by two hundred (200) billion shares.
=200
P
On March 30, 2010, the SEC approved the Parent Company’s application for corporate restructuring
thereby decreasing the authorized capital stock from P
=2.0 billion to P
=200 million by reducing the par
value of the common shares from P
=0.10 to P
=0.01. On this same day, the SEC subsequently approved
the Parent Company’s application to increase the authorized capital stock from P
=200 million divided
into twenty (20) billion shares to P
=2 billion divided into two hundred (200) billion shares. Out of the
increase in authorized capital stock, P
=450 million, divided into forty-five (45) billion shares has been
subscribed, of which P
=350 million was paid in cash, leaving a subscription balance of P
=100 million.
Moreover, the SEC approved the application of the reduction surplus of P
=459,056,968 (arising from
the reduction in the par value) to eliminate the accumulated deficit.
As discussed in Note 1, on May 19, 2010, a deed of exchange was executed between the Parent
Company and the Investor Group. The transaction involved the assignment of 1,923,077 shares of
MMDC by the Investor Group as payment to the subscription of 125 billion shares of the Parent
Company amounting to P
=1.25 billion.
On June 9, 2010, an additional five (5) billion common shares, with a par value of P
=0.01 per share
were subscribed with a price of P
=0.02 per share amounting to P
=100 million.
As of June 30, 2010, Capital stock as reflected in the consolidated statements of financial position is
net of subscription receivable amounting to P
=183,486 pertaining to 3,091,280 shares.
On September 6, 2010, the SEC approved the Parent Company’s application on the valuation of
shares of stock of MMDC in the amount of P
=1.25 billion as consideration for the additional issuance
of shares worth P
=1.15 billion and unpaid subscription of P
=100 million of the Parent Company.
On September 29, 2010, the subscription receivable amounting to P
=183,486 equivalent to 3,091,280
shares were fully paid by ATC Securities, Inc.
On September 30, 2010, the SEC approved the Parent Company’s application on the increase in par
value of the common shares from P
=0.01 to P
=1, thereby decreasing the authorized shares of stock
from 200 billion to 2 billion shares.
On August 2011, the SEC approved the conversion of 20,454,545 shares of the Parent Company
pertaining to private placements amounting to P
=45,000,000.
In January 2012, the SEC approved the conversion to 8,009,090 shares of the Company pertaining to
convertible loan private placement amounting to P18,820,000 and conversion to 6,206,817 shares of
the Company pertaining to exercise of stock warrants.
Capital stock was held by a total of 2,188 and 2,170 stockholders as of December 31, 2012,
and 2011, respectively.
- 35 Track record of registration:
Number of shares licensed Issue/offer price
28,975,139,248
=0.01
P
289,751,392
0.01
509,754,170
0.01
5,097,541,700
0.10
5,100,632,980
0.10
170,098,798,106
0.01
1,701,006,330
1.00
1,735,676,782
1.00
1997
1998
2010
September 1, 2003
June 30, 2009
June 30, 2010
December 31, 2011
December 31, 2012
19. Cost of Sales
This account consists of:
December 31,
Outside services
Production overhead
Contract fees
Personnel costs
Depletion and depreciation
2012
P
= 115,830,074
44,869,731
99,056,511
94,491,308
22,915,060
P
= 377,162,684
2011
=271,337,320
P
46,659,685
43,114,702
18,766,799
14,962,145
=394,840,651
P
June 30,
2011
=−
P
−
−
−
−
=−
P
2010
=−
P
−
−
−
−
=−
P
Outside services pertain to services offered by the contractors related to the mining activities of the
Subsidiary. These services include, but not limited to hauling, stevedoring, janitorial, maintenance,
security and blasting equipment rental.
20. Shipping and Loading
This account consists of:
December 31,
Outside services
Contract fees
Other services and fees
2012
P
= 47,392,924
28,221,852
5,938,515
P
= 81,553,291
2011
P88,790,180
=
13,791,921
2,046,773
=104,628,874
P
June 30,
2011
=−
P
−
−
=−
P
2010
=−
P
−
−
=−
P
- 36 21. General Administrative
This account consists of:
December 31,
2012
Moisture penalty
Representation
Salaries and wages
Depreciation (Note 11)
Taxes and licenses
Office supplies
Rental (Note 22)
Donation
Retirement expense (Note 25)
Professional fees
Advertising expense
Outside services
Communications, light and water
Bank charges
Membership and contribution
Transportation and travel
Repairs and maintenance
Insurance
Legal
SSS/PHIC/HDMF
13th month and other benefits
Impairment loss
Loss from sale of investment
Miscellaneous
2011
June 30,
20112
2010
P
=10,495,035
10,126,225
9,497,119
6,549,845
4,858,235
2,854,986
2,586,054
2,501,434
1,768,238
1,526,935
1,181,504
932,563
922,597
877,901
665,086
212,841
151,301
7,817
−
−
−
−
−
2,220,657
=−
P
15,378,140
700,141
3,606,336
5,038,223
527,110
1,571,525
−
602,978
2,357,082
292,005
5,553,334
937,795
560,710
1,160,844
49,061
10,597
888
1,808,814
61,380
−
−
−
4,322,145
=−
P
6,366,200
1,108,380
2,490,544
9,003,362
423,105
734,016
−
1,909,432
1,136,861
719,867
8,606,667
938,852
−
614,744
55,854
3,580
−
1,960,000
61,380
8,979
9,791,793
−
1,009,384
=−
P
119,822
1,188,305
113,741
9,842,995
121,240
101,349
−
−
19,548,314
−
−
398,530
−
101,933
158,853
−
−
−
68,854
828,551
−
827,086
284,523
P
=59,936,373
=44,539,108
P
=46,943,000
P
=33,704,096
P
22. Lease Commitments
The Group leases all of the premises occupied by their offices. The lease contracts provide for
annual rentals amounting to P
=2,154,660 as at December 31, 2012 and 2011. The standard lease
periods are from two to five years. The lease contracts contain renewal options, which give the
Group the right to extend the lease on terms mutually agreed upon by both parties.
The Group’s minimum lease payments on non-cancellable lease are as follows:
Less than one year
Between one year to five years
December 31,
2011
2012
=2,154,660
P
P
= 2,154,660
4,584,674
3,614,228
=6,739,334
P
P
= 5,768,888
June 30,
2011
=2,154,660
P
4,584,674
=6,739,334
P
2010
=218,051
P
67,500
=285,551
P
Rental expense charged to operations amounted to P
=2,586,054, P
=1,571,525, P
=734,016 in 2011 and
=101,349 for the years ended December 31, 2012 and 2011, June 30, 2011 and 2010, respectively
P
(See Note 21).
- 37 23. Other Income (Expense)
This account consists of:
December 31,
2012
Foreign exchange gain (loss)
Interest income
Demurrage
Provision for mine site rehabilitation
Interest expense
Gain on sale of property and equipment
Gain (loss) on sale of available securities
Others
June 30,
2011
2011
P
=10,989,235
325,502
(421,602)
(1,628,000)
(25,833,206)
−
−
398,699
=1,090,997
P
278,941
−
−
(17,066,333)
−
(9,527,081)
60,836
(P
=86,415)
238,821
−
−
−
32,857
(9,527,081)
8,314
(P
=16,169,372)
(P
=25,162,640)
(P
=9,333,504)
2010
(P
=292,184)
128,301
−
−
(50,000)
2,961,522
16,258,611
−
=19,006,250
P
24. Basic/Diluted Earnings (Loss) Per Share
The computation of the earnings (loss) per share is as follows:
December 31,
2012
Net income (loss)
Divided by weighted average
number of common shares
June 30,
2011
P
= 137,436,874
=240,339,316
P
1,735,676,782
1,721,460,874
P
= 0.079
=0.140
P
2011
(P
=55,705,468)
1,701,006,329
2010
(P
=14,821,204)
301, 006, 329
(P
=0.033)
(P
=0.049)
The computation of the diluted earnings (loss) per share is as follows
December 31,
2012
Net income (loss)
Divided by weighted average
number of common shares
P
=137,436,874
=240,339,316
P
1,820,790,418
1,826,642,693
P
= 0.075
=0.132
P
December 31,
2012
Weighted average number of
common shares for
basic earnings per share
Effect of exercise of conversion
options and warrants
Weighted average number of
common shares adjusted for
the effect of exercise of
conversion options and warrant
June 30,
2011
2011
(P
=55,705,468)
1,842,938,147
2010
(P
=14,821,204)
301, 006, 329
(P
=0.030)
(P
=0.049)
June 30,
2011
2011
2010
1,735,676,782
1,721,460,874
1,701,006,329
301, 006, 329
85,113,636
105,181,818
141,931,818
−
1,820,790,418
1,826,642,693
1,842,938,147
301, 006, 329
The Parent Company considered the effect of its potentially dilutive convertible promissory notes and
warrants. The assumed exercise of these stock options would have resulted in additional 85,113,636,
- 38 105,181,818 and 141,477,273 common shares as at December 31, 2012 and 2011 and June 30,
2011, respectively (See Notes 14 and 18).
25. Pension Costs
The Group has an unfunded and non-contributory defined benefit retirement plan covering
substantially all of its regular employees. The benefits are based on a certain percentage of final
monthly basic salary for every year of credited service of the employees. Discount rate of 10% was
used to get the present value of the defined benefit obligation and a 5% yearly salary increase was
estimated.
The principal actuarial assumptions used to determine the pension benefits with respect to the
discount rate, salary increases and return on plan assets were based on historical and projected
normal rates.
The Subsidiary’s retirement plan was only recognized in its 2010 financial statements thus resulting
to a prior period adjustment. This was only taken by the Parent Company in its
December 31, 2011 consolidated financial statements.
Total pension cost in the consolidated statements of comprehensive income amounted to
=1,768,238, P
P
=602,978 and P
=1,909,432 for the periods ended December 31, 2012 and 2011 and June
30, 2011, respectively (See Note 21).
Details of the Subsidiary’s retirement plan are as follows:
December 31,
2012
Current service cost
Interest cost on benefit obligation
June 30,
2011
2011
2010
P
=1,547,146
221,092
=442,184
P
160,794
=221,092
P
80,398
=401,986
P
109,633
P
=1,768,238
=602,978
P
=301,490
P
=511,619
P
Changes in the present value of the defined benefit obligation are as follows:
December 31,
2012
June 30,
2011
2011
2010
Opening defined benefit obligation
Interest cost
Current service cost
P
= 2,210,921
221,092
1,547,146
=1,607,942
P
160,794
442,184
P
=1,607,942
80,398
221,090
=1,96,325
P
109,633
401,986
Closing defined benefit obligation
P
= 3,979,159
=2,210,921
P
P
=1,909,432
=1,607,942
P
- 39 26. Income Taxes
a. Provision for income tax consists of:
December 31,
2011
2012
=−
P
P
=−
(118,264)
(859,128)
(P
=118,264)
(P
= 859,128)
Current
Deferred
June 30,
2011
2010
=1,217
P
(P
=79,181)
(511,417)
(8,874)
(P
=510,200)
(P
=87,655)
b. The Group’s deferred income tax assets consist of:
2011
2012
Tax effects of :
Accrued retirement
Provision for minesite
Rehabilitation
Unrealized foreign exchange loss
MCIT
=1,152,803
P
=688,302
P
488,400
−
385,619
=2,026,822
P
−
−
385,619
=1,073,921
P
The Group did not recognize the deferred tax effect on NOLCO as at December 31, 2012, 2011
and 2010 because management does not expect the carry forward tax benefit of such to be
realized prior to expiration.
Details of NOLCO and MCIT of the Parent are as follows:
Year incurred
2010
2011
2011
2012
Available Until
June 30, 2013
June 30, 2014
December 30, 2014
December 30, 2015
NOLCO
Amount
Tax effect
14,483,963
4,345,189
31,030,950
9,309,285
22,937,107
6,881,132
34,240,280
10,272,084
=102,692,300 P
P
=30,807,690
MCIT
384,403
1,216
−
−
=385,619
P
Details of NOLCO and MCIT of Subsidiary are as follows:
Year incurred
2010
Available Until
2013
NOLCO
Amount
Tax effect
11,307,765
3,392,336
MCIT
−
The reconciliation of the income tax expense computed at the statutory tax rate to the actual income
tax expense shown in the consolidated statements of comprehensive income is as follows:
- 40 -
December 31,
2012
Income (loss) tax at statutory rate
Additions to (deductions in) income (loss)
resulting from the tax effect of:
Due to income tax holiday
Nonrecognition of NOLCO
Interest income subject to final tax
and other nontaxable income
Nondeductible interest expense
and other nondeductible expense
2011
P
= 51,451,511
=72,066,316
P
(209,248,122)
−
(252,888,838)
−
(97,299)
(436,007)
157,034,782
(P
= 859,128)
181,140,265
(P
=118,264)
June 30,
2011
(P
=16,864,700)
−
8,633,595
(71,646)
2010
(P
=4,282,754)
−
4,345,189
(165,090)
7,792,551
15,000
(P
=510,200)
(P
=87,655)
27. Risk Management Objectives and Policies
General
The Group has risk management policies that systematically view the risks that could prevent the
Group from achieving its objectives. These policies are intended to manage risks identified in such a
way that opportunities to deliver the Group’s objectives are achieved. The Group’s risk management
takes place in the context of day-to-day operations and normal business processes such as strategic
planning and business planning. Management has identified each risk and is responsible for
coordinating and continuously improving risk strategies, processes and measures in accordance with
the Group’s established business objectives.
Financial Risk Management Objectives and Policies
The Group’s principal financial instruments consist of cash and cash equivalents, trade and other
receivables, notes payable, loans payable and related party payables. The primary purpose of these
financial instruments is to finance the Group’s operations. The Group has other financial instruments
such as receivable, trade and other payables and related party payables, which arise directly from its
operations. The main risks arising from the use of these financial instruments are credit risk, interest
rate risk, liquidity risk, currency risk, and market risk. Management reviews and approves the
policies for managing each of these risks which are summarized below.
Credit Risk
Credit risk represents the loss that the Group would incur if counterparty failed to perform under its
contractual obligations.
The Group’s exposure to credit risk arises from default of counterparty, with a maximum exposure
equal to the carrying amount of its financial assets. The Group assessed its receivable as collectible
and in good standing as at December 31, 2012 and 2011.
- 41 (Amounts in P
=’000)
December 31, 2012
Cash and cash equivalents
Accounts receivable - trade
Accounts receivable - others
Advances to related parties
Accounts receivables-employees
Cash advance for liquidation
Cash advance - others
December 31, 2011
Cash and cash equivalents
Accounts receivable - trade
Accounts receivable - others
Advances to related parties
Accounts receivables- employees
Cash advance for
liquidation
Cash advance - others
On
demand
Less than 3 to 6
3 months months
13,023
−
−
7,888
3,247
−
−
−
7,369
81
−
−
853
542
−
164,084
−
−
6,877
6,877
3,116
−
−
18,582
8
−
−
−
1,231
More
6 to 12 1 to 5 than 5
months years years
Total
−
−
−
−
−
−
1,886
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
13,023
9,255
81
7,888
3,247
853
542
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
− 164,084
− 18,582
8
−
−
6,877
−
6,877
−
3,116
−
1,231
Interest Rate Risk
As at December 31, 2012 and 2011, the Group’s loans are based on fixed rates. Management
believes that cash generated from future operations is sufficient to pay for its obligations under the
loan agreement as they fall due.
The following table sets out the maturity profile and the effective interest rate of the Group’s
financial assets and financial liabilities that are exposed to interest rate risk:
(Amounts in P
=’000)
Effective
interest
rate
December 31, 2012
Cash and cash equivalents Various
Interest-bearing loans
Notes payable
Fixed
10-12%
Related party
payables
−
December 31, 2011
Cash and cash equivalents
Various
Interest-bearing loans
Notes payable
Fixed
10-12%
Related party
payables
−
6 Months
Total
or less
=
P ’000
=
P ’000
6 to 12
months
=
P ’000
1 to 2
years
=
P ’000
2 to 5
years
=
P ’000
More
than 5
years
=
P ’000
13,023
64,925
13,023
−
−
25,502
−
−
−
−
−
39,423
149,800
−
− 149,800
−
−
41,711
−
−
41,711
−
−
164,084
99,507
164,084
−
−
76,809
−
−
−
−
−
22,699
176,120
26,320
− 149,800
−
−
19,157
−
−
−
−
19,157
Interest on financial assets classified as floating rate is repriced at intervals of less than one year.
Interest on financial assets and financial liabilities classified as fixed rate is fixed until the maturity of
- 42 the instrument. The other financial instruments of the Group that are not included in the above tables
are noninterest-bearing or have no fixed or determinable maturity.
Liquidity Risk
The Group manages liquidity risk by maintaining a balance between continuity of funding and
flexibility. Treasury controls and procedures are in place to ensure that sufficient cash is maintained
to cover daily operational and working capital requirements, including debt principal and interest
payments. Management closely monitors the Group’s future and contingent obligations and sets up
required cash reserves and reserve borrowing facilities as necessary in accordance with internal
policies.
The tables below summarize the maturity profile of the Group’s financial liabilities as at
December 31, 2012 and 2011 based on contractual undiscounted payments. Notes and loans payable
consist of principal and estimated future interest payments.
(Amounts in P
=’000)
December 31, 2012
Trade and other payables
Interest-bearing loans
Related party payable
Notes payable
December 31, 2011
Trade and other payables
Interest-bearing loans
Related party payable
Notes payable
On Less than
demand 3 months
3 to 6
months
6 to 12
months
1 to 5
years
More
than 5
years
Total
−
−
−
−
16,297 246,430
−
−
−
−
−
−
−
−
25,502
−
− 41,711
− 149,800
− 248,446
39,423 64,925
− 41,711
− 149,800
−
−
−
−
16,298 228,558
−
−
−
−
− 26,320
−
−
76,808
−
− 19,157
− 149,800
− 244,856
22,699 99,507
− 19,157
− 176,120
Currency Risk
The Group has transactional currency exposures. Such exposure arises from cash and cash
equivalents, accounts receivable and customer deposits in US$. For its foreign currency-denominated
trade receivables, the Parent Company ensures timely follow-up and collection to mitigate the impact
of foreign exchange fluctuations.
To mitigate the effects of foreign currency risk, the Group will seek to accelerate the collection of
foreign currency-denominated receivables and the settlement of foreign currency-denominated
payables, whenever practicable. Also, foreign exchange movements are monitored on a daily basis.
- 43 The Group’s foreign currency-denominated financial assets and liabilities and their Philippine peso
equivalents as at December 31, 2012 and 2011 are as follows:
(Amounts in P
=’000)
Financial Assets
Cash in bank
Accounts receivable
Financial Liability
Customer deposit
December 31, 2012
Foreign
Peso
Account
equivalent
December 31, 2011
Foreign
Peso
Account
equivalent
$5
225
$230
=192
P
9,255
=9,447
P
$2,148
423
$2,571
=94,378
P
18,582
=112,960
P
$4,697
=193,482
P
$2,311
=101,516
P
The exchange rates used for conversion of US$1.00 to peso equivalent were P
=41.192 and P
=43.928
as at December 31, 2012 and 2011, respectively.
Market Risk
Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result
from changes in the price of a financial instrument. The value of a financial instrument may change
as a result of changes in foreign currency exchanges rates, commodity prices, interest rates, equity
prices and other market changes.
28. Categories and Fair Values of Financial Assets and Financial Liabilities
The following methods and assumptions were used to estimate the fair value of each class of
financial instruments for which it is practicable to estimate that value:
The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other
payables, current portion of interest bearing loans and notes payable approximate their carrying
amounts due to relatively short-term nature of these financial instruments.
The fair values of the loans were based on the discounted value of future cash flows using the
applicable rates for similar types of loans.
(Amounts in P
=’000)
Category of Financial
Instruments
Cash and cash equivalents
Trade and other receivables
2012
Carrying Value
P13,125
=
13,630
=26,755
P
2011
Fair
Value Carrying Value
Fair
Value
=164,084
P
22,091
=186,175
P
=164,084
P
22,091
=186,175
P
P13,125
=
13,630
=26,755
P
- 44 Financial liabilities carried at cost
Trade and other payables
Interest-bearing loans
Notes payable
Related party payables
=248,446
P
64,925
149,800
41,711
=504,882
P
=248,446
P
64,925
149,800
41,711
=504,882
P
=244,857 P
P
=244,857
99,507
99,507
176,120
176,120
19,157
19,157
=539,641 =
P
PP
=539,641
During the periods ended December 31, 2012 and 2011, there were no transfers between Level 1 and
Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.
29. Capital Management Objectives, Policies and Procedures
The Group’s capital management objectives are to ensure the Group’s ability to continue as a going
concern and to provide an adequate return to shareholders.
Governance framework
The Group has established a risk management functions with clear terms of reference and with the
responsibility for developing on market credit and liquidity and operational risk. It also supports the
effective implementation of policies.
The policies define the Group’s identification of risk and its interpretation, limit structure to ensure
the appropriate quality and diversification of assets to the corporate goals and specify reporting
requirements.
Capital management framework
The Group’s risk management function has developed and implemented certain minimum stress and
scenario tests for identifying the risks to which the Group is the exposed, quantifying their impact on
the volatility of economic capital. The results of these tests, particularly, the anticipated impact on
the realistic consolidated statement of financial position and revenue account, are reported to the
Group’s risk management function. The risk management function then considers the aggregate
impact of the overall capital requirement reviewed by the stress testing to assess how much capital is
needed to mitigate the risk of insolvency to a selected remote level.
Debt to Equity Ratio
Total liabilities
Shareholders equity
2012
=519,596,967
P
=2,177,515,714
P
24:1
2011
=555,938,443
P
=2,008,803,843
P
28:1
Regulatory framework
The operations of the subsidiary are also subject to the regulatory requirements of SEC, Bureau of
Internal Revenue and DENR. Such regulations not only prescribe approval and monitoring of
activities but also impose certain restrictive functions.
- 45 30. Others
Sales agreement
The subsidiary has sales agreements with two of its buyers, Dunfeng Holdings Inc., and YinYi
Philippine Mining Inc. The agreement with Dunfeng Holdings Inc. was signed last December 2011
and is for the sale of 3 million wet metric tons of nickel ore over a period of 3 years, beginning in
2012 and ending in 2014. The two agreements signed with Yinyi Philippine Mining on December
2012 and January 2013, respectively, are for the sale of 495,000 wet metric tons of nickel ore over
the year of 2013.
Reclassification of accounts
The following accounts in 2011 have been reclassified to conform with the 2012 financial statement
presentation:
Reclassified from
Related party payable
(included in noncurrent liability)
Accrued expenses and other payables
Accrued expenses and other payables
Reclassified to
Related party payable
(reclassified under
current liability)
Accrued retirement
SSS/PHIC/HDMF Payable
Amount
=19,034,452
P
2,210,921
683,573
- 46 MARCVENTURES HOLDINGS, INC.
RETAINED EARNINGS AVALABLE FOR DIVIDEND DECLARATION
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
Retained earnings as of December 31, 2011
Add: Net income actually earned during the period
Net income during the period closed to retained earnings
Net income during the period
Less: Non-actual/unrealized income net of tax
Share in net income of Subsidiary
Net loss actually earned during the period
Add: Dividend received from subsidiary
Total retained earnings, end available for dividend
=194,564,746
P
137,436,875
172,364,167
(34,927,292)
−
(34,927,292)
P159,637,454
=
MARCVENTURES HOLDINGS, INC.
CONGLOMERATE MAP
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
MHI
(Parent Company)
MMDC
(100%)
Marcventures Mining & Development Corporation (MMDC), a wholly-owned Subsidiary of the
Parent Company, and incorporated in the Philippines is engaged primarily to carry on the business of
mining, smelting, extracting, smelting mineral ores such as, but not limited to nickel, chromites,
copper, gold, manganese and other similar ores and/natural metallic or non-metallic resource from
the earth, to operate, manage and/or engage in the business of smelting, and/or operate smelting
plant, to refine and/or convert metals, ore, and other precious metals into finished products within the
commerce of man.
MARCVENTURES HOLDINGS, INC.
LIST OF STANDARDS AND INTERPRETATIONS
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
New Accounting Policies Adopted
PAS 1
PAS 17
PAS 18
PAS 19
PAS 23
PAS 24
PAS 27
PFRS 7
PFRS 10
PFRS 12
PFRS 13
IFRIC 19
(Revised 2007)
(Amendment)
(Amendment)
(Revised 2011)
(Revised 2007)
(Revised 2009)
(Revised 2011)
(Amendment)
(Revised 2011)
(Revised 2011)
Presentation of Financial Statements
Leases
Revenue
Employee Benefits
Borrowing Costs
Related Party Disclosures
Separate Financial Statements
Financial Instruments: Disclosure
Consolidated Financial Statements
Disclosure of Interest in other Entities
Fair Value Measurement
Extinguishing financial liability with equity instruments
New Accounting Policy Not Adopted
PFRS 2
PAS 28
IFRIC 13
IFRIC 16
PFRS 2
PAS 32
Amendment
(Revised 2011)
PAS 39
Amendment
Amendment
Amendment
Group Cash-settled Share-based Payment Transactions
Investments in Associates and Joint Ventures
Customer Loyalty Programmes
Hedges of Net Investments in a Foreign Operation
Group Cash-settled Share based Payment Transactions
Financial Instruments: Presentation - Classification of
Rights Issues
Financial Instruments; Recognition and Measurement –
Eligible Hedge Items
MARCVENTURES HOLDINGS, INC.
MEASURE OF FINANCIAL SOUNDNESS
PURSUANT TO SEC MEMORANDUM CIRCULAR NO. 11
DECEMBER 31, 2012
The Group Liquidity Ratios:
a. Current Ratio
Total Current Assets
Total Current Liabilities
December 31,
2012
=76,904,967
P
=288,663,654
P
0.27:1
December 31,
2011
=443,649,126
P
=364,282,631
P
1.22:1
December 31,
2012
=26,757,398
P
=330,251,728
P
0.08:1
December 31,
2011
=186,231,852
P
=383,317,037
P
0.49:1
December 31,
2012
=519,596,967
P
=2,697,112,681
P
0.19:1
December 31,
2011
= 555,938,442
P
=2,564,742,286
P
0.22:1
December 31,
2012
=519,596,967
P
=2,177,515,714
P
0.24:1
December 31,
2011
=555,938,442
P
=2,008,803,843
P
0.28:1
b. Quick Ratio
Quick asset
Total Current Liabilities
The Group Solvency Ratios:
a. Debt Ratio
Total Liabilities
Total Assets
b. Debt Ratio
Total liabilities
Shareholders Equity
The Group Profitability Ratios:
a. Return on Equity
Net Income
Average Shareholders’ Equity
December 31,
2012
=137,436,875
P
=2,093,159,778
P
0.07:1
December 31,
2011
=240,339,316
P
=1,852,087,141
P
0.13:1
December 31,
2012
=137,436,875
P
=2,630,927,484
P
0.05:1
December 31,
2011
=240,339,316
P
=2,361,009,613
P
0.10:1
December 31,
2012
=697,491,039
P
=1,176,231,407
P
0.59:1
December 31,
2011
=842,901,957
P
=725,093,051
P
1.16:1
b. Return on Assets
Net Income
Ave. Total Assets
c. Fixed asset turnover ratio
Revenue
Property, Plant and Equipment
MARCVENTURES HOLDINGS INC.
Schedule A. Financial Assets.
December 31, 2012
Name of issuing entity and
association of each issue
No. of shares or principal
amount of bonds and notes
Amount shown in the
balance sheet
Valued based on
market quotation at
end reporting period
There are no Financial assets that reach 5% or more of the total current assets.
Income received and
accrued
MARCVENTURES HOLDINGS INC.
Schedule B.
Amounts Receivable from Directors, Officers, Employees, Related Parties, and Principal Stockholders (Other than Related parties)
December 31, 2012
Name and designation of debtor
Balance of
beginning of
period
Additions
Amounts
collected
Amounts
written-off
Current
Noncurrent
Balance at
the end of
the period
Officers
Mario Vijungco (Chairman of the Board)
₱393,300
−
₱393,300
−
₱−
−
₱−
Related Parties
Marcventures Minerals Holdings Inc. (MMHI)
Carac- an Development Corp ( Carac)
6,596,294
281,183
−
1,010,408
−
−
−
−
6,596,294
1,291,591
−
−
6,596,294
1,291,591
₱7,270,777 ₱1,010,408
₱393,300
₱− ₱7,887,885
₱− ₱7,887,885
MARCVENTURES HOLDINGS INC.
Schedule C. Amounts Receivable from Related Parties which are Eliminated during the Consolidation of Financial Statements (New)
December 31, 2011
Name and designation of debtor
Marcventures Mining and
Develompent Corp.
Balance of
beginning of
period
additions
Amounts
collected
Amounts
written-off
current
Noncurrent
Balance at
the end of
the period
₱434,445,021
₱− ₱31,500,004
₱−
₱−
₱402,945,017 ₱402,945,017
₱434,445,021
₱− ₱31,500,004
₱−
₱−
₱402,945,017 ₱402,945,017
MARCVENTURES HOLDINGS INC.
Schedule D. Intangible asset (Other asset)
December 31, 2012
Description
Beg Bal
Explored Mineral Resources
Additions
at cost
Charge to cost
and expenses
Ending balance
Charge to other
accounts
Other charges
additions (deduction)
₱1,294,766,157
₱−
₱−
₱−
₱−
₱1,294,766,157
₱1,294,766,157
₱−
₱−
₱−
₱−
₱1,294,766,157
MARCVENTURES HOLDINGS INC.
Schedule E. Long term debt
December 31, 2012
Title of issue and type of
obligation
Amount
authorized by
indenture
Amount shown under caption “Current
portion of long-term debt” in related balance
sheet
Amount shown under caption “Long-Term
portion of long-term debt” in related
balance sheet
In Thousands
Notes Payable
United Coconut Planters Life
Insurance (UCPLI)
Wealth Securities
−
−
₱100,000
30,000
Asian Alliance Investment Corp.
(AAIC)
−
19,800
Interest bearing loan
Orix Metro
13,991
26,815
United Coconut Planters Bank
11,511
38,109
25,502
₱214,724

MARCVENTURES HOLDINGS INC.
Schedule F. Indebtedness to Related Parties
December 31, 2012
Name of related party
Marcventures Resources Holdings, Inc.
Marcventures Minerals Holdings, Inc.
Beg Bal
Ending balance
₱105,209
₱105,209
17,354
17,354
₱122,563
₱122,563
MARCVENTURES HOLDINGS INC.
Schedule G. Guarantees of Securities of Other Issuers
December 31, 2012
Name of issuing entity of securities
guaranteed by the company for which
this statement is filed
Title of issue of each
class of securities
guaranteed
Total amount guaranteed and
outstanding
-Not Applicable -
Amount owned by person for
which statement is filed
Nature of
guarantee
MARCVENTURES HOLDINGS INC.
Schedule H. Capital Stock
Title of issue
Common Stock
Number of
shares
authorized
2,000,000
Number of shares issued and
outstanding at shown under
related balance sheet caption
₱1,735,676,782
Number of shares
reserved for options,
warrants, conversion and
other rights
−
No. Of shares held
by related parties
Directors officers
and employees
Others
−
1,021,169,891
−
PHILIPPINE FINANCIAL REPORTING STANDARDS AND INTERPRETATIONS
Adopted
Not
Not Applicable
Adopted
Effective as of December 31, 2012
Framework for the Preparation and Presentation of Financial
Statements
Conceptual Framework Phase A: Objectives and qualitative
characteristics
PFRSs Practice Statement Management Commentary
Philippine Financial Reporting Standards
PFRS 1
First-time Adoption of Philippine Financial Reporting
(Revised)
Standards
Amendments to PFRS 1 and PAS 27: Cost of an
x
X
Investment in a Subsidiary, Jointly Controlled Entity or
Associate
Amendments to PFRS 1: Additional Exemptions for First-
X
time Adopters
Amendment to PFRS 1: Limited Exemption from
X
Comparative PFRS 7 Disclosures for First-time Adopters
Amendments to PFRS 1: Severe Hyperinflation and
x
Removal of Fixed Date for First-time Adopters
PFRS 2
Amendments to PFRS 1: Government Loans
x
Share-based Payment
x
Amendments to PFRS 2: Vesting Conditions and
x
Cancellations
Amendments to PFRS 2: Group Cash-settled Share-
x
based Payment Transactions
PFRS 3
Business Combinations
X
(Revised)
1
PFRS 4
Insurance Contracts
x
Amendments to PAS 39 and PFRS 4: Financial
x
Guarantee Contracts
PFRS 5
Non-current Assets Held for Sale and Discontinued
x
Operations
PFRS 6
Exploration for and Evaluation of Mineral Resources
X
PFRS 7
Financial Instruments: Disclosures
X
Amendments to PAS 39 and PFRS 7: Reclassification of
X
Financial Assets
Amendments to PAS 39 and PFRS 7: Reclassification of
X
Financial Assets - Effective Date and Transition
Amendments to PFRS 7: Improving Disclosures about
X
Financial Instruments
Amendments to PFRS 7: Disclosures - Transfers of
x
Financial Assets
Amendments to PFRS 7: Disclosures – Offsetting Financial
x
Assets and Financial Liabilities
Amendments to PFRS 7: Mandatory Effective Date of
x
PFRS 9 and Transition Disclosures
PFRS 8
Operating Segments
PFRS 9*
Financial Instruments
x
Amendments to PFRS 9: Mandatory Effective Date of
x
PFRS 9 and Transition Disclosures
PFRS 10*
Consolidated Financial Statements
PFRS 11*
Joint Arrangements
x
x
2
PFRS 12*
Disclosure of Interests in Other Entities
PFRS 13*
Fair Value Measurement
x
x
Philippine Accounting Standards
PAS 1
Presentation of Financial Statements
x
Amendment to PAS 1: Capital Disclosures
x
(Revised)
Amendments to PAS 32 and PAS 1: Puttable Financial
x
Instruments and Obligations Arising on Liquidation
Amendments to PAS 1: Presentation of Items of Other
Comprehensive Income
x
PAS 2
Inventories
x
PAS 7
Statement of Cash Flows
x
PAS 8
Accounting Policies, Changes in Accounting Estimates
x
and Errors
PAS 10
Events after the Reporting Period
x
PAS 11
Construction Contracts
x
PAS 12
Income Taxes
x
Amendment to PAS 12 - Deferred Tax: Recovery of
x
Underlying Assets
PAS 16
Property, Plant and Equipment
x
PAS 17
Leases
x
PAS 18
Revenue
x
3
PAS 19
x
Employee Benefits
Amendments to PAS 19: Actuarial Gains and Losses,
x
Group Plans and Disclosures
PAS 19
Employee Benefits
x
(Amended)*
PAS 20
Accounting for Government Grants and Disclosure of
x
Government Assistance
PAS 21
The Effects of Changes in Foreign Exchange Rates
x
Amendment: Net Investment in a Foreign Operation
PAS 23
x
Borrowing Costs
x
Related Party Disclosures
x
PAS 26
Accounting and Reporting by Retirement Benefit Plans
x
PAS 27
Consolidated and Separate Financial Statements
x
PAS 27
Separate Financial Statements
(Revised)
PAS 24
(Revised)
x
(Amended)*
PAS 28
Investments in Associates
x
PAS 28
Investments in Associates and Joint Ventures
x
PAS 29
Financial Reporting in Hyperinflationary Economies
x
PAS 31
Interests in Joint Ventures
x
PAS 32
Financial Instruments: Disclosure and Presentation
(Amended)*
4
x
Amendments to PAS 32 and PAS 1: Puttable Financial
x
Instruments and Obligations Arising on Liquidation
Amendment to PAS 32: Classification of Rights Issues
x
Amendments to PAS 32: Offsetting Financial Assets and
x
Financial Liabilities
PAS 33
Earnings per Share
x
PAS 34
Interim Financial Reporting
x
PAS 36
Impairment of Assets
x
PAS 37
Provisions, Contingent Liabilities and Contingent Assets
x
PAS 38
Intangible Assets
x
PAS 39
Financial Instruments: Recognition and Measurement
x
Amendments to PAS 39: Transition and Initial
x
Recognition of Financial Assets and Financial Liabilities
Amendments to PAS 39: Cash Flow Hedge Accounting
x
of Forecast Intragroup Transactions
Amendments to PAS 39: The Fair Value Option
x
Amendments to PAS 39 and PFRS 4: Financial
x
Guarantee Contracts
Amendments to PAS 39 and PFRS 7: Reclassification of
x
Financial Assets
Amendments to PAS 39 and PFRS 7: Reclassification of
x
Financial Assets – Effective Date and Transition
Amendments to Philippine Interpretation IFRIC–9 and
PAS 39: Embedded Derivatives
5
x
Amendment to PAS 39: Eligible Hedged Items
x
PAS 40
Investment Property
x
PAS 41
Agriculture
x
Philippine Interpretations
IFRIC 1
x
Changes in Existing Decommissioning, Restoration and
Similar Liabilities
IFRIC 2
x
Members' Share in Co-operative Entities and Similar
Instruments
IFRIC 4
Determining Whether an Arrangement Contains a Lease
IFRIC 5
Rights to Interests arising from Decommissioning,
x
x
Restoration and Environmental Rehabilitation Funds
IFRIC 6
Liabilities arising from Participating in a Specific Market -
x
Waste Electrical and Electronic Equipment
IFRIC 7
Applying the Restatement Approach under PAS 29
x
Financial Reporting in Hyperinflationary Economies
IFRIC 8
Scope of PFRS 2
IFRIC 9
Reassessment of Embedded Derivatives
x
Amendments to Philippine Interpretation IFRIC–9 and
x
x
PAS 39: Embedded Derivatives
IFRIC 10
Interim Financial Reporting and Impairment
IFRIC 11
PFRS 2- Group and Treasury Share Transactions
x
IFRIC 12
Service Concession Arrangements
x
IFRIC 13
Customer Loyalty Programmes
x
6
x
IFRIC 14
x
The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
x
Amendments to Philippine Interpretations IFRIC- 14,
Prepayments of a Minimum Funding Requirement
IFRIC 16
Hedges of a Net Investment in a Foreign Operation
x
IFRIC 17
Distributions of Non-cash Assets to Owners
x
IFRIC 18
Transfers of Assets from Customers
x
IFRIC 19
Extinguishing Financial Liabilities with Equity Instruments
x
IFRIC 20
Stripping Costs in the Production Phase of a Surface
x
Mine
SIC-7
Introduction of the Euro
x
SIC-10
Government Assistance - No Specific Relation to
x
Operating Activities
SIC-12
SIC-13
Consolidation - Special Purpose Entities
x
Amendment to SIC - 12: Scope of SIC 12
x
x
Jointly Controlled Entities - Non-Monetary Contributions
by Venturers
SIC-15
Operating Leases - Incentives
x
SIC-25
Income Taxes - Changes in the Tax Status of an Entity or
x
its Shareholders
SIC-27
Evaluating the Substance of Transactions Involving the
x
Legal Form of a Lease
SIC-29
Service Concession Arrangements: Disclosures.
x
SIC-31
Revenue - Barter Transactions Involving Advertising
x
Services
7
SIC-32
x
Intangible Assets - Web Site Costs
8
Generated by CamScanner from intsig.com
TECHNICAL REPORT
ECONOMIC ASSESSMENT AND ORE RESERVE ESTIMATION
ON THE
MARCVENTURES MINING & DEVELOPMENT CORPORATION
NICKEL PROJECT,
CABANGAHAN, CANTILAN, SURIGAO DEL SUR
FOR
MARCVENTURES MINING & DEVELOPMENT CORPORATION
[MPSA–Exploration No. 016–93–XIII]
ORLANDO S. CRUZ
Registered & License Mining Engineer
License No. 000722, Oct. 6, 1966
Mining CP for Open Pit Nickel, Copper and Quarry (Industrial)
Effective Date
:
March 31, 2010
l. CERTIFICATES AND CONSENTS OF CPs FOR TECHNICAL
REPORTS
This is to certify that the undersigned has carefully examined the
exploration data and various geological reports on Marcventures Mining &
Development Corporation nickel project in Barangay Cabangahan,
Cantilan, Surigao del Sur including the report of their CP for Geology, Dr.
Carlos A. Arcilla and the validation report of the MGB on their Partial
Declared Feasibility Study.
Based on my personal opinion, the method employed in the calculation of
mineable ore reserves were based on acceptable mining engineering
practices and it adhered with the guidelines of the Philippine Mineral
Reporting Code (PMRC). Likewise, the parameters used in the Partial
Feasibility Study are still valid. Current prices are higher compared to
those used in this study.
ii
II.EXECUTIVE SUMMARY
The validation of Marcventures Mining and Development Corporation
nickel project was done by the undersigned from February 10 to March 15,
2010 with a minesite visit during the period of February 26–27, 2010.
The mine site can be accessed via Surigao City with daily commercial
flight from Manila. It can also be accessed via plane or sea vessel from
Cebu City. Another alternate route is a 2½ hour drive from Butuan City to
Surigao City. There are daily flights from Manila to Butuan City.
The initial mining area is situated in Barangay Cabangahan in the
Municipality of Cantilan, Surigao del Sur. It is accessible by land via the
Surigao City–Tandag National Highway which traverses the eastern
portions of Surigao del Norte and Surigao del Sur provinces. From the
town proper, the project site can be reached via a 15–kilometer Barangay
and dirt road that skirts through the mountainside up to Barangay
Cabangahan.
The area lies along the East Mindanao Ridge specifically within the Diuata
Mountains. The general topography of the project area is rugged to minor
Karst, characterized by steep slopes, deeply incised valley, ridges and
peaks. The highest peak is located at the southwestern portion with an
elevation of 646m. The drainage system consists of several creeks
including Aninungan, Opacon and Block 2 creeks forming dendritic to
rectangular pattern. It drains to the Carac–an River then to the Lanuza
Bay.
Surigao del Sur belongs to the second type in climate classification of
PAG–ASA wherein there is no pronounced dry and wet season and
maximum rainfall is from November to January. During rainy season
practically all mining activities will cease because access roads will be
impassable.
The nickel project is within the Samar–Surigao segment of the Bicol–
Eastern Mindanao Ophiolite Belt which stretches along the Eastern margin
of the Philippine archipelago. With favorable climatic and physiographic
features for laterization process, lateritic nickel deposits in the area are
abundant. Ultramafic rocks particularly harzburgite are pervasive in
Surigao del Sur. They are overlain unconformably by Upper Eocene
conglomerates and limestones. Overlying the Upper Eocene lithogies are
Meocene volcano–sedimentary rocks and Pliocene –Quaternary Clastics.
iii
The project covers an aggregate area of approximately 4,799 hectares.
MMDC conducted the in–house resource estimation of their deposits
within the project area using all available data gathered from the
exploration and drilling programs implemented in the said property. With
the use of GEMCOM GEMS 6.1 mining software, the resource estimate
was made covering the 120–hectare Initial mining area. A total of 170 drill
holes with an aggregate depth of 1,392.5 meters were used in the
estimation of mineral resource.
Using GEMCOM GEMS 6.1 mining software, Dr, Carlos Arcilla, the CP–
Geology of Marcventures, estimated the Mineral Resource at 10,155,000
WMT with an average grade of 1.48% Ni and 21.41% Fe;
The MGB validated the Mineral Resource of 11,864,000 WMT with
1.38%Ni and 23.84% Fe.
Dr. Arcilla used the Triangular Irregular Network method while the MGB
used the Inverse Distance Square (ID2) in the interpolation of Ni and Fe
grades.
The undersigned, after evaluating carefully the integrity of all the available
data estimated the Mineable Ore Reserve to be 11,031,000 WMT with
1.48% Ni and 25.72% Fe, using polygon method in the interpolation of Ni
and Fe values and 25m x 25m x 3m blocks in the mine design.
The ore reserve figure for the partial feasibility study submitted to MGB is
11,600,000 WMT. The undersigned’s calculated ore reserve is
11,031,000 WMT or 4.9% lower. I believe that the variance in tonnages for
the 10 year mine life is within acceptable limits and I am adopting the
figure 11,600,000 WMT.
iv
TABLE OF CONTENTS
Page
I. TITLE PAGE
II. CERTIFICATES AND CONSENTS OF CPs FOR
TECHNICAL REPORTS
ii
III. EXECUTIVE SUMMARY
iii
IV. TABLE OF CONTENTS
v
1.0
INTRODUCTION
1
2.0
RELIANCE ON OTHER EXPERTS or CPs
3
3.0
TENEMENT AND MINERAL RIGHTS
4
4.0
GEOGRAPHIC FEATURES
5
5.0
PREVIOUS WORK
6
6.0
HISTORY OF PRODUCTION
7
7.0
REGIONAL AND DISTRICT GEOLOGY
8
8.0
MINERAL PROPERTY GEOLOGY
9
9.0
MINERALIZATION
11
10.0
EXPLORATION
12
11.0
QA/ QC OF DATA USED
13
12.0
DECLARED MINERAL RESOURCES
14
v
13.0
ECONOMIC ASSESSMENT OF THE MINING PROJECT
13.1
15
Description of Mineral Resources estimates used as
basis for conversion to Ore Reserves
15
13.2
Type and Level of Feasibility Study
15
13.3
Brief Description of the Project
13.3.1 Planned mining and processing operations
13.3.2 Mining Method and capacity
13.3.3 Processing Method and capacity
13.3.4 Ore to be Mined / Product to be produced
13.3.5 Prospective Markets or Buyers
13.3.6 Estimated Mine Life
13.3.7 Total Project Cost/ Financing
13.3.8 Production Cost / Production Schedule
15
13.4
Marketing Aspects
13.4.1 World Supply and Demand Situation
13.4.2 Prospective Markets or Buyers
13.4.3 Product Specifications
13.4.4 Price and Volume Forecasts
13.4.5 Sales Contract
18
vi
13.5
Technical Aspects
23
13.5.1 Mining Plans
13.5.1.1 Mining method
13.5.1.2 Mine Design/ Mining Parameters/
Geotechnical Parameters
13.5.1.3 Mining Recovery, Dilution and Losses
13.5.1.4 Planned Capacity/ Production Schedule/
Estimated Life of mine
13.5.1.5 Working Schedule
13.5.1.6 List of Mining Equipment and Auxiliary
Machinery/ Mine Infrastructure
13.5.1.7 Mine Development Plans and Schedule
23
13.5.2 Processing Plans
34
13.5.3 Mine Support Services
13.5.3.1 Power Source / Power Generation Plant
13.5.3.2 Mechanical Shop
13.5.3.3 Assay Laboratory
13.5.3.4 Industrial Water Supply
13.5.3.5 Availability of Alternative Sources of
Mine Support Services
35
13.5.4 Environmental Protection and Management Plan
13.5.4.1 Environmental Impacts
13.5.4.2 Environmental Mitigating Measures
13.5.4.3 Environmental Infrastructures
13.5.4.4 Mine Closure Plan
37
13.5.5 Mine Safety and Health Plan
42
vii
13.6
13.7
13.8
Financial Aspects
43
13.6.1 Total Project Cost Estimates and Assumptions
13.6.1.1 Engineering Study Cost
13.6.1.2 Exploration/ Development Cost
13.6.1.3 Interest During Construction
13.6.1.4 Working Capital
13.6.1.5 Contingencies
43
13.6.2 List of Capital Equipment and Works
46
13.6.3 Financial Plans/ Sources of Funds
46
13.6.4 Production Cost Estimates and Assumptions
13.6.4.1 Mining Cost
13.6.4.2 Milling Cost
13.6.4.3 Marketing Cost
13.6.4.4 Mine Overhead Cost
13.6.4.5 Environmental Cost
13.6.4.6 Community Development Cost
13.6.4.7 Excise Tax
13.6.4.8 Head Office Overhead Cost
13.6.4.9 Royalty, if any
47
13.6.5 Government Financial Incentives
49
13.6.6 Basis of Revenue Calculation
13.6.6.1 Metallurgical Recovery
13.6.6.2 Selling Price
13.6.6.3 Exchange Rate
50
13.6.7 Proforma Financial Statements
13.6.7.1 Cash Flow
51
13.6.8 Financial Analyses
13.6.8.1 Sensitivity Analyses
13.6.8.2 Profitability Analyses
(ROI, IRR, NPV, Payback Period)
52
Economic Aspects
54
13.7.1 Employment/ management
13.7.1.1 Personnel Policies re Pay Scale
13.7.1.2 Table of Organization
54
13.7.2 Community Development Plan
58
13.7.3 Socio–economic Contributions
59
Project Schedule
60
viii
14.0
ORE RESERVES ESTIMATES
14.1 Database Used
14.2 Integrity of Database
14.3 Data Verification and Validation (limitations)
14.4 Ore Reserve Estimation Method Used
14.5 Ore Reserve Estimations
14.6 Ore Reserve Classification Used
14.7 Ore Reserves Estimates
61
61
61
62
63
63
64
64
15.0 INTERPRETATION AND CONCLUSIONS
65
16.0 RECOMMENDATIONS
67
17.0 REFERENCE
68
ix
Table 1 – Technical Description of MPSA No. 016–93–XIII T
Table 2 – Exploration History
Table 3 – Mineral Resources as Calculated by Dr.Carlos Arcilla
Table 4 – Annual Production
Table 5 – Initial Mining Equipment Requirement
Table 6 – Mine Development Plans & Schedules
Table 7 – Marcventures Standby Generators
Table 8 – Risks & Mitigating Measures
Table 9 – Summary of CAPEX
Table 10 – Engineering and Administration Cost
Table 11 – Sensitivity Analysis
Table 12 – Manpower Requirement
Table 13 – Project Schedule
Table 14 – GPS and Total Station readings on selected drill hole locations
Table 15 – Comparison between MMDC & Ostrea Lab Assay
Table 16 – Ore Reserve Classification
4
12
14
30
31
33
35
38
43
44
53
54
60
62
63
64
x
Figure 1 – Location Plan
Figure 2 – Location Geology
Figures 3 and 4 – World Nickel Production and Industrial Consumption
Figures 5 and 6 – 10 Year Nickel Price and LME Warehouse Inventory
Figure 7 – Section view of Mining sequence of Nickel Laterite (DSO)
Figure 8 – Plan view of Mining sequence of Nickel Laterite (DSO)
Figure 9 – MMDC production Flowsheet
Figure 10 – Table of Organization
Figure 11 – Marcventures Ultimate Pit Limit – Initial Mining Area
2
10
19
22
24
25
29
57
66
xi
Appendix A and B – Projected profit and Loss
Annex A – Production and revenue Schedule
Annex B – projected Annual Production and Direct Mining Costs
Annex C – Operating Expenses
Annex D – Marketing Cost Schedule
Annex E – Development of IP Communities
Annex F – Environmental Protection and Enhancement Program Cost
Annex G – Social Development and Management Program Cost
Annex H – Final Mine rehabilitation/ decommissioning Plan
Annex I – Safety and Health Budget
Annex J – Depletion
Annex K – Yearly Depreciated Expense
Annex L – National Taxes and Fees
Annex M – Local Taxes and Fees
Annex N – Marcventures Minable Ore Reserves by Bench
69
70
71
72
74
75
76
77
78
79
80
81
82
83
84
xii
Picture 1 and 2 – The Administration Building of MMDC
Picture 3 and 4 – On going drilling operation (RIG #02)
Picture 5 and 6 – MMDC Temporary Mechanical Shop
Picture 7 and 8 – MMDC’s Temporary Motor pool
Picture 9 – Assay Laboratory
Picture 10 – Newly Constructed Steel Bridge Located at Carac–An River
Picture 11 and 12 – Company rented Port Facilities
Picture 13 – Expansion school building (Library and Computer Room)
Picture 14 – Turn over ceremony
85
86
87
88
89
89
90
91
91
xiii
1.0
INTRODUCTION
The Nickel Laterite project of Marcventures is located within the
municipalities of Cantilan and Carrascal, Surigao del Sur. (Figure 1
Location Map). The project has an MPSA No. 016–93–XI one of the
earliest granted during the more recent mining laws, and is owned by
Marcventures Mining and Development Corporation (formerly Ventura
Timber Corporation). Exploration was done in the past by Marcopper
Mining Corporation, Geomin Management Corporation, Queensland
Nickel, Inc., and individual geologist like Tomas Malihan, Joel Muyco,
and Jorge Sta. Cruz among others.
The Marcventures area is within logging concession that was operated
by the Ventura Timber Corporation since 1986. In 1988, ten individual
claim owners who held 60 mining claims that were filed under the
provision of PD 463 agreed to assign their respective mineral rights to
Ventura Timber Corporation. From 1988 to 1990, geological appraisal
on the potential of these mining claims for various deposits, particularly
gold, nickel, chromite and other minerals were intermittently conducted.
In May 1991, Ventura Timber Corporation, realizing the mineral
potential of the area, engaged the services of the Geomin Management
Corporation as project managers for the exploration and possible
development and exploitation of the prospect.
In July 1991, an application for Mineral Production Sharing Agreement
(MPSA) was lodged with the MGB–DENR at Region XI.
1
2
2.0
RELIANCE ON OTHER EXPERTS or CPs
The Mineral Resource Validation report was prepared by Dr. Carlo A.
Arcilla (PMRC–CP Geology) originally submitted on August 7, 2009
and revised on September 9, 2009.
This Mineral Resource Validation report was used by the undersigned
as the basis for the Economic Assessment and Ore Reserve
Estimation.
3
3.0
TENEMENT AND MINERAL RIGHTS
The Marcventures project covers an aggregate area of approximately
4,799 hectares and is centered approximately at geographic
coordinates 125o52’51”E longitude and 9o17’15.41”N latitude.
Out of this area, the company has selected 120 hectares for its initial
mining operations. It is covered by an approved Mineral Production
Sharing Agreement denominated as MPSA No. 016–93–XIII.
Table 1
Technical Description of MPSA No. 016–93–XIII T
Corner
1
2
3
4
5
6
7
8
9
10
11
12
Total Area
Latitude
9o 20’ 00”
9o 20’ 00”
9o 19’ 00”
9o 19’ 00”
9o 15’ 30”
9o 15’ 30”
9o 14’ 00”
9o 14’ 00”
9o 15’ 00”
9o 15’ 00”
9o 19’ 00”
9o 19’ 00”
Longitude
125o 52’ 30”
125o 55’ 00”
125o 55’ 00”
125o 54’ 00”
125o 54’ 00”
125o 53’ 30”
125o 53’ 30”
125o 51’ 00”
125o 51’ 00”
125o 51’ 30”
125o 51’ 30”
125o 52’ 30”
4,799 hectares
4
4.0
GEOGRAPHIC FEATURES
The geomorphology of the region is described with reference to the
north–south trending Diuata Mountain Range, which extends from
Surigao to Davao. The range is rugged and has several peaks with
elevations from 900 to 2500m (BMG, 1982). The highest peak, Mount
Kampalili is in the southern side of the range. Other peaks include
Mount Legaspi in Claver and Mount Hilonghilong in Agusan del Norte.
The western side of the range which borders the east side of Agusan–
Davao lowlands has steep slopes. The eastern coastline is very
irregular with high promontories between bays, wide estuaries and relic
channels of streams and valleys (Ibid).
The Agusan del Norte district lies at the northern portion of the Eastern
Mindanao Ridge, in a region of intense splaying of the Philippine Fault
Zone. The Surigao del Norte district comprises three north/ south–
trending physiographic units (Rohrlach, 2005); the Western Range, the
Central Lowlands and the Eastern Highlands that are bounded by
strands of the Philippine Fault.
The Western Range is an uplifted area that is bound by two major
strands of the Philippine Fault system. The western strand lies offshore
on the western side of Surigao Peninsula whereas the eastern strand is
a sub–parallel splay – the Lake Mainit fault, which separates the
Western Range from the Central Lowlands.
The Central Lowlands comprises a down–faulted graben that is the site
of Pliocene to Quaternary sedimentation (Louca, 1996). The volcanic
mountains around Mt. Maniayao (an andesitic dome) separate the
Central lowland strip into two sub–units, Lake Mainit in the south and
the Lowlands to the north (UNDP, 1987). Lake Mainit drains to the
south along the Tubay River.
The river follows the Lake Mainit Fault on the western margin. The
Eastern Highlands comprise the northern end of the Diuata Range
which extends southward along the east Mindanao Ridge.
The project area is situated on the eastern edge of the Diuata Mountain
Range and principally drained by the Carac–an and Alamio Rivers that
form the Carrascal–Cantilan lowlands. There is no published regional
geomorphologic map; hence, the geomorphological units described are
indicated in a relief map which only covers Northeast Mindanao and
therefore, the southern portion of Diuata Mountain Range where Mt.
Kampalili is located.
5
5.0
PREVIOUS WORK
In 1970, Gozon Development Corporation through the MGB initiated
the exploration of laterite in the area by conducting geologic mapping
and auger drilling. Marcopper Mining Corporation did more intensive
drilling and test pitting between 1991 and 1995. However, the results of
the exploration were below economic grades of ore prevailing at that
time.
The property was then sold to Hinatuan Mining Corporation but
insurgency problems forced the company to abandon the area. It was
at this juncture that Ventura Timber Corporation, the predecessor of
MMDC filed an MPSA application over the area. QNI Philippines also
explored a portion of the area in 2000.
6
6.0
HISTORY OF PRODUCTION
The project has no recorded history of production.
7
7.0
REGIONAL AND DISTRICT GEOLOGY1
The proposed mining site is within the Samar–Surigao segment of the
Bicol–Eastern Mindanao Ophiolite Belt which stretches along the
Eastern margin of the Philippine archipelago. With favorable climatic
and physiographic features for laterization; lateritic nickel deposits on
the area are abundant.
Ultramafic rocks particularly harzburgite are pervasive in Surigao del
Sur. They are overlain in conformably by upper Eocene conglomerates
and limestone. Overlying the Upper Eocene lithologies are Miocene
volcano–sedimentary rocks and Pliocene–Quaternary clastics. The
Eocene and latest sedimentary deposit in the region covers a north–
trending basin near the East Mindanao Ridge (Louca and Santiago,
1992).
1
SECTION 7 to SECTION 12 is to be prepared by a CP GEOLOGIST and submitted as a separate report
8
8.0
MINERAL PROPERTY GEOLOGY
Lithologies in Marcventures area are the Cretaceous–Paleogene
Ultramafics, Oligocene–Miocene Limestone and Quaternary Alluvium.
The soil layer in the proposed Nickel Project is variable, but could be
up to approximately 18 meters thick. Overlying the Harzburgite is a
saprollitic layer, in parts more than 8 meters thick which is grey to
greenish brown and low plasticity and consists of rock fragments
derived from the basement rock.
Conformably overlying the saprolite is the limonite layer, also with
variable thickness, with orange–brown color and has low to moderate
plasticity. The topmost soil layer is a 4 meters thick laterite soil that
has distinct reddish brown color with low plasticity (Figure 2 Local
Geology).
9
10
9.0
MINERALIZATION
Nickel laterites are the product of laterization of magnesium–rich or
ultramafic rocks such as dunites, harzburgites and peridotites which is
a suite of an ophiolite complex. In the regional tectonic context, the
Eastern Mindanao ridge and where the project area is situated was
formed as a result of emplacement of ophiolitic sheets on an older
volcano sedimentary arc terrane during late Cretaceous to possibly
Eocene times. Uplift and subsequent weathering of the ultramafic rocks
produced the laterite deposit.
11
10.0
EXPLORATION
The following summarizes the exploration history conducted on Marc
Ventures property:
Table 2
Exploration History
Period
1970’s
Activity
Marcopper Mining Corporation – conducted comprehensive Ni
exploration program
1982
MGB Region X – Prospect covered under “Geology and Mineral
Resources of Surigao del Sur” study
1986
Ventura Timber Corporation – identified gold prospect (vein
type) at the western part of the prospect.
1991
Geomin Management Corporation – explored Ni–Co
mineralization potential of the prospect.
1991
United Nations Revolving Fund for Natural Resources
Exploration (UNRFNRE) – conducted geological assessment of
the area.
1992
Hinatuan Mining Corporation – conducted core drilling at Area II.
1993
Joel Muyco & Associates, Inc. – prepared a geologic report
1994
Ventura Timber Corporation – tested the geology and mineral
potential of the prospect.
1995
Tropical Exploration Philippines, Inc. – confirmed the presence
of a gold potential target area.
2000
QNI Philippines, Inc. – conducted geological mapping and
reconnaissance auger drilling.
12
QA/ QC OF DATA USED
The database that was used contains data from 170 diamond drill
holes, representing 1,392.5 meters of core. The combined database
was reviewed and validated prior to being finalized into an appropriate
format for resource estimation
The database contained the following data:
•
Collar information
o Hole ID
o XYZ coordinates of collar
o Maximum depth
•
Down–hole survey
o
o
o
o
•
Hole ID
Down–hole depth
Dip
Azimuth
Assay – Geology
o Hole ID
o Sample ID
o Depth from
o Depth to
o Ni grades
o Fe grades
13
11.0
DECLARED MINERAL RESOURCES
For the initial operating area of 120 hectares as approved by the DENR
in its Environmental Compliance Certificate (ECC), the indicated
mineral resources were calculated by Dr. Carlo Arcilla, CP for Geology.
Table 3
Mineral Resources as Calculated by Dr.Carlos Arcilla
Category
Density
Volume (M3)
Tons (DMT)
Metal grade (%)
Ni
1.2
10,590,000
12,708,000
1.54
Fe
Ni
19.5
1.5
10,590,000
15,885,000
Fe
Ni (Japan Grade)
1.54
19.5
1,440,000
2,160,000
2.22
14
12.0
ECONOMIC ASSESSMENT OF THE MINING PROJECT
With the improving price of Nickel and with relatively higher nickel
grade, The Marcventures project based on the parameters used in the
Partial Feasibility study appears to be viable.
13.1
Description of Mineral Resources estimates used as basis for
conversion to Ore Reserves2 .
MMDC conducted the in–house resource estimation of their
deposits within the project area using all available data gathered
from the exploration and drilling programs implemented in the
said property. With the able use of the GEMS 6.1 mining
software, the resource estimate was made covering the eastern
portion of the MPSA area. These data were used to create the
geological model representing the mineralized laterite profile of
the deposit. The grades for each section of the laterite profile
were estimated in order to determine the potential mineral
resource.
13.2
Type and Level of Feasibility Study
Partial Feasibility Study
13.3
Brief Description of the Project
13.3.1 Planned mining and processing operations
The clearing and grubbing consist of the removal of all
growth, stumps, roots and all organic matters and
disposal of cleared materials to waste dumps.
Stripping involves removal of all overburden material
below the nominal cut–off grade established by Grade
Control Engineer and/ or Mine Planning Engineer using
the approved pit design with benches of three (3) meters
height. Waste materials will be hauled and dumped to
mine–out areas and/ or to the designated waste dump
areas for future utilization.
After removing the overburden material below the
nominal cut–off grade, all benches at three (3) meters
A report on the mineral resource used in the estimation of ore reserves should be prepared by a CP
Geologist.
2
15
bench height will be sampled by channel (vertical)
sampling method. Samples are placed and labeled in
bags, and shall be sent to laboratory for analysis. With
the laboratory results, face sampling stakes shall be
coded with ribbons of which the corresponding color shall
be based on the material classification, and shall serve as
guide for the segregators in the excavation process and
later on ore–piled.
All segregated pre–pile ores with analysis shall be hauled
and piled at their designated stockyard. In order to
maintain the quality of stockpile specifically moisture
content stockpile is covered with canvas sheet for
protection from rain.
The Grade Control Engineer shall prepare the mining
ration to satisfy the buyer’s specifications. The stockpiled
segregated ores will be delivered to ship–sided barged
(LCT’s on the causeway by dump trucks). The loading will
be implemented in accordance to the mixing ration
prepared. During the loading of the LCT’s, the wheel
loader will constantly pile the ores in such a way to
maximize the capacity of each LCT without neglecting the
safety factor. From the pier, the loaded LCT will retreat
seaward to the foreign cargo vessel (anchored offshore).
After ship–siding, the LCT’s will start unloading the ores
through the vessels clamshell and finally loading the
same in its hatches
13.3.2 Mining Method and capacity
Open Pit mining method will be used. Mining will start at
the top most bench and slice of 3–meter thick will be
excavated up to the final pit wall.
This will continue for the next 10 years until all mineable
ore are excavated up to the bottom bench. Average
mining rate is 3,000 WMT per day of soft ore.
13.3.3 Processing Method and capacity
No processing except crushing and screening.
16
13.3.4 Ore to be Mined / Product to be produced
The ore to be mined out are soft ore and crushed hard
ore. The soft ore are classified into Limonite and
Saprolite.
The products to be shipped are classified by Nickel
grade; 1.5% Ni will be for China and ≥ 2.2% Ni will be for
Japan.
Hard or crushed ores are normally mixed with the Japan
Grade Ore.
13.3.5 Prospective Markets or Buyers
The project has two potential markets, namely: China for
its laterite (limonite and saprolite ores) and Japan for its
saprolite ores.
No statistics are available to project China’s demand for
nickel.
The Direct Shipping Ore (DSO) nickel started in late 2006
when stocks of low grade nickel ore being rejected by
Japanese steel plants were bought by Chinese traders.
13.3.6 Estimated Mine Life
The estimated life of the mine of the 120 hectares based
on the initial drilling activity is ten (10) years. This
excludes the additional mineral resources within the total
claim area of 4,799 hectares.
13.3.7 Total Project Cost/ Financing
The initial capital investment of approximately Php250
million has been estimated for the start–up operations.
13.3.8 Production Cost / Production Schedule
The project has an estimated production cost of
US$16.00 per ton. Base on the exchange rate of US$:
Php 48.50.
The said production cost covers all activities from mining
or extraction up to the shipment of the nickel ore.
17
13.4
Marketing Aspects
13.4.1 World Supply and Demand Situation
Global demand for nickel has fallen for three consecutive
years but is expected to rebound in 2010 as world
stainless steel production increases the use of the alloying
and plating metal to 1.35 million metric tons.
“The nickel market will remain very volatile according to
the International Nickel Study Group, but they still see an
11% rebound in purchasing. Analyst at Roskill Information
Services, however, forecast nickel demand by just 7% this
year to 1.3 million metric tons. Whatever forecast is
correct, both see nickel consumption increasing from an
estimated 1.21 million metric tons in 2009 because of an
estimated 8% improvement in world stainless steel output
of 27 million metric tons.
Although nickel is used to make or coat various specialty
alloys, its mainstream use is in the smelting of stainless
steel. In fact, stainless steel production accounts for
around two–thirds of total nickel consumption. Even with
the anticipated expanded use of nickel this year, analyst at
Roskill and INSG project a consensus market surplus of
around 81,000 metric tons this year, as output of primary
nickel increases to 1.42 million metric tons. (Figures 3 and
4).
18
Figures 3 and 4
World Nickel Production and Industrial Consumption
World nickel production
Source: WBMSwww.world–bureau.com
Industrial Consumption
Source: Standard CIB Global Research www.standardbank.co.za
19
13.4.2 Prospective Markets or Buyers
Marcventures is targeting both the China and Japan
markets.
13.4.3 Product Specifications
The China Market should have an average grade of 1.5%
Ni and ≥ 45% Fe, while the Japan market should have a
grade of ≥ than 2.2% Ni & ≤ 25% Fe.
13.4.4 Price and Volume Forecasts
Last 14 January 2010, the UK–based Roskill Information
Services projected that the demand for nickel is set to
rise again over the next few years. In the last year, the
recent economic crisis has led to wildly fluctuating prices,
with LME prices peaking at just over $52,000 per ton in
May 2007 and falling by over 80% by the end of 2008 as
demand collapsed and output decreased. By the fourth
quarter of 2009, however, prices had recovered to
$18,500 per ton.
The report suggests that nickel consumption will increase
by around 7% in 2010 with an annual average price in
2010 forecast to around US$ 20,000 per ton, expected to
rise in both 2011 and 2012.
The average price between 2010 to 2012 is forecasted at
more than US$22,000 per ton. As demand for nickel
increases across the globe, production is likely to follow
suit. A market surplus of around 75,000 per ton is
forecasted for 2010, as output of primary nickel increase
to 1.4Mt.
20
This recovery is primarily due to a demand for stainless
steel production of which accounts for around two–thirds
of the total nickel consumption. Crude stainless steel
production began falling by the third quarter of 2007,
while the first three quarters of 2009 saw production
decline globally by around 15% year–on–year, with the
fall most prominent in developed economies; emerging
market such as China and India actually saw domestic
output rise. While global crude stainless steel production
in 2009 is forecasted to decline to 25Mt, 2010 is expected
to see an increase in demand and production, the market
forecast to rise by around 8% in 2010 to 27Mt and almost
30Mt in 2011.
The price of nickel used in the partial feasibility study at
US$12,000 per ton is in conservative side.
Figures 5 and 6 Shows the 10–year Nickel Price and
LME Warehouse Inventor
21
Figures 5 and 6
10–Year Nickel Price and LME Warehouse Inventory
13.4.5 Sales Contract
Currently there are no sales contract available, however it
is anticipated that the MMDC will be able to obtain such
contracts from Nickel buyer from China and Japan.
22
13.5
Technical Aspects
13.5.1 Mining Plans
The initial mining area within the 120 hectares will be
mined by open pit mining method. From the topmost
bench, a 3 meter high slice will be excavated until it
reaches the final pit limit or wall. Mining will continue for
the next 10 years up to the bottom bench or limit of
mineable ore reserve. (Figure 7)
13.5.1.1 Mining method
Mining method is open pit mining. This method
comprises of the following Major activities:
Construction of access roads, 8 meters wide, from
the main haul road to develop a mine block, which
shall have 3–meter bench heights. A 5–meter final
berm widths will be installed every other bench to
attain a pit slope of 45 degree and to allow access
for drainage maintenance and mine rehabilitation/
revegetation after the block of ore is mined out.
Mining block is then cleared and grubbed with
trees, vegetation, roots and stumps. Those are
hauled to the designated waste dump site.
After clearing, stripping of overburden is done to
expose the ore. Once it is exposed, mining will
follow. Before mining, channel samples shall be
taken vertically from the bench face (5) – meter
internal and assay result shall be posted on grade
control stakes to serve as guide to backhoe
operator or segregators. No bench shall be
excavated without the assay guide. Face advance
is limited to 5–meter per slice. Each material
classification shall be excavated and loaded to 10–
wheeler dump trucks then it will be delivered to
different pile as classified.
23
Figure 7
Section view of Mining Sequence of Nickel Laterite (DSO)
24
Figure 8
Plan View of Mining Sequence of Nickel Laterite (DSO)
25
In order to achieve ore classification, pre–filling
activity shall be employed. Ore loaded to dump
trucks from Run-Of-Mine (ROM) shall be sampled
methodically using the JIS 125R Scoop. Based on
the initial bench assay, the ores will be pre–piled.
Truck sampling procedure as follows:
•
All samples shall be taken at the center–top
heap of the dump box (a sampling stand
shall be provided for the sampling
purposes).
•
The standard sampling interval and sample
size for each pre–pole shall be as follows:
Sampling intervals
Ore Class
Sampling Interval and Sample Size
Limonite and Saprolite Ore
•
3 truckloads per increment
and 10 increments/ sample
Proper tagging of samples and provision of
stake/ marker to the pre–piled material
should be carried–out strictly.
After the analysis of the pre–piled ores has been
completed, ore classification shall be identified by
transferring each pile to its designated segregated
area.
The saprolite ore will go through further
segregation, which will separate the hard ore
boulders from the soft ore minerals. Hard ore will
be reduced in size thru crushing and screening.
Segregated Ore product will be hauled to the pier
stockpile yard near the causeway and piled
according to its material classification/ Ore
stockpiles are covered with tarpaulin canvass
sheets to prevent it from getting wet. (Figure 9
Production Flowsheet)
26
Overburden/ Waste as well as low grade ore will
be dumped on designated barren areas, nearest to
the minesite. Topsoil will be separately dumped
and will be used for future rehabilitation.
Construction along drainage system such as gulley
and tributaries of environmental pollution
abatement measures such as silt dikes and silt
ponds as catchment basins to prevent siltation of
low laying areas. Only clear water shall drain
towards the rivers and open sea. The silts traps
will be regularly monitored and desilted when filled
up with silts.
27
Figure 9
MMDC Production Flowsheet
EXPLORATION
VDH/YBM DRILLING
CLEARING
STRIPPING
MINING
SOFT ORE
FROM
HARD ORE
FROM
SOFT ORE YARD
MINEYARD
HARD ORE YARD
MANUAL CRUSHING /SORTING AT
BREAKING AREA
RECLASSIFICATION OF
PILED ORE
ORE HAULING
SORTING / BREAKING
TRANSFERRING
LGO
BELOW SHIPPABLE
GRADE STOCK PILED
FOR FUTURE USE
LG ORE
HG ORE
>2.0% Ni
<2.% Ni
BENEFICIATION YARD
RECLASSIFIED SHIPPABLE
GRADE
SCREENING/SORTING
HARD ORE
BENEFICIATION SOFT ORE
LFO
LIMONITE ORE
SAPROLITE ORE
MANUAL CRUSHING/SORTING
LG ORE
>2.0% Ni
CRUSHED ORE SHIPPABLE GRADE
LIMONITE & SAPROLITE ORE
HG ORE
<2.% Ni
BELOW SHIPPABLE GRADE
PILED FOR FUTURE USE
PIER ORE STOCKYARD
BARGE LOADING
NICKEL ORE SHIPMENT
28
13.5.1.2 Mine Design/ Mining Parameters/ Geotechnical
Parameters
This is concurrently discussed in 13.5.1.1 Mining
Method section.
13.5.1.3 Mining Recovery, Dilution and Losses
When the ore is mined, below the cut–off grade
material above and below the ore body must be
sent to waste dump. However it is never possible
to differentiate the material with perfect accuracy
and so at each interface there will be a loss of ore
and/or a gain of waste into ore; or both
simultaneously. It is where the ore layers are thin
that the most significant loss and dilution occur. In
Marcventures initial mining area, the layers of both
Limonite and Saprolite are thick and therefore
dilution and losses are only minimum.
At the top of limonite, dilution is with limonite
material below the cut–off grade. While at the
footwall dilution will be with low grade bedrock. Per
my observation, the dilution in Marcventures will
be less than 1%.
29
13.5.1.4 Planned Capacity/ Production Schedule/
Estimated Life of mine
Planned Mine and Mill Capacity
The planned annual production capacity as
follows:
Table 4
Annual Production
Year
1
2
3
4
5
6
7
8
9
10
Total
Annual Production
(WMT)
937,500
1,037,500
1,062,500
1,137,500
1,237,500
1,237,500
1,237,500
1,237,500
1,237,500
1,237,500
11,600,000
Estimated Life of Mine
The estimated life of mine of the 120 hectares
based on the initial drilling activity is ten (10) years,
excluding the additional potential ore reserves
within the claim area.
The life of the mine based on the calculated
mineable ore reserve is:
Mineable Ore Reserve
Annual production
Life of the Mine
= 11,600,000 WMT
= 1,160,000 WMT
= 11,600,000/1,160,000
= 10 years
However, since the exploration of Marcventures is
ongoing, there (potential) additional ore reserve
within the existing mining claim.
30
13.5.1.5 Working Schedule
There are 218 working days per year. With 2
shifts per day and 8 hours per shift.
13.5.1.6 List of Mining Equipment and Auxiliary Machinery/
Mine Infrastructure
In the initial stage of operation, the company shall
need the following primary equipment.
Table 5
Initial Mining Equipment Requirement
Plan
Actual
Needed
Hydraulic Excavator (CAT 320D
11
6
5
Crawler Dozer
Dump truck (10–Wheelers)
Wheel Loader
Road Grader
Vibro Compactor
4
49
4
2
1
2
11
2
2
1
2
38
2
–
–
In the succeeding years, there will be a need for additional
mining equipment as production is ramped up from
600,000 to 1,500,000 WMT per year or a total of
11,600,000 WMT in ten (10) years. All mining equipment
will be provided by a service contractor.
31
13.5.1.7 Mine Development Plans and Schedule
Refer to Table 6 Mine Development Plans and
Schedules
32
Note:
–
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEPT
OCT
NOV
DEC
Shipment schedule is intended for Ni Saprolite Ore.
Shipment schedule is intended for Ni Limonite Ore.
Stripping and other Mining related activities as well as the 1st shipment schedule will be dependent on the weather
condition.
13. Jetty Construction
12. Mine Base Camp Constructions
9. Additional road network const'n.
10. Beneficiation yard & Drying
Area Const'n.
11. Pier yard Construction
7. Shipment (LGSO)
8. Environmental Activity
6. Shipment (Marginal Grade)
5. Sizing & Sorting/stockpiling
4. Ore Transportation
3. Mining
2. Stripping
ACTIVITIES
1. Envi. Structures Construction
Table 6
Mine Development Plans and Schedules
33
13.5.2 Processing Plans3
The operation will only be producing Direct Shipping Ore
(DSO); it will only involve crushing and sorting.
There will be no metallurgical processing required.
3
Metallurgical aspects of the feasibility studies should be undertaken by a CP Metallurgical Engineer.
34
13.5.3 Mine Support Services
13.5.3.1 Power Source / Power Generation Plant
Marcventure Project power requirement is
estimated at 2,000 Kwh per day and it could be
supplied by the local power cooperative, the
Surigao del Sur Electric Cooperative (SURSECO).
To ensure continuous power supply, the company
will install 3 standbys generating sets in the
minesite:
Table 7
Marcventures Standby Generators
Unit Code
GS–01
GS–02
GS–03
Capacity
20 KVA
55 KVA
45 KVA
Brand/Model
Nissan SD23
Mitsubishi6DS–7
Isuzu 4BGI PD–03
13.5.3.2 Mechanical Shop
Marventures established a temporary Mechanical
Shop in the town proper in Cantilan town. A
temporary satellite mechanical shop was also
constructed near the mining area to handle repair
requirements on various mine equipment to be
used in the mining operations.
13.5.3.3 Assay Laboratory
Marventures had established a mining assay
laboratory in Sitio Nangka, Barangay Cabangahan
adjacent to the initial mining site. Sample
preparation and storage area is also provided
adjacent to the assay lab building.
35
Exploration, production and face samples obtained
from the field are directly delivered to the sample
preparation area. The samples are then dried,
crushed, pulverized and reduce in volume. Excess
samples are being store in the core house.
Analyses of samples are done either by Titration,
VIS–Spectrophotometer, or AAS.
It is worth mentioning that emitting fumes during
acid digestion is mitigated by the use of scrubber
which is installed along the fume hood of the
digestion chamber.
13.5.3.4 Industrial Water Supply
Marcventures is expecting to use 4,000 cu.m. of
water for both domestic and industrial use monthly
and 48,000 cu.m. annually. Water shall be sourced
out from the Carac–an River that passes right
through the mine tenement area and the nearby
Alamio and Panikian Rivers.
13.5.3.5 Availability of Alternative Sources of Mine Support
Services
Marventures engages the service of Frasec
Ventures Corporation, an earth moving contractor
to do the stripping, mining and hauling for the
company. However, ore segregation and grade
control will be directly under the company
supervision.
36
13.5.4 Environmental Protection and Management Plan
13.5.4.1 Environmental Impacts
An in–house environmental monitoring team
(headed by the company’s environmental officer)
consisting of various company personnel will be
organized to monitor the activities of the mine. This
is in line with the creation of a “Mine Environmental
Protection and Enhancement Office” (MEPEO) as
stipulated on Section 173 of DENR DAO. No. 96–
40.
Promotion of environmental management policies
will be instituted and promulgated through the
team. Compliance with government regulatory
requirements may be assigned to the team.
Review and appraisal of existing operations will be
undertaken with the purpose of trimming pollution
generating agents.
Among the team’s regular monitoring will include
the following sampling and analysis of effluent
from the siltation/ settling ponds and identified
water bodies; dust generation; community–
relations and safety and environmental matter/
issues. The company monitoring team looks into
the impacts on the following:
•
•
•
•
•
•
•
•
•
Air Quality
Noise Levels;
Marine Water Quality;
Surface/ Fresh Water Quality;
Drinking Water Quality;
Terrestrial Environment;
Marine Flora and Fauna;
Public Health; and
Population Migration
37
13.5.4.2 Environmental Mitigating Measures
Table 8
Risks & Mitigating Measures
Type of Risks
Identified Risks
Sedimentation/ Siltation
Water
Water Contamination
Depletion of water source
Air
Dust Pollution
Mitigating Measures
Revegetation of mined–out/
open areas to control soil
erosion
Water Quality Monitoring
Proper disposal of laboratory
waste; used oil, lubricants and
other petrochemicals and solid
waste. Delineation of watershed
within the area
Enhancements planting of
communal forest and watershed
area and revegetation of the
remaining mined–out area.
Road watering until final
relinquishment
Air Quality monitoring
Soil Contamination
Land
Proper handling and disposal of
used oil, lubricants, filters and
other petrochemicals; laboratory
containers, used tires and
garbage/ wastes.
Slope stabilization.
Soil Erosion
Revegetation of open/mined out
areas
38
13.5.4.3 Environmental Infrastructures
The company built a check dam with a small dam
temporary across the Opakon Creek. The creek
dam is a gabion type which is built with stones and
it has a dimension of 5 x 10 meters. This structures
traps pollutant and allows sediments to settle.
Settling Ponds can be permanent or semi–
permanent structures, dugouts, impoundments or
raised tanks. But most of the company’s settling
ponds are dug–outs, further, settling ponds are a
catchment of all the run–offs from the mining
operations and allows silt to settle discharging
water to the receiving water body.
Collector sumps are small dugouts which allow
run–offs from mining operations to pass through
and allow silt to settle. The company has
established a series of collector sumps along the
haul roads.
39
13.5.4.4 Mine Closure Plan
A Final Mine Rehabilitation Decommissioning Plan
shall be implemented as part of the EPEP.
Marcventures is going to implement the following
guiding principle in the execution of this program.
•
•
•
•
Progressive rehabilitation and re–vegetation of
all distributed areas shall be implemented
consistently.
Ensure to minimize the long term visual
impacts caused by mining activities through
application of innovative measures.
Control off–site contamination, including water
pollution, siltation and erosion.
Conduct post rehabilitation monitoring and
implement improvement and enhancement
programs.
About 5% of the whole 4,779 hectares will be
disturbed by the proposed mining operation.
Operations will be done in phases.
Simultaneously mining of several areas may occur
during the life of the mine as expected that Phase
1 will be the first to be mined–out and that this
area will be first area to be decommissioned.
Decommissioning of the other areas will follow
according to the completion of the mining of the
different phases.
All mobile equipment for decommissioning shall be
leased on a per hour basis; hence, it shall be
removed or pulled out by the contractor after mine
closure or when no longer needed.
There are no contaminants commonly found in the
mine sites that include metals, organic and
inorganic compounds, fuels, oils and grease that
require special precautions or procedure to ensure
safety during decommission.
Infrastructures, equipment and other mine
component that require any special procedures
during decommissioning shall be disassembled,
transferred and disposed of properly.
40
The
implementation
of
the
progressive
rehabilitation included in the company’s EPEP is
considered as initial implementation of the final
mine rehabilitation and/or decommission plan.
As discussed in the EPEP’s progressive
rehabilitation, slope of the mined–out portion shall
be reduced and stabilized at 8% gradient while the
benches surface shall be back sloped towards the
slope’s toe. Appropriate drainage system shall be
put in–place along the slopes toe. Drainage shall
be directed towards the series of silt traps/dams
that shall be constructed across gullies.
For trial purposes, a number of appropriate tree
seedlings and grass shall be immediately planted
along the slope and width of the benches after
compaction and stabilization. The said process will
determine the seedlings’ suitability on the soil
condition of the reprofiled slope and benches.
While the seedlings are being tested, re–profiling
and stabilization of slopes and benches of mined–
out area will continue. If possible, the same trees
and grass species removed during stripping shall
be used during progressive revegetation.
Experts in Forest vegetation propagation shall be
consulted regarding tree species and grass
appropriate for the area and the method of planting
and maintenance. The same cycle and method of
rehabilitation shall be followed and implemented
throughout the remaining life of the mine
41
13.5.5 Mine Safety and Health Plan
Marcventures Mining and Development Corporation has
envisioned at engaging all personnel in a united effort in
accident prevention and the establishment of healthy
working conditions. Leadership in the establishment,
guidance and maintenance of this organization rests
primarily with management, which commonly assumes
both the moral responsibility for the prevention of injuries
and illnesses and financial responsibility for unit costs.
The proponent shall comply with all the rules and
regulations of the “MINE SAFETY RULES AND
REGULATIONS” under MAO–MRD–61 Series of 1991. It
will submit a “Safety and Health program” before the start
of the calendar year that will embody the following:
•
•
•
•
•
•
Management and employee training
Good Housekeeping
Health control and services
Provision for PPE.
Systems of monitoring and reporting
Emergency Response program
The safety department shall be handled by an MGB–
accredited safety engineer. The company shall employ a
doctor on a retainer basis and a company nurse to handle
the health section.
42
13.6
Financial Aspects
13.6.1 Total Project Cost Estimates and Assumptions
Table 9
The summary of CAPEX
Road and Bridges
Land Acquisition
Land Clearing and Site Preparation
Road Construction and Site Preparation
Causeway Construction
Stockyard Development
Settling Pond Construction
Exploration Drilling
Civil Works
General Services and Transportation
Mechanical, Electrical and Laboratory Equipment
Office Equipment
Pre–Feasibility Studies
Permit
ECC Acquisition
TOTAL
Amount
70,500,000
8,700,000
88,900
8,550,000
19,200,000
4,500,000
10,000,000
4,800,000
17,316,000
32,843,320
16,980,000
2,126,000
1,000,000
2,709,925
3,000,000
202,314,145
An additional Php50 million is needed by the Project as
working capital.
43
13.6.1.1 Engineering Study Cost
Engineering and Administration costs during
installation of building, machineries equipment
such as; Administration building, Mechanical shop,
Assay laboratory, Staff houses, and water supply
system, etc. is estimated at around Php 81 million.
Table 10
Engineering and Administration Cost
Exploration Drilling
Civil Works
General Services and Transportatlon
Mechanical, Electrical and Laboratory Equipment
Office Equipment
Pre-Feasibility Studies
Permits
ECC Acquisition
TOTAL
Amount
4,800,000
17,316,000
32,843,320
16,980,000
2,126,000
1,000,000
2,709,925
3,000,000
80,775,245
44
13.6.1.2 Exploration/ Development Cost
Exploration drilling is carried out at 100 meters
interval then reduced to 50 meters and in some
areas for detailed drilling and for blocking of the
ore resource/reserve. The company used four (4)
drilling machine namely two (2) Yoshida Boring
Machine and two (2) Koken Boring Machine both
were deployed our initial 120 hectares
A total of Php4.8 million is allotted for exploration
activity.
13.6.1.3 Interest During Construction
No interest charge has been inputted.
13.6.1.4 Working Capital
A total of PhP50 million is needed by the Project
as its estimated working capital.
13.6.1.5 Contingencies
No contingency has been added on the total
production cost.
45
13.6.2 List of Capital Equipment and Works
In addition to the list on 13.6.1, the following
infrastructures were constructed by Marcventure:
•
•
•
•
•
•
•
Administration Bldg.
Assay Laboratory
Motor pool
Haul Roads & Bridges
Stockyards
Siltation Ponds
Port Facilities including Causeway
13.6.3 Financial Plans/ Sources of Funds
Marcventures Mining & Development Corporation intends
to finance the project through loans convertible to equity.
46
13.6.4 Production Cost Estimates and Assumptions
13.6.4.1
Mining Cost
The mining cost is approximately US$10.00 per
ton.
Refer to Appendix A and B Projected Profit and
Loss and Annex B Projected Annual production
and Direct Mining Cost.
13.6.4.2
Milling Cost
The operation will only be producing Direct
Shipping Ore (DSO); it will only involve crushing
and sorting.
There will be no metallurgical processing required.
Refer to Annex B Projected Annual production and
Direct Mining Cost.
13.6.4.3
Marketing Cost
The marketing cost is Php146 per WMT for the first
year and Php128 per WMT starting year 2.
Refer to Annex D Marketing Cost Schedule.
13.6.4.4
Mine Overhead Cost
The mine overhead cost will range from Php368
million on the first year up to Php486 million
annually from year 2.
Refer to Annex B Projected Annual production and
Direct Mining Cost.
47
13.6.4.5
Environmental Cost
The proponent shall allot a total amount of
Php101,280,000 for its 10 year - EPEP (as
approved and submitted) and Php7,957,957 for
the 10 year-Safety and Health Plan.
Refer to Annex F Environmental Protection and
Enhancement Program Cost and Annex H Final
Mine Rehabilitation/ Decommissioning Plan.
13.6.4.6
Community Development Cost
The company shall allocate an annual amount
equivalent to the 1% of its annual total direct
mining cost for its Community Development Costs.
Refer to Annex E Development of IP Communities
and Annex G Social Development and
Management Program Cost.
13.6.4.7
Excise Tax
The excise tax will be 2% of gross sales. This will
range from Php15 million to Php20 million annually
throughout the life of the mine.
Refer to Annex L National Taxes and Fees.
13.6.4.8 Head Office Overhead Cost
The mine overhead cost will range from
Php111million on the first year and will be
Php82million annually from year 2.
Refer to Appendix A and B Projected Profit and
Loss and Annex C Operating Expenses.
13.6.4.9 Royalty, if any
No royalty has been allocated for payment in the
project.
48
13.6.5 Government Financial Incentives, if any
13.6.5.1 The Project did not input any BOI and PEZA
incentive.
49
13.6.6 Basis of Revenue Calculation
Production:
Year
Year
Year
Year
1
2
3
4 to 10
937,500 WMT
1,037,500
1,062,500
1,237,500
LME Ni Price, ($/WMT)
Ni % Grade
Recovery Rate
Moisture Content
Price per WMT of Ni ($)
US$12,000
1.50%
15%
35%
US$17.55
Stripping Cost
Mining Cost
Php90.10/ WMT
Php374.82
13.6.6.1 Metallurgical Recovery
The operation will only be producing Direct
Shipping Ore (DSO); it will only involve crushing
and sorting.
There will be no metallurgical processing required.
13.6.6.2 Selling Price
At the LME market price of US$12,000 per ton of
Nickel Metal, the selling price of our ore of 1.5% Ni
is US$17.55 per wet metric ton FOB Philippine
port. Using the Forex rate of US$:Php 48.50, this
is equivalent to Php851.
13.6.6.3 Exchange Rate
The Foreign Exchange used is Php48.50 to US$1 .
50
13.6.7 Proforma Financial Statements
Refer to Appendix A and B Projected Income Statement
13.6.7.1 Cash Flow
Return of Investment and Payback Period
•
The financial statement was prepared based on the
selling price of LME nickel at US$12,000 per ton.
•
Return of Investment (DCF - ROI) is based on the
annual cash contribution margin/ cash inflow and
capital investment of the Project.
•
Payback Period is computed based on the annual
cash contribution/ cash inflow deducted from the total
Project cost.
•
A summary on the profitability indicators based on the
assumed LME nickel price in US$ per ton.
51
13.6.8 Financial Analyses
Cost analysis
Operating Income Statement and ROI Analysis
•
The revenue is based at US$17.55 per WMT (at
US$12,000 LME per ton) on the selling price of nickel
ore to both Japan and China.
Operating Cost
•
Social Development and Management Program Cost
is 1% of the direct mining and milling cost
•
Excise Tax is 2% of the gross sales
•
Development of IP Communities is 1% of the gross
sales
•
Occupation Fee is Php75 per hectare of MPSA
•
No contingency has been added in the total
production cost
Capital Investment
•
Capital Investment of Php250 million is provided in
this Project.
52
13.6.8.1 Sensitivity Analyses
A sensitivity analysis was prepared to show the
viability of the Project. The approach was to
measure the effect on profitability by changing the
LME price of nickel
Table 11
Sensitivity Analysis
LME Nickel Price
(US$/ ton)
ROI
(%)
Payback Period
(years)
11,000
36%
3.1
13,000
71%
1.5
15,000
106%
1.1
20,000
194%
0.6
22,000
229%
0.5
13.6.8.2 Profitability Analyses (ROI, IRR, NPV, Payback
Period)
With the Php250 million investment and LME price
of nickel at US$12,000 per ton, the project
payback period is computed at 2.1 years.
53
13.7
Economic Aspects
13.7.1 Employment/ Management
During normal operations, manpower will be maintained
at 209 employees. 70% to 80% of this requirement will
come from local communities.
The service contactors employees are not included in the
list.
The manpower requirements of MMDC are as follows:
Table 12
Manpower Requirement
Position
Office of the Resident Manager
Resident Manager
Chief Chemist
Laboratory Analyst
Safety Engineer
Secretary
Lead Sampler
Safety Inspector
Sign Painter
Sampler
Utility
Driver
Sub–total
Mine Operation Department
Mine Operation Superintendent
Pit Supervisor
Ore Handling Officer
Mine Pit Foreman
Ore Handling Foreman
Backhoe Operator
Dozer Operator
DT Driver
Checker
Office Assistant/Secretary
Spotter
Driver
Sub–total
Persons
1
1
4
1
1
2
2
1
6
2
1
22
1
2
2
2
2
6
2
12
16
1
14
1
61
54
Technical Services Department
Technical Services Superintendent
Mine Planning and Engineering Officer
Geology and Grade Control Officer
Geology Exploration
Structural Supervisor
Drill Foreman
Drill Operator
Drill Helper/Sampler
Chief Surveyor
Construction Supervisor/GIS
Head GIS/AutoCAD
Transit man
Cartographer & AutoCAD Operator
Grade Controllers/Mappers
Carpenters/Mason
Helpers
Survey Aide
Office Assistant/Secretary
Driver
Sub–total
Environmental & Community
Department
HSEC Superintendent
Head Comrel
Mine Envin. Prot and Enhancement
Officer
Community Relations Dev. Officer
Agriculturist
Forester
Monitoring
Office Assistance/Secretary
Driver
Sign Painter
Nursery/Utilitymen
Sub–total
1
1
2
1
1
1
2
8
1
1
1
1
2
6
18
4
3
1
2
57
1
1
1
6
1
1
1
1
1
1
4
19
55
Administration & Finance
Department
Administrative & Finance
Superintendent
Mine Accountant
Personnel Officer
Company Gen. Physician (retainer)
Company Dentist (retainer)
Company Nurse
Midwife
Land Negotiator/Purchaser
General Services Officer
Mech’l Foreman
Mine Cashier
Personnel Clerk
Accounting Clerk
Logistic/property custodian
Warehouse man
Mechanic
Electrician
Lube man
Tire man
Welder
Fuel Truck Driver
Helpers
Mesh Hall–In charge
Mesh Hall Helpers
Office Assistant/Secretary
Driver
Sub–total
TOTAL
1
1
1
1
1
2
2
1
1
1
1
1
2
1
1
3
2
3
2
2
2
10
1
4
1
2
50
209
13.7.1.1 Personnel Policies re Pay Scale
Salary scale of personnel will at least be minimum
wage for labor and for technical people it will be at
least matching salaries comparable to the other
mining companies.
No foreign personnel will be employed in this
project.
56
13.7.1.2 Table of Organization
Figure 10
Table of Organization
57
13.7.2 Community Development Plan
The company shall allocate an annual amount equivalent
to the 1% of its annual total direct mining cost for its
Community Development Costs.
The following strategies will be adopted to implement the
Social development program:
•
Give priority to the residents of the impact areas for
both direct and indirect employment;
•
Provide basic social services such as water facilities,
road construction and maintenance;
•
Provide access and use of medical and recreational
facilities;
Provide training to qualified host community residents.
These training programs may include Equipment
operation, driving and others
58
13.7.3 Socio–economic Contributions
The present lifestyle in the host community is typically
rural but it is expected to change with the entry of the
project in the area. Employment will enable the residents
to improve their lives. Other measures that will guarantee
their reception of economic and social benefits will be as
follows;
• Provide long term employment
•
Preference of local workers for employment
•
Salaries, wages, allowances and fringe benefits
will be in accordance to provision of the law.
•
Provide subsidized medical centers for its
employees and also for its host and neighboring
communities
•
Provide more funds for its SDMP projects
especially on community infrastructure projects
and education
•
Enforce safety regulations within the sphere of
responsibility to protect and preserve health of
residents and workers
•
Company will establish an aggressive stand
towards the improvement of social, economic,
safety and health of the community.
59
13.8
Project Schedule
Table 13
Project Schedule
ACTIVITY
2009
1
2
3
YEAR
4
5
6
7
8
1. Environmental structures const.
2. Stripping
3. Mining
4. Shipment
5. Environmental Activity
60
9
10
14.0
ORE RESERVES ESTIMATES
14.1
Database Used
The database used by Marcventures was primarily obtained
from the 136 holes that were done by the company using Koken
and Yoshida Boring Machines.
Drill cores were logged and samples were taken every one
meter Interval. The Japanese Industry Standards (JIS) was used
in the sample preparation. The samples were then brought to
the assay lab for size reduction/preparation before they were
analyzed.
Analyses of samples were done either by titration and
Spectrophotometer. Results of analysis are consolidated and
formed part of the database used.
Collar elevations and locations were established using total
station. All control points were reckoned on WGS–84.
Topographic survey was likewise done to determine the actual
surface area.
Density of 1.12 DMT/ BCM was applied.
14.2
Integrity of Database
The undersigned conducted my own validation on the database
used, it was verified the company’s database more specifically
the volume and assay grades of the deposit. The Japanese
verified the database by examining the core log, coordinate
location,
collar
elevation,
maps/plans
and
geologic
interpretation, assay procedure and it all adhered to the best
engineering practice.
61
14.3
Data Verification and Validation (limitations)
The undersigned personally inspected the initial mining site.
GPS reading were taken from several drilled holes to compare
with the company’s reading.
The following is the comparisons:
Table 14
GPS and Total Station Rdgs on selected drill hole locations
Hole Number
1. C4–2.51
2. C4–3.5G
3. C4–2G’
4 C4–5.5H’
5 C4–4.5F
MMDC Survey
Instrument Reading
N 9°15’55.238”
E 125°53’18.377”
N 9°15’56.873”
E 125°53’15.924”
N 9°15’54.432”
E 125°53’15.108”
N 9°16’00.121”
E 125°53’17.565”
N 9°15’56.500”
E 125°53’19.600”
N 9°15’57.400”
E 125°53’16.100”
N 9°15’55.121”
E 125°53’16.348”
N 9°15’01.600”
E 125°53’18.800”
N 9°15’58.410”
E 125°53’14.348”
N 9°15’59.000”
E 125°54’15.600”
GPS Reading
The difference between my GPS readings and the MMDC
survey instruction rdgs. Is ±30 meters.
Several duplicate samples were taken from the core house with
known assay. Said samples were sent to Ostrea Lab. For
analysis. The following is the comparison of the Marcventures
and Ostrea Lab assays on the same samples:
62
Table 15
Comparison between MMDC & Ostrea Lab Assay
Sample Code/
Number
C4–2G
C4–5.5H
C4–2.5I
C4–3F
C4–3.5G
MMDC Assay
Ostrea Lab.
1.22% Ni
7.42% Fe
2.42% Ni
21.16% Fe
1.93% Ni
26.62% Fe
0.64% Ni
10.00% Fe
0.75% Ni
7.55% Fe
1.24% Ni
7.46% Fe
2.40% Ni
21.78% Fe
1.88% Ni
25.78% Fe
0.66% Ni
11.00% Fe
0.78% Ni
7.10% Fe
The ave. assay results on Ni% values are the same. On Fe%,
Ostrea Lab is 0.585% higher.
14.4
Ore Reserve Estimation Method Used
The polygon method was used in calculating the grade ore
reserve of Marcventures. In the mine design. Both GEMCOM
GEMS 6.1 mining software and Auto–CAD software was
utilized.
14.5
Ore Reserve Estimations
All materials within the 120 hectares initial mining area was
classified per 25m x 25m x 3m block into Overburden, Limonite,
Saprolite and Bedrock. A density of 1.12 is used in soft ore (both
for Limonite and Saprolite. The Limonite and Saprolite were
further classified into several groups based on nickel and Iron
grade. A cut–off of 1.5% Ni and ≤25% Fe and 0.80% Ni and
≥45%Fe were used. All blocks with an average grade below said
cut–off were not included.
63
14.6
Ore Reserve Classification Used
Table 16
Ore Reserve Classification
Ore Classification
A. Soft ore
A.1. Limonite
L–1
L–2
L–3
L–4
L–5
L–6
A.2. Saprolite
S–1
S–2
S–3
S–4
S–5
S–6
S–7
B. Hard Ore
CRO1
CRO2
CRO3
%Ni range
%Fe range
0.80–0.89
0.90–1.10
1.11–1.29
1.30–1.49
1.50–1.59
1.80–1.99
>45
>25
>25
>25
>25
>20
≤1.10
1.11–1.29
1.30–1.49
1.50–1.79
1.80–1.99
2.00–2.29
≥ 2.30
≤25
≤25
≤25
≤25
≤20
≤20
≤20
1.80–1.99
2.00–2.29
>2.30
≤12
≤12
≤12
14.7 Ore Reserves Estimates
The mineable ore reserve is 11,600,000 WMT with an average
grade of 1.5% Ni and 21.64% Fe.
The partial feasibility study did not have a detailed mining plan
(bench to bench), however undersigned prepared one under
Annex N Minable Reserve by Bench.
64
15.0 INTERPRETATION AND CONCLUSIONS
The Mineral Resource estimate for Macrventures was done by Dr.
Carlos Arcilla, CP for Geology; He came out with a figure of 13,767,000
WMT using the density of 1.3. He made a similar run using GEMCOM
GEMS 6.1 software and generated a 10,155,000 WMT at 1.48% Ni.
The MGB validation team after verifying the same initial mining area
came out with 11,864,000 WMT at 1.383% Ni. Using the density of
1.32 on the partial feasibility study, Marcventures used 11,600,000
WMT @ 1.5% Ni.
After validating the Marventures data and conducting field verification
on initial mining area (120 hectares), by locating several drill holes an
re–checking assay results, likewise, I used lower density of 1.12 which
the same as the one being used in nearby operating nickel laterite
operations, also the Nickel Laterite density used in the nickel mines in
Palawan and in Davao Oriental Province is between 1.0 to 1.2 for soft
ore. I came out with 11,031,000 WMT Ore Reserve, around 4.9%
lower than the one used in the partial feasibility study. Nickel grade
likewise is 1.33% lower.
The estimated ore reserve of the Partial Feasibility Study was based on
US$12,000.MT price of nickel. The current price of nickel is US$20,000
per MT. The projected price for the next 3 years will be between
US$20,000 to US$22,000 per MT. The price used in the Partial
Feasibility Study is conservative. The price of US$17.55 per WMT in
the Partial Feasibility Study. Current selling price now around the
Surigao area for 1.5% Ni ore is around US$ 20 per WMT.
Based on my findings, the current economic conditions more than
validates the data used in the Partial Feasibility Study where the nickel
price used is lower than the current nickel prices.
Since the initial mining area is only 2.5% and around 15% of the
laterized zone in the tenement area, it is safe to conclude that the
estimated ore reserves could still increase significantly depending on
the, future price of nickel. (Figure 11 Marcventures Ultimate Pit Limit,
Initial Mining Area)
65
Figure 11
Marcventures Ultimate Pit Limit – Initial Mining Area
66
16.0 RECOMMENDATIONS
Further exploration work is needed adjacent to the proposed initial
mining area. Additional holes south of the initial mining are showing
good nickel grades. Either acquire additional drill rigs or engage the
services of drill contractors to speed up exploration. Additional
information on the over–all volume, grade and locations of the ore
deposits within the tenement area will be vital in the long range
production planning.
The exploration and development of the northern portion of the
tenement should be considered to cut down the hauling distance to the
port by at least ¼ or 5–6 kms.
As much as possible, grade control or even segregation or mining of
ore should not be delegated to contractor for obvious reasons.
The company should seriously consider on short term basis the mining
of Japan Grade ore (≥2.2% Ni) and on long term use beneficiation on
low grade soft ore if additional ore reserve could be found after
exploration. There are new and cheaper technologies available to
beneficiate low grade nickel ore that will put added value to the low
grade nickel ore if beneficiated.
67
17.0
REFERENCES
1) Report on the Mineral Resource Validation of the Nickel
Project of Marcventures Mining and Development Corporation,
By Mine & Geosciences Bureau (Dominador Punongbayan
and Marcelo Alilo), October 2009.
2) Partial Declaration of Project Feasibility Studies, By Engr.
Gabriel P. Pamintuan, September 24, 2009.
3) Application for Mineral Resource Validation for MMDC, by
Dr. Carlos A. Arcilla, September 9, 2009.
4) Geological Report of the Cabangahan Nickel Prospect and
Proposed Mining Site of Marc Ventures Mining Development
Corporation. By Dr. Carlos A. Arcilla, January 3, 2009.
5) Marcventures Preliminary Geologic Resource Report, Dr.
Carlos A. Arcilla, April 7, 2008.
ORLANDO S. CRUZ
Registered & License Mining Engineer
License Number 000722, Oct. 7, 1966
Mining CP for Open Pit Nickel, Copper & Quarry (Industrial)
68
APPENDIX A and B
Projected Profit and Loss
69
ANNEX A
Production and Revenue Schedule
70
ANNEX B
Projected Annual Production and Direct Mining Costs
71
Operating Expenses
ANNEX C
72
ANNEX C (continued)
73
ANNEX D
Marketing Costs Schedule
74
ANNEX E
Development of IP Communities
75
ANNEX F
Environmental Protection and Enhancement Program Cost
76
ANNEX G
Social Development and Management Program Cost
77
ANNEX H
FMRDP
78
ANNEX I
Safety and Health Budget
79
ANNEX J
Depletion
`
80
ANNEX K
Yearly Depreciated Expense
81
ANNEX L
National Taxes and Fees
82
ANNEX M
Local Taxes and Fees
83
ANNEX N
Marcveture Minable Ore Reserves by Bench
84
The Administration Building of Marcventures Mining and Development Corporation
located in Barangay Magosilom, Cantilan, Surigao del Sur
Picture 1
Picture 2
85
On going drilling operation utilizing YHP Drill Machine
(RIG #02)
Picture 3
Picture 4
86
Marcventures Mining and Development Corporation
Temporary Mechanical Shop
Picture 5
Picture 6
87
MMDC’s Mining Service Contractor (Frasec Ventures Corporation)
Temporary Motor pool
Picture 7
Picture 8
88
Marcventures Mining and Development Corporation
Assay Laboratory located at Sitio Nangka, Barangay Cabangahan
Picture 9
Newly Constructed Steel Bridge Located at Carac–An River
Picture 10
89
Marcventures Mining and Development Corporation
Company rented Port Facilities
Picture 11
Picture 12
Picture 12
90
Expansion school building was built intended for Library and Computer Room
Picture 13
Turn over ceremony of books and other computer equipments
Picture 14
91