Lepanto, Philex, Manila Mining shares resume trading

James Ryan Jonas

After a voluntary trading suspension request yesterday, the shares of Lepanto Consolidated Mining Company (LC / LCB), Philex Mining Corporation (PX), and Manila Mining Corporation (MA / MAB) will resume trading today, following a disclosure announcement that PX is entering into a joint venture with Manila Mining in the exploration and development of the Kalayaan Project in Placer, Surigao del Norte.

The three companies submitted to the Philippine Stock Exchange today the following disclosure:

We are pleased to advise that Manila Mining Corporation (“MMC”), in which Lepanto holds a 20% interest, has finalized an agreement with Philex Mining Corporation for the exploration and joint development of the Kalayaan Project (“Project”) located in Placer, Surigao del Norte. The Project is covered by Exploration Permit No. XIII-014B in the name of Kalayaan Copper Gold Resources, Inc. (“Kalayaan”), a 100%-owned subsidiary of MMC. Pursuant to their agreement:

1. MMC sold to Philex for US$25 million a total of 125,000 shares of stock of Kalayaan, representing a 5% interest in Kalayaan.

2. Philex shall earn a further 55% interest in Kalayaan, for a total of 60%, by sole-funding all pre-development expenses including a bankable feasibility study for the Project and the development of the Project jointly with MMC.

What this means is that Philex is acquiring a majority stake (amounting to 60%) in the Kalayaan project by funding all pre-development expenses and by paying Manila Mining $25 million.

The consequence on the stock price of the three stocks would depend on the outlook for the Kalayaan project. If it would deliver huge output and huge returns in the future, Manila Mining, and ultimately Lepanto Mining, would suffer as it divested themselves a majority stake in that project. In turn, Philex becomes the big winner.

On the other hand, if the Kalayaan project’s outlook is bleak, Manila Mining and Lepanto were wise to divest their ownership, leaving potential losses in the hands of Philex.

But then again, this is just my opinion.

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James Ryan Jonas teaches business management, investments, and entrepreneurship at the University of the Philippines (UP). He is also the Executive Director of UP Provident Fund Inc., managing and investing P3.2 Billion ($56.4 Million) worth of retirement funds on behalf of thousands of UP employees.