April 25, 2014

MGB suspends MARC’s operations in Surigao del Sur

BusinessMirror today reported that the Mines and Geosciences Bureau (MGB) has suspended the mining operations of Marcventures Mining & Dev’t Corp (MARC, Not rated) for violations of the mining law.

Acting on complaints about the company’s alleged illegal operations, the MGB conducted a probe and subsequently concluded that the MARC was operating outside its mining tenement, engaged in unsystematic mining operations and has caused siltation to a nearby river. The company has earlier denied the allegations to the MGB.

Aside from the suspension, MARC was reportedly asked by the regulator to show cause within three days why its operations should not be suspended and its mineral processing and sharing agreement (MPSA) cancelled. Thesuspension reportedly may come with additional fines and penalties.

Our take: This negative news flow should weigh on market sentiment on the stock. In an earlier meeting, we gathered that MARC has mineral claims covering 4,799 hectares in Surigao and adjacent to the property of Nickel Asia Corp (NIKL, Buy).

MARC claimed that it has total resources of 53.9m wet metric tons (WMT) of which about 23m WMT is Saprolite (high grade Nickel) and 30.9mWMT is Limonite. There is no foreign independent verification yet on MARC’s resource claims but the company has had local independent verification through the Philippine Mining Resource Code.

If the suspension order on MARC holds or if its MPSA is cancelled, then this will further limit the sources of nickel ore for the global market and can benefit NIKL which is our preferred mining play. We have a Buy rating on NIKL with a target price of P31/sh. – WealthSec