April 30, 2015

Philex Mining Corp reports 1Q15 net income of P305m, +14% YoY

In a briefing yesterday, Philex Mining Corp (PX) said its 1Q15 net income grew 14% YoY to P305m which was primarily driven by cost management measures and the P107m one-time gain from the sale of its Indophil shares. Stripping out the latter, core income declined 23% YoY to P214m. The latter came as gross revenues dropped 18% YoY on weak metal prices and lower grades of ore.

Ore grades for gold and copper dropped 1% and 9%, respectively, as the Padcal mine is approaching the end of its mine life. As a result, production of gold and copper fell 2% and 12%, respectively. This was further exacerbated by lower average realized prices for both gold (-13% to US$1,189/ounce) and copper (-5% to US$2.71/pound)which resulted in the significant drop in gross revenues to 18% YoY.

PX, however, was able to partially mitigate the drop in revenues by cost cuts and operational rationalizations which reduced costs and expenses by 17%. The company also disclosed that it is currently exploring ways to extend the life of Padcal into 2020, even as it is on track to complete the Definitive Feasibility Study (DFS) on the Silangan mine project by October 2015 with early works and mine development to be done over 2016-2018. The company expects Silangan mine to start production by 2018/2019.

Our take: While the company could possibly extend Padcal well into 2020, ore grades would likely fall further decreasing metal production even if the company maintains mining and milling tonnage. This would make costs per unit of gold and copper rise further although this is better than having a revenue gap between the end of Padcal and the beginning of Silangan. The company would also likely need to further raise equity once the DFS is done. – WealthSec