Benguet Corporation (BC) Earnings Call Transcript & Summary

In compliance with Securities and Exchange Commission's memorandum Circular No. 3 series of 2020, please be advised that this meeting is being recorded. The meeting is hereby called to order. Due to the ongoing threat post by the COVID-19 pandemic, in compliance with the Interagency Task Force of emerging [indiscernible], to avoid physical mass gathering, the company conducts this 2021 annual stockholder's meeting, [indiscernible] August 24, 2021. The Board has also authorized stockholders to participate in the virtual AGM through remote communication and to exercise the rights to vote in absentia pursuant to provision of SEC's memorandum Circular No. 3 series of 2020. We welcome our stockholders who are joining us in this live webcast. We thank all of you who have participated in this meeting by voting in absentia or appointed proxy for this meeting. We hope that you are all keeping safe and in good health. Joining us today are the members of your company's board of directors and management. We have with us the following directors. Please wave your hand as I call you. Starting with myself, Bernardo Villegas; Jessie Caparas; Reginald Velasco, I think he's coming; Rhodora Dapula; Jose Raulito Paras; Andrew Patrick Casino; Lina Fernandez; Kwok Yam Ian Chan; Anthony Te; Maria Remedios Paz R. Pompidou.

Yes. Present.

Reynaldo B. Mendoza.

Good afternoon.

Max D. Arceno.

Good afternoon.

Valeriano B. Bongalos, Jr.; Pamela M. Gendrano;

Good afternoon.

Hermogene H. Real.

Good afternoon to all.

Also joining us in today's meeting are the company's external auditors, Sycip Gorres Velayo & Company, represented by [indiscernible] among the directors.

Good afternoon.

So among the SGV, Jaime Del Rosario, I think you have already -- the very last speaker, John R. Ventura.

Good afternoon, everyone.

And the company's transfer agent, Stock Transfer Service Incorporated, representative, Mr. Richard Regala, Jr. May we know from the secretary the stockholder's have been duly notified by of today's meeting and if there is a quorum with the transaction of the business?

Yes, Mr. Chairman. Stockholders of record as of September 17, 2021, were duly notified of this 2021 Annual Stockholders' Meeting in 4 ways. First, Pursuant to SEC's notice dated April 20, 2020, the notice of the meeting, including its agenda, was published both in written and online format in the business section of 2 newspapers of general circulation: The Manila Standard Today on October 16 and 18, 2021, and People's Journal on October 16 and 18, 2021. Second, by disclosure of the notice, together with the definitive information statement containing management report with the Philippine Stock Exchange through PSE EDGE portal. Third, by posting on the company's website and in the meeting portal, notice was also made accessible, including minutes of the previous meeting held on November 11, 2020, and other documents related to this meeting. And finally, through e-mail for those who have successfully registered online, consistent with applicable SEC rules and the company's internal guidelines on annual stockholder's meeting by electronic means of communication.

We now proceed the determination of the quorum. Do we have a quorum, Ms. Secretary?

Mr. Chairman, as set out in the requirements and procedures for participation and voting in this meeting, which was attached to the company's definitive information statement as Annex C, stockholder's who successfully registered within the prescribed period will be included in the determination of quorum. By voting in absentia or by proxy or by participating remotely in this meeting, a stockholder will be deemed present for purposes of determining a quorum. Based on this, yes, Mr. Chairman, we have a quorum for the transaction of business, and I hereby certify that out of the 624,981,745 outstanding shares of stock entitled to participate and vote, a total of 422,494,791 shares are represented in this meeting with [ 343,829,460 ] shares participating remotely or in absentia and 78,665,328 shares represented by proxy. This represents 67.60% of those entitled to participate and vote and constitute more than 2/3 of the outstanding capital stock.

Thank you, Ms. Secretary. On the basis of the second provision of the corporate secretary, we now call the 2021 annual stockholder's meeting in order. When the company is holding this meeting virtually, we are making exceptions to you, our stockholders will have an opportunity to participate in this meeting in extent as possible as you would have had the meeting being done in person. Ms. Secretary, may we request you to explain the participation of voting procedures adopted for this meeting?

Yes, Mr. Chairman. Under the company's bylaws, every stockholder shall be entitled to 1 vote for each share of stock standing in his or her name in the books of the company. For the election of directors, each stockholder may cumulate his or her votes. Stockholders who successfully registered for this meeting were given the opportunity to pass their votes by submitting their proxy forms or by voting in absentia through a secured online voting platform. This online voting platform contains the 6 items for approval, excluding the [ adjournment ] as indicated in the agenda set out in the notice. The proposed resolution will be shown in the screen later as each matter on the agenda is taken up. For items other than the election of directors, the stockholders have the option to either vote in favor of or against a matter for approval or to abstain. For the election of directors, in case the temporary restraining order of the Philippine Supreme Court is lifted on or before the annual stockholders meeting on November 10, 2021, or within 90 days thereafter, the stockholders have the option to vote their shares for each of the 11 nominees, not vote any nominee or vote for 1 or some nominees only in such number of shares as the stockholders prefer, provided that the total number of votes cast will not exceed the number of shares owned by them, multiplied by the number of directors to be elected. Votes received through electronic voting or by proxy form will be validated and tabulated by the company's stockholder relations office and the company's stock and transfer agent Stock Transfer Services, Inc. and further reviewed by the company's independent external auditors, Sycip Gorres Velayo & Company. The results of the voting with full details of affirmative and negative votes as well as abstentions will be reflected in the minutes of this meeting. For all items in the agenda to be approved today, other than the 2/3 vote required for approval of the stock option awards, the vote of the stockholders representing at least a majority of the outstanding capital stock will be sufficient to prove the matter. Finally, stockholders, once successfully registered, will also be given an opportunity to raise questions or express comments limited to the agenda items by submitting the same through the company's media portal or by e-mail. Management will endeavor to reply to these questions or address these comments during this meeting. Questions not answered during the meeting will be replied to via e-mail. This participation in voting procedures are also contained in the definitive information statement as Annex C accessible to all stockholders through the company's website and meeting portal.

The next matter on the agenda is the approval of the minutes of the previous meeting of shareholders held on November 11, 2020. Copy have been made available in the company's website. Ms. Secretary, may I request you to present the proposed resolution and the voting results.

Resolved, as it is hereby resolved that the minutes of the stockholders' meeting held on November 11, 2020, be as they are hereby approved as presented. "Mr. Chairman, as shown on the screen, a resolution has been proposed for the approval of the minutes of the November 11, 2020, annual stockholders meeting. I am pleased to inform the stockholders that a total of 422,494,791 shares, representing 67.60% of the total outstanding stock voted in favor of the resolution, to approve the minutes of the 2020 annual stockholders meeting. There was 0 against votes and 0 abstain votes. Therefore, the minutes of the 2020 Annual Stockholders Meeting is hereby approved".

It is so noted. We now proceed with the management's report and 2020 audited financial statements. Management prepared an annual report, which was posted in the company's website, aside from the required SEC Form 73A. May I request the president, Ms. Lina Fernandez, to present a reform of the company's consolidated operations and its 2020 audited financial statement.

Mr. Chairman and members of the Board of Directors, fellow stockholders, ladies and gentlemen, good afternoon to all of you. 2020 was another testament of your company's resiliency having withstood the difficult operations challenges brought about by the COVID-19 pandemic. We also attribute this past year's accomplishments to the lifting by the government of the suspension order over your nickel subsidiary, BenguetCorp Nickel Mines, Inc. or BNMI, paving the way for assumption of normal nickel mining operations in November and as new highs in metal prices were recorded. Improved good output from the Acupan Gold Project due to mine annual upgrades cushioned the operational impact of the pandemic in your gold operations. These auspicious events gave rise to our company's respectable financial performance for the year in review. Consolidated revenues rose to PHP 1.62 billion, double last years PHP 802 million. Mining revenues accounted for 98% of the total revenue at PHP 1.59 billion, up 112% from last year's PHP 748 million. The non-mining business was affected by the pandemic posting PHP 34 million revenue, 38% lower than last year's PHP 54 million. Nickel exports dominated this year's revenue, climbing 12x from PHP 65 million in 2019 to PHP 818 million this year, accounting for 52% of total. Gold revenue, corresponding to 44% of total, rose 22% year-on-year from PHP 576 million in the previous year to PHP 704 million in 2020. The remaining 4% came from [ LINE ] operations. Salability of lower grade nickel ores, coupled with 44% and 25% spike in nickel and gold prices, respectively, drove revenue upwards. As a result, your company registered after-tax net income of PHP 381 million in 2020, 3x better than last year's PHP 160 million. Earnings per share shoot up by 226% from PHP 0.19 in 2019 to PHP 0.62 in 2020. Total assets grew 7% year-on-year, attributable to increased nickel ore and gold sales. Equity likewise improved by 8% from PHP 4.4 billion in the previous year to PHP 4.8 billion in 2020. Your company's continued property is a viable prospect for epithermal gold mineralization and rock abrogates. The initial results of the Phase 1 drilling program have revealed interesting gold values, which were intersected at shallow depths at the southern half section of the MPSA Tenement. Due to the encouraging outcome from the first trading program, your company will be initiating immediately the follow-up drilling activity for Phase 2 drilling in the prospect area to further delineate the lateral and vertical extensions of the intercepted gold mineralization. The Phase 2 drilling program will consist of 6 to 8 diamond drill holes with a total down dip length of 1,200 meters, targeting the 2 promising gold mining systems named as V2 and V9. Your company is in the process of renewing Pantingan exploration permit. On the rock abrogates prospect, your company is prioritizing the permitting activities for the 40 hectares quarry permit area or QPA, north outside the MPSA over the large-scale quarry prospect identified inside the MPSA denominated as [ Pub 1 and Pub 2 ], which still needs drilling for the declaration of mining project feasibility. Your company likewise secured an exploration permit application for about 1,200 hectares in the northern portion, further outside of the Pantingan MPSA. The MGB has issued area clearance in the QPA, and your company is working on obtaining LGU consent, NCIT certification, trade inventory and environmental compliance certificate. In the meantime, your company continues to do topographical and road surveys and apply for road right of way permits. Your company will pursue evaluation of its real estate properties in the Benguet district. On August 18, 2021, the Philippine Economic Zone Authority, or PEZA, and your company formally signed a supplemental agreement amending the November [ 2022, 2011 ] original contract for the Kelly Special Economic Zone from a purely special economic zone to mix use ecozone. In this regard, PEZA issued certificate of registration number EZ 11-17 for the Company's Kelly Ecozone project. Amidst the pandemic, your company will pursue the execution and social development endeavors through the implementation of various social development and management programs in its gold, nickel and line processing operations in coordination with the local government units, various government agencies and organizations and the host communities in Zambales and Benguet. In the fulfillment of the social development programs, your company's gold and line operations spent PHP 56.3 million since 2005 while the nickel operations spent PHP 47.4 million since 2013. Your company has been assisting families in your host communities and nearby barangays and our employees by providing financial assistance, food and hygiene essentials and quarantine facilities in response to the pandemic. Scholarship programs benefit a total of 403 high school and college students in our host and neighboring communities. Your company likewise funded and supported various community infrastructure projects as well as for the community's water sanitation, trainings and child welfare programs, providing for livelihood projects such as contracting in the repair of construction of your company's infrastructure facilities, mill enhancing projects and reforestation activities also benefited our host communities. The total amount of PHP 18.1 million was spent by your company in 2020 for environmental mitigation and enhancement programs, the national greening program and other tree planting activities supporting the initiatives of the Department of Environment and Natural Resources. Since 2010, total expenditures for environmental protection amounted to PHP 978.2 million. This includes construction and maintenance of various environmental structures such as dams, benchtop, panels, roads, canals and others as well as reforestation activities. Since 2009, your company's nickel operations has planted about 2.2 million seedlings of various plant or tree species inside and outside the tenement with 95% survival rate. [indiscernible] propagated and planted 25,000 various bamboo species within 10 hectares area inside the MPSA and around 3,000 bamboo trees over a 1 hectare area in Kabaluan River in Zambales. The gold operations, on the other hand, has planted about 1.3 million seedlings of various plant prespecious all over its tenement with 82% survival rate. Your company anticipates that the pandemic will linger but remains optimistic about its prospects in 2021. It is counting on renewed government support for the mining sector and strong gold and nickel prices. Your company will endeavor to improve gold output in the Acupan Gold operations and increased volume of nickel ore shipments from the Sta. Cruz nickel operation in Zambales. Your company will continue with the exploration and resource validation in Pantingan, Bataan and other mining claims in order to develop or operate the new mine. It will also pursue the evaluation and development of viable prospects in its real estate portfolio in Benguet province. Finally, your company will revisit its water rights holdings for possible Bulk Water Supply Project. We thank the company's employees, management team and the Board of Directors for their dedication and commitment. We are especially grateful for the trust and confidence of our shareholders who have given us their unwavering support in overcoming this difficult year. Working together, your company is ready to face tomorrow's challenges and opportunities. Thank you.