Benguet Corporation (BC) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome to the 2022 Annual Stockholders' Meeting of Benguet Corporation. In compliance with Securities and Exchange Commission's Memorandum Circular No. 6 Series of 2020, please be advised that this meeting is being recorded. The meeting is hereby called to order. In view of the ongoing COVID-19 pandemic, we're again holding the annual meeting virtually or via remote communication. This is to ensure and further safeguard everyone's health and safety at this time. We welcome our stockholders who are joining us in the slide webcast, and we thank all of you who have participated in this meeting by voting or by appointing proxies 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: Dr. Bernardo Villegas, Sir Andrew Julian K. Romualdez, Atty. Rhodora Dapula, Atty. Jose Raulito Paras, Atty. Lina Fernandez, Ms. Maria Remedios Paz R. Pompidou, Atty. Andrew Patrick Casiño, Mr. Anthony Te, Mr. Reginald Velasco, Mr. Kwok Yam Ian Chan, Mr. Luis Juan Virata, Atty. Reynaldo Mendoza, Mr. Max Arceño, Mr. Valeriano Bongalos, Jr., Ms. Pamela M. Gendrano and Atty. Hermogene Real. The company's external auditors, SyCip Gorres Velayo & Co., represented by Misters Peter John R. Ventura and Jerome Afable, and the company's transfer agent, Stock Transfer Service, Inc., representative, Mr. Richard Regala, Jr., are joining us at today's meeting. May we know from the secretary if the stockholders have been duly notified of today's meeting and if there is a quorum for the transaction of business?

Yes, Mr. Chairman. Pursuant to the Securities and Exchange Commission's notice dated February 16, 2022, the Notice of the Meeting was published in print and online format in the Business section of the Manila Standard Today and People's Journal, both newspapers of general circulation, on October 17 and 18, 2022, respectively. A copy of the notice, together with the Definitive Information Statement, minutes of the previous annual stockholders' meeting and other documents related to this meeting were also made accessible through the company's website and the meeting portal. As set out in the requirements and procedures for participation in voting in this meeting, which was attached to the company's Definitive Information Statement, stockholders who successfully registered within the prescribed period will be included in the determination of quorum. By voting, by proxy or by participating remotely in this meeting, a stockholder will be deemed present for purposes of determining quorum. Based on this, I certify that there are present today stockholders owning at least 418,431,472 shares, representing at least 66.95% of the total outstanding capital stock. We therefore have a quorum for the transaction of business.

Thank you, Ms. Secretary. While the company is holding the meeting virtually, we're taking steps to ensure that you, our stockholders, will have an opportunity to participate in this meeting to the same extent as possible as you would have had, had the meeting been done in person. Ms. Secretary, we may request you to explain the participation and voting procedures adopted for this meeting?

Yes, Mr. Chairman. Under the company's bylaws, every stockholder shall be entitled the one 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 accumulate his or her votes. Stockholders who successfully registered for this meeting were given the opportunity to cast their votes by submitting their proxy forms or by voting in absentia through a secure online voting platform. This online voting platform contains the 8 items for approval, excluding the adjournment, as indicated in the agenda set out in the notice. The proposed resolutions 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 9, 2022, or within 90 days thereafter, the stockholders have the option to vote their shares for each of the 11 nominees, not vote for any nominee, or go for one or more or one 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 Service, Inc., and further reviewed by the company's independent external auditor, SyCip Gorres Velayo & Co. The results of the voting with full details of the affirmative and negative votes as well as abstentions will be reflected in the minutes of this meeting. For all items in the agenda and to be acted upon, the affirmative vote of the stockholders representing at least a majority of the outstanding common capital stock will be needed for approval. Finally, stockholders who have 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 meeting portal or by e-mail. Management will endeavor to reply to these questions or address these comments during this meeting. Questions will be answered via e-mail. This participation and voting procedures are also contained in the Definitive Information Statement accessible to all stockholders through the company's website and meeting portal and in PSE Edge.

The next matter on the agenda is the approval of the minutes of the previous meeting of the stockholders held on November 10, 2021, and a copy of which has been made available in the company's website. Ms. Secretary, may I request you to present the proposed resolution and the voting results?

Mr. Chairman, the proposed resolution for approval of the minutes of the previous stockholders meeting is flashed on the screen and will be read by Assistant Corporate Secretary, Atty. Reynaldo Mendoza.

Resolved, that the minutes of the annual stockholders meeting of the corporation held on November 10, 2021, be, as it is hereby, approved.

We note, for the record, that stockholders owning at least 418,431,472 shares, representing at least 66.95% of the outstanding common stock, voted in favor of approving the minutes, 0 shares voted against and 0 shares abstained on the matter. The affirmative votes are sufficient to approve the resolution. Therefore, the resolution is approved.

It is so noted. The next item is the management report, including the company's audited financial statements for the year ended December 31, 2021. Our President, Ms. Lina G. Fernandez, will now give a report on the company's business plans and financial results, the audited financial statements for the year ended December 31, 2021, and interim period financial report. For good order, any questions and comments that we receive by e-mail and through the meeting portal will be taken up before the end of the meeting. I will now turn you over to Ms. Fernandez for the management report.

Mr. Chairman, and members of the Board of Directors, fellow stockholders, ladies and gentlemen, good afternoon to everyone. We are pleased to report that your company rendered in 2021 its most remarkable performance in 3 decades. Consolidated revenue posted PHP 3.84 billion and after-tax income of PHP 1.42 billion made it the most profitable year of your company in its recent 30 operating years. 137% increase in revenue was reported by your company year-on-year from PHP 1.62 billion in 2020 to PHP 3.84 billion in 2021. After-tax income in 2021 soared to PHP 1.42 billion, almost 4x last year's net income of PHP 381.39 million. 2021 also saw profitable performance of all operating units and subsidiaries of your company, with the mining segment as the main driver of the revenue and income growth. Strong metal prices complemented higher mine output from both the nickel and gold operations. Nickel operations, which provided PHP 2.8 billion in export sales, dominated again this year's revenue, followed by the gold operations at PHP 945.8 million, up 238% and 34%, respectively, over the previous year. Lime operations also posted a healthy 20% increase in revenue year-on-year. The nonmining business segment, on the other hand, prided this year with a healthy PHP 54.4 million revenue, exceeding by 61% the PHP 33.9 million revenue posted in the previous year. As a result, earnings per share climbed 269% to PHP 2.29 per share in 2021 from PHP 0.62 a year ago. Total assets grew to PHP 8.8 billion, up 19%, compared to PHP 7.4 billion in 2020. On the other hand, total liabilities declined by 10% from PHP 2.6 billion in 2020 to PHP 2.3 billion in 2021. Accordingly, stockholders' equity increased by 34% to PHP 6.4 billion from PHP 4.8 billion in the previous year. During the year, your company invested PHP 11.7 million in exploration activities and PHP 40.9 million in mining and milling equipment for the expansion of its gold operations in Benguet Province and Sta. Cruz Nickel Project in Zambales. In 2020, PHP 10.8 million was invested in exploration activities and PHP 27.3 million in mining and milling equipment for the expansion of the said projects. Corporate restructuring was also implemented, with the inclusion of additional capital in several subsidiaries, amendment of the articles of incorporation and bylaws of Arrow Freight Corporation and Batong Buhay Mineral Resources Corporation, as well as change of corporate name of BenguetCorp Nickel Mines, Inc. to Benguetcorp Resources Management Corporation, or BRMC. The Pantingan property in Bataan remains to be a viable prospect of your company for epithermal gold mineralization and aggregates. The second phase drilling works of the Pantingan gold prospect, consisting of 7 drill holes, have been completed and the recovered core samples are undergoing physical and chemical analysis. On the aggregates prospect, your company is undertaking topographical and road surveys and is applying for permits, including road right of way, within the 40 hectares' quarry permit application outside the Mineral Production Sharing Agreement's area, as well as securing local government unit consent, tree inventory, National Commission on Indigenous People certification and environmental compliance certificate approval. Your company is currently completing the documentary requirements for conversion of Zamboanga Gold Project's application for Mineral Production Sharing Agreement, the Exploration Permit Application, or EPA, including securing Free, Prior and Informed Consent from the Indigenous People in compliance with DENR Administrative Order No. 2021-25 necessary in approval of the EPA. On August 18, 2021, registration of the company's Kelly Economic Zone Project in Itogon, Benguet was approved by the Philippine Economic Zone Authority for mixed-use ecozone. Consultation with the project-affected people is ongoing. Coordination with the Baguio City Economic Zone and collaboration with the newly elected Itogon local government officials for the phase development and project social acceptability are likewise being undertaken. A satellite nursery for the propagation of agroforestry species as initial site development activity and source of planting materials for the enhancement of disturbed areas during the site development is being stablished in Kelly. Your company plans to collaborate with Entoria Energy Asia Pte. Ltd. of Singapore to conduct feasibility study in solar project for large-scale industrial or local utility power supply. Your company will sign the renewal of the Memorandum of Agreement, or MOA, with Manila Water Philippine Ventures, Inc. on raw water purchase in connection with the bulk water supply proposal to Baguio City. The MOA renewal includes increase in raw water abstraction fee from PHP 46 million to PHP 55.2 million and royalty from 3% to 5%. Upon MOA signing, your company will stand to gain PHP 9.2 million as additional down payment on the raw water abstraction fee. A total of PHP 25.5 million in 2021 was set by our company for the continuous protection and enhancement of the environment. Accomplishment of various programs and activities based on the approved Annual Environmental Protection and Enhancement Program, or AEPEP, of ACMP BRMC Irisan Lime Project and BAGO-Care and Maintenance Program, shows your company's commitment to environmental protection and sustainable development. Majority of the programs implemented deals with the enhancement of land resources, which includes progressive rehabilitation and maintenance of various environmental structures such as the tailings storage facility and its [ supportinances ], drainage tunnels and the strict implementation of hazardous and solid waste management. The components of AEPEP and care and maintenance activities, which are continuously carried out, consists of: nursery development and seedling production; mining forest program and progressive rehabilitation within tenement; national greening program outside tenement; establishment of bamboo plantation areas; implementation of the sustainable agroforestry program, Gulayan sa Minahan; coastal area protection and management; river protection; and air, water and noise quality monitoring; solid and hazardous waste management. Your company implemented in 2021 total amount of PHP 6.98 million in social development programs, which supplement the general welfare programs provided by the national and local government. Your company provided its host communities in the province of Zambales and Benguet: education support to its 388 scholars; education equipment and supplies to schools; assistance to child development programs; provision of medicines, vaccines and medical equipment; provision of farming equipment and fertilizers to farmers; assistance to infrastructure development; and continuing support for various activities concerning information education, communication programs and development of mining technology and geosciences. In accordance to its commitment to be socially responsible corporate citizen, your company continues to deliver and support various environmental and social development programs that protect and improve the quality of life in the community where the company operates. Your company's continuing efforts and quest for excellence during the year has been recognized with awards and nominations received. The Acupan Gold Project was awarded by the Department of Environment and Natural Resources, Mines and Geosciences Bureau, or DENR-MGB, and the Philippine Mine Safety and Environment Association, or PMSEA, with the Safest Underground Mining Operation Award, Runner-Up, on November 26, 2021, during the 67th Annual National Mine Safety and Environment Conference. The nickel operations under BRMC received the following awards and recognitions during the MGB Region III Mining Summit in April 2022: attaining the highest average tenement, safety and health, environment and social development score for the Metallic Category in Region III; best recorded improvement on its mine operations and rehabilitation and safety award for attaining 2 million man-hours work without any lost time accident up until the end of calendar year 2021. BRMC will also be a recipient of the Presidential Mineral Industry Environmental Award, or PMIEA, Platinum Award, this coming November 18 during the PMSEA Awards Night in Baguio City. Irisan Lime operations is the recipient from DENR-MGB for the second time of the Safest Mine Award, Runner-Up, in the mineral processing calcining category. Last year's award was conferred on February 3, 2021, while award this year will be given during the PMSEA Awards Night in Baguio City next Friday or November 18, 2022. Your company's nickel growth and healthcare business operations continue to be ISO-certified. With the same performance in 2022, your company is hopeful 2023 will be another good year on the back of strong metal prices as well as government support to the mining and other industries. Your company will continue to develop its nonmining portfolio and pursue profitable business in real estate, renewable energy, agroindustry and water projects. As we look forward to maximize opportunities in your company's nonmining assets, we will continue to strive -- to contribute to the development of the mining industry and uplift the lives of our host communities. 2021 was indeed a banner year for Benguet Corporation despite the difficulties brought by the pandemic and climate change. We attribute the notable performance last year to the hard work, dedication and commitment of all the employees, cooperation and support from the stakeholders, guidance and wisdom of the Board of Directors as well as the unwavering trust and support of our stockholders. Until next year, keep safe always. Thank you so much.

Ms. Secretary, may I request you to present the proposed resolution and the voting results?

Mr. Chairman, the proposed resolution for approval of the management report and audited financial statements for the year ended December 31, 2021, is flashed on the screen.

Resolved, that the management report as presented by the President and the corporation's audited financial statement for the year ended December 31, 2021, be, as it is hereby, approved.

Mr. Chairman, we note, for the record, that the stockholders owning at least 418,431,472 shares, representing at least 66.95% of the outstanding common stock, voted in favor of approving the management report and audited financial statements for the year ended December 31, 2021, 0 shares voted against and 0 shares abstained on the matter. The affirmative both are sufficient to approve the resolution. Therefore, the resolution is approved.

It is so noted.

The company's Chairman of the Board, Mr. Bernardo M. Villegas is an Independent Director and his term, as such, has reached the 9 years maximum term limit in 2021, with 2012 as reckoning year. During the regular meeting of the Board of Directors held on August 24, 2022, he was approved for extension and for retention as Independent Director, as set by the company's Manual on Corporate Governance. Pursuant to Securities and Exchange Commission Memorandum Circular No. 19 Series of 2016, such term limit may be extended upon meritorious justifications and stockholders' approval. The justification for said extension or retention has been provided to the stockholders in advance through the Information Statement disclosed in the PSE Edge portal and posted in your company's website.

Ms. Secretary, may I request you to present the proposed resolution and the voting results?

Mr. Chairman, the proposed resolution for approval of the extension of the term or retention of Mr. Bernardo Villegas as Independent Director is flashed on the screen.

Resolved, that the extension/retention of Dr. Bernardo M. Villegas as Independent Director despite having reached the cumulative maximum term of 9 years and 1 year extension under SEC Memorandum Circular No. 4 Series of 2017, for reasons that Dr. Villegas has contributed, and will continue to contribute significantly to the success of the company be, as it is hereby, approved.

Mr. Chairman, we note for the record that stockholders owning at least 418,431,469 shares, representing at least 66.95% of the outstanding common stock, voted in favor of approving the extension/retention of Dr. Bernardo M. Villegas as Independent Director, 0 shares voted against, and 3 shares abstained on the matter. The affirmative votes are sufficient to approve the resolution. Therefore, the resolution is approved. Congratulations, Mr. Chairman.

Thank you. It's so noted. The next matter on the agenda is the approval of the extension of termination date for granting stock option to 8 years or until May 31, 2031, and the corresponding amendment to Paragraph 11 of the Amended Stock Option Plan of the company. The Amended Stock Option Plan provides the termination date of granting stock options will be on May 31, 2023. This was authorized and approved by the Board in its regular meeting held on August 24, 2022. Ms. Secretary, may I request you to present the proposed resolution and the voting results?