Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
June 2L,20L3
Attention:
Gentlemen:
In compliance with the requirements of the Exchange, please find attached a copy of the
Company's Response to the SEC Comments on the Company's 2072 Annual Report and
the Amended SEC Form I7-A (Annual Report) for the year 20L2.
Thank you.
Very truly yours,
Gilbeft
Finanhe
ago
Ad''min Manager
Corporite
tfi
formati on Officer/Alternate
ililt
Bui ldi
eto
M ani I a,Phi
Ii
pfi nes
Barcode Page
The
Doc Source
Company lnformation
SEC Regi$ration No.
Company Name
0000040938
UNITED PARAGON MINING CORP.
lndu$ry Classification
Company Type
Stock Corporation
Document lnformation
Document lD
Document Type
Document Code
Period Covered
No. of Days Late
Department
Remarks
10621201 3000078
17
-A (FORM 1 1 -A:AANU)
17-A
December 31 ,2012
0
CFD
Amended
with letter.
UNITED PARAGON
MINING CORPORATION
Head Office
stn Floor, Quad Alpha Centrum Bldg.
125 Pioneer Street, Mandaluyong City, Philippines
Tel no. (632) 636-5133 Fax No. (632) 636-4923
E-mail: jsbernardo@unitedparagon.com.ph
June 19,2013
Securities and Exchange Commission
SEC Bldg., EDSA, Greerrhills
Mandaluyong City
Attention:
Justina F. Callangan
Acting Director
Gentlemen:
C.LM
Alfredo C. Ramos
Chairman
"tref;arrd
/
issues raised in
l.
ITEM
1. BUSINESS OF ISSUER
as
This section shall describe in detail what business the registrant tloes and
proposes to do, including what products or goods are or rvill be procluce or
services that are or will be renclerecl. Briefly described the busirress of registrant
and its significant subsidiaries and include, to the extent rnaterial to art urtderstanding
of the. (bXiii) Mirring and Oil Companies. A statement clescribing the areas
2.
SEC Findine
- ITEM 5. MARKET
3.
irr
any interinr period in the current fiscal year for wlrich financial statemerrts are
furnished in the disclosure docurnent, shall in addition to applicable iterns under
subparagraph (2), provide the irrforrnatiorr in subparagraplr ( I ) hereof.
I . Plarr of Operation. Describe tlre plan of operation for tlre next twelve ( 120
months. Tlris description should include such rnatters as: (a) a discr"rssiorr of
how lorrg the registrant can satisfy its cash requirenrent and whetlrer it will
have to raise additional funds irr the next twelve (12) nronths.(b) a surnrnary
of any product research and developrnerrt that the registrant will perforrn for
tlre terrn of tlre plarr. (c) any expected purchase or sale of plarrt and significarrt
::iliJ:::l
cr':a
':ges
in trre
r*';rnber of
4.
SEC Findine
SIGNATURE PAGE
Pursuant to the requirernent of Sectiorr l7 of the Code and Section l4l of the
Corporatiorr Code. this repoft is signed on behalf of tlre issuer by the undersigrred.
thereunto duly autlrorized. irr the city - rrotarized. Durly signed by tlre following (l)
Prirrcipal Executive Officer; (2) Prirrcipal Operating Officer; (3) Principal Finarrcial
Officer; (4) Comptroller; (5) Principal Accounting Officer; (6) Corporate Secretary.
Notarized. .SEC Remarks - Incomplele
will
May 14,2013
RffiGffifi\flffiD
by: ).'
date/time:
This refers to the company's 2012 Annual Report (SEC Form 17-A) which was filed with
this Commission on April 29,2013.
A review thereof showed that the same is not in full compliance with the disclosure
requirements under SRC Rule 17.1(1XAX|). Please see attached checklist for the
required disclosures.
ln this regard, the company is directed to submit its amended report in accordance with
the enclosed checklist, including an explanation why the required information was not
reflected in the company's original filing within fifteen (15) days from receipt of this letter.
The amendment shall be filed under an amended cover sheet, marked "A", to indicate
that thedOcument is an amendment.
General lnstruction: A comment of "Not Disclosed" or "Nof complied with" or "lncomplete" is indicated herein to emphasize or
highlight the information not found in the report. lf the required information is not applicable, please state/explain in a
separate sheet.
ITEM
1.
BUSINESS
BUSTNESS
OF
ISSUER
gf lssuer : This section shall describe in detail whot business the registrant
does and prcposes to do, including what products ot goods are or will be produced or
services that are or will be rendered . Briefly describe the business of registrant and its
sftnificant subsidiories ond include, to the extent material to an understanding of the
(bl Adllilional Requirements as to Certain lssues or lssuers
(g)
Eusiness
ITEM
(a)
5.
Set forth the approximate number of holders of each ctass of common equity of
as of the latest practicabte date but in no event more than ninety (90) days prior
to fiting the registration statement. lnctude the names of the top twenty (20) shar
of each ctass and the number of shares hetd and the percentage of total shares outstanding
iIATTERS
on
hetd by each.
(a) a discussion of how long the registrant can satisfy its cash reguirements and whether it
wilt have to raise additionat funds in the next twetve (12) months
(b) a summary of any product research and devetopment that the registrant witl perfor
for the term of the ptan
(c) any expected
(d)
SIGNATURE PAGE
Pursuant to the requirements of Section 17 of the Code and Section '141 of the Corpo
Code, this report is signed on behatf of the issuer by the undersigned, thereunto dut
authorized, in the City of
y signed by the fottowing (1) Principat Executive Officer; (2) Principal Operatine Officer;
(3) Principal Financial Officer; (4) Comptrotter; (5) Princioat Accte. Officer; (6) Corporate
SecretarV.
tncomptete
(,i
COVER SHEET
4 0 9 3 8
SEC
Registration Number
/ Town / Province)
Gilbert V. Rabago
636-st33/34
Contact Person
SEC
FORM 17.A
l1-l-f FTf
Month
trTf
Month
FORM TYPE
Fiscal Year
Annual Meeting
Section
Foreign
File Number
LCU
Document lD
Cashier
:'-'-'
r!
rl
tl
;i
r!
STAMPS
tl
1.
2.
SEC
ldentification Number
40938
3.
4,
Philippines
Province, Country
6.
or other
jurisdiction
of incorporation or organization
7.
Citv
B.
9.
1550
Postal Code
(532) 636-5133 to 3a
lssuer's telephone number, including area code
NIA
Former name, former address, and former fiscal year, if changed since last report
10.
Securities registered pursuant to Sections 8 & t2 of the SRC, or Sec. 4 and 8 of the
Title of Each
clast
Common Stock
11.
RSA
26L,3L4,797,080
[rl]
No
lf yes, state the name of such stock exchange and the classes of securities listed therein:
lnc.
Common Stock
12.
(a)
Yes
(b)
[V]
No
Yes
[1 ]
[]
[]
13.
State the aggregate market value of the voting stock held by non-affiliates of the
registrant - P686.6 rnillion based on the closing price at the Philippine Stock Exchange,
lnc. on March 3'J,,2013.
1,4.
to be filed by
Section 17 of the Code subsequent to the distribution of securities under a plan
Check whether the issuer has filed all documents and reports required
Yes[]
No[]
NAlvl
15.
lf any of the following documents are incorporated by reference, briefly describe them
and identify the part of the report into which the document is incorporated:
The Company's 2012 Audited Financial Statements are incorporated under item 7 of
Part ll (Operational & Financial lnformation).
TABLE OF CONTENTS
Page No.
PART 1
Item
Item 2
Item 3
Item 4
PART II
Item
t2
Financial Statements
19
19
Item 6
Item 7
Item 8
Properties
Legal Proceedings
L2
t2
L4
PART III
Item
Item 12
PART IV
Item 13
27
SIGNATURES
29
Item 10
Item 11
20
23
25
26
30
INDEX TO EXHIBITS
31
The Company's principal mining operation is the Longos Mine at Paracale, Camarines Norte.
The Company operated an open pit area in the mine from August 01, 1988 to June 01,, 1994
having extracted 888,809 metric tonnes (MT) of ore, which yielded 79,120 ounces of gold. This
was more than twice its originally calculated reserve. By April L994, the Company began the
commercial operations of the underground mine at the same site. lt was placed under care and
maintenance in December 1998 because of depletion of economic reserves above Level 800,
high operating cost and low metal prices
ln L999, the management of the Company decided to continue exploration drilling in the main
Longos lode area and the neighboring sub-parallel veins to search for more ore to increase
reserves. However, in the last quarter of 2003, the management of the Company was convinced
that sufficient drilling had been done in these areas. ln November 2003, the Company decided
to suspend further drilling in Longos.
Another prospective area is San Mauricio in Jose Panganiban as an exploration target for the
Company. The Company has plans of continuing exploration drilling in San Mauricio once the
necessary clearance from the Department of Environment and Natural Resources ("DENR") is
secured.
With the current gold prices, the present ore reserves of the Company are now sufficient for a
viable project at 500-600 tonnes per day capacity. The Company pursued various options to
raise project financing subject to the company being awarded appropriate government permits
to resume further development and rehabilitation of Longos Mine.
Production. There were no gold and silver recovered in the years 2012, 2O1J and 2010. The
Company's mining and milling operations are still suspended.
Products/Sales/Competition. Prior to the suspension of the mining and milling operations, the
Company produced dore bullions, containing gold and silver, which were either refined by the
Bangko Sentral ng Pilipinas Mint and Gold Refinery or sent by airfreight and refined byJohnson
Matthey PLC. of England. The principal product, gold accounted for over 99% while the byproduct, silver contributed only less than t%. Since the suspension of the mining and milling
operations, the Company has had no new product.
The gold and silver dore bullions were sold either to Bangko Sentral ng Pilipinas or Johnson
Matthey PLC. of England. The sales were covered by contracts using internationally accepted
pricing in the world market available from the London Metal Exchange. Since no single gold
producer (mining company) can affect the international metal prices, competition among
mining companies is virtually non-existent. Competition among mining companies is on
acquisition of mining claims/areas. Dore bullion is readily marketable.
Sources and availability of raw materials and supplies. The ore as raw material extracted
usually comes from the Company's mineral properties. However, the Company suspended its
mining and milling operations in 1999 due to depletion of economic reserves at its Shaft 4, high
operating costs and low metal prices.
The Company has quite a number of suppliers for its operating supplies. Energy was sourced
from Camarines Norte Electric Cooperative ("CANORECO") under a long-term contract for the
supply of electricity from 1988 to 2000, Likewise, the Company has four (4) megawatt power
plant, which has the ability to provide sufficient power for operation during any power failure,
since these equipment has been idle for a period of time further rehabilitation is required.
However, in November 2000, the Company switched its power supply from CANORECO to an inhouse generating set to provide its limited power requirement of 10 KVA. ln early 20L2 site
power supply is now provided by CANORECO. However, the Company is also looking an option
for other possible power provider and/or participates in an open market to source its future
power requirement. Purchases of supplies, equipment and spare parts are obtained on a
competitive basis from sources both local and foreign and are generally available.
Transactions with and/or dependence on related parties. The information required is disclosed
on Note 11 of the Company's 2Ot2 Audited Financial Statements.
Government regulations and approvals. The Company has to strictly comply with governmental
regulations and seek government approvals, particularly those of the DENR, with respect to
disposal of waste and tailings, rehabilitation, environment etc. to be able to start or continue
mining operations. The Company's Environmental Compliance Certificate ("ECC") expired on
July 3L, 1999. The Company will have to renew its ECC before it can resume mining and milling
operations. ln preparation forthe planned reopening and rehabilitation of the Longos Mine, the
Company filed a request for the renewal of the said ECC on August 31, 2006. The DENR through
and approval prior to the renewal of the ECC. The Company had finalized and submitted the
EPRMP to EMB-V on April 7, 2010. On October 8, zOtO, the Company after satisfying the
requirements and upon the recommendation of the Environmental Management Bureau, was
granted an ECC for the Longos Mining Project. The company completed its documentation for
exploration permit application filed at the Mines and Geoscience Bureau -Region V (MGB-V) on
Feb 4, 201,3
Effects
of existing
is on hold.
compliance to the Company, which are appropriately reflected either as expense or as capital
asset under generally accepted accounting principles. The effect on the Company of any
probable government regulation could not be determined until specific provisions are known.
Research and Development. Exploration, drilling and development for a mining company, are
the equivalent of research and development. The Company's principal activities since the
suspension of the mining and milling operations until 2OO4 had been exploration and
confirmation drilling. The total cost of exploration and drilling for the year 2OO4 amounted to
P664,992.00.
Exploration/Drilling. No exploration work was initiated during the years 2012, 20tt and 2010.
The Company suspended its exploration/drilling activities in the San Mauricio mineral claim in
Jose Panganiban after completing the 2nd hole in February 2004, pending approval by the DENR
of the Company's application for Mineral Production Sharing Agreement ("APSA") over the area.
This area is covered by application denominated as APSA V-041.
Compliance with environmental laws. The Company had reforested and maintained mined-out
and disturbed areas in support of the DENR re-greening program. The Company has complied
with the "Adopt A Mountain, Adopt A Mining Forest Program" initiated by the DENR way back in
1989. This program mandates all mining firms to conduct reforestation and forestation in
mined-out areas, slopes, decommissioned tailings' pond, causeways and waste dumps and
vacant lots within the mining and adjoining communities. The company's target for 20'1,3 under
the NationalGreening Program is about ten (10) hectares or about 5,000trees planted.
The Company has reforested to date a total of 8.173 hectares of old tailings'ponds, abandoned
drill pads/sites and vacant lots within the mine site with some 24,689 of agoho, acacia mangium,
narra and gmelina species. The semi-annual report submitted to the MGB Region V showed
16,708 seedlings survived and is growing vigorously for a record of 67.67% survival rate. The
Company maintains an 800 square meter nursery within the mine site with seedlings of the
above species being grown for replanting in the old tailings pond, abandoned drill sites and
vacant lots.
the rehabilitation and reforestation of the exploration drilling area in the San Mauricio
mining claims in the town of Jose Panganiban, a total of 775 seedlings of narra, gmelina and
agoho were planted along the slopes of disturbed areas and drill pad sites. The topography was
For
re-graded to prevent erosion prior to the suspension of exploration drilling in February 2004.
Total environmental expenses amounted to P0.5 million for the years 2OI2 and 2011.
of
Exploration/Techni
ca
Fi
nance/Ad
nistration
2
6
11
6
T7
The Company expects no significant change in the number of employees for the ensuing year
unless the necessary permits have been awarded to the company and the needed funding
requirements for exploration and further rehabilitation and development of the Longos Mine
becomes available, in which case, a significant number of employees will be hired.
The Paracale based employees were members of National Allied Mines and Workers Union
("NAMAWU") for rank and file and United Paragon Mining Corporation Supervisors' Union
("UPSU") for supervisors. The collective bargaining agreement between the Company and
NAMAWU expired on December 31, 1999 while that between the Company and UPSU expired
on April 30, 2003. Mandaluyong City based employees and administrative personnel at the
mine site are not subject to collective bargaining agreement. The Company's employees have
not been on strike in the past three (3) years and are not threatening to go on strike. The
Company does not have any incentive arrangement with its employees and no plans to establish
one in the future.
Major Risk/s. The management of the Company regularly scans the events and trends
concerning the mining industry in order to identify and assess risks affecting the Company. At
the same time, the management of the Company assesses the internal risks and weaknesses in
its operations. The major risks involved in the Company's operations are as follows:
a.
Changes in the market price for gold. The market price for gold can fluctuate widely.
These fluctuations are caused by numerous factors beyond the Company's control such
as speculative positions taken by investors ortraders in gold; changes in the demand for
gold for industrial uses, for use in jewelry and investment; changes in the supply of gold
from production, disinvestment, scrap and hedging; financial market expectations
regarding the rate of inflation; the strength of the US dollar (the currency in which the
gold price trades internationally) changes in interest rates; actual or expected gold sales
by central banks; gold sales by gold producers in forward transactions; global or
regional political or economic events.
A sharp decline in the gold price would adversely affect the viability of the Longos
Rehabilitation Project and the Company's ability to raise the required amount to finance
the said project. However, inasmuch as gold price fluctuations are caused by numerous
factors beyond the Company's control and gold hedging is not applicable to the
Company at this stage, there is no way the Company can manage this risk at this time. ln
the future, when the Company reopens the mine, gold price hedging strategies will be
considered.
b
Skills shortages. Skills shortages are re-emerging as industry growth recovers and mine
Development risks. The Company's plan to rehabilitate and reopen the Longos Mine is
based on the results of a pre-feasibility study conducted by the Company. The study
used estimates of expected or anticipated project economic returns which are based on
assumptions such as future gold and silver prices, anticipated tonnage, grades of ore to
be mined and processed, anticipated recovery rates of gold and anticipated capital
expenditure and cash operating costs, among other factors.
Actual cash operating costs, production and economic returns may differ significantly
from those anticipated by Company's studies and estimates due to a number of
uncertainties inherent in the development and construction of an extension to an
existing mine or any new mine. Prior to reopening the mine, the Company may hire
additional consultants
study and
rehabilitation plan.
d. Ore reserves estimate risk. The ore reserves presented in this annual report are
the best
of
estimates
ore reserve estimates based upon actual exploration and drilling results, new
information and fluctuations in economic parameters. The actual mineral deposition in
quantity (tonnage) and quality (grade) may vary greatly from the Company's estimate
when actual mining/extraction is conducted. Some physical obstacles in operation such
as water inflow underground, fracturing of rock upon mining and erratic nature of the
mineral content of the vein can contribute to the variance between the estimated and
actual ore reserves.
e. The risk of flooding the underground workings. The ore reserves of Longos Mine
comprising of several parallel narrow gold veins are located in an ultramafic and
granodiorite country rocks. Heavy water ingress into the underground workings caused
by fissures of the veins under the ocean floor is inevitable but can be controlled by a
well-planned and designed dewatering plan inside the mine. The Company had been
successful in controlling water ingress in the past by installing heavy-duty pumps and by
pushing the shoreline with a cofferdam. The same dewatering strategy will be used
when the Company reopens the mine.
f.
Liquidity and access to capital. The Company needs an estimated amount of U5520
million for capital expenditures to implement its two (2) years exploration work
program. The company pursued various options to raise project funding subject to the
company being awarded the appropriate government permits to resume its operation. .
Although, the Philippine government has been aggressively promoting and supporting
the revitalization of the mining industry and investors are bullish on the gold price.
Failure to obtain the required permits and funding could delay the project planned
exploration works to upgrade the current ore reserve.
Item 2. Properties
The Compony owns vorious office furniture, fixtures ond tronsportation equipment in its Heod
office locoted at Mandaluyong City. The Compony olso owns various drilling, mining ond milling
equipment ond support focilities in its Longos mine site. There is no mortgoge, lien or
encumbrance over the oforementioned properties.
The Compony has no intention ot present to lease or ocquire ony odditionol significont real
property or mochinery ond equipment in the next twelve (1,2) months unless the appropriote
government permit hove been oworded to the compony ond the required funding for explorotion
ond further development of the mine becomes ovoiloble, in which cose, additional significont
reol property or machinery ond equipment will be ocquired. Mochinery ond equipment ore
usually acquired month to month os needed usually through direct purchose or through letters of
credit, if imported, under suppliers' or bonk's credit terms.
The Compony through an Operating Agreement executed on Februory 1.0, 1987 and Option ond
Operoting Agreement dated November 1-7, 1-987 with Comorines Minerols, lnc. ('CMl') has the
exclusive rights to operote the minerol properties in the nome of CMI thot are covered by mining
leose controcts, including the right to occupy the other real properties of CMl. The operating
ogreement expired on June L8, 2006. On July 30, 2007, the Company ond CMI signed on
operoting ogreement renewing ond consolidating the previous option ond operoting
ogreements. This operoting ogreement provides for the extension of the term for twenty-five
yeors or co-terminus with the relevont minerol production shoring agreement thot may be
issued by the Philippine Government and o royolty rote of 3.5% bosed on gross revenues, net of
marketing ond refining chorges.
The principal properties subject of on operoting ogreement with CMI consists of 1,204.6160
hectares with confirmed minerol resources ond prospective explorotion oreos. The approved
mining leose controcts with the Philippine Government cover 394 hectores, 64 hectares expired
in 2006 and 330 hectores expired in 20L0. However, prior to expiry of these mining lease
controcts, the Compony submitted opplications for conversion to minerol production shoring
ogreement/s. The mining cloims covered by the operating ogreement with CMt ore all locoted in
the Porocole - Jose Pongonibon District.
The mining leose controcts ossigned to the Company by CMI are as follows:
Mining Lease Contract ("MLC") No. MRD 267, granted on June 18, 1981. covering a group
of nine (9) mining claims with a total area of 64.1609 hectares, expired on June 17,
2006. This
is
MLC No. MRD 40L, granted on March 19, 1985, covering twelve (12) mining claims with
an area of 92.8699 hectares, expired on March 18, 2010. This is the southern portion,
known as Malaguit group of claims, which includes Haliguing Bato area.
MLC No. MRD 445, granted on July 01, 1985, covering a group of twenty-nine (29)
mining claims with a total area of 194.2786 hectares, expired on June 30, 2010. This is
the portion, which includes the UPMC village, the Tailings Pond No. L, Baluarte and San
Antonio structures and Barangay Palanas.
MLC No. MRD 446 granted on July 01, 1985, covering a group of six (6) mining claims
with a total area of 43.5000 hectares, expired June 30, 2010. This is the Tugos area.
The Company and CMI filed a joint application for production sharing agreement ("APSA") for
the above MLCs on February7,2006 (denominated as APSA V-375), However, with the passage
of the
Executive Order
IMPLEMENTING REFORMS
AND
AND
GUIDELINES TO ENSURE ENVIRONMENTAL PROTECTION AND RESPONSIBLE MINING IN THE
UTILIZATION OF MINERAL RESOURCES", the processing of the renewal of the APSA application is
on hold until a legislation rationalizing existing revenue sharing schemes mechanism shall have
taken effect. ln line with the company management mandate to upgrade its ore reserve the said
APSA 375 application was converted to an exploration permit application in February 4,2013.
UPMC on its own has located several mineral areas located in Paracale and Labo, Camarines
Norte consisting of 531.000 hectares for which APSAs were filed.
Following are the APSAs filed by the Company:
'
four (4) lots of 101 mining claims. Lots 1.,2 and 3 are owned by CMI
(known as San Mauricio claim group) and Lot 4 (Torana Group, 126.0000 hectares) is
owned by UPMC with a total area of 753.4439 hectares.
APSA V-254 covers six (6) mining claims owned by UPMC and located
Paracale, Camarines Norte consisting of Lots 1 and 2 with a total area of 405.0227
hectares, denied by MGB V in an order dated June 30, 20tI pursuant to the provisions
of Department Memorandum Order (DMO) NO. 2010-04. A motion for reconsideration
on the denial of the application has been filed by the Company which is currently being
evaluated by MGB V office.
twenty-four Qal mining claims owned by CMI also known as the JeffSindicado claim group with a total area of 1,82.3624 hectares.
APSA V-375 covers fifty-six (56) mining claims owned by CMI also known as
the Longos
claim group with a total area of 393.8607 hectares, this has been converted into an
Exploration Permit Application by UPMC and CMI on February 4,201,3 upon submission
of pertinent documents and payment of the required conversion fee and is now
renumbered as EXPA-000180-V.
'10
Mineral Resources and Ore Reserves. There was no change in the resource estimates during
the year 2Ot2 as compared to year 20L1. The lndicated Mineral Resources lnventory as of
January 01, 2OI3 is 3,'J,60,737 MT at 10.89 grams of gold per tonnes (Au g/t) containing
1.,106,420 ounces of gold. Summary of the ore resources as of January 01, 2013 is presented
below:
ldentified Mineral Resources
Above Level 800
Measured
lndicated
Tonnes
Grade, Au
g/t
Ounces, Gold
257,808
L24,955
7t.25
1.4.32
93,248
57,529
382,763
L2.25
L50,777
590,7t4
t,270,6LL
338,800
2,200,L25
L2.68
240,8r7
9.11
13.09
10.68
372,L53
L42,595
755,555
577,849
L0.77
200,088
577,849
3,L60,737
3,t60,737
10.77
10-89
10.89
t,L06,420
t,L06,420
lnferred
Sub Total
lnferred
Sub Total
Adjacent Vein Systems
Measured
lndicated
lnferred
Sub Total
200,088
Difference
Tonnes
Grade, Au
g/t
Ounces, Gold
Probable
Sub Total
Below Level 800
202,07L
85,928
287,999
68,930
22,875
10.61
8.28
9.9L
9l_,805
;
Proven
Probable
Sub Total
L,302,524
L,302,524
11.30
11.30
473,zrL
10.61
11.30
1L.05
6.63
68,930
496,085
565,0L6
7,494
473,zLL
Total
Proven
Probable
Total Ore Reserves
Less: Reserves Used For Pillars
202,07L
1,388,452
1.,590,523
5,953
11
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
The estimation, assessment, and evaluation of Mineral Resources and Ore Reserves were
undertaken by qualified technical personnel. However, the Company hired Competent Persons
to evaluate and certify the mineral resources and ore reserves, in compliance with the Philippine
Mineral Reporting Code for Reporting Exploration Results, Mineral Resources and Ore Reserves
(PMRC) adopted by the Philippine Stock Exchange, lnc. in October 2007.
The information in this report that relates to Mineral Resources was based on information
compiled and certified by Mr. Balgamel B. Domingo, who is a member of the Geological Society
of the Philippines (GSP). Mr. Domingo is not employed by any company. He is a consultant for
various mining and geologic projects. On the other hand, the information on Ore Reserves was
compiled and certified by Mr. Lucio R. Castillo, a member of the Philippine Society of Mining
Engineers. Mr. Castillo is the Chairman ICEO of Goldridge Mining Corporation. Both Messrs.
Domingo and Castillo are included in the lists of competent persons promulgated by their
respective accred ited professiona I orga nizations.
to the style of
mineralization and type of deposit under consideration and to the activity, which they had
undertaken to qualify as Competent Persons as defined in the 2007 Edition of PMRC. Messrs.
Domingo and Castillo consented to the inclusion in this report of the matters based on their
information in the form and context in which it appears.
Messrs. Domingo and Castillo have sufficient experiences, which are relevant
the matters taken during the annual stockholders meeting on September 28,2012,
no other matter was submitted to a vote of security holders during the period covered by this
report.
Except for
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market lnformation. The Company's shares of common stock are traded in the Philippine Stock
Exchange, lnc. ("PSE"). The quarterly high and low stock prices (in Philippine Pesos) for the
years 201,L,201-2 and the first quarter of year 2OI3 are as follows:
Market Price
First Quarter
20L2
2013
High r
0.017
Low
0.016
High ,
0.028 :
20LL
Low
0.02L
High
0.015
Low
0.011
12
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
Second Quarter
Third Quarter
Fourth Quarter
Note:
0.011
0.014
0.021
Up to August 73, 2008, par volue was P7.00 per shore; effective August 74, 2008, por value
was changed to P0.01. per share.
The Company's shares of common stock were traded with a closing price of P0.017 per share on
December 31,2072 and P0.016 March 3I,201.3.
Holders. The Company has 1,258 shareholders as of December 31, 2012 and 1,248 as of March
December
are
26L,3L4,797,080 shares of common stock; 12,200,000 shares of Class "A" preferred stock and
400,000 shares of Class "8" preferred stock.
Theeto
top 20 corrrmon
common 5Io
r5450
stockholders
o
as of March
a
foll
3t,2OI3 are a5
as Toilow5:
Name
No.
Percent of
Total
84,325,L08,842
57,000,000,000
32.27
2
3
ALAKOR CORPORATION
53,884,138,98L
20.62
29,206,893,1_50
10,670,L90,045
9,858,250,792
ABACUS BOOK
6,839,068,254
5,235,537,900
t,252,097,050
21.81
1.18
408
378
10
674,1,42,466
2.62
2.00
0.48
0.26
11
RAMOS, ALFREDO
282,3rO,\50
0.1
L2
216,653,850
13
l_09,250,000
0.08
0.04
L4
SY
15
GOTANCO, CHRISTOPHER M.
93,500,000
90,812,500
003
L6
87,000,000
L7
90,000,000
18
CASTILLO, EDUARDO B.
54,375,000
19
CASTANEDA, ISA
50,000,000
20
C,
P.
TIONG SHIOU
F.
49,250,000
0.04
0.03
0.03
0.02
0.02
0.02
Shown in the below table is the equity ownership on a per class basis as of March 31, 2013.
Security Class
1.
Outstanding Shares
Percent of Total
Common Shares
Filipino
245,377,700,385
93.90
13
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2O12)
15,937,096,595
6.10
Other
15,905,890,445
6.09
British
1,250,000
0.00
21,750,000
0.01
8,206,250
0.00
26t,3L4,797,080
100
Alien:
American
Chinese
Total
2.
Preferred A
Filipino
3.
Alien-other
Total
Preferred B
9,365,000
76.76
2,835,000
23.24
12,200,000
100
Filipino
L20,000
30.00
Alien-other
Total
280,000
70.00
400,000
100
Dividends. No dividends were declared in the first quarter of 2013 and in the years 2OI2 and
201,L. The Company's ability to declare and pay dividends on common equity is restricted by the
availability of sufficient retained earnings and funds.
Stock Ownership Plan. Currently, UPMC Board of Directors approved and authorizes the
adoption of a Stock Option Plan for the Directors and Management to cover an aggregate of 20
Billion UPMC Common Shares at various prices per share as follows:
Number of Shares
5 Billion
10 Billion
5 Billion
P0.020
0.0250
o.0275
The company hired a consultant to formulate and design a stock option plan to insure its proper
implementation.
During the annual meeting of the stockholders of United Paragon Mining Corporation ("the
corporation") on September 28,2013, the stockholders approved andlor ratified the adoption
and implementation of the Stock Option Plan for the directors and management of the
Corporation, under such terms and conditions as determined by the Board, subject to the
compliance with the applicable laws and rules and regulation of the Securities and Exchange
Commission and Philippine Stock Exchange. As of date of this report no stock options were
subscribed and/or availed.
Recent Sale of Unregistered Securities. No securities were sold by the Company within the past
three (3) years, which were not registered under the Code. There were no new issues (including
securities issued
14
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
the same period, except for 217,942,035,530 common shares issued resulting from
the
conversion of debts to equity approved by the SEC on July 24,2008. Please refer to Note L5 of
the 2012 Audited Financial Statements.
with 2011
The company posted a higher net loss of P79.0 million in 2012 compared to P61,.7 million in
201,1. The net increase of P17.3 million or 28% are due outside services, technical consultant
fees, depreciation and write-off of obsolete and dilapidated materials and supplies and interest
on advances and offset mainly by foreign exchange gain and reversal of liabilities.
General and administrative expenses of P61.7 million were higher by P41.1 million or 200% as
compared to P20.6 million as reported in 201,t. The increase in administrative expenses are
represented by increase in outside service of P25.6 million, salaries and allowances of P3.7
million, depreciation and write off of obsolete inventory of P9.2 million and miscellaneous
expenses for donations and staff amenities of P2.3 million.
Finance Expenses of P44.8 million
P41.5 million in 2011.
Finance income for the year 20L2 of P1.8 million and P0.8 million in 2011 consist mainly of
interest income from bank deposit.
Other income for the year 2012 of P20.2 million was higher by P19.0 million as compared to
P1,.2 million in 2011. The increase in other income consist rnainly of reversal of liabilities
amounting to P14.8 million, sale of scrap materials of P1.3 million gain on disposal of property,
plant and equipment of P1.3 million and income from condonation of debt of P2.3 million.
Provision for income tax (MCIT) increased by P0.37 million mainly due
income for year 201,2.
2011 compared
to
increase in other
with 2010
The Company posted a higher net loss of P61.7 million compared to P35.5 million in 2010. The
net loss for the year 2011 was higher by P26.2 million substantially due to the accrual of interest
charges (inclusive of cumulative dividends/interest on Class A preferred shares), increase in
general and administrative expenses and increase in foreign exchange loss.
Total general and administrative expenses of P20.6 million in 2011 was higher by P6.3 million
(44%) as compared to P1.4.3 million in 2010. The 2011 figure was higher due to the payment of
documentary stamp tax on loan document, PSE filing & listing fee of debt to equity conversion
15
United Paragon Mining Corporation
SEC Form 17-A (AnnualReport-2012)
Finance expenses of P41.5 million in 2011 was higher byP11.8 million (40%l compared toP29.7
million in 2010, due to the take up/accrual of interest on loans and advances, Class B preferred
shares and cumulative dividends on Class A preferred shares shown as interest expense in
accordance with PAS 32.
Other income account for the year 2011 of P1.2 million was lower by P0.2 million (16%) as
compared to P1.4 million in 2010. This is due to lower income recorded for 2Ott of P0.2 million.
Provision for income tax (MCIT) decreased by P0.01 million (23%l or from P0.04 million in 2010
to P0.03 million in 2011 due to decrease in other income subject to income tax during the year.
2010 compared
with 2009
The Company posted a higher net loss of P35.5 million compared to the P30.5 million in 2009.
The net loss for the year 2O7O was higher by P5.0 million substantially due to the accrual of
interest charges (inclusive of cumulative dividends/interest on Class A preferred shares).
Total general and administrative expenses of P14.3 million in 2010 was higher by P2.5 million
(21%) as compared to P11.8 million in 2009. The 2010 figure was higher by P2.5 million due to
the payment of professional and other fees in connection with the renewal of the Company's
Environmental Compliance Certificate which was received in October, 201.0 and the application
for Mineral Production Sharing Agreement for APSA 375V,041V, 27OV & 254V.
of P29.7 million in 2010 was higher by P4.8 million (1,9%l compared to P24.9
million in 2009, due to the take up/accrual of interest on loans and advances, Class B preferred
shares and cumulative dividends on Class A preferred shares shown as interest expense in
accordance with PAS 32.
Finance expenses
Other income account for the year 2010 of P1.4 million was lower by P1,.7 million (53%) as
compared toP3.1 million in 2009. This is due to lower income recorded for 2010 of P2.0 million
16
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
of remaining mill
plant
Out of the total current liabilities of P661.2 million as of December 31,2012, the amount of
P475.0 million (7I%l is due to related parties for loans and advances, interests, and dividends
and other liabilities, and the balance (29%) is due to suppliers and other creditors.
The loans and advances from related parties are covered by promissory notes subject to roll
over every ninety (90) days with interests accrued in the books. P2.2 billion worth of liabilities
due to related companies were converted to equity in July 2008 as part of the capital
restructuring approved by the SEC on July 24,2008. For the details of the amounts of loans and
advances and other liabilities converted to equity, please refer to Notes 11 and 15 of the 2011
Audited Financial Statements.
Due to the suspension of mining and milling operations and limited sources of funds, the
Company failed to meet payments within the stated terms to majority of its suppliers,
contractors and other creditors. However, the Company had reduced significantly the balance of
its outstanding accounts with suppliers, contractors and other creditors through offsetting
arrangements or installment payment schemes. The internal and external sources of funds and
the courses of action that the Company plans to undertake to address the liquidity problem are
discussed under "Plan of Operations for the Yea r 2013"
.
Management's plans to address the liquidity and going concern issues are discussed under "Plan
of Operations for the Year 20'J,3".
The gold price rose further by 5% during the year 2012 as investors continue to use gold as a
safe haven investment due to troubles in the financial markets. Gold was traded in the London
Metal Exchange ('LME") with a closing price of U551,664.00/oz. atthe end of 2012 as compared
to USS1,574.50 at the end of 201,1,. The gold price reached an all-time high of USS1,790.00 on
October 5,20L2. The outlookforgold remains bullish, as it continues to provide a hedge against
weakness in fiat currencies and further turmoil in the financial markets. On April 19, 2013, gold
price closed at USS1.,397.00 per ounce at the LME (Am Fix).
The bullish sentiments on gold prices have increased investors' interest in gold mining
17
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
companies and exploration projects thus improving the Company's chances of raising the
finances required for the rehabilitation and further development of the Longos mine. Likewise,
higher gold prices improve the viability/future profitability of the Longos mine.
Other than the foregoing, there are NO known
.
.
r
I
r
trends, demands, commitments or uncertainties that will result in or that are reasonably
likely to result in the Company's liquidity increasing or decreasing in a material wdy,
events that will trigger direct or contingent financial obligation that is material to the
Company, including any default or acceleration of an obligation,
significant elements of income or loss that did not arise from the Company's continuing
operations and
r I
There have been no material changes from December 31,2012 to December 31,
more line items of the financial statements except for the following:
201.1.
in one or
a)
Decrease in Cash & cash equivalents by P78.4 million or72%o, mainly due disbursement of
cash operating requirement for the year 2OI2 and no additional cash infusion made for
the year.
b)
Decrease in Prepaid expenses and other current assets byP0.4 million or 56% due to the
payment of deposit due to contractors.
c)
d)
lncrease in Other noncurrent assets by P0.4 million or 23% primarily due to the set-up of
input tax for the year 20t2.
e)
to write-off of
1B
United Paragon Mining Corporation
SEC Form 17-A (AnnualReport-2O12)
f)
in
Alakor Corp.
g) lncrease
to income tax
h)
Decrease in Pension liability by P1.5 million or 50% due to the resignation of 2 head office
staff for year 2012.
i)
Changes
20tt.
lnasrnuch as the Company's mining and milling operations are still suspended, there are no
significant key performance indicators other than the financial ratios presented under
Supplementary Schedule - Schedule
Plan
K.
of operations for the year 20L3. The plan of operations for the year 201.3 covers
the
following activities:
c.
d.
building while works on repairing and rehabilitating some of staff houses are completed;
After the series of talks with CANORECO, in February 2012, the mine site is now
provided with electricity from the local electrical cooperative and quotes for possible
contractors to carry out drilling program, access ramp, ref urbishment of power
substation and power lines have been collected for approval in due time;
The Company continued to dispose scrap, obsolete and excess assets to raise additional
funds and as part of the ongoing care and maintenance of the mine site to augment
current working capital cash requirement until such time the company obtain the
approval of the required government permits.
The Company already completed its exploration permit application and related
documents, but with the passage of Executive Order 79, issuance of these permits is on
hold.
The Company will continue with its exploration and drilling activities to increase the ore
reserves upon receipt of appropriate exploration permit from the government on the
advisory servicesto the Company in connection with the fund raising activity.
The Company expects significant purchases of machinery & equipment and change in the
number of its employees during the year, once the required government permit have been
awarded to the company and the financing for the exploration activity of its Longos Mine
becomes available during the year.
Item 7. Financial Statements
The 2012 Audited Financial Statements of the Company are incorporated herein by reference.
The schedules listed in the accompanying index to supplementary schedules are filed as part of
this SEC Form t7-A.
lnformation on lndependent Accountant. The accounting firm of SyCip Gorres Velayo & Co.
with address at the 6760 Ayala Avenue 1226 Makati City, was appointed as
external auditor of the Company atthe annual stockholders'meeting in2O!2 with Mr. John T.
Villa as partner-in-charge, in line with the Company's commitment to good corporate
governance and in compliance with SEC Memo Circular No. B Series of 2003. ln 2003, the
auditing firm of KPMG Manabat Sanagustin & Co. with address at KPMG Center, 9th Floor, 6787
Ayala Avenue, L226 Makati City was appointed as external auditor of the Company. Mr. Ricardo
G. Manabat was the audit partner for the year 2003 to 2005 and Mr. Ador C. Mejia for the years
2006 to 2009.
CPAs ("SGV')
External Audit Fees and Services. The fees of the external auditor in the pastthree (3) years are
as follows:
Year
Tax Fees
Other Fees
20L2
P306,000
20Lt
P305,000
P300,000
201_0
For the past three (3) years, the Company had not engaged the services of SGV nor KPMG
except for the audit and or review of the annual financial statements in connection with
statutory and regulatory filings and certification of the proposed accounts to be converted to
equity. The amounts under the caption "Audit and Related Fees" & "Other Fees" for the years
2012,2O\1 and 2010 pertain to these services. The Company's tax related matters are being
handled by the tax services department of SGV.
The Audit Committee reviews and recommends to the Board and stockholders the appointment
of the external auditor and the fixing of the audit fees for the Company. The Board and
20
United Paragon Mining Corporation
SEC Form 17-A (AnnualReport-2012)
SEC
regulations.
proced ure.
No independent accountant engaged by the Company has resigned or declined to stand for reelection, or was dismissed.
PART III
Alfredo C. Romo1 68, Filipino, has been the Chairman of the Board since February I, L990 and
President/Chief Executive Officer of the Company since December 7,1992. For the past five (5) years, he
director and/or executive officer, and maintained business interests in companies involved in
publication, sale and distribution of books, magazines and other printed media,
transportation, financial services, infrastructure, oil and gas exploration, mining, property development,
shopping center, department store, gaming and retail, among others.
has served as
the printing,
Eduardo B. Costillo, 65, Filipino, has been a Director of the Company since June L3, 1990. For the past five
(5) years, he has served as a director and/or executive officer and maintained business interests in
companies involved in agribusiness, travel and tourism, real estate, food processing, medical products,
marketing, telecommunication, mining, among others.
Corlos G. Dominguez,66, Filipino, has been a Director of the Company since October 29,1993. For the past
five (5) years, he has served as director and/or executive officer and continues to be involved in
maintaining business interests in companies involved in banking, hotel and property development,
retailing, smelting and mining, power distribution, among others.
Adrion Poulino S. Romos, 34, Filipino, has been a Director of the Company since April 20, 2006 and
Treasurer since July 28,2006. For the past five (5) years, he has worked as an lnstructor at a business
school, Operations Manager for a major book retailer and Business Analyst for Mckinsey & Company, He is
currently working in various management capacities and served as Director and/or Executive Officer, in
companies involved in mining, investment holdings, securities, sale and distribution of books, magazines
and other printed media, property development, transportation, oil and gas exploration, among others.
Ricardo Miguel S. Romos 4j, Filipino. has been a Director of the Company since May 23, 1997. For the past
five (5) years, he has served as an executive officer of companies involved in greeting cards and novelty
21
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
Augusto B. Sunico, 83, Filipino. has been a Director of the Company since June 27, 1995. For the past five
(5) years, he has served as a director and/or executive officer and maintained business interests in a
development, financial services, printing and publishing, shopping centers, among others,
Gerord Anton S. Ramos, 36, Filipino. has been a Director of the Company since August 6, 2010. For the past
five (5) years, he has served as a Director and/or Executive Officer in companies involved in the music
industry, broadcasting, stock brokerage, mining, holding companies, property development, sale and
distribution of books, magazines and other printed media, shopping centers, among others.
Christopher M. Gotonco, 63, Filipino, has been a Director of the Company since September 28,2012. For
the past five (5) years, he has served as Director, Chairman and/or Chief Executive Officer in companies
involved in natural resources (oil and gas), investment banking, mass transportation, property
development, and mining, among others,
John Peter C. Hoger, 43, Filipino, has been a Director of the Company since September 29, 2012. For the
past five (5) years, he has been working in various management capacities and serves as Managing Director
in companies involved in import/export commodities trading particularly pulp, paper, packaging, security
paper and security printing products, rubber, coconut oil and other coconut-related products, among
others. His business activities also include managing local interests of foreign principals and serving as
commercial advisor to several international companies and local agents.
Roberto V. Son Jose,70, Filipino, has been the Corporate Secretary of the Company since July 30, 1.999. For
the past five (5) years, he has been associated with the Castillo Laman Tan Pantaleon San Jose Law Offices
and has served as director or officer of various client companies involved in transportation, financial
services, infrastructure, mining, property development, holding companies, communication, foundations,
entertainment, among others. He is a member of the lntegrated Bar of the Philippines,
Delfin P. Angcao, 55, Filipino, has been the Assistant Corporate Secretary of the Company since July 30,
1999. For the past five (5) years, he has been a Partner of Castillo Laman Tan Pantaleon San Jose Law
Offices becoming such since the year 2000. He is or has been elected as director and/or Corporate
Pu
blic Accountants.
Messrs. Carlos G. Dominguez and John PeterC. Hagerare the current independent directors.
The Directors of the Company are elected at the annual stockholders' meeting to hold office
until the next succeeding annual meeting and until each respective successors have been
elected and qualified.
meeting following
22
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
Corporation*
Aquatlas,lnc,
Alfredo C. Ramos
Corp.*
| the
philodrill Corporation+
Metro
,ourrdo
B. Castitto
Carlos G. Dominguez
Corporation
RCBC
Christopher M. Gotanco
Capital Corporation+
Corporation*
lnc,
N.A.
Alakor Corporation
Corporation+
, lnc.
Corporation
Corp.+
Forewords, lnc.
NBS
Foundation,lnc.
Corporation*
Corp.
Manuel
L,
Quezon University
*Reporting Companies
Resignation or Declination to Stand for Re-election of a Director. Since the Company's last
annual meeting of stockholders held on September 28,2012, none of the directors elected
therein by the stockholders has resigned or declined to stand for re-election to the Board of
Directors.
23
United Paragon Mining Corporation
SEC Form 17-A (AnnualReport-2012)
Significant Employees. Other than the above named directors and executive officers, the
Company has not engaged the services of any person who is expected to make significant
contributions to the business of the Company. The business of the Company is not dependent
on certain key personnel and there are no arrangements to assure that certain personnel will
remain with the registrant and not compete upon termination.
Family Relationships. The following are the family relationships among officers and directors:
Mr. Gerard Anton S. Ramos and Mr. Adrian Paulino S. Ramos are the sons of Mr. Alfredo C.
Ramos, Chairman of the Board & President and are the nephews of Atty. Augusto B. Sunico,
Director of the Company. Atty. Augusto B. Sunico is a brother in law of Mr. Alfredo C. Ramos.
Mr. Ricardo Miguel S. Ramos is a nephew of Mr. Alfredo C. Ramos.
lnvolvement in Certain Legal Proceedings. The Company is not aware of any adverse events or
legal proceedings of the nature required to be disclosed under Part lV, paragraph (A), (a) of SRC
Rule 1.2, Annex C with respect to directors and executive officers during the past five (5) years
that are material to the evaluation of the ability or integrity of the directors or executive
off ice rs.
Position
Year
Salary
Bonus
Annual
Compensa
tion
Alfredo C. Ramos
Gerard Anton
Chai rman/President/CEO
Vice-President
Ramos
Gilbert Rabago
lris-Marie Carpio-
Manager
Legal and Compliance
Duque
Carlos E. Aspillera
Officer
Gloria A. Gerona
Financial Controller+
Josephine
S.
Bernardo
Atty. Roberto San
Jose/Delfin P.
Manager
Corporate Secreta ry/Asst.
Corporate Secretary
Angcao
20LT
20L2
P5.2 million
P5.4 million
24
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-20'l2)
I 2013 (Est.)
,,
20LL
'
20L2
, 2013 (Est)
P6.5 million
P5.3 million
,t
P5.4 million
P6.5 million
Note: *resigned executives effective 2012 ond 2071, however their salories ond seporotion benefits
For the most recently completed fiscal year and the ensuing fiscal year, directors received and
will receive a per diem of P5,000.00 per board meeting to defray their expenses in attending
board meetings. There are no other arrangements for compensation of directors, as such,
during the last fiscal year and for the ensuing fiscal year.
The Company maintains standard employment and consultancy contracts with the above
officers, all of which provide for their respective compensation and benefits. Other than what is
provided under applicable labor laws, there are no compensatory plans or arrangements with
executive officers entitling them to receive more than P2.5 million as a result of their
resignation, retirement or any other termination of employment, or from a change in control of
the Company, or a change in the executive officers' responsibilities following a change in control
of the Company.
The Company has not granted any bonus and other compensation to directors and executive
officers since 1994 except for the mandatory 13th month pay, which is already included in the
amounts shown in the above table. There are no warrants or options outstanding in favor of
directors and officers of the Company other than the item discussed under stock option plan
above.
of
Class
.
:
common ,
,
.Lommon
----.- :
Title
with
e
Owner
Name of beneficial
owner and relationship
lssuer
lnc. t''o''l
lpha
lnc.
,
:
Alakor corporation
Citizenship
No. of shares
:
held
Percent
of Class
City (Stockholder)
PCD Nominee
Corporationr"'
Ayala
Various
please see Note 4
Filioino/
l-orergn
29,206,993,1.50
11,19
25
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
Preferred
UA'
Preferred
t.At,
to'"
clo gth
Lancaster Holdings
Filipino
4,050,000
33.20
Foreign
2,835,000
23.24
Aurora B. Caringal
Filipino
2,700,000
22.13
Edmundo M. Tolentino
Filipino
2,000,000
16 40
Foreign
280,000
70.00
Filipino
99,500
Limited
Aurora B, Caringal
Preferred
..At,
Preferred
t.
An
No,
Commonwealth Village,
r''o''r
ttBD
Preferred
City (Stockholder)
Alakor Corporation r''o'"
9th Floor, Quad Alpha Centrum,
t25 Pioneer St., Mandaluyong
City (Stockholder)
Preferred
ilBn
Lancaster Holdings
Limited
Alakor Corporation
22.37
Notes:
(1)
(2)
Anglo Philippine Holdings Corp. is an investment holding firm focused on infrastructure and related property
development activities.
(31
(4)
(s)
(5)
Alakor Corporation is a holding company with investments in real estate and stock market.
wholly owned subsidiary of Philippine Central Depository, lnc. (PCD) and is the
registered owner of the shares in the books of the Company's transfer agent. The beneficial owners of such
shares are either PCD's participants (Brokers) themselves or the clients of these PCD participants in whose
names these shares are recorded in their respective books. No individual or entity owns more than 5% of
outstanding common shares in UPMC. Net of 213,049,831,935 shares in the name of Alakor Securities
Corporation (ASC). Of the 213,049,831,935 shares in the name of ASC, (a)National Book Store, lnc. owns
84,325,108,842 shares,(b) Anglo Philippine Holdings Corp. owns 57,000,000,000 shares and (c) Alakor
Corporation owns 53,884,138,981 shares.
Lancaster Holdings Ltd, is a company incorporated in the Bahamas.
PCD Nominee Corporation is a
National Book Store lnc., Lancaster Holdings Limited., Alakor Corporation and Pargold Mining Corporation are
record and beneficial owners owning more than 5% of the Company's common and or preferred shares. Based on
previous practice, these companies issue proxies nominating, constituting and appointing Mr. Alfredo C. Ramos,
Chairman & President as proxy to vote for the number of shares they beneficially owned as of Record Date.
Mr. Alfredo C. Ramos has some direct or indirect interests/shareholdings with these companies.
Security Ownership
of Management.
Following are
by
of
Class
Title
Name of Beneficial
Owner
@/Beneficial(B)ownership Lrtrzensnrp
Percent of
Class
lndirect
Direct
500,050@
Common
Common
Common
Common
Common
Common
Alfredo C. Ramos
Christopher Gotanco
Eduardo B. Castillo
Carlos G. Dominguez
Adrian Paulino S. Ramos
Gerard Anton S. Ramos
54,375,0000
Common
25,000
Common
Common
500000
281,810,100
90,312,500
50
500,0000
100,000
10,600
Filipino
Filipino
Filipino
Filipino
Filipino
Filipino
0.11
0.03
0.02
0.00
0.00
0.00
Filipino
0.00
15,190,550
Filipino
0.01
87,000,000
Filipino
0.03
26
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2O12)
17,600,000
Filipino
Filipino
0.01
0.00
As of March 3L,201,3, the aggregate number of shares owned by the Company's directors and
executive officers is 547,923,850 shares or approximately O.2I% of the Company's outstanding
common stock. Except for shares appearing on record in the names of the directors and officers
above, the Company is not aware of any shares, which said persons, may have the right to
acquire beneficial ownership.
Voting Trust Holders of 5% or More. To the extent known to the Company, there are no voting
trust holders of 5% or more of the Company's stocks.
Changes in Control. No change in control of the Company has occurred since the beginning of
its last fiscal year. The Company has no knowledge of any existing arrangements that may result
in a change in control of the Company.
The Company, on a regular basis secures loans and advances from its related parties (i.e.
companies with shareholders common with the Company) to fund its capital expenditure and
working capital requirements. The loans and advances are covered by promissory notes subject
to roll over every ninety (90) days with interests at 24% per annum. lnterest rates are
determined on arm's length basis and are based on terms similar to those offered to other
related and non-related parties by the creditor-related companies. These loans and advances,
inclusive of accrued interests, guaranty fees and other liabilities to related companies in the
amount of P2.2 billion were converted to common shares of stock of the Company in July 2008
as part of the capital restructuring program approved by the SEC on July 24, 2008. On
September 20,2011, the Company entered into a loan agreement with Alakor Corporation, a
company under common control, to finance the Company's cost of conducting feasibility study
on the Longos Gold Project and provides for its general working capital requirements. The loan
amounts to P250.0 million with 10% interest per annum due 36 months after draw down date.
As of December 3t,zOtI, initial drawdown amounted to P120.0 million. The loan agreement
gives the following rights to Alakor Corporation: (i) Option to convert, at any time after the
earliest draw down date, all amounts outstanding under the loan into equity of the Company at
the price of P0.018 per share. (ii) Subscribe to no more than 2,700,000 shares of the Company at
P0.018 per share within five years from the execution of the loan documents. As of December
31,,2012, no additional funds have been drawn.
The identities of the related parties, the nature of the relationships, amounts and details of the
transactions are disclosed on Note 11 of the Company's zOtZ Audited FinancialStatements.
There are no on-going contractual or other commitments as a result of the loans and advances
obtained from related companies otherthan the payment of the loans and advances, interests,
conversion of the same to equity and other rights as mentioned above.
During the last two (2) years, there were no other transactions involving the Company in which
27
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2O12)
any of its directors or executive officers, any nominee for election as director, or security holder
owning L0% or more of the Company's total outstanding shares and members of their
immediate family had a material interest.
There were no transactions with parties that fall outside the definition of "related parties"
under SFAS/IAS No. 24.
Parent of the Company. No person or entity holds more than 50% of the Company's voting
securities; consequently the Company has no parent company.
Transaction with Promoters. There are no transactions with promoters within the past five (5)
years.
PART IV
SEC
Form 17-C
a.
b.
Reports on SEC Form 17-C - Reports on SEC Form t7-C filed during the year of 2OI2 are
as
follows:
Date
Particulars
December 27,2OL2
November L3,2012
Response
201.1
Mr. Carlos
Dominguez.
October 29,20L2
October 04,20t2
September 28,2OL2
August 02,2OL2
March 28,ZOLZ
L3,2OLZ
January 27,20'J.2
February
January
20,201,2
Certification
on
Compliance
with Manual on
Corporate
Governance
29
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
SIGNATURES
Pursuant
to the requirements of Section t7 of the Code and Section 141 of the Corporation
ALFREDO C.
Pri ncipa I
t /.
oftice/ 12,
RAMOS
Executive
AGO
GILBE
tial &
Princip
Accounting Officer
to before me thi
Alfredo C. Ramos
05099825
os0se828
01187s8e
Delfin P. Angcao
10587019
Date of lssue
Place of lssue
0L-03-2013
Manila
01-03-2013
Manila
01-04-2013
Mandaluyong
02-01-201_3
Makati
'
Doc no.
Page no.
e)
lf,rv rntsl
4-i7ltiltTIL
fiF TAi(DALUYNNF
IJE(:Ei\'iLrER 3l'2013
Book no.
Series of 201-3
PTRN
0.
I (''
80B3
/ lt, A
DAL
tl Y AilFt t:tT v / 2- 12 -
li
Dp'Jl ,s , aB
30
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2O12)
iI
ll ll
'
llllilltrrritrt
to
#fnrus"r*l4xrruc
'trVm
liitli[iil
8sl 0307
(632) 819 0872
Phone; (632)
Fax:
www sgvcom ph
BOA/PRCReg No 0001,
December 28, 2Q12, valid until December 31 , 2O15
SEC Accreditation No 001 2-FR-3 (Group A),
November'l5. 2O12, valid until Noverrber 16, 2015
We have audited in accordance with Philippine Standards on Auditing, the parent company financial
statements of United Paragon Mining Corporation as at December 3l ,2012 and 201 I and for each of
the three years in the period ended December 31,2012, included in this Form l7-A, and have issued
our report thereon dated March 7 ,2013. Our audits were made for the purpose of forming an opinion
on the basic financial statements taken as a whole. The schedules listed in the Index to the Financial
Statements and Supplementary Schedules are the responsibility of the Company's management,
These schedules are presented for the purpose of complying with Securities Regulation Code Rule 68,
As Amended (2011) and are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audit of the basic financial statements and, in our
opinion, fairly state, in all material respects, the information required to be set forth therein in relation
to the basic financial statements taken as a whole.
o|n^ d
John T,
Partner
lLu
Villa
10, 2015
ilililr
ril
ilt
lililil
ilil
ilil
ililt
tilt ril
ill
Supplementary Schedules
December 3L,2OL2
number of shares or
principal amount of
bonds and notes
amount shown
period
Related parties and Principal Stockholden lOther than Relatedl Parties (Not Applicablel
Name and Desienation
oebtoi
of
Balance
at
Amounts Amounts
current
coilected written off
Beginningof Additons
Period
Balance at end of
Notcurrent
period
Name ano
oeosnation
ir Dettor
Balance at
*nJll'Jon
Additons
"
Amounb
Collected
Amounb
Written Off
Not Cunent
Cunent
Balance at end
ot pefloo
Description
Beginning
Additions at
Balance
Cost
Charsed to cost
ano exDenses
'
Charcedto
other
accounts
Otherchanges
additions
EndingSalance
(deductionsl
Amount authorized by
indenture
Long-Term Debt
P250.0 million
32
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
Name of Rerated
Balance
party
'
Beginning
of
each class
statement
Schedule H
is
of
of
is
Nature.of
Guarantee
filed
filed
Capital Stock
Number of
shares reserved
for options,
Numberofshares warrants,
Number of
Title of
i5sue
Common Stock
Preferred Class A*
conversion &
other rishts
None
I.2,2OO,OOO None
397,325,000,000 26L,374,797,08O
12,200,000
Numberofshares
related
oarties
held by
277,856,247
Directors,
officers and
emolovees
orhcr<
G,gOO,OOO
5,3OO,OOO
Prcsented under Cuftent Liobilities in the 2071 & 2O7O Stotement of Finonciol position
33
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
December 3L,2Ot2
List of Philippine Financial Reporting Standards (PFRSs) [which consist of PFRSs, Philippine
Accounting Standards (PASs) and Philippine lnterpretationsl and Philippine Interpretations
Committee (PlC) q&As effective as of December 31, 2012:
PHILIPPINE FINANCIAL REPORTING STANDARDS AND
Adopted
INTBRPRETATIONS
Effective as of December3l,20l2
A: Objectives
l: Additional
l:
of
Government Loans
Share-based Payment
Amendments to PFRS 2: Vesting Conditions and Cancellations
Amendments to PFRS 2: Croup Cash-settled Share-based
Payment Transactions
PFRS 3
(Revised)
Business Combinations
PFRS 4
lnsurance Contracts
Amendnrents to PAS 39 and PFRS 4: Financial Guarantee
Contracts
PFRS 5
PFRS 6
PFRS 7
34
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
Adopted
Not Adopted
Effective as of December3l,2012
Amendments to PAS 39 and PFRS 7: Reclassification
Financial Assets
of
of
Operating Segments
PFRS 9*
Financial Instruments
See footnote
See footnote
See footnote
PFRS IO*
PFRS
II*
Joint Arrangements
PFRS
I2*
PFRS
l3*
l: Capital Disclosures
Inventories
PAS 7
PAS 8
PAS IO
PAS
II
Construction Contracts
PAS
I2
Income Taxes
Amendment to PAS
Assets
PAS
I6
PAS
I7
Leases
35
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
Revenue
PAS 19
Employee Benefits
Amendments to PAS l9:Actuarial Gains and Losses, Group
Plans and Disclosures
PAS 19
(Amended)*
Employee Benefits
PAS 20
See footnote.
Government Assistance
PAS 2I
PAS 23
Borrowing Costs
(Revised)
PAS 24
(Revised)
PAS 26
PAS 27
PAS 27
(Amended)
PAS 28
Investments in Associates
PAS 28
(Amended)
PAS 29
PAS
3I
PAS 32
Financial Liabilities
PAS 33
PAS 34
PAS 36
Impairment of Assets
PAS 37
PAS 38
Intangible Assets
PAS 39
of
36
United Paragon Mining Corporation
SEC Form 1 7-A (Annual Report-201 2)
Adopted
Not Adopted
Effective as of December3l,2012
Amendments to PAS 39: Cash Flow Hedge Accounting
Forecast lntragroup Transactions
of
of
of
PAS 40
PAS
4I
Agriculture
Philippine Interpretations
IFRIC I
Liabilities
IFRIC
IFRIC
IFRIC 5
IFRIC
IFRIC
of
IFRIC 8
Scope
IFRIC 9
Reassessment
PFRS 2
of Embedded Derivatives
IFRIC IO
IFRIC
II
IFRIC I2
IFRIC I3
IFRIC I4
lFRtc t6
37
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
IFRIC 17
IFRIC 18
tFRtc l9
IFRIC 20
stc-7
$c-r0
Activities
slc-r2
slc-13
stc-15
sIc-25
slc-27
ofa
Lease
src-29
slc-3r
src-32
38
United Paragon Mining Corporation
SEC
Supplementary Schedules
Schedule
2r.8t%
A:g'6
?: :l:tiie
HD Ci:4gS
l:o ro -it:o^
At ;c fo-qo icatFc
\i'"r.tg eiC
le\,,e:Oti:. e-:t CO.t.
l-e ?i.
ocr';'.
Co':)o';tio-
'
39
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
Supplementary Schedules
December 37,2012
Schedule K - Financial Ratios
Formula
Ratios
2012
Cunent Ratio
0.12
Cunent Assets/
Current Liabilities
Debt to equity
ratio
Equity to
debt ratio
Asset to
equity ratio
Book wlue
per share
661,207,006
1.70
769,138,145
451,366,991
2.10
782,752,315
372,400,121
0.48
372,400,121
782,752,315
Stockholders' Equity/
Total liabilities
TotalAssets
3.10
,155,152,436
372,400,121
0.75
0.59
451 , 366,991
769,138,145
2.70
1
,220, 505, 1 36
451,366,991
(33,751,43s1
(44,810,6841
0.49
(20,160,630)
(41,518,281)
Stockholders' equity/
Total # of shares
0.0014
372,400,121
261,314,797,080
0.0017
451,366,991
261,314,797,080
Net loss/
Total # of shares
0.0003
78,966,870
261,314,797,080
0.0002
61,710,208
261,314,797,080
Loss per
share
0.24
157,733,537
646,047,849
77,191,400
Total Liabilities/
Stockholders' Eouitv
Stockholders' Equity
lnterest
corerage ratios
2011
40
United Paragon Mining Corporation
SEC Form 17-A (Annual Report-2012)
The management of United Paragon Mining Corporation is responsible for the preparation and fair
presentation of the financial statements for the years ended December 31. 2012 and 2011. including the
additional components attached therein:
c.
d.
e.
ln accordance with the prescribed flrrancial reporting framework indicated therein. This resportsibility
includes designing and irnplementing internal controls relevant to the preparation and fair presentation
of financial statements that are free from material misstatenrent, whether due to fraLrd or error, selecting
and applying appropriate accounting policies, and rnaking accountirtg estimates that are reasonable in
the circumstances.
The Board
of
Directors has reviewed and approved the finarrcial statements for subrnission to the
SyCip, Corres, Velayo and Co., the independent auditors, appointed by the stockholders has examined
the financial statements of the company in accordance rvith the Philippine Standards on Auditing, and in
its report to the stockholders. has expressed its opinion on the fairness of the presentatiorl
cornpletion of such exarr ination.
Signed under oath by the fbllowing:
Alfredo
C. Ramos
Kamos
Allredo U.
Chairman of the Boar
Gilbe
Finan
bago
dmin Manager
resident
upon
Mandaluyorg
:Zfftt f:lTY
to before this
affia nt
Date of lssue
Alfredo C. Ramos
0s09982s
01-03-2013
Manila
05099828
01-03-2013
Manila
Gilbert V. Rabago
01187589
01-04-201.3
Mandaluyong
Names
This document consists of two (2) pages including the page where the acknowledgement is written.
APR 2 o 2013
at Manda
NOTARy
tffill
Publlc
$l NP461/2013'2014
7618451/C1{7-13IQ.C.
PrR
l8p ll Ma68o/c1-07-13/Q.C.
Roll* 165$3 - 3-13-196r
tloS 4iC335915
Adm. Matter
S
day of
ll;[il
ll:l' iillll
l;
lr
SCV*Co
ll ititrllll'rttt"
5{ fnrvsr *'Yauwc
Fax:
(632) 81 9 0B72
www sgvcom ph
BOA/PRC Reg No 0001
December 2A,2012, valid until December 31 , 2O15
SEC Accreditation No 0012-FR-3 (Group A),
November 15.2012 valid until November 16, 2015
ib
lity
for
th
e F in an
ci
al
S lat
m ent
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Philippine Financial Reporting Standards and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with Philippine Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation ofthe financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity's internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
and
ililril
til
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SGV"*Co
il
Efl
fn,lsrs Younvc
-2-
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
United Paragon Mining Corporation as at December 3 1 , 2012 and 201 I , and its financial performance
and its cash flows for each of the three years in the period ended December 3 | ,2012 in accordance
with Philippine Financial Reporling Standards.
Emphasis of a Matter
Without qualifoing our opinion, we draw attention to Note 2 to the Company's financial statements,
which indicates that the Company incurred cumulative losses, negative working capital, and negative
operating cash flows. In addition, the Company was unable to pay its maturing obligations and related
interest, which are subject to negotiations with creditors. These conditions, along with other matters
as set fofth in Note 2 to the Company's financial statements, indicate the existence of a material
uncertainty which may cast significant doubt about the Company's ability to continue as a going
concern.
aL/^ d
John T.
Paftner
rilh
Villa
ji:
3t
-l{ ir-
nl
II
H,
a
March 7,2013
llillilillililllllllltilllililtilililtilililililil]tililt
smc
.riJrndOffi
CddrR{inf
t2
ECT TO REV EW OF
CONIENTS
ASSETS
Current Assets
Cash and cash equivalents (Notes 5 and 23)
Receivables (Notes 6 and 23)
Materials and supplies - at net realizable value (Note 7)
Prepaid expenses and other current assets
Total Current Assets
F30,193,248
24,789,728
P108,63 5,13 5
24,497,941
23,852,095
748,366
157,733,53'l
21,883,157
325,267
77,191,400
Noncurrent Assets
546,525,032 544,256,199
452,016,258 452,016,258
76,890,657
2,529,089
1,077,961,036
64,438,524
2,060,618
1,062,771,599
F1,155,152,436 ?1,220,505,136
TOTAL ASSBTS
l0
and 23)
P3,161,209
542,195,772
54,537,338
26,100,000
20,022,233
31,297
646,047.849
P3,130,393
521,857,641
83,691,988
26,100,000
20,022,233
404,751
661,207,006
120,000,000
121,545,309
120,000,000
3,090,296
123,090,296
782,152,315
769.1
1,545,309
3 8.1
45
Equity
Capital stock - F0.01 par value
ITY
lo Financial Stalemenls.
2,613,147
(2,260,197,226\
372,400,121
$
451,366,991
P61,697,260 ?20,579,116
44,810,684
(5,963,120)
(t,768,795)
(20.2r3.9r0)
41,51
8,281
,554,420
2010
P14,263,285
29,675,370
(7,019,988)
(755,925)
(
.21
16.864.8s9
41.099.195
21.197 .7 61
78,562,119
61,678,911
35,461,046
404,751
31,29'7
40,991
78,966,870
61,'710,208
35,501,937
P78,966,870
F61,710,208
F35,501,937
F0.0002
F0.0001
15 2m3
I
ilililtil
ril
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2O1O
Capital Stock
(Note
Balances at January
l,
year
Balances at December
Balances at December
year
2,613,147,971 19,449,376
31,20ll
Total
(35,501,937)
Deficit
Share Premium
2010
15)
year
31,2012
P2,613,147
,971
P19,449,376
(2,
(35,501,937)
513,077,199
(61,710,208)
(61,710,208)
181,230,356)
451,366,991
(78,966,870)
(78,966,870)
(*2,260,197
,226)
P372,400,121
ililt
ilil til
ll]
2010
payable
Accounts
liabilities
lrourlrrrvJ
and utrrvr
other cunent
vurrvrll
nv9lugu
Accrued
interest
lllL9l9J! 4lru
Pension liabiliw (Note
Net cash used in operations
Interest received
Income taxes paid
13)
Dividend received
Net cash used in operating
activities
(P78,562,1
l9)
(F6r,678,91r)
44,810,684
1,294,184
(F35,46 r,046)
4 t,5 r 8,281
2,893
371,570
I,531,548
(7 s5,925)
1,950,285
(5,939,477)
(1,768,795)
29,675,370
(7,0r 9,988)
603,040
(1,312,071)
(33,526,709)
(2,000)
(LOqE
(r9,0r2,544)
(12,204,624)
(89,308)
(291,788)
18,653
423,100
54,648
,034,002)
7,249
(r78,32r)
541,643
(r
(r98,r30)
(30'816)
15,968
(24,054,688)
\rltvJrtvve/'
(r5,1r4,649)
3,073,771
(59,007,235)
1,768,795
(31,297)
(33,979,17s)
(2,608.504)
(12,422,597)
(1,544,981
245.031
651,917
(40,89 r )
2,000
(57,269,737) (33,360,089)
(62,563)
2,000
(12,483,160)
l)
activities
l)
454,659
1,312,071
(12,452,133)
(9,563,617)
(468,471)
(78,441,887)
r08,635,13s
P30,193,248
(l s6,284)
(274,834)
21,936,333
l 5,500)
(220,196)
12'450'000
120,000,000
141,936,333
1
08,1 45,1 26
490,009
P108,635,135
12,450.000
85,803
304,206
F490,009
ililililtiltilililtil|ililil]rililillillllilllllllilllil
l.
Corporatelnformation
United Paragon Mining Corporation (the Company) was the name given to United Asia Resources
and Geothermal Corporation (UARGC), surviving corporation, when the Securities and Exchange
Commission (SEC) approved the merger of UARGC and Abcar-Paragon Mining Corporation
(APMC) on January 29,1990. The more significant provisions of the merger, which for
accounting purposes were effective July 31, 1989, included the acquisition of assets and
assumption of APMC's obligations by UARGC through issuance of shares of stock.
The Company's major activities are principally devoted to the exploration and development of its
underground mining operations for the extraction of gold.
No person or entity holds more than 50% of the Company's voting securities. Accordingly, the
Company has no parent company.
TheCompany's registered office address is 125 Pioneer Street, MandaluyongCity. Its exploration
and mining operations are located in Longos, Paracale, Camarines Norte.
The financial statements of the Company as of and for the years ended December 31 ,2012 and
201I and for each of the three years in the period ended December 37,2072, were authorized for
issue by the Board of Directors (BOD) on March 7 ,2013.
2.
a.
The Company's management started construction on road networks and mine engineering
design for underground mining operation in the future, work continues in the care and
maintenance of the grounds and building of the main administrative building while works on
repairing and rehabilitating some of staff houses are completed;
ililililtil il ililtil
-2-
b.
c.
d.
e.
f.
g.
h.
After the series of talks with CANORECO, in February 2012, the mine site is now provided
with electricity from the local electrical cooperative and quotes for possible contractors to
carry out drilling program, access ramp, refurbishment of power substation and power lines
have been collected for approval in due time;
The BOD has approved a resolution to secure additional loans and advances from related
parties to fund the Company's general working capital requirements and feasibility study
costs;
Various options are being pursued to raise project funding subject to the company being
awarded appropriate government permits to resume its operations. In this regard, the Company
entered into an agreement with a financial advisor to provide financial advisory services to the
Company in connection with the fund raising activity.
Prior to April I ,1994, start of commercial operations of the underground mine, significant costs
and expenses incurred by both APMC and UARGC, and subsequently by the Company, were
deferred in the accounts with the expectation that they would benefit future periods and were
recorded as deferred exploration costs and deferred development costs amounted toP64.4 million
and P452 mi I I i on, respectively.
On December 29, 1994, the Board of lnvestments (BOI) approved the Company's registration for
Rehabilitation of the Main Shaft project (Rehabilitation Project) in Longos, Paracale, Camarines
Nofte on a non-pioneer status with expansion to 750 tonnes per day (TPD) under the
Rehabilitation Program for the Mining Industry. As a registrant, the Company was entitled to tax
and duty free importation of capital equipment and tax credit on domestic capital equipment for a
periodoffiveyearsfromdateofregistrationuntil
l99gwithoutextension. Asconditionsforits
registration, the Company had to complete the Rehabilitation Project and adhere to production and
sales schedules as provided for in the certificate of registration.
Costs incurred in connection with the Rehabilitation Project were accumulated and deferred in the
accounts with the expectation that they would benefit future periods.
In the last quarter of 1998, the Company's BOD authorized the suspension of the Rehabilitation
Project until appropriate financing for its further development becomes available. In view of this,
the Company withdrew its registration with the BOI for the Rehabilitation Project with the
intention of submitting another application in the future when activities relating to the
Rehabi litation Project resumes.
Likewise, the underground Shaft 4 mining operations was discontinued in December 1998 to
avoid further operating losses and to preserve the remaining reserves for future extraction from the
Main Shaft at a profitable level. Following the suspension of its underground mining operations,
the Company retrenched its employees and paid separation pay totaling F24.6 miltion computed in
accordance with the provisions of the Labor Code of the Philippines.
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-3
The Company continued to explore and drill certain mining properties on a limited scale to find
additional ore reseryes to sustain an expanded operation in the future. However, in February 2004,
the Company temporarily suspended its drilling operations pending receipt of mineral production
sharing agreement for the San Mauricio group of mining claims. Also, in 2004, the BOD and
stockholders of the Company approved the proposed capital restructuring which was approved by
SEC in July 2008. As discussed in Note 15 to the financial statements, the capital restructuring
reduced the Company's deficit and capital deficiency by P460.5 million and resulted in the
termination of accrual of interest on advances from related parties that were converted to equity.
On July 30,2007 , the Company's Option and Operating Agreements with Camarines Minerals, Inc.
(CMI) were extended for twenty-five years or co-terminus with the relevant mineral production
sharing agreement that may be approved by the Government of the Philippines (see Note 22).
Policies
Basis of Preparation
The accompanying financial statements have been prepared using the historical cost basis. These
financial statements are presented in Philippine peso (F), which is the Company's functional
currency. All amounts are rounded off to the nearest F, except when otherwise indicated.
Statement of Compliance
The Company's financial statements have been prepared in accordance with Philippine Financial
Reporting Standards (PFRS).
Changes in Accounting Policies and Disclosures
New and Amended Standards and Interpretations and Improved Philippine Financial
Reporting Standards (PFRS) Adopted in Calendar Year 2012
The accounting policies adopted are consistent with those of the previous financial year except for
the adoption of the following new and amended standards and Philippine Interpretations from
International Financial Reporting Interpretations Committee (IFRIC) and improved PFRS. Unless
otherwise indicated, the adoption did not have any significant impact on the financial statements of
the Company.
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-4introduces the requirement that defened tax on non-depreciable assets that are measured using the
revaluation model in PAS 16, Properfy, Plant and Equipment, always be measured on a sale basis
of the asset. The amendment is effective for annual periods beginning on or after January 1,2012.
New and Amended Standards and Interpretations and Improved Philippine Financial Reporting
Stqndards (PFRS) Subsequent to December 31, 2012
The Company will adopt the standards and interpretation enumerated below when these become
effective. Except as otherwise indicated, the company does not expect the adoption of these new,
revised and amended PFRS, PAS and Philippine Interpretation from IFRIC to have significant
impact on its financial statements.
Effective in 2013:
PFRS 7, Financial instruments: Disclosures - Offsetting Financial Assets and
Financial Liabilities
These amendments require an entity to disclose information about rights of set-off and related
arrangements (such as collateral agreements). The new disclosures are required for all recognized
financial instruments that are set off in accordance with PAS 32. These disclosures also apply to
recognized financial instruments that are subject to an enforceable master netting arrangement or
'similar agreement', irrespective of whether they are set-off in accordance with PAS 32. The
amendments require entities to disclose, in a tabular format unless another format is more
appropriate, the following minimum quantitative information. This is presented separately for
financial assets and financial liabilities recognized at the end of the reporting period:
a) The gross amounts of those recognized financial assets and recognized financial
liabilities;
b)
c)
d)
e)
The amounts that are set off in accordance with the criteria in PAS 32 when determining
the net amounts presented in the statement of financial position;
The net amounts presented in the statement of financial position;
The amounts subject to an enforceable master netting arrangement or similar agreement
that are not otherwise included in (b) above, including:
i. Amounts related to recognized financial instruments that do not meet some or all of the
offsetting criteria in PAS 32; and
ii. Amounts related to financial collateral (including cash collateral); and
The net amount after deducting the amounts in (d) from the amounts in (c) above.
The amendments to PFRS 7 are to be retrospectively applied for annual periods beginning on or
after January 1,2013.
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-5PFRS
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PFRS I
Joint Arrangements
replaces PAS 31, Interest in Joint Ventures and SIC-13, Jointly-controlled Entities Non-Monetary Contributions by Venturers. PFRS 1l removes the option to account for jointly
controlled entities using proportionate consolidation. Instead, jointly controlled entities that meet
the definition of a joint venture must be accounted for using the equity method. The standard
becomes effective for annual periods beginning on or after January 1,2013 .
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As at
3l
Increase (decrease) in:
Statement of Financial Position
Deficit
December
As at
1 lanuary2012
2012
*2,647,126
F354,114
78,966,870
61,710,208
3l December 3l
2012
(*2,236\
76,676
17,256,662
December
2011
(?30,122)
9,594
26,208,271
Philippine Interpretation IFRIC 20, Stripping Costs in the Production Phase of a Surface
Mine
This interpretation applies to waste removal costs that are incurred in surface mining activity
during the production phase of the mine ("production stripping costs") and provides guidance on
the recognition of production stripping costs as an asset and measurement of the stripping activity
asset. This interpretation becomes effective for annual periods beginning on or after
January 1,2013.
Improvements to PFRS
The Annual Improvements to PFRS (2009-2011 cycle) contain non-urgent but necessary
amendments to PFRS. The amendments are effective for annualperiods beginning on or after
January 1,2013 and are applied retrospectively. Earlier application is permitted.
.
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7Effective in2014:
PAS 32, Finsncial Instruments: Presentation - Offsetting Financial Assets and Financial
Liabilities
These amendments to PAS 32 clarify the meaning of "currently has a legally enforceable right to
set-off'and also clarifl the application of the PAS 32 offsetting criteria to settlement systems
(such as central clearing house systems) which apply gross settlement mechanisms that are not
simultaneous. While the amendment is expected not to have any impact on the net assets of the
Company, any changes in offsetting is expected to impact leverage ratios and regulatory capital
requirements. The amendments to PAS 32 are to be retrospectively applied for annual periods
Effective in 2015:
PFRS 9, Financial Instruments: ClassiJication and Meosurcment
PFRS 9 as issued reflects the first phase on the replacement of PAS 39, Financial Instruments:
Recognition and Measurement, and applies to classification and measurement of financial assets
and financial liabilities as defined in PAS 39. In subsequent phases, hedge accounting and
impairment of financial assets will be addressed with the completion of this project expected on
the first half of 2012.
This is effective for annual periods beginning on or after January 1,2015.
Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Eslate
This interpretation, effective for annual periods beginning on or after January I ,2015, covers
accounting for revenue and associated expenses by entities that undertake the construction ofreal
estate directly or through subcontractors. The interpretation requires the revenue on construction
of real estate be recognized only upon completion, except when such contract qualifies as
construction contract to be accounted for under PAS I l, Construction Contracts, or involves
rendering of services in which case revenue is recognized based on the stage of completion.
Contracts involving provision of services with the construction materials and where the risks and
reward of ownership are transferred to the buyer on a continuous basis will also be accounted for
based on stage of completion. The Philippine SEC and the FinancialReporting Standards Council
have deferred the effectivity of this interpretation untilthe final Revenue standard is issued by
IASB and an evaluation of the requirements of the final Revenue standard against the practices of
the Philippine real estate industry is completed.
Financial lnstruments
Date of Recognition
Financial instruments are recognized in the statement of financial position when the Company
becomes a party to the contractual provisions of the instrument. In the case of a regular way
purchase or sale of financial assets, recognition and derecognition, as applicable, is done using
trade date accounting.
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-8liabilities. The classification depends on the purpose for which the financial assets were acquired
or liabilities incurred and whether they are quoted in an active market. Management determines
the classification of its financial assets and liabilities at initialrecognition and, where allowed and
appropriate, re-evaluates such designation at every financial reporting date. As of December 31,
2012 and 2011, the Company has no AFS financial assets, financial assets at FVPL, HTM
financial assets and financial liabilities at FVPL.
Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or
a component that is a financial liability are repofted as expense or income. Distributions to
holders of financial instruments classified as equity are charged directly to equity, net of any
related income tax benefits.
For all other financial instruments, fair value is determined using valuation techniques. For these
financial instruments, inputs the valuation models are market observable, and are therefore
included under Level 2.
'Day
I'
Dffirence
Where the transaction price in a non-active market is different from the fair value from other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from observable market, the Company recognizes the
difference between the transaction price and fair value (a 'Day I' difference) in the statement of
comprehensive income unless it qualifies for the recognition as some other type of asset. In cases
where data which is not observable is used, the difference between the transaction price and
model value is only recognized in the statement of comprehensive income when the inputs
become observable or when the instrument is derecognized. For each transaction, the Company
determines the appropriate method of recognizing the 'Day I ' difference amount.
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Amortized cost is calculated by taking into account any discount or premium on acquisition and
fees that are an integral part of the effective interest rate, The amortization, if any, is included in
the Interest income account in the statement of comprehensive income. The losses arising from
impairment of receivables are recognized in the statement of comprehensive income under
General and administrative expenses. The level of allowance for impairment losses is evaluated
by management on the basis of factors that affect the collectability of accounts (see accounting
policy on Impairment of Financial Assets Carried at Amortized Cost).
This accounting policy relates to the Company's cash and cash equivalents and receivables.
Other Financial Liabilities
Issued financial instruments or their components, which are not classified as at FVPL are
classified as other financial liabilities, where the substance of the contractual arrangement results
in the Company having an obligation either to deliver cash or another financial asset to the holder,
or to satisfl the obligation other than by the exchange ofa fixed amount ofcash or another
financial asset for a fixed number of own equity shares, The components of issued financial
instruments that contain both liability and equity elements are accounted for separately, with the
equity component being assigned the residual amount after deducting from the instrument as a
whole the amount separately determined as the fair value of the liability component on the date of
issue, Other financial liabilities are initially recorded at fair value, less directly attributable
transaction costs. After initial measurement, other financial liabilities are measured at amortized
cost using the effective interest method. Amorlized cost is calculated by taking into account any
discount or premium on the issue and fees that are an integral part of the effective interest rate,
Any effects of restatement of foreign currency-denominated liabilities, if any, are recognized in
Foreign exchange loss (gain) account in the statements of comprehensive income,
Other financial liabilities are classified as current liabilities when they are expected to be settled
within twelve months from the reporting date or when the Company has an unconditional right to
defer settlement for at least twelve months from reporting date, Otherwise, they are classified as
noncurrent
Ii
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lities.
This accounting policy applies primarily to the Company's Accrued interest and other current
Iiabilities, Advances from related parties, Accounts payable, Dividends payable, Long-term debt
and other obligations that meet the above definition (other than liabilities covered by other
accounting standards, such as income tax payable and pension liability).
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10
Derivative instruments are initially recognized at fair value on the date in which a derivative
transaction is entered into or bifurcated, and are subsequently re-measured at fair value.
Derivatives are carried as assets when the fair value is positive and as liabilities when the fair
value is negative. An embedded derivative is separated from the host contract and accounted for
as derivative if all the following conditions are met:
1. the economic characteristics and risks of the embedded derivative are not closely related to the
economic characteristic of the host contract;
2. a separate instrument with the same terms as the embedded derivative would meet the
definition of the derivative; and
3. the hybrid or combined instrument is not recognized as at FVPL.
The Company assesses whether embedded derivatives are required to be separated from host
contracts when the Company first becomes party to the contract. Reassessment only occurs if
there is a change in the terms of the contracts that significantly modifo the cash flows that would
otherwise be required. As of December 31 ,2012 and 2011, the Company has no bifurcated
embedded derivatives.
Impairment of Financial Assets Carried at Amortized Cost
The Company assesses at each reporting date whether a financial asset or group of financial assets
is impaired. A financialasset or group of financialasset is deemed impaired if, and only if, there
is objective evidence of impairment as a result of one or more events that has or have occurred
after initial recognition of the asset (an incurred "loss event") and that loss has an impact on the
estimated future cash flows of the financial asset or the group of financial asset that can be reliably
estimated. Objective evidence of impairment may include indications that borrower is
experiencing significant financial difficulty, default or delinquency reorganization and where
observable data indicate that there is measurable decrease in the estimated future cash flows, such
as charges in arrear or economic condition that correlate with default.
The Company first assesses whether an objective evidence of impairment exists individually for
financial assets that are individually significant, and collectively for financial assets that are not
individually significant. If it is determined that no objective evidence of impairment exists for an
individually assessed financial asset, whether significant or not, the asset is included in a group of
financial assets with similar credit risk characteristics and that group of financial assets is
collectively assessed for impairment. Assets that are individually assessed for impairment and for
which an impairment loss is or continues to be recognized are not included in a collective
assessment of impairment.
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If there is objective evidence that an impairment loss on receivables carried at amortized cost has
been incurred, the amount of the loss is measured as the difference between the assets' carrying
amount and the present value of estimated future cash flows (excluding future credit losses that
have not been incurred) discounted at the financial asset's original effective interest rate (i.e., the
effective interest rate computed at initial recognition). The carrying amount of the asset shall be
reduced either directly or through the use of an allowance account. The amount of the loss shall
be recognized in the statement of comprehensive income.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can
be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is
recognized in the statement of comprehensive income, to the extent that the carrying value of the
asset does not exceed its amortized cost at the reversal date.
In relation to receivables, a provision for impairment is made when there is objective evidence
(such as the probability of insolvency or significant financial difficulties of the debtor) that the
Company will not be able to collect all of the amounts due under the original terms of the invoice.
Impaired receivables are derecognized when they are assessed as uncollectible.
Derecognition of Financial Instruments
Financial Assels
A financial asset (or, where applicable a parl of a financial asset or part of a group of similar
financial assets) is derecognized when:
1. the rights to receive cash flows from the asset have expired;
2. the Company retains the right to receive cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to a third party under a 'pass-through'
arrangement; or
3. the Company has transferred its rights to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards ofthe asset, or (b) has neither transferred nor
retained substantially allthe risks and rewards of the asset, but has transferred control of the
asset.
Where the Company has transferred its rights to receive cash flows from an asset and has entered
into a "pass through" arrangement, and has neither transferred nor retained substantially all the
risks and rewards ofthe asset nor transferred control ofthe asset, the asset is recognized to the
extent of the Company's continuing involvement in the asset. Continuing involvement that takes
the form of a guarantee over the transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that the Company could be
required to repay.
Financial Liabilities
A financial liability is derecognized when the obligation under the liability is discharged,
cancelled or has expired. Where an existing financial liability is replaced by another from the
same lender on substantially different terms, or the terms of an existing Iiability are substantially
modified, such an exchange or modification is treated as a derecognition of the original liability
and the recognition of a new liability, and the difference in the respective carrying amounts is
recognized in statement of comprehensive income.
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Offsettin g Financial Instruments
Financial assets and financial liabilities are offset and the net amount is reported in the statement
of financial position if, and only if, there is a currently enforceable legal right to offset the
recognized amount and there is an intention to settle on a net basis, or to realize the asset and settle
the liability simultaneously. This is not generally the case with master nefting agreements, and the
related assets and liabilities are presented gross in the statement of financial position.
Any write-down of materials and supplies to NRV is recognized as an expense in profit or loss in
the year incurred.
Depreciation and amortization on property, plant and equipment, except for underground
development and exploration and mine and mining properties, is calculated using the straight-line
method to allocate the cost of each asset less its residual value over its estimated useful life.
Depreciation of the Main Shaft equipment is capitalized as deferred costs, However, effective
January 1,1999, depreciation of the Main Shaft equipment is charged to operations as a result of
the suspension of development activities in December 1998.
The average estimated useful lives of property, plant and equipment are as follows:
Category
Number of Years
5 -20
5
3-5
10
Depletion of underground development and exploration costs and mine and mining properties is
calculated using the units-of-production method based on estimated ore reserves.
The assets' residual values, useful lives and depreciation, amortization and depletion methods are
reviewed periodically to ensure that they are consistent with the expected pattern of economic
benefits from those assets.
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13
When assets are disposed of, or are permanently withdrawn from use and no future economic
benefits are expected from their disposals, the cost and accumulated depreciation, amortization,
depletion and impairment losses, if any, are removed from the accounts and any resulting gain or
loss arising from the retirement or disposal is recognized in profit or loss.
Fully depreciated property plant and equipment are retained in the accounts until these are no
longer in use.
Defened Exploration Costs and Defened Development Costs
Deferred exploration costs and defened development costs are carried at cost less any impairment
in value.
Defened exploration costs include costs incuned to obtain rights to explore a specific area,
including the determination of technical feasibility and commercial viability of extracting mineral
resources.
Defened development costs include costs incurred after determining the commercial viability of
extracting a mineral resource.
The exploration and subsequent development costs are deferred in the expectation of a positive
result and will be transferred to the "Properly, plant and equipment" account and subjected to
depletion upon start of commercial operations. When the results are determined to be negative or
not commercially viable or when the project is abandoned, the accumulated costs and impairment
losses, if any, are written off,
A valuation allowance is provided for unrecoverable deferred exploration costs based on the
Company's assessment of the future prospects of the exploration project.
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-14
Input VAT
Input VAT represents VAT imposed to the Company by its suppliers for the acquisition of goods
and services as required by the Philippine taxation laws and regulations,
Input taxes, which are included under the "Other noncurrent assets" account in the balance sheet
and stated at their estimated net realizable value, will be used to offset against the Company's
output VAT liabilities.
Provisions
Provisions are recognized when (a) the Company has a present obligation (legal or constructive)
a result of a past event; (b) it is probable that an outflow of resources embodying economic
benefis will be required to settle the obligation; and (c) a reliable estimate can be made of the
amount of the obligation. If the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, where appropriate, the risks specific to the
liability. Where discounting is used, the increase in the provision due to the passage of time is
recognized as interest expense,
as
P r ov is i on
Where rehabilitation is conducted systematically over the life of the operation, rather than at the
time of closure, provision is made for the estimated outstanding continuous rehabilitation work at
each reporting date and the cost is charged to the statement of comprehensive income.
Deficit
Deficit represents accumulated losses incurred by the Company.
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured. The following specific recognition criteria
must also be met before revenue is recognized:
Interesl Income
lnterest income on bank deposits and investment management account is recognized when earned,
and presented net of applicable final tax.
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15
Other Income
Other income is recognized when earned.
Cost and Expense Recognition
Costs and expenses are decreases in economic benefits during the accounting period in the form
(b)
(c)
arrangement;
A renewal option is exercised or extension granted, unless the term of the renewal or
extension was initially included in the lease term;
There is a change in the determination of whether fulfillment is dependent on a
specific asset; or
Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gives rise to the reassessment for scenarios (a), (c) or (d) above, and at
the date of renewal or extension period for scenario (b).
Operating Leases - The Company as a Lessee
Operating leases represent those leases under which substantially all risks and rewards of
ownership of the leased assets remain with the lessors. Lease payments under an operating lease
are recognized as an expense in the statement of comprehensive income on a straight-line basis over
the lease term.
Pension Cost
The Company provides for estimated pension benefit required to be paid under Republic Act (RA)
No. 7641, determined using the projected unit credit method.
The Company has an unfunded defined retirement benefit plan covering substantially all regular
employees. The obligation and costs of retirement benefits are determined using the projected unit
credit method. This method considers each period of service as giving rise to an additional unit of
benefit entitlement and measures each unit separately to build up the obligation. Upon
introduction of a new plan or improvement of an existing plan, past service costs are recognized
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on a straight-line basis over the average period until the amended benefits become vested. To the
extent that the benefits are already vested immediately, past service cost is immediately expensed.
Gains or losses on the curtailment or settlement of retirement benefits are recognized when the
curtailment or settlement occurs. Actuarial gains and losses are recognized as income or expenses
when the net cumulative unrecognized actuarial gains and losses for the retirement plan at the end
ofthe previous reporting exceeded l0% ofthe higher ofthe defined benefit obligation and the fair
value of plan assets at that date. These gains or losses are recognized over the expected average
remaining working lives of employees participating in the plan. The unfunded retirement benefit
obligation is measured at the present value of estimated future cash flows.
Forei gn Currency Translation
Transactions in foreign currencies are initially recorded in the functional currency rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies are
translated at the closing rate ofexchange at reporting date. Foreign exchange differences between
the rate at transaction date and rate at settlement date or reporting date are credited to or charged
against current operations.
lncome Taxes
Currenl Income Tax
Current tax liabilities for the current and prior periods are measured at the amount expected to be
paid to the tax authority. The tax rates and tax laws used to compute the amount are those that
have been enacted or substantively enacted as at the repofting date.
Deferred Income Tax
Deferred income tax is provided, using the reporting liability method, on all temporary differences
at the reporting date between the tax bases of assets and liabilities and their carrying amounts for
fi nancial reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary differences. Deferred
income tax assets are recognized for all deductible temporary differences, carry forward benefit of
unused tax credits from excess minimum corporate income tax (MCIT) and net operating loss
carryover CNOLCO) to the extent that it is probable that sufficient future taxable profit will be
available against which the deductible temporary differences and carry forward benefit of unused
MCIT and NOLCO can be utilized.
The carrying amount of defened income tax assets is reviewed at each reporting date and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow all
or part of the deferred income tax assets to be utilized. Unrecognized deferred income tax assets
are reassessed at each reporting date and are recognized to the extent that it has become probable
that future taxable profit will allow the defened income tax assets to be recovered.
Deferred income tax assets and liabilities are measured at the tax rate that is expected to apply to
the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted at reporting date.
Income tax relating to items recognized directly in equity is recognized in equity and as other
comprehensive income in the statement of comprehensive income and not as part of net income.
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Contingent liabilities are not recognized in the financial statements. These are disclosed in the
notes to financial statements unless the possibility of an outflow of resources embodying
economic benefits is remote. Contingent assets are not recognized in the financial statements but
disclosed in the notes to financial statements when an inflow of economic benefits is probable.
Events After the Reporting Date
Post year-end events that provide additional information about the Company's position at the
reporting date (adjusting events) are reflected in the financial statements. Post year-end events
that are not adjusting events are disclosed in the notes to financial statements when material.
4.
In the process of applying the Company's accounting policies, management has made judgments,
apart from those involving estimations, which has the most significant effect on the amounts
recognized in the financial statements.
D
e te
urr ency
The Company, based on the relevant economic substance of the underlying circumstances, has
determined its functional currency to be the Philippine Peso. It is the currency of the primary
economic environment in which the Company primarily operates.
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The amounts and timing of recorded expenses for any period would be affected by changes in
these factors and circumstances. Property, plant and equipment as of December 31, 2012 and
201
amounted to P546.5 million and?544.3 million respectively (see Note 8). The useful lives
Mineral reserves and resources estimates for mining projects are, to a large extent, based on the
interpretation of geological data obtained from drill holes and other sampling techniques and
feasibility studies which derive estimates of costs based on anticipated tonnage and grades of ores
to be mined and processed, the configuration ofthe ore body, expected recovery rates from the
ore, estimated operating costs, estimated climatic conditions and other factors. Proven reserves
estimates are attributed to future development projects only where there is a significant
commitment to project funding and execution and for which applicable governmental and
regulatory approvals have been secured or are reasonably certain to be secured. All reserve
estimates are subject to revision, either upward or downward, based on new information, such as
from block grading and production activities or from changes in economic factors, including
product prices, contract terms or development plans.
Estimates ofresource for undeveloped or partially developed areas are subject to greater
uncertainty over their future life than estimates of reserves for areas that are substantially
developed and depleted. As an area goes into production, the amount of proven reseryes will be
subject to future revision once additional information becomes available. As those areas are
further developed, new information may lead to revisions,
-20 -
Short-term deposits
201
P30,193,248
Cash
?28,131,456
P9,381,313
20,811,935
80,503,679
F108,635,135
with banks earn interest at their respective bank deposit rates. Short-term deposits are made
for varying periods up to three months depending on the immediate cash requirements of the
Company and earn interest at the respective short-term deposit rates (see Note l8).
Interest income from cash and cash equivalents recognized in the statements of comprehensive
income amounted to Fl .8 million and F0.8 million in 2012 and 2011 , respectively (see Note 1 8).
For the purpose of the statements of cash flows, cash and cash equivalents comprise the following
as
ofJanuary
1:
201r
201 0
P490.009
?304,206
6. Receivables
Claims for VAT tax credit certificates (TCC)
TCC's on hand
Receivables from staff and employees
Others
2012
20tl
*23,772,233
12,308,239
163,950
P23,772,232
12,308,239
115,128
3,046,469
2,743,506
8,999,105
39,290,891
12,944,529
1.556.634
14.501.163
12,944,529
*24,789,728
?24.497.941
I,556,635
r
4,501 .164
Claims for VAT TCC's of F23.8 million have been formally submitted to the Bureau of Internal
Revenue (BIR) and the Department of Finance (DOF) and subsequently filed with the Couft of
Tax Appeals (CTA) to preclude prescription. On September 9, 1998, the CTA granted the
Company's petition for refund of its excess and unutilized input value added tax amounting to
Fl0.9 million net of disallowance of P12.9 million. The TCC's for these claims, however, remain
unissued and are pending with the BIR National Office.
ililil
til til
-21
The TCC's on hand expired in December 2009, however the Company applied for revalidation of
the TCC's with the DOF before expiry date. As of March 7,2013,the Company is still waiting
for the revalidated TCC's from the DOF. The TCC's can be revalidated and are valid for a period
of five (5) years. They can be used to set-off against excise tax liabilities.
"Others" consists of employee advances for company expenses and external receivables from
other companies.
2012
2011
P17,989,517
3,893,640
?19,564,844
4,183,320
P21,883,157
P23,852,095
103.931
As of December 31, 2012 and 2011, the cost of spare parts amounted to P28.5 million and
F41.3 million, respectively. Consumables amounted to F6.2 million and F7.0 million in2012 and
2011, respectively. Fuel, oil, and lubricants amounted to nil and F0.1 million as of
December 31,2012 and 2011, As of December 31,2012 and 20l l total amount of allowance to
reduce materials and supplies to NRV amounted to F12.8 million and F24.5 million, respectively.
The amount of reversalof allowance for inventory obsolescence amounted to nil, F0.2 million and
F0.07 million in 2012,201 I and 2010, respectively. ln 2012, the Company wrote off its inventory
amounting to F13.7 million, of which F1 1 .7 million were previously provided with allowance.
ililililtilil ]iltillililililtilililtillllililllllillll
aa
Underground
Office and
Household
Exploration
and
Bridees
Roads
Construction
In Prosress
Total
Cost:
Balances at beginning of
year
f 1,058,040,597 ?405,000,000
Additions
Reclassifications
Dilpolrl!
Balances at end
ofvear
?175,792,953
P1,968,854
P2,953,116 *13,990,929
1,837,031
2,578,742
590,144
(360,000)
(19,034,77'D
3,553,710
6r8,06E)
1.058.040.597
405.000.000
158.595.207
4.s47.596
s.688.758
14.221.073
800,445,294
124,595,990
t69,933,404
5,946,057
1,109,096
522,584
2,946,645
13,859,821
825,803
340
P- *1,657,746,449
1,003,990 9,563,617
360,000
1.363.990
(19,852,845)
1.647.4s7.22t
Accumulated depreciation,
amortization, depletion
and impairment:
Balances at beginning of
year
Additions
Disposals
Balances at end of
Net books values
P280,404,010
P1,750,523
7,294,783
(19,852,844\
(818,068)
(19,034,7771
vear
I,1 I3,490,250
P2Jl5,9l6
2,954,380
P2,734378
I,100,932,I89
13,860,161
P360,912
f1,363,990
P546,525,032
til
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-23
2011
Offrce and
Underground
Development
And
Exploration
Cost:
Balances at beginning ofyear
and
Mine
Mining
Buildings, Household
Plant and Furniture and
F1,058,040,597 F405,000,000
P228,933,404
25,176
(53,140,451)
ofyear
1,058,040,597
800,445,294
year
Bridges
Total
F13,859,821 F1,711,078,516
l3l,l08
156,284
(53,488,35 r )
175,792,953
1,968,854
2,953,116
13,990,929 1,657,746,449
t24,595,990
222,922,560
2,051,149
2,893
(344,946)
r.709.096
2,946,645
13,859,821 1,166,821,459
(52,989,156)
P2.57,595,303
(347,900)
Roads and
405,000,000
Additions
Disposals
Balances at end of
Net books values
?2,9s3,t16
P2,29t,s78
Additions
Disposals
Balances at end
Transportation
Equipment
?259,758
As ofDecmber 31,2012 and 20l l, total net carrying amount of idle property, plsllt and equipment amounted to Pl.2
disposing thes idle assets as it is rserving thes for fufure use whcn the mine is reopened.
2,893
(s3,334,102)
2.946.645
13.859.821 1.n3.490.2s0
?6,471 Fl3l,l08
P544,256,199
has no plars
of
Total gross carrying amount of fully dpreciated property, plant ard quipment $4rich are still being utilized by the Company amounted to nil and F5.9 million as
of December 3 1, 2012 and 201 1 , respectively.
ilililil
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-24
9.
As of December 31 ,2012 and 201l, deferred development costs and deferred exploration costs
consist of the following:
2011
2012
Deferred development costs
Allowance for impairment
losses
?516,714,273 F516,714,273
(64,698,015) (64,698,015)
*452,016,258 P452,016,258
2012
losses
*85,734,575
(8,843,918)
2011
P73,282,442
(8,843,918)
P64,438,524
P76,890,657
Defened development costs include, among others, shaft sinking, horizontal and vertical
developments, further underground exploration and drilling costs incurred to delimit and access
adjacent veins, and the related capitalizable interests and financing charges.
Deferred exploration costs include, among others, acquisition of rights to explore, topographical
and geophysical studies, exploratory drilling, trenching, sampling and activities in relation to
evaluating the technical feasibility of extracting mineral resources,
No additional impairment loss was recognized in 2012 and 201 I as the Longos Mine still has an
estimated ore reserve of l.6 million metric tons (MT) at I 1.05 gram per ton of gold (Au g/t) with
an estimated mineable reserve of I .8 million MT at 9.88 Au g/t. Based on the estimates of ore
reseryes calculated by a qualified technical personnel and certified by a competent geologist and
mine engineer hired by the Company, the carrying value of the above assets, including that of the
related properry and equipment, is not higher than the estimated fair value less costs to sell of the
mineable reserves.
2011
P177,150,684
122,399,227
78,882,558
Fl 73,I 50,685
56,164,969
24,348,759
1,925,981
460.872,184
54,944,969
33,174,927
08, 1 09,3 21
84,239,',|',|7
1,804,49',7
4s5.424.176
36,823,316
8,472,945
8,612,719
35,021,1 I 8
14,144,993
7,908,322
(Forward)
ilililil
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-25
2012
2011
P4,508,778
2,874,885
61,075
F5,199,93 8
2,414,817
5,631,739
t4,132,311
7,950,097
86,771,596
P542,195,772
66,985,457
* 527,857,641
Accrued interest on royalty payable pertains to the interest on unpaid royalty due under the
Operating Agreement with CMI (see Note 22).
ln 2012 and 201 1 , the Company recorded the accrued interest on bonds payable, redeemable
class A preferred shares, and redeemable class B prefened shares. Redeemable preferred shares
are classified as current liabilities and discussed in Note 12.
Accrued interest on bonds pertains to unpaid dollar-denominated interest on bonds, which were
converted into equity shares in 1999.
In 2008, certain accrued interest on bonds payable, accrued interest on advances from related
parties, nontrade payables, accrued rental and utilities payable and guarantee fee payable were
converted to equity (see Note l5).
Other current liabilities - "others" consists mainly of statutory payables and payables to third
parties.
As of December
1|ilil|il|il|il||ililil|ililililtililililililtilililililll]
-26
l.
Outstanding balances oftransactions with related parties are set out below:
Accrual
Related
ParW
Year
2012
20tt
2Ol2
20ll
2Ol2
20ll
2012
20tl
National Bookstore, Inc.
2012
20tt
Anglo Philippine
2012
Holdings, Inc.
201 I
Abacus Book and Card
2012
20ll
Corporation
The Philodritl Corporation 2012
2011
2012
2011
Catesory
of
Outstanding Balance
Due to related
Interest
Advances
F-
P120,0O0,000
Conditions
Terms
Darties
l0oZ interest
bearing
uncollateralized
120.000,000
Accrued
Interest
15,266,667
3,066.667
Advances
Accrued
Interest
9,082,091
30,108,260
Advances
75,684,098
46,549,449
3,843,714
due and
demandable
demandable
3,347,744
uncollateralized
uncollateralized
non-interest
bearing
uncollateralized
non-interest
bearing
uncollateralized
non-interest
bearing
uncollaleralized
non-interest
bearing
uncollateralized
3,843,714
Advances
uncollateralized
3,347,744
493,413
Advances
493,413
Advances
323,019
P2438,758
P33.174.927
323.0t9
*203,691,988
?174.s57,339
The F29.1 million increase in due to related parties pertain to accrual of interest (non-cash financing activity).
ilililil
til
'\1
ln the normal course of business, the Company has transactions with related parties as follows:
Long-term debl
On September20,201l, the Company entered into loan agreement with Alakor Corporation, a
company under common control, to finance the Company's cost of conducting feasibility study
on the Longos Gold Project and provides for its general working capital requirements. The
uncollateralized loan amounts to P250 million with 100% interest per annum due 36 months after
draw down date.
The loan agreement gives the following rights to Alakor Corporation:
a. Option to convert, at any time after the earliest draw down date, all amounts outstanding
under the loan into equity of the Company at the price of P0.018 per share.
b. Subscribe to no more than 2,700,000 shares of the Company at P0.018 per share within five
years from the execution of the loan documents.
As of December 31,2012 and 2011, drawdown amounted to niland Fl20 million, respectively.
Due and demandable advances
Advances from Alakor Corporation, an entity under common control, consist of loans and
advances that are covered by promissory notes subject to roll-over every ninety (90) days with
interest at24%o per annum. These are used to finance the Company's capital expenditures and
working capital requirements. As of December 31,2012,2011 and 2010, total loans and
advances from Alakor Corporation amounted to F46.5 million. While the total loans and
advances availed from Alakor Corporation amounted to F137.4million. These loans and
advances have no collateral.
b
In 201 l, the Company's noninterest-bearing advances from other related parties represent
various expenses paid on behalf of the Company. These advances have no collateral.
Related Parties*
Amount
P3,843,714
3,347,',l44
493,413
323,019
F8,007,890
Interest expense arising from advances from related parties, including long-term debt, amounted
to F20.3 million, P18.0 million and F8.l million in2012,2011 and 2010, respectively
(see Note
l7).
illilil
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-28 -
Shares
December 31,2007
13,500,000
Class A
Par value
F1.00
Amount
F
13,500,000
to common shares
(see Note
15)
(1,300,000)
12,200,000
Shares
December 31,2007
Effect of capital restructuring in
400,000
2008:
Decrease in par value
(see Note
15)
(6,750,000)
(0.50)
400,000
(650,000)
F0.50
F6,100,000
Class B
Par value
Pr
Amount
00.0(
P40,000,000
(50.00)
(20,000,000)
F50.00
F20,000,000
The Company's preferred shares carry features or characteristics that provide for redemption on a
specific date which constitutes a financial liability. As such, the Company's preferred shares are
presented under current liabilities in the statements of financial position, in accordance with
PAS 32.
Class A
The holders of Class A prefened shares shall be entitled to a cumulative yearly dividend at the
rate of 20Yo, payable annually, on the dates to be fixed by the BOD. Each Class A preferred share
shall be redeemed at the option of the Company's BOD before May 5, 1992 at the price of PI.00
each share plus dividends accrued and unpaid atthe date of redemption.
In April 1994, the Company notified the holders of Class A preferred shares of its intent to redeem
the shares. Subsequently, redemption date was moved to October 1, 1995.
On October 21, 1994, the BOD approved the declaration of cash dividends in the amount of
F26.5 million or F0.0098 per share to all Preferred "A" stockholders of record as of
October 31, 1994 either payable not later than October 1 , 1995 or may be applied against any of
the unpaid subscriptions for common shares issued under the first and second 1994 stock rights
offerings, A substantial portion of these cash dividends equivalent to F20 million remains
outstanding as of December 31, 2012 and20ll.
ilililil
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ilfitil
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til llil
-29
The dividends accruing on Class A prefened shares from November 1, 1 994 to December 31,
2012 and20ll that have not been declared amounted to F56.2 million and F54,9 million or
F4.61 and F4.51 per share, respectively, The corresponding liabilities for these dividends were
recorded in the books.
As discussed in Note l5 to the financial statements, certain Class A preferred shares and the
related accrued dividends were converted to equity in 2008.
Interest expense recognized in statement of comprehensive income amounted to F1.2 million each
in 2012, 20 l l and 20 1 0,
Class B
The holders of Class B prefened shares shall not be entitled to any dividend. Each Class B
preferred share shall be subject to redemption before April 10,1994 at the price of P100 for each
share. In April 1994, the Company notified the holders of Class B preferred shares of its intent to
redeem. Subsequently, the redemption date was moved to October 1, 1995. The redemption
amount will earn 200lo interest per annum from April 10, 1994 untilpaid.
As of December
?177 .2
Interest expense amounted to F4 million each in 2012,201 1 and 201 0 (see Note 1 7).
2012
P645,564
P3,292,690
P1,545,309
P3,090,296
201 I
899,745
(202,394)
Position
20t1
2012
Balances at beginning of year
Net pension cost
Benefits
paid
Bqlq4ggs at end of
P2,845,265
329,731
(84,700)
P3,090,296
327,495
(1,872,4821
year
F1,545,309
P3,090,296
gains
Net actuarial
Net pension cost
2012
2011
P143,104
P121,092
208,639
184,391
P327,495
201 0
F161,964
308,305
(1 10,416)
F3s9,853
P329.731
ililil
til u
lliltil
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ililr
ilil
ril
ill
-30The Company does not expect to contribute to its retirement plan in 2013.
Changes in the Present Value of the Defined Benefit Obligation
2011
P2,938,576
121,092
208,639
2012
*3,292,690
143,104
184,391
(1,872,482',)
(84,700)
(1,102,139)
109,083
P645,564
P3,292,690
The principal assumptions used to determine retirement benefit obligation are as follows:
Annual rates
Discount rate
Future salary increases
Expected average remaining
working lives
20ll
2012
6'h
6%
5V.
s%
12 years
l0 years
2010
7%
5%
1
years
20t2
ofthe defined
benefit obligation
20lt
2009
20 r0
2008
Present value
P645,564
F3,292,690
(1,102,139)
t09,083
P2,938,s76 F3,853,8rs
r,582,849
?4,390,079
r,014,066)
mine rehabilitation and decommissioning costs. Provision for mine rehabilitation and
decommissioning costs will be made once the Company's EPEP, FMRDP and SDMP are
submitted and approved by the Mines Geosciences Bureau (MGB). On October 8, 2010, the
Company, after satisffing the requirements and upon recommendation of the Environmental
Management Bureau, was granted an ECC for the Longos Mining Project located at Sitio Longos,
Paracale, Camarines Norte.
ilrilil
til
il ililtiltil
- 3l
On January 7,201l, the Company submitted a revised EPEP and FMRDP to the MGB subject for
evaluation and approval. As of March 7 ,2013, the Company is still waiting for the approval of
MGB.
December
31.2007
12)
a)
b)
c)
d)
Increase in capital
Fr.00
2,830,000,000
138,670,000,000
F1,850,000,000
(0,50)
(435,000,000)
0.50
l,4l 5,000,000
(0.49)
0,01
0.01
255,825,000,000
and20ll
l4l,500,000,000
stock
Amount
Par value
1,850,000,000
1,415,000,000
2,558,250,000
Below is the Company's track record of registration of securities under the Securities Regulation
Code of the SEC:
Number
Date ofapproval or
dateofeffectivity
April 10, 1970
Description
Initial Capital
January 29,1990
Increase in authorized
capital stock:
Common shares
Preferred Class A
Preferred Class B
Balance as of January 29,
April 8,
1994
offer
registered
500,000,000
pnce
Balance
P0.01
500,000,000
Increase in authorized
capital stock:
200,000,000,000
2,000,000,000
200,000,000,000
252,705,000,000
2,000,000,000
2,500,000,000
2,500,000,000
0.01
r
00.00
200.000,000.000
252,705,000,000
3,027,000,000
of
shares
A
1997
0,0r
200,000,000,000
1994
Amount
P5.000,000
990
August 28,1997
Issue or
50,000,000,000
2,700,000,000
Common shares
Preferred Class A
Preferred Class B
Balance as ofApril 8.
of
shares
2,500,000,000
2,700,000,000
5,000,000
r.00
0.0r
5,205,000,000
1.00
2,700,000,000 27,000,000
5,000,000 500,000,000
5,205.000,000
3,027,000,000
(Forward)
ilililil
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ilililtililil
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-32 -
of Issue or
shares offer
reeistered orice
Number
Date ofapproval or
date of effectiviW Description
Decrease in
November 26,
1999
outstanding capital
stock by 50o/o wtd
reclassification of
2,200,000 prefened
shares to common
shares and change in
par value of
prefened A shares
from P0.01 to Fl .00
Common shares
Prefened Class A
Balance
Amount
(650,000,000)
(r
Preferred Class B
3,500,000)
r,863.900,000
l,863,900,000
l.903,500,000
(435,000,000)
(435,000,000)
(441,950,000)
(461,750,000)
,950,000
r,441 ,750,000
Decrease of authorized
(435,000,000)
(6,7s0,000)
r.00
r.0o
(200,000) 100.00
(44r,950,000)
(6,750,000) (6,7s0,000)
(200,000) (20,000,000)
stock
.42 l.950.000
I ,42 r
of common shares
from Fl .00 to F0.01
Common shares
Prefened Class A
Preferred Class B
r4
I,500,000,000
r 3,500,000
400.000
14r,5r3,900,000
r41,513,900,000 r,441,750,000
Increase in capital
stock
Common
Balance as of December 31,
shares
201I
As of December 3 I ,2012 and 201 I , there were no movements in the Company's registered
securities. There are 1,258 shareholders who hold 261.3 million shares as of December 3l ,2012.
ilililil
til
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Shares
December 31,2007
Capital resffucturing in 2008:
Change in par value from
P L00 to F0.50 per share
Reduction in par value ftom
F0.50 to F0.01, with
proportionate increase in
number of shares
Issued shares
Par value
86',1,455,231
a)
b)
c)
Debt-to-equity
Balances at December
2011
42,s0s,306,319
3I
P86'1,4ss,231
(0.50)
(433,727
,6ts)
(0.49)
43J72,761,550
0.0
261,3t4,797,080
F0.0
conversion 217,942,035,530
Amount
F1.00
433,727,616
2,1'79,420,355
0.01
, 20 12 and
P2,613,147 ,971
On July 24,2008, the SEC approved the Company's capital restructuring plan consisting of the
following:
a.
Decrease the Company's issued capital stock by 50% or F460.5 million by reducing the par
value of common and Preferred "A" shares from Pl.00 to F0.50 per share and Prefened "B"
shares from F100.00 to P50.00 per share, and accordingly decrease its authorized capital stock
from F1.9 billion to Fl.4 billion. The decrease in capital stock and in the redeemable
preferred shares was applied against the Company's deficit (see Note l2).
b.
Further reduction in the par value of the Company's common shares from F0.50 to P0.01 per
share with the corresponding increase in number of shares,
c.
Increase in the authorized capital stock from Fl.4 billion to P4.0 billion divided into
397.3 billion common shares with par value of P0.01 each; 13.5 billion Class A prefened
shares with the par value of F0.50 each;400.0 thousand Class B preferred shares with par
value of F50.00 each. The Company issued F2.2 billion worth of common shares with a par
value of F0.01 per share paid by way of conversion of existing liabilities of the Company to
related parties (see Note 12).
In June and October 2007, the Company obtained the approval of related party creditors for the
conversion of their loans, advances and accrued interests to common shares of stock of the
Company as part of the capital restructuring plan, with the following terms and conditions:
The interest on the loans and advances shall be reduced from24%o per annum to 18% per
annum effective April 1 ,2007,
The cut-offdate for the accruals ofinterest on the loans and advances shall be June 30, 2007
to facilitate the conversion process;
If for whatever reason, the debt conversion process does not materialize as planned,
of interest at the reduced rate of l8% per annum shall resume starting July 1, 2007.
ilililil
til ril
ililtil
ilil
accruals
P2,010,448,878
744,104,494
14,321,555
5,123,782
4,272,333
1,149,313
P2,179,420,355
The Philippine Stock Exchange ("Exchange") approved on December 14,2011, the application of
the Company to list 217.8 million common shares with a par value of P0.01 per share, to cover its
debt-to-equity conversion transactions with its creditors at a conversion price of F0.01 per share.
The total transaction value is F2.2 million,
As required by the Exchange, a separate listing application for the underlying common shares of
convertible preferred shares of 1 14.9 million new shares will be filed with the Exchange once the
necessary documentary requirements are available. The listing application for the underlying
common shares of convertible preferred shares was filed with the Exchange on
February 14,2012.
Expenses
2012
P34,415,781
Outside services
Salaries and allowances
9,063,165
Depreciation expense
Loss on inventory write
7,294,784
off
Rent
1,950,285
729,888
2010
2011
F8,843,9 I 3
5,359,916
P3,67',7,881
6,217,323
utilities
722,901
563,042
252,953
410,273
300,86 I
713,081
376,075
370,634
709,248
393,1 55
588,632
558,742
476,321
272,242
328,467
321,329
920,138
312,164
327,495
209,465
527,149
329,731
1,404,218
205,955
164,568
201,616
126,848
429,514
359,853
485,988
296,573
137,968
83,471
32,496
I,101,612
Professional fees
Fuel and oil
Pension cost (see Note 13)
Taxes and Iicenses
Representation and entertainment
SSS, HDMF and other contribution
Insurance
Miscellaneous
3,446,430
45,637
*61,697,260 P20,579,116
568,820
P14,263,285
ilililil
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- 35 -
17. Finance
Expenses
20t2
2011
P20,328,482
19,140,111
F17,980,130
17,857,360
4,000,000
4,000,000
4,000,000
1,220,000
l2l,49l
1,220,000
460,791
P44,810,684
1,220,000
629,909
P29,67 5,370
2010
1l)
F8,126,01
15,699,446
Incomefrom
reversalofliabilities
equipment
2012
*14,801,371
4,094,462
2011
F_
2010
F_
1,216,981
2,060,661
1.312.071
P20,213,910
P1,216,981
P1,457,621
(603.040)
Condonation ofdebt
2012
?2,397,353
20n
201 0
P_
?2,060,661
and supplies
Rental of equipment
Royalty income
1,397,109
300,000
P4,094,462
1,216,981
Pl,216,981
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36
20. Income
Taxes
The current provision for income taxin2012,2011 and 2010 pertains to MCIT,
31
F1,781,843
NOLCO
1,781,843)
F_
The Company has temporary differences and unused NOLCO for which no deferred income tax
assets were recognized as it is not probable that sufficient taxable profit will be available against
which the benefit of the deferred income tax assets can be utilized. These are as follows:
2012
20tl
2010
*77,004,945
?77,004,945
?77,004,945
64,698,015
12,944,529
64,698,015
12,944,529
64,698,015
8,843,918
8,843,918
8,843,918
NOLCO
Allowance for inventory
obsolescence
Pension liability
MCIT
t2,944,s29
I,556,635
1,556,635
163,290,047
| 19,235,444
106,801,971
12,792,004
24,525,880
1,545,309
476,939
3,090,296
24,731,223
2,845,265
123,844
I ,5
t34,751
56,63
1,53 1,548
As of December 3 1 ,2012, the Company has NOLCO and MCIT that can be claimed as deduction
from future taxable income and future income tax liabilities, respectively, as follows:
Year Incurred
2012
201 I
20t0
Year of Expiration
2015
2014
2013
NOLCO
MCIT
P77,816,435
?404,-t5l
54,509,908
36.903.181
31,297
40,891
?169,229,524
?476,939
NOLCO
Additions
Expiration
Balances at end of
year
2012
P119,235,444
77,816,435
(27,822,355\
*169,229,524
20tt
F106,801,971
2010
F209,039,460
36,903,181
54,509,908
(42,076,43s) (139,140,670)
?t19,235,444 PI06,801,971
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37
MCIT
Balances at beginning ofyear
Additions
Expiration
Balances at end of
2012
201 I
20r0
P134,751
404,151
P123,844
P20t,622
3t,297
(62.s63)
year
40,891
(20,390)
P476,939
I I 8,669)
?123,844
(
F 134,75 I
The reconciliation of the income tax expense computed at the statutory rate to income tax reported
in the statements of comprehensive income follows:
2012
(P23,568,636)
20lt
21,504,340
2,ggg,6g6
tax
(F I 0,63 8,3
t7,0s4,123
|,714,735
(530,639)
(227,378)
P404,751
(6,s ro)
F31.297
Nontaxable income
21.
2010
(F 18,503,673)
l4)
9,113,804
1,512,303
(600)
(6,302)
F40,89
share
P78,966,870
20tl
F6l ,710,208
26!,314.797.080 261,314,797,080
(P0.0003)
(F0.0002)
P3
2010
5,501,937
261,314,797,080
(F0.0001)
The resulting per share amounts are the same for both basic and diluted earnings per share in
2012,2011 and 2010 since the Company does not have any debt or equity securities that will
potentially cause a loss per share dilution.
will
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- 38
The Operating Agreement, which expired on June I 8, 2006, was renewed on July 30,2007 ,
consolidating the previous Option and Operating Agreements. The renewed Operating
Agreement provides for the extension of the term for twenty-five years or co-terminus with the
relevant mineral production sharing agreement to be approved by the Government of the
Philippines and for the payment of royalties at3.5Yo of the value of production from the covered
mineralpropefties.
Royalty payable amounts to F36.8 million and P35.0 million, F35.3 million as of December 31,
2012,2011 and 2010, respectively (see Note 10). Interest expense on royalty payable, which is at
l4% interest rate compounded annually and covered by promissory notes, is recognized in the
statement of comprehensive income amounts to F19.1 million, Pl 8.0 million and
Pl 5.7 million in 2012,201 I and 2010, respectively (see Note l7).
Credit Risk
Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument
fails to meet its contractual obligations. The Company's credit risk exposure arises principally
from the possibility that the counterparties may fail to fulfill their agreed obligations. To manage
such risk, the Company monitors its receivables on an ongoing basis. The objective is to reduce
the risk ofloss through default ofcounterparties.
The Company establishes an allowance for impairment that represents its estimate of incurred
losses in respect of receivables. The main components of this allowance are specific loss
component that relates to individually significant exposures, and a collective loss component
established for groups ofsimilar assets in respect of losses that have been incurred but not yet
identified. The collective allowance is determined based on historical data of payment statistics
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-39
With respect to credit risk arising from the financial assets of the Company, which comprise cash
and cash equivalents and receivables, the Company's exposure to credit risk arises from a
possible default of the counterparties with a maximum exposure equalto the carrying amounts of
these instruments.
The tables below show the credit quality by class of financial assets.
2012
Impaired
Hieh
Cash and cash
equivalents*
Grade
Standard
Grade
P30,178,517
Not
P-
Receivables from:
Staff and
employees
Others
exposure
Impaired Impaired
P
Total
P30,178,517
648,081 1,031,933
1l,799 I,518,608
P30,178,517
P-
P659,880 P2,550,541
1,680,014
I,530,407
P33,388,938
20fi
Neither Past Due Nor
Impaired
bank
Cash in
Receivables from:
F108,525,135
Staffand employees
Others
exposure
I .3
Grade
F-
Not
I I,178
06.446
P108,525,135 P1,317.624
Impaired
PF-
Impaired
F-
Total
P108,525,135
163,950
.060
| .437
175,128
2.7 43.506
F1,601,010 Plll,443;/69
The Company has assessed the credit quality of the following financial assets:
I
2.
Cash and cash equivalents are assessed as high grade since these are deposited with reputable
banks.
Receivables, which pertain mainly to receivables from staff and employees and others, were
assessed as standard grade since there were no history ofdefault on the outstanding receivables
as of December 3 1 , 2012 and 201 1 . These were assessed based on past collection experience
and the debtors' ability to pay the receivables
Liquiditv Risk
Liquidity risk is the risk that the Company will be unable to meet its obligations as they fall due.
To effectively manage liquidity risk, the Company has arranged for funding from related parties
and continues to dispose of scrap, obsolete and excess assets to raise additional funds aside from
the capital restructuring completed in 2008.
As of December 31,2012 and 2011, the contractual undiscounted cash flows from cash and cash
equivalents and receivables, which are short-term in nature and used for liquidity purposes
amounted to F24.0 million and Fl l l,4 million, respectively.
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-40The following are the contractual maturities of financial liabilities, including estimated interest
payments and excluding the impact of netting agreements:
2012
Due and
Demandable
6to12
Months
Months
Within
current liabilities
P5l7,l25,4l
75,684,098
26,100,000
Accounts payable
Dividends payable
Long-term debt:
20,022,233
Over
I vear
Total
-'ll:l3i,lll
_
26,100,000
3,130,393 3,130,393
20,022,233
120,000,000
Principal
Future interest
P638,931,742
120,000,000
36,000,000 36,000,000
PP159,130,393 P798,062,135
2011
Due and
Accrued interest and other
current liabilities
Advances from related parties
Redeemable preferred shares
Accounts payable
Dividends payable
Long-term debt:
Principal
Future interest
P345,5 I 0,3 59
54.537,33
6to12
Months
Months
Within
Demandable
?53,74t.167
Over I year
Ft59,804,974
Total
F-
F559,056,500
54,537,33 8
26, r 00.000
26, I 00,000
3,
3,l6l,209
l6 I .209
20,022,233
20,022.233
r20,000,000
36.000.000
20,000,000
36,000,000
P818,877,280
r
Information on the Company's $-denominated monetary liabilities and their F equivalent are
as
follows:
20L2
USD
20ll
PHP
USD
PHP
liabilities
2,030,841
83,366,023
2,369,852 103,894,317
As of December 31 ,2012 and 2011, the exchange rate of the Philippine peso to the USD is
F41.05 and F43.84, respectively.
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-41 -
The following table demonstrates the sensitivity to a reasonably possible change in Philippine
Peso/US Dollar exchange rate, with all other variables held constant, of the Company's income
before income tax. There is no other impact on the Company's equity other than those affecting
the statement of comprehensive income.
Change in exchange rate
5Yo $ weakens bv 5%
$ strengthensby
20t2
(P4,168,301)
P4,168,301
5,194,',l16
5,276,791
(5,194,716)
(5,276,791)
2011
2010
2011
Carrying
Loans and receivables:
Cash and cash equivalents
Carrying
Values
Fair Value
P30,193,248
P30,193,248
1,663,586
Values
P108,635,135 F109,635,135
I,663,586
Receivables*
Fair Value
1,361,199
1,361,199
liabilities
?527,857,641
54,537,338
26,100,000
3,130,393
54,537,338
26,100,000
3,130,393
20,022,233
20,022,233
I17.305.880
120,000,000
54,537,338 54,537,338
26,100,000 26,100,000
3,161,209
20,022,233
3,161,209
20,022,233
120,000,000 1r6,160,000
for
Cash and cash equivalents, Receivables, Accrued Inlerest and Other Current Liabilities, Advances
from Related Parties, Redeemable Preferred Shares, Accounts Payable and Dividends Payable
The carrying amounts approximate their fair values due to their short-term maturities.
Longterm debt
The fair value of the long-term debt is based on the discounted value of future cash flows using the
applicable interest rates for similar types of loans. Discount rates used were 2.2%o and 3.2%o in
2012 and 2011, respectively.
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-42Capital Management
The Company maintains a capital base to cover risks inherent in the business, The primary
objective of the Company's capital management is to increase the value of shareholders'
investment. The Company sets strategies with the objective of establishing a versatile and
resourceful financial management and capital structure upon commencement of its operations,
The BOD has overall responsibility for monitoring of capital in proportion to risk. Profiles for
capital ratios are set in the light of changes in the Company's external environment and the risks
underlying the Company's business operations and industry. No changes were made in the
objectives, policies or processes during the years ended December 31,2012,2011 and 2010.
Note 2 discusses management plans on how to address the Company's deficit.
The following table summarizes what the Company considers as its total capital as of
December 31,2012,2011 and 2010:
Capitalstock
Share premium
P2,613,147,971
19,449,376
?2,632,597,34',7
24. Supplementary Tax Information Required Under Revenue Regulations (RR) 19-2011
The following are the schedules and information on the Company's taxable income and
deductions for the year ended December 31,2012.
Other taxable income
Income from reversal of liabilities
Sale offixed asset and inventories
Others
Rental
?14,807,377
2,7og,1go
2,420,988
300,000
P20,237,545
Itemized deductions
Outside services
P34,415,781
19,594,81 I
19,140,711
9,063,164
7,294,784
Depreciation
Separation pay
1,872,482
Rent
729,888
Utilities
Transportation and travel
722,901
709,248
476,321
209,465
713,081
5
88,632
558,742
(Forward)
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-43
P201,616
121,491
83,471
1,557,391
F98,053,980
Interest expense-others
Insurance
Miscellaneous
Total
VAT
The Company's other income are subject to output VAT while its purchases from other
VAT-registered individuals or corporations are subject to input VAT.
a.
Other income subjected to output VAT amounted to F3,008,929, of which the related
b.
P2,106,240
118,284
711,242
P2,935,766
Withholding Taxes
The below summarizes the totalwithholding taxes paid or accrued by the Company:
Withholding taxes on compensation and benefits
Expanded withholding taxes
P2,953,837
2,243,011
F5, l 96.848
The documentary stamp tax payable related to 2011 loans amounted to P61 ,075 in2012.
Other Taxes and Licenses for 2012
Taxes and licenses, local and national, include real property taxes, licenses and permit fees
included in general and administrative expenses for 2012 are as follows:
Documentary stamps
Real property taxes
Business permits
Other
F61,075
59,436
35,564
53,390
P209,465
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