Benguet expects to generate more income in Q2

Benguet Corp. expects to generate more income in the second quarter of 2012 as investments in nickel mining projects in the first quarter start paying off, according to CFO Renato Claravall.

“We had just started doing it on our own in the first quarter so there will be a lag in terms of results,” Claravall said Thursday, without specifying how much quarter-on-quarter growth is expected.

Benguet used to work with DMCI Mining Corp, a subsidiary of the Consunji family’s holding firm DMCI Holdings Inc., on nickel production, but started solo work on nickel in the first quarter of 2012.

The 2012 target for nickel production is about 600,000 tons, for which Benguet Corp. subsidiary BenguetCorp Nickel Mines Inc. (BNMI) has offtake or supply agreements.

Benguet posted a net income of P26.5 million in the first quarter of 2012.

Whether there will be year-on-year growth for the second quarter of 2012 remains to be seen.

In the second quarter last year, Benguet chalked up a net income of P121.992 million.

In any case, the real “test” is whether the company can post profit in the fourth quarter, which is traditionally a strong income period for the company, aside from the first quarter, Claravall said.

BNMI’s Sta. Cruz nickel project in Zambales becomes productive from October to April and slows down production during the rainy season from June to September as wet ore and rocky seas make production and shipping difficult.

Claravall said Benguet is studying options for year-round nickel processing and shipping to get more value out of its products.

He had said that Benguet is considering acquiring property along the Surigao-Agusan coastline to be able to process and ship nickel year-round.

If it takes this option, the company will likely take on a loan to fund part of the venture.

The ballpark cost for a nickel processing plant is $200 million, Claravall said.

Another possible strategy is to build the processing plant in Zambales.

The Sta. Cruz nickel project sits on a 1,406.7-hectare property, of which 50 hectares can be used for processing, Claravall said.

In late 2009, Benguet and DMCI Mining agreed to conduct exploration, development and mining activities for a specific portion of the Sta. Cruz nickel project.

The deal between DMCI and Benguet covered the mining and sale of 2 percent high-grade nickel ore of up to 200,000 metric tons per year, according to a separate disclosure by DMCI.

In August 2011, Benguet said BNMI had partnered with Bright Mining and Resource Company Ltd. of China for the sale of a fixed nickel output “over the next three years.”

The off-take agreement covered delivery of 1.8 million metric tons of nickel ore with a grade of 1.8 percent nickel, Benguet said.

Also, Benguet started buying back debt paper in the fourth quarter of 2010 after selling its stake in the Kingking copper-gold project in Compostela Valley for $25 million.

Only about 17 percent of its accrued debt has yet to be settled.

In early 2011, Benguet said that the majority of its long-outstanding debt, including accrued interest amounting to P2.22 billion, had been settled and the company had improved its gold and nickel operations.