Atlas Mining: A sleeping giant awakens

It was, at one point in the 1980s, the third-biggest copper mine in the world.

At its peak, the facility of Atlas Consolidated Mining and Development Corp. in Cebu could process 110,000 tons of copper ore in a single day. And because of this, Toledo City—where the bulk of its mines and processing plants are situated—became one of the most progressive locations on the central Visayan island.

By the early 1990s, however, the company started to feel the strain of its debt-fueled expansion, including a large yen-denominated loan that took its toll on the mining firm’s cash flow.

It was also during this time when militant labor groups began “infiltrating” the ranks of its workers, resulting in labor troubles for what was then a labor-intensive mining operation.

“Then by 1994, two major typhoons hit the area, flooding the mines,” said Atlas vice president Adrian Ramos. “There were also systemic problems that aggravated [the situation]. It had simply become a black hole of money.”

Ramos—a second-generation member of the family that was invited to help Atlas when its troubles began two decades ago—is now presiding over what could be one of the most important turnaround stories in the local mining industry.

Debt burden

At the depths of the company’s crisis, it was struggling under a debt burden of as much as P8 billion (including a significant amount owed to its labor union), making it difficult to make significant progress in cleaning up its books, regardless of how much ore it mined.

To settle its liabilities to its workers, two of its three facilities were stripped of their equipment, which were sold for scrap, in order to pay union members their back wages.

“Only one concentrator was left operating, and that’s what we’re using today,” Ramos said.

According to Ramos, his father, Alfredo, had a vision of returning Atlas to the former glory it enjoyed in its heyday (it was founded in 1958 by the Soriano family).

“He was really dedicated to making this work, no matter the difficulties we faced,” he said.

And difficult it was. According to the younger Ramos, their family faced roadblock after roadblock since the 1990s in their bid to revive the mining giant, from tussles with creditors and shareholders, to sudden fluctuations in the world prices of copper, and even the 1997 East Asian financial crisis that sent commodity prices diving and debt levels soaring overnight.

“What we did then—since Atlas had so many problems—was to spin off its assets into various subsidiaries so that we could bring in investors at the asset level,” he said, pointing to the company’s decision to segregate its nickel and copper operations.

Father’s request

Around this time, Ramos—a graduate of the Kellog School of Management in Northwestern University and, back then, working for consulting firm McKinsey & Co.—was asked by his father to return to the country to help reverse Atlas’ fortunes.

“It took a while, but things started happening in 2005,” he said, starting with negotiations to settle contentious issues with equity investors (who were eventually bought out).

Atlas was also aided by rising demand for metal, especially from China, which had an insatiable demand for commodities to feed its booming economy.

Talks with private equity investors also yielded fresh funds, specifically a $40-million injection from Singapore-based Crescent Asia Special Opportunities (Casop), around $33 million of which was used to rehabilitate the miner’s decaying facilities.

According to Ramos, however, it was not until the Sy family came into the picture in 2009 that Atlas’ turnaround firmed up, giving the mining firm a fighting chance at recovering its lost position in the industry.

Savior

“BDO (Henry Sy-owned Banco de Oro Universal Bank) saved us,” he said, explaining that the bank helped take out expensive loans and provide working capital. What started with a $25-million loan eventually grew to $140 million, allowing Atlas to retire expensive debt that was constricting its cash flow.

By 2010, BDO came in as an equity investor, buying out one equity partner.

“This mine owes everything to BDO,” he said, adding that the investment-savvy Sy family’s involvement helped “legitimize” Atlas and the entire mining industry as a viable business.

Today, Atlas operates with an ore throughput of as much as 50,000 tons a day from its three sites in Toledo, Cebu. It is still a long way off from its peak of 110,000 tons a day, but Ramos believes the goal is within reach in the near future, given plans to make operations more efficient with new equipment.

“The bottom line is important, of course,” he said. “But what we really want to do is for Atlas to contribute to the national economy and the development of the area where we operate in.”

And while the Philippine mining industry is under attack from critics at the national level, Ramos said this phenomenon was rarely encountered at the local level, where the benefits brought by firms like Atlas are evident to the communities they operate in.

“For one, we’re very grateful for the support of the local government,” he said. “I think the LGUs, from the provincial level downward, understand the benefits that mining brings.”