Benguet Corporation Announces Third Quarter 1997 Results

February 23, 1998 PSE CIRCULAR FOR BROKERS NO. 184-98 PRESS RELEASE BENGUET CORPORATION ANNOUNCES THIRD QUARTER 1997 RESULTS MANDALUYONG CITY, 20 February 1998 BENGUET CORPORATION released today the 1997 Third Quarter results, which indicates that the suspension and closure of operations since the middle of the third quarter at the Dizon Copper-Gold Operation, a major source of revenue, principally brought about the company's loss for the third quarter. Consolidated net loss for the third quarter of 1997 was P271,100,000 (U.S.$8,003,000) or P2.38 (U.S. $0.07) per share, as compared to the loss of P18,100,000 (U.S. $690,000) or P0.15 (U.S. $0.006) per share for the same quarter in 1996. For the nine month period, consolidated net loss amounted to P600,000,000 (U.S. $17,713,000) or P5.26 (U.S. $0.155) per share in 1997, as compared to a loss of P91,200,000 (U.S. $3,474,000), or P0.80 (U.S. $0.03) per share for the same period in 1996. Operating revenues decreased to P307,300,000 (U.S. $9,072,000) for the quarter and P1,349,500,000 (U.S. $39,840,000) for the period ended September 30, 1997. For the same respective periods in 1996, operating revenues were P436,200,000 (U.S. $16,614,000) and P1,952,300,000 (U.S. $74,356,000). dctai Mining Operations Losses in the third quarter of 1997 for the Dizon mine operation amounted to P4,100,000 (U.S. $122,000), 93% lower than the loss of P56,400,000 in 1996. For the nine month period, losses amounted to P67,000,000 (U.S. $1,978,000), as compared with a loss of P2,400,000 for the same period in 1996. Losses from the Benguet Antamok Gold Operation amounted to P90,500,000 (U.S. $2,671,000) for the quarter, 11% lower than the loss of P101,700,000 for the same quarter in 1996. For the nine-month period, losses from the Benguet Antamok mine amounted to P267,000,000 (U.S. S7,882,000), as compared with a loss of P194,700,000 for the same nine months in 1996. Gold production output for the quarter aggregated 6,726 ounces at U.S.$325 per ounce from 4,186 at U.S.$385 per ounce for the third quarter in 1996. The Masinloc Chromite Operation generated net earnings of P2,400,000 (U.S.$72,000) this quarter, higher than the earnings of P2,100,000 recorded for the same quarter in 1996. For the nine-month period ended September 30 in 1997, net earnings from the Masinloc mine amounted to P4,900,000 (U.S.$144,000), a decrease from earnings of P8,000,000 seen for the same months in 1996. Shipment volume was higher this quarter at 8,945 tonnes compared with the 7,284 tonnes shipped in 1996. Trading Activities Due to the rapid deterioration of the peso to the dollar exchange rate during the third quarter of 1997, the Company's U.S. dollar and copper forward contracts and call options recorded a loss of P76,700,000 (U.S.$2,263,000) for the period, and P86,500,000 (U.S.$2,554,000) for the first nine months of the year. For the same respective periods in 1996, Benguet's trading activities recorded net earnings of P5,700,000 and P8,600,000. As of the end of the third quarter, the Company still has outstanding forward contracts and call options for three million pounds of copper set at the floor price of U.S.$0.99 per pound and a strike price of U.S.$1.16 per pound on the calls covering monthly calculation periods up to the end of the year. In addition, Benguet has dollar forward contracts under which it can sell dollars forward at a fixed peso to dollar exchange rate for delivery on various dates up to May 1998. Subsidiaries and Affiliate Companies Benguet Management Corporation (BMC), a 100% owned subsidiary, and its subsidiaries reported a consolidated net loss of P18,000,000 (U.S.$531,000) for the third quarter of 1997, lower than the net loss of P20,200,000 seen in 1996. For the nine-month period, BMC reported a consolidated net loss of P29,200,000 (U.S.$862,000), a decrease from the loss of P55,200,000 seen in 1996. BenguetCorp International Limited (BIL), the Company's Hong-Kong based and 100%-owned subsidiary for international operations, reported net earnings of P600,000 (US$18,000) for the third quarter of 1997, higher than the net earnings of P470,000 in 1996. For the nine months ended on September 30, 1997, net earnings of BIL amounted to P1,700,000 (US$50,000), as compared with net earnings of P945,000 for the same period in 1996. Petrofields Corporation, a 20% owned affiliate company, and its subsidiary reported consolidated net earnings of P1,300,000 (US$39,000) for the quarter and a net loss of P100,000 (US$4,000) for the nine-month period ended on September 30, 1997, as compared with net earnings of P1,700,000 and P4,900,000 for the same respective periods in 1996. Petrofields has 5% participating interest in the West Linapacan oil operation in Palawan province as well as 41.5% and 14.525% participating interests in oil exploration projects in Equata and Etame, Gabon, West Africa, respectively. On-going Projects The Company has regained full control of the Kingking Copper-Gold Project as operator after Kingking Mines, Inc. (KMI), the joint venture company of Echo Bay Mines Ltd. and TVI Pacific, Inc., gave notice that it will not exercise the option to acquire the Kingking property under the October 1995 option agreement with the Company. With KMI's decision, it forfeited previous option payments made to the Company totaling US$30 million. Full control over the Kingking project reverts to the Company which is now free to re-market the project to other interested parties. One of the alternatives being considered is to form a consortium of capital investors for the project where the Company remains as operator responsible for developing and operating the mine. Several parties have already approached the Company signifying interest. The Company is now closely studying new alternatives for the development and operation of the Kingking mines based on the additional data gathered by KMI during the past 24 months. Drilling and exploration studies conducted by KMI during the past 24 months indicate the geologic resource of the Kingking mineral properties to be at more than one (1) billion tonnes grading 0.31% total copper and 0.41 grams of gold per tonne at a cutoff grade of 0.20% T Cu, which confirms that the Kingking Project is principally a copper-gold mineral property. The Kingking Project is located in Southeastern Mindanao, about 8 miles from the town of Pantukan, Davao del Norte. The claims are covered by a Mineral Production Sharing Agreement between the Philippine government and Nationwide Development Corporation (NADECOR), with Benguet as operator. During the third quarter, the Company formally organized the BC Property Management (BCPM), a new division for the management and development of its real estate holdings. Extensive pre-feasibility studies of its real estate projects have been initiated during the quarter. The indicative Land Use Plan and marketing feasibility study which identifies qualitative economic and social benefits of the Company's real estate development project in the Benguet Province have been completed. The Kelly Ecozone/Gumatdang Plan has also been presented to the different line agency units of the national and local governments which favorably endorsed the plan and committed their full support. Specifically, government approval was obtained for its Kelly 130-hectare special economic zone for light industries. Documentary requirements for a Presidential Proclamation as a Philippine Special Economic Zone are currently being attended to. In line with its polity on sustainable development, the company has conducted engineering studies for the conversion into a water reservoir of the Antamok open pit which has been mined out. The Company has engaged the services of an independent consulting engineering firm to review and confirm the geotechnical, hydrological and economic aspects of the Company's in-house feasibility study on the venture to supply the adjacent Baguio City with water. At the same time, the company is evaluating possible tie-ups on joint venture basis with foreign firms and/or the proponents of the Water Supply Project of the Baguio Water District. The increasing demand for aggregates from the various private construction and government infrastructure projects has inspired the company to seriously consider the expansion of aggregate production at the Masinloc mine site. These on-going projects are consistent with the company's stated vision to become a major natural resource development company by identifying and developing the total potential of the company's mineral lands, real estate holdings and other natural resources under its control. To augment cash requirements principally for the Company's various projects, the Company entered into a tripartite agreement with Palm Avenue Realty & Development Corporation and Palm Avenue Holdings Company, Inc. (the "Palm Avenue Companies" which is a major stockholder of the Company) and the Presidential Commission on Good Government (PCGG) for the private placement of a major block of the Company's shares. Under this agreement, the Company will receive in cash from the Palm Avenue Companies the amount of P275.4 million in the form of subscription for 22,677,701 Class A shares and 18,000,000 Class B shares from the Company's present authorized capital stock. The subscription payment will be sourced from the sequestered funds of the Palm Avenue Companies with the PCGG, which had placed under sequestration the shares of stock owned by the Palm Avenue Companies in the Company. The Tripartite Agreement has been presented for court approval which is still pending. dctai