PSE Circular for Brokers No. 2228-99

September 7, 1999 PSE CIRCULAR FOR BROKERS NO. 2228-99 TO : Our Stockholders Despite the 11% improvement in milling tonnage from 299,761 tonnes last year to 332,132 tonnes, bullion production declined to 64,789oz. from 71,671oz. principally due to lower grades, 6.64 g/ton vs. 8.15 g/ton. Gross metal revenue for the period was lower by 24%, P705 million versus P992 million, due to three factors: (1) lower ounces of gold sold compared to last year, (2) lower average selling price per ounce of gold, $280.18 versus $297.14 in 1998, and (3) the stronger peso vis-a-vis the US$, P38.45 versus P40.03. However, the company realized significant profits amounting to P98.8 million from its gold and foreign exchange hedging, thus partially offsetting the losses from the lower gold price and exchange rate. Operating costs for the first half of 1999 totaled P589 million compared with P692 million last year. The difference of P103 million however represents the operating cost of the calcine inventory that was sold and expensed in 1998. Interest expense decreased by 37%,P33 million versus P53 million, mainly due to lower rates brought about by the conversion of some short-term loans to long-term financing. For the period under review, net income on a cost-method basis dropped by 7% to P226 million from P244 million a year ago. The company's share in the loss of subsidiaries and affiliates amounting to P25 million for the period was the same as last year. Guoco Holdings again contributed the biggest loss. Thus, under the equity method for investments, net income amounted to P201 million compared with P219 million in 1998. SUBSIDIARIES Earnings of our subsidiaries generally declined from the previous year's levels. Shipside, Incorporated's net income fell from P4.58 million to P2.58 million due to lower sawmilling and haulage volumes. Stringent cost-cuffing measures resulted in a lower net loss for Diamant Boart Philippines, Inc. (DBPI), P5.16 million in 1998 vs. P0.83 million. Under the cost method, net income of Lepanto Investment and Development Corporation was almost unchanged at P2.86 million. Under the equity method, however, its net income was diminished by losses posted by its affiliates which include DBPI. As exploration / drilling activities in the country slowed down, net income of the Diamond Drilling Corporation of the Philippines fell from P9.36 million last year to P2.54 million. cdll With the cost-cutting measures being implemented at the mine, improvement in gold grade and the favorable terms we have secured for our hedging contracts on gold and foreign exchange, we are confident that, despite the record low gold prices, our Victoria Gold Project will remain very profitable. FOR THE BOARD OF DIRECTORS: FELIPE U. YAP ARTEMIO F. DISINI Chairman of the Board & President & Chief executive Officer Chief Operating Officer