Low metal prices loom as some mining firms face cost pressures

THE mining industry faces a period of declining prices for industrial metals a year after some companies had to deal with increased costs, analysts said.

“Prices of industrial metals have settled lower, and we can theorize that several mining companies will be affected by that,” Luis A. Limlingan, head of sales at Regina Capital Development Corp., said in a Viber message.

The filing of full-year earnings to the stock exchange indicated that some mining companies suffered losses last year due to cost pressures and poor weather, which dampened output.

“Two factors that would significantly affect their revenue would be the reopening of the global economy and, more important, where the price of industrial metals will go towards in the remaining months of 2023,” said Mr. Limlingan.

Philex Mining Corp. reported an earnings drop of nearly 27% to P1.8 billion on a 5.5% decline in revenue to P9.26 billion.

Global Ferronickel Holdings, Inc. reported a decline in attributable income of 0.65% to P1.96 billion. Revenue slipped 13% to P6.73 billion.

Atlas Consolidated Mining and Development Corp. reported a 16.6% decline in net profit to P3.22 billion on higher operating costs. Revenue fell 4.4% to P17.68 billion.

Benguet Corp.’s net profit fell 6.3% to P1.33 billion in 2022, off a 5% rise in revenue to P4.03 billion.

This year, Mr. Limlingan said most miners are forecasting favorable weather, allowing them more days of operation.

The mining companies that reported higher profit in 2022 were buoyed by higher ore prices, as well as the impact of foreign exchange movements.

The Mines and Geosciences Bureau (MGB) said nickel ore prices remained elevated at between $3.70 and $11.86 per pound in 2022, with gold at $1,802.82 per troy ounce.

On the other hand, the price of copper fell to $4 while silver fell to $21.76 per troy ounce.

The value of metallic mineral output grew 31.73% to P238.05 billion, the MGB said.

Apex Mining Co., Inc. posted the highest growth in attributable income last year of 316.1% to P3.34 billion. Consolidated revenue rose 39% to P10.31 billion. Gold and silver revenue both rose to P6.97 billion and P455.81 million, respectively.

Nickel Asia Corp., the country’s largest producer of lateritic nickel ore, posted a 1.5% increase in attributable net income to P7.93 billion. It reported a 2.2% increase in revenue to P2 billion.

In a Viber message, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that geopolitical risks caused metal prices to rise last year.

Both Mr. Ricafort and Mr. Limlingan cited the reopening of China, the country’s biggest market on nickel supply, as a possible prop for demand.

“There are also proposals to tax mineral ore exports, similar to Indonesia, to encourage more smelting/mineral processing investments and facilities to be established in the country as well as raise additional tax revenues,” Mr. Ricafort said.

Chamber of Mines of the Philippines Chairman Michael T. Toledo said another driver for the industry is the Philippines’ intention to reduce carbon emissions.

He said that this will trigger the demand for raw materials for the production of electric vehicles (EVs) and renewable energy facilities. 

In January, the Palace approved a zero-tariff scheme for EV imports for five years to jump-start EV production amid hopes many components will eventually be produced here.

He said the industry is still waiting on “the enactment of a responsive mining fiscal regime that would allow mining to provide a consistent revenue stream” for the country and host communities. — Sheldeen Joy Talavera