Benguet Corporation

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Benguet Corporation

1 Corporate Plaza
845 Arnaiz Avenue
Legaspi Village, Makati City
Metro Manila 1223
Philippines
Telephone: (63) 2-812-1380
Fax: (63) 2-812-5168
Web site: http://www.benguetcorp.com

Public Company
Incorporated: 1903 as Benguet Gold Mines
Employees: 304
Sales: P 160 million ($3.57 million)(2002)
Stock Exchanges: OTC Philippine
Ticker Symbol: BENGB
NAIC: 212234 Copper Ore and Nickel Ore Mining; 212221 Gold Ore Mining; 331513 Steel Foundries (Except Investment); 484121 General Freight Trucking, Long-Distance, Truckload; 531210 Offices of Real Estate Agents and Brokers

Former Philippines mining giant Benguet Corporation has been redefining itself as a “total natural resource development company” for its next century of business. Benguet remains active in the mining industry through gold mines in the provinces of Benguet and Jose Panganiban and chromite mines in Masinloc in the Zambales Province. In 2003, the company began exploration operations for its concession at the Kingking copper-gold mining project. Other mining interests include projects for nickel laterite in Zambales and Sta Cruz and limestone in Alaminos. Mining continued to account for approximately half of the company’s revenues as the company celebrated its 100th anniversary in 2003. Yet the depressed state of the Philippines’ mining industry, coupled with continuing low metal prices, has led Benguet to focus its efforts on building up its non-mining interests, grouped under subsidiary Benguet Management Corporation (BMC). Through BMC, Benguet is active in forestry management through BMC Forestry Corporation, bottled and bulk mineral water through Agua de Oro, and eco-tourism at its historic Benguet Mines Tourism Village. Benguet is led by chairman Ferdinand Romualdez, who took over from his father Benjamin Romualdez, brother of Imelda Marcos, in 2002. The Romualdez family controls 53 percent of Benguet’s stock, which is traded on the over-the-counter market.

First Modern Gold Miner in the 20th Century

Benguet Corporation held a prominent position in exploiting the mineral wealth of the Philippines throughout the 20th century. For much of its first 100 years in business, Benguet boasted the country’s largest gold mining operation and was also a prominent miner of chromite and copper.

Exploration of the Philippine Islands’ vast mineral reserves began soon after the United States took possession of the former Spanish Colony following the end of the Spanish-American War of 1898. The discovery of gold and other precious metals encouraged a number of U.S. soldiers to remain in the Philippines following the war. Other fortune seekers quickly flocked to the new U.S. colony. Among these were three Americans, Nils Petersen, Judge Hauserman, and Judge Bean. The three partners set up a company, Benguet Gold Mines, based on gold claims staked in Antamok, Itogon, in the mineral-rich province of Benguet, and began exploration activities.

At the beginning of the 20th century, gold mining in the Philippines remained largely of the small-scale river panning method. The new Benguet company, which shortly took on the name of Benguet Consolidated Mining Company, was the first to introduce modern gold mining and processing techniques to the Philippines, ushering in a new industry. By 1906, the company had established its first mining site, setting up an accompanying mill using the modern technique of leaching ore with cyanide to filter out the gold. The company’s first mill was capable of processing up to 60 tons of ore in order to produce up to 350 grams of gold per day.

The richness of Benguet Consolidated’s gold mines enabled it to expand quickly in the decades to come, and before long the company claimed the title of the Philippines’ largest gold miner. The company also became responsible for building much of the infrastructure linking its remote location to the rest of the country, building some 80 bridges and 200 kilometers of roadway. It also built seven earth dams, one of which was among Asia’s largest.

As the company’s work force grew—topping 24,000 workers at its height—Benguet Consolidated built its own mining villages, as well as constructing and subsidizing the construction of schools and hospitals throughout its operating region. Workers were provided with free housing, water, utilities, medical services, and education.

Benguet Consolidated expanded in the 1927 when it bought gold mines in Balatoc and Acupan, both in the Benguet province. As these sites reached full production, the company’s production grew to a whopping 10,000 ounces per month.

With its gold mining operations booming, Benguet Consolidated set out to expand in the 1930s. In 1934, the company began mining for chromite when it took over operations of the refractory chromite mine owned by Consolidated Mines Inc. at Masinloc, in Zambales. Benguet began mining the site, which later featured both open-pit and underground mines, in 1936. By the 1950s, the site had developed into the largest refractory chromite deposit in the world. In 1956, the company changed its name to Benguet Consolidated Inc.

Benguet had in the meantime weathered the upheavals brought on by World War II, including Japanese occupation of the Philippines. Following the war, the company went public, listing on the New York Stock exchange in 1949. Benguet remained fully controlled by Americans through the 1960s, protected as it was by the “parity rights”—which gave Americans the same rights as native Filipinos to exploit the country’s natural resources—required by the U.S. government in exchange for its acceptance of the country’s claim to independence.

Benguet continued building up its gold and chromite mining operations through the 1960s. The company had also begun to eye a move into other metal categories, and in 1971 Benguet Consolidated opened its first copper mine. The arrival of Ferdinand Marcos to power and the imposition of martial law, however, had far-reaching effects on Benguet’s ownership structure. Marcos abolished parity rights and instead imposed legislation restricting foreign ownership of the country’s mining companies to just 40 percent. As a result, Benguet came under control of the Romualdez family, led by Benjamin Romualdez, brother of Imelda Marcos. The Romualdez family’s stake in the company reached as high as 80 percent.

Shifting Focus in the 1980s

Benguet Consolidated changed its name in 1980 to Benguet Corporation, signaling the start of a new era for the company. On the one hand, Benguet stepped up its mining operations, adding in 1980 a new copper-gold mine at Dizon, in San Marcelino, Zambales, under a 17-year profit-sharing agreement with the mine’s owner, Dizon Copper-Silver Mines Inc. The company also expanded its gold mill in Balatoc in order to process lower-grade gold ore. In the mid-1980s, Benguet began investing heavily in its original Antamok mine in the hope of expanding its production by striking higher-grade ore deposits. By the end of the decade, Benguet’s gold production topped 250,000 ounces. The company’s mining ambitions even led it to begin eyeing the international market, and in 1988 Benguet created a new subsidiary, Benguetcorp International, based in Hong Kong, with the express purpose of pursuing international mining opportunities.

Meanwhile, Benguet had also been pursuing a second growth strategy, that of adding diversified operations. In 1980, the company created a new subsidiary, Benguet Management Corporation (BMC) in order to oversee its non-mining interests. Over the next decade, the company entered a variety of new business areas, ranging from general engineering and construction, including its own steel foundry, to agriculture, shipping, banking and finances, transportation, and real-estate and forestry operations.

By the end of the 1980s, nearly 40 percent of the company’s sales came from its diversified businesses. Yet the company was heading into trouble. The company’s mining expansion drive, including the opening of a new Antamok open pit mine in the early 1990s, had left it heavily in debt. At the same time, the drastic slump in worldwide metals prices, especially the company’s core gold market, cut deep into Benguet Corporation’s finances. A final blow to the company was the devastating earthquake of 1990, which caused the closure of a number of the company’s mining operations.

By 1992, Benguet had defaulted on its debt and was forced to sell off a number of assets—including its headquarters building and most of its engineering business—in order to satisfy its creditors. At the end of 1993, Benguet had largely completed its assets disposal. The company remained heavily exposed to the highly competitive metals markets of the 1990s and, finding itself outpaced by more modern mining operations elsewhere in the world, began decommissioning a number of its mines, starting with its two Itogon province gold mines in 1992.

Benguet continued shedding its operations into the decade, including a phase-out of the Dizon mine, which had been heavily damaged by a typhoon and a resulting landslide. That phase-out started in 1994 and was completed with the shutdown of the mine in 1997. In 1996, the company sold off another mine, a gold mine in Paracale, to Australia’s Base Metals for P 142 million. Then, in 2000, Benguet sold its Itogon gold mill to TAV Construction Corporation.

Company Perspectives

Benguet Corporation aims to be a responsible, profitable, and growth-oriented conglomerate engaged in natural resource development.

Rebuilding a Diversified Operation in the 21st Century

Not all of the company’s efforts went toward reduction, however. At the beginning of the 1990s, Benguet acquired the concession to exploit the Kingking Copper-Gold Project in Pantukan, in the Compostela Valley. That project had originally been denied to the company by the Marcos government in the early 1980s, but work at the site was stalled as Benguet waged a protracted court battle to gain control of the mine. Benguet at last won the right to exploit the mine in a Supreme Court decision in 1991.

Benguet set to work mapping the mine and drilling a number of core holes, while also conducting metallurgical sampling and project feasibility studies through to the middle of the decade. By then, the company’s financial difficulties forced it to turn over the exploitation of the mine to a partnership between Echo Bay Mines and TVI Resources in 1995, including an option to buy the mine outright. Yet the continued drop in metal prices, coupled with the partnership’s own financial problems, returned control of the Kingking site to Benguet in 1997.

By then, Benguet had devised a new strategy built around its diversification as a ’’total natural resource development company.” Forestry management became a centerpiece of the company’s new strategy—Benguet had become involved in reforestation operations in 1977—and the company transformed its BMC Forestry Corporation from a unit focused on Benguet’s own operations to a company serving third party markets. In 1997, the company took the unusual step of converting one of its former mining sites in Antamok, a gold mine in Cordilleras, to the production of bottled and bulk mineral water under the Agua de Oro brand name.

Starting in 1994, Benguet had also been building up a trade division. Initially the trade operation provided products to support the company’s own mining operations, but by 1995 Benguet had begun servicing other mining companies, as well as a number of companies from outside of the industry, with an expanded product line. In 1996, the trade division took on a more classic trading role, acting as the importer for such products as Christensen-branded drilling equipment and accessories, Mecal lifting magnets, and other products ranging from industrial vacuum cleaners to Goretex filter bags. In 1997, BMC, which oversaw all of Benguet’s diversified non-mining operations, spun off its trade division as a separate subsidiary, Benguetrade Inc.

Another small but interesting area of the “new” Benguet was its entry into the eco-tourism market in 1998. In that year, the company established the Benguet Mines Tourism Village, located at one of the company’s former mine sites in Balatoc. The new village quickly gained attention from the media, enabling the site to attract a growing number of visitors.

Despite its diversifying interests, Benguet had not abandoned its heritage as one of the most prominent mining companies in the Philippines. At the turn of the century, the company pursued a number of new mining initiatives, including the acquisition, through a royalty agreement, of the Pantingan Project in Bagac, Bataan, in 1996, which held resource estimates of some 1.2 million ounces of gold. The company began conducting field geologic mapping in 2000.

Also in 2000, the company targeted entry into two new mining areas. Benguet began operating a limestone quarry in Barangay, Alaminos, with an estimated resource of some 36 million tons of cement-grade limestone. In the same year, the company entered an agreement with Japan’s Sumitomo Metal Mining and Nissho Iwai Corporation to launch exploration operations in order to locate nickel laterite deposits in Zambales. By 2002, Benguet had renewed interest in exploiting its Kingking concession and began seeking partners for that effort.

Benguet’s diminished status, however, brought about its de-listing from the New York Stock Exchange in 2000 after it was unable to meet new listing requirements set by the exchange. Instead, Benguet switched its listing to the over-the-counter market, while maintaining its listing on the Philippine Stock Exchange. As the company celebrated its 100th anniversary in August 2003, it appeared a mere shadow of the mining powerhouse it had once been. Yet the company’s continued interests in the mining sector, coupled with its growing non-mining holdings, suggested that Benguet remained poised for growth during the century to come.

Principal Subsidiaries

Aqua de Oro Venture; Arrow Freight Corporation; BC Property Management Inc.; BenguetCorp International Limited (Hong Kong); BenguetCorp USA Limited; Benguet Management Corporation; Benguet Parkland Development Corporation; Benugetrade Inc.; BMC Forestry Corporation.

Key Dates

1903:: Benguet Gold Mines is founded to exploit gold claims in the Philippines.
1906:: The company begins mining and milling operations in Antamok, Itogon, and changes its name to Benguet Consolidated Mining Inc.
1927:: Two more gold mines are acquired.
1934:: Benguet launches chromite mining operation in Masinloc.
1949:: Benguet is listed on the New York Stock Exchange.
1956:: The company changes its name to Benguet Consolidated Inc.
1971:: Copper mining operations begin.
1980:: The company changes its name to Benguet Corporation and forms Benguet Management Corporation as a holding company for its diversification into non-mining businesses.
1991:: Control of Kingking copper-gold concession is acquired after a lengthy court battle.
1993:: Benguet sells off its headquarters as part of an assets disposal to pay off debts.
1994:: The company forms a Trade division, which becomes Benguetrade subsidiary in 1997.
1997:: Benguet launches a bottled mineral water operation, Agua de Oro, and enters the eco-tourism segment with Benguet Mines Tourism Village.
2000:: The company is delisted from the New York Stock Exchange and transfers its shares to the over-the-counter market.
2003:: Benguet celebrates its 100th anniversary.

Principal Competitors

Philex Mining Corporation; Manila Mining Corporation; Philippine Sinter Corporation; Atlas Consolidated Mining and Development Corporation; Marcopper Mining Corporation; Philippine Associated Smelting and Refining Corporation; Dizon Copper-Silver Mines Inc.; Baguio Gold Holdings Corporation.