Jinchuan ups $1-B offer for Philnico

Jinchuan ups $1-B offer for Philnico

By Ma. Elisa P. Osorio, The Philippine Star

2nd May 2007

China's Jinchuan Group Ltd. has increased its initial investment offer of $1 billion (P47.6 billion) to run Philnico Industrial Corp., Trade Secretary Peter B. Favila said yesterday.

"It's an improvement from their earlier valuation," Favila said when asked about Jinchuan Group's offer to re-open the Nonoc nickel mine.

At the beginning of the year, Philnico chairman Evaristo Narvaez said they have ended talks with the Chinese investor after Jinchuan insisted on conducting a feasibility study. Narvaez said Philnico cannot afford further delays and a feasibility study could stall the opening of the mine which has not been operating since 1982.

Favila said he has received a letter from Jinchuan last week and has forwarded it to Environment and Natural Resources (DENR) Secretary Angelo Reyes Monday.

The trade official said the letter included refinements from the original offer but he refused to give details. He also declined to comment on whether the offer is acceptable to the government.

When asked if there are other investors interested in Philnico, Favila said they are also talking to other parties.

Earlier, Narvaez said four other groups from China, Russia and Japan had started their due diligence on the Nonoc mine, which has the capacity to produce 41,000 tons of nickel a year, equivalent to about three percent of world demand.

In 2005, Jinchuan, in partnership with Baosteel Group, China's biggest steel firm, agreed to invest $1 billion to revive the Nonoc mine.

In July, it signed a debt accord with the Philippine government and Philnico, which needs to settle some $300 million of debts.

Philnico's multi-million dollar debt to the government stemmed from the sale of Nonoc Mining in Surigao del Sur in the mid-1990s. The government sold Nonoc Mining to Philnico for a little over $300 million, the bulk of which remains unpaid.

According to Philnico, if the parties reach an agreement this year, the earliest the Nonoc mine could reopen would be in 2009 as construction of a new facility would take at least 18 months. Philnico is 55 percent owned by Hong-Kong based Compline Resources Co., about 30 percent by Australia's Pacific Energy Ltd., and the rest by local investors.

The Nonoc mines were operating from 1975 to 1982, with annual production at between 9,600 tonnes and 25,000 tonnes of nickel. It was closed due to high energy costs.