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THE
continuous spike in world oil prices has opened new
windows of opportunity for Sultan Mining and Energy
Development Corp. (SMEDC) by way of creating a new
market for its coal output to manufacturers in Mindanao.
“Many
industries, particularly the tuna canneries as well as
paper and textile firms, are refitting their power
plants to burn coal instead of bunker fuel because the
latter is now three times more expensive than local
coal,” Michael Morales, SMEDC vice president, said.
He added
that these industries spend P25 million to P30 million
to buy new coal-fired boilers but are able to recoup
this investment in less than a year from savings due to
the huge difference between the costs of coal and bunker
oil.
Morales
said this new nontraditional market for coal is
providing the Sultan with a strong base for growth on
top of its traditional customers in the power generation
and cement industries.
SMEDC is
supplying Philbest Canning Corp., General Tuna Corp. and
Picop Resources Inc. with coal from its open pit mine in
Bislig, Surigao.
He said
the nontraditional market has grown as the continuous
increase in oil prices makes the shift to local coal
more viable. He said two more canneries in General
Santos City are expected to start using coal later this
year and another two are in the process of shifting and
should start consuming coal by next year.
Aside
from General Santos City’s tuna canneries, Morales said
SMEDC is also looking at the sardine canneries in
Zamboanga City. Since its coal mine is the biggest in
Mindanao, Sultan is in the best position to supply the
coal requirements on manufacturing plants in the South.
One
advantage of Sultan’s Bislig coal mine is the firm’s
investment in a coal preparation or washing plant, which
allows the company to boost quality and the flexibility
to customize the type of coal produced to suit the
individual requirements of various boilers of its
customers.
Morales
said sales to canneries to nontraditional market is seen
to grow its share in SMEDC’s revenues as more firms
shift to coal.
Local
coal is preferred over imported coal since buyers save
on shipping costs, import duties value-added tax
payments. Buying coal locally also assures customers of
security of supply and insulates them from foreign
exchange fluctuations.
Aside
from exploiting its open pit reserves, Sultan Mining
expects to begin the development of its underground
mines at Bislig with the first underground mine starting
commercial operations by late 2010.
SMEDC is
set to undertake a P480-million initial public offering
this quarter to raise funds to finance its exploration
activities and the ramping up of current production from
its Surigao del Sur mine site.
The firm
has tapped Asian Alliance Investment Corporation to be
the lead underwriter for the IPO. SMEDC shareholder
Maxinvent Trading Corp. has also granted Asian Alliance
an option to purchase or place up to P48 million worth
of SMEDC shares for the purpose of covering
over-allotments.
SMEDC,
through wholly-owned subsidiary MG Mining and Energy
Corp., holds or exercises rights over Coal Operating
Contracts (COC) with the Department of Energy. These
COCs cover fully explored coal bearing area in Bislig
and Lingig, Surigao del Sur.
MGMEC
also has a 12.96-percent interest in Sultan Energy
Philippines Corp. which is the owner of a concession
area of approximately 7,000 hectares within the Daguma
coal deposit in the provinces of
South Cotabato and Sultan Kudarat in
Mindanao. |
