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About Semirara

Semirara Mining Corporation is the only large-scale coal producer in the Philippines and is engaged in surface open cut mining of thermal coal from its Panian mine on Semirara Island, in the Antique Province. Semirara Island covers an area of 55 square kilometers and is located 350 km south of Manila.

On 11 July 1977, the Government through its former Energy Development Board, now the Department of Energy (DOE), awarded a 35-year coal operating contract to a consortium formed by three private companies. On incorporation of the Company, these companies subscribed equally to the Shares and, in exchange for the Shares, they assigned the Coal Operating Contract to the Company, which was then known as Semirara Coal Corporation. As a result of their financial difficulties, two of the three initial shareholders transferred their Shares, which had been provided as security for loans from Government financial institutions, to the National Development Corporation (NDC) after the lenders had foreclosed on the loans. In order to obtain control of the Company, NDC bought the Shares of the third initial shareholder to obtain a 95% interest in the Company. The Coal Operating Contract, which was amended by an agreement dated 8 June 1983, gives the Company the exclusive right to conduct exploration, development and coal mining operations on Semirara Island until 2012. The DOE has stated that the Company may apply for extension or renewal of the Coal Operating Contract one year before its expiry date. In return for the mining rights granted to the Company, the Government is entitled to receive annual royalty payments calculated on the basis of gross revenues less allowable expenses. The DOE is entitled to receive 30% of the resulting amount, or a minimum of 3% of gross revenue.

Coal resources were initially discovered at two sites on Semirara Island, at Unong and Panian, with the Himalian resource remaining undiscovered until 1981. The development and opening of the first mine at Unong was a turnkey project contracted and funded through a credit facility provided by Voest Alpine, an Austrian state-owned company. All internationally sourced equipment and services were financed by the credit facility which was denominated in Austrian schillings. The Company had earlier entered into a coal supply agreement with the Government-owned National Power Corporation to provide coal to its Calaca plant and the CSA was used as collateral for the credit facility.

Production at the Unong mine commenced in early 1984 with final acceptance of the project by the Company occurring in 1987 following the resolution of technical issues raised by the Company. The settlement with Voest Alpine included a restructuring of the terms of the loans provided under the facility. However, due largely to lower than anticipated coal prices and an increase in borrowing costs due to the depreciation of the Peso against the Austrian schilling, the Company incurred significant losses. The Company negotiated a second restructuring of the terms of the loans and Voest Alpine also agreed to a partial debt to equity conversion which gave it a 40% interest in the Shares.

In February 1997, DMCI Holdings, Inc. (DMCI-HI), a PSE-listed holding company for construction and other businesses in the Philippines, purchased Voest Alpine’s 40% interest in the Shares, together with outstanding loans made by Voest Alpine to the Company amounting to P2.5 billion.

A new management team consisting of local and expatriate staff was installed by DMCI-HI in August 1999 and operated at the Unong mine until it became uneconomical to continue mining the remaining coal reserves. In January 2000, as the Unong mine approached the end of its economic life, the Company closed the operation after 17 years of extraction, and proceeded with the development of the new Panian mine. Mining operations commenced at Panian in the third quarter of 1999 when the Environmental Clearance Certificate was obtained. The Company had employed a continuous mining system at Unong that relied on bucketwheel excavators supported by smaller equipment. However, a conventional mining system using trucks and shovels was employed at Panian. Given the suitability of this mining technique to the Panian mining conditions, the mining operations have proved to be more flexible and cost efficient for the Company. The bucketwheel excavators used at Unong are now used only in reclamation operations in the Panian stockyard. In 1999, the new management also installed a coal washing plant which improved the coal quality through a lower ash content and consequently demand for the Company’s coal increased.

Following further financial difficulties experienced by the Company, DMCI-HI agreed to a debt to equity conversion in 1998, which gave it a total interest in the Company of 74%. The Company has consequently undergone a capital restructuring in 2004, pursuant to which it canceled P1,625.9 million of its outstanding share capital in order to eliminate an accumulated deficit of that amount which had accrued as a result of losses in previous years.

In addition, in July 2004 the Company issued 19,657,388 Shares to DMCI-HI, taking its shareholding to the current 94.5%, and on 3 December 2004, the Company issued a stock dividend of P225 million consisting of 225 million Shares in favor of all holders of record as at 25 November 2004.

In 4 February 2005, the Company etched a new milestone in its history when it successfully culminated an international public offering. This event reactivated the trading of Semirara stocks at the Philippine Stock Exchange under the ticker symbol “SCC”. The exercise generated P1.6 billion for the Company, providing sufficient liquidity to fully pay its restructured local and foreign debts and update trade accounts and royalties to the DOE. In addition, it enabled the Company to pay the required down payments for new mining equipment programmed for its modernization and expansion to augment production capacity. As a result of the Offering and the Domestic Placement, DMCI-HI reduced its shareholding to approximately 60.0%.

The Company has significant resources and reserves which supply a growing demand for coal. As at 30 June 2004, the Company’s in-situ coal resources at the Panian and Himalian sites were estimated at 210 million tonnes and 120 million tonnes, respectively. The estimated recoverable coal reserves at the Panian mine of 52.1 million tonnes are sufficient to support the Company’s target coal production rates for at least 10 years. The Company’s reserve estimates have been independently reviewed by Minarco Asia Pacific Pty Limited.

Consequently, in 2006 Australian consultants supervised additional confirmatory drilling activities in the Panian Pit in accordance with the Joint Ore Reserve Committee (JORC) standards of Australia (an internationally recognized body for establishing mineable reserves). As at 31 December 2006, 62 million MTs of coal were classified as measured and confirmed, while additional 24.5 million MTs and 6 million MTs were categorized as indicated and inferred, respectively. The Company’s coal is characterized as sub-bituminous-B and is appropriate for use in a wide range of combustion facilities.

 


Semirara Mining Corporation 2F DMCI Plaza. 2281 Chino Roces Avenue Extension, Makati City, Philippines 1231 T +632 888-3055 F +632 888-3955