AT, APX, FNI, PX not recommended for suspension.
The DENR announced in its audit results that a total of 11 companies were not recommended for suspension, including listed companies AT, APX, PX, and FNI. This means that the operations of the said companies will continue, however, activities will be monitored and infractions that were found during the audit will still need to be corrected. Infractions mainly pertain to deficiencies in compliance to mining and environmental laws. The DENR stated that it will still meet with these companies to discuss plans to further push environmental standards higher.
Most of NIKL’s mines pass audit except for Hinatuan; LC and MARC face suspension. For the case of NIKL, most of its mines also passed the audit, specifically Rio Tuba, Taganito, and Cagdianao, but the operations of Hinatuan was recommended for suspension. The latter is included in the 20 additional companies that face suspension, which also includes listed companies LC and MARC. The recommendation was made on the back of inadequate measures on the mining areas such as the lack of tree cutting permits, unregistered facilities for treatment, and incorrect storage and disposal of tailings, among others. The mining companies will be given a report on the audit and will have seven days to explain their side, after which a final decision will be made. In total, out of the 41 metallic mining companies, only 11 companies were spared, 20 companies recommended for suspension, while the remaining 10 that were previously suspended will remain suspended. The DENR noted that the companies facing suspension accounts for 55.5% of the country’s total nickel production value based on 2015 data.
NIKL estimates under review. We are reviewing our estimates in light of the potential suspension of NIKL’s Hinatuan operations. We estimate that Hinatuan accounts for 16% of NIKL’s total ore production for 2016. Should its operations be suspended, lost revenues this year is estimated at Php2.2Bil, comprising 17% of our total forecasted revenues of Php12.7Bil for the year. In addition, our FV estimate would be 11.1% lower to Php4.80/sh. We currently have a HOLD rating on NIKL and a fair value estimate of Php5.40/sh.