MANILA, Sept 17 — Philippine conglomerate San Miguel Corp is likely to invest in a gold and copper mine and is eyeing more ventures in telecoms, tollways and power as it pushes into heavy industry to fuel growth, its president said.
San Miguel is eyeing investing in a new gold and copper mine in the southern Mindanao region, with the mine having the potential to be bigger than existing ones in the country, Ramon Ang told Reuters in an interview today.
“There is a very, very good gold reserve, which I plan to recommend to San Miguel to invest in. It is very big,” Ang said.
“It’s a new one. We’ll develop it in partnership with an international mining company. This will be the biggest gold and copper venture of the Philippines,” said 54-year old Ang.
He said the firm was waiting for geological studies and a drilling test on the mine to confirm its commercial viability.
San Miguel is also working on another acquisition in the power and energy sector in the next few months and is set to sign a contract soon for an airport development project.
Ang declined to give details on these ventures. When asked if the project in the power and energy sector would be in the bag in 3-6 months, he said: “That is even too long.”
San Miguel has been working in recent years to transform the 119-year-old food and drinks group to include highly regulated, capital-intensive ventures such as power and energy, infrastructure and telecoms as it seeks higher sales growth.
“All the new businesses will deliver at least 20 per cent ROE (return on equity) down the line. That’s the target,” Ang said. In 2008, the company posted ROE — an important measure of company profitability and is the ratio of earnings to total equity value — of 12.9 per cent.
Analysts say the group’s expansion makes sense because of the low sales margins in its traditional food and drinks business, but it will take time for the company to realise the expected returns from the new ventures.
“We believe this is a good strategy but it will not immediately give the return that they want,” said Ron Rodrigo, research head at DBP-Daiwa Securities. “They still need to rehabilitate the power plant and develop the other projects.”
REVENUE MIX
Last month, San Miguel bought its first power plant, the 620-mw diesel-fired Limay facility sold by the government for US$13.5 million (RM47.3 million). It is waiting to complete a US$1.1 billion purchase of the output of a 1,000-MW coal-fired plant.
Ang said he expected power, energy, telecommunications, food and beverages and infrastructure to each contribute 20 per cent to group revenue. Food and drinks currently make up more than 50 per cent of group revenue.
San Miguel previously said it may spend as much as US$2 billion in new projects in heavy industry, to be financed by asset sales such as substantial minority stakes in its processed food and liquor units, as well as bank loans and debt issues.
“That’s the budget...for several deals,” Ang said. “If there is an opportunity, you can do it in a few months, but if there is no opportunity, it may take years (to spend).”
The firm was in talks with banks for a US$600 million 3-year loan. “That is in preparation for more acquisitions,” Ang said.
Last week, banking sources told Reuters Loan Pricing Corp that a mandated lead arranger was being formed for a US$600 million three-year loan for San Miguel.
It is waiting to complete deals to sell 49 per cent of Pure Foods Corp and Ginebra San Miguel, 14 per cent of its packaging unit and its international beer operations.
The stake sales in Pure Foods and the packaging unit alone may give San Miguel an extra US$600 million, Ang said.
The group intends to keep its stake of at least 27 per cent in the country’s largest power retailer Manila Electric Co and is willing to increase its holdings, Ang said.
He said the group was lining up more tollway and expressway projects in northern Philippines after it bagged a 35 per cent stake in a tollway development consortium.
San Miguel was looking at acquiring small phone firms in the country to boost its telecommunications venture, Ang said. — Reuters
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