President's Message to the Stockholders

As we deliberate on the performance of our company during the year just completed, we cannot undermine how deeply blest it has been and accentuate its resiliency in overwhelming the difficult grind of these extraordinarily complicated times as it emerges ever stronger from this financial debacle ravaging the rich Western and  European nations and reverberating into the global economies.

The financial troubles plaguing world economies is unmistakably attributed to the mechanisms of the extravagant cultural lifestyles of the Western world and the lawful propagation of investment derivatives to the nth degree authored by Wall Street geniuses whether consequential or machinations.  What is pathetic is the array of unmitigated proliferating investment instruments such as the collateralized Debt obligations or CDO and the like CMO, CBO, CPDO more specifically sub-prime mortgage instruments of the housing sector that started it all in Western Countries and even dragging down Wall Street byword names and banking institutions.  Ironically, institutions such those who sold them gave credence to the somewhat perplexing nature of the layered, exotic and highly complex pecuniary credit securities and derivatives.  As long as the institutions have the name nobody ever really bothered to temper them down to the tonalities of the real risks involved and so, sold them to the rest of the unsuspecting investing world while the market was biting hot in a fish-feeding frenzy.  When the dominoes fell, it soon entangled the global portfolios into a mess of contravening waves of extremely interconnected defaults and failures causing the collapse of the western financial system that only their governments can make amends but to the tune of trillions of taxpayer’s monies.  Bail out of toxic assets using taxpayers’ money has also the domino effect of escalating the problem and perpetuating it even further while this time even reaching down deeper and deeper into the pockets of the ordinary people or the working masses as they suffer the consequences in terms of their employment, work and health benefits, mortgages and eventually their savings.

Trillions of dollars in financial assistance were extended to these institutions in the form of bail-out or stimulus packages to buy out their toxic assets in the hope to reactivate lending and prevent panic and the dreaded economic turmoil. The government had to print tons of fiat money to implement the U.S. Troubled Asset Relief Program (TARP) or stimulus package. End product is indirectly devaluing the already stress-out dollar, resulting in the unprecedented sky rocketing prices of basic commodities. The remarkable price spiral of fuel & oil, the base metals and precious metals, explicitly gold, copper, silver and iron signal an era of credit crunch and commodity hyperinflation chased by fiat currency, in addition to an imminent shortage explosion detonated by the demands of a globally expanding population and rising unemployment rates.

The after effect of this financial fallout persists to this day worldwide and is more detrimental to countries with sensitive economies. Weaker economies with higher debt burden face bigger problems in their balance of trade as their exports suffer and balance of payments falter. Their only recourse is increased borrowing from their stronger neighboring countries who are, unfortunately, also afflicted and at the same time risking their already sensitive economic recovery. All financial packages from bailouts to stimulus programs require the printing of additional fiat currency, hence, furthering the dilution of major currencies into an accelerated value depreciating paper. As we witness on a daily basis the gradual appreciation of valuable commodities, it will not be surprising to witness one day the local currency as valueless as the Japanese currency during the World War II period because it was plainly a printed paper money without the necessary monetary backing such as the gold deposit in the treasury.

This is where government efforts is badly needed and most warranted. Having recognized the imminent problem at hand, government efforts in attracting foreign countryside investments must be given topmost priority, especially in the export sector like the mining industry. The Philippines is a country abounding in rich and diverse natural resources and yet, we hardly had any new descent mining ventures, much less newly opened operating mines, without any major hitches in the last two decades since the new mining law was enacted. Foreign investments and foreign mining companies have been pulling out of the countryside much faster that they are coming in. 

Government must get its act together and put an end to these loop holes of the mining laws. Among the more common concerns of new mining ventures is that 1) the law must define properly who are eligible IP’s and not just any group who have only recently sought recognition, this is a grave concern especially if monetary considerations are paramount in their agenda; 2) the terminal objective of any IP program must be to align itself and become an integral mainstream part of society after four generations detached from its roots; 3) IP land boundaries must be clearly defined so that mining in contracted or leased areas can proceed beyond those boundaries without needing IP consent; 4) the Commission on IP must align itself to the governments’ programs and not against it as it is now; 5) remove local government functions in giving-out Small Scale Mining Permits and instead, strengthen a more centralized MGB function to prevent corruption among politicians and their policies from controlling legitimate and illegitimate mining ventures in their politically-controlled areas.

The Global financial events unfolding before us are clear signs of the great paradigm shift. The steady appreciation of valuable commodities can be a reckoning force for developing countries such as ours. A rich countryside like that of the Philippines, that is remarkably endowed with vast wealth in natural resources now comes into the limelight. If the government of the current administration can make the necessary but important adjustments or refinement to the mining laws, more specifically when it comes to the Indigenous Peoples right Act (IPRA), then without a doubt the economic condition in the countrysides and the economy, in general, could change dramatically for the better. The Philippine government should take its cue on the rising economic wealth of China and India, together with the other developing countries of the East, as they now set their strong influence on the global economic community. The power of wealth is now gradually and consistently shifting to the East because of these financial cataclysmic events in the Western World. India is still positive on the export side, China on the other hand, has to contend with higher consumption of raw materials as it rapidly feeds it is ever-growing tiger economic status. While China continuously compete with the rest of the world in the consumption of natural resources to fuel its tiger hungry economy, it inadvertently transforms hapless countries with obscure future but teeming in abundant commodities such as oil and mineral export, into an economic powerhouse.

Our Mining Industry per se takes center stage and plays the pivotal role in this era of the great paradigm shift. While we take pride in having a beautiful country that nature bestowed with rich and diverse countryside and seaside tourism potentials, the Philippines is a sleeping dragon that only our government can wake it up from slumber of the enviable tiger economy. Our only ticket is maximizing the utilization of our natural resources. Good governance while securing the development of the countryside through sustainable and responsible mining is paramount in the growth of the tourism industry and, the effective utilization of our countryside natural resources such as oil and minerals is linchpin to the curtailment of poverty in the rural areas. This too is our passport to becoming an economic powerhouse and regain our stature as the “Pearl of the Orient”.

These globally contravening events motivate and endeavor your company to fasttrack the upgrading and development of our Alluvial Plant expansion in the recovery of magnetite iron sand with the precious metals gold, silver, platinum, palladium as derivatives. Other minerals present and coming in as minute seconds are precious minerals that are wide spread and abundantly visible to the unaided eye almost entirely in all our alluvial deposits. This bounteous discovery is a blissful blessing for the company in foreseeably raising asset values and revenues. We are presently witnessing the spiraling prices of iron ore and basic industrial materials because of the mottled difficulties from the ground up being experienced by mining companies around the world. Environmental concerns and social problems remain the biggest impediment to continuous extensive exploration and mining development. While it is true to form that violent natural calamities and other extremely catastrophic events dangerously aggravates and disrupts mining activities, including shipments of products, it is of utmost importance to emphasize that the Geo-Political color and atmosphere in countries like the Philippines is a more destructive operative factor to mining projects and investments than naturally occurring events since they last longer in effectiveness and sometimes even stalling projects forever.

The upgrading of the Baticang and Alluvial plant on the second half of the year under review was hampered by the occurrence of a series of strong typhoons during the onslaught of “Ondoy”. Installations on the riverside project were completely inundated forestalling further scheduled work programs. Expansion projects had to be rescheduled for the latter part of the year setting aback the projected operation on the first quarter of the coming year to a latter date due to the damage done while rehabilitation, relocation and construction was redesigned to higher ground to mitigate recurring flooding problems. The extensive damage to the main power lines and infrastructures of the Abra Electric Cooperative (ABRECO) restrained them from pursuing the hydroelectric connection to the Baticang Plant. Work overload back-tracked the electricification program on the other parts of the province until the end of the year. The typhoon strong winds and floods also severely damaged electrical installations on remote areas of the province that on the other side of the Abra River they had no electricity even during the Christmas and New Year holidays. The devastation substantially setback the Baticang and Alluvial Plant Operation due to power lags including trivial day to day operations like welding jobs and motor runs. Manpower for the Mechanical and Electrical departments was rerouted to menial jobs of clearing, cleaning and rehabilitating water submerged motors and equipment. Drying of these units took even longer period because of the frequent brownouts. 

The programmed rehabilitation of the Patok-Gold Project was also hampered by the inevitably high incidence of major landslides in the already miry area curtailing the delivery of supplies. These natural calamities plus the intense rivalry of candidates during the National and Local Elections in the nearby areas made the security situation highly volatile. While the company remains to be politically non-partisan at all election times, these are added risk factors should be greatly factored in the work programs.

The Baticang Lime Plant is also on the scheduled priority construction since lime products are an integral part in the operations of the Baticang CIP/CIL and Sulfide Flotation plant. Clearing of the site has been undertaken but then again was also disrupted by these unforgiving weather conditions that regularly visit these typhoon belts. Based on the company’s extensive project and feasibility studies, the lime products are also envisioned to supply the demands of surrounding mines and agricultural requirements within the neighboring areas. Theses excess products can contribute considerable revenue and cash flow when properly marketed as the supply of lime product in these areas still come from as far flung areas as Quezon province.

Your company in the last quarter of the year under consideration has been eagerly processing preliminary meetings with overseas investment funds to shore up finances and hasten the rehabilitation of the Patok Project including pre-export financing requirements for the Magnetite Iron Sand production. Due to difficulties in production and dwindling supplies, we foresee an even bigger boost in the demand for iron as the world supply is progressively outstripped by exploding global requirements of the steel industry. These situations invariably inflate prices even higher as we take credence of this opportunity to maximize production by retooling the plant with additional equipment. The Multi-Process Plant Design set up at the Baticang Hub does not discriminate on the different types of ore feed from the alluvial materials to the hard rock deposits and can even accommodate Patok Ore rich in sulfides with gold, silver and copper values. The gold concentrates and other precious metals that are recovered at the separate Alluvial Plant or Patok Plant are further processed here at the Baticang Plant Hub. The Baticang Mill Plant integrates Carbon-In-Pulp/Carbon-In-Leach and Sulfide Flotation Circuits that can easily recover different gold and copper values from the Patok ore and alluvial gold ore concentrates either individually or collectively. It was designed initially to process 200 MTPD of ore feed to recover gold and copper concentrates among other metals. Other facilities for the processing of concentrates are strategically located independently are also under construction. The Baticang Hub can even produce copper concentrates which are presently at very attractive market price level. The funding requirements will fast tract the rehabilitation and retooling of both projects taking the lead of the rising market. 

The Capcapo Copper-Gold Joint Venture Project of Abra Mining and Industrial Corporation (AMIC, PSE, AR) and Toronto Stock Exchange Listed Company Olympus Pacific Minerals, Inc. (Olympus-TSX-OYM) a Canadian based company have successfully concluded their due diligence in preparation for extensive drilling. They have conducted several in fill and step out drill holes confirming AMIC’s discovery that the Capcapo Deposit has the prospects of a World class deposit with over 7 million ounces of potential gold values, aside from the expected massive porphyry copper ore resource as indicated by the drill holes. Olympus is presently consolidating its resources to fasttrack their Vietnam operation which was expanded at the midst of the financial crisis. They have indicated their desire to reopen the project pending financing necessities.

The challenge to stay afloat during these troubled times is a gravely daunting task for the company while seeking to build growth potentials in our naturally endowed God given mineral rich mining tenements. Now is the opportune time to reallocate resources to expedite the construction and expansion of the Magnetite Iron Sand Recovery Plant and the installation of the Bulk Gold Recovery Circuit. Our long years of sacrifices to attain our goal in our mission-vision to develop and turn our hoard of highly valuable mining tenements over the years into a commercially producing mine are slowly coming into fruition. Capitalizing on our huge inventory of mining and milling equipment is a huge step towards accumulating massive start-up savings, valued at several hundreds of millions at current prices; it will not take long before our inception of a viable producing mine becomes a reality. Many are critical of the progress but then again Rome was not built in a day. Nay, there are no new mines around at these trying times that have opened up recently and continued to operate profitably. Our operation is moving albeit slowly but surely, and more importantly, devoid of the pressure from creditors as we have maintained our debt-free position up to the present.

It is time once again to count our blessings and give thanks while reflecting on the goodness of our Lord Almighty for the over-flowing blessings He has bestowed to our company, and to all those who have endeavored their time and effort unselfishly in the attainment of our project prominence. We implore the guiding light of His Divine Providence to bless us always. Keep us safe in troubling times while granting us the wisdom to make the right decisions in all our company undertakings so we shall endure in these highly unpredictable and difficult times. The steadfast determination and incessant support of our stockholders, suppliers, traders, venture investors and directors provide the driving forces that buttress our success. Likewise, we extend our heartfelt gratitude to our officers and employees for their outstanding accomplishments, commendable hard work and self-sacrifice beyond the call of duty and who have labored to serve generously during critical times of calamities affecting the company and the community. And more importantly, to our dedicated families whom we draw strength from, for their enduring support and trust in our company’s undertakings for without them we all are too frail and vulnerable. They all are our foremost inspiration for greater triumph and excellence. Again, in closing we invite you all to join us in merry anticipation of the forthcoming mining bonanza that will catapult our company and our nation to greatness.

GOD BLESS AND GOOD LUCK TO ALL. .

 
Jeremias B. Beloy
President
 
 
             
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