Berong Nickel Corporation The financial statements present all material respects and the financial position of Berong Nickel Corporation as at December 31, 2010 and 2009, and its financial performance and its cash flows for the years then ended in accordance with Philippine Financial Reporting Standards.

1. Berong Coastal Facilities – July 2008
Coastal Stockpiles
Crusher
Berong River
Assay Lab Accommodation
Rice
Paddies
Drying Area
Nursery Area
11

2. Limonite benches being prepared on higher elevation for wet
season mining – July 2008
Limonite Ore
Saprolite Ore
12

3. Rehabilitation – Area 4 - Berong
Water diverted around rehab area
108 Research Plots with
various species of plants
[with & without Top Soil]
Water Management
Systems
18

4. SyCip Gorres Velayo & Co.
6760 Ayala Avenue
1226 Makati City
Philippines
Phone: (632) 891 0307
Fax: (632) 819 0872
www.sgv.com.ph
BOA/PRC Reg. No. 0001
SEC Accreditation No. 0012-FR-2
INDEPENDENT AUDITORS’ REPORT
The Stockholders and the Board of Directors
Berong Nickel Corporation
Report on the Financial Statements
We have audited the accompanying financial statements of Berong Nickel Corporation, which
comprise the statements of financial position as at December 31, 2010 and 2009, and the statements of
comprehensive income, statements of changes in equity and statements of cash flows for the years
then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with Philippine Financial Reporting Standards, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with Philippine Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
*SGVMC409311
A member firm of Ernst & Young Global Limited

5. -2-
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of
Berong Nickel Corporation as at December 31, 2010 and 2009, and its financial performance and its
cash flows for the years then ended in accordance with Philippine Financial Reporting Standards.
Report on the Supplementary Information Required Under Revenue Regulations 15-2010
Our audits were conducted for the purpose of forming an opinion on the basic financial statements
taken as a whole. The supplementary information on taxes, duties and license fees in Note 26 to the
financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not
a required part of the basic financial statements. Such information is the responsibility of the
management of Berong Nickel Corporation. The information has been subjected to the auditing
procedures applied in our audit of the basic financial statements. In our opinion, the information is
fairly stated in all material respects in relation to the basic financial statements taken as a whole.
SYCIP GORRES VELAYO & CO.
Jaime F. del Rosario
Partner
CPA Certificate No. 56915
SEC Accreditation No. 0076-AR-2
Tax Identification No. 102-096-009
BIR Accreditation No. 08-001998-72-2009,
June 1, 2009, Valid until May 31, 2012
PTR No. 2641518, January 3, 2011, Makati City
March 18, 2011
*SGVMC409311

8. BERONG NICKEL CORPORATION
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
Retained
Earnings
Capital Stock (Deficit) Total
Balances at December 31, 2008 =
P303,750,000 =
P249,933,080 =
P553,683,080
Net loss – (142,440,297) (142,440,297)
Other comprehensive income – – –
Total comprehensive loss – (142,440,297) (142,440,297)
Balances at December 31, 2009 303,750,000 107,492,783 411,242,783
Net loss – (134,748,908) (134,748,908)
Other comprehensive income – – –
Total comprehensive loss – (134,748,908) (134,748,908)
Balances at December 31, 2010 =
P303,750,000 (P27,256,125)
= =
P276,493,875
See accompanying Notes to Financial Statements.
*SGVMC409311

9. BERONG NICKEL CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended December 31
2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before income tax (P135,100,062)
= (P142,769,963)
=
Adjustments for:
Depreciation, amortization and depletion (Notes 8 and 13) 56,323,955 54,325,231
Accretion expense for provision for mine rehabilitation and
decommissioning (Notes 11 and 17) 1,170,513 1,098,887
Provision for impairment losses on trade and other
receivables (Notes 5 and 13) 770,153 –
Unrealized foreign exchange gains - net (520,797) (1,116,042)
Loss (gain) on disposals of property and
equipment (Note 18) 327,381 (347,731)
Interest income (123,074) (177,337)
Movement in accrued rent (Note 21) 61,786 –
Interest expense (Note 17) – 151
Operating loss before changes in working capital (77,090,145) (88,986,804)
Decrease (increase) in:
Trade and other receivables 3,451,157 (940,949)
Inventories (1,472,052) 75,787,720
Other current assets (658,294) (73,930)
Decrease in trade and other payables (4,788,862) (45,496,708)
Net cash used in operations (80,558,196) (59,710,671)
Interest received 123,074 177,337
Interest paid – (151)
Net cash flows used in operating activities (80,435,122) (59,533,485)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of property and equipment 600,000 1,181,920
Acquisitions of property and equipment (Note 8) (229,441) (7,604,767)
Decrease (increase) in:
Deferred mine exploration costs (28,581,470) (3,364,402)
Other noncurrent assets 1,485,788 3,984,111
Net cash flows used in investing activities (26,725,123) (5,803,138)
CASH FLOW FROM FINANCING ACTIVITY
Additional advances from stockholders 70,513,338 46,834,677
NET DECREASE IN CASH AND CASH EQUIVALENTS (36,646,907) (18,501,946)
EFFECT ON CASH AND CASH EQUIVALNTS OF
CHANGES IN FOREIGN EXCHANGE RATE 14,060 (314,523)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 51,229,287 70,045,756
CASH AND CASH EQUIVALENTS AT END OF YEAR P14,596,440
= =
P51,229,287
See accompanying Notes to Financial Statements.
*SGVMC409311

10. BERONG NICKEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Corporate Information and Status of Operations
a. Corporate Information
Berong Nickel Corporation (the Company) was registered with the Philippine Securities and
Exchange Commission on September 27, 2004, for the purpose of exploring, developing and
mining the Berong Mineral Properties located in Barangay Berong, Quezon, province of
Palawan. The Company shall have the exclusive privilege and right to explore, develop, mine,
operate, produce, utilize, process and dispose of all the minerals and the products or
by-products that may be produced, extracted, gathered, recovered, unearthed or found within
the Mineral Properties, inclusive of Direct Shipping Project, under a Mineral Production
Sharing Agreement (MPSA) with the Government of the Philippines or under any appropriate
rights granted by law or the Government of the Philippines.
The Company is 60%-owned by Nickeline Resources Holdings, Inc. (NRHI), 21.3%-owned
by Toledo Mining Corporation (TMC) and 18.7%-owned by European Nickel Plc (EN). Its
ultimate parent is Atlas Consolidated Mining and Development Corporation (ACMDC).
The registered office address of the Company is 7th Flr. Quad Alpha Centrum, 125 Pioneer
Street, Mandaluyong City.
b. Status of Operations
Mining Project
In 2005, following the grant of temporary exploration permit by the Philippine Government,
the Company commenced a confirmatory exploration and resampling program in the initial
production area of the “Berong Nickel Mining Project” (the Berong Project).
In 2006, after establishing that economically recoverable reserves exist in the area, the
Company proceeded to develop the area into commercial mining operation. On
November 24, 2006, the Company was issued a Special Mines Permit (SMP) by the
Department of Environment and Natural Resources (DENR), through the Mines and
Geosciences Bureau (MGB) subject to the pertinent provisions of DENR Administrative
Order No. 96-40. The issuance of the SMP allowed the Company to commence its mining
operations while it completes a feasibility report as part requirement for the Company’s
commercial MPSA application.
On June 8, 2007, the government approved MPSA No. 235-2007-IVB in favor of the
Company as the Contractor. The MPSA covers a contract area of approximately two hundred
eighty-eight (288) hectares situated in Barangay Berong, Municipality of Quezon, Province of
Palawan.
In November 2008, the Company has decided not to continue its mining operations in the
Berong Project due to low nickel prices and demand. The Company continues to assess the
potential to re-open the Berong Project as a direct shipping operation, but no decision has been
made yet to resume mining operations.
*SGVMC409311

11. -2-
On February 12, 2010, MGB granted Exploration Permit (EP) No. EP-002-2010IVB in favor
of the Company. The EP covers an area of approximately one thousand sixty-nine (1,069)
hectares situated in the Municipalities of Quezon and Aborlan, Province of Palawan. The EP
shall be for a period of two (2) years from the date of issuance thereof.
Registration with the Board of Investments (BOI)
On May 28, 2007, the Company was registered with the BOI as a new producer of
beneficiated nickel ore on a non-pioneer status. On November 5, 2010, BOI has approved the
extension of Income Tax Holiday (ITH) period of the Company for another year until May 27,
2012 (see Note 25).
The Company has been certified by BOI as a qualified enterprise for the purpose of Value
Added Tax (VAT) zero-rating of its transactions pursuant to the terms and conditions set forth
by the BOI. On January 22, 2010, the Company received the renewed certification of BOI for
the Value Added Tax (VAT)-zero rated status, which is valid until December 31, 2010. In
2011, the registration was not renewed since the Company has no export sales in 2010, which
is one of the requirements of the said certification.
The financial statements of the Company as at and for the years ended December 31, 2010 and
2009 were authorized for issue by the Board of Directors (BOD) on March 18, 2011.
2. Basis of Preparation, Statement of Compliance and Summary of Significant Accounting
Policies
Basis of Preparation
The Company’s financial statements have been prepared on a historical cost basis and are
presented in Philippine peso, which is the Company’s functional and presentation currency. All
values are rounded to the nearest Philippine peso, except as otherwise stated.
Statement of Compliance
The financial statements of the Company have been prepared in compliance with Philipppine
Financial Reporting Standards (PFRS).
Changes in Accounting Policies
The accounting policies adopted are consistent with those of the previous financial year except for
the following new and amended PFRSs, Philippine Accounting Standards (PAS), Philippine
Interpretation International Financial Reporting Interpretations Committee (IFRIC) and
improvements to PFRSs, which were adopted as at January 1, 2010:
Amended and Revised Standards and New Interpretation
· Revised PFRS 3, Business Combinations and Amended PAS 27, Consolidated and Separate
Financial Statements
· Philippine Interpretation IFRIC 17, Distributions of Non-Cash Assets to Owners
Amendments and Improvements to Standards
· Amendment to PAS 39, Financial Instruments: Recognition and Measurement, Eligible
Hedged Items
· Amendment to PFRS 2, Share-based Payment, Group Cash-settled Share-based Payment
Transactions
*SGVMC409311

12. -3-
· Improvements to PFRSs 2008, with respect to PFRS 5, Noncurrent Assets Held for Sale and
Discontinued Operations
· Improvements to PFRSs 2009
The new, revised, amended and improved standards and/or interpretations that have been adopted
are deemed to have no impact on the financial position or performance of the Company.
Future Changes in Accounting Policies
The Company did not early adopt the following standards and Philippine Interpretations that will
become effective subsequent to December 31, 2010:
Effective in 2011:
· Amendment to PAS 24, Related Party Disclosures, effective for annual periods beginning on
or after January 1, 2011, with earlier adoption permitted for either the partial exemption for
government-related entities or for the entire standard. It clarified the definition of a related
party to simplify the identification of such relationships and to eliminate inconsistencies in its
application. The amended standard introduces a partial exemption of disclosure requirements
for government-related entities.
· Amendment to PAS 32, Financial Instruments: Presentation, Classification of Rights Issues,
effective for annual periods beginning on or after February 1, 2010. It amended the definition
of a financial liability in order to classify rights issues (and certain options or warrants) as
equity instruments in cases where such rights are given pro rata to all of the existing owners
of the same class of an entity’s non-derivative equity instruments, or to acquire a fixed
number of the entity’s own equity instruments for a fixed amount in any currency.
· Amendment to Philippine Interpretation IFRIC 14, Prepayments of a Minimum Funding
Requirement, effective for annual periods beginning or after January 1, 2011, with
retrospective application. The amendment provides guidance on assessing the recoverable
amount of a net pension asset. The amendment permits an entity to treat the prepayment of a
minimum funding requirement as an asset.
· Philippine Interpretation IFRIC 19, Extinguishing Financial Liabilities with Equity
Instruments, effective for annual periods beginning on or after July 1, 2010 with earlier
application permitted. The interpretation clarifies that equity instruments issued to a creditor
to extinguish a financial liability qualify as consideration paid. The equity instruments issued
are measured at their fair value. In case that this cannot be reliably measured, the instruments
are measured at the fair value of the liability extinguished. Any gain or loss is recognized
immediately in the statement of comprehensive income.
*SGVMC409311

13. -4-
Improvements to PFRS 2010
The omnibus amendments to PFRS issued in 2010 were issued primarily with a view of removing
inconsistencies and clarifying wordings. The amendments are effective for annual periods
beginning on or after January 1, 2011, except when otherwise stated.
· PFRS 3, Business Combinations, effective for annual reporting periods beginning on or after
July 1, 2010, clarifies that the amendments to PFRS 7, Financial Instruments: Disclosures,
PAS 32 and PAS 39 that eliminate the exemption for contingent consideration, do not apply
to contingent consideration that arose from business combinations whose acquisition dates
precede the application of PFRS 3 (as revised in 2008). The amendment will be applied
retrospectively.
The amendment also limits the scope of the measurement choices that only the components of
non-controlling interest that are present ownership interests that entitle their holders to a
proportionate share to the entity’s net assets, in the event of liquidation, shall be measured
either at fair value or at present ownership instrument’s proportionate share of the acquiree’s
identifiable net assets. Other components of non-controlling interest are measured at their
acquisition date fair value, unless another measurement basis is required by another PFRS.
The amendment will be applied prospectively from the date the entity applies revised PFRS 3.
Further, the amendment requires an entity in a business combination to account for the
replacement of the acquiree’s share-based payment transactions, whether obliged or
voluntarily, such as split between considerations and post-combination expenses. However, if
the entity replaces the acquiree’s awards that expire as a consequence of the business
combination, these are recognized as post-combination expenses. The amendment also
specifies the accounting for share-based payment transactions that the acquirer does not
exchange for its own awards: if vested - they are part of non-controlling interest and
measured at their market-based measure; if unvested - they are measured at market-based
value as if granted at acquisition date, and allocated between non-controlling interest and
post-combination expenses. The amendment will be applied prospectively.
· PFRS 7, Financial Instruments: Disclosures, emphasizes the interaction between quantitative
and qualitative disclosures and the nature and extent of risks associated with financial
instruments. The amendment will be applied retrospectively.
· PAS 1, Presentation of Financial Statements, clarifies that an entity will present an analysis
of other comprehensive income for each component of equity, either in the statement of
changes in equity or in the notes to the financial statements. The amendment will be applied
retrospectively.
· PAS 27, Consolidated and Separate Financial Statements, effective for annual reporting
periods beginning on or after July 1, 2010, clarifies that the consequential amendments from
PAS 27 made to PAS 21, The Effect of Changes in Foreign Exchange Rates,
PAS 28, Investments in Associates and PAS 31, Interests in Joint Ventures, apply
prospectively for annual periods beginning on or after July 1, 2009 or earlier when PAS 27 is
applied earlier. The amendment will be applied retrospectively.
*SGVMC409311

14. -5-
· Philippine Interpretation IFRIC 13, Customer Loyalty Programmes, clarifies that when the
fair value of award credits is measured based on the value of the awards for which they could
be redeemed, the amount of discounts or incentives otherwise granted to customers not
participating in the award credit scheme, is to be taken into account. The amendment will be
applied retrospectively.
Effective in 2012:
· Amendment to PAS 12, Income Taxes - Deferred Tax: Recovery of Underlying Assets,
effective for annual periods beginning or after January 1, 2012. The amendment provides a
practical solution to the problem of assessing whether recovery of an asset will be through use
or sale. It introduces a presumption that recovery of the carrying amount of an asset will,
normally, be through sale.
· Amendments to PFRS 7, Financial Instruments: Disclosures - Transfers of Financial Assets,
effective for annual periods beginning on or after July 1, 2011. The amendments will allow
users of financial statements to improve their understanding of transfer transactions of
financial assets (for example, securitizations), including understanding the possible effects of
any risks that may remain with the entity that transferred the assets. The amendments also
require additional disclosures if a disproportionate amount of transfer transactions are
undertaken around the end of a reporting period.
· Philippine Interpretation IFRIC 15, Agreement for Construction of Real Estate, effective for
annual periods beginning or after January 1, 2012, covers accounting for revenue and
associated expenses by entities that undertake the construction of real estate directly or
through subcontractors. This Interpretation requires that revenue on construction of real
estate be recognized only upon completion, except when such contract qualifies as
construction contract to be accounted for under PAS 11, Construction Contracts, or involves
rendering of services in which case revenue is recognized based on stage of completion.
Contracts involving provision of services with the construction materials and where the risks
and reward of ownership are transferred to the buyer on a continuous basis will also be
accounted for based on stage of completion.
Effective in 2013:
· PFRS 9, Financial Instruments: Classification and Measurement, effective for annual periods
beginning on or after January 1, 2013, introduces new requirements on the classification and
measurement of financial assets. It uses a single approach to determine whether a financial
asset is measured at amortized cost or fair value, replacing the many different rules in
PAS 39, Financial Instruments: Recognition and Measurement. The approach in the new
standard is based on how an entity manages its financial instruments (its business model) and
the contractual cash flow characteristics of the financial assets. The new standard also
requires a single impairment method to be used, replacing the many different impairment
methods in PAS 39.
The Company does not expect any significant impact in the financial statements when it adopts the
above standards and interpretations. The revised, amended and additional disclosures provided by
the standards and interpretations will be included in the financial statements in the year of
adoption, where applicable.
*SGVMC409311

15. -6-
Summary of Significant Accounting Policies
Presentation of Financial Statements
The Company has elected to present all items of recognized income and expense in one single
statement of comprehensive income.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and with banks and short-term cash investments
that are highly liquid with original maturity of three (3) months or less.
Financial Instruments
Initial Recognition and Measurement of Financial Instruments
The Company determines the classification of financial instruments at initial recognition and,
where allowed and appropriate, re-evaluates this designation at every end of the reporting period.
Financial instruments are recognized initially at fair value. Directly attributable transaction costs
are included in the initial measurement of all financial instruments, except for financial
instruments measured at fair value through profit or loss (FVPL).
Financial Assets
Financial assets within the scope of PAS 39 are classified as at FVPL, loans and receivables,
available-for-sale (AFS) investments, held-to-maturity (HTM) investments, or as derivatives
designated as hedging instruments in an effective hedge, as appropriate.
Purchases or sales of financial assets that require delivery of assets within a time frame established
by regulation or convention in the marketplace (regular way trades) are recognized on the trade
date (i.e., the date that the Company commits to purchase or sell the asset).
The Company’s financial assets are in the nature of loans and receivables. The Company has no
financial assets classified as at FVPL, AFS investments, HTM investments and derivatives
designated as hedging instruments in an effective hedge as at December 31, 2010 and 2009.
Financial Liabilities
Financial liabilities within the scope of PAS 39 are classified as at FVPL, loans and borrowings, or
as derivatives designated as hedging instruments in an effective hedge, as appropriate.
Financial instruments are classified as liabilities or equity in accordance with the substance of the
contractual arrangement. Interest, dividends, gains and losses relating to a financial instrument or
a component that is a financial liability, are reported as expense or income. Distributions to
holders of financial instruments classified as equity are charged directly to equity net of any
related income tax.
The Company’s financial liabilities are in the nature of loans and borrowings. The Company has
no financial liabilities classified as at FVPL and derivatives designated as hedging instrument in
an effective hedge as at December 31, 2010 and 2009.
*SGVMC409311

16. -7-
Subsequent Measurement
The subsequent measurement of financial instruments depends on their classification as follows:
Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. After initial measurement, loans and receivables are
subsequently measured at amortized cost using the effective interest rate method, less allowance
for impairment, in the statement of financial position. Amortized cost is calculated by taking into
account any discount or premium on acquisition and fees and costs that are an integral part of the
effective interest rate. Gains and losses are recognized in the statement of comprehensive income
when the loans are derecognized or impaired as well as through the amortization process.
Loans and receivables are included in current assets if maturity is within twelve (12) months from
the end of the reporting period. Otherwise, these are classified as noncurrent assets.
As at December 31, 2010 and 2009, the Company’s loans and receivables pertain to cash and cash
equivalents, trade and other receivables, which are classified under current assets, and Mine
Rehabilitation Fund (MRF), which is included under “Other noncurrent assets”.
Loans and Borrowings
This category pertains to financial liabilities that are not held for trading, not derivatives, or not
designated as at FVPL upon the inception of the liability. These financial liabilities are
subsequently carried at amortized cost, taking into account the impact of applying the effective
interest method of amortization or accretion for any related premium, discount and any directly
attributable transaction cost.
Loans and borrowings are included under current liabilities if it will be settled within 12 months
after the end of the reporting period or within the Company’s operating cycle, whichever is longer.
Otherwise, these are classified as noncurrent liabilities.
As at December 31, 2010 and 2009, the Company’s loans and borrowings pertain to trade and
other payables, advances from stockholders and dividends payable, which are classified under
current liabilities.
Determination of Fair Values of Financial Instruments
The fair value of financial instruments that are traded in active markets at each end of the
reporting period is determined by reference to quoted market prices or dealer price quotations, bid
price for long positions and ask price short positions, without any deduction for transaction costs.
For financial instruments not traded in an active market, the fair value is determined using
appropriate valuation techniques. Such techniques may include using recent arm’s length market
transactions; reference to the current fair value of another instrument that is substantially the same;
a discounted cash flow analysis or other valuation models.
The Company uses hierarchy below in determining and disclosing the fair value of financial
instruments by valuation technique:
· Level 1 - Quoted prices in active markets for identical asset or liability;
· Level 2 - Those involving inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (as prices) or indirectly (derived from
prices); and
*SGVMC409311

17. -8-
· Level 3 - Those with inputs for asset or liability that are not based on observable market data
(unobservable inputs).
When fair values of listed equity and debt securities as well as publicly traded derivatives at the
end of the reporting period are based on quoted market prices or binding dealer price quotations
without any deduction for transaction costs, the instruments are included within Level 1 of the
hierarchy.
For all other financial instruments, fair value is determined using valuation technique. Valuation
techniques include net present value techniques, comparison to similar instruments for which
market observable prices exist, option pricing models and other relevant valuation model. For
these financial instruments, inputs into models are market observable and are therefore included
within Level 2.
Instruments included in Level 3 include those for which there is currently no active market.
An analysis of fair values of financial instruments and further details as to how they are measured
are provided in Note 23.
Offsetting of Financial Instruments
Financial assets and financial liabilities are only offset and the net amount reported in the
statement of financial position when there is a legally enforceable right to offset the recognized
amounts and the Company intends to either settle on a net basis, or to realize the asset and the
liability simultaneously.
Impairment of Financial Assets Carried at Amortized Cost
The Company assesses at each end of the reporting period whether there is objective evidence that
a specific financial asset or group of financial assets may be impaired.
The Company first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial
assets that are not individually significant. The factors in determining whether objective evidence
of impairment exist include, but are not limited to, the length of the Company’s relationship with
debtors, their payment behavior and known market factors. Evidence of impairment may also
include indications that the borrowers are experiencing significant difficulty, default and
delinquency in payments, the probability that they will enter bankruptcy, or other financial
reorganization and where observable data indicate that there is measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults. If it is determined that no objective evidence of impairment exists for an individually
assessed financial asset, whether significant or not, the asset is included in a group of financial
asset with similar credit risk characteristics and that group of financial assets is collectively
assessed for impairment. Assets that are individually assessed for impairment and for which an
impairment loss is or continues to be recognized are not included in a collective assessment of
impairment.
If there is objective evidence that an impairment loss on loans and receivables carried at amortized
cost has been incurred, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit
losses that have not been incurred) discounted at the financial asset’s original effective interest rate
(i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset
shall be reduced either directly or through use of an allowance account. The amount of the loss
shall be recognized in the statement of comprehensive income.
*SGVMC409311

18. -9-
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed. Any subsequent reversal of an impairment loss is
recognized in the statement of comprehensive income, to the extent that the carrying value of the
asset does not exceed its amortized cost at the reversal date.
Impairment losses are estimated by taking into consideration the following information: current
economic conditions, the approximate delay between the time a loss is likely to have been incurred
and the time it will be identified as requiring an individually assessed impairment allowance, and
expected receipts and recoveries once impaired. Management is responsible for deciding the
length of this period which can extend for as long as one year.
Derecognition of Financial Instruments
Financial Assets
A financial asset (or, where applicable a part of a financial asset or part of a group of similar
financial assets) is derecognized when:
· the rights to receive cash flows from the asset have expired;
· the Company retains the right to receive cash flows from the asset, but has assumed an
obligation to pay them in full without material delay to a third party under a “pass-through”
arrangement; or
· the Company has transferred its rights to receive cash flows from the asset and either:
(a) has transferred substantially all the risks and rewards of the asset, or (b) has neither
transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Company has transferred its rights to receive cash flows from an asset and has neither
transferred nor retained substantially all the risks and rewards of the asset nor transferred control
of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the
asset.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured
at the lower of the original carrying amount of the asset and the maximum amount of
consideration that the Company could be required to repay.
Financial Liabilities
A financial liability is derecognized when the obligation under the liability is discharged,
cancelled or has expired.
When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are substantially modified, such an exchange or
modification is treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts is recognized in the statement of
comprehensive income.
*SGVMC409311

19. - 10 -
Inventories
Inventories are valued at the lower of cost or net realizable values (NRV). Cost is determined by
the moving average production cost during the period for beneficiated nickel ore exceeding a
determined cut-off grade and for fuel and supplies. NRV for beneficiated nickel ore is the
estimated selling price in the ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale. NRV for supplies and fuel is the current
replacement cost.
Property and Equipment
Property and equipment, except land, is stated at cost, excluding the costs of day-to-day servicing,
less accumulated depreciation, amortization and depletion and any accumulated impairment in
value. Such cost includes the cost of replacing part of such property and equipment when that cost
is incurred if the recognition criteria are met.
Land is carried at cost less accumulated impairment in value, if any.
Depreciation and amortization are computed on a straight-line basis over the following estimated
useful lives of the assets or the term of the lease, whichever is shorter, in case of leasehold
improvements.
Category Number of Years
Leasehold improvements 5-10
Laboratory and other equipment 5-10
Transportation equipment 5
Office equipment 5
Mine and mining properties consists of mine development costs, capitalized cost of mine
rehabilitation and decommissioning (refer to accounting policy on “Provision for mine
rehabilitation and decommissioning”) and mining rights. Mine development costs consist of
capitalized costs previously carried under “Deferred mine exploration costs”, which were
transferred to property and equipment upon start of commercial operations. Mining rights are
expenditures for the acquisition of property rights that are capitalized.
The net carrying amount of mine and mining properties is depleted using unit-of-production
method based on the estimated economically recoverable reserves of the mine concerned or are
written-off if the property is abandoned.
Property and equipment, except for land, are depereciated, amortized and depleted in the following
month from its availability for use and after the risks and rewards are transferred to the Company,
or, in case of mine and mining properties, from start of commercial operations upon extraction of
ore reserves. Depreciation, amortization and depletion ceases when the assets are fully
depreciated, amortized or depleted, or at the earlier of the date that the item is classified as held for
sale (or included in the disposal group that is classified as held for sale) in accordance with
PFRS 5, Noncurrent Assets Held for Sale and Discontinued Operations, and the date the item is
derecognized.
The estimated useful lives and depreciation, amortization and depletion methods are reviewed at
each end of the reporting period to ensure that the period and methods of depreciation,
amortization and depletion are consistent with the expected pattern of economic benefits from
items of property and equipment.
*SGVMC409311

20. - 11 -
An item of property and equipment is derecognized upon disposal or when no future economic
benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount of
the asset) is included in the statement of comprehensive income in the year the asset is
derecognized.
Construction in-progress is stated at cost. This includes the cost of construction and other direct
costs. Construction in-progress is not depreciated until completed and put into operational or
available for use, whichever comes earlier.
Deferred Mine Exploration Costs
Expenditures for mine exploration work prior to drilling are charged to operations. When it has
been established that a mineral deposit is commercially mineable and a decision has been made to
formulate a mining plan (which occurs upon completion of a positive economic analysis of the
mineral deposit), the costs subsequently incurred to develop a mine on the property prior to the
start of mining operations are capitalized. Upon the start of commercial operations, such costs are
transferred to mine and mining properties under “Property and equipment”. Capitalized amounts
may be written down if future cash flows, including potential sales proceeds related to the
property, are projected to be less than the carrying value of the property. If no mineable ore body
is discovered, capitalized acquisition costs are expensed in the period in which it is determined
that the mineral property has no future economic value.
Costs incurred during the start-up phase of a mine are expensed as incurred. Ongoing mining
expenditures on producing properties are charged against earnings as incurred. Major
development expenditures incurred to expose the ore, increase production or extend the life of an
existing mine are capitalized.
Impairment of Non-financial Assets
Inventories
The Company determines the NRV of inventories at each end of the reporting period. If the cost
of the inventories exceeds its NRV, the asset is written down to its NRV and impairment loss is
recognized in the statement of comprehensive income in the year the impairment is incurred. In
case the NRV of the inventories increased subsequently, the NRV will increase carrying amounts
of inventories but only to the extent of their original acquisition costs.
Property and Equipment
Property and equipment, except land, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. If any such
indication exists and where the carrying amount of an asset exceeds its recoverable amount, the
asset or cash-generating unit (CGU) is written down to its recoverable amount. The estimated
recoverable amount is the higher of an asset’s or CGU’s fair value less cost to sell and value in use
and is determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets, in which case the asset is tested
as part of a large CGU. The fair value less cost to sell is the amount obtainable from the sale of an
asset in an arm’s-length transaction less the costs of disposal while value in use is the present
value, using a pre-tax discount rate, of estimated future cash flows expected to arise from the
continuing use of an asset and from its disposal at the end of its useful life. Impairment losses are
recognized in the statement of comprehensive income.
*SGVMC409311

21. - 12 -
Recovery of impairment losses recognized in prior periods is recorded when there is an indication
that the impairment losses recognized for the asset no longer exist or have decreased. The
recovery is recorded in the statement of comprehensive income. However, the increased carrying
amount of an asset due to recovery of an impairment loss is recognized to the extent it does not
exceed the carrying amount that would have been determined (net of depletion, depreciation and
amortization) had no impairment loss been recognized for that asset in prior periods.
Deferred Mine Exploration Costs
An impairment review is performed, either individually or at the CGU level, when there are
indicators that the carrying amount of the assets may exceed their recoverable amounts. To the
extent that this occurs, the excess is fully provided against, in the financial period in which this is
determined. Exploration assets are reassessed on a regular basis and these costs are carried
forward provided that at least one of the following conditions is met:
· such costs are expected to be recouped in full through successful development and exploration
of the area of interest or alternatively, by its sale; or
· exploration and evaluation activities in the area of interest have not yet reached a stage which
permits a reasonable assessment of the existence or otherwise of economically recoverable
reserves, and active and significant operations in relation to the area are continuing, or planned
for the future.
Provisions
General
Provisions are recognized when the Company has a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow of resources embodying economic benefits will
be required to settle the obligation and a reliable estimate can be made of the amount of the
obligation. Provisions are reviewed at each end of the reporting period and adjusted to reflect the
current and best estimate. When the Company expects some or all of the provisions to be
reimbursed, the reimbursement is recognized as a separate asset but only when reimbursement is
virtually certain. The expense relating to any provision is presented in the statement of
comprehensive income, net of any reimbursement.
If the effect of the time value of money is material, provisions are made by discounting the
expected future cash flows at a pre-tax rate that reflects current market assessment of the time
value of money and, where appropriate, the risks specific to the liability. Where discounting is
used, the increase in the provision due to the passage of time is recognized as an accretion
expense.
Provision for Mine Rehabilitation and Decommissioning
The Company records the present value of estimated costs of legal and constructive obligations
required to restore operating locations in the period in which the obligation is incurred. The nature
of these restoration activities includes dismantling and removing structures, rehabilitating mines
and tailings dams, dismantling operating facilities, closure of waste sites, and restoration,
reclamation and re-vegetation of affected areas. The obligation generally arises when the asset is
installed or the ground/environment is disturbed at the production location. When the liability is
initially recognized, the present value of the estimated cost is capitalized by increasing the
carrying amount of the related mining assets. Over time, the discounted liability is increased for
the change in present value based on the discount rates that reflect current market assessments and
the risks specific to the liability. The periodic unwinding of the discount is recognized in the
*SGVMC409311

22. - 13 -
statement of comprehensive income under “Finance costs”. Additional disturbances or changes in
rehabilitation costs will be recognize as additions or charges to the corresponding assets and
provision for mine rehabilitation and decommissioning, respectively, when they occur.
The liability is reviewed on an annual basis for changes to obligations or legislation or discount
rates that affect change in cost estimates or life of operations. The cost of the related asset is
adjusted for changes in the liability resulting from changes in the estimated cash flows or discount
rate, and the adjusted cost of the asset is depleted prospectively.
When rehabilitation is conducted progressively over the life of the operation, rather than at the
time of closure, liability is made for the estimated outstanding continuous rehabilitation work at
each end of the reporting period and the cost is charged to the statement of comprehensive income.
The ultimate cost of mine rehabilitation is uncertain and cost estimates can vary in response to
many factors including changes to the relevant legal requirements, the emergence of new
restoration techniques or experience. The expected timing of expenditure can also change, for
example in response to changes in ore reserves or production rates. As a result, there could be
significant adjustments to the provision for mine rehabilitation and decommissioning, which
would affect future financial results.
MRF committed for use in satisfying environmental obligations are included within “Other
noncurrent assets” in the statement of financial position.
Related Party Relationships and Transactions
Related party relationship exists when one party has the ability to control, directly, or indirectly
through one or more intermediaries, the other party or exercise significant influence over the other
party in making financial and operating decisions. Such relationship also exists between and/or
among entities, which are under common control with the reporting enterprises and its key
management personnel, directors, or its shareholders. In considering each related party
relationship, attention is directed to the substance of the relationship, and not merely the legal
form.
Foreign Currency Transactions
Transactions in foreign currencies are initially recorded in the functional currency rate ruling at the
date of the transaction. Outstanding monetary assets and liabilities denominated in foreign
currencies are restated using the closing rate of exchange ruling at the end of the reporting period.
Nonmonetary items that are measured in terms of historical cost in foreign currency are translated
using the exchange rates as at the dates of the initial transactions. Nonmonetary items measured at
fair value in a foreign currency are restated using exchange rates at the date when the fair value
was determined. All differences are taken to the statement of comprehensive income.
Capital Stock
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction from proceeds. The excess of proceeds from issuance of shares over the par value of the
shares are credited to additional paid-in capital.
*SGVMC409311

23. - 14 -
Retained Earnings (Deficit)
Retained earnings (deficit) are the cumulative portion of annual earnings or losses as stated in the
statement of comprehensive income less dividends declared, if any.
Dividends are recognized as a liability and deducted from retained earnings when they are approved
by the stockholders of the Company. Dividends for the period that are approved after the end of the
reporting period are dealt with as an event after the end of the reporting period.
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured, regardless of when payments are being made.
Revenue is measured at the fair value of the consideration received or receivable, taking into
account contractually defined terms of payment. The following specific recognition criteria must
also be met before revenue is recognized:
Sale of Beneficiated Nickel Ore
Revenue is recognized when the significant risks and rewards of ownership of the goods have
passed to the buyer, which coincides with the loading of the ores onto the buyer’s vessel. Under
the terms of the arrangements with customers, the Company bills the remaining 10% of the ores
shipped based on the assay tests agreed by both the Company and the customers. Where the assay
tests are not yet available as at the end of the reporting period, the Company accrues for the
remaining 10% of the revenue based on the amount of the initial billing made.
HSEC Premium
Revenue is recognized when the significant risks and rewards of ownership of the goods haved
passed to Queensland Nickel Pty. Ltd. (QNPL).
Despatch
Despatch pertains to the income earned when shipment is loaded ahead of the allowable laytime.
Revenue is recognized upon preparation of final invoice.
Interest Income
Income recognized as interest accrues using the effective interest rate, that is, the rate that exactly
discounts estimated future cash receipts through the expected life of the financial instrument to the
net carrying amount of the financial asset.
Costs and Expenses
Costs and expenses are decreases in economic benefits during the year in the form of outflows or
decrease of assets or incurrence of liabilities that result in decrease in retained earnings or increase
in deficit. Costs and expenses are recognized in statement of comprehensive income in the year
these are incurred.
Cost of Sales
Cost of sales is incurred in the normal course of business and is recognized when incurred. They
comprise mainly of personnel cost, cost of outside services, depreciation, amortization and
depletion and production overhead, which are provided in the period when the goods are
delivered.
*SGVMC409311

24. - 15 -
Expenses
Expenses consist of costs associated with the development and execution of marketing and
promotion activities, excise taxes and royalties due to the government and indigenous people and
expense incurred in the direction and general administration of day-to-day operations of the
Company. These are generally recognized when the expense arises.
Leases
Determination of Whether an Arrangement Contains a Lease
The determination of whether an arrangement is, or contains a lease is based on the substance of
the arrangement and requires an assessment of whether the fulfillment of the arrangement is
dependent on the use of a specific asset or assets and the arrangement conveys a right to use the
asset.
A reassessment is made after inception of the lease only if one of the following applies:
(a) There is a change in contractual term, other than a renewal or an extension of the arrangement;
(b) A renewal option is exercised or extension granted, unless the term of the renewal or
extension was initially included in the lease term;
(c) There is a change in the determination of whether fulfillment is dependent on a specified asset;
or
(d) There is a substantial change to the asset.
When a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for scenarios (a), (c) or (d) above, and at the
date of renewal or extension period for scenario (b).
Company as a Lesee
Operating leases represent those leases under which substantially all risks and rewards of
ownership of the leased assets remains with the lessors. Noncancellable operating lease payments
are recognized as expense in the statement of comprehensive income on a straight-line basis over
the lease term.
Input VAT
Input VAT represents VAT imposed on the Company by its suppliers and contractors for the
acquisition of goods and services in accordance with Philippine tax laws and regulations.
Input VAT representing claims for refund from the taxation authorities, if any, is recognized under
current asset. Input VAT is stated at its estimated net realizable value.
Income Taxes
Current Income Tax
Current income tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted as at the end
of the reporting period.
*SGVMC409311

25. - 16 -
Deferred Income Tax
Deferred income tax is provided using the liability method on temporary differences at the end of
the reporting period between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax liabilities are recognized for all taxable temporary differences, except:
· where the deferred income tax liability arises from the initial recognition of goodwill or of an
asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting income nor taxable income or loss; and
· in respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse
in the foreseeable future.
Deferred income tax assets are recognized for all deductible temporary differences, carryforward
benefits of unused tax credits and unused tax losses, to the extent that it is probable that sufficient
future taxable income will be available against which the deductible temporary differences, and
the carryforward of unused tax credits and unused tax losses can be utilized except:
· where the deferred income tax asset relating to the deductible temporary difference arises from
the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting income nor taxable income or
loss; and
· in respect of deductible temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, deferred income tax assets are recognized only to the
extent that it is probable that the temporary differences will reverse in the foreseeable future
and sufficient future taxable income will be available against which the temporary differences
can be utilized.
The carrying amount of deferred income tax assets is reviewed at each end of the reporting period
and reduced to the extent that it is no longer probable that sufficient future taxable income will be
available to allow all or part of the deferred income tax asset to be utilized. Unrecognized
deferred income tax assets are reassessed at each end of the reporting period and are recognized to
the extent that it has become probable that sufficient future taxable income will allow the deferred
income tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply
to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted at the end of reporting period.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable
right exists to offset current income tax assets against current income tax liabilities and the
deferred income taxes relate to the same taxable entity and the same taxation authority.
*SGVMC409311

26. - 17 -
Contingencies
Contingent liabilities are not recognized in the financial statements. These are disclosed unless the
possibility of an outflow of resources embodying economic benefits is remote. Contingent assets
are not recognized in the financial statements but are disclosed when an inflow of economic
benefits is probable.
Events After the End of the Reporting Period
Post year-end events that provide additional information about the Company’s position at the end
of the reporting period (adjusting events) are reflected in the financial statements. Post year-end
events that are not adjusting events are disclosed when material.
3. Significant Accounting Judgments, Estimates and Assumptions
The preparation of the financial statements in compliance with PFRS requires the Company to
make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities,
income and expenses and disclosure of contingent assets and contingent liabilities. Future events
may occur which will cause the assumptions used in arriving at the estimates to change. The
effects of any change in estimates are reflected in the financial statements as they become
reasonably determinable.
Judgments, estimates and assumptions are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. However, actual outcome can differ from these estimates.
Judgments
In the process of applying the Company’s accounting policies, management has made the
following judgments, apart from those involving estimations, which has the most significant effect
on the amounts recognized in the financial statements:
Determining Functional Currency
Based on the economic substance of the underlying circumstances relevant to the Company, the
functional currency of the Company has been determined to be the Philippine peso. The
Philippine peso is the currency of the primary economic environment in which the Company
operates. It is the currency that mainly influences labor, material and other costs of providing
goods, and in which receipts from operating activities are generally retained.
Classifying Financial Instruments
The Company classifies a financial instrument, or its component parts, on initial recognition as a
financial asset, a financial liability or an equity instrument in accordance with the substance of the
contractual arrangement and the definitions of a financial asset, a financial liability or an equity
instrument. The substance of a financial instrument, rather than its legal form, governs its
classification in the statement of financial position.
Operating Lease Commitments - Company as a Lessee
The Company has entered into commercial property lease for its administrative office space and
other property leases. The Company has determined that it does not retain all the significant risks
and rewards of ownership of these properties which are leased on operating leases.
*SGVMC409311

27. - 18 -
Assessing Production Start Date
The Company assesses the stage of each mine development project to determine when a mine
moves into the production stage. The criteria used to assess the start date of a mine are determined
based on the unique nature of each mine development project. The Company considers various
relevant criteria to assess when the mine is substantially complete, ready for its intended use and
moves into the production phase. Some of the criteria include, but are not limited to the
following:
· the level of capital expenditure compared to construction cost estimates;
· completion of a reasonable period of testing of the property and equipment;
· ability to produce ore in saleable form; and
· ability to sustain ongoing production of ore.
When a mine development project moves into the production stage, the capitalization of certain
mine construction costs ceases and costs are either regarded as inventory or expensed, except for
capitalizable costs related to mining asset additions or improvements, underground mine
development or mineable reserve development. It is also at this point that depreciation or
depletion commences.
Estimates and Assumptions
The key estimates and assumptions concerning the future and other key sources of estimation
uncertainty at the end of the reporting period, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below.
Estimating Allowance for Impairment Losses on Trade and Other Receivables
The Company maintains allowance for impairment losses at a level considered adequate to
provide for potential uncollectible receivables. The level of this allowance is evaluated by
management on the basis of the factors that affect the collectibility of the accounts. These factors
include, but are not limited to, the Company’s relationship with its customer, customer’s current
credit status and other known market factors. The Company reviews the age and status of trade
and other receivables and identifies accounts that are to be provided with allowance either
individually or collectively. The amount and timing of recorded expenses for any period would
differ if the Company made different judgment or utilized different estimates. An increase in the
Company’s allowance for impairment losses will increase the Company’s recorded expenses and
decrease current assets. As at December 31, 2010 and 2009, the carrying value of trade and other
receivables amounted to P7,531,094 and =11,752,404, net of allowance for impairment losses
= P
which amounted to P11,507,364 and P13,489,151, respectively (see Note 5).
= =
Estimating Beneficiated Nickel Ore Reserves
Ore reserves are estimates of the amount of ore that can be economically and legally extracted
from the Company’s mining properties. The Company estimates its ore reserves based on
information compiled by appropriately qualified persons relating to the geological data on the size,
depth and shape of the ore body, and require complex geological judgment to interpret the data.
The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange
rates, commodity prices, future capital requirements, and production costs along with geological
assumptions and judgment made in estimating the size and grade of the ore body. Changes in the
*SGVMC409311

28. - 19 -
reserve estimates may impact upon the carrying value of deferred mine exploration costs, property
and equipment, provision for mine rehabilitation and decommissioning, recognition of deferred
income tax assets, and depreciation and depletion charges.
Estimating Allowance for Inventory Losses
The Company maintains allowance for inventory losses at a level considered adequate to reflect
the excess of cost of inventories over its NRV. NRV of inventories are assessed regularly based
on prevailing estimated selling prices of inventory less the corresponding estimated costs
necessary to make the sale. The carrying values of inventories amounted to P105,675,377 and
=
=
P104,203,325, net of allowance for inventory losses amounting to P2,231,556, as at
=
December 31, 2010 and 2009, respectively (see Note 6).
Estimating Useful Lives of Property and Equipment
The Company estimates the useful lives of property and equipment, except land, based on the
period over which the assets are expected to be available for use. The estimated useful lives of
property and equipment are reviewed periodically and are updated if expectations differ from
previous estimates due to physical wear and tear, technical or commercial obsolescence and legal
or other limits on the use of the assets. In addition, estimation of the useful lives of property and
equipment is based on collective assessment of industry practice, internal technical evaluation and
experience with similar assets. It is possible, however, that future results of operations could be
materially affected by changes in estimates brought about by changes in factors mentioned above.
The amounts and timing of recorded expenses for any period would be affected by changes in
these factors and circumstances. There were no changes in the useful lives of the property and
equipment during the year. The aggregate net book values of property and equipment, excluding
land, amounted to =627,701,090 and =684,722,985 as at December 31, 2010 and 2009,
P P
respectively (see Note 8). Depreciation, amortization and depletion recognized in 2010 and 2009
amounted to =56,323,955 and =54,325,231, respectively (see Notes 8 and 13).
P P
Estimating Allowance for Impairment on Property and Equipment
The Company assesses impairment on property and equipment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. The factors
that the Company considers important which could trigger an impairment review include the
following:
· significant underperformance relative to expected historical or projected future operating
results;
· significant changes in the manner of use of the acquired assets or the strategy for overall
business; and
· significant negative industry or economic trends.
In determining the present value of estimated future cash flows expected to be generated from the
continued use of the assets, the Company is required to make estimates and assumptions that can
materially affect the financial statements.
These assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss would be recognized
whenever evidence exists that the carrying value is not recoverable. For purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
*SGVMC409311

29. - 20 -
flows. As at December 31, 2010 and 2009, the Company has not recognized impairment losses on
its property and equipment. The carrying values of property and equipment amounted to
=
P628,230,990 and =685,252,885 as at December 31, 2010 and 2009, respectively (see Note 8).
P
Estimating the Recoverability of Deferred Mine Exploration Costs
The application of the Company’s accounting policy for deferred mine exploration costs requires
judgment and estimates in determining whether it is likely that the future economic benefits are
certain, which may be based on assumptions about future events or circumstances. Estimates and
assumptions may change if new information becomes available. If, after mine explorations costs
are capitalized, information becomes available suggesting that the recovery of expenditure is
unlikely, the amount capitalized is written-off in the statement of comprehensive income in the
period when the new information becomes available.
The Company reviews the carrying values of its mineral property interests whenever events or
changes in circumstances indicate that their carrying values may exceed their estimated
net recoverable amounts. An impairment loss is recognized when the carrying values of these
assets are not recoverable and exceeds their fair value. As at December 31, 2010 and 2009, there
was no impairment noted on the Company’s deferred mine exploration costs. Deferred mine
exploration costs amounted to P47,023,879 and P18,442,409 as at December 31, 2010 and 2009,
= =
respectively (see Note 9).
Estimating Allowance for Impairment Losses on Non-financial Other Current Assets
The Company provides allowance for impairment losses on non-financial other current assets
when they can no longer be realized. The amounts and timing of recorded expenses for any period
would differ if the Company made different judgments or utilized different estimates. An increase
in allowance for impairment losses would increase recorded expenses and decrease other current
assets.
There is no allowance for impairment losses on the Company’s non-financial other current assets
as at December 31, 2010 and 2009 as management has noted no indicators of impairment. The
carrying values of non-financial other current assets amounted to P54,430,783 and P53,772,489 as
= =
at December 31, 2010 and 2009, respectively (see Note 7).
Estimating Provision for Mine Rehabilitation and Decommissioning
The Company assesses its provision for mine rehabilitation and decommissioning annually.
Significant estimates and assumptions are made in determining the provision for mine
rehabilitation as there are numerous factors that will affect the provision. These factors include
estimates of the extent and costs of rehabilitation activities, technological changes, regulatory
changes, cost increases, and changes in discount rates. Those uncertainties may result in future
actual expenditure differing from the amounts currently provided. The provision at end of the
reporting period represents management’s best estimate of the present value of the future
rehabilitation costs required. Changes to estimated future costs are recognized in the statement of
financial position by adjusting the mine and mining properties and provision for mine
rehabilitation and decommissioning. Provision for mine rehabilitation and decommissioning
amounted to =19,128,663 and =17,958,150 as at December 31, 2010 and 2009, respectively
P P
(see Note 11).
*SGVMC409311

30. - 21 -
Estimating the Realizability of Deferred Income Tax Assets
The Company reviews the carrying amounts of deferred income tax assets at each end of the
reporting period and reduces deferred income tax assets to the extent that it is probable that taxable
income will be available against which these can be utilized. Significant management judgment is
required to determine the amount of deferred income tax assets that can be recognized, based upon
the likely timing and level of future taxable income together with future tax planning strategies.
The Company recognized deferred income tax assets on the provision for mine rehabilitation and
decommissioning costs amounting to P1,597,870 and P1,246,716 as at December 31, 2010 and
= =
2009, respectively. The Company has other temporary differences such as allowance for
impairment losses on trade and other receivables, allowance for inventory losses and accrued rent
for which no deferred income tax assets have been recognized because management believes that
the carryforward benefits would not be realized prior to its expiration (see Note 20).
4. Cash and Cash Equivalents
2010 2009
Cash with banks P14,257,447
= =
P30,843,827
Cash on hand 338,993 287,006
Short-term cash investments – 20,098,454
P14,596,440
= =
P51,229,287
Cash with banks earn interest at the respective bank deposit rates. Short-term cash investments are
made for varying periods of up to three (3) months depending on the immediate cash requirements
of the Company, and earn interest at the respective short-term cash investments rates.
In 2010 and 2009, the Company earned interest from its cash with banks and short-term cash
investments amounting to =115,313 and P134,136, respectively (see Note 22).
P =
5. Trade and Other Receivables
2010 2009
Trade P11,503,164
= =
P12,122,404
Advances to related parties (see Note 19) 6,602,632 10,417,753
Advances to officers and employees 486,880 1,585,153
Others 445,782 1,116,245
19,038,458 25,241,555
Less allowance for impairment losses (11,507,364) (13,489,151)
P7,531,094
= =
P11,752,404
The following are the terms and conditions of the above financial assets:
· Trade receivables are noninterest-bearing and are normally settled on 15 to 30 days’ terms.
· Advances to related parties and other receivables are noninterest-bearing and have an average
term of 30 to 60 days.
*SGVMC409311

31. - 22 -
· Advances to officers and employees are noninterest-bearing and are subject to liquidation
within 30 days, or if not liquidated within 30 days, this will be automatically deducted to
officers’ and employees’ salary.
Movement of allowance for impairment losses as at December 31, 2010 and 2009 follows:
Advances to
officers and
2010 Trade employees Total
Balances at beginning of year P12,122,404
= P1,366,747
= P13,489,151
=
Provision (see Note 13) – 770,153 770,153
Write-off – (2,132,700) (2,132,700)
Exchange rate adjustment (619,240) – (619,240)
Balances at end of year P11,503,164
= P4,200
= P11,507,364
=
Advances to
officers and
2009 Trade employees Total
Balances at beginning of year =
P12,459,575 =
P1,366,747 =
P13,826,322
Exchange rate adjustment (337,171) – (337,171)
Balances at end of year =
P12,122,404 =
P1,366,747 =
P13,489,151
As at December 31, 2010 and 2009, trade and other receivables amounting to =12,435,826 and
P
=
P14,823,802, respectively, were subjected to specific impairment assessment. Based on the
assessment done, the Company recognized allowance for impairment losses amounting to
=
P11,507,364 and =13,489,151, as at December 31, 2010 and 2009, respectively, covering those
P
receivables considered as individually impaired.
With the foregoing level of allowance for impairment losses, management believes that the
Company has sufficient allowance to cover any losses that the Company may incur from the
noncollection or nonrealization of its trade and other receivables.
6. Inventories
2010 2009
Beneficiated nickel ore - at cost P103,502,330
= =
P103,502,330
Fuel - at NRV 3,041,275 2,932,551
Supplies - at cost 1,363,328 –
107,906,933 106,434,881
Less allowance for inventory losses (2,231,556) (2,231,556)
P105,675,377
= =
P104,203,325
The allowance for inventory losses pertains to fuel inventory as at December 31, 2010 and 2009.
*SGVMC409311

32. - 23 -
7. Other Current Assets
2010 2009
Input VAT P52,345,766
= =
P52,043,011
Prepaid insurance 1,039,607 1,109,828
Prepaid rent 788,760 364,000
Prepaid income tax 195,650 195,650
Deposit with suppliers 60,000 60,000
Others 1,000 –
P54,430,783
= =
P53,772,489
Prepaid rent represents advance rental payments to the lessors of the properties leased by the
Company (see Note 21).
8. Property and Equipment
2010
Mine
and Mining Leasehold Laboratory and Transportation Office Construction
Land Properties Improvements Other Equipment Equipment Equipment In-progress Total
Cost:
Balances at beginning of year =
P529,900 P348,371,153
= =
P249,493,362 =
P190,633,692 =
P24,329,970 =
P25,402,307 =
P4,441,502 P843,201,886
=
Additions – – – – – 229,441 – 229,441
Disposals – – – – (1,464,286) – – (1,464,286)
Reclassification – – 4,441,502 – – – (4,441,502) –
Balances at end of year 529,900 348,371,153 253,934,864 190,633,692 22,865,684 25,631,748 – 841,967,041
Accumulated depreciation,
amortization and depletion:
Balances at beginning of year – 23,724,699 53,100,104 56,589,341 11,717,870 12,816,987 – 157,949,001
Depreciation, amortization and
depletion (see Note 13) – – 23,901,967 22,913,300 4,646,351 4,862,337 – 56,323,955
Disposals – – – – (536,905) – – (536,905)
Balances at end of year – 23,724,699 77,002,071 79,502,641 15,827,316 17,679,324 – 213,736,051
Net book values =
P529,900 P324,646,454
= =
P176,932,793 =
P111,131,051 =
P7,038,368 =
P7,952,424 P =
= – P628,230,990
2009
Mine
and Mining Leasehold Laboratory and Transportation Office Construction
Land Properties Improvements Other Equipment Equipment Equipment In-progress Total
Cost:
Balances at beginning
of year =
P529,900 P348,371,153
= =
P236,132,570 =
P183,518,312 =
P25,507,649 =
P25,085,361 =
P17,629,853 =
P836,774,798
Additions – – – 7,115,380 – 316,946 172,441 7,604,767
Disposals – – – – (1,177,679) – – (1,177,679)
Reclassification – – 13,360,792 – – – (13,360,792) –
Balances at end of year 529,900 348,371,153 249,493,362 190,633,692 24,329,970 25,402,307 4,441,502 843,201,886
Accumulated depreciation,
amortization and depletion:
Balances at beginning
of year – 23,724,699 30,534,217 34,862,864 7,087,412 7,758,068 – 103,967,260
Depreciation, amortization and
depletion (see Note 13) – – 22,565,887 21,726,477 4,973,948 5,058,919 – 54,325,231
Disposals – – – – (343,490) – – (343,490)
Balances at end of year – 23,724,699 53,100,104 56,589,341 11,717,870 12,816,987 – 157,949,001
Net book values P529,900 P324,646,454
= = P196,393,258
= P134,044,351
= P12,612,100
= P12,585,320
= P4,441,502
= P685,252,885
=
As at December 31, 2010 and 2009, mining rights, included in the mine and mining properties,
amounting to P76,128,171, net of accumulated depletion of =5,828,129, pertain to the acquisition
= P
costs of property rights on the Berong Project (see Note 24).
Fully depreciated property and equipment as at December 31, 2010 and 2009 amounting to
=
P1,428,511 and =56,300, respectively, are retained in the Company’s records until they are
P
disposed. No further depreciation and amortization are charged to current operations for these
items.
*SGVMC409311