Nickel Asia Corporation - Definitive Information Statement
COVER SHEET C S 2 0 0 8 1 1 5 3 0 S.E.C. Registration Number N I C K E L A S I A C O R P O R A T I O N (Company’s Full Name) 6 t h F l r N A C C e n t r e 1 4 3 D e l a R o s a S t . L e g a s p i V i l l a g e M a k a t i C i t y (Business Address: No. Street City/Town Province) Atty. Barbara Anne C. Migallos 899-2123 Contact Person Telephone Number of the Contact Person SEC 20-IS Definitive First Friday 1 2 3 1 of June Information StatementMonth Day FORM TYPE Month Day Fiscal Year Annual Meeting N/A Secondary license Type, If Applicable C F D N/ADept. Requiring this Doc. Amended Articles Number/Section Total Amount of BorrowingsTotal No. of Stockholders Domestic Foreign To be accomplished by SEC Personnel concerned File Number LCU Document I.D. Cashier STAMPS Remarks = Pls. use black ink for scanning purposes
SECURITIES AND EXCHANGE COMMISSION SEC FORM 20-IS INFORMATION STATEMENT PURSUANT TO SECTION 20 OF THE SECURITIES REGULATION CODE1. Check the appropriate box: [ ] Preliminary Information Statement [ x ] Definitive Information Statement2. Name of Registrant as specified in its charter NICKEL ASIA CORPORATION3. Province, country or other jurisdiction of incorporation or organization: PHILIPPINES4. SEC Identification Number CS2008115305. BIR Tax Identification Code 007-085-191-0006. 6th Flr. NAC Centre, 143 Dela Rosa Street, Legaspi Village, Makati City 1229 Address of principal office Postal Code7. Registrant’s telephone number, including area code +63 2 892 6669 / +63 2 892 41778. Date, time and place of the meeting of security holders Date : June 24, 2011 Time : 3:00 p.m. Place : Manila Golf and Country Club, Harvard Road, Forbes Park, Makati City9. Approximate date on which the Information Statement is first to be sent or given to security holders: As soon as practicable after the approval of the Definitive Information Statement but not later than June 2, 201110. In case of Proxy Solicitations: NOT APPLICABLE Name of Person Filing the Statement/Solicitor: Address and Telephone No:11. Securities registered pursuant to Sections 8 and 12 of the Code or Sections 4 and 8 of the RSA (information on number of shares and amount of debt is applicable only to corporate registrants): Title of Each Class Number of Shares of Common Stock Outstanding or Amount of Debt Outstanding Common Stock Issued 1,339,831,828 (as of May 10, 2011) Debt Outstanding 1,628,829,058 (as of March 31, 2011)12. Are any or all of registrants securities listed in a Stock Exchange? Yes x No _______ If so, disclose the name of Exchange: Philippine Stock Exchange, Inc.SEC Form 17-IS 1December 2003
PART I. INFORMATION REQUIRED IN INFORMATION STATEMENTA. GENERAL INFORMATIONItem 1. Date, time and place of meeting of security holders.The stockholders meeting shall be held on: Date : June 24, 2011 Time : 3:00 p.m. Place : Manila Golf and Country Club, Harvard Road, Forbes Park, Makati City Complete Mailing Address of the Principal Office of the Registrant: NICKEL ASIA CORPORATION 6th Floor, NAC Centre, 143 Dela Rosa Street, Legaspi Village, Makati CityCopies of the information statement and proxy form shall be sent to security holders as soonas practicable after the approval of the Definitive Information Statement by the Securitiesand Exchange Commission but not later than June 2, 2011.Item 2. Dissenters Right of AppraisalThere are no corporate matters or action that will entitle a stockholder to exercise a Right ofAppraisal as provided in Title X of the Corporation Code. Nevertheless, the following are theinstances when a stockholder may exercise his appraisal right, as provided in theCorporation Code: (1) In case any amendment to the articles of incorporation has the effect of changing or restricting the rights of any stockholder or class of shares, or of authorizing preferences in any respect superior to those of outstanding shares of any class, or of extending or shortening the term of corporate existence (Section 81); (2) In case of sale, lease, exchange, transfer, mortgage, pledge or other disposition of all or substantially all of the corporate property and assets as provided in the Code (Section 81); (3) In case of merger or consolidation (Section 81); and (4) In case of investments in another corporation, business or purpose (Section 42).The appraisal right may be exercised by any stockholder who shall have voted against theproposed corporate action, by making a written demand on the corporation within thirty (30)days after the date on which the vote was taken for payment of the fair value of his shares:Provided, that failure to make the demand within such period shall be deemed a waiver ofthe appraisal right. A stockholder must have voted against the proposed corporate action inorder to avail himself of the appraisal right. If the proposed corporate action is implementedor effected, the corporation shall pay to such stockholder upon surrender of his certificate(s)of stock representing his shares, the fair value thereof as of the day prior to the date onwhich the vote was taken, excluding any appreciation or depreciation in anticipation of suchcorporate action.SEC Form 17-IS 2December 2003
If within a period of sixty (60) days from the date the corporate action was approved by thestockholders, the withdrawing stockholder and the corporation cannot agree on the fairvalue of the shares, it shall be determined and appraised by three (3) disinterested persons,one of whom shall be named by the stockholder, another by the corporation and the third bythe two thus chosen. The findings of the majority of appraisers shall be final, and theiraward shall be paid by the corporation within thirty (30) days after such award is made;provided, that no payment shall be made to any dissenting stockholder unless thecorporation has unrestricted retained earnings in its books to cover such payment; andprovided, further, that upon payment by the corporation of the agreed or awarded price, thestockholder shall forthwith transfer his shares to the corporation.Item 3. Interest of Certain Persons in or Opposition to Matters to be Acted UponNo director, nominee for election as director, associate of the nominee or executive officerof the Company at any time since the beginning of the last fiscal year has any substantialinterest, direct or indirect, by security holdings or otherwise, in any of the matters to beacted upon in the meeting, other than election to office.No incumbent director has informed the Company in writing of an intention to oppose anyaction to be taken at the meeting.B. CONTROL AND COMPENSATION INFORMATIONItem 4. Voting Securities and Principal Holders ThereofAs of May 10, 2011, there are 1,339,831,828 common shares and 720,000,000 preferredshares of the Company. Each share of stock is entitled to one vote.Only stockholders of record at the close of business on May 10, 2011 are entitled to noticeand to vote at the Annual Stockholders’ Meeting.Cumulative voting may be adopted in the election of directors as allowed by the CorporationCode of the Philippines. On this basis, each registered stockholder as of May 10, 2011 mayvote the number of shares registered in his name for each of the nine (9) directors to beelected, or he may multiply the number of shares registered in his name by nine (9) and castthe total of such votes for one (1) director, or he may distribute his votes among some or allof the nine (9) directors to be elected.Security Ownership of Certain Record and Beneficial OwnersThe following stockholders own more than five percent (5%) of the Company’s stock as ofMay 10, 2011: Title of Name and Address of Name of Beneficial Citizenship No. of Shares % Class Record Owner and Owner and Held Relationship with Issuer Relationship with Record Owner Common Manuel B. Zamora, Jr. Mantra Resources Filipino 303,976,910 22.69% Stock 2/F NAC Centre, 143 dela Corporation Rosa cor. Adelantado Streets, Legaspi Village, Makati City Common PCD Nominee Corporation - Filipino 279,030,289 20.83% stock (Non-Filipino)SEC Form 17-IS 3December 2003
Common Sumitomo Metal Mining Co., Sumitomo Metal Mining Japanese 256,828,076 19.17% Stock Ltd.1 Philippine Holdings 11-3, 5-Chome, Shimbashi Corporation Minato-ku, Tokyo, Japan Common Luis J. Virata Nonillion Holding Filipino 176,381,559 13.16% stock 3/F Corporate Business Corporation Centre, 151 Paseo de Roxas Makati City Common Philip T. Ang Ni Capital Corporation Filipino 152,933,704 11.41% stock 3/F NAC Centre, 143 dela Rosa cor. Adelantado Streets, Legaspi Village, Makati City Common PCD Nominee Corporation - Foreign 83,146,319 6.21% stock (Non-Filipino) Preferred Nickel Asia Holdings, Inc.2 Direct ownership Filipino 720,000,000 100% stock 6/F NAC Centre, 143 dela Rosa cor. Adelantado Streets, Legaspi Village, Makati City 1 Sumitomo Metal Mining Co., Ltd. is represented by Mr. Takanori Fujimura and Mr.Takeshi Kubota on the Company’s Board of Directors. 2 The majority stockholders of Nickel Asia Holdings, Inc. are Mr. Manuel B. Zamora, Jr.,Mr. Philip T. Ang, Mr. Luis J.L. Virata and Sumitomo Metal Mining Co., Ltd.As of May 10, 2011, there are no participants under the PCD account who own more than 5%of the voting securities.Proxies of the foregoing record owners for the Annual Stockholders’ Meeting have not yet beensubmitted. The deadline set by the Board of Directors for submission of proxies is on June 14,2011.Security Ownership of ManagementThe beneficial ownership of the Company’s directors and executive officers as of May 10, 2011is as follows: Amount of Title Name of Beneficial Nature of Beneficial Citizenship % of Class Owner Ownership Ownership Indirect (Mantra Resources Common stock Manuel B. Zamora, Jr. Corporation) and direct 359,270,114 Filipino 26.82% Common stock Gerard H. Brimo Direct 1,855,000 Filipino 0.14% Common stock Ronaldo B. Zamora Direct 150 Filipino 0% Indirect (Ni Capital Common stock Philip T. Ang Corporation) and direct 180,752,246 Filipino 11.41% Indirect (Nonillion Holding Corporation) Common stock Luis J. L. Virata and direct 176,381,559 Filipino 13.16% Common Stock Fulgencio S. Factoran, Jr. Direct 150 Filipino 0% Common stock Frederick Y. Dy Direct 150 Filipino 0%SEC Form 17-IS 4December 2003
Common stock Takanori Fujimura Direct 200 Japanese 0% Common stock Takeshi Kubota Direct 200 Japanese 0% Common stock Michio Iwai - 0 Japanese - Common stock Emmanuel L. Samson - 0 Filipino - Common stock Rolando R. Cruz - 0 Filipino - Common stock Martin Antonio G. Zamora Direct 22 Filipino 0% Jose Roderick F. Common stock Fernando - 0 Filipino - Common stock Barbara Anne C. Migallos - 0 Filipino - Directors and Officers as a Group 718,259,791Voting Trust/ Changes in ControlThere are no voting trust holders of 5% or more of the Company’s stock. There are noarrangements that may result in a change of control of the Company.Item 5. Directors and Executive OfficersDirectorsThe names of the incumbent directors of the Company, their respective ages, citizenship,period of service, directorship in other companies and positions held for the last five (5) yearsare as follows: Manuel B. Zamora, Jr., (72 years old, Filipino) is the Chairman since June 16,2010 and a founder of the Company. He has been the President of RTN and the Chairman of TMC since these Subsidiaries were incorporated in 1969 and 1987, respectively. Mr. Zamora is also a director of a number of other companies in the Philippines, including CLSA Exchange Capital Inc. He was previously Chairman and President of the Chamber of Mines of the Philippines. Mr. Zamora is a lawyer and a member of the Integrated Bar of the Philippines. Gerard H. Brimo (59 years old, Filipino) is a director and the President and Chief Executive Officer of the Company since June 16, 2010. Mr. Brimo joined the Company in 2008 and is also the President of two privately owned exploration companies, Newminco Nickel Mining Corp. and Newminco Pacific Mining Corp. Mr. Brimo began his mining career with Philex Mining Corp. as a Vice President in 1985 and served as Chairman and Chief Executive Officer of Philex Mining from 1994 until his retirement from the company in December 2003. He was President of the Chamber of Mines of the Philippines from 1993 to 1995 and Chairman from 1995 to 2003. Mr. Brimo received a Bachelor of Science in Business Administration from Manhattan College in New York and a Master in Business Management from the Asian Institute of Management. Ronaldo B. Zamora (66 years old, Filipino) is a director of the Company since June 16, 2010. Mr. Zamora joined the company in 2010. He is currently the Chairman of RTN. Mr. Zamora has served in various functions with the Philippine Government, both in the executive and legislative departments. He is likewise a Partner of the Zamora Poblador Vazquez & Bretana law office.SEC Form 17-IS 5December 2003
Philip T. Ang (69 years old, Filipino) is the Vice Chairman of the Company since June 16, 2010. He is also presently a director of Security Bank Corporation and two of its subsidiaries, namely SB Capital Investment Corporation, and Security Finance, Inc. Luis J. L. Virata (56 years old, Filipino) is a director of the Company since June 16, 2010. He is presently the Chairman and Chief Executive Officer of CLSA Exchange Capital, an investment banking joint venture formed in 2001 between CLSA Emerging Markets and Exchange Capital, which Mr. Virata formed in 1998. Mr. Virata is also presently the President and Chief Executive Officer of Coastal Road Corp., Chairman and President of Exchange Properties Resources Corp., Founder and Trustee of Asia Society and a director of Benguet Corporation, Huntsman Foundation and Group 4 Securitas. Mr. Virata has previously held positions with Dillon, Read and Co., Crocker National Bank, Bankers Trust Company, Philippine Airlines, NSC Properties, Inc., The Philippine Stock Exchange, the Makati Stock Exchange, and National Steel Corp. Mr. Virata received a Master of Business Administration from the Wharton School, University of Pennsylvania in 1979, and a Bachelor of Arts and Master of Arts in Economics from Trinity College, Cambridge University in 1976. Fulgencio S. Factoran, Jr. (67 years old, Filipino) is an independent director of the Company effective June 16, 2010. Mr. Factoran joined the company in 2010 and is also a Director of Banco de Oro Leasing & Finance, Chairman of GAIA South, Inc., Chairman of Agility, Inc., and a Director of Geo-Surveys & Mapping, Inc. He was previously a Director of Central Azucarera de Tarlac and Business Certification International, Ltd. He previously held various government positions, such as Trustee of the Government Service and Insurance System, Secretary of the Department of Environment and Natural Resources, Chairman of the National Electrification Administration, Chairman of the Philippine Charity Sweepstakes, Director of the National Development Corp., Trustee of the Development Academy of the Philippines and Deputy Executive Secretary of the Office of the President of the Philippines. Frederick Y. Dy (55 years old, Filipino) is an independent director of the Company since September 24, 2010. Mr. Dy joined the company in 2010 and is also the Chairman and a director of Security Bank Corporation, Chairman of City Industrial Corporation, Vice- Chairman of St. Luke’s Medical Center and a director of Ponderosa Leather Goods Company, Inc. Takanori Fujimura (66 years old, Japanese) is a director of the Company since June 16, 2010. Mr. Fujimura joined the Company in 2009 and he is also the President of CBNC. Takeshi Kubota (56 years old, Japanese) is a director of the company effective June 16, 2010. Mr. Kubota joined the company in 2010 and is also currently a director and Managing Executive Officer of Sumitomo Metal Mining Co. Ltd. and General Manager of its Non-Ferrous Metals Division.Under the Company’s By-Laws, directors are elected at the Annual Stockholders’ Meeting.Each director holds office until the next election and his successor is duly elected, unless heresigns, dies or is removed prior to such election.The Nominations Committee have screened the nominees and prepared the Final List ofCandidates for election to the Board of Directors on June 24, 2011. The NominationsCommittee determined that the candidates possess all the qualifications and none of theSEC Form 17-IS 6December 2003
disqualifications for election as director or independent director. The Nominations Committee iscomposed of Manuel B. Zamora, Jr. (Chairman), Takeshi Kubota and Fulgencio S. Factoran,Jr. (Independent Director).The nominees for election to the Board of Directors are the following: 1. Manuel B. Zamora, Jr. 2. Gerard H. Brimo 3. Ronaldo B. Zamora 4. Philip T. Ang 5. Luis J. L. Virata 6. Takanori Fujimura 7. Takeshi Kubota 8. Fulgencio S. Factoran, Jr. (Independent) 9. Frederick Y. Dy (Independent)The Company complied with the guidelines on the nomination and election of independentdirectors prescribed in Rule 38 of the Amended Implementing Rules and Regulations of theSecurities Regulation Code.Mr. Factoran, Jr. was nominated by Mr. Philip T. Ang. Mr. Dy was nominated by Mr. Manuel B.Zamora, Jr. Both nominees have accepted their nominations in writing. There are norelationships between the foregoing nominees for independent director and the persons whonominated them. Please see attached Certificates of Qualification of Messrs. Factoran and Dy.Executive OfficersThe Company’s executive officers as of 10 May 2011, including information on their workexperience are as follows: Jose S. Saret (64 years old, Filipino) is the Senior Vice President and Chief Operations Officer of the Company and is the head of operations for all of the NAC Group’s mining properties. Mr. Saret has been with RTN since 1993 as Senior Vice President prior to assuming his current role with the Company. Likewise, Mr. Saret has a combined 24 years of experience in gold and copper to complement his 18 years of experience in nickel. Emmanuel L. Samson (51 years old, Filipino) is the Senior Vice President and Chief Financial Officer of the Company and is responsible for the finance and treasury functions of the NAC Group. Prior to joining NAC in 2006, Mr. Samson was Senior Country Officer for Credit Agricole Indosuez in the Philippines. Mr. Samson has 11 years experience in the Philippine equities markets having held positions with W.I. Carr Indosuez Securities (Phils.) Inc., Amon Securities Corporation and Rizal Commercial Banking Corporation. Martin Antonio G. Zamora (38 years old, Filipino) is the Vice President of the Company and is responsible for the marketing and purchasing functions of the NAC Group. He is likewise the President of Samar Nickel Mining Resources Corporation. Prior to joining NAC in 2007, Mr. Zamora was a director and head of the Philippines of UPC Renewables, a global developer, owner, and operator of wind farms and solar facilities. He also has more than 10 years experience in corporate finance andSEC Form 17-IS 7December 2003
investment banking, having held positions with firms such as CLSA, Robert Fleming & Co. (UK), Jardine Fleming, and SyCip Gorres Velayo & Co. Rolando R. Cruz (50 years old, Filipino) is the Vice President of Operations of the Company and is responsible for the operations and engineering functions of the Company’s projects and the Company’s Surigao and Dinagat-based operations. Mr. Cruz is a licensed mining engineer in the Philippines with 25 years of professional experience in both mining operations and project development in gold, copper, chromite, concrete aggregates, nickel, and oil sands deposits using the open pit and underground bulk mining methods. He has held various positions with firms such as Albian Sands Energy, Inc. (Canada), Berong Nickel Corporation, Concrete Aggregates Corporation, Philex Mining Corporation, and Benguet Corporation. Jose Roderick F. Fernando (37 years old, Filipino) is the Vice President and Assistant Corporate Secretary of the Company and is responsible for the Group’s legal and human resources matters. He is likewise the Corporate Secretary of NAC’s subsidiaries. Prior to joining the Company in 2008, Mr. Fernando was a practicing lawyer with Balane Tamase Alampay Law Office for 7 years, specializing in commercial litigation, labor and corporate law. Mr. Fernando is a member of the Integrated Bar of the Philippines and is a Commissioner of its Commission on Bar Discipline. He is also licensed to practice law in the state of New York. Barbara Anne C. Migallos (56 years old, Filipino) is the Corporate Secretary of the Company. She is the Managing Partner of Migallos and Luna Law Offices, and was a Senior Partner of Roco Kapunan Migallos and Luna from 1986 to 2006. A practicing lawyer since 1980, Ms. Migallos focuses principally on corporate law, mergers and acquisitions, and securities law. She is a Director of Mabuhay Vinyl Corporation, a listed company, Philippine Resins Industries, Inc. and several other corporations, and is the Corporate Secretary of Philex Mining Corporation, Eastern Telecommunications Philippines, Inc. and other corporations. Ms. Migallos lectures regularly for the Supreme Court-mandated Continuing Legal Education program on the topics Corporate Governance, Securities Law and Ethics for Corporate Lawyers.Significant employeesNo single person is expected to make a significant contribution to the business since theCompany considers the collective efforts of all its employees as instrumental to the overallsuccess of the Company’s performance.Family RelationshipsAside from Mr. Martin Antonio G. Zamora and Mr. Ronaldo B. Zamora being the son and thebrother, respectively, of Mr. Manuel B. Zamora, Jr., there are no family relationships up to thefourth civil degree either by consanguinity or affinity among directors, executive officers orpersons nominated or chosen to be directors or executive officers.Involvement in Certain Legal ProceedingsNone of the directors, nominees for election as a director, executive officers or control personsof the Company have been involved in any legal proceeding, including without limitation beingthe subject of any:SEC Form 17-IS 8December 2003
(a) bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two (2) years prior to that time; (b) conviction by final judgment, including the nature of the offense, in a criminal proceeding, domestic or foreign, or being subject to a pending criminal proceeding, domestic or foreign, excluding traffic violations and other minor offenses; (c) order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, domestic or foreign, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities commodities or banking activities; and (d) order or judgment of a domestic or foreign court of competent jurisdiction (in a civil action), the Commission or comparable foreign body, or a domestic or foreign Exchange or other organized trading market or self-regulatory organization finding him/her to have violated a securities or commodities law or regulation,for the past five (5) years up to the latest date, that is material to the evaluation of ability orintegrity to hold the relevant positions in the Company.Certain Relationships and Related TransactionsThe Company’s significant related party transactions, which are under terms that are no lessfavorable than those arranged with third parties, and account balances are as follows:Nickel Ore Sale Agreements with PAMCOHinatuan Mining Corporation (HMC), Cagdianao Mining Corporation (CMC) and TaganitoMining Corporation (TMC) supply saprolite ore to Pacific Metals Co., Ltd. (PAMCO) underrenewable annual agreements. PAMCO is a stockholder of the Company and of RTN andTMC. All sales made to PAMCO are transacted at prevailing market prices. Under the terms ofthe agreement, the base price of the ore products for a specific shipment shall be based onLondon Metal Exchange. PAMCO shall pay the Group ninety percent (90%) of the provisionalinvoice amount upon receipt of the required documents and pay the final payment of eachshipment after the final dry weight and applicable assay have been determined.Nickel Ore Sale Agreement with PAMCO and Sojitz Corporation (Sojitz)Rio Tuba Nickel Mining Corporation (RTN) supplies saprolite ore to PAMCO under a saleagreement, which shall continue to be valid and in effect until December 2012, wherein PAMCOappointed Sojitz as agent. PAMCO owns thirty six percent (36%) and Sojitz four percent (4%)of the outstanding shares in the capital stock of RTN.Other Receivables from Taganito HPAL Nickel CorporationOther receivables from Taganito HPAL Nickel Corporation amounted nil, P3.1 million and =P78.8 million as at March 31, 2011, December 31, 2010 and 2009, respectively, included in=trade and other receivables pertain to reimbursable costs and expenses advanced by theCompany to the related party.Funding Commitment with SMMRTN’s long-term debt was incurred to complete infrastructure projects to support thedevelopment of the Coral Bay HPAL facility. These projects included the causeway, trestlesand dolphins in the Rio Tuba foreshore and offshore areas.SEC Form 17-IS 9December 2003
Note 32 of the Notes to Consolidated Financial Statements of the Company’s Annual Report onSEC Form 17-A and Note 27 of the Notes to Consolidated Financial Statements of theCompany’s Quarterly Report on SEC Form 17-Q on Related Party Transactions areincorporated hereto by reference.The Company or its related parties have no material transaction with parties falling outside thedefinition of “related parties” under the Philippine Accounting Standard No. 24 that are notavailable for other, more clearly independent parties on an arm’s length basis.No director has resigned or declined to stand for re-election because of disagreement with theCompany on any matter relating to the Company’s operations, policies or practices.Item 6. Compensation of Directors and Executive OfficersThe following table shows the compensation of the directors and officers for the past twocompleted fiscal years and estimated to be paid for the ensuing fiscal year. The amounts setforth in the table below include a one-time IPO bonus paid out in 2010. SUMMARY COMPENSATION TABLE (IN THOUSANDS) Year Salary Bonus Total Named Executive Officers: 2009 P 10,647 P 5,762 P 16,408 2010 15,898 44,884 60,782 2011 23,936 11,499 35,435 (Estimated) 2009 1,150 492 1,642 2010 2,522 1,460 3,982 All other officers and directors as a group unnamed 2011 3,242 311 3,553 (Estimated)The named executive officers referred to above are: Name Position Gerard H. Brimo President & CEO Emmanuel L. Samson Chief Financial Officer Jose S. Saret Chief Operating Officer Rolando R. Cruz Vice President of Operations Martin Antonio G. Zamora Vice President for Purchasing and MarketingDirectors’ compensation is on a per diem basis in the amount of P10,000 per meeting of theBoard. Currently, there are no arrangements for additional compensation of directors.On June 16, 2010, the Board of Directors and stockholders approved the NAC Executive StockOption Plan (the “ESOP” or the “Plan”) which was duly approved by the Securities andExchange Commission on December 20, 2010. Note 15 of the Notes to Consolidated FinancialStatements of the SEC Form 17-Q on ESOP is incorporated hereto by reference.Item 7. Independent Public AccountantsThe accounting firm of SyCip Gorres Velayo & Co (“SGV & Co”) (a member practice of Ernst &Young Global Limited) with address at SGV Building, Ayala Avenue, Makati City has been theCompany’s independent auditor since its incorporation and is recommended for reappointmentfor the current year.SEC Form 17-IS 10December 2003
Mr. Jaime F. Del Rosario is the Company’s current audit partner. He signed the Company’sAudited Financial Statements for 2010, a copy of which is attached to this InformationStatement. Pursuant to SRC Rule 68 (4) (b) (iv) (re: rotation of external auditors), the Companyhas not engaged the services of Mr. del Rosario for more than five (5) years.During the two (2) most recent fiscal years or any subsequent interim period, the independentaccountant has not resigned nor was dismissed or has not declined to stand for reappointmentafter the completion of the current audit.Prior to the commencement of audit work, the external auditors present their program andschedule to the Company’s Audit Committee, which discusses issues and concerns regardingthe audit work to be done. The Company’s audited financial statements for the year arepresented by the external auditors to the Audit Committee for committee approval andendorsement to the full Board for final approval. The Company’s Audit Committee is composedof Frederick Y. Dy (Chairman and Independent Director), Gerard H. Brimo and TakanoriFujimura.Representatives of SGV & Co will be present at the scheduled stockholders meeting. They willhave the opportunity to make a statement should they desire to do so and will be available torespond to appropriate questions.External Audit Fees and ServicesThe following table sets out the aggregate fees billed for each of the years ended December31, 2010 and 2009 for professional services rendered by SGV & Co.: 2010 2009 (In Thousands) Audit and Audit-Related Services P24,760 = P2,110 = Non-Audit Services 1,325 875 Total P26,085 = P2,985 =Audit-Related FeesIn 2010, the Company engaged SGV & Co. to provide audit-related services in relation to theCompany’s initial public offering and advisory services on providing training and review of thevaluation and accounting of the Company’s ESOP.There are no other assurance and related services by SGV & Co. that are related to theperformance of the audit or review of the financial statements other than the services reportedabove.Tax FeesThe tax advisory fees for 2009 relate to tax advisory work provided by SGV & Co. on themerger of Nickel Asia Corporation formed and operated in the Britsh Virgin Islands (NAC-BVI)and Nickel Asia Corporation registered in the Philippines (NAC-Philippines) which wascompleted in 2009. The Company also engaged SGV & Co. to conduct a review of theinventory management at the Cagdianao mine site and the Company was billed fees by SGV &Co. for business risk advisory work in 2009.SEC Form 17-IS 11December 2003
All Other FeesThere are no aggregate fees billed in each of the last two (2) fiscal years for products andservices of SGV & Co., other than the services reported above.D. OTHER MATTERSItem 15. Action with Respect to ReportsAction is to be taken on the reading and approval of the following:1. Minutes of the previous stockholders’ meetingThe minutes of the annual stockholders’ meeting held on June 16, 2010 is available forinspection by stockholders at the principal offices of the Company. Copies thereof will also beposted at the venue of the annual meeting.Matters taken up during the 2010 stockholders’ meeting were the following: • Approval of the Annual Report including the Audited Financial Statements for the year 2009 • Ratification and approval of the acts of the Board and Officers for 2009 and up to the date of the 2010 stockholders’ meeting, • Approval of Amendment of the Articles of Incorporation to: a. Increase authorized capital stock from Php 500 Million to Php 800 Million b. Decrease in par value of shares from Php 1.00 to Php 0.50 c. Creation of preferred shares d. Increase in number of directors from seven (7) to nine (9) e. Waiver of pre-emptive rights to shares to be reserved for stock option plan • Approval of Stock Dividend • Approval of Stock Option Plan • Initial Public Offering (IPO) with waiver of pre-emptive rights to issuance of treasury shares for IPO • Approval of Amendment of By-Laws to provide for the election of independent directors in accordance with SEC guidelines and to create the Nominations and Audit Committee • Waiver of pre-emptive rights of the shareholders to the additional subscription of SMM or its domestic subsidiary to an additional 1% of the capital stock of the Company • Appointment of Sycip Gorres & Velayo & Co. as external auditors, • Election of Directors of the Company for the ensuing year.2. Management reportsThe Company’s Annual Report, which includes the Audited Financial Statements for 2010, willbe submitted for approval by the stockholders. A copy of the Company’s 2010 Annual Reporton SEC Form 17-A is attached hereto. Please see the attached updated information of Part II,Item 5 of the SEC Form 17-A on the Company’s Market Information and Holders.SEC Form 17-IS 12December 2003
Item 18. Other Proposed ActionAction is to be taken on the ratification and approval of the acts of the Board of Directors andexecutive officers during the corporate year 2010 to 2011.Meetings of the Board of Directors were held on August 13, 2010, September 24, 2010,October 4, 2010 and November 19, 2010. During said meetings, management presentedoperational / sales and financial reviews of the Company. Other matters discussed includedeclaration of cash dividend (August 13, 2010), election of director to fill-up vacancy(September 24, 2010) and election and constitution of Board committees (November 19, 2010).Item 19. Voting ProceduresStockholders as of May 10, 2011 may vote at the Annual Stockholders’ Meeting on June 24,2011.The affirmative vote of the stockholders owning at least a majority of the outstanding votingcapital stock shall be sufficient to approve matters requiring stockholders’ action. In all items forapproval, except for the election of directors, the holders of common and preferred stock areentitled to one vote per share.In the election of directors, cumulative voting may be adopted. On this basis, each stockholderas of May 10, 2011 may vote the number of shares registered in his name for each of the nine(9) directors to be elected, or he may multiply the number of shares registered in his name bynine (9) and cast the total of such votes for one (1) director, or he may distribute his votesamong some or all of the nine (9) directors to be elected. The nine (9) nominees with thegreatest number of votes will be elected directors.Stockholders shall be entitled to vote either in person or by proxy.The Corporate Secretary, assisted by the Company’s external auditor, will be responsible forcounting the votes. PART II. PLEASE SEE SEPARATE PROXY FORMSEC Form 17-IS 13December 2003
PROXY The undersigned stockholder of NICKEL ASIA CORPORATION (the “Company”) hereby appoints__________________ or in his absence, the Chairman of the meeting, as its attorney-in-fact or proxy, with power ofsubstitution, to represent and vote all shares registered in his/her name as proxy of the undersigned stockholder, at theAnnual Meeting of Stockholders of the Company to be held at the Manila Golf and Country Club Harvard Road, ForbesPark, Makati City, Metro Manila on June 24, 2011 at 3:00 pm and at any of the adjournments thereof for the purpose ofacting on the following matters:1. Approval of minutes of previous stockholders’ meetings Yes No Abstain2. Approval of annual reports and Audited Financial Statements for the year ending 2010 Yes No Abstain3. Ratification and approval of the acts of the Board of Directors and executive officers Yes No Abstain4. Appointment of Sycip, Gorres, Velayo & Co. as independent auditors Yes No Abstain5. Election of Directors Vote for all nominees listed below: Manuel B. Zamora, Jr. Takanori Fujimura Gerard H. Brimo Takeshi Kubota Ronaldo B. Zamora Fulgencio S. Factoran, Jr. (Independent) Philip T. Ang Frederick Y. Dy (Independent) Luis J. L. Virata Withhold authority for all nominees listed above Withhold authority to vote for the nominees listed below: _________________________________ __________________________________ _________________________________ __________________________________ _________________________________ __________________________________6. At their discretion, the proxies named above are authorized to vote upon such other matters as may properly comebefore the meeting. _______________________________ _____________________________________________ Date Printed Name of Stockholder ______________________________________________ Signature of Stockholder/ Authorized SignatoryThis proxy should be received by the Corporate Secretary on or before June 14, 2011, the deadline for submission ofproxies.This proxy, when properly executed, will be voted in the manner as directed herein by the stockholder(s). If no direction ismade, this proxy will be voted “for” the election of all nominees and for the approval of the matters stated above and forsuch other matters as may properly come before the meeting in the manner described in the information statement and/oras recommended by management or the board of directors.A proxy submitted by a corporation should be accompanied by a Corporate Secretary’s Certificate quoting the boardresolution designating a corporate officer to execute the proxy. Proxies executed by brokers must be accompanied by acertification under oath stating that the broker has obtained the written consent of the account holder.A stockholder giving a proxy has the power to revoke it at any time before the right granted is exercised. A proxy is alsoconsidered revoked if the stockholder attends the meeting in person and expresses his intention to vote in person. Thisproxy shall be valid for five (5) years from the date hereof unless otherwise indicated in the box herein provided.No director or executive officer, nominee for election as director, or associate of such director, executive officer ofnominee of the Company, at any time since the beginning of the last fiscal year, has any substantial interest, direct orindirect by security holdings or otherwise, in any of the matters to be acted upon in the meeting, other than election tooffice.
UPDATED INFORMATION ONItem 5. Market for Issuers Common Equity and Related Stockholder MattersMarket InformationThe Company’s common equity is traded in the Philippine Stock Exchange starting November22, 2010 at the initial public offering (IPO) price of P15.0 per share on November 22, 2010. The =stock prices for the Company’s common equity since the IPO are as follows: 2010 High Low December P16.80 = P15.10 = November P17.14 = P15.74 = 2011 High Low January-March P21.00 = P17.30 = April P22.85 = P20.10 =The Company’s share price was at P22.20 per share as of May 10, 2011. =HoldersThe Company has 19 shareholders as at May 10, 2011, with 1,339,831,828 common sharesissued and outstanding.The top 20 stockholders of the Company as of May 10, 2011 are as follows: Name Citizenship Shares % of Ownership 1 Manuel B. Zamora, Jr. Filipino 303,976,910 22.69% 2 PCD Nominee Corporation Foreign 279,030,289 20.83% (Filipino) 3 Sumitomo Metal Mining Filipino 256,828,076 19.17% Philippine Holdings Corporation 4 Luis J. L. Virata Filipino 176,381,559 13.16% 5 Philip T. Ang Filipino 152,933,704 11.41% 6 PCD Nominee Corporation Foreign 83,146,319 6.21% (Non-Filipino) 7 Mantra Resources Corporation Filipino 55,293,204 4.13% 8 Ni Capital Corporation Filipino 27,818,542 2.08% 9 Pacific Metals Co., Ltd. Japanese 2,242,225 0.17% 10 Gerard H. Brimo Filipino 1,855,000 0.14% 11 Alice P. Lacson Filipino 200,000 0.01% 12 Magdangal B. Elma Filipino 65,000 0.00% 13 Luismil De Villa Gala &/or Filipino 40,000 0.00% Sylvia Reynoso Gala 14 Eduardo C. Arroyo, Jr. Filipino 12,500 0.00% 15 Ebenezer D. Gener Filipino 2,500 0.00% 16 Bernarda P. Torres Filipino 2,000 0.00% 17 Jose A. Ferriols &/or Eduardo Filipino 2,000 0.00%
A. Ferriols18 Perfecto L. Nicolas Filipino 1,000 0.00%19 Pacifico B. Tacub Filipino 1,000 0.00% Total 1,339,831,828 100.00%
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(! $ $#(#( %.42 #%( H )# # #! #$($# Item 1. Business ………………………………………………………………………………………………….. 1 Item 2. Properties ………………………………………………………………………………………………. 17 Item 3. Legal Proceedings ……………………………………………………………………………………. 22 Item 4. Submission of Matters to a Vote of Security Holders ………………………………….. 22%( H $%($#! # ##! #$($# Item 5. Market for Issuer’s Common Equity and Related Stockholder Matters ………. 23 1. Market Information 2. Holders 3. Dividends 4. Recent Sales of Unregistered or Exempt Securities Item 6. Management’s Discussion and Analysis of Financial Position and Results of Operation (years 2007-2010) ……………………………………………………………… 24 Item 7. Financial Statements ……………………………………………………………………………….. 33 Item 8. Information on Independent Accountants and other Related Matters ………… 33%( H $#($! # $%#($# #$($# Item 9. Directors and Executive Officers ………………………………………………………………. 34 1. List of Directors and Executive Officers 2. Significant Employees/Executive Officers 3. Family Relationship 4. Involvement in Certain Legal Proceedings Item 10. Executive Compensation ………………………………………………………………………… 37 Item 11. Security Ownership of Certain Beneficial Owners and Management …………. 37 1. Security Ownership of Certain Record and Beneficial Owners 2. Security Ownership Management 3. Voting Trust Holders of 5% or More 4. Changes in Control Item 12. Certain Relationship and Related Transactions ………………………………………… 38%( * H )$# $# $%!# +( !# %( $# $%$($*## Item 13. Corporate Governance …………………………………………………………………………….. 40
(! $ $#(#( %.42 #%( * H ,( # )! Item 14. Exhibits and Reports on SEC Form 17-C …………………………………………………… 41 1. Exhibits 2. Reports on SEC Form 17-C#()#, ($ ##! ((#( # )%%!#(- )!
B@6;2@@A. Corporate ProfileNickel Asia Corporation (the Company) was originally formed and operated as a British Virgin Islands(BVI) company (referred to herein as “NAC BVI”) in 2006 by combining Hinatuan Mining Corporation(HMC; which owned majority stakes in Taganito Mining Corporation (TMC) and Cagdianao MiningCorporation (CMC)) and Rio Tuba Nickel Mining Corporation (RTN) under a single corporate umbrellaand senior management team. On July 24, 2008, we registered Nickel Asia Corporation (referred to in thisparagraph as “NAC Philippines”) with the Philippine SEC and in March 2009, pursuant to a plan of mergerbetween NAC Philippines and NAC BVI, we reorganized to make NAC Philippines the holding company ofNAC BVI’s subsidiaries.The Company owns four operating mines, all of which are located in the southern half of the Philippines.RTN was incorporated in 1969 to develop the nickel ore deposits discovered at the Rio Tuba mine site in1967. It was granted rights over the Rio Tuba property in 1970 and commenced mining in 1975. RTNmade its first commercial shipment in 1977.HMC was incorporated in 1979 and was granted rights over the Taganaan property in 1980. Developmentof the property commenced in 1981 and the first commercial shipment from the Taganaan mine wasmade in 1982. The size of the property was expanded in 1983 with the acquisition of additional claims onadjacent properties. HMC temporarily suspended operations at the Taganaan mine from April 2001 toJanuary 2006 due to depletion of high-grade saprolite ore reserves.In 2001, HMC acquired the right to mine the saprolite ore at the South Dinagat mine and undertook tostockpile the limonite ore for Pacific Nickel Philippines, Inc., the owner of the property. HMC haltedoperations at the South Dinagat mine in October 2007 due to substantial depletion of saprolite orereserves. HMC acquired the rights over the Taganito and Manicani properties in 1986 and 1987,respectively.TMC was incorporated and acquired the Taganito property from HMC in 1987. The first commercialshipments from the Taganito and Manicani mines were made in 1989 and 1992, respectively. Operationsat the Manicani mine were halted in 1994 due to low nickel prices and, with the exception of a briefperiod of operation in 2001 and three shipments from existing stockpiles in 2004 and 2005, the mine hasbeen inactive since then.CMC was incorporated in 1997 and acquired the right to operate the Cagdianao mine in 1998.B. Business OverviewA8=28?0; A3D2CB 0=3 )4AE824BWe are one of the largest global suppliers of lateritic nickel ore, and the largest nickel mining company inthe Philippines, where we accounted for over one-half of the country’s nickel ore exports in 2009. At eachof our mines at our Rio Tuba, Taganito, Cagdianao and Taganaan sites, we are able to employ a low-costopen pit mining method, without the need for explosives, chemicals or complex waste handling, to extracttwo types of nickel ore: limonite ore, which occurs at the upper layer of the deposit and generally consistsof lower nickel and higher iron content; and saprolite ore, which is generally found beneath the limonitelayer and typically consists of higher nickel and lower iron content. Since we began commercialoperations in 1977 through 2010, we have delivered over 60 million WMT of saprolite ore and limoniteore to our customers. As of December 31, 2010, our mines had proved and probable saprolite orereserves of 41.3 million WMT with an average grade of 1.80% nickel, and proved and probable limoniteore reserves (including stockpiles) of 178.4 million WMT with an average grade of 1.12% nickel, in eachcase as estimated in accordance with the Philippine Mineral Reporting Code (PMRC). 1 !
17-A Annual Report 2010We supply different grades of saprolite ore and limonite ore to multiple customers, which use the ore toproduce intermediate products for the manufacture of stainless steel and for the production of nickelcathodes. Our margins on sales of nickel ore vary depending on the type and grade of nickel ore that wesell, with high-grade saprolite ore providing higher margins than low-grade saprolite ore and limoniteore.We sell our nickel ore to the following customers: 028582 #4C0;B C3 #% We sell all of our high-grade saprolite ore and a portion of our low- grade saprolite ore to PAMCO under long-term supply agreements. PAMCO is the largest ferronickel producer in Japan. We have been selling saprolite ore to PAMCO since 1977. 78=4B4 2DBC4AB We sell a portion of our low-grade saprolite and both high- and low-grade limonite ore to Chinese customers, primarily DH Kingstone, a major Chinese trading company; and Baosteel Resources, a leading Chinese steel producing company. Our Chinese customers use our ore for the production of NPI, which is a substitute for traditional ferronickel products used in the production of stainless steel. A0; 0H $82:4; A?A0C8= $ We sell low-grade limonite ore from our Rio Tuba mine to the adjacent Coral Bay HPAL facility under a long-term supply agreement. The facility is owned by CBNC, which is a subsidiary of Sumitomo Metal Mining Co. Ltd. (SMM), a Japan-based refiner of copper, gold, nickel, and zinc. We have a 6% effective equity interest in CBNC.Prior to 2005, the Company focused primarily on sales of high-grade saprolite ore and stockpiled much ofthe limonite ore that we removed as overburden to access the saprolite ore. However, since thecommencement of NPI production in China and the completion of the Coral Bay HPAL facility in 2005, wehave developed a second major revenue stream through our sales of limonite ore to Chinese customersand to CBNC. In June 2009, the Coral Bay HPAL facility’s design capacity was doubled to 20,000 tonnes ofcontained nickel per year, further increasing our limonite ore sales to CBNC.To further expand the Company’s sales of limonite ore and increase our exposure to downstream nickelprocessing, we have partnered with SMM and Mitsui and have commenced construction of a new HPALfacility adjacent to our Taganito mine.Additionally, the Company also generates revenue from the sale of limestone and providing contractualservices to CBNC. $$.#! +$ *,%%)#0* ()+!* ,) )-,* / /) )!# ) + (*+ +) #*$ /)* .=.; 56;. %5696==6;2@ # (A.9 -2.? .=?96A2 !6:;6A2 (A.9 .=?96A2 !6:;6A2 (A.9 .=?96A2 !6:;6A2 (A.9 .=?96A2 !6:;6A2 (A.9
34% 34% 30% 16% 46% 20% 20% 64% 36% 100% 35% - 35% 19% 26% 44% - 21% 21% 54% 46% 100% 64% - 64% 14% 7% 21% - 15% 15% 79% 21% 100%?4C8C8=We compete with both domestic Philippine nickel ore suppliers and foreign nickel ore suppliers(primarily from Indonesia) in world nickel ore markets. Domestic competitors are CTP Construction Mining, Toledo Mining, and Platinum Group Metals Corp, while foreign competitors mainly include PTAneka Tambang.Geographic area in which we compete (Information and data provided by CRU Strategies):$82:4; 2=BD?C8= 8= 78=0Nickel Pig Iron (NPI) production began in China in early 2005, as a quickresponse to a shortage of nickel and increasing nickel prices due to rising demand. China had a largenumber of small, obsolete blast furnaces (smaller than 200m3), built to produce pig iron, which thegovernment had ordered to be closed down for environmental reasons. However, small ferroalloy blastfurnaces of 100-200m3 were still allowed to operate. The Chinese began to use these blast furnaces tosmelt low grade laterite ores, imported mainly from the Philippines, New Caledonia and Indonesia. 1 !
17-A Annual Report 2010A distinctive feature of the NPI industry in China is that the equipment to manufacture NPI was readilyavailable in the form of small-scale blast furnaces redundant to the needs of China’s modern-day steelindustry. When the London Metal Exchange (LME) cash price for nickel fell approximately 37% (innominal terms) between the second and third quarters of 2007, an additional stage of refining was addedby some NPI producers, which enabled a slightly higher nickel content product to be produced. NPIproduction from the BF process has a nickel content of around 2-8%. Since then some NPI producers havesupplemented such plants by installing EAF and sinter units to produce a low grade FeNi, which is alsoproduced from the higher-grade nickel laterite imported ores, with up to 15% contained nickel.Nickel consumption in China totaled 460,000 tonnes in 2009, with 339,000 tonnes consumed in theproduction of stainless steel. Before 2000, the demand for nickel in China was almost entirely for theproduction of copper-nickel alloys and other applications outside the stainless steel industry. However,since that time there has been very fast growth in the production of stainless steel in China, initially forexport but increasingly for domestic consumption. China’s growing NPI production capabilities andincreasing appetite for stainless steel for domestic consumption have made China the fastest growingnational market for nickel in the world. China is the only country in the world which produces NPI.$82:4; 2=BD?C8= 8= 0?0=Japan does not possess any nickel resources and therefore does not have adomestic nickel mining industry. However, Japan plays an important role in the global nickel industry. In2009, primary nickel consumption was 128,100 tonnes or 10% of global consumption. Japan imports allits nickel requirements for further processing via long-term contracts as well as its own stakes in nickelmining operations overseas. In 2009 nearly 60% of Japan’s nickel ore and concentrate imports came fromIndonesia and approximately 25% came from the Philippines.Demand for nickel comes from the stainless steel industry in Japan. During the period 2007 to 2009, themarket share of austenitic stainless steel (containing nickel) production in Japan rose from 58.1% to62.7%, indicating a decline in non-nickel containing 400 series grades at the height of the global economicdownturn. However, Japanese production of 400 series stainless steel is expected to rise significantlyfrom 2010 onwards. Japanese stainless steel producers have been developing new 400 series grades ofstainless steel, prompted by high nickel prices in recent years. They appear to be quite successful indeveloping these grades, which are said to have similar properties to more conventional 300 seriesgrades but are less costly due to the lack of nickel. However, the market is expected to remain focused onthe 300 series grade, which is forecast to account for 54.8% of Japan’s stainless steel production in 2010.There may be potential for NPI in the Japanese stainless steel sector. In 2007 there were reports of onemill importing NPI from China and using it in production, although these imports have been for trialpurposes and not in large quantities. Japanese stainless steel producers continue to look for ways toreduce costs. The current free iron and chromium contained in NPI could provide a wider market for NPIoutside of China, such as Japan.Japan is by far the largest producer of FeNi, with Nippon Yakin, PAMCO and SMM producing 59,000tonnes combined in 2009. The majority of this production is exported to China for use in refined nickelproduction. PAMCO was the third largest FeNi producer in 2009 (32,000 tonnes), bested only by CerroMatoso in Colombia (52,000 tonnes) and Eramet’s Doniambo plant in New Caledonia (38,000 tonnes).Nickel Trade (Information and data provided by CRU Strategies)*A034 5 =82:4; A4 0=3 2=24=CA0C4BChina’s production of refined nickel depends on both domestic oreproduction and imported raw material. However, domestic output of nickel ore is limited. Jinchuan,China’s largest nickel producer reports to have a maximum production capacity of 80,000 tonnes peryear. Therefore, further growth in Chinese refined nickel output depends on the availability of rawmaterial imports. In 2009, the country imported 16.5 million WMT of nickel ore and concentrates, a 34%increase on 2008.Looking forward to 2012, China and Japan will remain dependent on imported nickel ore. In China, nickeldemand is forecast to be consistently larger than domestic mine production, and no large-scale newmines are to be built or expansions of existing capacity to come on-stream, leaving Chinese consumers of 1 !
17-A Annual Report 2010nickel ore largely dependent on imports. In the future, Chinese and Japanese nickel refineries willcontinue to seek new opportunities overseas to secure supplies. Indeed, last year Jinchuan took acontrolling stake in Zambia’s Munali mine, although no known shipments of concentrates have takenplace thus far.China and Japan accounted for an estimated 90% of total nickel ore and concentrate imports, whileIndonesia and the Philippines accounted for about 95% of world nickel ore and concentrate exports in2009. Looking forward to 2012, this trend is expected to continue.Outlook For Nickel (Information and data provided by CRU Strategies))D??;H340=3 10;0=24B 0=3 8=E4=CA84B2009 ended with demand for nickel slowing and amplesupplies and inventories at a high level. There have been some subtle changes to this picture so far in2010. World nickel demand is currently higher than it has been since the market downturn began in mid-2008 and production constrained by a strike at Vale Inco’s Canadian nickel mines and delays to newproject start-ups. As a result the nickel market moved from a surplus of 7,900 tonnes in the fourth quarterof 2009 to an estimated deficit of 31,500 tonnes in the second quarter of 2010. Inventories are still high,but are now following a downward trend, moving from 291,000 tonnes in the fourth quarter of 2009 toan estimated 249,800 tonnes by the close of the second quarter of 2010.World demand is expected to pick up speed again in the next few months, and to register year-on-yeargrowth of 11.8% in 2010. Meanwhile, production will also grow, on the back of capacity reactivations inparticular, but at a reduced rate of 4.2%. The result will be a market deficit of approximately 55,700tonnes for 2010, which should allow further reductions in industry inventories. Nevertheless, atapproximately fourteen (14) weeks at year-end 2010, the inventory/consumption ratio will still remainrelatively high by historical standards. The average inventory/consumption ratio between 2000 and 2009was approximately eleven (11) weeks. The next two years should also see growth in demand outpace theexpansion in production. Market deficits of around 44,400 tonnes and 36,000 tonnes are thereforeforecast for 2011 and 2012 respectively and the stock/consumption ratio should be reduced to a low ofapproximately eight (8) weeks by the end of 2012.Stainless steel production will continue to be the key to demand for primary nickel. The ultimatedeterminant of nickel demand is the final demand for stainless steel in finished products. Nickel demandis also affected by the drive to economize on nickel use in final products. High prices and supplydifficulties have been a recurrent concern for end-users. The extent to which the stainless steel sectoruses nickel is reflected in the austenitic ratio. This ratio fell to 73% in 2007, one of the lowest on record,due more to the replacement of nickel-containing stainless steels with lower nickel content grades than adeparture from the use of nickel-containing stainless steels altogether. Non-nickel containing grades ofstainless steel may currently be experiencing a boost due to higher nickel prices thus far in 2010.However, the longer-term shift is smaller as their current share of the world market has not shifted far, atnearly 25% in 2009, from where it was in the 1990s.A824BThe LME nickel cash price reached $23.67/pound ($52,197/tonne) in May 2007, which ishistorically the highest the price had ever reached. However, by December 2007 the price had dropped toan average of $11.79/pound ($25,992/tonne) and peaked again in March 2008, at an average of$14.16/pound ($31,225/tonne).With the onset of the global financial downturn in mid-2008, the LME nickel cash price slid back to$4.40/pound ($9,696/tonne) by December 2008. While prices sporadically rallied for most of 2009, theyearly average cash price for 2009 was more than 60% lower than that of 2007.In 2010, as market fundamentals have started to improve, sentiment has become gradually more upbeatand funds and speculators have once again entered the market looking to buy nickel on the back of amore optimistic outlook for the metal. The involvement of investors in the market can cause additionalvolatility, as they often buy up large volumes of inventory when prices are expected to rise. Thecombination of these factors drove the LME cash price higher and, as a result, ending the year at a price of$11.32/pound ($24,950/tonne). 1 !
17-A Annual Report 2010In 2011 and 2012, the nickel market is expected to remain in deficit, leading to a more substantialreduction in inventories. The downward trend in inventories is expected to lead to a furtherimprovement in prices and we expect LME cash nickel to average $11.31/pound ($24,934/tonne) in 2011and $11.86/pound ($26,147/tonne) in 2012.Key Strengths of the CompanyA58C018;8CH D=34A?8==43 1H ;F 2BC ?A3D2C8=—The foundation of our business is our ability to operateprofitably through the commodity price cycle because of our low costs. We rank favorably in terms ofmining costs when compared to other nickel mining companies. There are a number of factors thataccount for our low cost position: We benefit from favorable geologic conditions at all of our four mines. Our lateritic nickel deposits are near-surface, blanket-like layered deposits with minimal overburden and generally five (5) to thirty (30) meters thick, enabling us to conduct simple open-pit mining using trucks and loaders without blasting, the use of chemicals or complex waste handling. Historically, there was generally no market for our limonite ore, which needs to first be extracted in order to mine the more valuable saprolite ore. There was also no market for lower grades of saprolite ore. Limonite ore was then regarded as overburden and placed in stockpiles, while we undertook selective mining of high-grade saprolite ore, leading to relatively high mining costs. Since 2005, we have found customers for our limonite ore with the development of the China NPI market and the commissioning of the Coral Bay HPAL facility. Since 2008, we have also experienced increasing demand from our customers for our low-grade saprolite ore. Our ability to sell limonite ore rather than place it in stockpiles as waste, and our ability to sell lower grades of saprolite ore allows us to mine in a more efficient manner and reduces the unit cost per WMT of nickel ore that we mine, thus improving our profitability. The anticipated commencement of commercial operations of the Taganito HPAL facility in 2013 is expected to add an additional outlet for our limonite ore. On average, the nickel deposits at our four operating mines are located within three to seven kilometers from the applicable tidewater loading area, enabling easy hauling and transportation by barges and LCTs to our customers’ ships. We own ten barges and seven landing craft transport (LCTs) and lease additional barges and LCTs as needed. The short hauling distance from our mining operations to our loading facilities substantially contributes to our favorable cost position. Because our lateritic nickel deposits are near surface and relatively shallow, the rehabilitation of our mining areas is a straightforward process. The process generally involves re-contouring of the mined areas, replacing the overburden and planting foliage. We undertake progressive rehabilitation of our mined areas in order to spread costs, and the nature of our deposits results in a relatively manageable level of rehabilitation costs.)DA24B 0=3 E08;018;8CH 5 (0F #0C4A80;B 0=3 )D??;84BThe main supplies that we require to operate our business include diesel fuel, tires and spare parts forour mining equipment. We buy diesel fuel from Petron Corporation and heavy mining equipment such astrucks and excavators from two manufacturers, Volvo and Komatsu, through their Philippine distributors.In addition, we lease barges for use at our Taganaan and Cagdianao sites during the shipping season. Webelieve that there are a number of alternative suppliers for all of our requirements.(4;0C43 0ACH *A0=B02C8=BAll sales to, and purchases from, related parties are made at prevailing market prices. Outstandingyearend balances pertain to the extension and receipt of, and advances to and from, related parties. Forfurther information, such as outstanding advance balances, see note 32 to our audited consolidatedfinancial statements. These balances are unsecured, short-term and interest-free, and settlement occursin cash.$82:4; %A4 )D??;H 6A444=CB F8C7 #%—We are party to nickel ore supply agreements with PAMCO.PAMCO has a 1.49% ownership interest in the Company and also owns 36% of our subsidiary, RTN, and33.5% of our subsidiary, TMC. 1 !
17-A Annual Report 2010$82:4; %A4 )D??;H 6A444=C F8C7 $—We are party to a nickel ore supply agreement with CBNC. Wehave an effective 6% equity interest in CBNC.)4AE824 6A444=CB F8C7 $—RTN has entered into various service agreements with CBNC pertainingto tailings dam construction and materials handling, among other things.%C74A (4248E01;4B 5A )##—SMM indirectly owns 26% of our outstanding equity securities. As ofDecember 31, 2010, we had receivables from SMM amounting to P58.1 million with respect to =reimbursable costs and expenses advanced to SMM by us.D=38=6 8C4=C F8C7 )##—RTN’s long-term debt was incurred to complete infrastructure projectsto support the development of the Coral Bay HPAL facility. These projects included the causeway, trestlesand dolphins in the Rio Tuba foreshore and offshore areas.$ )C2:7;34A 6A444=C—On July 1, 2002, RTN, along with the other stockholders of CBNC, agreed tomake loans to CBNC or guarantee the repayment of CBNC’s loans obligation in accordance with thefinancial requirements of CBNC, in proportion to their shareholding ratio in CBNC. RTN owns 10% ofCBNC’s outstanding capital stock.In a separate agreement dated October 22, 2002, SMM, which owns 54% of CBNC, agreed to assumeRTN’s obligation to make loans to, or guarantee the repayment of, CBNC’s loans obligations. RTN, inconsideration for this agreement, pays SMM an annual guarantee fee of 1% of CBNC’s outstanding loansobligation. The guarantee fee is recorded as part of “General and administrative expenses” in ourconsolidated statement of income.*060=8C )C2:7;34ABJ 6A444=C—On September 15, 2010, NAC, SMM and Mitsui and Co., Ltd(Mitsui) executed the Taganito HPAL Nickel Stockholders Agreement, pursuant to which the partiesformed a joint venture company, Taganito HPAL Nickel, to build and operate a plant in BarangayTaganito, Claver, Surigao del Norte for the purpose of producing and selling nickel-cobalt mixed sulfide tobe used for the production electrolytic nickel and electrolytic cobalt.Pursuant the Taganito HPAL Nickel Stockholders Agreement, SMM granted Taganito HPAL Nickel a non-exclusive license of technology owned by SMM to produce the Products and has undertaken to providetechnical assistance to Taganito HPAL Nickel. NAC has undertaken to cause TMC to supply Taganito HPALNickel with nickel ore and limestone and to further cause TMC to make available to Taganito HPAL Nickelthe use of the land and infrastructure necessary for the production of the Products while Mitsui shallassist Taganito HPAL Nickel in procuring materials and equipment necessary for the mine’s operations.The Taganito HPAL Nickel Stockholders Agreement shall terminate upon the dissolution of TaganitoHPAL Nickel.(H0;C84B E4A=4=C AH0;C84B. Because the Taganito, Cagdianao, Taganaan and South Dinagat mines are located within the Surigao Mineral Reservation, we are obliged to pay the Philippine government a royalty of 5% of our gross revenue from sales of ore from each mine. G28B4 C0G. An excise tax of 2% of gross revenue on all export sales is payable to the Philippine government. Our sales to the Coral Bay HPAL facility constitute export sales. ;08 F=4A AH0;C84B. We operate the Cagdianao mine and operated South Dinagat mine under operating agreements with the claim owners, East Coast and Pacific Nickel, respectively. Under these agreements we have the right to operate the mine, subject to the payment of a royalty to the claim owner, which is 8.75% of gross revenue from the Cagdianao mine and 12.5% of gross revenue from the South Dinagat mine. We made one shipment of saprolite ore from our South Dinagat mine in2008 and subsequently suspended operations at the site due to substantial depletion of the mine’s saprolite ore. 1 !
17-A Annual Report 2010 (H0;C84B C 8=3864=DB 6AD?B. Because our Taganito mine is located on an indigenous cultural community’s ancestral land, we are required to pay the indigenous community a royalty equal to 1% of gross revenue from sales from the Taganito mine.E4A=4=C (46D;0C8=B 0=3 ??AE0;TMC’s application on Mineral Production Sharing Agreement (MPSA) denominated as APSA No. 73-XIIIfor its La Salle Exploration project, and RTN’s application on MPSA denominated as AMA IVB-144A andAMA IVB-144B for its Bulanjao project are all under review and pending approval with the Department ofEnvironment and Natural Resources (DENR)-Mines and Geosciences Bureau (MGB).A Deed of Assignment was executed by HMC for the transfer of MPSA 012-92-VIII to SMNRC which wassubmitted to the MGB VIII Regional Office on September 2010 and was endorsed by the same to the MGBCentral Office for further evaluation and final approval on 2nd quarter of 2011.Extension of the exploration period for the Libjo property was applied for and approved by the MGBCentral Office on December 2010, adding another two years for CMC to conduct exploration.G?;A0C8= 0=3 4E4;?4=C$82:4; (4BDA24BWe have an extensive portfolio of exploration properties and an exploration program encompassing bothbrownfield exploration, which consists of work at our existing operations to extend resources and toupgrade resources to reserves; and greenfield exploration, which involves exploring and delineatingnickel lateritic deposits in our existing properties. We own more than one hundred (100) drilling unitsthat have been designed specifically for drilling near surface lateritic deposits in a quick and economicalmanner. We also have an experienced pool of geologists and laboratories at each of our mine sites toconduct assaying of samples as required.The following table sets forth a summary description of our exploration properties. %$=2?.A6;4 6;2 !0.A6; $D;2?@56= 4?22:2;A B9.;7. Palawan island RTN Mining lease contract that covers 3,604.5 hectares .;60.;6 Island of Manicani Samar Nickel MPSA covers 1,165 hectares and expires in 2017 2=5. Surigao del Norte TMC Operating agreement that covers 6,980.75 hectares and expires in 2032 !. .992 Surigao del Norte TMC Operating agreement that covers 6,824 hectares and expires in 2034 !6/7 Province of Dinagat CMC Operating agreement that covers 4,226.27 hectares and expires in 2017 !B14?; Province Surigao del TMC Operating agreement that Norte and Surigao del Sur covers 3,248.06 hectares and expires in 2032 BA5 6;.4.A Nonoc Island, Surigao City HMC Operating agreement that covers 215 hectares and expires in 20114B2A8?C8= 5 DA G?;A0C8= A942CBD;0=90—The Bulanjao property is held by RTN. It has a total area of 3,604.5 hectares and is situatedimmediately west of RTN’s mining operations. Our rights to the property are governed by a mining leasecontract. The conversion of the mining lease contract to an MPSA has been delayed for several years dueto restrictions on mineral development within the core and restricted zones declared by the PalawanCouncil for Sustainable Development (PCSD). The Municipality of Bataraza, where the Bulanjao property 1 !
17-A Annual Report 2010is located, has reclassified the mineralized areas within the said core and restricted zones into a MineralDevelopment zone, thus opening the area to mineral development. As a result, we expect to receiveapproval of an MPSA with respect to this property after PCSD approval of its SEP Clearance.During the years 1984 to 1992, we conducted mining on a portion of the property known as SouthernBulanjao and extracted and sold a total of 220,551 wet metric ton (WMT) of saprolite ore with an averagegrade of 2.21% nickel. We also extracted and stockpiled a total of 167,354 WMT of limonite ore in orderto access the saprolite.The Bulanjao deposit trends northwards to an area named Central Bulanjao, situated more than akilometer from Southern Bulanjao. We have conducted step-out drilling throughout the length of theCentral Bulanjao deposit and calculate measured and indicated resources of 7.5 million WMT of saproliteore with an average grade of 1.88% nickel and 19.2 million WMT of limonite ore with an average grade of1.01% nickel.It is our intention to recommence drilling on Southern Bulanjao and Central Bulanjao as soon as we enterinto an MPSA with respect to the properties.#0=820=8—The Manicani property is held by our subsidiary Samar Nickel Mining Resources Corporation(Samar Nickel). It has a total area of 1,165 hectares and is situated in Eastern Samar. Our rights to theproperty are governed by an MPSA that was entered into by HMC in 1992 and subsequently assigned toSamar Nickel. The application for the Deed of Assignment from HMC to Samar Nickel was submitted tothe MGB VIII Regional Office on September 2010 and will be endorsed by the same to the MGB CentralOffice for further evaluation and final approval.We conducted mining at the Manicani site between 1992 and 1994 and extracted and sold a total of63,176 WMT of saprolite ore with an average grade of 2.45% nickel from the site. We suspended miningat the site in December 1994 because low prevailing nickel prices made mining the site uneconomical. Wemade shipments from stockpiles in 2001 and 2004. In 2004 a regional Panel of Arbitrators rendered adecision recommending the cancellation of the MPSA on the grounds that we had violated certainapplicable environmental regulations. We disputed such allegations and our MPSA was upheld by theMines Adjudication Board of the Department of Environment and Natural Resources (DENR) inSeptember 2009.To date, there is work to be done before mining operations can be resumed. Currently, we are processingthe approval to extend the exploration period under the MPSA. In connection with that, we have receivedthe necessary endorsement from the host community in the form of resolutions issued by the four (4)barangays comprising Manicani Island and likewise from the Municipality of Guiuan. Theseendorsements, along with various presentations to be made to the MGB of Region VIII and to thecommunity, shall be part of our compliance with the government regulations pertinent to the approval ofthe extension of the exploration period.Once the exploration period has been extended and we are allowed to resume operations, we shall beginour exploration activities. It is expected that we can commence drilling of the property in the 2nd quarterof 2011.!4?70—The Kepha property is held by TMC. The property has a total area of 6,980.75 hectares and issituated in the province of Surigao del Norte, immediately southwest of our Taganito mine’s northernboundary. Our rights to the property are governed by an operating agreement that we entered into inFebruary 2007 with Kepha Mining Exploration Corp. Kepha Mining Exploration Corp. entered into anMPSA in June 2009, giving it the right to explore, develop and mine the property for an initial period oftwenty five (25) years.Under the terms of our operating agreement, TMC has the right to explore, develop and operate theproperty during the period of the MPSA in return for the payment of a royalty of 5% of gross revenues ofall metallic minerals sold from the property. 1 !
17-A Annual Report 2010We have conducted geological reconnaissance on the property and identified a lateritic zone on theeastern portion of the tenement. We intend to conduct follow-up exploration work and commence drillingin early 2011.D36A=—The Ludgoron property is held by TMC. The property has a total area of 3,248.06 hectares andis situated in the province Surigao del Norte and Surigao del Sur. It shares a common boundary with theKepha property on the northeast of the property. Our rights to the property are governed by an operatingagreement that we entered into in August 2007 with Ludgoron Mining Corp. Ludgoron Mining Corp.entered into an MPSA in July 2007, giving it the right to explore, develop and mine the property for aninitial period of 25 years.Under the terms of the operating agreement, TMC has the right to explore, develop and operate theproperty during the period of the MPSA in return for the payment of a royalty of 5% on gross revenuesattributable to the property.We have conducted geological reconnaissance on the property and drilled 92 holes over an area of1,071 meters in the identified lateritic zones.0 )0;;4—The La Salle property is held by TMC. The property has a total area of 6,824 hectares and issituated in the province of Surigao del Norte. It shares a common boundary with the Kepha property onthe southwest side of the property. Our rights to the property are governed by an operating agreementthat we entered into with La Salle Mining Exploration Company in December 2006. La Salle MiningExploration Company’s application for an MPSA is pending and TMC is responsible for completing therequirements for approval of the MPSA.Under the terms of the operating agreement, TMC will have the right to expire, develop and operate theproperty once the MPSA is approved, in return for the payment of a royalty of 5% on gross revenues of allmetallic minerals sold from the property and P10.00 per metric ton of limestone extracted and sold fromthe property.We have identified a limestone deposit within the property and determined that the quality of thelimestone is adequate for use in the proposed Taganito HPAL plant. We plan to conduct a feasibility studyto determine the feasibility of mining and delivering the limestone to the Taganito HPAL plant.We have also identified a nickel lateritic deposit on the southwestern portion of the property near theboundary with the Kepha property and intend to conduct further exploration work on this deposit.819—The Libjo property is held by CMC. The property has a total area of 4,226.27 hectares and issituated in the province of Dinagat northwest of our Cagdianao mine. Our rights to the property aregoverned by an operating agreement that we entered into with East Coast Mineral Resources Co., Inc. inOctober 2004. East Coast Mineral Resources Co., Inc. entered into an MPSA in June 2007, giving it the rightto explore, develop and mine the property for an initial period of 25 years.Under the terms of the operating agreement, CMC has the right to explore, develop and operate theproperty during the period of the MPSA in return for the payment of a royalty of 5% of the gross revenuesattributable to the property, net of taxes.We have conducted geological reconnaissance on the property and drilled a total of 1,640 holes over anarea of 30,427 meters in the identified lateritic zones. We have calculated a measured and indicatedresource of 1.5 million WMT of saprolite ore with an average grade of 1.44% nickel and approximately17.9 million WMT of limonite ore with an average grade of 0.84% nickel.Extension of the exploration period for the property was applied for and approved by the MGB CentralOffice on December 2010, adding another two years for CMC to conduct exploration. The explorationprogram submitted has two phases: Phase I which is intended for the determination of additional nickelreserves and Phase II which is intended for the determination of chromite reserves in the property.