i i - philex mining corp. · endorsed the appointment of sycip gorres velayo and company (sgv) as...

COVER SHEET

IT:ITIillIITJS.E.C- Registration Number

PHILEX I N I N G CORPORATION

(Company's Full Name)

PHIL E X B U I L D I N G B R X TON AND

FAIRLAN EST 5 . P AS I G CIT Y

(Business Address: No. Stree t City/Town Province)

Atty . Barbara Anne C. Miga lJos / I IA . Salvador Paolo A. Panelo, Jr. 896-9357 to 5~

Contact Person Telephone Number of the Contact Personr----- - - --'------,

SEC 20-15Preliminary IAny day in June Ilnfonnation Statement (Annual Month Day

Stockholders' Meeting)

IlTTl~ Day

Fiscal YearFORM TYPE Annual Meeting

I N/A ISecondary license Type, If Applicable

ICTFTDl~uiring this Doc.

I N/A IAmended Articles Numberl section

To be accomplished by SEC Personnel concerned

File N umber leU

Document 1.0. Cashier

STAMPS

Remarks - Pis. Use black ink for scanning pu rposes

SECURITIES i"... ·JD EXCHANGE

ill~ C OM~I~ I O~~~r)

~ [ fJ,AY 02 2C:S ~ "PHllEX MINING CORPORATION ~, ' .sts: ,:,llJ Jl

Notice of Annual Meeting of Stockholders. ......... \...- _-: TIGN O"o TMA,q k.[ 7.~.E/ >J L': . ='-1~

TO OUR STOCKHOLDERS: " --- f--"t)-- - --Please be informed that the Annual Meeting of the Slockholde.. of PHllEX MINING

CORPORATION will be held on Wednesday, June 29, 2016 at 2:30 p.m. at the Marco PoloOrtlgas Manila, Meralco Avenue and Sapphire Street, Ortlgas Centre, Paslg City, MetroManila 1600 {the -Annual Stockholders' Meeting-}. The order of business thereat will be asfollows:

1. Call to Order2. Proof of Required Notice of the Meeting3. Certification of Quorum4. Reading and Approval of the Minutes of the June 24, 2015 Stockholders' Meeting

and Action Thereon5. Presentation of Annual Report and Audited Financial Statements for the Year

Ended Oecember 31. 2015 and Action Thereon6. Ratification and approval of the acts of the Board of Directors and Executive

Officers during the corporate year 2015 - 20167. Approval of the amendment of Article III of the By-Laws re: corporate officers8. Appointment of Independent Auditors9. Appointment of election inspectors to serve until the close of the next annual

meeting10. Election of Directors, including Independent Directors11. Other Matters

A brief statement of the rationale and explanation for each Agenda item which requ iresshareholders ' approva l is conta ined in Annex -A- of this Notice . The Information Statementaccompanying this Notice contains more deta il regarding the rationale and explanation for eachof such Agenda items.

Fa the purpose of the meeting, only stockholders of record at the close of business onApril 15, 2016 will be entitled to vote thereat Please bring some form of identification, such aspassport. driver's license, or company 1.0. in order to facilitate reg istration, which will start at 1:00p.m.

Any stockholder who cannot attend the meeting in person and desires to be representedthe reat is requested to date and sign the proxy enctosed herewith and mail it back using theretum envelope. The proxy should be mailed in time so as to be received by the CorporateSecretary on or before June 20, 2016 , which is the deadline for submission of proxies.

Copies of the Minutes of the prevtoUS stockholders' meebngs are available on theCompany's website (WNW'.philexmlning.com.ph) and will be available for examination duringoffice hours at the office of the Corporate Secretary.

Proxy validation will commence on June 24, 2016 at 10:00 a.m. at the offices of StockTransfer Services, Inc. at 34th Floor, Rufino Plaza , Ayala Avenue, Makati City.

BA ~B' \~M~~osT~m~tary

ANNEX “A”

EXPLANATION AND RATIONALE For each item on the Agenda of the

2015 Annual Stockholders’ Meeting of PHILEX MINING CORPORATION

requiring the vote of stockholders

AGENDA

1. Call to Order

The Chairman will formally open the 2016 Annual Stockholders’ Meeting. The Directors and Officers of the Company will be introduced.

2. Proof of Required Notice of the Meeting The Corporate Secretary will certify that copies of this Notice and the Information Statement have been duly sent to stockholders of record as of April 15, 2016.

3. Certification of Quorum The Corporate Secretary will attest whether a quorum is present for the meeting.

4. Reading of the Minutes of the June 24, 2015 Stockholders’ Meeting and Action Thereon Shareholders may examine the Minutes of the previous annual stockholders’ meeting in accordance with Sec. 74 of the Corporation Code. The Minutes are available on the Company’s website. Resolution to be adopted: Shareholders will vote for the adoption of a resolution approving the minutes of the June 24, 2015 annual stockholders’ meeting.

5. Presentation of the Annual Report and Audited Financial Statements for the Year ended December 31, 2015 and Action Thereon The annual report and the financial statements of the Company, audited by the Company’s independent external auditors, Sycip Gorres Velayo & Company (SGV), will be presented. The report will include a summary of the 2015 Audited Financial Statements, a copy of which accompanies this Notice and the Information Statement. Copies of this Information Statement and the Audited Financial Statements for the year ended December 31, 2015 are also available on the Company’s website. There will be an OPEN FORUM after the presentation. A shareholder, upon identifying himself or herself, may raise questions that are relevant or express an appropriate comment. Resolution to be adopted: Shareholders will vote for the adoption of a resolution approving the Annual Report and the Audited Financial Statements for the year ended December 31, 2015.

6. Ratification and Approval of the Acts of the Board of Directors and Executive

Officers During the Corporate Year 2015 - 2016 Actions by the Board of Directors and by the Officers are contained in the Information Statement or are referred to in the Annual Report. Resolution to be adopted: Shareholders will vote for the adoption of a resolution ratifying and approving the acts of the Board of Directors and Officers.

7. Amendment of Article III of the Company’s By-Laws re: corporate officers On April 27, 2016, the Board of Directors approved the amendment of Article III of the Company’s By-Laws to provide that the President shall be Chief Executive Officer, and to expressly provide for Senior Vice Presidents. The amendment of the By-Laws to provide that the President shall be the Chief Executive Officer is consistent with present situation in the Company, and with the corporate governance best practice to have the positions of Chairman and of the Chief Executive Officer held by different persons. Mr. Manuel V. Pangilinan was previously Chairman and Chief Executive Officer until he relinquished the position of Chief Executive Officer in 2013. Mr. Eulalio B. Austin, Jr., previously President and Chief Operating Officer, has since been the Company’s President and Chief Executive Officer. Article III of the By-Laws also provides for Vice-Presidents (in the plural) but does not mention Senior Vice Presidents. The position of “Senior Vice President” is a classification of the position of Vice President, but for clarity, the proposal is to amend the By-Laws to expressly provide for Senior Vice Presidents. Resolution to be adopted: Shareholders will vote for the adoption of a resolution to approve the amendment of Article III of the Company’s By-Laws to provide that the President shall be Chief Executive Officer, and to expressly provide for Senior Vice Presidents.

8. Appointment of Independent Auditors The Audit Committee screened the nominees for independent external auditor and endorsed the appointment of Sycip Gorres Velayo and Company (SGV) as the Company’s independent external auditors for the year 2016. Resolution to be adopted: Shareholders will vote on a resolution for the appointment of said auditing firm as independent external auditor of the Company for 2016.

9. Appointment of election inspectors to serve until the close of the next annual meeting An independent party will be appointed by the shareholders to serve as election inspectors responsible for counting and/or validating the votes cast for all shareholders’ meetings held in the ensuing year until the next annual meeting. In 2015 and in previous years, representatives of the independent external auditor were appointed. This practice will be followed this year. Resolution to be adopted: Shareholders will vote on a resolution approving the appointment of election inspectors to serve until the close of the next annual meeting.

10. Election of Directors, including Independent Directors

The Final List of Candidates for election as directors, as prepared by the Nominations Committee in accordance with the Company’s By-Laws and Manual on Corporate Governance, will be presented to the shareholders, and the election of directors will be held.

11. Other Matters Matters that are relevant to and appropriate for the annual stockholders’ meeting may be taken up. No resolution, other than the resolutions explained in the Notice and the Information Statement, will be submitted for voting by the shareholders.

12. Adjournment C2330 PX 2016 ASM Notice and Agenda (2MAY16) spp62

(xlPreliminary Information Statement[ ] Definitive Infonnation Statement

1.

2 .

3 .

4 .

5.

6.

7.

8.

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 2o-lS SECURITIES'" 0 EXCH ANGE

INFORMATION STATEMENT PURSUANT TO SECTION'iz~ MM I"S IO ~OF THE SECURITIES REGULATION CODE J[ , @

IVi IJ,AV 02 2G'o 'Check the appropriate box: r, Ii iU ljl j

~..1' \.. 13:!Tu,-v-i.!J• iI'lARr':: j"Rf,", L.~TICN qf~

--f7--Name of Registrant as specified in its charter. PHILEX MINING CORPORATION

Province, country or other jurisdiction of incorporation or organization: Metro Manila,Philippines

SEC Identifica tion Number. 10044

BIR Tax IdentifICation Code: 000-283,731-000

Address of principal offce: Philex Building. 27 Brixten Street Paslg City, MetroManila. Philippines 1600

Registrant's telephone number, induding area code: (632) 631·1381 to 88

Date. time and place of the meeting of security holders:

DateTimePlace

June 29, 20162:30 p.m.Marco Polo Ortlgas Manila, Meralco Avenue and SapphireStreet, Ortigas Centre, Pas lg City, Metro Manila 1600

4,940,399.068 (as of March 31. 2016)

9. Approximate date on whk:h the Infonnation Statement is first to be sent or given tosecurity ho'ders: May 27 .2016 ilnd in no case later than May 30, 2016 .

10. In case of ProxySolicitations:

Name of Person Filing the StatemenVSolicitator:

Phllex Mining Corporation

Address and Telephone Number:

Philo. Building, 27 Brlx10n Stree~

Pasig City, Motro Manila, Philippines 1600(632) 631·1381 to 88

11. Securities registered pursuant to Sedoos 8 and 12 of the Code or Sections 4 and 8of the RSA (infonnation on number of shares and amount of debt is applicable only tocorporate registrants):

Number of Shares ofCommon Stock Issued

2

Amount of Debt Outstanding P9,438,768,299 (as of March 31, 2016)

12. Are any or all of registrant’s securities listed on a stock exchange? ( x ) Yes ( ) No If so, disclose name of Exchange: Philippine Stock Exchange, Inc.

PART I.

INFORMATION REQUIRED IN INFORMATION STATEMENT

A. GENERAL INFORMATION Item 1. Date, Time and Place of Meeting of Security Holders The Annual Meeting of the Stockholders of Philex Mining Corporation, a corporation organized and existing under the laws of the Philippines with address at the Philex Building, 27 Brixton Street, Pasig City, Metro Manila will be held on Wednesday, June 29, 2015 at 2:30 p.m. at Marco Polo Ortigas Manila, Meralco Avenue and Sapphire Street, Ortigas Centre, Pasig City, Metro Manila 1600 (the “Annual Stockholders’ Meeting” or the “Meeting”). The Agenda of the Meeting, as indicated in the accompanying Notice of Annual Meeting of Stockholders, is as follows:

1. Call to Order 2. Proof of Required Notice of the Meeting 3. Certification of Quorum 4. Reading and Approval of the Minutes of the June 24, 2015 Stockholders’ Meeting

and Action Thereon 5. Presentation of Annual Report and Audited Financial Statements for the Year Ended

December 31, 2015 and Action Thereon 6. Ratification and approval of the acts of the Board of Directors and Executive Officers

during the corporate year 2015 – 2016 7. Approval of the amendment of Article III of the By-Laws re: corporate officers 8. Appointment of election inspectors to serve until the close of the next annual meeting 9. Election of Directors, including Independent Directors 10. Other Matters

As in previous years, there will be an OPEN FORUM before the approval of the Annual Report and Audited Financial Statements for the year ended December 31, 2015 are submitted to the vote of the shareholders. Questions will likewise be entertained for other items in the agenda as appropriate and consistent with orderly proceedings. The Management Report and the Audited Financial Statements for the year ended December 31, 2015 are attached to this Information Statement. The Annual Report under Securities Exchange Commission (“SEC”) Form 17-A is available on the Company’s website (www.philexmining.com.ph). Upon written request of a shareholder, the Company shall furnish such shareholder with a copy of the said Annual Report on SEC Form 17-A as filed with the SEC, free of charge. The contact details for obtaining such copy are on page 32 of this Information Statement.

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Shareholders who cannot attend the Meeting may accomplish the attached Proxy Form. Please indicate your vote (Yes, No, Abstain) for each item in the attached form, and submit the same on or before June 20, 2016 to the Office of the Corporate Secretary at the Company’s principal office. Proxies will be tabulated by the Company’s stock transfer agent, Stock Transfer Services, Inc. (34th Floor, Rufino Plaza, Ayala Avenue, Makati City) (“STSI”) and will be voted in accordance with applicable rules. Proxies will be validated by a special committee designated by the Board of Directors, together with STSI. A report will be submitted to the independent election inspectors, who were appointed by the shareholders at the 2015 annual stockholders’ meeting to serve as election inspectors for the ensuing year and until the 2016 Meeting. Voting procedures are contained in Item 19 (page 30) of this Information Statement and will be stated at the start of the Meeting. Cumulative voting is allowed; please refer to Item 4, page 4 and Item 19, page 30 for an explanation of cumulative voting. Further information and explanation regarding specific agenda items, where appropriate, are contained in various sections of this Information Statement. This Information Statement constitutes notice of the resolutions to be adopted at the Meeting. This Information Statement and Proxy Form shall first be sent to security holders on May 27, 2016, and in no case later than May 30, 2016 (30 days before the Meeting), after the approval of the Definitive Information Statement by the SEC. Item 2. Dissenters' Right of Appraisal

There are no corporate matters or action to be taken during the Meeting on June 29, 2016 that will entitle a stockholder to a Right of Appraisal as provided in Title X of the Corporation Code of the Philippines (Batas Pambansa [National Law] No. 68). For the information of stockholders, any stockholder of the Company shall have a right to dissent and demand payment of the fair value of his shares in the following instances, as provided in the Corporation Code of the Philippines:

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 (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 Corporation Code of the Philippines (at Section 82) provides that the appraisal right may be exercised by any stockholder who shall have voted against the proposed 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 of the appraisal right. A stockholder must have voted against the proposed corporate action in order to avail

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himself of the appraisal right. If the proposed corporate action is implemented or 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 on which the vote was taken, excluding any appreciation or depreciation in anticipation of such corporate action. If within a period of sixty (60) days from the date the corporate action was approved by the stockholders, the withdrawing stockholder and the corporation cannot agree on the fair value 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 by the two thus chosen. The findings of the majority of appraisers shall be final, and their award 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 the corporation has unrestricted retained earnings in its books to cover such payment; and provided, further, that upon payment by the corporation of the agreed or awarded price, the stockholder shall forthwith transfer his shares to the corporation. Item 3. Interest of Certain Persons in or Opposition to Matters to be Acted Upon No director, nominee for election as director, associate of the nominee or executive officer of the Company at any time since the beginning of the last fiscal year, has any substantial interest, direct or indirect, by security holdings or otherwise, in any of the matters to be acted upon in the meeting, other than election to office. No incumbent director has informed the Company in writing of an intention to oppose any action to be taken at the meeting. B. CONTROL AND COMPENSATION INFORMATION Item 4. Voting Securities and Principal Holders Thereof As of March 31, 2016, there are 4,940,399,068 outstanding common shares of the Company. The Company does not have any class of shares other than common shares. The holders of the 4,940,399,068 outstanding shares are entitled to vote such shares. All stockholders of record as of April 15, 2016 are entitled to notice and to vote at the Annual Stockholders’ Meeting. A stockholder entitled to vote at the meeting shall have the right to vote in person or by proxy. Cumulative voting may be adopted in the election of directors as allowed by the Corporation Code of the Philippines. On this basis, each registered stockholder as of April 15, 2016 may vote the number of shares registered in his name for each of the eleven (11) directors to be elected, or he may multiply the number of shares registered in his name by eleven (11), the number of the Company’s directors as provided in the Articles of Incorporation, and cast the total of such votes for one (1) director. A stockholder may also distribute his votes among some among some or all of the eleven (11) directors to be elected.

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Security Ownership of Certain Record and Beneficial Owners The following stockholders own more than five percent (5%) of the Company’s stock as of March 31, 2016:

Title of Class

Name and Address of

Record Owner and

Relationship with Issuer

Name of Beneficial Owner and

Relationship with Record

Owner

Citizenship No. of Shares

Held %

Common Asia Link, B.V. Prins Bernhardplein 200, 1097 JB Amsterdam, The Netherlands

First Pacific Company Limited See Note 1 below.

Dutch 1,023,275,990 20.71%

Common PCD Nominee Corporation 37/F Tower I, The Enterprise Center 6766 Ayala Center, Makati City

See Note 2 below.

Filipino/ Other Alien

1,020,645,597 (exclusive of

shares of SSS held through

PCD)

20.66%

Common Social Security System c/o Loan and Investment Office, 7/F SSS Building, Diliman, Quezon City

Social Security System See Note 3 below.

Filipino 1,017,238,529 20.59%

Common Two Rivers Pacific Holdings Corporation 10/F MGO Building, Legaspi cor. Dela Rosa Sts., Legaspi Village, Makati City

Two Rivers Pacific Holdings Corporation See Note 4 below.

Filipino 738,871,510

14.96%

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1 Asia Link B.V., a wholly-owned subsidiary of First Pacific Company Limited (First Pacific), is the registered owner of 1,023,275,990 shares. In its SEC Form 23-A dated December 3, 2009, First Pacific disclosed that it beneficially owns 1,542,589,352 shares inclusive of the shares held by Asia Link B.V. First Pacific is represented on the Company’s Board of Directors by Messrs. Manuel V. Pangilinan, Robert C. Nicholson and Edward A. Tortorici.

2 Mr. Juan B. Santos, Mr. Bienvenido E. Laguesma and Mr. Michael Victor N.

Alimurung currently represent the Social Security System in the Company as members of the Board of Directors. Part of the shares of SSS (152,793,599 shares) are held through the PCD Nominee Corporation.

3 PCD Nominee Corporation (“PCD Nominee”), the nominee of the Philippine

Depository & Trust Corp., is the registered owner of the shares in the books of the Company’s transfer agent. The beneficial owners of such shares are PCD Nominee’s participants who hold the shares on their own behalf or in behalf of their clients. The 1,020,645,597 shares shown above as of March 31, 2016 are exclusive of the 152,793,599 shares owned by SSS which shares were included as part of the total holdings of SSS as indicated above. PCD Nominee is a private company organized by the major institutions actively participating in the Philippine capital markets to implement an automated book-entry system of handling securities transaction in the Philippines.

4 Two Rivers Pacific Holdings Corporation is represented by Ms. Marilyn A.

Victorio-Aquino and Mr. Eulalio B. Austin, Jr. on the Company’s Board of Directors.

As of March 31, 2016, there are no participants under the PCD account who own more than 5% of the voting securities. The Social Security System, which owns 20.59% of the Company’s shares, holds 3.09% through PCD Nominee Corporation. Proxies of the foregoing record owners for the Annual Stockholders’ Meeting have not yet been submitted. The deadline set by the Board of Directors for submission of proxies is on June 20, 2016. Security Ownership of Management The beneficial ownership of the Company’s directors and executive officers as of March 31, 2016 is as follows:

Title of Class

Name of Beneficial Owner

Nature of Ownership

Amount of Beneficial Ownership

Citizenship %

Common Manuel V. Pangilinan Direct 4,655,000 Filipino 0.09

Common Eulalio B. Austin, Jr. Direct 1,360,937 Filipino 0.03

Common Juan B. Santos Direct 1,000,001 Filipino 0.02

Common Robert C. Nicholson Direct 1,250 British 0.00

Common Marilyn A. Victorio-Aquino Direct 500,100 Filipino 0.01

Common Edward A. Tortorici Direct 3,285,100 American 0.07

Common Oscar J. Hilado Direct 173 Filipino 0.00

Common Wilfredo A. Paras Direct 1 Filipino 0.00

Common Bienvenido E. Laguesma Direct 1 Filipino 0.00

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Common Michael Victor N. Alimurung Direct 1 Filipino 0.00

Common Barbara Anne C. Migallos Direct 203,875 Filipino 0.00

Common Danny Y. Yu Direct 40,000 Filipino 0.00

Common Manny A. Agcaoili Direct 0 Filipino 0.00

Common Michael T. Toledo Direct 0 Filipino 0.00

Common Redempta P. Baluda Direct 20 Filipino 0.00

Common Victor A. Francisco Direct 155,000 Filipino 0.00

Common Joan A. De Venecia Direct 0 Filipino 0.00

Directors and Officers as a Group 11,201,459 0.23

Security Ownership of Non-Filipinos

The chart below shows the ownership of non-Filipinos as of March 31, 2016:

Total Outstanding

Shares

Shares Allowed to Foreigners

% Allowed to Foreigners

Shares Owned by Foreigners

% Owned by Foreigners

4,940,399,068 1,976,159,627 40% 1,915,597,312 38.77%

Voting Trust Holders/Changes in Control There are no voting trust holders of 5% or more of the Company’s stock. There are no arrangements that may result in a change of control of the Company. Item 5. Directors and Executive Officers DIRECTORS The following are the present directors of the Company whose terms of office are for one year or until their successors are elected and qualified: 1) MANUEL V. PANGILINAN, Chairman, Non-Executive Director

Age: 69

Date of First Appointment: November 28, 2008

Academic Background:

Mr. Pangilinan graduated cum laude from the Ateneo de Manila University with a

Bachelor of Arts degree in Economics. He received his Master of Business

Administration degree from the Wharton School of the University of Pennsylvania in

1968.

Business and Professional Background/ Experience: Mr. Pangilinan founded First Pacific Company Limited, a corporation listed on the Hong Kong Stock Exchange, in May 1981. He served as Managing Director of First Pacific since its founding in 1981 until 1999. He was appointed Executive Chairman until June 2003, after which he was named Managing Director and Chief Executive

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Officer. In May 2006, the Office of the President of the Philippines awarded Mr. Pangilinan the Order of Lakandula, rank of Komandante, in recognition of his contributions to the country. He was named Management Man of the Year 2005 by the Management Association of the Philippines. Mr. Pangilinan was awarded Honorary Doctorates in Science by Far Eastern University in 2010; in Humanities by Holy Angel University in 2008; by Xavier University in 2007; and by San Beda College in 2002 in the Philippines. He was formerly Chairman of the Board of Trustees of the Ateneo de Manila University and was a member of the Board of Overseers of the Wharton School. He is a member of the ASEAN Business Advisory Council. Mr. Pangilinan has been a Director of the Company and Philex Gold Philippines, Inc. (PGPI) since November 2008. Mr. Pangilinan has been Chairman of the Board since June 2009, and was Chairman and Chief Executive Officer from December 2009 to April 2013. He is also Managing Director and Chief Executive Officer of First Pacific, and Chairman of the Philippine Long Distance Telephone Company (PLDT) since 2004, after serving as its President and Chief Executive Officer (CEO) since 1998. He reassumed the position of President and CEO of PLDT effective December 2015. He is also Chairman of Smart Communications, Inc., PLDT Communications and Energy Ventures, Inc. (Digitel), Metro Pacific Investments Corporation, Silangan Mindanao Mining Co., Inc., Landco Pacific Corporation, Medical Doctors Inc. (Makati Medical Center), Colinas Verdes Corporation (Cardinal Santos Medical Center), Asian Hospital, Inc., Davao Doctors, Inc., Riverside Medical Center Inc., Our Lady of Lourdes Hospital, Central Luzon Doctors’ Hospital, Inc., Maynilad Water Services Corporation, Mediaquest, Inc., Associated Broadcasting Corporation (TV5) and Manila North Tollways Corporation. Mr. Pangilinan is also Chairman of the Manila Electric Company (MERALCO), after serving as its President and Chief Executive Officer from July 2010 to May 2012. In December 2013, Roxas Holdings, Incorporated, the largest sugar producer in the Philippines, announced the election of Mr. Pangilinan as Vice Chairman. Directorship in Other Listed Companies in the Philippines: 1. Philex Petroleum Corporation - Chairman 2. Philippine Long Distance Telephone Company - Chairman 3. Metro Pacific Investments Corporation - Chairman 4. Roxas Holdings, Incorporated - Vice Chairman and Non-Executive Director 5. Manila Electric Company – Chairman

2) JUAN B. SANTOS , Vice Chairman Non-Executive Director

Age: 77 Date of First Appointment: September 28, 2010 Academic Background: Mr. Santos graduated from the Ateneo de Manila University in 1960, with a Bachelor of Science degree in Business Administration, and a Master’s Degree at Thunderbird School of Global Management in 1962. Business and Professional Background/ Experience: Mr. Santos was President and Chief Executive Officer of Nestle Philippines, Inc. from 1987 to 2003, and continued to serve as Chairman of Nestle Philippines, Inc. until 2005. From 1989 to 1995, Mr. Santos concurrently served as Chief Executive Officer of Nestle Singapore Pte. Ltd. Prior to his appointment as President of Nestle Philippines, Inc., Mr. Santos was President of the Nestle Group of Companies in Thailand. In 2005, Mr. Santos served as the Secretary of the Department of Trade

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and Industry of the Philippines, and was designated as a member of the Governance Advisory Council, and Public Sector Representative for the Public-Private Sector Task Force for the Development of Globally Competitive Philippine Service Industries. He was awarded Management Man of the Year by the Management Association of the Philippines in 1994, and the Agora Awardee for Marketing Management by the Philippine Marketing Association in 1992. Mr. Santos has been a Director and Vice Chairman of the Company since September 28, 2010, and most recently re-elected as such on June 24, 2015. He is currently Chairman of the Social Security Commission, governing board of the Social Security System, Vice Chairman of Alaska Milk Corporation, and Director of the Philippine Long Distance Telephone Company, First Philippine Holdings Corporation, PHINMA, Inc., Sun Life Grepa Financial, and Inc., East-West Seeds Co., Inc. He sits on the Board of Advisors of Coca-Cola FEMSA Philippines, Mitsubishi Motors Philippines Inc. and serves as Trustee of the St. Luke’s Medical Center. He was former Chairman of the Ramon Magsaysay Award Foundation, and Consultant of the Marsman-Drysdale Group of Companies. He is also Chairman of Dualtech Training Center Foundation, Inc. Directorship in Other Listed Companies in the Philippines 1. Philippine Long Distance Telephone Company (PLDT) - Non-Executive Director 2. First Philippine Holdings Corp. - Independent Director

3) EULALIO B. AUSTIN, JR. President & CEO, Executive Director

Age: 54 Date of First Appointment : June 29, 2011 Academic Background: Mr. Austin graduated from Saint Louis University-Baguio City, with a Bachelor of Science degree in Mining Engineering and placed eighth (8th) in the 1982 Professional Board Examination for mining engineers. He took his Management Development Program at the Asian Institute of Management in 2005 and his Advance Management Program at Harvard Business School in 2013. Business and Professional Background/ Experience: Mr. Austin has been a Director of the Company and PGPI since June 29, 2011 and was re-elected on June 24, 2015. He became President and Chief Operating Officer on January 1, 2012 and President and Chief Executive Officer of the Company on April 3, 2013. He previously served the Company as its Senior Vice President for Operations and Padcal Resident Manager in 2011, Vice President & Resident Manager for Padcal Operations from 2004 to 2010, Mine Division Manager (Padcal) from 1999 to 2003, Engineering Group Manager in 1998 and Mine Engineering & Draw Control Department Manager from 1996 to 1998. Mr. Austin concurrently serves as Director of Philex Petroleum Corporation. He is also the Chairman of Silangan Mindanao Mining Co., Inc. He likewise sits on the Board of Directors of the Philippine Society of Mining Engineers (“PSEM”), and was Founding President of PSEM’s Philex Chapter. He was recently awarded as the CEO of the Year for Mining by The Asset last December 14, 2015 in Hong Kong. Directorship in Other Listed Companies in the Philippines: 1. Philex Petroleum Corporation - Non - Executive Director

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4) ROBERT C. NICHOLSON Non-Executive Director

Age: 60

Date of First Appointment : November 8, 2008


Mr. Nicholson graduated from the University of Kent in 1976 and qualified as a

solicitor in England and Wales and in Hong Kong.

Business and Professional Background/ Experience

Mr. Nicholson has been a Director of the Company and PGPI since November 28,

2008, and was re-elected on June 24, 2015. He is Executive Chairman of Forum

Energy Plc, Chairman of Goodman Fielder Pty Limited (since March 2015), a

Commissioner of PT Indofood Sukses Makmur Tbk. He is also a Director of Metro

Pacific Investments Corporation, and Philex Petroleum Corporation, and Executive

Director of Pitkin Petroleum Plc and Pacific Light Power Pte. Ltd., all of which are

First Pacific Group subsidiaries or associates.

Mr. Nicholson is also an Independent Non-executive Director of Pacific Basin

Shipping Limited and Lifestyle Properties Development Limited. Previously, he was a

senior partner of Reed Smith Richards Butler from 1985 to 2001 where he

established the corporate and commercial department, and was also a senior advisor

to the board of directors of PCCW Limited between August 2001 and September

2003.

Mr. Nicholson has wide experience in corporate finance and cross-border

transactions, including mergers and acquisitions, regional telecommunications, debt

and equity capital markets, corporate reorganizations and privatizations in China.

Directorship in Other Listed Companies in the Philippines

1. Philex Petroleum Corporation - Non-Executive Director

2. Metro Pacific Investment Corporation - Non-Executive Director

5) EDWARD A. TORTORICI Non-Executive Director

Age: 76

Date of First Appointment : December 7, 2009

Academic Background

Mr. Tortorici received a Bachelor of Science degree from New York University and a

Master of Science degree from Fairfield University.


Mr. Tortorici has been a Director of the Company and PGPI since December 7, 2009,

and was last re-elected on June 24, 2015. Mr. Tortorici has served in a variety of

senior and executive management positions, including Corporate Vice President for

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Crocker Bank and Managing Director positions at Olivetti Corporation of America and

Fairchild Semiconductor Corporation. Mr. Tortorici subsequently founded EA

Edwards Associates, an international management and consulting firm specializing in

strategy formulation and productivity improvement with offices in USA, Europe and

Middle East. In 1987, Mr. Tortorici joined First Pacific as an Executive Director for

strategic planning and corporate restructuring, and launched the Group’s entry into

the telecommunications and technology sectors. Presently, he oversees corporate

strategy for First Pacific and guides the Group’s strategic planning and corporate

development activities. Mr. Tortorici serves as a Commissioner of PT Indofood

Sukses Makmur Tbk and as Director of Metro Pacific Investments Corporation,

Maynilad Water Services, Inc., FEC Resources Inc. of Canada. He previously served

as Director of AIM-listed Forum Energy plc. Mr. Tortorici serves as a Trustee of the

Asia Society Philippines and is on the Board of Advisors of the Southeast Asia

Division of the Center for Strategic and International Studies, a Washington D.C.

non-partisan think tank. He also served as a Commissioner of the U.S. ASEAN

Strategy Commission.



6) MARILYN A. VICTORIO-AQUINO, Non-Executive Director

Age: 60



Ms. Victorio-Aquino graduated cum laude (class salutatorian) from the University of

the Philippines College of Law in 1980 and placed second in the Philippine Bar

Examinations.

Business and Professional Background/ Experience:

She has been a Director of the Company and PGPI since December 7, 2009 and

was re-elected on June 24, 2015. She is an Assistant Director of First Pacific Co. Ltd.

since July 2012, following her 32-year law practice at SyCip Salazar Hernandez and

Gatmaitan Law Offices, where she was Partner from 1989 to 2012. She is also a

Director of Philippine Indofood Distribution Corporation since August 2014, of Light

Rail Manila Corporation since July 2014, of Silangan Mindanao Mining Co., Inc. since

December 2012, Lepanto Consolidated Mining Company since October 2012, and of

Maynilad Water Services Corporation since December 2012.

Directorship in Other Listed Companies in the Philippines:


2. Lepanto Consolidated Mining Company – Non-Executive Director

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7) OSCAR J. HILADO Independent Director

Age : 78



Mr. Hilado, a Certified Public Accountant, completed his undergraduate studies at the

De La Salle College-Bacolod in 1958 and obtained his Masters in Business

Administration from the Harvard School of Business Administration (Smith

Mundt/Fulbright Scholar) in 1962. He received a Doctorate in Business Management,

Honoris Causa, from the De La Salle University and a Doctorate of Laws, Honoris

Causa, from the University of St. La Salle in 1992.


Mr. Hilado has been an Independent Director of the Company since December 7,

2009, and was last re-elected on June 24, 2015. He was the Chairman & Chief

Executive Officer of Philippine Investment Management (PHINMA), Inc. (January

1994 to August 2005), and currently Chairman of the Board. He is currently also

Chairman of PHINMA Corp, Trans-asia Oil and Energy Development Corporation,

PHINMA Property Holdings Corp., Vice Chairman of Trans-Asia Petroleum

Corporation and Trans-Asia Power Generation Corporation, and Director of Trans

Asia Renewable Energy Corporation. Mr. Hilado is an Independent Director of Smart

Communications, Inc. and Digital Telecommunications Phils., Inc, and the publicly

listed First Philippine Holdings Corporation and A. Soriano Corporation. He is also a

Director of United Pulp and Paper Company, Inc., Beacon Property Ventures, Inc.,

Manila Cordage Company, Pueblo de Oro Development Corporation, Seven Seas

Resorts and Leisure, Inc., Asian Eye Institute, Araullo University, Cagayan de Oro

College, University of Iloilo, University of Pangasinan, Microtel Inns & Suites

(Pilipinas) Inc.

Directorship in Other Listed Companies in the Philippines :

1. PHINMA Corporation - Non-Executive Director

2. Trans-Asia Oil & Energy Development Corporation and its subsidiary, Trans-Asia

Petroleum Corporation – Chairman and Vice Chairman, respectively

3. A. Soriano Corporation - Non-Executive Director

4. First Philippine Holdings Corporation, and its subsidiary, Rockwell Land

Corporation – Independent Director

5. Roxas Holdings – Independent Director

8) WILFREDO A. PARAS Independent Director

Age : 69

Date of First Appointment : June 29, 2011

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Academic Background

Mr. Paras completed his undergraduate studies at the University of the Philippines in

1969 with Bachelor of Science, Industrial Pharmacy and his Master in Business

Administration at the De La Salle University in 1991. He also completed an Executive

Program at the University of Michigan at Ann Arbor, Michigan, USA.


Mr. Paras has been an Independent Director of the Company since June 29, 2011

and was re-elected on June 24, 2015. He is currently Independent Director of GT

Capital Holdings, Inc. since May 2013, President of WAP Holdings, Inc., and a

Director of CIIF Oil Mills Group of Companies. He is also a member of the Board of

Trustees of Dualtech Training Foundation Inc. Mr. Paras was previously the

Executive VicePresident, Chief Operating Officer and Director of JG Summit

Petrochemical Corporation, President and Director of PT Union Carbide Indonesia,

Managing Director of Union Carbide Singapore, and Business Director for Union

Carbide Asia Pacific.


1. GT Capital Holdings, Inc. - Non-Executive Director

9) BARBARA ANNE C. MIGALLOS Corporate Secretary , Executive Director

Age: 61

Date of First Appointment: June 26, 2013


Ms. Migallos graduated cum laude from the University of the Philippines, with a

Bachelor of Arts degree, and finished her Bachelor of Laws degree as cum laude

(salutatorian) also at the University of the Philippines. She placed third in the 1979

Philippine Bar Examination.


Ms. Migallos was elected to the Board of Directors of the Company and PGPI on

June 24, 2015. She is also the Company’s Corporate Secretary since July 1998. She

is also Director and Corporate Secretary of Philex Petroleum Corporation, and

Corporate Secretary of Silangan Mindanao Mining Co., Inc. She is the Managing

Partner of the Migallos & Luna Law Offices. Ms. Migallos is also a Director of

Mabuhay Vinyl Corporation since 2000 and Philippine Resins Industries since 2001,

and Corporate Secretary of Eastern Telecommunications Philippines, Inc. since

2005, Nickel Asia Corporation since 2010, and Alliance Select Foods International,

Inc. since 2015. She is a professorial lecturer in Corporations Law, Insurance,

Securities Regulation and Credit Transactions at the De La Salle University College

of Law. She was a Senior Partner of Roco Kapunan Migallos and Luna Law Offices

from 1988 to 2006.



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2. Mabuhay Vinyl Corporation - Non-Executive Director

10) BIENVENIDO E. LAGUESMA, Non-Executive Director

Age: 65

Date of First Appointment: February 27, 2013

Academic Background

Mr. Laguesma finished his Bachelor of Laws at Ateneo De Manila College in 1975

and his post-graduate studies as a Colombo Scholar (British Council) for Public

Sector Administration course at the Royal Institute of Public Administration in

London, United Kingdom of Great Britain from May to August of 1985.


Mr. Laguesma has been a Director of the Company and PGPI since February 27,

2013, and was re-elected on June 24, 2015. He is presently a Commissioner of the

SSS and has held such position since March 2011. Mr. Laguesma was Secretary of

the DOLE from 1998-2001, Presidential Assistant (Office of the President of the

Republic of the Philippines) from 1996 to 1998, and DOLE Undersecretary from 1990

to 1996, after holding various other positions in the Government since 1976. He is a

Director of the First Metro Investment Corporation and Chairman of the Charter Ping

An Insurance Corporation of the Metrobank Group. He is also Senior Partner of the

Laguesma Magsalin Consultants and Gastardo Law Offices. He is currently a

Member, Board of Regents, Pamantasan ng Lungsod ng Maynila and a Director of

Drug Abuse Resistance Education, DAREPHIL, Inc.

Directorship in OTHER Listed Companies in the Philippines

1. None

11) MICHAEL VICTOR N. ALIMURUNG, Non-Executive Director

Age: 41


Academic Qualification:

Mr. Michael N. Alimurung graduated from the Ateneo de Manila University with

Honors in 1997 and 1998 with Bachelor of Science degrees in Management

Engineering and Computer Science respectively. He obtained an MBA from the

Stanford Graduate School of Business in 2006.


He is currently one of the nine (9) SSS Commissioners and the Chairperson of the

SSC-IT (Information Technology) Committee. He serves as Director of the Company

and Union Bank of the Philippines. He provides general management and strategy

consulting to government agencies, including the Commission on Audit, the

15

Department of Social Welfare and Development and the Development Academy of

the Philippines (DAP).

In the public sector, he served as Assistant Executive Secretary and Head of the

Government Performance Monitoring Office in the Office of the President, Republic

of the Philippines from 2010-2012. He was a Board Member of DAP in 2011 and

designated as a DAP Fellow in 2012.

In the private sector, he is the founder of Impact.ph, an organization that aims to

enhance and transform the Philippine nonprofit sector. He was previously the anchor

of Bright Ideas, a talk show of Bloomberg TV Philippines He also worked as a

Principal at the Wellspring Consulting, a top-tier consulting firm focused on the social

sector, based in Boston, MA from 2006-2010 and 2012-2014. He was a co-founder of

Jericho Systems, an e-commerce and publishing company and also a co-founder of

BukasSarili Foundation. He worked at Citibank in 2004 and Procter & Gamble from

1999-2003. He also taught at the Ateneo de Manila from 1999-2002 and at the

University of Asia and the Pacific from 1998-1999.

Directorship in Other Listed Companies:

1.) Union Bank of the Philippines - Non-Executive Director

Process and Criteria for Selection of Nominees for Directors The Board of Directors set April 15, 2016 as the deadline for the submission of nominations to the Board of Directors. The deadline was duly announced and disclosed on February 26, 2016. The Nominations Committee composed of Manuel V. Pangilinan (Chairman), Juan B. Santos, Robert C. Nicholson, Marilyn A. Victorio-Aquino and Wilfredo A. Paras (Independent Director) screened the nominees for election to the Board of Directors in accordance with the Company’s Manual on Corporate Governance. The Committee assessed the candidates’ background, educational qualifications, work experience, expertise and stature as would enable them to effectively participate in the deliberations of the Board. In the case of the independent directors, the Committee further reviewed their business relationships and activities to ensure that they have all the qualifications and none of the disqualifications for independent directors as set forth in the Company’s Manual of Corporate Governance, the Securities Regulation Code (SRC), and the 2015 SRC Implementing Rules and Regulations. The Committee further considered SEC Resolution No. 72, Series of 2009, SEC Memorandum Circular No. 9, series of 2011, the 2015 Philippine Corporate Governance Blueprint, and SEC Advisory 31 March 2016. The By-Laws of the Company were amended on June 30, 2003 to incorporate Rule 38 of Amended Implementing Rules and Regulations of the SRC (the “SRC Rules”) on the Requirements on Nomination and Election of Independent Directors. Nominees for Election at Annual Stockholders’ Meeting on June 29, 2016 The Nominations Committee screened the nominees to determine whether they have all of the qualifications and none of the disqualifications for election to the Company’s Board of

16

Directors, and prepared the Final List of Candidates for election to the Board of Directors at the Annual Stockholders’ meeting. The following have been nominated for election to the Company’s Board of Directors:

1. Manuel V. Pangilinan 2. Juan B. Santos 3. Eulalio B. Austin, Jr. 4. Robert C. Nicholson 5. Marilyn A. Victorio-Aquino 6. Edward A. Tortorici 7. Bienvenido E. Laguesma 8. Barbara Anne C. Migallos 9. Michael Victor N. Alimurung 10. Oscar J. Hilado (Independent Director) 11. Wilfredo A. Paras (Independent Director)

The experience and background of Messrs. Pangilinan, Santos, Austin, Nicholson, Tortorici, Laguesma, Alimurung, Hilado and Paras, and of Mses. Aquino and Migallos are contained in pages 7 to 15 of this Information Statement. The Company complied with the guidelines on the nomination and election of independent directors prescribed in Rule 38 of the SRC Rules. Mr. Oscar J. Hilado was nominated by Mr. Pangilinan. Mr. Wilfredo A. Paras was nominated by Ms. Migallos. Both nominees have accepted their nominations in writing. There are no relationships between the foregoing nominees for independent director and the persons who nominated them. Messrs. Hilado and Paras were elected as independent directors on December 7, 2009 and June 29, 2011, respectively. Mr. Paras has served less than five (5) years as independent director of the Company reckoned from the date he was first elected to the Board. Mr. Hilado has served six (6) years and four (4) months from the date of his first election, but is eligible for nomination and re-election to the Board as Independent Director pursuant to SEC Memorandum Circular No. 9, series of 2011, which provides that all terms served by independent directors prior to January 2, 2012 shall not be included in the application of term limits. Both Messrs. Hilado and Paras have each served less than the nine (9) year limit recommended under the 2015 Philippine Corporate Governance Blueprint. No director has resigned or declined to stand for re-election to the Board of Directors due to disagreement on any matter. Executive Officers The following persons are the present executive officers of the Company: EULALIO B. AUSTIN, JR. – 54, Filipino citizen. Mr. Austin has been a Director of the

Company and PGPI since June 29, 2011 and was re-elected on June 24, 2015. He became

President and Chief Operating Officer on January 1, 2012 and President and Chief

Executive Officer of the Company on April 3, 2013. He previously served the Company as its

Senior Vice President for Operations and Padcal \ Resident Manager in 2011, Vice

President & Resident Manager for Padcal Operations from 2004 to 2010, Mine Division

Manager (Padcal) from 1999 to 2003, Engineering Group Manager in 1998 and Mine

17

Engineering & Draw Control Department Manager from 1996 to 1998. Mr. Austin

concurrently serves as Director of Philex Petroleum Corporation and President and Director

of Silangan Mindanao Mining Co., Inc. He likewise sits on the Board of Directors of the

Philippine Society of Mining Engineers (“PSEM”), and was Founding President of PSEM’s

Philex Chapter. Mr. Austin graduated from Saint Louis University-Baguio City, with a

Bachelor of Science degree in Mining Engineering and placed eight at the 1982 Professional

Board Examination for mining engineers. He took his Management Development Program at

the Asian Institute of Management in 2005 and his Advance Management Program at

Harvard Business School in 2013. He was awarded as the CEO of the year on Mining by

The Asset in December 2015.

DANNY Y. YU. – 54, Filipino citizen. Mr. Yu was appointed Senior Vice President for

Finance and Chief Financial Officer (“CFO”) on September 2, 2013. He is also the

Company’s Compliance Officer and Corporate Governance Officer. Prior to joining the

Company, Mr. Yu was CFO of Digitel Communications, Inc. (subsidiary of PLDT) and of

Digitel Mobile Philippines, Inc. (Sun Cellular) from November 2011 to July 2013. He was also

Group CFO of ePLDT, Inc. and subsidiaries (November 2010 to December 2011); CFO of

PLDT Global Corporation (June 2004 to November 2010) and of Mabuhay Satellite

Corporation (March 1999 to May 2004). Mr. Yu was also Vice President-Corporate

Development of Fort Bonifacio Development Corporation (March 1997 to March 1999). He

was previously connected with Sycip, Gorres and Velayo & Co. Mr. Yu is a licensed CPA

and obtained a Bachelor of Science Degree in Commerce, Major in Accounting (Magna Cum

Laude) from the San Carlos University in Cebu City. In 1995, he completed a Master in

Management at the Asian Institute of Management

BARBARA ANNE C. MIGALLOS – 61, Filipino citizen. Ms. Migallos has been a Director of

the Company and PGPI since June 26, 2013 and was re-elected on June 24, 2015. She is

also the Company’s Corporate Secretary since July 1998. Ms. Migallos is also Director and

Corporate Secretary of Philex Petroleum Corporation and Brixton Energy & Mining

Corporation, and Corporate Secretary of Silangan Mindanao Mining Co., Inc. and Lascogon

Mining Corporation. She is the Managing Partner of the Migallos & Luna Law Offices. Ms.

Migallos has also been a Director of Mabuhay Vinyl Corporation since 2000 and the

Philippine Resins Industries since 2001, and Corporate Secretary of Eastern

Telecommunications Philippines, Inc. since 2005, Nickel Asia Corporation since 2010, AND

Alliance Select Foods International, Inc. since 2015. She is also a professorial lecturer in

insurance law and securities regulation law at the De La Salle University College of Law. Ms.

Migallos graduated cum laude from the University of the Philippines, with a Bachelor of Arts

degree, and finished her Bachelor of Laws degree as cum laude (salutatorian) also at the

University of the Philippines. She placed third in the 1979 Philippine Bar Examination.

MANUEL A. AGCAOILI – 59, Filipino citizen. Mr. Agcaoili has recently joined the Company

as Senior Vice President and Padcal Resident Manager effective January 15, 2014. He was

previously with MBMI Resources, Inc. (Vancouver, Canada) as Director and President from

2004 to 2014 and Senior Philippine Representative, Narra Nickel Mining and Development

Corporation, Tesoro Mining And Development Corporation, and McArthur Mining, Inc. as

18

Director and President from 2006 to 2008, and Lafayette Philippines, Inc. as Director also

from 2006 to 2008. He was also previously connected with the Philippine Associated

Smelting and Refining Corporation. Mr. Agcaoili graduated with a Bachelor of Science

Degree in Metallurgical Engineering at the University of the Philippines in 1980. He also

completed a Master in Business Administration Program at the Ateneo De Manila University

Graduate School of Business in 2002.

MICHAEL T. TOLEDO – 55, Filipino citizen. Mr. Toledo has been Senior Vice President for

Corporate Affairs since February 15, 2012. He also heads the Media Bureau of the MVP

group of companies. Before joining the Company, he was President and Chief Executive

Officer of the Weber Shandwick Manila office since 2006, and was Director and/or Legal and

Financial Consultant for various government owned and controlled corporations. Mr. Toledo

was also Press Secretary and Presidential Spokesperson for former President Joseph

Ejercito Estrada. Mr. Toledo finished a Bachelor of Arts Degree in Philosophy in 1981 and

completed a Bachelor of Laws Degree at University of the Philippines in 1985. In 1994, he

obtained a Masters of Law degree at the London School of Economics and Political Science.

REDEMPTA P. BALUDA – 60, Filipino citizen. Ms. Baluda has been Vice President for

Exploration since January 2, 2009. She was formerly Assistant Vice President for

Exploration from 2007 to 2009, Division Manager for Environment and Community Relations

and Geology for Padcal Operations from 1998 to 2007 and Department Manager for

Geology from 1996 to 1998. Ms. Baluda finished with a Bachelor of Science Degree in

Geology at the University of the Philippines in 1976. She also completed the academic units

under the Masters in Environment & Natural Resource Management at the University of the

Philippines campus in Los Banos, Laguna in 2007.

VICTOR A. FRANCISCO – 51, Filipino citizen. Mr. Francisco has been Vice President for

Environment and Community Relations since January 2, 2009. He was previously Group

Manager for Corporate Environment and Community Relations in 2007, Department

Manager– Corporate Environment and Community Relations in 1999 and Assistant Manager

–Corporate Environmental Affairs in 1997. Mr. Francisco completed a Bachelor of Science

Degree in Community Development at the University of the Philippines in 1987. He also

received a Masters in Environmental Science and Management at the University of the

Philippines campus in Los Banos, Laguna in 1995.

JOAN A. DE VENECIA – 35, Filipino citizen. Joan A. de Venecia is currently the Vice

President and General Counsel of Philex Mining Corporation, having joined the company on

August 1, 2015. Prior to this, Ms. De Venecia was the Vice President for the Public Relations

and Information Services Group at Pag-IBIG Fund, a government owned and controlled

corporation. Before joining public service, Ms. De Venecia was a senior associate at SyCip

Salazar Hernandez & Gatmaitan. She obtained her Master of Laws in International Legal

Studies degree (Hugo Grotius scholar & Fulbright scholar, 2010) from the New York

University School of Law; Bachelor of Laws degree (valedictorian, cum laude, Academic

Excellence awardee, 2005) from the University of the Philippines College of Law; and BS–

19

Legal Management (hon. mention, 2001) from the Ateneo de Manila University. She ranked

1st in the 2005 Bar Examinations. She teaches law at the UP College of Law, and is a

regular Mandatory Continuing Legal Education lecturer on Investor-State Arbitration.

Significant Employees No single person is expected to make a significant contribution to the business since the Company considers the collective efforts of all its employees as instrumental to the overall success of the Company’s performance. Family Relationships There are no family relationships up to the fourth civil degree either of consanguinity or affinity among any of the directors, executive officers and persons nominated or chosen to become directors or executive officers. Involvement in Certain Legal Proceedings None of the directors, nominees for election as a director, executive officers or control persons of the Company have been involved in any legal proceeding, including without limitation being the subject of any: 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 or integrity to hold the relevant positions in the Company. Note 31 of the Notes to the Consolidated Financial Statements as of December 31, 2015, attached hereto, is incorporated by reference. Certain Relationships and Related Transactions

The Company’s significant related party transactions as of December 31, 2015, 2014 and 2013, which are under terms that are no less favorable than those arranged with third parties, and account balances are as follows:

a) Advances from the Company to Silangan Mindanao Mining Co., Inc. (SMMI) and Silangan Mindanao Exploration Co., Inc. (SMECI)

The Company, owning directly and indirectly 100% of SMMCI and SMECI, provides the funds to SMMCI, through SMECI since 2011 and directly thereafter, for the

20

Silangan project’s expenditures since the Company’s acquisition of Anglo American’s interest in the Silangan Project in 2009. These advances, which were intended to be converted into equity, amounted to P6.174 billion and P7.556 billion as of December 31, 2014 and December 31, 2013, respectively. On February 10, 2015, the Company infused all outstanding advances amounting to P7.208 billion as equity resulting to nil advances as of December 31, 2015.

b) Advances from the Company to Philex Gold Philippines, Inc. (PGPI)

The Company advanced PGPI’s working capital and capital expenditure requirements, which as of December 31, 2014 and 2013, amounted to P1.349 billion and P1.292 billion, respectively. Until late 2015, a portion of these advances were secured by collateral participation certificates covering certain mining assets of PGPI’s Bulawan mine, which is currently under care and maintenance. On October 30, 2015, PMC acquired 100% direct ownership interest in PGPI from PGHI, which is awaiting the Certificate Authorizing Registration (CAR) from BIR as of date of this report. Accordingly, the Company reclassified all its advances in PGPI as Deposit for Future Stock Subscription.

c) Advances from the Company to Philex Petroleum Corporation (PPC)

The Company made cash advances to PPC for its additional working capital requirements, and for the acquisition of equity in Forum Energy Plc, PetroEnergy Resources Corporation and Pitkin Petroleum Corporation. These advances are unguaranteed and payable on demand through cash. As of December 31, 2015, 2014, and 2013, advances from the Company amounted to P2.194 billion, P2.684 billion, and P2.579 billion, respectively. In August 2015, PPC pledged certain assets to the Company to secure the outstanding advances.

d) Advances of the Company to Philex Gold Holdings, Inc. (PGHI) The Company provided advances to PGHI, a 100%-owned subsidiary, which amounted to P1.884 billion and P1.902 billion as of end-2014 and end-2013, respectively. In 2015, the Company converted advances amounting to P1.884 billion as equity in view of the accumulated deficit of PGHI.

e) Advances of the Company to Lascogon Mining Corp. (LMC) The Company advanced LMC’s working capital and exploration requirements, which as of December 31, 2015, 2014, and 2013, amounted to nil, P140.3 million and P138.1 million, respectively. The advances are intended to be converted into equity.

f) Advances from the Company to Brixton Energy and Mining Corporation (BEMC)

The Company provided cash advances to BEMC to fund the exploration and development activities of its coal company in Zamboanga, Sibugay. These advances are payable on demand through cash. The advances amounting to P737.8 million (net of repayments) proved uncollectible, thus written off, in 2014. As of December 31, 2013, total advances amounted to P799.7 million. With the declaration of cessation of BEMC’s underground mining operations of its coal mine in Zamboanga, Sibugay on September 1, 2013, the Company recognized an allowance for impairment of advances to BEMC amounting to P799.7 million in 2013.

21

g) Loan Facility Agreement between the Company and Forum Philippine Holdings Limited (FPHL)

The Long Facility Agreement between the Company (with FEP as guarantor) and FPHL covering a total of US$15 million loan amount with interest rate of US LIBOR + 4.5% for the drawn portion and a commitment fee of 1% for the undrawn portion was assigned to PPC on November 21, 2013, consequently assigning the outstanding loans of FPHL amounting to US$15 million from the Company to PPC and increasing the advances of the Company to PPC by the same amount.

h) Agreements with Anglo

The Company was reimbursed by Anglo American for expenses incurred by the Company on behalf of Northern Luzon Exploration & Mining Co. Inc. (NLEMCI) except in 2015 when no reimbursement was received. In 2014 and 2013, the Company received reimbursement of P235 thousand and P1.2 million, respectively. As of December 31, 2015, 2014, and 2013, the Company’s receivables from these transactions amounted to P2.4 million, P1.5 million, and P1.3 million, respectively.

The terms of the agreement entered into by the Company with Anglo for the possible transfer of Minphil Exploration Company, Inc. (Minphil), the parent company of NLEMCI, to the Company were not delivered during the agreed upon period, thus terminating the agreement in late 2013.

i) Funding Commitment of First Pacific Company Limited (FPC) to the Company In a letter issued by FPC in October 2012, it committed to provide funding of up to US$200 million to the Company for capital expenditures of the Padcal mine and Silangan Project, as well as for the Company’s working capital requirements.

As part of such commitment, subsidiaries of FPC provided loan facilities extending loans to the Company as follows: a) Kirtman Limited for P2.1 billion and US$15 million; b) Maxella Limited for US$15 million; and c) Asia Link B.V for $50 million. All these loans were subject to an interest rate of 5% and commitment fee of 1% for the undrawn amount of the loan facility. In December 2014, all outstanding loans to Kirtman Limited, Maxella Limited and Asia Link B.V. were fully paid thus terminating all loan agreements with them.

j) Issuance of Convertible Bonds to FPC and Social Security System (SSS) by SMECI In December 2014, SMECI and the Company, as the co-issuer, issued 8-year convertible bonds with a face value of P7.2 billion at 1.5% coupon rate p.a. payable semi-annually. The bonds are convertible into 400,000 common shares of SMECI at P18,000 per share one year after the issue date. The carrying value of loans payable amounted to P6.259 billion and P5.947 billion as of December 31, 2015 and 2014, respectively.

Note 14 and 24 of the Notes to Consolidated Financial Statements of the Exhibits in Part V, Item 14 on Related Party Transactions, is incorporated hereto by reference.

Item 6. Compensation of Directors and Executive Officers

There are no arrangements for additional compensation of directors other than that provided in the Company’s by-laws which provides compensation to the directors, at the Board’s

22

discretion to determine and apportion as it may deem proper, an amount up to one and a half (1 ½ %) percent of the Company’s net income before tax of the preceding year. Payments made in 2015 and 2014 amounted to P10.5 million and P10.6 million, respectively. In 2015 and 2014, the payments represented only 1% of the Company’s net income before tax while there were no payments made in 2013 (table below showing payments in 2013 represents value of stock options granted to directors).

Effective March 2015, the Directors’ per diem shall be increased to P40,000 per board meeting attendance and P30,000 per committee participation. Previously, the rate per attendance for both board and committee meeting was P8,000. In the event that financial results warrant the payment of the annual directors’ compensation under the Company’s by-laws, such directors’ compensation shall be inclusive of the annual total per diem paid to directors.

There is no executive officer with contracts or with compensatory plan or arrangement having terms or compensation significantly dissimilar to the regular compensation package, or separation benefits under the Company’s group retirement plan, for the managerial employees of the Company.

On June 23, 2006, the Company’s stockholders approved the stock option plan of the Company which was thereafter duly approved by the Securities and Exchange Commission on March 8, 2007.

On June 29, 2011, the Company’s stockholders approved a new stock option plan covering up to 246,334,118 shares equivalent to 5% of the Company’s outstanding shares of 4,926,682,368 as of June 29, 2011. This plan was approved by the SEC on February 22, 2013, which approval was received by the Company on March 5, 2013. Note 27 of the Notes to Consolidated Financial Statements of the Exhibits in Part V, Item 14 on the Company’s Stock Option Plan is hereby incorporated for reference.

The following table shows the compensation of the directors and officers for the past three

years and estimated to be paid in the ensuing year. Starting 2008, stock option exercises of

the Company’s non-management directors, consisting of the difference between the market

and exercise prices at the time of option exercise, are considered as director’s fee for

purposes of the table.

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SUMMARY OF COMPENSATION TABLE

(In Thousands)

DIRECTORS

Year Directors' Fee

2016 (Estimated) P 13,189

2015 P 13,544

2014 P 10,461

2013 P 33,833

CEO AND FOUR MOST HIGHLY COMPENSATED OFFICERS

Year Salary Bonus/Others

2016 (Estimated) P 62,649 P 5,221

2015 P 60,918 P 14,774

2014 P 64,499 P 21,992

2013 P 45,544 P 24,539

Total Officers'

Year Salary Bonus/Others

2016 (Estimated) P 70,767 P 5,897

2015 P 77,938 P 29,971

2014 P 84,829 P 27,669

2013 P 65,421 P 35,100

ALL DIRECTORS & OFFICERS AS A GROUP

Year Total Amount

2016 (Estimated) P 89,853

2015 P 121,453

2014 P 122,959

2013 P 134,354

The aggregate amount of compensation paid in 2015, 2014 and 2013 and estimated amount expected

to be paid in 2016 as presented in the above table are for the following executive officers:

2016 (Estimate) - Eulalio B. Austin, Jr. (CEO), Danny Y. Yu, Manuel A. Agcaoili, Michael T.

Toledo and Redempta P. Baluda

2014 - Eulalio B. Austin, Jr. (CEO), Danny Y. Yu, Manuel A. Agcaoili, Michael T. Toledo

and Benjamin R. Garcia

2013 - Eulalio B. Austin, Jr. (CEO), Michael T. Toledo, Benjamin R. Garcia, Redempta P.

Baluda and Renato N. Migriño

2015 - Eulalio B. Austin, Jr. (CEO), Danny Y. Yu, Manuel A. Agcaoili, Michael T. Toledo

and Redempta P. Baluda

24

Item 7. Independent Public Auditor The appointment, approval or ratification of the Company’s independent public auditor will be submitted to the shareholders for approval at the Annual Stockholders’ Meeting on June 29, 2016. The Audit Committee has recommended, and the Board of Directors has approved, the reappointment of the auditing firm of SyCip Gorres Velayo & Co (SGV & Co). SGV & Co has been the Company’s independent auditor since 1981. The certifying partner of SGV & Co primarily responsible for the audit of the Company’s financial accounts is rotated at least once every five (5) years, with a two (2) year cooling off period as applicable, in accordance with SRC Rule 68, Part 3(b)(iv)(ix). Mr. Jose Pepito E. Zabat III of SGV & Co was first engaged by the Company as certifying partner for the year-end audit in 2012 and was reappointed for the examination of the Company’s 2015 financial statements. The Company’s Audited Financial Statements for 2015 as certified by Mr. Zabat is, attached to this Information Statement as an Exhibit to the Annual Report. The Corporation has been advised that the SGV auditors assigned to render audit-related services have no shareholdings in the Company, or a right, whether legally enforceable or not, to nominate persons or to subscribe to the securities of the Company, consistent with the professional standards on independence set by the Board of Accountancy and the Professional Regulation Commission. Representatives of SGV & Co will be present at the scheduled stockholders meeting. They will have the opportunity to make a statement should they desire to do so and will be available to respond to appropriate questions. External Audit Fees and Services Audit and Audit-Related Fees For 2015, 2014 and 2013, the Company’s external auditors were engaged primarily to express an opinion on the financial statements of the Company and its subsidiaries. The audit, however, included the auditors providing assistance to the Company in the preparation of its income tax return in as far as ensuring the agreement of the reported income and costs and expenses in the return with the recorded amounts in the books. The procedures conducted for this engagement included those that are necessary under auditing standards generally accepted in the Philippines but did not include detailed verification of the accuracy and completeness of the reported income and costs and expenses. The audit fees for these services for the entire Philex group (excluding PPC group) were P5.27 million for 2015, P5.63 million for 2014 and P5.50 million for 2013. Tax Fees The Company has not engaged the external auditors for any tax-related services in 2015, 2014 and 2013. All Other Fees The external auditors were engaged to review the Company’s interim financial statements in relation to the Company’s planned stock right offering in 2013 which engagement included the issuance of a comfort letter on the Company’s financial statements as a requirement of the underwriter. Though the SRO was not pushed through, the external auditors were paid the amount of P14.5 million for their services.

25

Also in 2013, the external auditors were engaged to render services on customs compliance review of the Company’s importations for the period June 2010 to June 2013 for a fee of P400 thousand. All audit and non-audit engagements were approved by the Company’s Audit Committee. Audit Committee’s Approval of Policies and Procedures Prior to the commencement of this year-end audit work, the external auditors presented their program and schedule to the Company’s Audit Committee, which included discussion of issues and concerns regarding the audit work to be done. At the completion of this audit works, the Company’s audited financial statements for the year were likewise presented by the external auditors to the Audit Committee for committee approval and endorsement to the full Board for final approval. On quarterly basis, the external auditors also prepared a report on their review of the Company’s quarterly financial reports based on agreed upon audit procedures with the Audit Committee before the reports were filed with the SEC.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

There was no change in the Company’s independent accountants during the two most recent calendar years or in any subsequent interim period, except for the change in the Company’s audit engagement partner to Mr. Jose Pepito E. Zabat III starting the 2012 year-end audit.

There has been no disagreement with the independent accountants on accounting and financial disclosure. Item 8. Compensation Plans No action is to be taken by the shareholders at the Meeting with respect to any plan pursuant to which cash or non-cash compensation may be paid or distributed. Item 9. Authorization or Issuance of Securities Other than for Exchange No action is to be taken at the Meeting on March 1, 2016 with respect to the authorization or issuance of any securities otherwise than for exchange for outstanding securities of the Company. Item 10. Modification or Exchange of Securities No action is to be taken at the Meeting on March 1, 2016 with respect to the modification of any class of securities of the Company, or the issuance or authorization for issuance of one class of securities of the Company in exchange for outstanding securities of another class. Item 11. Financial and Other Information related to Items 9 and/or 10 As stated above, no action is to be taken at the Meeting on March 1, 2016 with respect to the matters under Items 9 (Authorization or Issuance of Securities Other than for Exchange) and 10 (Modification or Exchange of Securities).

26

Item 12. Mergers, Consolidations, Acquisitions and Similar Matters No action is to be taken at the Meeting on March 1, 2016 with respect to any transaction involving the following:

a) the merger or consolidation of the Company into or with any other person or of any other person into or with the Company;

b) the acquisition by the Company or any of its security holders of securities of

another person; c) the acquisition by the Company of any other going business or of the assets thereof; d) the sale or other transfer of all or any substantial part of the assets of the Company; or e) the liquidation or dissolution of the registrant.

Item 13. Acquisition or Disposition of Property No action is to be taken at the Meeting on March 1, 2016 with respect to the acquisition or disposition of any property. Item 14. Restatement of Accounts No action is to be taken at the Meeting on March 1, 2016 with respect to the restatement of any asset, capital, or surplus account of the Company. D. OTHER MATTERS Item 15. Action with Respect to Reports Action is to be taken on the reading and approval of the following:

1. Minutes of the Previous Stockholders’ Meeting

The Minutes of the Annual Stockholders’ Meeting held on June 24, 2015 are posted on the Company’s website (www.philexmining.com.ph) and also available for inspection by stockholders at the principal offices of the Company. Copies thereof will also be made available upon request at the venue of the next annual stockholders’ meeting. Matters taken up during the 2015 Stockholders’ Meeting were the: (i) reading and approval of the Minutes of 2014 Stockholders’ Meeting; (ii) presentation and approval of the Annual Report including the Audited Financial Statements for 2014; (iii) ratification and approval of the acts of the Board and Officers and Executive Officers for 2014 and up to the date of the 2014 Stockholders’ Meeting; (iv) appointment of Sycip, Gorres Velayo & Co. as external auditors; and (v) appointment of election inspectors; and (vi) election of Directors of the Company for 2014, including Independent Directors.

27

The resolution to be adopted will be for the approval of the Minutes of the June 24, 2015 Annual Stockholders’ Meeting.

2. Management Reports

The Company’s Management Report, which includes the Audited Financial Statements for 2015, will be submitted for approval by the stockholders. A copy of the Management Report is attached to this Information Statement. Upon written request, shareholders shall be provided with a copy of the Company’s Annual Report on SEC Form 17-A free of charge (please see page 32). The resolution to be adopted will be the approval of the Management Report and the Audited Financial Statements of the Company for the year ended December 31, 2015.

Item 16. Matters not required to be submitted There are no matters or actions to be taken up in the meeting that will not require the vote of the stockholders as of the record date. Item 17. Amendment of Charter On April 27, 2016, the Board of Directors approved the amendment of Article III of the Company’s By-Laws to provide that the President shall be Chief Executive Officer, and to expressly provide for Senior Vice Presidents. Article III of the Company’s By-Laws provides that the President shall be the Chief Operating Officer. The proposed amendment of the By-Laws to provide that the President shall be the Chief Executive Officer is consistent with present situation in the Company, and with the corporate governance best practice to have the positions of Chairman and of the Chief Executive Officer held by different persons. Mr. Manuel V. Pangilinan was previously Chairman and Chief Executive Officer until he relinquished the position of Chief Executive Officer in 2013. Mr. Eulalio B. Austin, Jr., previously President and Chief Operating Officer, has since been the Company’s President and Chief Executive Officer. Article III of the By-Laws also provides for Vice-Presidents (in the plural) but does not mention Senior Vice Presidents. The position of “Senior Vice President” is a classification of the position of Vice President, but for clarity, the proposal is to amend the By-Laws to expressly provide for Senior Vice Presidents. The resolution to be adopted will be the amendment of Article III of the Company’s By-Laws to provide that the President shall be Chief Executive Officer, and to expressly provide for Senior Vice Presidents. Item 18. Other Proposed Action Action is to be taken on (1) the ratification and approval of the acts of the Board of Directors and executive officers for the corporate year 2015 to 2016; and (2) the appointment of independent election inspectors for the ensuing year.

28

1. Acts of the Board of Directors and Executive Officers All acts, contracts, proceedings, elections and appointments made or taken by the Board of Directors and/or the officers of the Company during the past corporate year will be submitted for ratification and approval of shareholders. These refer to the actions taken by the Board of Directors at regular meetings held on February 25, April 28, June 24, July 28, October 28 and November 25, 2015, and February 24, and April 27, 2016, at special meetings held on February 8, and July 6, 2015 and February 29, and April 27, 2016, and at the organizational meeting held on June 24, 2015. The acts of officers referred to are those that implemented the actions taken by the Board. A summary of significant actions of the Board, as set forth in the Minutes of meetings, is provided below. At regular Board meetings, principal matters discussed included the presentation of detailed monthly operations and financial reports. Operations reports included safety performance, milling tonnage, gold and copper grades, metal production and updates on social development programs and environmental compliance. Key performance indicators such as production and operating cost per tonne are also discussed. Financial reports included operating revenues, operating costs and expenses, income from operations, other income (charges), income before income tax, net income, balance sheet and statements of cash flows. Metal prices and smelter charges are also regularly reported. Updates on the progress of the Silangan Project and other exploration projects, including the status of drilling programs, mining and exploration permit applications, project timetable and cost performance, were also presented. Various ministerial resolutions for the Company’s credit facilities with banks were also taken up. At the February 25, 2015 regular meeting of the Board, the Company’s 2014 Audited Financial Results were approved. A cash dividend of P0.02 per share was declared with a record date of March 11, 2015 and payment date of March 24, 2015. At the same meeting, the Board approved directors fees’ of 1% of the Company’s 2004 income before tax of P1.054 billion for a total of P10.54 million or P958,438 per director. Under the Company’s By-Laws, the Board may receive directors’ fees in an amount not exceeding 1 ½ of income before tax of the preceding year. The Board also approved a policy increasing directors’ per diems from P8,000 per meeting to P40,000 per Board meeting and P30,000 per Committee meeting, provided that the amounts received as per diems shall be credited to (or deducted from) directors’ fees for the year. A policy on Board Appraisal and Performance Evaluation and an amended policy on Related Party Transactions were also adopted by the Board at said meeting in line with corporate governance best practices. At the special meeting held on April 8, 2015, the Board of Directors approved the acquisition of one floor of the TV5 Media Center at Sheridan Street corner Reliance Street in Mandaluyong City for a total consideration of around P221,500,000.00. The said floor of the TV5 Media Center will be the new principal office of the Company and its wholly-owned subsidiary Silangan Mindanao Mining Co., Inc. At the regular meeting held on April 28, 2015, the Company’s 2015 first quarter financial results were approved. At the organizational meeting held on June 24, 2015, officers of the Company were elected and the Board Committees were constituted.

29

At the special meeting on July 9, 2015, the Board elected Atty. Joan A. De Venecia as Vice President & General Counsel of the Company. At the July 29, 2015 regular meeting, the Board approved the Company’s 2015 first half results. At the regular meeting on October 28, 2015, the Board approved, based on a Philippine Mineral Reporting Code report, the declaration of additional reserves of 20 million tonnes at grades of 0.21% copper and 0.42 g/t gold, and contained metal of 74 million pounds of copper and 218,000 ounces of gold, and the announcement of extension of the life of the Padcal mine by 2 years. The Company’s financial results for the nine months ended September 30, 2015 were also approved at the said meeting. At the November 25, 2015 regular meeting, the Board elected Mr. Michael Victor N. Alimurung as director of the Company to fill the vacancy left by Ms. Eliza Bettina R. Antonino. At the same meeting, the Board also approved the Company’s 2015 Annual Corporate Governance Report, and authorized the filing thereof with the SEC. At the regular meeting on February 24, 2016, the Board approved the Company’s 2015 audited financial results. At the same meeting, the Board approved directors’ fees of 1% of the Company’s 2015 core net income before tax of P905 million, or total directors’ fees of P7.4 million, net of the P4 million already paid as per diems. At the special meeting on February 29, 2016, the Board approved the declaration of a property dividend consisting of shares of stock of Philex Petroleum Corporation (PPC) at the ratio of 17 PPC shares for every 100 shares of the Company. Shareholders of record as of March 15, 2016 shall be entitled to the dividend, provided that entitled shareholders residing in the U.S. shall be paid in cash in lieu of PPC shares. The distribution of the property dividend shall be subject to the requisite approval of the SEC. The payment date shall be fifteen (15) trading days after the said SEC approval is obtained. At the regular meeting held on April 27, 2016, the Board approved the Company’s first quarter financial results for 2016. At the same meeting, the Board approved the amendment of Article III of the Company’s By-Laws to provide that the President shall be the Chief Executive Officer, and to expressly provide for Senior Vice Presidents. The resolution to be adopted is the ratification, approval and confirmation of all acts, contracts, proceedings, elections and appointments made or taken by the Board of Directors and/or the officers of the Corporation during the past corporate year, as set forth in the Minutes of the Meetings of the Board, and/or all acts and proceedings performed or taken pursuant thereto. 2. Appointment of Independent Election Inspectors On the appointment of independent election inspectors, an independent party will be appointed by the shareholders to serve as election inspectors responsible for counting

30

and/or validating the votes cast for all shareholders’ meetings held in the ensuing year until the next annual meeting. In 2015 and in previous years, representatives of the independent external auditor were appointed. This practice will be followed this year. The resolution to be adopted will be the appointment of election inspectors to serve until the close of the next annual meeting. Item 19. Voting Procedures Stockholders as of April 15, 2016 may vote at the Annual Stockholders’ Meeting on June 29, 2016. Stockholders have the right to vote in person or by proxy. Registration of stockholders and proxies attending the meeting will open at 1:00 p.m. of June 29, 2016. Approval of the matters requiring stockholder action as set forth in the Agenda and this Information Statement would require the affirmative vote of the stockholders owning at least a majority of the outstanding voting capital stock, except for the amendment of the Company’s By-Laws (Item 7 on the Agenda; Item 17, page 27 of this Information Statement) which will require a vote of stockholders holding and representing at least two-thirds (2/3) of the Company’s outstanding capital stock. In the election of directors, cumulative voting may be adopted. On this basis, each stockholder as of April 15, 2016 may vote the number of shares registered in his name for each of the eleven (11) directors to be elected, or he may multiply the number of shares registered in his name by eleven (11) and cast the total of such votes for one (1) director, or he may distribute his votes among some or all of the eleven (11) directors to be elected. The eleven (11) nominees with the greatest number of votes will be elected directors. The Company will distribute to shareholders not later than May 30, 2016 the Information Statement and proxy form. The proxy form contains each item on the Agenda that requires shareholders to vote “YES”, “NO” or “ABSTAIN”. In the case of the election of directors, the names of each of the nominees are listed in the proxy with space for the shareholder to indicate his or her vote for or against each of the nominees. Shareholders are given until June 20, 2016 to submit proxies to the Office of the Corporate Secretary at the Company’s principal office. Proxies will be validated by a special committee designated by the Board of Directors, together with the Company’s stock transfer agent, STSI. A report will be submitted to the independent election inspectors, who were appointed by the shareholders at the 2015 annual stockholders’ meeting to serve as election inspectors for the ensuing year and until the 2015 Meeting. The voting at the Stockholders’ Meeting will be by balloting. Shareholders who are present and did not submit proxies before the meeting will be given ballots upon registration. In the case of proxies submitted prior to the meeting, the proxy designated by the stockholder to represent them at the meeting will be provided with ballots for casting in accordance with the stockholders’ instructions, as indicated in the proxy. Ballots will be tabulated by STSI, under the guidance and supervision of the independent election inspectors. Results of the voting by shareholders will be announced for each item on the Agenda requiring the vote of shareholders. The tabulation and results of the voting shall be duly disclosed and shall be made available on the Company’s website on the business day following the meeting.

31

This voting procedure shall also be announced at the start of the meeting.

PART II.

(PLEASE SEE SEPARATE PROXY FORM)

PART III.

SIGNATURE PAGE

After reasonable inquiry and to the best of my knowledge and belief, I certify that theinformation set forth in this report is true. conpete andcorrect. Thisreport is signed in the Cityof Makati 00 May2,2016.

By:

B~e~~~ry l.~UPON THE WR ID EN REQUEST OF THE STOCKHOLDER, THE COMPANYUNDERTAKES TO FURNISH SAID STOCKHOLCER A COPY OF THE COMPANY'SANNUAL REPORT ON SEC FORM 17-A, AS FILED WITH THE SEC FREE OF CHARGE.ANY WRITTEN REQUEST SHALL BE ADDRESSED TO:

ATTY. BARBARA ANNE C. MIGALLOSCotporate Secretary

PHILEX MINING CORPORAnONPhilex Building, 27 Brixton St., Pasig City

C2!3lI ... _ • . _ _ .,........ _

32

PART II

PROXY FORM

The undersigned stockholder of PHILEX MINING CORPORATION (the “Company”) hereby appoints Mr. Manuel V. Pangilinan or in his absence, the Chairman of the meeting, as attorney and proxy, with power of substitution, to represent and vote all shares registered in his/her name as proxy of the undersigned stockholder, at the Annual Meeting of Stockholders of the Company to be held at the Marco Polo Ortigas Manila, Meralco Avenue and Sapphire Street, Ortigas Centre, Pasig City, Metro Manila 1600 on June 29, 2016 at 2:30 pm and at any of the adjournments thereof for the purpose of acting on the following matters:

1. Approval of minutes of previous

stockholders’ meeting Yes No Abstain 2. Approval of annual reports and Audited Financial

Statements for the previous year Yes No Abstain 3. Ratification and approval of the acts of the Board of

Directors and executive officers Yes No Abstain 4. Approval of amendment of Article III of the By-laws

to provide that the President shall be Chief Executive Officer, and to expressly provide for Senior Vice Presidents

Yes No Abstain 5. Appointment of Sycip, Gorres, Velayo & Co. as

independent auditors Yes No Abstain

6. Appointment of election inspectors

Yes No Abstain

6. Election of Directors Vote for all nominees listed below: Manuel V. Pangilinan Juan B. Santos Eulalio B. Austin, Jr. Robert C. Nicholson Edward A. Tortorici Marilyn A. Victorio-Aquino Barbara Anne C. Migallos Bienvenido E. Laguesma Michael Victor N. Alimurung Oscar J. Hilado (Independent) Wilfredo A. Paras (Independent) Withhold authority for all nominees listed above Withhold authority to vote for the nominees listed below: ______________ ______________ ______________ ______________ ______________ ______________ 7. At their discretion, the proxies named above are authorized to

vote upon such other matters as may properly come before the meeting.

__________________________________________

DATE

____________________________________________________

PRINTED NAME OF STOCKHOLDER

____________________________________________________ SIGNATURE OF STOCKHOLDER/ AUTHORIZED SIGNATORY

THIS PROXY SOLICITATION IS MADE BY OR ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY. THIS PROXY SHOULD BE RECEIVED BY THE CORPORATE SECRETARY ON OR BEFORE JUNE 20, 2016, THE DEADLINE FOR SUBMISSION OF PROXIES.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER AS DIRECTED HEREIN BY THE STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF ALL NOMINEES AND FOR THE APPROVAL OF THE MATTERS STATED ABOVE AND FOR SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, INCLUDING MATTERS WHICH THE SOLICITOR(S) DO NOT KNOW A REASONABLE TIME BEFORE THE SOLICITATION ARE TO BE PRESENTED AT THE MEETING, IN THE MANNER DESCRIBED IN THE INFORMATION STATEMENT AND/OR AS 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 BOARD RESOLUTION DESIGNATING A CORPORATE OFFICER TO EXECUTE THE PROXY. PROXIES EXECUTED BY BROKERS MUST BE ACCOMPANIED BY A CERTIFICATION UNDER OATH STATING THAT THE BROKER HAS OBTAINED THE WRITTEN CONSENT OF THE ACCOUNT HOLDER. FORMS OF THE CERTIFICATION MAY BE REQUESTED FROM THE OFFICE OF STOCK TRANSFER SERVICES, INC. (TEL NO. [02] 403-2410 or [02] 403-2412)

A STOCKHOLDER GIVING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME BEFORE THE RIGHT GRANTED IS EXERCISED. A PROXY IS ALSO CONSIDERED REVOKED IF THE STOCKHOLDER ATTENDS THE MEETING IN PERSON AND EXPRESSES HIS INTENTION TO VOTE IN PERSON. THIS PROXY SHALL BE VALID FOR FIVE (5) YEARS FROM THE DATE HEREOF UNLESS OTHERWISE INDICATED IN THE BOX HEREIN PROVIDED. This solicitation is primarily by mail; however, incidental personal solicitation may also be made by the officers, directors and regular employees of the Company whose number is not expected to exceed fifteen and who receive no additional compensation therefor. The Company bears the cost, estimated not to exceed P3 million, of preparing and mailing this proxy form and other materials furnished to stockholders in connection with this proxy solicitation and the expenses of brokers who may mail such materials to their customers.

No director or executive officer, nominee for election as director, or associate of such director, executive officer or nominee, of the Company, at any time since the beginning of the last fiscal year, has any substantial interest, direct or indirect, by security holdings or otherwise, in any of the matters to be acted upon in the Meeting, other than election to office. [C2228 Proxy Form spp26]

PLEASE FILL UP AND SIGN THIS PROXY AND RETURN IMMEDIATELY TO THE CORPORATE SECRETARY. A RETURN ENVELOPE IS PROVIDED FOR YOUR CONVENIENCE.

1

PHILEX MINING CORPORATION

MANAGEMENT REPORT

I. Consolidated Audited Financial Statements

The consolidated financial statements of the Company and its subsidiaries for the period ended

December 31, 2015, and the unaudited financial statements for the period ended March 31, 2016 on

SEC Form 17Q, in compliance with SRC Rule 68, as amended are attached to the Information

Statement and are incorporated by reference.

II. Information on Independent Accountants and other Related Matters

Audit and Audit-Related Fees

For 2015, 2014 and 2013, the Company’s external auditors were engaged primarily to express an

opinion on the financial statements of the Company and its subsidiaries. The audit, however,

included the auditors providing assistance to the Company in the preparation of its income tax return

in as far as ensuring the agreement of the reported income and costs and expenses in the return with

the recorded amounts in the books. The procedures conducted for this engagement included those

that are necessary under auditing standards generally accepted in the Philippines but did not include

detailed verification of the accuracy and completeness of the reported income and costs and

expenses. The audit fees for these services for the entire Philex group (excluding PPC group) were

P5.27 million for 2015, P5.63 million for 2014 and P5.50 million for 2013.

Tax Fees

The Company has not engaged the external auditors for any tax-related services in 2015, 2014 and

2013.

All Other Fees

The external auditors were engaged to review the Company’s interim financial statements in relation

to the Company’s planned stock right offering in 2013 which engagement included the issuance of a

comfort letter on the Company’s financial statements as a requirement of the underwriter. Though the

SRO was not pushed through, the external auditors were paid the amount of P14.5 million for their

services.

Also in 2013, the external auditors were engaged to render services on customs compliance review of

the Company’s importations for the period June 2010 to June 2013 for a fee of P400 thousand.

All audit and non-audit engagements were approved by the Company’s Audit Committee.

Audit Committee’s Approval of Policies and Procedures

Prior to the commencement of this year-end audit work, the external auditors presented their program

and schedule to the Company’s Audit Committee, which included discussion of issues and concerns

regarding the audit work to be done. At the completion of this audit works, the Company’s audited

financial statements for the year were likewise presented by the external auditors to the Audit

Committee for committee approval and endorsement to the full Board for final approval. On quarterly

basis, the external auditors also prepared a report on their review of the Company’s quarterly financial

reports based on agreed upon audit procedures with the Audit Committee before the reports were

filed with the SEC.

2

Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

There was no change in the Company’s independent accountants during the two most recent

calendar years or in any subsequent interim period, except for the change in the Company’s audit

engagement partner to Mr. Jose Pepito E. Zabat III starting the 2012 year-end audit.

There has been no disagreement with the independent accountants on accounting and financial

disclosure.

III. Management Discussion and Analysis of Financial Position and Results of Operations

For the years ended December 31, 2015, 2014 and 2013

Information on the Company’s results of operations and financial condition presented in the 2015

Audited Consolidated Financial Statements and accompanying Notes to the Consolidated Financial

Statements are incorporated herein by reference.

REVIEW OF FINANCIAL RESULTS

Revenues

2015 2014 2013

2015 vs

2014

2014 vs

2013

Gold

Revenue (P millions) P5,670 P5,889 P5,582 (4) 6

Ounces produced 107,887 105,008 99,802 3 5

Average realized price $1,147 $1,270 $1,297 (10) (2)

Copper

Revenue (P millions) P3,450 P4,615 P4,580 (25) 1

Pounds produced 34,104,049 35,391,154 32,495,443 (4) 9

Average realized price $2.29 $2.98 $3.27 (23) (9)

Other revenues (P millions) P242 P394 P300 (39) 31

Total Revenues (P millions) P9,362 P10,898 P10,462 (14) 4

For the Year Ended December 31 % Change

Total operating revenues for the year 2015 amounted to P9.362 billion, or 14% lower than P10.898

billion in 2014 (4% higher versus P10.462 billion in 2013). The Company operated for a full year in

2015 and 2014 producing higher volumes of metal compared with 2013, when it operated for ten

months, following the temporary and subsequent permanent lifting of the suspension order at the

Padcal mine in March 2013 and August 2014, respectively.

Gold production increased to 107,887 ounces in 2015 from 105,008 ounces in 2014 due to improved

metal recovery and 99,802 ounces for ten months production in 2013. As a result, gold revenues –

comprising 61% of the total in 2015 – amounted to P5.670 billion from P5.889 billion in 2014 and

P5.582 billion in 2013.

Copper production was down by 4% to 34,104,049 pounds in 2015 from 35,391,154 pounds in 2014

due to lower tonnage despite the improved metal recovery, but higher than the production in 2013 of

32,495,443 pounds from ten months of operation. Following lower copper production, coupled with

unfavorable copper prices in 2015, copper revenues were down to P3.450 billion in 2015 – accounting

for 37% of the total in 2015 – from P4.615 billion in 2014 and P4.580 billion in 2013.

3

Realized gold prices for the years ended December 31, 2015, 2014 and 2013 were $1,147 per ounce,

$1,270 per ounce and $1,297 per ounce, respectively. The decrease in realized gold price was due

to the continued decline in world metal prices starting the latter part of 2012. Similarly, realized

copper prices for years ended December 31, 2015, 2014 and 2013 declined and averaged $2.29 per

pound, $2.98 per pound and $3.27 per pound, respectively.

Other revenues, which came mostly from sales of silver and petroleum products, made up the

remaining 2% of the Company’s total revenue in 2015. Revenue from silver, oil and gas in 2015 was

lower at P242.0 million, compared with P393.9 million in 2014 and P300.4 million in 2013. This was

due to the steep decline in crude oil prices from US$105.8 per barrel in 2014 to US$53.8 per barrel in

2015 and the normal decline in production in Galoc oil field Phase II project, at 2.4 million barrels from

a high of 2.8 million barrels in 2014. In the second half 2013, production at the Galoc oil field Phase

II project was started following the completion of additional wells. Philex Petroleum Corporation’s

(PPC’s) 67.19%-owned subsidiary, Forum Energy Plc (FEP), derives most of its income from the

Galoc oil field.

In the previous years, to protect part of its revenues from unfavorable metal price and foreign

exchange fluctuations, the Company entered into metal and foreign currency hedging contracts in the

form of forwards, purchased put options and sold call options. The gains or losses from these

transactions were reflected in revenue as addition or deduction in deriving the realized metal prices

and realized foreign exchange for the Company’s metal production during the respective reporting

periods.

There were no outstanding gold hedging contracts as of December 31, 2015. In December 2014, the

Company entered into gold collar hedging contracts covering 3,000 ounces of monthly gold

production for the first quarter of 2015 at a strike price of US$1,200 per ounce for the put options and

US$1,210 per ounce for the call options. As of December 31, 2014, mark-to-market (MTM) gain on

these outstanding gold hedges amounted to P7.8 million recorded under equity with the recognition of

potential derivative asset. MTM gains or losses are reversed and actual gains or losses, if any, are

realized and recorded through revenue upon maturity of the hedge. Also in May 2015, the Company

concluded hedging contracts covering 3,000 ounces per month starting May to September 2015 at a

strike price of US$1,200 per ounce for the put options and US$1,230 per ounce for the call options.

These contracts were designated as cash flow hedges and matured as of December 31, 2015 with a

total net realized gain of P29.1 million in 2015.

In June and September 2014, the Company entered into gold collar hedging contracts covering 6,000

ounces of monthly production for the third quarter of 2014 at an average strike price of US$1,262.50

per ounce for the put options and US$1,325.50 per ounce for the call options, and 3,000 ounces of

monthly production for the fourth quarter of 2014 at a strike price of US$1,200 per ounce for the put

options and US$1,270 per ounce for the call options, respectively, with a total of 27,000 ounces. The

terms of these contracts already matured as of December 31, 2014 with net realized gain of P10.1

billion.

In 2013, the Company had not entered into hedging contracts as management supported the view

that prevailing market trends and conditions would remain favorable to operations.

4

Operational Overview

2015 2014 2013

2015 vs

2014

2014 vs

2013

Tonnes milled 9,198,540 9,506,195 7,738,258 (3) 23

Copper concentrates 69,987 70,062 60,582 (0.1) 16

No. of Operating Days 357 359 299 (0.4) 20

Gold

Ounces 107,887 105,008 99,802 3 5

Head grade - grams/tonne 0.438 0.438 0.503 - (13)

Recovery - % 83 78 80 6 (2)

Copper

Pounds 34,104,049 35,391,154 32,495,443 (4) 9

Head grade - % 0.205 0.212 0.236 (3) (10)

Recovery - % 82 80 81 3 (1)


Gold production rose to 107,887 ounces in 2015 from 105,008 ounces in 2014 and 99,802

ounces over a ten-month operation in 2013. The 3% increase in gold production in 2015 was

mainly due to the 6% improvement in metal recovery, despite lower tonnage of 9.2 million

from 9.5 million in 2014. Over the past three years, the 2015 production showed the highest

metal recovery though 2013 showed the highest average head grade of 0.503 grams per

tonne due to the presence of higher-grade performing mining blocks.

Copper production, however, decreased by 4% to 34,104,049 pounds in 2015 from

35,391,154 pounds in 2014 (9% higher versus 32,495,443 ounces in 2013). The lower

tonnage, coupled with lower average copper head grade, resulted in lower copper production

in 2015 against 2014 despite an improved metal recovery of 82% from 80%. In 2014, higher

tonnage resulted in higher copper production versus 2013, despite lower head grade and

metal recovery. The lower copper grades in 2015 and 2014 were expected and programmed

under the mine’s development plan.

Total tonnes milled from the Company’s Padcal mine for the year ended December 31, 2015

was 3% lower than 2014 (23% more than 2013) mainly due to ground conditions. Operation

in 2013 was for ten months or 299 operating days.

Operating Costs and Expenses

(P milions) 2015 2014 2013

2015 vs

2014

2014 vs

2013

Cash Production cost 4,615 5,143 4,188 (10) 23

Depreciation, Depletion & Amortization 1,546 1,666 1,339 (7) 24

Excise tax & Royalties 437 507 537 (14) (5)

General and Administrative Expenses:

Mining 415 662 929 (37) (29)

Petroleum and Others 214 281 382 (24) (26)

Petroleum and Other Cost 98 157 106 (38) 49

Consolidated Operating Costs and Expenses 7,324 8,415 7,480 (13) 13


Consolidated operating costs and expenses (including General and Administrative Expenses)

amounted to P7.324 billion in 2015, lower by 13% than the P8.415 billion in 2014 (13% higher versus

P7.480 billion in 2013) due mainly to the Company’s continuing cost management and expense

reduction programs.

5

Cash production costs declined by 10% to P4.615 billion in 2015 from P5.143 billion in 2014 as a

result of the Company’s continuing cost reduction programs. In 2014, cash production cost was 23%

higher against P4.188 billion in 2013 due to a full year operation in 2014 versus ten months in 2013.

Depreciation, depletion and amortization was also down by 7% at P1.546 billion against P1.666 billion

in 2014 (from P1.339 billion in 2013 or 24% higher) following the extension of Padcal mine life by two

more years from 2020 to 2022.

General and administrative expenses substantially decreased by 33% to P628.6 million from P943.0

million in 2014 (lower than P1.311 billion in 2013) as a result of the manpower rightsizing program

implemented last year and late 2014, and the continued expense management being effected across

the organization.

Excise tax and royalties in 2015 was lower by 14% than 2014 (5% lower versus 2013 due to higher

Social Development and Management Program (SDMP) amount that was deducted from royalties to

Indigenous People) as an effect of lower net revenue. General and Administrative

Petroleum and other costs were also down by 38% in 2015 against 2014 due to the normal decline in

production at Galoc oil field while costs in 2014 were higher by 49% compared with 2013 when coal

operation of BEMC was suspended.

Costs Per Tonne / Per Ounce / Per Pound

Padcal Mine 2015 2014 2013

2015 vs

2014

2014 vs

2013

Padcal Cash Production cost 4,615 5,143 4,188 (10) 23

Depreciation, Depletion & Amortization 1,546 1,666 1,339 (7) 24

Total Production Cost 6,160 6,808 5,527 (10) 23

Excise tax & Royalties 437 507 537 (14) (5)

Smelting Charges 837 850 660 (2) 29

Total Operating cost (P million) 7,434 8,165 6,723 (9) 21

Production cost per tonne P 670 P 716 P 714 (6) 0.3

Operating cost per tonne P 808 P 859 P 869 (6) (1)

Operating cost per ounce of Gold $ 933 $ 977 $ 858 (5) 14

Operating cost per pound of Copper $ 1.86 $ 2.29 $ 2.16 (19) 6


Production cost per tonne in 2015 of P670 was below 2014’s P716 per tonne (versus 2013’s

P714 per tonne). The decrease in production cost per tonne in 2015 against 2014 and 2013

was caused primarily by the reduction in manpower at the Padcal Mine in December 2014.

Operating cost (including smelting charges) per tonne similarly went down to P808 per tonne

in 2015 from P859 per tonne in 2014 (lower than 2013’s P869 per tonne). The drop in

operating cost per tonne was realized from further manpower reduction and other productivity

measures and the extension in Padcal mine life from 2020 to 2022, thereby extending the

depreciation of Company assets. In 2014, the capacity of tailings storage facility no. 3 (TSF3)

was increased to six (6) years from 2 ½ years previously, thus extending the total capacity

and reducing the amount of annual amortization related to the rehabilitation of TSF3.

In fact, the Company’s operating cost per tonne has dramatically declined from an average of

P859 per tonne in 2014 to P844 per tonne in 1Q2015 to P785 per tonne by 4Q2015 – the

lowest level recorded in the last three years.

Smelting charges slightly decreased in 2015 with lower production of copper concentrates

and pounds of copper, in spite of higher average treatment and refining charges (TC/RC)

6

following the increase in rates for the period from April 2014 to March 2015 by US$22 per

DMT of copper concentrate and 2.2 cents per pound copper, respectively. This is in line with

the change in TC/RC rates based on the increase in the Japanese Benchmark. The smelting

charges amounted to P836.6 million in 2015 from P849.8 million in 2014 and P659.5 in 2013.

Operating cost (using a co-production method) per ounce of gold and per pound of copper

were $933 per ounce and $1.86 per pound in 2015, both significantly lower than the 2014

level (but higher than 2013) due to the significant decrease in labor costs following the

manpower rationalization program of the Company in 2014 and early 2015.

Other Charges-Net

(P millions) 2015 2014 2013

Other Income:

Gain on disposal of AFS financial assets 107 - 27

Interest income 12 17 26

Gain on sale of property, plant and equipment - 765 -

Others 9 14 -

128 796 53

Other Charges:

Share in net loss of an associate (13) - -

Impairment loss on deferred exploration costs (41) (570) (298)

Forex exchange losses-net (132) (56) (174)

Reorganization costs - (394) -

Interest expense - (354) (416)

Others - - (412)

(187) (1,375) (1,300)

(59) (579) (1,247)

For the Year Ended December 31

Other charges-net in 2015 decreased significantly to P59.0 million from P579.2 million in 2014 and

P1.247 billion in 2013 due mainly to impairment loss on deferred explorations costs in 2014 and

various exceptional items in 2013.

Other Income

In 2015, the Company recognized a gain of P107.1 million from the sale of its investment in

Indophil Resources NL (Indophil) under an acquisition scheme offered by Indophil’s major

shareholder, Alsons Prime Investments Corporation, to Indophil’s other shareholders, where

AUD0.30 was offered for every share held. The Company’s investments in Indophil totaled

29,240,806 shares with a carrying cost of P190.4 million prior to the sale. The proceeds of

P297.5 million from the sale were received in February 2015. In 2013, P26.9 million gain also

from the sale of shares of stock in PetroEnergy Resources Corporation (PERC) was

recorded.

The Company realized an interest income of P11.5 million, P17.0 million and P26.1 million in

2015, 2014 and 2013, respectively, mostly coming from short-term money market

placements. Interest rates ranged from 1.0% to 2.0% for the past three years.

In 2014, the Company’s Pasig property was the subject of a Deed of Absolute sale with a

third-party for a total consideration of P777.4 million, with a corresponding gain of P764.7

million.

7

Other Charges

In 2015, the Company recognized its share in the net loss of Lepanto Consolidated Mining

Corporation (Lepanto) amounting to P13.2 million following the reclassification of the

investment in Lepanto from AFS financial asset to investment in an associate.

The Company continues to assess the viability of its existing exploration projects. In 2015, a

net impairment loss on deferred oil exploration costs was recognized amounting to P41.2

million under the Company’s subsidiary, PPC. The Company also recognized an impairment

loss of P569.9 million in 2014 on the deferred exploration costs under its subsidiaries, Philex

Gold Philippines, Inc, (PGPI) and Pitkin Petroleum Plc (Pitkin) for its SC 6A (Octon Project).

In 2013, the Company booked an impairment loss of P297.6 million related to the Company’s

Butan, Tapaya and Barobo projects and FEP’s SC 40.

The Company recognized higher net foreign exchange losses in 2015 of P132.4 million

against P56.4 million in 2014 mainly from the restatement of the Company’s net foreign

currency-related liabilities due to the depreciation of the Philippine peso against the US dollar.

In 2013, the Company recognized a foreign exchange loss of P174.0 million, with foreign

exchange rates at yearend closing at P47.06 in 2015, P44.72 in 2014, and P44.40 in 2013.

The Company incurred a P394.2 million in separation pay, on top of the retirement gratuity,

under the Philex Trust Fund in relation to the manpower rightsizing program implemented in

2014.

On interest expense, the Company incurred P354.5 million in 2014 mainly from the short-term

loans with local banks and FPC subsidiaries, slightly lower than 2013’s P416.4 million due to

the retirement of some local bank loans and repayment of the loans with FPC subsidiaries in

December 2014. Interest expenses on the convertible notes issued by Silangan Mindanao

Exploration Co., Inc. (SMECI) in December 2014 were capitalized at the SMECI level, thus no

expense shown in 2015. Interest expense of P108.8 million to local banks related to the

Silangan investment was likewise capitalized at the Parent Company level.

Other items in 2013 netted to P412.0 million. The impairment loss on Lepanto and Indophil

investments, Padcal maintenance costs, and additional provision for rehabilitation were

partially offset by the income from insurance claims and gain on disposal of subsidiaries.

In 2013, the Company recognized a P1.007 billion impairment loss on its investments

in shares of Lepanto and Indophil due to the significant decline in the fair value of the

said shares as determined by the Company as above the 30% threshold. The

Company owned then about 5% of Lepanto, a primary gold producer listed at the

Philippine Stock Exchange and 2.4% of Indophil, an Australian publicly-listed

company that has interest in the Tampakan Copper-Gold Project in the Philippines

through Sagittarius Mines, Inc.

Furthermore, P439.6 million in Padcal’s maintenance costs related to the TSF3

incident and an additional provision of P161.4 million for rehabilitation and other costs

were taken up in 2013.

On February 12, 2013, the full settlement of insurance claims, amounting to US$25

million or P1.017 billion, for pollution and business interruption under the Company’s

Pollution Legal Liability Insurance Policy pertaining to the 2012 TSF3 incident was

received from Chartis Philippines Insurance, Inc. (Chartis), which was used to settle

the P1.034 billion Mine Waste Tailings (MWT) fee.

8

In addition, a gain of P246.6 million from the sale of Pitkin’s interest in Vietnam

American Exploration Company LLC was recognized in 2013.

Core and Reported Net Income

Net income attributable to the equity holders of the Company in 2015 amounted to P896.2 million,

compared with P1.006 billion in 2014 and P341.9 million in 2013. The 2015 net income was largely

affected by depressed metal prices, while the improvement in net income in 2014 vs 2013 was

primarily due to the resumption of Padcal mine operations, by virtue of a temporary lifting of the

suspension order on March 8, 2013 and subsequent permanent lifting on August 27, 2014.

Despite depressed metal prices, the Company’s results of operations ended in a consolidated net

income of P775.6 million for the year 2015, higher than P702.8 million in 2014 and P312.4 million in

2013 due to the strict implementation of cost reduction programs, and significant reduction in other

charges-net in 2015.

The Company’s core net income was P905.2 million in 2015, 19% lower than the P1.122 billion in

2014 due primarily to lower metal prices. In 2013, core net income was at P1.508 billion, but

excluding the proceeds from business interruption claims, core net income would have been lower at

P1.081 billion and as such, the 2014 core net income would have been higher than that of 2013.

In 2015, EBITDA amounted to P2.779 billion, compared with P3.320 billion in 2014 and P3.920 billion

in 2013. The Company’s EBITDA, similar to core net income, excludes non-recurring transactions to

clearly provide results based on normal operating parameters of the business. The core net income

reflects the Company’s overall operating performance without the net effect of non-recurring

transactions.

Reconciliation of Core Net Income to Consolidated Net Income

(P millions) 2015 2014 2013

Core net income 905 1,122 1,508

Non-recurring gains (losses):

Gain on sale of assets 107 765 98

Net Provision for write-down of asset (2) (336) (303)

Share in net loss of an associate (13) - -

Foreign exchange losses (144) (57) (180)

Reorganization costs - (394) -

Provision for impairment of AFS investments - - (1,007)

Insurance proceeds - - 407

Provision for rehabilitation costs and others - - (161)

Net tax effect of aforementioned adjustments 43 (94) (20)

Net income attributable to equity holders of the Parent Company 896 1,006 342

Net income attributable to NCI (121) (303) (30)

Consolidated net income (loss) 776 703 312


9

FINANCIAL CONDITION REVIEW

(P millions, except ratios) 2015 2014 2013

Cash and Cash equivalents 1,009 5,232 4,081

Current assets excluding cash and cash equivalents 4,263 4,299 4,307

Non-current assets 38,278 35,110 31,533

Total Assets 43,549 44,640 39,921

Short-term loans 3,318 4,308 6,176

Current liabilities excluding short-term loans 2,397 3,215 3,599

Non-current liabilities 10,550 10,076 4,228

Equity attributable to Equity Holders of the Parent Company 24,563 23,599 21,811

Non-Controlling interests 2,721 3,442 4,107

Total Equity 27,284 27,042 25,917

Current/Liquidity ratios

Current ratio 0.92 1.27 0.86

Quick ratio 0.33 0.84 0.45

Solvency ratios and debt to equity ratios

Debt-to-equity ratio 0.60 0.65 0.54

Solvency ratio 0.14 0.13 0.12

Financial leverage ratios

Asset-to equity ratio 1.60 1.65 1.54

Interest rate coverage ratio - 3.97 3.58

Profitability ratios

Return on assets 1.76% 1.66% 0.90%

Return on equity 2.86% 2.65% 1.30%

Net profit margin 9.10% 6.99% 3.19%

As of December 31

Cash and Cash Equivalents

As of December 31, 2015, Current Assets of the Company stood at P5.271 billion, 45% lower than

P9.530 billion in 2014 (14% higher versus P8.387 billion in 2013), primarily due to lower Cash and

Cash Equivalents, which was down to P1.009 billion in 2015 compared with P5.232 billion in 2014

and P4.081 billion in 2013. In 2015, the cash balance of Silangan Mindanao Exploration Co., Inc. and

Pitkin decreased to P279.5 million (from P3.038 billion in 2014, mainly from its issuance of convertible

notes) and P249.8 million (from P1.761 billion in 2014), respectively, significantly due to extensive

exploration activities at the Silangan Project as well as in Pitkin’s oil exploration projects .

Current Assets excluding Cash and Cash Equivalents

Current Assets, excluding Cash and Cash Equivalents, was slightly down to P4.263 billion mainly due

to lower Accounts Receivable, particularly from the Company’s shipments of copper concentrates.

Accounts Receivable

Accounts Receivables consisted essentially of Trade Receivables from sales of the

Company’s copper concentrates or bullion, Accrued Interest Receivables and Other

Receivables. As at year-end 2015, Accounts Receivable amounted to P897.5 million, with

Trade Receivables amounting to P701.3 million (P893.9 million in 2014), Accrued Interest

10

Receivable amounting to nil (P2.0 million in 2014) and Other Receivables amounting to

P196.2 million (P160.0 million in 2014), against P1.056 billion in 2014 and P295.5 million in

2013.

As of December 31, 2015, outstanding receivables from copper concentrates mainly

consisted of 100% of the value of shipment no. 38-LDM which was shipped to Japan on

December 24, 2015 and the remaining 10% of four other shipments that remained

uncollected awaiting final pricing, while the 2014 receivables consisted of 100% of the value

of shipment no. S-708 which was shipped to Japan on December 31, 2014, 90% of the value

was collected only in early January 2015.

In 2013, the copper concentrates shipment (S-698) scheduled on the latter part of December

2013 remained unshipped as at year-end 2013 due to the unfavorable weather conditions. As

a result, Pan Pacific advanced the sales proceeds, equivalent to 90% of the value, from S-

698. The Company recorded the transaction in the balance sheet as a net liability to Pan

Pacific as the advance payment was more than the outstanding trade receivables from

previous shipments.

A total of fourteen copper concentrates shipments were made in 2015 compared with fifteen

shipments in 2014 from Padcal mines’ full year production, while only ten (10) in 2013 as a

result of the suspension of the Padcal operations from August 2, 2012 to March 7, 2013. The

Padcal mine’s copper concentrates shipments were provisionally valued based on prices in

the second calendar week immediately prior to the week of shipment. These were then

adjusted to the applicable final prices based on their “quotational period (QP)”, which for

contract years 2015 and 2014 was the calendar month following the month of the shipment’s

arrival in Japan for gold and silver, and the third calendar month following the month of arrival

for copper.

Inventories

Inventories, slightly higher at P1.887 billion in 2015 compared with P1.858 billion in 2014

(lower than P2.668 billion in 2013), comprised mostly of materials and supplies at 71% of total

value, with the 29% remainder from mine products inventories. Materials and supplies

increased to P1.334 billion in 2015 from P1.196 billion 2014 (slightly higher than P1.113

billion in 2013) due mainly to price inflation. On the other hand, mine product inventories,

corresponding to 5,136 dmt of copper concentrates that remained unshipped as of December

31, 2015, were lower at P543.2 million, compared with P643.5 million representing 5,112 dmt

of unshipped copper concentrates in 2014 (from a high of P1.534 billion covering ending

inventory of 10,267 dmt in 2013), while petroleum product inventories totaled P9.0 million in

2015 from P18.6 million in 2014 (lower than P21.2 million in 2013).

Other Current Assets

Other Current Assets increased to P1.479 billion in 2015 from P1.385 billion in 2014 and

P1.343 billion in 2013. The increase was substantially due to the rise in input value-added tax

claims on importation of materials and supplies and equipment pending with the Department

of Finance.

Non-current Assets

As of December 31, 2015, Non-Current Assets of the Company rose to P38.278 billion from P35.110

billion in 2014 and P31.533 billion in 2013, consisting mainly of property, plant and equipment, and

deferred exploration costs. With property, plant and equipment of P6.828 billion – representing 16% –

and deferred exploration costs of P29.439 billion – comprising 68% – of total assets, these portions

11

reflect the capital intensive nature of the mining business. In the Company’s case, these were

attributed to internal exploration and development activities as well as upgrading of existing facilities.

Property, Plant and Equipment

Property, plant and equipment (“PPE”) as of December 31, 2015 decreased to P6.828 billion

compared with P7.139 billion in 2014 and P6.880 billion in 2013. The decline in 2015 was due

to a bigger amount of depletion, depreciation and amortization compared with additions to

fixed assets during the year. On the other hand, the increase from 2013 to 2014 was mainly

due to capital expenditures sustained by the Company and its subsidiaries.

Available-for-Sale (AFS) Financial Assets

AFS financial assets, recorded at fair value, declined significantly to P106.7 million in 2015

from P906.7 million in 2014 and P975.4 million in 2013, due to the sale of Indophil shares and

the reclassification of the Lepanto shares to investment in an associate following effectivity in

July 2015 of the Joint Voting Agreement between the Company and another Lepanto

shareholder. In 2015 and 2014, changes in the fair value of all investments under AFS

financial assets were taken up under equity.

During 2014 and 2013, the AFS financial assets portfolio consisted substantially of

investments in shares of stock of Indophil and Lepanto. In 2013, following a continued drop in

the market prices of Lepanto and Indophil shares, which were used to determine the fair value

of these investments, the value of these investments was reduced by P1.007 billion in 2013

which was recognized as impairment loss in the Company’s income statement. The decrease

in the fair value of investments under AFS financial assets, other than Indophil and Lepanto,

were considered insignificant and temporary, therefore recorded as comprehensive loss

through equity.

Goodwill

The goodwill balance of P1.239 billion as of December 31, 2015 was unchanged from 2014

and 2013, which consisted of goodwill from acquisition of various investments (P103.3 million

for FEC Resources in 2007, P155.3 million for Forum Energy in 2008 and P980.0 million for

Pitkin in 2013).

Deferred Exploration Costs

Deferred Exploration Costs and Other Non-current Assets increased to P29.439 billion in

2015, a 14% growth from P25.817 billion in 2014 following a 15% jump from P22.427 billion in

2013. The increase in balances was mainly on account of the on-going extensive exploration

activities in the Silangan and Kalayaan projects as well as in the oil exploration projects of

FEP.

Under the energy and hydrocarbon business of PPC, the Company recorded impairment

losses of P41.2 million for SC 53 and Peru Block XXVII, net of reversal for SC 40, in 2015.

The Company also recorded impairment losses of P338.5 million in 2014 for SC 6 and P16.1

million in 2013 for SC 40 as the consolidation of Pitkin accounts in PPC further increased

Deferred Exploration costs and non-current assets.

Under the metals business, there were no impairment provisions made in 2015 compared

with P231.2 million in 2014 and P242.5 million in 2013 on various mine exploration projects.

12

Deferred Exploration Costs

2014

(P millions) Costs Impairment

Net Book

Value

Net Book

Value

Mining

Silangan Project 19,839 - 19,839 16,403

Kalayaan Project 2,706 - 2,706 2,676

Bulawan and Vista Alegre Projects 630 - 630 626

Sto Tomas II Exploration Project 281 - 281 277

Lascogon Project 300 161 139 129

Southwest Prospect 100 - 100 95

Clifton Project 110 - 110 85

Other exploration costs 1,654 1,333 322 245

Oil and Gas Projects

Forum 1,477 1,477 972

Pitkin 3,827 372 3,455 3,790

Area 4 133 54 78 69

Other Non-Current Assets 301 - 301 451

Total 31,358 1,920 29,439 25,817

As of December 31

2015

Total Assets

At year-end 2015, Total Assets of the Company stood at P43.549 billion compared with P44.640

billion in 2014 and P39.921 billion in 2013.

As of December 31, 2015, Total Current Liabilities decreased to P5.715 billion from the P7.523 billion

in 2014, also lower than the P9.775 billion in 2013, due to the repayment of existing loans with FPC.

The loan balance continues to go down with repayments regularly made by the Company.

Short-term Loans

Short-term loans went down to P3.318 billion (US$70.5 million) in 2015 from P4.308 billion (US$96.3

million) in 2014 and P6.176 billion (US$139.1 million) in 2013. In 2015 and 2014, the Company paid

off P1.176 billion (US$25.8 million) and P1.289 billion (US$29.3 million), respectively, in short-term

loans and the US$80 million loan with FPC in 2014, which the Company availed of together with

another P1.000 billion peso-loan in 2013. These were on top of the P1.100 billion loan availed in

2012, which were principally allotted for the capital expenditures of Silangan Project. The US$80

million FPC loan was repaid by the Company in December 2014.

The P2.100 billion loan was retired in 2013 from the Company’s availment of US$50 million from local

banks as follows: Philippine National Bank for US$20 million, Banco de Oro (BDO) for US$20 million

and Bank of the Philippine Islands (BPI) for US$10 million. The P350 million short-term loan of BEMC

in 2012 consisting of P250 million loan from BPI and P100 million loan from BDO remained

outstanding and was assigned to the Company in 2014 under the same terms. Forum Energy

Philippines Corporation (FEPCO), a subsidiary of FEP, drew down US$2.5 million from its loan facility

with BNP Paribas to finance the drilling of two additional production wells in Galoc Phase II, which

was fully paid in 2014.

13

Current Liabilities excluding Short-term Loans

Current Liabilities, excluding Short-term Loans, was slightly down to P2.397 billion against P3.215

billion in 2014 (versus P3.599 billion in 2013) due to a decrease in Accounts Payable and Accrued

Liabilities, and Provisions.

Accounts Payable and Accrued Liabilities

Accounts Payable and Accrued Liabilities, mainly payables to suppliers and contractors,

decreased by P347.3 million to P1.448 billion in 2015 from P1.796 billion in 2014 (down from

P2.321 billion in 2013, which included P693 million as advance payment for copper

concentrates shipment no. 698 which Pan Pacific extended to the Company following the

rescheduling of the shipment date from December 23, 2013 to January 2, 2014 due to

unfavorable weather conditions). No significant amount of the Company’s trade payables

have been unpaid within their acceptable terms agreed upon with suppliers.

Income Tax Payable

Income Tax Payable amounted to P13.0 million from P47.4 million in 2014 (higher than P11.5

million in 2013 due to an improvement in earnings).

Dividends Payable

Dividends Payable amounted to P479.7 million in 2015 compared with P488.8 million in 2014

and P460.7 million in 2013. In February 2015, the Company declared a cash dividend of

P0.02 per share (equivalent to P98.8 million) in addition to the P0.03 per share (equivalent to

P148.2 million) dividend declared in October 2014 or a total of P0.05 per share representing

22% of the 2014 core net income. In 2014, the Company also declared dividends of P0.05

per share, totaling P246.8 million, representing 16% of the Company’s core net income for

the full year of 2013. No dividends were declared in 2013 as a result of the suspension of

Padcal operations from August 2012 to March 2013.

Provisions and Subscription Payable

Provisions and Subscription Payable went down to P456.0 million from P883.1 million in 2014

(slightly higher than P805.1 million in 2013), due to the payment of reorganization costs as a

result of the Company’s manpower rationalization program. Subscription Payable remained

the same at P22.0 million for the years 2013 to 2015.

In 2013, the Company booked a total cost for the rehabilitation and remediation related to

TSF3 amounting to P1.447 billion, including the P1.034 billion MWT fee assessed by the

MGB. There were no provisions for directors’ compensation in 2015 and 2013, while P13.0

million was provided in 2014.

Non-current Liabilities

Total Non-Current Liabilities at year-end 2015 increased to P10.550 billion from P10.076 billion in

2014 and P4.228 billion in 2013, comprising mainly of Deferred Income Tax Liabilities and Loans and

Bonds Payable.

Deferred Income Tax Liabilities

Deferred Income Tax Liabilities (DTL) slightly increased to P3.939 billion in 2015 from P3.859

billion in 2014, while the decrease in DTL from P3.947 billion in 2013 was a result of the

acquisition of additional interest in Pitkin by PPC in 2013. The 2015 DTL consisted mainly of

the following: P1.665 billion arising from the acquisition of the remaining 50% of Silangan

14

from Anglo in 2009; P1.194 billion for accelerated depreciation and deferred exploration

costs; and P980.0 million from the acquisition of additional interest in Pitkin.

Loans and Bonds Payable

Loans and Bonds Payable as at end-2015 amounted to P6.259 billion, which increased from

P5.947 billion in 2014, due to the amortization of deferred transaction costs (DTC). This

amount represented the carrying amount of the convertible notes issued by SMECI, net of the

unamortized DTC amounting to P913.8 million. In 2013, the long-term portion of FEP’s loan

with BNP Paribas of P55.0 million balance of Loans Payable - Net of Current Portion was fully

paid in 2014.

Pension Obligation was P22.0 million in 2015 from P43.6 million in 2014 and P21.6 million in

2013.

Provisions for Losses and Mine Rehabilitation Costs

Provision for Losses and Mine Rehabilitation Costs amounted to P330.0 million in 2015,

slightly higher than P225.6 million in 2014 and P204.8 million in 2013, comprising mainly of

FEP’s contingent liability. Provision for Mine Rehabilitation increased to P134.9 million in

2015 from P31.5 million in 2014 and P20.8 million in 2013 representing the amortized value

of the Company’s estimated mine closure costs.

Total Liabilities

As of December 31, 2014, Total Liabilities of the Company decreased to P16.265 billion from P17.599

billion in 2014 and P14.003 billion in 2013, consisting mainly of short-term bank loans, deferred

income tax liabilities and the convertible bond issuance with a face value of P7.200 billion but with

carrying amount of P6.259 billion, net of P1.226 billion equity conversion option. The decrease in

Total Liabilities was primarily due to the repayment of short-term bank loans.

Shareholders’ Equity

2015 2014 2013

Common shares 4,940,399,068 4,940,399,068 4,936,966,068

Stock options 27,385,000 33,618,150 38,911,400

As of December 31

Total Equity as of December 31, 2015 amounted to P27.284 billion, slightly higher than P27.042

billion in 2014 and 7% more than P25.917 billion in 2013. The yearly increases in the Capital Stock

and Additional Paid-in Capital from 2013 to 2015 were from the exercise of stock options under the

Company’s stock option plan and amortization for share-based compensation.

The Company’s Net Income Attributable to the Equity Holders of the Parent Company amounting to

P896.2 million boosted Retained Earnings to P15.496 billion from P14.712 billion in 2014 and

P14.129 billion in 2013. A total of P98.8 million worth of dividends was declared in 2015 compared

with P395.1 million in 2014 and nil in 2013.

In 2015, a total of P13.1 million (P27.3 million in 2014) was taken up against retained earnings related

to re-measurement of pension obligation, net of tax, with a cumulative balance of P88.0 million. In

2013, the Company’s Board of Directors approved the appropriation of P10.000 billion of the Retained

Earnings for the Company’s share in the Silangan mine development and construction from 2016 to

2018.

15

A temporary decline in the fair value of AFS Financial Assets of P23.0 million was recorded in 2015 in

Net Unrealized Gain (Loss) on AFS Financial Assets under Equity, reducing further the balance to

P106.7 million in 2015 from P906.7 million in 2014 and P975.4 million in 2013. In 2013, the decline in

the market prices of Indophil and Lepanto was considered permanent therefore not taken up under

equity but recognized as loss in the income statement. With the sale of Indophil shares and the

reclassification of the investment in Lepanto to Investment in an Associate in 2015, no unrealized gain

(loss) from fair value change was recognized on these investments. As a result of the translation of

foreign subsidiaries in 2015, Cumulative Translation Adjustments amounted to P124.3 million in 2015

from P37.4 million in 2014 and P25.1 million in 2013.

The amount of Net Revaluation Surplus remained at P1.611 billion for the years 2013 to 2015. The

Effect of Transactions with Non-controlling Interests increased to P23.2 million in 2015 from P19.1

million in 2014 and P45.1 million in 2013 – reflecting the difference between the acquisition cost and

the book value of the interest acquired in PGI, FEP and FEC shares. The balances of Non-controlling

Interests of P2.721 billion in 2015, P3.442 billion in 2014 and P4.107 billion in 2013 were reduced by

losses in subsidiaries. In 2013, the consolidation of Pitkin accounts following PPC’s acquisition of

additional interest in Pitkin, thus making it a subsidiary, brought the balance to P4.107 billion.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s primary objectives are to fund existing operations and maintain a healthy pipeline of

exploration projects for potential expansion. Despite the risks inherent in the business associated

with metal prices, foreign exchange rates, regulatory environment, and the changing economic and

market conditions, the Company generated net cash flows from operating activities of P1.466 billion in

2015, P1.788 billion in 2014 and P2.471 billion in 2013. The cash generated in 2013 was significantly

affected by the lower metal production due to the suspension of Padcal operations from August 2,

2012 to March 7, 2013, while the cash generated in 2015 and 2014 were substantially affected by the

drop in gold and copper prices despite full year production.

Other than internally generated funds, which remain as the Company’s principal source of cash, the

Company also raised funds from borrowings primarily to finance the capital expenditures of the

Padcal mine, the development of Silangan project and exploration initiatives of various mine sites, as

well as to refinance existing debts. The liquidity position of the Company is supported by credit

facilities committed by various local banks and FPC. All amounts drawn from the US$150 million-loan

facility with FPC were repaid as of December 31, 2014, thus terminating the facility effective the date

of full repayment.

Net cash used in investing activities, principally for capital expenditures and exploration costs,

amounted to P4.408 billion from P5.462 billion in 2014 and P4.452 billion in 2013. Capital

expenditures decreased to P1.390 billion in 2015 from P2.354 billion in 2014 and P2.310 billion in

2013, which were attributed to the lower sustaining capital expenditure of Padcal mine amounting to

P1.534 billion as against P1.835 billion in 2014 and P1.667 billion in 2013. Expenditure for the

continuing exploration activities at the Silangan, Kalayaan, and other projects amounted to P3.068

billion in 2015, lower than P3.477 billion in 2014 and P3.778 billion in 2013.

The net cash used in investing activities also reflected the net proceeds from the sale of Indophil

shares of P297.5 million and the share buyback of Pitkin of P646.7 million in 2015, with proceeds

from the sale of Company’s real property of P765 million and a total of P395.7 million used for the

share buyback of Pitkin shown in 2014. In 2013, the proceeds from the sale of Pitkin’s interest in

VAMEX amounting to P2.100 billion and the acquisition of additional interest in Pitkin for P1.433

billion (partially offset by the P803.4 million cash reflected upon consolidation of the Pitkin accounts in

mid-2013) were also reflected under net cash generated from investing activities for the year.

16

Net cash used in financing activities amounted to P1.284 billion in 2015 as against the net cash

provided by financing activities of P4.825 billion in 2014 and P4.386 billion in 2013, on account of

lower loan availment of P3.015 billion in 2015 compared with P10.090 billion in 2014 – including

proceeds from the issuance of convertible notes of P7.162 billion – and P7.769 billion in 2013. Loan

repayments made in 2015, 2014 and 2013 were P4.192 billion, P4.935 billion and P3.375 billion,

respectively, while payments for cash dividends amounted to P108.0 million in 2015, P366.9 million in

2014 and P22.6 million in 2013.

Capital Expenditures and Exploration Costs

(P millions) 2015 2014 2013

By Project:

Padcal and Others

Mine Development 623 668 434

Tailings Pond Structures 258 298 791

Machinery & Equipment 643 869 442

1,524 1,835 1,667

Silangan and Kalayaan Project

Deferred Exploration 2,380 3,281 2,939

Machinery & Equipment, net of

asset disposal and

reclassification (134) 483 408

2,246 3,765 3,347

Mine Exploration Projects 107 164 681

Oil and Gas Exploration Projects 182 67 393

4,060 5,831 6,088

By Recording:

Deferred Exploration costs 2,669 3,477 3,778

Property, plant and equipment 1,390 2,354 2,310

4,060 5,831 6,088


Capital expenditures in 2015 amounted to P4.060 billion from P5.831 billion in 2014 and

P6.088 billion in 2013 as the Company focused on the Silangan project and mining projects

within the vicinity of Padcal. The Company, however, continues to invest in new technologies

to expand capacities, improve efficiencies and accelerate the Silangan Project.

Expenditures for the Silangan Project accounted for 55% of capital outlays in 2015 at P2.246

billion compared with P3.765 billion in 2014 and P3.347 billion in 2013. Deferred exploration

costs amounted to P2.380 billion in 2015 against P3.281 billion and P2.939 billion in 2014

and 2013, respectively. Machinery and equipment showed a negative P134.1 million balance.

This was the result of investments in new machinery and equipment of P61.0 million, offset by

the P39.8 million costs of equipment sold and P155.3 million costs of completed jobs in

progress reclassified to Deferred exploration costs. In 2014 and 2013, investments in new

machinery and equipment amounted to P483.4 million and P407.7 million, respectively.

Padcal operations accounted for the second largest chunk of capital investments at P1.524

billion in 2015 or 38% of the total. This decreased from P1.835 billion in 2014 and P1.667

billion in 2013 due to lower costs for the construction of TSF3, which entailed P258.1 million,

P298.0 million and P790.7 million in investments over the last three years.

Upgrade of equipment and machinery continued as well, with outlays amounting to P643.4

million in 2015, P869.0 million in 2014 and P442.0 million in 2013, which enabled the

Company to increase the inventory from 12 months in 2013 to 15 months in 2015.

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Investments in exploration projects, meanwhile, amounted to P107.4 million in 2015 from

P164.0 million and P680.9 million, respectively, the previous two years as a result of

prioritization of and a more focused approach to new mine developments.

Meanwhile, capex for the Company’s energy and hydrocarbon business amounted to P181.8

million, related to advanced exploration activities, as against expenditures of P67.0 million in

2014 and P392.9 million in 2013, mainly on data gathering for Service Contract 75 located in

North West Palawan.

Top Five Key Financial and Non-Financial Performance Indicators

Safety Performance

The Company believes that operational excellence can only be achieved unless personnel health and

safety remains an utmost priority. In 2015, the Company reported for its Padcal Mine four (4) Lost

Time Accident-Fatal (LTA-F), caused largely by Typhoon Lando, from one (1) LTA-F incident in 2014

and three (3) LTA-F incidents in 2013. Meanwhile, there were seven (7) Lost Time Accident-Non Fatal

(LTA-NF) recorded in 2015 from two (2) LTA-NF in 2014, a significant decline from the ten (10) LTA-

NF incidents reported the previous year.

The Company is working towards achieving a “zero-harm” record by constantly reviewing safety

policies and procedures. Initiatives are also in place to ensure that injuries are avoided and accidents

are eliminated in the workplace. Third-party consultants are also engaged to evaluate the Company’s

existing safety performance and identify risks areas as well as possible areas for improvement.

Earnings Per Share

The earnings per share (EPS) represent the net income attributable to equity holders of the Company,

expressed in the amount per share of the Company’s average outstanding capital stock. Assuming a

constant outstanding number of shares, the earnings per share correspondingly rises as the

Company's earnings increase. The EPS ultimately reflects the Company’s financial and operational

growth as a result of its performance in cost management, technical efficiency and productivity.

The basic earnings per share in 2015 was P0.181, based on 4,940,399,068 weighted average shares

outstanding for the period, compared with P0.204 in 2014 based on the 4,938,577,039 weighted

average shares and P0.069 in 2013 based on the 4,933,657,951 weighted average shares.

Considering the effect of the Company’s potentially dilutive stock options outstanding for the period,

an assumed exercise of the options at exercise price higher than market would have resulted in

additional common shares. In 2015, 2014 and 2013, the outstanding stock options were considered

anti-dilutive based on the lower market price of the Company’s shares compared with to the exercise

price, thus the diluted earnings per share in 2015, 2014 and 2013 were the same as the basic

earnings per share of the Company in the said periods.

Tonnes Milled and Metal Produced

Tonnes milled and ore grade determine the volume of concentrates produced and sold. Tonnes milled

totaled 9,198,540 in 2015, compared with 9,506,195 tonnes in 2014 and 7,738,258 tonnes in 2013.

The Company resumed its Padcal operations on a temporary basis on March 8, 2013 and

subsequently on a permanent basis on August 7, 2014 after the suspension of operations on August

2, 2012, thus the lower tonnes milled in 2013, compared with the full year production in 2015 and

2014.

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Metal production also increased to 107,887 ounces of gold and 34,104,049 pounds of copper in 2015,

compared with 105,008 ounces of gold and 35,391,154 pounds of copper in 2014 and 99,802 ounces

of gold and 32,495,443 pounds of copper in 2013.

Total Production Cost Per Tonne and Operating Cost Per Tonne of Ore Milled, and Per Ounce

Gold and Per Pound Copper Produced

The Company’s average cost per tonne is a key measure of the Company’s operating performance.

At the same cost level, the higher the production volume, the lower the cost per tonne becomes,

which will also be similar if the same production volume incurs a lower operating cost. Thus, a lower

cost per tonne would generally reflect an improvement in operating efficiency.

The same essentially applies to cost expressed in per unit of metal, which incorporates the metal

grade, as it affects metal production, and the exchange rate, as it affects the conversion from peso to

dollar.

In 2015, the total production cost (mine site cost and expenses excluding marketing charges, excise

tax and royalties) per tonne of ore milled was P670, with total production cost of P6.160 billion over

ore milled of 9.2 million tonnes. This was lower than the cost per tonne of P716 from the total

production cost of P6.808 billion over ore milled of 9.5 million tonnes in 2014 and 6% above the cost

per tonne of P714 from the total production cost of P5.527 billion over ore milled of 7.7 million tonnes

in 2013.

The operating costs and expenses (all cost and expenses excluding corporate overhead) per tonne of

ore milled in 2015 was P808 from the total operating cost and expenses of P7.434 billion, slighlty

lower than the P859 from the operating costs and expenses of P8.165 billion in 2014, and 7% more

than the P869 from the operating costs and expenses of P6.723 billion in 2013.

As the mine produces both gold and copper (and silver) together in one operating process, no

physical basis can be used in allocating costs between the two metals, thus, the cost may be

allocated proportionately based on the revenue contribution of each product. In 2015, the operating

cost applicable to gold produced amounted to US$933 per ounce compared with US$977 per ounce

in 2014 and US$858 per ounce in 2013. On the other hand, operating cost applicable to copper

produced amounted to US$1.86 per pound in 2015 compared with US$2.29 per pound in 2014 and

US$2.16 per pound in 2013.

Exploration Activities

The Company is cognizant that exploration in itself is a speculative endeavor, and mineral exploration

and mining operations can be hampered by force majeure and other unforeseen circumstances

beyond the Company’s control. To mitigate the impact of these external factors and other

contingencies, the Company banks on its ability to successfully explore and/or acquire reserves,

design and construct efficient processing facilities, operate and manage its projects, and provide

effective financial controls and management. To ensure the optimization of value from its natural

resource properties and the long-term sustainability of operations, the Company pursues and invests

in viable exploration activities and operational enhancements on a constant basis.

In 2015, the amount spent on exploration amounted to P2.669 billion compared with P3.477 billion in

2014 and P3.778 billion in 2013. As of December 31, 2015, total exploration costs, including costs

related to oil and gas exploration, amounted to P29.439 billion, 68% of the Company’s Total Assets,

compared with P25.817 billion in 2014 and P22.427 billion in 2013.

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Known Trends, Events, or Uncertainties

There is no known event that will trigger direct or contingent financial obligation that is material to the

Company, including any default or acceleration of an obligation that have not been booked, although

the Company could be contingently liable for lawsuits and claims arising from the ordinary course of

business, which contingencies are not presently determinable.

Other than as discussed above, there are no known significant trends, demands, commitments, or

uncertainties that will result in or that are reasonably likely to result in the Company’s liquidity

increasing or decreasing in a material way. There are no material commitments for capital

expenditures not reflected in the Company’s financial statements.

There is likewise no significant seasonality or cyclicality in its business operation that would have

material effect on the Company’s financial condition or results of operation. There were no other

significant elements of income or loss that did not arise from the Company’s continuing operations.

There are no material off-balance sheet transactions, arrangements, obligations (including contingent

obligations), and other relationship of the Company with unconsolidated entities or other persons

created during the reporting period. There are no line items in the Company’s financial statements

not already explained for causes either above or in the Notes to the Consolidated Financial

Statements other than due to the usual period-to-period fluctuations in amounts natural in every

business operations.

IV. Brief Description of the General Nature and Scope of the Business of the Company and its

Subsidiaries

Corporate Profile

Philex Mining Corporation (“PMC” or the “Company”) and its subsidiaries are organized into two main

business groupings: the metals business, which is directly under PMC, Philex Gold Philippines, Inc.

(PGPI) and Silangan Mindanao Mining Co., Inc. (SMMCI), and the energy and hydrocarbon business

under Philex Petroleum Corporation (PPC).

Metal Business

The Company was incorporated in the Philippines in 1955 and has been listed in the

Philippine Stock Exchange since November 23, 1956. PMC, PGPI (a wholly-owned

subsidiary through a holding company incorporated in the Philippines) and Silangan

Mindanao Exploration Co., Inc. (SMECI, a wholly-owned subsidiary incorporated in the

Philippines) and its subsidiary, SMMCI, are primarily engaged in large-scale exploration,

development and utilization of mineral resources.

PMC operates the Padcal Mine in Benguet for the past 58 years using the underground block-

cave method. It is one of the oldest operating mines in the country and provides PMC its

biggest source of revenue. In October 2015, an additional 20 million tonnes of ore reserves

were declared within the current ore body, which will extend the mine’s life by two (2) more

years, from 2020 to 2022. In February 2016, the Company disclosed the results of ongoing

exploration near the surface of Bumolo Project, which area is within MPSA 156-2000-CAR,

with an estimated 21.7 million tonnes of inferred resources at 0.21% copper and 0.30 grams

per tonne gold, at a cut-off of 0.312% CuEq.

PGPI, on the other hand, operated the Bulawan mine in Negros Occidental until the second quarter of 2002. The Company’s exploration strategy in the late 1980’s was focused on gold exploration, which resulted in the acquisition and staking of a number of primarily gold claim holdings throughout the Philippines. In July 1996, these gold assets were transferred to PGPI. These assets included the Bulawan mine in Negros Occidental, Negros Island, which operated commercially from January 1996 until 2002, when it was decommissioned due to

20

unfavorable metal prices. The Bulawan mine currently has remaining resources of 23.9 million tonnes, including that of the Vista Alegre area. Exploration projects in the Vista Alegre area include the Nagtalay project and the Laburan/Skid 9 project, which have completed the geological modelling and preliminary resource estimation.

SMECI, through SMMCI, owns the Silangan Project covering the Boyongan and Bayugo

deposits in Surigao. SMMCI completed the pre-feasibility study of Boyongan deposit in late

2014, and is currently conducting the definitive or bankable feasibility study, which is

expected to be completed in 2016. The Boyongan copper-gold porphyry deposit in Surigao

del Norte was discovered in August 2000 under SMMCI, a joint venture with Anglo American

Exploration Plc. On February 6, 2009, the Company acquired Anglo’s 50% interest in the

Silangan Project under SMMCI for a cash consideration of US$55 million, thereby owning

100% of the Silangan Project. Adjacent to the Silangan Project is the Kalayaan Project, the

exploration of which is being undertaken by the Company by virtue of a Farm-in Agreement

with Kalayaan Gold & Copper Resources, Inc., a subsidiary of Manila Mining Corporation.

Energy and Hydrocarbon Business

PPC, a 64.73% owned subsidiary of PMC, is a Philippine corporation organized in December

2007 and listed in the Philippine Stock Exchange.

PPC has interests in various petroleum service contracts in the Philippines and Peru held

directly and through its major subsidiaries, Pitkin Petroleum Plc (“Pitkin”) and Forum Energy

Limited (“Forum”).

PPC’s direct interests in Philippine petroleum service contracts include: (1) a 50% operating

interest in SC 75; (2) a 70% operating interest in SC 74 (transferred to PPC from Pitkin in

February 2016, subject to approval of the Department of Energy); (3) a 1.65% interest in SC 6

Cadlao and, (3) a 5.56% interest SC 6A Octon; all located in the Northwest Palawan.

PPC also holds a 53.43% controlling interest in Pitkin, an international upstream oil and gas

company registered in the United Kingdom with operations in Peru. Pitkin’s asset is a 25%

participating interest in Peru Block Z-38 located in offshore Tumbes Basin.

PPC likewise has a 67.19% controlling interest in Forum, with 48.77% held directly and

18.43% held indirectly through a 51.24%-owned subsidiary, FEC Resources, Inc., a Canadian

public company registered with the US Securities and Exchange Commission, the Alberta

Securities Commission, and the British Columbia Securities Commission and quoted in North

America.

Forum, a UK incorporated company with focus on the Philippines, has: (a) a 70% operating

interest in SC 72 Recto Bank which covers the Sampaguita natural gas discovery in offshore

West Palawan, held through Forum (GSEC 101) Limited; (b) a 100% operating interest in SC

40 North Cebu held through Forum Exploration, Inc.; (c) a 5.56% interest in SC 6A and (d)

minority interest in the SC 14 sub-blocks in offshore Northwest Palawan, including a 2.27%

interest in the producing Galoc field, held through Forum Energy Philippines Corporation.

Products / Sales

For the past 58 years, the Company has operated the Sto. Tomas II deposit at Padcal, Tuba, Benguet

Province – the first underground block caving operation in the Far East.

The Company’s Padcal mine produces copper concentrates, containing copper, gold and silver. Total ore extracted and processed from start of operation to 2015 aggregated to 391.247 million tonnes, producing 2.213 billion pounds of copper, 5.995 million ounces of gold, and 6.473 million ounces of silver.

21

Based on the Sales Agreement entered into by the Company and Pan Pacific Copper Co., Ltd. (Pan Pacific), a major Japanese copper producer jointly established by JX Nippon Mining & Metals Corporation and Mitsui Mining & Smelting Co., Ltd., in March 2004, 60% of the Company’s annual copper concentrate production, approximately 40,000 dry metric ton of current production level, is committed to Pan Pacific, and the remaining copper concentrate to Louis Dreyfuss Commodities Metals Suisse SA. Pan Pacific processes the concentrates through its smelter plants and produces products, such as refined copper, precious metals and sulfuric acid. Pan Pacific is one of the leading buyers of copper concentrates in the world, procuring approximately 1.7 million tonnes of copper concentrates annually from around the world. Compared to this huge volume, the Company’s shipments to Pan Pacific is relatively insignificant.

All of the Parent Company’s sales revenues for the years 2013 to 2015 were from copper concentrate

shipments made to Japan. The 2015 consolidated revenue of the Company included the net

realizable value of mine products inventory at the end of the financial reporting period. About 2% of

the 2015 consolidated revenue came from petroenergy contributed by FEP.

The contributions over the past three years of the gold and copper produced from the Padcal mine to

sales revenue are as follows:

(In Million Pesos) Amount

Percent to

Total

Revenue Amount

Percent to

Total

Revenue Amount

Percent to

Total

Revenue

Gold 5,670 61% 5,889 54% 5,582 53%

Copper 3,450 37% 4,615 42% 4,580 44%

9,120 97% 10,504 96% 10,161 97%

Total Revenue 9,362 100% 10,898 100% 10,462 100%

2015 2014 2013


V. Directors and Executive Officers

DIRECTORS The following are the present directors of the Company whose terms of office are for one year or until their successors are elected and qualified:

1.) MANUEL V. PANGILINAN, Chairman, Non-Executive Director

Age: 69



Mr. Pangilinan graduated cum laude from the Ateneo de Manila University with a Bachelor of

Arts degree in Economics. He received his Master of Business Administration degree from

Wharton School of the University of Pennsylvania in 1968.


Mr. Pangilinan founded First Pacific Company Limited, a corporation listed on the Hong Kong

Stock Exchange, in May 1981. He served as Managing Director of First Pacific since its

founding in 1981 until 1999. He was appointed Executive Chairman until June 2003, after

which he was named Managing Director and Chief Executive Officer. In May 2006, the Office

22

of the President of the Philippines awarded Mr. Pangilinan the Order of Lakandula, rank of

Komandante, in recognition of his contributions to the country. He was named Management

Man of the Year 2005 by the Management Association of the Philippines. Mr. Pangilinan was

awarded Honorary Doctorates in Science by Far Eastern University in 2010; in Humanities by

Holy Angel University in 2008; by Xavier University in 2007; and by San Beda College in 2002

in the Philippines. He was formerly Chairman of the Board of Trustees of the Ateneo de

Manila University and was a member of the Board of Overseers of the Wharton School. He is

a member of the ASEAN Business Advisory Council. Mr. Pangilinan has been a Director of

PMC and Philex Gold Philippines, Inc. (PGPI) since November 2008. He is also Managing

Director and Chief Executive Officer of First Pacific, and Chairman of the Philippine Long

Distance Telephone Company (PLDT) since 2004, after serving as its President and Chief

Executive Officer (CEO) since 1998. He reassumed the position of President and CEO of

PLDT effective December 2015. He is also Chairman of Smart Communications, Inc., PLDT

Communications and Energy Ventures, Inc. (Digitel), Metro Pacific Investments Corporation,

Silangan Mindanao Mining Co., Inc., Landco Pacific Corporation, Medical Doctors Inc. (Makati

Medical Center), Colinas Verdes Corporation (Cardinal Santos Medical Center), Asian

Hospital, Inc., Davao Doctors, Inc., Riverside Medical Center Inc., Our Lady of Lourdes

Hospital, Central Luzon Doctors’ Hospital, Inc., Maynilad Water Services Corporation,

Mediaquest, Inc., Associated Broadcasting Corporation (TV5) and Manila North Tollways

Corporation. Mr. Pangilinan is also Chairman of the Manila Electric Company (MERALCO),

after serving as its President and Chief Executive Officer from July 2010 to May 2012. In

December 2013, Roxas Holdings, Incorporated, the largest sugar producer in the Philippines,

announced the election of Mr. Pangilinan as Vice Chairman.

Directorship in other Listed Companies in the Philippines:

1. Philex Petroleum Corporation - Chairman

2. Philippine Long Distance Telephone Company - Chairman

3. Metro Pacific Investments Corporation - Chairman

4. Roxas Holdings, Incorporated - Vice Chairman and Non-Executive Director

5. Manila Electric Company – Chairman

2.) JUAN B. SANTOS , Vice Chairman Non-Executive Director

Age: 77

Date of First Appointment: September 28, 2010


Mr. Santos graduated from the Ateneo de Manila University in 1960, with a Bachelor of

Science degree in Business Administration, and a Master’s Degree at Thunderbird School of

Global Management in 1962.


Mr. Santos was President and Chief Executive Officer of Nestle Philippines, Inc. from 1987 to

2003, and continued to serve as Chairman of Nestle Philippines, Inc. until 2005. From 1989 to

1995, Mr. Santos concurrently served as Chief Executive Officer of Nestle Singapore Pte. Ltd.

Prior to his appointment as President of Nestle Philippines, Inc., Mr. Santos was President of

the Nestle Group of Companies in Thailand. In 2005, Mr. Santos served as the Secretary of

the Department of Trade and Industry of the Philippines, and was designated as a member of

the Governance Advisory Council, and Public Sector Representative for the Public-Private

Sector Task Force for the Development of Globally Competitive Philippine Service Industries.

23

He was awarded Management Man of the Year by the Management Association of the

Philippines in 1994, and the Agora Awardee for Marketing Management by the Philippine

Marketing Association in 1992. Mr. Santos has been a Director and Vice Chairman of PMC

since September 28, 2010, and most recently re-elected as such on June 24, 2015. He is

currently Chairman of the Social Security Commission, governing board of the Social Security

System, Vice Chairman of Alaska Milk Corporation, and Director of the Philippine Long

Distance Telephone Company, First Philippine Holdings Corporation, Sun Life Grepa

Financial, and Inc., East-West Seeds Co., Inc. He sits on the Board of Advisors of Coca-Cola

FEMSA Philippines, Mitsubishi Motors Philippines Inc. and serves as Trustee of the St. Luke’s

Medical Center. He was former Chairman of the Ramon Magsaysay Award Foundation, and

Consultant of the Marsman-Drysdale Group of Companies. He is also Chairman of Dualtech

Training Center Foundation, Inc.

Directorship in other Listed Companies in the Philippines

1. Philippine Long Distance Telephone Company (PLDT) - Non-Executive Director

2. First Philippine Holdings Corp. - Independent Director

3.) EULALIO B. AUSTIN, JR. President & CEO, Executive Director

Age: 54



Mr. Austin graduated from Saint Louis University-Baguio City, with a Bachelor of Science

degree in Mining Engineering and placed eight at the 1982 Professional Board Examination

for mining engineers. He took his Management Development Program at the Asian Institute of

Management in 2005 and his Advance Management Program at Harvard Business School in

2013.


Mr. Austin has been a Director of PMC and PGPI since June 29, 2011 and was re-elected on

June 24, 2015. He became President and Chief Operating Officer on January 1, 2012 and

President and Chief Executive Officer of the Company on April 3, 2013. He previously served

the Company as its Senior Vice President for Operations and Padcal Resident Manager in

2011, Vice President & Resident Manager for Padcal Operations from 2004 to 2010, Mine

Division Manager (Padcal) from 1999 to 2003, Engineering Group Manager in 1998 and Mine

Engineering & Draw Control Department Manager from 1996 to 1998. Mr. Austin concurrently

serves as Director of Philex Petroleum Corporation and Silangan Mindanao Mining Co., Inc.

He likewise sits on the Board of Directors of the Philippine Society of Mining Engineers

(“PSEM”), and was Founding President of PSEM’s Philex Chapter. He was recently awarded

as the CEO of the year on Mining by The Asset last December 14, 2015 in Hongkong.

Directorship in OTHER Listed Companies in the Philippines:

1. Philex Petroleum Corporation - Non - Executive Director

4.) MICHAEL N. ALIMURUNG, Non-Executive Director

Age: 41


24

Academic Qualification:

Mr. Michael N. Alimurung graduated from the Ateneo de Manila University with Honors in

1997 and 1998 with Bachelor of Science degrees in Management Engineering and Computer

Science respectively. He obtained an MBA from the Stanford Graduate School of Business in

2006.


He is currently one of the nine (9) SSS Commissioners and the Chairperson of the SSC-IT

(Information Technology) Committee. He serves as a Director of Philex Mining Corporation

and Union Bank of the Philippines. He provides general management and strategy consulting

to government agencies, including the Commission on Audit, the Department of Social

Welfare and Development and the Development Academy of the Philippines (DAP).

In the public sector, he served as Assistant Executive Secretary and Head of the Government

Performance Monitoring Office in the Office of the President, Republic of the Philippines from

2010-2012. He was a Board Member of DAP in 2011 and designated as a DAP Fellow in

2012.

In the private sector, he is the founder of Impact.ph, an organization that aims to enhance and

transform the Philippine nonprofit sector. He was previously the anchor of Bright Ideas, a talk

show of Bloomberg TV Philippines He also worked as a Principal at the Wellspring

Consulting, a top-tier consulting firm focused on the social sector, based in Boston, MA from

2006-2010 and 2012-2014. He was a co-founder of Jericho Systems, an e-commerce and

publishing company and also a co-founder of BukasSarili Foundation. He worked at Citibank

in 2004 and Procter & Gamble from 1999-2003. He also taught at the Ateneo de Manila from

1999-2002 and at the University of Asia and the Pacific from 1998-1999.

Directorship in Other Listed Companies:

1.) Union Bank of the Philippines - Non-Executive Director (Date of First Appointment:

October 15, 2015)

5.) OSCAR J. HILADO Independent Director

Age : 78



Mr. Hilado, a Certified Public Accountant, completed his undergraduate studies at the De La

Salle College-Bacolod in 1958 and obtained his Masters in Business Administration from the

Harvard School of Business Administration (Smith Mundt/Fulbright Scholar) in 1962. He

received a Doctorate in Business Management, Honoris Causa, from the De La Salle

University and a Doctorate of Laws, Honoris Causa, from the University of St. La Salle in

1992.


Mr. Hilado has been an Independent Director of PMC since December 7, 2009, and was last

re-elected on June 24, 2015. He was the Chairman & Chief Executive Officer of Philippine

Investment Management (PHINMA), Inc. (January 1994 to August 2005), and currently

Chairman of the Board. He is currently also Chairman of PHINMA Corp, Trans-asia Oil and

Energy Development Corporation, PHINMA Property Holdings Corp., Vice Chairman of

25

Trans-Asia Power Generation Corporation, and Director of Trans Asia Renewable Energy

Corporation and publicly listed Trans-Asia Petroleum Corporation. Mr. Hilado is an

Independent Director of Smart Communications, Inc. and Digital Telecommunications Phils.,

Inc, and the publicly listed First Philippine Holdings Corporation and A. Soriano Corporation.

He is also a Director of United Pulp and Paper Company, Inc., Beacon Property Ventures,

Inc., Manila Cordage Company, Pueblo de Oro Development Corporation, Seven Seas

Resorts and Leisure, Inc., Asian Eye Institute, Araullo University, Cagayan de Oro College,

University of Iloilo, University of Pangasinan, Microtel Inns & Suites (Pilipinas) Inc.

Directorship in Other Listed Companies in the Philippines :

1. PHINMA Corporation - Non-Executive Director

2. Trans Asia Oil & Energy Development Corporation and its subsidiary, Trans Asia Power

Generation Corporation - Non-Executive Director

3. A. Soriano Corporation - Non-Executive Director

4. First Philippine Holdings Corp. -Independent Director

5. Rockwell Land Corporation – Independent Director

6. Roxas Holdings – Independent Director

6.) MARILYN A. VICTORIO-AQUINO, Non-Executive Director

Age: 60



Ms. Victorio-Aquino graduated cum laude (class salutatorian) from the University of the

Philippines College of Law in 1980 and placed second in the Philippine Bar Examinations.


She has been a Director of PMC and PGPI since December 7, 2009 and was re-elected on

June 24, 2015. She is an Assistant Director of First Pacific Co. Ltd. since July 2012, following

her 32-year law practice at SyCip Salazar Hernandez and Gatmaitan Law Offices, where she

was Partner from 1989 to 2012. She is also a Director of Philippine Indofood Distribution

Corporation since August 2014, of Light Rail Manila Corporation since July 2014, of Silangan

Mindanao Mining Co., Inc., and Lepanto Consolidated Mining Company since October 2012,

and of Maynilad Water Services Corporation since December 2012.

Directorship in Other Listed Companies in the Philippines:


2. Lepanto Consolidated Mining Company – Non-Executive Director

7.) BIENVENIDO E. LAGUESMA, Non-Executive Director

Age: 65

Date of First Appointment: February 27, 2013

Academic Background

Mr. Laguesma finished his Bachelor of Laws at Ateneo De Manila College in 1975 and his

post-graduate studies as a Colombo Scholar (British Council) for Public Sector Administration

26

course at the Royal Institute of Public Administration in London, United Kingdom of Great

Britain from May to August of 1985.


Mr. Laguesma has been a Director of PMC and PGPI since February 27, 2013, and was re-

elected on June 24, 2015. He is presently a Commissioner of the SSS and has held such

position since March 2011. Mr. Laguesma was Secretary of the DOLE from 1998-2001,

Presidential Assistant (Office of the President of the Republic of the Philippines) from 1996 to

1998, and DOLE Undersecretary from 1990 to 1996, after holding various other positions in

the Government since 1976. He is a Director of the First Metro Investment Corporation and

Chairman of the Charter Ping An Insurance Corporation of the Metrobank Group. He is also

Senior Partner of the Laguesma Magsalin Consultants and Gastardo Law Offices. He is

currently a Member, Board of Regents, Pamantasan ng Lungsod ng Maynila and a Director of

Drug Abuse Resistance Education, DAREPHIL, Inc.

Directorship in OTHER Listed Companies in the Philippines

1. None

8.) BARBARA ANNE C. MIGALLOS Corporate Secretary , Executive Director

Age: 61

Date of First Appointment: June 26, 2013


Ms. Migallos graduated cum laude from the University of the Philippines, with a Bachelor of

Arts degree, and finished her Bachelor of Laws degree as cum laude (salutatorian) also at the

University of the Philippines. She placed third in the 1979 Philippine Bar Examination.


Ms. Migallos was elected to the Board of Directors of PMC and PGPI on June 24, 2015. She

is also the Company’s Corporate Secretary since July 1998. She is also Director and

Corporate Secretary of Philex Petroleum Corporation, and Corporate Secretary of Silangan

Mindanao Mining Co., Inc. She is the Managing Partner of the Migallos & Luna Law Offices.

Ms. Migallos is also a Director of Mabuhay Vinyl Corporation since 2000 and Philippine

Resins Industries since 2001, and Corporate Secretary of Eastern Telecommunications

Philippines, Inc. since 2005 and Nickel Asia Corporation since 2010. She is a professorial

lecturer in Corporations Law, Insurance, Securities Regulation and Credit Transactions at the

De La Salle University College of Law. She was a Senior Partner of Roco Kapunan Migallos

and Luna Law Offices from 1988 to 2006.



2. Mabuhay Vinyl Corporation - Non-Executive Director

9.) ROBERT C. NICHOLSON Non-Executive Director

Age: 60

Date of First Appointment : November 8, 2008

27


Mr. Nicholson graduated from the University of Kent in 1976 and qualified as a solicitor in

England and Wales and in Hong Kong.


Mr. Nicholson has been a Director of PMC and PGPI since November 28, 2008, and was re-

elected on June 24, 2015. He is an Executive Chairman of Forum Energy Plc, a Chairman of

Goodman Fielder Pty Limited (since March 2015), a Commissioner of PT Indofood Sukses

Makmur Tbk. He is also a Director of Metro Pacific Investments Corporation, Philex

Petroleum Corporation and Silangan Mindanao Mining Co, Inc., Executive Director of Pitkin

Petroleum Plc and Pacific Light Power Pte. Ltd., all of which are First Pacific Group

subsidiaries or associates.

Mr. Nicholson is also an Independent Non-executive Director of Pacific Basin Shipping

Limited and Lifestyle Properties Development Limited. Previously, he was a senior partner of

Reed Smith Richards Butler from 1985 to 2001 where he established the corporate and

commercial department, and was also a senior advisor to the board of directors of PCCW

Limited between August 2001 and September 2003.

Mr. Nicholson has wide experience in corporate finance and crossborder transactions,

including mergers and acquisitions, regional telecommunications, debt and equity capital

markets, corporate reorganizations and privatizations in China.




10.) WILFREDO A. PARAS Independent Director

Age : 69


Academic Background

Mr. Paras completed his undergraduate studies at the University of the Philippines in 1969

with Bachelor of Science, Industrial Pharmacy and his Master in Business Administration at

the De La Salle University in 1991. He also completed an Executive Program at the University

of Michigan at Ann Arbor, Michigan, USA.


Mr. Paras has been an Independent Director of PMC since June 29, 2011 and was re-elected

on June 24, 2015. He is currently Independent Director of GT Capital Holdings, Inc. since

May 2013, President of WAP Holdings, Inc., and a Director of CIIF Oil Mills Group of

Companies. He is also a member of the Board of Trustees of Dualtech Training Foundation

Inc. Mr. Paras was previously the Executive VicePresident, Chief Operating Officer and

Director of JG Summit Petrochemical Corporation, President and Director of PT Union

Carbide Indonesia, Managing Director of Union Carbide Singapore, and Business Director for

Union Carbide Asia Pacific.


1. GT Capital Holdings, Inc. - Non-Executive Director

28

11.) EDWARD A. TORTORICI Non-Executive Director

Age: 76


Academic Background

Mr. Tortorici received a Bachelor of Science degree from New York University and a Master

of Science degree from Fairfield University.


Mr. Tortorici has been a Director of PMC and PGPI since December 7, 2009, and was last re-

elected on June 24, 2015. Mr. Tortorici has served in a variety of senior and executive

management positions, including Corporate Vice President for Crocker Bank and Managing

Director positions at Olivetti Corporation of America and Fairchild Semiconductor Corporation.

Mr. Tortorici subsequently founded EA Edwards Associates, an international management

and consulting firm specializing in strategy formulation and productivity improvement with

offices in USA, Europe and Middle East. In 1987, Mr. Tortorici joined First Pacific as an

Executive Director for strategic planning and corporate restructuring, and launched the

Group’s entry into the telecommunications and technology sectors. Presently, he oversees

corporate strategy for First Pacific and guides the Group’s strategic planning and corporate

development activities. Mr. Tortorici serves as a Commissioner of PT Indofood Sukses

Makmur Tbk and as Director of Metro Pacific Investments Corporation, Maynilad Water

Services, Inc., FEC Resources Inc. of Canada. He previously served as Director of AIM-listed

Forum Energy plc. Mr. Tortorici serves as a Trustee of the Asia Society Philippines and is on

the Board of Advisors of the Southeast Asia Division of the Center for Strategic and

International Studies, a Washington D.C. non-partisan think tank. He also served as a

Commissioner of the U.S. ASEAN Strategy Commission.



EXECUTIVE OFFICERS

The following persons are the present executive officers of the Company:

EULALIO B. AUSTIN, JR. – 54, Filipino citizen. Mr. Austin has been a Director of the Company and

PGPI since June 29, 2011 and was re-elected on June 24, 2015. He became President and Chief

Operating Officer on January 1, 2012 and President and Chief Executive Officer of the Company on

April 3, 2013. He previously served the Company as its Senior Vice President for Operations and

Padcal \ Resident Manager in 2011, Vice President & Resident Manager for Padcal Operations from

2004 to 2010, Mine Division Manager (Padcal) from 1999 to 2003, Engineering Group Manager in

1998 and Mine Engineering & Draw Control Department Manager from 1996 to 1998. Mr. Austin

concurrently serves as Director of Philex Petroleum Corporation and President and Director of

Silangan Mindanao Mining Co., Inc. He likewise sits on the Board of Directors of the Philippine

Society of Mining Engineers (“PSEM”), and was Founding President of PSEM’s Philex Chapter. Mr.

Austin graduated from Saint Louis University-Baguio City, with a Bachelor of Science degree in

Mining Engineering and placed eight at the 1982 Professional Board Examination for mining

engineers. He took his Management Development Program at the Asian Institute of Management in

2005 and his Advance Management Program at Harvard Business School in 2013. He was awarded

as the CEO of the year on Mining by The Asset in December 2015.

29

BARBARA ANNE C. MIGALLOS – 61, Filipino citizen. Ms. Migallos has been a Director of the

Company and PGPI since June 26, 2013 and was re-elected on June 24, 2015. She is also the

Company’s Corporate Secretary since July 1998. Ms. Migallos is also Director and Corporate

Secretary of Philex Petroleum Corporation and Brixton Energy & Mining Corporation, and Corporate

Secretary of Silangan Mindanao Mining Co., Inc. and Lascogon Mining Corporation. She is the

Managing Partner of the Migallos & Luna Law Offices. Ms. Migallos has also been a Director of

Mabuhay Vinyl Corporation since 2000 and the Philippine Resins Industries since 2001, and

Corporate Secretary of Eastern Telecommunications Philippines, Inc. since 2005 and Nickel Asia

Corporation since 2010. She is also a professorial lecturer in insurance law and securities regulation

law at the De La Salle University College of Law. Ms. Migallos graduated cum laude from the

University of the Philippines, with a Bachelor of Arts degree, and finished her Bachelor of Laws

degree as cum laude (salutatorian) also at the University of the Philippines. She placed third in the

1979 Philippine Bar Examination.

DANNY Y. YU. – 54, Filipino citizen. Mr. Yu was appointed Senior Vice President for Finance and

Chief Financial Officer (“CFO”) on September 2, 2013. He is also the Company’s Compliance Officer

and Corporate Governance Officer. Prior to joining the Company, Mr. Yu was CFO of Digitel

Communications, Inc. (subsidiary of PLDT) and of Digitel Mobile Philippines, Inc. (Sun Cellular) from

November 2011 to July 2013. He was also Group CFO of ePLDT, Inc. and subsidiaries (November

2010 to December 2011); CFO of PLDT Global Corporation (June 2004 to November 2010) and of

Mabuhay Satellite Corporation (March 1999 to May 2004). Mr. Yu was also Vice President-Corporate

Development of Fort Bonifacio Development Corporation (March 1997 to March 1999). He was

previously connected with Sycip, Gorres and Velayo & Co. Mr. Yu is a licensed CPA and obtained a

Bachelor of Science Degree in Commerce, Major in Accounting (Magna Cum Laude) from the San

Carlos University in Cebu City. In 1995, he completed a Master in Management at the Asian Institute

of Management

MANUEL A. AGCAOILI – 59, Filipino citizen. Mr. Agcaoili has recently joined the Company as Senior

Vice President and Padcal Resident Manager effective January 15, 2014. He was previously with

MBMI Resources, Inc. (Vancouver, Canada) as Director and President from 2004 to 2014 and Senior

Philippine Representative, Narra Nickel Mining and Development Corporation, Tesoro Mining And

Development Corporation, and McArthur Mining, Inc. as Director and President from 2006 to 2008,

and Lafayette Philippines, Inc. as Director also from 2006 to 2008. He was also previously connected

with the Philippine Associated Smelting and Refining Corporation. Mr. Agcaoili graduated with a

Bachelor of Science Degree in Metallurgical Engineering at the University of the Philippines in 1980.

He also completed a Master in Business Administration Program at the Ateneo De Manila University

Graduate School of Business in 2002.

MICHAEL T. TOLEDO – 55, Filipino citizen. Mr. Toledo has been Senior Vice President for Corporate

Affairs since February 15, 2012. He also heads the Media Bureau of the MVP group of companies.

Before joining the Company, he was President and Chief Executive Officer of the Weber Shandwick

Manila office since 2006, and was Director and/or Legal and Financial Consultant for various

government owned and controlled corporations. Mr. Toledo was also Press Secretary and

Presidential Spokesperson for former President Joseph Ejercito Estrada. Mr. Toledo finished a

Bachelor of Arts Degree in Philosophy in 1981 and completed a Bachelor of Laws Degree at

University of the Philippines in 1985. In 1994, he obtained a Masters of Law degree at the London

School of Economics and Political Science.

REDEMPTA P. BALUDA – 60, Filipino citizen. Ms. Baluda has been Vice President for Exploration

since January 2, 2009. She was formerly Assistant Vice President for Exploration from 2007 to 2009,

Division Manager for Environment and Community Relations and Geology for Padcal Operations from

30

1998 to 2007 and Department Manager for Geology from 1996 to 1998. Ms. Baluda finished with a

Bachelor of Science Degree in Geology at the University of the Philippines in 1976. She also

completed the academic units under the Masters in Environment & Natural Resource Management at

the University of the Philippines campus in Los Banos, Laguna in 2007.

VICTOR A. FRANCISCO – 51, Filipino citizen. Mr. Francisco has been Vice President for

Environment and Community Relations since January 2, 2009. He was previously Group Manager for

Corporate Environment and Community Relations in 2007, Department Manager– Corporate

Environment and Community Relations in 1999 and Assistant Manager –Corporate Environmental

Affairs in 1997. Mr. Francisco completed a Bachelor of Science Degree in Community Development at

the University of the Philippines in 1987. He also received a Masters in Environmental Science and

Management at the University of the Philippines campus in Los Banos, Laguna in 1995.

JOAN A. DE VENECIA – 35, Filipino citizen. Joan A. de Venecia is currently the Vice President and

General Counsel of Philex Mining Corporation, having joined the company on August 1, 2015. Prior to

this, Ms. De Venecia was the Vice President for the Public Relations and Information Services Group

at Pag-IBIG Fund, a government owned and controlled corporation. Before joining public service, Ms.

De Venecia was a senior associate at SyCip Salazar Hernandez & Gatmaitan. She obtained her

Master of Laws in International Legal Studies degree (Hugo Grotius scholar & Fulbright scholar, 2010)

from the New York University School of Law; Bachelor of Laws degree (valedictorian, cum laude,

Academic Excellence awardee, 2005) from the University of the Philippines College of Law; and BS–

Legal Management (hon. mention, 2001) from the Ateneo de Manila University. She ranked 1st in the

2005 Bar Examinations. She teaches law at the UP College of Law, and is a regular Mandatory

Continuing Legal Education lecturer on Investor-State Arbitration.

While all employees are expected to make a significant contribution to the Company, there is no one

particular employee, not an executive officer, expected to make a significant contribution to the

business of the Company on his own.

The Company is not aware of any adverse events or legal proceedings during the past five (5) years

that are material to the evaluation of the ability or integrity of its directors or executive officers. Note

31 of the Notes to the Consolidated Financial Statements of the Exhibits in Part V, Item 14 is also

hereto incorporated by reference.

There are no family relationships up to the fourth civil degree of consanguinity among any of the

directors and executive officers.

No director has resigned or declined to stand for re-election because of disagreement with the

Company on any matter relating to the Company’s operations, policies or practices.

VI. Market Price of and Dividends on the Company’s Common Equity

Market Information

The registrant’s common equity, which was initially classified into Class A and Class B common stock

until it was declassified into a single class in 2006, is traded in the Philippine Stock Exchange under

the code name PX.

The Company’s public float as of March 31, 2016 is 32.99%

The average quarterly stock prices for the Company’s common shares within the last two years and

for the first quarter of 2016 were as follows:

31

Year Period High Low

2016 1st Quarter 6.57 3.75

2015

1st Quarter 9.72 7.28

2nd

Quarter 7.69 6.09

3rd

Quarter 6.30 4.64

4th

Quarter 5.75 4.30

2014

1st Quarter 9.98 8.00

2nd

Quarter 12.40 8.48

3rd

Quarter 12.88 10.08

4th

Quarter 10.20 7.50

The Company’s stock was traded at P.591 per share as of April 29, 2016.

Holders

Of the Company’s 44,283 shareholders as of March 31, 2016 with 4,940,399,068 common shares issued and outstanding, the top 20 are as follows:

Name of Stockholder Number of Shares Percentage

1. ASIA LINK B.V. 1,023,275,990 20.71%

2. SOCIAL SECURITY SYSTEM Named Account 864,444,930 Under PDTC Account 152,793,599

1,017,238,529 20.59%

3. PCD NOMINEE CORPORATION 1,070,645,697 16.41%

4. TWO RIVERS PACIFIC HOLDINGS CORP 738,871,510 14.96%

5. KIRTMAN LIMITED 242,011,062 4.90%

6. MAXELLA LIMITED 239,479,900 4.85%

7. THE FIRST NATIONAL INVESTMENT COMPANY INC. 12,195,042 0.25%

8. MAKATI SUPERMARKET CORP. 8,353,226 0.17%

9. ESTATE OF ALLEN CHAM 6,720,476 0.14%

10. ESTATE OF EUDALDO BOIX 5,025,422 0.10%

11. PHILIPPINE REMNANTS CO. 4,875,000 0.10%

12. PANGILINAN, MANUEL 4,655,000 0.09%

13. PAO, FRANK 3,639,260 0.07%

14. ESTATE OF EUDALDO BOIX & PETRA HERNANDO 3,093,203 0.06%

15. PAULINO DE UGARTE &/OR ELENA E. DE UGARTE 3,068,143 0.06%

16. CAROL JOAN REIF 2,974,086 0.06%

17. ROBIN JOHN PETTYFER 2,644,747 0.05%

18. ESTATE OF JOSE TAN YAN DO 2,569,251 0.05%

19. LUCIO W. YAN &/OR CLARA YAN 2,437,500 0.05%

20. VICTOR SY 2,437,500 0.05%

Total 4,396,210,544 83.72%

32

Dividends

Beginning 2010, the Company’s Board of Directors has adopted a policy to declare cash dividend of

up to 25% of the Company’s core net income should the circumstances allow for its declaration.

In 2015 and 2014, the following dividends were declared:

1. On February 25, 2015, a regular cash dividend of P0.02 per share based on the fourth quarter 2014 core net income; for record date of March 11, 2015; paid on March 25, 2015.

2. On October 29, 2014, a regular cash dividend of P0.03 per share based on the nine months 2014 core net income; for record date of November 12, 2014; paid on November 28, 2014.

3. On February 26, 2014, a regular cash dividend of P0.05 per share based on the full-year 2013 core net income; for record date of March 12, 2014; paid on March 26, 2014.

No dividends were declared in 2013.

VII. Compliance with Leading Practices on Corporate Governance

Vision and Mission

The Company’s Vision and Mission Statement is reviewed and approved by Management and the

Board of Directors on an annual basis. The Company’s vision is to be a highly respected, world-class

natural resource company, committed to deliver excellent value to its investors, employees, and other

stakeholders. Its mission is to become a responsible mining corporation that discovers and processes

minerals and energy resources for the use of society.

Governance Statement

As a publicly-listed Philippine corporation, PMC conforms to the corporate governance rules,

requirements, and regulations of the Philippine Securities and Exchange Commission (SEC) and the

Philippine Stock Exchange (PSE).

The Company is committed to the highest standards of corporate governance and continues to

benchmark its procedures against recognized international best practices. To ensure constant

improvement, PMC monitors developments in corporate governance to elevate the Company’s

corporate governance structures, processes, and practices to global standards. The Company also

advocates an ethical corporate culture guided by its core values of integrity, teamwork, respect for

individuals, work excellence, corporate as well as social and environment responsibility. PMC has

adopted a Corporate Governance (CG) Manual and complies with the Code of Corporate

Governance of the SEC and Corporate Governance Guidelines and listing rules of the PSE, and

endeavors to raise its corporate governance practices in line with global best practices.

Awards Received in Corporate Governance

33

1. Top CSR Advocates in Asia

Asia Corporate Excellence and

Sustainability (ACES) Awards)

November 2015

2. Top 50 PLCs in the ASEAN Region

for Corporate Governance

(Asean Corporate Governance

Scorecard Awards)

November 2015 Manila

3. Top 3 Philippine PLC in Corporate

Governance

(Asean Corporate Governance

Scorecard Awards)


4. PSE Bell Finalist for Corporate

Governance

(2015 PSE Bell Awards)


5. PSE Bell Awardee for Corporate

Governance

(2015 PSE Bell Awards)


6. Best Investor Relations Company

(Corporate Governance Asia)

April 2015 Hongkong

~..,.,· PHILEX MININGC O R P O RATI ON

STATEMENT OFMANAGEMENT'S RESPONSIBILITYFOR FINANCIAL STATEMENTS

SECURITIES AND EXCHANGE COMMISSIONSEC Building, EDSA, Greenhills

The management of Philex Mining Corporation is responsible for the preparation and fairpresentation of the consolidated financial statements for the years ended December 31, 2015,2014 and 2013, including the additional components attached therein, in accordance withPhilippine Financial Reporting Standards . This responsibility includes designing and implementinginternal controls relevant to the preparation and fair presentation of financial statements that arefree from material misstatement, whether due to fraud or error, selecting and applying appropriate

accounting policies, and making accounting estimates that are reasonable in the circumstances .

The Board of Directors reviews and approves the consolidated financial statements and submits thesame to the stockholders ofthe Company.

SyCip, eorres. veravo & co., the independent auditors, appointed by the stockholders have

examined the consolidated financial statements of the Company in accordance with PhilippineStandards on Auditing, and in its report to the stockholders have expressed their opinion on thefairness of presentation upon completion of such examination.

oJ-e./<-MANUEL V. PANGILINAN

Chairman of the Board

EU 10 B. AUSTIN, JR.Pre' ent & Chief Executive Officer

~~YUChief Financial Officer an

Senior Vice President-Finance

•

Philex Mining Corpo ration

Statementof Management's Responsibility for Financial StatementsPage 2

Subscribed andsworn to before me this APR 06 2016 as Pasig City, affiantsexhibiting to me their respective Social Security 10 No. indicated opposite their names:

Name

Manuel V. PangilinanEulalia B. Austin, Jr.OannyY. Yu

4Doc. No.Page No.Book No.Seriesof 20 1 6

SSSNo.

03·1881608·30l-Q61833S·S~96968·2

AlTY.'"C ·SA H n, A.\10nA~, ':!·101-- - N OI Jr\- Pll11lic

r .l..i~T.I~ ~~~ Soli: IU J II. "areros, M to. tLtnlil Dl· ~· (,fllb... r :tJ. ItJ16

6S6 n Shaw Bh'd. Kdr itulyu, " oas ig CityM 'I{ ,\'fl. 1 21 hl~2 .1.10.7, :!Olb

I~I ' \in. 1I Q ~%~ ,.10.7, 2111ft Hull :'\1l.6h37,\ PE'(l;nlml'nt ~Il; fxu~~ IJ "')

*SGVFS014558*

INDEPENDENT AUDITORS’ REPORT

The Stockholders and the Board of DirectorsPhilex Mining CorporationPhilex Building27 Brixton StreetPasig City, Metro Manila

We have audited the accompanying consolidated financial statements of Philex Mining Corporationand its subsidiaries, which comprise the consolidated statements of financial position as atDecember 31, 2015 and 2014, and the consolidated statements of income, statements ofcomprehensive income, statements of changes in equity and statements of cash flows for each of thethree years in the period ended December 31, 2015, and a summary of significant accounting policiesand other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financialstatements in accordance with accounting principles generally accepted in the Philippines applied onthe basis described in Note 2 to the consolidated financial statements, and for such internal control asmanagement determines is necessary to enable the preparation of consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on ouraudits. We conducted our audits in accordance with Philippine Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated financial statements. The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 14, 2015, valid until December 31, 2018SEC Accreditation No. 0012-FR-4 (Group A), November 10, 2015, valid until November 9, 2018

A member firm of Ernst & Young Global Limited

*SGVFS014558*

- 2 -

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of Philex Mining Corporation and its subsidiaries as at December 31, 2015 and2014, and their financial performance and their cash flows for each of the three years in the periodended December 31, 2015 in accordance with accounting principles generally accepted in thePhilippines applied on the basis described in Note 2 to the consolidated financial statements.

SYCIP GORRES VELAYO & CO.

Jose Pepito E. Zabat IIIPartnerCPA Certificate No. 85501SEC Accreditation No. 0328-AR-3 (Group A), May 1, 2015, valid until April 30, 2018Tax Identification No. 102-100-830BIR Accreditation No. 08-001998-60-2015, February 27, 2015, valid until February 26, 2018PTR No. 5321714, January 4, 2016, Makati City

February 24, 2016


*SGVFS014558*

PHILEX MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Amounts in Thousands, Except Par Value Per Share)

December 312015 2014

ASSETSCurrent AssetsCash and cash equivalents (Note 6) P=1,008,686 P=5,231,892Accounts receivable (Notes 7, 21 and 23) 897,479 1,055,864Inventories (Note 8) 1,886,544 1,858,220Other current assets (Note 9) 1,478,748 1,384,507Total Current Assets 5,271,457 9,530,483

Noncurrent AssetsProperty, plant and equipment (Note 10) 6,828,052 7,138,912Available-for-sale (AFS) financial assets (Notes 11 and 21) 106,687 906,681Goodwill (Note 4) 1,238,583 1,238,583Investment in an associate (Note 12) 659,408 –Deferred income tax assets - net (Note 25) 5,992 8,224Deferred exploration costs and other noncurrent

assets (Notes 1, 13, 14, 18 and 19) 29,438,845 25,817,465Total Noncurrent Assets 38,277,567 35,109,865

TOTAL ASSETS P=43,549,024 P=44,640,348

LIABILITIES AND EQUITYCurrent LiabilitiesLoans payable (Note 14) P=3,317,730 P=4,307,720Accounts payable and accrued liabilities (Note 15) 1,448,445 1,795,755Income tax payable (Note 25) 13,014 47,423Dividends payable (Note 26) 479,652 488,818Provisions and subscriptions payable (Notes 1 and 31) 456,043 883,102Total Current Liabilities 5,714,884 7,522,818

Noncurrent LiabilitiesDeferred income tax liabilities - net (Notes 4 and 25) 3,939,160 3,859,141Loans and bonds payable (Note 14) 6,259,063 5,947,366Pension obligation (Note 19) 21,968 43,585Provision for losses and mine rehabilitation costs (Notes 10 and 31) 330,047 225,618Total Noncurrent Liabilities 10,550,238 10,075,710

Total Liabilities 16,265,122 17,598,528

Equity Attributable to Equity Holders of the Parent CompanyCapital stock - P=1 par value (Note 26) 4,940,399 4,940,399Additional paid-in capital 1,142,722 1,117,627Retained earnings (Note 26) Unappropriated 5,496,271 4,712,032 Appropriated 10,000,000 10,000,000Net unrealized loss on AFS financial assets (Notes 11 and 25) (1,022) (64,010)Equity conversion option (Note 14) 1,225,518 1,225,518Cumulative translation adjustments (Notes 21 and 25) 124,334 37,370Net revaluation surplus (Note 4) 1,611,397 1,611,397Effect of transactions with non-controlling interests (Note 2) 23,164 19,084

24,562,783 23,599,417Non-controlling interests (Note 26) 2,721,119 3,442,403Total Equity 27,283,902 27,041,820

TOTAL LIABILITIES AND EQUITY P=43,549,024 P=44,640,348

See accompanying Notes to Consolidated Financial Statements.

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PHILEX MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Amounts in Thousands, Except Earnings per Share)

Years Ended December 312015 2014 2013

REVENUE (Notes 7 and 21)Gold P=5,669,860 P=5,889,107 P=5,581,587Copper 3,449,799 4,615,092 4,579,757Silver 69,723 78,161 82,063

9,189,382 10,582,360 10,243,407Less smelting charges 836,597 849,837 659,536

8,352,785 9,732,523 9,583,871Petroleum and others 172,250 315,717 218,385

8,525,035 10,048,240 9,802,256

COSTS AND EXPENSESMining and milling costs (including depletion and depreciation)

(Note 16) 6,088,040 6,719,928 5,457,881General and administrative expenses (Note 16) 628,588 943,001 1,311,059Excise taxes and royalties (Note 16) 436,856 507,188 536,522Petroleum and other production costs 97,981 156,264 105,665Handling, hauling and storage 72,312 88,417 69,003

7,323,777 8,414,798 7,480,130

OTHER INCOME (CHARGES)Foreign exchange losses - net (Note 21) (132,391) (56,374) (173,972)Gain on disposal of AFS financial assets (Note 11) 107,088 – 26,867Impairment loss on deferred exploration costs - net

(Notes 8, 10 and 13) (41,218) (569,926) (297,585)Share in net loss of an associate (Note 12) (13,200) – –Interest income (Note 6) 11,529 16,952 26,060Interest expense (Notes 10 and 14) − (354,461) (416,360)Gain on sale of property, plant and equipment (Note 10) − 764,685 –Reorganization costs (Note 31) – (394,154) –Others - net (Notes 1, 7, 11, 13, 21 and 32) 9,165 14,118 (412,084)

(59,027) (579,160) (1,247,074)

INCOME BEFORE INCOME TAX 1,142,231 1,054,282 1,075,052

PROVISION FOR (BENEFIT FROM) INCOME TAX(Note 25)

Current 245,566 421,584 255,703Deferred 121,030 (70,147) 506,954

366,596 351,437 762,657

NET INCOME P=775,635 P=702,845 P=312,395

Net Income (Loss) Attributable to:Equity holders of the Parent Company P=896,181 P=1,005,552 P=341,932Non-controlling interests (Note 26) (120,546) (302,707) (29,537)

P=775,635 P=702,845 P=312,395

Basic Earnings Per Share (Note 28) P=0.181 P=0.204 P=0.069

Diluted Earnings Per Share (Note 28) P=0.181 P=0.204 P=0.069


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PHILEX MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(Amounts in Thousands)


NET INCOME P=775,635 P=702,845 P=312,395

OTHER COMPREHENSIVE INCOME (LOSS)Items to be reclassified to profit or loss in subsequent periods:

Reversal of fair value changes in AFS investmentsubsequently accounted for as an associate (Note 11) 193,099 – –

Gain on translation of foreign subsidiaries 147,278 7,655 210,071Realized gain on sale of AFS financial assets (Note 11) (107,088) – –

Unrealized loss on AFS financial assets - net of related deferred income tax (Note 11) (23,023) (68,699) (1,620,140)

Realized loss on fair value of hedging instruments transferred to the consolidated statements of income - net of related deferred income tax (Note 21) (7,766) – –

Gain on fair value of derivative (Note 21) – 7,766 – Realized loss on impairment of AFS investments (Note 11) – – 1,006,508 Realized loss on sale of AFS financial assets (Note 11) – – 30,485

202,500 (53,278) (373,076)Items not to be reclassified to profit or loss in subsequent periods:

Remeasurement gains (losses) on pension obligationplans - net of income tax effect (Note 19) (15,621) (28,038) 207,671

TOTAL OTHER COMPREHENSIVE INCOME (LOSS) 186,879 (81,316) (165,405)

TOTAL COMPREHENSIVE INCOME P=962,514 P=621,529 P=146,990

Total Comprehensive Income (Loss) Attributable to:Equity holders of the Parent Company P=1,033,019 P=921,823 P=21,275Non-controlling interests (Note 26) (70,505) (300,294) 125,715

P=962,514 P=621,529 P=146,990


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PHILEX MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013(Amounts in Thousands)

Equity Attributable to Equity Holders of the Parent Company

CapitalStock

(Note 26)

AdditionalPaid-InCapital

Retained Earnings (Note 26)

NetUnrealized

Gain (Loss)on AFS

FinancialAssets

(Note 11)

CumulativeTranslation

Adjustments(Note 21)

NetRevaluation

Surplus(Note 4)

Effect ofTransactions

withNon-

controllingInterests) Subtotal

Non-controlling

Interests(Note 26) TotalUnappropriated Appropriated

BALANCES AT DECEMBER 31, 2012 P=4,933,027 P=963,867 P=13,578,086 P=– P=601,055 (P=41,785) P=1,611,397 P=45,099 P=21,690,746 P=400,256 P=22,091,002Net income (loss) – – 341,932 – – – – – 341,932 (29,537) 312,395Other comprehensive income (loss):Items to be reclassified to profit or loss in

subsequent periods:Unrealized loss on AFS financial

assets - net of related deferredincome tax (Note 11) – – – – (1,620,140) – – – (1,620,140) – (1,620,140)

Realized loss on AFS financial assets due toimpairment – – – – 1,006,508 – – – 1,006,508 – 1,006,508

Realized loss on sale of AFS financial assets – – – 17,266 – – – 17,266 13,219 30,485Gain on translation of foreign subsidiaries – – – – – 66,901 – – 66,901 143,170 210,071

Items not to be reclassified to profit or loss in subsequent periods:

Remeasurements of net defined benefit gains,net of tax – – 208,808 – – – – – 208,808 (1,137) 207,671

Total comprehensive income – – 550,740 – (596,366) 66,901 – – 21,275 125,715 146,990Increase in paid-in capital due to exercise of stock

option and others (Note 27) 3,969 10,497 – – – – – – 14,466 – 14,466Increase in additional paid-in capital due to stock

option plan (Note 27) – 84,133 – – – – – – 84,133 – 84,133Increase in minority due to acquisition of Pitkin

Petroleum Plc (PPP) (Note 4) – – – – – – – – – 3,580,663 3,580,663Appropriation during the year (Note 26) – – (10,000,000) 10,000,000 – – – – – – –

BALANCES AT DECEMBER 31, 2013 P=4,936,996 P=1,058,497 P=4,128,826 P=10,000,000 P=4,689 P=25,116 P=1,611,397 P=45,099 P=21,810,620 P=4,106,634 P=25,917,254

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CapitalStock

AdditionalPaid-In Retained Earnings (Note 26)

NetUnrealized

Gain (Loss)on AFS

FinancialAssets

EquityConversion

Option


Adjustments(Notes 21

NetRevaluation

Surplus


withNon-

controlling

Non-controlling

Interests(Note 26) Capital Unappropriated Appropriated (Notes 11) (Note 14) and 25) (Note 4) Interests Subtotal (Note 26) Total

BALANCES AT DECEMBER 31, 2013 P=4,936,996 P=1,058,497 P=4,128,826 P=10,000,000 P=4,689 P=– P=25,116 P=1,611,397 P=45,099 P=21,810,620 P=4,106,634 P=25,917,254Net income (loss) – – 1,005,552 – – – – – – 1,005,552 (302,707) 702,845Other comprehensive income (loss):Items to be reclassified to profit or loss in

subsequent periods: Unrealized loss on AFS financial

assets - net of related deferredincome tax (Note 11) – – – – (68,699) – – – – (68,699) – (68,699)

Gain on translation of foreign subsidiaries – – – – – – 4,488 – – 4,488 3,167 7,655Items not to be reclassified to profit or loss in

subsequent periods:Remeasurements of pension obligation, net

of tax (Note 19) – – (27,283) – – – – – – (27,283) (755) (28,038) Gain on fair value of derivative – – – – – – 7,766 – – 7,766 – 7,766Total comprehensive income – – 978,269 – (68,699) – 12,254 – – 921,824 (300,295) 621,529Increase in paid-in capital due to exercise of

stock option (Note 27) 3,403 33,322 – – – – – – – 36,725 – 36,725Increase in additional paid-in capital due to stock

option plan (Note 27) – 25,808 – – – – – – – 25,808 – 25,808Sale of PPC shares – – – – – – – – 259 259 193 452Share buyback transaction (Note 2) – – – – – – – – (26,274) (26,274) (364,129) (390,403)Equity conversion options (Note 14) – – – – – 1,225,518 – – – 1,225,518 – 1,225,518Declaration of cash dividends (Note 26) – – (395,063) – – – – – – (395,063) – (395,063)

BALANCES AT DECEMBER 31, 2014 P=4,940,399 P=1,117,627 P=4,712,032 P=10,000,000 (P=64,010) P=1,225,518 P=37,370 P=1,611,397 P=19,084 P=23,599,417 P=3,442,403 P=27,041,820

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CapitalStock

AdditionalPaid-In Retained Earnings (Note 26)

NetUnrealized

Gain (Loss)on AFS

FinancialAssets

EquityConversion

Option


Adjustments(Notes 21

NetRevaluation

Surplus


withNon-

controlling

Non-controlling

Interests(Note 26) Capital Unappropriated Appropriated (Notes 11) (Note 14) and 25) (Note 4) Interests Subtotal (Note 26) Total

BALANCES AT DECEMBER 31, 2014 P=4,940,399 P=1,117,627 P=4,712,032 P=10,000,000 (P=64,010) P=1,225,518 P=37,370 P=1,611,397 P=19,084 P=23,599,417 P=3,442,403 P=27,041,820Net income (loss) – – 896,181 – – – – – – 896,181 (120,546) 775,635Other comprehensive income (loss):Items to be reclassified to profit or loss in

subsequent periods: Unrealized loss on AFS financial

assets - net of related deferredincome tax (Note 11) – – – – (23,023) – – – – (23,023) – (23,023)

Reversal of fair value changes in AFSinvestment subsequently accountedfor as an associate (Note 11) – – – – 193,099 – – – – 193,099 – 193,099

Realized gain on sale of AFS financial assets(Note 11) – – – – (107,088) – – – – (107,088)) – (107,088))

Realized loss on fair value of hedginginstruments – – – – – – (7,766) – – (7,766) – (7,766)

Gain on translation of foreign subsidiaries – – – – – – 94,730 – – 94,730 52,548 147,278Items not to be reclassified to profit or loss in

subsequent periods:Remeasurements of pension obligation, net

of tax (Note 19) – – (13,114) – – – – – – (13,114) (2,507) (15,621)Total comprehensive income – – 883,067 – 62,988 – 86,964 – – 1,033,019 (70,505) 962,514Increase in additional paid-in capital due to stock

option plan (Note 27) – 25,095 – – – – – – – 25,095 – 25,095Share buyback transaction (Note 2) – – – – – – – – 4,080 4,080 (650,779) (646,699)Declaration of cash dividends (Note 26) – – (98,828) – – – – – – (98,828) – (98,828)

BALANCES AT DECEMBER 31, 2015 P=4,940,399 P=1,142,722 P=5,496,271 P=10,000,000 (P=1,022) P=1,225,518 P=124,334 P=1,611,397 P=23,164 P=24,562,783 P=2,721,119 P=27,283,902See accompanying Notes to Consolidated Financial Statements.

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PHILEX MINING CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Thousands)


CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax P=1,142,231 P=1,054,282 P=1,075,052Adjustments for: Depletion and depreciation (Note 18) 1,568,431 1,690,556 1,447,592 Gain on disposal of AFS financial assets (Note 11) (107,088) – (26,867)

Impairment loss on deferred exploration costs and others -net (Notes 7, 8, 10 and 13) 41,218 569,926 297,934

Stock-based compensation expense (Note 27) 25,095 25,808 84,133Share in net loss of an associate (Note 12) 13,200 − −

Interest income (Note 6) (11,529) (16,952) (26,060) Interest expense (Notes 10 and 14) − 354,461 416,360 Gain on disposal of property and equipment (Note 10) − (764,685) – Reorganization costs (Note 31) – 394,154 – Provision for rehabilitation, clean up and other costs

(Notes 1 and 32) – – 161,400 Impairment loss on AFS financial assets (Note 11) – – 1,006,508 Gain on sale of subsidiaries (Note 1) – – (246,597) Unrealized foreign exchange losses and others - net 199,964 98,778 378,671Operating income before working capital changes 2,871,522 3,406,328 4,568,126Decrease (increase) in: Accounts receivable 156,711 (761,700) (63,279) Inventories (28,324) 810,054 (1,469,759) Pension assets 78,117 (101,370) (38,955) Other current assets (102,007) (33,496) (345,905)Increase (decrease) in: Accounts payable and accrued liabilities (258,443) (517,892) 1,216,999 Provisions and subscriptions payable (427,059) (316,160) (933,528) Pension obligation (45,175) 21,987 15,278Cash generated from operations 2,245,342 2,507,751 2,948,977Interest received 13,497 18,574 41,757Interest paid (512,719) (352,474) (442,220)Income taxes paid (279,975) (385,680) (77,717)Net cash flows from operating activities 1,466,145 1,788,171 2,470,797

CASH FLOWS FROM INVESTING ACTIVITIESIncrease in deferred exploration costs and other

noncurrent assets (2,669,474) (3,477,330) (3,778,195)Additions to property, plant and equipment (Note 10) (1,389,710) (2,353,691) (2,309,854)Net proceeds from sale of: Property, plant and equipment – 764,685 – Subsidiaries – – 2,097,815 AFS financial assets 297,462 – 167,999Share buyback of Pitkin (Note 1) (646,699) (395,734) –Acquisition of additional interests in PPP (net of cash acquired; Notes 1 and 4) – – (629,953)Net cash flows used in investing activities (4,408,421) (5,462,070) (4,452,188)

(Forward)

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CASH FLOWS FROM FINANCING ACTIVITIESProceeds from: Availment of short-term loans (Note 14) P=3,015,505 P=2,928,378 P=7,769,313 Exercise of stock options and others (Note 27) – 36,725 14,467 Issuance of bonds - net of transaction costs – 7,162,000 –Payments of: Short-term bank loans (Note 14) (4,191,825) (4,880,022) (3,374,935) Long-term loans – (55,014) – Dividends (Note 26) (107,994) (366,894) (22,607)Net cash flows provided by (used in) financing activities (1,284,314) 4,825,173 4,386,238

EFFECT OF EXCHANGE RATE CHANGESON CASH AND CASH EQUIVALENTS 3,384 106 6,123

NET INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS (4,223,206) 1,151,380 2,410,970

CASH AND CASH EQUIVALENTSAT BEGINNING OF YEAR 5,231,892 4,080,512 1,669,542

CASH AND CASH EQUIVALENTSAT END OF YEAR (Note 6) P=1,008,686 P=5,231,892 P=4,080,512


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PHILEX MINING CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Amounts in Thousands, Except Amounts Per Unit and Number of Shares)

1. Corporate Information, Business Operations and Authorization for Issuance of theFinancial Statements

Corporate InformationPhilex Mining Corporation and its subsidiaries are organized into two main business groupings: themetals business under Philex Mining Corporation, and the energy and hydrocarbon business underPhilex Petroleum Corporation.

Philex Mining Corporation (the Parent Company or PMC) was incorporated on July 19, 1955 in thePhilippines and is listed in the Philippine Stock Exchange on November 23, 1956. Having reachedthe end of its 50 years corporate life, the Parent Company’s Philippine Securities and ExchangeCommission (SEC) registration was renewed on July 23, 2004. The Parent Company, Philex GoldPhilippines, Inc. (PGPI, a wholly-owned subsidiary incorporated in the Philippines), LascogonMining Corporation (LMC), (a subsidiary of PGPI and incorporated in the Philippines), andSilangan Mindanao Exploration Co., Inc. (SMECI, a wholly-owned subsidiary directly by the ParentCompany and incorporated in the Philippines) and its subsidiary, Silangan Mindanao Mining Co.Inc. (SMMCI, a wholly-owned subsidiary directly by the Parent Company and through SMECI, andincorporated in the Philippines) are all primarily engaged in large-scale exploration, developmentand utilization of mineral resources. The Parent Company operates the Padcal Mine in Benguet.PGPI operated the Bulawan mine in Negros Occidental until the second quarter of 2002. LMCconducts exploration work in Taganaan, Surigao del Norte. SMMCI owns the Silangan Projectcovering the Boyongan and Bayugo deposits.

Philex Petroleum Corporation (PPC, a 64.7% owned subsidiary of the Parent Company andincorporated in the Philippines) and its subsidiaries: Forum Energy Plc (FEP, 58.2% owned andregistered in England and Wales) and its subsidiaries, Pitkin Petroleum Plc. (PPP, 53.4% owned andincorporated and registered in United Kingdom of Great Britain and Northern Ireland) and itssubsidiaries, and FEC Resources, Inc. (FEC, 51.2% owned and incorporated in Canada) are engagedprimarily in oil and gas operation and exploration activities, holding participations in oil and gasproduction and exploration activities through their investee companies.

The foregoing companies are collectively referred to as the “Group” (see Note 2) whose income isderived mainly from the Padcal Mine. Income from petroleum and coal and other sources arerelatively insignificant.

The Parent Company’s registered business address is Philex Building, 27 Brixton Street, Pasig City,Metro Manila.

Status of Business OperationsPadcal Mine OperationsThe Parent Company has the Padcal Mine as its main source of revenue from its metals businesssegment. The Padcal Mine is on its 58th year of operation producing copper concentrates containinggold, copper and silver.

On August 27, 2014, the Parent Company received an order from Mines and Geosciences Bureau(MGB) for the permanent lifting of the cease-and-desist order as the result of the Parent Company’scompliance to its environmental obligations, such as payments of required fees, the carrying out of

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immediate remediation measures, and the submission of proof on the safety and integrity of itstailings dam.

This followed the Parent Company’s voluntary suspension of Padcal Mine operations after theTailings Storage Facility (TSF) No. 3 incident in the mine arising from unabated and historicallyunprecedented heavy rains during the last two weeks of July 2012 from the two typhoons thatbrought unusual and heavy accumulation of rain water in TSF No. 3. The sealing of the undergroundtunnel in November 2012 allowed Padcal Mine to start conducting the necessary remediation andrehabilitation program (which included the rehabilitation of TSF No. 3 and the construction of anopen spillway in place of the existing penstock system for water management, and the undertakingof remediation and rehabilitation measures in the areas affected by the tailings spill) relative to theresumption of its operations.

On February 18, 2013, the Parent Company paid P=1,034,358 Mine Waste and Tailings Fee to MGBin connection with the TSF No. 3 as provided for under Department Administrative Order (DAO)No. 2010-21 implementing the provisions of the Philippine Mining Act of 1995. In an Order datedFebruary 25, 2013, the Pollution Adjudication Board (PAB) lifted its Cease and Desist Order datedNovember 28, 2012 effective for four months and imposed compliance on certain reportorialmatters. On July 5, 2013, the MGB advised the Parent Company that it was authorized to continueimplementing such remediation measures in the meantime that the former was thoroughly reviewingthe pertinent technical details, subject to the Mineral Industry Coordinating Council’s (MICC)guidance. On the same date, the PAB issued an Order extending the temporary lifting of the issuedCease and Desist Order issued last November 28, 2013 to allow the Parent Company to implementits Pollution Control Program.

The Group’s ability to continue as a going concern depends on the results of its exploration projects.The effect of these uncertainties will be reported in the consolidated financial statements as theybecome known and estimable.

The Group continues to look for sources of funding to finance its exploration activities and workingcapital requirements. On December 18, 2014, SMECI and PMC (co-issuer) have issued convertiblebonds amounting to P=7,200,000. The proceeds of the bonds were intended primarily to financeSMMCI’s exploration activities and payment of its advances from the Parent Company (seeNotes 14 and 24).

PGPIPGPI operated the Bulawan mine in Negros Occidental from 1996-2002, when it wasdecommissioned due to unfavorable metal prices. The Bulawan mine currently has remainingresources of 23.9 million tonnes, including that of the Vista Alegre area. Exploration projects in theVista Alegre area include the Nagtalay project and the Laburan/Skid 9 project, which havecompleted the geological modeling and preliminary resource estimation. PGPI is now looking forpossible joint venture partners to explore further and operate the Bulawan and Vista Alegre projects.PGPI currently holds 98.9% of LMC.

SMMCISMMCI is currently conducting the definitive feasibility study of the Silangan Project covered byMPSA-149-99-XIII following completion of its pre-feasibility study in late 2014. The Declarationof Mining Project Feasibility (DMPF) for underground mining operations was approved in April2015. As of December 31, 2015, the Company is awaiting approval for the amended DMPF foropen-pit mining operations. Adjacent to the Silangan deposits is the Kalayaan Project, theexploration of which is being undertaken by the Parent Company by virtue of a Farm-in Agreementwith Kalayaan Gold & Copper Resources, Inc., a subsidiary of Manila Mining Corporation.

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*SGVFS014558*

PPC and its subsidiariesPPP, PPC and FEP, through its subsidiaries, has various participating interests in petroleum servicecontracts as follows:

Participating InterestService Contract Pitkin PPC FEPSC 6 (Cadlao Block) – 1.65% –SC 6A (Octon Block) – 5.56%1 5.56%1

SC 6B (Bonita Block) – – 7.03%SC 14 (Tara PA) – – 10.00%SC 14 Block A (Nido) – – 8.47%SC 14 Block B (Matinloc) – – 12.41%SC 14 Block B-1 (North Matinloc) – – 19.46%SC 14 Block C (Galoc) – – 2.28%SC 14 Block C-2 (West Linapacan) 0.00%2 – 9.10%SC 14 Block D (Retention Block) – – 8.17%SC 40 (North Cebu Block) – – 100.00%SC 53 (Mindoro) 70.00%3 – –SC 72 (Reed Bank) – – 70.00%SC 74 Area 5 (Northwest Palawan) 70.00% – –SC 75 Area 4 (Northwest Palawan) – 50.00% –Peru Block XXVIII 100.00% – –Peru Block Z-38 25.00% – –1 Both PPC and FEP's interest in SC 6A returned to 5.56% upon the approval by the DOE of the Deed of Assignment

(DOA) entered into by Pitkin and the other consortium partners where the former re-assigns all of its participatinginterest to the remaining consortium partners which include PPC and FEP.

2 Pitkin’s share in SC 14C2 decreased to 0.00% upon the termination of the Farm-In Agreement (FIA) between theCompany and RMA.

3 On the letter dated 11 June 2015 to RMA, the DOE has revoked its approval of the DOA between Pitkin and RMA due tothe latter’s failure to comply with the requirements to prove its financial capability. With this, Pitkin’s share revertedto its original participating interest of 70% in SC 53.

FEP and its subsidiaries FEP’s principal asset is a 70% interest in Service Contract (SC) 72 which covers an area of 8,800square kilometers in the West Philippine Sea. FEP is scheduled to accomplish its secondsub-phase of exploration activities from August 2011 to August 2013. However, due to maritimedisputes between the Philippine and Chinese governments, exploration activities in the area aretemporarily suspended as at December 31, 2015.

FEP’s SC 14C Galoc has completed its development of Galoc Phase 2 which increased the capacityof the field to produce from 4,500 barrels of oil per day (BOPD) to 12,000 BOPD in December2013.

PPPPitkin is an international upstream oil and gas group, engaged primarily in the acquisition,exploration and development of oil and gas properties and the production of hydrocarbon productswith operations in the Philippines and Peru. Pitkin’s principal asset is 25% interest in Peru BlockZ-38.

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On July 16, 2013 and October 25, 2013, Pitkin completed the sale of all its interests in its wholly-owned subsidiaries, Vietnam American Exploration Company LLC (Vamex) with a 25%participating interest in both Vietnam Block 07/03 and Lonsdale, Inc. The gain on sale of thesesubsidiaries amounted to P=246,597. Accordingly, goodwill attributable to Vietnam Block 07/03 attime of acquisition of Pitkin by PPC was derecognized amounting to P=554,178.

PPCOn April 5, 2013, PPC increased its shareholding in Pitkin Petroleum Plc (Pitkin) from 18.46% to50.28% through subscription of 10,000,000 new ordinary shares and purchase of 36,405,000 sharesfrom existing shareholders at US$0.75 per share. The transaction led to PPC obtaining control overPitkin. Pitkin was incorporated and registered in the United Kingdom (UK) of Great Britain andNorthern Ireland on April 6, 2005.

On July 2, 2014, PPC surrendered 2,000,000 of its shares held in Pitkin following the latter’s tenderoffer to buy back 11,972,500 shares equivalent to 8.55% of all shares outstanding as of that date fora consideration of US$1 per share. Pitkin received a total of 11,099,000 shares surrendered from itsexisting shareholders. The share buyback transaction caused an increase in PPC’s ownership inPitkin from 50.3% to 53.1% as at July 2, 2014.

In May 2015, PPP tendered another offer to buy back its outstanding shares. PPC and the non-controlling interests surrendered 21,373,000 shares and 19,499,500 shares, respectively. Followingthis transaction, PPC’s interest in PPP has increased from 53.1% to 53.4%.

Recovery of Deferred Mine and Oil Exploration CostsThe Group’s ability to realize its deferred mine and oil exploration costs amounting toP=28,963,295 and P=25,366,569 as at December 31, 2015 and 2014, respectively (see Note 13),depends on the success of exploration and development work in proving the viability of its miningand oil properties to produce minerals and oil in commercial quantities, and the success ofconverting the Group’s EPs or EPAs or APSAs to new mineral agreements, which cannot bedetermined at this time. The consolidated financial statements do not include any adjustment thatmight result from these uncertainties.

Authorization for Issuance of the Financial StatementsThe consolidated financial statements are authorized for issuance by the Parent Company’s Boardof Directors (BOD) on February 24, 2016.

2. Summary of Significant Accounting Policies and Financial Reporting Practices

Basis of PreparationThe consolidated financial statements of the Group have been prepared using the historical costbasis, except for mine products inventories that are measured at net realizable value (NRV), and forAFS financial assets and derivative financial instruments that are measured at fair value.The consolidated financial statements are presented in Philippine Peso (Peso), which is the ParentCompany’s functional and reporting currency, rounded to the nearest thousands, except whenotherwise indicated.

Statement of ComplianceThe consolidated financial statements of the Group have been prepared in accordance withaccounting principles generally accepted in the Philippines. The Group prepared its consolidatedfinancial statements in accordance with Philippine Financial Reporting Standards (PFRS), exceptfor the Parent Company’s mine products inventories that are measured at NRV, which was permitted

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by the Philippine SEC. The significant accounting policies followed by the Group are disclosedbelow.

Changes in Accounting Policies and DisclosuresThe Group applied for the first time certain standards and amendments, which are effective forannual periods beginning on or after January 1, 2015. The adoption of these amendments did nothave any significant impact on the financial statements.

· Amendments to Philippine Accounting Standards (PAS) 19, Defined benefit Plans: EmployeeContributions

· Annual Improvements to PFRSs 2010 - 2012 Cycleo PFRS 2, Share-based Payment - Definition of Vesting Conditiono PFRS 3, Business Combinations - Accounting for Contingent Considerations in a Business

Combinationo PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of

the Total of the Reportable Segments’ Assets to the Entity’s Assetso PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Revaluation

Method - Proportionate Restatement of Accumulated Depreciation and Amortizationo PAS 24, Related Party Disclosures - Key Management Personnel

· Annual Improvements to PFRSs 2011 - 2013 Cycleo PFRS 3, Business Combinations - Scope Exceptions for Joint Arrangementso PFRS 13, Fair Value Measurement - Portfolio Exceptiono PAS 40, Investment Property

Future Changes in Accounting PoliciesThe standards and interpretations that are issued, but not yet effective, up to the date of issuance ofthe Group’s financial statements are listed below. The Group intends to adopt these standards whenthey become effective. Adoption of these standards and interpretations are not expected to have anysignificant impact on the financial statements of the Group.

No definite adoption date prescribed by the SEC and Financial Reporting Standards Council(FRSC)· Philippine Interpretation IFRIC 15, Agreements for the Construction of Real Estate

Effective January 1, 2016· PFRS 10, Consolidated Financial Statements, and PAS 28, Investments in Associates and joint

Ventures - Investment entities: Applying the Consolidation Exception (Amendments)· PAS 27, Separate Financial Statement - Equity Method in Separate Financial Statements

(Amendments)· PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests (Amendments)· PAS 1, Presentation of Financial Statements - Disclosure Initiative (Amendments)· PAS 14, Regulatory Deferral Accounts· PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants· PAS 16, Property, Plant and Equipment, and PAS 38, Intangible Assets - Clarification of

Acceptable Methods of Depreciation and Amortization (Amendments· Annual Improvements to PFRSs (2012 - 2014 cycle)

o PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes inMethods of Disposal

o PFRS 7, Financial Instruments: Disclosures - Servicing Contractso PFRS 7, Applicability of the Amendments to PFRS 7 to Condensed Interim Financial

Statements

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o PAS 19, Employee benefits - Regional market issue regarding discount rateo PAS 34, Interim Financial Reporting - Disclosure information elsewhere in the interim

financial report

Effective January 1, 2018· PFRS 9, Financial Instruments

In addition, to International Accounting Standards Board has issued the following new standardsthat have not yet been adopted locally by the SEC and FRSC. The Group is currently assessingthe impact of these new standards and plants to adopt them on their required effective datesonce adopted locally.

· International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers(effective January 1, 2018)

· IFRS 16, Leases (effective January 1, 2019)

Summary of Significant Accounting Policies

Presentation of Financial StatementsThe Group has elected to present all items of recognized income and expenses in two statements: astatement displaying components of profit or loss in the consolidated statement of income and asecond statement beginning with profit or loss and displaying components of other comprehensiveincome (OCI) in the consolidated statement of comprehensive income.

Basis of ConsolidationThe consolidated financial statements comprise the financial statements of the Parent Company andits subsidiaries as at December 31, 2015 and 2014. Control is achieved when the Group is exposed,or has rights, to variable returns from its involvement with the investee and has the ability to affectthose returns through its power over the investee. Specifically, the Group controls an investee ifand only if the Group has:

· Power over the investee (i.e. existing rights that give it the current ability to direct the relevantactivities of the investee),

· Exposure, or rights, to variable returns from its involvement with the investee, and· The ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Groupconsiders all relevant facts and circumstances in assessing whether it has power over an investee,including:

· The contractual arrangement with the other vote holders of the investee,· Rights arising from other contractual arrangements,· The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate thatthere are changes to one or more of the three elements of control. Consolidation of a subsidiarybegins when the Group obtains control over the subsidiary and ceases when the Group loses controlof the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed ofduring the year are included in the consolidated statement of comprehensive income from the datethe Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of OCI are attributed to the equity holders of the parent of theGroup and to the non-controlling interests, even if this results in the non-controlling interests havinga deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries

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to bring their accounting policies into line with the Group’s accounting policies. All intra-groupassets and liabilities, equity, income, expenses and cash flows relating to transactions betweenmembers of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as anequity transaction. If the Group loses control over a subsidiary, it:

· Derecognizes the assets (including goodwill) and liabilities of the subsidiary· Derecognizes the carrying amount of any non-controlling interests· Derecognizes the cumulative translation differences recorded in equity· Recognizes the fair value of the consideration received· Recognizes the fair value of any investment retained· Recognizes any surplus or deficit in profit or loss· Reclassifies the parent’s share of components previously recognized in OCI to profit or loss or

retained earnings, as appropriate, as would be required if the Group had directly disposed of therelated assets or liabilities.

The Parent Company’s subsidiaries and their respective natures of businesses are as follows:

Subsidiaries Nature and Principal Place of Business

Philex Gold Holdings, Inc. (PGHI) Incorporated in the Philippines on August 28, 1996 to serve as anintermediary holding company through which its subsidiaries and theParent Company conduct large-scale exploration, development andutilization of mineral resources. PGHI owned 100% of theoutstanding shares of PGPI effective April 27, 2010. In 2015, PGHIsold 100% of its ownership in PGPI to the Parent Company.

Philex Gold Inc. (PGI) Incorporated in Canada on June 14, 1996 and owned 100% of theoutstanding shares of PGPI until April 26, 2010.

PGPI Incorporated in the Philippines on August 9, 1996 as a wholly-ownedsubsidiary of PGI and became a wholly-owned subsidiary of PGHI onApril 27, 2010. In 2015, PGPI was acquired and 100% owned by theParent Company. PGPI was primarily engaged in the operation of theBulawan mine and the development of the Sibutad Project both oncare and maintenance status since 2002. PGPI currently owns 98.9%of the outstanding shares of LMC.

LMC Incorporated in the Philippines on October 20, 2005 to engage inexploration, development and utilization of mineral resources,particularly the Lascogon Project in Surigao.

SMECI Incorporated in the Philippines on October 12, 1999 primarily toengage in the business of large-scale exploration, development andutilization of mineral resources; currently the holding company ofSMMCI.

SMMCI Incorporated in the Philippines on January 4, 2000 primarily toengage in the business of large-scale exploration, development andutilization of mineral resources, principally the Silangan Project.

PPC Incorporated in the Philippines on December 27, 2007 to carry onbusinesses related to any and all kinds of petroleum and petroleumproducts, oil, and other sources of energy. PPC’s shares are listed inthe Philippine Stock Exchange.

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Subsidiaries Nature and Principal Place of Business

FEP Incorporated on April 1, 2005 in England and Wales primarily toengage in the business of oil and gas exploration and production, withfocus on the Philippines. FEP shares were delisted in the AlternativeInvestment Market of the London Stock Exchange in 2015.

FEC Incorporated on February 8, 1982 under the laws of Alberta, Canadaprimarily to engage in the business of exploration and developmentof oil and gas and other mineral related opportunities.

BEMC Incorporated in the Philippines on July 19, 2005 to engage inexploration, development and utilization of energy-related resources,particularly the Brixton coal operations in Diplahan, ZamboangaSibugay. On September 1, 2013, BEMC announced the closure of itscoal mine in Diplahan, Zamboanga Sibugay.

On January 6, 2014, BEMC has finalized the agreement for theassignment of COC 130 to Grace Coal Mining and Development Inc.(GCMDI). On May 12, 2015, the DOE has approved the assignmentcompleting the transfer of COC 130 from BEMC to GCMDI.

PPP Incorporated and registered in United Kingdom (UK) of Great Britainand Northern Ireland on April 6, 2005 and is engaged primarily in theacquisition, exploration and development of oil and gas properties andthe production of hydrocarbon products. PPP registered its PhilippineBranch, Pitkin Petroleum (Philippines) Plc, on March 19, 2008 and ispresently engaged in the exploration of oil and gas assets in thePhilippine territories.

Fidelity Stock Transfers, Inc. (FSTI) Incorporated in the Philippines on December 28, 1981 to act as a stocktransfer agent and/or registrar of client corporations. The company iscurrently in dormant status.

Philex Land, Inc. (PLI) Incorporated in the Philippines on February 26, 2007 to own, use,develop, subdivide, sell, exchange, lease, and hold for investment orotherwise, real estate of all kinds including buildings, houses,apartments and other structures. The company is currently in dormantstatus.

Philex Insurance Agency, Inc.(PIAI)

Incorporated in the Philippines on May 20, 1987 to act as a generalagent for and in behalf of any domestic and/or foreign non-lifeinsurance company or companies authorized to do business in thePhilippines. PIAI is currently in dormant status.

Also included as part of the Parent Company’s subsidiaries are those intermediary entities whichare basically holding companies established for the operating entities mentioned above. Thefollowing are the intermediary entities of the Group: Forum Philippine Holdings Limited (FPHL),Forum FEI Limited (FFEIL), Pitkin Peru LLC (PPR), Pitkin Petroleum Peru 2 LLC (PP2) and PitkinPetroleum Peru 3 LLC (PP3).

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The ownership of the Parent Company and subsidiaries over the foregoing companies in 2015 and2014 are summarized as follows:

Percentages of Ownership2015 2014

Direct Indirect Direct IndirectPGHI 100.0 – 100.0 –

PGI – 100.0 – 100.0PGPI – – – 100.0

LMC – – – 98.9PGPI 100.0 – – –

LMC – 98.9 – –PPC 64.7 64.8 –

BEMC – 100.0 – 100.0FEP and

subsidiaries – 48.8 – 36.4FEC – 51.2 – 51.2

LMC – 1.1 – 1.1FEP – 18.4 – 24.1

PPP – 53.4 – 53.1SMECI 100.0 – 100.0 –

SMMCI – 100.0 – 100.0FSTI 100.0 – 100.0 –PLI 100.0 – 100.0 –PIAI 100.0 – 100.0 –

Sale of PPC sharesIn 2015, PMC sold 839,100 share of PPC to third parties. The resulting sale of share decreased theownership of the Parent Company in PPC from 64.8% to 64.7%.

Infusion of additional capital of PMC in SMECIOn February 3, 2015, by virtue of SMECI’s BOD and by the vote of the stockholders representingat least two-thirds of the outstanding capital stock, SMECI’s Articles of Incorporation wereamended to increase its authorized capital stock from 170,000 shares with par value of P=10,000 pershare to 1,000,000 shares also with a par value of P=10,000 per share. On February 10, 2015, PMCsubscribed 500,000 shares out of the 830,000 new shares for an aggregate price of P=7,207,500.

Acquisition of additional shares of PPPOn July 2, 2014, PPC surrendered 2,000,000 of its shares held in PPP following the latter’s tenderoffer to buy back 11,972,500 shares equivalent to 8.55% of all shares outstanding as of that date fora consideration of US$1 per share. PPP received a total of 11,099,000 shares surrendered from itsexisting shareholders. The share buyback transaction resulted to an increase in PPC’s ownership inPPP from 50.3% to 53.1%.

In May 2015, PPP tendered another offer to buy back its outstanding shares. PPC and the non-controlling interests surrendered 21,373,000 shares and 19,499,500 shares, respectively. Followingthis transaction, PPC’s interest in PPP has increased from 53.1% to 53.4%.

Acquisition of additional investment in FEPIn June and November 2015, PPC purchased additional investment from the non-controllingshareholders of FEP. The transaction resulted in increase in ownership of PPC over FEP from 36.4%to 48.8%.

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NCINCI represents interest in a subsidiary that is not owned, directly or indirectly, by the ParentCompany. Profit or loss and each component of OCI (loss) are attributed to the equity holders ofthe Parent Company and to the NCI. Total comprehensive income (loss) is attributed to the equityholders of the Parent Company and to the NCI even if this results in the NCI having a deficit balance.

NCI represents the portion of profit or loss and the net assets not held by the Group. Transactionswith NCI are accounted for as an equity transaction.

Interest in Joint ArrangementsPFRS defines a joint arrangement as an arrangement over which two or more parties have jointcontrol. Joint control is the contractually agreed sharing of control of an arrangement, which existsonly when decisions about the relevant activities (being those that significantly affect the returns ofthe arrangement) require unanimous consent of the parties sharing control.

Joint operationsA joint operation is a type of joint arrangement whereby the parties that have joint control of thearrangement have rights to the assets and obligations for the liabilities, relating to the arrangement.

In relation to its interests in joint operations, the Group recognises its:· Assets, including its share of any assets held jointly· Liabilities, including its share of any liabilities incurred jointly· Revenue from the sale of its share of the output arising from the joint operation· Share of the revenue from the sale of the output by the joint operation· Expenses, including its share of any expenses incurred jointly

Business Combination and GoodwillBusiness combinations, except for business combination between entities under common control,are accounted for using the acquisition method. The cost of an acquisition is measured as theaggregate of the consideration transferred, measured at acquisition date fair value and the amountof any NCI in the acquiree. For each business combination, the acquirer measures the NCI in theacquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets.Acquisition-related costs incurred are expensed and included in general and administrativeexpenses.

When the Group acquires a business, it assesses the financial assets and financial liabilities assumedfor appropriate classification and designation in accordance with the contractual terms, economiccircumstances and pertinent conditions as at the acquisition date. This includes the separation ofembedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the acquisition date fair value of the acquirer’spreviously held equity interest in the acquiree is remeasured to fair value at the acquisition date andany gain or loss on remeasurement is recognized in the consolidated statement of income.

Any contingent consideration to be transferred by the acquirer will be recognized at fair value at theacquisition date. Subsequent changes to the fair value of the contingent consideration which isdeemed to be an asset or liability, will be recognized in accordance with PAS 39 either in theconsolidated statement of income, or in the consolidated statement of comprehensive income. If thecontingent consideration is classified as equity, it is not remeasured until it is finally settled withinequity.

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Goodwill is initially measured at cost being the excess of the aggregate of the considerationtransferred and the amount recognized for NCI over the net identifiable assets acquired andliabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiaryacquired, the difference is recognized in the consolidated statement of income.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Forthe purpose of impairment testing, goodwill acquired in a business combination is, from theacquisition date, allocated to each of the Group’s cash-generating units (CGUs) that are expected tobenefit from the combination, irrespective of whether other assets or liabilities of the acquiree areassigned to those units.

Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, thegoodwill associated with the operation disposed of is included in the carrying amount of theoperation when determining the gain or loss on disposal of the operation. Goodwill disposed of inthis circumstance is measured based on the relative values of the operation disposed of and theportion of the CGU retained.

Goodwill is reviewed for impairment, annually or more frequently if events or changes incircumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of the CGU or groupof CGUs to which the goodwill relates. Where the recoverable amount of the CGU or group ofCGUs is less than the carrying amount of the CGU or group of CGUs to which goodwill has beenallocated, an impairment loss is recognized in the consolidated statement of income. Impairmentlosses relating to goodwill cannot be reversed in future periods. The Group performs its impairmenttest of goodwill annually every December 31.

Foreign Currency Translation of Foreign OperationsEach subsidiary in the Group determines its own functional currency and items included in theconsolidated financial statement of each subsidiary are measured using that functional currency.Transactions in foreign currencies are initially recorded in the functional currency rate on the dateof the transaction. Outstanding monetary assets and liabilities denominated in foreign currenciesare retranslated at the functional currency rate of exchange at consolidated statement of financialposition date. All exchange differences are recognized in consolidated statements of income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translatedusing the exchange rates as at the dates of the initial transactions. Non-monetary items measured atfair value in a foreign currency are translated using the exchange rates at the date when the fair valuewas determined.

For purposes of consolidation, the financial statements of FEP, PPP and PGI, which are expressedin United States of America (US) dollar amounts and the financial statements of FEC, which areexpressed in Canadian (Cdn) dollar amounts, have been translated to Peso amounts as follows:

a. assets and liabilities for each statement of financial position presented (i.e., includingcomparatives) are translated at the closing rate at the date of the consolidated statement offinancial position;

b. income and expenses for each statement of income (i.e., including comparatives) are translatedat exchange rates at the average monthly prevailing rates for the year; and

c. all resulting exchange differences are taken in the consolidated statement of comprehensiveincome.

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Cash and Cash EquivalentsCash includes cash on hand and with banks. Cash equivalents are short-term, highly liquidinvestments that are readily convertible to known amounts of cash with original maturities of threemonths or less from dates of acquisition and that are subject to insignificant risk of change in value.

Financial InstrumentsDate of recognitionThe Group recognizes a financial asset or a financial liability in the consolidated statement offinancial position when it becomes a party to the contractual provisions of the instrument. Purchasesor sales of financial assets that require delivery of assets within the time frame established byregulation or convention in the marketplace are recognized on the trade date.

Initial recognition and classification of financial instrumentsFinancial instruments are recognized initially at fair value. The initial measurement of financialinstruments, except for those designated at fair value through profit or loss (FVPL), includestransaction cost.

On initial recognition, the Group classifies its financial assets in the following categories: financialassets at FVPL, loans and receivables, held-to-maturity (HTM) investments, and AFS financialassets. The classification depends on the purpose for which the investments are acquired andwhether they are quoted in an active market. Financial liabilities, on the other hand, are classifiedinto the following categories: financial liabilities at FVPL and other financial liabilities, asappropriate. Management determines the classification of its financial assets and financial liabilitiesat initial recognition and, where allowed and appropriate, re-evaluates such designation at everyreporting date.

Financial instruments are classified as liabilities or equity in accordance with the substance of thecontractual arrangement. Interest, dividends, gains and losses relating to a financial instrument ora component that is a financial liability are reported as expense or income. Distributions to holdersof financial instruments classified as equity are charged directly to equity, net of any related incometax benefits.

As at December 31, 2015 and 2014, the Group’s financial assets and financial liabilities consist ofloans and receivables, AFS financial assets and other financial liabilities.

Determination of fair valueThe Group measures financial instruments, such as, derivatives, and non-financial assets such asinvestment properties, at fair value at each statement of financial position date. Fair value is theprice that would be received to sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date. The fair value measurement is based on thepresumption that the transaction to sell the asset or transfer the liability takes place either:

· In the principal market for the asset or liability, or· In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Group. The fair valueof an asset or a liability is measured using the assumptions that market participants would use whenpricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s abilityto generate economic benefits by using the asset in its highest and best use or by selling it to anothermarket participant that would use the asset in its highest and best use.

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The Group uses valuation techniques that are appropriate in the circumstances and for whichsufficient data are available to measure fair value, maximizing the use of relevant observable inputsand minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements arecategorized within the fair value hierarchy, described as follows, based on the lowest level inputthat is significant to the fair value measurement as a whole:

· Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities· Level 2 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is directly or indirectly observable· Level 3 - Valuation techniques for which the lowest level input that is significant to the fair

value measurement is unobservable

For assets and liabilities that are recognized in the financial statements on a recurring basis, theGroup determines whether transfers have occurred between Levels in the hierarchy by re-assessingcategorization (based on the lowest level input that is significant to the fair value measurement as awhole) at the end of each reporting period.

Day 1 differenceWhere the transaction price in a non-active market is different from the fair value based on otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables include only data from observable market, the Group recognizes the differencebetween the transaction price and fair value (a Day 1 difference) in the consolidated statement ofincome unless it qualifies for recognition as some other type of asset. In cases where use is madeof data which is not observable, the difference between the transaction price and model value is onlyrecognized in the consolidated statement of income when the inputs become observable or when theinstrument is derecognized. For each transaction, the Group determines the appropriate method ofrecognizing the “Day 1” difference amount.

Derivatives and HedgingThe Group uses currency and commodity derivatives such as forwards, swaps and option contractsto economically hedge its exposure to fluctuations in gold and copper prices. For accountingpurposes, such derivative financial instruments are initially recognized at fair value on the date onwhich a derivative contract is entered into and are subsequently remeasured at fair value.Derivatives are carried as assets when the fair value is positive and as liabilities when the fair valueis negative.

Derivatives are accounted for as at FVPL, where any gains or losses arising from changes in fairvalue on derivatives are taken directly to consolidated statement of income, unless hedge accountingis applied.

For the purpose of hedge accounting, hedges are classified as:a. fair value hedges when hedging the exposure to changes in the fair value of a recognized asset

or liability; orb. cash flow hedges when hedging exposure to variability in cash flows that is either attributable

to a particular risk associated with a recognized asset or liability or a forecast transaction; orc. hedges of a net investment in a foreign operation.

A hedge of the foreign currency risk of a firm commitment is accounted for as a cash flow hedge.

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At the inception of a hedge relationship, the Group formally designates and documents the hedgerelationship to which the Group wishes to apply hedge accounting and the risk managementobjective and strategy for undertaking the hedge. The documentation includes identification of thehedging instrument, the hedged item or transaction, the nature of the risk being hedged and how theentity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in thehedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected tobe highly effective in achieving offsetting changes in fair value or cash flows and are assessed onan ongoing basis to determine that they actually have been highly effective throughout the financialreporting periods for which they were designated.

Hedges that meet the strict criteria for hedge accounting are accounted for as follows:

Cash flow hedgesCash flow hedges are hedges of the exposure to variability in cash flows that is attributable to aparticular risk associated with a recognized asset or liability or a highly probable forecast transactionand could affect profit or loss. The effective portion of the gain or loss on the hedging instrument isrecognized in the consolidated statement of comprehensive income, while the ineffective portion isrecognized in the consolidated statement of income.

Amounts taken to equity are transferred to the consolidated statement of income when the hedgedtransaction affects profit or loss, such as when the hedged financial income or financial expense isrecognized or when a forecast sale or purchase occurs. When the hedged item is the cost of a non-financial asset or liability, the amounts recognized as OCI are transferred to the initial carryingamount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, amounts previouslyrecognized in equity are transferred to the consolidated statement of income. If the hedginginstrument expires or is sold, terminated or exercised without replacement or rollover, or if itsdesignation as a hedge is revoked, amounts previously recognized in equity remain in equity untilthe forecast transaction or firm commitment occurs. If the related transaction is not expected tooccur, the amount is taken to the consolidated statement of income.

Embedded derivativesAn embedded derivative is separated from the host financial or non-financial contract and accountedfor as a derivative if all of the following conditions are met:

§ the economic characteristics and risks of the embedded derivative are not closely related to theeconomic characteristic of the host contract;

§ a separate instrument with the same terms as the embedded derivative would meet the definitionof a derivative; and

§ the hybrid or combined instrument is not recognized as at FVPL.

The Group assesses whether embedded derivatives are required to be separated from host contractswhen the Group first becomes a party to the contract. Reassessment only occurs if there is a changein the terms of the contract that significantly modifies the cash flows that would otherwise berequired.

Embedded derivatives that are bifurcated from the host contracts are accounted for either as financialassets or financial liabilities at FVPL. Changes in fair values are included in the consolidatedstatement of income.

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Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. After initial measurement, loans and receivables are subsequentlycarried at amortized cost using the effective interest method less any allowance for impairment.Amortized cost is calculated taking into account any discount or premium on acquisition andincludes transaction costs and fees that are an integral part of the effective interest rate andtransaction costs. Gains and losses are recognized in the consolidated statement of income when theloans and receivables are derecognized or impaired, as well as through the amortization process.These financial assets are included in current assets if maturity is within 12 months from theconsolidated statement of financial position date. Otherwise, these are classified as noncurrentassets.

As of December 31, 2015 and 2014, the Group’s cash and cash equivalents and accounts receivableare included under loans and receivables.

AFS Financial AssetsAFS financial assets are non-derivative financial assets that are designated as AFS or are notclassified in any of the three other categories. The Group designates financial instruments as AFSfinancial assets if they are purchased and held indefinitely and may be sold in response to liquidityrequirements or changes in market conditions. After initial recognition, AFS financial assets aremeasured at fair value with unrealized gains or losses being recognized in the consolidated statementof comprehensive income as “Net unrealized gain (loss) on AFS financial assets.”

When the investment is disposed of, the cumulative gains or losses previously recorded in equityare recognized in the consolidated statement of income. Interest earned on the investments isreported as interest income using the effective interest method. Dividends earned on investmentsare recognized in the consolidated statement of income as “Dividend income” when the right ofpayment has been established. The Group considers several factors in making a decision on theeventual disposal of the investment. The major factor of this decision is whether or not the Groupwill experience inevitable further losses on the investment. These financial assets are classified asnoncurrent assets unless the intention is to dispose of such assets within 12 months from theconsolidated statement of financial position date.

Note 11 discuss the details of the Group’s AFS financial assets as of December 31, 2015 and 2014.

Other Financial LiabilitiesOther financial liabilities are initially recorded at fair value, less directly attributable transactioncosts. After initial recognition, interest-bearing loans and borrowings are subsequently measured atamortized cost using the effective interest method. Amortized cost is calculated by taking intoaccount any issue costs and any discount or premium on settlement. Gains and losses are recognizedin the consolidated statement of income when the liabilities are derecognized as well as through theamortization process.

As at December 31, 2015 and 2014, included in other financial liabilities are the Group’s accountspayable and accrued liabilities, dividends payable, subscriptions payable and loans and bondspayable (see Notes 14, 15 and 26).

Debt Issuance CostsDebt issuance costs are amortized using effective interest rate method and unamortized debtissuance costs are included in the measurement of the related carrying value of the debt in theconsolidated statement of financial position. When loan is repaid, the related unamortized debtissuance costs at the date of repayment are charged in the consolidated statement of income.

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Impairment of Financial AssetsThe Group assesses at each consolidated statement of financial position date whether there isobjective evidence that a financial asset or a group of financial assets is impaired. A financial assetor a group of financial assets is deemed to be impaired if, and only if, there is objective evidence ofimpairment as a result of one or more events that have occurred after the initial recognition of theasset (an incurred “loss event”) and that loss event (or events) has an impact on the estimated futurecash flows of the financial asset or the group of financial assets that can be reliably estimated.Evidence of impairment may include indications that the contracted parties or a group of contractedparties are/is experiencing significant financial difficulty, default or delinquency in interest orprincipal 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 cashflows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at costIf there is objective evidence that an impairment loss on an unquoted equity instrument, that is notcarried at fair value because its fair value cannot be reliably measured, or on a derivative asset thatis linked to and must be settled by delivery of such an unquoted equity instrument has been incurred,the amount of the loss is measured as the difference between the asset’s carrying amount and thepresent value of estimated future cash flows discounted at the current market rate of return of asimilar financial asset.

Loans and receivablesThe Group first assesses whether objective evidence of impairment exists individually for financialassets that are individually significant, and individually or collectively for financial assets that arenot individually significant. If there is objective evidence that an impairment loss on financial assetscarried at amortized cost has been incurred, the amount of loss is measured as a difference betweenthe asset’s carrying amount and the present value of estimated future cash flows (excluding futurecredit losses that have not been incurred) discounted at the financial asset’s original effective interestrate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the assetshall be reduced through the use of an allowance account. The amount of loss is recognized in theconsolidated statement of income.

If it is determined that no objective evidence of impairment exists for an individually assessedfinancial asset, whether significant or not, the asset is included in the group of financial assets withsimilar credit risk characteristics and that group of financial assets is collectively assessed forimpairment. Assets that are individually assessed for impairment and for which an impairment lossis or continues to be recognized are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can berelated objectively to an event occurring after the impairment was recognized, the previouslyrecognized impairment loss is reversed. Any subsequent reversal of an impairment loss isrecognized in the consolidated statement of income, to the extent that the carrying value of the assetdoes not exceed its amortized cost at the reversal date.

AFS financial assetsFor AFS financial assets, the Group assesses at each consolidated statement of financial positiondate whether there is objective evidence that a financial asset or group of financial assets is impaired.In case of equity investments classified as AFS financial assets, this would include a significant orprolonged decline in the fair value of the investments below its cost. The determination of what is“significant” or “prolonged” requires judgment. The Group treats “significant” generally as 20% ormore and “prolonged” as greater than 12 months for quoted equity securities. When there is evidenceof impairment, the cumulative loss measured as the difference between the acquisition cost and the

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current fair value, less any impairment loss on that financial asset previously recognized in theconsolidated statement of income is removed from equity and recognized in the consolidatedstatement of income.

Impairment losses on equity investments are recognized in the consolidated statement of income.Increases in fair value after impairment are recognized directly in the consolidated statement ofcomprehensive income.

Derecognition of Financial Assets and Financial LiabilitiesFinancial assetsA financial asset (or, where applicable, a part of a financial asset or part of a group of similarfinancial assets) is derecognized when:

§ the rights to receive cash flows from the asset have expired;§ the Group 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 Group has transferred its rights to receive cash flows from the asset and either (a) hastransferred substantially all the risks and rewards of the asset, or (b) has neither transferred norretained substantially all risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset or has entered into apass-through arrangement and has neither transferred nor retained substantially all the risks andrewards of the asset nor transferred control of the asset, the asset is recognized to the extent of theGroup’s continuing involvement in the asset. Continuing involvement that takes the form of aguarantee over the transferred asset is measured at the lower of the original carrying amount of theasset and the maximum amount of consideration that the Group could be required to repay. Wherecontinuing involvement takes the form of a written and/or purchased option (including a cash-settledoption or similar provision) on the transferred asset, the extent of the Group’s continuinginvolvement is the amount of the transferred asset that the Group may repurchase, except that in thecase of a written put option (including a cash-settled option or similar provision) on asset measuredat fair value, the extent of the Group’s continuing involvement is limited to the lower of the fairvalue of the transferred asset and the option exercise price.

Financial liabilitiesA financial liability is derecognized when the obligation under the liability is discharged, cancelledor has expired.

Where an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability are substantially modified, such an exchange ormodification is treated as a derecognition of the original liability and the recognition of a newliability, and the difference in the respective carrying amounts is recognized in the consolidatedstatement of income.

InventoriesMine products inventory, which consist of copper concentrates containing copper, gold and silver,are stated at NRV. Coal and petroleum inventory and materials and supplies are valued at the lowerof cost and NRV.

NRV for mine products and coal inventory is the selling price in the ordinary course of business,less the estimated costs of completion and estimated costs necessary to make the sale. In the case ofmaterials and supplies, NRV is the value of the inventories when sold at their condition at theconsolidated statement of financial position date.

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Costs of coal include all mining and mine-related costs and cost of purchased coal from small-scaleminers. These costs are aggregated to come up with the total coal inventory cost. Unit cost isdetermined using the moving average method.

Cost of petroleum inventory includes share in productions costs consisting of costs of conversionand other costs incurred in bringing the inventories to their present location and condition. Unit costis determined using the weighted average method.

Costs of materials and supplies comprise all costs of purchase and other costs incurred in bringingthe materials and supplies to their present location and condition. The purchase cost is determinedon a moving average basis.

Input Tax RecoverableInput tax recoverable is stated at 10% in prior years up to January 2006 and 12% starting February2006 of the applicable purchase cost of goods and services, net of output tax liabilities and allowancefor probable losses. Input tax recoverable represents the value-added tax (VAT) paid on purchasesof applicable goods and services, net of output tax liabilities, which can be recovered as tax creditagainst future tax liabilities of the Group upon approval by the BIR and/or the Philippine Bureau ofCustoms.

Property, Plant and EquipmentProperty, plant and equipment, except land, are stated at cost less accumulated depletion anddepreciation and accumulated impairment in value, if any. Land is stated at cost less anyaccumulated impairment in value.

The initial cost of property, plant and equipment consists of its purchase price and any directlyattributable costs of bringing the asset to its working condition and location for its intended use andany estimated cost of dismantling and removing the property, plant and equipment item andrestoring the site on which it is located to the extent that the Group had recognized the obligation tothat cost. Such cost includes the cost of replacing part of the property, plant and equipment if therecognition criteria are met. When significant parts of property, plant and equipment are required tobe replaced in intervals, the Group recognizes such parts as individual assets with specific usefullives and depreciation. Likewise, when a major inspection is performed, its cost is recognized in thecarrying amount of property, plant and equipment as a replacement if the recognition criteria aresatisfied. All other repair and maintenance costs are recognized in the consolidated statement ofincome as incurred.

When assets are sold or retired, the cost and related accumulated depletion and depreciation, andaccumulated impairment in value are removed from the accounts and any resulting gain or loss isrecognized in the consolidated statement of income.

Depletion or amortization of mine, mining and oil and gas properties is calculated using theunits-of-production method based on estimated recoverable reserves. Depreciation of other itemsof property, plant and equipment is computed using the straight-line method over the estimateduseful lives of the assets as follows:

No. of YearsBuildings and improvements 5 to 10Machinery and equipment 2 to 20Surface structures 10

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Depreciation or depletion of an item of property, plant and equipment begins when it becomesavailable for use, i.e., when it is in the location and condition necessary for it to be capable ofoperating in the manner intended by management. Depreciation or depletion ceases at the earlier ofthe date that the item is classified as held for sale (or included in a disposal group that is classifiedas held for sale) in accordance with PFRS 5, and the date the asset is derecognized.

The estimated recoverable reserves, useful lives, and depreciation and depletion methods arereviewed periodically to ensure that the estimated recoverable reserves, periods and methods ofdepletion and depreciation are consistent with the expected pattern of economic benefits from theitems of property, plant and equipment.

Property, plant and equipment also include the estimated costs of rehabilitating the ParentCompany’s Padcal Mine and BEMC’s Coal Mine, for which the Group is constructively liable.These costs, included under land, buildings and improvements, are amortized using theunits-of-production method based on the estimated recoverable mine reserves until the Groupactually incurs these costs in the future.

Level and block development (included as part of mine and mining and oil and gas properties) andconstruction in progress are stated at cost, which includes the cost of construction, plant andequipment, other direct costs and borrowing costs, if any. Block development and construction inprogress are not depleted nor amortized until such time as these are completed and become availablefor use.

Deferred Exploration CostsExpenditures for exploration works on oil and mining properties (i.e., acquisition of rights toexplore, topographical, geological, geochemical and geophysical studies, exploratory drilling,trenching, sampling, and activities in relation to evaluating the technical feasibility and commercialviability of extracting an oil and mineral resource) are deferred as incurred and included under“Deferred exploration costs and other noncurrent assets” account in the consolidated statement offinancial position. If and when recoverable reserves are determined to be present in commerciallyproducible quantities, the deferred exploration expenditures, and subsequent oil and minedevelopment costs are capitalized as part of the mine and mining and oil and gas properties accountclassified under property, plant and equipment.

A valuation allowance is provided for unrecoverable deferred oil and mine exploration costs basedon the Group’s assessment of the future prospects of the exploration project. Full provision is madefor the impairment unless it is probable that such costs are expected to be recouped throughsuccessful exploration and development of the area of interest, or alternatively, by its sale. If theproject does not prove to be viable or when the project is abandoned, the deferred oil and mineexploration costs associated with the project and the related impairment provisions are written off.Exploration areas are considered permanently abandoned if the related permits of the explorationhave expired and/or there are no definite plans for further exploration and/or development.

Borrowing CostsBorrowing costs that are directly attributable to the acquisition, construction or production of aqualifying asset as part of the cost of that asset is capitalized by the Group. The capitalization ofborrowing costs: (i) commences when the activities to prepare the assets are in progress andexpenditures and borrowing costs are being incurred; (ii) is suspended during the extended periodsin which active development, improvement and construction of the assets are interrupted; and(iii) ceases when substantially all the activities necessary to prepare the assets are completed.

Other borrowing costs are recognized as an expense in the period in which they are incurred.

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Impairment of Noncurrent Non-financial AssetsThe Group’s noncurrent non-financial assets include property, plant and equipment, deferred mineexploration costs, and other noncurrent assets. The Group assesses at each reporting date whetherthere is indication that a noncurrent non-financial asset or CGU may be impaired. If any indicationexists, or when an annual impairment testing for such items is required, the Group makes an estimateof their recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’sfair value less costs to sell and its value in use, and is determined for an individual item, unless suchitem does not generate cash inflows that are largely independent of those from other assets or groupof assets or CGUs. When the carrying amount exceeds its recoverable amount, such item isconsidered impaired and is written down to its recoverable amount. In assessing value in use, theestimated future cash flows to be generated by such items are discounted to their present value usinga pre-tax discount rate that reflects the current market assessment of the time value of money andthe risks specific to the asset or CGU. Impairment losses of continuing operations are recognizedin the consolidated statement of income in the expense categories consistent with the function of theimpaired asset.

An assessment is made at least on each consolidated statement of financial position date as towhether there is indication that previously recognized impairment losses may no longer exist ormay have decreased. If any indication exists, the recoverable amount is estimated and a previouslyrecognized impairment loss is reversed only if there has been a change in the estimate in the assetsor CGU’s recoverable amount since the last impairment loss was recognized. If so, the carryingamount of the item is increased to its new recoverable amount which cannot exceed theimpairment loss recognized in prior years. Such reversal is recognized in the consolidatedstatement of income unless the asset or CGU is carried at its revalued amount, in which case thereversal is treated as a revaluation increase. After such a reversal, the depreciation charge isadjusted in future periods to allocate the asset’s revised carrying amount less any residual value ona systematic basis over its remaining estimated useful life.

Provision for Mine Rehabilitation CostsThe Group records the present value of estimated costs of legal and constructive obligations requiredto restore the mine site upon termination of the mine operations. The nature of these restorationactivities includes dismantling and removing structures, rehabilitating mines and settling ponds,dismantling operating facilities, closure of plant and waste sites, and restoration, reclamation andre-vegetation of affected areas. The obligation generally arises when the asset is constructed or theground or environment is disturbed at the mine site. When the liability is initially recognized, thepresent value of the estimated cost is capitalized as part of the carrying amount of the related miningassets.

Changes to estimated future costs are recognized in the consolidated statement of financial positionby either increasing or decreasing the rehabilitation liability and asset to which it relates if the initialestimate was originally recognized as part of an asset measured in accordance withPAS 16, Property, Plant and Equipment. Any reduction in the rehabilitation liability and, therefore,any deduction from the asset to which it relates, may not exceed the carrying amount of that asset.If it does, any excess over the carrying value is taken immediately to consolidated profit or loss.

If the change in estimate results in an increase in the rehabilitation liability and, therefore, anaddition to the carrying value of the asset, the Group considers whether this is an indication ofimpairment of the asset as a whole, and if so, tests for impairment in accordance with PAS 36.If, for mature mines, the estimate for the revised mine assets net of rehabilitation provisions exceedsthe recoverable value that portion of the increase is charged directly to expense.

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For closed sites, changes to estimated costs are recognized immediately in consolidated profit orloss.

Capital StockOrdinary or common shares are classified as equity. The proceeds from the increase of ordinary orcommon shares are presented in equity as capital stock to the extent of the par value issued sharesand any excess of the proceeds over the par value or shares issued less any incremental costs directlyattributable to the issuance, net of tax, is presented in equity as additional paid-in capital.

Dividends on Common SharesCash and property dividends on common shares are recognized as a liability and deducted fromequity when approved by the respective shareholders of the Parent Company. Stock dividends aretreated as transfers from retained earnings to capital stock.

Dividends for the year that are approved after the consolidated statement of financial position dateare dealt with as an event after the consolidated statement of financial position date.

Retained EarningsRetained earnings represent the cumulative balance of periodic net income or loss, dividendcontributions, prior period adjustments, effect of changes in accounting policy and other capitaladjustments. When the retained earnings account has a debit balance, it is called “deficit.” A deficitis not an asset but a deduction from equity.

Unappropriated retained earnings represent that portion which is free and can be declared asdividends to stockholders. Appropriated retained earnings represent that portion which has beenrestricted and, therefore, not available for dividend declaration.

Revenue RecognitionRevenue is recognized upon delivery to the extent that it is probable that the economic benefitsassociated with the transaction will flow to the Group and the amount of revenue can be reliablymeasured. The Group assesses its revenue arrangements against specific criteria in order todetermine if it is acting as principal or agent. The Group has concluded that it is acting as principalin all of its revenue arrangements. The following specific recognition criteria must also be metbefore revenue is recognized:

Revenue from sale of mine productsRevenue from sale of mine products is measured based on shipment value price, which is based onquoted metal prices in the London Metals Exchange (LME) and weight and assay content, asadjusted for marketing charges to reflect the NRV of mine products inventory at the end of thefinancial reporting period. Contract terms for the Group’s sale of metals (i.e. gold, silver and copper)in bullion and concentrate allow for a price adjustment based on final assay results of the metalconcentrate by the customer to determine the content.

The terms of metal in concentrate sales contracts with third parties contain provisional arrangementswhereby the selling price for the metal in concentrate is based on prevailing spot prices on aspecified future date after shipment to the customer (the quotation period). Mark-to-marketadjustments to the sales price occur based on movements in quoted market prices up to the date offinal settlement, and such adjustments are recorded as part of revenue. The period betweenprovisional invoicing and final settlement can be between one (1) and three (3) months. Ninetypercent (90%) of the provisional shipment value is collected within a week from shipment date,while the remaining ten percent (10%) is collected upon determination of the final shipment value

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on final weight and assay for metal content and prices during the applicable quotational period lessdeduction for smelting charges.

Revenue from sale of petroleum productsRevenue is derived from sale of petroleum to third party customers. Sale of oil is recognized at thetime of delivery of the product to the purchaser. Revenue is measured, based on participatinginterest of the Group, at the fair value of the consideration received, excluding discounts, rebates,and other sales tax or duty.

Revenue from sale of coalRevenue from sale of coal is recognized when the risks and rewards of ownership is transferred tothe buyer, on the date of shipment to customers when the coal is loaded into the Group’s orcustomers’ loading facilities.

Interest incomeInterest income is recognized as the interest accrues using the effective interest method.

Cost and Expense RecognitionCosts and expenses are recognized in the consolidated statement of income in the year they areincurred. The following specific cost and expense recognition criteria must also be met before costsand expenses are recognized:

Mining and milling costsMining and milling costs, which include all direct materials, power and labor costs and other costsrelated to the mining and milling operations, are expensed as incurred.

Excise taxes and royaltiesExcise taxes pertain to the taxes paid or accrued by the Parent Company for its legal obligationarising from the production of copper concentrates. Also, the Parent Company is paying forroyalties which are due to the claim owners of the land where the mine site operations were located.These excise taxes and royalties are expensed as incurred.

Petroleum production costsPetroleum production costs, which include all direct materials and labor costs, depletion of oil andgas properties, and other costs related to the oil and gas operations, are expensed when incurredbased on the Group’s participating revenue interest in the respective service contracts.

Cost of coal salesCost of coal sales includes costs of purchased coal and all direct materials and labor costs and othercosts related to the coal production. Cost of coal sales is recognized by the Group when sales aremade to customers.

General and administrative expensesGeneral and administrative expenses constitute the costs of administering the business and areexpensed as incurred.

Handling, hauling and storageHandling, hauling and storage expenses includes all direct expenses incurred for logistics and storeroom costs for mine and mining inventories. Handling, hauling and storage costs are recognized bythe Group when incurred.

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Retirement Benefits CostsThe net defined benefit liability or asset is the aggregate of the present value of the defined benefitobligation at the end of the reporting period reduced by the fair value of plan assets (if any), adjustedfor any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling is thepresent value of any economic benefits available in the form of refunds from the plan or reductionsin future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using theprojected unit credit method.

Defined benefit costs comprise the following:· Service cost· Net interest on the net defined benefit liability or asset· Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss. Past service costs are recognizedwhen plan amendment or curtailment occurs. These amounts are calculated periodically byindependent qualified actuaries.

Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined by applyingthe discount rate based on government bonds to the net defined benefit liability or asset. Net intereston the net defined benefit liability or asset is recognized as expense or income in consolidated profitor loss.

Remeasurements comprising actuarial gains and losses, return on plan assets and any change in theeffect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in OCI in the period in which they arise. Remeasurements are not reclassified toconsolidated profit or loss in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurancepolicies. Plan assets are not available to the creditors of the Parent Company, nor can they be paiddirectly to the Group. Fair value of plan assets is based on market price information. When nomarket price is available, the fair value of plan assets is estimated by discounting expected futurecash flows using a discount rate that reflects both the risk associated with the plan assets and thematurity or expected disposal date of those assets (or, if they have no maturity, the expected perioduntil the settlement of the related obligations). If the fair value of the plan assets is higher than thepresent value of the defined benefit obligation, the measurement of the resulting defined benefitasset is limited to the present value of economic benefits available in the form of refunds from theplan or reductions in future contributions to the plan.

The Parent Company’s right to be reimbursed of some or all of the expenditure required to settle adefined benefit obligation is recognized as a separate asset at fair value when and only whenreimbursement is virtually certain.

Termination benefitTermination benefits are employee benefits provided in exchange for the termination of anemployee’s employment as a result of either an entity’s decision to terminate an employee’semployment before the normal retirement date or an employee’s decision to accept an offer ofbenefits in exchange for the termination of employment.

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A liability and expense for a termination benefit is recognized at the earlier of when the entity canno longer withdraw the offer of those benefits and when the entity recognizes related restructuringcosts. Initial recognition and subsequent changes to termination benefits are measured in accordancewith the nature of the employee benefit, as either post-employment benefits, short-term employeebenefits, or other long-term employee benefits.

Employee leave entitlementEmployee entitlements to annual leave are recognized as a liability when they are accrued to theemployees. The undiscounted liability for leave expected to be settled wholly before twelve monthsafter the end of the annual reporting period is recognized for services rendered by employees up tothe end of the reporting period.

Share-based PaymentsCertain officers and employees of the Group receive additional remuneration in the form of share-based payments of either the Parent Company or FEP, whereby equity instruments (or “equity-settled transactions”) are awarded in recognition of their services.

The cost of equity-settled transactions with employees is measured by reference to their fair valueat the date they are granted, determined using the acceptable valuation techniques. Further detailsare given in Note 27.

The cost of equity-settled transactions, together with a corresponding increase in equity, isrecognized over the period in which the performance and/or service conditions are fulfilled endingon the date on which the employees become fully entitled to the award (“vesting date”). Thecumulative expense recognized for equity-settled transactions at each reporting date up to and untilthe vesting date reflects the extent to which the vesting period has expired, as well as the Group’sbest estimate of the number of equity instruments that will ultimately vest. The consolidatedstatements of income charge or credit for the period represents the movement in cumulative expenserecognized at the beginning and end of that period. No expense is recognized for awards that do notultimately vest, except for awards where vesting is conditional upon a market condition, whichawards are treated as vesting irrespective of whether or not the market condition is satisfied,provided that all other performance conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum, an expense is recognizedas if the terms had not been modified. An additional expense is likewise recognized for anymodification which increases the total fair value of the share-based payment arrangement or whichis otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation,and any expense not yet recognized for the award is recognized immediately. If a new award,however, is substituted for the cancelled awards and designated as a replacement award, thecancelled and new awards are treated as if they were a modification of the original award, asdescribed in the previous paragraph.

Foreign Currency-Denominated Transactions and TranslationsTransactions denominated in foreign currencies are recorded using the exchange rate at the date ofthe transaction. Outstanding monetary assets and monetary liabilities denominated in foreigncurrencies are restated using the rate of exchange at the consolidated statement of financial positiondate. Non-monetary items that are measured at fair value in a foreign currency shall be translatedusing the exchanges rates at the date when the fair value was determined.

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When a gain or loss on a non-monetary item is recognized in other comprehensive income, anyforeign exchange component of that gain or loss shall be recognized in the consolidated statementof comprehensive income. Conversely, when a gain or loss on a non-monetary item is recognizedin profit or loss, any exchange component of that gain or loss shall be recognized in the consolidatedstatement of income.

Income TaxesCurrent income taxCurrent income tax assets and liabilities for the current and prior periods are measured at the amountexpected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used tocompute the amount are those that are enacted or substantively enacted at the consolidated statementof financial position date.

Deferred income taxDeferred income tax is provided using the liability method on temporary differences between thetax bases of assets and liabilities and their carrying amounts for financial reporting purposes at thereporting date.

Deferred income tax liabilities are recognized for all taxable temporary differences, except:

· When the deferred income tax liability arises from the initial recognition of goodwill or an assetor liability in a transaction that is not a business combination and, at the time of the transaction,affects neither the accounting profit nor taxable profit or loss,

· In respect of taxable temporary differences associated with investments in subsidiaries,associates and interests in joint ventures, when the timing of the reversal of the temporarydifferences can be controlled and it is probable that the temporary differences will not reversein the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, the carryforward benefits of the excess of minimum corporate income tax (MCIT) over the regular corporateincome tax (RCIT) [excess MCIT], and net operating loss carryover (NOLCO), to the extent that itis probable that sufficient future taxable profits will be available against which the deductibletemporary differences, excess MCIT and NOLCO can be utilized, except:

· When the deferred income tax asset relating to the deductible temporary difference arises fromthe initial recognition of an asset or liability in a transaction that is not a business combinationand, at the time of the transaction, affects neither the accounting profit nor taxable profit orloss,

· 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 theextent that it is probable that the temporary differences will reverse in the foreseeable future andtaxable profit will be available against which the temporary differences can be utilized.

In business combinations, the identifiable assets acquired and liabilities assumed are recognized attheir fair values at acquisition date. Deferred income tax liabilities are provided on temporarydifferences that arise when the tax bases of the identifiable assets acquired and liabilities assumedare not affected by the business combination or are affected differently.

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The carrying amount of deferred income tax assets is reviewed at each reporting date and reducedto the extent that it is no longer probable that sufficient taxable profit will be available to allow allor part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets arere-assessed at each reporting date and are recognized to the extent that it has become probable thatfuture taxable profits 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 applyin the year 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 reporting date.

Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable rightexists to set off the current income tax assets against the current income tax liabilities and thedeferred income taxes relate to the same taxable entity and the same taxation authority.

Provisions and ContingenciesProvisions are recognized when the Group has a present obligation (legal or constructive) as a resultof a past event, it is probable that an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be made of the amount of the obligation.If the effect of the time value of money is material, provisions are determined by discounting theexpected future cash flows at a pre-tax rate that reflects current market assessments of the time valueof 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 asinterest expense. When the Group expects a provision or loss to be reimbursed, the reimbursementis recognized as a separate asset only when the reimbursement is virtually certain and its amount isestimable. The expense relating to any provision is presented in the consolidated statement ofincome, net of any reimbursement.

Contingent liabilities are not recognized in the consolidated financial statements but are disclosedin the notes to the consolidated financial statements unless the possibility of an outflow of resourcesembodying economic benefits is remote. Contingent assets are not recognized in the consolidatedfinancial statements but disclosed when an inflow of economic benefits is probable. Contingentassets are assessed continually to ensure that developments are appropriately reflected in theconsolidated financial statements. If it has become virtually certain that an inflow of economicbenefits will arise, the asset and the related income are recognized in the consolidated financialstatements.

Basic Earnings Per ShareBasic earnings per share is computed by dividing the net income attributable to equity holders ofthe Parent Company by the weighted average number of common shares outstanding during the yearafter giving retroactive effect to stock dividends declared and stock rights exercised during the year,if any.

Diluted Earnings Per ShareDiluted earnings per share amounts are calculated by dividing the net income attributable to equityholders of the Parent Company by the weighted average number of ordinary shares outstandingduring the year plus the weighted average number of ordinary shares that would be issued on theconversion of all dilutive potential ordinary shares into ordinary shares.

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Other Comprehensive IncomeOther comprehensive income comprises items of income and expense (including items previouslypresented under the consolidated statement of changes in equity) that are not recognized in theconsolidated statement of income for the year in accordance with PFRS.

Events After the Statement of Financial Position DateEvents after the consolidated statement of financial position date that provide additional informationabout the Group’s position at the consolidated statement of financial position date (adjusting event)are reflected in the consolidated financial statements. Events after the consolidated statement offinancial position date that are not adjusting events, if any, are disclosed when material to theconsolidated financial statements.

Operating SegmentA business segment is a group of assets and operations engaged in providing products or servicesthat are subject to risks and returns that are different from those of other business segments. Ageographical segment is engaged in providing products or services within a particular economicenvironment that is subject to risks and returns that are different from those of segments operatingin other economic environments. For management purposes, the Group is organized into businessunits based on their products and services, and has three (3) reportable operating segments. Financialinformation on business segments is presented in Note 5. The Group operates in one geographicalsegment, being the location of its current mining activities; therefore, geographical segmentinformation is no longer presented.

3. Management’s Use of Significant Judgments, Accounting Estimates and Assumptions

The preparation of the consolidated financial statements in accordance with accounting principlesgenerally accepted in the Philippines requires the management of the Group to exercise judgment,make accounting estimates and use assumptions that affect the reported amounts of assets, liabilities,income and expenses, and disclosure of any contingent assets and contingent liabilities. Futureevents may occur which will cause the assumptions used in arriving at the accounting estimates tochange. The effects of any change in accounting estimates are reflected in the consolidated financialstatements as they become reasonably determinable.

Accounting assumptions, estimates and judgments are continually evaluated and are based onhistorical experience and other factors, including expectations of future events that are believed tobe reasonable under the circumstances.

JudgmentsIn the process of applying the Group’s accounting policies, management has made the followingjudgments, apart from those involving estimations, which have the most significant effects onamounts recognized in the consolidated financial statements:

Determination of the Functional CurrencyThe Parent Company and most of its local subsidiaries based on the relevant economic substance ofthe underlying circumstances, have determined their functional currency to be the Philippine peso.It is the currency of the primary economic environment in which the Parent Company and most ofits local subsidiaries primarily operates. FEC’s functional currency is Cdn dollar. PGI, PPP andFEP’s functional currencies are US dollar.

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Recognition of Deferred Income Tax AssetsThe Group reviews the carrying amounts at each end of reporting period and adjusts the balance ofdeferred income tax assets to the extent that it is no longer probable that sufficient future taxableprofits will be available to allow all or part of the deferred income tax assets to be utilized. Thesufficiency of future taxable profits requires the use of assumptions, judgments and estimates,including future prices of metals, volume of inventories produced and, sold and amount of costs andexpenses that are subjectively determined like depreciation. As at December 31, 2015 and 2014,deferred income tax assets recognized in the consolidated statements of financial position amountedto P=306,335 and P=449,024, respectively (see Note 25). As at December 31, 2015 and 2014, nodeferred income tax assets were recognized on the following deductible temporary differencesamounting to about P=2,655,280 and P=2,472,080, respectively (see Note 25), because managementbelieves that it is not probable that future taxable income will be available to allow all or part of thebenefit of the deferred income tax assets to be utilized.

Classification of Financial InstrumentsThe Group exercises judgment in classifying financial instruments in accordance with PAS 39. TheGroup classifies a financial instrument, or its components, on initial recognition as a financial asset,a financial liability or an equity instrument in accordance with the substance of the contractualarrangement and the definitions of a financial asset, a financial liability or an equity instrument. Thesubstance of a financial instrument, rather than its legal form, governs its classification in theGroup’s consolidated statements of financial position.

The Group has no intention of selling its investments in stocks in the near term. These are beingheld indefinitely and may be sold in response to liquidity requirements or changes in marketcondition. Accordingly, the Group has classified its investments in stocks as AFS investments. TheGroup has no plans to dispose its AFS investments within 12 months from the end of the reportingdate.

The Group determines the classification at initial recognition and re-evaluates this classification,where allowed and appropriate, at every reporting date (see Note 20).

Determining and Classifying a Joint ArrangementJudgment is required to determine when the Group has joint control over an arrangement, whichrequires an assessment of the relevant activities and when the decisions in relation to those activitiesrequire unanimous consent. The Group has determined that the relevant activities for its jointarrangements are those relating to the operating and capital decisions of the arrangement.Judgment is also required to classify a joint arrangement. Classifying the arrangement requires theGroup to assess their rights and obligations arising from the arrangement. Specifically, the Groupconsiders:· The structure of the joint arrangement - whether it is structured through a separate vehicle· When the arrangement is structured through a separate vehicle, the Group also considers the

rights and obligations arising from:a. The legal form of the separate vehicleb. The terms of the contractual arrangementc. Other facts and circumstances (when relevant)

This assessment often requires significant judgment, and a different conclusion on joint control andalso whether the arrangement is a joint operation or a joint venture, may materially impact theaccounting.

As at December 31, 2015 and 2014, the Group’s joint arrangement is in the form of a joint operation.

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Accounting Estimates and AssumptionsThe key assumptions concerning the future and other key sources of estimation uncertainties at theend of reporting period that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are as follows:

Measurement of Mine Products RevenueMine products revenue is provisionally priced until or unless these are settled at pre-agreed futureor past dates referred to as “quotational period,” the prevailing average prices at which time becomethe basis of the final price. Revenue on mine products is initially recognized based on shipmentvalues calculated using the provisional metals prices, shipment weights and assays for metal contentless deduction for insurance and smelting charges as marketing. The final shipment values aresubsequently determined based on final weights and assays for metal content and prices during theapplicable quotational period. Total mine products revenue, gross of marketing charges, amountedto P=9,189,382, P=10,582,360 and P=10,243,407 in 2015, 2014 and 2013, respectively.

Impairment of Loans and ReceivablesThe Group maintains an allowance for doubtful accounts at a level that management considersadequate to provide for potential uncollectability of its loans and receivables. The Group evaluatesspecific balances where management has information that certain amounts may not be collectible.In these cases, the Group uses judgment, based on available facts and circumstances, and based ona review of the factors that affect the collectability of the accounts. The review is made bymanagement on a continuing basis to identify accounts to be provided with allowance.

The Group did not assess its loans and receivables for collective impairment due to fewcounterparties that can be specifically identified. Outstanding trade receivables are mainly from theParent Company’s main customer. Other receivables of the Group are not material. The amount ofloss is recognized in the consolidated statements of income with a corresponding reduction in thecarrying value of the loans and receivables through an allowance account. Total carrying value ofloans and receivables amounted to P=1,769,486 and P=6,232,091 as at December 31, 2015 and 2014,respectively (see Note 21). Allowance for impairment on these financial assets as atDecember 31, 2015 and 2014 amounted to P=1,747 and P=2,613, respectively (see Note 7).

Valuation of AFS Financial AssetsThe Group carries its quoted and unquoted AFS financial assets at fair value and at cost,respectively. Fair value measurement requires the use of accounting estimates and judgment. Atinitial recognition, the fair value of quoted AFS financial assets is based on its quoted price in anactive market, while the fair value of unquoted AFS financial assets is based on the latest availabletransaction price. The amount of changes in fair value would differ if the Group utilized a differentvaluation methodology.

Any change in fair value of its AFS financial assets is recognized in the consolidated statements ofcomprehensive income. As at December 31, 2015 and 2014, the Group has net cumulativeunrealized loss on its AFS financial assets amounting to P=1,022 and P=64,010, respectively(see Note 11). As at December 31, 2015 and 2014, the carrying value of the Group’s AFS financialassets amounted to P=106,687 and P=906,681, respectively (see Note 11).

Impairment of AFS Financial AssetsThe Group treats AFS financial assets as impaired when there has been a significant or prolongeddecline in fair value below its cost or where other objective evidence of impairment exists. Thedetermination of what is “significant” or “prolonged” requires judgment. The Group treats“significant” generally as 20% or more and “prolonged” as greater than 12 months for quoted equitysecurities. In addition, the Group evaluates other factors, including normal volatility in share price

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for quoted equities and the future cash flows and the discount factors for unquoted securities. TheGroup recognized impairment loss on investments in quoted shares amounting to P=1,006,508 in2013 due to significant decline in the fair value of the quoted shares below its cost. As atDecember 31, 2015 and 2014, the carrying value of the Group’s AFS financial assets amounted toP=106,687 and P=906,681, respectively (see Note 11).

Impairment of GoodwillThe Group reviews the carrying values of goodwill for impairment annually or more frequently ifevents or changes in circumstances indicate that the carrying value may be impaired. Impairmentis determined for goodwill by assessing the recoverable amount of the CGU or group of CGUs towhich the goodwill relates. Assessments require the use of estimates and assumptions such as long-term commodity prices, discount rates, future capital requirements, exploration potential andoperating performance. If the recoverable amount of the unit exceeds the carrying amount of theCGU, the CGU and the goodwill allocated to that CGU shall be regarded as not impaired. Wherethe recoverable amount of the CGU or group of CGUs is less than the carrying amount of the CGUor group of CGUs to which goodwill has been allocated, an impairment loss is recognized. Noimpairment losses were recognized in 2015, 2014 and 2013, whereas the carrying value of goodwillas at December 31, 2015 and 2014 amounted to P=1,238,583 (see Notes 1 and 4).

Measurement of NRV of Mine Products InventoryThe NRV of mine products inventory is the estimated sales value less costs to sell, which can bederived from such inventory based on its weight and assay for metal content, and the LME andLondon Bullion Metal Association for prices, which also represents an active market for the product.Changes in weight and assay for metal content as well as the applicable prices as the mine productsinventory are eventually shipped and sold are accounted for and accordingly adjusted in revenue.The NRV of mine products inventory as at December 31, 2015 and 2014 amounted to P=543,228 andP=643,474, respectively, which were also reflected as part of mine products revenue for the yearsthen ended (see Note 8).

Write-down of Carrying Values of Coal and Materials and Supplies InventoriesThe Group carries coal and material and supplies inventories at NRV when such value is lower thancost due to damage, physical deterioration, obsolescence or other causes. When it is evident thatthe NRV is lower than its cost based on physical appearance and condition of inventories, anallowance for inventory obsolescence is provided. Additional provision for materials and suppliesamounted to nil in 2015 and 2014, and P=46,059 in 2013. Related allowance for inventoryobsolescence amounted to P=116,185 as at December 31, 2015 and 2014. The carrying value ofmaterials and supplies inventories amounted to P=1,334,272 and P=1,196,196 as at December 31, 2015and 2014, respectively (see Note 8).

Additional provision for coal inventory write-down amounted to nil in 2015 and 2014, and P=71,313in 2013. Reversal of coal inventory write-down amounted to nil and P=3,159 in 2015 and 2014,respectively. Related allowance for decline in coal inventory amounted to nil and P=220,083 as atDecember 31, 2015 and 2014, respectively. The carrying amount of coal inventory amounted to nilas at December 31, 2015 and 2014 (see Note 8).

Estimation of Fair Value of Identifiable Net Assets of an Acquiree in a Business CombinationThe Group applies the acquisition method of accounting whereby the purchase consideration isallocated to the identifiable assets, liabilities and contingent liabilities (identifiable net assets) on thebasis of fair value at the date of acquisition. The determination of fair values requires estimates ofeconomic conditions and factors such as metal prices, mineral reserve, freight exchange rates andothers. Transactions qualified as business combinations are discussed in Note 4.

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Estimation of Useful Lives of Property, Plant and EquipmentThe Group estimates the useful lives of depreciable property, plant and equipment, except for mineand mining and oil and gas properties, based on internal technical evaluation and experience. Theseestimated useful lives are reviewed periodically and updated if expectations differ from previousestimates due to physical wear and tear, technical and commercial obsolescence and other limits onthe use of the assets. For mine and mining properties which were depreciated based on units-ofproduction, the Group estimates and periodically reviews the remaining recoverable reserves toensure that remaining reserves are reflective of the current condition of the mine and mining and oiland gas properties. The estimated useful lives of the Group’s property, plant and equipment aredisclosed in Note 2 to the consolidated financial statements.

As at December 31, 2015 and 2014, net book value of property, plant and equipment amounted toP=6,828,052 and P=7,138,912 respectively (see Note 10).

Estimation of Recoverable ReservesRecoverable reserves were determined using various factors or parameters such as market price ofmetals and global economy. These are economically mineable reserves based on the current marketcondition and concentration of mineral resource. The estimated recoverable reserves are used in thecalculation of depreciation, amortization and testing for impairment, the assessment of life of themine, and for forecasting the timing of the payment of mine rehabilitation costs. On June 30, 2011,the Padcal Mine life had been extended from 2017 to 2020. On March 20, 2015, the Padcal Minelife has been extended once again from 2020 to 2022. The extension of mine life is due to theadditional reserves from the mineral resources delineated below the current mining level.

As at December 31, 2015 and 2014, the carrying value of the mine and mining properties of theParent Company amounted to P=3,109,995 and P=3,079,946, respectively net of related accumulateddepletion amounting to P=8,655,590 and P=7,804,555, respectively.

Estimation of Provision for Mine Rehabilitation CostsThe Group recognized a liability relating to the estimated costs of mine rehabilitation. The Groupassesses its mine rehabilitation provision annually. Significant estimates and assumptions are madein determining the provision for mine rehabilitation as there are numerous factors that will affectthe ultimate liability. These factors include estimates of the extent and costs of rehabilitationactivities, technological changes, regulatory changes, cost increases and changes in discount rates.

Those uncertainties may result in future actual expenditure differing from the amounts currentlyprovided. The provision at each end of the reporting period represents management’s best estimateof the present value of the future rehabilitation costs required. Changes to estimated future costsare recognized in the consolidated statements of financial position by adjusting the rehabilitationasset and liability. If the net rehabilitation provisions of revised mine assets for mature mines exceedthe carrying value, that portion of the increase is charged directly to the consolidated statements ofincome. For closed sites, changes to estimated costs are recognized immediately in the consolidatedstatements of income. Provision for mine rehabilitation costs amounted to P=134,898 and P=31,522as at December 31, 2015 and 2014, respectively (see Note 10).

Impairment of Non-financial AssetsThe Group’s non-financial assets include input tax recoverable, property, plant and equipment,deferred mine and oil exploration costs and other noncurrent assets. The Group assesses whetherthere are indications of impairment on its current and noncurrent non-financial assets, at least on anannual basis. If there is objective evidence, an impairment testing is performed. This requires anestimation of the value in use of the CGUs to which the assets belong. Assessments require the useof estimates and assumptions such as VAT disallowance rate, long-term commodity prices, discount

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rates, future capital requirements, exploration potential and operating performance. In assessingvalue in use, the estimated future cash flows are discounted to their present value using a suitablediscount rate that reflects current market assessments of the time value of money and the risksspecific to the asset. Impairment losses amounting to P=429,848, P=569,944 and P=179,962 wererecognized in 2015, 2014 and 2013, respectively. As at December 31, 2015 and 2014, the carryingvalue of non-financial assets amounted to P=37,633,208 and P=34,223,326, respectively (see Notes 9,10, and 13).

Valuation of Financial InstrumentsThe Group carries certain financial assets and financial liabilities (i.e., derivatives and AFS financialassets) at fair value, which requires the use of accounting estimates and judgment. While significantcomponents of fair value measurement were determined using verifiable objective evidence (i.e.,foreign exchange rates, interest rates, quoted equity prices), the amount of changes in fair valuewould differ if the Group utilized a different valuation methodology. Any change in fair value ofthese financial assets and financial liabilities is recognized in the consolidated statements of incomeand in the consolidated statements of comprehensive income.

The carrying values and corresponding fair values of financial assets and financial liabilities as wellas the manner in which fair values were determined are discussed in Note 20.

Convertible BondsThe Group’s convertible bonds, treated as a compound financial instrument, are separated intoliability and equity components based on the terms of the contract. On issuance of the convertiblebonds, the fair value of the liability component is determined using a market rate for an equivalentnon-convertible instrument. This amount is classified as a financial liability measured at amortizedcost (net of transaction costs) until it is extinguished on conversion or redemption. The remainderof the proceeds is allocated to the conversion option that is recognized and included in equity.Transaction costs are deducted from equity, net of associated income tax. The carrying amount ofthe conversion option is not remeasured in subsequent years. Transaction costs are apportionedbetween the liability and equity components of the convertible bonds based on the allocation ofproceeds to the liability and equity components when the instruments are initially recognized.

Provisions for LossesThe Group provides for present obligations (legal or constructive) where it is probable that therewill be an outflow of resources embodying economic benefits that will be required to settle the saidobligations. An estimate of the provision is based on known information at each end of the reportingperiod, net of any estimated amount that may be reimbursed to the Group. The amount of provisionis being re-assessed at least on an annual basis to consider new relevant information. In 2015 and2014, payments were made for a total of P=891,576 and P=219,495, respectively, through FEP andPGPI. Provisions in 2015 and 2014 amounted to nil and P=13,000, respectively. Total provision forlosses amounted to P=764,094 and P=1,086,725 as at December 31, 2015 and 2014, respectively (seeNote 31).

Estimation of Net Pension Obligations (Plan Assets) and CostsThe Group’s net retirement benefits costs are actuarially computed using certain assumptions withrespect to future annual salary increases and discount rates per annum, among others. The ParentCompany’s net excess retirement plan asset, which is recorded as part of “Deferred exploration costsand other noncurrent assets” amounted to P=285,835 and P=363,952 as at December 31, 2015 and2014, respectively (see Note 19).

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SMMCI’s retirement liability amounted to P=21,968 and P=19,033 as at December 31, 2015 and 2014,respectively. PPP’s and FEPs retirement liability amounted to nil and P=24,552 as at December 31,2015 and 2014, respectively. SMMCI’s, PPP’s and FEP’s retirement liability are presented as partof noncurrent liabilities (see Note 19).

4. Business Combinations

Acquisition of PPPOn April 5, 2013, PPC increased its stake in PPP from 18.46% to 50.28% through acquisition ofadditional 46.4 million shares at US$0.75 per share which resulted to PPC obtaining control overPPP.

The goodwill of P=1,534,168 arising from the acquisition pertains to the revenue potential the Groupexpects from PPP Peru Block Z-38, SC 14 Block C-2 (West Linapacan) and other Philippine blocks.

As at the acquisition date, the fair value of the net identifiable assets and liabilities of the PPP areas follows:

Fair ValueRecognized on

Acquisition

Previous CarryingValue in the

SubsidiaryAssetsCash and cash equivalents P=803,379 P=803,379Receivables 40,916 40,916Inventories 1,035 1,035Deferred exploration oil and gas exploration costs 5,521,113 407,219Property and equipment 2,801 2,801Other noncurrent assets 6,842 6,842

6,376,086 1,262,192LiabilitiesAccounts payable and accrued liabilities 48,391 48,391Deferred tax liability 1,534,168 –

1,582,559 48,391Total identifiable net assets P=4,793,527 P=1,213,801Total consideration 6,327,695Goodwill arising from acquisition P=1,534,168

The fair values of deferred oil and gas exploration costs recognized as at December 31, 2013financial statements were based on a provisional assessment of their fair value while the Groupsought for the final results of independent valuations for the assets. The valuation is based ondiscounted cash flows for each of the project subject to uncertainty which involves significantjudgments on many variables that cannot be precisely assessed at reporting date.

During 2014, results of studies from third party oil and gas consultants and competent persons wereobtained by each of the respective operators of the projects which enabled the Group to perform andupdate the discounted cash flows. As a result of these assessment, an increase in carrying amountof Peru exploration assets by P=393,399 occurred while assets in the Philippines decreased by thesame amount. These adjustments, however, did not have any material effect on goodwill, deferredtax assets or liabilities, impairment losses and foreign currency exchange gains or losses as atDecember 31, 2014.

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In business combinations, the identifiable assets acquired and liabilities assumed are recognized attheir fair values at the acquisition date. Deferred income tax liabilities are provided on temporarydifferences that arise when the tax bases of the identifiable assets acquired and liabilities assumedare not affected by the business combination or are affected differently.The aggregate consideration follows:

AmountFair value of previously held interest P=1,313,700Consideration transferred for additional interest acquired 1,433,332Fair value of non-controlling interest 3,580,663

P=6,327,695

The Group measured NCI using the fair value method.

AmountConsideration transferred for additional interest acquired P=1,433,332Less cash of acquired subsidiary 803,379

P=629,953

Revenues and net income of the acquiree since the acquisition date amounted to P=3,465 andP=1,980,796, respectively. Consolidated revenue and net income of the Group had the businesscombination occurred on January 1, 2013 would be higher by P=2,564 and lower by P=34,650,respectively.

The Group also recorded additional retirement benefit liability amounting to P=11,373 as atJanuary 1, 2013 as a result of the business combination.

Acquisition of SMECI and SMMCIOn February 6, 2009, the Parent Company acquired control over SMECI and SMMCI from AngloAmerican Exploration (Philippines), Inc. which qualified as a step acquisition. Due to thetransaction, a revaluation surplus amounting to P=1,572,385 was recognized.

Acquisition of FEPOn July 3, 2008, PPC acquired control over FEP through a transaction which qualified as a stepacquisition. A revaluation surplus amounting to P=39,012 was recognized which pertains to theadjustment to the fair values of the net assets of FEP relating to the previously held interest of theParent Company in FEP through FEC.

Acquisition of BEMC and FECOn September 24, 2010, PMC transferred all of its investment in shares of stock in BEMC and FECto PPC. This qualified as a business combination under common control. The acquisitions resultedto an increase in equity reserves and non-controlling interests amounting P=40,588 and P=303,525,respectively, as at the date of business combinations. Goodwill arising from the businesscombination amounted to P=258,593.

GoodwillAs at December 31, 2015 and 2014, the goodwill resulting from business combinations amounting toP=1,238,584 are allocated to the Group’s cash-generating units namely: SC 14 C1 Galoc Oil Field,SC 14 A&B Nido-Matinloc, SC 72 Reed Bank and Peru Z38. The Group performed its annualimpairment test in December 2015 and 2014.

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The recoverable amount of the CGUs were determined based on a value in use calculation usingcash flow projections from financial budgets covering the expected life of the oil and gas fields.Based on its analysis, management concluded that the goodwill is recoverable. The calculation ofthe value in use for the CGUs incorporates the following key assumptions: a) oil prices which areestimated with reference to external market forecasts; b) volume of resources and reserves whichare based on resources and reserves report prepared by third party; c) capital expenditure andproduction and operating costs which are based on the Group's historical experience and latest lifeof well models; and d) discount rate of 10%. The management believes that key assumptions usedin determining the recoverable amount at reasonable possible changes would not cause the CGUscarrying amount to exceed its recoverable amount.

5. Segment Information

The Group is organized into business units on their products and activities and has two reportablebusiness segments: the metals segment and the energy and hydrocarbon segment. The operatingbusinesses are organized and managed separately through the Parent Company and its subsidiariesaccording to the nature of the products provided, with each segment representing a strategic businessunit that offers different products to different markets.

Management monitors the operating results of its business units separately for the purpose of makingdecisions about resource allocation and performance assessment. Segment performance is evaluatedbased on net income (loss) for the year, earnings before interest, taxes and depreciation and depletion(EBITDA), and core net income (loss).

Net income (loss) for the year is measured consistent with consolidated net income (loss) in theconsolidated statements of income. EBITDA is measured as net income excluding interest expense,interest income, provision for (benefit from) income tax, depreciation and depletion of property,plant and equipment and effects of non-recurring items.

EBITDA is not a uniform or legally defined financial measure. EBITDA is presented because theGroup believes it is an important measure of its performance and liquidity. The Group reliesprimarily on the results in accordance with PFRS and uses EBITDA only as supplementaryinformation.

The Group is also using core net income (loss) in evaluating total performance. Core income is theperformance of business segments based on a measure of recurring profit. This measurement basisis determined as profit attributable to equity holders of the Parent Company excluding the effects ofnon-recurring items, net of their tax effects. Non-recurring items represent gains (losses) that,through occurrence or size, are not considered usual operating items, such as foreign exchange gains(losses), gains (losses) on derivative instruments, gains (losses) on disposal of investments, andother non-recurring gains (losses).

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The following tables present revenue and profit and certain asset and liability information regardingthe Group’s business segments.

December 31, 2015

MetalsEnergy and

Hydrocarbon

UnallocatedCorporate

Balances Eliminations TotalRevenueExternal customers P=8,352,785 P=172,250 P=− P=− P=8,525,035Inter-segment − − − − −Consolidated revenue P=8,352,785 P=172,250 P=− P=− P=8,525,035

ResultsEBITDA P=3,379,577 (P=129,112) P=202 (P=471,816) P=2,778,851Interest income (expense) - net 4,085 7,444 − − 11,529Income tax benefit (366,580) (16) − − (366,596)Depreciation and depletion (1,563,972) (4,175) (284) − (1,568,431)Non-recurring items (64,809) (14,911) − − (79,720)Consolidated net income (loss) P=1,388,301 (P=140,770) (P=82) (P=471,816) P=775,635

Core net income (loss) P=939,930 (P=34,893) P=205 P=− P=905,242

Consolidated total assets P=39,491,704 P=4,057,188 P=132 P=− P=43,549,024

Consolidated total liabilities P=14,946,576 P=1,317,339 P=1,207 P=− P=16,265,122

Other Segment Information:Capital expenditures and other non-current assets P=3,844,397 P=214,787 P=− P=− P=4,059,184Non-cash expenses other than

depletion and depreciation 173,828 362,354 − 41,187 577,369

December 31, 2014

MetalsEnergy and

Hydrocarbon

UnallocatedCorporateBalances Eliminations Total

RevenueExternal customers P=9,732,523 P=311,414 P=4,303 P=– P=10,048,240Inter-segment – – – – –Consolidated revenue P=9,732,523 P=311,414 P=4,303 P=– P=10,048,240

ResultsEBITDA P=3,498,322 (P=115,803) (P=4,004) (P=58,521) P=3,319,994Interest income (expense) - net (344,319) 6,756 54 – (337,509)Income tax benefit (expense) (342,507) (8,955) 25 – (351,437)Depreciation and depletion (1,686,827) (3,428) (301) – (1,690,556)Non-recurring items 82,634 (315,307) 12 (4,986) (237,647)Consolidated net income (loss) P=1,207,303 (P=436,737) (P=4,214) (P=63,507) P=702,845

Core net income (loss) P=1,233,573 (P=103,557) (P=8,223) P=– P=1,121,793

Consolidated total assets P=36,654,743 P=4,988,051 P=9,631 P=2,987,923 P=44,640,348

Consolidated total liabilities P=14,540,661 P=1,133,774 P=1,876 P=1,922,217 P=17,598,528

Other Segment Information:Capital expenditures and other non-current assets P=5,434,637 P=396,384 P=– P=– P=5,831,021Non-cash expenses other than depletion

and depreciation 720,859 338,403 – – 1,059,262

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December 31, 2013

MetalsEnergy and

Hydrocarbon

UnallocatedCorporateBalances Eliminations Total

RevenueExternal customers P=9,583,871 P=208,773 P=9,612 P=– P=9,802,256Inter-segment – – – – –Consolidated revenue P=9,583,871 P=208,773 P=9,612 P=– P=9,802,256

ResultsEBITDA P=4,209,905 (P=294,016) P=3,641 P=– P=3,919,530Interest income (expense) - net (395,475) 5,054 121 – (390,300)Income tax benefit (expense) (776,484) 14,837 (1,010) – (762,657)Depreciation and depletion (1,442,750) (4,478) (364) – (1,447,592)Non-recurring items (1,188,626) 181,945 95 – (1,006,586)Consolidated net income (loss) P=406,570 (P=96,658) P=2,483 P=– P=312,395

Core net income P=816,409 P=440,927 P=2,418 P=248,585 P=1,508,339

Consolidated total assets P=29,938,772 P=6,010,486 P=20,366 P=3,950,921 P=39,920,545

Consolidated total liabilities P=10,866,323 P=1,243,781 P=4,380 P=1,888,807 P=14,003,291

Other Segment InformationCapital expenditures and other

non-current assets P=5,540,200 P=547,801 P=48 P=– P=6,088,049Non-cash expenses other than depletion

and depreciation 1,444,597 105,377 – – 1,549,974

The following table shows the Group’s reconciliation of core net income to the consolidated netincome for the years ended December 31, 2015, 2014 and 2013.

2015 2014 2013Core net income P=905,242 P=1,121,793 P=1,508,339Non-recurring gains (losses):

Foreign exchange losses (143,895) (56,505) (180,062)Gain on sale of assets 107,088 764,685 97,747Net tax effect of aforementioned

adjustments 43,168 (94,208) (19,615)Share in net loss of an associate (13,200) − −Net provision for impairment

of asset - net (2,222) (336,059) (303,419)Provision for impairment of

AFS investments − – (1,006,508)Proceeds from insurance claims − – 406,850Provision for rehabilitation costs

and others – (161,400)Reorganization costs − (394,154) –

Net income attributable to equity holdersof the Parent Company 896,181 1,005,552 341,932

Net income attributable to NCI (Note 26) (120,546) (302,707) (29,537)Consolidated net income P=775,635 P=702,845 P=312,395

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Core net income per share is computed as follows:

2015 2014 2013Core net income P=905,242 P=1,121,793 P=1,508,339Divided by weighted average number of

common shares outstanding duringyear (Note 28) 4,940,399,068 4,938,577,039 4,933,657,951

Core net income per share P=0.183 P=0.227 P=0.306

Sales of the Parent Company are made to Pan Pacific Copper Co., Ltd. (Pan Pacific), which iscovered by a Sales Agreement, and to Louis Dreyfuss Commodities Metals Suisse SA (LD Metals)for the remaining copper concentrate. Gross revenue, excluding provisional pricing adjustments,from Pan Pacific and LD Metals for the year ended December 31, 2015, 2014 and 2013 are presentedbelow:

2015 2014 2013LD Metals P=6,109,840 P=8,336,374 P=5,961,458Pan Pacific 3,128,525 3,179,773 2,606,474

P=9,238,365 P=11,516,147 P=8,567,932

Sales AgreementOn March 11, 2004, the Parent Company entered into a Sales Agreement with Pan Pacific coveringthe copper concentrates produced at the Padcal Mine. The said agreement is the subject ofmanagement review.

6. Cash and Cash Equivalents

Cash and cash equivalents consist of:

2015 2014Cash on hand P=2,370 P=3,305Cash with banks 693,894 719,424Short-term deposits 312,422 4,509,163

P=1,008,686 P=5,231,892

Cash with banks and short-term deposits earn interest at bank deposit rates. Short-term deposits aremade for varying periods, usually of up to three months depending on the cash requirements of theGroup. Interest income arising from cash with banks and short-term deposits amounted to P=11,529,P=16,952 and in P=26,060 in 2015, 2014 and 2013, respectively.

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7. Accounts Receivable

Accounts receivable consist of:

2015 2014Trade P=701,328 P=893,943Accrued interest – 1,968Others 197,898 162,566

899,226 1,058,477Less allowance for impairment losses 1,747 2,613

P=897,479 P=1,055,864

The Parent Company’s trade receivables arise from shipments of copper concentrates which areinitially paid based on 90% of their provisional value, currently within one week from shipmentdate. The 10% final balance does not bear any interest until final settlement, which usually takesaround three months from shipment date. The Group has US dollar (US$) accounts receivableamounting to US$13,194 and US$18,295 as at December 31, 2015 and 2014, respectively(see Note 23).

Accrued interest receivables arise from the Group’s short-term deposits. Other receivables includeadvances to officers and employees, and other non-trade receivables.

The following table is a rollforward analysis of the allowance for impairment losses recognized onaccounts receivable:

2015 2014January 1

Trade P=− P=423Others 2,613 2,770

Reversals during the yearTrade − (423)Others (866) (157)

December 31 P=1,747 P=2,613

The impaired receivables were specifically identified as at December 31, 2015 and 2014.

8. Inventories

Inventories consist of:

2015 2014Mine products - at NRV P=543,228 P=643,474Petroleum - at cost 9,044 18,550Materials and supplies:

On hand - at NRV 1,291,969 1,165,764In transit - at cost 42,303 30,432

P=1,886,544 P=1,858,220

As at December 31, 2015 and 2014, the cost of materials and supplies inventories on hand amountedto P=1,408,154 and P=1,281,949, respectively.

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The following table is a rollforward analysis of the allowance for impairment losses recognized oncoal and materials and supplies inventories:

2015 2014January 1

Coal P=220,083 P=223,242Materials and supplies 116,185 197,474

Reversals during the yearCoal − (3,159)Materials and supplies − (78,322)

Write-off during the yearCoal − –Materials and supplies − (2,967)

December 31 P=336,268 P=336,268

Additional provision for coal inventories which is related to BEMC’s closure in 2013 is included inthe “Impairment loss on deferred exploration cost and others” account in the consolidated statementsof income due to its non-recurring nature. In 2014, impairment losses amounting to P=3,159 werereversed by the BEMC since it was able to sell these inventories at cost.

Materials and supplies recognized as expense amounted to P=1,560,676, P=1,789,423 andP=1,656,730, for the years ended December 31, 2015, 2014 and 2013, respectively (see Note 16).

9. Other Current Assets

Other current assets consist of:

2015 2014Input tax recoverable - net P=1,366,311 P=1,266,949Prepaid expenses and others 112,437 117,558

P=1,478,748 P=1,384,507

Allowance for impairment loss on input tax amounted to P=99,433 as at December 31, 2015 and2014.

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10. Property, Plant and Equipment

Property, plant and equipment consist of:

December 31, 2015Mine, Non-operating

Mining and Land, Machinery Property andOil and Gas Buildings and And Surface Construction Equipment at

Properties Improvements* Equipment Structures in Progress Bulawan Mine TotalCost:January 1 P=11,706,548 P=413,492 P=8,403,607 P=186,358 P=502,187 P=2,085,073 P=23,297,265Additions 481,968 87,857 655,715 2,317 258,472 3,840 1,490,169Disposals − (42,070) (361,854) − − − (403,924)Reclassifications 416,966 − − − (416,966) − −Effect of CTA 31,823 − 3,852 − − − 35,675December 31 12,637,305 459,279 8,701,320 188,675 343,693 2,088,913 24,419,185Accumulated Depletion and Depreciation:January 1 8,316,034 254,055 5,369,828 133,363 – 2,085,073 16,158,353Depletion and depreciation

for the year (Note 18) 865,214 29,086 906,400 13,748 − 3,840 1,818,288Disposals − (42,070) (361,854) − − − (403,924)Effect of CTA 15,092 − 3,324 − − − 18,416December 31 9,196,340 241,071 5,917,678 147,111 − 2,088,913 17,591,133Net Book Values P=3,440,965 P=218,208 P=2,783,642 P=41,564 P=343,693 P=− P=6,828,052*Cost of land amounts to P=2,053. This also includes capitalized costs of mine rehabilitation of P=18,130 and related accumulated amortizationof P=18,130.

December 31, 2014Mine, Non-operating

Mining and Land, Machinery Property andOil and Gas Buildings and And Surface Construction Equipment at

Properties Improvements* Equipment Structures in Progress Bulawan Mine TotalCost:January 1 P=10,680,277 P=328,248 P=7,399,540 P=130,159 P=514,326 P=2,197,683 P=21,250,233Additions 1,036,672 62,082 1,166,038 56,199 32,700 – 2,353,691Disposals – – (73,658) – – (112,610) (186,268)Reclassifications (10,911) 23,162 (88,537) – (44,839) – (121,125)Other Adjustments (3,583) – (3,772) – – – (7,355)Effect of CTA 4,093 – 3,996 – – – 8,089December 31 11,706,548 413,492 8,403,607 186,358 502,187 2,085,073 23,297,265Accumulated Depletion and Depreciation:January 1 7,227,623 229,711 4,585,052 130,068 – 2,197,683 14,370,137Depletion and depreciation

for the year (Note 18) 1,086,277 24,344 894,549 3,295 – – 2,008,465Disposals – – (71,464) – – (112,610) (184,074)Reclassifications – – (39,918) – – – (39,918)Other Adjustments – – (725) – – – (725)Effect of CTA 2,134 – 2,334 – – – 4,468December 31 8,316,034 254,055 5,369,828 133,363 – 2,085,073 16,158,353Net Book Values P=3,390,514 P=159,437 P=3,033,779 P=52,995 P=502,187 P=– P=7,138,912*Cost of land amounts to P=2,053. This also includes capitalized costs of mine rehabilitation of P=18,130 and related accumulated amortizationof P=18,130.

Mine and mining properties as at December 31, 2015 and 2014 include mine development costs ofthe 908 Meter Level, 782 Meter Level and 798 Meter Level project amounting to P=2,977,142 andP=2,526,172, respectively. In 2011, the estimated mine life of the Parent Company’s Padcal Minewas extended until 2020, or an additional three years from the original estimated mine life of until2017. In 2015, with the discovery of additional resources, the estimated mine life of the PadcalMine was again extended for an additional two years until 2022. Correspondingly, the extensions inmine life were considered as a change in estimate and the effect on the amortization of the depletioncosts was taken up prospectively.

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Total depreciation cost of machinery and equipment used in exploration projects amounting toP=249,857, P=317,909 and P=67,967 in 2015, 2014 and 2013, respectively, are capitalized underdeferred exploration costs, which relate to projects that are currently ongoing for PMC, SMMCI andPGPI.

Land, buildings and improvements include the estimated costs of rehabilitating the ParentCompany’s Padcal Mine from 2023 up to 2030, discounted at a rate of 2.79%. In 2015, the ParentCompany performed a reassessment of its provision for mine rehabilitation costs which increasedthe liability and related asset by P=100,459. Accretion of interest totaled P=3,414 and P=1,986 in 2015and 2014, respectively.

The Group’s provision for mine rehabilitation costs amounted to P=134,898 and P=31,522 as atDecember 31, 2015 and 2014, respectively.

Non-operating property and equipment in the Bulawan mine pertains to PGPI’s fully-depreciatedproperty and exploration equipment that are presently not in use. These assets do not qualify asassets held for sale under PFRS 5 and are thus retained as property, plant and equipment.

On July 17, 2014, the Parent Company sold its property located in Pasig City for a total amount ofP=777,445. Total gain of P=764,685 was recognized in the consolidated statements of income after therelated necessary taxes and expenses.

11. Available-for-sale (AFS) Financial Assets

AFS Financial AssetsThe Group’s AFS financial assets consist of quoted and unquoted investment in share of stock asfollows:

2015 2014Investments in quoted shares P=33,975 P=833,987Investments in unquoted shares of stock 72,712 72,694

P=106,687 P=906,681

AFS financial assets in quoted shares of stock are carried at fair value with cumulative changes infair values presented as a separate account in equity. Meanwhile, AFS financial assets in unquotedshares of stock are carried at cost because fair value bases (i.e., quoted market prices) are neitherreadily available nor is there an alternative basis of deriving a reliable valuation at the end of thereporting period.

In 2013, the Company recognized impairment loss on quoted AFS investments to P=1,006,508 dueto a significant decline in the fair value of the quoted shares below cost recorded under “Otherincome (charges)” on the consolidated statements of income. On February 21, 2013, the Companysold all of its investment in PERC for P=167,999. Gain on sale of PERC shares amounted toP=26,867 which was recognized in the consolidated statements of income.

On February 3, 2015, the Parent Company sold its investment in quoted shares in Indophil for aconsideration of P=297,462. The transaction resulted in a gain amounting to P=107,088 recorded under“Other income (charges)” on the consolidated statements of income.

Investment in Lepanto is reclassified as investment in an associate in 2015 (see Note 12).

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As at December 31, 2015 and 2014, the cumulative change in value of AFS financial assetsamounted to a decrease of P=1,022 and P=64,010, respectively. These changes in fair values in thesame amounts have been recognized and shown as “Net unrealized gain (loss) on AFS financialassets” account in the equity section of the consolidated statements of financial position and are alsoshown in the consolidated statements of comprehensive income.

The following table shows the movement of the “Net unrealized loss on AFS financial assets”account:

2015 2014January 1 (P=64,010) P=4,689Decrease in fair value of

AFS financial assets (23,023) (68,699)Reversal of fair value changes in AFS

investment subsequently accountedfor as an associate (Note 12) 193,099 –

Realized gain on sale of AFS financial assets (107,088) –December 31 (P=1,022) (P=64,010)

12. Investment in an associate

In July 2015, the Parent Company entered into a Joint Voting Agreement (the Agreement) withanother Lepanto shareholder to jointly vote their share on all matters affecting their right on Lepantofor five years from the effectivity of the Agreement. By virtue of the Agreement, the shareholdingand board representation of the combined interest of PMC and the other Lepanto shareholderresulted in significant influence over Lepanto.

Lepanto is involved on the exploration and mining of gold, silver, copper, lead, zinc and all kindsof ores, metals, minerals, oil, gas and coal and their related by products. Lepanto is listed on thePhilippine Stock Exchange (PSE). The Group’s interest in Lepanto is accounted for using the equitymethod on the consolidated financial statements. The following table illustrates the summarizedfinancial information of the Group’s investment in Lepanto:

2015*Current assets P=1,844,445Non-current assets 14,879,042Current liabilities (1,008,527)Non-current liabilities (8,141,015)Equity P=7,573,945

2015Group’s carrying amount of the investment P=659,408

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2015*Revenue P=907,999Cost and expenses (1,391,951)Finance costs (18,327)Other income (expenses) (8,321)Loss before income tax (510,600)Income tax expense (328)Loss for the year P=510,928

Total comprehensive loss P=510,928

Group’s share of loss forthe year P=13,200

*Balances are based on unaudited September 30, 2015 interim financial statements submitted by Lepanto to PSE.

13. Deferred Exploration Costs and Other Noncurrent Assets

Deferred exploration costs and other noncurrent assets consist of:

2015 2014Deferred mine exploration costs P=25,482,996 P=22,054,748

Less allowance for impairment losses 1,493,336 1,519,54223,989,660 20,535,206

Deferred oil exploration costs 5,399,948 5,705,778Less allowance for impairment losses 426,313 874,415

4,973,635 4,831,363Other noncurrent assets 475,550 450,896

P=29,438,845 P=25,817,465

The following table is a rollforward analysis of the allowance for impairment losses recognized ondeferred exploration cost and other noncurrent assets:

2015 2014January 1

Deferred mine exploration cost P=1,519,542 P=1,288,123Deferred oil exploration cost 874,415 535,890

Provisions during the yearDeferred mine exploration cost – 231,419Deferred oil exploration cost 429,848 338,525

Reversals during the yearDeferred oil exploration cost (388,630) –

Write-off during the yearDeferred mine exploration cost (26,206) –Deferred oil exploration cost (489,320) –

December 31 P=1,919,649 P=2,393,957

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Deferred Mine and Oil Exploration CostsDeferred mine and oil exploration costs relate to projects that are ongoing. The recovery of thesecosts depends upon the success of exploration activities and future development of thecorresponding mining properties or the discovery of oil and gas that can be produced in commercialquantities. Allowances have been provided for those deferred costs that are specifically identifiedto be unrecoverable. Allowances recognized are included under “Impairment loss on deferredexploration costs” in the consolidated statements of income amounting to P=429,848, P=569,944 andP=297,585 in 2015, 2014 and 2013, respectively.

SC 6A (Octon Block)The SC is located offshore North West Palawan and covers an area of 1,080 square kilometers andwas entered into by the DOE and the original second parties to the contract on September 1, 1973.On July 11, 2011, PPP acquired 70% interest and operatorship of the block by carrying all costs ofPhase 1 of the work program.

In 2014, Pitkin elected not to enter Phase 2 of a farm-in agreement to earn a 70% participatinginterest in SC 6A and reassigned its participating interest back to the farm-out partners which wasapproved by the DOE on March 9, 2015. As a result of the decision to exit SC 6A, Pitkin recordedan impairment loss of P=338,525 in 2014 and subsequently written off the carrying value of the assetin 2015.

SC 40 (North Cebu)In 2012, FEP commissioned a resource assessment study undertaken by Petroleum Geo-ServicesReservoir Consultants (PGS), an independent competent person. The results of the studydowngraded previously identified leads and prospects within SC 40. As a result, the carrying valueof the investment in SC40 was impaired by P=388,630 in 2012. The carrying value as atDecember 31, 2012 reflects the potential of a number of smaller onshore locations within SC 40.

In 2015, the management has finalized its assets review of SC 40 based on a more detailed ResourceEstimation Report prepared by PGS. The updated report indicated a significant increase in resourceswhich triggered the reassessment and reversal of the impairment recognized in 2012. The results ofthe assets review and the competent person report were presented to the Risk and ResourceCommittee of the Board in 2015. The Committee have approved and adopted the report. A reversalof impairment amounting to P=388,630 was recognized by the Group in 2015.

SC 53 (Mindoro)SC 53 measures 6,600 square kilometres and is mostly located in onshore Mindoro Island. The SCwas entered into on July 8, 2005 between the DOE and Laxmi Organic Industries Ltd. OnSeptember 5, 2007, PPP executed a farm-in agreement with the existing partners of SC 53 and wasapproved by the DOE on June 11, 2008. On April 4, 2011, PPP executed a farm-out agreementwhereby it transferred 35% of its participating interest to the farmee in exchange for being carriedthrough the drilling, testing and completing of the Progreso-2 well and the acquisition, processingand interpretation of 2D onshore and offshore seismic data. The farm-out agreement was approvedby the DOE on July 4, 2011.

In 2015, Pitkin recognized impairment loss amounting to P=359,395 following Pitkin’s intention inearly 2016 to exit from the JV, thereby reducing the carrying value of SC 53 to nil as atDecember 31, 2015.

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SC 72 (Reed Bank)SC 72 was awarded on February 15, 2010. It covers an area of 8,800 square kilometers and containsthe Sampaguita Gas Discovery which has the potential to contain In-Place Contingent Resources of2.6 trillion cubic feet (TCF) as reported by Weatherford Petroleum Consultants (Weatherford) in2012.

Based on the study, In-Place Prospective Resources totalling 5.4 TCF is expected to be drilled inthe area. The results of the study were used to define the location of two wells, to be namedSampaguita-4 and Sampaguita-5, which if successfully drilled, would be expected to increase theamount of potentially recoverable resources. The drilling of two wells is part of the work programmeof FEP for the second-sub-phase of SC72 which was supposed to be accomplished by August 2013.However, FEP was unable to commence the drilling programme because of maritime disputesbetween the Philippine and Chinese governments. The DOE has granted FEP an extension fromAugust 2014 up to August 2015 on the grounds of force majeure to allow the completion ofobligations under the SC. In the meantime, FEP recognizes its ongoing commitment to the projectby continuously undertaking studies to discover the field’s potential.

In 2014, the DOE granted GSEC 101 request to extend the completion date of the secondExploration Sub-Phase of SC 72 by one year to August 15, 2016. The arbitration case between theRepublic of Philippines and the People’s Republic of China is ongoing. The schedule of the secondSub-Phase and all subsequent Sub-Phases of the Exploration Period shall be adjusted to compensatefor the Force Majeure period.

In 2015, the DOE granted Force Majeure to SC 72 work commitments. Such suspension shall beeffective from December 15, 2014 until the date when DOE notifies Forum to commence drillingthat should be in accordance to the final resolution on the arbitration proceedings between thePhilippines and China.

In 2015, the United Nations Arbitral Tribunal (Tribunal) unanimously decided that it has jurisdictionover the maritime dispute between China and the Philippines over the West Philippine Sea, and itwas the proper body to decide on the case filed by the Philippines in January 2013. It also ruled thatChina’s decision not to participate in these proceedings does not deprive the Tribunal of jurisdictionand that the Philippines’ decision to commence arbitration unilaterally was not an abuse of theUNCLOS dispute settlement procedures. Further hearings were held during the 4th Quarter of 2015and a definitive ruling is expected to be issued by the Tribunal in 2016.

The DOE has already approved the Work Program and Budget for 2016 submitted by FEP consistingof License Administration and the conduct of a geotechnical survey contingent on the lifting of theForce Majeure over SC 72.

SC 75 Area 4 (Northwest Palawan)In September 2013, Pitkin, in consortium with Philodrill, acquired acreage on SC74 covering Area5 North West (NW) Palawan Basin in a competitive bid under the PECR4, with operating interestof 70% and participating interest of 30%, respectively. It covers an area of 4,240 square kilometersand is located in shallow waters of the NW Palawan area.

Peru Block XXVIII Block XXVIII was awarded to Pitkin in October 2010. It covers an area of 3,143 square kilometerslocated in the eastern portion of the productive Sechura Basin.

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In 2015, Pitkin recognized impairment loss amounting to P=70,453 after its exit in the explorationsub-phase 2 and surrendered the exploration contract to the Peruvian Government reducing thecarrying value to nil as at December 31, 2015.

Other Noncurrent AssetsThis account primarily includes the following:

a. Bank accounts that the Parent Company and PGPI maintain with Land Bank of the Philippinesto establish their respective Mine Rehabilitation Funds (MRF), pursuant to the requirements ofRepublic Act (RA) No. 7942, otherwise known as “The Philippine Mining Act of 1995.” TheMRF shall be used for the physical and social rehabilitation of areas and communities affectedby the Padcal, Bulawan and Sibutad Mines, and for research in the social, technical andpreventive aspects of their rehabilitation. As at December 31, 2015 and 2014, the ParentCompany’s MRF amounted to P=5,361 and P=5,474, while PGPI’s MRF amounted to P=6,825 andP=6,768, respectively.

b. The Parent Company’s net excess retirement plan assets amounting to P=285,835 and P=363,952as at December 31, 2015 and 2014, respectively (see Note 19).

14. Loans and Bonds Payable

2015 2014Current Loans

Bank loansBanco de Oro (BDO) P=1,882,400 P=1,341,600Philippine National Bank (PNB) 1,364,740 1,788,800Bank of the Philippine Islands (BPI) 70,590 827,320Land Bank of the Philippines (LBP) – 350,000

Total current loans 3,317,730 4,307,720Noncurrent Loans

Bonds payable 6,259,063 5,947,366P=9,576,793 P=10,255,086

Related party loans in prior yearsIn 2012 and 2013, the Parent Company entered into unsecured Term Loan Facility Agreements withKirtman Limited, Maxella Limited and Asia Link B.V., companies under common control of FirstPacific Company Limited (FPC Group), to finance the capital expenditures of Silangan Project andworking capital requirements of the Group. The Term Loans Facility Agreements were fully settledin 2014.

Interest expense on the Term Loan Facility Agreements with Kirtman Limited, Maxella Limitedand Asia Link B.V amounted to nil, P=207,074 and P=374,765 in 2015, 2014 and 2013, respectively.

BDO LoansOn April 25, 2013, PMC assumed the liability of BEMC for the settlement of the P=100,000 loanfrom BDO at the interest rate of 4% subject to repricing. After a series of renewals, the maturity ofthe loan was extended to January 20, 2014. The loan was consequently renewed upon maturity foran additional 85 days until April 15, 2014 under the same terms. The loan was fully paid inJuly 2014.

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On November 6, 2013, the Parent Company obtained unsecured short-term loans from BDOamounting to US$20,000. The original loan term carries 2.5% interest per annum and will matureon February 4, 2014. The loan was renewed upon maturity for an additional 90 days untilMay 5, 2014 under the same terms and was subsequently renewed several times with last renewalmaturing April 28, 2015 under the same terms. Upon maturity on April 28, 2015, the ParentCompany renegotiated the loan to reduce the interest rate to 2.3% per annum and new maturity dateon July 27, 2015. PMC renewed the loan several times with the latest maturity date set onMarch 24, 2016. Partial payments amounting to US$3,000 were made in 2015 which reduced theoutstanding balance to US$17,000.

On July 1, 2014, the Parent Company obtained unsecured short term loan from BDO amounting toUS$10,000. The loan carries 2.5% interest per annum and will mature on September 29, 2014. Theloan was renewed several times with PMC renegotiating on June 17, 2015 for a lower interest rateper annum of 2.3%. The loan was rolled several times with the latest renewal setting the maturitydate on March 11, 2016. Partial payments amounting to US$4,000 were made in 2015 whichreduced the outstanding balance to US$6,000.

On April 27, 2015, the Parent Company obtained a new unsecured short term loan from BDOamounting to US$17,000. The loan carries 2.3% interest per annum and will mature onJuly 24, 2015. The loan was renewed several times upon maturity wherein the last maturity was seton March 20, 2016.

PNB LoansOn November 6, 2013, the Parent Company obtained unsecured short-term loans from PNBamounting to US$20,000. The loan carries 2.5% interest per annum and will mature onFebruary 4, 2014. The loan was renewed several times upon maturity for an additional 90 days oruntil May 5, 2014 under the same terms. Subsequent renewal followed with last renewal maturingon April 15, 2015. The loan was fully paid in 2015.

On March 19, 2014, the Parent Company obtained an unsecured short-term loan from PNBamounting to US$10,000. The loan carries 2.5% interest per annum but subject to repricing every30 days. The loan will mature on June 19, 2014. Partial payments amounting to $1,000 was madein 2015 which reduced outstanding balance to $9,000. When the partial payment was made in July2015, the rate was also renegotiated to 2.3%. The loan was renewed several times in 2015 with thelast renewal made on January 4, 2016. The loan will mature on March 3, 2016.

On June 3, 2014, the Parent Company obtained unsecured loan from PNB amounting to US$10,000.The loan carries 2.5% interest per annum and will mature on September 23, 2014. After severalmaturity and renewals, the latest maturity date of the loan is set at March 21, 2016. The rate wasalso renegotiated to 2.3% in June 2015.

On November 24, 2015, the Parent Company obtained unsecured loan from PNB amounting toUS$10,000. The loan carries 2.3% interest per annum with original maturity on February 22, 2016and was later extended for another 90 days.

BPI LoansOn January 14, 2013 and February 18, 2013, PMC assumed the liability for the settlement of theP=150,000 and P=100,000 loans with BPI, previously payable by BEMC. The interest rates of thenotes are at 4% per annum but subject to repricing every 30 days based on the prevailing interestrate at the date of repricing. The related interest is payable every 30 days. After a series of renewals,the maturity of the P=150,000 and P=100,000 loans from BPI was extended to January 30, 2014 andFebruary 14, 2014, respectively. Interest was increased to 4.5% per annum for both loans. The

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maturity dates of both loans were extended through another renewal under the increased interestrate until March 3, 2014 and March 28, 2014, respectively. These loans were both fully paid in July2014.

On November 6, 2013, the Parent Company obtained an unsecured short-term loan from BPIamounting to US$10,000. The loan carries 2.5% interest per annum and will mature onFebruary 6, 2014. The loan was also renewed upon maturity for an additional 45 days or untilMarch 21, 2014 under the same terms. The loan was fully paid on March 21, 2014.

On May 12, 2014, PMC obtained an unsecured short-term loan from BPI amounting to US$10,000.The loan carries 2.5% interest per annum and will mature on June 1, 2014. After several maturityand renewals, the loan was fully settled on November 25, 2015.

On November 24, 2014, the Parent Company obtained an unsecured short-term loan from BPIamounting to US$5,000. The loan carries 2.5% interest per annum but subject to repricing every30 days and last renewal to mature on January 23, 2015. After several maturity and renewals, theloan was fully settled on September 18, 2015.

On November 27, 2014, the Parent Company obtained an unsecured short-term loan from BPIamounting to US$3,500. The loan carries 2.5% interest per annum but subject to repricing every30 days and last renewal to mature on January 26, 2015. The Parent Company renewed the loanseveral times in 2015 with the latest maturity date set on February 19, 2016. Partial paymentsamounting to US$2,000 were made in 2015 which reduced the outstanding balance to US$1,500.

LBP LoansOn July 14, 2014, the Parent Company obtained an unsecured short-term loan from LBP amountingto P=100,000. The loan carries 4.5% interest per annum which will start on the date of initialborrowing and having a duration not exceeding 88 days, and will mature on October 10, 2014. Thisloan was renewed for another 88 days to mature on January 8, 2015. The Parent Company renewedthe loan under the same terms in 2015 with partial payment amounting to P=50,000 made onFebruary 26, 2015 and full settlement made on March 9, 2015.

On July 28, 2014, the Parent Company obtained an unsecured short-term loan from LBP amountingto P=250,000. The loan carries 4.5% interest per annum but subject to repricing every 90 days, andwill mature on October 27, 2014. This loan was renewed for another 88 days to mature onJanuary 23, 2015. The Parent Company renewed the loan under the same terms in 2015 with partialpayment amounting to P=100,000 made on January 23, 2015 and full settlement made onFebruary 10, 2015.

BNP Paribas LoanOn December 21, 2012, FEP, together with Galoc Production Co. (GPC), entered into a $40,000loan facility with BNP Paribas for the purpose of financing the development activities of SC 14C’sGaloc Phase 2. On June 30, 2014, the loan was fully settled in cash and all accessory contracts areterminated.

Interest expense on the bank loans amounted to P=108,837, P=90,757 and P=37,676 for 2015, 2014 and2013, respectively. Bank interest expense capitalized as deferred exploration costs amounted toP=76,186 in 2015.

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Bonds PayableOn December 18, 2014, SMECI, with PMC as the co-issuer, issued 8-year convertible bonds witha face value of P=7,200,000 at 1.5% coupon rate p.a. payable semi-annually. The bonds areconvertible into 400,000 common shares of SMECI at P=18 per share 12 months after the issue date(“Standstill Period”). On the last day of the Standstill Period, the Issuer shall have a one-time rightto redeem the bonds from the holders in whole or in part. After the Standstill Period, the noteholdersmay exercise the conversion right, in whole but not in parts, at any time but no later than the maturitydate. At redemption/maturity date, the bonds can be redeemed together with the principal or facevalue of the bonds. A 3% p.a. redemption premium based on the face value of the bonds and unpaidaccrued interest (if there be any) at the relevant payment date.

At the date of issuance, the carrying amount of the bonds payable and equity conversion optionsamounted to P=5,974,482 and P=1,225,518, respectively.

Interest expense pertaining to the convertible bonds amounting to P=433,488 and P=14,731 in 2015and 2014, respectively, was capitalized as deferred exploration costs.

15. Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities consist of:

2015 2014Trade P=738,635 P=776,581Accrued expenses 502,524 678,546Accrued royalties and excise taxes 67,890 104,360Withholding taxes 59,903 53,875Other nontrade liabilities 79,493 182,393

P=1,448,445 P=1,795,755

Trade payables are non-interest bearing and are generally settled within 30-60 day terms. Accruedexpenses consist of accrued operating and administrative expenses, contracted and outside services.Other nontrade liabilities include payroll-related liabilities.

16. Costs and Expenses

Costs and expenses include the following:

2015 2014 2013Mining and milling costs:

Communications, light and water P=1,664,852 P=1,709,707 P=1,291,863Depletion and depreciation

(Notes 10 and 18) 1,545,778 1,665,523 1,339,139Materials and supplies 1,557,628 1,785,909 1,580,141Personnel (Note 17) 822,254 1,076,790 862,676Contracted services 290,567 240,024 232,155Others 206,961 241,975 151,907

P=6,088,040 P=6,719,928 P=5,457,881

(Forward)

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2015 2014 2013General and administrative expenses:

Personnel (Note 17) P=367,077 P=507,299 P=550,866Contracted services 89,764 152,189 236,400Taxes and licenses 44,796 73,951 60,592Depreciation (Notes 10 and 18) 22,653 25,033 22,562Communications, light and water 16,153 15,762 18,738Donations 9,465 3,934 6,875Repairs and maintenance 5,513 12,189 27,999Travel and transportation 5,033 13,408 48,101Office supplies 3,048 3,514 5,729Others 65,086 135,722 333,197

P=628,588 P=943,001 P=1,311,059

Excise taxes and royalties:Royalties P=269,380 P=311,248 P=343,548Excise taxes 167,476 195,940 192,974

P=436,856 P=507,188 P=536,552

Other general and administrative expenses include security, janitorial and other outside services,and general miscellaneous expenses.

Starting August 1, 2012, the Parent Company suspended its operations at the Padcal Mine after theTSF No. 3 incident at the mine. Maintenance costs incurred during the suspension of operations ofthe Padcal Mine until March 7, 2013, which are included under “Others - net” account in theconsolidated statements of income, are as follows:

2015 2014 2013Padcal maintenance costs:

Personnel (Notes 17 and 19) P=– P=– P=126,313Depreciation (Notes 10 and 18) – – 85,891Materials and supplies – – 70,660Communications, light and water – – 67,213Contracted services – – 60,580Others – – 28,933

P=– P=– P=439,590

17. Personnel Cost

Details of personnel costs are as follows:

2015 2014 2013Mining and milling costs (Note 16):

Salaries and wages P=562,458 P=733,826 P=576,940Employee benefits 216,887 402,622 228,047Retirement costs (gain) (Note 19) 42,909 (59,658) 57,689

822,254 1,076,790 862,676

(Forward)

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2015 2014 2013General and administrative expenses

(Note 16):Salaries and wages P=271,338 P=317,898 P=323,714Employee benefits 86,772 191,386 211,304Retirement costs (gain) (Note 19) 8,967 (1,985) 15,848

367,077 507,299 550,866Padcal maintenance costs (Note 16):

Salaries and wages – – 73,398Employee benefits – – 36,637Retirement costs (Note 19) – – 16,278

– – 126,313P=1,189,331 P=1,584,089 P=1,539,855

In 2013, the Parent Company, PPP and FEP recognized retirement costs amounting to P=448,780,P=24,212, and P=1,391, respectively. In 2014, PPP and FEP recognized retirement costs amounting toP=2,939 and P=4,788, respectively while the Parent company recognized a net retirement gainamounting to P=69,370. In 2015, retirement costs amounted to P=49,894 and P=1,982 for the ParentCompany and FEP, respectively (see Note 19).

18. Depletion and Depreciation

Details of depletion and depreciation expense are as follows:

2015 2014 2013Mining and milling costs P=1,545,778 P=1,665,523 P=1,339,139General and administrative 22,653 25,033 22,562Padcal maintenance costs − – 85,891

P=1,568,431 P=1,690,556 P=1,447,592

Total depreciation cost of machinery and equipment used in exploration projects amounting toP=249,857, P=317,909 and P=67,967 in 2015, 2014 and 2013, respectively, are capitalized underdeferred exploration costs, which relate to projects that are currently ongoing for PMC, SMMCI andPGPI.

19. Retirement Benefits

Under the existing regulatory framework, Republic Act 7641 requires a provision for retirement payto qualified private sector employees in the absence of any retirement plan in the entity, provided,however, that the employees retirement benefit under the collective bargaining and other agreementsshall not be less than provided under the law. The law does not require minimum funding of theplan.

Parent Company Retirement FundThe Parent Company has a funded, noncontributory, defined benefits retirement plan covering allof its regular employees. The pension funds are being administered and managed through theRetirement Gratuity Plan of Philex Mining Corporation, with Union Bank of the Philippines andBDO as Trustee. The retirement plan provides for retirement, separation, disability and deathbenefits to its members.

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Changes in the net defined benefit liability (asset) of funded funds of the Parent Company are as follows:

2015Net benefit cost in charged to consolidated statements

of income Remeasurements in other comprehensive incomeReturn on Actuarial Actuarialplan assets changes changes(excluding arising from arising from

amount changes in changes inJanuary 1, Current Settlement/ Benefits included in experience financial Contribution December 31,

2015 service cost Net interest Curtailment Subtotal paid net interest adjustments Assumptions Subtotal by employer 2015Present value of

defined benefitobligation P=798,089 P=63,240 P=25,466 P=– P=886,795 (P=13,092) P=– P=55,575 (P=51,185) P=4,390 P=– P=878,093

Fair value ofplan assets (P=1,162,041) – (38,812) – (1,200,853) 13,092 23,833 – – 23,833 – (1,163,928)

(P=363,952) (P=314,058) P=– P=23,833 P=55,575 (P=51,185) P=28,223 P=– (P=285,835)

2014Net benefit cost in charged to consolidated statements

of income Remeasurements in other comprehensive incomeReturn on Actuarial Actuarial

plan assets changes changes(excluding arising from arising from

amount changes in changes inJanuary 1, Current Settlement/ Benefits included in experience financial Contribution December 31,

2014 service cost Net interest Curtailment Subtotal paid net interest adjustments assumptions Subtotal by employer 2014Present value of

defined benefitobligation P=1,138,837 P=71,905 P=33,064 (P=492,422) (P=387,453) (P=78,155) P=– P=130,802 (P=5,942) P=124,860 P=– P=798,089

Fair value ofplan assets (1,436,542) – (45,508) 363,591 318,083 78,155 (89,737) – – (89,737) (32,000) (1,162,041)

(P=297,705) (P=69,370) P=– (P=89,737) P=130,802 (P=5,942) P=35,123 (P=32,000) (P=363,952)

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2013Net benefit cost in charged to consolidated

statements of income Remeasurements in other comprehensive income

January 1,2013

Currentservice cost Net interest Subtotal

Benefitspaid

Return onplan assets(excluding

amountincluded in

net interest)

Actuarialchanges

arising fromchanges

experienceadjustments

Actuarialchanges

arising fromchanges in

financialassumptions Subtotal

Contributionby employer

December 31,2013

Present value ofdefined benefitobligation P=1,418,115 P=88,819 P=49,395 P=138,214 (P=145,263) P=– (P=33,906) (P=238,322) (P=272,228) P=– P=1,138,838

Fair value ofplan assets (1,374,142) – (52,303) (52,303) 116,397 (30,495) – – (30,495) (96,000) (1,436,543)

P=43,973 P=85,911 (P=28,866) (P=30,495) (P=33,906) (P=238,322) (P=302,723) (P=96,000) (P=297,705)

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The fair value of net plan assets of the Parent Company by each classes as at the end of the reportingperiod are as follows:

2015 2014AssetsCash and cash equivalents P=119,321 P=218,917Receivables 9,116 8,209Investment in debt securities 648,793 555,279Investment in equity securities 387,427 380,264Other investments – 447

1,164,657 1,163,116LiabilitiesAccrued trust fees payables 729 1,075

P=1,163,928 P=1,162,041

The cost of defined benefit pension plans as well as the present value of the pension obligation isdetermined using actuarial valuations. The actuarial valuation involves making various assumptions.The principal assumptions used in determining pension and post-employment medical benefitobligations for the defined benefit plans are shown below:

Actuarial valuation assumptions 2015 2014Discount rate 4.25% 3.34%Future salary increases 5.00% 5.00%

The overall expected rate of return of assets is determined based on market expectation prevailingon that date, applicable to the period over which the obligation is expected to be settled.

The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption of the defined benefit obligation as of the reporting period, assuming all otherassumptions were held constant:

Increase(decrease)

Effect on definedbenefit obligation

Discount rates 1.00% (P=48,578)(1.00%) 52,220

Future salary increases 1.00% P=44,396(1.00%) (42,429)

Shown below is the maturity analysis of the Company’s undiscounted benefit payments:

Expected benefitpayments

Less than one year P=35,650More than one year to five years 142,653More than five years to ten years 1,527,811

The average duration of the defined benefit obligation at the end of the reporting period is 6.65years.

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The Parent Company’s actuarial funding requirement in 2014 and 2015 is nil, however, the intentionis to continue regular contributions to the fund.

Pension expense from the defined benefit retirement plan is actuarially determined using theprojected unit credit method. The latest actuarial valuation report was made as atDecember 31, 2015.

SMMCI Retirement FundSMMCI has unfunded, noncontributory defined benefit retirement plan covering its regular and full-time employees. The Company also provides additional post employment healthcare benefits tocertain senior employees in the Philippines.

The cost of defined benefit pension plans and other post-employment medical benefits as well asthe present value of the pension obligation are determined using actuarial valuations. The actuarialvaluation involves making various assumptions. The principal assumptions used in determiningpension and post-employment medical benefit obligations for the defined benefit plans are shownbelow:

Actuarial valuation assumptions 2015 2014Discount rates 5.07% 4.60%Future salary increases 10.00% 10.00%

Changes in the defined benefit liability of SMMCI are as follows:

2015 2014January 1 P=19,033 P=8,320Current service cost 10,907 8,909Interest cost 870 486

Subtotal 11,777 9,395Remeasurements in other comprehensive income:

Experience adjustments (2,460) (2,175)Actuarial changes from changes in demographic assumptions (4,879) –Actuarial changes from changes in financial assumptions (1,503) 3,493Subtotal (8,842) 1,318

December 31 P=21,968 P=19,033

Retirement expense amounting to P=11,777 and P=9,395 in 2015 and 2014, respectively, werecapitalized as part of the deferred mine exploration costs.

The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption on the defined benefit obligation as of the end of the reporting period,assuming if all other assumptions were held constant:

Increase(decrease)

Present Value ofObligation

Discount rates 1.00% (P=2,751)(1.00%) 3,394

Future salary increases 1.00% P=3,290(1.00%) (2,736)

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Shown below is the maturity analysis of the undiscounted benefit payments:

2015 2014Less than 1 year P=– P=123More than 1 year to 5 years 24,793 10,147More than 5 years to 10 years 20,824 17,674More than 10 years to 15 years 15,181 21,280More than 15 years to 20 years 115,792 72,867More than 20 years 378,500 500,595

The average duration of the defined benefit obligation at the end of the reporting period is 22.29 and25.42 years in 2015 and 2014, respectively.

PPP Retirement FundPPP has an unfunded, noncontributory defined benefit retirement plan covering its regular and full-time employees.

The cost of defined benefit pension plans and other post-employment medical benefits as well asthe present value of the pension obligation are determined using actuarial valuations. The actuarialvaluation involves making various assumptions. The principal assumptions used in determiningpension and post-employment medical benefit obligations for the defined benefit plans are shownbelow:

Actuarial valuation assumptions 2014Discount rates 3.50 - 5.77%Future salary increases 5.00%

Present value of defined benefit obligation:

2014Net benefit cost in consolidated statements of

comprehensive incomeJanuary 1 P=15,623Current service cost 5,132Interest cost 2,595Subtotal 23,350Re-measurements in OCIExperience adjustments 2,267Actuarial changes from changes in financial

assumptions (1,065)Subtotal 1,202Ending balance P=24,552

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The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption on the defined benefit obligation as of the end of the reporting period,assuming if all other assumptions were held constant:

Present Value of ObligationIncrease (decrease) 2014

Discount rates 1.00% P=23,638(1.00%) 26,326

Future salary increases 1.00% 26,271(1.00%) 23,668

Turnover rate 1.00% 23,570(1.00%) 25,602

Shown below is the maturity analysis of the undiscounted benefit payments:

2014Less than 1 year P=−More than 1 year to 5 years 27,050More than 5 years to 10 years 16,527

PPP terminated all of its employees in 2015. FEP also terminated its employees and were rehiredthe PPC in August 2015. These resulted in absolute and full extinguishment of the obligation of thePPP to pay retirement benefits under the existing regulatory framework. Consequently, theoutstanding retirement benefits liabilities of the PPP and FEP at the date of extinguishment wererecognized as gain in the statement of comprehensive income. Gain on extinguishment of retirementbenefits liability of PPP and FEP amounted to P=3,463 and P=24,893, respectively.

The retirement benefits liability amounting to nil and P=24,552 as at December 31, 2015 and 2014,respectively, are recorded under ‘Pension obligation’ in the consolidated statements of financialposition.

20. Financial Instruments

Fair Values of Financial InstrumentsThe carrying values of cash and cash equivalents, accounts receivable, short-term bank loan,accounts payable and accrued liabilities, dividends payable and subscriptions payable, approximatetheir fair values because of their short-term nature. Quoted AFS financial assets are carried at fairvalue based on the quoted values of the securities. Unquoted AFS financial assets are carried atbook value since fair value cannot be readily determined based on observable market data.

The fair value measurement of the quoted financial assets is categorized as under Level 1 under fairvalue hierarchy.

21. Financial Risk Management Objectives and Policies and Hedging Activities

Financial Risk Management Objectives and PoliciesThe Group’s principal financial instruments, other than derivatives, comprise mainly of cash andcash equivalents, accounts receivable, AFS financial assets, short-term bank loan and accountspayable and accrued liabilities. The main purpose of these financial instruments is to providefinancing for the Group’s operations and capital intensive projects.

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The BOD is mainly responsible for the overall risk management and approval of the risk strategiesand principles of the Group. The BOD has approved its formalized hedging policy in relation toentering into commodity derivatives in order to manage its financial performance.

Financial RisksThe main risks arising from the Group’s financial instruments are credit and concentration risks,liquidity risk and market risk. The market risk exposure of the Group can be further classified toforeign currency risk, interest rate risk, equity price risk and commodity price risk. The BODreviews and approves the policies for managing these risks and they are summarized as follows:

Credit and Concentration RisksCredit risk is the risk where the Group could incur a loss if its counterparties fail to discharge theircontractual obligations. To avoid such losses, the Group’s primary credit risk management strategyis to trade only with recognized, creditworthy third parties. At present, 60% of the ParentCompany’s annual production of concentrates is sold to Pan Pacific Copper Co., Ltd. The balanceof the Parent Company’s annual production of concentrates is contracted with LD Metals which iscovered by several short-term agreements up to March 2018.

Credit risk may also arise from the Group’s other financial assets, which comprise of cash and cashequivalents. The Group’s exposure to credit risk could arise from default of the counterparty, havinga maximum exposure equal to the carrying amount of these instruments.

The table below summarizes the Group’s exposure to credit risk for the components of theconsolidated statements of financial position as of December 31, 2015, and 2014:

2015 2014Cash and cash equivalents:

Cash with banks P=693,894 P=719,424Short-term deposits 312,422 4,509,163

Accounts receivable:Trade 701,328 893,943Accrued interest – 1,968Others 61,842 107,593

Gross maximum credit risk exposure P=1,769,486 P=6,232,091

The following tables show the credit quality of the Group’s financial assets by class as atDecember 31, 2015 and 2014 based on the Group’s credit evaluation process:

December 31, 2015

Neither Past Due nor ImpairedPast Due andIndividually

TotalHigh-Grade Standard ImpairedCash and cash equivalents:

Cash with banks P=693,894 P=– P=– P=693,894Short-term deposits 312,422 − − 312,422

Accounts receivable:Trade 701,328 − − 701,328Accrued interest − − − −Others 61,842 − 1,747 63,589

Total P=1,769,486 P=– P=1,747 P=1,771,233

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December 31, 2014

Neither Past Due nor ImpairedPast Due andIndividually

TotalHigh-Grade Standard ImpairedCash and cash equivalents:

Cash with banks P=719,424 P=– P=– P=719,424Short-term deposits 4,509,163 – – 4,509,163

Accounts receivable:Trade 893,943 – – 893,943Accrued interest 1,968 – – 1,968Others 159,953 – 2,613 162,566

Total P=6,284,451 P=– P=2,613 P=6,287,064

Credit quality of cash and cash equivalents and accounts receivable are based on the nature of thecounterparty and the Group’s evaluation process.

High-grade credit quality financial assets pertain to financial assets with insignificant risk of defaultbased on historical experience.

The Group has no past due but not impaired financial assets as at December 31, 2015 and 2014.

Liquidity RiskLiquidity risk is the risk where the Group becomes unable to meet its obligations when they fall dueunder normal and stress circumstances. The Group’s objective is to maintain a balance betweencontinuity of funding and flexibility through the use of bank loans. The Group addresses liquidityconcerns primarily through cash flows from operations and short-term borrowings, if necessary.

The tables below summarize the maturity profile of the Group’s financial assets that can be used bythe Group to manage its liquidity risk and the maturity profile of the Group’s financial liabilities,based on contracted undiscounted repayment obligations (including interest) as atDecember 31, 2015 and 2014, respectively:

December 31, 2015

On DemandWithin1 Year

More than1 Year Total

Loans and receivables:Cash and cash equivalents P=1,008,686 P=− P=− P=1,008,686Accounts receivable:

Trade − 701,328 − 701,328Others − 61,842 − 61,842

AFS financial assets:Quoted equity investments 33,975 − − 33,975Unquoted equity investments 72,712 − − 72,712

Total undiscounted financial assets P=1,115,373 P=763,170 P=− P=1,878,543

(Forward)

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December 31, 2015



Other financial liabilities:Short-term loans

Principal P=– P=3,317,730 P=– 3,317,730Interest – 81,730 – 81,730

Long-term loansPrincipal – – 7,200,000 7,200,000Interest – – 756,000 756,000

Accounts payables and accruedliabilities – 1,318,165 – 1,318,165

Dividends payable 479,652 – – 479,652Subscriptions payable 21,995 – – 21,995

Total undiscounted financialliabilities P=501,647 P=4,717,625 P=7,956,000 P=13,175,272

December 31, 2014



Loans and receivables:Cash and cash equivalents P=5,231,892 P=– P=– P=5,231,892Accounts receivable:

Trade – 893,943 – 893,943Accrued interest – 1,968 – 1,968Others – 107,593 – 107,593

AFS financial assets:Quoted equity investments 833,987 – – 833,987Unquoted equity investments 72,694 – – 72,694

Total undiscounted financial assets P=6,138,573 P=1,003,504 P=– P=7,142,077Other financial liabilities:

Short-term loansPrincipal P=– P=4,307,720 P=– P=4,307,720Interest – 134,258 – 134,258

Long-term loansPrincipal – – 7,200,000 7,200,000Interest – – 864,000 864,000

Accounts payables and accruedliabilities – 1,003,504 – 1,003,504

Dividends payable 488,818 – – 488,818Subscriptions payable 21,995 – – 21,995

Total undiscounted financialliabilities P=510,813 P=5,445,482 P=8,064,000 P=14,020,295

Market Risks

Foreign Currency RiskForeign currency risk is the risk where the value of the Group’s financial instruments diminishesdue to unfavorable changes in foreign exchange rates. The Parent Company’s transactional currencyexposures arise from sales in currencies other than its functional currency. All of the ParentCompany’s sales are denominated in US dollar. Also, the Parent Company is exposed to foreignexchange risk arising from its US dollar-denominated cash and cash equivalents, trade receivablesand loans payable. For the years ended December 31, 2015, 2014 and 2013, the Group recognizednet foreign exchange losses of P=132,391, P=56,374 and P=173,972, respectively, arising from thetranslation of these foreign currency-denominated financial instruments.

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As the need arises, the Group enters into structured currency derivatives to cushion the effect offoreign currency fluctuations.

The following tables summarize the impact on income before income tax of reasonably possiblechanges in the exchange rates of US dollar against the Peso. The reasonable movement in exchangerates was determined using 1-year historical data.

Year Ended December 31, 2015US$ Appreciate (Depreciate) Effect on Income before Income Tax

4%-4%

(P=123,005)(4%) 123,005

Year Ended December 31, 2014US$ Appreciate (Depreciate) Effect on Income before Income Tax

4% (P=5,728)(4%) 5,728

There were no outstanding dollar derivatives as of December 31, 2015 and 2014.

Interest Rate RiskInterest rate risk arises from the possibility that changes in interest rates would unfavorably affectfuture cash flows from financial instruments. The Group’s exposure to the risk in changes in marketinterest rates relates primarily to the Parent Company’s loans from related parties in 2014. From thevariable interest rates of loans in 2014, the Group’s borrowings as at December 31, 2015 are allunder fixed interest rates.

The Group relies on budgeting and forecasting techniques to address cash flow concerns. The Groupalso keeps its interest rate risk at a minimum by not borrowing when cash is available or byprepaying, to the extent possible, interest-bearing debt using operating cash flows.

The following table illustrates the sensitivity to reasonably possible change in interest rates, with allother variables held constant, of the Group’s 2014 income before income tax. The change in marketinterest rates is based on the annualized volatility of the 6-month benchmark rate:

Year Ended December 31, 2014Change in Market Rate of Interest Effect on Income before Income TaxDecrease by 1.0% P=102,551Decrease by 0.5% 51,275

Increase by 1.0% (P=102,551)Increase by 0.5% (51,275)

There is no other impact on the Group’s equity other than those affecting the consolidated statementsof income.

Equity Price RiskEquity price risk is the risk where the fair values of investments in quoted equity securities couldincrease or decrease as a result of changes in the levels of equity indices and in the value ofindividual stocks. Management monitors the movement of the share prices pertaining to the Group’sinvestments. The Group is exposed to equity securities price risk because of investments held bythe Parent Company and PPC, which are classified in the consolidated statements of financial

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position as AFS financial assets (see Note 11). As of December 31, 2015 and 2014, investments inquoted shares totaling P=33,975 and P=833,987 represent 0.08% and 1.87% of the total assets of theGroup, respectively. Reasonable possible changes were based on an evaluation of data statisticsusing 1-year historical stock price data.

The effect on equity, as a result of a possible change in the fair value of the Group’s quoted equityinstruments held as AFS financial assets as at December 31, 2014 and 2013 that could be broughtby changes in equity indices with all other variables held constant are as follows:

December 31, 2015

CurrencyChange in Quoted Prices ofInvestments Carried at Fair Value

Effecton Equity

Peso Increase by 21% P=7,474Increase by 41% 14,949Decrease by 21% (7,474)Decrease by 41% (14,949)

December 31, 2014

CurrencyChange in Quoted Prices ofInvestments Carried at Fair Value

Effecton Equity

Australian dollar (AU$) Increase by 48% (AU$4,141)Decrease by 95% (8,195)

Peso Increase by 21% P=100,696Increase by 41% 196,597Decrease by 21% (100,696)Decrease by 41% (196,597)

Commodity Price RiskThe Parent Company’s mine products revenues are valued based on international commodityquotations (i.e., primarily on the LME and London Bullion Metal Association quotes) over whichthe Parent Company has no significant influence or control. This exposes the Group’s results ofoperations to commodity price volatilities that may significantly impact its cash inflows. The ParentCompany enters into derivative transactions as a means to mitigate the risk of fluctuations in themarket prices of its mine products.

The following table shows the effect on income before income tax should the change in the pricesof copper and gold occur based on the inventory of the Company as at December 31, 2015. Thechange in metal prices is based on 1-year historical price movements.

December 31, 2015Change in Metal Prices Effect on Income before Income TaxGold:

Increase by 12% P=41,536Decrease by 12% (41,536)

Copper:Increase by 21% P=40,613Decrease by 21% (40,613)

There were no outstanding gold and copper derivatives as at December 31, 2015.

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As at December 31, 2014, there were outstanding gold derivatives designated as cash flow hedgeswherein fair value changes are reported under equity. The following table summarizes the impacton equity of reasonably possible change in the prices of gold and copper.

December 31, 2014Change in Metal Prices Effect on EquityGold:

Increase by 12% P=43,903Decrease by 12% (43,903)

Copper:Increase by 13% P=35,553Decrease by 13% (35,553)

Derivative Financial Instruments

Gold DerivativesIn December 2014, the Parent Company has entered into gold collar contracts covering3,000 ounces of monthly gold production for the first quarter of 2015 at an average strike price ofUS$1,200 per ounce for the put options and US$1,210 per ounce for the call options. Also inMay 2015, the Company concluded hedging contracts covering 3,000 ounces per month startingMay to September 2015 at an average strike price of US$1,200 per ounce for the put options andUS$1,230 per ounce for the call options. These contracts were designated as cash flow hedges.

In June 2014, the Company entered into gold collar hedging contracts covering 6,000 ounces ofmonthly production for the third quarter of 2014 at an average strike price of US$1,262.50 per ouncefor the put options and US$1,325.50 per ounce for the call options. Similarly in September 2014,the Company concluded gold collar hedging contracts covering 9,000 ounces of monthly productionfor the fourth quarter of 2014 at an average strike price of US$1,200 per ounce for the put optionsand US$1,270 per ounce for the call options. These contracts were also designated as cash flowhedges.

There were no outstanding gold derivatives as at December 31, 2015.

Embedded DerivativesAs at December 31, 2015 and 2014 the Parent Company has embedded derivatives, which isrepresented by price exposure relative to its provisionally priced commodity sales contracts(see Notes 5 and 7). Mark-to-market gains and losses from open or provisionally priced sales arerecognized through adjustments to revenue in the consolidated statements of income and to tradereceivables in the consolidated statements of financial position. The Parent Company determinesmark-to-market prices using the forward price for quotational periods after the consolidatedstatements of financial position date stipulated in the contract. The effect of these fair valueadjustments arising from embedded derivatives amounted to a net loss of P=152,906 and P=138,679in 2015 and 2014, respectively, which were included under revenue and adjusted againstreceivables.

Fair Value Changes on DerivativesFair value changes of derivatives that are not designated as accounting hedges flow directly to theconsolidated statements of income, while those which are designated as accounting hedges go toequity. Realized gains and losses on settlement are adjusted to the related revenue accounts.

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The details of the net changes in the fair values of all derivative instruments as atDecember 31, 2015 and 2014 are as follows:

2015 2014January 1 P=7,766 P=–Premiums paid – –Net changes in fair values of derivatives:

Designated as accounting hedges – 7,766Not designated as accounting hedges – –

7,766Fair value of settled instruments (7,766) –December 31 P=– P=7,766

Hedge Effectiveness of Cash Flow HedgesBelow is a rollforward of the Parent Company’s cumulative translation adjustments (CTA) on cashflow hedges for the years ended December 31, 2015 and 2014:

2015 2014January 1 P=7,766 P=–Changes in fair value of cash flow hedges – 7,766Transferred to consolidated statements of income (7,766) –December 31 P=– P=7,766

22. Capital Management

The Group maintains a capital base to cover risks inherent in the business. The primary objectiveof the Group’s capital management is to optimize the use and earnings potential of the Group’sresources, ensuring that the Group complies with externally imposed capital requirements, if any,and considering changes in economic conditions and the risk characteristics of the Group’sactivities. No significant changes have been made in the objectives, policies and processes of theGroup from the previous years.

The following table summarizes the total capital considered by the Group:

2015 2014Capital stock P=4,940,399 P=4,940,399Additional paid-in capital 1,142,722 1,117,627Retained earnings:

Unappropriated 5,496,271 4,712,032Appropriated 10,000,000 10,000,000

P=21,579,392 P=20,770,058

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23. Foreign Currency-Denominated Monetary Assets and Liabilities

The Group’s foreign currency-denominated monetary assets and liabilities as atDecember 31, 2015 and 2014 follow:

2015 2014

US$Peso

Equivalent US$Peso

EquivalentAssets

Cash and cash equivalents $8,914 P=419,493 $67,776 P=3,030,943Trade receivables 13,194 620,910 18,295 818,152

22,108 1,040,403 86,071 3,849,095Liabilities

Accounts payable 680 32,001 773 34,569Bank loan 70,500 3,317,730 88,500 3,957,720

71,180 3,349,731 89,273 3,992,289Liabilities ($49,072) (P=2,309,328) ($3,202) (P=143,194)

The exchange rates of the Peso to US dollar were P=47.06 as at December 31, 2015 andP=44.72 to US$1 as at December 31, 2014.

24. Related Party Transactions

Related party relationships exist when the party has the ability to control, directly or indirectly,through one or more intermediaries, or exercise significant influence over the other party in makingfinancial and operating decisions. Such relationships also exist between and/or among entitieswhich are under common control with the reporting entity and its key management personnel,directors or stockholders. In considering each possible related party relationship, attention isdirected to the substance of the relationships, and not merely to the legal form.

Companies within the Group in the regular conduct of business, enters into transactions with relatedparties which consists of advances, loans, reimbursement of expenses, regular banking transactions,leases and management and administrative service agreements.

Intercompany transactions are eliminated in the consolidated financial statements. The Group’sdoes not have significant related party transactions except for the settlement of loans from FPCGroup as disclosed in Note 14.

Compensations of Key Management PersonnelCompensations of the members of key management personnel follow:

2015 2014 2013Short-term employee benefits P=107,909 P=112,498 P=100,521Pension costs 5,240 5,094 7,719

P=113,149 P=117,592 P=108,240

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25. Income Taxes

a. The components of the Group’s net deferred income tax assets (liabilities) are as follows:

2015 2014Deferred income tax assets on:

Provision for losses and others P=140,505 P=270,984Unrealized foreign exchange losses - net 69,214 65,432Unamortized past service costs 42,079 51,981Accumulated accretion of interest on provision

for mine rehabilitation costs 7,480 6,456Pension obligation 5,993 5,917Allowances for:

Unrecoverable deferred mine and oil exploration costs 16,303 24,159

Disallowable claims receivable 24,761 24,095Total deferred income tax assets 306,335 449,024Deferred income tax liabilities on:

Difference in fair value and carrying value of the net assets of subsidiary acquired (2,645,504) (2,645,504)Accelerated depreciation (1,318,640) (1,346,332)Mine inventory at year-end (42,848) (57,515)Gain on dilution on interest (126,615) (126,615)Net retirement plan assets (92,376) (111,214)Unrealized foreign exchange gain (13,520) (12,761)

Total deferred income tax liabilities (4,239,503) (4,299,941)Net deferred income tax liabilities (P=3,933,168) (P=3,850,917)

b. A reconciliation of the Group’s provision for income tax computed at the statutory income taxrates based on income before income tax to the provision for income tax is as follows:

2015 2014 2013Provision for income tax

computed at the statutoryincome tax rates P=342,669 P=316,285 P=322,516

Additions to (reductions in)income tax resulting from:Unrecognized DTA, NOLCO

and excess MCIT 54,960 287,310 406,144Nondeductible expenses and

non-taxableincome - net (35,103) (254,813) 35,906

Stock-based compensationexpense 7,529 7,742 25,240

Interest income alreadysubjected to final tax (3,459) (5,087) (7,818)

Effect of difference in taxrates and others - net – – (19,331)

Provision for income tax P=366,596 P=351,437 P=762,657

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c. As at December 31, 2015 and 2014, no deferred income tax assets were recognized ondeductible temporary differences amounting to about P=2,655,280 and P=2,472,080, respectively.

d. As at December 31, 2015, significant respective NOLCO and MCIT of the Parent Company’ssubsidiaries for which no deferred income taxes were recognized are as follows:

PPC and subsidiaries:As at December 31, 2015, the PPC and subsidiaries’ NOLCO that can be claimed as deductionfrom future taxable income and excess MCIT that can be deducted against income tax due areas follows:

Year Incurred Available Until NOLCO Excess MCIT2013 2016 P=109,821 P=1,0222014 2017 516,164 1,4282015 2018 1,367 937

P=627,352 P=3,387

The following are the movements of the PPC and subsidiaries’ NOLCO and excess MCIT forthe years ended December 31:

NOLCO Excess MCIT2015 2014 2015 2014

Beginning balance P=702,425 P=291,483 P=2,742 P=1,316Additions 1,367 516,164 937 1,428Applications (25, 911) (36,474) − −Expirations (50,529) (68,748) (292) (2)Ending balance P=627,352 P=702,425 P=3,387 P=2,742

SMMCIAs at December 31, 2015, SMMCI’s NOLCO and excess MCIT that can be claimed asdeduction from future taxable income are as follows:

Year Available NOLCO ExcessIncurred Until Amount Tax Effect MCIT2013 2016 P=24,187 P=7,256 P=–2014 2017 11,149 3,345 712015 2018 56,590 16,977 –

P=91,926 P=27,578 P=71

The following are the movements of the SMMCI’s NOLCO and excess MCIT for the yearsended December 31:


At January 1 P=68,724 P=77,243 P=74 P=3Additions 56,590 11,149 − 71Expirations (33,388) (19,668) (3) –At December 31 P=91,926 P=68,724 P=71 P=74

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PGPIAs at December 31, 2015, PGPI’s NOLCO and excess MCIT that can be claimed as deductionfrom future taxable income are as follows:

Year Incurred Available Until NOLCO Excess MCIT2013 2016 P=92,882 P=222014 2017 32,567 –2015 2018 34,459 188

P=159,908 P=210

The following are the movements in NOLCO and excess MCIT for the years endedDecember 31:


Beginning balance P=160,788 P=164,715 P=46 P=52Additions 34,459 32,567 188 –Expirations (35,339) (36,494) (24) (6)Ending balance P=159,908 P=160,788 P=210 P=46

26. Equity

Capital StockThe details of the Parent Company’s capital stock follow:

Number of Shares2015 2014

Authorized common stock - P=1 par value 8,000,000,000 8,000,000,000Issued, outstanding and fully paid:

January 1 4,940,399,068 4,936,996,068Issuance during the year – 3,403,000December 31 4,940,399,068 4,940,399,068

Below is a summary of the capital stock movement of the Parent Company:

Year Date of Approval

Change in Numberof AuthorizedCapital Stock

New Subscriptions/Issuances***

1956 November 26, 1956 60,000,000 20,590,2501957 30,539,7501958 107,0351959 1,442,5001960 September 12, 1960 30,000,000 10,997,3971961 1,238,5001962 9,737,2941963 December 16, 1993 90,000,000* 103,258,3781964 March 6, 1964 220,000,000 65,339,5201965 61,546,755

(Forward)

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Year Date of Approval

Change in Numberof AuthorizedCapital Stock

New Subscriptions/Issuances***

1966 60,959,1821969 September 22, 1969 600,000,000 182,878,2801970 274,317,4201971 August 20, 1971 1,000,000,000 411,476,1311973 4,000,000,000**** 2,623,160,3321974 1,543,035,4761978 540,062,4201981 August 4, 1981 5,000,000,000 1,485,171,6551983 742,006,9771985 815,707,4731986 3,923,841,2151987 August 14, 1987 9,000,000,000 3,867,787,3261989 July 11, 1989 20,000,000,000 5,028,123,5241990 June 27, 1990 (38,000,000,000)** (20,549,744,536)1991 375,852,2331992 162,869,2581993 179,156,1831995 403,8491997 985,928,4831999 May 23, 1997 3,000,000,000 –2007 10,781,2502008 912,279,6622009 May 22, 2009 3,000,000,000 1,019,753,7892010 21,525,9992011 7,619,7832012 3,276,0752013 3,969,2502014 3,403,0002015 –

8,000,000,000 4,940,399,068 *This is the result of the change of par value from P=0.10 to P=0.05. **This is the result of the change in par value from P=0.05 to P=1.00. ***Information on issue/offer price on public offering not available or information not applicable since the shares

were not issued in relation to a public offering.****Information on date of approval not available.

As at December 31, 2015 and 2014, the Parent Company’s total stockholders is 44,296 and 44,386,respectively.

Retained EarningsRetained earnings consist of the following:

2015 2014Retained earnings:

Unappropriated P=5,408,240 P=4,610,889Cumulative actuarial gains 88,031 101,143Total Unappropriated 5,496,271 4,712,032Appropriated 10,000,000 10,000,000

Ending balance P=15,496,271 P=14,712,032

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On December 13, 2013, the Parent Company’s BOD approved the appropriation of P=10,000,000 ofthe unappropriated retained earnings for purposes of mine development and construction of theSilangan Project from 2016 to 2018.

On February 26, 2014, the BOD of the Parent Company approved the declaration of cash dividendof P=0.05 per share as regular dividend to all stockholders at record date of March 12, 2014.

On October 29, 2014, the BOD of the Parent Company approved the declaration of cash dividendof P=0.03 per share as regular dividend to all stockholders at record date of November 12, 2014.

On February 25, 2015, the BOD of the Parent Company approved the declaration of cash dividendof P=0.02 per share as regular dividend to all stockholders at record date of March 11, 2015.

The Parent Company’s retained earnings available for dividend distribution amounted toP=6,117,846 and P=4,235,911 as at December 31, 2015 and 2014, respectively.

NCINCI consist of the following:

Percentage of Ownership Amount2015 2014 2015 2014

NCI on net assets of:PPC 35.3% 35.2% P=641,864 P=617,807BEMC 35.3% 35.2% (249,565) (251,157)FEC 66.8% 66.8% 118,607 98,765FEP and its subsidiaries 62.3% 68.4% 163,852 (80,005)PPP and its subsidiaries 65.4% 65.6% 2,046,600 3,057,212LMC 0.7% 0.7% (239) (219)

P=2,721,119 P=3,442,403

Transactions with NCI are disclosed in Note 2.

Financial information of subsidiaries that have material non-controlling interests are providedbelow:

Income (loss) allocated to material NCI:

2015 2014PPP and its subsidiaries (P=351,239) (P=326,008)PPC 22,299 7,698

Other comprehensive income allocated to material NCI:

2015 2014PPP and its subsidiaries P=524 P=7,903PPC − −

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The summarized financial information of these subsidiaries are provided below:

Statements of comprehensive income as of December 31, 2015:

PPP PPCRevenue P=− P=−Cost of sales − −General and administrative expenses (109,721) (35,822)Other income (charges) (427,215) 102,302Interest expense − −Income (loss) before tax (536,936) 66,480Provision for (benefit from) income tax (14) −Net income (536,950) 66,480Other comprehensive income (loss) (6,010) −Total comprehensive income (loss) (P=542,960) (P=66,480)Attributable to non-controlling interests (P=355,639) (P=24,467)

Statements of comprehensive income as of December 31, 2014:

PPP PPCRevenue P=– P=–Cost of sales – –General and administrative expenses (167,102) (23,287)Other income (charges) (327,327) 45,151Interest expense – –Income before tax (494,429) 21,864Provision for income tax – –Net income (494,429) 21,864Other comprehensive income 9,308 –Total comprehensive income (P=485,121) P=21,864Attributable to non-controlling interests (P=317,754) P=7,718

Statements of financial position as at December 31, 2015:

PPP PPCCurrent assets P=281,920 P=1,045,869Noncurrent assets 189,509 3,009,190Current liabilities (7,343) (2,198,851)Noncurrent liabilities − (122,399)Total equity 464,086 1,733,809Attributable to:Equity holders of the Parent Company P=160,110 P=1,121,774Non-controlling interests 303,976 612,035

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Statements of financial position as at December 31, 2014:

PPP PPCCurrent assets P=1,818,056 P=833,241Noncurrent assets 567,738 3,639,570Current liabilities (25,747) (2,692,539)Noncurrent liabilities (20,964) (112,889)Total equity 2,339,083 1,667,383Attributable to:Equity holders of the Parent Company P=804,644 P=1,080,464Non-controlling interests 1,534,439 586,919

Statements of cash flows as of December 31, 2015:

Activities PPP PPCOperating (P=234,888) (P=23,188)Investing 55,464 644,844Financing (1,332,272) (490,398)Net increase (decrease) in cash and cash

equivalents (P=1,511,696) P=131,258


Activities PPP PPCOperating (P=196,275) (P=14,106)Investing (112,817) 7,459Financing (513,737) 95,044Net increase (decrease) in cash and cash equivalents (P=822,829) P=88,397


Activities PPP PPCOperating (P=194,886) (P=30,281)Investing 1,824,363 (1,265,347)Financing 332,985 1,303,935Effect of exchange rate changes on cash – 21Net increase in cash and cash equivalents P=1,962,462 P=8,328

27. Share-based Payments

2006 Parent Company Stock Option Plan (SOP)On June 23, 2006, the Parent Company’s stockholders approved and ratified the stock option planof the Parent Company as approved by the Parent Company’s BOD on March 31, 2006. Amongthe salient terms and features of the stock option plan are as follows:

i) Participants: directors, officers, managers and key consultants of the Company and itssignificantly-owned subsidiaries;

ii) Number of shares: up to 3% of the Company’s issued and outstanding shares;iii) Term: Five years from adoption date;iv) Exercise price: Average stock price during the last 20 trading days prior to the date of grant

multiplied by a factor of 0.8, but in no case below par value; and

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v) Vesting period: Up to 16.67% in six months from grant date; up to 33.33% in 1 year from grantdate; up to 50% in 1.5 years from grant date; up to 66.67% in 2 years from grant date; up to83.35% in 2.5 years from grant date; and up to 100% in 3 years from grant date.

On March 8, 2007, the stock option plan was approved by the Philippine SEC.

A total of two confirmed new grants for 15,000,000 shares were awarded on June 24 andDecember 7, 2009.

For the year ended December 31, 2010, three confirmed new grants were endorsed. A total of9,950,000 shares were awarded on May 25, September 28 and November 23, 2010.

On January 5, 2011, a new stock option grant was given following the terms of the approved plan.A total of 6,000,000 options were awarded vesting every 6 months up to January 5, 2014. TheCompany uses the Customized Binomial Lattice Model to compute for the fair value of the optionstogether with the following assumptions:

January 5, 2011Spot price per share P=15.40Time to maturity 5 yearsVolatility* 54.57%Dividend yield 1.93%Suboptimal exercise behavior multiple 1.5Forfeiture rate 2%

2010May 25 September 28 November 23

Spot price per share P=11.00 P=14.88 P=14.00Time to maturity 5 years 5 years 5 yearsVolatility* 54.57% 55.09% 54.98%Dividend yield 2.69% 2.00% 2.12%Suboptimal exercise behavior multiple 1.5 1.5 1.5Forfeiture rate 2% 2% 2%*Volatility is calculated using historical stock prices and their corresponding logarithmic returns.

The following table shows the movements in 2015 and 2014 of the 2006 Parent Company SOP:

Number of Options Weighted Average Exercise Price2015 2014 2015 2014

January 1 P=5,368,150 P=9,001,400 P=11.78 P=11.35Exercised – (3,403,000) – 10.79Forfeited (853,150) (230,250) 9.54 9.54December 31 P=4,515,000 P=5,368,150 P=12.20 P=11.78

The number of unexercised vested stock options as at December 31, 2015 and 2014 are 4,515,000,and 5,368,150, respectively.

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2011 Parent Company SOPOn April 27, 2011, the BOD approved the 2011 SOP of the Company, which was concurrentlyapproved by the shareholders on June 29, 2011. Among the salient terms and features of the stockoption plan are as follows:

i) Option Grant Date is the date on which option is awarded under the Parent Company 2011 SOP,provided such award is subsequently accepted by eligible participant.

ii) The vesting percentage and vesting schedule of the options granted under the 2011 ParentCompany SOP shall be determined by the Compensation Committee of the Board.

iii) 246,334,118 shares representing 5% of the Parent Company’s outstanding capital stock shall beinitially reserve for exercise of options to be granted.

iv) The exercise price for the options granted under the 2011 Parent Company SOP shall bedetermined by the Compensation Committee of the Board but shall not be lower than the highestof: (i) the closing price of the shares on PSE on the Option Grant Date, (ii) the average closingprice of the shares on the PSE for the 5 business days on which dealings in the shares are madeimmediately preceding the Option Grant Date; and (iii) the par value of shares.

v) Any amendments to the 2011 Parent Company SOP shall be deemed adopted and made effectiveupon approval by shareholders owning at least two-thirds of the outstanding capital stock of theParent Company and, to the extent legally necessary, by the SEC.

On March 5, 2013, the Parent Company received the SEC resolution approving the 2011 SOP.

The Parent Company granted 40,410,000 options under the 2011 SOP.

The Parent Company uses the Customized Binomial Lattice Model to compute for the fair value ofthe options together with the following assumptions:

Spot price per share P=17.50Exercise price per share P=24.05Time to maturity 7 yearsRisk-free rate 3.3435%Volatility* 49.8731%Dividend yield 1.0031%*Volatility is calculated using historical stock prices and their corresponding logarithmic returns.

The following table shows the movements in 2015 of the 2011 SOP of the Parent Company:

Number ofOptions

WeightedAverage

Exercise Price2015 2015

January 1 P=28,250,000 P=24.05Granted 6,250,000 16.45Forfeited (11,630,000) 24.05December 31 P=22,870,000 P=21.97

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The following table shows the movements in 2014 of the 2011 SOP of the Parent Company:

Number ofOptions

WeightedAverage

Exercise Price2014 2014

January 1 P=29,910,000 P=24.05Forfeited (1,660,000) 24.05December 31 P=28,250,000 P=24.05

The number of unexercised vested stock options totaled to 20,432,500, 21,347,500 and 14,955,000in 2015, 2014 and 2013, respectively.

The total share-based compensation expense for the 2006 and 2011 SOP in 2015, 2014 and 2013amounted to P=25,095, P=25,808 and P=84,133, respectively. The corresponding share-based optionreserve included under Additional Paid-in Capital as at December 31, 2015 and 2014 amounted toP=351,911 and P=326,816, respectively.

28. Basic/Diluted Earnings Per Share

Basic earnings per share are computed as follows:

2015 2014 2013Net income attributable to equity

holders of the ParentCompany P=896,181 P=1,005,552 P=341,932

Divided by weighted averagenumber of common sharesoutstanding during year 4,940,399,068 4,938,577,039 4,933,657,951

Basic earnings per share P=0.181 P=0.204 P=0.069

Diluted earnings per share amounts are calculated as follows:

2015 2014 2013Net income attributable to equity

holders of the ParentCompany P=896,181 P=1,005,552 P=341,932

Divided by weighted averagenumber of common sharesadjusted for the effect ofexercise of stock options 4,940,399,068 4,938,577,039 4,933,657,951

Diluted earnings per share P=0.181 P=0.204 P=0.069

Weighted average number ofcommon shares adjusted forthe effect of exercise of stockoptions 4,940,399,068 4,938,577,039 4,933,657,951

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The Parent Company considered the effect of its potentially dilutive stock options outstanding as atDecember 31, 2015, 2014 and 2013 (see Note 26). The stock options outstanding are anti-dilutive.The effect of the conversion option of the convertible bonds is anti-dilutive as at December 31, 2015and 2014.

29. Farm-in Agreement with Manila Mining Corporation (MMC)

On May 11, 2011, the Parent Company entered into a farm-in agreement with MMC and to acquireup to 60% of the outstanding capital stock of Kalayaan Copper Gold Resources, Inc. (Kalayaan), awholly owned subsidiary of MMC. The Parent Company purchased from MMC 125,000 shares ofKalayaan representing 5% of the outstanding capital stock for US$25,000 or P=1,071,521. Further,the Parent Company will subscribe to additional 3,437,500 shares of Kalayaan, representing 55%of outstanding capital stock, subject to the condition that the Parent Company will fulfill thesubscription services within the earlier of 3 years following the execution of the agreement or expiryof the term of the exploration permit.

Upon acquisition of 5% stake over Kalayaan, MMC, under the Operating Agreement, grants theParent Company exclusive, irrevocable and unconditional rights:

a. To conduct exploration and pre-development;b. To perform all activities necessary to complete a final feasibility study for the project; and,c. To possess and/or exercise all of Kalayaan’s surface rights, to exercise, utilize and enjoy all the

rights, benefits, privileges, and perform all the obligations of Kalayaan under and in relation tothe exploration permit and the mineral rights, provided that Kalayaan shall remain liable for allaccrued obligations under the exploration permit as at the date of the agreement.

The transaction was recorded by allocating the US$25,000 to Investment in AFS pertaining to the5% interest in Kalayaan and to the exploration rights acquired. The acquisition cost is thenallocated by valuing the investment in AFS at P=100 and the deferred exploration cost atP=1,071,421.

As at December 31, 2015, the Company is undergoing discussions with MMC to revise, andconsequently, extend the term of the farm-in agreement on the Kalayaan Project.

30. Joint Ventures with Anglo

In order to accelerate exploration, the Parent Company and PGPI entered into separate joint ventureswith Anglo covering the Parent Company’s Baguio District and PGPI’s Surigao del Norte mineraltenements, respectively. Shareholders agreements were executed on September 2, 1999, pursuant towhich Anglo is to fund all exploration costs up to feasibility studies, if warranted, in return for equityin the tenements.

The exploration work of Anglo led to the discovery of the Boyongan copper-gold deposit in August2000. In 2001, Anglo exceeded the US$2,200 threshold of expenditures and earned a 40% equityinterest in the Surigao del Norte tenements, now referred to as the Silangan Project.

On April 10, 2000 and December 29, 1999, final government approval of the Parent Company andPGPI’s respective mining tenements in the form of MPSA were granted. For the Surigao del Nortejoint venture, SMECI (60% owned by PGPI and 40% owned by Anglo) and SMMCI (then wholly-owned by SMECI) were organized in 1999 and 2000, respectively. In 2000, the Parent Company

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and PGPI transferred their respective rights and interest in the MPSAs to SMMCI. SMECI startedto be consolidated in 2009.

In December 2001, Anglo purchased from PGPI an effective 10% equity interest in SMMCI forUS$20,000, plus additional payments of up to US$5,000 should there be an increase in metal contentof the deposit or from any subsequent discovery within the surrounding tenements on the basis offeasibility studies. Benefits from subsequent discovery of minerals by SMMCI that will increasethe value of its shares will inure to Anglo. Conversely, the risk of decrease in the value of SMMCIshares will be suffered by Anglo.

Anglo completed its pre-feasibility study of the Boyongan deposit in December 2007 whichconcluded that a mining operation based on the currently defined resources, proposed mining andprocessing methods, assumed long-term copper and gold prices, and estimated capital and operatingcosts would not provide an acceptable rate of the return on the project investment. The ParentCompany, however, had differing points of view from Anglo on a number of assumptions andconclusions made in the feasibility study. The Parent Company thus asserted its position that giventhe results of the study, as provided for under the terms of the joint venture agreements, Angloshould return the Boyongan property to the Parent Company, which Anglo contested.

Anglo claimed that other mineralized centers have been discovered in the vicinity, currently thenthe subject of intensive exploration and delineation drilling program which Anglo wanted tocontinue throughout 2008. Anglo also reported that there was geologic evidence for two additionalporphyry copper-gold targets within two kilometers of Boyongan which Anglo planned to test.These recent discoveries and their impact were not included in the Boyongan pre-feasibility study.

On September 25, 2008, the BOD approved the Parent Company to pursue the acquisition of the50% equity interest over the Silangan Project through SMECI and SMMCI from Anglo. Theacquisition, which was consummated on February 6, 2009, was executed through a share and assetpurchase agreement for a total consideration of US$55,000 (or P=2,619,375) broken down as follows:US$24,695 (or P=1,176,114) for the shares, US$43 (or P=2,020) for the project properties, US$27,053(or P=1,288,416) for the receivables and US$3,209 (or P=152,825) for the payment of loans of Angloto the joint venture companies. This acquisition effectively gave the Parent Company, together withPGPI, which currently owns the other 50% interest, control over the property.

On December 7, 2011, the Parent Company entered into an agreement with Anglo and AngloAmerican Exploration (Philippines), Inc. (AAEPI) where the Parent Company agreed to buy andAnglo agreed to sell all Anglo’s rights, interests and obligations in MECI for US$25. In addition,AAEPI agreed with the Parent Company that all of its rights, interests and title in and to itsreceivable to MECI will be assigned to the Parent Company for a consideration amounting toUS$175. The purchase of share and assignment of receivable will become effective and legallyenforceable only upon fulfillment of the closing obligations. The term to fulfill the closingobligations expired in 2013.

31. Other Matters

a. The Group is currently involved in certain legal, contractual and regulatory matters that requirethe recognition of provisions for related probable claims against the Group. Management andthe Group’s legal counsel reassess their estimates on an annual basis to consider new relevantinformation. The disclosure of additional details beyond the present disclosures may seriouslyprejudice the Group’s position and negotiation strategies with respect to these matters. Thus, as

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allowed by PAS 37, Provisions, Contingent Liabilities and Contingent Assets, only a generaldescription is provided.

b. In 2014, the Parent Company recognized additional provision amounting to P=394,154 for itsmanpower right-sizing program (MRP), which brought down overall manpower headcount by512 employees.

32. Notes to Consolidated Statements of Cash Flows

The principal non-cash investing activities of the Group follows:

a. In 2015 and 2014 total depreciation expense that was capitalized as part of deferred mineexploration costs amounted to P=249,857 and P=317,909, respectively.

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INDEPENDENT AUDITORS’ REPORTON SUPPLEMENTARY SCHEDULES

The Stockholders and the Board of DirectorsPhilex Mining CorporationPhilex Building27 Brixton StreetPasig City, Metro Manila

We have audited in accordance with Philippine Standards on Auditing, the consolidated financialstatements of Philex Mining Corporation and its Subsidiaries as at December 31, 2015 and 2014, andfor each of the three years in the period ended December 31, 2015 included in their form 17-A andhave issued our report thereon dated February 24, 2016. Our audits were made for the purpose offorming an opinion on the consolidated financial statements taken as a whole. The schedules listed inthe Index to the Consolidated Financial Statements and Supplementary Schedules are theresponsibility of the Company’s management. These schedules are presented for purposes ofcomplying with Securities Regulation Code Rule 68, As Amended (2011) and are not part of theconsolidated financial statements. These schedules have been subjected to the auditing proceduresapplied in the audit of the consolidated financial statements and, in our opinion, fairly state, in allmaterial respects, the information required to be set forth therein in relation to the consolidatedfinancial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Jose Pepito E. Zabat IIIPartnerCPA Certificate No. 85501SEC Accreditation No. 0328-AR-3 (Group A), May 1, 2015, valid until April 30, 2018Tax Identification No. 102-100-830BIR Accreditation No. 08-001998-60-2015, February 27, 2015, valid until February 26, 2018PTR No. 5321714, January 4, 2016, Makati City

February 24, 2016

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, December 14, 2015, valid until December 31, 2018SEC Accreditation No. 0012-FR-4 (Group A), November 10, 2015, valid until November 9, 2018


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PHILEX MINING CORPORATION AND SUBSIDIARIESSUPPLEMENTARY SCHEDULESFOR THE YEAR ENDED DECEMBER 31, 2015

Schedule

Reconciliation of Retained Earnings Available for Dividend Declaration I

Schedule of Financial Soundness Indicators II

Chart Showing Ownership and Relationship between the Parent Company and its Subsidiaries III

Schedule of All Effective Standards and Interpretations IV

Schedules as Required by SRC Rule 68, As Amended VA. Financial AssetsB. Amounts Receivable from Directors, Officers, Employees, Related Parties

and Principal Stockholders (Other than related Parties)C. Amounts Receivable from Related Parties which are eliminated during the

consolidation of financial statementsD. Intangible Assets - Other AssetsE. Long Term DebtF. Indebtedness to Related Parties (Long-term Loans from Related Companies)G. Guarantees of Securities of Other IssuersH. Capital Stock

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SCHEDULE IRECONCILIATION OF RETAINED EARNINGSAVAILABLE FOR DIVIDEND DECLARATION

As of December 31, 2015

PHILEX MINING CORPORATIONPhilex Building, 27 Brixton Street, Pasig City, Metro Manila

(Amounts in Thousands)

Unappropriated retained earnings, as adjusted to available fordividend distribution, December 31, 2014 P=4,235,911

Net income during the period closed to retained earnings P=1,834,868Less: Recognized deferred tax asset that increased net

income (101,997)Equity in net income (loss) of an associate (13,200)Other realized gains (loss) or adjustments to the

retained earnings as a result of certain transactions accounted under the PFRS (30,698)

(145,895)

Net income actually earned during the period 1,980,763Less: Dividend declared during the year (98,828)

Unappropriated retained earnings as at December 31, 2015, as adjusted P=6,117,846

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SCHEDULE IIPHILEX MINING CORPORATION AND SUBSIDIARIES

SCHEDULE SHOWING FINANCIAL SOUNDNESSPURSUANT TO SRC RULE 68, AS AMENDED

DECEMBER 31, 2015

2015 2014 2013Current/Liquidity ratios

Current ratio 0.92 1.27 0.86Quick ratio 0.33 0.84 0.45

Solvency ratios and debt to equity ratioDebt-to-equity ratio 0.60 0.65 0.54Solvency ratio 0.14 0.13 0.12

Financial leverage ratiosAsset-to-equity ratio 1.60 1.65 1.54Interest rate coverage ratio – 3.97 3.58

Profitability ratiosReturn on assets 1.76% 1.66% 0.90%Return on equity 2.86% 2.65% 1.30%Net profit margin 9.10% 6.99% 3.19%

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SCHEDULE IIIPHILEX MINING CORPORATION AND SUBSIDIARIES

CHART SHOWING OWNERSHIP AND RELATIONSHIP BETWEEN THE PARENT COMPANYAND ITS SUBSIDIARIES

PURSUANT TO SRC RULE 68, AS AMENDEDDECEMBER 31, 2015

*Interest of immediate parent**Effective interest of Philex Mining Corporation

53.4%* 34.5%**

60.0%**100.0%*

60.0%*

100.0%*

100.0%*

100.0%*

100.0%*

100.0%*

100.0%*100.0%*

100.0%*

99.3%** 98.9%*

1.1%*

48.8%* 31.6%**

18.4%* 6.1%**

51.2%* 33.1%**

100.0%* 64.7%**

64.7%*

Philex MiningCorporation

Philex Petroleum Corporation(Philippines)

Forum Energy PLC(United Kingdom)

FEC Resources, Inc.(Canada)

Brixton EnergyMining Corporation

(Philippines)

Philex Gold Holdings, Inc.(Philippines)

Philex Gold Inc.(Canada)

Philex GoldPhilippines Inc.

(Philippines)

Silangan Mindanao Exploration Co., Inc.(Phlippines)

Silangan Mindanao Mining Co., Inc.(Phlippines)

Lascogon MiningCorporation

(Philippines)

Philex Land, Inc.(Philippines)

Philex InsuranceAgency, Inc.

(Philippines)

Northern LuzonExploration andMining Co., Inc.

(Philippines)

Fidelity StockTransfer, Inc.

(Philippines)

Minphil ExplorationCo., Inc.

(Philippines)

Pitkin Petroleum Plc(England and Wales)

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SCHEDULE IVPHILEX MINING CORPORATION AND SUBSIDIARIES

TABULAR SCHEDULE OF ALL EFFECTIVE STANDARDS ANDINTERPRETATIONS PURSUANT TO SRC RULE 68, AS AMENDED

DECEMBER 31, 2015

PHILIPPINE FINANCIAL REPORTING STANDARDS ANDINTERPRETATIONS

Effective as of December 31, 2015Adopted Not

AdoptedNot

Applicable

Framework for the Preparation and Presentation of FinancialStatementsConceptual Framework Phase A: Objectives and qualitativecharacteristics

ü

PFRSs Practice Statement Management Commentary ü

Philippine Financial Reporting Standards

PFRS 1(Revised)

First-time Adoption of Philippine Financial ReportingStandards

ü

Amendments to PFRS 1 and PAS 27: Cost of anInvestment in a Subsidiary, Jointly Controlled Entity orAssociate

ü

Amendments to PFRS 1: Additional Exemptions forFirst-time Adopters

ü

Amendment to PFRS 1: Limited Exemption fromComparative PFRS 7 Disclosures for First-timeAdopters

ü

Amendments to PFRS 1: Severe Hyperinflation andRemoval of Fixed Date for First-time Adopters

ü

Amendments to PFRS 1: Government Loans ü

PFRS 2 Share-based Payment ü

Amendments to PFRS 2: Vesting Conditions andCancellations

ü

Amendments to PFRS 2: Group Cash-settled Share-based Payment Transactions

ü

PFRS 3(Revised)

Business Combinations ü

PFRS 4 Insurance Contracts ü

Amendments to PAS 39 and PFRS 4: FinancialGuarantee Contracts

ü

PFRS 5 Non-current Assets Held for Sale and DiscontinuedOperations

ü

PFRS 6 Exploration for and Evaluation of Mineral Resources ü

- 2 -

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AdoptedNot

Applicable

PFRS 7 Financial Instruments: Disclosures ü

Amendments to PFRS 7: Transition ü

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets

ü

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets - Effective Date and Transition

ü

Amendments to PFRS 7: Improving Disclosures aboutFinancial Instruments

ü

Amendments to PFRS 7: Disclosures - Transfers ofFinancial Assets

ü

Amendments to PFRS 7: Disclosures - OffsettingFinancial Assets and Financial Liabilities

ü

Amendments to PFRS 7: Mandatory Effective Date ofPFRS 9 and Transition Disclosures

Not early adopted

PFRS 8 Operating Segments ü

PFRS 9 Financial Instruments ü

Amendments to PFRS 9: Mandatory Effective Date ofPFRS 9 and Transition Disclosures

ü

PFRS 10 Consolidated Financial Statements ü

PFRS 11 Joint Arrangements ü

PFRS 12 Disclosure of Interests in Other Entities ü

PFRS 13 Fair Value Measurement ü

Philippine Accounting Standards

PAS 1(Revised)

Presentation of Financial Statements ü

Amendment to PAS 1: Capital Disclosures ü

Amendments to PAS 32 and PAS 1: Puttable FinancialInstruments and Obligations Arising on Liquidation

ü

Amendments to PAS 1: Presentation of Items of OtherComprehensive Income

ü

PAS 2 Inventories ü

PAS 7 Statement of Cash Flows ü

PAS 8 Accounting Policies, Changes in Accounting Estimatesand Errors

ü

PAS 10 Events after the Balance Sheet Date ü

PAS 11 Construction Contracts ü

- 3 -

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AdoptedNot

Applicable

PAS 12 Income Taxes ü

Amendment to PAS 12 - Deferred Tax: Recovery ofUnderlying Assets

ü

PAS 16 Property, Plant and Equipment ü

PAS 17 Leases ü

PAS 18 Revenue ü

PAS 19(Amended)

Employee Benefits ü

Amendments to PAS 19: Actuarial Gains and Losses,Group Plans and Disclosures

ü

Amendments to PAS 19: Defined Benefit Plans:Employee Contributions

PAS 20 Accounting for Government Grants and Disclosure ofGovernment Assistance

ü

PAS 21 The Effects of Changes in Foreign Exchange Rates ü

Amendment: Net Investment in a Foreign Operation ü

PAS 23(Revised)

Borrowing Costs ü

PAS 24(Revised)

Related Party Disclosures ü

PAS 26 Accounting and Reporting by Retirement Benefit Plans ü

PAS 27(Amended)

Separate Financial Statements ü

PAS 28(Amended)

Investments in Associates and Joint Ventures ü

PAS 29 Financial Reporting in Hyperinflationary Economies ü

PAS 31 Interests in Joint Ventures ü

PAS 32 Financial Instruments: Disclosure and Presentation ü

Amendments to PAS 32 and PAS 1: Puttable FinancialInstruments and Obligations Arising on Liquidation

ü

Amendment to PAS 32: Classification of Rights Issues ü

Amendments to PAS 32: Offsetting Financial Assets andFinancial Liabilities

ü

PAS 33 Earnings per Share ü

PAS 34 Interim Financial Reporting ü

PAS 36 Impairment of Assets ü

PAS 37 Provisions, Contingent Liabilities and Contingent Assets ü

PAS 38 Intangible Assets ü

- 4 -

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AdoptedNot

Applicable

PAS 39 Financial Instruments: Recognition and Measurement ü

Amendments to PAS 39: Transition and InitialRecognition of Financial Assets and FinancialLiabilities

ü

Amendments to PAS 39: Cash Flow Hedge Accountingof Forecast Intragroup Transactions

ü

Amendments to PAS 39: The Fair Value Option ü

Amendments to PAS 39 and PFRS 4: FinancialGuarantee Contracts

ü

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets

ü

Amendments to PAS 39 and PFRS 7: Reclassification ofFinancial Assets - Effective Date and Transition

ü

Amendments to Philippine Interpretation IFRIC–9 andPAS 39: Embedded Derivatives

ü

Amendment to PAS 39: Eligible Hedged Items ü

PAS 40 Investment Property ü

PAS 41 Agriculture ü

Philippine Interpretations

IFRIC 1 Changes in Existing Decommissioning, Restoration andSimilar Liabilities

ü

IFRIC 2 Members' Share in Co-operative Entities and SimilarInstruments

ü

IFRIC 4 Determining Whether an Arrangement Contains a Lease ü

IFRIC 5 Rights to Interests arising from Decommissioning,Restoration and Environmental Rehabilitation Funds

ü

IFRIC 6 Liabilities arising from Participating in a SpecificMarket - Waste Electrical and Electronic Equipment

ü

IFRIC 7 Applying the Restatement Approach under PAS 29Financial Reporting in Hyperinflationary Economies

ü

IFRIC 9 Reassessment of Embedded Derivatives ü

Amendments to Philippine Interpretation IFRIC–9 andPAS 39: Embedded Derivatives

ü

IFRIC 10 Interim Financial Reporting and Impairment ü

IFRIC 12 Service Concession Arrangements ü

IFRIC 13 Customer Loyalty Programmes ü

- 5 -

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AdoptedNot

Applicable

IFRIC 14 The Limit on a Defined Benefit Asset, Minimum FundingRequirements and their Interaction

ü

Amendments to Philippine Interpretations IFRIC- 14,Prepayments of a Minimum Funding Requirement

ü

IFRIC 16 Hedges of a Net Investment in a Foreign Operation ü

IFRIC 17 Distributions of Non-cash Assets to Owners ü

IFRIC 18 Transfers of Assets from Customers ü

IFRIC 19 Extinguishing Financial Liabilities with EquityInstruments

ü

IFRIC 20 Stripping Costs in the Production Phase of a SurfaceMine

ü

SIC-7 Introduction of the Euro ü

SIC-10 Government Assistance - No Specific Relation toOperating Activities

ü

SIC-12 Consolidation - Special Purpose Entities ü

Amendment to SIC - 12: Scope of SIC 12 ü

SIC-13 Jointly Controlled Entities - Non-MonetaryContributions by Venturers

ü

SIC-15 Operating Leases - Incentives ü

SIC-25 Income Taxes - Changes in the Tax Status of an Entity orits Shareholders

ü

SIC-27 Evaluating the Substance of Transactions Involving theLegal Form of a Lease

ü

SIC-29 Service Concession Arrangements: Disclosures ü

SIC-31 Revenue - Barter Transactions Involving AdvertisingServices

ü

SIC-32 Intangible Assets - Web Site Costs ü

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SCHEDULE VPHILEX MINING CORPORATION AND SUBSIDIARIES

SCHEDULE AFINANCIAL ASSETS

(Amounts in Thousands, Except Number of Shares)

Name of issuing entity and association of eachissue

Number of sharesor principal amountof bonds and notes

Amount shown inthe balance sheet

Income receivedand accrued

Investments in quoted shares:Philippine Realty & Holdings Corporation 68,865,002 P=30,645 P=–Others various 3,330 –

33,975Investments in unquoted shares:

Pacific Global One Aviation – 37,500 –Philippine Associated Smelting and Refining

Corporation 14,047,247 14,055 –Others various 21,157 –

72,712 –P=106,687 P=–

Quoted AFS financial assets are valued based on PSE quotation as at December 31, 2015. AFSfinancial assets in quoted shares of stock are carried at fair value with cumulative changes in fairvalues presented as a separate account in equity. Meanwhile, AFS financial assets in unquoted sharesof stock are carried at cost because fair value bases (i.e., quoted market prices) are neither readilyavailable nor is there an alternative basis of deriving a reliable valuation at the end of the reportingperiod.

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PHILEX MINING CORPORATION AND SUBSIDIARIESSCHEDULE B

AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS, EMPLOYEES, RELATED PARTIES AND PRINCIPALSTOCKHOLDERS (OTHER THAN RELATED PARTIES)

December 31, 2015

Name and Designationof debtor

Balance at beginningof period

Additions Amounts collected Amounts written off Current Not Current Balance at endof period

NOT APPLICABLE

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PHILEX MINING CORPORATION AND SUBSIDIARIESSCHEDULE C

AMOUNTS RECEIVABLE FROM RELATED PARTIES WHICH ARE ELIMINATEDDURING CONSOLIDATION

December 31, 2015(Amounts in Thousands)

Name and Designation of Debtor

Balance atbeginning of

period AdditionsAmountscollected

ForexAdjustment

OtherAdjustments/

Reclassification CurrentNot

Current

Balanceat end

of periodSubsidiaries: (Advances)

Silangan Mindanao Exploration Co., Inc. P=6,174,350 P=20,001 (P=5,161,639) P=– 1 (P=1,032,712) P=– P=– P=–Philex Gold Philippines, Inc. 1,349,282 18,535 – – 2 (1,367,817) – – –Philex Petroleum Corporation 2,684,021 5,114 (495,306) – – 2,193,829 – 2,193,829Philex Gold, Inc. 24,448 – – – 3 (24,448) – – –Philex Gold Holdings, Inc. 899,582 266 (50,000) – 4 (849,848) – – –

Lascogon Mining Corporation 140,310 7,718 – – 5 (148,028) – – – Others 941 – (1,522) – 5 (581) – – –

P=11,272,934 P=51,634 (P=5,708,467) P=– (P=3,422,272) P=2,193,829 P=– P=2,193,829

Notes:1. During 2015, PMC subscribed 500,000 shares out of the 830,000 shares increase of SMECI for an aggregate price of P=7,207,500.2. On October 30, 2015, as approved by PMC’s BOD, PMC’s advances to PGPI amounting to P=1,349,149 were reclassified under deposit for future stock subscriptions under

non-current liabilities. At year-end, additional advances to PGPI were converted into deposit for future stock subscriptions amounting to P=196,896.3. Advances to PGI are net of allowance for impairment losses amounting to P=24,448 recognized during the year.4. Advances to PGHI are net of allowance for impairment losses amounting to P=984,725 recognized in prior years. The impairment was reversed in 2015.

On October 30, 2015, as approved by their respective BOD, PMC and PGHI entered into an Agreement wherein PMC’s advances to PGHI amounting to P=1,834,307 wereconverted into investment in PGHI.

5. During 2015, the advances to LMC were transferred and conveyed to PGPI amounting to P=148,028.

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PHILEX MINING CORPORATION AND SUBSIDIARIESSCHEDULE D

INTANGIBLE ASSETS - OTHER ASSETSDecember 31, 2015

(Amounts in Thousands)

DescriptionBeginning

balanceAdditions at

CostCharged to cost

and expensesCharged to

other accounts

Other changesadditions

(deductions)Endingbalance

i) Intangible AssetGoodwill P=1,238,583 P=– P=– P=– P=– 1,238,583

ii) Other AssetsDeferred mine exploration costs 22,054,748 3,454,454 (26,206) – – 25,482,996Allowance for impairment (1,519,542) – 26,206 – – (1,493,336)

20,535,206 3,454,454 – – – 23,989,660Deferred oil exploration costs 5,705,778 183,490 (489,320) – – 5,399,948Allowance for impairment (874,415) 1059,472 – 388,630 (426,313)

4,831,363 183,490 (429,848) – 388,630 4,973,635Others 450,896 24,654 – – – 475,550Allowance for write down – – – – – –

450,896 24,654 – – – 475,550P=27,056,048 P=3,662,598 P=– P=– P=388,630 P=30,677,428

Note:1. The allowance for impairment of deferred oil exploration cost is net of additional provision amounting to P=429,848 and write-off amounting to P=489,320 recognized during

the year.

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PHILEX MINING CORPORATION AND SUBSIDIARIESSCHEDULE E

LONG TERM DEBTDecember 31, 2015

Title of Issue and type ofobligation

Amount authorized byindenture

Amount shown under caption "Current portion of long-term debt"

Amount shown caption "Long-termDebt"

NOT APPLICABLE

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PHILEX MINING CORPORATION AND SUBSIDIARIESSCHEDULE F

INDEBTEDNESS TO RELATED PARTIES (LONG - TERM LOANS FROM RELATED COMPANIES)December 31, 2015

Name of the Related Party Balance at beginning of period Balance at end of period

NOT APPLICABLE

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PHILEX MINING CORPORATION AND SUBSIDIARIESSCHEDULE G

GUARANTEES OF SECURITIES OF OTHER ISSUERSDecember 31, 2015

Name of the issuing entity of securitiesguaranteed by the company for which the

statement is filed

Title of issue of each class ofsecurities guaranteed

Total amountguaranteed and

outstanding

Amount owned by personfor which statement is

lifted

Nature of guarantee

NOT APPLICABLE

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PHILEX MINING CORPORATION AND SUBSIDIARIESSCHEDULE H

CAPITAL STOCKDecember 31, 2015

Title ofIssue

Number of SharesAuthorized

Number of shares issued andoutstanding and shown underrelated balance sheet caption

Number of shares reserved foroptions, warrants, conversion

and other rights

Number of sharesheld by related

parties

Directors,officers andemployees

Others

Common 8,000,000,000 4,940,399,068 – – 11,201,459 –

i i - philex mining corp. · endorsed the appointment of sycip gorres velayo and company (sgv) as...

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