Beneficial ownership

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䴀愀 搀 攀 椀 氀 椀 渀 攀   愀 氀 漀 爀 椀 愀


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ABOUT THE AUTHOR

Madeleine Aloria is a researcher from Action for Economic Reforms, a nongovernmental organization conducting policy analysis and advocacy on key issues of economic reforms and access to information policies. She is a graduate of the University of the Philippines School of Economics.

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I.

Introduction

Known for its rich sources of metallic minerals such as gold, nickel, and copper, the Philippines is estimated to possess 21.5 billion metric tons of metal deposits, the highest in Southeast Asia. Worldwide, the country ranks as the 3rd largest producer of gold, the 4th largest producer of copper, and the 5th largest producer of nickel according to the Chamber of Mines of the Philippines. In 2014, the country’s metal production was valued at Php 138.61 billion (USD 3.1 billion). The Philippine mining sector is presently governed by the Philippine Mining Act of 1995 (Republic Act No. 7942), which provides that the State owns all mineral resources. It also provides for the different mineral agreements and revenue-sharing schemes crucial in converting the extracted mineral resources into revenues that the government then can use for social services. Extraction of mineral resources requires huge capitalization. Reviewing the beneficial owners of companies operating in the country’s mineral sector will provide us information about the investors capable of mobilizing funds to operate mines. It also gives us a picture on who is ultimately benefiting from the extraction of minerals. The civil society representatives in the Extractive Industry Transparency Initiative (EITI) have been lobbying for the inclusion of the disclosure of beneficial owners of companies as a requirement under the initiative. Currently, disclosure of beneficial owners is only “encouraged.” “Beneficial owners”, according to the EITI, are “natural person(s) who, directly or indirectly, ultimately own(s) or control(s) the corporate entity.” Beneficial ownership disclosure is one key to guard against abuses and corruptions such as (i) dummy or subsidiary corporations violating the Philippines’ foreign ownership restrictions and (ii) politicians or government enterprises with obscured control or relationship over certain mining firms, unduly taking advantage of their position to enact biased policies or treat contracts unfairly. The same can help track individuals hiding illicit funds behind anonymous companies, and also help ensuring proper tax payments among firms. In 2014, The One Campaign1 estimated that USD 1 trillion is lost annually from developing countries due to illegal cross-border transactions, which then partly arise from vagueness of company ownerships. Disclosure of beneficial ownership will also allow government and the public to easily evaluate the track record of mining operators and avoid awarding mining contracts to irresponsible ones. It aims to equip citizens with the necessary information to help increase understanding of the sector and analyze if conflict of interest between owners and regulators/governments exists. II.

Overview of the Study

This paper not only aims to determine the companies’ beneficial owners but also to grasp the numerous issues concerning beneficial ownership in the country’s metallic mining sector. This entails i) understanding the diversity of foreign ownership levels among firms, and ii)

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The Trillion Dollar Scandal Report (www.one.org)

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understanding the extent of ownership of influential institutions and individuals in mining operations which may present conflict of interests. The paper also explains the local context and the rationale behind the call to institutionalize beneficial ownership disclosure. In the end, the paper also assesses the accessibility, reliability, and complexity of the existing mechanisms in tracing beneficial ownership and provides recommendation to increase public information. III.

Background

1.

Definition of a Beneficial Owner

In addition to the definition by the EITI, Financial Action Task Force (FATF)—an independent organization that also advocates on the protection of the global financial system— describes that beneficial owners are natural persons who possess material control in making decisions for the corporation. Looking at the percentage of ownership provided in the General Information Sheets submitted by the companies would not suffice if we are to trace the beneficial owners of the companies. More challenges in finding the beneficial owners arise when a company’s corporate structure becomes complex. It is necessary to examine the corporate layers to find out the natural persons with significant control of the corporation’s activities.

2.

Importance of Beneficial Ownership Disclosure

2.1 Enforcing Foreign Ownership Restrictions In addition to the goal of guarding firms’ compliance to their tax liabilities, making corporate layering transparent allows for better understanding of the status of a firm’s foreign ownership. The 1987 Constitution of the Philippines [Article XII, Section 2] provides for the allowable participation of foreign entities in mining —at least sixty percent (60%) of the capital — to protect Filipinos’ rights over the country’s natural resources. The four agreements described in the Philippine Mining Act are Mineral Production Sharing Agreement (MPSA), Co-Production Agreement (CPA), Joint Venture Agreement (JVA) and a Financial or Technical Assistance Agreement (FTAA). Currently, the country only has MPSAs and FTAAs. Under the MPSA, foreign ownership of mining operations is limited to 40% and foreign mining companies are required to partner with Filipinos. On the other hand, FTAA allows for 100% foreign ownership. In recent years, however, firms, not exclusive to the mining sector, are found to commit diminution strategies to game the rulings on foreign ownership. The most common tactic is foreign entities layering under dummy Filipino corporations, which although allowed under the Foreign Investments Act of 1991 (FIA), becomes illegal when used

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to circumvent the Constitution. Today, two general tests are acknowledged in judging cases involving foreign ownership violations: the (1) control test and the (2) “grandfather” rule2. The latter in particular traces the direct and indirect shareholders of a corporation including the shareholders’ citizenships. More recently, it was used to on an SEC Opinion with regard to the 2014 case of Narra Nickel Mining and Development Corp. vs. Redmont Consolidated Mines Corp. (G.R. No. 195580). The former, together with McArthur Mining, Inc. and Tesoro Mining and Development, Inc. were declared to be non-Filipino corporations with more than 60% of their respective equity interests owned by a wholly Canadian corporation named MBMI Resources, Inc. 2.2 Promoting Accountability of Public Officials The 1987 Constitution of the Philippines [Article XI: Accountability of Public Officers, Section 1] states that “Public Office is a public trust.” The provision adds: “Public officers and employees must, at all times, be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency; act with patriotism and justice, and lead modest lives.” This is further reinforced by the Republic Act 3019 or the Anti-Graft and Corrupt Practices Act, specifically Section 3-e, which states that “causing any undue injury to any party, including the Government, or giving any private party any unwarranted benefits, advantage of preference in the discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence” is punishable by law. Catering to those with vested interests may run contrary to public officials’ duty for the country. Take the case of the provision in the Omnibus Election Code prohibiting major players or corporations from donating to the election machineries of candidates and/or parties. This not only provides a leveled playing field for all candidates in terms of campaign expenditures, but more importantly, this prevents quid pro quo, wherein industries enjoy favors from their bets who’ve won during the elections. There have already been numerous cases of abuse of authority in the different lines of local government. In 2011, a case was filed against a Cebu mayor for allegedly using the town’s equipment without rental costs to undertake the non-metallic quarry activities of a private company. In the third quarter of 2014, several Pangasinan local

2

Grandfather Rule

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government leaders, including its governor, were charged by the Ombudsman with graft cases for granting permits for small scale mining illegally. Table 1: Public officials’ duties that may be related to mining (not exhaustive) Mayor and Vice Mayor ü Pass ordinances prohibiting mining (Local Government Code of the 1991)

ü

Governor Grants or cancels quarry, extraction, and gathering permits in their area of jurisdiction (RA 7942)

ü

Legislators Makes laws, conducts investigations in aid of legislation, and attends to his/her constituents (1987 Constitution)

The briefer by the National Resource Governance Institute explains that questionable preferential deals with the government and non-compliance with industry rules/standards not sanctioned by the government are among the warning signs3 of nondisclosure of the real owner of a given firm. This two both relates to the implications of politically exposed persons hiding their influence over firms. Although it is not the goal of beneficial ownership disclosure to ban politically exposed persons from engaging in the sector or vice versa, it is crucial for the public to know these politicians’ extent of involvement or ownership because various leadership positions provide public officials with power and responsibilities that can be related to mining (see following table). 2.3 Ensuring Proper Tax Payments and Guarding against Money Laundering A complex ownership structure, although at times important to the management of a company, can be used to avoid and/or evade taxes4. This is easier to do especially by those with chains of legal ownership in numerous borders or tax havens, through transfer pricing wherein a lower tax is sought by the firm in either its home country or host country/ies. In their paper entitled “The Tax Treatment of the Mining Sector”, Sunley and Baunsgaard explain that maximizing deductible expenditures, a way to lower declared income, includes the following strategies: • • •

The provision by related parties of debt finance at above-market interest rates perhaps leading to highly leveraged projects. Claiming excessive management fees, deductions for head-quarter costs, or consultancy charges paid to related parties The provision of capital goods and machinery in leasing arrangements with above-

The full list can be found in this paper’s Annex, table 2. Owning Up: Options for Disclosing the Identities of Beneficial Owners of Extractive Companies (Aaron Sayne, Erica Westenberg and Amir Shafaie) 3 4

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market leasing costs by a related party lessor. If the mining tax rate is above the standard corporate income tax, there may be an incentive to establish a domestic shell firm that will on-lend finance from related parties to the mining firm giving rise to an interest deduction that may be applicable at a higher tax rate than is charged on the interest earnings in the shell company. First, pertinent information hidden through corporate layers can help reveal to the competent authorities any signs of illegal transfer pricing, or any of the abovementioned strategies to reduce tax payments. Second, transparency on beneficial ownership can also help determine if the tax payments of an individual already cover all the flow of funds he/she has received from the mining firm, or validate if a person’s declaration of assets is accurate.

3.

Beneficial Ownership Disclosure and the Extractive Industry Transparency Initiative (EITI)

Extractive Industry Transparency Initiative (EITI) saw the importance of maximizing the benefits of distributing the extractive industry revenues captured by the elites to the goals of alleviating poverty and reducing corruption (EITI, n.d). In achieving this, Both transparency and dialogue are crucial in achieving this. The EITI acts as a platform for countries and stakeholders to share information and create dialogues regarding the management of extractive resources. In February 2013, the EITI Board agreed to conduct pilot tests and researches in eleven (11) EITI countries (Burkina Faso, the Democratic Republic of Congo, Honduras, Kyrgyz Republic, Liberia, Niger, Nigeria, Tajikistan, Tanzania, Togo, and Zambia) until late 2015 to understand beneficial ownership disclosure in the extractive industry. It is subject to the success of these pilots that the EITI will detail how to make beneficial ownership information a requirement for EITI implementing countries.5 By 2020, disclosure of beneficial ownership will become mandatory under EITI. The EITI has also laid its protocols out in the “EITI Standard”, a document which countries can follow in partaking in the initiative. The Standard contains clear mention of beneficial ownership disclosure as part of the effort to make the country reports understandable, clearer, more accurate, and more relevant to countries. The section on beneficial ownership defines a beneficial owner and also states the “standards”:

a)

It is recommended that implementing countries maintain a publicly available register of the beneficial owners of the corporate identity(ies) that bid for, operate or invest in extractive assets, including the identity(ies) of their beneficial owner(s) and the level of ownership, and details about how ownership or control is exerted. Where possible, beneficial ownership information should be incorporated in existing filings by companies

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EITI Implementing countries

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to corporate regulators, stock exchanges or agencies regulating extractive industry licensing. Where this information is already publicly available, e.g. through filing to corporate regulators and stock exchanges the EITI report, should include guidance on how to access this information. b)

It is required that:

a.

The EITI Report documents the government’s policy and MSG’s discussion on disclosure of beneficial ownership. This should include details of the relevant legal provisions, actual disclosure practices and any reforms that are planned or underway related to beneficial ownership disclosure.

b.

By [date], the multi-stakeholder group publishes a roadmap for disclosing beneficial ownership information in accordance with clauses (c)-(f) below. The MSG will determine all milestones and deadlines in the roadmap, and the MSG will evaluate implementation of the roadmap as part of the MSG’s annual activity report.

c.

As of [date], it is required that implementing countries request, and companies disclose, beneficial ownership information for inclusion in the EITI report. This applies to corporate entity(ies) that bid for, operate or invest in extractive assets and should include the identity(ies) of their beneficial owner(s), the level of ownership and details about how ownership or control is exerted. Any gaps or weaknesses in reporting on beneficial ownership information must be disclosed in the EITI Report, including naming any entities that failed to submit all or parts of the beneficial ownership information.

d.

Information about the identity of the beneficial owner should include the name of the beneficial owner, the nationality, and the country of residence, as well as identifying any politically exposed persons. It is also recommended that the national identity number, date of birth, residential or service address, and means of contact are disclosed.

e.

The multi-stakeholder group should agree an approach for participating companies assuring the accuracy of the beneficial ownership information they provide. This could include requiring companies to attest the beneficial ownership declaration form through sign off by a member of the senior management team or senior legal counsel, or submit supporting documentation

f.

Definition of beneficial ownership: i. A beneficial owner in respect of a company means the natural person(s) who directly or indirectly ultimately owns or controls the corporate entity. ii. The multi-stakeholder group should agree an appropriate definition of the term beneficial owner. The definition should be aligned with (f)(i) above and take

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international norms and relevant national laws into account, and should include ownership threshold(s). The definition should also specify reporting obligations for politically exposed persons iii. Publicly listed companies, including wholly-owned subsidiaries, are required to disclose the name of the stock exchange and include a link to the stock exchange filings where they are listed to facilitate public access to their beneficial ownership information. iv. In the case of joint ventures, each entity within the venture should disclose its beneficial owner(s), unless it is publicly listed or is a wholly-owned subsidiary of a publicly listed company. Each entity is responsible for the accuracy of the information provided. g) The EITI Report should also disclose the legal owners and share of ownership of such companies. 4.

Beneficial Ownership in the International Context

Countries and international unions worldwide are realizing the need for reliable transparency mechanisms mainly to combat abusive anonymous companies engaging in illicit cash transactions. On October 2013, Denmark and the United Kingdom (UK) made the first move in committing to institutionalize a public registry of companies’ beneficial owners. The UK passed the necessary legislation on March 2015, later followed by Norway, which adopted the same last June 5, 2015. While there have been good developments on the side of the UK, the Global Financial Integrity (GFI) urges the rest of the GK7 to step up in implementing their National Action Plans. It was in June 2013 that the GK7 met to discuss the principles of beneficial ownership transparency. The G7 leaders have reiterated their commitment earlier in 2013, part of which is to “ensure that beneficial ownership information is available in a timely fashion to financial intelligence units, tax collection, and law enforcement agencies, for example through central registries or other appropriate mechanisms”. This was relevant to the release of the “Guidance on Transparency and Beneficial Ownership” by the Financial Action Task Force (FATF) in October 2014 and of the “High Level Principles on Beneficial Ownership” by the G20 in November 2014. Aside from the GK7, GK8, and G20, the advocacy towards beneficial ownership transparency has also gained support from the European Union (EU). In June 2015, the EU announced requiring its member-states to also create beneficial ownership information registries to comply with the revised framework on anti-money laundering as well as anti- terrorist financing. Member states are given two years to integrate the ruling in their national laws.

5. Metallic Minerals Production in the Philippines This portion of the paper describes the general background of the production of metallic minerals in the country. As of June 30, 2015, the data from MGB reveals that there are 338 MPSAs and 6

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FTAAs existing in the Philippines’ mining sector (metallic and non-metallic), covering a total of 710,551 hectares. Forty-three (43) metallic (excluding processing) mining companies under MPSA are identified as currently producing, and one (1) is under FTAA. Table 4: Existing mineral agreement schemes in the Philippines, by total land area covered Type of Agreement

Existing number as of June 30, 2015

Mineral Production Sharing Agreement Financial or Technical Assistance Agreement Total

Total area covered (hectares)

338

601,679.3364

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108,872.45

344

710,551.7864

Source: Mines and Geosciences Bureau 2015

The metallic mining firms analyzed in this paper constitute 39% of total production value in the first quarter of 2015. Of them, the top producing firm was Carmen Copper Corporation, which produces gold, silver, and copper, declaring Php 2.6 billion (USD 58.2 million) worth of production during the quarter. This is an 11.2% share, followed by Rio Tuba Nickel Mining Corporation’s 7.3% share worth Php 1.7 billion (USD 38.03 million). Five (5) operations are located in Region XIII (Caraga) specifically Agusan del Sur and Surigao del Norte, three (3) are in Palawan, Region IVB (MIMAROPA), three (3) are in Zambales, Region III (Central Luzon), two (2) are in Benguet, Cordillera Administrative Region (CAR), one (1) is Cebu, Region VII, and one (1) is in Compostela Valley, Region XI. Table 5: Metallic mining contractors and basic information on their operation Name of Mining Firm

Minerals

Total Production Value (Q1 of 2015) (in Php million) 2,659.07

1

Carmen Copper Corporation

Copper with gold and silver

2

Philex Mining Corporation Rio Tuba Nickel Mining Corporation Philsaga Mining Corporation SR Metals, Inc.

Copper with gold and silver Nickel

2,410.77

Gold with silver

1,121.01

Nickel

772.39

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Citinickel Mines & Development Corp.

Nickel

681.30

7

Greenstone Resources Corporation Taganito Mining Corporation

Gold with silver

630.68

Nickel

573.03

3 4 5

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1,739.03

Project Name and Location of Operation Toledo Copper Project located in Toledo City, Cebu, Region VII Padcal Copper-Gold Operation located in Tuba, Benguet CAR Rio Tuba Nickel Project in Bataraza, Palawan, Region IVB Co-O Gold Project in Rosario, Agusan del Sur, Region XIII Tubay Nickel-Cobalt Mining Project in Tubay, Agusan del Sur, Region XIII Toronto and Pulot Nickel Projects in Narra and Sofronio Espanola, Palawan, Region IVB Siana Gold Project in Tubod, Surigao del Norte, Region XIII Taganito Nickel Project in Claver, Surigao del Norte, Region XIII

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Apex Mining Company, Inc.

Gold with silver

435.75

10

Eramen Minerals Inc.

Nickel

296.03

11

Nickel

281.22

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LNL Archipelago Minerals Inc. Benguet Corporation

Nickel

280.41

13

Berong Nickel Project

Nickel

269.10

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Lepanto Consolidated Mining Company Hinatuan Mining Corporation

Gold with silver

228.64

Nickel

109.00

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Apex Maco Operation located in Compostella Valley, Region XI Sta. Cruz, Candelaria Project in Sta. Cruz, Zambales, Region III Guinabon Nickel Project in Sta. Cruz, Zambales, Region III Sta. Cruz Nickel Project located in Zambales, Region III Berong Nickel Project in Quezon, Palawan, Region IVB Victoria Gold Project, located in Mankayan Benguet, CAR Tagana-an Nickel Project located in Tagana-an Suriago del Norte, Region XIII Philippines

Data Source: Mines and Geosciences Bureau (MGB)

IV.

Data and Methodology

1.

Focus and Limitation of the Study

This paper focuses on the top fifteen (15) large scale metallic mining companies currently producing and operating under a Mining Production Sharing Agreement (MPSA), and which were filtered or ranked in terms of total production value recorded in the first half of 2015. The full list of metallic mining companies as of 2015 was accessed from the Mines and Geosciences Bureau (MGB) website6. Processing plants/companies were excluded in the analysis. Companies with zero production value in the first quarter of 2015 and FTAAs were also excluded in the sample. Afterwards, their General Information Sheets (GIS) are analyzed. Table 2: Final list of Mining Firms included in the study 1 2 3 4 5 6 7 8 9 10 11 12

Name of Mining Firm Carmen Copper Corporation Philex Mining Corporation Rio Tuba Nickel Mining Corporation Philsaga Mining Corporation SR Metals, Inc. Citinickel Mines & Development Corp. Greenstone Resources Corporation Taganito Mining Corporation Apex Mining Company, Inc. Eramen Minerals Inc. LNL Archipelago Minerals Inc. Benguet Corporation

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Please see Appendix Table 1 for full list of companies from MGB.

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13 14 15

Berong Nickel Corporation Lepanto Consolidated Mining Company Hinatuan Mining Corporation

This study relies on publicly-available information including companies’ General Information Sheets (GIS) requested from the SEC. Unfortunately, this may not be exhaustive, but this can provide us an idea of what is publicly available in terms of company ownership. It is also because of these data limitations that the paper cannot assess the financial capacity of the natural persons determined as the final owners behind the corporate ownership layers or conclude if they are not used as dummies of more financially-endowed entities. However, the challenges that come from limited availability and accessibility of pertinent information are what the paper is also about – identifying barriers to beneficial ownership disclosure in the sector and bringing to the table recommendations in response to them.

2.

Sources of Data

The various data used for the analyses are sourced from the Mines and Geosciences Bureau (MGB), Securities and Exchange Commission (SEC) and Philippine Stock Exchange (PSE), corporate websites of the firms (the links to companies’ websites are tabulated and presented in the Annex section of this paper) and relevant government agencies, and news portals. The first provides important information on mining sites’ location, size, volume of production, and type of agreement they are operating under. The second provides information about the shareholders of the companies and other pertinent information relevant to beneficial ownership. Government websites such as those of the Department of Interior and Local Government (DILG) and the Official Gazette are used as references in matching the identified beneficial owners with their immediate relatives in public office. Table 3: Data Needs and Identified Sources Data Needs

Source/s

Production and Operation

Mines and Geosciences Bureau, Company websites Securities and Exchange Commission (General Information Sheets), Philippine Stocks Exchange (PSE) Company websites News articles, Department of Interior and Local Government, Official Gazette, local government websites

Company Profiles, Shareholder Information Company owners’ relationship with politically-exposed persons

The SEC has launched the “SEC i-View: Documents Online”, a pay-per-use online facility that makes available to the general public the documents submitted to the SEC by the companies. The first, and perhaps the most important, document crucial to finding beneficial owners is called General Information Sheet (GIS)7. It aims to capture pertinent corporate data such as the profile of the

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Other documents are equally helpful. This includes the (i) SEC Form 20-IS/ “Information Statement Pursuant to Section 20 of the Securities Regulation Code” required for companies to notify its shareholders who are entitled to vote, with

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directors and/or officers, the number and name of stockholders, and their shares and/or percentage of ownership. All companies in the Philippines are required to submit an updated GIS every year. A company is required to submit its certified and sworn GIS within thirty 30) calendar years after its annual stockholders’ meeting. Meanwhile, the Philippine Stocks Exchange (PSE) also launched in 2013 a similar online portal called “PSE Edge” that contains company disclosures such as the list of Top 100 Stockholders and financial and operational reports and can be accessed online for free. Unfortunately, it only includes a few selected mining companies. Especially in instances when no other records can be retrieved from previously mentioned sources, news articles are also considered as extremely useful source of information.

3.

Data Processing and Levels of Analysis

The previously mentioned data sources are used not only to determine the companies’ beneficial owners and raise concerns over possibility of any violations, but also to examine the (i) layers of companies, (ii) characteristics of their foreign partners if applicable, and (iii) track record of operation. In treating corporate layers to determine the beneficial owner, the FATF describes the process to follow8: “[I]f a company is legally owned by a second company (according to its corporate registration information), the beneficial owners are actually the natural persons who are behind that second company or ultimate holding company in the chain of ownership and who are controlling it. Likewise, persons listed in the corporate registration information as holding controlling positions within the company, but who are actually acting on behalf of someone else, cannot be considered beneficial owners because they are ultimately being used by someone else to exercise effective control over the company.” In a note, SEC General Counsel Vernette Umali-Paco explained that such cases require information on the citizenship of individual stockholders (natural persons) to determine if foreign ownership restrictions are complied with. To quote him: “If the shares of stock of the immediate investor corporation is in turn held and controlled by another corporation, then we must look into the citizenship of the individual stockholders of the latter corporation. In other words, if there are layers of

regard the upcoming stockholder meetings (or other meetings applicable), and the SEC Form 23-A and B or “Initial Statement of Beneficial Ownership of Securities” and “Statement of Changes in Beneficial Ownership of Securities”. 8 Guidance on Transparency and Beneficial Ownership, 2014 FATF/OECD

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intervening corporations investing in a mining joint venture, we must delve into the citizenship of the individual stockholders of each corporation.” 3.1.

Corporate Ownership Layers. In the General Information Sheets, not only the nationality that the company used to register is noted but as well as the nationality of individuals and companies listed as major shareholders. Here, the proximity of the company to the 40% limit of foreign ownership is noted and the corporate ownership layers are analyzed, using the “control” test and more especially, the “Grandfather Rule”. Note: The SEC rulings provide that the primary test to determine whether a company is Filipino- or foreign owned is its country of incorporation. Only the SEC has the jurisdiction over it and so a case has to be filed in order for them to act. Once a case is brought to them, it will be the time they will use the “Grandfather Rule”.

3.2.

Politically Exposed Persons. In order to determine if a beneficial owner is a politically exposed person or related to one who is, the paper (i) finds in the separate lists of senators, congressmen, local chief executives, their surnames and confirm from news articles if they are in fact related by blood, and (ii) searches their websites for any documents, which may have mention on the existing relationships of the big owners. When the ultimate beneficial owner cannot be completely determined, the paper also inquires about the relationship of the top individual from the management to any politically exposed person.

3.3.

Tax payments. The total production values and level of ownership layers of metallic mining companies in the short list are compared with their costs and tax payments declarations accessed through the EITI. This can provide insights on the existing red flags.

V.

Presentation of Observations and Findings

1.

A Note about PCD Nominee Corporation (PCNC)

In the course of determining the ultimate owners, the research finds the preponderance of PCD Nominee Corporation (PCNC) owning majority of shares of some of the firms. The PCNC, a firm wholly-owned by the Philippine Central Depository, and which holds shares publicly traded in the PSE—technically cannot be considered as a beneficial owner due to the lack of voting powers. However, in a 2015 editorial article entitled “Hiding anonymous stockholders behind PCD Nominee” author Emeterio Sd. Perez asks: “Should listed companies be allowed to list PCD Nominee Corporation as the biggest stockholder?” He believes that it is in the interest of the public and the stockholders to know the people involved in their investments. He then cites the case of

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Max’s Group Inc., which lists PCNC as the owner of 99.37% of outstanding shares. “There are so many others that attribute ownerships to the public that may not be necessarily be public,” he added, reiterating that individual owners may in fact be hiding behind the PCNC.

2.

“Thickness” of Corporate Ownership Layers

Almost all firms under the study have layers of corporations as its owners. One has to scrutinize an average of 4 layers of corporate ownership to arrive at names of natural persons/ beneficial owners. The lowest number of layers is zero (this is the case of LNL Archipelago Minerals, Inc., which lists all natural persons in its direct owners) and the highest is 6 (the case of Berong Nickel and Greenstone Resources Corporation). As said earlier, two important characteristics of a beneficial owner are that he/she possesses material ownership and control over the firm. Finding the beneficial owner then entails understanding if any of these people in the firms’ Board or officers own material shares, whether direct or indirectly. Among the initial observations include that Rio Tuba Nickel Mining Corporation and Taganito Mining Corporation, both subsidiaries of Nickel Asia Corporation (NAC), are under the management of Gerard H. Brimo as its president, and Manuel B. Zamora Jr. as their Board of Chairman. Figure 1: Number of Corporate Layers (Conservative estimate) Berong Nickel Corporation Greenstone Resources Corporation Philsaga Mining Corporation Apex Mining Company, Inc. Citinickel Mines & Development Corporation Philex Mining Corporation Carmen Copper Corporation Hinatuan Mining Corporation Lepanto Consolidated Mining Company Benguet Corporation Taganito Mining Corporation Rio Tuba Nickel Mining Corporation Eramen Minerals Inc. SR Metals, Inc. LNL Archipelago Minerals Inc. 0

1

2

3

4

5

6

7

Source: General Information Sheets (2015), Securities and Exchange Commission (SEC)

3.

Actual Beneficial Owners: Ownership and Management

It is said to be an ideal practice to have a company president separate from the Chairman of the Board. This way, the interests of shareholders are protected and any abuse of power is prevented. Among the firms with same president and chairman are Carmen Copper Corporation and Citinickel

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Mines & Dev. Corporation. Meanwhile, Philsaga Mining Corporation, Greenstone Resources Corporation, and Eramen Minerals, Inc. have no declared chairman in their General Information Sheets, and desk research was unable to provide supplementary information. Table 6: Firms and their president and chairman Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Name of Mining Firm Name of President Name of Chairman Carmen Copper Corporation Enrico Nera Alfredo C. Ramos Philex Mining Corporation Eulalio B. Austin Manuel V. Pangilinan Rio Tuba Nickel Mining Corporation Gerard H. Brimo Manuel B. Zamora Philsaga Mining Corporation Raul C. Villanueva --SR Metals, Inc. Miguel Alberto V. Gutierrez Francis Enrico M. Gutierrez Citinickel Mines & Development Corp. Ferdinand M. Pallera Ferdinand M. Pallera Greenstone Resources Corporation Love D. Manigsaca --Taganito Mining Corporation Gerard H. Brimo Manuel B. Zamora Jr. Apex Mining Company, Inc. Walter William Brown Ramon Y. Sy Eramen Minerals Inc. Enrique C. Fernandez --LNL Archipelago Minerals Inc. Lawrence N. Leonio Leonardo L. Leonio Benguet Corporation Benjamin Philip Romualdez Daniel Andrew G. Romualdez Berong Nickel Corporation ---Alfredo C. Ramos Lepanto Consolidated Mining Company Bryan U. Yap Felipe U. Yap Hinatuan Mining Corporation Source: General Information Sheets (GIS) (2015 or whichever is latest), and other sources

The next section of the paper presents the beneficial owners of the mining firms. It estimates the effective level of ownerships of these beneficial owners using the Grandfather Rule. For better organization, the paper presents back-to-back discussions of companies that are closely related. These include (i) Carmen Copper, Berong Nickel Mining, and Apex Mining all having Mindanao Gold Limited in its major shareholders, (ii) Hinatuan Mining, Rio Tuba Nickel, and Taganito Mining Corporation all having Nickel Asia Corporation (NAC) as its major shareholder, and (iii) Philex and Lepanto (Philex owns some Lepanto shares). Carmen Copper Corporation and Alfredo Ramos’ Family

Carmen Copper Corporation is 100% owned by Atlas Consolidated Mining Corporation. In its 2015 GIS, Atlas Mining declares that PCNC (Filipino and non-Filipno combined) owns 73.93% of its shares. The next companies that owns Atlas Mining is Alakor Corporation (holds 14.18% ownership), and Anglo Philippine Holdings Corporation (8.22%). Alakor is owned and controlled by the family of Atlas Mining’s chairman Alfredo Ramos. Alfredo Ramos is the son of the National Bookstore founder Socorro Ramos. Presently, he possesses a diversified portfolio that includes publishing, property development, and financial services, and was also listed in Forbes as one of the Philippines’ richest businessmen. On the individual level, he owns 5.7% of Carmen Copper. Despite knowing he is a beneficial owner, the end of the corporate layer still needs to be scrutinized. Mindanao Gold Limited, an entity incorporated and registered in Malaysia, through its stake in

16


Anglo Phil. Holdings Corporation effectively owns 7.6% of Atlas Consolidated Mining. Its major shareholders can be considered beneficial owners. Mindanao Gold Ltd. is a “special purpose company” formed by Malaysian company ASVI (Abracadabra Speculative Ventures Inc.) to acquire all of Crew Gold’s Philippine interests. In spite those pieces of information, Mindanao Gold’s beneficial owner remains unidentifiable Figure 2: Carmen Copper Corporation’s Owners and their effective shares Alakor Corporation (100% owned by Ramos family) 14%

Various other owners 4%

RCBC -in trust for Apex Group of Companies 0.6%

Anglo Phil. Holdings Corporation 8.2%

PCD Nominee Corporation (Filipino and Foreign) 74%

Who owns Mindanao Gold Ltd.? Effectively it owns 7.6% of Carmen Copper

Apex Mining Corporation, Enrique Razon Jr. and Jose Eduardo Alarilla

Both Apex and Atlas Mining corporations have Mindanao Gold Ltd. as one of its shareholders, raising the same question about its shareholders who might potentially be among Apex’s beneficial owners. In addition, a certain “Eastern Investments International Limited” registered in Hong Kong appears to hold material indirect shares as well. Despite not being able to know these firms’ owners, two Filipinos (natural persons) are found to be beneficial owners. These are Enrique Razon and Jose Eduardo Alarilla, effectively owning 27% and 16% of Apex Mining, respectively. Razon is Apex’s chairman and president while Alarilla is a Board Member. Enrique K. Razon Jr. is considered among the richest Filipino billionaires (network of USD 3.2 billion), sourcing his wealth primarily from International Container Terminal Services, the country’s largest port operator. He also has stakes in Solaire Casino and Bloomberry Resorts Co, wherein Jose Eduardo Allarilla also plays a role in the overall management. Figure 4: Apex Mining Corp.’s owners and their effective shares Eastern Investments International 17.9% Enrique Razon 27.2%

Jose Eduardo Alarilla 16.2%

PCNC 1.6%

Mindanao Gold 11.3%

17


Berong Nickel Mining Corporation and Consunji Family

Berong Nickel Mining Corporation was established in 2004 through the joint venture of Atlas Mining and London-based Toledo Mining Corporation (TMC). The company is managed by TMM Management, Inc., a venture of the two.9 Although Atlas Mining owns shares of both Carmen Copper and Berong, Berong’s case is far more complex. With four (4) corporate ownership layers to sift before seeing names of natural persons, its beneficial owners are not easily identifiable using GIS. Berong is also partly owned by Atlas Mining through the latter’s 70% stake in Ulugan Resources Holdings, Inc, which owns 60% of Nickeline Resources Holdings, which then finally holds 60% of Berong. This gives Atlas (and Alfredo Ramos’ family) an effective share of only 2.52 %. However, Atlas Mining announced in the first half of 2014, that they own 30% of Berong10. Topping its corporate owners are Toledo Mining Corp. Ltd. and European Nickel Ltd. (ENK), British firms with 21.30% and 18.75% of direct shares of Berong Nickel, respectively. However, the effective ownership of TMC grows to as big as 63.3% after considering its ownership of the subsequent corporate owners in the layers (see following figure). Toledo Mining Corporation (TMC) and ENK are listed on London’s Stock Exchange’s AIM Market and both have huge interest in nickel resource in the Philippines (Reuters). In its website, DMCI has declared owning both TMC, which gained Board and management control over Berong Nickel in 2014. DMCI’s interest jumped from 68.18% to 100%. In the same year, DMCI declared having acquired 100% of ENK PLC, from its 60% ownership in 201211. DMCI composes of Consunji family’s diversified portfolio in construction businesses, real estate, energy, water, and mining. In its website, DMCI states that the Consunji family owns 66% of DMCI Holdings, and the public owns the rest (34%). DMCI Holdings owns 100% of DMCI Mining. Philsaga Mining Corporation and various individuals

Philsaga Mining Corporation is based in Davao City. It is almost 100% owned by Medusa Overseas Holdings, Corporation, which is then 40% owned by Medusa Mining. Through stakes in Medusa Exploration Development Corporation (MEDC), more than half (60%) of ownership of Philsaga is equally shared among Rudy C. Obial, Roberto M. Doctura Jr., and Ernesto Lim Apostol. Of them, only Roberto Doctura is a stockholder declared in Philsaga’s GIS. A 2007 document from Medusa Mining, section 13.7 titled “MEDC Shareholders’ Agreement” states that the company “entered into a shareholders’ agreement with MEDC, Ernesto Apostol,

www.atlasmining.com.ph/about-us/berong-nickel-corporation http://www.philstar.com/business/2014/07/20/1348144/atlas-raise-stake-berong-nickel-mine 11 http://www.sec.gov.ph/aboutsec/SEC%20News/SEC%20News%20032614.pdf 9

10

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Rudy Obial and Roberto Doctura. Jr., which regulates the parties’ conduct in respect of their shareholdings in MEDC.12” Furthermore, the said section “provides that every shareholder shall be entitled to one seat on the board of directors of MEDC for every 20 percent of MEDC’s issued share of capital that he holds.” While Mr. Rudy C. Obial from RC Obial and Associates may have been pointed out as a beneficial owner, but what Medusa Mining’s website (www.medusamining.com.au) only explains about him is that he is only an independent consultant who provides site visit reviews and advice. Rudy C. Obial is a geologist who which has been in the past commissioned as independent consultant by Philex Mining Corporation. He was also the PMRC Coordinator of Geological Society of the Philippines 13 and has been an appointed member of the Professional Regulatory Board of Geology of Philippine Regulation Commission (PRC)14. Meanwhile, Roberto M. Doctura Jr., is the president of MEDC-owned PHSAMED Mining Corporation whose main operation is on gold15. Figure 7: Beneficial owners of Philsaga Mining, and their effective level of ownership Medusa Mining Ltd. 40% - National Nominees Ltd. (18.33%) - HSBC Custody (12.08%) JP Morgan Nominees Australia (11.77%) - Citicorp Nominees Australia (11.35%)…

Rudy C. Obial 20%

Roberto M. Doctura 20% Ernesto Lim Apostol 20%

Rio Tuba Nickel Mining, Taganito Mining, and Hinatuan Mining corporations

The three companies are are 60%, 65%, and 100% owned by Nickel Asia Corporation (NAC), respectively. On nickel, giant firm Nickel Asia Corporation (NAC) makes it as the largest producer of lateritic nickel ore in the country. NAC’s ownership of Rio Tuba and Taganito adds to its 22.5% and 10% ownership in nickel processing plants namely Taganito HPAL Nickel Corporation and Coral Bay Nickel Corporation (CBNC), respectively. CBNC became operational in 2005 and is currently considered the number one facility in the high-pressure acid leach (HPAL) process, followed by

http://medusamining.com.au/wp-content/uploads/prospectus.pdf http://www.philexmining.com.ph/userfiles/OR_10May13_TechReport1.pdf 14 http://www.gov.ph/2015/12/14/appointments-and-designations-december-14-2015/ 15 http://www.mgb.gov.ph/attachments/article/51/R13_mtsr_Apr_2016.pdf 12 13

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Taganito HPAL Nickel Corporation (THNC). The top 1 stockholder of NAC is PCD Nominee Corporation 70.27% (Filipino and Non-Filipino PCNC share combined), followed by Sumimoto Metal Mining Philippine Holdings Corporation (19.02%). While the research cannot find Sumimoto Metal Mining Phil. Holdings Corporation’s stockholders, in its website, Sumimoto Metal Mining details its shareholder composition16. 1. 2. 3. 4. 5. 6.

Financial Institutions (33.17%) Foreign Investors (31.10%) Individuals and Others (14.90%) Other Corporations (13.15%) Treasury Stock (5.15%) Securities Companies (2.53%)

It is noted that while in 2014, NAC Board member Luis J. L. Virata recorded the highest direct and indirect shares (12.7% of total outstanding shares) in Nickel Asia Corporation among all NAC board members, his share plummeted to zero in the most GIS published by NAC covering June 2015. The rest of board members have very low level of direct ownership. Gerard H. Brimo, Rio Tuba and Taganito’s president, as well as Manuel B. Zamora, Jr., NAC’s chair, have only 0.14% and 0.08% ownership, respectively. Nickel Asia Corporation’s Board Members officers owning shares: Natural Persons Manuel B. Zamora, Jr. Philip T. Ang Gerard H. Brimo

Nationality Filipino Filipino Filipino

Position in the Board Chairman Vice Chairman President and CEO

% Ownership 0.08% 0.02% 0.14%

Total 0.24%

Annex Figure 4 shows the corporate layers of Hinatuan Mining Corporation—a 100% NAC-owned firm. Meanwhile, aside from Sumimoto Metal Mining Phil. Holdings, Rio Tuba Nickel Mining Corporation is 36% owned by Pacific Metals, Co. Ltd, and 4% owned by Sojitz Corporation. The same is true with Taganito Mining Corp. which is 33% owned by Pacific Metals and 2% owned by Sojitz. Pacific Metals Co. is a manufacturer and seller of ferronickel and possesses stake in nickel ore development projects in the Philippines. Its three major business segments are nickel, electricity supply, and others (gas products, recycling of various wastes, etc). In 2002, the company became a wholly owned subsidiary of Reliance Steel & Aluminum Co., which is based in the United States. Reliance Steel’s family of companies has numerous shareholders17 making it extremely difficult to track its ultimate beneficial owners. Only Thomas W. Gimbel, one of its independent directors,

16 17

http://www.smm.co.jp/E/ir/stock/description/ http://www.4-traders.com/RELIANCE-STEEL-ALUMINUM-14292/company/

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appears as the natural person in the top 10 shareholders list. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

The Vanguard Group, Inc (6.74%) BackRock Fund Advisors (6.59%) Royce and Associates LLC (3.67%) Adage Capital Management LP (3.66%) Wellington Management Co. LLP (3.11%) SSGA Funds Management, Inc. (3.02%) Dimensional Fund Advisors LP (2.84%) Brandywine Global Investnemnt Management LLC (2.7%) Jennison Associates LLC (2.6%) Thomas W. Gimbel (2.45%)

Meanwhile, Sojitz Corporation is a general trading company formed after the merger of Nissho Iwai and Nichimen corporations. Its main segments are machinery, energy and metal, chemicals, lifestyle, and others. Like Pacific Metals, Sojitz has numerous shareholders.18 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Japan Trustee Services Bank, Ltd (10.33%) Ichigo Trust PTE Ltd. (5.04%) Chase Manhattan Bank GTS Clients Account Escrow (4.75%) The Master Trust Bank of Japan, Ltd (2.83%) Trust and Custoday Service Bank, Ltd (2.71%) State Street Bank and Trust Company (1.21%) BBH for GMO International Equity Fund (1.03%) State Street Bank and Trust Company (1.01%) JP Morgan Chase Bank (0.92%) MSCO Customer Securities (0.91%) Sojitz Corporation 4% Reliance Steel and Aluminum 36% Sumimoto Metal mining Phil. Holdings Corp. 12%

PCNC (Foreign and Filipino) 48%

18

https://www.sojitz.com/en/ir/stkholder/stock/

21


Rio Tuba’s Board Members who own shares Natural Persons Manuel B. Zamora, Jr. Philip T. Ang Luis Juan L. Virata Martin Antonio G. Zamora Masayuki Aoyama Keiichi Koide Kazuyuki Sugai

Nationality Filipino Filipino Filipino Filipino Japanese Japanese Japanese

Position in the Board Chairman of the Board Director Director Senior Vice President Director Director Director

% Ownership (Direct) 0.00024% 0.00024% 0.00024% 0.00024% 0.00024% 0.00024% 0.00024%

Total

0.00168%

Philex Mining and Anthoni Salini

Philex Mining Corporation primarily works on gold exploration/ extraction in the Philippines. Among its direct shareholders, the biggest share goes to the Social Security System (SSS) (20.59%), followed by PCNC (Filipino and Foreign combined) with around 20% ownership. The rest are divided among Two Rivers Pacific Holdings Corporation (Filipino, 14.96%), Asia Link BV (20.71%), Kirtman Ltd. (4.9%), Maxella Ltd. (4.85%), and so on. Although it does not appear outright in the first layer of GIS, a 2011 affidavit by Pangilinan states that First Pacific International Ltd., through its wholly-owned subsidiaries, owns 31% of Philex Mining19. The same source says that all of Asia Link BV, Kirtman Ltd., and Maxella Ltd are owned by First Pacific International Ltd., which makes sense as the sum of shares of the three is 30.5%. In addition, First Pacific’s owns 7.2% indirect shares of Philex Mining through Two Rivers Pacific Holdings Corporation and Metroc Pacific Holdings, Inc., (second and third ownership layers). It results then in a total of 37.5% First Pacific International Ltd. ownership of Philex Mining Corporation. Lastly, Intalink BV, a firm incorporated in Netherlands and is present in the last layer, is also said to be operating as a subsidiary of First Pacific Company Ltd. Assuming it is wholly-owned by First Pacific too, First Pacific’s total shares could get as high as 39.9%, comprising the limit of 40% ownership for foreigners. Meanwhile, no GIS of “Enterprise Investments Holdings, Inc.” can be found in the SEC despite it being declared as a Filipino corporation, although it seems to be a subsidiary of Enterprise Holdings Corporation, an international firm also potentially connected with Anthoni Salim’s business empire. Enterprise Investments Holdings, Inc., through its stakes in Metro Pacific Holdings Inc, effectively owns 5.4% of Philex Mining. Manny V. Pangilinan, who is known for his stake in Philippine Long Distance Telephone Company (PLDT), Businessworld, and Interaksyon, has acquired Philex Mining Corp. in 2008.

19

http://www.manilatimes.net/how-salim-group-skirted-foreign-ownership-limits/79660/

22


Shares of ultimate owners of Philex Mining Maxella Ltd. 4.8% Kirtman Ltd. 4.9%

Enterprise Investments Holdings, Inc. 5.4% Intalink B.V. 2.4%

Various entities with low individual shares 13.5%

Social Security System 20.6% PCD Nominee Corporation (Filipino and Foreign) 20.5%

First Pacific International Ltd. 7.2%

Asia Link B.V. 20.7%

Lepanto Consolidated Mining Company and Yap Family

Lepanto Consolidated Mining Company is a publicly listed company operating gold mines located in Mankayan, Benguet. Its chairman is Felipe U. Yap and its president and COO is his son, Bryan Yap. Its biggest shareholder is the F-Yap Securities (Filipino and foreign) owning 38.4% of shares, followed by PCNC, with 35% ownership. F-Yap Securities is owned and controlled by the Yap family. Felipe U. Yap was a former Chairman of the Philippine Stock Exchange and has been chairing various firms in the extractive industry (such as Manila Mining Corporation and Far Southeast Gold Resources, Inc.) and real estate. It was also reported that his family was the one who pioneered the supermarket and convenience store business in Davao20. SR (San Roque) Metals, Inc. (SRMI) and the Gutierrez Family

SRMI is owned by the family of Francis M. Gutierrez (John Anthony V. Gutierrez, Patrick Angelo V. Gutierrez, Miguel Alberto V. Gutierrez) once their individual shares are combined. About 31% of shares are owned by Board members, including Caloocan representative Edgar Erice (full details about politically-exposed persons are found in the next portion of the paper. Table: SR Metals’ Board Members who own shares Natural Persons Miguel Alberto V. Gutierrez Raymund P. Ilustre

Nationality Filipino Filipino

Position in the Board President Vice Chairman

% Ownership 9.999840% 21.066700%

Total 31.07%

http://interaksyon.com/business/43944/lepantos-yap-ventures-into-property-devt http://quotes.wsj.com/PH/XPHS/MA/company-people/executive-profile/208128 20

23


Edgar Erice 3%

Others 4% Gutierrez Family 38%

Jose Alex Colonel 13% Isagani Ferrer 21%

Raymond P. Ilustre 21%

Citinickel Mines & Development Corporation and various individuals

In terms of direct ownership, Citinickel Mines and Dev. Corporation is 95.9% owned by the Oriental Peninsula Resources Group, Inc, and 5.18% owned by King Crown Group Ltd. The corporation is then owned by Citimax Group, Inc. (33.05%), and Golden Spin Realty, Inc. (29.07%), Apex Dev. Ltd (5.16%), and PCD Nominee Corporation (31.87%). Figure 10: Citinickel Mines and Development Corporation’s Ownership Layers The natural persons holding highest shares are all indirect shareholders; they are Caroline Tanchay, president of Citimax Group, followed by Golden Spin Realty shareholders Dario Roxas, Antero V. Bacnotan, and Luisa F. Roxas whose shares total to 9.18%. King Crown Group Ltd. is a Hong Kong-based investment firm. According to one of its property portfolio manager Laurie Pollock, the said group of companies specializes in the sector of property and commerce/trade. Companies include Kingcrown Properties Ltd., Premier Builders Ltd., the Royal View Management Company Ltd., and Wingwise Ltd. Although it turns out that around 28% of Citinickel Mines is owned by a certain King Crown Group Ltd., no sufficient information are found over the web about its beneficial owners. Figure: Effective Ownership of Individuals and entities (Citinickel Mines) PCD Nominee Corporation 32% Amor Tan 7% Luisa F. Roxas 3% Antero V. Bacnotan Dario Roxas 3% 3%

Billion Apex. Dev. Ltd. 5%

Caroline L. Tanchay 19%

Who owns King Crown Group Ltd.? 28%

Greenstone Resources Corporation and Red5 Asia’s beneficial owners

24


Greenstone Resources Corporation is a Red 5 Philippine affiliate company connected with the Red 5 Limited in Australia. Red5 Limited engages in mineral exploration and evaluation, specifically in the Siana Gold Project located in Mindanao. Greenstone is 60% owned by Surigao Holdings and Investments Corporation (SHIC) and 40% owned by Red5 Asia Incorporated (foreign). Using the Grandfather test, the corporation may have violated the foreign ownership restriction because SHIC is 95% owned by Red5 Asia Philippines, which is then 95% owned by Red5 Asia. This then makes Red5’s effective ownership of the said foreign company up to 95%. Red5 Limited lists its top 10 shareholders in its website21. The remaining 5% was owned by a certain Orlando Salatandre. Only 0.0001% of stocks are owned by the board officers. Huy Minh Tran Gwynvill Trading 1% Pty Ltd BNP Baribas Others 1% Noms Pty. Ltd 35% JP Morgan 3% HSBC Custody Nominees Nominees Australia Ltd. (Australia) Ltd 4% Citicorp 5% Contango Nominees Pty Nominees Pty Ltd Ltd. 6% 12%

Orlando Salatandre 5% National Nominees Limited 28%

Board Members of Greenstone Corporation who owns shares Natural Persons Elmer T. Paniamogan Love D. Manigsaca

Nationality Filipino Filipino

Position in the Board Treasurer President

% Ownership 0.0005% 0.0005%

Total 0.0010%

Eramen Minerals Inc. and Enrique Fernandez

Eramen Minerals Inc. is 90% owned by its president Enrique Fernandez, and Eramen Holdings Corporation owns majority of the rest. The latter is also 99.99% owned by Enrique C. Fernandez himself. Natural Persons

Nationality

Position in the Board

Enrique C. Fernandez

Filipino

President

% Ownership 90% (Direct) and 10% (indirect)

Total ~100%

LNL Archipelago Minerals Inc. and the Leonio Family

LNL Archipelago Minerals is 51% owned by the Leonios. From the table that follows, it can be seen that 78% of the shares are owned by those seated in the Board. Juan M. Casillo 0.2% Lawrence N. 22.5% 21 http://www.red5limited.com/corporate/shareholder-information.html Leonio 31.2% Clarissa Teresita

Oscar S. Reyes

0.2% L. Asuncion

Carlo Leonardo N. Leonio

Leonardo L.

25


Board Members owning share Natural Persons Leonardo L. Leonio Lawrence N. Leonio Clarissa Teresita L. Asuncion Juan M. Castillo

Nationality Filipino Filipino Filipino Filipino

Position in the Board Chairman of the Board CEO Treasurer Corporate Secretary

% Ownership 24.13000% 31.25000% 22.50000% 0.25000%

Total 78.13%

Benguet Corporation and various individuals

Benguet Corporation’s biggest shareholders are the so-called “Palm Companies” holding around 35% shares. They are followed by PCNC with around 27% ownership. From a SEC Form 20-IS document, it was stated that: “the company is not aware of who is/are the direct or indirect beneficial owner/s of the stocks issued to Palm Avenue Holdings Company, Inc. and Palm Avenue Realty and Development Corporation (the “Palm Companies’). The nominee of Palm Companies in the Board of Director is Mr. Benjamin Philip G. Romualdez, Vice Chairman President/ CEO.” The rest Yolanda Q. 22% Mauricio 3%

Marilyn M. Javalera 3% Minda P. De Paz 3% Rodolfo C. Reyes

3% Remequio C. Dayandayan Ma. Fe C. Jr. Siscar Michelle F. 3% 2% Ayangco 7%

PCD Nominee Corporation 27%

Anatolio Sabilllo, Jr. Cesario Sudario, 3% Eugenia I. Jr. Rosa A. Abania 8% Loyola 8% 8%

1. Foreign Ownership Mining firms’ declared Filipino-Foreign ownership ratios in their GIS look diverse. This is without using the grandfather rule. A number of other foreign nationalities appear on the available GIS: Australian, American, British, and Japanese. Some companies are fully Filipino-owned (100%) such as the Eramen Minerals Inc. while others are at the edge of the 60-40 threshold such as the Rio Tuba Nickel Mining Corporation (60:40) and Taganito Mining Corporation (65:35), which are both under Nickel Asia Corporation. Now comparing these numbers with the estimates using Grandfather test, it would appear that almost all of them do in fact have lower level of Filipino ownership.

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Table 8: Name of contractors, by percentage of foreign ownership as declared in their GIS vs. when using Grandfather Rule Name of Contractor/ Operator

Control Test

Carmen Copper Corporation Philex Mining Corporation Rio Tuba Nickel Mining Corporation Philsaga Mining Corporation

Grandfather Rule (~)

99.99999995192%

87%

60.59%

60%

60%

40%

99.99988%

60%

100.00%

100%

Citinickel Mines & Development Corp.

96%

72%

Greenstone Resources Corporation

60%

4%

Taganito Mining Corporation

65%

SR Metals, Inc.

Apex Mining Company Eramen Minerals Inc. LNL Archipelago Minerals Inc. Benguet Corporation

89.40%

72%

100%

100%

100%

100%

82.96%

Berong Nickel Corporation

60%

Lepanto Consolidated Mining Company

91.%

Hinatuan Mining Corporation

24% 69%

Sources of data: General Information Sheets (2015)

2.

Promoting Accountability of Public Officials

In metallic mining, like any other sector, we can see that three basic forms of non-ideal political relations exist (see table below). Ideal: Both BO and his/her relatives are not in public office

(1)

BO is a politician himself but has no other relative/s holding public office

BO is not a politician but has other relative/s holding public office

(3)

Both BO and relative/s are holding public office

(2)

First is when one of a company’s beneficial owners is a politician him/herself but has no other relative/s holding public office. The involvement of Caloocan Rep. Edgar Erice in a nickel ore extracting firm in Agusan del Norte named SR Metals Inc. (SRMI) qualifies under the first type. SRMI allegedly contributed to the elections-related campaigns of the Liberal Party in 2010 when Rep. Erice was the president of the company22. Rep. Erice is also the current spokesperson of the Liberal Party. Meanwhile, the non-politician owners with bigger shares—Miguel Alberto Gutierrez

22

According to the 2014 GIS of SRMI Rep. Erice holds only 3.4% of SRMI shares

27


and Eric Gutierrez—are also said to be affiliated with the Liberal Party, although not consanguineous. The shares of the Gutierrezes23 totaled to around 40% ownership of the firm. Second is when a beneficial owner is not a politician but is closely connected, usually by blood, to someone else in the government. Table 12: Stockholders of mining companies and their immediate relatives in the government Name Edgar Erice Ronaldo B. Zamora Richard J. Gordon Roderico V. Puno

Position in Public Office Caloocan City (2nd District) representative San Juan City, Lone district

Firm

Ownership

Position

SR Metals, Inc.

3.4%

-

NAC

0.02%

-

Senatoriable Brother of Antipolo (1st District) representative Roberto V. Puno

Atlas Mining Atlas Mining

0.00% 0.00%

Independent Director Corporate Secretary

Although already outside the top 10 list being focused on in this paper, other cases are worth noting. Beneficial owner Regis V. Puno of Napnapan Mineral Resources, Inc. is a sibling of Antipolo City Representative Roberto Puno. The current president of the Chamber of Mines of the Philippines, Mr. Benjamin Philip Romualdez, is with his brother Leyte Rep. Ferdinand Martin Romualdez in the Executive Committee of Benguet Corporation in Surigao del Sur. The ownership of the Romualdezes results in more than the 40% ownership of the said corporation. Still on this type but on a bigger scope, non-politician Clarence T. Pimentel, Jr. is a major beneficial owner of CTP Construction and Mining Corporation (CTPCMC) together with his siblings in politics—Carrascal, Surigao del Sur Mayor Vicente T. Pimentel Jr, and Surigao del Sur Governor Johnny T. Pimentel. Lumping the shares of the Pimentels24 results in the 75% ownership of the Pimentels of CTP-CMC. Other Pimentels outside the CTPCMC turn out to be local chief executives of Surigao del Sur Municipalities too. These are Rogelio M. Pimentel (Mayor of Tago) and Roxanne C. Pimentel (Mayor of Tandag City). Lastly, on the third type: the Ecleo clan altogether forms Minahang Bayan ng Dinagat Island Cooperative’s set of the company’s beneficial owners. Benglen B. Ecleo, the president of the said cooperative and the Dinagat Islands’ incumbent vice governor.

3.

Ensuring Proper Tax Payments

Of the identified beneficial owners, only three made it to the Top 500 Individual Taxpayers, and only ___ were part of the the Top 500 Non-Individual Taxpayers for 2014. Table 10: Beneficial owners included in the Top 500 Individual Taxpayers in 2012 Beneficial Owner

Rank

Amt. of tax paid (Php)

Mining firm where he is a beneficial owner

From SRMI’s 2014 GIS: Patrick Angelo V. Gutierrez [18.02%], John Anthony V. Gutierrez [10%], Miguel Alverto V. Gutierrez [10%] 24 From CTP-CMC’s 2014 GIS: Stockholders with more than 12% share are May L. Pimentel, Lawrence B. Pimentel, Christopher J. Pimentel, Christian James L. Pimentel 23

28


Francisco M. Gutierrez

51

26,106,176.00

SRMI

Enrique Razon Jr.

58

24,260,237.57

Apex Mining Corporation

Victor Consunji

454

7,649,998.00

Berong Nickel Mining Corporation

Source: Bureau of Internal Revenue (BIR)

Table 9: Metallic Mining Companies included in the Top 500 Non-individual Taxpayers for 2012 Company/ Contractor

Rank

Taganito Mining Corporation Rio Tuba Nickel Mining Corporation Source: Bureau of Internal Revenue (BIR)

Amount of tax paid (Php)

75

398,385,329.21

72

424,331,735.40

Table 11: Other Beneficial owners of Firms (aside from the 10 firms focused on by this paper) Beneficial Owner Manuel Velez Pangilinan

Rank

Amt. of tax paid (Php)

Mining firm where he is a beneficial owner

30

24,671,703.10

Philex Mining

Source: Bureau of Internal Revenue

Manuel B. Zamora ranked 467th as well as Nickel Asia’s affiliates Taganito Mining Corporation (75th) and Rio Tuba Nickel Mining Corporation (72md) (and Hinatuan Mining Corporation at 71st). If including those without controlling positions, the table would also include Manuel V. Pangilinan (30th), and Henry Sy Jr. and Henry Sy Sr. (73rd and 74th, respectively), who are diversifying their already-vibrant portfolio in various sectors. The challenge with just matching the list of non-individual taxpayers with that of the individual taxpayers is that it does not provide information on one’s tax payments from income earned exclusively from a given mining firm. Because doing so may violate privacy laws, the government can rather trace red flags. As stated earlier, a huge expenditure rate may signal tax avoidance and evasion strategies. The figure below presents the share of total expenses (excluding income tax) to companies’ total revenues for the year 2012. This information is accessed through the EITI. Philsaga Mining Corporation recorded that more than 100-percent, 344.4% of its revenues (worth Php 136.7 million (USD 3.058 million)) are all going to total expenses (excluding income tax). Its operating costs alone comprise 281.89% of total revenues, the highest of the ten companies. Note as well that the total production value of Philsaga Mining recorded by the MGB in 2012 was at Php 3.66 billion (USD 81.8 million). The paper is unable to follow through the tax payments of Philsaga’s parent company Medusa Overseas Holdings/ Medusa Mining Limited due to lack of available data. 344.39% 65.93% 63.72%

87.61% 75.72% 88.97% 58.72% 85.05%

134.65%

81.52%

29


Figure 9: Share of total expenses (excluding income tax) to total revenues of companies Source: Firms’ Financial Statements accessed through the EITI

Another company, LNL Archipelago Minerals Inc. recorded huge expenses, which is at 134.7% of its total revenues. Of those whose expenses did not exceed revenues, the average share of expenses is 75.9%. VI.

Challenges in Beneficial Ownership Disclosure in the Philippine Metallic Mining Sector

As of this writing, the Philippines has yet to undertake necessary steps ideal for the disclosure of pertinent corporate information relevant to beneficial ownership of metallic mining companies. For instance, the most crucial data used in this paper—production/ industry data and corporate data—which are from MGB and SEC or PSE, respectively, are either incomplete, outdated, or at risk of being inaccurate. Information on companies’ and their parent companies’ (i) basic profile such as location of operation and office, (ii) stockholders and managers, (iii) relative/s and/or position in public office, if applicable, among others, have to be available, accessible, accurate, and timely.

1.

Data Availability and Timeliness

Some local firms, especially those that are deeper in the corporate layers also don’t have GIS published in the SEC. These include the following: 1. 2.

Enterprise Investments Holdings, Inc. (owns 60% of Metro Pacific Holdings, Inc which through the corporate layering effectively owns 8.97% of Philex Mining Corporation) Billion Apex Development Ltd. which effectively owns 4.95% of Citinickel Mines and Development Corporation

The lack of General Information Sheets (GIS) requires backup steps such as looking into other documents from which information on stockholders can be gathered. The latter approach may provide less timely or less accurate information than what could have directly gotten from the company disclosures. Another related impediment to knowing the beneficial owner is the lack of information about the layers of companies declared as major stockholders. As it is a goal to arrive at names of natural persons who identify as ultimate owners, firms declared in the GIS as owning majority of the shares have to provide in turn, the names of their beneficial owners as well. Below is a table of website links of firms that are part of a firm’s corporate layers. It shows that only SR Metals Inc. (which has no corporate layer of ownership) has its own website. The rest are either dependent on their parent companies’ sites, or have no website at all. This impedes transparency especially with those registered as foreign entities.

30


Company and website Carmen Copper Corporation** Rio Tuba Nickel Mining Corp.** Philsaga Mining Corporation** SR Metals www.srmetalsinc.com Citinickel Mines & Dev. Corp. No website found Greenstone Resources Corp.** Taganito Mining Corporation** Eramen Minerals, Inc. No website found LNL Archipelago Minerals, Inc. No website found Berong Nickel Corporation**

Stockholder and website - 100% owned by Atlas Consolidated Mining & Development Corp (http://www.atlasmining.com.ph/about-us/carmen-copper-corporation) o Atlas is 14.2% owned by Alakor Corporation (http://alakorcorp.yocal.ph/ (not verified) - 60% owned by Nickel Asia Corporation (http://www.nickelasia.com) o Sumimoto Metal Mining Philippine Holdings Corporation (http://www.smm.co.jp/) - 30% owned by Pacific Metals Co. Ltd* (http://www.pacificmetal.com/) o Wholly owned by Reliance Steel & Aluminum Co. (http://www.rsac.com/) - 100% owned by Medusa Overseas Holdings, Corp. (http://www.medusamining.com.au/) § 40% owned by Medusa Mining

- 38% owned by Family of Francis M. Gutierrez - 95.9% owned by Oriental Peninsula Resources Group, Inc. (No credible website found) Surigao Holdings Investment Corporation (No website found) Red5 Asia Incorporated* http://www.red5limited.com Nickel Asia Corporation (http://www.nickelasia.com)

- 90% owned by Enrique C. Fernandez (President) - 10% owned by Eramen Holdings (No website found( Lawrence N. Leonio (CEO) and Leonardo L. Leonio (Chairman) - 60% owned by Nickeline Resources Holdings, Inc. (No website found) o A subsidiary of Atlas Mining (http://www.atlasmining.com.ph)

** No website separate from parent company/ies A number of General Information Sheets accessed were not the most recent, with a two-year lag on the average. Some of the most recent documents accessed in the late 2014 were even those that cover 2011. Moreover, it can be noticed that almost all companies in the final list did not completely fill in their GIS; Information such as website addresses, email addresses, and geographical code information are more often than not left blank. The process—knowing whether a beneficial owner is a politically-exposed person or related to someone who is—is not only time-consuming compared to when it is already declared, but also not encompassing given that relatives with different surnames may be filtered out.

2.

Data Accessibility and Costs

The problem with tracing the individual owners is that you have to go through layers of companies, which may require time and huge costs. Although there are improvements in the process of requesting and delivering information such as the SEC creating internet-based platforms accessible anytime and from anywhere, the documents may be accessed online but with prescribed fees, which then hinder access to information.

31


Annex

Table 1: List of producing metallic companies, and production value in first quarter of 2015 Gold with Silver Apex Mining Company Inc. Greenstone Resources Corporation

435,750,311.00 630,680,461.00

Johson Gold Mining Corporation* Lepanto Consolidated Mining Company Philippine Gold Processing and Refining Corporation (PGPRC) Philsaga Mining Corporation/ Mindanao Mineral Processing and Refining Corporation (MMPRC) Benguet Corporation

228,636,936.00 2,288,634,240.00 1,121,007,931.00 280,411,434.00

Copper with Gold Mt. Sinai Mining Exploration and Development Corporation* Copper with Gold and Silver Oceana Gold (Philippines), Inc. Carmen Copper Corporation Philex Mining Corporation

3,518,346,284.00 2,659,065,108.00 2,410,768,044.00

Chromite Cambayas Mining Corporation Krominco Inc. Nickel AAM-Phil Natural Resources Exploration and Dev. Corporation* Adnama Mining Resources Incorporated Benguet Corporation Nickel Mines Inc.* Berong Nickel Project Cagdianao Mining Corporation/ East Coast Mineral Resources Com., Inc.* Carrascal Nickel Corporation* Century Peak Corporation* Citinickel Mines and Development Corporation Coral Bay Nickel Corporation CTP Construction and Mining Corporation Eramen Minerals, Inc. Hinatuan Mining Corporation LNL Archipelago Minerals Inc. Marcventures Mining and Development* Nortweah Metals and Minerals Company, Inc.* Oriental Synergy Mining Corporation/ Minahang Bayan ng Mamayan ng Dinagat Is. Cooperative Pacific Nickel Philippines, Inc.* Platinum Group Metals Corporation* Rio Tuba Nickel Mining Corporation Sinosteel Phils. H.Y. Mining Corporation*

32,435,258.00 6,614,577.00 56,160,000.00 269,098,427.00 681,297,394.00 2,555,143,000.00 97,944,185.00 296,031,450.00 109,001,896.00 281,224,605.00 1,859,862.00 1,739,030,000.00 -

32


SR Metals, Incorporated

772,385,466.00

Taganito Mining Corporation Taganito HPAL Nickel Mining Corporation TVI Resources Development, Inc/Minimax Mineral Exploration Corporation* Wellex Mining Corporation* Zambales Diversified Metals Corporation*

573,031,779.00 2,475,988,851.00 -

Iron Atro Mining - Vitali Inc./Hard Rock Mineral Trading Inc.* Investwell Resources, Incorporated* Leyte Ironsand Corporation* Ore Asia Mining & Development Corporation Strong Built (Mining) Development Corporation* Total production value of metallic minerals in Q1 2015 Source: Mines and Geosciences Bureau *Companies in asterisks are those without recorded production in the first quarter of 2015

9,200,414.00 23,529,747,913.00

List of possible warning signs that a company has problematic concealed beneficial owners – from the National Resource Governance Institutes (August 2015): Talk in the market 1.

Rumors circulate that a firm is actually a particular person’s company, despite appearances, or is “linked” or “close to” a politically-exposed person. 2. A news story, NGO report or court case makes similar claims 3. Industry insiders or officials will not discuss who owns a company. 4. A little-known person, company, or network of companies keeps cropping up in different deals, suggesting one beneficial owner has stakes in all of them Preferential deals with government 1.

A company’s business suddenly takes off or falls apart when the government changes hands suggesting its hidden owner’s political connections were key to its success. 2. A company wins a government contract or license for which it does not seem qualified based on its track record, age, or relatively unknown, inexperienced managers and shareholders. 3. A company receives a contract, license or other favor—e.g. a tax holiday or import duty waiver—that officials in the awarding government typically hand out as patronage. 4. An unqualified indigenous company with unclear ties to officials receives a government contract or license purportedly in the interest of complying with the country’s “local content” laws or policies. 5. A company signs a deal at a discounted price or on a single-source basis outside normal competitive action or procurement processes. 6. Government does not publicize the deal. Non-compliance with industry rules and standards not sanctioned by government 1. 2. 3.

A company fails to file required paperwork. A company routinely breaks operational regulations. A company never performs its contractual obligations in full, or walks away from an unfinished, over-budget project 4. Underpayment or non-assessment of taxes and/or fees Suspect commercial relationships 1.

A company engages in high-value transactions with little obvious commercial justification

List of beneficial owners

33


Company Carmen Copper Corporation

Beneficial Owner/s and nationality Alfredo Ramos and his family (Filipino)

Philex Mining Corporation Rio Tuba Nickel Mining Corporation Philsaga Mining Corporation

Anthoni Salim (Indonesian)

SR Metals, Inc.

Citinickel Mines and Development Corporation

Ruby C. Obial (F) Roberto M. (F) Doctura, Jr. Ernesto Lim Apostol (F) Raymond P. Ilustre (F) Isagani Ferrer (F) Jose Alex Colonel (F) Gutierrez Family (F) • Francis Enrico M. Gutierrez • Miguel Albeto V. Gutierrez • John Anthony V. Gutierrez • Patrick Angelo V. Gutierrez Edgar Erice (F) Caroline Tanchay (F) Dario Roxas (F) Antero V. Bacnotan (F) Luisa F. Roxas (F)

Greenstone Resources Corp. Apex Mining Corporation

Orlando Salatandre (F) Red5 Asia, Inc. beneficial owners Enrique Razon (F) Jose Eduardo Alarilla (F)

Eramen Minerals

Enrique C. Fernandez (F)

LNL Archipelago Minerals

Leonio Family (F) • Lawrence Leonio • Leonardo Leonio • Clarissa Teresita L. Asuncion • Carlo Leonardo N. Leonio Beneficial owners of Toledo Mining Corp. Ltd. and European Nickel Ltd. Yap Family

Berong Nickel Corporation Lepanto Consolidated Mining Corp. Hinatuan Mining Corporation

Ownership, Corporate Layer 14.8% (through Alakor Corporation, which the family owns 100%)

Position -

20% 20% 20% 21.066% 20.73% 12.7% 38.018%

President Secretary -Vice Chairman --Chairman President ---

3.46% 19.02% (through Citimax Group) 3.06% (through Golden Spin Realty) 3.06% (through Golden Spin Realty) 3.06% (through Golden Spin Realty) 4%

----

24.19% (through Prime Metroline Holdings, Inc.) 14.42% (through Lakeland Village, and Devoncourt Estates, Inc.) 99.999% (direct ownership and through Eramen Holdings, Corp.) 100% (direct ownership) • 31.25% • 24.13% • 22.5% • 20.6%

--

----

-President CEO Chairman Treasurer --

Beneficial owners of Sumimoto Metal Mining Phil. Holdings. Corp

34


Company Stockholders declared in the GIS 1.

Carmen Copper Corporation

Natural Persons/ Corporate Layer

Nationality

Position in the Board

Alfredo C. Ramos

Filipino

Chairman of the Board

0.0000%

Frederic C. Dybuncio

Filipino

Vice Chairman

0.0000%

Adrian Paulino S. Ramos

Filipino

N/A

0.0000%

Jose T. Sio

Filipino

N/A

0.0000%

Isidro A. Consunji

Filipino

N/A

0.0000%

Enrico C. Nera

Filipino

President

0.0000%

Martin C. Buckingham

British

Executive Vice President

0.0000%

Richard J. Gordon

Filipino

N/A

0.0000%

Fulgencio S. Factoran, Jr.

Filipino

N/A

0.0000%

Gerard Anton S. Ramos

Filipino

N/A

0.0000%

Laurito E. Serrano

Filipino

N/A

Roderico V. Puno

Filipino

Not a stockholder

Maria Eleonor A. Santiago

Filipino

Corporate Secretary Compliance Officer/ Assistant Corporate Secretary/ Head of Legal Affairs and Corporate Governance

Tristan Ronald B. Choa

Filipino

Executive Vice President

Not a stockholder

Fernando A. Rimando

Filipino

VP for Finance

Not a stockholder

Rene G. De Ocampo

Filipino

VP for Human Resources

Not a stockholder

Rodrigo C. Cal Atlas Consolidated Mining and Development Corporation

Filipino

Vice President

Not a stockholder

Filipino

-

2.

% of Ownership

0.0000%

Not a stockholder

100.000%

Philex Mining Corporation

Natural Persons/ Corporate Layer Manuel V. Pangilinan Juan B. Santos Eulalio B. Austin Marilyn A. Victorio-Aquino Eliza Bettina R. Antonio Robert C. Nicholson Edward A. Tortorici Bienvenido E. Laguesma Oscar J. Hilado Wilfredo A. Paras Barbara Anne C. Migallos Danny Y. Yu Manuel A. Agcaoili Benjamin Deodato R. Garcia Michael T. Toledo Redempta P. Baluda Victor A. Francisco Raymund Brett C. Medel Asia Link B.V Social Security System PCD Nominee Corporation

Nationality Filipino Filipino Filipino Filipino Filipino British American Filipino Filipino Filipino Filipino Filipino Not indicated Filipino Filipino Filipino Filipino Filipino Dutch Filipino Filipino

Position in the Board Chairman Vice Chairman President and CEO Corporate Secretary SVP, CFO and Compliance Officer SVP & Resident Manager SVP - Human Resource SVP - Corporate Affairs VP Exploration VP Environment and Comrel VP & Chief Information Officer -

% of Ownership 0.09%

20.71% 20.59% 15.66%

35


Two Rivers Pacific Holdings Corporation Kirtman Limited PCD Nominee Corporation Maxella Limited The First National Investmnet Co. Makati Supermarket Corporation Estate of Allen Cham Estate of Eudaldo Boix Philippine Remnants Co., Inc. Frank Pao Religious of the Virgin Mary - B Estate of Boix & Petra Hernando Paulino &/or Elena de Ugarte Carol Joan Reif Robin John Pettyfer Estate of Jose Tan Yan Doo Others

3.

American Filipino American Foreign Filipino

-

14.96% 4.90% 4.86% 4.85% 0.25% 0.14% 0.14% 0.10% 0.10% 0.07% 0.06% 0.06% 0.06% 0.05% 0.05% 0.05% 12.21%

Rio Tuba Nickel Mining Corporation

Natural Persons/ Corporate Layer Manuel B. Zamora, Jr. Philip T. Ang Gerard H. Brimo Luis Juan L. Virata Martin Antonio G. Zamora Masayuki Aoyama Keiichi Koide Kazuyuki Sugai Jose B. Anievas Jose Roderick F. Fernando Yuta Osagawara Norberto R. Reyes Ryan Rene C. Jornada Emmanuel L. Samson Augusto C. Villaluna Nickel Asia Corporation Pacific Metals Co., Ltd Sojitz Corporation

4.

Filipino British Foreign British Filipino Filipino Filipino American Filipino Foreign

Nationality Filipino Filipino Filipino Filipino Filipino Japanese Japanese Japanese Filipino Filipino Japanese Filipino Filipino Filipino Filipino Filipino Japanese Japanese

Position in the Board Chairman of the Board Director President Director Senior Vice President Director Director Director Senior Vice President Corporate Secretary Deputy Treasurer Vice President Assistant Corporate Secretary Treasurer Vice President

% of Ownership

0.00024% 0.00024% 0.00000% 0.00024% 0.00024% 0.00024% 0.00024% 0.00024% Not a stockholder Not a stockholder Not a stockholder Not a stockholder Not a stockholder Not a stockholder Not a stockholder 59.99928% 35.99929% 4.000000%

Philsaga Mining Corporation

Natural Persons/ Corporate Layer Raul C. Villanueva Roberto M. Doctura, Jr. Geoffrey J. Davis Andrew B.S. Teo Roy P. Daniel Marie Glenn C. Sorita Ciceron A. Angeles, Jr. Armand B. Dy Medusa Overseas Holdings, Corporation

Nationality Filipino Filipino Australian Australian Australian Filipino Filipino Filipino Filipino

Position in the Board President N/A N/A N/A N/A Corporate Secretary N/A Treasurer -

% of Ownership

Not a stockholder 99.9997211155379%

36


5.

SR Metals, Inc.

Natural Persons/ Corporate Layer Francis Enrico M. Gutierrez Jose Rafael S. Ledesma Alfredo E. Belen Miguel Alberto V. Gutierrez Raymund P. Ilustre Jesusito G. Morallos Ida A. Juico Edgar Erice Alejandro T. Basalio John Anthony V. Gutierrez Patrick Angelo V. Gutierrez Isagani Ferrer San R. Construction Corporation Galeo Equipment Corporation Jose Alex Coronel

6.

Nationality Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Not indicated Not indicated Filipino

Position in the Board Chairman of the Board Vice President Treasurer President Vice Chairman Corporate Secretary Assistant Corporate Secretary -

% of Ownership 0.000080% 0.000080% 0.000080% 9.999840% 21.066700% Not a stockholder Not a stockholder 3.400000% 0.680000% 10.000000% 18.020000% 20.726600% 1.7000000% 1.7000000% 12.7066000%

Citinickel Mines and Development Corporation

Natural Persons/ Corporate Layer

Nationality

Position in the Board

Ferdinand M. Pallera

Filipino

President

0.0000%

Jose Marie E. Fabella

Filipino

Secretary

0.0000%

Miguel D. De Regla

Filipino

Treasurer

0.0000%

Kenneth C. Radaza

Filipino

N/A

Oriental Peninsula Resources Group, Inc.

Filipino

-

95.9000%

Reynilda Cabahug de Leon

Filipino

-

0.0100%

Olympic Mines and Development Corporation

Filipino

-

0.2800%

7.

0.0100%

Greenstone Resources Corporation

Natural Persons/ Corporate Layer Rogelio A. Canedo Mark J. Williams Elmer T. Paniamogan Orlando M. Salatandre Love D. Manigsaca Jeanette C. Ardemil Surigao Holdings Investments Corporation (SHIC)

Nationality

Filipino

Position in the Board N/A N/A Treasurer N/A President Corporate Secretary -

Red5 Asia Incorporated

Australian

-

8.

% of Ownership

% of Ownership 0.0005% 0.0005% 0.0005% 0.0005% 0.0005% Not a stockholder 60.00150%

39.99600%

Taganito Mining Corporation

Natural Persons/ Corporate Layer Manuel B. Zamora, Jr. Philip T. Ang Gerard H. Brimo Michio Iwaj Martin Antonio G. Zamora Masayuki Aoyama

Nationality Filipino Filipino Filipino Japanese Filipino Japanese

Position in the Board Chairman of the Board Vice Chairman President Vice President -

% of Ownership 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

37


Keiichi Koide Emmanuel L. Samson Lennie A. Terre Jose Roderick F. Fernando Yuta Osagawara Ryan Rene C. Jornada Jose B. Anievas Augusto C. Villaluna Koichi Ishihara Nickel Asia Corporation Pacific Metals Co., Ltd Sojitz Corporation

9.

Japanese Filipino Filipino Filipino Japanese Filipino Filipino Filipino Japanese Filipino Japanese Japanese

Treasurer VP for Finance Corporate Secretary Deputy Treasurer Assistant Corporate Secretary Senior Vice President Vice President Vice President -

0.00% Not a stockholder Not a stockholder Not a stockholder Not a stockholder Not a stockholder Not a stockholder Not a stockholder Not a stockholder 65.0000% 33.00000% 2.00000%

Position in the Board

% of Ownership

Apex Mining Corporation, Inc.

Natural Persons/ Corporate Layer

Nationality

Walter William Brown

President and CEO

Ramon Y. Sy

Chairman and CFO

Noel V. Tanglao

EVP

Graciano P. Yumul, Jr.

SVP - Exploration and Development

Modesto B. Bermudez

SVP - Operations

Dennis A. Uy

-

Joselito H. Sibayan

-

Rosanna Parica

Corporate Secretary

Silverio Benny Tan

Assistant Corporate Secretary

Prime Metroline Holdings, Inc.

Filipino

Mindanao Gold Limited

Malaysian

40.32% 9.59%

Monte Oro Resources & Energy, Inc.

Filipino

9.07%

Lakeland Village Holdings, Inc.

Filipino

7.62%

Devoncourt Estates, Inc.

Filipino

6.81%

Mapula Creek Gold Corporation

Filipino

1.85%

PCD Nominee Corporation

Filipino

0.57%

PCD Nominee Corporation

Foreign

1.02%

Rexlon Industrial Corporation

Filipino

0.02%

Lucio Yan and/or Clara Yan

Filipino

0.01%

Jalandoni, Jayme, Adams & Co., Inc.

Filipino

0.01%

Ignacio R. Ortigas

Filipino

0.01%

Ansaldo Godinez & Co. Inc.

Filipino

0.01%

Prudential Sec, Inc.

Filipino

0.01%

F. Yap Securities, Inc.

Filipino

0.00%

JRT Sec. Corp.

Filipino

0.00%

First Integrated Cap. Sec. Inc.

Filipino

0.00%

Goldern Tower Sec. & Holdings Inc.

Filipino

0.00%

Lippo Sec. Inc.

Filipino

0.00%

Solar Sec. Inc

Filipino

0.00%

Others Walter William Brown

23.09% Filipino

President and CEO

38


Ramon Y. Sy

Filipino

Chairman and CFO

Noel V. Tanglao

Filipino

EVP

Graciano P. Yumul, Jr.

Filipino

SVP-Exploration and Devt.

Modesto B. Bermudez

Filipino

SVP-Optns/RM

Dennis A. Uy

Filipino

N/A

Joselito H. Sibayan

Filipino

N/A

Rosanna Parica

Filipino

Corporate Secretary

Silverio Benny Tan

Filipino

Asst. Corporate Secretary

Natural Persons/ Corporate Layer Enrique C. Fernandez

Nationality Filipino

Position in the Board President

Leo G. Dominguez

Filipino

N/A

0.0000%

Oscaar S. Reyes

Filipino

-

0.0000%

Marlon B. Tornito

Filipino

Treasurer

Eduardo M. Pangan

Filipino

COS

Eramen Holdings Corporation

Filipino

-

Nationality

Position in the Board Chairman of the Board CEO Treasurer N/A N/A Corporate Secretary Assistant Corporate Secretary

10. Eramen Minerals, Inc. % of Ownership 90.0000%

0.0000% Not a stockholder 10.00000%

11. LNL Archipelago Natural Persons/ Corporate Layer Leonardo L. Leonio Lawrence N. Leonio Clarissa Teresita L. Asuncion Oscar S. Reyes Carlo Leonardo N. Leonio Juan M. Castillo Oberato R. Lapina

% of Ownership 24.13000% 31.25000% 22.50000% 0.25000% 20.63000% 0.25000% Not a stockholder

12. Berong Nickel Corporation Natural Persons/ Corporate Layer Isidro A. Consunji Adrian Paulino S. Ramos Cesar F. Simbulan, Jr. Frederic C. Dybuncio Victor A. Consunji Victor S. Limlingan Roberto O. Parel Aldric G. Borlaza Miracle Joy P. Sebilla Nickeline Resources Holdings, Inc. ENK Limited/ European Nickel Ltd Toledo Mining Corporation Ltd.

Nationality Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino Filipino British British

Position in the Board Chairman of the Board N/A President/ COO N/A N/A N/A Corporate Secretary CFO/ Treasurer Assistant Corporate Secretary -

% of Ownership 0.0000% 0.0000% 0.0000% 0.0000% 0.0000% 0.0000% 0.0000% Not a stockholder Not a stockholder 60% 18.70% 21.30%

39


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40


Lim, F. (2014). Rebels burn mining company’s buses in Compostella Valley. Philippine Daily Inquirer. Retrieved from http://newsinfo.inquirer.net/621438/rebels-burn-mining-companysbuses-in-compostela-valley. See also Apex Mining Cover Sheet http://spotidoc.com/doc/258343/cover-sheet---apex-mining-inc. Medusa Mining Limited (n.d.) MML Prospectus. http://medusamining.com.au/wpcontent/uploads/prospectus.pdf Obial, R.C and Cinco J (2013). Exploration Results and Mineral Resources of the Sto. Tomas II Copper-Gold Deposit Located in Padcal, Tuba, Benguet Province, Philippines. Retrieved from www.philexmining.com.ph/userfiles/OR_10May13_TechReport1.pdf Official Gazette, (2015). Appointments and Designations: December 14, 2015. Retrieved from http://www.gov.ph/2015/12/14/appointments-and-designations-december-14-2015/ ONE Campaign, (2014). The Trillion Dollar Scandal. Retrieved from https://www.one.org/international/policy/trillion-dollar-scandal/ Mines and Geosciences Bureau (2016). Mining Tenements Statistics Report: Mineral Production Sharing Agreement (MPSA). Retrieved from http://www.mgb.gov.ph/attachments/article/51/R13_mtsr_Apr_2016.pdf Montealegre, K.A. (2012) Lepanto’s Yap ventures into property dev’t. Interaksyon. Retrieved from http://interaksyon.com/business/43944/lepantos-yap-ventures-into-property-devt Nickel Asia Corporation (2014). Who We Are. Retrieved from www.nickelasia.com/about-us/ Pacific Metal Company (2016). Pacific Metal Company. Retrieved from www.pacificmetal.com Superformance (2016). Reliance Steel & Aluminum Co (RS). Retrieved from http://www.4traders.com/reliance-steel-aluminum-14292/company/ Sojitz Corporation (2015). Stock Information. Investor Relations. Retrieved from https://www.sojitz.com/en/ir/stkholder/stock/ Tiglao, R.D. (2014). How Salim group skirted foreign ownership limits. Manila Times. Retrieved from http://www.manilatimes.net/how-salim-group-skirted-foreign-ownership-limits/79660/ The Wall Street Journal (n.d.) Manila Mining Corp. A. Retrieved from http://quotes.wsj.com/PH/XPHS/MA/company-people/executive-profile/208128

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NCPH Staff, (2016). Is Roxas campaign financier leaving PH? News Central. Retrieved from http://newscentral.ph/breaking-news/roxas-campaign-financier-leaving-ph/ Philippines-Australia Business Council, (2008). Members. Retrieved from http://pabc.org.ph/main/members.php Petrolift website (2007). Board of Directors. Retrieved from http://petroliftgroup.com/aboutus_bod_ceo.html Rogan, D [Editor], (2016, February). The EITI Standard. Retrieved from www.eiti.org/files/english-eiti-standard_0.pdf Sayne A., Westenberg E., Shafaie A., (2015). Owning Up: Options for Disclosing the Identifies of Beneficial Owners of Extractive Companies. Retrieved from www.resourcegovernance.org/sites/default/files/nrgi_Beneficial%20Owners20150820.pdf Sollano, JP. (2011). Samboan mayor faces charges. Philippine Star. Retrieved from www.philstar.com/cebu-news/759344/samboan-mayor-faces-charges Sunley E.M. and Baunsgaard, T. (n.d.). The Tax Treatment of the mining Sector: An IMF Perspective. Retrieved from www.siteresources.worldbank.org/INTOGMC/Resources/sunleybaunsgaard.pdf St. James Press (2004). Benguet Corporation History. International Directory of Company Histories. Volume 58. Retrieved from http://www.fundinguniverse.com/companyhistories/benguet-corporation-history/ Valencia C. (2013) Conquering the local mining industry. Philippine Star. Retrieved from http://www.philstar.com/business-usual/2013/04/01/925421/conquering-local-mining-industry Valencia C., (2014). Atlas to raise stake in Berong nickel mine. Philippine Star. Retrieved from http://www.philstar.com/business/2014/07/20/1348144/atlas-raise-stake-berong-nickel-mine

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Annex Figure 2: Corporate Ownership Layers of Berong Nickel Corporation

Annex Figure 1: Corporate Layers of Apex Mining Corporation

1


Annex Figure 5: Rio Tuba Nickel Mining Corporation

Annex Figure 4: Hinatuan Mining Corporation

Annex Figure 3: Philsaga Mining Corporation

2


Annex Figure 7: Philex Mining Corporation

Annex Figure 6: Taganito Mining Corporation

3


Annex Figure 9: Lepanto Consolidated Mining Corporation

Annex Figure 8: Lepanto Consolidated Mining Corporation

4


Annex Figure 10: Lepanto Consolidated Mining Corporation

5


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