Semirara Mining continues to face regulatory challenges

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Outlier

SEMIRARA Mining and Power Corp. (SMPC) was among the most actively traded stocks last week, after the Department of Energy (DoE) issued a suspension of Consunji-led company’s coal trading activities for one month and coal mining operations due to a mudflow incident in Semirara island.

A total of P348.56 million worth of 16.36 million shares of SMPC exchanged hands on the trading floor from Nov. 18 to 22, data from the Philippine Stock Exchange showed, making it the 17th most actively traded issue last week.

SMPC shares closed at P20.75 apiece on Friday, up five percent from P19.76 the previous day but down 13.2% from P23.90 a week ago. Year to date, it slipped by 10.6%.

“The sudden news of coal mining shutdown made SMPC one of the most active stocks. In addition, the company was slapped with a fine and suspension for one-month due to coal trading,” Unicapital Securities, Inc. Technical Analyst Jeff Radley C. See said in an e-mail interview.

“The bears took control and push the price lower to new lows,” he said.




In a disclosure to the stock exchange, SMPC said it suspended its mining operations after receiving a letter from the DoE dated Nov. 14 directing the company to “suspend any and all mining activities under Coal Operating Contract No. 5” until conditions set by the department are met.

The mudflow incident in its Molave Pit on Semirara island occurred on Oct. 2. SMPC’s mining operator went missing after the incident and his remains were found after a three-day search and rescue operation, the DoE said on Oct. 5.

“The DoE orders of suspension will result to opportunity loss in production per day from 40,000-45,000 MT (metric tons). The financial impact, however, shall depend on the prevailing price of coal,” SMPC said.

In a separate e-mail, Philstocks Financial, Inc. senior research analyst Japhet Louis O. Tantiangco said SMPC’s share price fell by 13.18% week on week to P20.75 “due to the regulatory challenges it is facing.”

“Investors were worried of the opportunity losses brought by the suspension. At the same time, Investors feared the possible coal trading suspension brought by the Department of Energy (DoE) amid SMPC’s said transactions with Gold Anchorage, an unaccredited coal trader,” Mr. Tantiangco said.

Also last week, the DoE imposed a one-month suspension on SMPC, after the company was found to be in violation of Department Circular No. DC2012-05-0006 or the Guidelines on the Accreditation of Coal Traders and Registration of Coal End-Users. The company was found to have made coal trading transactions with an unaccredited coal trader.

The DoE also slapped a P1.735-million fine against SMPC for violating Section 3 of the same circular over alleged unabated and continuous coal trading despite suspension of its accreditation.

Last Thursday, SMPC appealed to the Energy department to reconsider the sanctions.

Mr. Tantiangco said that SMPC’s fundamentals are facing struggles with its power generating segment.

“While a suspension is already in place, the company’s coal production and shipment has already exceeded 2018 levels. And this is seen to support SMPC’s financial performance for the rest of 2019. This is unless the DoE’s coal trading suspension becomes final,” Mr. Tantiangco said.

SMPC’s consolidated net income during the nine months fell by 4.8% to P8.25 billion from P8.66 billion posted in the same period last year.

For this week, Mr. See placed the stock’s support level at P20.00. Meanwhile, resistance level is pegged between P24.00 and P25.00.

“The stock would move sideways for now awaiting the resume of their operation. The stock is a buy near P20.00 but make sure to place a mental stop just in case it moves down below its support,” added Mr. See.

Meanwhile, Mr. Tantiangco gave SMPC’s support price at P20.00 and a resistance range from P21.50 to P22.00, adding that if it fails to hold the P20.00 support line, its next support would be P18.00.

“The regulatory challenges are still expected to weigh on SMPC’s share price next week giving it a downward bias with a possible testing of the P20.00 support level. We could see a rally in its price if it is able to show positive developments in the said challenges,” added Mr. Tantiangco. — Lourdes O. Pilar









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