SAINT PAUL SCHOOL OFBUSINESS AND LAW, INC.

FINAL REQUIREMENT
FOR
ADVANCED FINANCIAL
ACCOUNTING 2
PHILEX MINIG CORP. AND SUBSIDIARIES

DIAMARO, JESSA B., MACABENTA, CLAUJO ANNIE M., GARRIDO,

CHRISTIAN PAUL O., GALLARDO, NEUMAN

I.

Introduction
Philex Mining Corporation and its subsidiaries are organized into two main
business groupings: the metals business under Philex Mining Corporation,
and the energy and hydrocarbon business under Philex Petroleum
Corporation.
Philex Mining Corporation (the Parent Company or PMC) was incorporated
on July 19, 1995 in the Philippines and is listed in the Philippine Stock
Exchange on November 23, 1956. Having reached the end of its 50 years
corporate life, the Parent Companys Philippine Stock and Exchange
Commission (SEC) registration was renewed on July23, 2004. The Parent
Company,Philex Gold Philippines, Inc. (PGPI, a wholly-owned subsidiary
through a holding company and incorporated in the Philippines), Lascogon
Mining Corporation (LMC), (a subsidiary of PGPI and incorporated in the
Philippines), and Silangan Mindanao Exploration Co., Inc. (SMECI, a whollyowned subsidiary directly by the Parent company and through a holding
company and PGPI, and incorporated in the Philippines) and its subsidiary,
Silangan Mindanao Mining Co. Inc. (SMMCI, a wholly-owned subsidiary
directly by the Parent Company and through SMECI, and incorporated in
the Philippines) are all primarily engaged in large-scale exploration,
development amd utilization of mineral resources. The Parent Company
operates the Pacdal Mine in Benguet. PGP operated the Bulawan mine in
Negros Occidental until second quarter of 2002. LMC conducts exploration
work on Taganaan, Surigao del Norte. SMMCI own the Silangan Project
covering the Boyogan and Bayugo deposits, which are under prefeasibility study stage as of December 31, 2012.
Philex Petroleum Corporation (PPC, a 64.8% oqwned subsidiary of the
Parent Company and incorporated in the Philippines) and its subsidiaries:
Forum Energy plc (FEP, 60.5% owned and registered in England and
Wales) and its subsidiaries, and FEC Resources, Inc. (FEC, 51.2% owned
and incorporated in Canada) are engaged primarily in oil and gas
operation activities, holding participations in oil and gas production and
exploration activities through their investee companies. Brixton Energy &
Mining Corporation (BEMC), a wholly-owned subsidiary of PPC and
incorporated in the Phillippines commenced operation of its coal mine in
Diplahan, Zamboanga Sibugay in November 2010 but suspended
operation in December 2012, pending results of a detailed review of the
coal mine operations and prospects. (Source: SGV & Co., Ernst & Young)
a. Statement of the problem
i. Are there changes in the ownership interest of the Parent
company in its subsidiaries?

II.

b. Significance of the study

i. This study aims to identify the changes and transactions that
occurred with regards to the ownership interest of the Parent
company in its subsidiaries and to be able to know the current
standing of its ownership as of the last dated consolidated
financial statements-2012 as declared by Philex Mining
Corporation and Subsidiaries.
Methodology
Research
In this company that we chose to create a Critique, we have conducted
first a research on the background of Philex Mining Corp. in order for us to
have a better understanding on what type of company it is, when and how
it started, and how did it grow. Basically, we tend to know first the
company before we proceed with our study on its entirety.
Some
important facts that we have also researched are the financial statements
of the said company. Financial statements are needed in order to support
all the qualitative judgments with quantitative information. Having this
information will provide us better understanding not just about those
related to the business combination but also for us to have a clearer
picture for our conclusions.
Review
A review of the Philex Mining Corp.s Financial Statements was also
conducted to find out if there really is a change in the ownership interest
of Philex Mining Corp. being the parent on its subsidiary. We dont just
limit ourselves to finding out if there really is a change, but also we
reviewed the factors that affect the change.
Compute and Compare
Checking the financial statements of the company for three consecutive
years gives us the opportunity to conduct computations and series of
comparisons. Through the computations and comparisons that weve
conducted, we come up not just with a conclusion but also supporting
information to it.
Summarize and Conclude
After summing up the information gathered and all the computations and
comparisons conducted, we wrapped up everything to arrive at a
conclusion supporting our Statement of the Problem.

III.

Presentation, Analysis of Data

2012
Direct
Indirect

2011
Direct
Indirect

2010
Direct
Indirec

PGHI

100.0
-

PGMC-BV
PGI
PGPI
LMC
SMECI
S
MMCI
PPC
64.8
BEMC
FEP
FEC
LMC
FEP
SMECI
40.0
SMMCI
16.7
FSTI
100.0
PLI
100.0
PIAI
100.0
Additional Information:

100.0
100.0
100.0
98.9
60.0
83.3

100.0
-

100.0
100.0
100.0
60.0
60.
83.3

100.0
-

t
100.0
100.0
100.0
60.0
60.0
83.3

64.8
40.0
16.7
100.0
100.0
100.0

100.0
38.8
51.2
40.0
25.6
-

100.0
40.0
16.7
100.0
100.0
100.0

100.0
38.8
51.2
40.0
25.6
-

100.0
36.4
51.2
1.1
24.1
-

Infusion of additional capital in LMC

o On April 24, 2012, LMC increased its authorized capital stock
from P10, 000 to P260, 000. By virtue of such increase, PMC ,
through its wholly-owned subsidiary PGPI, infused additional
capital of P150, 000 in LMC. Following the capital infusion, the
Parent Company increased its effective ownership in LMC from
73.4% to 99.3%.
o The difference between the equity in shareholders before and
after the infusion of capital amounting to P34, 552 was
recognized as effect of transactions with non-controlling
interests in the equity section of the consolidated statement of
financial position.
Distribution of PPC shares as property dividend
o On May 16, 2011, the Parent Company declared approximately
35.2% of its ownership interest in PPC as property dividend to its
shareholders. As a result of the dividend declaration, the Parent
Companys ownership to PPC was reduced from 100.0% to
64.8%
Acquisition of additional shares of stock in FEC
o On January 2, 2010, the Parent Company acquired additional 5,
000, 000 shares of FEC at a purchase price of United States (US)
$2, 500 (or P116, 063). Following the acquisition, the Parent
Company has ownership of and control over 225, 000, 000

shares of FEC, representing 51.2% of the issued shares of FEC as

at January 7, 2010.
o The difference between the acquisition cost and the book value
of the interest acquired amounting to P56, 200 was recognized
as effect of transactions with the non-controlling interests in
the equity section of the consolidated statement of financial
position.
Acquisition of additional shares of stock in FEP
o On February 24, 2010, PPC acquired additional 786, 259 shares
of FEP at a purchase price of 511 (P36, 910) representing 2.4%
equity interest in FEP, which increased the number of shares
owned and controlled by PPC to 21, 503, 704 shares. The
acquisition increased PPCc holdings to 39.1% of the issued and
outstanding shares of FEP. The difference between the
acquisition cost and the book value of the interest acquired
amounting to P4, 981 was recognized as effect of transactions
with non-controlling interests in the equity section of the
consolidated statement of financial position.
Dilution of interest in FEP
o On May 26, 2010, certain directors and employees exercised
their option over ordinary shares granted under FEPs 2005
Share Option Plan. As a result of the exercise of options,
ownership interest of PPC and FEC in FEP decreased to 38.8 %
and 25.6%, respectively. The difference between the equity in
shareholdings before and after the dilution of ownership was
recognized in 2010 as effect of transactions with noncontrolling interests amounting to P3, 266 in the equity section
of the consolidated statement of financial position as a result of
the dilution of interest in FEP. On May 30, 2012, PPCs and FECs
interest in FEP were further reduced to 36.4% and 24.1%,
respectively, after further option exercises were made over 2,
185, 000 ordinary shares of FEP. Shares aggregating to 700, 000
and 1,000, 000 were subsequently sold to Asia Link B.V (a
wholly-owned subsidiary of FPC) and Tidemark Holdings Limited
(a wholly-owned subsidiary of Atok-Big Wedge Co., Inc.),
respectively. The additional amount of P26, 376 was recognized
as effect of transactions with non-controlling interests in 2012.
Acquisition of NCI of PGI
o On April 27, 2010, PGHIs acquisition of the NCI in PGI consisting
of 7, 726, 310 shares representing the remaining 19.0% equity
interest of PGI at US$0. 75 per common share ( a total of US$5,
795 or P256, 039) was completed.

PPC's Issued Capital Stock As of 2010

Parent's
Ownership
Interest

100%

PPC's Issued Capital Stock As of May 16, 2011 (After Distribution of Property Dividends By Parent)

Parent's Ownership Interest

35%

NCI

65%

BEMC'S Issued Capital Stock As of 2010 (Before the Said Property Dividend Distribution By Parent)
Parent's Ownership Interest

100%

BEMC's Issued Capital Stock As of 2011 & 2012 (After the Property Dividend Distribution By Parent)

35%

NCI
Parent

65%

FEP's Issued Capital Stock (2010)

Other Shareholders of FEP

20%

Parent thru 100% owned

PPC
50%

FEC (13.1% Parent; 12.5%

Other Shareholders of
FEC)

30%

FEP's Issued Capital Stock As of 2011 (After Property Dividend Distribution)

Other Shareholders of FEP
20%

PPC (25.1% Parent; 13.7%

Other Shareholders of
PPC)
50%

30%

FEC (8.5% Parent; 17.1%

Other Shareholders of
FEC)

FEP's Issued Capital Stock As of 2012 (After Dilution of PPC's and FEC's Interest in FEP)

Other Shareholders of FEP

25%
37%

PPC (23.6% Parent; 12.8%

Other Shareholders of PPC)
FEC (8.0% Parent; 16.1%
Other Shareholders of FEC)

38%

LMC's Issued Capital Stock As of 2010

Parent, thru 100%-owned

PGPI
FEC (20.5% Parent; 19.5%
Other Shareholders of
FEC)

40%

60%

LMC's Issued Capital Stock As of 2011 (After Property Dividend Distribution)

Parent, thru 100%-owned

PGPI
FEC (13.3% Parent; 26.7%
Other Shareholders of
LMC)

40%

60%

LMC's Issued Capital Stock (2012)

1%
PGPI
NCI of FEC

99%

Computations: Parents Ownership Interest

2010
Direct
PGHI

Indirect

100%

PGMC-BV

x100.0%

100%

PGI

x100.0%

100%

PGPI

x100.0%

100%

LMC

x60.0%

60.0%

SMECI

x60.0%

60.0%

SMMCI
PPC

x83.3%

100.0%

BEMC

x100.0%

100.0%

FEP

x38.8%

38.8%

FEC

x51.2%

51.2%

LMC

x40.0%

20.5%

FEP

x25.6%

13.1%

50.0%

SMECI

40.0%

SMMCI

16.7%

FSII

100.0%

PLI

100.0%

PIAI

100.0%

2011
Direct
PGHI

Indirect

100%

PGMC-BV

x100.0%

100%

PGI

x100.0%

100%

PGPI

x100.0%

100%

LMC

x60.0%

60.0%

SMECI

x60.0%

60.0%

SMMCI
PPC

x83.3%

64.8%

BEMC

x100.0%

64.8%

FEP

x38.8%

25.1%

FEC

x51.2%

33.2%

LMC

x40.0%

13.3%

FEP

x25.6%

8.5%

SMECI

40.0%

SMMCI

16.7%

FSII

100.0%

PLI

100.0%

50.0%

PIAI

100.0%

2012
Direct
PGHI

Indirect

100%

PGMC-BV

x100.0%

100%

PGI

x100.0%

100%

PGPI

x100.0%

100%

LMC

x 98.9%

98.9%

SMECI

x 60.0%

60.0%

SMMCI
PPC

x 83.3%

64.8%

BEMC

x100.0%

64.8%

FEP

x36.4%

23.6%

FEC

x51.2%

33.2%

LMC

x1.1%

0.4%

FEP

x24.1%

8.0%

SMECI

40.0%

SMMCI

16.7%

FSII

100.0%

PLI

100.0%

PIAI

100.0%

50.0%

IV.

Summary
PARENTS OWNERSHIP INTEREST

Subsidiaries

2012

2011

2010

PGHI

100%

100%

100%

PGMC-BV

100%

100%

100%

PGI

100%

100%

100%

PGPI

100%

100%

100%

LMC

99.3%

73.3%

80.5%

SMECI

100%

100%

100%

SMMCI

66.7%

100%

100%

PPC

64.8%

64.8%

100%

BEMC

64.8%

64.8%

100%

FEP

31.6%

33.6%

51.9%

FEC

33.2%

33.2%

51.2%

FSII

100%

100%

100%

PLI

100%

100%

100%

PIAI

100%

100%

100%

After a careful study, review, computations and comparisons of the Philex

Mining Corp.s consolidated financial statements, we have come up with a summary
(above) of the observed changes in the ownership interest of Philex to its
subsidiaries. Yes, we noticed there are changes and we found out how all these
changes in ownership interest creates an effect to other direct and indirect relations
of the Parent(Philex) to its Subsidaries as presented in our Data Presentation.