Tuesday, October 15, 2019

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Companies 218

Written by September 17 2019 0

EPM general manager Jorge Londoño de la Cuesta revealed in a September 17 press conference here in Medellin that insurer Mapfre just issued a letter of coverage worth trillions of Colombian pesos for damages at the under-construction, US$5 billion Hidroituango hydroelectric plant in Antioquia.

The exact amount of payment won’t be known for months, as a technical panel must now prepare a detailed, itemized report on the exact value of each area of the dam works and machinery damaged by a diversion tunnel collapse last year, Londoño explained.

While EPM has insurance coverages totaling about COP$8 trillion (about US$2.5 billion) for physical damages as well as US$628 million for lost power sales, EPM likely won’t be getting the maximum amount, as the damages (as roughly estimated to-date) probably will come-in at below that total, he estimated.

EPM expects that the first sales of power from Hidroituango will be in December 2021, rather than the initially planned start-up in December 2018 -- a date that was forcibly postponed by the April 2018 tunnel collapse.

So, until the company has an exact startup date -- and an exact market quote for Colombian power prices matching that start-up date -- it can’t yet quantify the value of the insurance coverages for lost and delayed Hidroituango power sales. But the payment likely will be less than the US$628 million policy-coverage maximum for lost power sales, he estimated.

“The positive response of the insurer to the efforts made by EPM to obtain the coverage for the incident was based on the investigations and findings advanced by the insurer autonomously, which concluded that the cause of the contingency is framed in the terms and conditions of the policy and therefore we will have coverage,” Londoño said.

“In this sense, once the value of the incident has been quantified, and taking into account the conditions and limits established in the insurance policy, the [insurance payment] resources will be reimbursed to EPM and will enter into the financial statements of the project.

“It is important to highlight that the insurer appointed a series of national and international experts including engineers, geologists and geo-technicians specialized in dams and underground works, as well as lawyers, among others, to review the technical information of the main fronts of project work including tunnels, caverns, dam and landfill. Likewise, they reviewed the designs, plans, technical specifications, construction processes, work logbooks, risk matrix and pre- and post-contingency studies.

“The work of this group of experts also included 12 visits to the project, multiple meetings and in-depth interviews with the EPM technical team, the main contractors and the board of experts,” he added.

The letter from Mapfre confirming insurance coverage for Hidroituango is a huge step forward, because “if we’d done something wrong, then they wouldn’t agree to pay us” for damages, he explained.

“The causes of the [tunnel collapse] are covered by this policy. This was an unpredictable accident, not negligence,” Londoño added.

“Now we’re entering the second phase, where the experts will adjust the amount of payment and determine when they pay. This involves a detailed inventory of all the damages and the value of each,” up to a maximum US$2.5 billion in insurance coverage for physical damages.

Medellin Mayor Federico Gutierrez added at the press conference that the insurance coverage announcement not only is good news for EPM but also for the city of Medellin, which gets about 25% of its annual revenue from the city-owned utility.

Chile Asset Sales

On a related financial front, EPM announced September 17 that it inked a US$138 million sale of its Chile wind-power unit to AES Gener SA and its Norgener Renovables SpA subsidiary, following a plan announced last year to sell “non-strategic” assets -- aiming to boost liquidity as a result of the Hidroituango project delay.

Combined with EPM’s continuing sale of its 10% stake in shares of Colombian power transmission giant ISA, its sale of Chile assets, its successful US$1.3 billion bond sale this year, and now the upcoming multi-trillion-peso Hidroituango insurance payment, EPM’s financial outlook has improved dramatically when compared to market worries in the aftermath of the Hidroituango tunnel collapse last year, Londoño added.

 

Written by August 24 2019 0

Medellin-based multinational paper products and personal-hygiene specialist Grupo Familia revealed in an August 20 filing with Colombia’s Superfinanciera corporate oversight agency that its first half (1H) 2019 net income rose to COP$126 billion (US$37 million), up from COP$98 billion (US$28 million) in 1H 2018.

Gross revenues also rose, to COP$1.28 trillion (US$374 million), from COP$1.14 trillion (US$333 million) in 1H 2018. Operating earnings likewise rose to COP$190 billion (US$55 million) versus COP$153 billion (US$45 million) in 1H 2018.

As for second quarter (2Q) 2019, gross revenues rose to COP$667 billion (US$195 million) versus COP$578 billion (US$169 million) in 2Q 2018, while operating earnings rose to COP$88 billion (US$25.7 million) versus COP$73 billion (US$21 million) in 2Q 2018.

Net income climbed to COP$56 billion (US$16 million) in 2Q 2019 versus COP$44 billion (US$13 million) in 2Q 2018, the filing shows.

Commenting on the results, Familia general manager Andrés Gómez Salazar cited “solid growth” in 2019 sales based in part on the launch of new products including a novel four-ply “Expert” toilet paper, “AcochaMax” kitchen towels, “Premium Touch” baby diapers and “Buenas Noches” feminine-hygiene napkins.

Grupo Familia markets its products in 20 Latin American/Caribbean countries and has its principal factories in Medellin and Rionegro, Antioquia; two other plants in Colombia; two more plants in Ecuador and single factories in Argentina and the Domincan Republic.

Written by August 16 2019 0

Medellin-based socially responsible gold miner Mineros SA announced that its second quarter (2Q) 2019 net income fell 41% year-on-year, to COP$11 billion (US$3.2 million).

“The decrease in net income is mainly explained by an increase in financial expenses -- close to COP$6.6 billion (US$1.9 million), derived from the acquisition of Gualcamayo [mining in Argentina], as well as [currency] exchange [costs] on the order of COP$3.7 billion [US$1.07 million) and higher exploration expenses” for proposed mining projects in Argentina and Chile, according to Mineros.

On the other hand, earnings before interest, taxes, depreciation and amortization (EBITDA) rose 47% year-on-year, to COP$94 billion (US$27 million). EBITDA margin for the latest quarter rose slightly, to 31.5%, compared to 31.1% in 2Q 2018, according to Mineros.

Revenues also rose 45% year-on-year, to COP$298 billion (US$$86.7 million), “explained by a 30% increase in production due mainly to the new ounces from our [recently acquired] operations in Argentina, at an 11.8% higher sale price of gold” as measured in Colombian pesos, according to the company.

Operating costs also rose 55% year-on-year, hitting COP$235 billion (US$68 million), “due to the operating costs (about COP$75 billion/US$22 million) in Argentina that did not exist in the prior year, as well as greater purchases of mining material in Nicaragua [at COP$9.3 billion/US$2.7 million],” according to Mineros.

Gross profit for 2Q 2019 grew 17%, reaching COP$63 billion (US$18 million), with a margin of 21.2%, versus COP$54 billion (US$15.7 million) with a margin of 26.3% in 2Q 2018.

Gold production rose 30% year-on-year, of which Colombia accounted for 15,172 ounces, while Nicaragua contributed 31,610 ounces and Argentina contributed 23,935 ounces.

Full-year 2019 gold production is now estimated in the range of 280,000 to 300,000 ounces of gold equivalent, with “expectations that gold prices continue with high volatility and with an upward tendency,” according to the company.

Colombia Permit Update

Regulatory permitting delays had been holding-up expansion of Mineros' environmentally responsible alluvial mining in Antioquia, although “we have made some progress,” according to Mineros.

The company recently won permit approval from the Forest Directorate of the Ministry of Environment, following an environmental study on possible impacts on epiphytic species. The company also eventually convinced Corantioquia to lift a prior ban on riverbank mining.

On another front, Mineros recently completed a required impact study for Colombia’s national environmental licensing agency (ANLA) for some proposed logging near a mining site. Then, in an August 16 filing with Colombia's Superfinanciera corporate oversight agency, Mineros announced that it has finally won crucial ANLA approvals. 

"Mineros S.A. informs the market that via 'Resolución No. 01612' of August 15, 2019, ANLA resolved our request to modify the environmental management plan for our alluvial operation, unifying some of the resource-use permits," according to the company announcement. 

"Through this modification it is [now] possible to continue our alluvial operation, which had been restricted because of delays in obtaining permits," the company added. 

Written by August 16 2019 0

Medellin-based multinational Grupo Orbis – which includes paint manufacturing giant Pintuco – on August 15 reported COP$6 billion (US$1.7 million) net income for second quarter (2Q) 2019, a big reversal from a COP$17 billion (US$4.9 million) net loss in 2Q 2018.

Earnings before interest, taxes, depreciation and amortization (EBITDA) skyrocketed by 490% year-on-year, to COP$43.6 billion (US$12.6 million), according to the company.

“This good result was due to the dynamics of its businesses in Colombia and its subsidiaries abroad,” according to Orbis.

“In the paints business, [profits growth were from] significant growth of Pintuco stores and high performance coatings in Colombia, the recovery of profitability in Central America, and the optimization of raw material costs and operational expenses,” according to the company.

“In the [Andercol] chemical business, the good results of Brazil and the profitability of the companies in Colombia [can be credited to] finishing the process of stabilization of the new production plants.

“In O-tek [water-treatment technologies subsidiary], results are tied to the good performance of our subsidiary in Argentina and in the [favorable] positioning of the cleaning business, with 7.3% growth in its brands,” according to Orbis.

For first half (1H) 2019, corporate-wide revenues grew 4.11% year-on-year, to COP$680 billion (US$197.6 million), while gross profit rose 12%.

“These results are due to various dynamics within our businesses, among which the following stand out: a 10% increase in sales of the paints business, where the decorative painting and high performance coatings businesses stand out; the completion of the transfer of Colombian plants for chemical business to Cartagena; and better results of the group’s subsidiaries abroad, especially in Brazil, Central America and Argentina,” according to the company.

Written by August 15 2019 0

Toronto, Canada-based Gran Colombia Gold (GCC) – operator of Colombia’s largest underground gold-mine in Antioquia – on August 14 reported second quarter (2Q) 2019 adjusted net income of US$14 million, up from US$8.2 million in 2Q 2018.

Meanwhile, for the first half (1H) 2019, adjusted net income rose to US$27 million, up from US$18.1 million in 1H 2018.

“Improved earnings in the second quarter and first half of 2019 compared with the corresponding periods last year continued to reflect the significant contribution of Segovia [Antioquia] operating performance in 2019 on revenues, total cash costs per ounce, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and income from operations,” according to GCC.

“With the recent run up in gold prices, well above the average for the first half of this year, our second half earnings, cash flows and cash balance are poised to benefit from our leverage to gold prices,” added GCC CEO Lombardo Paredes.

“We’ve continued to improve our liquidity in the second quarter, bolstering our mid-year cash position to US$51.3 million, including the net proceeds of the convertible debentures financing completed in April.

“The recently announced high-grade results from our drilling program at Segovia in the first half of 2019, and the work we are doing to identify and prioritize step out and brownfield drilling targets, increase our confidence in the potential to add mineral reserves and extend mine life at our flagship operation.”

GCC raised its annual gold production guidance for 2019 to a range of between 225,000 and 240,000 ounces. Total gold production of 57,882 ounces in the second quarter of 2019, up 9% over the second quarter last year brought the total for the first half of 2019 to 118,483 ounces, up 12% over the first half last year.

“With another 18,166 ounces produced in July, the company’s trailing 12-months’ gold production at the end of July 2019 now stands at 229,776 ounces, up 5% over 2018’s annual production,” according to GCC.

“Despite a 1% year-over-year decline in spot gold prices to an average of $1,307 per ounce in the first half of 2019, the company reported a $6 per ounce improvement in realized gold prices to an average of $1,296 per ounce in the first half this year.

“This was the result of lower charges in a new refining contract that the company entered into in January 2019 with an international refinery, saving approximately $20 per ounce sold compared with its previous arrangement.

“With the ‘London P.M. Fix’ gold price ranging from a low of $1,390 per ounce to a high of $1,506 per ounce thus far in the third quarter, the company expects to see a significant increase in revenue and operating cash flow in the second half of 2019 compared with the first half of 2019 if spot gold prices remain at the current level.”

Total cash costs per ounce came-in at $655 per ounce in 2Q 2019, down from $696 per ounce in the 2Q 2018, bringing the average for the first half of 2019 to $638 per ounce, down from $683 per ounce in the first half last year.

Adjusted EBITDA rose 25% year-on-year to US$33.2 million, bringing the total for the first half of 2019 to $68.5 million, up 27% over the first half last year.

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Medellin Herald is a locally produced, English-language news and advisory service uniquely focused upon a more-mature audience of visitors, investors, conference and trade-show attendees, property buyers, expats, retirees, volunteers and nature lovers.

U.S. native Roberto Peckham, who founded Medellin Herald in 2015, has been residing in metro Medellin since 2005 and has traveled regularly and extensively throughout Colombia since 1981.

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