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MANILA – Integrated Chrome Corp. used to mine chrome ore, producing ferrochrome, an important material in making ferroalloy, which in turn was used in the manufacture of stainless steel.
But in 1996, the company stopped its smelter operations because of a market downturn and increasing production costs.
With the entry of the Araneta group later that year, the company changed its corporate name to Araneta Properties Inc. and its primary purpose to land and property development, while maintaining its smelter operations as a secondary purpose.
Integrated Chrome was one of many listed companies engaged in mining and oil exploration that shifted their primary purpose to that of a property developer or holding firm in the years leading to the 1997 Asian financial crisis.
This mad dash to go into real estate was at the root of the crisis that brought the Philippines along with other Asian economies to their knees, said Jose Vistan of AB Capital and Securities Inc.
"During the 1990s, there was a property boom that's why everybody wanted to go to property development. That particular property boom eventually turned into a bubble in Asia," said Vistan.
Astro del Castillo of First Grade Finance Inc. said these mining companies were used as backdoor listing vehicles in the 1990s, as firms awash with cash took advantage of the industry's rout and bought the miners at a discount.
"During the Asian financial crisis, there was still an issue of viability of certain mining companies to explore and deliver. Some opted to sell their shares and take interested investors to use it as a vehicle for backdoor listing while maintaining an option to be in mining," said del Castillo.
Fifteen years later, some of these mining-turned-property developers have successfully ventured into new businesses. Such was the case of Anglo Philippine Holdings Corp, which has core investments in Atlas Consolidated Mining & Development Corp., United Paragon Mining Corp., Shang Properties Inc., MRT Development Corp., MRT Holdings Inc., among others.
Others are still thriving in the property sector like ATN Holdings Inc., which derives income from its subsidiaries’ sale and rent of real estate assets.
Some never recovered, still reeling from the effects of the crisis, such as Asia Amalgamated Holdings Corp. The crisis put its main affiliate and major source of business, the Uniwide Group, in serious financial straits and from then onwards, Asia Amalgamated ceased operations of its subsidiaries one by one. By 2002, none of its subsidiaries had resumed operations.
“As an investor, if my businesses are hit, I may diversify to higher-yielding investments since the property sector back then was booming. Most businesses will tend to shift to more lucrative returns but there will be more risks because some businesses do not have the expertise to venture into that business,” said Freya Natividad, investment analyst at 2TradeAsia.com.
Some of these miner-turned-developers have also reverted to their original purpose of mineral and oil exploration - Atok Big Wedge Inc. and Marcventures Holdings - in a move to capitalize on rising metal prices.
“Back then, everybody wanted to get to real estate development and the simultaneous entry to property created the crisis. It's like mining right now. That's booming,” said Vistan.
While the slowdown in major economies may have dampened the outlook for commodities, analysts say it's not yet too late to jump on the mining bandwagon.
"Nowadays, mining is a frontline business because there is money in mining at current prices. This uncertainty in the Middle East, Europe and the United States continues to somehow make gold a shelter for investors," del Castillo said.
"It's a case of companies trying to look at areas where opportunities are. My view is given the current global financial crisis that's leading to quantitative easing, it will only bode well for commodities," Vistan said.
With the seemingly unending European crisis and the slowdown in the United States, analysts say local companies are "more mature and prudent" now, having learned their lessons from the Asian financial crisis.
"We learned our lessons. Laws have been passed to regulate companies and companies have their own way of regulating themselves,” said del Castillo.
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