Vulcan Industrial & Mining CorporationVUL

Update on the Memorandum of Agreement (MOA) between East Coast Vulcan Corporation (formerly Vulcan Industrial & Mining Corporation (the “Company” or ECVC) and the majority stockholders of East Coast Mineral Resources Company Incorporated (ECMRC) represented by Hilario G. Pagauitan and Sofia G. Pagauitan (the HGP Group) for the latter’s subscription to 5,180,000,000 shares of VIMC arising from an increase in authorized capital stock.

On May 29, 2023, the Securities and Exchange Commission (“SEC”) approved the increase in authorized capital stock of ECVC from Php 4,000,000,000.00 divided into 4,000,000,000 common shares with par value of Php1.00 each share, to Php 12,000,000,000.00 divided into 12,000,000,000 common shares with a par value of Php1.00 per share, and the corresponding amendment to the Seventh Article of the Company’s Amended Articles of Incorporation. The SEC also approved the subscriptions out of the increase in authorized capital stock of a total of 5,180,000,000 new common shares with an aggregate par value of Php5,180,000,000.00. The 5,180,000,000 new common shares have been subscribed and fully paid through shares swap or assignment of the total of 925,000,000 shares of East Coast Mineral Resources Company, Incorporated (“ECMRCI”)

On the same date, the SEC also approved the change in name to East Coast Vulcan Corporation, the increase in number of directors from 11 to 13, and the change in address to 4th Floor, Pacific Star Building, Low Rise Tower, Makati Avenue corner Senator Gil Puyat Avenue, Makati City

On July 1, 2021, ECVC entered into a MOA with the majority stockholders of ECMRC represented by the HGP Group for the latter’s subscription to 5,180,000,000 shares of ECVC arising from an increase in authorized capital stock. The total subscription consideration of Php5,180,000,000.00 shall be paid in full and in the form of cash and/or assets, and/or shares in ECMRC, subject to a third-party valuation/fairness opinion compliant with regulatory requirements.

On the same date, the Board of Directors of the Company convened in a special Board of Directors meeting and unanimously approved, among others, the following:

1. Consent to the assignment of the subscription rights of National Book Store, Inc. (NBS) over 486,055,662 partially paid shares of the Company, and to the assumption by the HGP Group of NBS’ obligations for the unpaid subscription price on such shares; and

2. Subscription by the HGP Group to up to Five Billion One Hundred Eighty Million (5,180,000,000) shares out of VIMC’s unsubscribed authorized capital stock and/or out of an increase thereof and more than a majority of VIMC’s outstanding capital stock, through cash and/or by way of transfer of the HGP Group’s ownership in ECMRC, inclusive of its MPSAs, assets and operations, subject to the conditions of the respective operating agreements, into the Company, subject to a third-party fairness opinion/valuation compliant with regulatory requirements;

Amendments approved by SEC:
1. Increase in authorized capital stock of ECVC from Php 4,000,000,000.00 divided into 4,000,000,000 common shares with par value of Php1.00 each share, to Php 12,000,000,000.00 divided into 12,000,000,000 common shares with a par value of Php1.00 per share
2. Change in name to East Coast Vulcan Corporation
3. Increase in number of directors from 11 to 13
4. Change in address to 4th Floor, Pacific Star Building, Low Rise Tower, Makati Avenue corner Senator Gil Puyat Avenue, Makati City

The transaction involves the assignment of 486,055,662 outstanding partially paid shares of VIMC to HGP Group; and subsequently, the subscription to 5,180,000,000 new shares of VIMC arising from an increase in authorized capital by HGP Group in exchange for cash, assets and/or shares in ECMRC.

Please be informed that on May 29, 2023, the Securities and Exchange Commission
approved the following applications of the Company:
1. Increase in authorized capital stock from Four Billion Pesos (Php 4,000,000,000.00)
divided into Four Billion (4,000,000,000) common shares with a par value of One
Peso (Php 1.00) per share, to Twelve Billion Pesos (Php 12,000,000,000.00) divided
into Twelve Billion (12,000,000,000) shares with a par value of One Peso (Php 1.00)
per share and the issuance of Five Billion One Hundred Eighty Million
(5,180,000,000) common shares out of such increase.

The Five Billion One Hundred Eighty Million (5,180,000,000) common shares were
issued in exchange for 100% ownership of East Coast Mineral Resources Company,
Incorporated (“East Coast”), a corporation engaged in mining operations.
East Coast holds three Mineral Production Sharing Agreements (“MPSA”) containing
nickel ore deposits, two of which are in full operations, namely:
a. MPSA-233-2007-XIII (SMR) covers an area of 4,226.27 hectares located
in Libjo, Dinagat Islands.
b. MPSA-078-97-XIII (SMR) covers an area of 697.05 hectares located in
Barangay Valencia, Cagdianao, Dinagat Islands.
For the above MPSA properties, East Coast currently earns royalties and marketing
fees from the Operating Agreements with its existing contractors. For the years
ending December 31, 2021 and 2022, the total revenues of East Coast are PHP 736.5
million and PHP 612.4 million, respectively. The Comprehensive Net Income of East
Coast for the said years were PHP 503.6 million and PHP 363.7 million, respectively.
East Coast also holds MPSA-232-2007-XIII (SMR) that covers an area of 248 hectares
in Hibuson Island, Municipality of Loreto, Dinagat Islands

2. Amendments to the Amended Articles of Incorporation, as follows:

Amendments approved by SEC:
1. Increase in authorized capital stock of ECVC from Php 4,000,000,000.00 divided into 4,000,000,000 common shares with par value of Php1.00 each share, to Php 12,000,000,000.00 divided into 12,000,000,000 common shares with a par value of Php1.00 per share
2. Change in name to East Coast Vulcan Corporation
3. Increase in number of directors from 11 to 13
4. Change in address to 4th Floor, Pacific Star Building, Low Rise Tower, Makati Avenue corner Senator Gil Puyat Avenue, Makati City

At present, the Company has no ongoing commercial operations. However, it has always been studying and exploring strategies to generate the most value to its shareholders. Recent changes in the mining climate have prompted VIMC to reconsider its previous decision to exit the mining industry. On a global scale, metal commodity prices have surged, and its outlook continues to be positive. Locally, the moratorium on mining/mineral agreements has been lifted, opening the possibility for new mining projects.

The contemplated transaction will result in VIMC owning a consistently profitable going concern and cashflow-generating mining business, which will allow VIMC to immediately recognize income. Beyond recurring and sustainable income, the envisioned business combination will also provide VIMC the capability to embark on further value-enhancing and growth-oriented expansion initiatives.

The aggregate value of the consideration is Php5,666,055,662.00 representing 5,666,055,662 common shares of the Company at Php1.00 per share broken down as follows:

486,055,662 Partially Paid shares at Php1.00 per share for a gross consideration of Php486,055,662.00
1. Php28,552,782.00 payable to NBSI for the assignment of the 486,055,662 partially paid shares on or before July 1, 2021

2. Php457,502,880.00 consisting of cash, assets and/or ECMRC shares for the payment of the subscription payables of the 486,055,662 partially paid shares shall be paid subsequent to the approval by the Securities and Exchange Commission of the Company’s increase in authorized capital stock.


5,180,000,000 new shares coming from an increase in authorized capital at Php1.00 per share for a gross consideration of Php5,180,000,000.00
1. Php5,180,000,000.00 consisting of cash and/or assets and/or shares of ECMRC for the full payment of the subscription to be paid on or before the end of September 2021.

The assets to be used as payment shall be subject to an acceptable valuation that will be beneficial to the shareholders of the Company and supported by a third-party valuation/fairness opinion. Essentially, these assets are composed of the shares of ECMRC held by the HGP Group. ECMRC's assets are mainly the Mineral Production Sharing Agreement (MPSA) properties. Attached to these MPSAs are the future revenue and income from the royalties and commissions from the operators, and the future plans of ECMRC's own mining operations within the MPSA properties.

ECMRC's three existing nickel MPSAs, all in Dinagat Islands with the following details:

MPSA No. Area Operator/s Status
(hectares)
078-97-XIII 697 Cagdianao Mining Corp. Commercial Operations
232-2007-XIII 249 Oriental Vision Mining Philippines Inc. Exploration
233-2007-XIII 4,226 Libjo Mining Corp. Commercial Operations

Based on the Company’s audited December 31, 2020 financial report, the Company’s book value is NEGATIVE Php1,289,630.00. Given the Company’s 1,450,000,000 outstanding shares, this corresponds to a book value per share of NEGATIVE Php0.0009 per share. Given this negative equity situation and the present status of no ongoing commercial operations, the transaction price of Php1.00 per share, which is equivalent to the Company’s par value, is at a premium to the current book value per share.

1. Current business and operations of VIMC
At present, the Company has no active businesses and operations.

2. Change/s in its business model, operations or change in business strategy
Previously, in light of the unfavorable mining environment, both globally and locally, the Company decided to exit the mining industry and explore other opportunities towards the objective of creating value for the Company’s shareholders. However, with the recent drastic improvement in the mining industry, the Company decided to reconsider its previous decision and resolved to focus on business opportunities in mining.

The Company recognized that acquiring an existing and going-concern mining company is one of the best and the quickest modes to be able to capitalize on and immediately partake in the mining industry’s current upbeat environment and outlook. This business strategy was determined to be preferable compared to starting a mining project which will take years before revenues and income can be generated. Furthermore, the risks associated with a greenfield mining project is far greater compared to the acquisition of a mining company with a proven track record of profitability.

3. Reason/purpose of the transaction including the benefits, business and financial impact and material implications of the transaction on VIMC
The contemplated transaction will result in the Company owning a consistently profitable going concern and cashflow-generating mining business, which will allow the Company to immediately recognize income. Beyond recurring and sustainable income, the envisioned business combination, through the cash flows generated by ECMRC, will also provide the Company the capability to embark on further value-enhancing and growth-oriented expansion initiatives.

4. VIMC’s short, medium, and long-term business plans and prospects, risks, and opportunities
In the short and medium term, the Company, through its prospective subsidiary ECMRC, will realize revenues and income from the royalties and commissions from its operators of its MPSA properties. Anchored on this, the Company’s long term plan is to conduct its own mining operations within its own mines to further grow income, and acquire more mining assets to expand income sources. Likewise, the Company will actively evaluate downstream business opportunities by identifying nickel ore processing technologies and partnerships with possible regional and global players.

5. Business pursuits, and the detailed steps undertaken and proposed to be undertaken by VIMC
The Company’s immediate business pursuit towards the above-mentioned plans is to complete the acquisition of ECMRC inclusive of its MPSA, assets and existing business operations.

1. Current business and operations of VIMC
At present, the Company has no active businesses and operations.

2. Change/s in its business model, operations or change in business strategy
Previously, in light of the unfavorable mining environment, both globally and locally, the Company decided to exit the mining industry and explore other opportunities towards the objective of creating value for the Company’s shareholders. However, with the recent drastic improvement in the mining industry, the Company decided to reconsider its previous decision and resolved to focus on business opportunities in mining.

The Company recognized that acquiring an existing and going-concern mining company is one of the best and the quickest modes to be able to capitalize on and immediately partake in the mining industry’s current upbeat environment and outlook. This business strategy was determined to be preferable compared to starting a mining project which will take years before revenues and income can be generated. Furthermore, the risks associated with a greenfield mining project is far greater compared to the acquisition of a mining company with a proven track record of profitability.

3. Reason/purpose of the transaction including the benefits, business and financial impact and material implications of the transaction on VIMC
The contemplated transaction will result in the Company owning a consistently profitable going concern and cashflow-generating mining business, which will allow the Company to immediately recognize income. Beyond recurring and sustainable income, the envisioned business combination, through the cash flows generated by ECMRC, will also provide the Company the capability to embark on further value-enhancing and growth-oriented expansion initiatives.

4. VIMC’s short, medium, and long-term business plans and prospects, risks, and opportunities
In the short and medium term, the Company, through its prospective subsidiary ECMRC, will realize revenues and income from the royalties and commissions from its operators of its MPSA properties. Anchored on this, the Company’s long term plan is to conduct its own mining operations within its own mines to further grow income, and acquire more mining assets to expand income sources. Likewise, the Company will actively evaluate downstream business opportunities by identifying nickel ore processing technologies and partnerships with possible regional and global players.

5. Business pursuits, and the detailed steps undertaken and proposed to be undertaken by VIMC
The Company’s immediate business pursuit towards the above-mentioned plans is to complete the acquisition of ECMRC inclusive of its MPSA, assets and existing business operations.

ECMRC, incorporated in 1995, is a company primarily engaged in the business of operating gold and nickel mines. Its Chairman and principal owner, Hon. Hilario G. Pagauitan, a geologist by profession with extensive experience in the mining industry, has worked to secure Mineral Production Sharing Agreements with the government, undertook drilling, exploration and mine development, and other necessary preparatory activities that led to long-term partnerships with current operators of ECMRC’s MPSA.

On November 19, 1997, ECMRC signed an MPSA covering 697 hectares in the Municipality of Valencia, Cagdianao in the Province of Dinagat Islands, which is currently being operated by Cagdianao Mining Corporation. Thereafter, on June 8, 2007, ECMRC secured two other MPSAs covering a combined area of 4,475 hectares and spanning the Municipalities of Loreto, Osmena & Plaridel and Libjo, all in the province of Dinagat Islands. These MPSAs are currently being operated by Libjo Mining Corporation, Westernshore Nickel Corporation, Alnor Nac’s Construction and Development Corporation and Oriental Vision Mining Philippines Corporation.

Presently, ECMRC receives royalties and commissions from the operators of its MPSA properties

The HGP Group is the intended acquiror of the controlling interest in the Company and is comprised of Hon. Hilario G. Pagauitan, Sofia G. Pagauitan, Ma. Hilarnie Mercurie P. Parada, Isaac Hilario G. Pagauitan II, and Michael Abraham G. Pagauitan. The majority shareholder of ECMRC, Hon. Hilario G. Pagauitan, is a geologist by profession and has worked extensively in the mining industry. Presently, he also serves as the Municipal Mayor of Santa Maria, Isabela. Collectively, the HGP Group’s businesses are focused on mining.

Apart from ECMRC, the HGP Group is affiliated with the following other mining companies:
1. Libjo Mining Corporation (“LMC”) is an operating nickel mining company and an MGB-recognized operator of MPSA No.233-2007-XIII (SMR) under ECMRC. The HGP Group at present is a minority shareholder in LMC and holds key positions as follows:

Hilario G. Pagauitan – Managing Director
Michael Abraham G. Pagauitan -CFO
Isaac Hilario G. Pagauitan II - Special Asst. to VP-Operations

2. Norweah Metals & Minerals Company, Inc. (“Norweah”) is a nickel mining company with three MPSAs covering a combined area of 3,765 hectares, all in the province of Dinagat Islands:

MPSA No. 240-2007-XIII(SMR) – Area:1,225.1904
MPSA No. 241-2007-XIII(SMR) – Area No. 226.0236
MPSA No. 242-2007-XIII(SMR) – Area: 2,314.2018

HGP Group is the majority shareholder group of Norweah, owning 99.96%. The following positions are held by the HGP Group in Norweah:

Hilario G. Pagauitan –CEO/President
Sofia G. Pagauitan-Treasurer
Ma. Hilarnie Mercurie Parada-COO
Isaac Hilario G. Pagauitan II – Director
Michael Abraham G. Pagauitan – Vice President

The HGP Group has no other material relationship with VIMC, its directors, officers and/or stockholders apart from the disclosed acquisition by HGP Group of the 486,055,662 partially paid VUL shares owned by NBS.

As regards the interest which the parties' directors have in the transaction, the directors of VIMC have no personal interest in the transaction. Other than the acquisition of shares of the Company, the directors of ECMRC have no other personal interest in the transaction.

The Company’s shareholders can vote in favor of, against, or abstain on the transaction and the increase in authorized capital stock during the Annual Stockholders’ Meeting on September 7, 2021.

The fold-in of assets shall be subject to an acceptable valuation supported by a third-party fairness opinion that is compliant with regulatory requirements.

The Company has obtained the necessary consent from the relevant individuals for the submission to the PSE and for the posting to the EDGE Portal of the personal information and sensitive personal information contained in the following attachments:
1) ECMRC General Information Statement for 2020
2) ECMRC Audited Financial Statements for 2018-2020
3) ECMRC Articles of Incorporation and By-laws
4) Deed of Assignment of Subscription Rights between NBS and HGP Group
5) Memorandum of Agreement between VIMC and HGP Group

Pursuant to PSE's directive on July 14, 2021, this Disclosure was amended to to further include information on the background of the HGP Group including, but not limited to, the following:

1. The identity/ies of the persons who intend to acquire a controlling interest in the Company, business affiliation/s, brief background on the business/es, and position/s held; and

2. . The nature and extent of material relationship with VUL, its directors, officers and/or stockholders of all parties to the transaction.

Further to the Memorandum of Agreement dated July 21, 2021 (initially reported as the “Subject of the Disclosure” above), and by way of update to the Comprehensive Corporate Disclosure, the Company wishes to report that the Securities and Exchange Commission approved the following on May 29, 2023:

1. Increase in authorized capital stock to Twelve Billion Pesos (Php 12,000,000,000.00) divided into Twelve Billion (12,000,000,000) shares with a par value of One Peso (Php 1.00) per share and the issuance of Five Billion One Hundred Eighty Million (5,180,000,000) common shares out of such increase. The Five Billion One Hundred Eighty Million (5,180,000,000) common shares were issued in exchange for 100% ownership of East Coast Mineral Resources Company, Incorporated (“East Coast”), a corporation engaged in mining operations.

East Coast holds three Mineral Production Sharing Agreements (“MPSA”) containing nickel ore deposits, two of which are in full operations, namely:
MPSA-233-2007-XIII (SMR) covers an area of 4,226.27 hectares located in Libjo, Dinagat Islands.
MPSA-078-97-XIII (SMR) covers an area of 697.05 hectares located in Barangay Valencia, Cagdianao, Dinagat Islands.

For the above MPSA properties, East Coast currently earns royalties and marketing fees from the Operating Agreements with its existing contractors. For the years ending December 31, 2021 and 2022, the total revenues of East Coast are PHP 736.5 million and PHP 612.4 million, respectively. The Comprehensive Net Income for the said years were PHP 503.6 million and PHP 363.7 million respectively.

East Coast also holds MPSA-232-2007-XIII (SMR) that covers an area of 248 hectares in Hibuson Island, Municipality of Loreto, Dinagat Islands.

2. Amendment of the Amended Articles of Incorporation, as follows:
FIRST Article – Change in name to to “EAST COAST VULCAN CORPORATION”
THIRD Article – Change in place of principal office to Quad Alpha Centrum, 125 Pioneer Street, Mandaluyong City, Philippines and now at the 4th Floor, Pacific Star Building, Low Rise Tower, Makati Avenue corner Senator Gil Puyat Avenue, Makati City, Philippines, 1209..
SIXTH Article – Change in the number of directors from eleven (11) to thirteen (13)