October 30, 2010

MR. HONORIO F. DE LEON

Site Manager, Berong Nickel Corp
Berong, Quezon, Palawan

Sir,

With the just concluded warehouse inventory headed by Mr. Ed Banque for the
period September 22 to October 20, 2010; amongst his findings were as follows - 231
unaccounted and 239 unlisted items.

After a week of reconciliation, please find herewith our findings –

• 79 items of the unaccounted were physically located in the same

mechanical Vans 1-3
• 21 items of the unaccounted were physically located. These items were
transferred to the chemical warehouse
• 59 items were covered with MIS. Stocks were not located because during
the currently conducted inventory taking, these line items are presumed to
be with zero quantity since listing used in the inventory was the physical
count made as of June 2009
• 55 items of the unaccounted were in the ‘unlisted’ items due to wrong part
name or number identification (or wrong brand)
• 15 items of the unaccounted we termed as “double entry”. During the
physical count made June 2009, same items were counted separately due
to different locations.
• 1 item of the unaccounted listed per Van 3, item #73 has no particulars

• ATTENTION : JM - 1 item is still questionable (item #47, Van 2)

• ATTENTION : JM - Pls see summary since we do not tally. I have
made a serial numbering in the “Vans” worksheet. Kindly go over
them and let me know if there are/will be any changes.
• ATTENTION : MITCH - Incomplete pictures submitted (shld be
100 in all = 79 + 21. I can only account for 51 items of the pics you
previously e-mailed). Take note of the attached worksheet w/
particulars as ‘accounted’ and ‘relocated’ for Vans 1-3.
• ATTENTION : JUN, BINGO, JM - Some of the physically accounted
items have still “zero balances”.

WE STILL HAVE A LONG WAY TO GO, GUYS. PLEASE MAKE

THIS A PRIORITY. HEHE…. PARANG LIFE & DEATH SITUATION
aa….
 Note: Oct 31, 2010, 1500H, I write;

Bingo and I will reconcile some items that need to have MIS to match
actual balances. Bingo told me that there are still some unused forms to
be used for the items as listed by JM.

The reason for the ‘unlisted’ items found was due to the unfinished inventory
(taking) that was conducted June of 2009. Ms. Claudette Basaya was tasked to head this
undertaking with just one (1) week deadline to do sorting, housekeeping, physical
counting and encoding with her team composed of Mr. Roberto Parangue, Edgar Roque
and Eduardo Sarol, who were all still doing their assigned work load during the period of
inventory.

It is an SOP for every sound company to do a yearly physical count of

warehouse inventory. BNC site likewise has been adhering to this procedure however,
with the absence of a personnel who is permanently designated to do the task of
monitoring receipts and issuances of supplies, it is therefore expected that no accurate
data is available to support the inventory list and that discrepancy is noted.

We support Mr. Ed Banque’s recommendation that a warehouseman be

assigned to take care of this. It is also noteworthy to mention that no computer program
or warehousing software has been acquired in order to have a more reliable and accurate
data and a faster report generation most especially when the company will be back on
operation. We likewise strongly recommend that a software program for warehousing be
seriously considered and installed 3-4 months prior to operation.

During the initial discussion with Mr. Banque, the following targets were
planned to be accomplished that would have been useful to the company. However,
maybe due to the enormous task on inventory and lack of time, they were not addressed –

1. List of items that will not be utilized by the company now or in the future. This
will later on be costed (priced) so that we will have a ballpark estimate of what
we may term as ‘useless’ warehouse stocks. This would have been the best
opportunity to come up with that list and presented to higher management for
proper disposition (jun/vi, did I use the correct term?). Vikki, can we use priced
for costed?

2. Sorting of non-scrap and scraps materials. (Can we use “items for disposal”
instead of SCRAP?)

3. Physical inventory of Assets. Mr. Luis Fernandez commented on the listing of

assets and this was duly noted by Mr. Ed Banque that there were several line
items in the listing that should not be considered assets but just an additional
accessory or part of the main asset.
Jun/Vi/Mithc/JM/Bingo/Melnore,

Please ADD or SUBTRACT if I have forgotten some things.

JUN,

KINDLY DO THE HONORS RE: OUR CLOSING REMARKS. HEHE….

CONCLUSION.

THANKS

The recent inventory of parts has finally been put to a conclusion. With due credit to the
personnel who had labored and diligently searched, sort and put all these items in order
can not be over emphasized. It is therefore proper and fit to say that this order is now in
effect and will be very useful in future undertakings, so to speak, in warehousing.

The findings and recommendations have been laid and is believed to make things easier
and more effective. The final listing of parts is made in an orderly fashion, straight
forward and very systematic.

With great expectations, this will now be the ground zero of the future activities in
materials management system. Good Luck to All!