Opinion: Can the value of the Philippines’ mineral resources be fully realised?

By Isidro C. Valencia*, based in the Philippines

However, the Philippines remain a strategic source of gold, silver, manganese, chrome, iron, nickel, copper and cobalt ores. The freight cost advantage ranges from USD7.00 to P15.00/mt as compared to other Asian and Latin American countries, if delivery is to China or India.
Mitchell Hooke, CEO of the Minerals Council of Australia (MCA) was quoted by the Philippine Daily Inquirer as saying that the region has estimated reserves of mineral deposits valued at around US$850 to USD$900 billion. Australian-based stock brokering financial outfit Macquarie affirmed the figure of USD840 billion.
Filipinos boast about the country’s valuable ores which, if extracted, some claim could pay the Philippine foreign debt of US$40 billion, and perhaps help the Americans to solve their present economic woes.
But the big question remains, is the Philippines ready to extract these resources considering factors such as the intervention from religious sectors and environmentalists; corruption and Government bureaucracy; lack of technical know how; absence of clear cut-policy or vague implementation of regulations; and, importantly, lack of investment capital?

Environmental issues and religious groups
The mining industry has been under attack from various sectors in the Philippines, most notably from the dominant religious group represented through its highly politicised organisation of bishops known as the Catholic Bishop Conference of the Philippines (CBCP).
The CBCP is openly campaigning against the “negative effects of mining on the environment”. It has issued a pastoral letter condemning the “uncontrollable plunder of the country’s resources” in which “no material gain can equate with the value of life.”
However, a bishop in Nueva Vizcaya in the North, while opposing the operation of Didipio Mine owned by OceanaGold, was less strident and admitted that it is still the Government’s will which will prevail.
There have been allegations by the local people in Nueva Vizcaya, where the project is located, that one of the reasons for OceanaGold putting the mine into care and maintenance, in December, was due to disagreement on “certain money” between OceanaGold and Government officials.
OceanaGold said in a statement that it is not aware of these allegations. It said the primary reason for the move was the effect of the global economic crisis.
OceanaGold has spent approximately US$75 million on the project thus far. Previous expenditures by Climax Mining (1990-2005) prior to the merger with OceanaGold in 2006 which would include exploration costs, feasibility studies, total approximately US$70 million.
Darren Klinck, vice president for corporate and investors relations said that OceanaGold continues to work closely with its key stakeholders including the local community, local Government units in Nueva Vizcaya and Quirino provinces as well as Department of Environment and Natural Resources Secretary Jose Atienza’s office and Mines Geoscience Bureau.
Environmentalists have also complained about the effects of mining in the Philippines. They claim that clear cutting of new and old growth trees has destroyed animal and floral habitats; and mine tailings containing poison have resulted in the death of marine life, destroyed marine habitats and affected the livelihood of fishing communities.
They also claim that Marcopper, a mining firm in Southern Luzon has failed to rehabilitate fully the damage caused by massive tailing spillages.
One of the most devastating effects of mining is flash flood to low lying barrios/barangays, enhanced by the high rainfall in the region.

Corruption in the Government
A survey has ranked the Philippines as the second most corrupt nation in the world. A well known joke says that Filipinos must have bribed the organisation that comes up with the rankings, to move it from number one to two.
There have been eyewitness accounts of corruption in Visayan Island, where it is alleged a Governor’s representative directly asked for the amount of US$212,000 from a chrome ore’s trader to facilitate the release of a mining permit; and another US$10.00 per metric ton for the release of an Ore Transport Permit (OTP).
It is a customary practice in the Philippines that a trader makes advance payments for mining operations including costs for “securing and releasing” of mining documents.
In Luzon, there is another account alleging that an Environmental Management Bureau employee negotiated with a small-scale mining project for the release of an Environmental Compliance Certificate (ECC) in exchange for US$4,555.
David “Datu Maghuhukum” Puspus, president of Manobo Tribal Foundation Philippines has complained about non-remittances of revenues generated from mining operations in land covered by the Indigenous People’s Right Act of 1997 and rampant illegal mining. This organisation represents about one million members of “lumads” or mountain people.
He has also questioned who has rights for different kinds of mining activities and holders of permits, claiming that many of these people are either previously or currently connected with the Government, lawmakers, cabinet officials and military officials.
The European Council recently offered technical and financial support to the Philippine Government to fight corruption. A Mines GeoScience Bureau official said that the Bureau has been coordinating well with the National Bureau of Investigation to fully implement the Anti-Graft and Corrupt Practices Act, and investigations are ongoing against officials involved in corruption in the mining industry.

Financial capabilities and foreign capital
Philippine Mines and Geo Science Bureau (www.mgb.gov.ph) responding to controversial social issues against mining in the context of globalisation affirms that the country must compete for investment funds to sustain a mining industry as embodied in the Philippine Mining Act of 1995. The Bureau is tasked to administer and dispose mineral lands and resources, conduct geological, mining, metallurgical, chemical and other related research including geological and geophysical surveys.
Reported foreign investment in the Philippines mining sector from 2004 to 2008 (third quarter) was around US$1.9 billion.
Mining figures from the Department of Environment and Natural Resources - Mines GeoScience Bureau show that the value of Philippine metal production as of November 2008 (precious and base metals) was US$1.1 billion.
To date, the Philippine Government has affirmed that seven of the 63 priority mining projects will proceed into production in 2009, namely:
. Carmen Copper Corporation’s Carmen-Toledo Copper Project
. OceanaGold’s Didipio Copper-Gold Project
. Coral Bay Mining Corporation’s Palawan HPAL Nickel (Nickel-Line 2) Project
. Filmenera Resources Corporation’s Masbate Gold Project
. Platinum Group of Metals Corporation’s Iligan Ferronickel Smelter Plant and Manticao Ferronickel Smelter Plant
. Philsaga Mining Corporation’s Banahaw Gold Project.
The total investment in these projects is estimated at US$737 million.
Despite the lacklustre growth of investments in the mining sector, the Philippine Government continues to attract foreign mining investments by enhancing its policies particularly on environmental safeguards, community consultation and development programs.
Recently, the Philippine Congress formulated a provision to allow land ownership by foreigners through constitutional amendments that could provide incentives to foreign capital investment. Congress has indicated it will amend that part of the constitution provided it is focused on economic development.
Much more needs to be done in developing the mining industry in the Philippines - approximately 12.2 million hectares or about 40.65 per cent of the Philippines’ total land area is prospective for minerals.
There are some problems in governance and laws but prospective investors should also consider the prevailing professionalism particularly from the country’s Mines Geoscience Bureau, and development of world-class projects to date.

* Isidro C. Valencia is general manager of Growlandtech Corporation, engaged in trading minerals and producing activated carbon made of coconut shell.