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Mining for a more sustainable future

Article - June 4, 2012
Climate change mitigation, anti-corruption measures and a desire to increase Government revenue yields in order to more fairly share profits do not mean that investment opportunities in mining have diminished. Quite the opposite: with illegal mining now being targeted, the field is clear for responsible players who understand that transparency and sustainable methods will bring longer-lasting rewards, for everyone

President Benigno Aquino is proposing the nation introduce competitive bidding for mining rights, widen the ban on mining activity to more areas, and boost state revenue from the industry. 

“We are now reviewing what is fair… we get 2 per cent of the profit and 100 per cent of the risks,” says President Aquino who is seeking investments of more than P700 billion (£10.2 billion) for projects in railways, highways and airports, in a bid to boost growth to 8 per cent annually.

The Philippines’ $200 billion (£128 billion) economy expanded 3.7 per cent last year, and the country is believed to possess some of the biggest mineral reserves in the world – at least $840 billion in gold, copper, nickel, chromite, manganese, silver and iron.

Investments in exploration and mining projects totalled $3.8 billion from 2004 to 2010, and the industry generated P9.1 billion in taxes, fees and royalties in 2010, according to the Department of Environment and Natural Resources’ (DENR) Mines and Geosciences Bureau.

Mineral exports totalled $1.87 billion in 2010 and mining employs 197,000 people in an economy where the World Bank says “one in four people lives on less than $1.25 a day.”

Balancing act

The proposals reflect President Aquino’s struggle to balance efforts to spur investment with the need to protect the environment and ensure ordinary Filipinos benefit. But it also reflects a worldwide trend: the Philippines would join at least 11 other countries from Australia to Ecuador, that, according to Deutsche Bank AG, have announced plans to increase taxes or royalties on sales of resources such as gold and coal.

The new guidelines could affect companies including Xstrata Plc, whose stalled $5.9 billion copper and gold project would be the country’s biggest foreign investment. But Finance Secretary Cesar Purisima disagrees: “The new guidelines will help resolve Xstrata’s dispute with a provincial government over its project.”

While DENR has ordered the shutdown of six mineral processing plants that had been accused of polluting fishing grounds, there should be no doubt about progress, or fear of stalled initiatives, according to Chairman of the Chamber of Mines of the Philippines, Artemio Disini.

“The copper mines of Atlas and Rapu-Rapu were reopened. There is a new mine with TVI in Mindanao, and we also have two gold mines – Medusa in Agusan del Sur and Filminera’s project in Masbate. These five mines are in operation and are doing fantastically in terms of profit.

“There are about 17 other projects in the pipeline given the brilliant results from the other mining projects, and these projects are either operational or in the advanced stage of exploration… Within six or seven years, we are projecting investment of approximately $14 billion to fund these new projects and, after this, production will increase across copper, gold and nickel mining.

“We can guarantee that the playing field in the country has been levelled, and that we will protect foreign investments.”

Ramon J P Paje,
Secretary of DENR

“In eight years’ time, copper mining will increase from about 59,000 tonnes per year to about 74,000 tonnes; gold will increase from about 40,000 tonnes per year to about 88,000 tonnes; and nickel production will increase dramatically from about 19,000 tonnes per year to over 200,000 tonnes,” he says.

Protection for both the investor and the environment

Leo L Jasareno, Acting Director of the Mines and Geosciences Bureau, believes President Aquino’s desires to strike a balance are eminently achievable.

“The balancing act is easy, with environmental concerns on one side, and the extractive side on the other. The simple answer is responsible mining, where as you provide benefits for economic growth you also provide measures to protect the environment and make better communities, environment and economy. That is the triple bottom line of responsible mining,” he says.

Ramon J P Paje, Secretary of DENR, stresses another bottom line: “We cannot put the investor in jeopardy. We cannot allow them to come in and then decide to ban them after they have been exploring for ten years. At least, if the guidelines are definitive, if you say that mining here is banned because it is a protected area, then we will never allow or entertain investors there.

“Once overseas investors come, we will protect their investments. We can guarantee that the playing field in the country has been levelled, and that we will protect foreign investments.”

The Aquino administration’s mining legislation is cracking down on illegal mining, especially in protected areas.

Nevertheless, the sector is still being perceived in a negative light due to misunderstandings of which came first: the ban or the miners.

Mr Jasareno insists: “I reiterate that the MGB has not issued any mining permit, not one, inside a protected area. Never. It is the reverse. It is the protected area that is encroaching on mining tenement areas.

“You have a Mineral Production Sharing Agreement (MPSA) and a mining contract approved by the government. Then you might have the government covering the mining area with a proclamation establishing it as a protected area.”