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Cebu open pit mine
Storm Crypt/Flickr

China is prospecting RP’s neglected mineral reserves to feed its expanding industries

When early colonists first stepped on the islands, they discovered endless fields of green, teeming with rare, precious spices. But what sent Spanish explorers in a feverish rush to annex the archipelago was what ancient Filipinos were adorned with—huge trinkets of pure gold.

Despite the uncovering of a diverse system of metallic and nonmetallic arteries throughout the Philippine mountain ranges, it was not until the 1930s that the industry boomed as miners began extracting gold from more than 50 sources.

By the mid-1960s, the Philippines had achieved global prominence as one of the world’s biggest producers of gold, copper, nickel, and chromite. This was sustained up until the 1980s when mining became the source of 50% of Philippine exports and contributed as much as 30% to the country’s GDP.

But the boom suddenly fizzled out.

The great slump came towards the end of the 20th century when declining global prices and a popular advocacy against mining pulled both exports and GDP percentages to dismal figures of less than 2%.

To the Rescue

By all indications, the country’s mining industry seemed dead, even if it continued to employ some 104,000 workers in early 2000. But international

demand for precious metals and nonmetallic minerals continued to dramatically increase. And most (over 90%) of the country’s deposits remained untapped.

This pushed the government to reassess its policy towards mining and refocus its efforts to revitalize the dying industry—which made sense given that mining has been given a staggering valuation of up to US$1 trillion.

The key, government concluded, was to invite foreign capital in to boost the industry and restore it as a major driver of economic growth.

Open to All

Speaking before prospectors from around the world during the International Convention, Trade Show and Investors Exchange in Toronto last year, former Environment Secretary Angelo Reyes said the government tried to boost the industry with the passage of the Philippine Mining Act of 1995.

A highlight of the landmark law was the provision on Financial or Technical Assistance Agreement (FTAA), which allows foreign participation in mining exploration.

“This means that even a wholly foreign-owned corporation can now enter into an FTAA with the Philippine government for the large-scale exploration and development of its mineral resources,” Reyes explained.

He said the government envisions China as among the country’s major partners in a new and resurrected mining industry.

It is the sector singled out by President Gloria Macapagal Arroyo as a flagship industry that would be instrumental in meeting the targets of her employment-boosting Medium-Term Philippine Development Plan by 2010.

Following this development road map, the government has set out to develop 23 large-scale mining projects in partnership with technology experts and mining companies from China and other nations.

China Roadshow

Reyes’ predecessor, Secretary Michael Defensor, along with teams from the Department of Trade and Industry and the Philippine Chamber of Mines, laid the groundwork for the Chinese partnership.

In early 2005, they went on a roadshow to China, and discussed possible investment opportunities with Chinese government and industry officials.

During the roadshow, a memorandum of understanding was entered into between the China Metallurgical Corp., the Department of Environment and Natural Resources (DENR), and the Philippine Chamber of Mines to facilitate investment of some US$100 million in several mining projects in the country.

Another Chinese firm pledged to invest US$200 million in a mining site in Mindanao during same occasion.

The roadshow team was also able to negotiate with several Chinese companies interested in the country’s existing nickel mines.

Among them were state-owned Jin Chuan Non-Ferrous Metals Corp., China’s biggest nickel and cobalt producer, and Shanghai Bao Steel Group. Both companies said they intended to invest US$1 billion each in Philnico Industrial Corp., a mining firm in Surigao del Norte that closed down.

According to the DENR, the investment is the biggest single investment by a Chinese corporation in a local nickel mining company.

Aside from these, the DENR also clinched a deal for a $300-million fresh investment by a Chinese glass manufacturing company, which will relocate to a 70-hectare site in Subic Bay.

Investments Pour In

Barely a year after the roadshow in 2005, more companies had been aggressively courting Philippine companies for possible partnership in mining exploration. Electronics giant ZTE Corp. has been looking into joint-venture arrangements with some members of the Filipino-Chinese community.

Another Chinese firm, ITIC Resources, is also negotiating with local partners for a slice of the action.

On top of these is Jin Chuan, which continued talks with Philnico to operate the abandoned Nonoc plant in Surigao. The Jin Chuan project is expected to generate high value-added exports of US$300 million annually, 500 million pesos for yearly taxes and royalties, and the employment of around 5,000 workers.

Bao Steel, the top steel producer in China and No. 5 in the world, is looking for other investment opportunities in coal and iron ore mining. The company, partnering with China Development Bank, is also investing US$1 billion in the Nonoc mine.

Prospective Chinese investors will collectively pour in an estimated US$4-6 billion in investments in mining, particularly in Mindanao.

Sitting on a Goldmine

Within the next three years, 23 major mining projects will set up shop. Mining sites in the pipeline have the capacity to generate for their companies some US$3 billion in annual gross sales, US$61.4 million in annual excise taxes, income taxes worth US$434.3 million every year, and over 200,000 in direct and indirect employment.

During the same period, 37 exploration projects with annual expenditures reportedly worth US$92 million are also expected to become active.

But all these, according to DENR officials, are but the tip of the proverbial iceberg.

Out of the Philippine land area of 30 million hectares, 9 million hectares—or 30% of the country’s entire landmass—have been identified to potentially contain high mineral concentrations.

However, only about 420,000 hectares, a mere 1.4% of the country’s total terrain, are covered by existing mining permits.

Even if only half the country’s mining potential is exploited, imagine the billions in revenue it would generate. Not to mention the hundreds of billions more in profit for foreign miners—in US dollars.

print ed: 01/08

 

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