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After the Gold Rush

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[Photo of Mining site in China]Among the country's industries, the mining sector is the only one that has weathered the economic recession pretty well. But are threats just standing by to pull down the recovering industry?

Long before the island has been known across the Atlantic for its spices, the Philippines has already made a name to Chinese traders and Greco-Roman scholars for something else more valuable: gold.

Greek historian Ptolemy and Buddhist pilgrim I-Tsing called the archipelago “Isle of Gold” for its rich gold deposit. The news reached power-hungry Spain that time, giving it more reason to colonize the Philippines.

Unhurdled by the challenges of technology unlike pre-colonial times, the country now boasts of more than 50 mineral commodities found in mining sites across the country. Despite the economic recession, the mining industry has managed to stay afloat, with US$640 million inflow investments that realizes a 23% growth from the previous year.

Chamber of Mines of the Philippines President Benjamin Romualdez said the country will be seeing US$1.5 billion investments this year. The government, meanwhile, projects that investments would reach US$13.5 billion by 2013.

Interest in mining was revived by former President Gloria Macapagal-Arroyo when Malacanang issued Executive Order No. 270 or the National Agenda on Revitalizing Mining in the Philippines. The Department of Environmental and Natural Resources backed this up with a Mineral Action Plan (MAP) that calls for the participation of local government units and non-government groups to establish mitigation measures and parameters for responsible mining.

Challenges still remain, however, for the mining industry because of the bad raps it has received over the years. Non-government groups and advocacies pit mining operations for destroying natural resources. The apprehension of illegal Chinese workers in a Masinloc mining facility last June has also exposed another evil face of mining in the country.

Old Habits Die Hard

Chamber of Mines of the Philippines Executive Vice President Nelia Halcon says a big stigma to the mining community is the presence of illegitimate middlemen or traders that arrange the deal between Chinese investors and local mining companies. Halcon says this is more prevalent in the south.

Because it takes a long time to get the Chinese Central Govenment's approval to secure permits in investing in mining companies in the Philippines, Chinese investors would resort to middlemen who can assist them in landing a joint-venture deal with local companies straight away.

The situation has also driven away Chinese investors to pursue mining projects elsewhere despite the  Supreme Court's final ruling on the Mining Law of 1995 (R.A. 7942) in 2004 allowing 100% foreign ownership to large-scale mining companies as well as the existence of a financial and technical assistance agreement (FTAA) that allows foreign investors to recover its primary investment by placing 60% ownership to the government and 40% to the contractor. The first 100% foreigned-owned company in the country, Australia-based Climax Arimco, started its commercial production in 2004.

Another negative factor affecting the Philippine mining industry is the presence of Chinese traders dabbling in stock mining and the existence of “paper” companies listed in the Philippine Stock Exchanges. Paper companies are fraudulent companies that would lift their shares in the PSE.

It's Not Easy Being Green

Halcon blames small-scale mining projects for the public’s notion that the mining industry is generally destructive to the environment. “The small-scale mining industries are the ones that don't follow environmental rules and regulations. They are the ones cutting down trees.”

Halcon says that large-scale mining companies would even transfer trees from areas of exploration to new locations. Mining accidents and spills are inevitable (like the Lafayette Philippines waste spills in Rapu, Rapu Albay in 2005), but large-scale mining companies that have encountered such follow disciplinary measures and penalties laid down by the government, according to her.

Asked if the country would ever run out of mineral resources, Halcon has this in mind: “How can you run out of mineral resources when you're reusing things like iron and steel. Metals from old railways and buildings are melted down in facilities to be used for other construction purposes.”

“My thinking is, we have a lot of resources here and we have to develop it so that we may export other products rather than just raw materials. ” Halcon adds. She says that we can take cues from China that has put up processing facilities for its resources that in turn, has fueled the growth of its manufacturing industry.

The MGB way or the highway

A senior official from the DENR Mines and Geosciences Bureau (DENR-MGB) says that the government can't run after illegitimate traders or middlemen in the mining sector as it should be a police matter. “That should be taken up to the Philippine National Police or judiciary,” the official said. “We don't run after them because the engagements they [middlemen and investors] have are private in nature.”

According to the DENR-MGB official, the government only comes into the picture at the time of the sale or transfer of the mining permit. The bureau will then check the legitimacy of both parties, if there's an existing permit for the mining project owner and if the investor has the financial capability to sustain the project.

The DENR-MGB official cites a Hong Kong investor he's communicating with as an example. Through DENR-MGB's investigation, the Hong Kong-based company found out that the permit for the small-scale mining project that they were interested in had already been awarded to another company. The problem, however, was that the Hong Kong company had already shelled out US$300,000 worth of investments for the apparently fraudulent deal.

Asked the probable reason investors were reluctant to approach the government to help them seal a deal with local companies, the official said it might be the notion that the process would be difficult as well as the corruption in the government. “But that's only my perception, I really don't know... The most reliable institution to ask is the government. Now, if you find out there's something wrong with it, then you go to the private sector,” the official said.

Individuals and companies interested in investing in local mining companies in the country can double-check the list of permits posted on the DENR-MGB website. It was last updated on Dec 31 last year.

Golden Prospects

The mining sector has seen a rise in its contribution to the country's gross domestic product (GDP) by 1.3% (P100.5 billion) from 0.6% (P21.6 billion) in the year 2000. This was buoyed by an increase of mining operations last year.

Investment road shows like the First Philippine Mining Investment Forum in Shanghai last July has provided the country's mining players opportunity to do business-matching sessions with over 80 investors who attended the forum.

China Mining Association Vice Chairman Fan Zhiquan said in his speech during the forum's opening ceremonies that as of June 2010, the China Mining Association has looked into 11 Philippine mining projects worth US$600 million dollars that Chinese investors are interested in.

Halcon says the country still has a lot of untapped resources especially in Mindanao but if exploited would draw lots of foreign investments. She also said that if the open-pit mining Tapakan, South Cotabato mining project would be revived this year, it will definitely set an example for responsible mining and many mining companies would follow suit. The project is reported to be the largest copper mining project in Southeast Asia.

Though allowed by  R.A. 7942, the open pit-mining project pursued by foreign-backed company Sagittarius Mines, Inc. was stopped by the Provincial Board of South Cotabato. Open pit mining is done when metals and minerals are found close to the land surface. Perhaps, a bold move like this is just what the industry needs.

Print ed: 09/10

 

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