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Mining giants cautious on Philippines over ‘volatile government policy’ risks

17-Oct-2008 Intellasia | | 7:01 AM

A view of part of the base camp of the Tampakan mine, located north of General Santos City, on the island of Mindanao, southern Philippines January 9, 2008. Policy inconsistencies, hostility from the church and rebel threats have long frustrated companies hoping to mine the Philippines for minerals. (Reuters)

Several mining giants are reportedly wary on pouring more investments in the Philippines because of potential risks involved that include volatile government policy on mineral development in the country.

Phil Carney, who spoke on strategic risk and management planning during the 8th Asian Pacific Mining Conference, said although there has been a shift in policy direction in the Arroyo government towards mining- one from “tolerant to active promotion”- big mining firms want “100% assurance that their investments here are protected.”

He said the 60-40 rule on local and foreign ownership in mining firms are holding back foreign investors from pouring in more capital to fast track the exploration and development of existing and potential mining projects.

In December 2006, the Philippine Supreme Court upheld the constitutionality of the Philippine Mining Act of 1995 which allows big ticket mining firms to own 100% of local mining companies under the financial or technical assistance agreement (FTAA).

The maximum FTAA contract area that may be applied for or granted per Qualified Person in the entire Philippines are 1,000 meridional blocks or approximately 81,000 hectares onshore, 4,000 meridional blocks or approximately 324,000 hectares offshore or a combination of 1,000 meridional blocks onshore and 4,000 meridional blocks offshore.

So far, only two firms have been granted FTAAs.

One of them is Sagittarius Mines, Inc., holder of the Tampakan Copper and Gold Project.

The Tampakan Gold and Copper project is the biggest in Southeast Asia and Western Pacific region and reportedly has a potential ore deposits of f 2.2 billion tonnes at a grade of 0.6% copper and 0.2 grams per tonne gold and contains 12.8 million tonnes of copper and 15.2 million ounces of gold using a 0.3% copper cut-off grade.

Carney also said eyes are now focused on China following a projected decline in its gross domestic product over the next few years.

“China used to have a 12% annual GDP growth. Now it is down to something like eight%,” he said.

China is the world’s biggest consumer of commodities products because of the demands of its ever growing economy.

Any slow down in China’s economic growth, Carney warned, will affect the global mining industry.

At the same time, he likewise said the global financial meltdown and possible recession in the US could take their toll on foreign investments in the mining industry in the country.

Carney said while prices of minerals in the international market have been relatively steady, how the US can recover from its current financial crises two or three-years from now is crucial to the local mining sector.

The Arroyo government has been pushing for the revitalisation of the mining industry and has vowed to make the Philippines a “mining country” in 2011.

Environment secretary Lito Atienza earlier said the Philippines could attain that target if the mining sector will contribute six% of the country’s GDP.

But while Carney said foreign mining firms have now viewed the Arroyo administration as mining-friendly, a change in leadership when the president steps down from office in 2010 could also affect the future on the country’s mining industry.

Aside from the aforementioned risks, the Philippine mining industry is also facing strong opposition from environmentalists and the Catholic Church which has traditionally taken an anti-mining stance.


Category: ResourceAsia

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