IndoPhil Resources NL of Australia is in a “range of discussions” with Glencore Xstrata regarding the Anglo-Swiss firm’s majority stake in the $5.9-billion Tampakan copper-gold project in Mindanao, Indophil said in its quarterly report, citing uncertainties hounding the project have and a pared-down work plan.
Indophil, a minority stakeholder in Tampakan, has a preemptive right over Glencore Xstrata’s 62.5-percent economic interest in the project.
Glencore, which is based in the United Kingdom, recently merged with Xstrata of Switzerland. Glencore has outlined a plan to deliver growth through the development of brownfield projects and its “preference to avoid” greenfield projects, Indophil said.
There is also the possibility that Glencore Xstrata may have to divest its stake in Tampakan as a result of the commitments made to the Chinese government to secure approval of the merger earlier this year, Indophil said.
China, a major commodities consumer, conditionally approved the merger. The deal contained provisions meant to prevent monopoly of the Chinese market, which depends largely on imports.
Final approval has yet to be granted.
Such variables have created uncertainty in the market as to the immediate progress and future ownership of Tampakan, Indophil CEO and managing director Richard Laufmann said in the report.
As the effectiveness of Glencore Xstrata’s approach and its impact on the project’s large-scale mining contract with the Philippine government remains to be seen, Indophil and its Philippine partners remain committed to moving Tampakan toward development, the company said.
Tampakan, a greenfield project, is still in the exploration and permitting stage.
The key driver of project level activity during the third quarter, Indophil said, has been the decision by Sagittarius Mines Inc. (SMI)—the Glencore Xstrata and Indophil joint venture for the Tampakan project—to implement a revised work plan to resolve a provincial ban on open-pit mining, finalize the local community resettlement program, and obtain the remaining approvals to commit to development.
SMI is trimming its workforce by 85 percent, laying off nearly 1,000 workers, due to delays caused by the open-pit mining ban in South Cotabato and delays in obtaining permits from the government.
The downscaling of the Tampakan project is among those cited by the Chamber of Mines of the Philippines as the result of a volatile business climate in the country. It is one of the reasons why the country can not meet its $16-billion mining investment target by 2016, the chamber said.
Originally, commercial operation is set to begin in 2016. The date has since been moved to 2019. The Tampakan project is expected to contribute $2.8 billion to the Philippine’s gross domestic product each.