After the gold rust

Let us stop fooling ourselves about the reason for the enormous drop in the gold purchase of the Bangko Sentral from local mining companies.

The stock knowledge, at least the one hyped about by Secretary Ramon Paje of the Department of Environment and Natural Resources, is that the drop resulted from the 7 percent tax imposed by the Bureau of Internal Revenue on the Bangko Sentral ng Pilipinas’ gold purchases.

Yet, based on official figures on the mining industry, as collected by the Bureau of Mines and Geosciences from the organized mining sector, otherwise known as “big” mining companies, the obvious reason was the sharp decline in the country’s gold production.

Only two years ago in 2011, the country produced more than 30,000 kilograms of gold, but in the following year, production fell by more than half to less than 15,000 kilograms. Latest figures on gold production in 2013 showed that output could drop by as much as 70 percent. It said that production facilities in many gold mines were merely rusting away.

The mining industry of course blamed the lackluster performance of the sector on the policy of the Aquino (Part II) administration, which seemingly put the entire sector into limbo with its inaction.

Really, it has little to do with the taxation imposed by the BIR on gold purchased by the Bangko Sentral, contrary to the stock knowledge peddled by the DENR, claiming that the “small” mining sector stopped selling its gold output to the central bank to avoid payment of the tax.

In other words, the small mining companies smuggled the gold out of the country, evading the law that requires all gold production to be sold to the central bank, the lone legitimate buyer of the precious metal, to be kept as international reserves.

The brave Paje even threatened to file charges against mining companies that smuggle gold out of the country. Good luck, boss. Everybody knows that the smugglers are the small miners—or the groups that buy the production from small-scale gold mining operations. The DENR could hardly stop illegal small mining operations, right? What more their gold smuggling! And so our heroic Paje  has yet to file a single case against any of them. Well, small mining operations have always been under the purview of politicos and their warlords.

On the other hand, the big mining companies could hardly avoid the tax payment on their gold production because the DENR, through the BMG, monitored each and every step in their operations.

And how did the Aquino (Part II) administration treat the organized so-called big mining companies? Well, first off, earlier in his administration, our leader Benigno Simeon (aka BS) has been trumpeting his policy as supportive to the mining industry. In the past three years, the administration nevertheless refused to declare clearly its development strategy for the mining sector. Yes, the industry remained in limbo.

Up to today, more than three years under our leader BS, the administration has yet to deliver on its promise that the government would come up with a new policy, spelled out in a new law, to reform the industry and thus encourage more investments.

It did not happen of course. On top of  government inaction, our dear Paje threatened to cancel all existing mining contracts. He may have to cancel all of them. As the government continues to provide no direction for the industry, nobody is willing to invest heavily to raise production. Under a neglectful administration, they cannot seem to determine where their bottom lines may end.

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And now even the 15,000 or so small investors of the troubled Uniwide Holdings Inc. (UHI) are running after their investments in the highly acclaimed P4-billion IPO of the company some 17 years ago.

In our previous pieces, we talked about how the SEC, as receiver of UHI that was undergoing court-ordered rehabilitation, tried to cannibalize the company by selling its assets piece by piece—at major discounts, of course.

The UHI, in the meantime, also filed court cases against its partner in the development of the Coastal Mall in Parañaque City in what was supposed to be a “business park” development of Manila Bay Development Corp., headed by Jack Ng Sr., who also owned Republic Biscuit Corp. (Rebisco).

In the complaint filed recently before the Makati City prosecutor, the small stockholders—headed by a certain Brenelie Rualo—accused MBDC of “estafa,” including in their complaint two former finance officers of UHI.

At that time, MBDC was developing a 40-hectare property along the Manila Bay into a commercial and office district, similar to the “Greenhills” concept of the Ortigas group in San Juan, complete with the “tiangge” type retail outlets.

Apparently, MBDC attracted the UHI group of Jimmy Gow to build the Coastal Mall on the 20-hectare portion of the development. The area was later cut into half, as the government expropriated the other half to give way to the construction of the Diosdado Macapagal Blvd. The small stockholders of UHI claimed that MBDC knew about the expropriation from the start, but it kept the bad news from the UHI group of Jimmy Gow.

Thus, the small stockholders claimed that, in effect, the maneuvering of MBDC —i.e. the trio of Jack Ng and the two UHI finance offiers, namely Jimmy Cabangis and Corazon Rey—caused UHI to “squander” P1.7 billion for the construction of the mall, on top of their defrauding UHI of almost P400 million in “irregular” rentals.

The amount, according to the small stockholders, represented more than half of what UHI raised in its IPO in 1996.

The minority stockholders apparently took encouragement from another court case involving UHI and its supposed partner in the mall venture, none other than MBDC. The Parañaque Regional Trial Court earlier already ruled the MBDC-UHI contract to be “iniquitous” owing to MBDC’s charging of full rentals on UHI despite the failure of MBDC to put up a business center in the development as it has promised UHI.

Thus the small stockholders also filed a derivative suit for damages against MBDC, asking the court to compel MBDC to return to UHI almost P400 million in rentals— plus damages.

The stockholders claimed that the “anomalous” lease contract imposed by MBDC on UHI was the direct cause of the financial problems of UHI that led its move to seek SEC receivership.

Still, while UHI was under SEC receivership, MBTC was able to obtain a court order evicting UHI from the Coastal Mall, which would have become the sole property of MBTC, valued at more than P3 billion at that time.

According to the stockholders, MBTC acquired the entire 40 hectare property at only P200 million.