All mines to give | Inquirer Business
Breaktime

All mines to give

/ 11:48 PM September 14, 2011

Uh-oh, the Department of Environment and Natural Resources, our very own DENR, is threatening to take over “old and abandoned” mines, reportedly valued at an amazing P90 billion.

That may be an exaggerated figure, even given the spectacular increase in world prices of metals, particularly gold, and even assuming that prices will continue to rise. Still, those are unproductive mines, unable to ride on the current cyclical upswing of metal prices. Like it or not, mining is a boom-or-bust industry. Metal prices go up and down in a 10- to 20-year cycle. Now that metal prices are high, this country can hardly take advantage of the cyclical uptrend.

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Thus DENR reportedly wants to get hold of those unproductive mines, and then it will bid them to existing mining companies, presumably those with decent track records. DENR has all those mines to give, in short.

There are not many mining companies with good records, unfortunately, owing perhaps to the neglect of the sector by the government over the years. Some publicly listed mining companies, for instance, are just paper corporations. They do not have existing and currently operating mines. It is doubtful if they can muster the means to rehabilitate and then operate those abandoned mines.

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The key word is “rehabilitate” because those abandoned mines are practically reduced to rubble. According to our sources in the industry, to reopen those abandoned mines, you actually have to start from scratch. It will take a long time to rehabilitate those mines, in other words. The question is, will the new operators, and the DENR itself, have enough time for the rehabilitation and still ride the upswing in world prices of metals? This, according to mining experts, must require serious study, which in turn takes a lot of time, too.

The DENR thus may just end up with new operators in a lot of those mines that are still unproductive. That is the problem of ad hoc band-aid type solutions, actually. What we need is a program of incentives for serious mining companies to maintain their mines when world prices of metal go bust. Mining, after all, is a long-term venture. Even 10 years after you have already invested millions of pesos, you still can’t be certain of making money.

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Still unresolved is the problem of the Aquino (Part II) administration in the 25,000-hectare mining claims in Surigao, the rich nickel mines called Nonoc.

In the 1990s, the government sold the right to operate the claims to a company called Philnico for about $260 million. Philnico—which eventually transferred the claims and the right to operate the mines to Pacific Nickel Holdings and Pacific Nickel Philippines, which nevertheless had the same owners as Philnico—exploited the mines over the years, reportedly earning billions upon billions of pesos. The thing is, it never paid the government for the mining rights.

Up to now, according to Finance Secretary Cesar V. Purisima, in a memo he wrote Environment and Natural Resources Secretary Ramon Jesus P. Paje, Philnico was able to pay for less than 1 percent of the total contract price. Pacific Nickel Philippines at present holds the MPSA [mineral production sharing agreement], which is the license to operate the mines, for huge areas of the Surigao mineral reservation area. The thing is, the contracting party for the mining rights was not Pacific Nickel. As I said, the government assigned the rights to Philnico.

Still, Purisima asked the DENR to stop the Pacific Nickel group from shipping raw ore out of the Surigao reservation, by canceling the group’s ore transport permit. Pacific Nickel, nevertheless, obtained a TRO from the Surigao RTC against the DENR suspension order. The Pacific Nickel group thus continued to ship nickel to China, worth millions of dollars. According to our source in DoF, the Pacific Nickel group is still refusing to pay for Philnico’s obligations to the government.

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The Chamber of Mines of the Philippines is expecting some 500 local and international delegates in the ongoing “Mining Philippines 2011 Conference and Exhibition” (until September 15) at the Sofitel Philippine Plaza Hotel.

In the opening ceremonies on Tuesday, chamber president Benjamin Philip Romualdez took a dig at the DENR for its slow action on pending applications for mining licenses. And the DENR thinks it can take over “old and abandoned” mines and make them productive again in no time? Anyway, aside from the “inaction” over at the DENR, the mining industry at this time must face up to the media campaign of anti-mining groups. One of them, backed by some clerics, even advocates total mining ban in the whole country.

Now, for the conference, the chamber invited the ambassador of Chile to the Philippines, Roberto Mayorga, who was to deliver a talk entitled “Mining—A Vital Partner for National Progress: The Chilean Experience.” Last year, Chile was able to rescue 33 miners trapped for 69 days in a collapsed mine, thus transforming a mining crisis into an event of national glory. That is probably what the local mining industry needs at this time. It needs a good break. The industry is not really confident that the break it needs is, well, the DENR threat to take over “old and abandoned” mines.

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TAGS: Department of Environment and Natural Resources, mines, Mining and quarrying, Philippines, take-over
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