‘Responsible mining’ key to industry’s survival

In 2016, the mining industry was greeted with the appointment of Regina Paz Lopez as the country’s environment secretary, a staunch environment advocate who had President Duterte as one of her earnest backers.

According to the President, appointing Lopez as environment secretary was a no-brainer. He recalled a passionate woman entering his office in Davao who flew all the way from Manila to show him pictures of environmental destruction caused by mining. He needed no convincing that this woman was right for the job.

It was no surprise then that Lopez’s 11-month tenure, which carried over until the early part of 2017, became the precedent of a tumultuous year for the mining industry.

After her appointment, Lopez immediately brought shockwaves both to the local and global mining communities after she ordered the closure of 28 operating mines and the cancellation of 75 mineral production sharing agreements (MPSA)—a quarter of the industry’s contracts—claiming these illegally encroached on watersheds, leaked waste into rivers and destroyed trees.

She also directed a ban on open-pit mining, which led to the closure of more than half of the country’s operating mines that used this method. This unforgiving stance affected the biggest mining companies in the country, including Nickel Asia Corp., the largest nickel producer in the country and the biggest supplier of nickel to China.

The issuance of permits was also put on hold, which was proven detrimental to the overall health of an industry that was already struggling from the pile of adverse administrative orders.

It seemed like an avalanche hit the industry and mining firms could not do anything but appeal to the department headed by Lopez herself or go straight to the Office of the President, which had vocally supported the secretary.

The issues besetting the mining sector were highlighted by no less than President Duterte himself, who shook the industry in his second State of the Nation Address (Sona) with a threat to mining firms: Restore the “virginity” of the protected areas or you will be “taxed to death.”

Lopez opposition

The Chamber of Mines of the Philippines (COMP), the largest mining organization in the country with more than 32 member-companies, had been outspoken about its opposition to Lopez’s appointment. According to COMP executive director Ronnie Recidoro, the former secretary’s orders would cost the government some $22 billion worth of projects.

Industry officials also described the move as absurd, adding that Lopez could not amend the Constitution by banning a globally recognized way of extracting minerals, or by putting a moratorium on permits by her lone authority.

“We are dealing with someone who does not believe in the Constitution’s mandate for the state to undertake the exploration, development and utilization of natural resources and as such, has put us, the government’s partners in minerals development, at a quandary,” the chamber said.

But for Lopez, it was within her discretion “to decide on the resources of the country.”

Her resolute stand seemed to not sit well with members of the Commission on Appointments who delayed her appointment twice. With her controversial policies and alleged incompetence, Lopez’s appointment was rejected with finality by the Commission on Appointments in May—a boon to the mining community but a bane to advocacy groups like Alyansa Tigil Mina (ATM) and Greenpeace, which had rallied behind her.

Lopez said she was saddened by the rejection of her appointment, saying it was “unfortunate” that “business interests have run the day.” She asked: “How can a body, which is mandated to make decisions based on the common good, make decisions based on business interests?”

One of the lawmakers who voted against the confirmation of Lopez was San Juan Rep. Ronaldo Zamora, the elder brother of Manuel Zamora Jr., who sits as chair of Nickel Asia.

But according to Sen. Panfilo Lacson, who also voted no, “passion and enthusiasm do not automatically translate into fitness and qualification.”

“Above all these is the rule of law,” he pointed out.

Military man

With the rejection of Lopez comes the appointment of a military man, former chief of the Armed Forces of the Philippines retired Gen. Roy Cimatu. Having no background in environmental policies at all, the industry’s fate has become more uncertain.

Cimatu’s appointment came out of nowhere, but with the President’s penchant to tap strongmen to his Cabinet, it was not entirely a surprise.

He has a shallow environment portfolio with no existing relationship neither with industry stakeholders nor with advocacy groups. Nonetheless, Cimatu’s statements during his confirmation hearings with the CA were welcomed by the sector with guarded optimism.

“Even though he has limited experience, his statements were about sustainable and responsible mining. We supported him,” said Recidoro.

The new environment secretary, who was then confirmed after only four months, was quick to reiterate that he would not hesitate to kill the industry if it failed to comply with the directive of the President, that is, for mining firms to rehabilitate exploited areas affected by their operations and care for the communities they shared the land with.

He also reiterated that his department was keen on weeding out corruption in the sector. “If mining companies cannot improve their operations, then they need to get out of business,” he warned.

Cimatu’s threats was followed by his decision not to lift the ban on open-pit mining, at least not until the Mining Industry Coordinating Council (MICC) has finished its “science-based review.”

Open-pit debate

By October, the industry began to feel more hopeful. Cimatu, under the guidance of the MICC that he co-chairs with Finance Secretary Carlos Dominguez III, decided to reverse the ban on open-pit mining imposed by his predecessor—his first major policy shift since his confirmation.

This was met by both cheers and jeers from the industry and advocacy groups.

“If it is not warranted, the government will not issue the permits,” Global Ferronickel Holdings Inc. president Dante Bravo said. “To ban such method altogether, even if it is environmentally safe and technically feasible, is unreasonable.”

For Marcventures Holdings Inc. chair Isidro Alcantara, open-pit mining was legally justifiable and made business sense.

“The Mining Act allows open-pit mining and there are deposits that can only be economical if you use open pit,” he said. “The real issue there is how it will be regulated and companies must be able to rehabilitate the sites.’

But for oppositors, Cimatu’s decision to adhere to the decision of the MICC was a way to escape personal accountability for endorsing the much-debated mining method.

Nonetheless, the secretary could not speak with finality. Mining policies continued to be unstable with the pronouncement of the President that he would not lift the open-pit mining ban, adding that “it is destroying the soil and the environment.”

This flip-flopping of the administration when it came to mining policies has been a concern for the industry. Recidoro had said that foreign investors were worried that investing in the Philippines might be affected by such politics.

For now, the industry could not do anything but prove itself worthy of the President’s trust, and that its members were responsible contractors of the government.

Baguio declaration

Cimatu, in a bid to work with the stigmatized industry, crafted a five-point document called the “Baguio Declaration.” In it, the agency posed a challenge to mining companies to follow five points that the DENR considered as the most important factors in a mining operation.

A way, it seems, to prove to the President that sustainable and responsible mining could be done.

Included in it were the protection and enhancement of the environment, protection of the indigenous communities, fair contribution to the economy, and compliance with highest international standards.

COMP, for its part, adopted a Canada-led initiative to strengthen its drive toward sustainable mining after the President also called on the industry to follow mining practices of Canada and Australia.

The chamber subscribed to the Mining Association of Canada’s (MAC) initiative called “Towards Sustainable Mining (TSM)” program, known as a globally recognized set of standards that would serve as the industry’s latest benchmark in measuring its performance.

This made the Philippines the first country in southeast Asia to adopt TSM and the fifth in the world after Canada, Finland, Argentina and Botswana.

Moreover, two Philippine mining companies—NAC’s subsidiary Rio Tuba Nickel Mining Corp. and Oceana Gold Philippines—won big during the first Asean Mineral Awards (AMA) in the Best Practices and Mineral Processing category, respectively.

This was a huge victory for the whole industry, which had been on the receiving end of several criticism both from the government and industry groups.

And finally, the issue on the sector’s fiscal regime has been settled by the new tax reform bill. Under the Tax Reform Acceleration and Inclusion bill signed into law this month, the excise tax imposed on mining companies would be doubled to 4 percent from the current 2 percent.

This was in addition to a royalty fee of about 5 percent imposed on mining operations situated in mineral reservations and an additional 1 percent on those situated in social domains.

Reversal

These efforts of large-scale mining companies did not go unnoticed. The Mines and Geosciences Bureau (MGB) under the DENR had disclosed its position to lift the moratorium on the issuance of new mining permits to companies that were earlier frozen by Lopez’s administrative orders.

MGB Director Wilfredo Moncano said the bureau was also reviewing the provisions of an executive order issued by then President Aquino that banned the issuance of new mining agreements, although it allowed the renewal of existing ones.

Moreover, they would also be pushing for the lifting of the open-pit ban by presenting their study to the President some time next year, given the “right timing.”

“This does not mean we are preempting the move of the President,” Moncano said. ‘The mind of the President is not closed. We’ll show him the benefits of mining in the country and that there are no environmental damage involved.”

Finally, in the words of COMP’s Recidoro, “there has now been a turning of the tide.”

Cimatu, for the first time since his appointment, admitted that it was small-scale miners that were destroying the environment. In his speech during the signing ceremony between COMP and the MAC, he said that his first order of business was to go after them.

For that, MGB is already on its way to legalizing small-scale operations while also subjecting them to similar standards set on large-scale mining operations. Those who would fail to comply would be penalized.

But for environment group ATM, the agency’s plans for 2018 were not the turning of the tide for the sector, but only a “business as usual” scenario. That Cimatu has slowly but surely initiated the reversal of Lopez’s open-pit mine ban, mine closure and suspension orders, and other mining regulations gave the unmistakable signal to mining investors that “business as usual” has returned.

A study by PwC Research showed the industry’s top 40 companies would bounce back with an aggregate net profit of $20 billion, with big mines most likely gearing for renewed aggressiveness going into 2018.

For COMP chair and NAC president Gerard H. Brimo, he said he was expecting a “far better and improved performance from the industry next year as a whole” while the sector continued to push for reforms.

Although a lot of global factors would come into play by next year—Indonesia will start shipping ore again, China’s economy will continue to dictate demand for nickel—the industry is looking ahead with guarded optimism.

“We showed resilience, we were able to keep our heads above water, and we survived the uncertainties of policies. There is now clarity under the new leadership with clear directives from the President, and key to that is the emphasis on responsible mining, which all the mines now have committed to continue,” Alcantara said.

“In fairness to Gina Lopez, she probably brought to the fore the issue of responsible mining and the environment, which is positive. Although in fairness to the community, we have been environmentally compliant. She brought it to the consciousness of everybody,” he added.

Director Moncano also had the same sentiment: “I think Gina Lopez is a wake up call on the part of the mining industry. They are now aware of their responsibility as a mining contractor of the government.”

Indeed, 2017 will go down as a year of revitalized environmental and national movements, thanks to the national debate on mining sparked by the controversial environment secretary.