More policy changes in mining seen

(First of a series)The coronavirus-induced recession failed to dampen metal prices, and with President Duterte’s latest order to lift the ban on new mining permits, more companies are raring to cash in.But the President’s Executive Order (EO) 130, which lifted the nine-year moratorium on new mining agreements, is just a prelude to more policy changes in the mining sector.

These may include reforms that will allow the government to get a bigger share in mining revenues, the possible imposition of royalty fees on all projects, a directive that will require all mining companies to go into processing and the possible lifting of the ban on open-pit mining.

Plucking more minerals in the countryside would bring in more money to the state coffer, said Environment Undersecretary Jonas Leones.

Mr. Duterte himself noted in his directive that less than 5 percent of the country’s mineral resources had been tapped. The order allows the industry to undertake more mining projects, but miners must cough up more funds that the government needs to revive the economy.

“The point is we are trying to maximize the revenue that we can get. We are trying to improve the financial regime,” Leones said. “We need a source of income because we cannot rely heavily on borrowings alone. We can tap our resources and attract potential investors. That investments can help in our economic recovery.”

Trade-offsLifting the ban on new mining permits may come with two significant trade-offs: the possibility of requiring all mining companies to put up their own processing plants, and imposing royalties on mining sites outside mineral reservation areas.These two proposals are not new, but EO 130 has breathed new life into the discussion.

According to Mines and Geoscience Bureau director Wilfredo Moncano, consultations are ongoing to put these two reforms into law. Currently, there are six processing plants in the country—two for nickel, two for copper and two for gold.High electricity costs discourage mining firms to go into processing, especially as these companies are already making a killing in exporting ore given the strong demand in China and without the supply from Indonesia, which banned ore exportation. Forcing mines to go into processing is a tall order, Moncano stressed, and incentives must be put in place to make this possible.

Congress may have to pass a measure that will grant incentives for the construction of ore processing plants and reduce power costs.

Mining firms with the same mineral commodities that do not have the capital to put up their own plants may also group themselves in one area and put up one plant , he suggested.

“It would be ideal if we could implement this before the end of President Duterte’s term, but we only have one year left. The construction period for plants may take two to three years so it will be an ongoing process until after the term of this administration,” he said.

High power costIn processing minerals, over 30 percent of the operating costs are eaten up by electricity. This makes it more practical for the local industry to simply export ore to China which can do the processing given that both its power and labor are cheap.

Overall, the mining industry’s sentiment regarding the idea has been lukewarm.

“Processing is the future of the industry … one of the important considerations is creating an environment that will make it competitive,” said Dante Bravo, president of the Philippine Nickel Industry Association and CEO of Ferronickel Holdings Inc.

The same cannot be said when it comes to royalties. INQ