Nose barrage
Something must be happening in the mining industry. It just showed in the trading of mining stocks at the PSE. The mining sector took a severe beating in the stock market last Tuesday. Prices of almost all mining issues dropped. A couple of them fell sharply by about 6 percent—all in a single day. Result: the mining index shed more than 700 points.
To think, the PSE mining sector was on a roll in the past four months, its terrific run-up since last October even pushing up the mining index by almost 45 percent. Like the rest of the market, these are said to be boom times for mining.
What just happened there?
Word has been going around that the Aquino (Part II) administration was ready to announce this month a new mining policy. Our leader, Benigno Simeon (a.k.a. BS), formed sometime ago a so-called mining policy study group. The members were supposed to come up with a new mining policy “in line with the economic development program” of the administration.
One of the recommendations of the study group possibly spooked the stock market. It is about this thing called the TEV—or “total economic valuation.”
Specifically, the TEV study is a cost-benefit analysis, taking the profit of mining companies alongside things like “environmental hazards” or “social costs” of mining as an industry. You know—the “total” package.
By the way, we may become the only country in the world that nature has blessed with mineral wealth that would use the TEV as a policy tool in mining. None of the other countries that are good in mining—such as the United States, Canada, Australia, United Kingdom, China and India—are using it.
Anyway, the “total package” is well and good, but here is the thing: It seems that the study group wanted the administration to undertake the TEV study before any other trivial matters—such as giving out new mining permits.
I am not kidding, ladies and gentlemen. The study group is asking BS to suspend—as in “stop”—approval of new mining applications until the TEV study will have been done. Well, in this country, such a study could only take a couple of decades, if not forever.
In other words, the TEV angle could be just another form of mining ban.
From what I gathered, the study group even attacked the mining industry, implying at one point that, despite the mineral wealth of this country, the mining industry has delivered its part poorly in achieving economic development.
Now, the study group is made up of—guess what—the presidential adviser on environmental protection, the environment secretary, the presidential adviser on climate change, and the vice chair of the Climate Change Commission. In other words, they are government officials who are all concerned with—what else—environmental issues.
We all know that we have some noisy anti-mining NGOs in the country today. That noise barrage about the end of the world due to mining! Those groups, by the way, also label themselves as concerned with the environment. So there.
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For more than 30 years now I have covered the mining industry as a nosy newsman, long enough—I think—to know that it was wrong to say the mining industry has failed in delivering economic gains to the country.
Sure, there was a short span of misery in the industry, back in the 1980s, when mining companies were closing down due to poor prices of commodities abroad. The workers of those bankrupt mining company surely suffered a lot, more so because they had a taste of the good times in the mining sector.
You see, back in the 1970s, even with only 45 “large scale” mines (versus the “small scale” mines favored by certain noisy groups) operating in the country, the mining industry accounted for more than 20 percent of our total export receipts.
In the mid-1990s, the government decided that it was time to revive the mining industry by attracting investments, particularly from abroad, since by definition this developing country did not have enough capital. Thus Congress enacted a new mining law (RA 7942), hoping to give the industry some sort of a fresh start.
Enter the anti-mining groups, which contested the “constitutionality” of the law before the Supreme Court, which in turn took its sweet time to decide on the case, finally ruling in favor of the new mining act about 10 years after, so that the new law—together with its features supposedly aimed to encourage investments in the sector—took effect only in 2004.
Clearly, the industry only had about eight years of what those in the business call “investment security.” That was not enough time for the industry to put some prospects into operation.
Based on industry standards, it normally takes about 12 to 15 years for a new mining site to become fully operational—provided, and this is important, the government gives all out support to the project.
In this country, however, while the national government seems to mouth good vibes for the mining industry, the national government seems to cower in fear when some LGUs decided to ban—totally—any mining activities in their areas, except of course “small scale” mining, which get permits from the very same LGUs.
This may be an interesting fact on the mining industry: Despite the lack of support from the government, particularly during the cute administration of Gloriaetta, the sector posted exports of more than $2 billion in 2010.
That was about 5.6 percent of our total exports.
Just imagine what the mining industry, free from all troubles from noisy groups, including the call for total mining ban, could accomplish with the $20 billion or so in fresh investments that it expects in the next five years.
Right now the industry is growing at almost 22 percent a year—the highest rate among all the industries in the country today.
In 2010, the industry (i.e. large-scale mining companies) delivered to the government—in the form of excise taxes, fees and royalties—almost P14 billion.
The guys down here in my barangay thus can only wonder where the BS-formed mining study group got the idea that the mining industry did not deliver on its promise of economic gains. From the noisy groups maybe!
