Listed Lepanto Consolidated Mining Co. and Gold Fields Limited of South Africa may have to wait longer than expected before completing their part of the $340-million deal involving the Far Southeast Project in Mankayan, Benguet province.
Gold Fields is set to acquire a majority stake in Far Southeast but this is hinged on the acquisition of a Financial or Technical Assistance Agreement (FTAA) license, which allows full foreign ownership of large-scale mining projects to attract globally competitive investors.
Gold Fields said it was expecting to get the FTAA in the second half of 2012. However, getting an FTAA depends on three things, according to Mines and Geosciences Bureau (MGB) director Leo L. Jasareno.
First is the issuance of the government’s long-awaited mining policy, which will signal the restart of processing of new applications related to mining, environmental compliance and tree cutting.
“If their expectation is (to get the FTAA) in the second half, that will depend on the timing of the mining policy,” Jasareno said. The government maintains the policy is an “urgent matter” but has yet to issue the same.
Second is the MGB decision on Lepanto’s plea to have its Mineral Production Sharing Agreement (MPSA) for Far Southeast, which has four years left, converted into an FTAA with a fresh 25-year term from the end of the existing MPSA. However, Jasareno said in an interview that the FTAA would simply inherit the remaining years of the MPSA according to existing rules.
“What they want is a new 25-year term to start when the MPSA is converted into an FTAA, and with a possible extension, they would have about 40 years. That can’t be. What is doable is for them to seek an extension of the MPSA. That would be another 25 years, plus the four remaining years, which would give them a total of 29 years,” he added.
Third is the resolution of conflicting claims over parts of the proposed FTAA. Jasareno said the proposed FTAA covered the present MPSA and nearby areas that were subject to competing claims from other companies. “Those conflicting claims must be resolved first,” Jasareno said.
Gold Fields has acquired a 40-percent interest in Far Southeast through option agreements with two companies: Lepanto, which owns 60 percent of the project, and Liberty Express Assets. Gold Fields bought Liberty’s 40 percent stake for $220 million and is set to exercise an option to get an additional 20 percent from Lepanto.
The total consideration for acquiring a 60-percent stake is $340 million, according to separate announcements from Gold Fields and Lepanto.
However, the FTAA license is “a contractual condition to the exercise by Gold Fields of the Lepanto option.”
In November 2011, Lepanto filed an application for an FTAA license for Far Southeast. In March 2012, Gold Fields said in a statement that it was anticipating the granting of the FTAA “in the second half of 2012.”