Biz Buzz: Mining EO pitfalls

Various stakeholders in the mining industry, from government agencies to private companies and civil society groups, have said there was room for “responsible mining” in “sustainable development.” Yet, they have also noted that what responsible mining meant would depend on who was talking.

Given this, one key government official believes it is time to define it through legislation. It may take a little more time for this to happen, however. The long-awaited Palace executive order on mining (reportedly signed last Thursday night) is expected to be made publicly available on Monday. And even then, companies seeking new mineral agreements may have to wait some more.

The industry will first have to go through a review of the Performance of Existing Mining Operations and the Cleansing of Non-Moving Mining Rights Holders by a multistakeholder team led by the DENR. This will be based on the specific mining contract or agreement and on other laws, rules and regulations, such as the Mining Act of 1995 and the Labor Code.

Mining stakeholders said there might be a review of existing mining contracts for possible renegotiation. That may not come as a surprise, considering all the effort exerted to define “responsible” mining and where it exists, if at all. What seems to be giving mining executives the chills right now is the prospect of an additional moratorium on issuing mineral agreements until the sticky issue of revenue sharing is settled through legislation.

For more than a year now, the Department of Environment and Natural Resources has banned new mining applications except for sand and gravel and mineral processing permits. New environmental compliance certificates and tree-cutting permit applications have recently been added to the moratorium. The department may (or may not) start lifting that ban once the EO is made publicly available. But even then there is a question of “when.”

On a positive note, exploration permits may finally be issued, with the grantees getting the right of first option to develop their respective projects after the said legislation is enacted. Sometime in the future, this convoluted solution may turn out better for everyone than the present moratorium. But then again, it probably depends on whom one talks to, and when.—Riza T. Olchondra

Game changer

With the entry of Macau casino operator Melco into the $1-billion Belle Grande entertainment complex, many are left pondering how the deal will affect Leisure & Resorts World Corp. (LR), which would have been Belle Corp.’s 50-50 partner in the venture.

Some analysts have already discounted LR being eased out of the project after a memorandum of agreement was signed last week by Belle and Melco (co-owned by billionaires James Packer of Australia and Lawrence Ho, son of gaming tycoon Stanley Ho) to team up on the project. Note that it has been long rumored that Henry Sy Jr., a.k.a. “Big Boy,” and his siblings, allegedly realizing the amount of money they needed to plow into this business that their pious mother doesn’t approve of, was indeed scouting for a foreign strategic partner for this project.

Prior to Thursday night’s announcement of a deal with Melco, LR shares spiked on talks that it would still get a 15-percent share of the project’s cash flow or earnings before interest, taxes, depreciation and amortization (Ebitda) while Belle’s share would be diluted to 35 percent. Melco, which will become the single biggest investor with a $580-million contribution, will get a 50-percent share of Ebitda.

But a source from the SM group clarified that this Ebitda sharing scheme, while technically correct, was not the complete picture. As Belle owns the property, Melco will pay rent to Belle and this rental income is sizeable enough to trim Melco’s total economic interest in the project such that both Belle and Melco will end up with more than 40 percent (not necessarily equal) effective share in the project. Of total rental income, 70 percent will go to Belle and 30 percent to LR. LR’s overall economic interest (share in Ebitda and rent) will be diluted to between 6 and 8 percent. But this token stake left to LR will still be of good value if Melco indeed improves on the project and attracts the region’s high-rollers.

For its part, the dilution in Belle’s interest allows the SM group to reduce its exposure in a lucrative business that it does not want to include among its core subsidiaries for obvious reasons.—Doris Dumlao

DBP resignations

Francisco del Rosario, president and CEO of the state-owned Development Bank of the Philippines, has indicated to Malacañang his decision to step down from office effective September 1. According to the grapevine, the banker does not see eye to eye with some board members. It’s uncertain as of press time whether the Palace has accepted his resignation but one name has floated as a potential replacement: Gil Buenaventura, chief operating officer of Bank of the Philippine Islands.

One DBP board member has also quit—Anton Periquet, who was among those critical of the credit policy of the previous management. The resignations in the bank, which has had a vivid and sometimes turbulent chronicle in the last two years, are not necessarily related.—Doris Dumlao

First airport, first airline

The former Nielson Airport, which used to dominate the Makati central business district (long before it was a CBD), is celebrating its 75th anniversary this month, and what better way to commemorate it than to honor the airline that first took flight from its dirt runways?

The Filipinas Heritage Library(FHL)—which is housed in the building that used to be the Nielson Airport’s control tower and terminal, along Paseo de Roxas—will be displaying Philippine Airlines memorabilia at The Alcove, its ground-floor gallery for the whole month of July. Taking center stage at the exhibit are newspaper clippings, advertisements, maps, collectible stamps and photographs, among others, from the collection of aviation enthusiast Ian San Gabriel.

According to the Filipinas Heritage Library, the Nielson Airport was the country’s first international commercial airport, from which PAL’s maiden flight took off on June 15, 1941. The Nielson Tower, which now houses FHL, used to be the airport control tower and passenger depot, while Ayala Avenue and Paseo de Roxas used to be the airport runways.

The exhibit called “Flight to Progress: 75 Years of the Nielson Airport” is also being co-hosted by Ayala Land at the Ayala Triangle Gardens this month.—Daxim L. Lucas

Speaking of which …

The recent delivery of Philippine Airlines’ latest Boeing B777-300 has once more highlighted the importance of getting the country upgraded back to Category 1 status, especially since a fourth B777 is scheduled for delivery before year’s end. There are, of course, few things more problematic for PAL than to be paying amortization on four brand-new B777s while being unable to use them on the lucrative trans-Pacific routes.

As such, PAL’s new management has come up with an innovative—and interim—solution. The airline’s parent firm, San Miguel Corp., is now looking at small regional airlines it can buy (or partner with) through which PAL can fly to the US mainland, albeit indirectly. The airline to be acquired, of course, is based in a country that enjoys Category 1 status with the US Federal Aviation Administration. And it is based relatively near the Philippines so that PAL can easily and conveniently shuttle passengers to its jump-off point to North America.

It’s an innovative solution, of course, but the cheapest option continues to be a Category 1 upgrade for the country. PAL has taken it upon itself—spending not an insignificant amount of resources, we’re told—to help local aviation regulators comply with US regulations.—Daxim L. Lucas

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