RP’s glimmering mining prospects

BIZLINKS By Rey Gamboa
Friday, June 15, 2007

The local mining sector must still be ecstatic over the recent success of the ASEAN mining conference here last week. It was a triumph of sorts, with some of the biggest names in the international mining business in attendance – Xstrata, Oceana Gold, Rusina Mining NL, BHP Billiton, CVMR, Anglo Gold Ashanti, and Crew Minerals.

All of them, along with the so-called junior mining companies were obviously very much interested in mining in the Southeast Asian region, but with particular interest in the Philippines .

Chamber of Mines of the Philippines president and ASEAN–AFMA mining conference chairman Benjamin Philip Romualdez just wasn’t exaggerating when he described the entire hall as almost always filled to the rafters now that the topic was about the country’s mining prospects.

Indeed, there seems to be that atmosphere of bullishness among foreign and local mining investors in the country. Even food and beverage conglomerate San Miguel Corp. is reportedly planning to get a foothold in the business.

A group of businessmen led by SMC chief executive officer Ramon Ang reportedly has filed an application for an exploration permit in Occidental Mindoro that many widely believe will eventually be the vehicle for SMC’s entry in the mining business.

Thing of the past

It helps of course that a number of developments augur well for the Philippines .

In recent years, Indonesia had attracted mining bigwigs because of its investor-friendly policies, quite unlike in the Philippines when anti-mining groups in the past stymied the industry’s growth, although with just cause, of course. There were just too many irresponsible miners wrecking havoc on the environment of their host communities.

Such a thing, Romualdez and colleagues swear, is a thing of the past. It should be.

Nowadays though, Indonesian authorities seem to be under a lot of pressure to preserve their remaining mining interests. Its government and legislators are expected to have a long-winded debate with mining groups on a proposal that would have serious implications over the viability of mining operations there.

The proposal calls for a virtual halt in the granting of new mining rights in what its proponents explained is a move to preserve what’s left of their rich mineral resources.

This would only mean that rich foreign mining companies will seek other prospects where there are no such restrictions.

‘Mining country’

In contrast to Indonesia , our local mining sector is gearing up for a boom. If and when all the major mining exploration projects go on stream in a couple of years, the Mines and Geosciences Bureau (MGB) expects the Philippines to be a “mining country” by 2010.

A mining country is defined by the World Bank as one where the local mining sector contributes at least six percent to the country’s total exports. The MGB is projecting that mining’s contribution to exports would be on an uptrend starting next year at 2.8 percent, rising in 2009 to 2.9 percent, and jumping in 2010 to 8.6 percent when most of ongoing exploration projects would have evolved into commercial operations.

The forecasted mining boom is expected to be sustained by high metal prices, particularly as China ’s industrialization aspirations are fuelling the insatiable demand for imported mine commodities.

Alexander Molyneux, an analyst of Citigroup Global Markets, noted in the mining conference that China remains as the key medium-term driver for changing global dynamics for metals and mining usage as its rapidly expanding economy is already outpacing India as a major driver.

Molyneux also stressed that China will need 150 percent of current global supply for nickel and copper by 2030 and 200 percent by 2050!

Tracking the capital inflow into the ASEAN mining region, Molyneux said that mining investments, while only $180 billion in 2001, will be more than $800 billon before the end of the year due to China’s monstrous demand.

As a result, mineral output of ASEAN miners since 2001 has been increasing at a faster rate compared to other traditional mining regions.

Molyneux said the mining industry’s contribution in the last six years to the gross domestic product of Indonesia , one of the largest mineral producers in the region, was 6.4 percent, while the impact in Lao PDR was 21.6 percent. Mining contributed 2.7 percent in Vietnam , and 3.7 percent in the Philippines during the same period.

There is a real future indeed for mining operations in the country, especially if the government will be consistent in implementing policies earlier framed to lure in mining firms already “eagerly gambling” on the mining industry.

Minding the local community

There is a need though to pay more attention to winning the hearts and minds of local host communities that were gravely aggrieved in the old mining regime. Companies should definitely keep their promises of judiciously implementing only the best mining practices.

If it’s any measure of comfort, local governments are more vigilant these days; many studiously evaluate proposed mining projects before giving their approval. Only then does the MGB give its go-ahead for a project to proceed.

Nowadays, multilateral creditors also require the thumbs-up sign of host communities. The guiding principle supporting this decision is that the community and its surrounding environment will have to bear the collateral damage from large-scale mining operations.

Because of this, affected communities rightly deserve a fair share of the indigenous resources being exploited. Real economic development should be the ultimate result of their accommodation of mining operations.

Unless, of course, we allow our local officials to dip their hands on these lucrative mining projects and turn them into glimmering prospects for re-election campaign funding.