Commentary – Philippines mining: Open for business, or so they say

Manila, Philippines — Just a year ago, no one would have imagined the Philippines as the site for this year’s Asia Pacific Mining Conference. But last week it happened: many of the most senior mining leaders of Asia were brought together in Manila.

The country used to be one of the largest mineral producers in the world, but years of abuse have left the mining industry in tatters. There have been no new mines for the past 30 years — that is, until just the past few months.

A new mining law has made the industry viable in Philippines once again and, according to the government, the country is open for business.

Politicians, judges and government officials were present at the conference in large numbers to provide smiles and rosy assurances to the hundreds of foreign delegates in attendance.

Mining executives were not quite as optimistic as the politicians, but the overall tone was certainly positive and a big change from just one year ago. Understandably, the companies with the most positive messages about Philippines were those experiencing the most success.

Andrew McIlawain, chief executive of Melbourne-based Lafayette Mining (LAF-A), declared his company’s flagship Rapu Rapu project as the Philippines’ “first greenfield development in thirty years.” Pouring of gold had already begun and full production was said to be only another month or so away.

John Ridsdel, country manager of Lafayette partner TVI Pacific (TVI-T), says his company is planning an expansion to increase its production.

James Askew, chairman of Aussie junior Climax Mining (CMX-A) proudly announced that his company had been awarded its permit to operate the day before, and would proceed with its large development plans for its gold deposits. In addition, work would continue with its large exploration assets.

Tony Robbins, managing director of Australia’s Indophil Resources (IRN-A), was similarly positive. He described his company’s copper-gold deposits in Philippines as probably the seventh- or eighth-largest in the world.

Inco‘s (N-T, N-N) vice-president of exploration, Nick Sheard, also provided a riveting speech about his company’s projects. Most of his presentation was focused on the Asia Pacific region but he expressed pointed optimism about the Philippines.

While there was much to be upbeat about, some expressed caution about operating in a country with a long history of antagonism toward mining.

Patrick Waters, president of Anglo American Exploration Philippines, cited problems in many areas. He says that while there is strong support at the national level of government, this rhetoric is often not transferred to the local level. Small communities are often easily influenced by anti-mining non-governmental organizations and militant church leaders.

Corruption and red tape are other hindrances, as is difficulty gaining access to adjacent sites because of uncertain and sometimes arbitrary regulatory and legal structures.

Well-respected business consultant Peter Wallace, of the Wallace Business Forum, was similarly guarded. The “new” mining law, he said, was originally passed in 1995. The country’s supreme court held it up for nine years to determine whether it was constitutional or not.

In addition to an arbitrary judiciary, some of the other concerns he expressed included vested interests, poor security and slow approvals.

He told the story of Placer Dome‘s (PDG-T, PDG-N) experience in Philippines some years ago as a message of the risks to be avoided. The company held a minority stake in a project called Marcopper that had a nasty spill. The company has since spent more than US$70 million for clean-up work that has been described by independent analysts as more than adequate. Today, Placer Dome is still reviled. The local company that had majority control of the project has paid nothing.

Despite the concerns, the Philippines is said to be “not much different” and “probably even better” than many countries in Asia and Africa that already have more-established mining sectors.

Indonesia, for instance, currently has foreign mining executives languishing in jail with no end in sight.

Given the alternatives and the current sense of commitment by the government, it seems that the Philippines mining industry will gradually continue to improve its position. That is, as long as there are no changes.

— The author is chairman of executive search firm Chalre Associates and is based in Manila. He can be reached at rmills@chalre.com or www.chalre.com.