UPDATE: Communists turn up heat on Philippine mining industry

*analyst comments added in graphs 6,7 and 8.

The Communist Party of the Philippines (CPP) says things may get violent in response to governmental-reforms regarding mining on the nation of islands.

Just over two weeks after President Gloria Arroyo announced she would take direct control of the countrys largest and most important state-run mining corporation, and that her brother-in-law would be appointed head of the House Committee on Natural Resources, the CPP issued what amounts to a call to arms against the government.

Accusing Arroyo of committing a double coup over the countrys mineral wealth, the CPP says its armed wing, the New People’s Army (NPA) has been issued standing orders to carry out all necessary action (both armed and un-armed) to prevent foreign big mining companiesand bureaucratic collaborators from carrying out the all-out plunder of our natural resources.”

The release says any mining operations in the revolutionary territory which is understood to be certain rural areas of Luzon in the northern, Visayas in the central, and Mindanao in the southern part of the country would be under threat.

“With their heightened control, Arroyo and her kin and collaborators will be pocketing billions of pesos in cuts and bribes,” the release reads.

Alex Gorbansky, managing director at Cambridge, Massachusetts-based risk assessment firm Frontier Strategy Group says while the CPPs threat isnt a major challenge in the grand scheme-of-things, it is yet another issue investors must consider when contemplating investing in the tumultuous country.

The Communists certainly have the capacity to create very difficult situations for mining companies on the ground, he says. They can mobilize communities in and aggressive manner, somewhat along the lines of what weve seen in Bolivia and Peru.

Gorbansky says while he wasnt surprised by Arroyos move to gain greater control of the countrys natural resource sector, he thought she failed to understand how to best address concerns from grassroots groups in mining regions.

Arroyo placed the Philippine Mining Development Corporation (PDMC), a government-owned and controlled body active in all aspects of the mining-stream, under her direct supervision in mid-July.

She said the measure was necessary to closely monitor and oversee the efficient and effective implementation of the countrys utilization and development of its mineral resources.

Patric Barry, president and chief executive of Tiger International Resources (TGR-V)– a junior exploration company operating in the country — says while it’s still too early to tell whether Arroyo’s move will have a positive effect on the industry, it is the right first step towards unleashing the countrys long pent-up mineral potential.

If the president gets a hand around this industry and frees up some of the piddle-y bureaucracy and gets on with it, this has got to be a good thing, he says. It cant be worse than the old way were things werent getting done. Everyone was getting bogged down at the local level where its very bureaucraticEverything takes a fee, this is the Filipino way.

Barry went on to say that the changes Arroyo made were likely done with an eye towards winning back investor confidence, which he says, was damaged back in the dark days of the Marcos regime and never fully returned.

But another executive with exploration properties in the country isnt quite as optimistic about the reforms.

Niyazi Kacira is the president and chief executive of Altai Resources (ATI-V). Like Barry, Kacira sees local bureaucracies as the biggest impediment to juniors trying to get projects off the ground. But he believes the central government must take more drastic measures to reign-in localities that act independently of central government decrees.

Unless they change the whole permitting system the changes wont do much good, he says.