Miners gather for pow-wow in Manila

Manila, Philippines — Held recently here, and organized by the Asean Federation of Mining Associations (AFMA), the 7th Asia Pacific Mining Conference attracted many of Asia’s most prominent miners and mining organizations.

Charlie Sartain, CEO of Xstrata (XTA-L, XSRAF-O) subsidiary Xstrata Copper, spoke on the company’s recent progress. Sartain’s most recent acquisition is the world-class Tampakan copper-gold project in the Philippines.

With prefeasibility estimates of 2 billion tonnes of resources, the site is the largest copper development project in Xstrata’s portfolio and some say it will be the most significant in Asia. Copper, Sartain explained, is arguably his company’s most important mineral since it accounts for 53% of Xstrata’s cash flow (EBITDA).

The story of Tampakan’s development is one of great achievement in the face of extreme adversity. The original ownership entity, called Indophil Resources, began in 1996 under the direction of an Australian named Tony Robbins.

The company almost went under during the lean years, but Robbins endured personal hardship and plodded on. From an original market capitalization of just A$500,000, it has grown to A$300 million.

Indophil and its hard-driving boss succeeded beyond expectations and it would not have been possible without dedicated government support. Most importantly, Tampakan will provide a 50-year economic benefit for the people of the Philippines and will open the gates for investment by other world-class companies.

Owen Hegarty, the high-flying CEO of Oxiana (OXR-A), gave what many considered the most enthusiastic performance of the 3-day conference, providing a riveting account of his company’s early beginnings in the late 1990s and its ongoing evolution.

With operations almost exclusively in Asia, Oxiana recently reported a profit of A$500 million. Over the past 10 years, Owen’s company has grown its market capitalization to A$5 billion from A$20 million.

Mitch Hooke, CEO of the Minerals Council of Australia, spoke about his strong beliefs in the mining “super cycle.” This theory posits that demand for minerals will be strong for many years to come since countries in Asia — with roughly half the world’s population — are industrializing quickly.

The super cycle concept is treated with suspicion by many experienced industry watchers who have “seen it all before.” But to people in Asia who are witnessing relentless economic growth firsthand, it is considered a fact of nature.

Patrick Waters of Anglo American (AAUK-Q) gave a persuasive presentation showing that field exploration is the best path to value creation.

His numerous examples from places such as Indonesia and the Philippines showed investment returns that were beyond those possible through the high-priced acquisition route that seems more fashionable these days.

Lastly, Benjamin Romualdez, the extroverted president of the AFMA and the Chamber of Mines of the Philippines, expressed strong opinions on continuing growth of the mining sector in Asia.

Using the Philippines as an example, he cited mining giants such as BHP Billiton (BHP-N, BLT-L), Sumitomo Metal Mining (STMNF-O, SMM-L) and Xstrata that are looking at billion-dollar investments in the country.

Romualdez predicted that mining industry dollar earnings could reach as high as $10 billion by 2012 — up from just $2 billion today. Other countries in southeast Asia have similar growth opportunities ahead, according to Romualdez.

While not everyone believes that such growth is possible, it is clear that most people in Asia feel strong development in the mining sector is inevitable for years to come.

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