Mining to the Philippines
Trends and opportunities
The market
The Philippines is the fifth most mineralised country in the world, with the third largest deposits of gold, fourth for copper, fifth for nickel and sixth for chromite. The nation’s mineral resource assets are valued at around A$1.32 trillion, but those remain largely untapped. The country’s total land area covered by mining tenements is only 0.872 million hectares or 2.91 per cent of the country’s 30 million total land area. In terms of non-metallic minerals, the country has untapped coal resources estimated at about 2.4 billion tonnes.
The country has 44 mining companies of which 37 are operating mines – six gold mines, three copper mines and 28 nickel mines – as well as 65 non-metallic mining companies. The Department of Environment and Natural Resources has been undertaking an audit to ensure these companies are ISO14001 compliant. Australian and Canadian standards have been named by Philippine President Rodrigo Duterte as the reference point.
Metallic mineral production value increased by 5.1 per cent in the first quarter of 2017. This was due to good metallic prices. More importantly, gold with the highest price contributed to the highest percentage to total mineral production. The combined gold output of the Didipio Gold Project of OceanaGold Philippines, Inc. and Masbate Gold Production of Filminera Mining Corporation/Philippine Gold Processing and Refining Corporation in Masbate accounted for more than 58 per cent of the country’s total gold production. In terms of mining method, five are underground and one open-pit mine.
In terms of nickel production, Direct Shipping Ore (DSO) and mixed nickel-cobalt sulphide accounted for 28 per cent of total mineral production coming. Out of the 28 nickel mines, only seven reported production for the first quarter of 2017. Zero production was due to unfavourable weather conditions, some mines are on care and maintenance status, and suspended operations due to environmental related issues. Coral Bay Nickel Corporation and Taganito Mining are at the forefront, combined nickel production increased by 27 per cent in the first quarter of 2017. Both companies/plants make use of hydrometallurgical nickel processing method.
In terms of copper production, Carmen Copper Corporation reported the largest output equivalent to 46 per cent of total copper production, followed by Padcal Copper-Gold Project of Philex Mining which is an underground mine, Toledo Copper open pit mine and Didipio Copper-Gold Project of OceanaGold Philippines also an open pit mine.
For non-metallic mine operations, Semirara Mining is the major coal producer of the country, accounting for almost 97 per cent of total coal production. In the first half of 2017, Semirara Mining increased coal production by 25 per cent to 7.35 million metric tons (MMT) from 5.88MMT (Source: Semirara Mining and Power Corporation report, 1H2017).
Government and policies
The Department of Environment and Natural Resources (DENR) is the primary agency responsible for the conservation, management, development, and proper use of the country’s environment and natural resources. Its mandate among others is to assure availability and sustainability of the country’s natural resources through judicious use and systematic restoration or replacement, whenever possible (Source: Department of Environment and Natural Resources ).
The Mines and Geosciences Bureau (MGB) is mandated to take charge in the administration and disposition of mineral lands and mineral resources; promulgate rules and regulations, policies and programs relating to mineral resources management and geoscience developments (Source: Mines and Geoscience Bureau (MGB ).
The Department of Energy (DOE) is mandated to prepare, integrate, coordinate, supervise and control all plans, programs, projects and activities of the government relative to energy exploration, development, utilisation, distribution and conservation.
Philippine Mining Act of 1995
The Philippine Mining Act of 1995 (Republic Act No. 7942) is the governing law for mining. Under this Act, mineral resources are owned by the state and their exploration, development, utilisation, processing and conservation are under its full control and supervision. The state may grant mining rights in three ways:
- Exploration Permit (EP) or Mineral Processing Permit (MPP) – grants the right to explore specified areas for two years, renewable for a maximum of eight years for metallic mines and six years for non-metallic mines.
- Mineral Production Sharing Agreement (MPSA) – grants the contractor the right to conduct mining operations within a contract area and share the gross output. The MPSA is for 25 years, renewable for another 25 years.
- Financial or Technical Assistance Agreement (FTAA) – a contract involving financial and technical assistance for large scale exploration, development and utilisation of mineral resources. This type of contract is open to Filipinos and foreign corporations with up to 100 per cent foreign equity and has a term of 25 years and renewable for another 25 years.
As of September 2016, the Philippines has 29 existing EPs; 303 MPSAs; and five FTAAs. (Source: Mines and Geoscience Bureau (MGB) ).
Executive Order 79
Reforms in the Philippine mining industry was institutionalised in July 2012 through the Executive Order 79. Two important issues have been raised under the EO 79, which will greatly affect the mining industry:
- The proposed mining revenue sharing scheme
- The proposed no-go zone maps
ouse Bill (HB) 5367 proposes a government share equivalent to 10 per cent of the gross revenue, or 55 per cent of the ‘adjusted mining revenue’, whichever is higher. The no-go zone maps developed by the Mining Industry Coordinating Council (MICC) identified areas reserved for agriculture, eco-tourism, protected landscapes and seascapes.
The no-go zone maps developed by the Mineral Industry Coordinating Council (MICC) closes approximately 84 per cent of the country’s 30 million hectare total land area as off limits to mining activities. These areas are reserved for agriculture, eco-tourism, protected landscapes and seascapes. Effectively, about 4.5 million hectares of the 9 million hectares generally considered to be of high mineral potential are now closed off to mining. The ‘no-go’ zone maps remain pending approval with the Office of the President, but it is now being used by the MGB in its review of exploration permit applications.
Legislation on Open Pit Mining
The EO 79 does not have specific laws on mining techniques. The Department Secretary (Minister) for Environment and Natural Resources will recommend a legislation providing clear-cut rules and regulations on open-pit mining. Discussions are ongoing with the Mining Industry Coordinating Council (MICC).
The MICC is tasked to formulate the implementation rules and regulations for EO 79. It is composed of the Economic Development Cabinet Cluster and the Climate Change Adaptation and Mitigation Cluster. The Philippine mining stakeholders which include the MICC, the Chamber of Mines of the Philippines, and the mining non-governmental organisations are currently having a series of discussions to ensure that it is equitably beneficial to the state and to the private sector with emphasis on environment sustainability and safety standards.
Extractive industries transparency initiative
The Philippine Government has joined the Extractive Industries Transparency Initiative. This is a commitment to fiscal transparency and accountability for effective governance. The Philippines-EITI Multi-Stakeholder Group (MSG) appointed an independent administrator that reconciled the accounts submitted by the relevant government agencies and the 33 participating mining and oil and gas companies.
Through the EITI process, local governments and mining communities now have access to data regarding their shares from national wealth and payments collected from companies in their area. The data is collected from an electronic reporting system where EITI data and the Local Government Units and Department of Finance are integrated.
The Philippine-Extractive Industries Transparency Initiative (PH-EITI) report for 2014 covered a total of 36 companies – 31 large-scale metallic mining companies and 5 oil and gas companies for collections in year 2014. The report revealed that there was a variance of over Php 76 million from what was paid by mining and oil and gas companies in the form of taxes to what was received by the Philippine government. The causes of variances were a result of difference in accounting frameworks, no centralized database, disaggregated data, delayed submissions of required schedules and documents to support disclosures.
The recommendations of the report include: uniform accounting framework preferably through the accrual method, formalise alternative procedures, close coordination by agencies’ central offices and provincial branches, and regular conduct of audit.
Source: austrade.gov.au