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Southeast Asia May 26, 2006 Philippines' mining down in the dumps By David L Llorito MANILA - These should be boom times for the Philippines' mining industry, given that the country has some of the world's biggest under-exploited deposits of copper, gold and to a lesser degree nickel, and commodity prices are at historic highs. Instead, a toxic spill at an Australian-run mine has the entire industry in turmoil, with powerful political interest groups calling for a total ban on mining activities. Mining opponents, including the Catholic Church, nationalistic politicians and nongovernmental organizations (NGOs), have recently taken hard aim at a tailings spill on Rapu-Rapu Island, where seepage of toxic metals allegedly polluted fishing waters. An independent commission submitted a 169-page report to the government last Friday urging it to stop all mining in the area, revoke Australian mining concern Lafayette's Environmental Compliance Certificate (ECC), and force the company to pay damages. Philippine President Gloria MacapagalArroyo on Saturday declined the commission's request to ban all mining activities, though she has promised to
the Philippines has some of the region's more liberal mining codes. . Challenged by nationalist politicians. Liberal on paper. Hundreds of millions of dollars' worth of proposed new mining projects have recently stalled because of foreign investor and bank reservations about the legal status of their established and planned investments. the Supreme Court upheld the Mining Act as recently as December 2004. while other Philippines-based mining executives have questioned the ad hoc body's independence. The whole affair has greatly undermined investor confidence in the Philippine mining-policy regime. where toxic pollution spoiled fishing waters and caused health problems among local villagers.study carefully the report's various other recommendations. which allows for 100% foreign-equity participation through so-called financial and technical assistance agreements with local miners. including the Mining Act. However. restricted in practice On paper. including a review of the 1995 Mining Act's provisions for foreign participation and management. the lingering memories of the 1996 Marcopper mining disaster on Marinduque Island. Lafayette has dismissed the commission's findings as "unscientific and flawed".
they were frequently confronted by environmentalists. however.still casts a long shadow over the entire industry. So does the government's poor record of handling and distinguishing between minor and major environmental incidents. civil-society groups. When local mining companies backed by Canadian. Strident. offering a wide raft of tax and non-tax incentives to potential investors and creating the Mineral Development Council to help foreign investors cut through red tape and quickly begin digging. Australian and Japanese investors recently started probing around local communities for undiscovered deposits of precious metals. It doesn't always work that way on the ground. who together represent a formidable political force against miners. widespread opposition from local-level activists and the Catholic Church are undermining the government's efforts to attract more foreign mining-oriented investment. and the politically influential Catholic bishops. The government has said it expects mining to generate between US$5 billion and $7 billion annually in foreign exchange and to create as many as a quarter of a million jobs over the next six years. Manila has nonetheless actively sought new foreign mining investments. The outspoken Bishop Dinualdo .
can bring mining operations in the Philippines to a screeching halt. Benguet. . backed by Canada's TVI. (According to a study by Peter Walpole.Gutierrez of South Cotabato recently accused the Tampakan Gold and Copper Project invested by Australia's Indophil Resources of "environmental degradation" and "displacement" of indigenous peoples .even though the project was still in the exploration stage. In 2001. to date there have never been any documented cases of people being displaced to make way for mining sites.) Similar unsubstantiated complaints have recently been leveled against. and the Canatuan Gold Project in Siocon. the Didipio Gold/Copper Project operated by Australian Philippines Mining Inc. regardless of their scientific or technical veracity. and complicated the workings of. the Teresa Gold Project operated by Lepanto Consolidated Mining in Mankayan. after more than five years of lost revenues. a Norwegian company. Those complaints. an academician-priest who has studied the social impact of mining in the Philippines. protests led by NGOs. President Arroyo has only recently reinstated Crew's mining rights. left-leaning groups and Catholic priests forced then-environment secretary Heherson Alvarez to cancel the mining rights of the Mindoro Nickel Project financed by Crew Minerals. Zamboanga del Norte.
6 . claiming that mining operations often displace indigenous peoples. gives away control of lands to foreigners. unleashing 1. the bishops echoed the sentiments of militant environmental groups. was stymied after a vigorous campaign led by local community organizations and militant leftist groups against feared environmental degradation. commissioned to the Manila Mining Corp. the Kalaya-an Gold Project. The situation for foreign miners has become all the more precarious since January. The Ghost of Marcopper The opposition movement draws heavily on one tragic mining accident to push its agenda. "The adverse social impacts on the affected communities far outweigh the gains promised by [transnational mining] corporations. In their statement.Another project. and called for the repeal of the 1995 Mining Act and the closure of big mining operations across the country. and destroy the environment. the plug in the Tapian pit drainage tunnel operated by the Marcopper Mining Corp on Marinduque Island failed. when the politically influential Catholic Bishops Conference of the Philippines (CBCP) issued a pastoral statement denouncing mining as a "destroyer of life"." the public statement said. In 1996.
Now. when a pump at the Rapu-Rapu mines failed. have packed their bags and returned home unscathed. The executives of Canada's Placer Dome. conjured up the bitter memories of Marinduque. which then controlled the Marcopper Mining Corp. The lack of foreign-company accountability has not gone down well with the Philippines' active and vocal civil-society. causing the overflow of cyanideladen tailings into nearby creeks. killing about 2 kilograms of fish. the national government still has not decided on how best to clean up the social and environmental mess. rightly or wrongly. environmental and faithbased groups. even after the commissioning and availability of extensive scientific and technical studies of the incident. a heavy six-hour rain caused the tailings pond to overflow into the nearby Ungay and Hollowstone . Mining-industry sources say their current headaches started last October. The spillage caused health problems among local residents and devastated the island's ecosystems. Ten years later. About three weeks later.million cubic meters of toxic mining slurries and tailings into the Makulapnit and Boac rivers. the controversy over the tailings spill at the Rapu-Rapu mine operated by Lafayette Philippines and Lafayette Mining of Australia has.
"The total volume of the tailings released in the two incidents is just about 20 cubic meters. notably at the same time the government and Chamber of Mines were actively pursuing new foreign mining investments as part of a state- ." Regardless. A Mines and Geosciences Bureau (MGB) source said. and hire a full-time pollution-control officer. implement a comprehensive pollution-control program.creeks. On January 6. It's nowhere near the scale of the Marcopper mine tailings spill. president of the Philippines' Chamber of Mines. the government has contended that Lafayette Philippines has violated some of the conditions of its original ECC.7 million ($210.000) fine for three different ECC violations. It's just about a truckload. PAB said Lafayette Philippines must submit an environmental-management system or ISO 14001 certification. To resume operations. "It was really a minor incident. a drop in the ocean. put up a surety bond equivalent to 25% of the total cost of the pollution-control program. the Pollution Adjudication Board (PAB) slapped the company with a P10." said Benjamin Philip Romualdez. The Rapu-Rapu incident occurred in October. this time killing 15kg of fish.
Arroyo announced the creation of an allegedly "independent commission" to investigate the health and environmental impacts of the twin tailings spills. The commission was to be headed by Bishop Arturo M Bastes. politically embattled over allegations she had attempted to rig national elections.led job-creation scheme." Sean Georget. miners will go to Mongolia or somewhere else. "From a geological standpoint. mining analyst with Shaw Stockbroking based in Sydney. also announced a congressional review of the Mining Act." Ted Leschke. told Asia Times Online that the Philippine Mining Act compares favorably with similar mining legislation . In a surprising move. but as the protests and media coverage became more widespread. Arroyo finally acquiesced to the political pressure. a well-known opponent of the mining industry. Arroyo. a statement that immediately sent shock waves through the foreign investment community. But if they keep changing things. On March 10. "It's not good news for the Philippines as there is a perception now that policy is going the other way. Arroyo at first tried to ignore the Rapu-Rapu controversy. executive director of the Canadian Chamber of Commerce of the Philippines. the Philippines is A-1. was quoted as saying in the Malaya newspaper.
Romualdez said that as of this month. and that another $2 billion in so-called "announced investments" are in the pipeline. Australia and New Zealand Banking Group Ltd. mining investments have steadily increased. "What is there to review? If you say you are going to review the law. including NM Rothschild & Sons (Australia). but because of the fallout of the Marcopper incident. . have also reportedly been shaken by the possibility of a policy flip-flop.000 workers by the end of 2005. however. you are putting uncertainty into the policy landscape. ABN AMRO Bank NV (Australia). A total of 17 metal mines were operating across the country in 1997. The growing uncertainty surrounding Philippine mining comes as the industry was clearly re-emerging from the Marcopper Marinduque Island debacle." Foreign banks exposed to the industry.in Canada. and Standard Chartered First Bank Korea Ltd. Investec Bank (Mauritius) Ltd. according to statistics provided by the Philippine Embassy in Washington. Australia and the United States. Since then. that number was down to seven by 2002. reaching $345 million and employing 7. total "on the ground" investments have reached about $500 million.
according to MGB officials. the industry would in the coming years ensure the inflow of $10 billion into the economy through the expansion of existing projects and the operation of new ones." Indeed. However. many of those promised projects have stalled or have failed to secure the necessary foreign financing needed to commence operations. "It's really up to the Department of Environment and Natural Resources [DENR] now. "All [the fact-finding commission] had in the report are pure allegations. Cancellation of Lafayette's ECC would mean that the company could not resume operations and would be forced to close shop an outcome that industry sources contend would scare off resident and potential new foreign investors. Bastes presented his report to Arroyo at a closed-door meeting in the presidential palace. with a pending congressional review of the Mining Law.The Chamber of Mines also said in a recent statement that by continuing to allow foreign investments in mining. They haven't built a case against the company. especially the provisions allowing for greater foreign-equity participation. Sources inside the Bastes Commission said the final report echoed the PAB's findings against Lafayette and. in a statement this week Lafayette challenged the scientific accuracy of the Bastes Commission's allegations that the company caused mercury contamination of coastal water . Political mine shaft Last Friday. in an extreme measure. The report also reiterated calls for a congressional review of the Mining Act. But how could 17kg of dead fish force the closure of a multimillion-dollar project that is benefiting more than a thousand workers and the community in terms of social development projects?" asked one mining executive. called for the cancellation of Lafayette's ECC.
a Manilabased daily newspaper. .areas. in fact. "Investment losses would amount to $259 million in terms of bank loans. and bank hedging exposures. Since early this month. He claims that the company is bleeding about $2. The firm claims it has already hired an independent group of mining and engineering experts to help it comply with the requirements of the PAB. the threat of closure compounds the company's daily losses suffered by their padlocked operations. the company does not use any mercury in its production processes. to tap the Philippines' rich bounty of natural resources. saying that. [it] may be forced to close. shareholder advances.7 million each month in overhead costs and about $13 million in forgone revenue. however.. He has more than a decade of experience in socioeconomic research. policy analysis..000 ." Not exactly the sort of financial result that Lafayette had in mind when it signed up. did not act on the company's request because at the time it was still waiting for the results of the Bastes Commission's investigation. at the government's invitation. The DENR. David Llorito is a researcher at the BusinessMirror. and businesseconomy journalism in the Philippines. Still." said Lafayette's Manny Agcaoili.. would be approximately $1. Lafayette's managers have repeatedly asked the government to allow it to conduct test runs and eventually resume normal operations. Loss of employment . It's still altogether unclear what the department will do next now that the report is in hand. despite having completed all the required remedial measures.. Now the company fears that its creditors might foreclose on their dormant operating assets. "If the restart of the project is subjected to further delays.
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