2003 LEGACY MINES VISIT

BENGUET CORPORATION’S
CONTRACTUAL MINING AGREEMENT

and

SMALL-SCALE MINING IN ITOGON, BENGUET

Philippine Working Group on Mining

Environmental Science for Social Change (ESSC)

March 2008
 TABLE OF CONTENTS

MINING IN ITOGON, BENGUET.........................................................................3

Background ............................................................................................................3
Land use .................................................................................................................3
Socio-economic profile...........................................................................................4
BENGUET CORPORATION’S OPERATIONS....................................................4
POST-MINING OPERATION IMPACT, CONFLICTS AND LEGACIES.........5
Environmental liabilities.........................................................................................5
Socio-economic conditions .....................................................................................5
POST-MINING OPERATION REHABILITATION PLANS AND MINE SITE
DEVELOPMENT PROJECTS ...............................................................................6
Reforestation program ............................................................................................6
Relinquishment of some mining claims to the local government unit (LGU)...........7
Bulk water project ..................................................................................................7
Tourism ..................................................................................................................8
Contractual mining agreement with SSM................................................................8
Objectives of the BC-SSM agreement.....................................................................8
Roles and responsibilities of contracting parties......................................................9
Benefits for the contracting parties........................................................................11
Local environmental and social concerns ..............................................................12
Taxation ...............................................................................................................13
Profit sharing........................................................................................................14
BC POST-MINING OPERATION MINE SITE: QUESTIONS AND
CONCERNS ...........................................................................................................14
Piloting access of small-scale miners in large-scale mining company’s mining claim
.............................................................................................................................14
Ensuring local participation in monitoring contractual mining operations .............15
Working out local development contributions from the contractual SSM operations
.............................................................................................................................15
Ensuring fair benefit sharing.................................................................................16
Lack of clarity of post-operation rehabilitation plans.............................................16
Regulation of small-scale mining operations in the area........................................17
REFERENCES.......................................................................................................18
ENDNOTES ...........................................................................................................19

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MINING IN ITOGON, BENGUET

Background

Itogon, one of 13 municipalities comprising the province of Benguet, has a long

history of mining. Traditional small-scale mining (SSM) by Ibalois predated the
colonial period. Interest in the gold deposits in the Cordillera attracted Spanish
expeditions to Itogon and other parts of Benguet,i but were generally unsuccessful in
gaining control of the goldmines. The American colonial period, starting in the early
1900s, saw the inception of large-scale mining in Itogon and other parts of Benguet.

As a mining town, Itogon hosted the operations of Benguet Corporation (BC), the
oldest mining company in the country, Atok Big Wedge, Itogon-Suyoc Mines,
Ominco Mines and other mining companies. The operations of BC, or its earlier
corporate entities, and the other companies that operated in the town spurred the
growth or expansion of a number of barangays in Itogonii (such as Antamok, Balatoc,
Dalicno, Kelly, Kias, Tram, Ucab, and Virac) with the influx of people to the mining
sites and the growth of downstream commerce. Mining operations in Itogon brought
about the steady increase in the town’s population from 39,349 in 1970 to 47,605 in
1980, then to 61,651 – its highest – in 1990. Following the closure of BC mines in
the 1990s, the municipal population dropped to 47,781 in 1995 and to 46,705 in 2000.

Mining in Itogon, along with other towns in the Benguet Province, contributed to the
growth of Baguio City, the regional center of the Cordillera Region.

Land use

Itogon has a mountainous topography cut by narrow valleys in the southern portion of
the Central Cordillera mountain range. Its highest point is found at the peak of Mount
Ugo, the second highest mountain of the province, at an elevation of 2,086 meters
above sea level. Itogon is on the lower stretch of the Agno River that drains the San
Roque Multi-purpose Dam. The Binga hydroelectric dam, which contributes to the
electric power supply of North Luzon, is located in Barangay Tinongdan in Itogon.

The municipality of Itogon has a total land area of 49,800 hectares, which comprises
almost 20% of the province’s total land area. The town’s present land use
classification is as follows:
Table 1. Land use classification of Itogon in 2003
Type of land use Area (in hectares)
1. Forest 9,908.14
2. Agroforest 3,714.03
3. Agriculture 1,183.00
4. Institutional 59.76
5. Patented mining claim 983.67
6. Residential 184.00
7. Water bodies 406.03
8. Roads 203.44
9. Open/brushland 33,157.93
TOTAL 49,800.00
Source: Mayor’s Office, Municipality of Itogon, 2003

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According to Mayor Mario Godio, the town’s land use classification overlaps with a
proclaimed protected area and with mining claims.iii A major portion of eastern
Itogon is declared a protected area as part of the Lower Agno River watershed that
supports the San Roque Multi-purpose Dam. This declaration leaves the town with
little development options as it is left with only about 2,000 ha of non-forestlands (or
alienable and disposable lands) under its jurisdiction.

About 2% of the town’s land area is under mining patents. The town officials are
asking mining companies to relinquish their non-operating mining claims to the local
government unit for town development instead of leaving these idle and untapped.iv

Socio-economic profile

Revenues from previous mining operations in Itogon elevated the status of the town
from its classification as a third class municipality in 1990 to a second class
municipality in 1995, then to a first class municipality in 1996, with corresponding
increases in the Internal Revenue Allotment or IRA.

Except for the ongoing contractual SSM operations in BC’s mine site in Acupan,
there are no current large-scale mining operations in Itogon. However, Barangay
Ampucao in Itogon hosts some mine structures of Philex Mining Corporation, one of
two surviving mining companies in Benguet province that has its main operation in
the adjacent town of Tuba, which entitles the said barangay and the municipal
government to a share in the excise tax from Philex mining operations.

Despite the closure of BC mine sites, Itogon retained its classification as a first class
municipality until now. The municipal government unit receives an IRA of PhP 49
million per year.v The LGU remains dependent on the IRA for the delivery of basic
social services to the communities. The town has 14 barangay health centers and also
a 10-bed hospital put up to serve its two remotest barangays. As of 2001, Itogon has
39 public elementary schools and six secondary schools, three of these privately
owned. The literacy rate of the population’s age group of 10 years old and above is
high at 93.99%.

With the BC mines shutdown, agriculture is the primary source of income in Itogon,
although agricultural lands are very limited. The key products of the town are rice,
vegetables, cut flowers and fruits, especially mangoes. Also, SSM operations, which
are mostly without government permits, are expanding. As of 2000, the approximate
average annual income of Itogon residents is PhP 49,000.

BENGUET CORPORATION’S OPERATIONS

Established in 1903 as Benguet Consolidated Mining Company, Benguet Corporation

(BC) “pioneered” modern mining in the Philippinesvi. Hitherto, gold extraction in
Itogon was restricted to small-scale gold panning along the river.

Since the early 1900s that BC or its earlier corporate entities were mining in Itogon,
the company served as a long-term employer for Benguet’s people and nearby
provinces. At the height of its operation in the late 1980s, BC employed as many as
8,000 workers in its three major underground mines, namely, Antamok, Acupan and

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Kelly. At the time, BC was the biggest employer in the province of Benguet. The
company also operated under contract with other companies at the Atok-Big Wedge
and Itogon-Suyoc mine areas, and operated a small experimental open pit mine in its
Cal Horr site.

In 1992, BC started the commercial operation of its open-pit mining in Antamok in

addition to the three major mine sites. That same year, however, BC suspended its
underground operations owing to very low gold market prices, high production costs
and deep-tunnel flooding triggered by the 1990 earthquake that hit Northern Luzon.
Prior to 1990, BC was operating its underground mines at a net loss and was spending
PhP 2 million per day just for pumping out water from its tunnels. The company
continued its open pit mining operations in Antamok until 1998 despite strong local
opposition. In 1998, the company also ceased its open-pit mining in Antamok
because of the prolonged low market price of gold and risks associated with the La
Niña phenomenon on the slope stripping activities,vii and also because the presence of
surrounding communities prevented mining expansion in the area.

Antamok open pit

POST-MINING OPERATION IMPACT, CONFLICTS AND LEGACIES

Environmental liabilities

After a complete stop in its mining operations in 1998, BC left a legacy of several
inactive mine structures which include three underground tunnel systems, a major
open pit, waste dumps, tailings dams, a processing plant and other surface and
underground mining facilities in its Antamok, Acupan, and Kelly mine sites and its
Balatoc support facility area. Mine waste materials generated by previous BC
operations were either disposed of in designated waste dumps or recycled for other
purposes within the mine site.viii

Socio-economic conditions

BC’s mine closures led to a major blow on the local economy of Itogon, of Benguet
province, as well as of the entire region. It resulted in the retrenchment of thousands
of workers in Itogon. All retrenched workers of BC were given their separation pay.
Given the scarcity of job opportunities in the town and in the province, many
retrenched workers turned to SSM and commercial vegetable production.

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 Antamok pit and waste pile hill

Thousands of people who migrated to Itogon when the mines were operating left the
town after the mines shut down. Between 1990 and 2000, Itogon lost over 14,000
residents. Still, according to Mayor Godio, Itogon did not completely turn into a
ghost town after the closure of BC mines, because many of the former workers of the
mining company are local residents who found alternative livelihoods in small-scale
mining and vegetable gardening, or employment in nearby Baguio City. With the
shutdown of BC mines, agriculture became the main source of income. The
expansion of commercial vegetable production is resulting in the conversion of forests
into vegetable farms.

Estimates of the number of small-scale miners currently operating in Itogon range

from 1,300 to 5,000ix. These figures do not include the number of gold panners in the
downstream Itogon areas. Most of the SSM operations do not have government
permits. Lack of regulation of the expanding SSM operations is increasing
environmental degradation and risks to the health of the miners and nearby
communities. Small-scale miners use uncontrolled amounts of mercury and cyanide
in extracting gold that contaminate streams and soils and expired dynamites that are
dangerously recycled or repackaged for their mining activities.

During its years of active operations, BC provided its workers free housing, water and
electricity, medical services and education. The company built and subsidized
schools and a hospital. In the wake of its mines closure, BC turned over the schools
to the government and closed the hospital. BC’s mine site roads improved access to
the area, and its other infrastructure served the workers and mining communities and
surrounding barangays.

POST-MINING OPERATION REHABILITATION PLANS AND MINE SITE

DEVELOPMENT PROJECTS

Instead of proceeding straight to mine site rehabilitation, BC diversified into non-

mining development ventures.

Reforestation program

As part of its mine site rehabilitation program, BC planted a total of 993,084 tree
seedlings within 395 hectaresx between 1991 and 1999. BC’s reforestation program
started in 1991 to re-vegetate its mining pits, waste dumps, tailings dams, roadsides

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and denuded slopes with suitable species of trees, shrubs and grass. However, many
of BC’s reforestation sites in Itogon were prone to forest fires. Some forest fires were
deliberately started by farmers to clear mountainsides for growing crops.

Relinquishment of some mining claims to the local government unit (LGU)

BC is considering giving up its mining claims on large tracts of non-mineable areas to

the Itogon local government, which the LGU was actively negotiating with the
company. The municipal government considers leaving the large tracts of non-
income-generating lands idle a loss to the development potential of the town that has a
shortage of lands for local development purposes. BC’s asset managers submitted
this proposal for the consideration of the company’s higher officials. BC mine areas
that are not considered for relinquishment to the government are its Acupan, Antamok
and Kelly mine sites and the Ampucao Copper Prospect Area that lies on the southern
portion of its mining claim.

Bulk water project

In January 1999, BC entered into a memorandum of agreement with local

stakeholders establishing the Contingent Liability and Rehabilitation Fund (CLRF)
for its Antamok mine site. A CLRF is an environmental guarantee fund mechanism
that each operating mine is mandated to establish to be used for paying damages,
which may occur as a result of past or ongoing mining operations, and for
rehabilitating the mine site and affected areas after closure. BC allocated PhP 5
million for the CLRF. In May 2001, DENR approved the Environmental Protection
and Enhancement Program (EPEP) of BC for its Antamok mine operation. BC said
that approximately 12.4 million tones of mineable ore at 3.45 grams of gold per tonne
of ore are still left in its Antamok mine site but that the company could not pursue
further open pit mining expansion of the 150,000 sq m Antamok pit due to the
presence of communities close to the open pit.xi

However, in place of the original plan of completely rehabilitating – through

backfilling, re-countouring and re-vegetating – the Antamok open pit, the company is
planning to convert the pit into a large water reservoir for its planned bulk water
project. This project intends to draw water from various sources covered by water
rights that the company gained during its active operations to supply the residents of
Itogon and Baguio City.

BC’s bulk water project thwarted the hopes of the local communities to gain and
regain control of the water sources that BC obtained water rights for during its active
mining operation. The attempt of the local communities to contest the water rights of
BC failed to acquire these rights from the company.

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Tourism

In April 1997, BC
embarked on its
“Benguet Mines Tou-
rism Village” project as
part of the post-mining
operation development
of its Balatoc mine
structures. The project
taps an underground
tunnel for a mine tour,
a young forest park, Phase 3 Tailings Pond Lake - formerly designed as a boating
Crosby Park, developed and fishing area for the Balatoc Ecotourism Project
by BC and a human-
made lake (BC’s former Phase 3 Tailings Pond) for camping, fishing and boat riding.
BC also offers buildings for meeting venues for its former mine staff. The tourism
project hopes to generate employment in the area and provide new tourism and
business opportunities for local communities.

Contractual mining agreement with SSM

BC opened the Acupan mine for contractual mining operation in late 2001, and will
continue to deal this out while looking for investors for the re-operation of the mine’s
deep, large-scale operation or a mine property buy-out. The company is negotiating
with different interested investors for the Acupan mine. BC approximates 500 million
tonnes of total potential mineable ore at 6% gold are still left in the underground of
Acupan.

BC is considering two options for its Kelly mine site: one, to convert it into a business
technology zone as it strategically lies on a relatively flat area; or to open the area for
contractual mining similar to the arrangements for the Acupan mine site. The
company finds the Kelly mine site no longer suitable for large-scale mining
operations but still profitable for the downscaled operations offered by contractual
SSM.

BC holds 223 mineral claims spread over Acupan that cover an aggregate land area of
1,524 hectares.xii The underground Acupan gold mine was in continuous operation
for 65 years, from 1927 to 1992. It was closed in November 1992 due to the
depressed market prices of gold and high production costs caused by the flooding of
the mine’s lower main production levels in the aftermath of the 1990 earthquake in
North Luzon. The company now maintains only around 150 core employees largely
for the care and maintenance of its facilities in the Acupan mine site.

Objectives of the BC-SSM agreement

Following the cessation of BC’s operations, unlicensed SSM activities became

rampant in the Acupan mine site. A number of the former BC employees turned to
illegal SSM within the BC underground mine and its vicinity.

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 Communities in Benguet Corporation’s Acupan Mine Site

Familiar with BC’s mining tunnel systems, many of the miners created pocket tunnels
in the direction of BC’s underground tunnel networks. BC tried to stop SSM within
its claims, but it lacks enough resources to police and ward off illegal miners within
its mining claims.

To regain control over its mining area in Acupan, BC formulated the contractual
mining agreement scheme with small-scale miners and operators in consultation with
the regional office of the DENR-Mines and Geosciences Bureau in the Cordillera
Administrative Region (CAR) and in partnership with the LGUs.xiii The contract
between the company and the small-scale miners-financier groups aims to regulate
and legalize the ongoing SSM operations in its mine site; make SSM practices
efficient, safe and in keeping with environmental controls; and, generate local revenue
for the municipal government (in the form of taxes) as the underground economy of
SSM is legalized.

Roles and responsibilities of contracting parties

As specified under the Contract Mining Agreement, the roles and responsibilities of
the parties are as follows:xiv

Benguet Corporation:
1. Identifies areas in Acupan mines which are appropriate for small-scale mining;
2. Conducts exploration and delineate ore reserves;
3. Undertakes mine production, planning and monitors implementation;
4. Provides centralized crushing, grinding and carbon-in-pulp (CIP) treatment
plant and anti-pollution devices;
5. Sells gold output to the Bangko Sentral ng Pilipinas.

Small-scale miners and contractors (Community)

1. Organizes themselves into mining cooperatives or associations which serve as
the contractors;
2. Abandons the use of mercury and other small-scale mill plants and use the
more efficient and centralized ore treatment facility of the Company;

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 3. Finances the mining operations;
4. Conducts mining according to the plans and safety regulations of the
Company and the government.

Government
A. DENR-MGB in CAR and the Environmental Management Section (EMS)-
CAR that:
1. Creates the mechanism, rules and regulations to accommodate within the law
this new cooperative arrangement between the large and small mining
operators;
2. Enforces safety standards in the mining and milling operations;
3. Ensures that environment protection measures are implemented;
4. Provides technical assistance in the mining operation;
5. Assists in the proper information, education and communication of this
scheme.

B. Local Government Unit

1. Provides basic social, health and other services to the community;
2. Assists in maintaining peace and order;
3. Facilitates local government-required permits;
4. Formulates and monitors a simplified tax collection scheme; and,
5. Assists in information dissemination and proper education of the community.

At present, five mining contractor groups (miners and financiers) are involved in BC
contractual mining. Each group consists of 50 to 250 members. These contractor
groups are made up of either registered cooperatives or unorganized miner-financier
groups. These groups were accredited by MGB but have yet to register with the
Securities and Exchange Commission.

Majority of the miners and contractors that qualified for the BC contract mining
program are not from Itogon. Of the 750 miners and financiers who are currently part
of the venture,xv only 200 are from the barangays of Itogon.xvi Previously, there were
1,208 miners and financiers involved in the project, but many were taken out by BC
due to non-compliance to the provisions of their contracts.xvii

The financiers and the miners do not

necessarily have to be residents of
Itogon or Benguet province to qualify
for the contractual mining arrangement,
as long as they meet MGB requirements
and BC bond and financial capability
requirements. Contractors who enter
into the BC Mining Agreement are the
ones who offer the best deals with BC
for one year of contract for the mine
areas that the company opens for
contractor bidding. The BC-contractor Ball mill grinding area and the pan used for
agreements also spell out production separating free gold from the water-ground
tonnage quotas, grade of ores to be ore mixture
mined, mode of sharing and company-

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contractor ore percentage sharing, contract duration and performance bonds.xviii

BC provides technical assistance, including mine planning and exploration, and

allows the use of its mine structures needed for the activities of its legalized
contractual mining groups. The company assigns the underground areas to be mined
and provides the contractors with timber and explosives for their use. The contractor
financiers provide the mining tools like drills and picks as well as safety gadgets to
the miners.

Ore produced by the small-scale miners is milled in the 15 ball mills that BC
particularly built for the miners. The ore is then shared and processed in a purpose-
designed CIP mini-plant within the Acupan mine site. The gold produced is sold to
the Central Bank of the Philippines. The present average ore processing capacity of
the CIP plant is 50 tonnes per day. BC hopes to upgrade the mill and raise its present
capacity to 100 tonnes per day.

BC spent a total amount of PhP 5 million for the construction of the present custom-
built CIP plant and the ball mills. To recoup its investments, the company collects
milling and processing fees from the contractors for the use of these structures. BC
rents its ball mills for PhP 600 for every four hours of ore grinding. In addition to
these milling and plant fees, BC also charges
an amount equivalent to approximately 10%
of gross ore output of contractors for its
technical and engineering services. This
additional fee is often paid in the form of
sacks of ore, labor or money. Each ore sack
contains approximately 50 kg of ore
materials with an approximate average grade
of 21-22 grams of gold per ton of ore (mill
grade is 16-17 gram of gold per tonne of ore,
~30 % of gold removed from crushed ore by
manual panning or gravity separation).

Based on the contract, the SSM financiers

and BC are governed by 60% to 40% ore-
output-sharing arrangement, in which 60% of
Contractual Mining CIP/CIL plant’s the total ore produced (quantified in ore
cyanidization tank sacks) go to the financiers and the 40% to
BC. BC gets its 40% share of ore by randomly selecting sacks from the whole
stockpile of ore from each contractor group.

Benefits for the contracting parties

The arrangement accrues several benefits to the company. The venture allows for the
generation of income on low capital and overhead cost, and the income generated is
ploughed back for the maintenance of the mine site. Some of the facilities in the
Acupan mine that were left idle when operations closed were again put to use.
Through the arrangement, the company regained control of its mine site with reduced
security cost, enlisting the help of the contractor-miners and operators in keeping out
illegal SSM operations.

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For the SSM contractors, the mining agreement allows them access to a mineral area
that is legally under BC’s exclusive jurisdiction. But while the agreement legalizes
the operations of some small-scale miners who qualified for the arrangement, it also
inevitably meant the displacement of those excluded from the agreement.

Local environmental and social concerns

Many residents in
Acupan expressed
their apprehensions
that the medium
scale mining
operations between
BC and the SSM
contractors is putting
their community in
serious danger. They
fear that BC’s
reopening of the
underground mine Phase 2 Tailings Pond - catchment for BC contract mining mill
and allowing its tailings and waste materials
tunnel pillars to be
mined by the SSM contractors would undermine the ground surface on which their
houses and a local school are standing. They are also concerned about possible
flooding from the use of two partially clogged river diversion tunnels of the Phase 2
Tailings Pond, river poisoning and fishkills. Phase 2 TP is the site where contractual
mining tailings are being directed.

In relation to these concerns, BC gave its assurance that there would be no shallow
mining and that underground mining activities would be done in areas far from
communities and other surface facilities. BC explained that even if two of its three
drainage diversion channels are partially clogged, the remaining drainage tunnel
would be more than enough to divert the course of river discharge and surface run-off.
The company viewed the concern over possible river poisoning from the contractual
mining as unfounded, since the discharge from their mining activities would be non-
toxic or detoxified. BC attributed the high levels of cyanide and mercury in streams
to the rampant and uncontrolled illegal SSM in Itogon.

One of the government requirements for BC’s contractual mining project was to set
up a centralized milling process to ensure more control of the mine tailingsxix from the
separate SSM operations. While BC also put in place a centralized waste
management system, compliance by the company and contractors to environmental
controls on waste disposal requires close monitoring.

In early 2003, reports in Itogon spread that BC was discharging mill wastewater into
the Batuang River. Monitoring conducted by the MGB-CAR of the Acupan mine site
found out that the mill plant wastes were being discharged directly to the Batuang
River. A petition from the barangay officials of Virac and the Benguet Provincial
Mining Regulatory Board complained to the MGB-CAR about this issue. On 27

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March 2003, the DENR-Environmental Management Bureau (EMB)–CAR issued a
cease and desist order (CDO) to BC, specifying BC to stop using the improvised CIP
plant.

However, BC explained that the

spilled wastewater came from its
small-volume containment or
settling tank and not from the
CIP plant. The tank was
designed to hold diluted water-
sediment mixtures and drain
excess water produced by manual
panning of ground ores.
According to BC, the watery
sediment suspension discharged
into the river was devoid of any
cyanide or mercury. BC said that
the spill occurred because the
water mixture diversion pipeline
that was installed to drain water
from the decantation tank was
clogged during a heavy The decantation tank that spilled during a typhoon in
downpour. The 2 inch-diameter early 2003 - the spillage led to reports that BC and
its contractors were discharging mill tailings directly
pipes used for draining excess to the river system in Itogon
water mixtures from the holding
tanks did not have the capacity to allow free flow of tailings in the pipelines into BC’s
Phase 2 Tailings Pond. In May 2003, BC started installing a four-inch pipeline that
would divert excess effluents from BC’s settling tank to BC’s Tailings Pond No. 2.
On 13 September, the CDO for the use of CIP plant was lifted. On the same day,
local protesters who were against the continuance of BC’s contractual mining tried to
derail the installation of the pipeline. BC suspects the protesters were led by
disgruntled small-scale mining groups that were removed from the BC contract
mining because of poor performance.

At this point that there is no pressing mining issue at hand, there is no active anti-
mining social movement in the municipality. Intermittently, anti-mining groups visit
the area. The local Catholic Church is very active in the anti-mining movement when
BC was still operating the Antamok open-pit.

Taxation

BC allocates 2% of the profit gained from its processed share of ore for the excise tax
it pays to the Itogon municipal government. Unlike BC, the contractor-miners and
financiers do not pay taxes to the LGU. BC advised the municipal government to
work out clear guidelines for taxing the SSM financiers/operators. The company is in
no position to get withholding taxes from them since they are not company
employees. BC offered assistance in assessing taxes from the contractor or SSM
financiers through the amount of gold they produce from the CIP plants. What cannot
be closely monitored for possible taxation is the exact amount of free gold produced
through panning before the ground ores are subjected to the CIP process.

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According to town officials, BC has also been remiss in paying its real property taxes
to the government ever since it stopped operations. BC now owes approximately PhP
two million in accumulated delinquent taxes to the Itogon municipal government,
which the company said it intended to pay.

Profit sharing

Apart from the agreement between BC and contractor-financiers, the latter engages in
a separate deal with their hired small-scale miners. Financiers can opt to pay daily
wage for miners or engage in profit sharing with them. The average small-scale
miner’s daily income is PhP 289, which is 40% higher than the PhP 174 minimum
wage in CAR.xx The usual arrangement between contractors and the miners is that
free gold panned from ground ore goes to miners, while the tailings or the ore slurry
(sediment-water mixture) goes to the financiers. According to some miners who are
familiar with ore grades and gold smelting processes, free gold granules or nuggets
from ground ores approximately accounts for only 30% of the total gold in ores. The
remaining 70% gold is embedded molecularly or physically in finer form in the
tailings or water-fine ore mixtures produced from initial gold screening by panning or
gravity separation. The MGB wants BC to produce a contract that will contain or
address a fair profit-sharing or wage agreement between small-scale miners and their
financiers in its mining area.

BC POST-MINING OPERATION MINE SITE: QUESTIONS AND

CONCERNS

Piloting access of small-scale miners in large-scale mining company’s mining

claim

Conflicts between SSM groups and large-scale mining companies over access to
mineral areas are common.

During a mining dialogue in Benguet in 2000,xxi an SSM representative raised the

issue of the marginalization or displacement of small-scale miners by mining
companies on the basis of the companies’ mining permits. SSM groups were
demanding that LGUs, through the Provincial Regulatory Mining Board (PRMB), to
declare People’s SSM areas in the province. However, the LGUs are constrained
from acting on such demands by their lack of jurisdiction over mineralized areas that
are covered by mining patents and leases even if the patented areas were already
abandoned or mined out.

The BC-SSM contractual mining agreement tries out an option wherein a large-scale
mining company and SSM groups enter into a partnership that allows the latter legal
access to the company’s patented mining area and mine structures. Thus far, the
arrangement affords mutual benefits to the parties involved – for BC, profit and
regained control over the Acupal mine site; for the SSM contractors, legalized
operations and income; for the MGB, a level of regulation over the SSM operations in
the area; and for the LGU, excise tax from the company. With the positive results
from the contractual mining arrangement in the Acupan mine site, BC is currently

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evaluating the commercial viability of putting its Antamok and Kelly mine sites under
similar arrangement as the Acupan operation.

However, the contract needs to be reviewed to address some emerging limitations.

Ensuring local participation in monitoring contractual mining operations

One limitation of the current agreement is that, beyond the small-scale miners or
operators, the contract does not involve the larger community of Acupan and adjacent
villages, who are within the direct impact areas of the SSM mining operations.

Neither does the arrangement specify the role of the Provincial Mining Regulatory
Board, which has jurisdiction over small-scale mining.

Negative opinions on the contractual mining agreement of BC with SSM groups

coming from the communities are founded on their fear of possible geological
hazards, such as subsidence and landslides that might be triggered by continuous
underground tunneling as well as flooding from the possible clogging of rivers. The
local community and LGUs reacted strongly when they saw that the wastes of the
SSM operations in the Acupan mine site were being released straight into the river.

To address the concerns of local communities and LGUs on the impact of the ongoing
mining activities, the MGB-CAR and BC should initiate the establishment of the
company’s multipartite monitoring process. From the start, a multi-stakeholder
monitoring effort has to first lay down clearly the monitoring process to be followed,
including clear commitments on the part of the stakeholders who will be involved,
and define comprehensive guidelines for decision-making on issues and planning that
may arise. A multi-stakeholder monitoring mechanism, to be comprised of
representatives of mining stakeholders, such as the local communities, the LGUs, the
church, NGOs and concerned regional line agencies (NCIP, DENR-MGB and DENR-
EMB) can be a venue for communication and information sharing, resolution of local
mining-related conflicts, and monitoring of the SSM operations to environmental
protection and enhancement commitments.

Working out local development contributions from the contractual SSM

operations

Apart from the employment of some local residents and the payment of excise tax by
the company to the Itogon municipal government, the larger picture of how the BC
contractual mining venture would impact on the social and economic development of
the local mining communities is not integrated in the current arrangement. If BC will
go on with the contractual mining venture for a number of years more and will absorb
more SSM contractors, the company should initiate a community development project
that would ensure that part of the profit from the mining operations will redound to
the affected communities. BC must also establish an environmental guarantee fund
mechanism for the contractual mining operations for a ready source of fund in the
event of any untoward event that may happen in the mine site.

The BC contractors do not pay excise taxes for whatever they get from the mines. A
move should be made by the LGU, the company and the Bureau of Internal Revenue

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March 2008
(BIR) to exact fair taxes from these small-scale miners and their financiers since they
are extracting from the state’s natural wealth. Taxes derived from the mining contract
agreement will be of great help to the IRA-dependent municipal government for
implementing social services or environmental projects.

Ensuring fair benefit sharing

Another shortcoming of the agreement is that it does not guarantee fair benefit or
profit-sharing. Small-scale miners in Itogon view the average 60%-40% contractor-
BC sharing agreement as beyond acceptable: they ask that the share for the company
be reduced to 10% only. Small-scale miners who engage in separate deals with their
financiers are at the loosing end of the bargain with their financiers. The general
impression in the town is that only the financiers make enough money out of the BC
contract mining scheme, and that the small-scale miners who do the heavy manual
labor are just given meager salaries or share of the profits. BC, upon pressure from
DENR/MGB, said that it is exploring ways to work out a better contract with the
mining financiers and the small-scale miners that will address the shortcomings of the
existing contracts.

Also, the agreement fails to ensure the safety of the small-scale miners. Although the
agreement specifically lays this responsibility to the financiers, the small-scale miners
remain ill-equipped with mine safety gadgets.

Lack of clarity of post-operation rehabilitation plans

Concerned stakeholders are in the dark as to what the immediate future plans of BC
are as regards the full rehabilitation of its mine sites. The municipal government has
been pushing for more definite corporate decisions and plans on post-operation mine
sites rehabilitation on the part of Benguet, as these would affect the town’s land use
and development planning. BC admits to lack of funds for any immediate complete
rehabilitation of their mine sites. Further, BC claims that their alternative
rehabilitation projects for their mine-out areas still need much marketing and actual
capital investment. Town officials insist that if the alternative rehabilitation programs
of BC are not to be financed in the near future, then the company should fully re-
contour or rehabilitate the mine sites and then turn these over to the LGU for
development use.

In implementing the policy on post-mining operation rehabilitation and in light of

BC’s plan to adopt the contractual mining agreement for its other mine sites, the
DENR and MGB must clarify some terms of arrangement. How long will the
government allow BC to engage in contractual mining with the SSM
operators/financiers? How can the emerging limitations of the business scheme –
such as participation of local communities and government units (including the
PMRB) in monitoring the ongoing operations, incorporation of community
development in the arrangement, inequitable benefit sharing – be addressed? When
will government compel complete mine site rehabilitation from the company?

The complete rehabilitation of mine sites by BC will inevitably deprive the small-
scale miners of their livelihood. The open pits and underground tunnels left by BC

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March 2008
are a source of livelihood for the local illegal SSM miners and local conflicts may
arise if full rehabilitation of the mine sites would be pursued.

Regulation of small-scale mining operations in the area

Applications for large-scale mining permits swamped the Cordillera region shortly
after the passage of the Philippine Mining Act. However, large-scale mining permit
applications were widely rejected by the local communities, local government units
and civil society groups. As a result, there are no new large-scale mining projects in
the region. the closure of the large-scale mining operations in Benguet, small-scale
mining operations are expanding.

Small-scale miners operating in Benguet tend not to practice proper disposal of

mining wastes and to illegally cut trees for the needed support to their underground
workings.xxii Gold processing methods used by small-scale miners in Itogon are still
generally crude and involve the unregulated use of mercury and cyanide. These
chemicals, which are often disposed of untreated, eventually find their way into the
streams traversing the mine sites. Small-scale miners usually leave mercury to
evaporate into the immediate environment. Mercury in the rivers and dumped
sediments from SSM operations were measured to have highly exceeded the standard
levels.xxiii Sophisticated processing of gold by miners is accessed only by the small-
scale miners that are legalized by BC to work in its Acupan mine-site or some
technologically-oriented SSM groups in Itogon. Many miners are still unaware or
unconcerned of the environmental and safety hazards that their activities can bring on
themselves, their families and the larger community.

Many small-scale miners in Itogon work without the necessary government permits.
Much of the small-scale mining activities remain unmonitored and unregulated in
terms of the location and depth of their digging and tunnel constructions, timber
sourcing, use of cyanide or mercury, waste disposal, safety of their underground
tunnels, etc. The accomplishment of permit requirements for the miners is too
technical and some are adamant against applying for permits on the grounds that the
mineral grounds are their ancestral domains and, hence, obtaining government permits
was not necessary. xxiv Many unregistered small-scale miners in Itogon escape
taxation by declaring in their income tax returns that they are small farmers.
Moreover, children in SSM areas are also made or allowed to do heavy physical
mining work normally done by adults.

The Provincial Mining Regulatory Board (PMRB) is presently conducting an

inventory of small-scale miners in the whole province as part of its effort to regulate
small-scale mining in the entire Benguet province. Beyond the effort to regulate
small-scale mining, there is a need for the stakeholders – the local communities,
LGUs, small-scale miners and operators, mining companies, local church
organizations, NGOs and line agencies – to work together to develop small-scale
mining as a viable and equitable livelihood option that does not result in
environmental destruction.

ESSC: 2003 Legacy Mines Visit – Benguet 17

March 2008
REFERENCES

Benguet Corporation. 1997. Benguet Corporation Annual Report of 1996.

Benguet Corporation Website.

Benguet Corporation. 2003a. Acupan Contract Mining Project (Mining in Partnership

with the Community). Hand-out. National Minerals Policy Regional Consultations
by the Mines and Geosciences Bureau. Venus Hotel, Baguio City. September 15-
16, 2003.

__________. 2003b. Acupan Contract Mining Project (Partnership Mining with the
Community). Presentation Materials. National Minerals Policy Regional
Consultations by the Mines and Geosciences Bureau. Venus Hotel, Baguio City.
September 15-16, 2003.

__________. 2003c. Benguet Antamok Gold Operations (BAGO). Hand-out. National

Minerals Policy Regional Consultations by the Mines and Geosciences Bureau.
Venus Hotel, Baguio City. September 15-16, 2003.

Bureau of Mines and Geo-Sciences, Ministry of Natural Resources. 1986. Geology

and Mineral Resources of the Philippines, v. 2 (Mineral Resources).

ESSC. 1999. Mining Revisited: Can An Understanding of Perspectives Help?

Quezon City: Philippines.

Kaniteng, L. N. 2000. Statement on Small-scale Miners’ Issues and Concerns. In

Summary of Formal Dialogue Process at the Site Visit of Philex Mining
Corporation, Padcal Operations, May 2000. BBC-ESSC-PWG internal Report.

Mines and Geosciences Bureau-Department of Natural Resources. 2003. Benguet

Corporation Fact Sheets.

Mines and Geosciences Bureau-Department of Natural Resources Website. Benguet

Corporation link.

Mines and Geosciences Bureau-Department of Natural Resources Website. ca 2002.

New Acupan Mining (Partnership with the Community). Short Talk Presentation
materials.

Murao, S., Maglambayan, V., de la Cruz, N. , eds. 2002. Small-Scale Mining in Asia:
Observatons Towards a Solution of the Issue. Mining Journal Books Ltd.:
Edenbridge, UK.

Office of the Mayor, Itogon. 2003. Itogon Briefing Profile.

Scott, William Henry. 1993. Of Igorots and Independence. Baguio City: ERA.

ESSC: 2003 Legacy Mines Visit – Benguet 18

March 2008
ENDNOTES

i
William Henry Scott, 1993. Of Igorots and Independence. Baguio City: ERA. p. 13.
ii
Benguet Corporation, Benguet Corporation’s Acupan Contract Mining Project (Mining in Partnership
with the Community). A presentation at the National Mineral Policy Consultation. 15-16 Sept. 2003.
iii
Mayor Godio, personal communication, 2003.

iv
Ibid.

v
Office of the Mayor, 2003.
vi
Ibid.
vii
Benguet Corporation, Benguet Antamok Gold Operation. (Fact Sheet). National Mineral Policy
Consultation in Venus Hotel, Baguio City. 15-16 September 2003.

viii
Benguet Corporation, 1997. Benguet Corporation Annual Report of 1996.

ix
Benguet SSM leader, 2003, pers. comm.

x
Benguet Corporation, BAGO (Fact Sheet).

xi
Ibid.

xii
Benguet Corporation, Acupan Gold Mine. Handout given in the MGB-regional Mining Workshop.
Venus Hotel, Banguio City. 15-16 Sept 2003.

xiii
Benguet Corporation. Acupan Contract Mining Project.

xiv
Ibid.

xv
Tabanda, E., 2003, pers. comm.; Kaniteng, L., 2003, pers. comm.

xvi
Benguet SSM leader, 2003, pers. comm.

xvii
Benguet Corporation, Acupan Contract Mining Project.

xviii
Benguet Corporation, BAGO (Fact Sheet).

xix
Benguet Corporation. “Acupan Contract Mining Project Milling Operation and Process Waste
Management.”

xx
Benguet Corporation. Acupan Contract Mining Project.

xxi
Environmental Science for Social Change. BBC Mining Dialogue in Benguet and Site Visit to
Philex Mining Corporation.

xxii
Redempta Baluda, “Small-scale Gold Mining in the Baguio Mineral District, Philippines” in
Satoshi Murao, et. al. Eds. Small-scale Mining in Asia: Observations Towards a Solution of the Issue,
2002. UK: mining Journals Books, Ltd., p. 14.

ESSC: 2003 Legacy Mines Visit – Benguet 19

March 2008
xxiii
Leslie Joy Lanticse, et. al. “Chemical Separation of Mercury from Amalgamation Effluent” in
Murao, et. al., p. 20.

xxiv
Kaniteng, 2003, personal communication; Baluda, p. 14.

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March 2008