Mining sector can generate $6.2-B investments — MGB

The Mines and Geosciences Bureau (MGB) said a revitalized mining industry will generate $6.209 billion in foreign direct investments from new large scale metallic mining and mineral exploration projects in the next six years.

Morever, an additional 277,380 direct and indirect jobs jobs will be generated between 2004 to 2010 if the government goes full blast with the implementation of the Mineral Resources Development Project (MRDP). The project however, is being stalled by the Supreme Court’s (SC) declaration of the Philippine Mining Act (PMA) of 1995 as unconstitutional and as a result, has kept foreign investors waiting at the sidelines.

The MGB estimated that should the SC consider the government’s appeal to reconsider its earlier unfavorable ruling issued last January, the Department of Environment and Natural Resources (DENR) and the MGB could act on pending mining projects.

Currently sitting at the DENR-MGB offices are applications for 22 large-scale metallic projects projected to generate $6.147 billion in foreign direct investments and 25 exploration projects worth $62 million.

The MGB said that additional taxes and fees from new mining projects could bring in P3 billion annually to the government’s coffers and these should significantly ease its deficit woes.

The agency cited the multiplier effects in mining and stressed the mineral processing industries are important generators for other sectors and are among the best economy-wide creators of employment and personal income.

As a result of backward linkages such as purchase of goods and services, forward linkages such as use mineral products and social multipliers such as development of human resources, schools, colleges, clinics – each additional 100 people employed by the mining industry translates into roughly 500 new jobs created elsewhere in the country.

Under the MRDP, investors are required to put up P44 million annually and this will bankroll the Social Development Management Program of large scale mines which will prioritize education for host communities. Also, royalties to indigenous people will contribute $23 million to the trust fund.

Some of the scheduled large-scale mining projects under the MRDP are the Nonoc nickel project by Nonoc Processing Corp./Philnico in Nonoc Island, Surigao del Norte with potential investment of $1 billion projected to begin commercial operations by 2009; Pujada nickel project in Davao Oriental by Asiaticus, $1 billion, 2009; Mindoro nickel project of Aglubang Mining Corp. in Mindoro Oriental, $1 billion, 2009; Boyungan copper project by Silangan Mindanao Mining Corp. in Surigao del Norte, $500 million, 2009; Tampakan copper project by Sagittarius Mines Inc. in South Cotabato, $500 million, 2009; King King copper-gold project by Benguet Corp. and Nationwide Development Corp. in Compostela Valley, $532 million, 2007 Victoria II gold project by Lepanto Consolidated Mining Corp. in Mankayan, Benguet, $80 million, 2004 and the Didipio copper-gold project by Climax Arimco Mining Corp. in Neuva Vizcaya, $63 million, 2006.

The potential revenues and benefits from these projects however, will depend largely on the ruling of the SC on the DENR-MGB/ Office of the Solicitor General appeal to the SC to reconsider its earlier ruling on the PMA.

"The decision may have far-reaching implications on investments not only on the minerals industry but in the economy at large as well," MGB Director Horacio Ramos said previously. 

In a landmark decision, the SC issued its resolution on the appeal of environment groups blocking implementation of the PMA, questioning several provisions and has asked SC to declare Republic Act 7942 or PMA 1995 as unconstitutonal.

In particular, the SC declared as unconstitutional an agreement signed by the government allowing Australian firm, Western Mining Corp. (WMC) in 1995, just months after the PMA was passed, that allowed the company 100 percent ownership of a mining project.

In a 95-page decision penned by Justice Conchita Carpio-Morales, the SC said the agreement between the government and WMC was invalid because the financial and technical assistance agreement (FTAA) was similar to the service contracts allowed under RA 7942 but are prohibited under the 1987 Constitution.

At the same time, the decision may affect existing FTAAs with a number of foreign-controlled mining companies, among them, the Australian mining companies, Climax Arimco Mining Corporation and Sagittarius Mines.

Foreign mining companies have been wanting to invest in the mineral-rich local mining sector but have gone on to countries that provide more incentives.

Groups such as the Legal Rights and Natural Resources Center-Kasama sa Kalikasan (LRC-KSK) launched a national campaign seeking the scrapping of the PMA. The groups pushed for the cancellation of all existing FTAAs, mineral production sharing agreements (MPSAs), exploration permits, and other mining agreements. They added that the PMA also violates the Indigenous Peoples Rights Act since most of pending mining concessions are located in the ancestral lands also being claimed by indigenous groups or tribes.

The PMA allowed three major kinds of mining rights that would govern access to mineral resources and for which an interested investor may apply. These are the Exploration Permit (EP), the mineral agreement (MA) and the FTAA.

An EP grants the right to explore a specified area for a period of two years. If a mineral deposit is found and has potential commercial viability, the permit holder has the right to enter into any type of mineral agreement or financial or technical agreement (FTAA) with the government.

An MA grants the contractor the right to conduct mining operations within a specified contract area for a period of 25 years, renewable for another 25 years. 

For large-scale mining operations, the government may opt to enter into a FTAA with either a Filipino or foreign corporation. The PMA defines the FTAA as a contract involving either financial or technical assistance for the large-scale exploration, development and utilization of mineral resources.

The Philippines used to be one of the world’s five largest mineral exporters in the 1980s, with annual export revenue of $1.2 billion. The Philippines exports gold, copper, nickel and chromite