Sumitomo Metal Mining to expand operations in RP

Japan-based Sumitomo Metal Mining Corp. (SMM) recently formalized its position to infuse an additional investment of around $180 million to $270 million in the Philippine mining industry.

SMM cited proximity, lower costs of raw materials, reliability of supply, and growing global demand as the critical factors in expanding its operations in the Philippines.

The Department of Trade and Industry (DTI) through its Philippine Trade and Investment Center (PTIC) in Tokyo reported last June 2005 that SMM plans to expand their operations in Palawan and in September, the company formally manifested their intentions.

In a report to Trade and Industry Secretary Peter B. Favila, Commercial Attaché in Tokyo, Mauino Haresco said SMM is increasing its nickel smelting production capacity in response to strong demand from China’s booming economy.

"The additional $180 million to $270 million in fresh investments will be used to build a second processing unit that is expected to double its plant’s production capacity starting 2007 to 20,000 tons annually," CA Haresco said.

SMM regularly gets its raw materials from countries like the Philippines and Australia in order to sustain its operations.

SMM however decided to solely expand its operations in the Philippines rather than in Australia as prices of raw materials in Australia are high and sometimes SMM encounter supply problems.

Australian suppliers to SMM also purchase their raw materials from other companies resulting to much higher raw materials.

Lower shipping costs to and from the Philippines, due to advantage of proximity and aggravated by the rising fuel costs, was likewise a major factor that made SMM chose the Philippines.

Sumitomo Metal Mining, the world’s ninth largest nickel producer, was one of the first major foreign companies to invest in the Philippine mining industry when Supreme Court ruled last year the legitimacy of foreign ownership in mining ventures.

Sumitomo began nickel production in April 2005 through the $180-million Coral Bay Nickel Corp.’s Plant on Palawan Island, a joint venture it formed with Mitsui & Co. Ltd. and Sojitsu Corp. Sumitomo owns 54-percent stake in the joint venture.

The Coral Bay plant’s total production this year is estimated to be 5,000 tons, out of an annual capacity of 10,000 tons.

"We at the Department are very much pleased with the decision of SMM to further expand its investments in the Philippines. SMM’s strategic decision to infuse additional capital only reaffirms Japanese investors’ continued confidence in the country’s reputation as an investment destination of choice. The company’s move likewise strengthens the trade and investment relations between the Philippines and Japan," Haresco said.

The Philippines has about 20 million to 25 million tons of nickel in its soil, or at least a quarter of the world’s known nickel laterite resources. According to the Chamber of Mines, the abundance of mining resources in the country ranks the Philippines as potentially the world’s fourth or fifth largest nickel mine.

Last year, the Philippines exported about $359.71 million worth of mineral products, up by 14.56 percent compared to 2003. Philippine exports of nickel and nickel ores and concentrates reached $51.64 million in 2004, an improvement of 82.77 percent compared to 2003.

Japan was the Philippine’s main market, accounting for 88.58 percent (or about $45.75 million) of total nickel export.

Australia was a far second, with 10.99 percent of the total export of nickel. The Philippines also shipped $0.21 million worth of nickel to China.