Jinchuan Group’s investment in Philnico may be delayed further

The government is going back to the drawing board to re-assess the value of the controversial Nonoc mines before the Chinese mining giant Jinchuan Group could buy into the Philippine Nickel Co. (Philnico).

The Jinchuan-led consortium had been promised a quick resolution of the Philnico case but the re-appraisal of the mine could push the Chinese investment back longer than originally expected.

Finance officials said over the weekend that the inter-agency group assigned to sort out the legal tangle involving the mine has decided to form yet another group, this time to value the property.

Finance Undersecretary Jay Singson told reporters over the weekend that a group had been formed together with mining experts from the Department of Environment and Natural Resources (DENR) and the National Resources and Mining Development Corp. (NRMDC).

"A decision was made this week to determine the valuation of the Nonoc mines, basically to agree on what it is we are talking about in the first place," Singson said.

According to Singson, all subsequent decisions would be based on the revaluation of Philnico’s main asset, including the proposed out-of-court settlement scheme for the $300 million that the company still owed the government.

Philnico owed the National Government at least $300 million when it bought Nonoc nickel mines in Nonoc Island, Surigao. Singson said the company made some small payment when the transaction was completed but it has not made any other payment since.

"The bottom line is that we have to make this happen as soon as possible," Singson said. "We are glad that Jinchuan is interested in Nonoc mines, but that investment can happen only after Philnico settles government’s claims."

In 2005, the Arroyo administration had begun considering an out-of-court settlement with Philnico just to expedite the court case and finally facilitate the entry of the Chinese mining consortium led by Jinchuan Non-Ferrous Metals Corp. and Shanghai Bao Steel Corp. which expressed intentions to invest about $1 billion in Philnico’s Nonoc mines.

Jinchuan is China’s biggest nickel mining and processing corporation, with a nickel reserve of 5.5 million tons.

According to Singson, however, there was a fundamental disagreement over the present and updated valuation of Nonoc mines. "We can not proceed with any of the arrangements we have to make until we get this done," he said. "We don’t know how much government will be paid for what Philnico still owes and we don’t know what is possible and what it isn’t until we do this."

The government was considering a restructured settlement schedule and debt-for-equity swap that would allow the government to retain part of its ownership of Nonoc mines but Singson said these options would be validated once the valuation is done.

Philnico bought Nonoc mines from the government but finance officials said it has not been able to pay for this acquisition since it bought the mine and the nickel processing plant in Nonoc Island, Surigao City.