Chinese firm still keen on Nonoc

Despite the legal tangle delaying the privatization of Nonoc mines, the Chinese mining consortium led by the nickel giant Jinchuan Group has indicated it is willing to wait for the case to clear up.

Finance officials said yesterday that a March deadline has been set for the completion of the feasibility study that would determine, among other things, exactly how much the mine is now worth.

According to Finance Undersecretary Gabriel "Jay" Singson Jr., the privatization committee met with representatives from the Jinchuan Group and the Shanghai Bao Steel Corp. yesterday.

"We told them about the March deadline for the study and they said they were amenable to the timetable that has been set," Singson said. "This indicates that they are still very much interested and they are willing to wait."

The government was forced to go back to the drawing board to re-asses the value of the controversial Nonoc mines before the Chinese consortium buy into the Philippine Nickel Co (Philnico) which owns the mine.

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

"There’s really no way around it, we have to know what we are talking about and how much it is worth," Singson said. "Only then can we start talking about terms."

Singson said even the talks with the Jinchuan consortium has not reached the level of detail where the government could start considering its options on how to collect Philnico’s arrears.

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 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."

Jinchuan has been interested in Nonoc mines for years. The Jinchuan Group signed a memorandum of understanding during the recent state visit of Chinese prime minister Hu Jintao last April.

During the visit, Jinchuan and Baosteel officially stated their intentions to invest in the country’s mining industry, following the Supreme Court decision allowing foreign companies to hold controlling interests in Philippine mining companies.

According to Singson, the Chinese Group is expecting the Philnico situation to be resolved within six months after signing the MOU. The case is pending in court but Singson said both parties had agreed to explore other options including restructuring.