Permanent shutdown of Rapu-Rapu to result in loss of $259M for Lafayette Phils

The closure of Lafayette Philippines Inc.’s (LPI) Rapu-Rapu mining project in Albay would result in the loss of $259 million in investments and loss of employment for about 1,000 workers.

This was disclosed to Cecilia K. Songco, officer-in-charge of the Mining Division of the Board of Investments, by Manuel A. Agcaoili, president of Rapu-Rapu Processing, Inc., a subsidiary of Lafayette.

Songco had recently sought information regarding the possible reopening of the Rapu-Rapu Polymetallic project of Lafayette in Rapu-Rapu, Albay.

In a reply-letter, Agcaoili said that Lafayette has complied with all 21 conditions imposed by concerned government agencies.

Unfortunately, however, Agcaoili said, the recently created Rapu-Rapu Fact Finding Commission has so far not completed its evaluation of the alleged accidental discharge of mine tailings, thus, delaying the reopening of the project.

The delay, Agcaoili said, "has created a lot of uncertainty, specially for foreign investors and banks, as they expect that the transparent and regular legal process be followed."

Agcaoili added that "any deviation from the established legal process would adversely affect investor confidence."

If the restart of the project is further delayed despite having completed all the required remedial measures, Agcaoili said, "the project may be forced to close."

The investment losses, Agcaoili said, would amount to $259 million consisting of $43.4 million in bank loans, $39.5 million in shareholder advances and $176.1 million in bank hedging exposures.

The banks which have an exposure in the project, Agcaoili further said, include N.M. Rothschild & Sons (Australia) Limited, Australia and New Zealand Banking Group Limited, ABN AMRO Bank NV (Australia), Investec Bank (Mauritius) Limited and Standard Chartered First Bank Korea Limited.

Furthermore, Agcaoili said, the monthly overhead cost to maintain the project during the shutdown period is approximately $2.7 million.

Foregone revenues would amount to $13 million during the shutdown period.

Loss of employment if the project was forced to close would be approximately 1,000 including project employees, Agcaoili said, including P320 million spent yearly for food, supplies and salaries.

Lafayette country manager Rod Watt had previously stated the firm’s commitment to stay in the Philippines even after the unfortunate mine tailing spillage.

LPI, Watt said, continues to plan for its future in the country which includes a possible listing in the Philippine Stock Exchange.

Watt revealed that LPI wants to list with the PSE some time in the future after it has resolved its current spillage problem.

The purpose of the PSE listing, Watt explained, is not so much to raise funds, but rather to open up the mining firm to local ownership.

Once a firm decision is made to go ahead with the listing, Watt said, LPI would be ready to list in as short as six months time.

Operations at LPI’s Rapu-Rapu mines in Albay has been suspended since the fourth quarter of 2005 following two mine tailing spillage incidents.