The Jinchuan group had entered into a memorandum of understanding in 2005, signifying its intention to invest at least $1 billion on the development of the mine provided the government settles its dispute with Philnico.
The Department of Finance (DOF) disclosed that the government has already made representations with the consortium led by Jinchuan and discussions were on-going on how to facilitate the group’s entry into Philnico.
Finance Secretary Margarito B. Teves said a decision has finally been reached where the government agreed to accept equity holdings in the mine instead of requiring Philnico to settle its arrear in cash.
According to Teves, separate feasibility studies have been completed and were being reconciled, including a third-party appraisal that would determine how much share the government would keep and how much Philnico would pay in cash.
Philnico still owed the government roughly $300 million when it purchased the Nonoc nickel mine but has not settled its obligation after paying a token amount at the time of the purchase.
Before the Jinchuan consortium could take over the mine, this obligation would have to be settled between the government and Philnico.
According to Teves, the decision to maintain an interest in Nonoc meant that the government would continue to hold interest in the largest mining project so far since the Supreme Court lifted the restrictions on foreign interests in mining development in the country.
"It’s now only a matter of deciding how much equity we will keep and how much we are actually going to get paid in cash," Teves said.
Teves however would not confirm whether government participation in the project was a condition of the Jinchuan group although there would be little choice since Philnico is broke.
Since the government has been able to contain its financial hemorrhage by paring down its fiscal deficit and cleaning up its debt portfolio, it could afford not to get paid in cash.
Philnico has been locked in a legal battle with the government for the settlement of the arrears but an out-of-court settlement has since been reached.
Jinchuan has been interested in Philnico for years and had agreed to wait at least six months from the signing of the memorandum of understanding for the government to decide on how to facilitate its investment.
However, Jinchuan’s take-over bid was stalled by the unresolved legal tangle between the Philippine government which used to own the nickel mine in Surigao and Philnico which bought the mine but never settled its obligations.
The Jinchuan-led consortium had been promised a quick resolution of the Philnico case but the re-appraisal of the mine pushed the Chinese investment back longer than originally expected.