The consortium, led by the Jinchuan group, signed a memorandum of understanding (MOU) with the government as well as Philnico, paving the way for the take-over of the nickel mine on Nonoc Island in Surigao.
Finance Secretary Margarito B. Teves said over the weekend that the MOU was signed initially to facilitate the conduct of resource exploration in Nonoc.
"We have not made a final decision on the extent of government participation in this venture other than we will retain some equity as partial payment from Philnico," Teves said.
The MOU, however, was the first official document signed so far since the Chinese consortium signified its interest in the nickel mine when Chinese president Hu Jintao came for a state visit in 2005.
Since then, the government has also entered into an out-of-court settlement with Philnico.
Instead of being paid cash, the government said it has opted to own equity in the Nonoc nickel mine. Teves said only a portion of Philnico’s arrears would be paid in cash.
According to Teves, the decision to maintain an interest in Nonoc meant that the state 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 MOU for the government to decide on how to facilitate its investment.