Philnico right on Nonoc mine eyed for review

As government admitted it could do little to compel Philippine Nickel Co. (Philco) to return to the negotiating table with China’s Jinchuan Group, finance officials have suggested a review of the company’s mining rights agreement for possible revocation.

They said Philnico’s performance could be put under evaluation with respect to its mining rights agreement with the government.

Chinese nickel giant Jinchuan Non-Ferrous Mining Co. has formally ended negotiations with Philnico, telling the government that it could no longer continue the pursuit of Nonoc mines.

Finance Secretary Margarito Teves told reporters that the government’s role in the Philnico-Jinchuan deal was only as a facilitator to bring the two groups to the table and negotiate a possible joint venture.

According to Teves, however, Jinchuan has already officially indicated that it could no longer work with Philnico, thanking government officials for their efforts to push the project through.

Teves said that at this point, the government could not force Philnico to resume talks with Jinchuan especially since the Chinese group has given up on the process.

"Unless we can find a way, if we can see the performance of Philnico based on its mining rights agreement and determine whether it has been meeting its end of the transaction," Teves said.

The government has been pushing for the Jinchuan deal which would have allowed Philnico to settle some $300 million worth of arrears that it has failed to pay since it acquired the mining rights to the nickel mine on Nonoc Island in Surigao.

Since the negotiations collapsed, Teves said the government would have to look for alternative investors that would take a look at the project involving the development of the nickel mine.

Teves declined to reveal what caused the negotiations to collapse but sources privy to the talks intimated that Philnico had been "particularly adamant" about the terms of the agreement with Jinchuan.

When asked which of the parties proved unreasonable, the source only said it was Philnico that should have given up some of its demands since the company had everything to gain after years of failing to actually develop the mine.

Teves, for his part, only said that there was little the government could do to compel the parties to return to the table although he admitted that the Department of Environment and Natural Resources (DENR) "had options to consider."

He said the terms of the mining agreement with Philnico could be put under review.

Wire news reports quoted Philnico officials as saying that there were four other groups from China, Russia and Japan that have started their due diligence on the Nonoc mine, opening new possibilities for Philnico.

Teves said despite the snags and delays in the joint venture between Philnico and Jinchuan, the Chinese nickel giant was still intent on putting its investment in Nonoc mines.

Teves said he was in receipt of a letter from Jinchuan expressing its unwavering interest in Nonoc. "They were very appreciative of the efforts to make this happen," he said.

He said Jinchuan had been intent on the Nonoc mine and has not indicated interest in any other mining venture in the Philippines.

"As far as we know, they are not looking for another partner or any other resource," Teves said. "I don’t know if there are other opportunities open to them."

Philnico earlier disclosed that Jinchuan had offered it a 15-percent stake in the proposed joint venture, subject to the conduct of another feasibility study on the project that would be completed in May 2007.

Philnico is 55 percent owned by Hong Kong-based Compline Resources Co., about 30 percent by Australia’s Pacific Energy Ltd. and the rest by local investors.

The company bought the Nonoc mining rights from the government but has yet to settle its arrears estimated at $300 million for the right to develop and extract nickel resources.

Philnico estimated that if the Jinchuan partnership should push through, the earliest Nonoc could reopen would be in 2009. Construction of a new processing facility was estimated to take at least 18 months.

The mine is located on Nonoc Island in Surigao, with a land area of 5,825 hectares. The mine was estimated to have more than 144 million tons of nickel ore reserves.

Nonoc was actively mined from 1975 to 1982, with annual production at between 9,600 tons and 25,000 tons of nickel, but it was closed down due to high energy costs.