Gold Fields purchase of FSE project faces hurdles

MANILA, Philippines - South African miner Gold Fields Ltd. will have to wait for the release of the government’s new mining policy as well as the resolution of Lepanto Consolidated Mining Co.’s conflict with adverse claimants in the Far Southeast project in Benguet before it may pursue the acquisition of a 60 percent stake in the project, an official said.

Mines and Geosciences Bureau director Leo Jasareno told reporters late Friday the Mineral Production Sharing Agreement (MPSA) of the Far Southeast project could only be converted to a Financial or Technical Assistance Agreement (FTAA) after the release of the mining policy.

“The approval (of conversion) is subject to the new mining policy,” he said.

The government has imposed a moratorium on the approval of new mining permits, tree-cutting permits and environmental compliance certificates.

The moratorium, Jasareno said, would be lifted after the mining policy is released.

While the release of a mining policy is a priority of the government, it has not set a specific date for its issuance.

Jasareno said that apart from waiting for the release of the mining policy, Lepanto will also have to resolve the conflict with adverse claimants of some parts of the mine before the MPSA can be converted to a FTAA.

“While there are issues, conflict with others...there are adverse claimants of some parts of the mine to be resolved, we cannot convert (the MPSA) to FTAA,” he said.

Lepanto filed an application for the conversion of the MPSA of the Far Southeast project to FTAA in November last year.

The FTAA is a license which allows a foreign corporation to legally own a majority stake in a mining project in the Philippines.

Lepanto currently owns 60 percent of the Far Southeast project.

Gold Fields which acquired a 40 percent stake in the Far Southeast project in March said earlier that it plans to exercise its option to acquire another 20 percent of the project once the FTAA application is approved.

Gold Fields said it expects the grant of the FTAA for the project in the second half of the year.

Gold Fields entered into option agreements with Liberty Express Assets and Lepanto for the purchase of a 60 percent stake of the project for a total consideration of $340 million in September 2010.

Jasareno also said that should the government approve the conversion of the MPSA to a FTAA for the Far Southeast project, it could only allow the converted contract to be extended by another 25 years since that is what is permitted by law.

He said Lepanto was requesting for the existing MPSA to be converted to a fresh FTAA which would have a term of 25 years and could be renewed for another 25 years.