Indophil eyes Glencore stake in Tampakan mine

MANILA, Philippines - Australian miner Indophil Resources NL is still interested in acquiring a 100-percent interest in Sagittarius Mines Inc. (SMI), the operator of the beleaguered Tampakan copper-gold project in South Cotabato, should majority owner Glencore Xtrata pull out of the project.

Indophil vice president for Corporate Affairs Gavan Collery said yesterday discussions for the possible acquisition of Glencore Xstrata’s stake in the Tampakan project would be discussed after the completion of the sale of Glencore’s Las Bambas mine in Peru.

“We would like to have a prominent position in the (Tampakan) project. We have asked Glencore to decide if they want to continue with the project. We would be able to discuss this with them after the sale of the Las Bambas mine,” he said.

Glencore Xstrata – the merger of Glencore International Plc and Xtrata Plc – has expressed interest in divesting its majority interest in the $5.9-billion project as it prefers not to develop greenfield projects.

The merger has raised apprehension in several countries that would be supplied by the company as the merged entity would control a significant portion of world copper supply and other mineral commodities.

The Chinese antitrust authority, for instance, is pressuring the commodities giant to loosen its grip on copper supply by divesting its stake in some of its copper mines.

The Chinese Ministry of Commerce (Mofcom) gave its nod to merger last year after Glencore Xstrata agreed to sell its Las Bambas copper project in Peru by September 2014, and possibly including the Tampakan project as among the other projects that may be sold.

If the sale is not be completed, the Chinese government could demand the sale of Glencore’s Xstrata’s holdings in other developments including the Tampakan project.

Aside from China, Glencore Xstrata also has to secure approvals from regulatory and antitrust bodies of other countries it is supplying such as the European Union and South Africa.

China, being a major commodities consumer and Glencore Xstrata’s major buyer, fear that the world’s fourth biggest commodities trader would control a substantial amount of the world’s copper supply.

Glencore Xstata’s divestment plan, however, is still subject to discussion and no formal divestment process has commenced.

Collery noted that Indophil is in an advantageous position to buy Glencore’s stake in the project should this arrangement materialize because they have the right of first refusal.

Indophil, Collery said, would also take into consideration any progress on the permitting process for the project before pursuing a potential stake purchase.

SMI is now implementing a pared down work plan within the tenement, entailing a significant reduction in funding as well as the retrenchment of 80 percent of its workforce.

Activities within the tenement are now confined to maintaining local community support and clarifying with the Philippine government the process and timeline for the remaining approvals required for the commencement of the project.

The Tampakan project, which has an initial 17-year mine life, has a start-up milling capacity of 66 million tons per annum and an annual metal production of 450,000 tons of copper and 435,000 ounces of gild over the first five years of operation.

An inter-agency working group (IAWG) has been created within the Mining Industry Coordinating Council (MICC) to resolve the challenges in the advancement of the project which include the following: conflicting agrarian-reform claims within its tenement; the condition laid down in its Environmental Compliance Certificate (ECC) for perpetual liability for all environmental damages resulting directly or indirectly from project operations, the open-pit mining ban in South Cotabato, and the difficulty in securing the Free Prior Informed Consent (FPIC) of communities that would be impacted by its operations.

Operation of the mine was originally slated for 2016 but was pushed back to 2019 because of such concerns.

“The creation of an IAWG within the MICC for the resolution of the permitting challenges in the Tampakan project is a welcome development,” said Collery.

Glencore Xstrata holds a 62.5 percent interest in SMI while Indophil holds a 37.5 percent stake.

Indophil, in turn, is currently 30 percent owned by Filipino corporations. These include the Alsons group through funding by BDO Unibank, the SM group, San Miguel Corp. and Philex Mining Corp.

Collery said that should Indophil succeed in acquiring 100 percent ownership on SMI, its local stakeholders may up their stake in the local firm.

“That of course, would depend on the progress in the permitting process for the project,” he said.