MAC/20: Mines and Communities

South Cotabato governor signs ban on open-pit mining, Philippines

Published by MAC on 2010-07-04
Source: Philippine Daily Inquirer, Manila Bulletin

After much lobbying on both sides, the out-going governor of South Cotabato has signed the environmental code, which will ban open-pit mining in the province, aimed squarely at Xstrata's proposed copper and gold Tampakan mine. See:

The provision seems to have triggered the death of the already-stalled deal for Zijin Mining to buy out Indophil's share of the project.

Legal challenges are already being mooted, but it will be very interesting to see where this goes now (given that the biggest legal challenge, mounted against the country's 1995 Mining Act, was over this same project).

One of the articles below highlights that the provision will have implications for open-cast coal mining proposed by brewer-turned miner, the San Miguel Corporation (among others).

The code itself can be downloaded as a pdf here.



South Cotabato governor signs ban on open-pit mining

By Aquiles Zonio

Philippine Daily Inquirer

29 June 2010

GENERAL SANTOS CITY, Philippines - Religious and environment groups hailed outgoing Gov. Daisy Fuentes of South Cotabato for signing into law a local environment code, which banned open-pit mining in the province.

"Up to the last hour of her stay in office, Gov. Fuentes remains true to her promise to protect the environment and uphold the interest of the greater majority," Fr. Romeo Catedral, chief of the social action center of the Diocese of Marbel based in Koronadal City, some 58 kilometers west of here.

Both the pro-mining and anti-mining groups staged separate protest actions a few weeks back to push for their positions on the issue.

The Sangguniang Panlalawigan (SP) or the provincial council members approved on June 9 the province's environment code, with nine board members voting in favor of the controversial code, one opposing and two abstaining.

The SP passed the code, considered as landmark legislation and the greatest legacy of the Fuentes administration, despite the protest rally staged by the pro-mining groups outside the SP building.

A week after the passage of the code by the local legislative body, about 3,000 pro-mining protesters picketed the residence of Fuentes to pressure her not to sign into law the environment code.

Xstrata-SMI managing director Peter Forrestal met with Fuentes shortly after the rally to present the company's position.

Both parties refused to divulge what were discussed during the meeting.

On June 22, Church workers, students, militants and other pro-environment groups staged their own rally in front of the governor's house to convince her to sign the code.

Fuentes, however, refused to be influenced, even turning down the dialogue arranged by the pro-mining groups between her and Bishop Dinualdo Gutierrez, vocal critic of Xstrata-backed Sagittarius Mines Inc. (SMI).

She kept both parties guessing.

Catedral, in a mobile phone interview, said they did not insist when Fuentes refused to meet with the bishop.

"We trust her competence and political will. We don't want her to feel being pressured. We had no idea what would be her final decision but we admire and we thank her for making the right decision," Catedral said.

Fuentes called for a press conference Tuesday afternoon to announce her decision to sign into law the environment code.

The governor claimed that as early as Friday last week she had already made up her mind but she did the actual signing only on Tuesday morning.

She claimed she examined closely the position of both camps before finally coming up with such a tough decision.

Fuentes served as congresswoman of the South Cotabato 2nd congressional district and as governor for three consecutive terms. She was elected again as congresswoman of her district last May 10 election.

Catedral said: "This is not just our victory but the victory of all people in the province. This is just the beginning. We will continue the fight against mining."

Xstrata-SMI announced earlier that it would employ open-pit in extracting copper and gold deposits in the area due to the near-to-the-surface mineral stocks.

The bulk of the mineral deposits are said to lie in Tampakan town.

Oppositors to the mining venture say that despite the presence of Xstrata-SMI in the province and neighboring areas for years, the host communities remain mired in poverty.

Over the years, Sagittarius has sponsored thousands of scholars in the elementary, secondary and college levels in the areas affected by its operation.

John B. Arnaldo, SMI corporate communications manager, said a local law could not supersede a national law, referring to Republic Act No. 7942, or the Philippine Mining Act of 1995, which did not ban open-pit or any other mining method.

The management of Xstrata-SMI is planning to question before the higher court the legality of the local environment code.

But Fuentes, herself a lawyer, said the passage of the environment code was well within the ambit of local autonomy.

In its sustainability report, Xstrata-SMI has claimed that the Tampakan copper-gold project is a world-class 2.4-billion ton resource containing 13.5 million tons of copper and 15.8 million ounces of gold.

The report further states that when developed, it has the potential to generate foreign investment amounting to over US$5 billion, employment opportunities for up to 8,000 to 9,000 people during construction and for around 2,000 during operations.

The project is also expected to contribute significantly to local and national taxes.

The company expects to start the actual mining operation in 2016.

12,000 in S. Cotabato rally urge gov: Sign open-pit mine ban

By Aquiles Zonio

Philippine Daily Inquirer

23 June 2010

GENERAL SANTOS CITY-ANTImining advocates staged a rally at the South Cotabato provincial capitol in Koronadal City on Tuesday to call on Gov. Daisy Avance Fuentes to sign into law the provincial environment code which bans open-pit mining.

The rally was staged a week after promining groups staged a rally to press Fuentes to veto the ordinance, which could stop plans to start extracting gold and copper from what was touted to be Asia's largest mining find in decades.

Global mining giant Xstrata operates Sagittarius Mines Inc. (SMI), which holds a license to operate in Tampakan town.

Fr. Romeo Catedral, social action chief of the Diocese of Marbel, said at least 12,000 people joined the antimining rally.

The rally, led by Marbel Bishop Dinualdo Gutierrez, was aimed at pressuring Fuentes to finally sign the code, which the Sangguniang Panlalawigan passed on June 9.

Gutierrez said Fuentes should not think twice about signing because the people of South Cotabato have spoken against open-pit mining, which requires the blasting of entire mountain tops to open access to ore deposits.

Xstrata-SMI gathered about 3,000 people last week and called on Fuentes to veto the environment code.

Peter Forrestal, Xstrata-SMI managing director, met with Fuentes, who said she would decide based on her own study of the pros and cons of open-pit mining.

Fuentes exits as governor on June 30. Her failure to sign the ordinance in 30 days, however, would allow it to lapse into law.

Antimining advocates said although it would automatically become law if Fuentes didn't act on it, it was better for the governor to sign.

"This gathering is not just for the environment ... but for our children and our children's children," said Fr. Catedral.

Xstrata-SMI said it will run to the courts should Fuentes sign the environmental code.

It said the company has already spent a lot of money to develop the open-pit mines and banning them would lead to huge losses.

An alternative law group, however, said the provincial government has the power to ban open-pit mining and Xstrata could not do anything about it.

Judy Pamela Pasimio, head of one group opposing open-pit mining, said local governments have the power to manage and administer their natural resources.

Abelardo Wali, a T'boli leader from Barangay Ned in Lake Sebu town, said the environment code would preserve his tribe's ancestral domain, which is also being threatened by the entry of coal-mining firms.

South Cotabato environment code violates Mining Act - MGB 12

By Ben O. Tesiorna

Manila Bulletin

26 June 2010

KORONADAL CITY, South Cotabato - Mines and Geosciences Bureau (MGB) Region 12 director Constancio Paye Jr. has formally informed the office of Governor Daisy Fuentes regarding the possible violation of the controversial South Cotabato Environment Code on a national statute.

In his letter dated June 25, Paye cited in particular Section 22(b and c) of the environment code which prohibits open pit mining in the province and "has the effect of banning all forms of mining activities in the area".

For an ordinance to be valid, it must not only be within the powers of the local government unit to enact and pass according to the procedure prescribed by law, but it must also conform to the following substantive requirements: (1) it must not contravene the Constitution or any statute; (2) it must not be unfair or oppressive; (3) it must not be partial or discriminatory; (4) it must not prohibit but may regulate trade; (5) must be general and consistent with publiolicy; (6) and it must be reasonable.

"Accordingly, an ordinance in conflict with a state law of general character and statewide application is universally held to be invalid," Paye said in his letter. "Moreover, an ordinance which seeks to prohibit an activity which is merely regulated by the State is considered illegal and ultra vires."

Ultra vires is a Latin word [phrase] which means "beyond the power".

Paye said the Provincial Board of South Cotabato does not have the power to specify areas where mining activities are prohibited as it is only the Congress that has the power to do so, as specified in Section 19 of Republic Act 7942 or the "Philippine Mining Act."

"We cannot overemphasize that the South Cotabato Government cannot, on its own accord, regulate, much less ban, mining activities within its jurisdiction since mining operations are a national concern regulated by the State," Paye said. "In fact, under Executive

Order No. 292, otherwise known as the 'Administrative Code of 1987,' it is the DENR which is charged with carrying out the State's constitutional mandate to control and supervise the exploration, development, utilization, and conservation of the country's natural resources. Moreover, it is the DENR's primary responsibility to formulate and implement policies related to said mandate."

The Environment Code was recently passed and approved by the provincial board and is now awaiting for the signature of Gov.Fuentes for it to become an ordinance.

Earlier, Environment Secretary Horacio Ramos declared that the South Cotabato Environment Code undermines the Philippine Mining Act of 1995 and runs opposed to the national policy of revitalizing the Philippine mining industry.

Mindanao Development Authority (MinDA) chair Jesus Dureza also warned that the South Cotabato Environment Code puts the government entities that have been working hard to attract investments in the country, especially here in Mindanao, in a disconcerted position.

South Cotabato host the US$5-billion Tampakan Gold-Copper Project, which is currently being explored and studied by Sagittarius Mines Inc. (SMI), the largest single private investment in the history of the Philippines.

There has been a suspicion that the Code was aimed at driving away SMI, which provincial legislators readily denied. SMI has been conducting drilling explorations and feasibility studies on the Tampakan Gold-Copper Project since 1999.

The first casualty on the brewing controversy is the $473-million buyout deal between Indophil Resources NL of Australia and Zijin Mining Group Co. of China, which has already been terminated.

Zijin cancelled its offer to acquire all the shares of the Australian miner, whose key asset is its 37.5-percent interest in Tampakan, due to the "uncertainties" surrounding the gold-copper project.

$473-M Tampakan mining deal scrapped over environmental measure

By Riza T. Olchondra

Philippine Daily Inquirer

25 June 2010

THE $473-MILLION BUYOUT DEAL BETWEEN INDOPHIL Resources NL of Australia and Zijin Mining Group Co. of China has been terminated-a casualty of the trouble now plaguing the $5.2-billion Tampakan copper-gold project.

In separate disclosures, Indophil and Zijin said that the Chinese company canceled its offer to acquire all the shares of the Australian miner, whose key asset is its 37.5-percent interest in Tampakan.

At the root of the problem is a proposed environmental measure banning open pit mining in South Cotabato-one of three provinces hosting the Tampakan project.

The proposed measure prompted Indophil and Zijin to scrap the mining deal due to "uncertainties" attending the gold-copper project.

Zijin is the largest gold miner of China.

Mining industry analysts said that the proposed South Cotabato measure could run into conflict with the Philippine Mining Act of 1995. Under that law, companies may undertake any form of mining, including the "open pit" method.

Analysts said that the local government measure might not necessarily put a halt to the $5.2-billion Tampakan project, but the legal repercussions arising from its implementation could delay the project's development.

"This is very disappointing, and a decision that was not made easily by either party. However, given the lengthy delay in Zijin securing ... approval for their Indophil offer, and no clear timeframe forthcoming, both parties agreed to terminate the agreement," Indophil CEO Richard Laufmann said in a written comment on the scrapped deal.

Indophil will be looking for another buyer, Laufmann added.

But the Australian company is confident that there is "considerable" global interest in Indophil's interest in Tampakan, given the size of its copper-gold reserves.

Laufmann cited a recent study where it was claimed that Tampakan held one of the largest and most significant undeveloped copper resources in the world.

Meanwhile, Indophil shares remain in voluntary suspension on the Australian Securities Exchange "until no later than July 14," when the proposed South Cotabato provincial Environmental Code in respect to open pit mining will have been "clarified."

In December, Zijin announced that it wanted to take over Indophil's shares. Australian regulators approved the bid in January, but Chinese regulators delayed their decision.

The feasibility study for Tampakan, where Xstrata Copper has a controlling stake of 62.5 percent, was submitted to Philippine mining regulators in April. The study affirmed Tampakan's huge economic potential through open pit mining.

In early June, the provincial board of South Cotabato passed an environmental code banning open pit mining. The code needs to be acted upon by outgoing provincial governor Daisy Avance Fuentes. She may approve, reject, or leave the code untouched until her term and that of the provincial board expire on June 30.

Incoming governor Arthur Pinggoy and the new provincial board may review the code.

Nevertheless, the local business community has increased pressure to reject the proposed measure. The South Cotabato Chamber of Commerce and Industry Foundation, Inc., the Region XII Development Council, and the Mindanao Development Authority have all expressed concern that the code will hamper efforts to attract investments.

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