MAC: Mines and Communities

San Miguel buys into contentious Philippine mine

Published by MAC on 2010-10-25
Source: Manila Standard, Business Mirror, statement

San Miguel is best known in the Philippines as a brewer.

It has, however, been moving into mining and energy production. It's latest move is to buy 10% of Indophil's shares, making it a stakeholder in the troubled Tampakan project (see: Tampakan mine criticised in Philippines).

The national government and mining industry assert that South Cotabato's provincial ordinance, banning open pit mining, will be trumped by national law. If the company pushes through the outcome will doubtless by decided by the courts.

In order to emphasize the need for the open-pit ban, campaign groups continue to stress the risk to the project from seismic activity.

San Miguel may end up RP's biggest mining firm

Manila Standard

14 October 2010

It may be too early to tell but diversifying conglomerate San Miguel Corp. has a legitimate chance of becoming the country's biggest mining company in the medium-term period.

San Miguel's mining exposure so far is limited to the rich Daguma coal reserves in South Cotabato and an initial 10-percent equity in Australia's Indophil Resources NL, owner of a 37.5-percent stake in Tampakan mine, considered the largest untapped gold and copper deposit in Southeast Asia.

San Miguel could take full control of Indophil through a tender offer to acquire all the Australian company's shares. San Miguel is about to conduct a due diligence on Indophil's books.

Indophil earlier agreed to a binding exclusivity period until Jan. 10, 2011 with San Miguel, in which the food and beverage giant will complete a due diligence on Indophil and decide whether to submit a control proposal.

Taking over Indophil will give San Miguel a 37.5-percent stake in the Tampakan copper-gold project in the same South Cotabato province, where it owns the Daguma coal mines. The Tampakan project, controlled by Anglo-Swiss miner Xstrata PLC, contains an estimated 2.4 billion metric tons, with a grade of 0.6 percent copper and 0.2 percent grams per ton of gold.

San Miguel will likely make an aggressive bid to acquire Indophil lock, stock and barrel as part of its plan to go into non-core businesses with higher investment returns. It has the money to finance the $5.2-billion development cost of Tampakan, which is touted to become the Philippines' biggest mining project.

The Tampakan mine, when fully developed, will make San Miguel a major mining company in the class of Philex Mining Corp. and Atlas Consolidated Mining & Development Corp., the no. 1 and no. 2 metal producers in the Philippines, respectively.

Problematic control

San Miguel faces a bumpy road in gaining a stake in the Tampakan mine. Indophil in a statement Wednesday said other companies were free to try to beat San Miguel's planned purchase. A bidding war for Indophil's control is likely but San Miguel president Ramon Ang seems ready for it, given the conglomerate's huge war chest.

China's Zijin Mining Group Co. early this year attempted to buy out Indophil with a $500-million offer. Zijin, however, terminated the talks in June after it failed to convince the Chinese government to approve the deal. A ban in the open-pit mining method in South Cotabato helped in the collapse of the takeover talks.

Hong Kong-based conglomerate First Pacific Co Ltd. is another company that could challenge San Miguel. First Pacific, which has engaged San Miguel and businessman Joselito "Butch" Campos earlier in a bidding war to acquire Del Monte Pacific Ltd., has expressed interest in the Tampakan project through Indophil.

San Miguel's mining foray started with its acquisition of Daguma Agro, an upstart mining company that has rights over one of the country's richest coal deposits. San Miguel now plans to put up a 150-megawatt to 300-MW mine-mouth power plant in General Santos City in South Cotabato.

Ang had gushed over the potential coal reserves of Daguma Agro's concession area, which is close to picturesque Lake Sebu. The company's coal deposits are so huge that it could fuel a 2,000-megawatt power plant.

Initial drillings had established that the coal deposits in the two blocks owned by Daguma Agro were in the magnitude of 50 million MT. Semirara Coal Corp., the biggest coal exploration company in the Philippines, started with estimated reserves of 20 million MT. Semirara is now annually producing about 2 million MT from 1.5 million MT in its first few years of operation.

Tampakan project site cut by fault line, poses high disaster risk to communities, environmentalists assert

Kalikasan PNE Press Release

20 October 2010

Environmental groups maintain opposition despite the government's active promotion of the Tampakan mining project. The groups headed by Kalikasan People's Network for the Environment (Kalikasan PNE) and Defend Patrimony! Alliance said that among the bases for opposing the project is the high environmental and socio-economic risks that the project poses to the surrounding communities, compounded by the fact that the mine site is traversed by a fault line.

"The proposed mining site is traversed by numerous fault lines particularly where the tailings pond is planned to be located. This poses a big risk to the stability of the pond that will be built," said Catherine Abon, geologist from the University of the Philippines National Institute of Geological Sciences (UP NIGS).

The Tampakan gold-copper project is located in the boundaries of South Cotabato, Davao del Sur, Sultan Kudarat and Saranggani Province where the open pit mining method will be used. The project is owned by Swiss company Xstrata Queensland Ltd and Australian publicly listed company Indophil Resources.

Study of the geology of the area reveals that Mindanao Island is traversed by the Philippine Fault and the Cotabato Fault. The deposit lies within the Cotabato Fault Zone, a west-northwest trending srtike slip fault zone said Abon. The presence of faults in the proposed mine site is presents a danger in the facilities that will be constructed for the mine operation such as tailings pond dam.

The tailings pond is where the materials left after the valuable minerals have been separated from the ores and wastes will be placed. The tailings dam have been proven to be one of the most sensitive and risky facilities in a mine site as it will contain high amounts of heavy metals such as mercury, arsenic and copper and other toxic elements associated with mine operation and must be treated before flowing out to river. However, due to accidents, disasters or negligence, polluted water and chemical waste have spilled in waterways causing massive pollution, economic displacement and health risks to the communities.

"Tailings dam failure is a high probability and is common in the country's mining history. According to the data compiled by one environmental group, since 1992 - 2007 there has been 22 major tailings dam failures that occurred in the country such as the Marcopper mining disaster in Marinduque and Rapu-rapu mining disaster in Bicol. In the case of Tampakan project, if the dam fails, the heavy metals and toxic elements will flow to the Mal River which supports the agricultural and domestic needs of the people in Malalag and Kiblawan in Davao del Sur," Abon explained.

"This observation is supported by a study by National Irrigation Association (NIA) of Davao del Sur. In 1990, there was a proposal for the construction of a water reservoir that will supply water for irrigation purposes. This project was not carried out because NIA has concluded that the area is too unstable due to the presence of faults. Now, SMI is proposing to build a more dangerous facility and destructive project in the same area, and ironically, the government have not resisted the idea," said Abon.

According to the groups, it is alarming how the Department of Environment and Natural Resources (DENR) would go to great lengths and employ every strategy it could use just for mining to commence in the area, however glaring and persistent the calls and basis of the people for opposing the project.

The groups were reacting to the recent pronouncement of the acting director of the Mines and Geosciences Bureau (MGB) that the entry of a Filipino company, in this case the San Miguel Corporation (SMC), in the project will appease the dissent against the project.

"The national government, especially the agency tasked to protect our environment, DENR, cannot seem to get the demands of the people which is the rights to their lands and natural resources, access to basic social services, and right to a healthy ecology," said Clemente Bautisa of Kalikasan People's Network for the Environment (Kalikasan PNE).

According to Bautista, introducing a Filipino company to the project, does not 'change the landscape in Tampakan', contrary to the claims of MGB and does not address the fundamental reasons why the project is being opposed.

"In attempts to speed up the Tampakan mine operations, the MGB has stepped in by introducing local partners thinking that this would be the key for successful mining projects. They seem to be forgetting the more important requirement which is wise utilization of natural resources, environmental safety, social acceptability, support of the local communities that brings about genuine development which the Tampakan project clearly has not," ended Bautista.

Reference: Clemente Bautista, national coordinator Kalikasan PNE, 09228449787 or 9209099.

KALIKASAN People's Network for the Environment is a network of people's organizations (POs), non-governmental organizations (NGOs) and environmental advocates. It believes that the struggle for the environment is a struggle of the people, thus all environmental action shall have the interest of the majority at their core.


National Coordinator
Kalikasan People's Network for the Environment (Kalikasan-PNE)
No.26 Matulungin St. Bgy. Central, Diliman, Quezon City, Philippines 1100
Tel. No. +63-2-9248756 Fax No. +63-2-9209099

National laws govern mining

By Max V. de Leon

Business Mirror

13 October 2010

THE government assured investors on Wednesday that any antimining ordinance will never prevail over national laws, and that it is ready to use stiff disciplinary measures against local government officials who will insist on implementing contradicting local laws that will turn away investments.

Trade Undersecretary and Board of Investments (BOI) managing head Cristino Panlilio said suspending local officials through the Department of the Interior and Local Government (DILG) is one option that the national government can take to "straighten up" these officials.

"The DILG has that power, if push turns into shove," Panlilio told reporters at the sidelines of the Philippine Business Conference (PBC) on Wednesday at the Manila Hotel.

But, of course, Panlilio said the national government will first resort to moral suasion and dialogues to amicably settle differences with local governments. If nothing happens, he said the DILG has to use its authority and undertake the suspension and subsequently dismissal of local officials who will continue to make life difficult for mining investors through their ordinances.

Panlilio was a reactor to the presentation of Mark Williams, president of Sagittarius Mines Inc., which is undertaking the $5.9-billion Tampakan mining project. The company's operation is currently under threat following the promulgation of an ordinance in South Cotabato banning the use of open pit mining in the area.

Philip Romualdez, president of the Chamber of Mines of the Philippines and chairman of the PBC, said the imposition of additional taxes by local governments is also threatening the confidence level of mining investors as these are again signs of changing of rules in the middle of the game.

Panlilio said the superiority of the national laws against local ordinances will stand in court and is consistent even with the Constitution.

He said mining is an important component of the administration's thrust to eradicate poverty in the country, particularly in the countryside.

"The objectives of the national government in promoting job generation and business to alleviate poverty should prevail," he said.

Williams said despite the challenges it is facing, the company remains committed to pursuing its investment in Tampakan, which is labeled as the largest mining project in the country.

He said the Mining Act of 1996 already has sufficient checks and balances to safeguard the environment and the communities, and if properly communicated to all stakeholders, the local governments no longer need to come up with their own safeguards. In terms of government incentives, Panlilio said mining investors are assured that once they have obtained their registration with the BOI, they will continue to enjoy the privileges granted to them for the generation of their incentives coverage.

Home | About Us | Companies | Countries | Minerals | Contact Us
© Mines and Communities 2013. Web site by Zippy Info