MAC: Mines and Communities

Another blow for Xstrata's Tampakan project ...

Published by MAC on 2012-06-19
Source: Asian Correspondent, Malaya, PDI et al

... and against mining in the Philippines

Xstrata's proposed Tampakan mine continues to be mired in controversy. The project is increasingly seen as the lynchpin of the battles over the mining industry in the Philippines.

As such, it has been a bad past few weeks for the company, and for the industry.

Xstrata's appeal against the denial of their environmental clearance has itself been denied.

As we have seen from previous articles, this hasn't stopped the company continuing to develop the mine regardless. However, it is a big blow in legal terms. Added to this, farmers whose water rights may be affected, are the latest group to raise their voices against the mine.

Not far away from Tampakan, in the Compostella Valley, there has been another attack by communist guerillas on mining companies; including one on a mine effectively owned  by Canada's Cadan Resources.

Meanwhile, the promise - or threat - of changes to the country's mining legislation drags on.

Industry representatives have refused an invite to debate such issues at the Ataneo School of Governance, instead focussing their pressure on the Office of the President, and urging the government to "promptly address uncertainties now hounding the mining industry".

SMI dealt another blow

By Edwin Espejo

Asian Correspondent

4 June 2012

Mining firm Sagittarius Mines Inc. suffered another setback when the Environment Management Bureau denied its appeal to have an earlier decision overturned, derailing further its target commercial production date.

Public forum on Tampakan mining project
Mining forum over Tampakan mining project Source: Edwin Espejo

In a decision handed down on May 22, 2012 but only released last week, the legal department of the environment bureau stood pat in its decision to deny SMI the required environmental clearance certificate (ECC) citing the Provincial Environment Code of South Cotabato which bans open pit mining method.

Environment secretary Ramon Jesus Paje said the ordinance must first be repealed or amended before his office could issue an ECC.

The ordinance raises constitutional issue as the country's existing mining law is silent on open pit mining method.

Republic Act No. 7160 or the 1991 Local Government Code of the Philippines however empowers local government units to impose statutory limitations to protect the environment covered by its territory.

In 2010, then South Cotabato Gov. Daisy Avance-Fuentes signed the ordinance banning open pit mining in the province.

Current provincial governor Arthur Pingoy said the provincial board is not inclined to repeal or amend the ordinance. Until it is recalled, the governor said he will implement all its provisions, including denying permits to mining companies that will employ open pit mining method.

Last week, SMI invited members of the press to and stakeholders to a presentation of its sustainability report for 2011.

In a video and power point presentation, SMI still expressed hope that the EMB will reverse its earlier decision.

"The denial decision was not made on the merits of our mine EIS, which fully complies with the requirements of the EMB's own ECC process and is backed by a world-class EIA," SMI president Peter Forrestal said in his 80-page report.

Mines and Geosciences Bureau (MGB) director Leo L. Jasareno said company's "most available remedy under the law" now would file an appeal to the Office of the President.

SMI has so far avoided bringing the issue to the Supreme Court.

Last week, however, SMI general manager for external affairs Mark Williams said the company is considering bringing the matter to court.

The Xstrata Plc-controlled SMI owns the Tampakan Copper and Gold Project reputed to be Asia's biggest untapped deposits of copper and gold. It plans to pour in US$5.9 billion to extract ore deposits that is said to have a mining life of at least 20 years.

It will reportedly generate revenues of up to $37 billion during its entire 20 mine life.

According to its original target, SMI plans to go on commercial production in 2016.

Strong opposition from the local Catholic Church and environment groups, coupled with its recent legal setbacks, is putting SMI operations in jeopardy.

DENR halts $5.9B project

By Madelaine Cabrera


5 June 2012

Sagittarius Mines Inc. (SMI) yesterday said it has put on hold preparatory construction for the Tampakan mine site.

The Department of Environment and Natural Resources has denied the $5.9-billion project an environmental clearance certificate (ECC) without which it cannot operate.

The DENR said the ban on open pit mining at the site must first be lifted.

SMI officials said they will seek help from Malacañang or ask for a legal opinion.

John Arnaldo, SMI external communications and media relations manager, said the company has yet to receive the notice from the DENR.

"The legal option is always our option, but it is not our preferred option; we prefer dialogue," Arnaldo said.

In dismissing SMI's appeal for reconsideration of an earlier rejection of its ECC, the DENR, in a four-page order dated May 22, maintained its position to deny the ECC application pending the resolution of the issue on the open pit mining.

Earlier, DENR Secretary Ramon Paje issued a memorandum that denied the ECC application "until the issues and concerns on the use of open pit mining method shall have been clarified and resolved" by SMI with the provincial government of South Cotabato.

In its appeal, SMI challenged the authority of Paje to issue the memorandum.

In the May 22 order, the DENR said "the issue of constitutionality of the provincial ordinance does not fall within the power of this (DENR) office to decide."

"Further, the constitutionality of an ordinance cannot be attacked collaterally. Its validity and legality therefore shall be respected until the same is declared unconstitutional by the appropriate authority," it said.

The grant of the ECC would have allowed the company to start with the development phase within the next three years. The project is supposed to be on stream by 2016.

Anselmo Abungan, OIC-assistant secretary for legal of the DENR, said the department has no authority to decide on the unconstitutionality of the South Cotabato provincial ordinance, which bans the open pit mining method, adding that the validity of an ordinance cannot be attacked collaterally.

"Its validity and legality therefore shall be respected until the same is declared unconstitutional by the appropriate authority," Abungan said.

Smarting from DENR's decision, SMI is ready to take another blow, should and if the government proceeds with the plan to strip the mining sector of income tax holiday.

Justin Hillier, finance and commercial manager of SMI, said the company is unsure if tax holiday is "on the table or not on the table,"

"That's where we are at," Hillier said, adding that SMI has made its assumptions that the government gets to rake in $7.195 billion in taxes and royalties for the 20-year mine life of Tampakan without factoring in the tax holiday.

Hillier said SMI has registered its project with the Board of Investments (BOI) and "income tax holiday is being reconsidered."

Arnaldo said SMI's current BOI registration only covers the exploration and pre-feasibility phases and has not been amended.

He said SMI needs to apply for registration for the construction and operation phases once the corresponding ECC is granted.

"Should SMI be granted the BOI registration for the construction and operation phases, the key tax incentive, being the income tax holiday, would be effective from commencement of operations," Arnaldo said.

Under the Mining Act of 1995, large-sale contractors covered by financial and technical assistance agreements are entitled to an additional incentive in the form of a tax holiday on national taxes.

The Mining Act of 1995 is included in the Investment Priorities Plan's mandatory list, which is composed of all the special laws that extend BOI tax incentives.

Under the guidelines of the Mining Act, the tax holiday is granted from the start of the construction and development period until the end of the cost recovery period, but not to exceed five years from the start of commercial operations.

After the recovery period, the contractor starts paying these taxes, including the additional government share based on negotiated scheme.

Based on the mine project feasibility conducted in April 2010, when copper was at $2.20 per pound (copper was trading $3.24 to $3.31 on the CME yesterday), the $7 billion that government gets in the form of taxes and royalties would take effect after the five-year recovery period. These come in three schemes: profit-based, which accounts for 63 percent of the total and which all goes to the national government: income tax of 30 percent of net income amounting to $2.771 billion; dividend withholding tax, which is 15 percent of dividends, amounting to $1.79 billion. The cost-based taxes that account for 15 percent are VAT (12 percent on sales and purchases), customs duty (3 percent of landed cost) and real property (2 percent of assessed value) at $105 million, $221 million and $734 million, respectively.

The revenue-based taxes, accounting for 22 percent, are excise tax (2 percent of gross output), $584 million; local business tax (0.375 percent of gross output), $156 million; royalties to indigenous peoples/indigenous cultural communities, 1 percent of gross output, $417 million; and royalties to host communities, 1 percent of gross output, $417 million.

The Tampakan mine, which shall be the largest foreign direct investment in the Philippines, is projected to produce 340,000 metric tons of copper and 350,000 ounces of gold annually from 2016 into 2036. Unless the government fixes its policy problems, this ban could potentially dampen investment funds in the mining industry to develop the country's estimated $1 trillion in mineral resources.

SMI said that the Tampakan project will add 1 percent to national GDP on average throughout the 20-year mine life.

Farmers oppose open-pit copper-gold mine in Davao Sur

By Kristine L. Alave

Philippine Daily Inquirer

27 May 2012

MANILA, Philippines - A battle between farmers and Sagittarius Mines, the operator of the copper-gold mine set to open in southern Mindanao in 2016, is looming over water resources in the lush, mineral-rich province of Davao del Sur.

Farmers and an irrigators' association in Davao del Sur and Davao City have asked the Aquino administration to stop the $6-billion open pit mine project, saying it would destroy the watershed that feeds into 13,000 hectares of mostly-rice farmlands downstream.

The complaint of the farmers was confirmed by Agriculture Secretary Proceso Alcala, who was asked by the farmers recently to halt the massive project. "Farmers are against the Tampakan project. I think they will not let this push through," Alcala said.

A resolution made by the Davao del Sur and Davao City Federation of Irrigators' Association that was submitted to the Department of Agriculture and the Office of the President said the national and communal irrigation system of Davao del Sur would face "environmental destruction" from the open pit mine and various mining facilities that would be built to support it.

Davao del Sur is an agricultural basket and one of the rice-producing provinces in Mindanao. The irrigators' association said their rice production would be threatened by the mining project.

More than 13,000 farmer-irrigators are very much dependent on water resources of the rivers, considering that water is the life-blood of our rice farmers," the group said in the resolution.

If our watershed will be damaged due to this open pit mining operations, we are certain that the Road Map to Rice Self-Sufficiency from year 2011-2016, which is one of the major components under the present administration will not be achieved," the resolution read. The Aquino administration has been aiming to make the Philippines produce enough rice for its population so that the government could halt the costly importation of rice, the Filipinos' main staple.

Nestor Rama, president of the group, said the tailings and chemicals used in the processing of the minerals could contaminate the water flowing from the Mal River to downstream.

Leogene Bangahon, another farmer-irrigator, said the location of the mining area, as well as the use of the open pit method, could wipe out the watersheds in the mountains.

"Once you destroy a mountain, it's gone," he said. "If the source of our water is gone, we will not be able to plant," he added.

The Sagittarius Mines project is a joint venture among Xstrata Copper, Indophil Resourcs NL and Tampakan Group of Companies. The companies' $5.9-billion investment in the copper-gold mine is considered to be the largest single foreign direct investment in the Philippines.

The Tampakan mining site straddles four provinces in Southern Mindanao. The proposed mine site covers 10,000 hectares and is located between the towns of Tampakan, South Cotabato and Kiblawan, Davao del Sur.

The Department of Environment and Natural Resourcs has yet to issue an environmental clearance certificate (ECC) for the project following the ban on open pit mining by the provincial government of South Cotabato.

Agriculture officials have confirmed that the area where the mine project is located has large-scale irrigation facilities and a major river system. Antonio Nangel, NIA administrator, said the government has spent P250 million for the irrigation system in Mal River.

Alcala said the complaints from farmers and irrigators in other mining areas have compelled them to include a provision in the new mining regulations being drafted by the government. "There should be no mining in areas where there are established agricultural facilities. Prime agricultural land should also be exempt," he said in an interview.

Davao del Sur is part of Region XI, a highly mineralized area in Southern Mindanao. The region is home to large-scale and small-scale mining operations, as well as vast plantations of rice, bananas, and pineapples. Over the years, the region's rice output has declined. According to data from the National Irrigation Administration, Region XI produced 427,184 metric tons of rice in 2007. In 2010, paddy yield dropped to 402,111 metric tons.

A spokesman from Sagittarius Mines said the project would not contaminate agricultural land in the area.

John Arnaldo of SMI said: "SMI confirms and guarantees that no mining activities are proposed to be undertaken in any prime agricultural lands."

He added that the company would build a fresh water dam to mitigate any impact on water supply downstream.

"If the project is approved, we would construct a freshwater storage dam to collect water that is excess to current downstream agricultural requirements during the wet times of the year, which would then be used during the dry times when river water levels are low," he said.

"This will lead to increases in rice production and farmer's incomes as well as provide an opportunity for an improved equitable distribution of irrigation water," Arnaldo said.

Miners decline Ateneo invite

By Manila Standard

4 June 2012

The Chamber of Mines of the Philippines and its member firms have declined the invitation to participate in the Society of Jesus Social Apostolate Mining Colloquium at the Ateneo de Manila University Loyola campus on June 4 and 5.

CoMP, composed of the biggest mining and exploration firms in the country, cited the Ateneo School of Government's "extreme bias" against the country's legitimate large-scale mining industry for its decision.

CoMP, in a letter to AdMU president Jose Ramon Villarin, however, expressed hope for a constructive dialogue with the Ateneo community, after the announcement of the Aquino government's mining policy.

"We thank you [Fr. Villarin] for taking the position that...[AdMU] is for responsible mining-a position fully supported by the Ateneo Alumni Association," CoMP said. "We also welcome your invitation to a dialogue between AdMU and the minerals development industry."

"It is quite unfortunate that [ASoG Dean] Dr. Antonio La Viña's idea of a dialogue does not conform with ours, especially since the ASoG does not view responsible mining in the same light as we do," the mining association added.

CoMP said only mining critics would be given a slot at the start of the colloquium to provide an overview on the industry, but industry representatives were left out as indicated in the event program.

CoMP further added that sector representatives that have expressed profound biases against mining would be given a disproportionately greater opportunity to reiterate their views vis-à-vis the industry in the two-day event.

The three invited representatives from industry (CoMP, Sagittarius Mines Inc. and Philex Mining Corp.) will be relegated towards the tail end of the colloquium on the second day, "a seeming afterthought in the event" that CoMP believes is "not the Ateneo's idea of a dialogue."

CoMP said adding to its disappointment is the fact that the book Is There a Future in Mining? would be launched on Day 1.A golden opportunity we can't miss

NPA rebels raid 2 mining firms in Mindanao

Mindanao Examiner

9 June 2012

DAVAO CITY (Mindanao Examiner / June 9, 2012) - Communist rebels raided two mining firms and attacked government troops pursuing them Saturday in the southern Philippines, officials said.

Officials said undetermined number of New People's Army rebels raided the Milagrosa mining firm after disarming private guards at around 1 a.m. in the village called Saranga in Compostela Valley's Maragusan town.

Troops sent to pursue the raiders resulted in a fire fight after gunmen detonated a landmine in the village of Nuevo Visayas in the nearby town of Mawab, but there were no reports of casualties, according to Major Rosa Maria Cristina Manuel, of the 10th Infantry Division.

She said the rebels earlier raided the Philco mining company in the village of Camanlangan in the neighboring town of New Bataan and burned two excavating equipment, and two trucks and a driller before fleeing under cover of darkness.

"There is an operation going on against the NPA in the province," Manuel told the Mindanao Examiner.

The military has condemned the continued use of landmines by the rebels, saying it put the lives of civilians in grave dangers.

"Landmines are totally banned around the world, but the NPA continues to use those explosives that endanger the lives of innocent civilians. We totally condemned the use of landmines," she said.

The NPA, which is fighting for decades for the establishment of a Maoist state in the country, is opposed to mining operations in Mindanao, saying it is destroying the environment. But the military said the attacks were triggered by refusals of mining firms to pay so-called "revolutionary taxes." (Mindanao Examiner)

Government pressed to settle policy towards mining sector

Business World

4 June 2012

DAVAO CITY -- The national government should promptly address uncertainties now hounding the mining industry due to the former's unclear policy towards the sector, Artemio F. Disini, chairman of the Chamber of Mines of the Philippines, said on the sidelines of a public forum last week in Manila.

"Last year, we lost about P10.4 billion in opportunities," said Mr. Disini, pointing out that some companies that considered the Philippines as a possible area for investment decided to look elsewhere due to the current confusion over the country's mining policy.

While he did not provide details on the opportunities lost, Mr. Disini warned that "losses could be higher if the government continues to be tentative with its policies."

The government has been observing a moratorium on new applications for mining permits since October 2010 as it reviews existing ones to weed out inactive projects.

It has also yet to release a long-awaited policy that is supposed to hike state revenues from the sector and address conflicts between national and local government laws.

Edilberto L. Arreza, Mines and Geosciences Bureau regional director, confirmed the adverse impact of the moratorium on mining in Davao Region, including an increase in illegal small-scale mining. "Because of the increase in the number of small-scale miners, the smuggling of gold has become so rampant," Mr. Arreza noted, even as he admitted it was difficult to estimate the magnitude of this problem. -- DTW

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