MAC: Mines and Communities

President Arroyo’s Decision Not To Ban Mining: A Poor Bet To Rp’s Economic Growth

Published by MAC on 2006-05-23
Source: LRC-Ksk-FoE Philippines ()

President Arroyo’s Decision Not To Ban Mining: A Poor Bet to RP’s Economic Growth

For Immediate Release - Legal Rights and Natural Resources Center –Kasama sa Kalikasan-Friends of the Earth-Philippines (LRC-KsK-FoE).

23rd May 2006

Short-term gains resulting in long-term and irreparable damages. This will be the outcome of Malacanang’s decision not to ban large-scale mining operations in the country despite proofs of its ecological unsustainability and lack of economic viability, according to the Legal Rights and Natural Resources Center –Kasama sa Kalikasan-Friends of the Earth-Philippines (LRC-KsK-FoE). “Once again, President Arroyo has turned her promise up-side-down by putting profit before the interest of the people and the environment. This despite the glaring evidence of environmental disasters exemplified by the tailings spills in Rapu-Rapu, Albay and the Marcopper incident in Boac, Marinduque,” said Jo Villanueva, LRC-KsK executive director.

Last March 15, in her speech before volunteer rescue workers of the Leyte landslide, President Arroyo promised that the government will never prefer profits over sound environment. Last March 10, President Arroyo created the Rapu-Rapu Fact-Finding Commission thru Administrative Order No. 145 to probe the mine spill that affected fishing in the waters around Rapu-Rapu island. The President has also agreed to the request of Catholic bishops to review the Mining Act of 1995.

“All these pro-people and pro-environment stance and initiatives made by the President have all become lip service. President Arroyo herself is doing further disservice to her already tarnished credibility. Her decision to allow large-scale mining operations in the country will mean profit for a few and poverty for the majority of the poor and marginalized Filipinos” said Villanueva.

Poor bet LRC claimed that the interest for profit that President Arroyo now protects will benefit not the Filipino people but foreign mining companies who have caused irreparable damage to the country’s environment and the massive displacement of indigenous peoples, farmers and fisher folk.

Mining, according to Villanueva “is a poor bet to the country’s economic growth”. Under the Mining Act of 1995, Villanueva said that gains from mining operations will not ensure real contributions to the country’s economic growth because the law does not provide clear provisions on how the Philippine government, as the owner in trust of the country’s mineral resources, will benefit from its contracts with mining operators.

“The Filipino people, represented by the state, are the owners of the country’s mineral deposits. Since the state does not have the financial and technical capabilities to extract its mineral deposits, it enters into agreements with mining contractors to help extract its own wealth. The question now is who should receive the larger share of the profit from the mining operations, is it the owner of the mineral deposits or the mining contractor? ” said Villanueva. Huge profit A 2003 report from the Chamber of Mines of the Philippines titled “Philippine Mining Investment Opportunities” showed that the Philippines would only receive a very small share from the huge profit that would be raked in by large-scale mining operators.

For instance, in the 4,663-hectare Rapu-Rapu polymetallic project in Rapu-Rapu, Albay operated by the Rapu-Rapu Minerals Inc. and Ungay-Malobago Mines, Inc. in partnership with Lafayette NL of Australia, LG Collins and KORES of South Korea ,the report showed that the potential annual gross sales would be US$ 41 million.

The mine life of the said project, based on the report, is seven years thus total estimated gross sales would be US$ 287 million. Minus the mining contractor’s US$ 42 million potential total investment, total potential sales would be US$ 245 million.

Of the US$ 245 million potential sales, only 19 percent or US$ 45.5 million would be paid to the Philippine government in the form of excise tax and income tax without incentives. Thus, the mining contractor will be left of a total potential net sale of US$ 199.5 million or 81 percent of the total potential sales.

In the 21, 465-hectare Didipio Copper Project in Kasibu, Nueva Vizcaya, operated by the Climax-Arimco Mining Corp. the report noted that annual potential gross sales would be US$ 49 million. With a mine life of 14 years, total potential gross sales would be US$ 686 million.

Minus the mining contractor’s total potential investment of US$ 63 million, total potential sales would be US$ 623 million.

Of the US$ 623 million potential sales, only 17 percent or US$ 108.92 million would be paid to the government in the form of excise tax and income tax without incentives. Thus, the mining contractor would enjoy a potential net profit of US$ 514 million or 83 percent of the total potential sales.

“The Chamber of Mines report only goes to show that the Philippines would be at a losing end on its business deals with large-scale foreign mining operators. Since the mining contractors enjoy incentives such as corporate tax incentives and duty holidays and are given privilege to fully recover their pre-operating and property expenses before they give the government its revenue share, the profit sharing becomes more inequitable,” explained Villanueva.

“This losing bet would further turn into an economic disaster, when large-scale foreign mining contractors cause irreparable damage to the environment and the lives of displaced communities,” concluded Villanueva.

For further details please contact Jo Villanueva – 0919-4111660 or 0915-5302993

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