MAC/20: Mines and Communities

Mining firm starts 30-day test run

Published by MAC on 2006-07-11

Mining firm starts 30-day test run

By Katherine Adraneda and Rocel Felix, The Philippine Star -

11th July 2006

The government's P1.4-billion flagship mine project on Rapu-Rapu island in Albay began yesterday its 30-day test run to determine if it can efficiently perform a sustainable mining system and warrant the permanent lifting of its suspension by the government.

The start of Lafayette Philippines' test run came almost simultaneously with the approval of the four-page resolution issued by the Pollution Adjudication Board (PAB) giving the green light for the test run by Department of Environment and Natural Resources (DENR) Secretary Angelo Reyes.

Reyes visited Lafayette's polymetallic mine facility over the weekend and finalized the validation of the mining firm's compliance with government-set conditions for its test run.

Lafayette chairman and president Carlos Dominguez welcomed Reyes' order, saying it is a "watershed milestone for the company that is determined to prove it stands for responsible mining and is a sincere partner in the growth of its host communities and the country in general."

He said after passing all tests, the company expects to be allowed to resume full operations after a lull of eight months.

The Rapu-Rapu polymetallic project started commercial production in July last year, producing an average of about 2,500 ounces of gold a month.

Lafayette was shut down for pollution violations during the same year. A fact-finding committee investigating two cyanide spills in October 2005, chaired by Sorsogon Bishop Arturo Bastes, called for the permanent closure of Lafayette's operations, a moratorium on mining on the island and a review of the law allowing 100 percent foreign ownership of local mines.

In June this year, the company paid a fine of P10.4 million imposed by the government for the twin spills at the Rapu-Rapu mine.

Lafayette said the DENR had verified the company's remedial environmental measures and a temporary order allowing operations to restart on a 30-day trial.

Lafayette, the first foreign firm to develop and run a mine in the Philippines in almost 40 years, estimates the lode will generate revenues of $350 million a year from annual production of 10,000 tons of copper in concentrates, 14,000 tons of zinc, 50,000 ounces of gold and 600,000 ounces of silver.

Dominguez said that once the mine is "back in business, we expect to have the needed funds soon enough for our community projects, with education, livelihood, public health and environmental protection as priority."

He heads the new management that put P400 million worth of new systems and remedial measures in place to comply with the requirements and conditions imposed by the government before it could be allowed to conduct test runs and resume operations.

The mining project is expected to employ 900 people, most of them from host communities, and pay the government P3 billion in taxes, P244 million of which would go to local governments. Lafayette will also provide P31.3 million in social development projects for the communities. Strict conditions Aside from allowing Lafayette to start the test run, the PAB resolution instructed the regional Environmental Management Bureau (EMB) and Mines and Geosciences Bureau (MGB) to issue necessary permits to the mining firm to facilitate test run operations.

The EMB and MGB in the Bicol Region separately canceled Lafayette's wastewater discharge and milling operation permits after the twin mine spills last year.

The EMB-Region 5 also stopped Lafayette from using cyanide by suspending its chemical control order registration certificate. Cyanide is used in the milling operations of Lafayette.

MGB director Horacio Ramos said eight to 12 technical experts from the DENR's central and regional offices will be deployed to monitor the Rapu-Rapu mine and will submit weekly reports on the test run.

"But we may also submit daily reports if needed," he added.

On June 13, the DENR allowed Lafayette to resume its mining operations, subject to "certain stringent pre-conditions" that include a three-stage test run to determine the efficient compliance of the mine firm on the requirements set by the government, especially to environmental standards.

The DENR issued a 30-day temporary lifting order (TLO) on June 16 to pave the way for the test run to determine the production efficiency of the base metal plant to process copper and zinc, sufficiency and adequacy of remedial measures and environmental safeguards, and receptivity of the mine facility's emergency response.

Under the PAB resolution dated July 9, but approved by Reyes on July 10, the TLO shall start when Lafayette receives the order.

The PAB resolution proves that the TLO shall be implemented in stages, working up to resuming 30 percent of the mine's capacity in order to simulate normal operations.

"Before, during and after the test run, certain conditions would have to be met. After the company complies with all these conditions, a final lifting order shall be issued to Lafayette for it to resume full operations," Reyes said.

Bastes and environmentalists vowed to intensify its campaign against mining operations on the island. They said that a protest rally will be held today to condemn Lafayette's re-opening. They also plan to file a lawsuit against Lafayette.

"Our campaign to save the people and environment of Rapu-Rapu island continues. We will do everything to kick out Lafayette Philippines from our communities," said Fr. Felino Bugauisan, Coordinator of Sagip Isla, a local alliance in Rapu-Rapu opposed to Lafayette's operations.

He added that Bicolanos "will go out into the streets to condemn the re-opening and demand the permanent closure of Lafayette mining."

Bastes said the people of Sorsogon and Albay condemned Reyes for allowing the "irresponsible mining company Lafayette to resume operation."

"The re-opening of Lafayette endangers the health and safety of our people. Based on our experience and scientific studies, large-scale mining operation in a small island ecosystem like Rapu-Rapu is inappropriate and will just bring disasters and miseries to the people," Bastes said.

He also said Rapu-Rapu residents hold Reyes "and Lafayette responsible for further danger and damages that will occur in the area" due to resumption of mining operations.

Last March 2006, President Arroyo created the Rapu-Rapu Fact-Finding Commission, headed by Bastes, to investigate the twin spills. In its report, the RFFC recommended the permanent closure of Lafayette and a moratorium on large-scale mining in Rapu-Rapu island.

"The re-opening of Lafayette demonstrates how indifferent the Arroyo administration and the DENR are to the demands of the people and protection of the environment. It shows no qualms in giving in to... transnational mining companies like Lafayette," said Clemente Bautista, national coordinator of the environmental activist group Kalikasan-PNE.

He added that the DENR's move proves "that under the liberalization policy of Mining Act, foreign mining companies can despoil our environment, endanger the people's health, and cheat the government of taxes and still operate in the country."

Clemente reiterated their group's call for the scrapping of the Philippine Mining Act of 1995, saying that the Rapu-Rapu spills provide glaring proof of the administration's "environmentally destructive, anti-people and pro-foreigner" mining revitalization program.

Meanwhile, the Catholic Bishops' Conference of the Philippines expressed dismay over the government's decision allowing Lafayette to resume mining operations.

Bastes said the bishops agreed to stand against mining operations during their semi-annual plenary assembly held in Manila over the weekend.

"The minds of the bishops are one in believing that mining is not the savior of our economy but rather a cause of destruction and havoc to the people and the environment," he said at a press conference at the CBCP yesterday. Optimistic outlook Lafayette managing director David Baker earlier expressed confidence the company can resume full operations and start delivering the first of its contract shipments this September.

"We are definitely looking forward to an immediate resumption of operations in a strong commodity market. We hope to make the first of four contracted deliveries this September," he said.

Baker said that stakeholders' support for the Rapu-Rapu project, including its "anxious" creditors, never wavered despite the controversy that stalled the project.

He said that at the height of RFFC's hearings, Lafayette managed to gather additional financing for the project.

"We raised $20 million from the issuance of new shares for Lafayette and this was a positive signal to investors," Baker said.

Aside from the $20 million that was raised through the successful share placements and a share purchase plan, Lafayette also acquired an additional $11 million through a placement to domestic and overseas investors arranged by ABN Amro Morgan, $3 million on a placement to AuSelect Ltd., while Lion Manager Pty Ltd. also agreed to take a placement of $2 million.

At the same time, additional funding was obtained from the company's 26 percent joint venture partners in Rapu-Rapu, LG Collins and Korean Resources, which contributed $6.7 million in subordinated debt. Lafayette also received approval for a $20 million standby credit facility from its creditor banks.

"Our banks are anxious for us to go into production, we have a fully-drawn facility and they expect us to go into full production and make our deliveries as scheduled this September," Baker said.

He added Lafayette is also bent on improving its relations with Rapu-Rapu residents and those in Albay and Sorsogon.

"We have a strong commitment to develop responsible mining in the Philippines. Our operations would reflect best practices and our mandate now is to translate this new support into tangible, positive benefits for residents," Baker said. — With Edu Punay, Reuters

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