MAC/20: Mines and Communities

Philippines Update

Published by MAC on 2006-11-02


Philippines Update

2nd November 2006

Philippines President Arroyo has spent much of the week in China and Hong Kong, engaging in talks as the current head of ASEAN. Of course various mining deals have resulted from these activities, promoting the idea that the Philippines is 'open for business' (or sale), especially to China. MAC editoral board member, Kalikasan-PNE, reminds us of the price being paid for the promotion of such mining, highlighting the deaths of 18 environmental activists under Arroyo's regime.

However, this continuing threat is not sufficient to intimidate local opposition. Lafayette's Rapu Rapu project once again makes the news, as it battles to return to "normal" production against yet more threatened legal action; and local communities re-affirm their opposition to Crew Gold's local partner at Lake Sebu, Daguma Agro.

Meanwhile, almost cavalier in the face of controversy, UK-Swiss Xstrata is still hedging its bets on the option on the nearby Tampakan project.


Kalikasan-PNE pays tribute to slain colleagues - No justice in sight for 18 environmental activists killed under Arroyo administration

Kalikasan-PNE Press Release

31st October 2006

Justice has yet to be given to at least eighteen environmental activists killed under the Arroyo administration, from January 2001 to September 2006, Kalikasan Peoples Network for the Environment (Kalikasan-PNE) noted today. The group staged a protest action condemning the executions of fellow environmental advocates as a prelude to All Souls Day, holding a short program this morning at the Bantayog ng mga Bayani monument in Quezon City.

Clemente Bautista, Kalikasan-PNE National Coordinator, said that the group monitored at least eighteen (18) cases of extrajudicial killings, one (1) case of attempted murder, and one (1) case of abduction among their colleagues nationwide. The most number of killings were reported in the Southern Tagalog region (5).

"Many of the victims were active leaders of grassroots campaigns against large dam, commercial logging, and large-scale mining operations in their respective communities. They were very vocal in their opposition to particular environmental laws, such as the Mining Act of 1995s. Most of the slain environmental workers were also indigenous people or peasant leaders by sectoral affiliation," Bautista said.

"Our colleagues may hail from different provinces, from Baguio City to Sultan Kudarat, but they were all commonly active in opposing the environmental destruction and economic plunder brought about by the entry of foreign transnational corporations aided and abetted by the Arroyo administration," Bautista said.

The 18 environmental activists include the following:

Nicanor delos Santos, a Dumagat tribe leader and Secretary-General of Makbayan Samahan ng Katutubong Dumagat (MASKADA), an indigenous people's organization which protested against the Laiban Dam project. Delos Santos was killed by suspected elements of the Task Force Panther, 2nd Division of the Philippine Army led by Ccl. Laureano Tolentino on December 8, 2001.

Rogelio Lagaro, a member of the Labugal tribal association and an active campaigner against the operations of mining corporation Tampacan Mineral Resources, Inc. Lagaro was killed in Columbio, Sultan Kudarat on June 1, 2006 by suspected elements of the 25th IBPA.

Jose Doton, Chairperson of the Tignayan dagiti Mannalon a Mangwayawaya iti Agno (TIMMAWA), a local network actively opposing the controversial San Roque Multi-Purpose Dam (SRMD) project. Doton was killed in San Nicholas, Pangasinan by unidentieif gunmen.

Noli Capulong, Spokesperson for the Southern Tagalog Environmental Action Movement (STEAM) and Bayan Muna deputy regional coordinator for Southern Tagalog, was killed by unidentified gunmen in Calamba, Laguna on May 27, 2006.

Manuela and Expedito Albarillo, Roger Fernando, Erwin Bacarra, and Ramon Ternida of Mindoro Oriental, all killed between 2001-2002, coinciding with Gen. Jovito Palparan's assignment to the region. The four were local community leaders and anti-mining activists who successfully opposed the operations of Mindex Crew Minerals in the province.

Central Luzon Aeta Association (CLAA) leaders and anti-mining activists Joel Pelayo and Rodel Abraham, killed in Balanga, Bataan on February 19, 2005. The two were also active opposers to the operations of Dizon Mining Corporation.

Save the Abra River Movement (STSRM) and Makabayang Samahan para sa Kalikasan at Bayan (MASAKBAYAN) leader Romy Sanchez, killed in Bauio City on March 9, 2005. Sanchez campaigned against large-scale mining in the Ilocos and Cordillera regions by the Lepanto Mining Corporation.

Rev. Raul Domingo, environmentalist and clergy from the United Church of Christ in the Philippines, killed in Puerto Princesa, Palawan on August 20, 2005. Domingo was an active critic of Ric Tuba Mining Corporation.

Rogelio Lagaro of the Labugal Tribal Association, killed in Columbio, Sultan Kudarat on June 1, 2006 by suspected elements of the 25th IB Philippine Army. Lagaro's association opposed the operations of Tampacan Mineral Resources' Inc.

Quezon National High School faculty member and Mirant coal power plant critic Napoleon Pornasdoro, killed in Lucena City, Quezon, on February 27, 2006.

Cordillera Peoples' Alliance Elders Desk Coordinator and anti-mining activist Marcus Bangit , killed in San Isidro Echague, Isabela on June 8, 2006.

Defend Our Patrimony-Negros Vice-Chairman Eladio Dasi-an, killed in Guihuingan, Negros Oriental on June 20, 2006.

Peasant leader and anti-large dam advocate Victor Olayvar, killed by suspected military elements in Danao, Bohol last September 7, 2006)

Bautista said that military personnel or state-sponsored assassins are generally believed to be behind the extra-judicial killings of environmental workers. "These brutal assassinations of environmental workers all occurred amidst intensified military surveillance, red-baiting, and political harassment in their respective communities. Environmental activists who oppose the Arroyo administration's destructive and exploitative 'development projects' in their provinces are conveniently branded as 'communists' and 'terrorists' by the AFP and villified. Many, such as Victor Olayvar, have been harassed by suspected military surveillance agents prior to their deaths," Bautista said.

Despite their efforts to seek justice for their colleagues, Bautista expressed disappointment at the pace at which government probes have been going. "The investigations into their deaths have slowed to a standstill. The Task Force Usig created by the Philippine National Police and the Melo Commission created by the Palace have yet to solve a single case involving slain environmental workers," Bautista said.

Bautista said that Kalikasan-PNE would be bringing the issue of slain Philippine environmental workers and advocates to the international community if the Philippine government continues to ignore the rising trend of killings. He also revealed that Kalikasan-PNE was also contemplating bringing the cases involving their slain colleagues to the attention of United Nations (UN) Human Rights Council (HRC) mandate-holders, particularly the Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions and the Special Rapporteur on the Situation on Human Rights and Fundamental Freedoms of Indigenous Peoples.

-- CLEMENTE BAUTISTA national coordinator Kalikasan-People's Network for the Environment (Kalikasan-PNE) No.26 Matulungin St. Bgy, Central, Quezon City, Philippines 1100 Tel. No. +63-2-9248756 Fax No. +63-2-9209099 Email: kalikasan.pne@gmail.com, kpne@edsamail.com.ph, royalroi@yahoo.com


$1-B technical aid signed in China

By Aurea Calica, The Philippine Star

28th October 2006

XIAMEN (via PLDT/Smart) - President Arroyo witnessed here yesterday the signing of 10 agreements, including a $1-billion technical and financial assistance from China's Jinchuan Non-Ferrous Materials Corp. to Philnico Industrial Corp.'s Nonoc nickel project in Surigao del Norte.

Agriculture Secretary Arthur Yap said the Philippines and China will sign two memoranda of understanding and a memorandum of agreement on the setting up of three ethanol fuel plants in the country, which will involve the development of thousands of hectares of land for sugar cane. Sugar cane is the principal ingredient in ethanol production.

Yap said BSBM Biofuels Corp. and the Southern Negros Development Corp. also signed an MOU with Philippine companies for the development of ethanol plants in Negros.

The development of an ethanol plant in Zamboanga del Norte is embodied in another MOA signed by Chinese-Filipino companies. "For BSBM they are studying to put up a 120,000 liter per day ethanol plant and the second one is for a 150,000 liter per day plant," Yap said.

He said 10,000 to 12,000 hectares of land may have to be developed for the projects.

Another MOA signed will involve the investment of $10 million for the exploration, development and utilization of 4,568 hectares of mineral property covered by a mineral production agreement among Adnama Resources Inc., Fulim Global Mining and Export Corp., and Fujihan Wahang Stainless Steel Co. Ltd.

The Philippines-China Business Council and the China-Philippines Business Council, Beijing chapter signed an MOU on trade and investment partnership program that would strengthen business-to-business alliances between the two countries with focus on tourism, infrastructure and mining.

Panay Railways Inc. and China Shenyang International Economic and Technical Cooperation Corp. also signed a partnership for the development and rehabilitation of the Panay railway system. Other MOAs Other agreements signed were:

. Establishment of a joint venture firm in the Philippines that will engage in the production and marketing of construction materials, between Century Properties Inc. and LEE World Group;

. Exploring opportunities for cooperation in the field of securities, trading and other investment banking services between First Metro Investment Corp., a subsidiary of Metrobank Group of Companies and Donghai Securities Company;

. The setting up of a joint venture company that will pursue real estate development in the Philippines and China. The agreement was signed by Haisheng Real Estate Co., Century Properties Inc. and Federalland Inc.;

. On increasing business facilitation between the Federation of Filipino-Chinese Chambers of Commerce and Industry and All China Federation of Industry and Commerce and;

. Establishment of a Filipino-Chinese language institute for professionals and overseas Filipino workers who want to learn the Chinese language. The agreement was signed by FFCCI and Fujian Normal University.

Mrs. Arroyo attended a business luncheon immediately after landing here before 11 a.m. and asked the Chinese businessmen to "look at the Philippines as a destination for greater investment, particularly in the areas of mining, infrastructure, development, agriculture and fisheries, as well as housing."

"I encourage Chinese firms to plan relocation of the assembly of agricultural machinery to the Philippines. I also would like to invite Chinese fishing firms to participate actively in the Philippines-China fisheries cooperation activities under the bilateral MOU (memorandum of understanding) on fisheries cooperation," she said.

"The Philippines is the perfect regional partner to aid as a logistics partner and provider of high-value, high-skilled labor. We look forward to the day when China substantially raises the level of investments in the Philippines," Mrs. Arroyo said.

In another speech delivered before the Filipino community, the President described China's financing of the North Rail Project infrastructure as "crucial to the country's economic development plan."

Mrs. Arroyo noted that the government has enough money to match foreign investments in infrastructure because of the tax reforms now in place.

She said the country's revenues before were only enough to pay debts, the salaries of employees and shares of local governments.

"The ardent goal of my administration is to be able to lift the Philippines up and make it a strong republic for our children and grandchildren to inherit," she said.

"I long for the day when going abroad for a job is an option, not the only choice for a Filipino worker," Mrs. Arroyo said.

Mrs. Arroyo also cited the good relations between the Philippines and China, which she said would hopefully become stronger through the exchanges of visits.

As a new president in 2001, she said the country's electronics export hit a record low and which made her think, "ang malas naman (how unlucky)."

"The Philippine electronics industry gained access to a new market. As demand for electronics products slowed in the United States and US manufacturing firms outsourced to other countries other than Southeast Asia such as India, the Philippines found another huge customer with China," she said.

"The Philippine electronics firms were able to boost their export performance during difficult years. The top exports between China and the Philippines comprise semiconductor devices, machinery parts and accessories, electrical and electronic machinery, and electronic micro assemblies. Approximately one-third of total electronics exports are skewed towards the Chinese market," Mrs. Arroyo said.

According to Mrs. Arroyo, China is now the third biggest trading partner of the Philippines and bilateral trade between the Philippines and China amounted to almost $17 billion in 2005.

"Our nation's relationship with China is among the most important ties of our country. Philippine relations with China are now more confident, mature, and comprehensive, punctuated with substantial and important projects aimed at deepening exchanges in a number of areas, including economics, trade and investment, and even defense," she said.

"From 2001 to 2005, trade with China grew at an annual rate of 41.9 percent," Mrs. Arroyo said. - With Rainier Allan Ronda


China's Baosteel, partners to invest 1 bln usd in Philippine nickel mine project

1st November 2006

AFX News Limited - http://www.forbes.com/home/feeds/afx/2006/11/01/afx3135504.html

HONG KONG - China's Baoshan Iron & Steel Co Ltd (Baosteel), Jinchuan Group and China Development Bank have agreed to invest 1 bln usd in a nickel mining project in the Philippines' southern island of Mindanao, Philippine President Gloria Arroyo said. 'Our country is generating huge investments and other forms of assistance from China and this project of Baosteel and its partners is a clear demonstration of our expanding trade relations with China,' she told a media briefing here today.

Arroyo is in Hong Kong this week after attending a business conference in Nanning, China which was attended by senior officials from the mainland, including Chinese Premier Wen Jiabao, and members of the Association of Southeast Asian Nations (ASEAN).

Arroyo said Philippine officials signed a memorandum of agreement with officials of Baosteel and its consortium partners relating to their proposed investment in the Philippines.

Baosteel is China's largest steelmaker, while Jinchuan Group is the country's largest producer of nickel, with an output of 60,000 tonnes of nickel per year and accounting for about 88 pct of China's total production.

Philippine Trade and Industry Secretary Peter Favila said Baosteel and its partners will own 100 pct of the mining project under recently-promulgated mining regulations which now allow foreign investors to wholly own projects which they intend to set up in Philippines.

'Other Chinese companies have expressed interest in putting up gold, chromite, bauxite and other mineral-related projects in the Philippines. The Chinese have emerged as the largest investors in minerals in the Philippines,' he said.

Arroyo said trade between China and the Philippines is expanding rapidly and that she expects more Chinese companies to invest in the country.

'Trade between the Philippines and China is growing by leaps and bounds. It is currently worth some 17 bln usd and the trade balance is very much in favor of the Philippines as China imports copper, electronics and other agricultural products from our country,' she said.

Arroyo said Philippine officials also signed two separate preliminary agreements with Chinese groups, involving a 500 mln usd investment in the second phase of a railway project north of metropolitan Manila and a 300 mln usd investment in a glass factory in Subic from a company in China's Hebei province.

(1 usd = 7.8 hkd)


Lake Sebu coal project royalty only P1 per ton

30th October 2006

Sun Star General Santos - http://www.sunstar.com.ph/static/gen/2006/10/30/bus/lake.sebu.coal.project.royalty.only.p1.per.ton.html

KORONADAL CITY -- "Too small an amount in exchange for so mammoth an income."

This is how a local official in Lake Sebu, South Cotabato described the share Barangay Ned landowners would get from a coal mining company.

Municipal Agrarian Reform Officer Celso Caro said there is a need to review the government rules on the sharing scheme in mining coal deposits which he described as disadvantageous to villagers.

"It (Presidential Decree 1174) is outdated and should be updated," he said.

Showing documents he obtained from Daguma Agro Minerals Inc., Caro pointed out that the firm will only pay a very meager amount to landowners.

"Daguma is to pay a royalty based on the provisions of PD 1174. It shall pay the amount of at least one peso for every ton of coal extracted from titled lands and fifty centavos for every ton extracted from untitled lands," he read from the documents.

PD 1174 is an amendment to PD 972, or the Coal Development Act of the Philippines.

PD 972 provides for the active and systematic exploration, exploitation, development, disposition and utilization of Philippine coal resources. This decree introduced the Philippine coal service contract system and established the appropriate guidelines for coal operations.

PD 1174, as amendment to PD 972, awards additional incentives to coal operators through the reimbursement of all operating expenses not exceeding ninety percent (90 percent) of the gross income after deducing all operating expenses, likewise the granting of timber and water rights within the coal contract area and access to government reserved lands subject to applicable laws and guidelines by the concerned agencies.

The Daguma coal project covers 2,000 hectares under Coal Operation Contract 126. It consists of Coal Blocks 380 and 381.

The operation contract was awarded a conversion from exploration phase to a development/production phase by the Department of Energy only last February.

The South Cotabato coalfield, particularly the Daguma Agro area, is a recent discovery. It is believed to be hosting the largest coal deposits in the country, according to a comparative report by the energy department.

Edilberto Navarro, a geologist for Crew Gold Corp. (not Daguma Agro as reported earlier), earlier said the Ned project has coal deposits of at least 27 million metric tons.

"Studies suggest the coal deposits would be extracted using the strip mining method," he said.

Crew Gold Corp has an option to acquire 95 percent of Daguma Agro.

Benjamin Guingona, Daguma Agro head, was not immediately available when contacted at his Manila office for comment Wednesday about the royalty issue and other matters involving the company.

The Daguma coal project is being opposed by members of the T'boli tribe and some Christian settlers in Ned, who insisted that the venture went on without their consent.


Environmentalists ask for fair media coverage of Albay spill

By Ephraim Aguilar, Inquirer - http://newsinfo.inq7.net/breakingnews/metroregions/view_article.php?article_id=29994

1st November 2006

LEGAZPI CITY -- Leaders of various anti-mining groups under the Save Rapu-Rapu Alliance (SARA) appealed for balanced media coverage of the mining situation in Albay as they marked the first anniversary of the October 31, 2005 mining spill caused by the operation of the Lafayette Philippines Inc. (LPI) in the province.

Fr. Fedelino Bugauisan, assistant parish priest of the Sta. Florentina Parish in Rapu-Rapu and spokesperson of the Anti-Lafayette Mining Alliance, said media reports regarding the toxic spill in Rapu-Rapu tended to be biased in favor of LPI.

Members of SARA met on Monday in a forum at the Aquinas University and held a symbolic march to the Department of Environment and Natural Resources (DENR) here to mark the first anniversary of the mining disaster.

The environmentalists urged the DENR and the Mining and Geosciences Bureau (MGB) to produce the results of the test run the government did on LPI operations. Aquinas Vice Rector for Administration Virgilio Perdigon Jr. said he received reports that LPI would resume operations on Nov. 8 but local officials had not been informed of the results of the test run.

Lawyer Julito Sarmiento, LPI corporate secretary, said results of the 90-day extended test run had not been released as it will end November 7. He expressed confidence DENR will lift the suspension order on Lafayette and allow it to resume full operations.

The lawyer said the mining company spent P700 million to P800 million to ensure ecologically safe mining operations.

Lawyer Howie Calleja, SARA's legal counsel, said LPI was facing a suit for possible violations of the Mineral Production Sharing Agreement (MPSA) and the Financial Technical Assistance Agreement issued by the Mines and Geosciences Bureau (MGB).

An MPSA is an agreement wherein the government shares in the production of the contractor, whether in kind or in value, as owner of the minerals, subject to the requirements of the Philippine Mining Act of 1995 and other existing mineral policies in the country.

The new case would be the second filed by SARA against LPI this year.

Sarmiento, LPI corporate secretary, said he was not aware of a new case that would be filed by the anti-mining groups, but he said they were ready to face all cases.

Albay Representative Joey Salceda, who was also present in the forum, warned LPI of possible violations of the Foreign Corrupt Business Practices Act. Salceda said that under the law, multinational corporations like LPI should adhere to the laws of the host country and respect the local culture, values and rights of the community.

Sarmiento, however, said in a mobile phone interview, that LPI, under its new Filipino-Bicolano management, has appointed a compliance officer to make sure its mining operations do not violate any Philippine laws. But he urged the anti-mining groups not to rush to judgment. "It's one thing to allege but it's another thing to convict," he said.

Inquirer Southern Luzon


DENR-Bicol set to decide on fate of mining company

Rhaydz B. Barcia, The Manila Times http://www.abs-cbnnews.com/storypage.aspx?StoryId=54836

1st November 2006 RAPU-RAPU, Albay

The Department of Environment and Natural Resources in Bicol will decide within two weeks time whether Lafayette Philippines, Inc. will resume its regular mining operation after the two-month test run.

Rey Juan, MGB-DENR regional director here, told the congressional committee investigating the Lafayette operation on site that the department should be ready with a decision by then based on studies it made.

The committee, led by Rep. Jose G. Solis, chairman of the Committee on National Defense and vice-hairman of the Natural Resources secretariat concluded its investigation on Friday.

The comprehensive report on the Lafayette operation will be submitted to Secretary Angelo Reyes and Congress within two next two weeks, said Juan, adding that favorable improvements were observed.

Roger Corpuz, LPI senior vice-president for operation, said that several remedial measures were adopted and developed to prevent any untoward incident like waste tailing spills.

"When the waste tailings overflowed on October 11 and 31, 2005, the dam height was only 1.24. The new waste tailing now could accommodate around 740,000 cubic meters with its final upper clay core at 145 mRC," Corpuz explained. "A piezometer, an instrument that measures the water level, and monitoring pins, a gadget that monitors the movement of water within the surface as well as emergency alert signal for residents were also installed, which resulted in a more efficient performance."

At least three rock dams at Pagcolbon creek and a catchment's basin for trapping and absorbing metals for further treatment before releasing the water into the sea were also constructed.

On July 10, Reyes gave Lafayette Philippines Inc. the go-ahead to conduct a 30-day test run after having complied with conditions set by the department. The test run was extended for another month, which will end on November 8.

Congressional investigation

Officials of Lafayette Philippines Inc. showed Representative Solis and members of the congressional natural resources secretariat, along with media men, the various improvements within the mine site.

"I wanted to see the mine site personally rather than rely on documents," said Solis. "We brought along media men from Bicol so that the investigation would be transparent. Our investigation is very objective, technical and legal."

When asked what his assessment was of the new setup in the mining firm, Solis told The Times he will wait for the report of the DENR and examine the company's environmental safety standard profile to countercheck the data before coming up with a final decision.

On October 5 Bishop Arturo Bastes, who headed an independent commission tasked to investigate the Rapu-Rapu mine spill that affected marine life in the area, issued a statement saying that the local church in the Bicol region laments the continued existence and operation of Lafayette Philippines, Inc.

"What we have witnessed is environmental plunder rather than economic development. The worst impact of open-pit mining far outweighs its supposed gains," said the bishop. "We Bicolanos have witnessed the devastating effects of irresponsible mining on the economic life of the people and the adverse consequences of the mine spill on the fragile biodiversity of the Island."

Responsible mining

But Jesus Varela, bishop emeritus of Sorsogon, said that the new Filipino management must be given a chance to conduct responsible mining. Varela, who served as prelate in Sorsogon province for 18 years, was the only top official of CBCP Bicol chapter who supported responsible mining.

A couple of months ago, the prelate visited the mining site in Rapu-Rapu to check if the risks of mining in the island town can be avoided and substantially mitigated. Varela then said that he went to check out Lafayette's Rapu-Rapu project to see if the situation there was consistent with responsible mining, as well as personally observe the conduct of the test run. His concern was to find out if the company had learned its lessons from previous mistakes.

"The test run is critical for three reasons such as to demonstrate if the company has complied with all conditions for responsible mining, to show whether the objections of antimining groups to the company's continued operations were valid and to prove if the government is capable of strictly enforcing and monitoring the compliance of the company with all relevant laws and environmental conditions." Varela pointed out.

He said that mining is inherently risky but it can also provide substantial benefits, especially to the poor and less privileged in the countryside.

The prelate explained that the final decision on the fate of the company would be made by the DENR as the legally mandated agency of the government. That decision will be based not on mere speculations and hearsay but on careful studies made by experts as well as on scientific data obtained through a transparent, closely monitored and credible process.

Residents of Rapu-Rapu as well as local government officials were now pushing for the continuous operation of Lafayette. Town councilmen Mariano "Quaky" Bolaños, Jovanni Guapo and Mariano Baranda told The Manila Times that they're supporting the continuous operation of the mining firm after it has substantially complied with the DENR's conditions.

"Before we contested the operation of mining here but after the new management has remedied the situation, we think the mining operation can continue provided that the PEZA exemption given to the firm be revoked in order people to be able to benefit from its taxes." Bolaños told The Times.

In November 2005 the government suspended the operation of Lafayette Philippines Inc., following a series of toxic spillage on October 11 and October 31, which affected the waters off Rapu-Rapu town in Albay and Prieto Diaz in Sorsogon province.


Xstrata to study $1.8b copper venture

Jamie Freed, Sydney Morning Herald

2nd November 2006

THE $US1.4 billion ($1.8 billion) Tampakan copper and gold project in the Philippines has edged closer to development nearly 15 years after its discovery.

Xstrata agreed yesterday to fully fund more work on the deposit, which Australia's Indophil Resources owns, in return for an option to pick up 62.5 per cent of the project for between $50 million and $60 million.

Tampakan has a resource of nearly 2 billion tonnes at 0.72 per cent copper equivalent, which makes it the largest undeveloped copper-gold project in South-East Asia. The pre-feasibility study outlined a plan to mine 210,000 tonnes of copper and 218,000 ounces of gold a year.

The capital costs of the project were originally estimated at about $US600 million in a scoping study completed several years ago. But because of industry-wide cost pressures over recent months, Indophil has referred to Tampakan as a $US1 billion-plus project.

It said the pre-feasibility study estimated cash operating costs of less than US70c a pound of copper. Copper has been trading at about $US3 a pound.

Indophil's managing director, Tony Robbins, and exploration head, Chris Middleton, were part of the team of WMC geologists who discovered the deposit on the island of Mindanao in 1992.

Mr Robbins bought the project from WMC when it decided to divest projects in the Philippines, Cuba and Uzbekistan to focus on its giant Olympic Dam mine in South Australia.

Xstrata gained its option over Tampakan through its acquisition of Mt Isa Mines, which signed a joint venture with Indophil in 2000.

Many market observers expected Xstrata would decide to fund more work on the project when the chief financial officer of its copper division, Louis Irvine, was appointed to Indophil's board earlier this year.

Xstrata was required to make a decision on whether to keep its option over the project by Tuesday evening. It is believed Xstrata waited until the deadline because its management team has been busy integrating its $C20 billion ($23 billion) acquisition of Canadian base metals miner Falconbridge.

The Philippines has proven a difficult operating environment for companies such as Australia's Lafayette Mining, which was forced to close its mine for months after an accidental contaminant discharge. But an Indophil spokesman said his company had a good relationship with the Philippines Government.

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