MAC/20: Mines and Communities

Philippines - putting a "spin" on bad mining news

Published by MAC on 2009-01-26

There's been a glut of articles in the Philippine press, following a recent Mining Financial Forum which examined financial options for the mining industry in the current credit crisis. The meeting also sought ways to "spin" the bad news, so that panic won't set in: there are now 63 priority projects in the state's constantly shifting 'priority project' list.

Mining industry may fail to meet investment goals

20th January 2009

MANILA, Philippines - The Philippine mining industry may be unable to meet its investment goals as the credit crunch makes it difficult for miners to raise cash for operations.

The current crisis has put pressure on financial institutions that should be providing funding to miners, Chamber of Mines president Philip Benjamin Romualdez said at the sidelines of a Makati forum.

"There is no question [that] there will be a delay [in meeting the industry's investment goals]," Romualdez told reporters while at the sidelines of the Funds and Financing Forum in Makati on Tuesday.

The industry plans to attract as much as $10 to $12 billion by 2013, as agreed upon by miners during conference held last year in Manila.

Funding difficulties are forcing companies to go into mergers, he said.

"Companies that are in the early exploration stages will have greater difficulty. Projects that are ready to be developed will have easier time. It's just a question of equity," he said.

For its part, the government has yet to announce whether it will reduce its mining investment targets.

For this year, Manila is planning to attract as much as $800 million to $1 billion investments in the sector. In 2008, the government incurred a shortall, generating only $630 million in investments, lower than its $800 million goal.

Earlier, some 63 priority mining projects were identified, which in turn, could contribute 6.5 percent to global demand for minerals by 2011.

By 2011, the Philippines also expects to reach "mining country status," defined by the World Bank as a condition in which a country's total mineral exports comprise six or more percent of its total exports.

Ten of 63 Philippine priority projects are already in production phase.

These are the Palawan Nickel Project of Coral Bay/Sumitomo; Rapu-Rapu Polymetallic Project of Lafayette Mining; Canatuan Silver-Gold Project of TVI Philippines; Sto. Tomas II Copper Expansion Project of Philex Mining Corp.; Teresa Gold Project of Lepanto Mining Consolidated Co.; Berong Nickel Project of Atlas Mining and Toledo Mining; Masara Gold Project of Apex Mines; CTP and PGMC Nickel Projects of Surigao Integrated Resources Corp.; Carmen Copper Project; and PASAR Refinery Expansion. - GMANews.TV

Mining firms told to cut costs to attract funding for projects



21st January 2009

MANILA, Philippines - Mining companies must prove their projects profitable by cutting costs to counter depressed metal prices and secure funding amid tight global credit, financial experts said Tuesday.

"Funds will be hard to find but for excellent projects with good management teams and low-cost operations, there will be opportunities to raise funding," Karsten Fuelster, a senior investment officer of the International Finance Corp., said at a forum in Makati.

Mr. Fuelster said investment focus would again shift to mining ventures once a shortage in supply reappears during a fragile global recovery.

But this, he said, could lead to destabilizing higher metal prices and interrupt economic recovery.

Nickel prices have dropped to $10,875 per metric ton as of Tuesday from $24,000 in June, data from the London Metal Exchange showed.

Meanwhile, copper prices for cash buyers have fallen to $3,32 per metric ton from $9,000 in June.

"The question will come back to the quality of projects, [and] the management of the company," Benjamin Philip G. Romualdez, president of the Chamber of Mines of the Philippines, told reporters on the sidelines of the forum.

The government has admitted that the $10-billion mining investment target for 2011 would have to be delayed by one to two years due to financing difficulties.

Full-year investments in the local mining industry likely fell short by more than a third of the $1-billion target for last year as companies grappled to fund projects amid tightening global credit, the Mines and Geosciences Bureau said earlier.

BDO Capital and Investment Corp. President Eduardo V. Francisco, a panelist at the forum, said miners would have to compete with companies from other industries for P80-P100 billion in capital funds parked in the banks in the absence of investor confidence.

"Financial institutions are looking at mining projects already in production or are so close to production so that cash flow can be expected in the short term," Mr. Fuelster said.

Meanwhile, mining companies can help educate financial institutions about the risks and benefits of mining ventures, Henry Antonio, a partner from international accounting and consulting firm KPMG, told the audience.

Mr. Romualdez concurred, saying banks should hire miners for them "to get more comfortable with the issues in mining."

Roberto Juanchito T. Dispo, executive vice-president of First Metro Investment Corp., said the government could mandate banks to set aside some of their portfolio for mining companies.

Under Presidential Decree 717 or the Agri-Agra law, bank must allocate at least a quarter of their total loans to the agriculture sector.

Difficulties in securing financing amid tightening global credit have added to a slew of problems besetting mining investors in the Philippines.

These range from government red tape in approving permits to opposition from church, left-wing groups and host communities.

Mining companies and financial institutions will present a summary of discussions and will recommend to the Environment department tomorrow steps on how the government can help fast-track investments in the mining sector.

The Philippines sits atop an estimated $1 trillion worth of unexplored copper, gold, nickel and zinc reserves. - BusinessWorld

Mining investments seen lower

Max V. de Leon

Business Mirror

21st January 2009

THE steep decline in mineral prices and the expected difficulties in getting financing have dampened the robust outlook for the local mining industry this year, with the government already downgrading the investment projection for the sector to only $800 million from the original target of $1 billion.

Horacio Ramos, director of the Mines and Geosciences Bureau (MGB), said the global crisis is forcing several companies to reprogram their plans for the year, aware that getting financing would be harder at this time, compounded by diminishing revenues due to lower mineral prices.

Ramos said the big boom for the mining industry that they originally thought would happen in 2009 is now tempered by realities.

"At the start of 2008 we thought that 2009 would be the start of a boom in the industry, but suddenly we were hit by the crisis," Ramos told reporters at the sidelines of a forum hosted by the Chamber of Mines of the Philippines with the Financial Executives Institute of the Philippines (Finex) and the Philippine Stock Exchange (PSE) on Wednesday at the Hotel Intercon.

Despite the setbacks, mining-industry stakeholders were assured of the government's unwavering support to help them cope with the trying times.

The assurance was conveyed by Environment Secretary Lito Atienza, who said no less than President Arroyo is personally committing her full support to the industry.

"The President has always been supportive of the mining industry because we believe that mining is a pillar of the economy. We at the Department of Environment and Natural Resources [DENR] are always supportive of the industry," Atienza said at the same forum.

Atienza was supposed to accompany Mrs. Arroyo to conduct a site inspection and assess the damage brought by severe flooding in Cagayan de Oro City, but said he begged off in order to relay the President's message.

"I'm here with you today and not with the President. That is how important mining is," he said.

The MGB's Ramos said the expectations for the industry started to fall short in 2008 when investments only managed to equal the 2007 level.

This year Ramos said the volume of production might also go down owing to less investments.

However, thanks to the gold projects of TVI Resources and Atlas Mining that will start production in the middle of the year, the export value could still go up.

Philip Romualdez, Chamber of Mines president, said the financial world has drastically changed. It is now forcing the mining companies to review their feasibilities given the new market conditions.

For example, Romualdez said copper was selling at about $2 per pound a year ago, while its current price is only about $1.30. Nickel prices have also went down by up to 70 percent.

Besides this, Romualdez said the financial sector has become selective, lending money only to a very few "Triple A" companies and projects.

This, he said, is forcing other firms to repackage their financing, resulting in higher rates.

"We are asking the government to give us a reprieve in terms of its expectations from the mining industry. There is now a force majure taking place because the global downturn is impacting severely on earnings and borrowing cost," he said.

Finex president Roberto Borromeo said another problem the mining sector currently faces is the tack of financial institutions to shift preference to other industries, particularly power.

Borromeo said while banks may still entertain mining firms, they would definitely impose tighter requirements and do a thorough review of the overall performance.

"The question now is how they will be able to provide adequate information to the sources of funds to familiarize them more on the thrust that the government is putting on mining to get them to finance mining projects," he said.

Borromeo also said financial institutions are now putting more emphasis on outlook and long-term performance of companies, besides their good corporate governance.

Romualdez said the Finex, PSE and Chamber of Mines are putting together the inputs of the two-day forum and will submit them to concerned agencies for appropriate action.

Bullish about the future of Philippine mining, Atienza congratulated foreign and local investors who are already into mining, and urged those who are wavering to have a stake in mining and "take a serious, closer look" at the investment opportunity in the Philippines.

"The train is about to go; take a serious, closer look. You might not be able to get on before it takes off," he said.

He said mining investment in the Philippines is supported not only by law, referring to the Philippine Mining Act of 1995, but the full support of the national government, as well.

Atienza assured mining companies of faster processing of permits and other documents, which is part of his commitment to good governance.

He said a number of measures have been put in place to cater to the needs of the industry, such as the faster processing of applications and permits for various mining activities.

However, Atienza warned mining companies to make their transactions official, and avoid using a second or third party in seeking permits, saying he will not allow such mediation. (With Jonathan Mayuga)

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