Philippines emerges from murky pit
This article was written by John Miller for The ASIA Miner and is republished here with permission.
The Philippines looks set to benefit from its enormous mineral potential - it has been said countless times before in recent history but this time around appears to have some substance. Strength in the nickel sector owing to Indonesia’s ban on raw ore exports, the success of a number of gold producers and a government that is making some positive moves to attract mining investment all add up to create a bright light in a rather gloomy global mining scene.
The island nation holds the world’s second largest gold reserves and is rich in nickel and copper deposits. Mining value is said to amount to at least US$1.4 trillion and applications from foreign mining firms are piling up to tap the gold potential plus a list of other metals that basically just sit under the ground.
Despite the potential, mining development has been mired since the 1980s in cumbersome, and often contradictory, laws at national and provincial levels, environmental battles which at times have become very bitter, and land rights issues.
A number of strategists say that mining is one of the country’s next boom sectors and officials in Manila see it as an untapped treasure that could help sustain strong annual economic growth of about 6%. They would also like it to bring in foreign investment and say that more investment in mining will add to some 250,000 jobs to be offered by the industry.
This edition includes articles on a number of mining companies making progress with their mines, with mine development and with their exploration. As part of the edition’s commodity focus on nickel, we turn the spotlight on the Philippines and see how the sector is doing extra well as a result of Indonesia’s ban on raw ore exports imposed in January 2014.
However, this progress could easily be undone, yet again, in the medium to long term by government intentions to head down a similar path as other governments in mineral-rich countries by imposing greater taxes on the mining industry. Officials in Manila appear determined to get a bigger share of revenues from the nation’s mineral treasures before they go offshore. Executive Order 79, signed in 2012 and now pending Congressional approval, may lead to an excise tax of 10% on gross sales of minerals, replacing two smaller taxes.
A fiscal mining framework under study now may give Manila more royalties, as well.
There are some who believe these regulations may clear the way for more investment by making the industry more transparent and calming environmental interests, but the increased taxes may also have the effect of driving away investors, as they have done in other countries.
If Executive Order 79 creates a one-stop permitting process for miners and forces local governments to be more transparent about contracts, foreign investors may worry less about getting mired in legal messes. Also, the Mines and Geosciences Bureau intends to stop permit speculation, meaning more of the 700-some permits issued would be used for extraction rather than sold onward for a higher price and deterring investors who need a geographically unified cluster of permits to work on a profitable scale.
It is definitely a balancing act and the government must carefully consider all implications before proceeding, which may take some time.
We have all seen the mistakes made in Australia, Indonesia and Mongolia by governments who claim to be doing the right thing but whose decisions have led to difficult times for the mining industry.
Thankfully, Mongolia’s government seems to be making the right noises at present and the entire mining world is hoping that recent statements by the Prime Minister about a positive decision on the massive Oyu Tolgoi underground development do indeed come to fruition … we wait with bated breath.