Big mining firms to sue government over ‘illegal’ rule

Big mining prerogative to review and renegotiate a mining contract after 25 years under the implementing rules of Executive Order No. 79, which defines the Aquino administration’s mining policy reforms.

The Chamber of Mines of the Philippines (COMP) is “preparing legal action” over Section 9 of the IRR (implementing rules and regulations), its president, Benjamin Philip Romualdez, told reporters Wednesday on the sidelines of the Mining Philippines 2012 Conference at Sofitel Hotel in Pasay City.

In his speech, Romualdez described the provision as “patently illegal,” saying the government review of mining contracts would effectively shorten the maximum 50-year period for projects and would contradict the Philippine Mining Act of 1995.

The provision imposes a bidding scheme in the renewal of mining contracts after the first 25 years of a tenement, the COMP said.

Section 9 states that in the case of expiring 25-year mining tenements, “the mining contract/agreement that may be renewed shall be subject to new terms and conditions pursuant to the laws, rules and regulations that are existing at the time of the renewal or may be hereafter issued, such as, but not limited to, the establishment of the contract area as a mineral reservation.”

Under Section 32 of Republic Act No. 7942, or the Mining Act of 1995, “mineral agreements shall have a term not exceeding 25 years to start from the date of execution thereof, and renewable for another term not exceeding 25 years under the same terms and conditions thereof, without prejudice to charges mutually agreed upon by the parties.”

The Department of Environment and Natural Resources (DENR) recently released the EO 79, which President Aquino issued in July and aimed at boosting revenues from the mining sector while increasing environmental safeguards.

The IRR extended the ban on new mining permits until Congress passed a law raising royalties on the sector from two percent to five percent.

Environment Secretary Ramon Paje on Wednesday maintained that he would not be signing new mineral agreements until the existing government sharing scheme of a “measly” two percent of gross sale is changed. “It is not even enough to pay for the environmental impact of mining,” he said.

Paje said EO 79 was primarily meant to protect the state and the future generation from the menace of a one-sided approach to mineral resources development, considering the long 50-year term of mining contracts.

“There has to be new terms and conditions in order to optimize revenues from mining. In fact, the International Monetary Fund has just disclosed its report on the current fiscal regime of mining in the country, and it is recommending that a seven-percent flat sharing scheme be adopted and that the existing incentives for mining projects be removed,” he said.

From raging to sitting bull

Romualdez said the ongoing challenges in the mining industry, including local government ordinances that banned mining or methods, such as open pit mining, and high investment requirements amid high political risks, were hampering investments at a time when the government was seeking more revenue from the sector.

“The Philippine mining industry is at a crossroads. After being the raging bull of the Philippine stock exchange from 2008 to early 2010, mining stocks have sputtered to become a sitting bull,” he said.

“The moratorium (on new mining projects) has caused an outflow in foreign direct investments in our sector beginning in 2011 to the tune of over P10 billion,” Romualdez said.

“The projected $16 billion in investments that were supposed to occur during this administration will not happen. The $2 billion that we as a country were expecting in additional foreign direct investments this year from the minerals sector will not happen. The $2 billion that we expect in additional investments next year will not happen,” he added.

In 2011, the Philippines missed its mining investment target of $1.44 billion due to the deferred development in major projects, although mineral sales grew as existing mines continued to be productive.

Actual mining investments reached only $618.5 million from ongoing developments, such as in the Surigao Sumitomo HPAL project, Didipio copper-gold project, and the Siana and Runruno gold projects.

Production gains

In terms of production, the government is fairly optimistic, except for gold. Gold production may reach 756,482 ounces (oz) this year from a little over one-million oz in 2011 as concerns on smuggling persist.

The DENR has said it is concerned that small-scale miners, who account for about 70 percent of gold output, may not sell their gold to the Bangko Sentral ng Pilipinas as the government has started collecting excise taxes and withholding taxes.

Copper concentrate production is expected to reach 82,935 metric tons this year from 63,834 MT. Silver output may reach 1.47-million oz from a little over 1.46-million oz, and zinc concentrates may grow to 24,874 dry metric tons (DMT) from 18,170 DMT.

Nickel ore production is expected to increase to almost 20.83-million DMT from a little over 20.29-million. Mixed nickel sulphides may shrink to 23,800 DMT in production from 38,798 DMT.

Cobalt concentrate production is expected to start this year with 1,552 DMT. Chromite output may also shrink to 280,000 from 40,437 DMT, and iron ore output may surge to 1.1-million DMT from 126,177 DMT.

Romualdez expressed hope that Vice President Jejomar Binay, one of the main speakers of the conference, would relay the industry’s “shock” at the implementing rules to concerned agencies and public servants.

Binay role

Binay said he would try to discuss the issue with the President “if there is time.”

In his speech, Binay said the government should adopt mining policies that would uphold economic and social justice, and that various sectors should make sure that the gains of mining would benefit the Filipino people who “truly own” the country’s natural resources.

Mining has become a “very complex” issue, he said, but he stressed that the Mining Act and EO 79 is able to balance the interests of companies and the communities. “(These) provide firm basis upon which those who invest can make a decent profit, and a country hungry for development can reap just gains from the treasures it holds,” he said. With reports from AFP and Jerome Aning