THE MINERAL INDUSTRY OF THE PHILIPPINES By Travis Q. Lyday The Philippines has a long, well-established history of major material was spilled into the Boac River system and coastal production from its mines and previously ranked among the areas of Marinduque Island because of a tailings dam failure, world’s top 10 in the production of chromite, copper, nickel, some rules and regulations of the act were revised and new and gold. Production was hampered for much of the last two ones written to incorporate a setting for environmental decades by the effects of low foreign investment owing to protection and social responsibility, as well as for mineral political instability, low international metal prices accompanied resource development. The act became one of the most modern by high operating and production costs, labor problems, and in the Asia-Pacific area because its environmental provisions natural disasters. Nevertheless, in 1999, the Philippines ranked are on a par with other established mineral-producing countries second to Indonesia in the Asia Pacific region in terms of and it safeguards the indigenous culture of local communities mineral prospectivity and resources (Resource Information (Luna, 1998, p. 7). Unit, 2000, p. 12). The Philippine Mining Law provides three major forms of In 1999, the mining industry was dominated by only seven mining rights—Exploration Permit (EP), Mineral Agreement companies. Lepanto Consolidated Mining Co. Inc., Manila (Mineral Production Sharing, Co-Production, and Joint Mining Corp., Maricalum Mining and Industrial Corp., and Venture), and Financial or Technical Assistance Agreement Philex Mining Corp. accounted for all the country’s copper (FTAA). The EP’s and the FTAA’s are modes of entry for production and more than 80% of the total gold production. foreign companies to have up to 100% ownership of a mining The remaining 20% of the gold was produced by a large small- project. An EP is limited to a maximum period of 6 years, by scale mining sector that included several thousand mechanized which time it will need to be converted to either a Mineral alluvial gold operations and primitive manual gold panning- Agreement or an FTAA. Mineral Agreements are limited to sluicing workings by numerous individuals. The remaining Filipino corporations (minimum 60% Filipino owned and three companies Hinatuan Mining Corp., Rio Tuba Mining maximum 40% foreign-owned). FTAA’s are 25-year contracts Corp., and Taganito Mining Corp., produced nickel in raw that involve a minimum investment commitment of $50 million form (Resource Information Unit, 2000, p. 17). The previous for infrastructure and mine development (Tanchuling and few years witnessed the closure of Atlas Consolidated Mining Villaluna, 1998, p. 2-3). FTAA’s were to be negotiated with and Development Corp.’s Toledo Copper and Masbate gold the Department of Environment and Natural Resources projects (1994), Benguet Corp.’s Paracale gold project (1994), (DENR), and proposals were to be filed with the Mines and Marcopper Mining Corp.’s Marcopper copper-gold-silver mine Geosciences Bureau. The DENR is the primary Government (1996), Benguet’s Antamok gold project (1998), Dizon Copper- agency responsible for conservation, management, Silver Mines Inc.’s Dizon Mine (1998), and Itogon-Suyoc development, and proper use of the country's natural resources, Mines Inc.’s Itogon and Suyoc Mines (1998). These mines and which include its minerals. companies were considered to be the country’s biggest producers during their time (De Vera, 2000, p. 20). The Structure of the Mineral Industry minerals industry was estimated to have contributed less than 1% to the country's gross domestic product (GDP), which was The minerals industry of the Philippines employed an estimated to be $74.6 billion in 1999, a real GDP growth rate estimated 400,000 people, or about 1.5% of the labor force; of increase estimated to be 3.0% compared with that of 1998 (U.S. that total an estimated 300,000 workers were engaged in small- Bureau of Economic and Business Affairs, 2000). scale mining and panning activities, chiefly in artisanal gold workings. The metallic sector accounted for an estimated 44% Government Policies and Programs of the industry's production value and nearly 100% of mineral export earnings. The industrial minerals sector, which was In 1995, the Philippines enacted a new Mining Act (Republic dominated by the production of limestone for cement Act 7942) that changed the system of mineral lands disposition manufacture and marble and sand and gravel for construction from leasehold to mining agreements that were designed to uses, brought in the remaining nonfuel mineral production establish a legal framework for the mining sector and to value (De Vera, 2000, p. 20). Refined gold and copper streamline the law to ensure that the Philippines could compete continued to be the country's most important mineral products, effectively for foreign investment in the country’s minerals each of which was estimated to represent more than 30% of industry. At least partially as a result of Marcopper’s accident total mineral value. in March 1996 in which about 4 million metric tons (Mt) of THE MINERAL INDUSTRY OF THE PHILIPPINES—1999 21.1 Trade stacked ore continued. Also owing to the low gold price, a 15% retrenchment of the work force (about 130 personnel) was Japan was the primary market for the country's mineral instituted during the first quarter of 1999 (Resource products. Nearly all the Philippine production of nickel and Information Unit, 2000, p. 65). more than 60% of its copper concentrates were exported to The Canadian firm TVI Pacific Inc. of Calgary, Alberta, Japan. The remaining copper concentrates were smelted by received all major Government approvals for it to proceed with Philippine Associated Smelting and Refining Corp. (Pasar) into its Canatuan polymetallic (copper-gold-silver-zinc) massive copper cathodes at Isabel, Leyte Province, on Leyte Island, for sulfide project near Siocon in Zamboanga del Norte Province export, again primarily to Japan; Pasar was the country’s only on Mindanao Island. TVI had been conducting an extensive copper producer and one of Asia’s largest copper refineries. exploration program that included surface geological mapping, On May 14, the Government formally approved the $84.5 diamond drilling, and test pitting, as well as underground million bid for 37.72% of its 41.91% controlling interest in mapping and sampling of the small-scale mine workings, since Pasar. Copper Smelting Investments Ltd. (CSIL), which was a it acquired the property from Benguet, which retained a 12.5% 60-40 joint venture between a Filipino businessman and Swiss- buy-back right, in 1995. In June 1999, a Japanese group signed based Glencore International AG, submitted the winning bid a letter of intent to develop and earn a 40% joint-venture share among three others on May 3. The bidding terms did not by making a cash payment to TVI and by providing or include a floor price (Metal Bulletin, 1999c). Beginning in arranging 75% of the total cost of the project, which was June, lawsuits were being filed against CSIL, now known s estimated to be $18.5 million (TVI Pacific Inc., 1999b). Pasar Holdings Inc., that claimed that the sale was grossly Construction of the project was scheduled to begin in mid- disadvantageous to the Government, among other allegations 2000, and concentrate production, in mid-2001 (Asian Journal (Metal Bulletin, 1999b). In December, the Supreme Court of of Mining, 1999b). In December, the Japanese group the Philippines dismissed the lawsuits that alleged that the sale completed the drilling program, which consisted of five holes was detrimental to the Government and the Filipino people that provided samples for metallurgical test work. The ore (Mining Journal, 1999c). At yearend, the Government’s intersections and grades determined from the drilling privatization of Pasar resulted in Pasar Holdings having the confirmed previous drill core results and enhanced the controlling interest of 37.72%; three Japanese companies, a confidence of continuity of the ore zones and their thicknesses combined 31.23%; eight Filipino mining companies, combined and grades (TVI Pacific Inc., 1999a). 21.78%; the Philippine Government, through its National In 1998, Climax Mining Ltd., which was based Sydney, Development Corp., 4.19% and the International Finance Australia, completed a bankable feasibility study that had been Corp., 5.08% (Mining Journal, 1999b). based on a 1996 study which had defined the geological resources for a large-scale open pit to mine gold-copper ore Commodity Review from the Dinkidi porphyry deposit, which is 200 kilometers (km) northeast of Manila on Luzon Island. Owing to the fall in Metals the price of both commodities following the baseline study, Climax reworked the study to focus on development of only the Copper, Gold, and Silver.—The Santo Tomas II copper- high-grade central core of the ore body (Resource Information gold-silver mine at Padcal (and thus primarily called the Padcal Unit, 2000, p. 66-67). In August, the DENR issued an Mine) near Baguio City on Luzon Island was the first environmental compliance certificate for the project to Climax. underground block-caving operation in the Far East and has The certificate was issued only after an extensive community been mined continuously since 1958. Initially, it was an open consultation program that involved local and provincial cut operation, and subsequently became an underground mine. governments and securing their acceptance and support for the Its remaining mine life was estimated to be 10 to 15 years. In Dinkidi Project, which was the first FTAA granted by the 1999, Philex Mining, which owned the mine, modified the free- Philippine Government to a foreign company (Mining Journal, gold recovery circuit to maximize gold recovery and bullion 1999a). At yearend 1999, negotiations were in progress for the production (Resource Information Unit, 2000, p.