INTERVIEW-Foreign firms join Philippine mining revival
Mon Aug 15, 2005
By Robin Paxton and Dolly Aglay
MANILA, Aug 15 (Reuters) - The Philippines has secured $500 million of a targeted $6.5 billion to revive its mining sector as a world shortage and China's hunger for raw materials spur metal prices to record highs, a top mining official said on Monday.
Benjamin Philip Romualdez, president of the Chamber of Mines of the Philippines, said the other $6 billion would arrive within five years as investors from countries like Japan, China and Australia help reverse 20 years of decay at the country's mines.
"The floodgates for mining developments in the Philippines have been opened," said Romualdez, who is also president of the country's oldest mining firm, Benguet Corp. (BCB.PS: Quote, Profile, Research).
"People are putting their money where their mouth is," he told Reuters at Benguet's new premises in Manila's Makati financial district. "The wave of funds coming into the Philippines will only grow."
Copper prices have set new records as the world's miners struggle to keep pace with fast-growing demand in China, which absorbs a fifth of world supply of the metal used in everything from air conditioners to power stations.
Just over 20 years ago, the Philippines was the world's fifth-largest gold and ninth-biggest copper producer, deriving a quarter of its export revenues from mining, said Romualdez.
Today, mining brings in less than two percent. Environmental disasters and clashes with local communities cut off investment from the early 1980s, leaving the country trailing rival mining powers like Chile and Indonesia.
Yet recent government estimates suggest $1 trillion of mineral wealth -- 12 times annual GDP, dwarfing about $70 billion national debt -- lies in the ground.
"We have all known for years, for generations, that the Philippines has been blessed with rich natural resources. It's just that for a period of time we forgot," said Romualdez -- a nephew of Imelda Marcos, wife of the late dictator Ferdinand Marcos, who ruled the Philippines from 1965 until 1986.
"The answer to some of the poverty, the fiscal problems, the lack of economic activity has been sleeping under our feet."
RECORD-BREAKING COPPER
Since Romualdez took over the Chamber of Mines' presidency in December 2003, copper has risen 60 percent in value, hitting an all-time peak of $3,615 a tonne on Monday. Nickel, used in stainless steel, has brushed 15-year highs.
"It's international interest that's driving the whole revitalisation," said Romualdez, flicking through a dossier on his laptop computer of the 23 key projects identified by the government for development.
He said Japan's Sumitomo Metal Mining Co. Ltd. (5713.T: Quote, Profile, Research) and partners Mitsui and Co. Ltd. (8031.T: Quote, Profile, Research) and Sojitz Corp. (2768.T: Quote, Profile, Research) are among the leading investors during his tenure as Chamber of Mines president, having put $180 million into producing nickel powder at the Coral Bay joint venture on Palawan island.
Last year's ruling by the Supreme Court, which effectively allows foreign companies to own 100 percent of local mining projects, has been key, said Romualdez, just back from Australia -- his fifteenth overseas trip this year.
Even a change of government in the politically volatile Philippines wouldn't reverse this development, he said.
"I don't think there is any other law, in our plethora of laws, that has had more scrutiny, more analysis, more challenge, more debate than the mining law."
He added mining was one area in which the Philippines had the potential to make an international impact. "This is certainly one area where the Philippines has a strong competitive edge."
While analysts have said lower ore grades, security and political risk make the Philippines a less attractive location than somewhere like Chile or Peru, Romualdez countered that new mining taxes might scare off investors in both South American countries.
He added that the 23 key projects cover only 471,000 hectares of land in the Philippines, from 9 million hectares of mineral-bearing land and 30 million hectares in total land area.
Of the $500 million already invested, $60 million has come from Australia's Lafayette Mining Ltd. (LAF.AX: Quote, Profile, Research), which last month poured the first gold from its Rapu-Rapu project, he said. LG International Co. Ltd. (001120.KS: Quote, Profile, Research) and KORES, the South Korean government's resources investment arm, also hold a stake.
Pan Pacific Copper Co. Ltd., Japan's top producer and a joint venture between Nippon Mining Holdings Group (5016.T: Quote, Profile, Research) and Mitsui Mining and Smelting Co. Ltd. (5706.T: Quote, Profile, Research), had invested $15 million in expanding Philex Mining Corp.'s (PXB.PS: Quote, Profile, Research) Padcal mine.
Potential future investors include BHP Billiton Plc./Ltd. (BHP.AX: Quote, Profile, Research) (BLT.L: Quote, Profile, Research) and Anglo American Plc. (AAL.L: Quote, Profile, Research), eyeing large nickel and copper projects respectively, and China's top nickel firm, Jinchuan Nonferrous, which together with steel industry leader Baosteel Group (600019.SS: Quote, Profile, Research) has pledged $800 million to restart the Nonoc refinery.
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