The Philippines – what now for mining?

Materials World magazine
30 Apr 2017

A new government campaign to fight environmental degradation is putting more pressure on mining companies, as Michael Schwartz explains. 

President Rodrigo Duterte has attracted attention for several of his policies since coming to power in June 2016, and the mining industry is no exception. In a speech on 13 March 2017, Duterte accused a number of mining companies of colluding with the opposition and drug dealers to destabilise his Government and claimed that mining firms were funding his opposition.

In terms of mining, Duterte stated that he would be willing to forego the US$1.4bln revenue from mining, claiming that mining companies had destroyed the Philippines' environment through their operations. Documentation and photographs accompanied Duterte’s speech to prove the extent of environmental damage. The President went on to challenge several mining companies that he described as irresponsible, notably Adnama Mining, Emir Minerals, Citinickel Mines and Development, Berong Nickel and OceanaGold. Of these companies, Berong Nickel was singled out, with Duterte asking whether people could live with the consequences of that company’s activities. It was the financial contribution to the economy that influenced people – or maybe contributions to campaign funds?

Commendations were few and far between from Duterte, but he did commend Philex Mining for its tree planting programme, which reforested more than seven million trees in Padcal. Duterte looked to the future and stated his hope that new ventures would materialise, helping to make up for the US$1.4bln of mining revenue. ‘Let us just pray that enough business will come in, new ones, but not as devastating as this one. Sayang [what a waste].’ 

The president has his allies, not least Gina López, Secretary of the Philippines Department of Environment and Natural Resources (DENR). Duterte took an environmental standpoint, asking, ‘Where are the trees that God gave us?’ At his bluntest, the president declared he would do what was necessary to protect the environment, expressing the possibility of a total ban on mining, stating, ‘Then let’s talk, let’s be frank with one another.’ 

Poor performance

So, where does that leave the mining industry and its analysts? The Fraser Institute’s Survey of Mining Companies, Canada, while compiled before President Duterte’s speech, brings together the opinions of senior mining professionals by individual country or region and different forms of evaluation.

The review for 2016 by Taylor Jackson, Senior Policy Analyst and Kenneth Green, Senior Director at the Center for Natural Resource Studies, Fraser Institute, summarises 350 responses covering 104 countries. An overall Investment Attractiveness Index (IAI) is constructed, taking both mineral and policy perceptions into consideration. The Philippines was ranked 66 out of the 104 who responded. The survey also compiles the Policy Perception Index (PPI), described as a report card to government on its mining policies, geology, economics and overall policy climate as an important investment consideration. It is in the PPI that the Philippines experienced the largest slump in the Oceania region, from 88th in 2015 to 100th for 2016, well within the bottom ten administrations. There was greater concern regarding administration, interpretation, or enforcement of existing regulations, and uncertainty concerning protected areas, environmental regulations and disputed land claims.

Comments by those answering the survey were welcomed and published. A manager with a producer company valued at more than US$50m replied, ‘Lack of physical security is a deterrent to investment in the country,’ while an exploration company president was forthright in saying that ‘the decision by the new president, Duterte, to ban some open pit mining will hurt the potential for investment in the Philippines.’

For all the recent comments and actions by Duterte, the Fraser Institute responders have rated the Philippines tenth for encouraging investment in the Best Practices Mineral Potential Index, flying in the face of everything happening in the country. Materials World approached Taylor Jackson to comment on this apparent contradiction. ‘Fortunately it's not a contradiction and does make some sense to us. The IAI ranks jurisdictions based on both how attractive a jurisdiction's policy environment is and the geology. These are weighted 60/40 in favour of geology. The weights are determined based on input from miners. Our measure for policy is our PPI, which is based on 15 different policy-related questions. It is here that the Philippines performs so poorly,’ he said.

‘The Best Practice Mineral Potential Index is our measure of geology, asking investors to provide their perspective of how attractive a jurisdiction’s geology is. What those rankings mean is that the Philippines is viewed as having one of the most attractive geologies in the world but one of the worst policy environments.’ 

The fight back 

Among the companies listed by President Duterte for closure is Marcventures Mining and Development Corporation (MMDC), which received permission in October 2015 from the Environmental Management Bureau at the DENR to increase its nickel ore production from 3Mt to 5Mt. Marcventures holds a mineral production sharing agreement (MPSA) of less than 5,000ha at Surigao Del Sur, Philippines. The mine produces nickel ores exported to China, although Japan and other Asian destinations may also be on the horizon. To date, MMDC has explored one third of its MPSA contract area, while continuously seeking additional nickel properties, venturing into nickel processing. The 4,800ha property has indications of porphyry copper and gold as well as nickel. At present, acquisition of a neighbouring nickel property is under finalisation. 

MMDC immediately replied to the Duterte briefing, expressing its readiness to present facts that would refute the remarks of the DENR secretary López in closing the Surigao del Sur mine. ‘We invite and challenge Ms López to visit and observe on the ground rather than just by a helicopter flyover within the Marcventures MPSA area to see for herself the clean rivers and silt-free farms, which prove our responsible mining practices. We believe this is necessary as she has disregarded the audit findings of the Mines and Geosciences Bureau, Philippines, which did not find any serious violations. It also appears that the pictures she showed in her presentations may not actually be located in the mining areas of Marcventures.’

Responsible mining

One of the companies categorised by President Duterte as irresponsible is OceanaGold Corporation, a mid-tier global gold producer for 27 years in New Zealand and since 2013 in the Philippines. Headquartered in Melbourne, Australia, it is listed on the Toronto and Australian stock exchanges. Mention of these two countries is ironic, as a company spokesman points out, ‘The president and his administration are on record as saying they’re open to mining operations continuing in the country if it follows the strict, high standards of “responsible mining” as exemplified in Canada, Australia and New Zealand.’ 

In September 2016, Mick Wilkes, President and CEO of OceanaGold, defended its Didipio gold and copper operation as receiving endorsement from local communities, as well as numerous awards and qualifications to ISO standards. On 4 October 2016, OceanaGold announced direct talks with DENR to confirm Didipio’s benefits to its local communities – Didipio continued uninterrupted. Two weeks later, DENR stated in its audit report for Didipio that OceanaGold was ‘found to be complying with its permitting requirements set forth by different Philippine environmental laws. Moreover, its operations are being governed by an environmental management system that is ISO14001/2004 compliant.’ The audit report did point out small-scale artisanal activities that had to be tackled, but despite this, in November 2016, Didipio was declared to be the safest in the country for surface mining, metallic mining and concentrator mineral processing.

In February 2017, OceanaGold received an order calling for suspension due to alleged damage from blasting and declining agricultural production. The company was given three months to address the problem. OceanaGold has lodged a direct appeal with President Duterte’s office, resulting in a stay of execution as Didipio continues to operate. In addition, OceanaGold’s Didipio mine garnered three awards at the recent Annual Global CSR Summit and Awards 2017 in Malaysia.

At a time when President Duterte’s policies for mining in the Philippines are uncertain, and with talks on banning mining, reducing its scale, or allowing mining to continue to the Canadian and Australian standards, Wilkes comments, ‘We believe the Didipio operation is the template for what President Duterte is seeking when stating his desire for a responsible mining sector within the Philippines.’