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Miners, government outlook bleak on Philippines' role in EV metals supply chain

by Philippine Resources - April 12, 2021

Despite being the world's second-largest nickel producer, the Philippines' capacity to engage in the development of a global battery metals supply chain is severely restricted due to a shortage of facilities and stringent policies, as the country's mines bureau and mining industry both agree.

"While the Philippines is a top nickel ore producer, we only have two existing nickel/cobalt processing plants that produce nickel and cobalt sulfide concentrates — intermediate products that are further processed in Japan to make electric vehicle batteries," Rocky Dimaculangan, vice president for communications at the Philippines' Chamber of Mines, or COMP, said. 

Mines and Geosciences Bureau Director Wilfredo Moncano reiterated the view of COMP, saying the Philippines "can participate in the supply of battery metals but it will be limited to the capacity of two mineral processing plants in the country put up by Sumitomo Metal Mining Co. Ltd."

"Although the country is a top supplier of nickel as export, most of these or about 70% are exported as raw, directly shipped ore and has not undergone mineral processing," Moncano said.

According to Moncano, the bureau has sent a request to Congress that would require current and new players to construct mineral processing plants that would manufacture finished and semi-finished materials. Some gold and copper mines in the United States have already built processing plants, and Moncano said the bureau hopes to see nickel and iron ore mines follow suit.

"This initiative needs legislation by Congress because MGB cannot obligate these companies to do it without a law. A resulting consequence to this one is the gradual and partial ban of raw nickel and iron ore exports as well as Congressional support for the needed infrastructure like additional electric power plants, and the reduction of power cost because it requires billion dollars to put up a medium size mineral processing plant," Moncano said, noting that electricity costs are very significant in mineral processing.

Domestic power prices are among the highest in the ASEAN region, on par with Singapore, according to the Department of Energy's Power Development Plan 2016-2040, owing to the absence of government subsidies, which are present in Thailand, Indonesia, and Malaysia.

Miners in the Philippines had planned to benefit from Indonesia's ban on nickel exports, which will take effect in 2020. However, current environmental constraints will preclude the Philippines from fulfilling China's nickel production requirements in the absence of Indonesia, according to Market Intelligence's Metals and Mining Research unit, driving Chinese primary capacity down from a projected 715,000 tonnes in 2020 to 490,000 tonnes in 2025. 

"Larger policy issues ... remain unresolved, particularly the ban on open-pit mining and the moratorium on new mining projects until a new mining tax scheme has been put in place," Dimaculangan said.

A prohibition on open-pit mining remains in effect in the Philippines, as does a restriction on new mining licenses before a new tax system is enacted.

"To encourage the building of extremely expensive mineral processing facilities and manufacturing plants for EV batteries as well as for clean energy and renewable power projects, the industry needs full government support in terms of stable mining and investment policies that do not change mid-stream," Dimaculangan said.

If the obstacles are overcome, the mining industry may be a crucial sector in the country's post-pandemic recovery, according to the COMP and the MGB.

"It stands to reason that if policy problems are not immediately resolved, the Philippines will remain an unattractive mining destination and will most definitely fall short of its tremendous potential to participate in this worldwide trend towards mineral-intensive renewable power generation and battery storage technologies," Dimaculangan said. "Otherwise, and this would be most unfortunate, the Philippines will, so to speak, miss the boat again."

For the time being, COMP sees the Philippine government's decision to authorize at least 26 new mining ventures that had been shut down by former Environment Secretary Regina Lopez to restart operations as a positive move for the industry.

Dimaculangan also expressed hope after the government decided to renegotiate the terms of its financial and technical assistance deal with OceanaGold Corp., the owner of the Didipio gold-copper mine in Quirino province.

"Once they are onstream, these projects will undoubtedly help increase the country's exports and the industry's contribution to our GDP," Dimaculangan said.



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