• Philippine Resources

PH nickel mining sector to benefit from Indonesia's export ban



The nickel production in the Philippines, one of the highest mineralized countries in the world, is seen to recover after years of decline, but the overall growth of the country’s mining sector is still hanging by a thread on the weight of several regulatory issues.


Fitch Solutions Macro Research, a unit of Fitch Group, said in its latest report that the Philippines may soon see “modest growth” in nickel mine production due to restarting mines and gains from current operations.


But the group is also not keeping its hopes high, adding that the sector is still at the risk of more mine closures and suspension.


“Over the coming years, we are maintaining a subdued growth forecast, held down by declining ore-grades and strict environmental regulations that could result in mine closures.


Despite some mines receiving clearance to re-open this year, since 2016, a number of mining operations, including nickel, have been ordered to shut down due to environmental concerns, which has kept production growth subdued,” Fitch Solutions said.


One mine that has not yet been given the permission from the Department of Environment and Natural Resources to restart operations is domestic miner Zambales Diversified Metals Corp., a subsidiary of Consuji-led DMCI Mining Corporation.


The firm that its Zambales unit has already submitted all the necessary requirements to the DENR.


“We expect the country’s path of increasingly strict policies towards miners to undermine investment potential into projects from new players, thus keeping growth subdued,” Fitch Solutions said.


In August, Mines and Geosciences Bureau (MGB) proposed amendments to the DENR’s Administrative Order (DAO) that will introduce an Environmental Damaged Compensation Fee to all nickel mining operations which would be used in the event of an environmental disaster.


Furthermore, declining ore-grades at mines will continue to strain growth. For example, Fitch Solutions said that government officials have reportedly revealed of a closure of mid-size miner in the country, SR Languyan Mining Corp, due to declining nickel grades at its operations.


Still, Fitch Solutions does not see this year as an entirely bad year for the mining sector. According to it, the decision of the government in Indonesia, the largest nickel producer globally, to bring forward a nickel ore export ban “will pose upside risks to lackluster nickel production forecasts in the Philippines”.


The Indonesian government last week announced a planned nickel ore export ban from 2020 to 2022.


Fitch Solutions said this has created an opportunity for Philippine nickel miners to alleviate the impending supply shortfall in Indonesia.


“We believe nickel smelters in China, which currently import the majority of their ore from Indonesia, will likely look to the Philippines as an alternative source of supply, due to its proximity and substantial nickel mining capacity,” the group said.


“This sudden increase in demand could lead to an acceleration of nickel mine development and increased investment into current operational projects, aimed at increasing production in 2020,” it added.


Over the past years, the country has seen declining nickel mine production, with output falling from 554,000 metric tons (MT) in 2015 to 340,000 MT in 2018, a trend that was attributed to mine closures and ore-grade declines.


The closures were the result of the government’s environmental crackdown on mining operations. Following a round of mine audits in 2018 to determine which operations should be allowed to continue, many of the operations had passed the set standards.


As mines begin to restart over this year, Fitch Solutions believes there is room for an aggregate increase in production when factoring in the increased production at current operations already.


For example, the first quarter nickel production data from the Mines and Geosciences Bureau (MGB) has shown a 2.5 percent year on year (y-o-y) increase in nickel ore production to 2.97 million dry MT, which led to an 11.7 percent increase in tons of nickel content to 38,100 MT from 34,000 MT previously.


Dominant domestic producer Nickel Asia Corp. also showed a slight increase in nickel ore sold. Over the first half of the year, the company was able to increase ore sale volumes by 2.1 percent with increases at the Cagdianao and Hinatuan mines offsetting declines at its other operations.


Source: https://business.mb.com.ph/2019/09/04/ph-nickel-output-seen-to-recover-soon/

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