• Philippine Resources

The copper industry we should have

By: Orlando Oxales

"Our mineral wealth has remained just another potential for far too long."

One of the more controversial orders issued by former Department of Environment and Natural Resources Secretary Gina Lopez was the blanket ban on open-pit mining. While that particular method of mining could appear to be especially disruptive to the environment, there are existing technologies to effectively manage and rehabilitate it, bolstered by numerous cases of successful rehabilitations of once-thriving open-pit mining sites.

The nuances of such a polarizing policy became the subject of a roundtable discussion hosted by independent think tank Stratbase ADR Institute and environmental advocacy group Philippine Business for Environment Stewardship in partnership with DENR. In particular, a sector with massive potential that could benefit from a careful revisiting of that policy is the copper industry.

Board of Investments Supervising Investment Specialist Dennis Panga, in presenting the Philippine Copper Industry Roadmap, noted how fragmented the copper industry value chain is. This is the reason why the country is unable to take full advantage of what is touted to be the fourth-largest copper deposit in the world.

He explained: “Mining companies export almost 100 percent of the copper concentrates, while PASAR [Philippine Associated Smelting and Refining Corporation] also imports its required copper concentrates and exports almost 100 percent of copper cathodes. on the other hand, rods are being imported and sold as wires and cables in the domestic market.”

The purpose of the roadmap then is to integrate this supply chain, from establishing casting rods facilities and facilitating linkages between auto wire harness and the local supply chain.

While the Philippines figures significantly as exporter of copper concentrates, copper cathodes, and other commodities in the global copper value chain, the downstream sector definitely has room to grow. The roadmap, for instance, proposes the establishment of an ecological industrial zone in Leyte.

But in addition to infrastructure, the sector is also hindered, Panga said, by other things. Foremost is the uncertainty in the regulatory and fiscal regime on mining, environmental issues, high power cost and threats of power interruptions.

In particular, a “clear, stable, and forward-looking policy” is key if such a capital-intensive initiative were to prosper, which means there is no room for things like the Aquino-era Executive Order 79, which effectively banned the entry of new mining projects in the country, at least until a policy rationalizing revenue sharing schemes is approved.

The other identified roadblock, of course, is DAO 2017-10, or the ban on open-pit mining. In the same roundtable discussion, Mines and Geosciences Bureau’s Larry Heradez said the Mining Industry Coordinating Council has recommended measures for strict compliance in relation to open pit mines. Among these is the DENR, through a technical committee, being tasked to review the mining regulatory process, in particular new guidelines for activities “that involve permanent surface modification and potential long-term rehabilitation.”

Other measures include the enhancement of design and performance standards for open-pit mines, taking into consideration best-practice control strategies and technologies especially on mine rehabilitation and restoration; revisiting the sanctions and penalties for violations; prioritizing and scaling up of the rehabilitation of abandoned and legacy mines; conducting a periodic review of go and no-go zones for mining applications, and finally strengthening of the monitoring system on mining operations, including rehabilitation activities.

The Chamber of Mines of the Philippines, through its Chairman Gerard Brimo, also assailed EO 79 and DAO 2017-10 as among the fundamental culprits in why the mining industry continues to be relatively unattractive to investments. A 2017 global survey ranks the Philippines in the bottom seven among 91 jurisdictions in terms of mining policies and last in terms of investment attractiveness in the Australia / Oceana region.

In this regard, Brimo said House Bill 8400 is a step toward the right direction. It proposes a margin-based royalty on income from mining operations, in addition to a 3-percent royalty on gross output of the minerals for large-scale metallic and non-metallic operations located within mining reservation areas. This, Brimo said, will impose even higher taxes but compared to other versions, an income-based scheme aligns the Philippines a bit closer to comparable large mining countries in the world.

If HB 8400 hopefully takes care of EO 79 (the open-pit ban which continues to derail important projects), the Tampakan Copper Project, the King-King Copper Gold Project, and the Silangan Copper Gold Project, all in Mindanao and, once operational, could hike the total industry contribution to exports to 9 percent and to GDP to 1.5 percent, Brimo said.

Projected yearly revenues of these three projects will generate P12 billion for the national government and P1.5 billion for local government.

“The open-pit mining method is practiced all over the mining world. For most types of near-surface mineral deposits, there is no alternative,” he explained.

For former DENR-MGB Director Horace Ramos, there are technical solutions and technologies that can alleviate fears of ecological damage from open-pit mining. The evaluation of open mines, he said, should be on a case-to-case basis, based, for instance, on the Environmental Impact Assessment and the Environmental Compliance Certificate.

This was the same point raised by PBEST Convenor Carmelo Bayarcal, who said harnessing the country’s untapped mineral wealth need not clash with environmental protection. “A more balanced approach that imposes strict evaluation on the capacity and competence of mining companies to rehabilitate disturbed areas instead of an outright ban will minimize the inherent environmental impact of mining,” he said.

Stratbase ADRi President Dindo Manhit said: “Finally resolving this policy stalemate with a reloaded and stable regulatory environment aligns well with President Duterte’s vision for economic and infrastructure development.”

When the Senate resumes in June, it will have three weeks to approve a counterpart bill for HB 8400 with hopefully enough time to pass into law. This and the existing ban on open-pit mining remain to be most severe obstacles in the Philippine copper and mining industry’s take-off. If the experience of other countries were to serve as a model, clarifying and stabilizing the regulatory environment should be the first step. There is special currency in this in the context of the Duterte administration’s ambitious development agenda.

Our mineral wealth has remained just another potential for far too long. Reversing these mistakes with policies that are stable and competitive would create an industry, as we’ve seen in legitimate mining operations, bring much needed prosperity to isolated and undeveloped communities where it is most needed.

For President Duterte, the copper and mining industries are well worth his political capital.

Original article: http://manilastandard.net/opinion/columns/open-thoughts-by-orlando-oxales/289752/the-copper-industry-we-should-have.html


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