Why Philippine ores stay underground
By Romer S Sarmiento
TAMPAKAN, Philippines – Australia-based miner Xstrata Copper has big investment
and production plans for this sleepy town in the southern Philippines, which
some mining experts say represents the largest unexploited stores of copper and
gold in Southeast Asia.
But a xenophobic communist insurgency, environmentally-minded Catholic clergy
and ever-shifting tribal loyalties in the area of the find have all conspired
to complicate those designs, underscoring the high risks to foreign investors
who dare to take the treacherous plunge into the Philippines' underdeveloped,
yet politically tumultuous, mining sector.
Xstrata Copper, a subsidiary of Swiss-British giant Xstrata, assumed management
control of the Tampakan Copper-Gold
Project last year from local miner Sagittarius Mines Inc, which is still
involved in the project as a minority partner. Australian miner Indophil
Resources NL retained a 32.5% stake in Sagittarius - which before Xstrata took
control of the venture held a 95% stake in the locally incorporated miner.
Xstrata Copper said in December that the mine site has as much as 2.2 billion
tons combined of recoverable copper and gold. That estimate is up 10% from the
2 billion ton projection made in April 2006 by Sagittarius, which at the time
was leading the project but lacks the technological reach of Xstrata Copper.
That projection underscores the Philippines’ vast and underexploited mining
potential. The National Economic and Development Authority (NEDA), a state
economic policy-making body, estimates that the country’s untapped mineral
wealth at around US$840 billion at current global market mineral prices, making
the Philippines the "fifth most mineralized country in the world" by its
estimates.
The Philippines is naturally endowed with abundant formations of metallic
mineral deposits such as copper, gold, iron, cobalt, chromate, nickel and
platinum. Of the Philippine’s total 30 million hectare land area, an estimated
30% is geologically prospective for mineral deposits, according to a paper
titled "Extracting Growth from Mining" produced by the Philippine Senate
Economic Planning Office.
President Gloria Macapagal-Arroyo has expressed her hopes that the mining
industry will attract between $4 billion and $6 billion in new investments
before the end of her term in 2010. Between 2004 and 2007, foreign investors
pumped US$1.4 billion into the country’s mining industry, according to data
from the government’s Mines and Geosciences Bureau. Last year foreign mining
investments amounted to US$325 million, according to the Philippine Board of
Investments.
There is still some legal uncertainty lingering over the sector. The
controversial 1995 Mining Act allows foreign miners 100% equity ownership in
local mining ventures, permits them to repatriate all profits generated from
mining activities, and allocates Filipino tax money to reimburse corporations
for their contributions to the community.
The Supreme Court flip-flopped on the legality of the Act in 2004, first
declaring it unconstitutional then months later reasserting its legal basis. At
the same time, the Philippine constitution allows local governments to protect
their environment and communities and certain Provincial Boards are now
considering whether to ban large-scale open pit mining, including in Tampakan’s
area.
Pivotal project
Arroyo’s administration has listed about two dozen priority mining projects,
including Tampakan, to boost the national economy and restore foreign investor
confidence in the industry. If all goes to plan, Xstrata Copper will invest at
least US$2 billion in the mine development site, which over the project’s life
is expected to yield copper and gold deposits valued at a minimum of US$80
billion.
The company has not yet announced precise plans for how it will excavate the
deposits; because the resources are close to the surface, it is likely to use
open pit methods. Previous company statements based on preliminary studies have
pointed to use of the controversial excavation technique.
That’s one of several major concerns of the project’s critics, who fear the
excavation process will have an irreparable and negative impact on the local
environment. Prior to Xstrata Copper’s entry, local opposition to the project,
which was then led by nominally local miner Sagittarius, was spearheaded by
local members the influential Catholic Bishops Conference of the Philippines.
Now that multinational Xstrata Copper is in the project’s lead, opposition to
the mine has taken on an ideological dimension. The New People’s Army (NPA),
the armed-wing of the Communist Party of the Philippines, on January 1 stormed
the project’s forest-surrounded base camp in a remote village and torched
several of its buildings valued at around US$280,000.
It was the first violent attack since Sagittarius resumed its mining operations
in the area in 2003, following its acquisition of Tampakan’s rights from their
previous owner, Australian mining firm Western Mining Corp, which abandoned the
project due to persistent opposition from the local Catholic Church. Western
Mining officially transferred the mining rights to Sagittarius in August 2002
for around US$30 million.
Communist rebels have in the past assaulted other foreign-run mining operations
in the region, often on nationalistic claims that multinationals have
"plundered" the country’s natural resources and sent the proceeds abroad
without sufficiently developing local communities. Yet as Xstrata Copper moves
ahead with its plans, the problems confronting the company are more complex
than basic security concerns.
Dinualdo Gutierrez, a Catholic bishop who has jurisdiction over Tampakan town,
requested the company abandon the project just days after the communist rebel
attack. "While the diocesan territory condemns the terroristic act … we are not
surprised by the incident," said Gutierrez, who along with two other bishops
assembled an estimated 8,000 people in Tampakan town in 2006 to protest
Sagittarius’ mining designs for the area.
"Previous statements from the diocese cited that the presence of large scale
mining would affect our peace and order situation," said the bishop, adding:
"The message is clear. In the spirit of Christian charity, we pray to the
mining company: 'Please leave and our people will have peace.'"
In citing "social ills" caused by mining in the area, Gutierrez recalled a
labor dispute over the use of so-called "rotational" rather than permanent
labor last October, when workers padlocked several of Sagittarius’ facilities
and barricaded roads leading to the base camp, which is located about a three-
to four-hour drive uphill from the town proper.
Tribal turncoats
Tribal leaders, even those previously strongly supportive of the project when
it was led by Sagittarius, are now reportedly having second thoughts, adding
yet another layer of complication to the already staunch opposition from
Catholic church leaders and threat of violence from communist rebels.
Tribal chieftain Neraldo Capion said villagers are disgruntled by perceived
broken multinational promises to better local living standards in exchange for
rights to the resources. Capion says that a school built in the local community
by Sagittarius has recently ceased to function because roads have not been
properly maintained.
He claimed that children are now forced to attend classes in neighboring
villages, some as far as seven kilometers away. He also said that the New
Year’s Day communist attack on the mining project’s assets was supported by the
local B’laan tribe, the dominant population in the mine’s development site.
Former corporate insiders to the project corroborate those claims. "A
significant number of B’laans from the area has joined the raid … a testament
to the breakdown of community support to the Tampakan project," said Allan
Buenavista, a former project manager of Sagittarius.
Buenavista, who was involved in initial prospecting
evaluations for Western Mining Corp in 1991 and was one of the founders of
Indophil but divested from the company last year, claimed in an interview that
the Xstrata Copper-led Sagiiarious venture is not pereceived locally to be a
"responsible miner". He left Sagittarius in February 2007, a month before
Xstrata assumed management control of Sagittarius and the project.
Philippine military chief General Hermogenes Esperon has said the Armed Forces
of the Philippines will work to secure foreign mining projects and protect
private property rights in the country. The military’s offer to protect foreign
mining firms has sparked more sharp criticism and threats from the NPA.
Communist party spokesperson Gregorio Rosal has said the military’s offer
exhibits the Arroyo government’s "servility" to big foreign capitalist
interests and their "all-out plunder of the country’s already dwindling natural
resources". The spokesman also warned Xstrata Copper and other foreign mining
companies operating in the Philippines to brace for more attacks. He said the
New Year’s Day assault was in revenge for the company’s "land grabbing, plunder
and environmental destruction, and also in response to a longstanding demand of
the people to put a stop to the firm’s operations in the area".
Despite the military’s assurances, Xstrata Copper isn’t leaving its security to
chance. The company recently hired the services of global security provider,
Group 4 Securicor, which will take over security arrangements in the Tampakan
project starting in March. The company also plans to hire more than 100 private
guards and is setting up eight guard posts within the mine’s development site.
That raises the risks of human rights abuses and international criticism,
similar to that faced by US mining giant Freeport in Indonesia, which similarly
deployed armed heavies to protect their operations.
Before the New Year’s Day attack, the rebels and the multinational company had
coexisted peacefully. Roy Antonio, a senior Sagittarius official, says the firm
is "developing a model for a responsible minerals development for the Tampakan
project, where concern for the community and the environment is a high
priority". He declined to respond to allegations that the company had
previously paid "revolutionary taxes" to the communist rebels for the right to
operate in the area and the breaking of that alleged arrangement motivated the
New Year’s attack.
Antonio also took exception to claims that the company’s local support base is
waning, but conceded there was some "discontent" among the community against
the company. In response, the company recently established an independent
grievance mechanism where community members can lodge their complaints and
grievances directly with the company.
"We are confident that by continuing the work that we started last year, our
relationships with the local communities will be even stronger," said Antonio.
"We are working very hard to engage with communities in a transparent,
equitable and culturally appropriate manner to ensure that we understand and
respond to any concerns raised."
Romer S Sarmiento is a Mindanao-based journalist and a correspondent for
BusinessWorld, a Philippines’ based daily business newspaper. He also reports
for a string of Mindanao-based news outfits.
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