The State and Prospects of the Philippine Mining Industry

EO79 and Beyond: the State and Prospects of the Philippine Mining Industry

Atty. Ronald S. RecidoroVice President, Legal & Policy

Chamber of Mines of the Philippines

Key Points in Mining History

1984 – President Marcos signs PD1899 defining small-scale mining.

1974 – President Marcos signs PD463, The Mineral Resources Dev’t Act

1991 – President Aquino signs RA7076 ‘People’s Small-scale Mining Act’

1995 – President Ramos signs RA7942 ‘The Philippine Mining Act’

1997 – President Ramos signs RA8371 ‘Indigenous Peoples’ Rights Act’

2004 – President Arroyo signs EO270

2004 – The Supreme Court declares the Mining Act constitutional.

2012 - President Aquino signs EO79 Institutionalizing Reforms in the Mining Industry

1995 – The Marcopper Tailings Disaster

2012– The Philex Tailings Spill

The Current Situation

All signs point to a mineral resource boom;

CSOs have intensified their anti-mining campaign;

Many large-scale operations now in their twilight years with mining investments started in mid 2000s only now poised to take off;

However, with the issuance of EO79, the industry is in limbo;

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.00

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20-Year Copper Price$/lb.

A Mining Boom

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.00

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20-Year Nickel Price$/lb.

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120.00

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20-Year Gold Price$/tr.oz

Large-scale Mining is still largely misunderstood.

Perceived environmental destruction of watershed and key biodiversity areas;

Pollution;

Displacement of indigenous peoples;

Violence and conflict in mining areas.

The Philippines: A Poor Man Sitting on a Pot of Gold?

3rd in GOLD;

4th in COPPER;

5th in NICKEL.

Our country’s mineral resource

High-Potential

Only 2% are covered by mining contracts/ permits;

Our Total Land Area: 30 million hectares

Our Mining Potential

Footprint of Major Operating MinesCOMPANY LOCATION FOOTPRINT

Lepanto Benguet TD 100 has

Philex Benguet TD 450 hasSubsidence 200 has

Rapu-Rapu Albay Open Pit, TD 230 hasFilminera Masbate Open Pit, TD 650 hasTaganito Surigao Open Pit 200 hasCagdianao Surigao Open Pit 200 hasCTP Surigao Open Pit 360 hasAtlas Cebu Open Pit 1200 hasRio Tuba Palawan Open Pit 1200 has

Other Mines ~3,700 hectares

Total 8,500 hectares

Footprint of Future Mining ProjectsCOMPANY LOCATION FOOTPRINT

OceanaGold Cu, Au Nueva Vizcaya ~750 hectaresMaricalum Cu Negros Oriental ~750 hectares

Boyongan Cu, Au Surigao del Norte ~500 hectares

Batong-Buhay Cu, Au Kalinga-Apayao ~1,000 hectares

Far Southeast Cu, Au Benguet ~200 hectaresKingking Cu, Au Compostela Valley ~1,000 hectares

Tampakan Cu, Au South Cotabato ~2,000 hectaresRed5 Au Surigao del Norte ~300 hectares

Diwalwal Au Compostela Valley ~400 hectares

Runruno Au Nueva Viscaya ~700 hectares

Philnico Ni Surigao del Norte ~1,000 hectares

Mindoro Ni Mindoro ~700 hectares

Pujada Ni Davao Oriental ~700 hectares

Total 10,000 hectares

Our Estimated Inventory

8.03 Billion tons of COPPER; 4.91 Billion tons of GOLD; 0.81 Billion tons of NICKEL; 480.26 Million tons of IRON; 39.66 Million tons of CHROMITE; 433.88 Million tons of ALUMINUM.

US$1,000,000,000,000.00(Yes, that’s TRILLION, with a T.)

The Philippine Mining Industry

In 2011, all mines in the Philippines had a total GROSS MINERAL PRODUCTION of Php163.2 Billion;

Large-scale mines accounted for Php88 Billion;

Small-scale mines and non-metallic mines produced Php75.2 Billion;

Philippine Mining Now

Operating metallic mines = 35 Nickel processing plant = 1 Gold refinery

= 1 Copper Smelter = 1

Approved/registered tenements = 730

Some 1,818 mining and exploration applications are currently under process.-------------------------

As of October 2012, based on MGB data.

Mining’s Contribution to the Economy

Mining’s contribution to GDP: 2011: Php99.2 Billion (1.00% of GDP)

Mineral Exports 2011: US$ 2.659 Billion (5.6% of Total Exports)

Taxes, Fees & Royalties from Mining 2010: Php17.364 Billion

*Mining Industry Statistics Table of MGB (Release Date: May 6, 2011)

The people we employ.

340,000 jobs as of 2010.

The Taxes we pay.

Corporate Income Tax Excise Tax Withholding taxes Customs Duties Value-added Tax

Mineral Reservation Royalty Additional Government Share in FTAAs

Local Business Tax Real Property Tax

Social Development Management Program Indigenous People’s Royalty Landowner’s Royalty

COPPER PROJECTS

Far Southeast Project 2018 $1.5B

Philex (Operating)

Oceana Project 2013 $320m

Atlas Copper Project (Operating)

Maricalum Project 2016 $250m

Boyongan Project 2014 $1.5B

TVI (Operating)

Kingking Project 2016 $1.3B

Tampakan Project 2017 $5.9B

3 operating mines6 large scale projects in the pipeline

GOLD PROJECTS

Victoria Gold Project (Operating)

Runruno Gold Project 2014 $150m

Masbate Gold Project (Operating)

RED5 Gold Project 2014 $83M

Philsaga Mining (Operating)

Apex Gold Project (Operating)

4 operating mines2 gold projects in the pipeline

NICKEL PROJECTS

• Eramen Nickel Project (Operating)

• Sta. Cruz Nickel Project 2011

• Mindoro Nickel Project 2015

• Philnico Nickel Project 2013

• Berong Nickel (Operating)

• Coral Bay (Operating)

• Taganito Project (NA) 2012

• Carrascal (Operating)

• Marcventures (Operating)

• Pujada Nickel Project 2016

Potential Growth for 17 New Projects

Philippine Metallic Investments and Revenues

2011 2012 2013 2014 2015 2016 2017 2018

Total Investment (Million $)

730 1,369 2,072 3,302 3,995 2,892 812

Total Revenues**(Million $)

2,820 2,820 3,955 4,954 7,163 9,248 11,171 12,114

Total investments from 2011 to 2018: US$15.2 billion

Total Annual Revenue: US$2.8 billion in 2011, ramps up to $12.1 billion in 2018;

Mining contribution to GDP: 1.7% in 2011, increases to 5-6% in 2018

Opportunities

Construction companies to do contract work for infra-structure projects;

Service contractors for open pit and underground mines;

Foundry and steel fabrication shops; Suppliers of heavy equipment, explosives, steel

balls/rods, and lime plants.

Challenges & Roadblocks to Growth

Need for clear, stable and predictable policies on minerals development;

LGU ordinances banning open pit mining;

Illegal SSMs that give mining a negative image;

Heightened opposition from CSOs;

Security issues for mining investors.

The Latest Challenge: A New Mining Policy.

E.O. 79 and its IRR: The Good, the Bad, and the Ugly.

The Aquino Administration’s Mining Policy: A case of Waiting for Godot?

The GOOD: It mostly reiterates existing laws, rules and

regulations on mining; It recognizes and upholds existing mining tenement

rights; It takes steps to improve the small-scale mining

industry; It has a clear aspiration for consistency and

harmonization of laws; It makes a clear commitment for the PHL to join the

EITI;

The BAD: It expands “no-go” areas for mining

applications;

It disqualifies applicants with previous “record(s) of environmental incidents”;

The UGLY: It imposes an indefinite moratorium on new mining

agreements until a new revenue sharing law is passed;

It manifests Government’s intention to review and renegotiate all existing contracts;

It says nothing about promoting mining as a driver for the Philippine economy.

The Challenges Continue

Meanwhile…

The moratorium on new permits continues; An Alternative Mining Bill in Congress; Tedious permitting process: NCIP Guidelines

on FPIC; LGUs continue to ban mining in their

jurisdictions.

THANK YOU.

The Chamber of Mines of the Philippines. Working for responsible mining.