February 7, 2018
THE PHILIPPINES remains a compelling
proposition for foreign miners, even as the current administration — which ends
its six-year term in 2022 — continues its predecessor’s tack of tightening the
state’s hold on the industry, according to an assessment of BMI Research.
“Environmental regulations, high
taxes and resource nationalism will continue to plague the mining industry of
the Philippines,” the Fitch Group unit said in a summary of findings — e-mailed
to journalists on Tuesday — of its Philippines Mining Report that was
published in January.
“However, we maintain that the
industry is well-positioned for longer-term growth as foreign miners look to
take advantage of the country’s sizeable and relatively untapped deposits and
low operating costs.”
The country’s mining sector has been
reeling from an unfriendly policy environment since former president Benigno
S.C. Aquino III issued Executive Order No. 79 in July 2012 that imposed a
moratorium on new mining projects until a new mine revenue sharing scheme is enacted.
President Rodrigo R. Duterte’s
assumption of power has not lifted pressure on the industry, and while a harsh
crackdown in February 2017 by staunch environmentalist-turned-Environment
secretary Regina Paz L. Lopez relaxed somewhat when she was booted out of
office in May after failing to bag lawmakers’ fiat for her appointment, her ban
on open-pit mining — widely used by miners — remains in effect.
The current government is also
moving to increase its share in industry revenues by including higher mining
levies in a tax reform package that the Finance department will submit to
Congress within the year.
Adding to uncertainty is an ongoing
review by the multi-agency Mining Industry Coordinating Council of sanctions
Ms. Lopez had imposed — for various infractions of environment laws — on 28 of
41 operational metal mines in the country and 75 other projects in
pre-production stage.
Despite nagging policy constraints,
BMI Research now expects value of the country’s mining output to rise annually
— though by progressively smaller increments — until Mr. Duterte ends his
six-year term in 2022: by six percent to $3.98 billion this year, five percent
to $4.18 billion next year, four percent to $4.34 billion in 2020, three
percent to $4.47 billion in 2021 and by two percent to $4.56 billion in 2022.
Latest available data from the Mines
and Geosciences Bureau showed that total mining production rose in value by
6.06% to P81.475 billion as of September from the P76.82 billion recorded in
2016’s comparable nine months, but mainly because of better world prices.
The same comparative nine months saw
production of most metallic minerals fall in volume terms despite increases in
value: gold by three percent to 16,999 kilograms (kg), silver by 11% to 23,951
kg, copper concentrate by 19% to 210,428 dry metric tons (DMT), nickel direct
shipping ore by 11% to 19.01 million DMT and chromite by 47% to 13,694 DMT.
As of end-2016, the Philippines was
estimated to have reserves consisting of 1.854 billion MT of gold, 1.696
billion MT of silver, 1.761 billion MT of copper, 116.136 million MT of nickel,
116.001 million MT of iron and 47.264 million MT of chromite.
BMI Research said it sees average
annual copper production growth easing to 4.6% in the 2018-2027 period from
18.0% over 2008-2017.
Performance of gold production,
however, should rebound to 5.7% over 2018-2027 from a 2.6% drop in 2008-2017.
“Growth will be boosted by a pipeline of new projects coming online and higher
prices of gold in the coming years,” BMI Research said, adding that it projects
average world price of the yellow metal to improve to $1,525 per ounce (/oz) by
2021 from $1,300/oz last year.
Nickel ore production growth will
slow to an annual average of 2.7% over 2018-2027 from 22% in the preceding 10
years “because of the introduction of more stringent regulations and depleting
ore grades”.
“Environmental regulations will
remain a top concern for mining firms operating in the Philippines, especially
since a ban on open-pit mining was put in place in April 2017,” BMI Research
said, citing other challenges as “proposals to increase taxes and resource
nationalism”.
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