beyondbrics

A newly approved local government ban on open pit mining in the southern Philippine island of Mindanao shows why mining investors in the South-east Asian country of over 90m people need not just money and guts but also a lot of patience.

Signed by the governor of South Cotabato province, about 1,000km south of Manila, on her last day in office, the provincial environment code imposes an absolute prohibition on open pit mining ostensibly for being harmful to the environment. The local law could potentially derail plans by a unit of Swiss-based Xstrata Copper to develop South-east Asia’s biggest untapped copper and gold deposits in the province’s Tampakan town.

Initial estimates place mineral resources in Tampakan at 2.4bn tonnes containing 13.5m tonnes of copper and 15.8m ounces of gold at the 0.3 per cent copper cut-off grade. Xstrata’s Philippine unit, Sagittarius Mines, estimates the project needs a stage-one capital outlay of $5.2bn to bring annual production to 340,000 tonnes of copper and 350,000 ounces of gold for at least 20 years. The final feasibility study is due for completion by the fourth quarter this year, and first production is scheduled for 2016.

The ban looks like a serious blow to the Tampakan project but those with a long mining experience in the Philippines know better. Already, the province’s new governor has indicated he will review the environment code as soon as he assumes office on July 1. Xstrata’s Philippine unit also has the option to challenge the local law in court on the grounds that it is incompatible with national environmental and mining laws, which allow open-pit mining.

Certainly, the Tampakan project, which began in the early 1990s, has faced many challenges before, including communist guerrilla attacks, opposition from Catholic bishops and demands for more assistance from indigenous tribes occupying the lands surrounding the copper and gold deposits.

Those who fear the newly approved ban in Tampakan could be a sign of more restrictions to come should be reminded of a Supreme Court ruling in January 2004. Of the challenges the Tampakan project has experienced, perhaps none was worse than the 2004 ruling that declared full foreign ownership or control of mining projects was unconstitutional.

The case, filed by environmentalists opposed to the project, and the foreign mining companies behind it, was reversed 11 months later.