Mining compelling despite policy hurdles — BMI
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 — emailed 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 environment a list- 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 20082017.
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 openpit mining was put in place in April 2017,” BMI Research said, citing other challenges as “proposals to increase taxes and resource nationalism”.