Philippine Resources Issue 1 2015

Philippine Resources Mining, Petroleum & Energy Journal Issue 1, 2015

Extractive Industries Transparency Initiatives

The “Good, the Bad and the Ugly� of small-scale mining

GXD expands service offering to the Philippines

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Headlines in this issue

8

Front cover: GXD has expanded its service offering to the Philippines . See page 38

26

Resources Commentary

8

“Ronnie” Penarroyo discusses land use conflicts.

16

Patricia A. O. Bunye provides an update on the Philippines Extractive Industries Transparency Initiatives

22

Maria Paula Tolentino reports on the “Good, the Bad and the Ugly” of small-scale mining

Economic Commentary

26

World Bank tips Philippine economy to keep surging

28

BIR Chief tells miners to register where they mine

32

Philippines to lead renewable energy business

6 Philippine Resources

40

Mining

38

GXD expands service offering to the Philippines

40

BDA confident in Mindanano business potential

44

OceanaGold looking at underground opportunities

52

Mining Briefs

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Philippine Resources Mining, Petroleum & Energy Journal Issue 1 2015 Philippine Resources Journal is published independently for executives in Philippine mining, petroleum and energy and associated business sectors.

Publisher Elizabeth Galura Charismatic (WA) Pty Limited Consulting Publisher Greg Brimble Editor: Colin Sandell-Hay Sales and Marketing Kevin Lewis kevin@philippine-resources.com & Cecilia Pamular cecille@philippine-resources.com Design/Production Elizabeth Galura Journalists Maria Paula Tolentino Kevin Lewis Steve Hill Contributors Patricia A.O. Bunye Fernando Penarroyo ___ Manila publishing office: Lomar Offices Paseo de Roxas Bldg, 3rd Floor 111 Paseo de Roxas Legaspi Village Makati, Metro Manila, Philippines Phone +632 815 8836 or +632 714 0029

Individual contacts: Greg Brimble greg@philippine-resources.com Australia: +614 172 20759 Manila: +63949 338 3664

Digital online edition: www.Philippine-Resources.com

8 Philippine Resources

Philippines tipped to be a big winner from crude price fall

T

he world is a very different place today than it was three months ago.

The significant dive in global crude oil prices in late 2014/early 2015 has dramatically changed the world’s economy and significantly affected global politics.

While there are a host of reasons for the sudden crash in crude prices, there is no doubt that a push by the Saudi-led OPEC block to regain control of the market is a major component.

It can be no coincidence that the timing of OPEC “murmurings” that it was happy to see oil prices slide and would not consider production reductions came at the same time that the USA was making initial moves to allow its onshore producers to export oil and gas.

While the West Texas Intermediate (WTI) oil price has crept back up around the US$50 per barrel market after sliding to around US$40 per barrel in early 2015, there are many analysts suggesting it will be heading back down shortly -- and it could quite easily slide lower than the US$40 mark.

What does this mean for the Philippines? Think tanks, bankers, global economists and energy market specialists are almost unanimous in suggesting that this country will be one of the big winners if oil stays at that US$40 per barrel mark.

In fact, a number, including global research firm Oxford Economics, suggests that the Philippines will be the big winner.

The market has concluded that as a significant oil importer, the Philippines will gain instant benefits through lower oil costs.

It is also suggested that continued lower oil prices will potentially lead to lower inflation in the country, in turn leading to a lowering of interest rates, further fuelling the Philippines’ remarkable economic growth.

The Oxford Economics study has tipped that the country’s economic growth rate could jump as high as 7.6 per cent, making it truly Asia’s new economic “Tiger”.

On the downside, the fall in crude prices cannot be viewed as a positive for the current oil and gas acreage offer under the Philippine Energy Contracting Round (PECR 5) for petroleum.

Globally, oil companies are slashing their exploration budgets and a number of bid rounds have been affected.

While the DOE is still positive that it can attract strong interest to the petroleum offering it has been marketing around the world, the Government has already extended the cut-off time for the lodging of applications from March 31, 2015 to June 30, 2015.

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Resources Commentary

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Land use conflict in the Philippine resources industry

By Fernando Penarroyo

L

and use is associated with human rights issue.

Resource developers must respect the rights of host communities affected including farmers and indigenous peoples.

They should obtain permission not only from landowners but also from occupiers or users before commencing development and be aware of the obligation to protect sources of food and water. In consultation with the community, both government and project proponents must engage a process to compensate fairly for adverse effects, identify strate-

gies to manage environmental and social consequences, and if possible, avoid displacement or resettlement of people

pected to place undue pressure on the use of land and its rational and equitable allocation among competing uses.

Land and natural resource issues often times are the main causes of conflict.

Land conflicts especially when related to access to land or insecurity of tenure commonly become violent when linked to wider processes of political exclusion, social discrimination, economic marginalization, and a perception that peaceful action is no longer a viable strategy for change.

Second, investments in agriculture and property development are being stymied by continuing property rights problems and inconsistent policy.

The globalization of economies has generated a surge in investments related to land and other natural resources The Philippines is no stranger to violence in relation to land and natural resources conflict. (Toolkit and Guidance for Preventing and Managing Land and Natural Resources Conflict, 2012).

The exploitation of natural resources and the concomitant environmental degradation exacerbated by climate change intensify the perceived ‘land scarcity’. Unresolved disputes will continue to prevent the resources from being developed sustainably creating uncertainty and prolonged conflicts.

Land and Resource Governance

Fernando “Ronnie” Penarroyo is the Managing Partner of Puno and Penarroyo Law (fspenarroyo@punopenalaw. com). He has negotiated numerous land access agreements with local government units, landholders, indigenous peoples and host communities on behalf of land development, mineral and energy companies.

10 Philippine Resources

The World Bank-supported 2013 report entitled “Improving Land Sector Governance in the Philippines: Implementation of Land Governance Assessment Framework” (“LGAF”) aims to provide a tool for diagnosis of land governance issues, establishment of benchmarks and monitoring progress over time.

The report identified several key challenges that were expected to highlight the importance of improving land governance in the Philippines. These are: First, the country has one of the fastest growing population in Asia, which is ex-

Third, smaller sized farms resulting from completion of land redistribution pose challenges in improving productivity to meet food security.

Fourth, degradation of the country’s forests and natural resources has continued, affecting the poor greatly, due to their dependence on these resources.

Fifth, as the country scales up public investments in infrastructure to promote inclusive growth, it becomes more crucial to set clear and equitable policies on expropriation and safeguards for those whose properties would be affected.

Finally, the challenges of creating an improved environment for private investments are associated with having a wellfunctioning land market that is backed up by access to reliable land information, an efficient and complete registry, and clear and transparent procedures for rights registration and transactions on real property.

According to the LGAF report, the Philippines fared high on the strength of its legal framework for land rights recognition. In the rural areas, the Comprehensive Agrarian Reform Act of 1988, Commonwealth Act 141 or the Public Land Act, Republic Act 636 and the recently issued Republic Act 10023 put in place the policies for recognition of rights of more than 90% of the country’s rural population. The Indigenous Peoples’ Rights Act (“IPRA”) on the other hand, laid out the policy for recognition of customary Continued on page 10 >

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< Continued from page 8 rights and the systems and procedures for mapping and registration of ancestral lands relying on both documentary and non-documentary forms of evidence.

The Forestry Code and National Integrated Protected Areas System Act both recognize the public goods aspects of forestlands serving as the rationale for maintaining these lands under the public domain. The report also noted that there is strong public participation in the formulation of land policies, owing to the vibrant civil society sector, and the democratic space created by the legislative process.

In the Philippines the key land administrative agencies are: 1) the Land Management Bureau under the Department of Environment and Natural Resources (“DENR”) recommends policies/programs for the administration of alienable and disposable lands; 2) the Land Registration Authority (“LRA”) under the Department of Justice (“DOJ”) issues patents and certificates of title and registers land transaction documents (a Registry of Deeds is attached to the LRA in every city and province); 3) the Department of Agrarian Reform (“DAR”) implements the comprehensive land reform program of the government by providing land tenure security to landless farmers through land acquisition and distribution of Certificates of Land Ownership

Award; 4) the National Commission on Indigenous Peoples (“NCIP”) assists indigenous cultural communities in securing title to their lands and approves any proposed disposal, utilization, management or appropriation of ancestral lands and processes Certificate of Ancestral Land Titles and Certificate of Ancestral Domain Titles; and 5) local government units develop land-use and development plans and zoning ordinances.

However according to the LGAF study, among the areas where Philippines is struggling to meet good governance criteria is the strong horizontal overlaps in mandates of key agencies including the DAR, DENR, LRA, and NCIP in issuing original titles, review and approval of survey plans, and maintenance of land records.

regimes, each with their own legal framework, have legal authority over land rights and are each legitimized to resolve conflict.

It gives rise to situations where there are contradictions, ambiguities or ignorance over statutory and customary rules and legal norms. Legal pluralism causes confusion as to which legal system should be and can be appealed to in a given conflict. (Food and Agriculture Organization, 2006) The LGAF study also revealed that the processes for appeal of land dispute rulings are lengthy and expensive. Cases decided by the Supreme Court in 2012 showed that in more than 90% of the cases it took more than 20 years for cases to be resolved with finality.

This overlap affects efficiency in service delivery and prohibits access by the public and government agencies to complete and reliable land records. Furthermore, the current state of records and overlapping mandates create confusion among the public and create long-standing disputes owing to contradictory rulings issued by the agencies. An example is the ongoing dispute in Baguio City resulting from conflicting land titles issued by the LRA and the NCIP covering the same property.

Land-related cases take a very long time to be resolved, in many cases spanning decades, and in some, outliving the parties involved.

This is clearly a case of legal pluralism, which occurs when different land tenure

The USAID Country Profile on Property Rights and Resource Governance Philippines (2010) made similar observations that despite legislation and various land reforms, the majority of rural people remain landless and there is a swelling urban population living in informal settlements. The country profile noted:

The study also noted a lack of reliable data on property markets where record systems are unsystematic and unreliable as to land ownership, locations, boundaries, actual land uses and land values.

There is no complete set of cadastral maps that shows titled and untitled properties on alienable and disposable lands.

“Outdated land administration laws, an inefficient land administration and adjudication infrastructure, and a poor land information system have resulted in problems of fraudulent, overlapping and duplication of land titles and to widespread land-grabbing. They have also contributed to high transaction costs in securing, registering and transferring property rights, and to tenure insecurity.

Continued on page 12 > 12 Philippine Resources

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< Continued from page 10 Inconsistent legislation and policy declarations have led to unsustainable land use and conflict over competing land uses.

Power- and rights-based systems are designed to adjudicate rights, not reconcile interests. Such systems are less likely to produce durable outcomes because results can be overturned when the power balance changes.

Resolving Land Conflicts Land tenure conflicts are characterized as multilayered and multidimensional and best understood in the light of their historical, social, environmental, economic and political contexts. They are often nested within bigger conflicts that may be difficult to see and temporal in nature, changing over time. (Food and Agriculture Organization, 2006) The Lincoln Institute of Land Policy (2013) identified three principal approaches to resolving disputes: • Rely on power. Use one’s leverage to force or coerce someone to act.

• Adjudicate rights. Rely on an arbiter to decide who is right. Set up adjudicatory processes to determine who has legally enforceable right and who does not.

• Reconcile interests.Try to satisfy needs, concerns, and fears of every-one involved.

In local communities, the power balance in the local government units is always shifting with new elections and court challenges. While such approaches may allow for quick decisions, the results of those decisions are not likely to last or satisfy many of the people involved, and they might be challenged through administrative and judicial appeals.

The Lincoln Institute proposes the mutual gains approach, which is based on all stakeholder interests as well as the necessary technical information. It involves stakeholders along with appointed and elected decision makers and generates information relevant and salient to stakeholders.

The approach requires strong community and public engagement skill along with strong technical planning skills, and engages the public above and beyond sharing information and views.

The mutual gains approach to preventing and resolving land use disputes is not

a single process or technique. It draws from the fields of negotiation, consensus building, collaborative problem solving, alternative dispute resolution, public participation, and public administration.

The result is a more public, collaborative process designed to tease out the range of interests and criteria, compare various alternatives, and determine which of those alternatives meet the most interests.

Similarly the US Bureau of Land Management (Collaborative Stakeholder Engagement and Appropriate Dispute Resolution, 2009) adopts a collaborative stakeholder engagement and appropriate dispute resolution (“ADR”) for preventing or resolving disputes outside the conventional arenas of administrative adjudication, litigation, or legislation.

Bureau policy is to seek to use collaborative stakeholder engagement and ADR processes as standard operating practice for natural resources projects, plans, and decision-making. By preventing, managing, and resolving conflicts or disputes through these processes, the Bureau and stakeholders can realize savings of time, budget dollars, and public resources.

The existing land use system in the Philippines relies on the adjudication of rights, not the reconciliation of interests.

On the other hand, the mutual gains approach which have yet to be adopted in the country, encourages contending parties to focus on mutual interests and strive to achieve mutual gains, minimizing the destructive nature of land use conflicts.

Improving Land Governance in the Philippines Several initiatives are being undertaken by the Philippine government to improve land governance as an effective instrument for addressing the interconnected issues affecting the sector The Senate Economic Planning Office in its Policy Brief “Requisites of a Land Use Continued on page 14 >

14 Philippine Resources

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<Continued from page 12 > Policy” (October, 2005) identified five main uses of land: economic and commercial uses, food production, shelter, environment preservation and preservation of indigenous peoples. However, these uses cannot be pursued exclusively.

This means that compromises and conflicts arise whenever one implements one specific land use over the other.

Economic and commercial use of land may, at times, be in conflict with the food production role of land. For example, indiscriminate land conversions from agriculture to non-agricultural purposes that persist around the country pose the danger of food insufficiency for the Filipinos.

At present, the growing population of the country has resulted in an increasing demand for housing. Because of the limited space available for mass housing, there is now congestion particularly in urban areas, and this is where the use of land for shelter comes in conflict with other interests. Due to the rapid need of urban centers for housing and the lack of a national land use policy to guide planners, lands allocated for other purposes near these areas (such as agricultural) are utilized for housing.

According to the DENR (1997), the Philippines’ natural resources “have been, and continue to be, subjected to numer-

ous yet conflicting uses that include forest production (for wood and other forest products like resin, pulp and paper), food production, human settlements, watershed, tourism/recreation, mineral production, energy production, biodiversity conservation, industrial site, and other economic activities or any combination of the above.”

Increasing population, resource exploitation, hyper-urbanization and industrialization have put much pressure on the biological and physical well being of the environment. The enactment of IPRA raised some issues on property rights especially regarding ancestral lands rich with mineral and energy resources.

Improving Land Governance in the Philippines Several initiatives are being undertaken by the Philippine government to improve land governance as an effective instrument for addressing the interconnected issues affecting the sector The Senate Economic Planning Office in its Policy Brief “Requisites of a Land Use Policy” (October, 2005) identified five main uses of land: economic and commercial uses, food production, shelter, environment preservation and preservation of indigenous peoples. However, these uses cannot be pursued exclusively.

This means that compromises and conflicts arise whenever one implements one specific land use over the other. Economic and commercial use of land may, at times, be in conflict with the food production role of land.

For example, indiscriminate land conversions from agriculture to non-agricultural purposes that persist around the country pose the danger of food insufficiency for the Filipinos. At present, the growing population of the country has resulted in an increasing demand for housing. Because of the limited space available for mass housing, there is now congestion particularly in urban areas, and this is where the use of land for shelter comes in conflict with other interests.

Due to the rapid need of urban centers for housing and the lack of a national land use policy to guide planners, lands allocated for other purposes near these areas (such as agricultural) are utilized for housing.

According to the DENR (1997), the Philippines’ natural resources “have been, and continue to be, subjected to numerous yet conflicting uses that include forest production (for wood and other forest products like resin, pulp and paper), food production, human settlements, watershed, tourism/recreation, mineral production, energy production, biodiversity conservation, industrial site, and other economic activities or any combination of the above.”

Increasing population, resource exploitation, hyper-urbanization and industrialization have put much pressure on the biological and physical well being of the environment.

The enactment of IPRA raised some issues on property rights especially regarding ancestral lands rich with mineral and energy resources.

At the House of Representatives, Rep. Kaka Bag-ao filed House Bill No. 04382 entitled “National Land Use and Management Act of Philippines” on 12 May 2014.

Continued on page 16 >

16 Philippine Resources

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Updates on the Philippines Extractive Industries Transparency Initiative

By Patricia A. O. Bunye

T

he Philippines is one of the most mineralised countries in the world.

However, the lack of available data on the government’s revenue from mining has spawned criticisms that the government does not receive its just share of this resource wealth.

Executive Order No. 79, Series of 2012 (“EO 79”), which embodies the current administration’s mining policy, provides that in order to improve transparency, accountability, and governance in the

sector, the government shall support and commit participation in the Extractive Industries Transparency Initiative (EITI).

To implement this provision, Executive Order No. 147, Series of 2013 (“EO 147”) was subsequently enacted to institute the Philippine EITI.

identified by the MSG in the 2014 Philippine EITI Report (the “EITI Report”) which was submitted to EITI International on 29 December 2014:

EO 147, following international EITI guidelines, created a Philippine EITI Multi-Stakeholder Group (“MSG”), composed of representatives from government, business, civil society. Under EO 147, the Philippine EITI is implemented and operationalized under the MSG.

2) improve understanding of the management of natural resources and availability of data;

Following its mandate under EO 147 to set the strategic direction required for effectively implementing EITI in the Philippines, the following objectives were

1) show direct and indirect contribution of extractives to the economy;

3) strengthen national resource management and governance systems; 4) create opportunities for dialogue and constructive engagement in natural resource management in order to build Continued on page 18 >

< Continued from page 14

social and financial costs of delays.

The bill was approved by the House on Third Reading on 02 June 2014 and transmitted and received by the Senate on 04 June 2014.

The persistence of strong horizontal overlaps among land agencies will continue to deprive the public access to reliable, up-to-date records discouraging investments and affects land market activity preventing the realization of the full potential of land and the resources thereat.

In the Senate, Sen. Loren Legarda filed a corresponding Senate Bill 07 entitled “An Act Instituting a National Land Use Policy” on 01 July 2013. This has been a two-decade old proposal to ensure the proper allocation of land to various uses and that land conversion and development are guided by a framework to meet the country’s long term requirements for food security, settlements, industrial and economic development, among others.

A long process towards harmonization of implementing policies and procedures of the DENR, DAR, NCIP and DOJ/LRA in the issuance of tenurial instruments in public lands was completed, leading to a Joint Administrative Order in 2012. The order aims to address not only overlapping jurisdiction among the land agencies but also operational issues and conflicting claims in the implementations of their respective programs.

The government should also consider setting up of dedicated land courts and/or land adjudication boards to speed up the resolution of land cases. Serious reforms in the administration of justice system including the organization of court records to help in monitoring of land cases are warranted to minimize the 18 Philippine Resources

Conclusion More often concession, exploration and development rights given by the central government through the market economy’s land titling and resource contracting system are inconsistent with other property rights.

Government regulators and resource developers must carry out due diligence to be informed as to the laws, regulations, treaties and standards, and also international standards of practice associated with land use and conflict management. Inconsistent legislation and policy declarations have led to conflict over competing land uses linked with overregulation, overlapping policies and jurisdictions and weak monitoring for compliance.

The government must strive to secure property rights for land tenure holders and resource contractors, implement consistent land and resources policies, and provide incentives for improved sustainable resource management.

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< Continued from page 16 trust and reduce conflict among stakeholders; 5) strengthen business environment and increase investments.

What is EITI? Based on its website (www.ph-eiti. org), EITI is a â&#x20AC;&#x153;global standard ensuring transparency of revenues from natural resources. It is a multi-stakeholder initiative led by the government, industry and civil society representatives.â&#x20AC;?

The EITI Fact Sheet (available at http:// www.ph-eiti.org/document/EITI-factsheet-English.pdf) also states that, through EITI, governments, private companies, and civil society benefit from a transparent and informative system that may lead to policy reforms, a stable investment climate, and an accountable industry.

The 2014 Philippine EITI Report The EITI Report consists of two volumes with a total of roughly 500 pages.

20 Philippine Resources

The first volume consists of contextual information about the Philippine extractive industry and provides the following: an overview of the legal framework and governance mechanisms for the sector; the contracts and licensing processes, including payments and revenue sharing schemes at the national and local levels; state-owned extractive enterprises; and procedures for obtaining permits in ancestral domain areas.

The second volume, the Reconciliation Report, consists of information on the material revenue streams as reported by the government and private companies.

The objective of the Reconciliation Report is to compare the payments disclosed by the mining companies with the payments collected by the government agencies.

Discrepancies are reconciled by the Independent Administrator, which in this case is Isla Lipana & Co.The Independent Administrator gathered the information disclosed by the participants in the templates provided, and thereafter reconciled the discrepancies.

Thirty mining companies, including OceanaGold Philippines, Inc, Carmen Copper Corporation, Philex Mining Corporation, Rio Tuba Nickel Mining Corporation, and Filminera Resources Corporation. Six oil and gas companies also participated, namely: Chevron Malampaya LLC, PNOC - Exploration Corporation, and Shell Philippines Exploration B.V., among others.

Various government agencies, such as the Bureau of Internal Revenue, Philippine Ports Authority, National Commission on Indigenous Peoples, Bureau of Customs, Department of Energy, Department of Environment and Natural Resources - Mines and Geosciences Bureau, and local government units also participated.

Data Collected for the EITI Report Information on the following payments and fees were included in the scope of the EITI Report: 1.

Corporate income tax Continued on page 20 >

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8. Final mine rehabilitation and decommissioning fund Total Contribution of Mining, Oil, and Gas to the National Revenue The EITI Report collected a large amount of information on the contribution of extractive industries to the countryâ&#x20AC;&#x2122;s revenue.

Based on the EITI Report, the total amount contributed by extractive industries to the Philippines in 2012 was Php52,763,496,000.

The total discrepancy or variance, due to an incomplete database, disaggregated data, and delayed submission of the required schedules and documents to support disclosures made in the templates, was Php58,215,000.

The mining sector contributed Php6,238,422,000, while the oil and gas sector contributed Php52,763,496,000. < Continued from page 18

15. Community tax

2.

Excise tax

16. Other local taxes

3.

Final withholding tax

17. Royalty for indigenous peoples

4.

Improperly accumulated income tax

18. Free and prior informed consent expenditures

5.

Customs duties

6.

Value added tax on importations

7.

Wharfage fees

8.

Occupation fees

1. Annual environment protection and enhancement program

9.

Royalty in mineral reservations

2.

Community development program

10. Government share from oil and gas operations

3.

Safety and health program

The EITI Report also covers the following mandatory expenditures and social funds:

The Mines and Geosciences Bureau collected 2%, while the NCIP and local government units both collected 1% each.

The collections attributed to local government units, however, do not include their 40% share in the national wealth.

Among the different regions, Region VII (Central Visayas) collected the biggest amount at Php79,491,301, while Region VIII (Eastern Visayas) only collected Php1,151,162.

Using the Data Gathered

11. Training fund for DOE employees

4. Social development management program

12. Local business taxes

5.

Environmental work program

13. Real property taxes

6.

Mine rehabilitation funds

14. Mayorâ&#x20AC;&#x2122;s permit

7. Mine waste and tailings fees reserve fund

22 Philippine Resources

Of the total amount contributed by extractive industries, 55% was collected by the Department of Energy and 40% was collected by the Bureau of Internal Revenue.

The EITI Report collected and reported an enormous amount of data. The process which the MSG went through, as well as the data collected from their efforts, may be helpful in improving the future data-gathering process and industry Continued on page 22>

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Resources Commentary

Issue 1 2015

www.philippine-resources.com

Small-scale mining: The Good, the Bad, and the Ugly

By Maria Paula Tolentino

office. “Implementing the ID system helped lower the number of child laborers and mining accidents”, Flaviano says.

The Good

T

To ensure safety in the mines, the provincial government has made good use of the geohazzard map produced by the Mines and Geosciences Bureau in identifying areas prone to land slides and heavy flooding in the site.

While they contribute to the local government coffers through taxes, the government helps ensure safety in the mining area and promote scientific technology to sustain industry income, says Seigfred Flaviano, designated head of the provincial environment and management

“At first, they did not understand why they had to be kept away from danger zones, but with continous dialogue, they eventually relented. Tunnel operators are required to submit a map of their mining areas when applying for a permit. We

’Boli, South Cotabato – regulated small-scale mining has worked two ways for South Cotabato province and the miners:

<Continued from page 20

then plot their coordinates on the geohazzard map, so they can see whether their tunnel falls within the safe areas” Flaviano says.

Soon, a Minahang Bayan Center will be set up to serve as a one-stop shop for permit processing, training and other assistance to miners. “That way, all processing of permits and all training for miners will already be done right at the mining site,” Flaviano says.

Even if South Cotabato’s gold and copper reserves run out, Governor Fuentes says, she wants the local community to have Continued on page 24>

nostic tool of the governance of the extractives sector.

policy creation.

Moving forward The MSG recognizes that legislation may be necessary in order for EITI to be institutionalized. Further, legal barriers to full disclosure, such as the confidentiality of tax payments made to the Bureau of Internal Revenue, which require a waiver, may entail legislation for these to be addressed.

Patricia A. O. Bunye is a senior partner at Cruz Marcelo & Tenefrancia and head of its mining and energy practice.

She is also President of Diwata-Women in Resource Development, Inc. Questions and comments are welcome at po.bunye@cruzmarcelo.com.

24 Philippine Resources

The MSG also recognizes that the monitoring processes in government concerning the mandated social expenditures and environmental funds, such as the social development programs, environmental funds, and royalties to indigenous peoples may be improved through strict and regular monitoring to ensure that the provisions of applicable laws are followed.

Aside from improving the EITI process, government may also use the EITI Report as basis for policy creation. According to Mr. Andrew Schloeffel of the World Bank, the EITI Report may be used by the government to recover unpaid taxes and revenue generation. The EITI Report may also be used as an effective public diag-

Based on the Philippine EITI website, the focus of the next reporting cycle will primarily be the formulation of policies to address the gaps and the implementation of measures to enhance the EITI Report.

Further, the MSG is expected to ensure that different sectors connected with the extractive industries will be able to fully use the findings of the EITI Report. In the coming months, how the EITI Report will be utilized by the different sectors to address current issues and propose national and local policy changes will be a development worth anticipating.

However, it should be emphasized that the availability of a huge amount of information is always at risk of being misinterpreted and taken out of context. The amounts reported cannot be taken at face value and must be properly analyzed and explained when communicated to policymakers. In this regard, care should also be taken when the available data is disseminated to the various sectors.

Resources Commentary

Issue 1 2015

www.philippine-resources.com

<Continued from page 22 something to fall back on by developing jewelry-making skills among its artisans.

Through the system it is putting in place, Flaviano says, the provincial government wants to ensure that it works hand in hand to develop the capacity of smallscale miners.

“What makes South Cotabato unique, aside from the ban on destructive openpit mining, is we regulate our small-scale mining and that we see to the welfare of our miners. We want them to professionalize their operations by allowing them access to technology and credit in the future. At present, we are seeing to it that they’re safe” Flaviano adds.

According to Bangko Sentral ng Pilipinas, small-scale gold mining contributed P300 million in gross production value in 2013.

The Bad Republic Act No. 7076 defines “SmallScale Mining” as mineral exploration that employs manual labor with simple implements and methods and not explosives or heavy equipment.

Small-scale miners must form cooperatives to be duly licensed by the Department of Environment and Natural Resources (DENR). The DENR’s Mines and Geosciences Bureau (MGB) estimates 26 Philippine Resources

the number of small-scale miners in the country at 3,000.

Mineral Resources Exploration, Development, Utilization and Conservation Act.

In 2012, President Aquino signed Executive Order No. 79 to institutionalize and implement reforms in the mining sector. Section 11 of the law restricts small scale miners to “Minahang Bayan” zones and prohibits large-scale mining in these areas. EO 79 also restricts small-scale mining to the extraction of gold, silver and chromite, but not any other metallic minerals. It prohibits the use of mercury.

Supt. Glicerio Cansilao, Calapan City Police Chief, said the tailings were extracted from Puerto Galera town. The minerals were placed in 428 sacks, each weighing 30 kilos.

There are currently three (3) Minahang Bayan sites – one in the province of Quezon, Dinagat Island and Agusan del Norte province.

The Ugly Small-scale gold mining continues in Oriental Mindoro province, desite an ordinance prohibiting the activity. Oriental Mindoro has a 25-year moratorium until 2026 against big-scale mining operators.

“Only sand and gravel are allowed,” says Mike Jumig, PG-Enro head.

Chief Insp. Emerson Tarac, Puerto Galera Police Chief, said small-scale miners operate in Barangay Dulangan, Puerto Galera. A source who requested not to be identified said mining also thrives in Tabinay for a selling price of P1,200 per gram.

Jumig says gold residues could fetch from P1,800 to P2,000 per gram in the province. As of February 11 2013, they were able to arrest and detain 19 miners from Tabinay and Dulangan.“The law enforcers are trying very hard to apprehend but the remoteness of the areas makes it difficult for them” says Evelyn Cacha, co-convenor of Alliance Against Mining (Alyansa Laban sa Mina).

References:

Last November 25, 2014 , law enforcers apprehended at the port of Calapan City two trucks loaded with soil believed to contain gold residues. Roland de Jesus, MGB Chief for Mindoro, Marinduque, Romblon and Palawan, said the persons who attempted to transport the tailings, were charged with theft of mineral or violation of Republic Act No. 7942 or the

The Philippine Daily Inquirer, Across the Nation. ‘In S. Cotabato, a template for smallscale mining’. December 8, 2014. Germelina Lacorte The Philippine Daily Inquirer, Across the Nation. ‘Small-Scale Mining Alive in Mindoro’.

December 30, 2014. Maricar Cinco

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Economic Commentary

Issue 1 2015

www.philippine-resources.com

World Bank tips surging PH economy to reduce poverty

T

he World Bank has forecast 6.5 percent in 2015 and 2016 for the Philippine economy despite the weak global economy.

The World Bank’s latest Philippine Economic Update (PEU) also claimed the country could eradicate poverty and boost shared prosperity within a generation if it can sustain this level of high growth and make it inclusive over the long term.

“The Philippines has what it takes to sustain this high level of growth for many years,” said World Bank Country Director Motoo Konishi.

2014 to 6.0 per cent from 6.4 per cent, owing to slower government spending and lower farm production, but expects growth to bounce back in 2015 and 2016.

The country can even grow beyond 6.5 percent if the government can fully utilize its budget as planned and accelerate reforms, the PEU report says.

It also says that sustained growth in recent years has started to translate into gains in job creation and improvement in the lives of the poor.

“The country is benefiting from low and stable inflation, its finances are healthy, and debt levels are declining. It has a dynamic private sector that is seizing global opportunities. Now is the time to move the economy decisively onto a path that reduces poverty and creates more and better jobs.”

More than a million jobs were created in October from the same month the previous year. Unemployment fell from 6.4 percent a year ago to 6 percent, the lowest figure in 10 years. Government data also shows that the real wage income of the poorest 20 perc ent of the population grew by almost 10 per cent compared to only 2.4 per cent for the upper 80 per cent, while underemployment among the poor declined significantly in 2013, coinciding with the improvement in poverty incidence.

The World Bank revised its forecast for

“If growth is sustained at six per cent

28 Philippine Resources

per year and the current rate at which growth reduces poverty is maintained, poverty could be eradicated within a single generation,” said World Bank Lead Economist Rogier van den Brink.

Achieving this goal will require sustaining and speeding up structural reforms, the report says. Key reform areas are: • Increasing investments in infrastructure, health, and education; • Enhancing competition to level the playing field; • Making regulations simpler to promote job creation, especially for micro and small enterprises; and, • Protecting property rights.

Over the medium-term, putting more money in infrastructure as well as in people’s education and health will require tax reforms to generate adequate resources. The report highly recommends Continued on page 28>

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Economic Commentary

Issue 1 2015

www.philippine-resources.com

BIR Chief holds ground, tells mining firms to register where they mine

By Maria Paula Tolentino

itself. Why don’t you register in the place where you are, so that your taxes do go to the people where you are depleting resources?”

W

hy don’t you register in the place where you are, so that your taxes do go to the people where you are depleting resources.”

- Kim S. Jacinto-Henares, Bureau of Internal Revenue Commisioner In the recent International Tax Forum organized by the Department of Finance held at Fairmont Hotel in Makati City from November 12-14 2014, Chamber of Mines of the Philippines (COMP) representatives asked Finance Officials: What is the government doing to distribute revenues from mineral resources in an equitable way?

BIR Commissioner Kim Henares speaks at the International Tax Forum at the Fairmont Hotel in Makati City.

the mining companies – because if you look at it, they all register in Makati.

In a personal response, a credible source of the Journal says that mining companies have done their job of paying their taxes.

It is the discretion of the government to make sure that those taxes are well distributed to the LGU’s and areas where they mine, not the mining companies.

A classic case of “whose job is it?”

We would like to get your thoughts on this story. Get in touch with the journalist mpatolentino@gmail.com / paulatolentino@gmail.com

Citing that it takes 3 long years before local governments get their share, making communities that host mining operations feeling left out of the financial benefits.

“If you register where you mine, then the benefit of that business activity will go to the place where you are. But because all of you register in Makati, the business tax is generated not by where you are depleting the resources -- it goes to a city that did not even invest on anything.

BIR Commisioner Kim Henares responded: “There’s also a problem with

“So you cannot say that it’s the government’s fault. It’s the fault of the company

Philippine Star, November 17, 2014 (Monday), “BIR to Online Vendors: Start Paying Taxes”, Zinnia Dela Pena

marginal income tax rate to 25 per cent, reducing the gap between regular and special corporate income tax rates, and simplifying the tax system for micro and small enterprises, he said.

Open Data, particularly passage of the Freedom of Information Bill; enhancing budget reporting to allow the public to track spending; and simplifying tax procedures to improve compliance.

“For these reforms to succeed, strengthening tax administration and improving transparency and accountability of government spending are essential,” Mr Chua said.

The report also recommends further reforms to enhance competition, including enacting and implementing a clear competition policy; liberalizing key sectors of the economy that directly impact poor Filipinos; further opening up the economy to more foreign competition; and strengthening regulatory capacity.

<Continued from page 26 rationalizing tax incentives by making them more targeted, transparent, performance-based and temporary, as well as adjusting tax rates and valuations to keep pace with inflation so that the tax system becomes more equitable.

Karl Kendrick Chua, World Bank Senior Country Economist, said both tax administration and tax policy reforms are needed to generate the revenues required to finance the decades-old investment deficit in infrastructure, health and education.

He suggested that Only when revenues improve should policy makers consider further reforms, such as lowering the top 30 Philippine Resources

“These would allow the Filipino people to see a better link between taxes and services and convince them that the taxes they are paying are being spent wisely.”

According to the report, needed governance reforms include institutionalizing

Reference: Philippine Daily Inquirer, November 21 2014 (Friday). “Miners in Makati”, Ben De Vera

“These reforms can provide firms of all sizes and origins the incentives to invest and massively create good jobs for all Filipinos,” Mr Chua said.

Issue 1 2015

www.philippine-resources.com

ADB trumps up US$300 million for education reforms

T

he Asian Development Bank (ADB) has approved a US$300 million loan to the Philippines to support sweeping reforms, spearheaded by the government, to the school system, with a focus on the addition of two years of senior high school.

school infrastructure and a voucher program to help students with tuition costs.”

“These major changes are designed to improve educational outcomes and better prepare students for both work and further education and training, as part of the government’s broader push for more inclusive growth,” said Norman LaRocque, Principal Education Specialist in ADB’s South East Asia Department.

A key part of that reform is the addition of two years of senior high school, which will take effect from school year 2016/17.

“ADB’s assistance will target improvements at the senior high school level including curriculum development, new

The Government of the Philippines in school year 2011/12 began implementing its new K to 12 reform plan, which introduced kindergarten and extended the period of basic schooling from 10 to 12 years.

The reforms are expected to cost around US$4.4 billion from 2015 to 2019. ADB’s program will support selected elements of those reforms, including the development of new senior high school curricula for mathematics, science, and technical and vocational training programs.

Assistance will also be given to build classrooms, to engage and train up to 84,000 teachers, and to develop and introduce a voucher system to help cover tuition fees for an estimated 800,000 senior high school students each year.

The main beneficiaries of ADB’s assistance will be about 5.9 million students who are expected to enter senior high school from June 2016 to April 2019 during the early implementation phase of the new system.

The ADB loan to the Philippines is the fourth results-based lending program approved by ADB, and the first in Southeast Asia and the Philippines.

Results-based lending links disbursements directly to the achievement of program results.

Philippine Resources 31

Energy News

Issue 1 2015

www.philippine-resources.com

Philippines to lead renewable energy business, RE director gives details

By Maria Paula Tolentino

T

he Philippines is one of the leading countries in terms of renewable energy generation.

“We have already developed our (geothermal) energy resources which is 2nd in the world,” according to Mario C. Marasigan, Director of the Department of Energy’s Renewable E n e r g y Management Bureau (DOEREMB).

Almost 200,000 megawatts that we have in place, in terms of capacity, compared to the 300,000 megawatts of the US in terms of geothermal energy consumption is just a small dot in terms of their per watt requirement.

So the Philippines is the biggest consumer of geothermal energy resources.

At the same time, the Philippines has its hydropower resources wherein we have

The Journal discusses where we are on the renewable energy industry, the business potential behind it and where the country is going, all in a sit-down in-depth interview with Renewable Energy Director, Mario C. Marasigan.

PRJ: Please give us the over-all picture of renewable energy here in the Philippines Dir. Marasigan: Being the Director of the Renewable Energy Management Bureau, it is my role to administer policy formulation, policy implementation as well as regulation of the renewable industry in the Philippines.

In terms of renewable energy generation, the Philippines is one of the leading countries since we have developed our own geothermal energy resources which are 2nd in the world next to the United States. Though 2nd, we are 1st in actual consumption.

34 Philippine Resources

developed data abilities which are now serving Luzon, Visayas and Mindanao. In fact, in Mindanao, more than 50% of our energy supply is coming from the agus and polangi complexes. If we are look at the total energy mix of the country, renewable energy resources contribute around 28-29%.

PRJ: What are the RE sources currently being developed in the country? Where are we in this and who are the organizations that advocate them?

Dir. Marasigan: For everyone’s easier reference of renewable energy, the department uses the acronym BIGSHOW – Bi (biomass & biofuel), G (geothermal),

S (solar), H (hydropower), O (Ocean energy & OTEC), W (wind). In our taglines, we say “We are the BIGSHOW in the energy industry”.

In terms of resource development and utilization, there are so many. At the moment, each and every resource developer has their own respective association: For BioFuel, we have the BioMass Alliance; Geothermal, the National Geothermal Association of the Philippines (NGAP); Solar, the PSPA (Philippine Solar Power Association); Hydro, the Philippine Association for Small Scale Hydro Power (PASS-HYDRO), none for OTEC, and for Wind energy, Wind Energy Developers Association of the Philippines (WEDAP).

But the real advocates of clean and renewable energy are mostly civil societies and NGOs such as WWF, GreenPeace, etc.

But here in the Philippines, there is also this organization called the Renewable Energy Coalition that has been helping the DOE push for the passing of the renewable energy sector as of 2008. We worked together in Congress, the House of Representatives, and the Senate during the deliberation of the Renewable Energy Act. Country’s Energy Supply PRJ: What is your take on the country’s Continued on page 34 >

Energy News

Issue 1 2015

www.philippine-resources.com

<Continued from page 32

other appliances) what will be the estimated savings if we use solar power like our German friends?

energy needs vs our existing supply?

Dir. Marasigan: At the moment, we have sufficient supply of fuel energy. The biggest contribution of renewable energy is more on the power and kilowatt hours although BioFuels also contribute to fuel. If you referrring to the total energy outlook of the country, we have sufficient supply. However, our consumption patterns differ: there is peak demand and none-peak demand.

Normally, our major concern is the availability of reserves especially during summer. These are the times where our Hydropower may be at their minimum generation due to lack of water. But as long as we can make it during this season, we are still okay.

Dir. Marasigan: That consumption profile is wrong. 60-65% go to cooling systems (airconditioning, refrigeration, etc.), while 35% go to other equipment and lighting. As far as Germany is concerned, they are interconnected with the European grid. So even if they don’t generate wind, solar – they can easily buy from the EU grid. While in the Philippines, we have to do our own balancing system. The Philippines can be considered as a huge off-grid area. We have no interconnection with other countries, so if we don’t set-up our own, we don’t have any other resource to get from. And that is one of the reasons why we cannot do away with the conventional.

Feed-in Tariff Program Status

PRJ: What is the total oil and coal import of the country for its power generation?

PRJ: There seems to be not much movement after the approval of the Feed-in Tarriff program (FIT) 2 years ago.

Dir. Marasigan: In terms of the overall energy mix, oil is about 8%, natural gas (Malampaya) is about 30-31%, RE is at 38-39% and the rest are coming from coal. 100% of our liquid fuel demand, especially for transportation, are all imported.

Dir. Marasigan: There is little movement because it was only two years ago when the FIT program contracted. Of course, the easiest and fastest structure that can be created is solar (1 year, at most 18 months). We have already achieved more than the 50 megawatt installation target for solar energy. In fact, we have alread inaugurated the 13 megawatt facility in San Carlos City in Negros and that has expanded to 22 megawatts.

PRJ: From the typical utilisation ratio of 65-35% at household level use of electricity (65% being for lights and 35% for

Aside from that, we have in Cavite a 40 megawatt installation that is on its final stage for its interconnection to the grid.

So that means the 50 megawatt target is already subscribed.

That is why we have alrady amended our installation target for solar from 50 megawatt to 500 megawatt to attract more of the solar energy industry. Now when it comes Wind, consider the time it was approved. For wind energy generation, it takes 2 years or more for construction.

By December, our 400 megawatt target will also be fully subscribed, in fact, it maybe oversubscribed.

Competition is tough when it comes to construction. What we maybe missing is the Biomass sector. Construction takes more than 24 months. Even if there are several companies constructing their facilities, their major concern is how to interconnect these facilities into the grid.

When it comes to hydropower, there are several projects being constructed at the moment, with the FIT as just one of the market options for renewable energy.

With a FIT rate of 590, it is already competitive with new conventional facilities.

So what happens now is that they try to offer their projects through bi-lateral agreement because the market is different. It could be, that RE is not moving but in reality almost everybody is constructing.Wait till December or until next year and you will see a lot of projects being commissioned.

Philipines Vs Other Countries on Renewable Energy PRJ: Will the government be more aggressive like other countries who are pushing for RE? (Germany was cited as an example) Dir. Marasigan: In terms of percentage, we are better and bigger than them!

But in terms of actual capacity, since they are heavy consumers, their requirements are much bigger. Germany has more than 13,000 megawatts installed capacities both for wind and solar. But the requireContinued on page 36 >

36 Philippine Resources

Energy News <Continued from page 34 ment is in terms of million of megawatts.

In fact, 30% of their generation is already from RE and by 2020 they will be able to achieve a 20% over-all energy mix coming from RE. We have already surpassed that.

In terms of aggressiveness, we are very agressive. But our challenge is (and most have this perception) that RE (especially solar energy) is expensive. In terms of Pesos, yes it is. However, overtime these projects will be the same as hydro and geothermal that will eventually get cheaper because we don’t need fuel.

As example: Why do the Mindanaoans don’t want coal (and even diesel)? This is because diesel and coal are more expensive than hydropower generation.

Their hydropower that was constructed 70 years ago (which has fully recovered) --- the cost of generation is very minimal (Php 2.00) compared to coal which is (Php 50-60). The ERC approved rates are P5.90 per kilowatt hour (kWh) for run-of-river hydro, P6.63 per kWh for biomass, P8.53 for wind and P9.68 for solar. These are competitive rates!

Educating the Public on Renewable Energy PRJ: What will it take for the RE to take a lead in the shift as an alternative power source?

Dir. Marasigan: Renewable Energy is not merely an alternative. We have removed the word ‘alternative’ because RE is already considered a source in itself.

The utilization, development and exploration of RE was strengthened because of the passage of the Renewable Energy Act of 2008.

This law actually mandates the use of renewable energy sources. However be advised that it is also not sufficient if we only use RE since demand varies.

And our demand, in most cases, will not match the supply.

For example, solar energy particularly in NCR (Luzon), can play a big role in sum38 Philippine Resources

Issue 1 2015

www.philippine-resources.com mer. During summer, we reduce our use of hydropower and generate more power for solar energy. Wind, on the other hand, is not regularly available.

Others would call it intermitent, althought we call it variable and unpredictable. So we still do need conventional facilities for continous and adequate supply. Biomass is also seasonal. Geothermal on the other hand can supply 24 hours, and though it is renewable, you can’t really dictate when it will be available. We still have limitations as far as the projects are concerned.

Hence, it is really a mix of different sources, you cannot focus only on one.

Our aim is to maintain our level (which is 30%) and if possible, we attain more (40% the least) by the year 2030 that w ould greatly present a big contribution of RE to the country based on our demand.

We have to address the variability of renewable energy.

Energy Forecast of the Department PRJ: What are the short, med and long term plans of the government to encourage private enterprise/ ordinary Filipinos to use RE?

PRJ: What are the timelines for these projects?

Dir. Marasigan: We are already on the procurement process. The donating institution is JAICA. The Japanese government is donating funds so we can push for this. At most, 2 years our solar PVs are already installed. And this is not only on solar. The Japanese government has donated a hydropower system which will be placed in NIA (National Irrigation Administration) to show that even this small 40 kilowatt system can be placed in water and generate power.

Another one is in Ifugao.We are partnering with the LGU of the Ifugao province, (a plant donated by JAICA, while DOE will commit to the construction). The earnings or any income it may incur will go to the preservation and restoration of the Ifugao rice terraces.

While at the same time, we are doing inventories of the various RE resources either with assistance coming from international institutions (JAICA, USAID, etc.)

We have done hydropower and biomass energy inventory, wind energy mock up reading which we are doing with ADB and USAID.

Dir. Marasigan: We are not limited to REC (renewable energy conservation), though it is already included in our capacity building initiatives. We are promoting actual demonstration: we have programs for private schools. For private academic institutions, we have net metering installations, etc.

Where it will be low cost for the school and they can benefit more from the solar energy generation. Instead of buying the panels, with the help of our partners in the private sector, the school will pay in terms of power generation.

They will buy the generated power and that will be their payment for the solar panel. We are also looking into foreign assisted projects for the demonstration of the solar PV on the rooftop. In the next few years, we will see solar PV installation in hospitals (NKI, Lung Center, etc.), Luneta, the MOA terminal, etc.

Maria Paula Tolentino is a freelance journalist representing a number of respected publications. The views of the author are her own and do not reflect the publication or entity she represents. For comments regarding this story, you may reach her at paulatolentino@gmail.com

Mining News

Issue 1 2015

www.philippine-resources.com

GXD expands service offering to the PH via Site Services arm

G

eological, exploration, and drilling supplies specialist GXD has expanded its capabilities to include geologically focused technical, logistical and management services to the minerals industry across Asia under its newly incorporated GXD Site Services Company.

Since being founded in 2010, GXD Supply Inc. has quickly become known as the one-stop-shop for supplying the mining and exploration Industry in the Philippines.

Recent expansion into a variety of different sectors has helped GXD Supply to broaden the companyâ&#x20AC;&#x2122;s scope, such as venturing into camp design and con-

struction under sister company GXD Site Services Ltd who formed earlier this year.

Not only has this expanded the capability of the GXD Company but also increased the client base beyond the mining and exploration industry to now include infrastructure, oil and gas, civil construction, energy and service sectors.

According to Damien Blyth, Chairman for GXD Associates Ltd, the expansion into these additional service related areas allows GXD to provide a truly integrated approach to many of the challenges facing the various industries.

The latest addition under the GXD company umbrella is the GXD Earth Sciences Division. The Earth Sciences Divi-

sion aims to provide geologically focused technical, logistical and management services to the minerals and related industries across Asia-Pacific region.

The key to success will be through the provision of quality and flexibility. Quality is guided by compliance with international codes of practice such as JORC and NI43-101, while flexibility is attained by the ability to be â&#x20AC;&#x153;switched on and offâ&#x20AC;? which frees the client from the residual costs of managing and maintaining a technical pool of employees long term.

The services offered include exploration program support, which can range from initial grass root projects to full-scale feasibility studies.

Continued on opposite page >

<Continued from opposite page Building on a wealth of local and international knowledge and experience, GXD Earth Sciences can implement the design, execution and supervision of exploration drilling programmes, as well as data interpretation and exploration targeting.

This includes 3D conceptual modelling, as well as solid geological modelling for resource estimation.

GXD Earth Sciences utilises a “boots on the ground” approach in terms of geological support. By readily being able to supply a team of experienced geologists to projects, Earth Sciences can be relied on for delivering competent and diligent geological support on site.

Not only does this include fundamental geological work such as core logging and mapping, but extends to data compilation and presentation. Exploration to resource development project appraisals and independent geological reports also available.

The new division is led by Principle Geologist Aaron Wehrle. Aaron brings his expertise in the industry with over 20 years of experience in international mineral exploration and mining.

expertise accompanied by field instrumentation available for a multitude of geological, geotechnical and geochemical surveys, for both downhole and surface work.

The creation of this new GXD division will mean an expansion across a number of sectors, especially looking to target the rapidly growing Philippine energy market. By incorporating the already existing Downhole Services division of GXD, Earth Sciences now has a variety of downhole tools, probes, and extensive

“Taking on this integrated approach to supply and services has opened up more opportunity during a significant downturn in the mining industry, which in turn has allowed the sponsoring of continued growth for the company both outside and within the industry,” Mr Blyth said.

Mining News

Issue 1 2015

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Bangsamoro Development Agency confident in Mindanao business potential

By Maria Paula Tolentino

B

ACKGROUND1: Twenty five years ago, the Autonomous Region in Muslim Mindanao (ARMM) came to existence. The 1987 Constitution provided for the creation of two autonomous regions – one in the Cordillera and the other in Muslim Mindanao.

The experiment in the Cordillera never materialized but the one in Muslim Mindanao took off when Republic Act No. 6734 (“An Act Providing for an Organic Act for the ARMM”) was ratified by four provinces on November 17, 1989, after being signed on August 1, 1989, by then President, the late Corazon Aquino.

The four provinces that ratified the law in a plebiscite were Lanao del Sur, Maguindanao, Sulu and Tawi-Tawi, the first to constitute the ARMM.

Fast forward 2001, the expanded ARMM had its first election and the MNLF’s (Moro National Liberation Front) Parouk Hussin became its first elected governor under RA 9054. It was this ARMM that became notorious as a ‘bloated bureaucracy’ with nearly 30,000 personnel.

Close to 80 per cent of its budget was utilized in personal services and the rest on maintenance and other operating expenses. In short, the system in the ARMM became so rotten and untenable that when the Maguindanao Massacre happened on Nov. 23, 2009, the relevance of the whole structure was put in question.

In 2010, when President Aquino took office, he declared the ARMM a ‘failed experiment’. In 2011, he designated officers in charge of the region. P-Noy entrusted the task of cleaning up the proverbial Augean stables to Gov. Mujiv Hataman (a Yakan with Tausug blood).

Last November 21 2014, The Philippine Mining Club had in attendance as its honored guest speaker the Bangsamoro Development Agency (BDA) spearheaded by its Chairman Dr. Saffrulah M. Dipatuan, together with his panel: Executive Director Mohammad Yacob, Ph.D, Programs Division Head Engr. Windel Diangcalan and Senior Adviser Dr. Urooj Malik.

Philippine Resources Journal sat down with the Chairman to discuss in further detail the opportunities and challenges of doing business in Mindanao now that the Bangsamoro Development Agency (BDA) is in power.

BDA Chairman Dr. Saffrulah Dipatuan. Photo courtesy Chromagraphic Images Manila.

42 Philippine Resources

PRJ: November 20 2014 commemorated the ‘first and last anniversary celebration of the ARMM’. ‘All of us will have heavier and larger sacrifices if the Bangsamoro will not be realized before 2016’ [Gov. Mujiv Hataman].

Continued on page 42 >

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<Continued from page 40

for quite sometime and it has fought big wars against the Philippine armed forces so many times.

What are your thoughts on this?

SD: I do agree with Governor Hataman.

This is now the chance for us to have a really successful, genuine and principled autonomy in the Bangsamoro. We do hope that we do realize it as soon as possible. But if this is not realized, the situation before might become worse.

There are factors that you really have to consider now.

First, this is not the first peace agreement that has been signed between the Bangsamoro and the government. We are also talking about the agreements between the MILF. Now, the people in the Bangsamoro have high hopes that once and for all, in this particular instance, the problems will be addressed and resolved.

But if not, there will be massive demoralization on the ground and this will just give some armamentarium for the ‘spoilers’ of peace in order to shoot the peace process between the Philippine government and the MILF. Second, the radical elements (MNLF, Abu Sayaff, etc.) will have reason why they will continue their activities because it will reflect ‘insincerity’ from the Philippine government if the agreement will not be realized.

PRJ: Chief Supt. Noel delos Reyes (ARMM Police Chief) said security was tight in the anniversary celebration particularly in the ARMM compound. He mentioned that the Gov. Hataman’s calling for an all-out war on the Abu Sayaff made him and other ARMM officials targets of the crime group. Where does the BDA sit on this? Given the security issue, how are development plans even possible?

SD: We are not claiming that once the BDA is there, all security problems will be gone overnight. This will be a work in progress. The most important thing people should know is that the biggest revolutionary organization in the South is the Moro Islamic Liberation Front (MILF). It has been waging arms struggle 44 Philippine Resources

Once the Bangsamoro Transition Authority (BTA) is there, it already solves the biggest chunk of security issue with only small problems to be worked out.

Once the BTA is there, we will be able to remove the reasons for the existence of radical groups ultimately whose relevance will no longer matter in the future and people will no longer support them for what they are doing.

PRJ: The BDP is a 6 year development plan covering two phases from 20142019. We are now on the last quarter of the year, what are the developments?

SD: We have just presented the BDP (Bangsamoro Development Plan) during the Philippine Development Forum on the Bangsamoro last November 5-6 in Davao and have received the strong commitment of the Philippine government to invest in the BDP. We are now in the process of determining the institutional arrangement and once we are able to secure the funds needed, we can then start with quick high-impact projects that would be implemented in the area even while the Bangsamoro transition authorities are not yet there.

You really have to develop the confidence of the people in the area and show them that there is stability so that more and more people will support the ongoing peace process between the Philippine government and the MILF. PRJ: Despite its natural and human resources, the envisioned Bangsamoro territory has historically been the poorest in the region. Its consistently underperforming economy is primarily a result of a backward agriculture sector and the persistence of a shadow economy. Has the BDA considered other alternatives for potential economic growth? What are they?

SD: In the BDP, our target is to address the roots of the problem in Mindanao.

That is why the BDP is not your ordinary plan. The BDP is anchored on the fact that the Bangsamoro is unique because it is just emerging from the conflict situation, making it more challenging for us.

This is not business as usual. Once you get back to ‘business as usual’, you will not be able to give the Bangsamoro the opportunity to catch up with the rest of the country. What we have formulated is not only focusing on the socio-economic aspect of the Bangsamoro but a comprehensive development plan that will address the various forms of injustices suffered by the Bangsamoro for a long time.

The BDP also includes culture, governance, security, environment and natural resources, etc. Because we know that once we are unable to establish long lasting peace, we will not be able to establish sustainable development in Mindanao.

When it comes to the Bangsamoro, we have the opportunity to start from a clean slate. We are starting from scratch and we will be able to learn from the experiences of the Philippine government and other governments in order to implement good practices.

PRJ: The BDP is built around 7 thematic areas, one of which is environment and natural resources. Under the proposed projects in this area is hiring forest rangers to protect the forests and sea guards for coastal area protection. Where does resource development come in?

SD: The Bangsamoro has abundance of natural resources but this area is undeveloped. It is a fact that mining is regarded by some sectors as anti-environment because according to them, they view mining as destructive to the environment. However, in the Bangsamoro perspective, we see minerals as God-given natural resources.

We would welcome companies in our areas that will help us develop our resources, not only mining but the private sector as a whole, so that our resources will be properly developed provided that Continued on page 44 >

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A gastronomic tour for the palate awaits guests at the Raffles and Makati Spectrum is the vibrant all-day dining restaurant featuring five “culinary theaters” to enjoy from.

A chic pastry boutique, Cafe Macaron,offers fresh sandwiches,desserts, pralines and exquisite pastries.While the Long Bar, inspired by its name sake in Raffles Singapore,features creative liquid concoctions including the famous “Singapore Sling”.Finally, the parlour-like. Writers Bar provides a quiet and quintessential space from the busting city.

Meetings and special events can be boked at the hotel’s 1,700 square meters (18,000 square feet) of function space, including an 859 square meter ballroom.

Finally, the Willow Stream Spa allows for a relaxing getaway with its soothing surroundings, featuring five fully equipped treatment rooms, hair salon, full-service nail studio, a mineral pool, an outdoor swimming pool and beautiful terrace offering a luxurious urban retreat.

For more information please call the Raffles Makati at +63 2 555 9777 and the Fairmont Makati at +63 2 555 988 Or, visit raffles.com/makati and fairmont com/makati

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OceanaGold Chair looks to potential of underground mine

By Maria Paula Tolentino

D

uring the 24th Philippine Mining Club held at the Makati Shangri-La hotel last February 6 2015, the industry was all a buzz thanks to the organization’s distinguished guest and speaker, OceanaGold’s Chairman James ‘Jim’ E. Askew.

The perfect opportunity for the prestigious Miner to clarify matters from socio-civic groups, the sit-down was also a favorable moment to introduce OceanaGold’s newest venture: Didipio’s underground mine.

Philippine Resources: According to Kalikasan PNE (People’s Network for the Environment), since OceanaGold and FCF began operations in the area, several cases of human rights violations have also been recorded. Instances of threats, intimidation and deception by the mining companies were documented. The resi< Continued from page 42 they will comply with our laws and sustainable development framework of preserving our environment for our future generations.

PRJ: What is the Agency’s timeframe for all its current mining operations?

SD: There are already existing mining operations found in the Bangsamoro. With the existence of the MGB in ARMM, the Bangsamoro will be continuing these operations.What is good is that we have something to start with and will be picking up from the present achievements.

We will move forward in order to achieve our objectives with regards to the private sector particularly, in mining.

Let me emphasize, however, that we are 46 Philippine Resources

dents said restrictions imposed on them by the companies have limited their activities and hampered their livelihood.

Are you aware of these events?

JA: I’m not aware of the specifics of the event. OceanaGold with its previous guys, which was then Climax Mining, there were some accusations that in the late 1990s there were some human rights violations in the Didipio Valley.

We (OceanaGold) weren’t aware of them when we became involved, it came from the past history and we took those accusations extremely seriously.

We participated in various investigations not only in this country but also with the Australian Federal Police and any authority that cared to make that accusation.

None! Zero were those accusations founded! If we were found to be guilty of those accusations, I would be extremely disappointed. It is not within our value system and it never will be.

against any form of irresponsible mining and we will look into some reports that there are irresponsible practices that are happening in our midst.

PRJ: Is there any chance Mindanao will be fully independent from the national government?

SD: I think no provided that the government honor its present agreement with the MILF. The arrangement as far as the Framework Agreement on the Bangsamoro (FAB) and the Comprehensive Agreement on the Bangsamoro (CAB) that was signed in Malacanang last October, and also according to the Bangsamoro Basic Law that is being deliberated in Congress, is that the issue now is not an independent state but a genuine and meaningful autonomous arrangement.

However, this agreement could also be a precursor for a political reconfiguration

You must realize, at the very local level socially, there can be minor disagreements between two people. We’ve had some serious incidents since we’ve been in operation up there. None of them have had anything to do with the mine, none! So, I refute those accusations and I strongly defend our people and the way they act.

Philippine Resources: According to Karl Begnotea, a research biologist of Kalikasan PNE “Recent scientific studies revealed that the operations of both OceanaGold and FCF Minerals also have resulted in the clear pollution of different freshwater ecosystems, biodiversity loss within mine operations and its adjacent environments, and the socio-economic and cultural dislocation of different affected communities”. Your thoughts on this?

JA: In relation to OceanaGold, we try not to compromise World Health standContinued on page 46 >

of the entire country leaning towards Federalism.

While results and impacts have yet to be fully felt, strides are being made to respond adequately to constituents in remote and destitute areas. ARMM has found a new “home” but it has to give way to the new political entity called Bangsamoro. There are some fears and insecurities about the future but the people generally believe that Bangsamoro is a step forward to greater autonomy and prosperity for the region and all its constituents. (1) References: 1 The Philippine Daily Inquirer, Commentary.

November 24, 2014 – ARMM @ 25 Gives Way To Bangsamoro; Fr. Eliseo ‘Jun’ Mercado, OMI

MARKETING PARTNER:

MARKETING PARTNER:

MARKETING PARTNER:

Mining News

<Continued from page 44 ards. And in fact, we have just spent a lot of money building a water treatment plant. This water is well within the limits of discharge. World Health best practice states that we don’t directly drink from the well but we can do that! We discharge totally clean water.

What happened is that it goes a short distance downstream, then intersects

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with another water stream where illegal mining takes place, which by the way is very polluted, and eventually merges with the other water streams. And that’s where these accusations are coming from.

Philippine Resources: Clemente Bautista, national coordinator of Kalikasan PNE says “The DENR should respect the political will of the frontline communities who have borne the brunt

of OceanaGold and FCF als’ pollutive and destructive operations.” Do you think there is any truth to this statement?

JA: None!

Philippine Resources: There is an ongoing bill in Congress that states the decision of the Government to ban the export of unprocessed ores and the plan is for mining companies to set-up their own processing plants here in the country. Is OceanaGold thinking of setting up a smelter here?

JA: The size of our mine, the amount of concentrate we produce, is completely incompatible with the capital needed to build a smelter We produce about 20,000 tons in copper concentrate, way below than the threshold we deliver just by building a smelter. So a Philippine smelter is not something we would consider.

Philippine Resources: It could take probably a year before the bill gets passed. What are the implications for OceanaGold if that bill becomes a law?

JA: I’ve learned that in my business to not try and predict the future.

Philippine Resources: Another policy is the revenue-sharing scheme between the Government and large-scale mining companies.This new scheme gives the government 55% share (net of mining revenue) or 10% of the company’s gross revenues, whichever is higher along with the taxes that go with it. How does this affect the country’s investment appeal or OceanaGold for that matter?

JA: It does not affect us since we have an existing FTA that encapsulates those terms. However those terms do come with a very high cost. If it would be made even higher, it would prejudice investment opportunities here. The fiscal framework here is completely different.

It’s unusual. It would be beneficial for all parties if there was a unified framework.

Philippine Resources: OceanaGold

Jim Askew speaks out. Photo courtesy Chromagraphic Images Manila.

48 Philippine Resources

Continued on page 48 >

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Alsons takeover of Indophil approved by stockholders

E

xploration firm Indophil Resources NL of Australia became a wholly Filipinoowned company effective January 13 when it began delisting from the Australian Stock Exchange following the approval of its sale to the Alsons Group in a stockholders meeting in December.

The deal, valued at AU$361 million (P14.3 billion) in cash, allows Alsons Prime Investment Corporation (APIC) to acquire 37.5 percent of Sagittarius Mines Inc. (SMI) which owns the stalled US$ 5.9-billion Tampakan Copper and Gold Project.

Global mining and commodities giant Glencore International controls the rest of the 62.5 percent stake of SMI.

Indophil waited for the formal signoff by the Supreme Court in Australia, with the process slated for the morning of January 13.

After that, corporate secretary and vice president Gavan Collery said Indophil “begins a de-listing process which leads to 100 percent ownership by Philippine company Alsons through its subsidiary APIC.” The acquisition of the minority share in SMI completes Alsons’ attempts to make a significant exposure to the moribund firm.

Alsons is reportedly backed by mall magnate Henry Sy’s SM Prime Holdings, which earlier appointed Frederic DyBuncio as member of the Board of Directors of Indophil.

< Continued from page 46 has a new underground tunnel. Tell us more about this project.

JA: We have always been transparent about our projects.With the Didipio open pit mine, we all knew that at some stage we would be leading to the creation of an underground mine. We are commencing process next month and we have doubled the design work.

Didpio will utilize an open pit mine that leads to an underground mine, in a way that production sources that come from them will be of use thus eventually leading to a purely underground mine which also processes low grade stockpiles in order to sustain production. Based from my presentation, we have reserved one till 2030.

Philippine Resources: Is OceanaGold filing exploration permits for Didipio?

JA: We are currently filing those permits. But it is a long and arduous process. Since there are considerations such as local communities, indigenous peoples, etc. to think about. It is essentially a part of what we have to do and it is what it should be.

50 Philippine Resources

Nicasio Alcantara represents the Alsons Group.

Also owning minority shares in SMI are San Miguel Corporation’s Ramon Ang and PLDT’s Manny Pangilinan.

Indophil had been looking to unload its stake in SMI beginning with the botched 2008 sale to a consortium of investors led by Stanhill Resources of Hong Kong for AUS$1.28 per share, on condition that Indophil delivers at least 90 per cent of its shares in the mining firm.

But minority shareholder Lions Selection sold 17.76 percent of its 25 percent stake at Indophil to Xstrata, which automatically voided the bid offer of Stanhill after Xstrata exercised its veto power.

Continued on opposite page >

A part of it that can be done professionally and correctly. We are extremely hopeful that we be granted exploration titles around the area where we can start work. We are now working on the approvals that go with it.

The time to work is now. In most cases, mines have a very short life span, however in our case, we are looking at a mine that will last for many years. We currently enjoy a tremendous relationship with the local communities and we want that to continue. So, it is in my personal assessment and hope that the Didipio mine lasts for many, many decades.

Lady luck may have smiled at OceanaGold who exceeded 2014 targets, with an output of 25,010 tonnes of copper and 106,256 ounces of gold from Didipio, last year; however, 2015 maybe a different case.

Currently, the Miner has an underground mine that needs development; a bill in Congress that they have to face whose mandate is to halt ore export with the intention of building local processing plants, all the while dealing with resistance from socio-civic groups. The question is: will 2015 be as abundant and successful for the Miner?

All eyes are on OceanaGold to make things happen for 2015; not only for themselves but for the entire industry as well.

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<Continued from opposite page

erations after the company failed to secure necessary government permits to proceed with the commercial operations of the project.

The year before, in 2007, Xstrata PLC exercised its option in SMI, allowing it to gain majority control of SMI by converting its interest to a 62.5 percent stake in the firm.

Reluctant to proceed

Alsons Corp. is one of the companies that joined Stanhill in the consortium that failed to buy out Indophil.

Glencore has publicly stated that it is reluctant to proceed with “greenfield” projects as its takeover of Xstrata required the commodities giant to pour in massive capital and the sale of several of Xstrata’s productive mining projects.

After the failed bid to sell to Stanhill, Alsons Corp. submitted another bid for the same price per share, this time for only the shares held by Indophil at SMI. Xstrata rejected the offer.

In 2009, Indophil nearly completed the sale of its stakes in SMI to Chinese mining giant Zijin Mining Group Limited before the latter terminated talks in 2010.

In 2012, Filipino-owned San Miguel Corporation conducted due diligence in a prelude to the acquisition of Indophil shares in SMI. San Miguel, however, also backed out from the negotiations.

Following Glencore International’s takeover of Xstrata PLC, SMI plunged into further uncertainties. It scaled down its op-

SMI has been facing strong opposition from the local Catholic Church and environmental groups.

It also faces a major obstacle to its commercial operations as the provincial government of South Cotabato refuses to repeal or amend a local ordinance that banned open pit mining in the province.

The SMI copper and gold project is located in the mountainous area of Tampakan in South Cotabato.

In addition, the communist-led New People’s Army has been harassing and attacking SMI facilities and personnel, as the armed rebels have vowed to stop the company from proceeding with its mining activities.

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Philippine Resources 51

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Mining Briefs.......

Palace-endorsed mining revenue bill now in Congress

regime, with the government bent on getting a larger, more equitable share of industry revenues.

A new revenue sharing scheme the mining industry has been anticipating for more than two years now has finally entered the legislative mill, with the bill endorsed by Malacañang itself filed in the House of Representatives.

Malacañang regards the rationalization of the mining fiscal regime as one of its legislative priorities for both the second and third regular sessions of the current Congress, and included it on the list of 29 priority bills that was submitted to legislators in June last year.

But while the Palace has expressed its desire to have this priority measure approved by Congress before it adjourns on June 11 -- in order to avoid inaction as legislators begin preparations for the 2016 national and local elections -House leaders could not give such assurance.

Under Republic Act No. 7942, or the Philippine Mining Act of 1995, government gets a 50 percent share in profits of foreign miners operating in the Philippines under Financial or Technical Assistance Agreements, and a 2 percent excise tax on actual market value of output under Mineral Production Sharing Agreements with local companies.

House Bill No. 5367, which provides a new revenue-sharing arrangement between government and large-scale mining companies has been filed at the chamber and referred to its Committee on Ways and Means, according a higher share to government “as owner of the minerals.”

“The State shall get a fair and equitable share of the revenues and economic benefits derived from the mineral resources.

Any economic rent arising from such exploration, extraction and utilization belongs to the State,” the bill reads.

The bill’s author, Ways and Means committee Chairman Rep. Romero S. Quimbo of Marikina (2nd district), confirmed that the measure is the one drafted by the Malacañang-created Mining Industry Coordinating Council (MICC).

The interagency MICC is tasked to implement Executive Order 79, signed by President Benigno S.C. Aquino III on July 6, 2012, which mandates reforms in the mining sector, including the crafting of a new revenue regime.

Issuance of new operating permits has been suspended pending the new fiscal 52 Philippine Resources

The new proposal now with the House provides: • for a government share of 10 percent of gross revenue or 55 percent of adjusted net mining revenue (ANMR, or gross revenue less production and other deductible costs “but not to exceed 10 percent of direct mining, milling and processing costs”), whichever is higher; • in case the ANMR margin (ANMR divided by gross revenue) exceeds 50 percent “due to increase in metal prices or other factors”, the government gets 55 percent of the threshold ANMR (50 percent of gross revenue) plus 60 percent of the excess.

The national government will get 60 percent of the state’s share, while host local government units (LGUs) will get 40 percent. If the contract area is located in an ancestral domain, royalties for indigenous cultural communities (ICCs) will be taken from the government share, with the balance shared by the national and local governments according to the aforementioned ratio.

Within five days from the end of each

quarter, the mining companies will directly pay ICCs their share as well as the government share (net of ICCs’ share).

The measure also provides that the government’s share will be in lieu of corporate income tax, royalty to ICCs, duties on imported specialized capital mining equipment, mayor’s fee and/or business permits “and other fees and charges imposed by the host LGUs pursuant to the Local Government Code of 1991, as amended.”

However, mining companies will still have to pay value added tax, capital gains tax, stock transaction tax, documentary stamp tax, withholding tax on passive income, donor’s tax, environmental fee, real property tax, Securities and Exchange Commission fee, water usage fee, as well as administrative and judicial cost and penalty.

“The list of exceptions shall be reviewed annually, or as often as may be necessary; provided, however, that none of the exceptions indicated herein shall be delisted,” the bill read.

Sought for clarification, Mines and Geosciences Bureau Director Leo L. Jasareno explained that mining firms would still have to pay some taxes under the new scheme.

“There are still some exceptions... They will still have to pay some taxes, but in terms of significance, these are not that much,” Jasareno said. “They will no longer have to pay bulk of taxes.”

Finally, the bill provides for the designation of Mining Industry Zones -- or the approved mining areas -- that will be administered by the Philippine Mining Development Corp.

While Malacañang is targeting congressional approval by early June, legislative leaders could not commit to such timetable.

Rep. Quimbo said he expects exhaustive debates on the proposal before it Continued on page 52 >

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<Continued from page 50 can secure approval. “Any bill that seeks to change the fiscal regime will always be contentious... The rates can go up or down,” he said.

“What we are certain is that we will pass this before the President ends his term,” he added. “More importantly, what bill will be eventually approved is one that makes investors more confident in our business environment, with permanent rules that don’t change from one administration to the next.”

“The bill will likewise consider the extraordinary financial risks that mining companies are exposed to as well. It will have to be competitive with other countries and give the investors a reasonable return on their investments.”

Natural Resources committee Chairman Rep. Francisco T. Matugas of Surigao del Norte (1st district) said the bill will have to be certified as urgent by Malacañang if it wants a June approval.

“If that will be certified as urgent, we can (pass it) . It will take time with the opposition,” Matugas said, adding that he himself wants a faster remittance of LGUs’ share.

Currently, it usually takes the Treasury bureau 2 to 3 years to give local governments mining revenues due them, Matugas noted, depriving especially poor municipalities of much-needed development funds.

OceanaGold sees 2015 gold output rising 9%, rules out building smelter OceanaGold Corp. expects its gold output this year to rise as much as 9 percent, but ruled out building a smelter for its Philippine gold and copper business, despite a possible export ban on unprocessed metallic minerals.

The Philippine Congress is considering legislation to halt ore exports and 54 Philippine Resources

require miners to build domestic processing plants, so as to add value to its metallic mineral resources, in line with a similar step by Indonesia, according to a Reuters report.

“The size of our mine, the amount of concentrate we produce, is completely incompatible with the capital needed to build a smelter,” OceanaGold Chairman James Askew told reporters after addressing the Philippine Mining Luncheon in Makati City.

OceanaGold, which is listed on the Toronto, Australian and New Zealand stock exchanges, ranks second among the Philippines’ copper producers and third among its gold producers. It operates the Didipio mine, its flagship project, in the province of Nueva Vizcaya.

The company ended 2014 exceeding its output guidance with 307,463 ounces of gold and 25,010 tonnes of copper produced, including 106,256 ounces of gold from Didipio, which began commercial production in April 2013.

This year OceanaGold expects to produce 295,000 to 335,000 ounces of gold from the combined New Zealand and Didipio operations and 21,000 to 23,000 tonnes of copper from Didipio, which has a mine life of up to 2030.

Askew echoed comments by Philippine miners that a proviso to build processing plants could kill their projects in the country. The ban could be imposed by 2021 at the soonest, if the law is passed by next year, one of the bill’s authors has said.

Building a processing plant may cost miners at least $1 billion in capital upfront, industry estimates show.

“We produce about 20,000 tonnes of copper, that’s way below the threshold to justify building a smelter,” Askew said, referring to annual concentrate output.

“It would make the project dead.”

The Philippines is sitting on mineral reserves worth $1.4 trillion, among the world’s biggest, but development has

been hampered by policy bottlenecks and a strong anti-mining lobby led by the Roman Catholic Church.

TVI eyes first-quarter start of production at Zamboanga mine The Philippine unit of Canada’s TVI Pacific Inc. expects to begin production at its gold-silver mine in Zamboanga del Sur within the first quarter of this year.

In a report, TVI Pacific said TVI Resources Development Phils. Inc (TVIRD) was to submit the final requirements for the declaration of mining project feasibility (DMPF) of its Balabag gold-silver project by end of January.

The DMPF is the final approval required from the Department of Environment and Natural Resources (DENR), allowing a proponent to begin mineral production.

“We are very encouraged to be nearing the completion of the permitting process at Balabag,” said Clifford James, chief executive officer of TVI and chairman of TVIRD. “While the process has taken longer than anticipated, it has given our team the time to fully optimize the process flow sheet by conducting thorough pilot plant test work and various other studies to ensure the eventual operation’s success,” he said.

Even though exploration work has been suspended, TVIRD has completed the engineering design for its proposed goldsilver processing plant, and has built 16 kilometers of access road to the project.

TVIRD holds a mineral production sharing agreement (MPSA) for 4,779 hectares containing the Balabag project, which is estimated to hold 1.78 million tons of minerals, with an average of 2.34 grams of gold per ton and 72.3 grams of silver per ton. These amount to 134,262 ounces of gold and 4.148 million ounces of silver.

Mining News

Issue 1 2015

www.philippine-resources.com

Undeterred by industry dip, mining players continue to soar

By Maria Paula Tolentino

M

any parts of the mining sector maybe down, but industry players continue to ascend and aspire.

Proof can be seen in the awards and profits recently bagged by three substantial mining players: Philex Mining Corporation, OceanaGold Philippines and Nickel Asia Corporation.

Philex Bags Best in Corporate Governance With the theme “Emerging Asia”, the Asia CEO Awards bestowed Philex Mining Corp. ‘Security Bank Corporate Gov-

ernance Company of the Year’ during awards night on November 12 held at the Solaire Resorts and Casino, in Paranaque.

“This is another recognition of our efforts to continue adhering to good governance and responsible mining. I am happy that the number of organizations recognizing that good governance is in our DNA, has grown.” says Philex Chairman Manuel V. Pangilinan. 1 “We are grateful for these awards, which are a result of our painstaking efforts to continuously be a better organization and responsible mining company. We thank our management and employees, as well as our stakeholders for their avid support” says Philex CFO and Chief-Corpo-

rate-Governance Officer, Danny Yu. The Asia CEO Awards promotes leadership excellence and team-building within organizations, and displays Filipino business accomplishment to the world’s business leaders. 2 OceanaGold PH Chair Scores Management Excellence Award BizNewsAsia, the country’s largest weekly business and news magazine, marked its 13th anniversary of publishing history last November 25, 2014 at the Grand Ballroom of InterContinental Hotel by honoring 24 of the Philippines’ “who’s who” in business, society and governContinued on following page >

Technical Services and Engineering Personnel Worldwide Bright Heritage Associates (H.K.) Limited also known as “BHAL” provides technical and engineering consulting services deployable with minimum notice to any location globally for industrial, civil, oil and gas, offshore, power generation, environment and community interface, telecommunications, and mining industries. We can support projects of any scope and size with our team that includes multi-lingual, multi-skilled, and qualified personnel that has extensive experience working at some of the world’s most competitive and challenging locations.

Incorporated in 2003, BHAL is known for its professionalism and corporate integrity. We’re ISO 9001:2008 certified and we’re committed to quality service and continual improvement.

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Philippine Resources 55

Mining News

Issue 1 2015

www.philippine-resources.com

<Continued from previous page ment. Among its roster of winners is OceanaGold Philippines’ Chairman Jose P. Leviste who landed the Management Excellence Award.

With diverse interests in mining, renewable energy, land development and green architecture, Joey is not only the Chairman of OceanaGold Philippines, but also the Director of OceanaGold Corp. in Melbourne, Australia, which is listed in the Toronto, Australian and New Zealand stock exchanges. OceanaGold is New Zealand’s biggest gold operation and owns the Didipio Mine in North Luzon (good until 2029).3 Fellow awardees who won in the same category include: Hans T. Sy (President, SM Prime Holdings, Inc.), Arthur Vy Ty (Chairman, Metrobank), and Amando Tetangco (Governor, Bangko Sentral)

56 Philippine Resources

Nickel Asia Income Grows 370% Thanks To Shipment Volume Listed miner Nickel Asia Corp. (NAC) saw its net income surge 370 percent year-on-year in the January to September period due to higher shipment volumes as well as nickel prices. The miner attributed the sharp rise in earnings to the uptick in shipments as well as nickel prices.

The surge in shipment volume was mainly the result of increased ore deliveries to Taganito HPAL Nickel Corp. (THPAL), which was commissioned last year and is now on its first full year of operations.

The firm’s total cash operating costs and expenses grew 58 percent to P6.45 billion as of end-September from P4.09 billion in the comparable period last year.4 “We ae delighted with our strong results fr the first nine months of this year and our ability to build on the combination of

higher prices and increased production to meet higher demand for our ore,” Nickel Asia President and CEO Gerard H. Brimo.4 Reference: 1 Philippine Daily Inquirer,‘Philex Best in Corporate Governance’. November 28, 2014.

2 Business Mirror, ‘Top Companies, Executives Feted at Asia CEO Awards 2014’. November 13, 2014. Roderick L. Abad http:// www.businessmirror.com.ph/top-companiesexecutives-feted-at-asia-ceo-awards-2014/ 3 Philippine Daily Inquirer, ‘Largest Business Weekly BizNewsAsia’ marks 13th year, to honor 24 Top CEOs and Tycoons’. November 25, 2014.

4 The Philippine Star, ‘Nickel Asia Profit Surges 370%’. November 11, 2014. Louella D. Desiderio.

Energy Briefs

Issue 1 2015

www.philippine-resources.com

Gas2Grid receives go-ahead to move forward on Cebu

A

ustralia’s Gas2Grid Limited has commenced a programme aimed at fast tracking the development of the Malolos oil field on the island of Cebu after the receipt of approval for a 2 Year Technical Moratorium by the Philippine Department of Energy.

Gas2Grid is undertaking a Malolos Oil Field technical programme to establish the best completion technology to fully appraise and develop the oil field.

The 2 Year Technical Moratorium handed down by the Philippine Government provides security of tenure over Service Contract 44 until the 28th January, 2017 and within that time the company is aiming to demonstrate the field commercial-

ity and apply for a 25 year production term.

In conjunction with the work programme, Gas2Grid has already met with selected companies to consider farming in the Service Contract 44 by funding the oil field appraisal and development. Further meetings with additional companies are planned.

Gas2Grid said it is looking to fast-track the programme to allow it to achieve field commerciality by bringing forward the Year 2 program, subject to funding.

The company said its preference is to fund the full appraisal and development of the Malolos Oil Field by securing a

farm-in partner. It commenced farm-out presentations prioe to the end of 2014, initially targeting oil companies located in South East Asia.

Gas2Grid believes Malolos represents an attractive investment opportunity despite the recent oil price drop and the immediate effect that it has had on the oil industry Worldwide.

The field has a 20.4 million barrel “Best Estimate (P50) Contingent Resource” of good quality, low sulphur crude oil that is located onshore close to transportation in a country with excellent fiscal terms, providing an opportunity for low development and operating costs.

Gas2Grid’s drilling successes at Malolos have given the company confidence it can commercialise the historic discovery.

58 Philippine Resources

Energy Briefs

Issue 1 2015

www.philippine-resources.com

Energy Briefs......

Energy department pushes back auction

of Palawan Island covering 576,000 hectares.

The Philippines is giving investors more time to prepare bids for oil and gas contract areas that would be auctioned off this year.

Energy Secretary Carlos Jericho L. Petilla earlier said an initial six companies had purchased data for the offered contract areas.

Department of Energy (DOE) Undersecretary Zenaida Y. Monsada the agency decided to move the timetable for the fifth round of the Philippine Energy Contracting Round (PECR 5).

The new schedule moves the opening of bids for oil and gas exploration and development contracts from March to June, and the endorsement of winning offers to Malacañang from June to September this year.

The postponement comes as oil prices slump to multiyear lows on the back of weak global demand and the international oil cartel’s refusal to cut production.

Weak prices erode margins, if not cash flow, thus discourages exploration, which is a very costly venture.

Since last year, exploration permit holders have sought government consent to push back their timetables. Last December, the government cleared the extension of Gas2Grid’s work program in Cebu. This follows another Australian firm’s bid to similarly push back its timetable.

“The revision will enable the potential proponents to review and evaluate the additional available marine seismic data acquisition, processing and interpretation in the offered areas. Additional data will be made available in February,” Monsada said.

PECR is the government’s public bidding round for oil and gas exploration and development projects.

The DOE earlier offered 11 petroleum blocks to interested investors through the PECR with the largest located east 60 Philippine Resources

“I’ve also talked to some people. That will decide if anyone is interested,” Petilla said, according to Interaksyon.com.

Local oil sector takes stock on falling prices Falling world crude oil prices are expected not only to benefit the Philippines in terms of economic growth, but also to have more positive than negative implications for the country’s energy sector, local petroleum company officials said.

Oxford Economics said in a Dec. 9 research note that, among 45 economies, net oil importer Philippines stands to benefit the most if prices were to drop to as low as $40 per barrel (pb).

In the note, “Oil-ipedia!,” Oxford Economics simulated impact of the sixmonth-long oil price slump on gross domestic product (GDP), inflation, bond yields and current account of 45 economies.

“As prices get lower, the prize for the fastest-growing major economy goes to... the Philippines, whose GDP growth would pick up to 7.6% on average over the next two years, were oil prices to slump as far as $40 pb,” it said in a BusinessWorld report.

While the local petroleum exploration and production sector may find it more difficult to lure investors, some officials said oil companies will not abandon prospect areas since oil prices should eventually recover, while retailers will benefit from increased consumption.

To be sure, UK-based Pitkin Petroleum Plc warned that the continued decline in

world oil prices could affect the interest of existing and potential contractors.

“As a start, the Philippines is traditionally not a popular address for international oil and gas exploration companies,” Arturo A. Morado Jr., chief executive officer and managing director of Pitkin Petroleum, told BusinessWorld via e-mail.

Pitkin Petroleum, which is 53 percent owned by locally listed Philex Petroleum Corp., has interests in service contracts (SCs) 53 and 14 located onshore Mindoro and waters northwest of Palawan, respectively.

“If oil price continues to be very low, I would imagine that the little interest in the country’s upstream oil and gas sector will further be reduced,” Morado added.

But officials of the Department of Energy (DOE) noted interest in developing the country’s indigenous petroleum resources remains stable.

The department in May last year launched the fifth leg of the Philippine Energy Contracting Round (PECR), in which the government offered 11 petroleum areas for exploration and development that could add to the existing 29 SCs. Ismael U. Ocampo, director of DOE’s Energy Resource Development Bureau (ERDB), said: “Up to now, prospective PECR 5 bidders have not yet withdrawn their interest, so we are still okay.”

Rino E. Abad, another director of ERDB, weighed in, saying: “My opinion is that this price slump is temporary. I believe our contractors may delay projects, but will never abandon.”

Francisco L.Viray, president of Trans-Asia Oil and Energy Development Corp., said while lower oil prices may weigh on the upstream sector, his company -- which holds interests in various oil and gas exploration prospects in the country -- has no plans of abandoning its petroleum contracts.

Continued on opposite page >

Energy Briefs

Issue 1 2015

www.philippine-resources.com

< Continued from opposite page “Our projects are in the drilling stage, so by the time they start commercial operations -- assuming there’s oil discovery -prices might recover,” Viray said. “Drilling rigs are also cheaper nowadays.”

“Lower operating capital and, hopefully, lower price will result in higher demand as consumers will be encouraged to consume more, like motorists who will not hesitate to use their vehicles more often,” said Martinez, who is also chief executive officer of Eastern Petroleum Corp.

Trans-Asia Senior Vice-President Raymundo A. Reyes Jr. acknowledged that in- Raymond T. Zorilla, vice-president of ternational oil companies usually reduce Phoenix Petroleum Philippines, Inc., budgets for exploration when oil prices are down. “So risk investments available for the local upstream oil business will also dive,” Reyes said. “On the other hand, cost of equipment materials and services will be relatively low.”

shared this expectation and added that extra capital that was otherwise allotted for oil purchases at higher prices can be used for other purposes.

There could be pressure, however, if a firm sells stock that was bought when international oil prices were higher.

Continued on following page >

Companies with a more strategic view and capability, Reyes added, can wait out the slump. “This is the opportunity for companies that have long-term view of the market and are predicting rebound of oil prices,” he said. “It is a good time to drill now.”

Is your building an asset or a liability?

Philex Petroleum Corp. President Carlo S. Pablo noted that “exploration cost should also go down so some projects may still be viable at low oil prices.”

Never assume the investment is the best it can be until you’ve had the construction professionally assessed by RLB.

“Because of lower demand, exploration contractors and vendors also adjust their fees and prices downward,” he explained.

Fernando L. Martinez, chairman of the Independent Philippine Petroleum Companies Association, backed Oxford’s expectation of economic gains for the country from falling world crude prices.

Our Quantity Surveying, Project Management, and Construction Management Services protect your investment and guarantee the maximum return.

Sought for comment on Oxford’s simulations, Martinez said: “That’s really possible as it will redound to lower operating cost for a lot of energy-dependent industries like transport, mining, cement, steel and other heavy industries.”

“Manufacturing and distribution will gain from lower transport cost as well. With lower costs, productivity may naturally increase, hence, added output,” Martinez said.

The effect on the downstream sector could vary, depending on strategies of firms concerned.

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Davao Office:

Building 3, Corazon Clemeña Compound, #54 Danny Floro Street, Bagong Ilog, Pasig City 1600, Philippines T: +63 2 687 1075 / 470 0642 F: +63 2 570 4025 E: rlb@ph.rlb.com, bizdev@ ph.rlb.com

Suite 602, PDI Condominium Archbishop Reyes Avenue cor.

J.Panis St., Banilad, Cebu City 6014, Philippines T: +63 32 268 0072 E: rlbcebu@ph.rlb.com

6th Floor, Units 15 & 19, Metro Lifestyle Complex, cor. F. Torres St. & E. Jacinto Extension, Davao City 8000, Philippines T: +63 82 222 5315 M: +63 917 550 7013 Philippine Resources E: rlbdavao@ph.rlb.com

61 rlb.com

Energy Briefs

<Continued from previous page “It actually depends on the inventory position of a company,” Martinez explained.

“If it’s caught in a long position with inventory and hit with lower price on succeeding sales, then, as in all other commodities, a trader may suffer.”

Philippine oil production seen to rise 50 % in 2019

Issue 1 2015

www.philippine-resources.com

in spite of low consumption levels relative to its Southeast Asian neighbors.

The country produces small volumes of oil, natural gas, and coal. Geothermal, hydropower, and other renewable sources constitute a significant share of electricity generation,” EIA said in The Philippine Star report.

EIA is a US Congress-funded office that collects, analyzes, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets, and public understanding of energy and its interaction with the economy and the environment.

Oil production in the Philippines could rise 50 percent or up to 39,000 barrels per day (bpd) by 2019 from 26,000 bpd in 2013, according to data from the United States Energy Information Ad- The DOE launched its latest exploration ministration (EIA). round in May.Through the current round, the government is eyeing new investors In a recent report on the Philippines, to explore potential coal and petroleum EIA said the current exploration round fields around the country. launched by the Department of Energy (DOE) could boost the country’s oil pro- A regular activity conducted by the deduction and reduce its dependence on partment, the Philippine Energy Confuel imports. tracting Round (PECR) is a transparent and competitive system for awarding Specifically, EIA said the 11 oil and gas service contracts. blocks in the Palawan Basin and nearby areas offered by the DOE for exploration The goal is to showcase the country’s could significantly boost production. petroleum exploration opportunities and to attract energy investors to develThe American agency said in 2013, the op the country’s indigenous oil and gas Philippines consumed 299,000 bpd, with resources. most sourced from imports.

In 2011, the DOE launched its 4th PECR “The Philippines is a net energy importer covering 15 blocks or an area of approxi-

mately 100,339 square kilometers (km).

The blocks have an average size of 6,700 square km each, located mostly in the country’s frontier regions.

Investments in these service contracts are huge but the returns are attractive as well, depending on their respective petroleum potential.

Proponents have to embark on seismic studies, which may cost at least $5 million, and exploration well drilling activities amounting to $100 million per well.

‘Clean’ energy seen as still competitive despite oil slump Falling oil prices that have made conventional power sources cheaper may take the shine off renewable alternatives, but such disadvantage should prove temporary, “green” advocates in the Philippines believe.

While world oil prices have been falling since June last year, renewable energy (RE) stakeholders are optimistic their sector will enhance competitiveness over the long term.

Gregorio S. Navarro, president of the Management Association of the Philippines, acknowledged the continued drop of oil prices may affect investor interest in renewable energy projects for now.

“There will be no urgency or appetite to expand existing RE facilities or build new ones if this will continue,” Navarro said in a BusinessWorld report. “Many of the renewables make sense only if oil is above $85 per barrel [compared to less than $50 currently], but I hope RE will continue to be developed.”

“Oil prices will not forever be cheap,” Navarro added.

Pedro H. Maniego Jr., chairman of the National Renewable Energy Board, adContinued on page 62 >

62 Philippine Resources

Company News

Issue 1 2015

www.philippine-resources.com

Rider Levett Bucknall throws its hat into PH mining ring

O

ver 25 years ago, quantity surveying – the practice of cost planning and commercial management of a construction project throughout its entire life cycle, from inception to post-completion – was an almost unheard of practice in the Philippines, if you ask Corazon Clemeña Ballard.

“My ex-husband (Liam Ballard) said that we couldn’t run this company because there’s no QS here, it’s not gonna work,” says Clemeña Ballard, the chairman and president of Rider Levett Bucknall (RLB) Philippines Inc. “And I told him that’s exactly the point.

“There’s no one doing it here, and it might work for us. All we have to do is introduce it to the market. It took us almost 3 years to get accepted by the entire market.”

Not only has quantity surveying become

<Continued from page 60 mitted that lower oil prices translate to lower fuel costs and electricity rates.

But Maniego said the expected “decline in cost of RE technologies combined with increased efficiencies” should make the sector competitive.

He added that the cost of running oilfired plants is still higher compared to those fed by renewable sources because of “additional costs of pollution control and safety equipment to comply with environmental regulations.”

“In the long term, the need to reduce greenhouse gas emissions to mitigate global warming will become more and more imperative,” Maniego said, adding that the true cost of power from con64 Philippine Resources

a vital part of the country’s construction boom, it has helped Ballard’s firm grow to become the biggest QS consultancy practice in the Philippines.

Now RLB has its sights set on the mining industry, armed with a stellar portfolio of projects with clients that include Ayala Land, the Shangri-La resorts, and other top local and international firms.

Ballard said her company, which grew from a single proprietorship in 1989 to a firm with over 400 employees at present, has already established an infrastructure division of about 40 staff to handle mining projects as well as those in the water, renewable energy and land development sectors.

RLB, which has offices in Pasig City, Cebu, and Davao, will work hand in hand with an established Australian design company -- which Ballard did not name as they have yet to formally announce their partnership -- to handle the mining projects, which are mostly in Mindanao.

ventional sources is “higher than RE if environmental and social damage are considered.”

Moreover, developers of renewable energy resources noted that prices of their sector are on the whole more stable than those of oil-dependent counterparts.

“While, admittedly, the gap (between prices of electricity from renewable energy-based and oil-fired plants) got larger, it is important to note that we have to lessen our dependence on imported fuel,” said Ernesto B. Pantangco, executive vice president of Energy Development Corp. (EDC).

Pantangco said prices of imported fuel are volatile, and at the same time “there’s no long-term assurance that the current price levels are sustainable.”

“In Mindanao, a lot of infrastructure is coming up, and a lot of mining, so we’re doing a lot of PPP (public-private projects),” said Ballard, noting that RLB already has a few partner mining firms but is looking to build up its portfolio in the sector.

But as far as buildings, towers and land developments are concerned, arguably no other company has as extensive a portfolio as RLB Philippines, which started out as Liacor International Construction Services.

It changed its name to Rider Hunt Liacor Inc. after Ballard accepted the invitation of a foreign consortium to join the Rider, Hunt, Levett & Bailey Group -- now RLB -- in 1995.

With its global headquarters in Sydney, Australia, Rider Levett Bucknall is an award-winning independent practice maintaining over 100 offices – and over 3,500 employees – worldwide, servicing clients throughout the property, construction and facilities industry.

Aside from Ayala Land, which provides RLB Philippines with about 40 percent of its business, and the Shangri-La hotel chain, Clemeña Ballard says past and present clients include IBM, Nestle, HSBC, Texas Instruments, the University of Guam, and Philippine corporate heavyweights such as SM, PLDT, Araneta Center, Eton, Filinvest, Century Properties, RCBC, Rockwell Land and others.

Apart from quantity surveying and project management, RLB Philippines also offers quality assurance and quality control services, construction cost management and procurement management.

The global company offers a wealth of related advisory services which includes contractual advice, contractual claims preparation, builders’ quantities preparation and financial, physical and quality audit of construction.

Company News

Issue 1 2015

www.philippine-resources.com

Metso introduces the world’s largest cone crusher

T

he global mining industry is striving to develop more energy and cost efficient technologies for minerals processing. As ore grades decline, more and more ore needs to be processed to obtain the same amount of the valuable mineral and to meet production targets. This equation often results in increased processing costs and can prove problematic for miners.

Metso is responding to the customer challenge by developing larger and more energy efficient equipment for minerals processing. One result of this work, the world’s largest cone crushers, the MP2500, will be shipped to First Quantum Minerals Ltd (FQML) Sentinel Mine in Zambia. The crushers will be fully operational in early 2015. The crusher order, worth more than EUR 10 million, was booked in Metso’s orders received in Q1 2013.

Efficient crushing saves energy

Metso has introduced the world’s largest cone crusher, MP2500, to respond to the mining industry’s efficiency challenge. is more throughput from each crusher.

To duplicate the performance of two (2) MP2500’s would require four (4) smaller MP1250’s and all associated infrastructure.

The MP2500 was selected for Sentinel because it can process large volumes of rock as single machine. It saves costs as fewer crushers, related infrastructure and maintenance are needed for achieving the same or increased amount of production.

Less equipment leads to improved safety

Because the MP2500 crusher has the largest feed opening ever made, it can crush bigger chunks of rock. Its ability to crush rock further than the traditional crushers decreases energy consumption in the later parts of the process.

The most important result is based on the fact that there is less equipment installed at the mine site thus generating less need for maintenance and limiting the number of times personnel has to conduct work at any single equipment.

The MP2500 cone crusher is designed for use in secondary and tertiary crushing. It links easily with other Metso products to create a simplified, cost effective process flow for high production sites. Larger equipment reduces the number of crushers to install since there

Serviceability and ease of maintenance was also a focus during the design. Since the part was so large, Metso developed a new method to remove the socket which eliminates heating of the part in a difficult working space. This method also eliminates process variables associ-

The development of the MP2500 cone crusher resulted in innovations in the area of health and safety, many based on discussions with FQML.

ated with socket removal and reduces the overall stress on both the socket and main shaft. Metso has a patent pending for this new concept. Metso also refined the existing jackbolt locknut design to reduce the amount of manual work and replaced it with hydraulics to simplify the same work.

Metso is assisting Sentinel mine to guarantee the efficient operation of the new MP2500 by stationing full-time field service engineers on-site for one year after commissioning and by stocking critical spare parts in Metso’s distribution center in South Africa as well on-site.

First Quantum Minerals Ltd. is an established and rapidly growing mining and metals company operating seven mines and developing five projects worldwide, currently producing copper, nickel, gold, zinc, and platinum group elements. In addition, FQML is developing projects in Zambia, Panama and Peru that when complete, will increase their annual copper production capacity to more than 1.3 million tonnes per annum.

Philippine Resources 65

Company News

Issue 1 2015

www.philippine-resources.com

Brunel brings world of knowledge to the right place

T

he company slogan goes “the right knowledge, at the right place, at the right time,” and for Brunel Technical Services Philippines Inc. (BTS), this could never be truer, especially in the last four years.

In that span, the local unit of Amsterdambased Brunel International NV has grown a “dramatic” 7,000 percent, expanded its staff from 13 to 60, and -- if David Waters, Brunel’s country manager for the Philippines is concerned – expects a rosier picture for their operations here going forward.

“Our growth from the last 4 years has been rather dramatic, about 7,000 percent, predominantly because of our domestic operations,” Waters told Philippine Resources in an exclusive interview.

the oil and gas industry, onshore and offshore, from engineering to construction; the energy and power station sector; and mining and pharmaceutical, although we are involved in other industries,” the Australian added.

As a human resources services, contract labor and manpower supplier for both blue- and white-collar jobs, Brunel Philippines’ main bread-and-butter is the Malampaya natural gas project, and the oil and gas sector is its largest source of income “without a doubt,” Waters acknowledged.

But a growing percentage of Brunel’s local operations -- which provide about 70 percent of its income according to Waters -- is being devoted to mining, as the sector has “slowly taken over” its power industry clients and is “striking a balance” with that sector, the country manager added.

“The main industries that we support are “The mining industry is a little down still at the moment, but this office started 3.5 years ago, and we’ve been here 10 years, we celebrated our 10th anniversary in July (2014),” added Waters, who himself has been working in the Philippines on and off for over 30 years.

In the Philippines Brunel has two subsidiaries: Brunel Technical Services Philippines Inc. (BTSI), a labor exporting company accredited with the Philippine Overseas Employment Agency (POEA), and Brunel Technical Services Manpower Corp. (BTSM), its domestic arm that supports its local clients such as the consortium running the Malampaya project.

Inspired by the cause of the Ice Bucket Challenge that has gone viral globally, Brunel Philippines recently took the test in a more fun and creative way to benefit the children at the Manila Boys Town.

66 Philippine Resources

And Brunel is not done growing on local soil. Waters said that in the next 3 to 4 months it will add “20-odd people to the staff here, all full time positions,” as well as expanding its presence at its regional offices and project sites, in Subic, Clark, and Batangas “to help control the domestic work, and where possible to help

with recruitment in those locations.”

Long term, Waters says he sees “a very, very good opportunity for Brunel and its partners here in the Philippines,” adding there are “lots of opportunities coming up in the various sectors of industry, which we are structuring to do now.”

The local operation is also providing an international back-office support function for Brunel’s units worldwide, which Waters says they may extend to support clients.

“We’ve had a few requests from clients but we aren’t sure if we’re going to support that,” he added, noting that it’s another possible growth area for the Philippine company.

“Overall, we’re seeing the economy lift in the Philippines, which is good for us,” Waters told Philippine Resources. “We’ll probably be looking to opening further offices in the provinces as when new projects start. We set up offices because of the project, but at same time we try to make each office capable of generating income as well.”

Waters also noted the Brunel Philippines is also setting up to help the company’s new operation in Myanmar. He adds: “It’s a mirror image of the type of establishment we have here, because we provide vehicles to the client and do a lot of other support services, such as procurement and logistic services for them, hence the growth of the company.”

Overall, the Dutch-listed global company is definitely pleased with its expansion into the Philippines, says Waters.

“We’re happy to be here, happy to have made a decision 10 years ago to be here.

We see a bright future for the Philippines, our country. Things are improving, maybe not at the rate we’d all like, but things are getting better.”

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Company News

Issue 1 2015

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Industrial gear box specialist David Brown opens Subic facilityd

By Maria Paula Tolentino

1

50 year old ,worldleading industrial gear manufacturer, David Brown, recently opened the doors of its first local service and repair center in Waterfront Road, Global Industrial Park, Subic Bay Free Port Zone, Zambales Philippines.

British Ambassador to the Philippines, HE Ambassador Asif Ahmad welcomed David Brown’s investment in Subic Bay, saying “It is good to see another worldleading British company choosing the Philippines for its operations in this fast growing region.

Filipino businesses in industries such as mining, energy and construction will benefit from David Brown’s experience and expertise.

With more than 150 years in the business, David Brown offers top-notch specialist transmission engineering and repair services and adheres to the highest global quality assurance standards. I am also impressed by David Brown’s commitment to transfer technology for the Philippines; particularly to new employees the company will be recruiting.”

Despite an assiduous schedule and preparing to fly from one time zone to the next, David Brown’s Chief Operating Officer Gerry Marshall provides the details

of this new business venture and where he sees the local presence going.

PRJ: A new David Brown facility in the heart of Subic. Tell us more.

GM: David Brown is a 150 plus year old company, that was established in 1860 at Huddersfield, UK. We are a global gear engineering company that designs, manufactures and services gear boxes for industrial firms. We cover mining, oil and gas, marine, sugar, power, and the like.We currently have a number of manufacturing sites, service centers, while also having presence in Africa, the Americas, Asia, Australasia, Europe and the Middle East.

We truly are a global company.

The event today is a landmark occasion for all of us at David Brown. Coming to the Philippines and putting a service center here that has the support of our global network, we are now able to service the needs of our local customers.

It’s about delivering a quality product on time, every time where we can decrease the cost to our customers, while working in partnership with them and in the long term, grow the business here in the Philippines.

PRJ: There is an impressive number of gear on display today.

GM: The gears that you see here are all David Brown gear. On display is a 14 year old David Brown gear, and we are currently upgrading it for one of our customers.

One of the keys to our success is that we don’t just do David Brown gears.

We have the engineer and infrastructure behind us, that we can actually do anybody’s repair needs services. Even the marine vessels located outside our service center had a gear box problem. So what they did was, they parked outside and asked us if we could fix their gear box. Ofcourse, we said yes!

68 Philippine Resources

Just having this presence here in the Philippines and being in the Subic area is phenomenal. If you look at the business people that come here is simply phenomenal, it really is. We have a fantastic turn-out and I wish to say thank you to everyone. It’s very tight-knit here. Everybody wants to help and everyone wants us to be a success. And with the kind of welcome we have, this will be a great business venture for us.

PRJ: It’s the first for David Brown here in the Philippines. What are the plans?

GM: Short term is really establishing a presence here in the Philippines and identify the customer base. David Brown being a global brand, we would also like to develop our local network combined with our already existing international network.

Medium term is to expand from that, while long term is looking at where we are and if there is indeed an opportunity here or probably elsewhere? We want to have the facility here, but if there is an opportunity elsewhere or within the region as well, then we may be looking at expansion capabilities. And since it’s a good facility, the interest now has been really fantastic.

PRJ: Who are David Brown’s clients in the mining sector?

GM: Basicaly, it’s all the major mining companies. The company is a world Continued on opposite page >

Company News

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< Continued from opposite page leader in gear-engineering and service support working in core industries such as defense, oil & gas, mining and minerals processing.

We currently have in our roster Masbate Gold, Philex, OceanaGold, Carmen Copper... For the Oil and Gas industry, we have Shell Petroleum. For cement, we have La Farge and Holcim Cement group.

While for sugar, we have Victoria’s milling and HYPCO sugar mill. Observe that we have started to delve into different industries but the mining sector is still our number one.

David Brown is also invested in the local workforce as well. If you look at our people here, we have specialists who do technology transfer. Part of our long term plan is to develop our people here.

We also have a world class Gear Academy where we train them.

PRJ: Tell us more about this Gear Academy.

GM: Since we do a lot of onsite traininig of our customers, we are very big on developing our employees and technology transfer that can help us grow this business.Yes we do have a school. All our local employees have access to that. All lectures are done online.

The David Brown team.

The school is based in the UK. All the modules that we have prepared through the years, every David Brown employee has access to this. These modules also help us train our customers. We cover from all things basic to more complicated gear box servicing. These modules are very technical in the way they were designed, developed and how it works.

PRJ: Why do business in the Philippines?

GM: We simply see so much opportunity here. David Brown has two product lines: we manufacture new gear boxes in our mining projects, the other is the service and repair maintenance.

Now at the moment, in the Philippines and even globally, new mining projects have declined. Mining companies hence have opted for repairs. So currently, the service and repair maintenance busi-

ness is growing.

If you look at the opportunities we currently have: we’ve got not only local presence, but we are working with the regional workforce with a fully functional service center that can reach our local customer base efficiently and effectively.

David Brown Gear Systems (Philippines) Inc. can now be found at their Philippine address [Bldg. 646 Waterfront Road, Global Industrial Park Subic Bay Free Port Zone, Zambales.

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Philippine Resources partnering with PHILCONSTRUCT 2015

P

hilippine Resources is proud to announce it is a media partner of PHILCONSTRUCT 2015, the no. 1 construction show in the country.

A nationwide series, the event will be held in all three key cities in the Philippines – in Cebu on June 4 to 6, in Davao on September 4 to 6, and in Manila on October 8 to 11.

Last year, PHILCONSTRUCT set a new record when it welcomed a total of 75,921 trade visitors in just four days.

The show was held simultaneously in three massive venues – SMX, the World Trade Center Metro Manila, and the Philippine Trade Training Center – making it the biggest PHILCONSTRUCT to date.

This year, the organizers are looking at another expansion: the World Trade Center – Tent. “The industry is growing and we must grow along with it in order to provide the best service and exposure to our exhibitors,” shared Dan Abando, Overall Chairman for PHILCONSTRUCT

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“Expect to see over 1,500 exhibitors carrying top industry brands from countries like Canada, China, Germany, Japan, Malaysia, Philippines, South Korea, Thailand, United Kingdom, United States and more,” he added.

Aside from the exhibit, PHILCONSTRUCT also features TECHNOFORUM, a series of seminars that serves as a platform for knowledge-sharing in the industry. It opens a venue for experts and professionals to discuss relevant issues and share the best practices in their profession. Another feature is Estilo De Vida, the longest-running interior design competition that fosters creativity and helps build the future of young Filipino interior designers. “This

show has gone a long way,” said Delfin Wenceslao Jr., President of the Philconstruct Events, Exhibitions, and Conference Corp. (PEECC).

“We have had this trade show for more than two decades now and it has become a perfect gateway for investors, both local and foreign, to tap business potentials in this booming region. This is one of the reasons why we continue to hold PHILCONSTRUCT bigger each year.”

PHILCONSTRUCT 2015 is expected to welcome over 80,000 trade visitors and generate multi-million pesos worth of business deals. “As organizers, we are humbled to become part of an event that plays a huge role in defining the landscape of the country’s construction industry. That is why, we will make sure that our event this year will be the biggest and most impressive show yet,” remarked Abando.

Held alongside PHILCONSTRUCT is HVAC/R PHILIPPINES, organized by the Philippine Society of Ventilating, Air-conditioning and Refrigerating Engineers, Inc. (PSVARE), presenting the newest innovations in air and cooling technologies.

For more information please go to http:// www.globallinkmp.com/philconstruct/

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