Philippine Resources Issue 1 2016 by PaperlessTrail

Philippine Resources Mining, Petroleum & Energy Journal Issue 1, 2016

Is Philippine Mining Adapting to Climate Change?

Should Mining Companies Think of IP?

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Table of Contents

Issue 1 2016

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Headlines in this issue

On the Cover: MineARC Systems has partnered up with OceanaGold and Site Skills Training in their project to create Asia’s first completely immersive mine safety training center inside Clark Freeport Zone, Pampanga.

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Is the Philippine Mining Industry Ready to Adapt to Climate Change?

Should Mining Companies Think of Intellectual Property?

IEA Says World Oil Market Could Drown in Over-supply

The Status of the Coal Industry in the Philippines: A 2030 Outlook

4 Philippine Resources

Miners unite at ANMSEC 2015

Forward-looking Diwata plans for the next three years

Miners hoping to see a new ‘friend’ in Malacañang

Chamber of Mines calls on next President to repeal EO 79

Aquino administration’s shortcomings listed at Baguio forum

Editor’s Note

Philippine Resources Mining, Petroleum & Energy Journal Issue 1 2016 Philippine Resources Journal is published independently for executives in Philippine mining, petroleum and energy and associated business sectors. Publisher Elizabeth Galura Brimble 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 Matthew Brimble matthew@philippine-resources.com Design/Production Elizabeth Galura Journalists Maria Paula Tolentino Kevin Lewis Jimbo Gulle 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

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Future of Philippine oil not looking bright

ith a combination of difficult offshore geology, mixed exploration success and confusing jurisdictional oil and gas legislation, the Philippines has struggled for petroleum investment throughout its history. And that looks like it is about to decline to a serious level on the back of the global decline in oil prices and the related slashing of oil company expenditure. The Philippines lost a major potential investor when BHP Billiton pulled out recently, reportedly due to concerns over constant delays to its exploration plans due to “red tape”. Now another international player, and this one a former major Philippines oil producer, has confirmed that it is looking to move to greener pastures elsewhere. Otto Energy, which has been of the most active explorers in the Philippines for more than a decade, announced in its latest Quarterly report that it had “commenced structured exit from Philippine assets.” It also reported that it has requested a two-year moratorium from Philippines Department of Energy (DOE) over its Philippine assets. That is a massive turn-around from a company that a few years ago had a major focus on the Philippines and the Galoc oil field. Another international investor in the Philippine oil and gas sector, Gas2Grid, has also reduced its activity in the country. Gas2Grid, which is investigating the potential to commercialize the historic onshore Malolos Oil Field in Cebu, is currently under a 2 Year technical moratorium until 27th January, 2017 over the SC 44 permit where Malolos is located. The Australian company has also reported that it considers the best way to fund the full appraisal and development of the Malolos Oil Field is by securing a farm-in partner. Even the most optimistic oil and gas investor will admit that finding farm-in partners in this market is extremely difficult. There is no doubt that the upcoming elections will be closely watched by international markets, and it will be important that the leading contenders show support for the resources sector pre and post the election.

Economic Commentary

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Is the Philippine Mining Industry Ready to Adapt to Climate Change? By Fernando Penarroyo

ocated along the Pacific Ring of Fire and the Western Pacific typhoon belt, the Philippines is one of the most natural hazard-prone countries. Tropical storms and typhoons bringing with them destructive winds, torrential rains and landslides cause loss of lives and destruction of infrastructure and properties. In addition, the country is also exposed to intense volcanic activities, tsunamis, earthquakes, and prolonged dry spells causing drought and forest fires. Climate change has a huge impact on the Philippines making it vulnerable to sea level rise, rising temperatures and extreme rainfall. In 2013, the country ranked first in the list of countries most affected by natural disasters. The government estimated the annual cost of disasters to the economy to be between 0.7 and 1% of gross domestic product and an average of P15bn per year in direct damages. There are also substantial social and environmental impacts arising from disasters hindering

the government’s efforts to reduce the incidence of poverty. Endowed with vast coastlines and a tropical climate, the Philippines is one of the hotspots of terrestrial and marine diversity ranking 25th worldwide in the total number of animal and plant species. The country is also located within the “Coral Triangle”, a six million sq. m. area considered as the most biologically diverse marine region on Earth. While predominantly agricultural, Philippines is also highly mineralized and replete with energy sources particularly renewables. Greenhouse Gases and Climate Change The Philippines is not a major emitter of greenhouse gases (GHG), as it accounts for only 0.4 per cent of global emissions. However, the Asian Development Bank reported that the South East Asia region registered the fastest growth in carbon dioxide emissions between 1990 and 2010 and is becoming a major contributor to global GHG emissions. Increasing

reliance on fossil fuels for energy demand, deforestation and land degradation have been driving most of the emissions. Given the region’s vulnerability to climate change, curtailing global emissions growth should be a priority consideration. It is in the economic interest of the region that a global climate arrangement that keeps mean warming below 2°C is followed. (Southeast Asia and the Economics of Global Climate Stabilization, 2015) According to the report “Climate Change in the Philippines” (February 2011) the climate trends were analyzed using available observed data from 1951 to 2009 with the average period of 1971-2000 as the reference value. The key findings are summarized as follows: • There has been an increase in annual mean temperature by 0.57°C; and • In terms of maximum and minimum temperatures, the increases have been 0.35°C and 0.94°C; Under a high emissions scenario, mean annual temperature is projected to rise by about 3.7°C on average from 1990 to 2100. If emissions decrease rapidly, the temperature rise is limited to about 1°C. The stated long-term goal of the 2015 Paris Agreement on climate change is to limit global warming to ‘well below’ 2°C, or 1.5°C if possible. The Paris Agreement seeks to limit the increase in global average temperatures to “well below 2°C above pre-industrial levels” – the level beyond which scientists say we will see the worst extremes of global warming. It also aims to “pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels, “recognizing that this would significantly Continued on opposite page >

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< Continued from opposite page reduce the risks and impacts of climate change.” Philippine Development and Climate Change

Plan

Natural hazards are beyond the control of anyone and it is therefor important to assess the country’s current capacity to reduce and manage disaster risk; and identify options for more effective management of that risk. The vulnerability to disasters is also influenced by the effectiveness and efficiency of disaster risk management (DRM), disaster risk reduction (DRR), and climate change adaptation (CCA) measures. The Philippine Development Plan 20112016 (PDP) identifies enhanced resilience of natural systems and improved adaptive capacities of human communities to cope with environmental hazards

Economic Commentary

including climate change-related risks as a priority goal. The PDP, drawing on the National Framework Strategy on Climate Change 2010–2022 treats mitigation as a function of adaptation. While mitigation measures are being implemented by the Philippines, they are not carried out as a commitment but rather as a result of developmental growth. Major climate change and disaster risk reduction/management strategies in the PDP includes: • Strengthening institutional capacities of national and local governments for CCA and DRR; • Improving adaptive capacities of communities to the impact of climate change; • Building resilience of the natural ecosystems; • Promotion of environment friendly technologies for industry and transpor-

tation sectors; and • Promotion of clean and renewable energy. The Philippine Legal Framework on Climate Change The Climate Change Act of 2009 envisions the Philippines to be a climate risk-resilient country that proactively implements cost-effective and nationally approved mitigation actions. The Act provides overarching policy direction to national and local actions on climate change and includes provisions for attracting foreign funds for climate change adaptation and disaster risk reduction projects. The passage of the Disaster Risk Reduction Management (DDRM) Act of 2010 in conjunction with the Climate Change Act was intended to strengthen the instiContinued on page 12 >

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Economic Commentary

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< Continued from page 9 tutional foundation for disaster risk management and climate change adaptation. The DRRM Act emphasizes the need for a coherent, comprehensive, integrated, and proactive approach to DRRM across levels and sectors of government, and among vulnerable communities. It shifts the focus from a purely reactive approach to include risk management and preparedness and establishes links to CCA. The National Framework Strategy on Climate Change was signed in April 2010, providing a basis for the national program on climate change headed by the Department of Environment and Natural Resources. The National Framework Strategy for Climate Change recognizes and adopts disaster risk reduction calling for a review of existing policies, plans, and projects of the different sectors to ensure alignment with the National Disaster Risk Reduction and Management Framework. The National Climate Change Adaptation Plan on the other hand is expected to give direction on the implementation of climate change adaptation measures in a cross-sectoral manner to be reflected

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in and implemented through local plans. The Climate Change Act was amended in August 2012 by the Peopleâ&#x20AC;&#x2122;s Survival Fund Law, which establishes long-term finance streams to enable the government to effectively address the problem of climate change. The law provides the fund with an initial P1 billion for the financing of adaptation programs and projects based on the National Framework Strategy and Program on Climate Change. Other sources such as donations, endowments, grants and contributions can be used to augment the Fund. Besides the Climate Change Act of 2009 and the National Framework Strategy on Climate Change in 2010, various

laws such as the Agriculture and Fisheries Modernization Act (1997), Philippine Clean Air Act (1999), Ecological Solid Waste Management Act (2000), Philippine Clean Water Act (2004), Biofuels Act (2006), and Renewable Energy Act (2008) direct appropriate agencies to consider climate change. Climate Change Adaptation in the Context of the Philippine Mining Industry Stakeholders in the industry should take a proactive approach to climate change adaptation as more frequent and extreme weather conditions will have complex impacts on the sector. Continued on page 14 >

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Economic Commentary

< Continued from page 12 Climactic conditions will affect the stability and effectiveness of infrastructure and equipment, environmental protection and site closure practices, and the availability of transportation routes. Climate change may also impact the stability and cost of water and energy supplies. (BSR, Adapting to Climate Change: A Guide for the Mining Industry) On the part of government, it has issued Executive Order No. 79, which designated the Climate Change Adaptation and Mitigation and Economic Development Cabinet Clusters as constituting the interagency forum to be known as the Mining Industry Coordinating Council.

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In its implementation of Executive Order No. 79, the government reported that it has completed the No-Go Zones map, clearly delineating areas that are off-limits to mining in an apparent attempt to shield prime agricultural lands and agrifishery development zones, tourism development areas and island ecosystems from potential mining hazards. It has also mandated mining contractors to secure ISO 14001 Certification. The Philippine Environmental Impact Statement (EIS) System is also one of the entry points identified to mainstream climate risk reduction into national and local development plans and regulatory processes. The DENR reported that it has harmonized the implementation of

the EIS system and the Philippine Mining Act of 1995 in relation to mining projects and, in the process, improve the implementation of the environmental laws. Mining company disclosures on climate change risks and adaptation strategies must become the standard norm in risk mitigation. As part of the Philippinesâ&#x20AC;&#x2122; participation in the Extractive Industries Transparency Initiative (PH-EITI) to enhance transparency and accountability in the mining industry, the PH-EITI reported that Memorandum of Agreements between the indigenous peoples groups and participating mining companies were also disclosed and reviews of EIS undertaken. The multi-stakeholders group also committed to make the information on the auxiliary rights, including timber and water rights, granted to companies available quarterly mining monitoring reports which reflects the level of compliance of companies to environmental regulations. Recognition of the Precautionary Principle and Writ of Kalikasan The Rules of Procedure for Environmental Cases have afforded environmental Continued on page 16 > 14 Philippine Resources

Economic Commentary

< Continued from page 14 litigants easier access to judicial remedies to stop mining operations. The evidentiary challenge using the precautionary principle is showing the casual relationship between an act and the resulting environmental harm, especially when the harm concerns human health since judges and justices are more accustomed to applying strict evidentiary rules in courts. (Mohan and Morel, Business and Human Rights in Southeast Asia: Risk and the Regulatory Turn) The precautionary principle was made public policy under the Climate Change Act of 2009, and was enunciated by the Supreme Court in issuing the Writ of Kalikasan. The Writ of Kalikasan is a legal remedy available to any natural or juridical person, entity authorized by law, peopleâ&#x20AC;&#x2122;s or-

ganization, non-government organization, or any public interest group accredited by or registered with any government agency, on behalf of persons whose constitutional right to a balance and healthful ecology is violated, or threatened with violation by an unlawful act or omission of a public official or employee, or private individual or entity, involving environmental damage of such magnitude as to prejudice the life, health or property of inhabitants in two or more cities or provinces. The Supreme Court expressed the precautionary principle in Part V, Rule 20 of the Rules of Procedure: Sec. 1. When there is a lack of full scientific certainty in establishing a causal link between human activity and environmental effect, the court shall apply the precautionary principle in resolving the case before it.

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Sec. 2. In applying the precautionary principle, the following factors, among others, may be considered: (1) threats to human life or health; (2) inequity to present or future generations; (3) prejudice to the environment without legal consideration of the environmental rights of those affected. Environmental litigants may also use the writ in order to compel the disclosure of information necessary for the support of their case e.g. discovery measures available include ocular inspection and production or inspection of documents or materials when necessary to establish the magnitude of the violation or the threat. (Rule 7, Sec. 12) Anti-mining advocates have also sought to pursue international remedies and mechanisms to stop industrial mining e.g. if there are indigenous people involved, use the Human Rights Committee [International Convention on Civil and Political Rights] mechanism under Art. 27 (Right to Culture) and UN Committee on the Elimination of All Forms of Racial Discrimination; invoke jurisdiction of the Rome Statute over crimes against humanity such as the forcible dislocation of indigenous people and the destruction of their means of subsistence which can be considered genocide; and push for universal jurisdiction to enforce criminal negligence, tort, malfeasance, etc. committed by transnational mining companies. (International Peopleâ&#x20AC;&#x2122;s Conference on Mining, Legal Aspects of Globalized Mining, 2015) Recommendations Disaster management systems in the mining industry must veer away from a reactive approach and evolve to a more effective proactive approach in which disasters are avoided by appropriate landuse planning and measures to avoid the creation of disaster-prone conditions. To evolve to this more proactive role, it is important that the stakeholders conduct a national assessment of climate change impacts, vulnerability and adaptation for Continued on page 18 >

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Economic Commentary

< Continued from page 14 the mining industry. In coordination with the government, the industry should also implement activities to increase climate resilience of existing mining infrastructure and assets. A national framework for comprehensive mining disaster risk management must be prepared and implemented with political leadership and policy support at the highest levels, while facilitating the active engagement and implementation of all relevant stakeholders.

The government must also seek development assistance for the provision of technical and lending support for disaster risk management e.g. to strengthen the Environmental Management Bureau monitoring process with respect to such issues as mining tailings, waste rocks, and acid rock drainage. While entailing an additional cost to companies, the government may also require sufficient trust funds from and increase the premiums and contributions required of mining companies to ensure environmental safeguards and commu-

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nity benefits, and compensate for improper mining operations or unforeseen mining accidents. Despite the high hazard risk in the Philippines, there is a limited riskbearing capacity of the domestic insurance market and over-dependence on international reinsurers for claims paying capacity. Climate-related damage will certainly raise premiums or sometimes even make insurers unwilling to provide insurance or re-insurance. Mining disasters hurt the bottom-line and investors, lenders and insurers are expected to conduct a strenuous due diligence on climate risks and company performance thereto in terms of mitigation and adaptation. Conclusion While the Philippines has created many legislative and institutional structures to address disaster risk management and climate change adaptation, there is a need to strengthen institutions in mainstreaming these issues into the mineral industry. The industry is likely to sustain larger economic losses from climate change. Losses on productivity, health and safety,environmental damage to agriculture and ecosystems, and loss of social license to operate in the host communities may be larger than previously estimated. Litigation often involves considerable time and expense to the adverse parties especially on the part of mining companies, which though successful in their defence will bear the brunt of damaged reputation.

Fernando â&#x20AC;&#x153;Ronnieâ&#x20AC;? 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.

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Benefits from avoided mine disasters and natural hazards resulting from climate change strongly outweigh prevention costs. Through best practice, mining companies should become catalysts for climate change adaptation in the community where they operate.

Economic Commentary

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Should Mining Companies Think of Intellectual Property? By Patricia A. O. Bunye

he mining industry is driven by technological innovation. Improvements in methods, processes and equipment stimulate growth, expansion and sustainability of the industry. One way of maximizing the value of these innovations is through the protection, enforcement and commercialization of a company’s intellectual property (“IP”) rights. Mining companies may not always be aware that they create or hold IP. Technologies and know-how used in the exploration, extraction, and processing of minerals are all covered by IP. By exploring the advantages of IP rights, mining companies

20 Philippine Resources

may be able to enhance their revenue streams, especially in times of economic uncertainty. In the mining industry, IP tends to consist mostly of patents, utility models, industrial designs, trade secrets, and to a lesser extent, trademarks and copyright. Patents cover any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable, while utility models are inventions in the mechanical field without the necessity of an inventive step. Industrial designs are any compositions of lines or colors or any three-dimensional form, whether or not associated-with lines or colors that gives a special appearance to and can serve as pattern for an industrial product or handicraft.

(“DENR”) announced a new gold and copper processing technology that no longer requires the use of mercury and cyanide. This innovation, along with other technologies that have already been and are still being developed in the Philippines, are valuable IP. Their owners are entitled to assert their right to prevent unauthorized use and registration of these inventions to the exclusion of others. In addition, the protection of trade secrets from public disclosure has been acknowledged by the Supreme Court in the 2007 case of Air Philippines vs. Pennswell, where it said that “the protection of industrial secrets is inextricably linked to the advancement of our economy and fosters healthy competition in trade.” In the same case, the Court said that trade

For example, in 2014, the Department of Environment and Natural Resources

Continued on page 22 >

Economic Commentary

< Continued from page 20 secrets “may consist of any formula, pattern, device, or compilation of information that: (1) is used in one’s business; and (2) gives the employer an opportunity to obtain an advantage over competitors who do not possess the information.” Within the mining industry,certain information may be protected as trade secrets, such as, technical or commercial information or data (including geological, geochemical, geophysical or engineering information), maps, models or any other material related to exploration or production activities over the area of interest. The DENR, however, requires that the extent of operation to be undertaken, area location, geographical coordinates/ meridional blocks of the proposed contract area and location map/sketch plan with

22 Philippine Resources

index map relative to major environmental features and projects and to the nearest municipalities be among the information disclosed in notices of applications for exploration permits, mineral agreements and financial or technical assistance agreements (“FTAA”), which are published, posted, and announced via radio broadcast. Nevertheless, sales agreements in mineral agreements and FTAAs, and some information disclosed during negotiations of FTAAs may be covered by confidentiality agreements so that they cannot be publicly divulged. Certain information supplied by the contractor during negotiations with the government may still be considered confidential, and may fall under the protection of trade secrets. Contractors, permit holders, and lessees are also required by the DENR to make

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publicly available to the science and technology community their geological, geophysical, geochemical maps and reports, as well as data generated from the contract/ mining area such as cores, assays and other related information. However, they are permitted by the DENR to delay release of these data within a reasonable period of time not exceeding three (3) years. Another area governed by IP law is technology transfer agreements. Local mining companies often license existing technology from international firms, then adapt or modify the same according to the needs and requirements of local conditions or use. Much like a company’s other tangible property, IP becomes valuable assets only when properly identified, protected and commercialized. A company that has Continued on page 24 >

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programs in connection with new products, processes or equipment. The IP Code also prohibits a licensor from taking any of the licensee’s inventions or improvements to the licensed technology for free. Developing an increased consciousness and more proactive policies to manage and protect its IP assets will benefit a mining company in the long run. These policies can be formulated and implemented with the guidance of experienced IP practitioners with expertise in the mining and resources industry. Companies should take advantage of the way the Philippine IP system encourages and strengthens innovation in the development of new and emerging mining technologies. In a highly-competitive industry where marginal modifications may result in exponential gains, it is important to protect the exclusivity and confidentiality of one’s intellectual property. < Continued from page 22 designed a labor-saving, cost-efficient, or sustainable improvement to an existing mining technology should consider availing IP protection as a safeguard from exploitation by competitors. IP can also bring additional profit when the technology or know-how is licensed, sold or assigned. It becomes an asset of the company giving the same more value. At the same time, apart from the additional revenue stream, companies that license their technology will cultivate a reputation for being research and development leaders within the industry, and boost their profiles locally and internationally. For companies that are licensees of foreign technology, an awareness of the degree of use or modification permitted by the IP owners may prevent costly and frustrating litigation. The same awareness also extends to the possibility that the use of certain methods, processes, or machinery may in fact constitute infringement of a competitor’s IP, a problem which may be addressed through a systematic audit of a company’s IP. 24 Philippine Resources

An IP audit is a systematic review which identifies a company’s IP assets for protection, enforcement and commercialization. Among others, its purpose is to uncover hidden or under-utilized IP assets and to enable business planners to devise informed strategies that will maintain and improve the company’s market position. A thorough IP audit will also review a company’s IP-related contracts, policies, and procedures for compliance with legal and industry standards. The IP Code contains provisions that favor licensees in technology transfer agreements. Under the IP Code, licensees cannot be prohibited from adapting imported technology to local conditions, or from introducing innovation to the licensed product, so long as the licensor’s quality standards are not impaired. Licensors also cannot restrict the research and development activities of the licensee designed to absorb and adapt the transferred technology to local conditions or to initiate research and development

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.

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Economic Commentary

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IEA says world oil market could drown in over-supply The International Energy Agency (IEA) has suggested that there is the potential for crude oil prices to fall even further with global demand failing to keep up with production.

In its first Oil Market Report of 2016, the IEA said that while the pace of stock building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, “the oil

market could drown in over-supply”, driving oil pirces even lower. Strain on system The latest IEA OMR concluded that the oil market faces the prospect of a third successive year when supply will exceed demand by one million barrels per day and that there will be enormous strain on the ability of the oil system to absorb it efficiently. The IEA says that exceptionally mild temperatures in the early part of the winter in Japan, Europe and the US, alongside weak economic sentiment in China, Brazil, Russia and other commodity-dependent economies, saw global oil demand growth flip from a near five-year high in third quarter of 2015 to a one-year low in Quarter 4 – and their outlook for 2016 has demand growth moderating to 1.2 mb/d. IEA said markets were routed in December as persistent oversupply, bloated inventories and a slew of negative economic news pressured prices so that by mid-January crude oil touched 12year lows. Oil prices have already slid below US$30 a barrel since the start of the year and Iran set to add an estimated 300,000 to 500,000 barrels per day following the recent lifting of sanctions, some forecasters have tipped oil prices as low as US$10 per barrel are possible. Production fall The IEA said that while non-OPEC oil production is projected to fall by 600,000 per day in 2016; this will inevitably be largely offset by higher production from Iran. They also suggested that other Middle East producers will stay on the sidelines; their regularly stated policy is to protect market share and allow the price to find its level. The IEA also suggested that Saudi Arabia’s sharp increase in domestic fuel prices is a sign that OPEC’s top producer is preparing for a long period of lower prices.

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Economic Commentary

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The Status of the Coal Industry in the Philippines: A 2030 Outlook By: Maria Paula Tolentino

he Philippines has the 3rd largest mineral deposits in the world: gold, copper, nickel and chromite. Aside from these mineral deposits, coal is also part of this untapped resource. Due to the passing of Executive Order (EO) 79 in 2012, mining laws were centralized with the goal of improving safety standards while balancing mining rights and environmental concerns. According to the IEA (Institute of Economic Affairs) Clean Coal Centre, the country’s current coal estimate is at 316 million tonnes (MT): 170MT being higher in moisture sub-bituminous coal, 105MT being lignite (brown coal) and 41MT of bituminous coal and anthracite.The group adds that the country has as much as 270

Regional Coal Reserves found in the Philippines billion tonnes of coal resources that can be actually mined. This circumstance notably highlights the minimal mapping and limited

understanding of coal resources by the Philippine government. The Advantages the National Government & LGU’s get from a Coal Mine Project: 1. Government Share – 30 per cent of Net Proceeds 2.

National Government – 60 per cent

LGUs - 40 per cent

a) Province – 20 per cent b) Municipality – 45 per cent c) Barangay – 35 per cent The Benefits for Host Communities in a Coal Mine Project: 1. Three per cent government share from gross proceeds of coal sales 2.

Income tax Continued on page 30 >

28 Philippine Resources

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Economic Commentary

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< Continued from page 28

Summary of Power Projects in the Philippines: 3. Corporate social responsibility projects for the host community The Challenges for Developing a Significant Coal Industry in the Philippines: 1. The desire to import from Indonesia than develop new assets 2. Geopolitical issues in the country – approvals, anti-mining, terrorism 3.

Exploration and mine planning

Philippines. However, the top three locations where resource potential, probable reserves and mineable reserves can all be found are in the areas of Semirara, South Cotabato and Surigao with Cagayan Valley, Sultan Kudarat, Zamboanga and Central Cebu following suite. Semirara leads in resource potential (570,000,000) and mineable reserves (88,533,484) but it is in probable reserves that South Cotabato (68,959,017) and Surigao (60,978,034) were able to topple Semirara (43,820,358). As of August 15 2015, the data above indicates the current power projects of the country. Luzon still holds the majority of committed (38) and indicative(65) proponents, that is then followed by Mindananao and Visayas, respectively.

4. The country is below international (or even regional) best practices 5. Lack expertise

in-country

2014 – 2030 Coal Supply and Demand Outlook. In historical data from years 2013-2014, it can be observed that coal only plays second fiddle to oil in the primary energy mix of the country. With oil (31.28 per cent ) leading, coal (22.41 per cent) is followed suite by geothermal (18.67 per cent), biomass (15.62 per cent), natural gas (6.39 per cent), hydro (4.79 per cent), biofuels (0.81 per cent) and solar/wind (0.03 per cent). What is alarming to note is that the self sufficiency level for all of these has lowered from year 2013 (56.92 per cent) to year 2014 (56.07 per cent).

technical

Though we still have to see data for years 2015 – 2016, does this mean that as the years progress, the country’s self sufficiency level will wane as well?

6. The location of resources in relation to power demand 7.

All three island groups have coal power plants as the lead in the over-all power projects located in the country. Coal is then followed by natural gas (550MW total committed capacity; 1,750MW total indicative capacity) and renewable energy (562.9MW total committed capacity; 1,733.8MW total indicative capacity).With 3,877MW (total committed capacity) and 8,250MW (total indicative capacity), coal projects obviously still reign supreme in the Philippines.

Foreign ownership

Coal reserves can be found all over the

Coal’s Role in the Energy & Power Mix. 30 Philippine Resources

Coal Operating (Exploration).

Contracts

In the power generation mix of the country, coal is still king though only at a 16 per cent difference from years 2013-2014. Natural gas is also a huge component but has declined in production at 78 per cent, and so with hydro at 1.48 pr cent in year 2014. Amazingly, the biggest improvement can be seen for oil (1.42 per cent), followed by geothermal (58 per cent), and biofuels/solar/wind/biomass (0.10 per cent). From year 2013 to 2014, the total power generation mix has improved at 1995 Gwh.

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Economic Commentary

Australian Miner Probes Coal Exploration and Production Hiatus By Maria Paula Tolentino

hen is fresh exploration investment for coal needed? According to a representative from Australian mine, Bengalla, “not for a while”. In the very first Coal Trans Conferences held last November 2015 at the Dusit Thani Hotel in Makati City Philippines, industry players from both the mining and energy sector shared their insights on the status of coal exploration, production and what all of these mean for the industry. According to Bengalla Mine’s Marketing and Logistics Manager, Chris Walker, there is a long pipeline of new projects, but not all will progress. As of August 30, 2015, Australia had 37 projects sitting at the feasibility stage, nine publicly announced as coal mine projects, and less than seven actually commenced operations.

Walker says the reasons for these challenges can be summed up in six points: (1) while prices remain soft, and signs of recovery limited, certainty of the viability of some projects are still questioned, (2) lower prices are likely to reduce the incentive to invest in new thermal coal capacity in the near term, with prices not expected to increase until 2017, (3) the appreciating US$ against the AU$ has meant some of this pain has been set off for Australian producers, (4) strong supply competition will remain in the medium term, (5) funding is less likely and, (6) regulatory and political environment is still a challenge. In general, Australian coal assets have higher specific calorific value, relatively low in moisture and sulphur and therefore has a competitive advantage in the current market. However, how far can Australia’s quality advantage carry them in Asia? Walker says that Australia produces predominantly cleaner coal than its

competitors and as prices have fallen, higher quality coals offer more ‘bang for your buck’ especially for end-users in Asia. At the time of writing (February 6 2016), the New South Wales government’s Environment Protection Authority (EPA) is investigating wastewater discharges from dams at three coal mines in Australia’s Hunter Valley coal field operated by Peabody Energy and Rio Tinto. Officials are probing separate dam water incidents at two Rio Tinto mines, (1) Bengalla and (2) Warkworth, and a dam water discharge incident at Peabody Energy’s Wambo mine. Bengalla Mine produces 8.6 million mt/ year of thermal coal for export markets. Rio Tinto’s 40 per cent stake in Bengalla mine is soon to transfer to Queensland coal producer New Hope Group following its sale last September for $606 million. Australian company Wesfarmers is a 40 per cent shareholder in the mine, and Taipower and Japanese trading company Mitsui each have 10 per cent stakes in Bengalla.

Philippine Resources 31

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Economic Commentary

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DOE offers oil and coal exploration opportunities

HE Department of Energy (DOE) recently showcased the country’s vast petroleum- and coalexploration opportunities at the Energy Investment Forum in a bid to lure more investors. Energy Undersecretary Donato D. Marcos said there are 16 sedimentary basins with an area of over 700,000 square kilometers, and a combined potential of 4,777 million barrels of fuel equivalent. At present, the country has 29 active petroleum service contracts with Shell Philippines Exploration, Total E&P, Otto Energy, Philippine National Oil Co.Exploration Corp., Nido Petroleum, Philodrill, Pitkin Petroleum and Galoc Production Co., to name a few DOE operator-partners. These contracts have produced 1.42 million barrels of oil, 63.33 billion cubic feet of gas and 1.97 million barrels of condensate. “We hope to invite more investors in the country through our continuous conduct of the Philippine Energy Contracting Round [PECR],” Marcos said. PECR is a transparent mechanism that

allows the government to develop and utilize indigenous petroleum resources under a service contract through partnerships with qualified local and international exploration companies.

PECR5 could increase the country’s oil production to 39,000 barrels per day (bbl/d) by 2019, the US Energy Information Administration (EIA) said in its latest report.

The fifth round of the PECR was launched last year, offering 11 petroleum areas with a total of over 4.7 million hectares in West Luzon, Southeast Luzon, West Masbate-Iloilo, East Palawan and the Recto Bank. The DOE received four proposals for them and qualified three proposals for evaluation.

“In 2013 total oil production was 26,000 bbl/d, while the country consumed 299,000 bbl/d,” the EIA said. The latest exploration bid round “could push oil production up to 39,000 bbl/d by 2019.”

The areas for petroleum exploration include Area 1 in Southeast Luzon; 2 and 3 in Masbate-Iloilo; 4 and 5 in Northeast Palawan; 6 in Southeast Palawan; 7 in West Palawan; and 8 to 11 in West Luzon. Two of the blocks are close to the Spratly Islands, a portion of which is claimed by the Philippines and is subject of a territorial dispute with China. Ratio Oil Exploration Ltd. of Israel submitted an offer for Area 4, which covers 416,000 hectares in waters east of Palawan. Colossal Petroleum Corp., an affiliate of listed Coal Asia Holdings Inc., submitted bids for Area 5, a 576,000-ha block in waters east of Palawan, and Area 7, a 468,000-ha block within the disputed Reed Bank. A petroleumservice contract has a seven-year exploration period, which could be extended to up to 10 years. If exploration activities are fruitful, the parties could enter into a 25year production period.

34 Philippine Resources

The coal sector is another potential source of power, with coal reserves all over the country that could be explored and developed, Marcos said. The DOE is currently monitoring 76 coal-operating contracts (COCs), 46 in exploration phase and 30 in the development and production phase. “During the PECR5, 15 coal areas were also offered to encourage private companies to participate in the coal business. As a result, seven contracts have been awarded and are all in the Mindanao region,” Marcos said. The DOE has been conducting regular investment fora in Luzon, the Visayas and Mindanao to promote investments in the Philippine energy sector by facilitating the process of doing business and availing of incentives in the country. The forum held in Makati City is part of the government’s commitment to facilitate ease of business in the energy sector, said Irma Exconde, Electric Power Industry Management Bureau Officer in Charge. She added that the Philippine energy sector “still has a broad spectrum of opportunities to offer.” About 200 project developers and representatives from financial institutions, distribution utilities and electric cooperatives, the business sector, government agencies and diplomatic organizations attended the event.

Economic Commentary

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Miners unite at ANMSEC 2015, awards go to top five companies

ive mining companies were presented with the Presidential Mineral Industry Environmental Award during the 62nd Annual National Mine Safety and Environment Conference (ANMSEC) in Baguio City last November 2015. With an emphasis on promoting the advancement of the Philippine Minerals Industry in the fields of occupational safety and health, environmental protection and social development consciousness, the following companies were also awarded according to best practices in mining: In a press conference called ‘Kapihan sa Baguio’ held at Baguio Country Club, the group had on its panel PMSEA President Louie Sarmiento, PMSEA Director Annie Dy, Mines & Geosciences Bureau (MGB) Director Boy Velasco and Regional Director (MGB – Cordillera Region) Faye Apil as resource persons to answer questions from the press. On typhoons and natural calamities, the four had this to say “NDRMMC and mining companies are the first to respond during calamities. As ‘Pusong Minero’, we are involved in the search, rescure and retrieval operations that also try to provide potable

drinking water to disaster-stricken areas. It is the small-scale miners that contribute to the degredation of the environment and the numbers have multiplied. PMSEA is there to help regulate and legalize their operations that help protect the environment.”

Way gives Oceana Gold update In the same event and in such a rare opportunity, PMSEA invited as one of its guest speakers Oceana Gold Philippines, Inc. (OGPI’s) very own David James Way. In his speech, the mining executive shares the vision Oceana Gold has for its business, employees and their host countries ~ “...To develop and empower high potential employees to strengthen Didipio’s operational performance. The vision was to reinforce the capacity and to give transference of our expertise to new hires and potential employees in Didipio, our host community located in Northern Luzon... The growth of our operations accentuated the need for the Company to buttress all other initiatives either by employing experts in this industry, or by fortifying the local talent pool. We did BOTH.

The panel of PMSEA President Louie Sarmiento, PMSEA Director Annie Dee, Mines & Geosciences Bureau (MGB) Director Boy Velasco and Regional Director (MGB – Cordillera Region) Faye Apil. 36 Philippine Resources

Oceana Gold’s David Way shares vision for Didipio project, company. Photo courtesy of Oceana Gold. “In 2012, our CEO Mick Wilkes said that the company was on the verge of ‘transforming resource capital that being, what is found in the ground, into human capital.’ “As an industry, we are vested with the privilege to place our mark the farthest we can, and reach it...Through its new underground training facility, Oceana Gold is truly invested in a country... The Underground Training Facility is the testimony to OceanaGold’s investment not in buildings, or structures, or facilities, but in people. The Competency through Learning Program is not just a graduated exercise towards proficiency in mining, but a thoughtful nurturing of people’s trust in their potential, in themselves... This is our legacy even beyond the life of mine, the horizon OceanaGold now shares with the Filipinos. This horizon will flourish in, and through you. We recognize that Filipino Underground Mine Professionals are but a few in Continued on page 38 >

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Economic Commentary

< Continued from page 36 numbers. Naturally rich in mineral resources, we envision a Philippines with highly skilled local underground mining professionals.” Winning Partnerships: Way further adds that partnerships were critical to achieve this milestone. “In 2013 Barangay Didipio was identified to be a center of economic activity in the Cagayan Valley region. This fuelled our commitment to generate (ten thousand) training man-hours annually for our host community starting that year.We partnered with industry expert, Site Skills which offers an Australian-recognized and internationalbest-practice-tailored training, assessment and competency assurance for trade

specific and industrial skills... “Predominantly without prior experience nor employment, the aim was for them (trainees) to become highly skilled and competent professionals with an international accredited course certificate. They graduated industryready on April 2014 with 8 of them being eventually hired in the Site & Community Services Department and in the Process Department. “OceanaGold Corporation in partnership with Site Skills Training Philippines has invested over US$1.4M in a world-class underground training facility including Asia’s only Underground Metalliferous Mining Simulator. The training facility construction was completed July of this year. This will be recognised as an international facility to train competent

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and highly-skilled underground miners for OceanaGold’s Didipio Underground Mine and for other national and international recognised companies. The underground simulator has been constructed to provide students an immersive environment as the best preparation to undertake work in an underground mine.” Empowering Women Skills Training:

through

“In an industry that was perceived to be exclusively for men, it was unprecedented that women would become part of it, much less excel in it. Yes, it was time for meaningful change. This was epitomized in the “experience of Mrs. MarinaBiniahan-Bartolome, wife of a bulldozer operator, who underwent training to become a 100-tonne CAT or Komatsu 785 haul truck driver. The trucks she now operates are more than twice the size of the bull-dozer her husband drives. That year, OceanaGold garnered The Gold Award for the Empowerment of Women,” adds Way [Note: Oceanagold’s main asset is the Didipio gold mine in northern Philippines, which last year emerged as the top mine in the Southeast Asian nation by output value, with production worth 13.7 billion pesos ($290 million).]

Photo courtesy of OceanaGold.

Continued on page 40 >

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Economic Commentary

< Continued from page 38

processing and mining operations:

Other personalities that graced the 62nd annual mine safety conference were Presidential candidate Mar Roxas, Senatorial candidate Leila de Lima, DENR Secretary Ramon Paje, and Legaspi City Mayor Hon. Noel E. Rosal.

Mineral Exploration Category - Silangan Mindanao Mining Co., Inc.

Mining Companies Get President’s Nod This 2016 By Maria Paula Tolentino As of January 20 2016 year, President Benigno Aquino III awarded five mining companies for being environmentally responsible, while carrying out commendable mineral exploration,

Mineral Processing Category - Coral Bay Nickel Corp. Surface Mining Operation Category RioTuba Nickel Mining Corp., OceanaGold (Phils) Inc., and SR Metals, Inc. The President lauded the awardees for showing that mining can be both safe and responsible — urging other companies to follow their best practices. Aquino also mentioned programs that minimize or prevent the destruction of the environment such as: the go and no-

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go zone maps indicating where mining is prohibited, anti-illegal logging campaign and the national greening program. In his speech, Aquino says “These companies—namely Silangan Mindanao Mining, SR Metals, OceanaGold, RioTuba Nickel Mining, and Coral Bay Nickel— have performed well in protecting the environment, keeping their operations safe, and helping the communities in which they operate.Your companies are embodiments of our belief that inclusive growth is the most potent philosophy—both in business and governance. Fostering good will in the areas that support your success is not only the right thing to do, it also ensures the sustainability of your operations, and secures the future of your firms.”

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Forward-looking Diwata plans for the next three years By: Maria Paula Tolentino

n Saturday, January 30 2016, at Florâ&#x20AC;&#x2122;s Garden, Antipolo, the ladies of Diwata regrouped to prepare for the next three years of the organization. The objective of the meeting was to create a clear and compelling 3 year strategic plan that will engage and motivate members, stakeholders, and communities. The meeting also identified the specific goals, funding and resources targets, while defining the organizational capability requirements and future organizational structure of the group.

During the discussion, Diwata saw the opportunity in the following areas: (1) partnering with organizations with CSR targetted to helping IPs, (2) creation of programs/training modules specific to IP women, (3) continue to spearhead womenâ&#x20AC;&#x2122;s issues (4) plant and grow Diwata regionally and (5) the establishment and maintenance of the frequency of educational forums. The only organization of its kind catering to the resources and extractive industries, the group is composed of members with strong professional profiles. Spearheaded by Ambassador Delia Domingo Albert, each Diwata member is strategically positioned with the ability to leverage connections

inside and outside their professional network. Each Diwata brings their role and area of expertise to the group with the core values of Diplomacy, Integrity, Wisdom, Allegiance, Teamwork and Accountability essential to help the group navigate through their programs and advocacies. With a growing online presence, Diwata can be reached via their website and social media accounts: Website - http://www.diwata.org/ Facebook - https://www.facebook.com/ DiwataResourceDevt/ Twitter - @DiwataResrcDevt

[Bottom L-R: Trisha Bunye, Yody Marzo, Annie Dee, Cynthia Hernandez, Roma Hamilton, Bing Carrion, Monette Villa, Midge De Leon, facilitator Michael Milbier, Leo Dominguez, Lita Lee. Middle L-R: Joy Dompor, Lilet Abuel, Joan Adaci-Cattiling, Rodalee Ofiaza, Dindi Samsuya, Jen Raposas, Ann Cabusora, Mai Romano. Top L-R: Tata Corpuz, Paula Tolentino, Ging Laudencia, Malyn Molina, Septtie Jacot.] 42 Philippine Resources

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Mining News

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Miners hoping to see a new ‘friend’ in Malacañang in 2016

evelopments on the domestic front— including the seemingly mining-friendly roster of presidential bets—are giving miners hope for a strong rebound this year. The external factors, however, particularly the China gloom and depressed prices of commodities, are tempering their expectations. Chamber of Mines of the Philippines Vice President for Legal and Policy Ronald S. Recidoro told the BusinessMirror that 2016 will prove to be another challenging year for the mining industry, especially since the prices of metals in the international market continue to tumble down. China watch “The prices of these commodities are dependent on several factors, primarily China. So, given the downturn in the Chinese economy, the appetite for the minerals that we extract is currently down. And it’s not just for the Philippines; it’s a global trend,” he said. China, with its massive industrialization program in the past decade, ramped up its infrastructure initiatives, increasing its need for base metals, such as nickel, iron and copper. However, the downturn in its economy has cut its demand for such commodities. Also, Recidoro said China has amassed a substantial stock of the metals during the times it was aggressive in its development and construction. This reserve has not yet been used up.The situation in China has caused prices of metals in the international market to go down. The Philippines exports its metals—such as gold, copper and nickel—mainly to China and Japan. But the mining compa44 Philippine Resources

nies also have reasons to be optimistic, buoyed by developments in the domestic front. For one, investor confidence is not affected yet by the May elections, as none of the presidential bets have openly expressed opposition to mining activities, according to Michael Toledo, Philex Mining Corp. vice president for Public and Regulatory Affairs. He said this is important because mining is seen to help ensure the sustainable growth of the Philippine economy. Political interest Recidoro said local stakeholders are keenly following the political movements for upcoming polls. “Investors will really want to see who our new leaders will be because that will, in turn, shape up the country’s minerals policy.” The industry is also implementing several initiatives in their internal operations to boost their viability. Philex, for one, will still continue to increase its production this year. The latest report from the company showed improvements in its metal output. Philex’s copper production in the third quarter of 2015 rose by 2 percent to 8.82 million pounds, from 8.64 million pounds recorded in the same period in 2014. The company’s gold output during the period increased by 5 percent to 27,910 ounces. However, the increment in production was not enough to prevent the reduction in the company’s revenues due to the depressed metal prices in the world market. Philex’s consolidated operating revenues for the third quarter of last year went

down by 7.32 percent to P2.406 billion from P2.596 billion in 2014. Other mining firms, such as Atlas Consolidated Mining and Development Corp. and Nickel Asia Corp., also observed increases in production levels and reduction in revenues in their latest reports in 2015. Data from the Mines and Geosciences Bureau of the Department of Environment and Natural Resources also showed that the value of Philippine metallic production in the first nine months of 2015 went down to P85.78 billion as compared to P107.24 billion, in the same period in 2014. But Toledo said the strategies implemented by Philex in managing its costs and reducing its expenses, together with its increased metal output, have partially offset the impact of the low prices in the global market. “We put into place, as part of our strategic planning, a number of cost-reduction measures, which have been very successful. At the same time, we still endeavor to continue our production levels,” he said. “Most of our mining companies would have to reduce their cost. To offset the downturn in prices, they’ll try to lower their cost,” Recidoro said. Two more factors are boosting the miners’ optimism. “The good thing now is oil prices have gone lower, so that’s helping. We’re also looking at the dollar exchange rate because that will help us as net exporters,” Recidoro said. But, naturally, he said some small miners have been severely affected. Some were not able to address their losses, forcing them to temporarily stop their operations until such time that the prices of commodities have improve.

Mining News

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Chamber of Mines calls on next President to repeal EO 79

ining firms operating in the Philippines want the next President, following the general elections this May, to repeal Executive Order No. 79 and craft a new mining policy.

expanding areas closed to mining applications. “Zones which overlay many highly mineralized parts of the country will constitute a major obstacle to new mine development,” it added. “Many of the areas classified as ‘no-go’ actually have no real scientific or technical basis and may be challenged,” the

COMP said. Instead, it proposed the preparation of a clear definition of mineral lands that can be prioritized because of their economic value. Guidelines for the creation of maps and delineation of no-go areas, and their justification, must also be prepared, the group said.

In a position paper, the Chamber of Mines of the Philippines (COMP) called on the successor to President Benigno Aquino III to scrap such a “flawed” minerals policy as embodied in EO 79, which he issued in 2012. The Chamber instead proposed the creation of a “Minerals Development Agency” to ensure long-term growth of the mining sector and reverse EO 79’s supposed adverse impact to the industry. A new, alternative mining policy for the next administration should be one that “emphasizes the stream of benefits from a vibrant minerals industry, and institutionalizes reforms that will ensure prolonged and long-term growth,” the COMP paper said. The group said it was pitching its recommendations on such an alternative policy to presidential candidates, for their consideration and for possible inclusion in their administrative platform. Otherwise, the Chamber said it would “consider a judicial attack on the validity of EO 79 in order to prevent continued implementation by the next administration.” COMP also wants open areas for mining and seeks a review and rationalization of the current “no-go” zones policy. “EO 79 is executive legislation that unduly expands the areas closed to mining under (the Mining Act or Republic Act 7942),” the chamber said. The group noted that the Mining Industry Coordinating Council had proposed

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Resource Briefs

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How did Aquino gov’t fail mining? Shortcomings listed at Baguio forum

ow did the Aquino administration fail the mining industry?

Mine leaders and experts outlined President Benigno Aquino III’s effort to reform mining regulations, his economic priorities and even Malacañang’s supposed inability to detect fraud in the export of raw minerals in the National Mine Safety and Environment Symposium last November at Camp John Hay in Baguio City. Low world metal prices and the administration’s economic fiscal regime are “the two primary threats” against mining these days, said Jose Leviste, chair of OceanaGold Phils Inc., in a keynote speech at the symposium. He cited a Malacañang-initiated measure to raise government share in mining that is pending in Congress. Leviste said the Aquino administration’s “disappointing track record” has compelled mine executives to seek new leaders “who love us” in the 2016 national elections.

“I suggest we flex our political muscles… I follow this principle where I offer my love to those who love me… If a candidate loves us, why shouldn’t we carry his or her candidacy? If the candidate is anti-mining, then he or she need not seek our votes anymore,” he said. “Mining exploration and development are not a priority of the current administration. It did not merit [a mention] in the [President’s] State of the Nation Address on July 27, and it was not even included in the investment priorities plan of the Department of Trade and Industry,” said a paper delivered by De La Salle University Economics professor Patrick Caoile. Caoile urged the government to view mining as a “logical” growth driver of the economy. “Agriculture is down with the failure of land reform. Rice in the Philippines is three times as expensive to produce [compared to] Vietnam and Thailand. The build-operate-and-transfer law (now known as the public-private partnership program) which is currently the hallmark of this administration’s [economic pro-

grams] is mired in arbitration proceedings in Singapore [because the government questioned deals made by former President Gloria Macapagal-Arroyo].” Former Energy Undersecretary Rufino Bomasang, a career miner who joined one of the forums, said the administration’s changing of rules in the middle of contracts had turned away investors. Bomasang was former president of the Philippine National Oil Company’s Exploration Corp. Caoile said the major drivers of growth under the Aquino administration have been overseas migrant workers and the business process outsourcing companies. But this was growth reached “without government help,” he said. “The government, in fact, was the major cause of the lower than expected growth of 5 percent in the first quarter (of 2015) due to the lower-than-expected government expenditure. If government did its role and spent what it budgeted for, then the growth level is easily 6 to 7 percent,” Caoile said.

Farm waste eyed as potential fuel source

griculture is the new frontier for the Philippines’ energy sector given the huge potential for the use of farm waste in fueling biomass and biogas power plants, industry players said. The potential capacity could be enough to contribute about 10 percent of the country’s power output. Ditmar Gorges, president of First Environtech Alliance Corp., said that farm waste and other organic materials such as fish innards coming from wet markets and animal materials from piggeries could be used to power biogas plants. 46 Philippine Resources

“Some of the organic waste that can be used for biogas plants are sludge from septic tanks, which is a perfect feedstock for biogas plants,” Gorges said, adding that sludge treatment plants have the potential to generate thrice the power needed to power a biogas plant. Food processing wastes, whether solid or in liquid form, could also be a feedstock for biomass plants, Gorges added. Using waste water from ethanol plants would also help the environment because it could produce waste water equivalent to the residential wastewater of about 720,000 people, he explained. Bronzeoak Philippines president Jose Maria Zabaleta noted that waste from

rice, straw, cane and corn could be collected as fuel for biomass power plants instead of adding to garbage dumps. “The existing volume of agricultural residues produced in the country, if utilized for power, would allow us to generate an additional 2,000 MW to the grid,” Zabaleta said -- about one-tenth of the country’s current total capacity. However, it might take “a couple of decades” to have enough capacity to pitch in 10 percent of the country’s energy output, so the government and the private sector should explore ways to make such technologies more feasible for investors to develop, he pointed out.

Training News

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MineARC Supports Training Facility in the Philippines

ine safety leader MineARC Systems has partnered up with OceanaGold and Site Skills Training in their project to create Asia’s first completely immersive mine safety training centre inside Clark Freeport Zone, Pampanga. The training centre plans to provide training for over 1000 mine workers per year, providing OceanaGold with a highly trained underground work force for their Didipio gold-copper mine, which is expected to go underground by 2019. The mine safety training centre is available to be used by all mining companies that have a requirement to train their miners in all aspects of underground mining. Mine specific and general mining courses can be delivered. MineARC has a strong history of supporting their clients to advocate safe work practices in the industry. Over the years, MineARC has been involved in the

48 Philippine Resources

development of various training centres and educational endeavours, including the Murray Engineering Training Centre and the Perth Central Institute of Technology CUT Mine in Western Australia, as well as the Colorado School of Mines (CSM) in the United States. In this most recent venture with OceanaGold, MineARC has contributed to the Site Skills Training Centre. The ‘underground’ simulation area of the centre is fabricated from a series of above-ground buildings; the interior of which are shot-creted to give the appearance of a real-life underground mine.A replica MineARC refuge chamber is a key feature of the underground facility and is regularly utilised to conduct emergency response training. In addition, MineARC has donated samples of various safety products to facilitate the training program including MARCISROB chemical cartridges and manual gas detection equipment. MineARC’s SEA Business Development

Manager, Kane Read, was pleased to attend the official opening of the training centre in September of last year. Moving forward, MineARC will continue to work closely with Site Skills Training, OceanaGold and other companies to increase the standard of mine safety training in the Philippines.

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Mining Briefs

Issue 1 2016

www.philippine-resources.com

Aussie chamber hopes next PH administration prioritizes mining

ustralian businessmen hope the coming general elections in May will install a Philippine government that recognizes the importance of the mining industry to the country’s economic development.

Weymouth cited Australia’s experience with the mining industry, its huge contribution over the last 20 years to their economy, and how it created regional jobs. He compared this to a shelved General Santos-located copper and gold mining project that could have created at least 1,000 jobs.

Anthony Weymouth, Australian Senior Trade Commissioner for the Philippines and Micronesia, said in a recent forum that the mining industry could provide substantial employment and uplift lives of Filipino families, as it did for the country Down Under.

Mining contributes about 5.60 percent of Australia’s Gross Domestic Product (GDP).The country is a leading exporter of aluminum, coal, diamond, gold, iron, lead, ore and uranium.

“It is disappointing that it has not been given emphasis,” Weymouth said in describing how the administration of President Benigno Aquino III has handled the industry. “It depends on the next administration” where to take the industry, he added, but stressed: “There must be an emphasis on mining. Mining has a trickle-down effect on the community that is 10 times bigger than the industry.”

50 Philippine Resources

Mining has been projected to increase the Philippines’ GDP by 2 percent. However, it has been estimated that only 2 percent of the country’s mineral resources are being extracted. The Joint Foreign Chambers of the Philippines (JFC) has been calling on the government to lift the moratorium on new mining contracts, which it described as stalling the industry. Government neglect of the industry has led to the Philippines placing in the bottom 10 of least attractive destina-

tions for mining, the JFC noted. The Australia-New Zealand Chamber of Commerce or Anzcham is part of the JFC, which also counts the American, Canadian, European, Japanese and Korean business chambers as members, along with the Philippine Association of Multinational Companies Regional Headquarters Inc. Weymouth said challenges in the mining sector “will take senior-level effort to improve.” He also acknowledged that there are moves being done to address the red tape in doing business in the country. Bradley Norman, OceanaGold Philippines Country Director, echoed Weymouth’s sentiments. “The Philippines is a wonderful place to do business. We have got primarily Filipino work force. We want to develop them.They have showed willingness to work and learn. They have a wonderful work ethic,” he said. OceanaGold is looking to do more explorations in the country this year, aside from its current Didipio gold-copper mine in Nueva Vizcaya.

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Mining Briefs

Issue 1 2016

www.philippine-resources.com

Cheap coal threatens LNG’s toehold in fast-growing PH

he Philippines is set to import liquefied natural gas (LNG) for the first time in 2016 as it bids to replace fast-fading local gas supplies, but cheap coal is blowing off course Manila’s vow to lift the use of cleaner fuels, Reuters writes in a report by Enrico Dela Cruz and Manolo Serapio Jr.

This type of dilemma is echoed throughout Asia, where more than 500 coal-fired plants are on the drawing board, spurred by coal’s low cost and availability, while LNG needs billions of dollars for infrastructure to receive and store imported gas.

“Many countries in Asia will remain reliant on coal for power generation over the coming decade,” said Georgina Hayden, senior energy and infrastructure With 100 million people and one of the analyst at BMI Research. world’s fastest growing economies, the country aims to double its power gen- Gas field decline eration capacity by 2030, hoping to put an end to daily blackouts that crippled its The Philippines wants to roughly doueconomy in the 1990s. ble the share of natural gas in its power generation mix to up to a third by 2030, But despite government support for gas, evenly balanced with coal and renewaa rash of approvals for coal-fired plants is bles. already set to push coal’s share of power generation up sharply to over 50 percent Adding impetus to its plan is the expectby that time, while the share of gas may ed depletion by 2024 of the Malampaya fade slightly to 15 percent. gas field, which accounts for all of the country’s gas supplies. Despite efforts A congressman from Oriental Mindoro to find reserves elsewhere, buying LNG conceded it is too early to say when leg- overseas is the immediate option. islators will call time on new coal plants. Australia-listed Energy World Corp. “It presents a great challenge, especially Ltd. expects to switch on the Philipfor us in Congress,” said Reynaldo Umali, pines’ first power plant fired by imwho heads the committee on energy at ported LNG sometime in 2016, afthe House of Representatives. ter delays to the original December 2014 start-up. The power plant is part of an $800 million LNG hub the company is building in Quezon province, the Philippines’ first such facility. It plans to ship gas from its Sengkang LNG field in Indonesia or buy from the spot market. 52 Philippine Resources

Others are also looking to LNG. Philippine power distributor Manila Electric Co. (Meralco) is in talks with Osaka Gas Co. Ltd. to build gas facilities worth about $2 billion, and power firm First Gen Corp. may start building a $1 billion LNG terminal next year to sustain its Malampaya-based gas-fired power plants. The operator of Malampaya, a unit of Royal Dutch Shell Plc, has also been looking to set up a floating regasification facility to sell LNG locally, company officials have said. Cheap power But the Philippines accepts that rejecting cheap coal is not an option as its economy develops, with more than 40 new power plants in the pipeline, including projects still seeking financing. “The Philippine electricity market is very competitive, so to be able to make sure that we can sell the power capacity to be generated by our power plants, it has to be cheap,” said Lito Lantin, senior vice president at Meralco Power Gen Corp., which plans to build three coal-fired plants over five years. Congressman Umali said he is keen on legislation aimed at giving more incentives, such as tax exemptions, to investors in LNG infrastructure to make the fuel competitive with coal. President Benigno Aquino, who is due to step down this June, has passed the baton of boosting gas use to his successor, arguing last November that the government was hampered by a lack of infrastructure. “It limits our ability… it won’t happen under my watch,” he told the Asia Pacific Economic Cooperation CEO summit.

Resource Briefs

Issue 1 2016

www.philippine-resources.com

The True Cost of Collecting Environmental Monitoring Data: A Case Study With TSI

requent collection of data from remote locations used to indicate trends when levels exceed limits can be costly and time consuming. Whilst an otherwise time consuming and possibly financially costly task, modern aerosol mass measurement instruments like the TSI Environmental DustTrak Aerosol Monitor uses wireless cloudbased data management technology to provide real time access to the instrumentâ&#x20AC;&#x2122;s data anytime and anywhere where there is an internet connection. Case Study Example The TSI Environmental DustTrak Aerosol Monitor can be deployed in remote location as a stand-alone unit with solar power. The instrument can literally be in the middle of nowhere to provide realtime access to data 24/7, 365 days a year. Customers in Australia have already deployed TSI DustTrak Monitors across the Australian outback inside enclosures with solar power systems. When an instrument is several hours drive from the nearest road, the data cannot be collected every day without the use of a sophisticated wireless data management system like the TSI Environmental DustTrak Aerosol Monitor.

Regardless of whether the instruments are as remote as being in the outback or just deployed around all sides of an open pit mining operation, getting to each instrument to collect data can be very time consuming. As shown in the open mine image, eight instruments are deployed around the mine site with each instrument located at 8km intervals (15mins driving time). The total travel time to visit all the instruments equates to 2 hours. Add an additional 10 minutes to download the logged data and to restart each instrument increases the total travel time to visit all the instruments to 3.3 hours. The Manual Data Collection table compares the cost to collect the data manually and using the TSI Cloud Data Management System as hosted by Netronix. As shown, the cost-savings is evident with use of the Cloud Data Management System when considering both the direct and indirect costs of employing manual data collection. Additionally, if site activity is regulated by a local air district or is cause for concern by neighbours, the operation could be at risk if the air district or local government issues a cease and desist order. How would shutting down operations for half a day impact the bottom line financially? How about shutting down for a week? The financial risks could prove to be huge. Thatâ&#x20AC;&#x2122;s why smart Risk Managers use every technology resource available to keep the operation running

54 Philippine Resources

efficiently. Real-time data collection works to avoid and mitigate problems. In our mining operation example, if weather conditions change and the wind switches to the northwest, sensors #2, 1, 8, 7 and 6 will begin recording elevated readings as methods of dust suppression fail. Using the Cloud Data Management System, Risk Managers, and the Operation team as a whole, can get alerts sent direct to their cell phones indicating sensor readings are exceeding the predetermined set point. Within minutes, this can initiate immediate notification to equipment operators to increase dust suppression control measures, or stop the dust generating activities for a limited time until the weather conditions remedy. In this example, the cost of perimeter dust monitoring is part of the price of managing risk and collecting good data. Itâ&#x20AC;&#x2122;s easy to see how real-time access to data and employing sophisticated alert capabilities can alleviate risk and save on operation money. It also can have great benefit in reaffirming the responsible nature of a company within the surrounding communities to maintain support for the existence of the operation. Ultimately, the true perspective and cost of monitoring data equates to what the data is being collected for and what kind of decisions will be made according to the data received by the sensors. Article courtesy of www.airmet.com.au

Air-Met;

Issue 1 2016

Energy News

www.philippine-resources.com

Floating LNG: Costs and Drivers

ith the LNG sector set for unprecedented growth, but with gas prices globally under pressure from both low oil prices and a very competitive supply situation, project developers are looking for innovative and cost effective ways to get their gas to market, both quickly and efficiently.

storage and regasification units (FSRU), LNG transport carriers, or floating LPG processing units (LPG FPSO). This article focusses only on those projects where natural gas is liquefied by cooling and is located on a floating vessel- Floating LNG. A list of some 25 current FLNG projects forms the basis of this study.These include some 20 projects in various stages of pre-FID development, 5 projects under construction, and none (as yet) in service.

Although historically the industry has stuck closely to the tried and tested traditional methods of producing LNG by land based liquefaction and storage with accompanying marine facilities, more and more projects are considering new alternatives, and many are actively pursuing floating concepts, built in shipyards, and moved into position where needed.

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FLNG: Costs and Cost Drivers Fundamental project decisions (onshore vs. offshore LNG, project feasibility) are being progressed on a limited understanding of FLNG development costs. Indeed, some feasibility studies have excluded FLNG cost altogether due to the lack of information. GCA has carried out a review of public domain cost information in order to bring some insight to the wide range of numbers quoted.

There has been a tendency (outside of the industry) to attach the “FLNG” label to any technology that is associated with gas, and floats. This includes floating

Continued on following page >

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The key question for the industry is how the economics of these novel projects will compare to more traditional approaches. To make informed decisions Natural Gas resource holders, investors and regulators need an understanding of the nature, costs and cost drivers of Floating Liquefied Natural Gas (FLNG) technology.

What is FLNG (and what isn’t)

Even among the “true FLNG” projects it is also important to recognize that this includes a wide variety of facility types, ranging from essentially liquefactiononly facilities limited to benign water environments, to fully-fledged gas preprocessing, liquefaction, storage and offloading facilities that can operate even in hostile environments.

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< Continued from previous page

Think of it in terms of a minimal facilities shallow water Gulf of Mexico development versus a northern North Sea / Norwegian Sea integrated platform. A big variance in cost results! FLNG Project Costs A convenient benchmark to compare FLNG projects is the “$/TPA” (US dollars per tonne per annum liquefaction capacity) metric. Figure 1 provides a histogram of published data, with costs normalized to 2015 US $ by application of capital cost escalation metrics. This data set covers press releases from projects announced, project in construction, and quotes published by vendors with no associated project. Data is grouped into “Bins” of $500/TPA increments, from below $500 to above $4,000. The data average is just under $1,500/TPA, the median is just over $1,100/TPA, and ranges from $200/TPA to over $6,000/TPA.

of some of the projects currently in construction.

to handle extreme weather conditions and a wide variety of reservoir fluids.

These estimates are generally at a preliminary stage of project definition, and relate to FLNG vessels of smaller train capacity; and low weight, lower efficiency, refrigeration cycles.

The cost data may also include first phase drilling and subsea development costs, and (in some cases) full cycle project costs including all wells required for full field development. These developments are typically based on high efficiency DMR refrigerant cycles, and have LNG storage volumes to allow full loading of an LNG carrier plus additional volumes in case of offloading delays (220,000 m3).

Clearly such a wide range of results is of little practical use. However, examination of the maturity and scope of the project data in each Bin provides some insights.

Bin C ($1,000 to $1,500/TPA) is characterized by recent cost data on vessels of smaller train size, with Nitrogen Recycle refrigeration process.

Bin A (below $500/TPA) includes data from vessel construction and conversion contracts, some early low-end speculative estimates, and small capacity inshore (sheltered waters) liquefaction projects with limited storage.

This process offers low specific weight, but is also of lower efficiency than (for example) Dual Mixed Refrigerant (DMR) processes. Nitrogen Recycle refrigeration processes have a relative process efficiency of 75, versus 100 from DMR1, thus producing proportionately less marketable LNG from any given quantity of feed gas.

A number of the data refer to vessel construction or conversion contract awards and may therefore exclude other critical project costs such as transport and installation, supervision, or client supply of key components. It is likely that pre-conditioning of gas to conventional pipeline specification is not included in these costs. Data in Bin B ($500 to $1,000/TPA) is dominated by information released by developers of FLNG concepts intended for lease, and early stage estimates 56 Philippine Resources

The Nitrogen Recycle process is also limited to a train size up to 1.5 MTPA. The LNG storage capacity of these vessels (177,000 m3) is sized to provide a full loading to the majority of LNG cargo vessels (120,000 to 140,000 m3 LNG, or 56,000 to 65,000 MT2). Bins D, E, and F ($1,500 to $3,000/TPA) includes the large capacity, high efficiency, remote offshore FLNG vessels designed

Additionally, these vessels may include full gas pre-conditioning, LPG extraction, and condensate stabilization and associated storage. Clearly, for comparability, these costs must be adjusted to account for the upstream project scope. Bins G, H, and I (above $3,000/tpa) include early stage (or out of date) estimates for the full project scope. In some cases, the cost benchmark is based on LNG capacity only, ignoring the condensate and LPG capacities but including the associated costs. This review shows public domain FLNG cost data to be a mixture of component costs, FLNG vessel costs, and part- or full-cycle project costs. Hence, the data Continued on page 58 >

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Energy News < Continued from page 56 has a very wide range. It is crucially important when comparing costs to understand technically what is being compared as well. FLNG Facility Cost Drivers Even when focusing on just the cost of an FLNG facility and excluding the project costs associated with reservoir development (drilling, subsea architecture, risers, and shore base), there still remains a large scope for variability in project cost and unit cost. The block diagram in Figure 2 illustrates the functionality that might be found in a typical full-scale LNG plant, with additional blocks related to an offshore FLNG vessel. All these processes are likely to be found in a full-scale FLNG development such as those in Bins D, E, and F above. However the processes circled (in red), mounted on an inshore-moored barge receiving pipeline quality gas from an onshore supply, would also be characterized as an FLNG development (Bin A). Clearly,

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Issue 1 2016

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the functionality of the vessel in addition to the core liquefaction capability is a key cost driver. A study by KBR3 (based on onshore LNG, but nevertheless illustrative), indexing a minimum scope “base” plant at 100, shows construction costs approaching a 300 index, driven mainly by the process complexity illustrated above. As noted when discussing smaller train size (Bin C), the choice of liquefaction technology will affect the vessel weight, cost, train capacity, and process efficiency. Lower efficiency processes also tend to have lower specific weight (i.e. tonnes of process equipment per TPA LNG capacity). A nitrogen recycle process requires 87% of the equipment weight required for an equivalent capacity DMR process, but delivers only 75% of the capacity. These process weight savings will have knockon effects in vessel size and costs. Feed gas composition and variability will impact the process functions required. H2S removal, CO2 & other inert gas removal, mercury removal, gas dehydration, and condensate separation

& stabilization may all be found in the “high cost” FLNG projects (Bin D and above), but are excluded from the scope of the lowest cost developments. Product storage and offloading rate is another key differentiator between projects. Shell’s Prelude FLNG provides 220,000 m3 of LNG storage together with 216,000 m3 of condensate and LPG storage. Some small, inshore moored concepts provide limited on board storage but rely on an adjacent, permanently moored LNG FSO. The available storage volume obviously affects the size of cargo vessel the development can service but also impacts system availability and operational continuity in cases where offloading disruptions occur. System availability and facilities lifetime impact costs and economic performance on many levels. The consequences of an unplanned process shutdown to an FLNG development in terms of re-start time, contractual penalties, and lost production provide a strong incentive Continued on opposite page >

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< Continued from previous page to aim for high reliability when overall economic performance is considered. Equipment sparing, storage capacity, offloading rate, vessel motion characteristics, mooring design, and vessel fatigue life all contribute to the overall uptime and cost of an FLNG vessel. A final cost driver, common to all floating facilities, is mooring design. The projects included in this review range from small barges moored in sheltered waters to world-scale 600,000 tonne facilities permanently moored to withstand Category 5 cyclone conditions. Mooring designs include jetty mooring, spread-moored, external turret, and internal turret. The reported cost of the turret in Shellâ&#x20AC;&#x2122;s Prelude development

exceeds the total facility cost of the smallest developments in this review. In summary, there are trade-offs between cost (and unit cost) with functionality, capacity, reliability, and process efficiency. Other Considerations Project assessment includes many other aspects beyond cost and capacity. FLNG developments may differ in certain aspects to more conventional projects (e.g. an onshore LNG option). The environmental footprint of an FLNG development, assuming equivalent process efficiency, is arguably less than an onshore plant. Of course no land is required for the FLNG vessel, no loading jetty, and no pipelines or shore approach. Furthermore, there is less likelihood of urban development near to the facility.

Logistics support for FLNG is likely to be supply boat and helicopter based, whereas an onshore facility might be serviced by road and fixed wing aviation. As an immature technology, experience suggests that cost predictability and cost control of FLNG developments will be an issue, at least with the early projects. This will require greater levels of contingency in time and budget, together with strong client project supervision. In turn this will pose increased risks to project finance providers, limiting the level and restricting the sources of financing that can be expected. By analogy with the evolution of the FPSO industry, FLNG does offer the opportunity for new commercial structures in LNG. There has already

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Philippine Resources 59

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Energy News < Continued from previous page been development of “spec” FLNG vessels, with a business model to lease these to resource holders and accelerate development cycles. Although difficult to place a dollar figure on mobility, FLNG facilities offer one major advantage over traditional approaches, as a result of them having the potential for relocation. This could be as a result of planned events, such as multiple smaller fields/ reservoirs, or unplanned events such as local political risk, disappointing reservoir performance or market conditions. For investors, this can represent a significant area of risk reduction with a potential commensurate adjustment to the cost of finance, or at least a mitigation of the technical risk premium mentioned above Finally, local content must be considered. However, these days both onshore and offshore project developments depend strongly on modular fabrication in yards remote from the project site. The host country’s capability to fabricate and deliver these modules is critical from a local content perspective. Although the near-term focus tends to be on the local content of project development, the long term prize lies in the local component of the operational support and economic

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multiplier effect during the decades of project operation. Future Trends The evolution of the FPSO industry since the first (IOC-sponsored) developments in the 1970s to the current day offers a model for the future direction of FLNG. Figure 3 compares the time on station of FPSO’s currently in service, with the early growth of FLNG facilities under construction or in planning. There is a clear similarity in the growth curves, typical of the trajectory of technology adoption in oil and gas. On this analogy, what trends might be seen in FLNG? Reduction in unit development costs. As more yards develop the capability to build FLNG units, supply chains evolve, and technology becomes established, unit costs (in real terms) are likely to fall. Easier finance. Technical maturity and project experience will build the confidence necessary for project finance to become available. This, in turn, will bring FLNG developments within the reach of the smaller player. Leasing. Vessel owners will begin to offer FLNG capacity on a leased basis. This trend is already emerging.

Commercial innovation. Other commercial structures will evolve to match project development risk with FLNG ownership risk. Technology innovation. Developers will continue to explore other options to new build. Vessel owners are already converting LNG carriers to FLNG. Conceptual designs for a higher capacity, twin-hull design, based on two LNG carriers, have also been considered. Variety in vessel capacity, cost, capability, and specification will continue to emerge. Unplanned outcomes. Inevitably, with any new technology development, some projects will not go according to plan. There may be economic shortfalls due to cost overruns, technical failures, or market conditions. Conclusions With an understanding of the technology choices and cost drivers behind FLNG projects, it is possible to make sense of the limited financial information offered in the public domain. Although the uncertainty range around FLNG costs will remain wide until the experience base develops, understanding is now at the stage where a more detailed appreciation of the requirements of each particular project can be used to prepare screening level estimates in support of concept selection. Author: Andrew Duncan, Principal Advisor, Gaffney, Cline & Associates. Email: GC A.BD.Singapore@ gaffney-cline.com 1 Natural Gas Liquefaction Technology for Floating LNG Facilities: Air Products and Chemicals Inc. 2013 2 1 m3 of LNG is equivalent to 0.465 tonnes 3 KBR Paper PS4-1 “LNG Liquefaction- Not All Plants are Created Equal”

60 Philippine Resources

Technical News

Issue 1 2016

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Filtration of tailings: a new approach for sustainable mining

ailings management has become one of the most critical points in the life of a mine, most of all because of the increasing dimensions and productivity of it, but also as a consequence of the fact that environmental awareness is becoming more and more widespread in the last few years. So serious has the tailings management issue become that it can even drastically change the profit margin of the whole operation, putting its life into risk. Traditional waste disposal methods, which bring to the creation of tailing ponds, are more and more opposed by local com-

munities, who fear the risks related to the presence of a dam that could eventually collapse, but also the environmental impact of such presence has to be remarked, since it generally implies that the basin water is polluted with chemicals and heavy metals. It is also worth considering that the service life of these tailing ponds is quite short. Big containment basins are not safe, especially in those areas that are subjected to earthquakes or have a tropical climate, because in this case the heavy rainfalls can affect the dam’s stability causing many natural disasters that were sadly reported recently. Furthermore, the new technologies are making more and more profitable even

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Technical Manpower & Consultancy Services Worldwide Bright Heritage Associates (H.K.) Limited also known as “BHAL” provides technical manpower and consultancy 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. With BHAL you will benefit from: • Contracted consultants on a contingent basis providing you with the flexibility to easily and cost-effectively accommodate variability in demand and project cycles. • A diverse pool of consultants residing around the world reducing both delivery times and costs. • A single point of contact for consulting and contracting for multiple trades and skills simplifying your projects and requirements. • Old fashioned values, courtesy and a corporate culture founded on honesty, integrity and professionalism. • Internal stakeholders with mining, civil and industrial experience. Contact Us:

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Technical News < Continued from previous page the exploitation of low-grade ores, which increases the quantity of treated material and at the same time it decreases the service life of the basin. The use of filtration systems for tailings management is gaining more and more ground worldwide. Dry stack has several advantages: no risks of dam collapse or soil liquefaction caused by an earthquake, no presence of free water which reduces the environmental impact and, last but not least, smaller ecological footprint and longer service life of the storage. In this editorial we want to report two case studies that show how filtration through Diemme速 Filtration filter presses has improved the overall process. Case A: Real del Monte In Real del Monte mine, Mexico, the use of Diemme速 Filtration filter presses has brought to a considerable operational improvement compared to the previous washing system by means of counter-current decanters (CCD). In this plant the mineral, which is an old tailing already treated some decades ago and still rich in gold and silver, is milled and treated according to the classic Merrill-Crowe process. After being subjected to cyanide leaching, the sludge used to be washed through a counter-current decanter circuit. The drawbacks of this process were the high water consumption and the long dwell time inside the plant. It was also impossible to increase the production due

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to a lack of free-space and to the high ecological footprint of the CCD circuit that would need an expansion. In Real del Monte mine, the countercurrent decanters circuit was replaced by four Diemme速 Filtration filter presses model GHT 2500, which are able to filter the sludge coming out from the first thickener and wash the wet cake during the filtration cycle. The results in this case were outstanding: 2500 MTPD of old tailings still containing gold and silver are milled once again to obtain a very fine slurry, which is leached with cyanide. Afterwards, the sludge is sent to a high rate thickener and the underflow goes to the filter presses. The washing in the CCD circuit is in this way avoided. The cake is dried up to 80% and, thanks to the counter-current washing performed on the cake already formed inside the filter press, we are able to recover up to 99.8% of the leached gold and silver. This is a slight improvement compared to the quantity recovered by means of the traditional CCD system and it also allows a remarkable reduction of the sludge dwell time in the process, only two hours after cyanide leaching. But there are other advantages for this: First of all, the final concentration of precious metals is higher, thanks to the reduced washing volume that the filter press requires compared to the CCD system.This determines as a consequence a considerable improvement in the overall performance of the whole process. But the key element that contributes to the success of this operation is the dif-

ferent tailings management after filtration: instead of storing 50% of solid matter sludge polluted by cyanides in a surface impoundment, we are now able to stock the cake made up of 80% of dry matter in a smaller area and by respecting the environment at the same time. The use of membrane plates allows not only the recovery of precious metals, but also the cake decontamination during the washing phase inside the filtering cycle: in this way, we can obtain an inert cake from a highly toxic material, and this cake can be stacked without any special care and in compliance with environmental legislation, thanks to the cake decontamination. Also in this way it was possible to achieve the increase of productivity of the plant: the four thickener of CCD circuit were replaced by two filter presses, so there was enough space to install other two filters and to double the previous productivity reaching the goal of 2500 MTPD from the previous 1200 with the original CCD circuit. Finally, the last advantage is the possibility to recover most of the dissolved sodium cyanide and water used in the process, with further considerable savings. Case B: Consorcio Minero Horizonte Another interesting case of gold tailing dry stack has been performed in the Consorcio Minero Horizonte plant, Peru. In this case, the terrain configuration did not allow the creation of a surface impoundment that could be broad enough to store the sludge. The mine is in fact situated on the Peruvian Andes, which are often subjected to earthquakes and are made up of very deep valleys that are not very suitable to host storage basins. The problem was solved by using two Diemme速 Filtration model GHT2000 filter presses. In this way, instead of sending to the surface impoundment 4000 m3/day approx. of sludge, now only 1200 m3/day are stacked in the form of dry cakes containing 85% of solid matter. In this case, Continued on opposite page >

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Technical News

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< Continued from opposite page the little area at the valley bottom leant against the side of the mountain that has been destined to the dry stack will be able to hold all the tailings produced in the next 18 years of the mine’s service life. This is possible thanks to the reduced volume (less than 1/3) that the cake occupies compared to the sludge and to the fact that it can be stacked by means of traditional earth-moving tractors and stored in terraces placed on the side of the mountain. This operation is completely safe from an environmental point of view and this becomes particularly important if we consider that this is an area prone to high seismic activity and to heavy rainfalls. Indeed, the cakes obtained through filtration with Diemme Filtration GHT 4x4 filter presses are not subjected to liquefaction in case of earthquake thanks to their high percentage of solid matter and to their

low degree of residual moisture. For the same reason they are not dissolved even by the heavy seasonal rainfalls and are therefore not subjected to landslide anymore. The management of the tailings is now far safer than before. Besides being safer and having smaller ecological footprint, this kind of tailings management is also cheaper: first of all, the area destined to cake disposal is much smaller and, secondly, the stacked dry cake has already its own stability and containment devices such as solid dam embankments are not required anymore. GHT 4x4 filter press: main features The design and development of the Diemme®filtration GHT 4x4 pressure filter has led to the application of pressure filter technology in dewatering mine tailings. The key features of the design allow huge

filtration areas to be accommodated in a single machine (typically 1,000 to 1,600 square metres), minimising the number of units required in a single duty. Previously, the number of pressure filters required for a typical tailings filtration duty was economically prohibitive so the technology was rejected. Over the last ten years, Diemme®filtration has built an impressive list of tailings installations and is now known for building the largest pressure filters in the world. The GHT 4x4 design’s most important features are the four hydraulic rams that hold the plate pack together, working in tension when closed, and the overhead beam containing the fast ‘carousel’ plateshifting mechanism. These features allow large numbers of filter plates to be installed in a single machine and enable the plates to be moved Continued on next page >

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Technical News

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Isuzu leading the way in the PH

n its thrust to continue to promote brand-new trucks and maintain market leadership, Isuzu Philippines Corporation (IPC) is set to strengthen its fleet of heavyduty trucks by keeping stocks locally available. Prior to this arrangement, Isuzu only accepts heavy-duty truck orders through indent or special importation direct from its mother company, Isuzu Motors Limited in Japan. But starting last year, IPC began retaining insignificant number of its heavy-duty trucks in anticipation of the growing demand. The C and E Series trucks are equipped with a 14.2-liter 6WF1-TCC directinjection OHC diesel engine which provides a maximum output of 390 horsepower at 1,800 rpm and a torque of 1,863 Nm. The environment-friendly power plant also comes with electronic controlled common rail system which reduces emission and greater fuel economy. “To be the number one in the truck segment means that you need to have a variety of products that will build and maintain customers. The trucks should be made available at the least amount of time so as not to delay our customer’s operations, which is why we decided to keep a pool of heavy-duty trucks in our local plant - to easily supply the demand,” said IPC President Hajime Koso. These trucks also come with a wider gear range with the addition of a 7-speed and

16-speed transmissions that gives better handling. Inhibitor shift warning alerts, which warns the driver when shifting on the wrong gear, is also available on the 16-speed transmission. Inside its cabin is ample of space for at two to three passengers. Drivers have easy access to quick-read meters and a tilt and telescopic powered steering wheel. Other amenities such as cup holders, air conditioner and AM/FM radio with CD player. Air suspension seats are reclinable with center seat back tray and optional bed to relax after a long day of driving. Other key features to look forward in the new Isuzu C and E series are: simplified rear body mounting which adds trailer versatility; heavy-duty front and rear leafspring suspension that absorbs vibration and smooth ride; and a high-clearance smoke-stack with vertical silencer for better exhaust. Isuzu has also improved the safety features

< Continued from previous page very quickly thus minimizing cake discharge time. The filters are equipped with automatic cloth washing systems that use low volume, high pressure nozzles, washing each cloth thoroughly. Such a washing system maintains the filtration rate and extends cloth life. Successful pressure filtration of mine tailings requires extensive sampling and testing of the material before designing and sizing the filters. Of course these filters could be equipped with recessed plates for standard dewatering duty but, if the recovery of leachate or the decontamination from a pollutant is required, more sophisticated membrane plates could be employed. Diemme’s laboratory is equipped with the latest analytical tools to enable precise characterization of the feed slurry. The particle size and shape are examined

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of their heavy-duty trucks combining its highly rigid cab construction and steel door beams with features such as ABS, worry-free trailer coupling, locking fuel tank with step to prevent theft and spillage, replaceable sediment filters to remove deposits and water from oil and a protective insect screen over the radiator grille to avoid damage caused by stone chips and insect. This year, Isuzu will stage another round of its annual truck display at the SMX Convention Center Manila sometime in April. During the display, truck buyers can view the different body applications for the trucks and can even avail of the special discount and promos. Select Isuzu dealership nationwide will also display heavy-duty trucks in their showrooms to cater to more customers especially in the Visayas and Mindanao areas. For more information about the Isuzu C and E Series trucks, log on to www. isuzuphil.com for more details.

carefully as these can provide clues to the filterability even before filtration tests are begun. X-ray fluorescence, and infrared spectroscopy are used to help measure cake washing efficiency when valuable products or harmful contaminants are required to be removed from the filter cake before cake discharge. Diemme Filtration’s headquarters and manufacturing center is located near Bologna in northern Italy, where it started in 1923. Since the very beginning the R&D is the heart and the success key of this brand. As an example non-standard plates with optimized fluid dynamics are used when high washing efficiency are wanted and not achievable with standard solutions. The company now has more than 7,000 installations serviced by offices and representatives world-wide.

Technical News

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Metso Mill Lining Solutions: Tailor Made to Meet Your Requirements

evelopment and innovation is synonymous with Metso. Metso has been in the mill lining industry for decades and has encountered different varieties of mills and countless challenges. This makes Metso well equipped to solve problems that may occur in the grinding process. In 1959, Metso, through Skega, was the first company in the world to develop and manufacture rubber mill linings. Back then the objectives were different, the mills and process plants were small and most of the linings were installed by hand. Capacity and energy were not the main concerns at the time. Most important was to

have light-weight linings which were easy to install. The light-weight and easy to install rubber mill lining met those requirements. The trend then turned to bigger mills with, in comparison, an enormous capacity which changed the game completely. The demands on supplier, service and product became quite different. To meet the changing demands Metso needed to develop a more extreme liner type. The outcome of this was the Skega PolyMet concept which combined the most desirable properties of rubber and wear resistant metallic alloys to maximum advantage. A successful and flexible concept which Metso still develops to suit new applications. Metallic linings are traditionally used in almost any given mill application

and is a proven concept. Three decades ago metallic mill linings were added to the Metso product range allowing Metso to offer a complete range of mill linings. Challenge the tradition Metso can combine many types of liners and materials in order to offer completely customized solutions to maximize cost efficiency. Unique solutions consisting of the best mill lining materials available can result in energy efficiency, maximized throughput, weight reduction as well as overall cost reduction. Our total cost approach includes looking at minimizing downtime and maintenance costs. Continued on following page >

Is able to serve you better with

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Technical News

< Continued from previous page There is a long and strong tradition of using only one material in a certain mill. The lining may have fulfilled its purpose for many years but it is not necessarily completely optimal. There is often room for improvements.To challenge the tradition and to blend different types of liners and materials, presents new opportunities for optimization. One option may be metallic lifters combined with Poly-Met shell plates and a rubber/Poly-Met discharge system. A combination which can extend the wear life of the shell plates and lower the weight of the lining allowing increased throughput. Different solutions for different needs One mill lining application is never identical to the next. Customer objectives are also different and may change over time as ore properties change, processes change, production rates change etc. Our wide product range allows Metso to find solutions for the most diverse conditions and challenges.

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Different problem requires different solutions. A rubber lining is light-weight and there is no leaking or peening between the liners. It is well suited in applications where installations are done manually.

Metallic linings are robust and suitable in mills with high loads. Metso can provide a wide collection of profiles for any type of mill, ranging from rod mill and ball mills up to big AG and SAG mills.

The noise reduction properties are generally appreciated as mills are loud machines. The flexibility of rubber makes the material ideal for certain products like grate plates. A rubber grate plate moves and there is no risk of permanent obstruction from media or rock.

As metallic liners are cast it is possible to make any shape which makes the liners easy to optimize. Metso provides optimized types of alloys, everything from though impact resistant to hard and abrasion resistant types, carefully selected for each specific application.

Poly-Met combines the best of two worlds, the low weight and flexibility of rubber and the hardness and abrasion resistance of metallic alloys. The dampening effect of the rubber absorbs extreme impact, which makes it possible to use hard alloys without risking breakage. Most of the products available in rubber is also available in Poly-Met.

Metso - continuous development and innovations

The Poly-Met shell plate is a good example of a versatile product. It can of course be used with Poly-Met lifter bars but it is also possible to combine the Poly-Met shell plate with metallic lifter bars in mills where cracking shell plates is a problem or where the liner weight is an issue.

More than 50 years of pioneering developments have given Metso an exceptional bank of know-how and experience which is a prerequisite when developing leading innovative products. The latest innovation is the successful Megaline concept, improving worker safety and minimizing mill reline time in big AG, SAG and ball mills where modern, advanced liner handlers are available. Continued on opposite page >

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< Continued from previous page Due to the low weight, the Megaline elements can generally be made larger than conventional liners, reducing the number of parts to be installed. Each Megalin integrates multiple components, has a minimum number of attachment points and a unique attachment system making the liners easy to install and remove. The bolts are inserted from the outside of the mill and there is no need for workers to be in the dangerous area close to the liners being installed. Metso also recently launched Megaliner™ for grinding mill heads as a complement to the successful shell liners. If applicable the head elements can be designed to incorporate, not only lifters and head plates, but also the filling segments to further reduce the number of liner components. The Megaliner™ concept is a result of Metso’s aim to meet customer objectives and find solutions which improves safety and the customer’s total cost. Metso’s mill discharge systems are developed and optimized for each individual mill. As an example, the curved discharge

system is designed to achieve a more effective discharge in a single rotation mill. It ensures efficient discharge of the slurry and prevents recycling. As a result efficiency increases and wear decreases. Metso offers light-weight designs with a perfect fit and every part made in the best material. Metso seeks improvement possibilities and close relationship with the customers. A mission of Metso is to help customers, not just for the day, but in the long run and support them in their future challenges. To design for the present and to prepare for the future, Metso is continuously monitoring liner wear and collecting process data. By analyzing the information, Metso can offer continuous improvements. A proactive approach is beneficial for both customers and Metso. Extended offerings Metso has a variety of service offerings. Metso’s simulation softwares are perfect tools enabling Metso to thoroughly try out ideas and find solutions functional both when it comes to wear

performance and process optimization. Basic simulations are generally included and more advanced simulations can be offered or included in service contracts. Auxiliary products like customized mill trommel screens and trunnion liners are also part of Metso’s product offering. Grinding media can be offered in a Full Comminution Offering. A Life Cycle Service contract spans over a longer time and can include different products, (pumps, crushers etc.) and also includes services like installation, maintenance and maintenance planning, training, consignment stock etc. Contracts are generally set up for a minimum of two years and are individually packaged for each specific customer, based on application and client preferences.

Philippines joins geothermal energy alliance

hirty-six countries officially started an initiative to promote geothermal energy in developing economies as a cleaner alternative to oil, gas and coal. The Global Geothermal Alliance, launched on the sidelines of the UN climate talks in Le Bourget, aims at a sixfold increase in geothermal electricity production and a tripling of geothermalderived heating by 2030. At present, geothermal is growing modestly, at three to four percent per year, providing 12 gigawatts of electricity annually. But this just a fraction of its overall potential of 100 gigawatts, according to the industry. Only 24 out of 90 countries with geothermal potential actually use the resource. The alliance said its members will seek to overcome “political uncertainty” about geothermal and strengthen the industry’s skills base. The Global Geothermal Alliance initiative was sketched out in September 2014 at a summit organised by UN Secretary General Ban Ki-moon. Members include countries on thermal “hotspots” in Africa, Southeast Asia and Latin America, ranging

from Kenya and Tanzania to Malaysia, the Philippines and Guatemala. Geothermal energy entails drilling into hot rock and using the heated water to generate electricity or provide heating for communities. It is considered exceptionally clean, as the heat extraction process requires far lower emissions of carbon dioxide (CO2) compared with fossil fuels. It is also deemed sustainable, given the almost limitless source of the energy, although individual wells can cool down or run out of water. Obstacles to geothermal are the high cost of drilling and risks entailed in the exploration phase. “Geothermal energy development particularly in developing countries faces important challenges,” the alliance said. “Due to risks related to geological drilling during the exploration phase, along with the associated costs, financing the early stage of the process is limited to investors that understand and accept the possible associated risks.” Philippine Resources 67

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Calendar of Events 15

Air-Met 59 Antrak Philippines

Asian Corporate Sustainability

Asia Rep

Austhai 37 Brunel OBC Bilfinger Water

Bright Heritage

Del Net

Diamond Drilling

Dynalab 17 Goulds Water

GXD 2 Inaec Aviation

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Lomar 57 Lycopodium 35 Metso 3 Oil & Gas 2016

Orica 7 Orion Projects

Ostrea Minerals

Paperless Trail

Philippine Mining Luncheon

Power & Electricity World 2016

Protect 2016

P.T. Cerna

QED IFC RDCL 38 Reflex 1

Philippine Resources 2016 Editorial Deadlines (Contributions are welcome for the Editorâ&#x20AC;&#x2122;s consideration before the dates below) ISSUE 2, 2016 April 15

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ISSUE 3, 2016 August 19 ISSUE 4, 2016 October 21