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Philippine Resources Mining, Petroleum & Energy Journal Issue 4 2011-2012, November-January

Anti-mining campaign turns ugly

Want to buy gold at $500 an ounce?

Mining ban on Zamboanga peninsula

Rethink urged on oil search rules

Plugging leaks in dangerous ponds Photo by Roel N. Catoto

Current Resources November 2011 - January 2012

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Mineral Resources

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Getting their act together

Supreme Court ban helps spread of anti-mining ‘people’s power’ Anti-mine campaign turns ugly After conflict, new hope for dialogue Raadsma out at Crazy Horse Changes at St Augustine NiHAO teams up with Glencore, AGP for nickel mining projects ‘World class’ iron sands project on the way in Cagayan River delta Major investments eyed in China deals

Oil & Gas Resources

BP backs Raisama with Cadlao finance Partner for Basic Energy ‘High interest’ in new contracts PNOC-EC readies new drilling Rethink urged on oil search rules Gas2Grid looks deeper in Cebu New fields may make the Americas top of the oil companies’ charts

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Renewable Resources

Investment Resources

Environmental Resources

Resources Events

Supply Resources

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Geothermal energy risk management Psst, want to buy gold at $500?

Retired open pit mines are opportunities Mining defense gets its act together Plugging leaks in dangerous ponds Mapping new ground with LiDAR Monark boosts support for mining Brunel, Site Works team up Camp manager on the expansion trail Diesel fuel, filters and maintenance Solving a tough ore crushing challenge

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Philippine Resources Mining, Petroleum & Energy Journal Issue 4 2011 November ‘11 - January ‘12

Philippine Resources Journal is published independently for executives in Philippine mining, petroleum and energy and associated business sectors.

Publisher Elizabeth Galura Charismatic (WA) Pty Limited Consulting Publisher Greg Brimble Editor Simon Halley Sales Manager Cora A. Laureano Design/Production Edrick Bruel Contributors Mars Buan 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 Simon Halley edit@philippine-resources.com Phone +63917 833 1656

Getting their act together

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hamber of Mines of the Philippines president Benjamin Philip Romualdez was keynote speaker at a recent Philippine Mining Club lunch forum. He was asked to single out the three most positive recent developments for the mining business sector – and he had to pause and think for a moment or two before replying.

In the end Romualdez could single out only one positive development: “The mining industry has come together.”

After largely fragmented responses by pro-miners in the face of all the recent bad news and the gains made by the anti-miners, Romualdez believes the key members of the mining sector are finally getting their act together.

He was referring mainly to the Chamber of Mines, which is the senior industry grouping of miners and should be the main mouthpiece, but which has been lacking. Romualdez recounted recent chamber developments which may mean that, indeed, it will be more effective. Its successful recent Mining Philippines 2011 Conference & Expo broke new ground with participation by senior government officials; a message from President Benigno Aquino (although not personal attendance) that he is in favor of responsible, large-scale mining; and several important advances towards ensuring responsibility, accountability and transparency by miners such as an independent “scorecard” system.

Importantly, the Chamber of Mines has strengthened its own structure and hopefully its activities with the appointment of two new vice presidents in key areas. In charge of image building is

Cora Laureano ads@philippine-resources.com +63918 959 3536 Edrick Bruel luovoolagallina@gmail.com Phone +63905 2684656

Rocky G. Dimaculangan while legal challenges and legislative matters are now under the care of skilled attorney Ronald S. Recidoro.

Dimaculangan’s job is very important and he has had a lot of practice. Before joining the chamber he was director of public affairs at TVI Resource Development and saw that company through very difficult times when its public image was at all an-time low.

Romualdez moved on at the mining club forum to exhort mining sector members to keep their act together, to work in the same direction, to cooperate rather than compete, to be active pro-miners rather than passively “staying under the radar” which many have chosen as corporate policy. For those who have grown somewhat cynical about the Chamber of Mines, this was good stuff and a cause for optimism.

Romualdez also touched on an another key issue in industry unity – the hoped-for revival of the Minerals Development Council or something similar, involving both private sector and government representatives and covering such until-now fragmented key areas as security, regulations, local government, production, environment, licensing and legislation.

The Minerals Development Council was abolished in late 2010 by President Aquino because he believed its functions were already being handled by other government departments, particularly the Department of Environment and Natural Resources, as well as budgetary constraints. Ironically, both DENR Secretary Ramon Paje and Department of Interior and Local Government Secretary Jessie Robredo are now recommending the council’s revival.

But care must be taken that a bornagain Minerals Development Council does not become unwieldy in trying to give everybody a voice. ■

___ Philippine Resources Journal is printed in Manila by IPrint.

Digital online edition www.Philippine-Resources.com

6 Philippine Resources

Chamber of Mines President Benjamin Philip Romualdez (center) with the chamber’s two new key staff members – image builder Rocky G. Dimaculangan (left) and law expert attorney Ronald S. Recidero.

Simon Halley Consulting Editor

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Supreme Court ban helps spread of anti-mining ‘people’s power’

By Jesus Llanto

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avoring a petition by religious and environmental groups, the Supreme Court has banned mining on the Zamboanga Peninsula in the southern Philippines. In a recent decision, the tribunal directed the government’s Department of Environment and Natural Resources and the Mines and Geosciences Bureau (MGB) to cease issuing new mining permits and applications by issuing a Writ of Kalikasan.

The petition was filed by the Philippine Earth Justice Center, Alliance to Save the Integrity of Nature, a group representing the indigenous Subanon tribe, Bishop Jose Maguiran and other private individuals who claimed mining activities on the Zamboanga Peninsula have dangerous effects not only on the environment, but also on indigenous communities.

The petitioners argued that 2008 data from the MGB showed that the total land area subject to and opened for mining on the Zamboanga Peninsula had reached 703,595 hectares, accounting for 45.25 percent of the peninsula’s total land area. In March 2011, the total land area opened to mining reached 51 percent of the peninsula’s land mass with the approval of 170 mining applications.

The Zamboanga Peninsula – composed of Zamboanga del Norte, Zamboanga Sibugay and Zamboanga del Sur provinces, and Isabela and Zamboanga cities – is a mineral-rich region. While many of the mining operations in the area are small-scale mining, there are at least 33 major ongoing, large-scale operations there.

It remains unclear how the Supreme Court ruling will affect ongoing mining on the peninsula, as the high court’s ruling was specific to new applications and was conspicuously mum on the previously granted mining permits, licenses and agreements.

What is clear, however, is that the Supreme Court ruling has effectively curtailed further mining opportunities 8 Philippine Resources

on the Zamboanga Peninsula and, by extension, all their projected benefits. In addition to the mining project across the peninsula, and several more approved mining permits, the majority of the area’s mineral resources remain untapped.

The National Economic Development Authority’s regional development plan for the Zamboanga Peninsula states that gold and silver deposits can be found in nine areas in Zamboanga Sibugay, seven in Zamboanga del Norte, four in Zamboanga del Sur and two in Zamboanga City. Copper, zinc, lead, iron, manganese and chromium ore deposits, and non-metallic minerals Continued on page 10 >

Jesus Llanto is a business intelligence research analyst with Pacific Strategies and Assessments (www. psagroup.com), based in Manila.

MAJOR MINING INVESTMENTS AND OPERATORS IN ZAMBOANGA PENINSULA Source: MGB and PSA Research

Company China Metallurgical Construction Corp Peng Cheng Metallic Resources Corp EMACO, Inc. Villor Mining Corp.

VL Chrome Corp.

TVI Resource Devt. Phils., Inc. (Assignment from Ramon B. Bosque/Benguet Corp.)

Philex Gold Phil., Inc. Siennalynn Gold Mining Corp.

A-Dynasty Multi-Purpose Cooperative Said North Mineral Corporation (Assignment from Kennel Mining Corporation) Glicerio C. Pescado Jr. TVI Resources Development Phils. Inc. (Assignment from Zamboanga Mineral Corp.)

Hard Rock Mineral Trading, Inc. 168 Ferum Pacific Mining Corp.

Geotechniques and Mines, Inc. Roldan B. Dalman Peng Cheng Metallic Resource Corporation Maharlika Dragon Mining Corporation Czarstone Mining Corporation Cresente Y. Llorente, Jr. SEQ Mineral Resources Corporation Danilo Lambatan Leonardo I. Dalman Cresente Y. Llorente, Jr. Maribel S. Belandres Celia S. Yu Ma. Riza D. Monteclaro Thaddeus A. Montano/Montano Construction Mark Lloyd R. Bayawa Elvira D. Tan Preulo D. Jaloslos Giovanni N. Empeynado

Location Zamboanga del Sur Zamboanga del Norte Sibuco, Zamboanga del Norte Siayan, Zamboanga del Norte Dumingag, Zamboanga del Sur Siocon, Zamboanga del Norte Sibutad, Dapitan City and Rizal, Zamboanga del Norte Titay, Ipil and R.T. Lim, Zamboanga del Sur San Miguel and Guipos, Zamboanga del Sur Siayan, Sindangan and Jose Dalman, Zamboanga del Norte Kumalarang, Zamboanga del Sur Diplahan, Zamboanga del Sur Vitali, Zamboanga City Midsalip and Bayog Zamboanga del Sur Midsalip, Zamboanga del Sur Del Norte Siayan, Zamboanga del Norte Polanco, Sergio Osmena and Kalawit, Zamboanga del Norte and Ipil, Zamboanga Sibugay Midsalip, Zamboanga del Sur, and Siayan, Zamboanga del Norte Dumingag, Zamboanga Del Sur Sindanan, Zamboanga Del Norte Mahayag, Zamboanga Del Sur Sindangan, Zamboanga Del Norte Sindangan, Zamboanga Del Norte Siayan, Zamboanga Del Norte Labangan, Zamboanga Del Sur Sindangan, Zamboanga Del Norte Polanco, Zamboanga Del Norte Sindangan, Zamboanga Del Norte Katipunan, Zamboanga Del Norte Katipunan, Zamboanga Del Norte Gutalac, Zamboanga Del Norte

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Decision a clear setback to mining < Continued from page 8 including asbestos, limestone, marble, quartz, sand and gravel, can also be found throughout the region.

These mineral deposits, however, remain largely untapped due to:

• Policy instability at national and local levels;

• Opposition from various interest groups;

• The tedious and cumbersome permitting process.

Proof of the untapped mining potential in the region is clear in the small contribution of mining to the gross regional development product. According to the most recent available statistics from the National Statistical and Coordination Board, mining and quarrying output accounted for only two percent of the Zamboanga Peninsula’s gross product in 2009.

The Supreme Court decision is a clear setback to the development of the mining industry, and to the Philippines’ still fledgling efforts to attract foreign direct investments on the whole. In addition to the already myriad issues and concerns (such as corruption, red tape, poor or absent infrastructure, politicized decision-making and insecurity) that have hindered the flow of foreign capital into the country, the state of the Philippine judicial process shows that the national legal framework can also be a serious business and investor risk, even in industries touted by the national government as the anticipated drivers of

10 Philippine Resources

income and development for the country and its people.

The controversial decision is unnervingly reminiscent of the high court’s January 2004 ruling on the case of an indigenous Blaan group in South Cotabato against the now defunct Western Mining Corporation. In that ruling in favor of the plaintiffs, the Supreme Court nullified provisions of the 1995 Mining Act which allowed foreign mining firms to operate in the country under financial technical assistance agreements with the national government.

That decision, which was penned by former associate justice and now Ombudsman Conchita Carpio-Morales, stated that foreign-owned companies are not allowed under the 1987 Constitution to enter into service contracts for the exploration and development of the Philippines’ mineral and oil resources.

The ruling threatened not only mining companies but also oil firms seeking to explore the Philippines. Back then, analysts said the ruling could jeopardize the operation of the Malampaya natural gas project in Palawan, in which Dutch oil giant Shell and the United States-based Chevron each had a 45 percent stake.

In December 2004, the Supreme Court reversed its decision. Unsurprisingly, foreign direct investment in mining immediately jumped from US$5 million in 2004 to US$170 million in 2005).

Mining is a capital-intensive industry and most of the companies that have the financial muscle and technical capa-

bility to responsibly and most effectively engage in the extractive industries are foreign or multinational. And while mining still comprises a relatively small chunk of the total foreign direct investment in the Philippines, the industry has been strongly credited for providing employment, contributing to local economies, facilitating infrastructure development in host areas, and raising the standards and improving mining practices and operations in the Philippines through new technology and best practices.

In Zamboanga, for instance, MGB regional director Albert Johann Jacildo acknowledges that the mining ban could result in an economic imbalance that could undermine the growth in employment and other businesses across the Zamboanga Peninsula. Moreover, there are serious and legitimate concerns that while the mining ban will likely prompt unscrupulous small-scale miners to operate illegally, further undermining government regulations and environmental safety standards.

More importantly, the ban could become a dangerous precedent in the Philippines. Militant environmental, religious and indigenous peoples’ groups as well as anti-mining personalities in other parts of the Philippines will likely be emboldened to file their own writs of kalikasan or some other resolutions resulting in the imposition of similar bans and the cancellation of mining permits.

Continued on page 12 >

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Ban may set dangerous precedent < Continued from page 10

The Writ of Kalikasan has become another readily available tool for antimining entities to harass and possibly even disrupt various other mining firms, which otherwise operate legally and in compliance with government standards and regulations. This is on top of an already growing list of anti-mining initiatives by local government units that threatens even legitimate mining operations in different parts of the country.

In September 2011, just a month after the Supreme Court ruling, the Department of Environment and Natural Resources cancelled the nickel mining permit of Altai Philippine Mining to explore Sibuyan Island in Romblon province. Local officials led by San Fernando mayor Dindio Rios initiated the cancellation, citing adverse effect on tourism, natural resources and wildlife on the island. The mining permit of Altai Mining, a Canadian-Philippine joint venture, was approved in 2009 and covered a 1,580hectare area. It is worth noting that the provincial government of Romblon has had a moratorium on all metallic mining activity in the province since January 2011, when governor Eduardo Firmalo

signed an executive order that was unanimously endorsed by the provincial board.

In South Cotabato, the provincial government board in 2010 passed an ordinance banning open pit mining that threatens the development of the Tampakan mine project. At stake are the biggest untapped copper reserves in South-east Asia.

Sagittarius Mines Inc., which is partly owned by Switzerland’s Xtrata and Australia’s Indophil groups, has a financial technical assistance agreement with the Philippine government to explore, develop and operate in Tampakan.

While the project is still in the development phase, Sagittarius Mines has already poured over 2.5 billion pesos into the national economy in 2010 and is currently employing about

The Writ of Kalikasan has become another readily available tool for anti-mining entities to harass and possibly even disrupt mining firms.

1,500 people. The figures are expected to significantly expand when the company commences production in 2016 – but the open pit mining ban threatens to stall the project.

The provinces of Occidental Mindoro, Oriental Mindoro, Marinduque, Eastern Samar, Samar and Western Samar have either similar mining moratoriums or other antimining ordinances. ■

Writ of Kalikasan

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he Writ of Kalikasan is a special civic action and environment law promulgated by the Supreme Court in April 2010 for the quick resolution of environmental cases. A special project of recently retired chief justice Reynato Puno, the writ empowers local communities to fight environmental degradation and allows for the expedited litigation of complaints filed by individuals or groups claiming that their:

• Constitutional right to a balanced and healthful ecology is violated;

• Constitutional right to a balanced and healthful ecology is threatened with any violation by an unlawful act of omission of public officials or employees, or private individuals or entity, and such violation or threat involves “environmental damage such magnitude as to prejudice the life, health or property of inhabitants of two or more cities or provinces.”

Essentially, the Writ of Kalikasan allows individuals and groups to protest activities which could adversely affect their economic and social rights. An element of the writ called the “precautionary principle” effectively permits special environmental courts to issue protection orders against individuals and/or business entities engaged in construction or extraction projects, even if those entities have secured the required legal permits and licenses for operation. The writ also exempts poor plaintiffs from paying court fees that they would ordinarily incur in the prosecution of environmental cases.

The initiative alarmed the foreign-invested business community because irresponsible issuance of protection orders could cause unwarranted interruption to business operations of infrastructure, natural resources, and other investors and could very well shut them down completely. Among the sectors forecast to be hardest hit by the measure are mining, power and energy, agriculture and real estate development. The Supreme Court issued the first Writ of Kalikasan in November 2010 in favor of condominium residents in Makati City who were worried about the health and environmental effects of the operation of a leaking pipeline belonging to the Lopez-owned First Philippine Industrial Corporation.

12 Philippine Resources

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Anti-mine campaign turns ugly

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dive on the Philippine Stock Exchange but executives saw this as little more than a knee-jerk reaction.

But the rebels have made it clear they intend to follow up with more raids which may not be as lenient in terms of harm to people. At the same time, there is now the threat that vigilante groups may go into action against the rebels to make up for military shortcomings. All in all, this is a dangerous escalation that has the mining sector worried.

Immediately after the Taganito raids, NPA spokesman Jorge Madlos told media the guerillas had written letters and sought meetings with executives of the mining companies, including parents Nickel Asia and Japan’s Sumitomo group, to tell them to stop practices that they deemed destructive to the environment.

They also accused Raiding NPA rebels torched one of the nickel ore shipment vessels at the companies of anchor at the Cagdianao pier of Platinum Group Metals in Claver. exploiting workwas shot dead with 10 bullets from the ers. Madlos said the companies had silencer-equipped gun of a lone killer ignored the rebels, who then decided at the Mother of Perpetual Help church to launch the attacks.

He said Japanese and Filipino emcompound in Arakan, North Cotabato.

Father Tentorio, 59, had been in the Phil- ployees were given lectures on rebel polippines for 32 years. Anti-mining advo- icies on mining during the raids. “If they cates have been quick to point out that still won’t reform and continue to ignore he was a staunch opponent of mining, us, there will be bigger attacks,” Madlos particularly in Mindanao’s Arakan Val- told the Associated Press news agency. ley where he worked with the indig- “They know now that we can do this.”

Madlos said other mining firms in enous communities.

The two attacks were apparently not Mindanao face similar “punishment” if linked. However, they signal how things they continued to destroy the environhave reached a dangerous turn. What has ment. The raids were “not about revountil now been a campaign based on pro- lutionary tax as this can be negotiated, and anti-mining publicity, speeches and but it was more on the environment and political maneuvering, has suddenly got the companies’ treatment of employees and the indigenous peoples who were physical and turned ugly.

The damage in the Taganito attack, reduced to being beggars.”

He accused the three Taganito comalthough extensive, was not crippling and the mining company was back in panies of damaging the environment by business almost immediately shipping using harmful chemicals, violating nickel ore to customers in Japan and workers’ rights and displacing the loChina. Nickel Asia’s shares took a quick cal tribal people.

Photo by Roel N. Catoto

n October 3, an estimated 250 heavily armed New People’s Army rebels simultaneously raided the Surigao del Norte mine operations of Taganito Mining and its sister companies, Taganito High-Pressure Acid Leaching Nickel and Platinum Group Metals. In the roughly five-hour attack, they destroyed equipment and facilities valued at about 500 million pesos and briefly held company staff before releasing them unharmed.

Exactly two weeks later, on October 17, Italian priest Father Fausto Tentorio

14 Philippine Resources

Madlos said the NPA is not prohibiting mining, “as this is an economic enterprise,” but mining operations must be in line with the policies of the NPAS’s political parent, the National Democratic Front.

For its part, the Philippine military maintained rebel attacks on mining firms are part of long-standing extortion attempts and demands for so-called “revolutionary taxes.”

Executives of the Taganito companies echoed this sentiment but have been reluctant to offer detailed explanation.

Nickel Asia president Gerard Brimo said in a statement: “It is apparent that the insurgents are not happy with the economic progress in this part of the Surigao province accelerated by the commencement of this project,” he said.

“Whatever may have been the political agenda for this unfortunate incident, the company will not be deterred in its mission,” he said.

Pacific Strategies and Assessments analyst Richard Jacobson believes the background is more complex. “Like many major events and disasters, this attack was the culmination of many factors coming together in a perfect storm,” he told a forum organized by PSA and the Cardno group.

“These factors include corporate mismanagement, corruption within local government units, serious community concerns that had been ignored, community indifference and or complicity, a confident and well-led communist insurgency in the region, effective New People’s Army intelligence, and the inability of government forces to protect rural based resources.”

The rebels took advantage of the limited presence of army and police personnel in the remote region. The raids came just 12 days after the Armed Forces of the Philippines pulled out its 30th Infantry battalion from the area for retraining, while police forces were involved in counterinsurgency operations in another area of Surigao.

During the raid, the rebels had the three adjacent mining bases virtually Continued on page 16 >

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Taganito raid ‘the perfect storm’ to themselves for about five hours after launching their simultaneous attacks just before noon, before an apparently quite leisurely departure when troops finally arrived backed by two Philippine Air Force helicopters from Davao City.

The Taganito mining firm has now apparently requested the deployment of a special paramilitary unit to beef up its own security force. Although the goahead for this is still pending, the government itself has in the past urged mining firms and other big companies operating in rebel-infested areas to employ paramilitary forces to secure their businesses.

Initially the mining companies were reluctant to get involved with special Citizens Armed Forces Geographical Units, as they are called, for fear this might encourage further NPA activities. They also reportedly refused to allow the Armed Forces of the Philippines to use their mining sites as staging areas for AFP operations against the NPA rebels.

After an emergency meeting between police, military, the miners and senior government officials, Chamber of Mines of the Philippines Benjamin Philip Romualdez said: “The government is turning back to the mining companies to beef up our own security. But I argue that it is the government’s role, not ours, to protect the mining projects because these are their projects. We are merely contractors and it is not our role to arm ourselves. Oftentimes we have to rely on the Environment Department, who themselves seem to be at a loss.”

The Chamber of Mines also felt obliged to enter the fray over the slaying of Father Fausto Tentorio, with a newspaper advertising campaign. A spokesman said it was “preposterous” to suggest the priest’s murder was instigated by a mining company or organization.

But notwithstanding, allegations continue that this may have been the case. The Philippine National Police has set up a special task force to investigate Tentorio’s killing and expects its investigation to take some time. However, asked by media whether the investiga16 Philippine Resources

tors are looking at the mining angle, spokesman PNP spokesman Agrimero Cruz said, “Yes, part of that is we are validating the threats allegedly received

by Father Tentorio before he was killed.

But it’s too early to remove other angles from our list.”

The line-up of people linking the murder to the priest’s anti-mining advocacy is growing and further inflaming public opinion, especially among the religious.

Monsignor Pedro Quitorio, media director of the Catholic Bishops’ Conference of the Philippines, told reporters how a former staff member of Tentorio’s parish had called him during his program at Radio Veritas and told him the missionary’s death was related to his anti-mining campaign. Quitorio said Tentorio had strongly opposed the operation of two mining companies in Arakan.

Senior Catholic church leader Bishop Dinualdo Gutierrez said over the church-run Radio Veritas: “My advice to the government is not to allow mining activities any more, especially in areas where there is strong opposition to it.” Recalling that Tentorio was a strong defender of indigenous peoples “imperiled by mining activities” in Arakan Valley, he said: “Maybe because of that he was killed.”

“The government should no longer allow mining like this because we will also continue to oppose it and I don’t

know if they (the mining firms) are hiring killers or whatever, but I am worried that one of us would get killed again,” he said.

Sister Mary John Mananzan, chair of the Association of Major Religious Superiors of the Philippines, believes Tentorio’s death should prompt President Beningo Aquino to halt all mining operations in the country. “The killing of Father Tentorio should signal him to declare a stop on foreign mining operations in the country,” Mananzan said over Radio Veritas.

The outpouring also drew comparisons with the murder in Palawan last January of journalist and environmentalist Gerry Ortega – even though the anti-mining lobby itself has withdrawn its earlier suspicions that Ortega’s killing may have been linked to his anti-mining advocacy.

The outcry was such that Kidapawan Bishop Romulo de la Cruz felt compelled to issue a cautionary statement in apparent rebuke to fellow-churchmen: “Father Fausto indeed tackled problems about mining in the region and he was the program director for the indigenous peoples, but we cannot really say that these activities triggered his death,” the bishop warned. The Kidapawan bishop noted: “Investigators are still pursuing a number of theories that would identify the motive and the perpetrators, and jumping to conclusions until all of the facts are known will not help. ■ Photo by Toti Navales, PNP PIO

< Continued from page 14

The rebel raids on Taganito brought together in an emergency meeting (from left) Philippine National Police chief Nicanor A. Bartolome, Environment and Natural Resources Secretary Ramon Paje, Interior and Local Government Secretary Jesse Robredo, and Chamber of Mines president Benjamin Philip Romualdez.

Mineral Resources November 2011 - January 2012

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After conflict, new hope for dialogue

By Patricia A. O. Bunye

panies. In line with this, the DENR and DILG are working out security protocol t took less than a month after the arrangements with mining companies, to successful Mining Philippines 2011 the extent that PNP and Armed Forces Conference & Expo for the mining of the Philippines representatives are industry to suffer yet another setback, making the rounds visiting the differin the shape of the October 4 New ent companies to assess their particular People’s Army attacks on three mine needs and establish specific plans of action. Robredo also emphasized the need operations in Surigao.

More than the financial damage for regional alliances or networks so that inflicted on the companies with the de- intelligence, equipment and personnel struction of equipment and facilities, the can be pooled.

While the October attacks were diattacks brought to the fore security con- cerns, particularly for operations in re- rected at three companies, the propamote areas of the country, and the safety ganda value of these attacks was not lost on members of the Chamber of Mines, of the people who live and work there.

A meeting of the Chamber of Mines some of whom expressed apprehenof the Philippines with the Department sion that the attacks were but part of a of Interior and Local Government Secre- concerted effort to discredit the mining tary Jessie Robredo, Department of En- industry, together with misinformation vironment and Natural Resources Secre- against mining, specifically in the provtary Ramon Paje and Philippine National ince of Palawan, and attempts to repeal Police chief Nicanor Bartolome a few the Mining Act. This underscores the need for the days after the attacks helped allay some of these concerns and allowed members chamber and its members to step up of the chamber to directly engage the their information and education camthree government officials on peace and paign, as it needs to match if not surpass order issues in mining. All three gave as- the efforts of anti-mining groups to win surances that President Benigno Aquino hearts and minds.

On this note, at the Mining Philipremains committed to attracting and pines 2011 conference, two speakers protecting investments in mining.

Robredo underscored the fact that who are identified with non-government security is the responsibility not only organizations and cause-oriented groups of the authorities, but also of the com- – Rapa Lopa of Philippine Business for Social Progress and Lorenzo Tan of the World Wildlife Fund – urged the chamber and its members to devise a scorecard or grading system that would highlight the positive contributions of specific companies and projects to the economy and to social development.

The sharing of information Patricia A. O. Bunye is a senior partner at Villaraza Cruz Marcelo & Angangco (website www.cvclaw.com). Her areas of is just as crucial specialization are mining and natural resources, power and energy within the governand intellectual property (particularly IP commercialization). ment which, as the She may be reached at po.bunye@cvclaw.com.

I

18 Philippine Resources

owner of the minerals, has an equal if not greater stake than the mining companies in the success of the projects. The Minerals Development Council, which was established in 2005 but unfortunately abolished in 2010, allegedly due to budgetary constraints and redundancy, was a valuable mechanism for various government departments and agencies to meet regularly to support and address the needs of the minerals sector. It is therefore very timely that secretaries Paje of the DENR and Robredo of the DILG are both recommending its revival to President Aquino.

On a related front, a group of women involved in extractive sectors have organized themselves, upon the inspiration and with the guidance of former mining envoy Delia Domingo Albert, to champion, among others, transparency and stakeholders’ dialogue in natural resources development. The group will be officially launched at the forthcoming Annual National Mine Safety and Environment Conference in Baguio.

It is a diverse group which includes representatives of mining companies, lawyers, government workers (including a former Mines and Geosciences Bureau regional director and MGB geologist), a journalist, PMSEA volunteers and a UNDP consultant for the Philippine Poverty Environment Initiative, which has the Extractive Industries Transparency Initiative, or EITI, as a major component.

EITI is a global standard for transparency in the extractive sector which involves the reconciliation of company payments with government receipts by an independent administrator and the disclosure of that information to the public. It is anticipated that, by participating in EITI, the local minerals development sector will be able to address the need of stakeholders for accurate information on the economic contributions of an extractive activity.

Among the group’s immediate plans, apart from supporting EITI, are to assist the Chamber of Mines in its information and education campaign by providing a credible, yet non-combative, platform for substantive discussions on mining issues. ■

Cardno FP

Mineral Resources November 2011 - January 2012

www.philippine-resources.com

NiHAO teams up with Glencore, AGP for nickel mining projects

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iHAO Mineral Resources International has signed a deal with Glencore International and AGP Industrial involving joint exploration of prospective mining sites in the Philippines. The focus is to be on nickel with the trio combining “their respective expertise in the mining industry for the purposes of investigating, identifying, acquiring, developing and operating mining claims of economically feasible nickel deposits in the Philippines for purposes of direct shipping or selling ore and other related nickel mining business,” NiHAO told the Philippine Stock Exchange in a disclosure.

Glencore, a major commodities trader, will specifically contribute its expertise in marketing nickel ores in the world market using its overseas network.

NiHAO and AGP will be responsible for mining, contracting and developing the mines, given their knowledge of relevant Philippine laws and issues.

The companies agreed to form by end-2011 a joint venture corporation, which will have an initial capital of US$2 million. Of the amount, $1 million will come from Glencore while NiHAO and AGP will contribute $500,000 each.

The joint venture firm will be governed by the laws of Hong Kong but the proprietary rights of the company over the prospective mining interests and operations in the Philippines will be governed by either Philippine or Hong Kong laws, whichever is applicable.

The joint venture may also look into mining projects in Indonesia and other countries, for which the parties may create a new joint venture entity that would

have the same terms and conditions as provided in the initial agreement.

Glencore, registered in Switzerland, is one of the world’s leading integrated producers and marketers of commodities, with worldwide activities in production, sourcing, processing, refining, transporting, storage, financing and supply of metals and minerals, energy products and agricultural products.

Glencore launched an IPO in London and Hong Kong in May, raising US$10 billion. It has mines, processing and refining plants in Australia, the United States, Italy, South Africa, Zambia, Colombia, Kazakhstan, Peru and the Philippines.

Glencore is also the largest shareholder in the Swiss mining giant Xstrata, a partner in developing the Tampakan mine in South Cotabato.

AGP is a Philippine listed company that has interests in real estate and mining ventures.

Jose Francisco Miranda, NiHAO’s chief operating officer, said: "This partnership presents a great opportunity for both parties and I believe that this can be the start of something. It can pave the way for further partnerships between Philippines companies and global players to jointly grow the mining industry."

NiHAO has 20,842 hectares of nickel claims and 16,129 hectares of gold claims. The firm also has investments in Oriental Vision Mining, which operates the Palhi nickel mine on Dinagat island, as well as in Oriental Peninsula Resources Group, which owns and operates the Narra and Espanola nickel mines in Palawan. ■

NiHAO’s name means “Bountiful Nickel,” the main mineral targeted in the company’s exploration efforts in Zambales, Misamis Oriental, North Cotobato and Antique (pictured above).

20 Philippine Resources

Raadsma out at Crazy Horse

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ohan Raadsma has left Crazy Horse Resources. The board of the Canada-based company said he has resigned as its president, chief executive officer and secretary and as a director, for personal reasons.

Mitchell Alland, already a director, has been named president, CEO and secretary. Alland is currently CEO and executive chairman of Copper Development Corporation, a company that holds 11.8 percent of Crazy Horse's common shares and has two copper mining projects in the Philippines – Hinoba-an and Basay.

Crazy Horse is currently continuing with drilling and resource estimates at its Taysan copper/gold project in Batangas. ■

Changes at St Augustine

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t Augustine Gold and Copper has named Terry Krepiakevich director and chairman of the audit committee. He replaces Michael Carrick who has resigned in order to focus his time on CGA Mining of which he is president and chief executive.

Krepiakevich was most recently chief financial officer of SouthGobi Resources and is now a senior advisor to the company. He is a director and audit committee chairman of Alexco Resource, Western Lithium USA, Concordia Resource and NovaCopper.

Additionally, the Spokane, Washington-based St Augustine has contracted the services of Jack Miller, through his company Mining Solutions, as an executive project development consultant for the company’s King-king project.

St Augustine is installing a newly formed project development and financing oversight committee which will be composed of Robert Russell, Terry Krepiakevich and Jack Miller as advisor.

The committee will provide guidance to the board and executive team in development and financing of the King-king project. ■

JCLI FP

Mineral Resources November 2011 - January 2012

www.philippine-resources.com

‘World class’ iron sands project on the way in Cagayan River delta

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he international mining and steel group Astra Resources has signed a memorandum of understanding for what it believes is a “world scale” iron sands development in the northern Philippines. The agreement between Astra and Cagayan River Construction & Development Corporation (CRCDC), owned by businessmen Rocky Young and Valentino Acuzar, intends to establish a joint venture entity to manage and put to use the iron sands deposits in the Cagayan River delta in the Cagayan Valley region.

The joint venture is subject to final due diligence, including legal, independent geological reports and Astra Resources board approval.

Astra chief executive Jaydeep Biswas said third party reports including geological studies from CRCDC show that the area is an established producing

region exporting to nearby steel manufacturing markets such as China, South Korea and Taiwan.

Legal advice received by CRCDC advises that the memorandum of agreement, signed by CRCDC and the province of Cagayan, allows immediate dredging of the delta and export of the iron sands.

Extension of this operation outside the immediate delta into the shallow adjacent areas will require a future mining license or mineral production sharing agreement, with the legal advice on this opportunity also positive.

“The geological studies and extensive sampling further suggest that at dredging depths of 14 meters, well above nine billion tonnes of iron sands are available in the delta and adjacent areas with iron content between 27 and 59 percent, with an average of 46 percent,” Biswas said.

The joint venture will start dredging

a small part of this area under the memorandum of agreement and extend when the MPSA is granted.

Astra managing director Silvana De Cianni said the finance requirement to bring the project to fruition is low given its scale. “The opportunity fits with Astra’s business model which focuses on the steel value chain, low infrastructure and logistics investment, low extraction costs, proximity to markets, licenses to operate being imminent and pathways to revenues being defined,” De Cianni said.

“This would be a fast-track entry into mining in the Philippines with future opportunities to develop assets in manganese, gold and copper.”

Astra Resources portfolio includes gold and copper interests in South-east Asia, coal mines in Africa, iron ore in India and the production of the high-strength TSteel technology in Hungary. ■

companies Tranzen and Macro Asia. He noted that Jinchuan has already committed investment of $1.5 billion in a Nonoc, Surigao mining project with Philnico Industrial.

Two other mining companies, Oriental Peninsula Resources and Eramen Minerals have signed agreements for projects in Palawan and Zambales.

Romualdez said Oriental Peninsula was able to secure investments for three projects involving hydropower, coal and nickel off-take with Yun Feng, a company which owns and controls automotive companies and parts suppliers in China. The Eramen Minerals project involves nickel off-take and nickel processing in Santa Cruz, Zambales.

• Toledo Mining has confirmed that the joint venture partners of Ipilan Nickel have separately entered into memoranda of understanding with a wholly owned subsidiary of the Jinchuan group of China which may result in Jinchuan and its Philippine partners acquiring 100 percent of the equity of Ipilan.

Completion of the transaction will be subject to conditions, including Jinchuan

being satisfied with the results of its due diligence investigation, clearance being obtained from the relevant authorities in China and the Philippines and the parties agreeing a form of share purchase agreement.

Toledo says should a transaction be completed as currently envisaged, gross proceeds to Toledo from the transaction are expected to amount to US$17.4 million.

Ninety per cent of the transaction price is to be paid on completion with a 10 per cent retention to be settled 60 days later.

The Ipilan Nickel project in Palawan is a joint venture between Toledo Mining with a 52 percent interest, Celestial Nickel Mining Exploration with 24 percent and Brookes Nickel Ventures with 24 percent.

Toledo chief executive George Bujtor has described it as “arguably one of the best tested nickel laterite deposits in the world.”

• MacroAsia Corp can start production within six to nine months at its Infanta nickel mine in Palawan, part of a 1,113hectare prospect it plans to develop with China's Jinchuan group, once all required permits are in, says Ramon Santos, vice president for MacroAsia mining operations. ■

Major investments eyed in China deals

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our mining agreements signed with Chinese companies could bring in US$14 billion in new investments in the Philippines within the next five years and they are seen as demonstrating the government’s support for mining activities in the country. Chamber of Mines president Philip Romualdez told a media briefing the agreements involve nickel mining projects in Palawan and Zambales and were formalized during President Benigno Aquino’s recent visit to China.

“Assuming that all these materialize, we are looking at $14 billion starting this year through 2016. This year, we see more investments from China involving nickel mining,” Romalduez said.

Romualdez maintained Aquino’s state visit accompanied by 15 leading mining company executives “restored the confidence of the Chinese government and Chinese companies in Philippine mining and the confidence that they have that the Philippine government supports mining throughout the Philippines including Palawan.”

He singled out agreements between China’s Jinchuan group and local mining 22 Philippine Resources

Austhai FP

Oil & Gas Resources November 2011 - January 2012

www.philippine-resources.com

BP backs Raisama with Cadlao finance

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ustralia-based oil junior Raisama has struck an agreement under which the Singapore subsidiary of BP will provide finance and crude marketing services for the redevelopment of its Cadlao offshore oil field in the Philippines.

Under terms of the deal, BP Singapore will advance Raisama the sales revenue for its maiden cargo of up to 350,000 barrels of crude oil, or around $35 million at prevailing prices, as it is produced into the floating storage facility at Cadlao. BP will also market the crude produced at Cadlao, as well as provide marketing support for Raisama's wider

The Cadlao oil field is located about 40 kilometers off the north-west coast of Palawan.

portfolio. Raisama holds a 50 percent operating stake in the Cadlao oil project.

"The involvement of a major oil company of BP's caliber in the provision of marketing services and a working capital This Cadlao oil field schematic shows the original development wells facility for Cad- (Cadlao 1A and 3) and the redevelopment wells Cadlao 4, 5 and 6. lao is an endorsement of the project's fundamentals," said reports have subsequently estimated the Raisama managing director Jeff Steketee. field's remaining reserves at around six "This, coupled with the $30 million debt million barrels on a proven and probfacility announced recently, will ensure able basis and four million barrels on a proven basis, Raisama said. The comCadlao is fully funded beyond first oil."

The Cadlao oil field, located about pany added the project's demonstrated 40 kilometers off the north-west coast production history meant it has very low of Palawan, was discovered in 1977 by development risk.

Raisama plans to extract the reAmoco. The field started producing in 1981 as the first-ever subsea well and maining reserves at Cadlao, and utilize floating production storage and offload- the field facilities as a regional hub for the production of nearby accumulations ing development.

Cadlao produced about 11 million within tie-back distance. The Cadlao barrels of 47 degree API oil from two nat- partners have farmed into the surroundurally flowing subsea wells, until output ing Bonita permit which contains the was abandoned in 1991 due to high oper- Bonita discovery, with an estimated two million to three million barrels of oil, ating costs and prevailing low oil prices.

Two separate independent experts' and the Cadlao East prospect. ■

‘High interest’ in new contracts Partner for

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bout 50 oil and gas exploration companies have so far requested access to the petroleum reserves data of the Department of Energy covering 15 highly prospective areas that currently are up for auction.

The contenders include Royal Dutch Shell, Total of France, the ENI group of Italy, BHP Billiton and Exxon of the United States.

“We expect the number [of companies] to increase as we make more data available for viewing,” said DoE Undersecretary Jose M. Layug Jr. Interest is high in participating in the upcoming Philippine Energy Contracting Round 4, he said.

Layug said the Philippine government continues to aggressively push its oil and gas exploration program de-

24 Philippine Resources

spite problems arising from conflicting claims in the South China Sea. “The Philippines is firm in its resolve to discover and develop oil and gas reserves. We are open for business,” said Layug.

The energy undersecretary recently attended Oil and Gas Week in Singapore and the New Generation Oil and Gas Summit in Malaysia, promoting the upcoming contracting round – in particular 15 blocks, 12 of which are located offshore. The prospective oil and gas blocks are in the Northwest Palawan, East Palawan, and Sulu Sea basins.

Under the new Energy Contracting Round, the DoE expects to award 15 new service contracts next year. There are currently 28 active petroleum service contracts in the country. ■

Basic Energy

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he listed firm Basic Energy has signed an agreement with Prime Energy Consult to jointly explore and develop prospective oil and gas projects. In a disclosure to the Philippine Stock Exchange, Basic Energy said the deal with Prime Energy, which is based in Dubai, allows both parties to look for opportunities in the petroleum sector.

However, it was not made clear where the companies plan to explore.

Prime Energy provides technical advisory and consulting services to the oil and gas industry. It says it is owned and managed by a team of oil and gas experts with experience in delivering large-scale subsurface, field development and drilling projects worldwide. Most of its current projects are in the Arabian Gulf. ■

Oil & Gas Resources November 2011 - January 2012

www.philippine-resources.com

Rethink urged on oil search rules

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he Philippines needs better policies to encourage oil and gas exploration and development if it is to compete effectively with other countries in South-east Asia. This is the opinion of veteran oil business executive Rufino Bomasang.

“The need to further improve the Philippine contractual regime has become more imperative because our neighbors in South-east Asia, particularly Indonesia and Malaysia (both former major oil exporters that have become net oil importers), as well as Vietnam, have already been making their own policies more attractive,” Bomasang told the Philippine Star newspaper.

Bomasang is currently chairman of NorAsian Energy. He is a former government Department of Energy undersecretary and president of Philippine National Oil Co. He also now also serves as director of Otto Energy and chairman of PhilCarbon.

Bomasang noted that amid the continuing crisis in the Middle East and with the Philippines’ continuing heavy dependence on imported oil, particularly in the transport sector, the quest for indigenous petroleum has once again become a matter of urgent national concern.

He said a proposal to amend Presidential Decree 87 to further improve contractual terms was in fact first proposed by the Petroleum Association of the Philippines to the Office of Energy Affairs in

the early 1990s. However, while the OEA and the DoE were very supportive of such an amendment, Congress and other government agencies have not been supportive and attempts to amend PD 87 fizzled out, he said.

“The most important proposed amendment to PD 87 is the lifting of ring fencing around service contracts. This simply means allowing costs incurred within a contract area to be recovered in another contract area,” he said. The immediate impact of this, he said, would be that contractors in producing areas – such as Malampaya and Galoc – would be enticed to drill more wells, especially in frontier areas.

“For the long term, even companies without production areas will also be enticed to drill more wells, knowing that their costs can be recovered later in future producing areas,” he told the Philippine Star..

Apart from policy revisions, Bomasing believes there is also a need for administrative reforms. He said this can be done soonest as it does not require legislative proposal.

He stressed the need for the government to expedite the processing of documents usually submitted by service contractors for approval, especially those that involve other government agencies, such as the customs, immigration and quarantine units.

PNOC-EC readies new drilling

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NOC Exploration, the upstream oil unit of state-run Philippine National Oil Company, expects to start drilling a new exploration well in northwest Palawan in mid-1012.In particular focus in the plan are sites within the area covered by Service Contract 63.

The Aboabo discovery and Kalapato site in question are estimated hold 222 million barrels and 239 million barrels of oil respectively. PNOC-EC is the operator of the field.

“The initial phase of work will focus on fully resourcing the drilling and subsurface teams, implementing preplanning activities including securing long lead items for up to two wells and 28 Philippine Resources

completing the basis of design work for a number of possible well options,” PNOC-EC told the Philippine Stock Exchange in a disclosure.

The exact schedule for drilling, probably next June or July, depends on the availability of a suitable rig. “The planned drilling window based on the latest schedule fits well with the requirement to drill the SC 63 commitment well before the end of the current subphase on November 24, 2012,” PNOCEC said.

PNOC-EC holds a 50 percent interest in SC 63 and is the field operator, while the remaining 50 percent is held

by Australian firm Nido Petroleum.■

Among these documents is the Tax Exemption Certificate. The most common complaint among service contractors, he said, is that it takes an inordinately long time – several weeks and sometimes months – for certificates to be processed. Similarly, he said, service contractors have also complained about delays in the approval of farm-in documents.

Bomasing said there is also a need to harmonize often different requirements set by different government agencies regulating the petroleum industry. “This includes, among others, differences in effluent standards and classification of drill ships and other specialized offshore equipment used by the industry,” he said. ■`

Gas2Grid looks deeper in Cebu

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as2Grid will shortly begin a second phase workover of its Malolos-1 well in onshore Cebu to deeper levels of between 1,000 meters and 2,100 meters.

Gas and oil-bearing sandstones in the deeper levels of the Malolos-1 well were not targeted during the phase 1 workover conducted last year. Instead, Phase 1 targeted gas bearing sandstones less than 1,000 meters deep, confirming the existence of multiple shallow natural gas and oil-bearing sandstone intervals and determining the high quality of the sandstone reservoirs.

Nitrogen stimulation and flow testing of the shallow gas bearing intervals was completed in June this year, and the well produced gas and oil at low rates. During July and August, casing was set to isolate the shallow gas-bearing intervals within the well.

The phase 2 workover to deeper levels will involve drilling out the existing cement plugs and cleaning the cased hole from 1,000 meters to 2,100 meters, cased hole electric logging, as well as a decision on recompletion and flow testing of selected oil and gas bearing sandstones at deeper levels above 2,100 meters.

As well as the Philippines, Gas2Grid has projects in Australia, New Zealand and France. ■

Oil & Gas Resources November 2011 - January 2012

www.philippine-resources.com

New fields may make the Americas top of the oil companies’ charts

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output from locations where razil has begun buildoil is contained in shale and ing its first nuclear other rocks projected to exsubmarine to protect ceed two million barrels a day its vast, new offshore oil by 2020, according to some discoveries. Colombia’s oil estimates. The United States production is climbing so already produces about half of fast that it is closing in on Alits own oil needs, so the increase geria’s and could hit Libya’s could help it further peel away prewar levels in a few years. dependence on foreign oil.

ExxonMobil is striking new

The challenges of tapdeals in Argentina, which ping Brazil’s new offshore recently heralded its bigThe semipublic energy corporation Petrobras is investing more fields, located beneath 6,000 gest oil discovery since the than $200 billion to help make Brazil a major oil player. feet of water and salt beds 1980s. Technology has made Canada's oil sands easier to tap in recent Arabia, putting it at the top of OPEC’s formed by the evaporation of ancient years, creating foreign interest as well as rankings. If it opened up more to foreign oceans, are even greater. Petrobras, investment, it could tip the scales further which has ambitions of surpassing Exxa demand for workers. onMobil as the world’s largest publicly

Up and down the Americas, it is a in the hemisphere’s direction.

Exactly how the Americas’ growing traded oil company, is investing more similar story: a Chinese-built rig is prepar- ing to drill in Cuban waters; a Canadian oil clout might rebalance energy geo- than US$200 billion to meet its goals.

“Brazil will become an oil power by official has suggested that unemployed politics remains an open question. The Americans could move north to help fill Middle East can still influence oil prices the end of the decade, with production in tens of thousands of new jobs in Canada’s greatly, its oil fields are generally cheap- line with that of Iran,” said Pedro Cordeiro, expanding oil sands; and one of the hemi- er to develop, and some countries in the an energy consultant for Bain & Company, sphere’s hottest new oil pursuits is actually region are endowed with great reserves. who sees the country’s oil production climbMoreover, the Americas still vie for ing to 5.5 million barrels a day by 2020. in the United States, at a shale formation Construction backlogs could slow in North Dakota’s prairie that is producing investment with other oil-rich regions, 400,000 barrels of oil a day and is part of like Russia’s portion of the Arctic Ocean Brazil’s offshore expansion. But resura broader shift that could ease American and West African waters. Security con- gent industries related to the oil boom, cerns like the abduction of oil workers like shipbuilding, and strategic efforts dependence on Middle Eastern oil.

For the first time in decades, the could, as they have in the past, prevent like nuclear submarine construction to emerging prize of global energy may be Colombia from continuing to raise output. defend oil wells, underscore Brazil’s plan the Americas, where Western oil compa- And environmental and financing ques- of using its energy resources to project nies are refocusing their gaze in a rush to tions pose persistent challenges to the rapid global power from this hemisphere.

“No other place on the planet is seegrowth of the hemisphere’s oil production. explore clusters of coveted oil fields.

Still, the new oil exploits in the ing this kind of investment,” said Marcio

“This is an historic shift that’s oc- curring, recalling the time before World Americas suggest that technology may Mello, a former Petrobras geologist who War 2 when the United States and its be trumping geology, especially in the re- is now the chief executive of HRT, a new neighbors in the hemisphere were the gion’s two largest economies, the United oil company based in Rio de Janeiro. world’s main source of oil,” Daniel Ye- States and Brazil. The rock formations in “This decade is our chance to rise,” he rgin, an American oil historian, told the Texas and North Dakota were thought told the New York Times.

Optimism is plentiful, and even a New York Times. “To some degree, we’re to be largely fruitless propositions before going to see a new rebalancing, with the contentious exploration methods involv- bit of hubris can creep into conversation.

Western Hemisphere moving back to ing horizontal drilling and hydraulic frac- Still, oil analysts say the hemisphere’s turing — the blasting of water, chemicals new energy profile is already challengself-sufficiency.”

The hemisphere’s oil boom is all the and sand through rock to free oil inside, ing the sway OPEC has long held.

Canada, for instance, is already the more remarkable given that two of its tra- known as fracking — gained momentum.

While the contamination of water top petroleum exporter to the United ditional energy powerhouses, Venezuela and Mexico, have largely been left out, supplies by fracking is a matter of fierce States, followed by Mexico. Beyond that, held in check by entrenched resource na- environmental debate, the technology is output from Canada’s oil sands may altionalism. Venezuela is now considered already reversing long-declining oil proContinued on page 35 > to have bigger oil reserves than Saudi duction in the United States, with overall 30 Philippine Resources

Renewable Resources November 2011 - January 2012

www.philippine-resources.com

Geothermal energy risk management

By Fernando Penarroyo

T

he current industry and political landscape has opened opportunities for cleaner energy options, while investors and government regulators endeavor to provide the essential infrastructure, services and legal framework to develop and deploy new energy technologies.

Before considering some of the key risks which have an impact on renewable energy projects and the general approach to proper assessment, it is useful to identify barriers that are preventing the uptake of RE projects.

Foremost of these are barriers, which relate to the low level of awareness, understanding and attention, afforded to the complex array of policy, regulatory, technical financing and organizational factors affecting RE projects.

Geothermal project financing is not the typical boilerplate scheme with

pro forma agreements utilized in other resource project development.

Investors are either large and traditional energy service companies that have the ability to finance RE investments in technology or projects funded on a non-recourse finance basis, or smaller but entrepreneurial geothermal developers seeking investors for technology R&D and/or project finance.

For these entrepreneurial geothermal development firms, there are different business models and balance sheet sensitivities to consider.

While financial institutions carefully evaluate developer qualification and track record, being a major and well-known developer is not required because financiers recognize investment opportunities having considerable experience in developing energy projects by providing equity. However, new geothermal developers are required to demonstrate their competency by se-

lecting experienced and well-respected consultants, and specifying and using equipment with proven track record.

Most if not all capital prior to a geothermal projectâ&#x20AC;&#x2122;s proven feasibility is done through equity and not debt. Financing of exploration and confirmation drilling usually comes from company equity or risk capital provided by investors.

Generally, investment is sourced from seed capital, venture capital, or equity financing for a geothermal developer.

Due to the high risk involved with geothermal exploration, banks do not provide funding through loans until the later stages in the development process.

During the critical resource identification phase, the developer aims to obtain as much information as possible about potential resources while investor costs are low providing the developer with a stronger foundation Continued on page 32 >

Brunel loc FP

Philippine Resources 31

Renewable Resources November 2011 - January 2012

www.philippine-resources.com

Geothermal energy risk management < Continued from page 31 for decisions on actual exploration and project development. Information and knowledge increase resource certainty and reduce risk, which allows better access to capital.

For this reason, the government can help mitigate risks by establishing a well-documented geothermal database that is readily available to potential investors. The government must also develop a standard classification system that addresses the probability of risk based on a standard set of geothermal resource criteria and attributes.

Key indicators of success from geothermal exploration wells are high temperatures and permeability combined with production of a high-enthalpy fluid that is not acidic and does not produce scaling over and above that is normally expected for geothermal fluids.

The highest risks for the implementation of geothermal energy projects are resource availability risks. Risk management challenge is magnified in the context of geothermal development due to the extremely high risk of loss during the identification, exploration, and delineation drilling phases of project development where the probability of drilling a dry hole is high. Other identified risks can be further categorized into: operational risks (failures in planning, etc.), economic risks (increasing operating costs, etc.) and political risks (licenses, etc.). Risks that cannot be realistically avoided can increase the cost of capital or raise the required rate of return.

In Europe and North America, the insurance industry has been providing many of the traditional risk management products for the petroleum industry to geothermal, such as property

Brunel Scl FP

32 Philippine Resources

damage, business interruption, machinery breakdown and construction.

Geothermal project financing is initially dependent on a “bankable” reservoir report, which is based on the complete and thorough documentation of the exploration and drilling data as independently evaluated by a disinterested third-party’s technical analysis and recommendation report. Engineering, procurement and construction (EPC) contracts typically pass all geothermal plant facility design, development and construction risks from the developer who acquires a “bankable” turnkey energy project, to the contractor who is paid a premium for the assumption of the risks. In an EPC contract, the contractor agrees to deliver the keys to a commissioned geothermal energy plant to the developer for an agreed price, Continued on page 33 >

Renewable Resources November 2011 - January 2012

www.philippine-resources.com

< Continued from page 32 on a fixed schedule with performance guarantees and liquidated damages for the failure of acceptance tests and timely commissioning.

Project finance is also highly dependent on the power purchase agreement (PPA) executed between the developer and purchasing end user, typically an electrical utility. The PPA provides for the sale of capacity and energy at an agreed price, price structure and specified time period. In addition, the financial institution will include a careful analysis of the interconnection studies and transmission agreements. From the risk perspective however, it is preferable that economics and demand for power drive projects rather than contract provisions. Also, contracts negotiated with either side being at a disadvantage are a cause of concern for lenders.

Needless to say, streamlining the permit process by government regulators will have an impact on geothermal

development, as shorter project periods would reduce uncertainty for policy and market dynamics when modeling economic returns.

Geothermal projects are characterized by significant upfront capital investment for exploration, well drilling and the installation of plant and equipment. But once the geothermal projects are placed in commercial operation, the fuel source is secure for the decades of expected lifetime with a steady revenue stream.

It is good to note that traditional insurance products are now becoming more available to the RE industry while new financial risk management instruments are evolving. Nevertheless, there is a need for customization of coverage and linked products that provide a total solution for the risks inherent in geothermal development. While geothermal energy will continue to face obstacles to gain investment market acceptance and application, there is room for optimism as the use of this energy source is only beginning. â&#x2013;

Fernando â&#x20AC;&#x153;Ronnieâ&#x20AC;? Penarroyo is the managing partner at Puno and Penarroyo Law Offices (www.punopenalaw.com). He specializes in energy and resources law, project finance and business development.

Brunel Ovs FP

Philippine Resources 33

Investment Resources November 2011 - January 2012

www.philippine-resources.com

Psst, want to buy gold at $500?

By Steve Hill & Nigel Ball

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ecent stock market declines resulting from the euro crisis and a lack of confidence in debt-ridden western economies have resulted in opposite movements in the prices of gold and gold mining equities. This in turn may have created a buying opportunity for bargain hunters.

As most people are aware, there has been a correction in the equity marketplace that was caused by the thing that investors hate most – uncertainty. The sluggish economic recovery in developed countries and downgrading of government credit ratings has caused much anxiety. More pressing is the concern over the future of the Greek economy and the country’s ability to stay with the other 16 countries in the eurozone, with further fears of the departure of the Spain, Portugal, Ireland and Italy.

All this has caused a broad-based decline in equities. The MSCI World Stock Index of over 6,000 stocks dropped from 1391.86 on May 2, 2011 to 1074.81 on October 3 – almost a quarter of its value. Mining stocks have naturally taken a hit along with others with the MSCI World Mining Index dropping from 517.94 on April 13 to 327.41 on October 4 representing a decline of 36.8 percent - showing mining’s vulnerability to the economic cycle.

Counter to this gloom and decline

34 Philippine Resources

and loss of confidence in “fiat” currencies that are not linked to gold. As a result the price of the yellow metal rose 12.83 percent in the six months to October 4, and hit a record high of US$1,923.70 on September 5.

Gold mining company shares have come down in price with the other mining equities, but their worth is in their gold in the ground. The price of proven – not estimated – reserves of many gold mining companies is down to approximately $500 per ounce.

As a result, a gap has opened between the price of the metal and the shares of mining companies, and this is clearly not historically sustainable. The two have been closely correlated over time, so the gap will surely be closed in the near future.

Consequently we believe gold stocks will recover to some extent and that gap closed, and could be a smart investment move.

We’re not the only ones. The Qatari royal family’s sovereign wealth fund plans to spend up to $10 billion buying stakes in gold producers. The fund is seeking to invest in a range of natural resources, but gaining access to physical gold is its top strategic priority. On October 2, Qatar Holdings, which handles the wealth of the Middle East state’s royal family, confirmed it would invest about $1 billion in European Goldfields, a London-listed mining

company currently developing the largest gold mining project in Greece.

“Qatar Holdings have done a systematic and detailed study of the gold sector,” said Ken Costa, who put the deal together.

“They chose European Goldfields because [chairman] Martyn Konig is very experienced - a 30-year veteran in the gold market.”

They are bargain hunting. For example European Goldfields, which they are buying into, is down 41 per cent in the year to date. This is despite the company receiving the long-awaited approval for mining from the Greek authorities in July.

The Qatari fund has acquired a 9.9 per cent stake in European Goldfields and is welcomed by the troubled Greek economy, and some 1500 jobs will be created as a result. Future likely targets for the Qataris are likely to be in Africa and Russia.

So as they say on the London Underground: “Mind the gap!”

This particular “gap” – between the price of physical gold and the share price of gold producers which have been dragged down by overall market sentiment, could be good news for mining companies and for investors holding and of course for bargain hunters buying mining stocks or funds.

“When others are greedy, be fearful, and when others are fearful, be greedy.”

– Warren Buffett. ■

Oil & Gas Resources November 2011 - January 2012

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Americas top of the oil charts? < Continued from page 30 most double to three million barrels a day by 2020, and there is an effort under way to build a pipeline to the Gulf Coast, stirring an environmental debate.

Investors from other regions, notably Chinese oil companies, are also wading into the hemisphere’s oil plays, whether in Brazil’s “pre salt” fields or the tight oil areas in the United States.

They are looking to secure new oil supplies or gain expertise that would help them explore similar rock formations within their own borders.

The United States and Brazil do not see eye to eye on every issue — the Obama administration is still hesitant about endorsing the country’s ambition for a permanent seat on the United Nations Security Council — but the hemisphere’s two largest economies are strengthening energy ties, further cementing an already expansive economic relationship.

As the United States has cut OPEC imports by more than a million barrels a day since 2007, Brazil and Colombia have emerged as leading suppliers to the American market, surpassing Kuwait.

President Obama visited Brazil in March, refusing to delay the trip even as war was raging in Libya, emphasizing while here that he wanted the United States to be a “major customer” for Brazil’s oil once production climbed at new fields.

American officials went to Brazil again for talks in August, focusing on offshore exploration and biofuels cooperation. The United States is close to overtaking Brazil as the world’s largest ethanol exporter, a significant turn, and American producers may actually increase their corn ethanol exports to Brazil. The shift stems from factors including weak harvests of sugar, which is used in Brazil to produce ethanol, and rising costs for land and labor.

The hemisphere’s capacity to meet

demand for fuels from sources of new importance, whether agriculture or shale formations, is arguably what makes it competitive with countries like Iraq and Libya, which have abundant conventional reserves but face hurdles getting the oil out of the ground.

“Middle East turmoil is almost always bad for oil production,” said Amy Myers Jaffe, associate director of Rice University’s Energy Program. “This should make the world’s megasuppliers nervous, since the pendulum has already begun to move in this direction.” ■

Employees finish a production platform that will service Brazil’s new offshore fields, located beneath 6,000 feet of water.

Philippine Resources 35

Environmental Resources November 2011 - January 2012

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Retired open pit mines are opportunities

By Paolo Penson

M

ining is defined as the extraction of valuable minerals or other geological materials from the earth. Any material that cannot be grown agriculturally or manufactured in a factory is usually mined. In a broader scope, mining can involve the extraction of oil, natural gas and even water.

The life of a mine has five stages.

The first and second involve prospecting and exploration - locating, identifying and quantifying minerals. The third and fourth stages are development and exploitation, involving preparing and constructing access to the mineral reserve, followed by the extracting, processing and shipping of minerals. Lastly comes the reclamation or rehabilitation stage â&#x20AC;&#x201C; which is now a necessary part of mining due to the demands of the public for a cleaner environment and more stringent laws.

There are a number of mining methods which depend on the occurrence and formation of the mineral, each having their pros and cons. Drift, slope and shaft mines are among underground mining methods, while area, augur contour and open pit mines are among the surface mining techniques.

Among these, open pit or strip mining is the method that has drawn the most attention from the public following the Marcopper and Rapu-rapu mining disasters in the provinces of Marinduque and Albay â&#x20AC;&#x201C; such that the local governments of Bohol, Capiz, Mindoro, Samar, South Cotabato and Zamboanga del Norte have already banned or are contemplating bans on open pit mines in their respective provinces.

The people who oppose open pit mining say this method brings about ecological degradation due to the clearance of the flora and fauna, as well as the soil degradation and erosion at the

Berrima

36 Philippine Resources

mine site. This method also produces chemical and toxic pollution if not properly managed.

However there are also a number of advantages in using the open pit method. Aside from being the most economical method for certain minerals, it is also the safest for mining personnel.

Aside from these, retired open pit mines also offer investment opportunities in agriculture, power generation and tourism, since open pit mines are usually located in mountainous areas or desserts. These huge pits can be recycled and turned into reservoirs that can irrigate agricultural lands and provide hydroelectric power if sufficiently elevated and the area experiences enough annual rainfall or is in the vicinity of a river with adequate water volume. They can also be venues for water sports such as boating, fishing, triathlons, wake boarding and water skiing and become tourist attractions.

Environmental Resources November 2011 - January 2012

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Lake Caliraya, a man-made lake built in 1940s to supply water to the Caliraya Hydroelectric Plant, now hosts a number of resorts.

A case in point is the Marcopper pit in Marinduque. Locals from Marinduque always ask tourists if they want to see the “pit.” And that is exactly what the tourists do – see the pit and leave, heading

for the beach or to see the Moriones. But imagine if the locals could show tourists something like Lake Caliraya, a manmade lake built in 1940s to supply water to the Caliraya Hydroelectric Plant, now

the location of a number of resorts.

It is difficult to quantify the exact significance of Lake Caliraya to Laguna’s tourism industry due to the number of other tourist attractions in the province. However, one cannot dismiss the significance of the Camsur Watersports Complex to the province of Camarines Sur where the number of visitors grew by 117 percent in 2009.

For the stake holders, this translates to the following: A mining company’s excavation expense can translate to a pre-operating expense and be capitalized for a reservoir or resort project. Farmers can benefit from the irrigation. Local folk and the local government will still benefit from employment opportunities and taxes even after the retirement of the mine. This can also translate to more foreign tourists and an inflow of foreign currency for the national government.

With all these opportunities, it would be prudent for the officials not to ban open pit mining without due consideration to the long-term benefits. ■

Philippine Resources 37

Resources Events November 2011 - January 2012

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Mining defense gets its act together

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Vladimar Solic (left) of Mining & Petroleum Services with Edwin Castro of JAMMPL Exploration Philippines.

Thynor Amor (left) of FLSmidth with Frederick Fernandez of Pacific Chartering & Shipping.

Richard Dyas (left) of Asian Tigers Lane with Kenneth Richard John Litjens of SGS.

Cecilio Bautista (left) of Oceana Gold and Ron Sangil of Philippine Sundt.

Tom Vaillancourt (left) and Wayne Gibbon of Pacific Metals with Harry Kiss of DeVere & Partners.

38 Philippine Resources

Keynote speaker Philip Romalduez, president of the Chamber of Mines of the Philippines and Benguet group chief.

Ken Trebilco (left) and Anne Lavers of GHD.

Photos by Dean Homer, www.chromagraphic-images.com

Seated from left: Teresita Samson of Bulawan Minerals Resources, Simon Mangos of QED, Colin Jenner of McConnell Dowell, Johan Raadsma of CGA Mining. Standing (from left): Alasdair Stuart of Bulawan Minerals Resources, Brian Luerck of Crazy Horse Resources, Alan Blackley of QED, Pete Caleon of Bulawan Minerals Resources, Eric Pasigian of QED.

he “roadblocks” facing companies in the mining sector and the progress being made in dismantling or avoiding them were discussed in detail by Chamber of Mines of the Philippines president Benjamin Philip G. Romualdez at the latest lunch networking meeting and forum organized by the Philippine Mining Club.

Romalduez spelled out recent moves by the chamber to counter the roadblocks and he made it clear he believes progress is being made against the anti-mining factions.

About 200 members and guests attended the lunch at the Makati ShangriLa Hotel. The next event is scheduled for December 2, where the main speaker will be Cifford M. James, president, chief executive officer and chairman of the TVI Pacific group, which operates the Canatuan copper and zinc mine as well as a diamond drilling subsidiary in the Philippines. ■

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Plugging leaks in dangerous ponds

A

mong the critical areas of environmental concern, necessitating special systems for protection, is the storage of waste materials such as mine tailings, which present potentially significant impacts to the environment if not properly contained. These materials are frequently stored in containment ponds which are typically lined with high density polyethylene liners to prevent release of contaminated materials into the environment. Although a superb material for this purpose, HDPE liners are still subject to potential damage during installation and usage, making it crucial to identify a means of located such damage so that it can be rectified with little or no impact on the environment. To do this requires a system that can identify such damage, preferably before the liner system goes into full use.

Fortunately such technology does exist, and even better is readily available in the Philippines and throughout the Asian region. It is called as electronic leak location, more commonly known as liner integrity surveys.

LIS can locate holes in installed geomembranes whether exposed or covered with water or a relatively thin (up to one meter) layer of soil, sand or

gravel. For several decades now high density polyethylene and other polymer membranes have become the materials of choice for providing protection to the environment from harmful substances contained in various industrial waste streams, when stored in large containment structures.

Conventional construction quality assurance procedures include the testing of the installed liners, principally the integrity of the seams.

Despite these efforts, some degree of holes or other damages can escape detection during this process. Rogue windblown rocks or other debris can get under liners while they are being installed, or can be dragged along during the process of deployment of the liners themselves. When loaded with overburden, these rocks under the liners can readily lead to the development of holes.

After installation, liners are often covered with layers of sand, gravel, ore or waste, intended to provide a protective layer guarding against future damage during the lifetime of the system.

Regrettably however, this process of covering liners with protective materials is often the main source of damage. And because the liner has been covered in the

To locate any sources of liner damage by checking via electrical leakage, voltage measurements are taken throughout the survey area in a grid pattern.

40 Philippine Resources

process, this damage can go undetected until it is too late to readily access such areas and conduct repairs.

To address these concerns, electrical leak location technology has been developed and been in commercial operation for over 20 years. Regulators and engineers are increasingly specifying such surveys, known as geoelectric liner integrity surveys, as a critical and final stage of construction quality assurance for landfills, waste water treatment plants, heap leach pads, potable water reservoirs, fuel tank secondary containment, evaporation ponds, ash ponds, tailings ponds, concentrated animal feed operation waste lagoons and similar installations.

The technology employed to perform a LIS is the geoelectric potential method, with the applicable standards being the American Society of Testing and Materials standards D7007-03 & D7002-03.

To conduct a survey, a DC voltage is applied to the material covering the geomembrane and the power source is grounded to the earth beneath it. The survey area must be isolated from the surrounding ground so the applied voltage can only travel through holes in the geomembrane in the survey area.

To locate the sources of electrical leakage, voltage measurements are taken throughout the survey area in a grid pattern. The magnitude of horizontal measurements of voltage potential will increase sharply when approaching a hole location due to the sudden drop in voltage caused by the electrical leakage.

The sensitivity of the survey dictates the hole size capable of being located, which can vary from several millimeters to a centimeter for surveys with soil as a cover material, while pinhole leaks can typically be located with water as a cover material.

The survey sensitivity is dependent upon the site conditions. The success of a dipole survey depends heavily on the conductivity of the material above and below the geomembrane, the thickness Continued on page 42 >

PHILIPPINE MINING CLUB FP

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LIS technology can find hidden damage

Surveys around complex structures can be challenging, but are often still possible.

< Continued from page 40 of the soil cover material and the boundary conditions. If covered with water, a geomembrane can be surveyed for leaks with a very high sensitivity due to the high conductivity of water.

The boundary conditions of the survey area are critical because the loss of current through areas where the overlying media can contact ground will create a preferential path for current flow and likely prevent current flow through the holes in the geomembrane; essentially the holes become invisible to the LIS operator.

A pre-survey site inspection is conducted in order to determine whether or not the required boundary conditions can be met for a successful survey. It is common during such a survey to identify issues that will need to be dealt with in order for the survey to proceed, in particular the identification of potential current leak scenarios that could compromise testing. Some examples follow.

Drainage channels: In bunded areas, drainage channels are often located for removal of accumulated rainwater. The termination of the liner at these channels can be critical, especially if there is covering media like or sand or gravel on top of the liners. This covering media can be in contact with the concrete of the channel itself and this would create a conductive 42 Philippine Resources

path from the media to ground as concrete is sufficiently electrically conductive. This would require that the covering media be removed along the length of all channels prior to testing. This is a simple task, but must be done carefully so as to avoid damage to the liner. After testing, any required repairs and subsequent retesting of repaired areas, the covering material has to be replaced.

Pipe penetrations, concrete and steel structures: Liner attachment at pipe penetrations and around concrete and steel structures can present similar circumstances and require special attention to prevent current leakage. On footings where the liner termination is sufficiently above any internal media there is not a problem. However if the liner is only marginally exposed or not exposed at all, it will require removal of sufficient covering media so as to adequately expose the edge of the liner.

Cable trays and other electrical services: The presence of cable trays and other electrical services can also affect testing. These must be carefully examined as to whether they will constitute a path for the electrical current used in testing to reach to ground.

Sub-grade issues: An ancillary aspect of an LIS test is that it can sometimes identify problems with sub-grade preparation that might have been missed earlier, due to the

detailed examination of every square meter of the lined surface.

For a successful survey, there must be a conductive medium above the geomembrane, in the holes through the geomembrane, and beneath the geomembrane. Additionally, there must not be any contact between the medium above the geomembrane and below the geomembrane other than through the holes. The goal of the survey is for current to flow only through leaks in the geomembrane.

An existing sand or gravel base cover, properly wetted down, provides a suitably conductive medium above the liner, as does a full water covering. Bare membranes can also be tested utilizing the water puddle methodology.

Each day of every survey begins with a calibration sequence. Calibration is performed using an â&#x20AC;&#x153;artificial holeâ&#x20AC;? if no known holes are available for this purpose, otherwise a known actual hole is utilized. A potential is applied and adjusted so that the signal generated by the calibration hole is detectable at a level more than 3x background at a distance of say approximately 1.5 meters. Thereafter, a grid spacing of 2 meters is adequate to detect such a hole during the production survey.

For testing, with the geomembrane acting as an insulator an electric potenContinued on page 44 >

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LIS technology can find hidden damage

Liner integrity surveys to find leakage sometimes involve tricky tasks for the survey personnel, such as clambering up, down and across slopes, and wading through waist-deep, murky water.

< Continued from page 42 tial is applied across the geomembrane between a current injector electrode placed in the water or sand/gravel above the geomembrane and a current return electrode placed in the ground outside the lined area and adjacent to the survey area.

Since the geomembrane liner is an electrical insulator, current will only flow through holes in the geomembrane.

A hand-held survey probe is then used to measure the potential gradients in the water or on the surface of the gravel/sand on an orthogonal grid pattern. High gradients of a characteristic pattern identify the locations of leaks.

An analogy would be measuring the elevation gradient on the surface of a pond with a whirlpool above a hole.

Away from the whirlpool the gradient is quite constant. As the leading electrode enters the whirlpool the gradient increases and reaches a maximum when the leading electrode is over the hole.

When the electrodes are equidistant from the hole there is no gradient. There is another maximum when the trailing electrode is over the hole, but of the opposite sign to the previous maximum.

The gradient then returns to the original constant level. This up-down-up signal is characteristic of a hole. However, lo44 Philippine Resources

cal geometrical features (drains, toes of slopes, corners) can modify the signal, and the background level steadily increases or decreases as the injector electrode is approached or recedes.

When working on slopes or bare surfaces, a water lance probe is utilized, wherein the current injector is placed within a reservoir of water that is also used as the source water for the probe.

The return electrode is placed as above.

Whenever the stream of charged water coming from the probe encounters a hole it will generate a signal that the operator can detect. Slopes are probed from the bottom up to increase the ability of the operator to readily detect the location of the holes.

Once hole signals have been identified, the liner in the suspect areas needs to be exposed so that the hole or damage can be located precisely and repaired.

If necessary, the LIS equipment can be used to assist in pinpointing the damage if it is not readily obvious â&#x20AC;&#x201C; under some conditions, pinholes can be detect by a survey which are too small to be readily detected by the unaided eye.

After repairs and conventional testing are completed at each location, a retest with the LIS system should be conducted covering the areas surrounding the repair works as the signals from

the originally identified leaks could have masked signals from other smaller leaks in the near vicinity.

LIS surveys are used almost exclusively for the construction quality assurance of new containment facilities, with the exception of filled ponds which can often be surveyed while in use. It has been focused on the detection of holes created during or after installation activities.

Surveys can typically be conducted through up to 1 meter thick covering media such as sand or gravel. Upcoming advancements in leak location equipment are expected to further expand the capabilities, allowing even deeper surveys to be conducted. This will expand the capabilities of an LIS survey to encompass existing containment facilities known to contain leaks, but which would be unfeasible to excavate.

LIS surveys are available in the Philippines and throughout the Asian region through Infratex Environmental Services (www.infratexenviro.com; sales@infratexenviro.com). Infratex has already conducted close to 500,000 sq.m. of surveys in the Philippines encompassing water-filled structures, sand-covered liner, 1 meter deep gravel-covered liner and even HDPE floating cover structures. Infratrex is a subsidiary of Maccaferri Philippines, part of the global Maccaferri group. â&#x2013;

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Mapping new ground with LiDAR

By Francisco Gonçalves

M

apping using light detection and ranging, known as LiDAR, is a relatively new technology that has made an immediate impact on the mapping sector worldwide and in particular in tropical type climate regions.

The reason for this is very simple – LiDAR can see through the vegetation canopy. “See” maybe is the wrong term but what it tries to convey or emphasize is that a laser beam emitted from an instrument on board a small aircraft is able to penetrate between tree leaves, branches and trunks and measure the surface of the earth at a high accuracy. It is the accuracy - 7cm to 10cm on open and hard surface terrain; 10cm to 15cm on open but loose terrain such as plowed fields and 30cm under tree canopies – that makes LiDAR so attractive for most types of mapping project.

One of systems used by McElhanney is a Leica ALS60 LiDAR system. This can acquire up to 8 points per square meter and provide terrain models generated from the ALS60 LiDAR (cloud points) or point data with each point having x, y and z coordinates, to a high degree of accuracy and acquiring up to 5,000 hectares per hour.

At this stage and depending on the size of the project area, the LiDAR data is a collection of billions of precise x, y and z points. McElhanney’s classification, editing and attributing allocation of these “point clouds” transforms an airborne survey service into LiDAR mapping carrying high accuracy and able to service a wide range of needs and requirements.

LiDAR systems are able to penetrate different types of vegetation to precisely measure millions of ground elevation points. This LiDAR point data is used by geologists to examine hidden rock features, by archeologists to search for historic sites, by civil engineers to plan infrastructure corridors, by mining engineers for mine planning, site infrastructure and facilities, and by environmentalists to 46 Philippine Resources

establish environmentally safe procedures, for example at natural resource developing sites.

In addition, LiDAR mapping data accuracy provides accurate terrain models from which road engineers can establish the best routes for their roads, saving time and effort on the design and construction, precise cut and fill design that minimize road maintenance and environmental impact and improve safety.

LiDAR technicians acquire both LiDAR and digital aerial photography simultaneously and process both data sets for delivery to clients. Mapping products such as 0.5 or 1.0 meter contours can be derived from high density LiDAR ground points and are vertically accurate up to 7cm.

Digital orthophoto mosaic (15cm – 50cm ground pixel size) can be provided showing all that can be seen from the air. Using the LiDAR point data, 3D mapping features such as streams, rivers, lakes, roads and buildings are extracted. Other deliverables include intensity map imagery, LiDAR classified data such as digital surface models, digital elevation models, slope analysis, volume calculations, profiles, crosssections as well as forest feature extraction providing tree height, stem counts, crown diameters and bio-mass volumes.

All of this provides potential clients with the best quality data to make informed

business decisions on their projects.

To ensure that our clients receive the LiDAR mapping data they need to develop their properties, a project management system is set in place to design the surveyed ground control layout, to find the most effective test point sites that will support the LiDAR data QC process, the most effective LiDAR flight plans and the most efficient data processing matrices, procedures and effective quality assurance and quality control.

The cost of LiDAR mapping is in general less expensive than digital photogrammetric mapping and digital orthophoto and in particular since it is much more accurate, when mapping under tree cover, it provides users full data support for a wider range of applications. Once we fly LiDAR and digital air photo data for a project area located either on open terrain or tree covered terrain, the topography of the area will be defined at high accuracy and does not require further surveying or mapping unless, significant changes occur such as the establishing of an environmentally safe deposition area.

Like any modern mapping service, LiDAR mapping is produced digitally, no printing, no paper is handled or manipulated and a large percentage of clients do not require “hard copies” either in paper or plastic based sheets. Data is delivered on hard drives. ■

Phil Mining Club FP

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Monark boosts support for mining Brunel, Site onark, the sole Caterpillar Established in 1997, the founda- Works team up

M

dealer in the Philippines, is increasing its support capability for the mining sector with the establishment of a mining business unit. The new unit is headed by Allan Ward and encompasses staff in sales and product support.

Monark says the move underlines its recognition of very bullish prospects for mining amidst favorable metal prices and “a very high interest in investments in the mining industry,” in preparation for “exponential growth in the mining sector.”

The company sees the unit as “a onestop shop determined to provide loyal support with the objective of establishing a deeper relationship between Monark and its mining customers.”

The Caterpillar dealer is also strengthening its activities in staff training with its Monark Foundation Institute, which offers young Filipinos job opportunities by providing them with knowledge, skills and values.

tion has evolved from just providing technicians for Monark Equipment to providing technicians to its local industry partners – including Power Power Asia,Galeo Equipment and SR Metals.

It says the partnerships with these companies have provided job opportunities to 860 foundation scholars as well as boosting their manpower requirements in the field of heavy equipment maintenance.

With its “Technician for the World Project,” The foundation produces technicians for Monark Equipment and other CAT dealers around the world.

It uses the Caterpillar apprentice service technicians training program and applies Caterpillar assessment tools and learning standards to ensure that graduates of the program have the required skills to become Caterpillar technicians to support mining industry growth not only in the Philippines but also overseas. ■

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he Brunel group has teamed up with the Australia-based company Site Works in a strategic alliance.

The pair will deliver compliance education IELTS OHS and Trade Assessment for the Australian and international markets as well as trade up skilling, OHS and IELTS to international certification for the Philippine domestic market.

Site Works will utilize its Clark Education City campus in Clark north of Manila to develop a world class education curriculum designed to specific client requirements for the onshore and offshore oil and gas, mining and energy sectors.

The Brunel group encompasses Brunel Technical Services Philippines which is POEA-licensed for the export of Filipino personnel, and Brunel Technical Services Manpower which is a DOLE-compliant company for the employment and on hiring of Filipino personnel on behalf of clients, as well as a foreign work permit sponsorship, payrolling and relocation. ■

Philippine Resources 49

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Camp manager on the expansion trail

T

he facilities management provider ADEN Services is expanding further in the Philippines. The company has won the contract to provide full camp management services for Sagittarius Mines Inc.’s Tampakan copper-gold project in Mindanao, one of the world’s largest undeveloped copper-gold deposits.

Earlier this year, ADEN was signed up to provide technical assistance services to the Gold Fields group gold-copper exploration project in the northern Philippines and has recently expanded its services to full camp management Since it opened its Philippine operation in 2009 signing up with the Masbate Gold Project, ADEN has moved quickly to establish itself as a leader in camp management services in the country.

In Masbate, the company provides food service, cleaning and housekeeping, laundry, minor maintenance, procurement and logistics for the camp housing 350 people.

Discussing the new SMI contract, David Ringholt, sales and marketing director for ADEN’s remote site division, said: “Critical to ADEN Services’ successful bid for the project was our demonstrated performance in local supplier development and local employment schemes and our ability to align with SMI’s sustainable development standards.”

Ringholt said ADEN prides itself on utilizing 95-plus percent of all project hires from the immediate proximity of the camp site, while typically 97 percent of supplies for the camp come from local suppliers and producers. The company supports local community development and implements corporate social responsibility, health, safety and environment programs, and develops micro-business opportunities at all its locations, he said.

Internationally, ADEN’s remote site division also manages projects in DR Congo, Guinea, Vietnam, Saudi Arabia, Eritrea and Kazakhstan, specializing in the mining, oil and gas, construction and heavy industry sectors. ■

David Ringholt (left), sales and marketing director for ADEN’s remote site division, with the company’s operations manager in the Philippines, Patrice Baudouin.

50 Philippine Resources

Supply Resources November 2011 - January 2012

www.philippine-resources.com

Diesel fuel, filters and maintenance

By Andrew Leimroth

A

lthough diesel fuel quality appears to be getting better, horror stories still abound about damaged injectors or pumps and huge repair bills, all relating to dirty fuel – or is it just misguided maintenance?

Sure, a good old Landcruiser 60 series can run on bio fuel and irregular maintenance but anyone with a late model diesel (that means most diesels from year 2000 on)running electronic injection needs be much more aware of basic rules. Just to kick you into life, repair bills above 450,000 pesos are not uncommon for repairs on common rail diesels.

Rule 1: Buy known, major brands of diesel. Because these represent a brand, there are rules and guidelines that are followed in relation to fuel handling and cleanliness.

Rule 2: “Nicht Bio Diesel!” as the fuel cap on the 22 million pesos worth of 2010 model international truck says. I stick with the vehicle manufacturers on this. No bio fuel in anything with electronic control. Maybe that’s another day’s writing.

Rule 3: Keep at least a dozen of your fuel receipts handy in the vehicle. If you get a bad load of fuel, you have an available history. This means that if you bought Brand X fuel regularly and got bad fuel, you have a clear history of fuel from that company. Generally the one who has his documents in order wins the battle.

Rule 4: Have your vehicle’s fuel filter changed regularly.

I usually recommend every 5,000km to 10,000km. Prevention is better than the cure. The longer a fuel filter is exposed to contamination, the more chance you have of a problem. Dirt as such may not get through a blocked filter but water can if it builds up too much in the filter bowl. Heavily restricted filters put strain on the injection system. We regularly see newer common rail diesels coming in with performance issues only to find a blocked filter.

Most manufacturers recommend not changing the fuel filter or “inspecting” it. In not changing it, the manufacturer’s logic is that if you change the fuel filter it increases the chance of contamination getting to the clean side of the fuel line....so leave it to the dealer when a warning light comes on and they will change it safely.

That could be a good argument but I have seen many more problems from blocked filters than from incorrectly changed filters. Again, I would rely on about 5000km to 10,000km change intervals.

Rule 5: Be careful how much fuel conditioner you use.

Good quality diesel has all the right additives already in it – anti-foam agents for easy filling and anti-algae agents to kill algae and disperse water.

This doesn’t mean good diesel is always perfect and some of us choose to use additives. Just be careful, because most diesel fuel additives are corrosive and not good at lubricating, so overdosing may lead to other issues. ■ Philippine Resources 51

Supply Resources November 2011 - January 2012

www.philippine-resources.com

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I

nnovation in beneficiation of iron ore in a wet application has become another first for the mine equipment specialist Metso. The technology is now in place with Metso customer JSW Steel in India, and both report it is performing well.

JSW Steel is India’s second largest steelmaker and claims the most modern, eco-friendly steel plants with the latest technologies. The company is currently undertaking major expansion of production at its plant in Toranagallu in the Bellary district of Karnataka, to meet soaring steel demand in India and beyond.

One challenge facing the company involved the beneficiation process, in which crushing iron ore lumps into fines is the first requirement. JSW needed minus 3mm products from 30mm to 35mm iron ore lumps.

JSW called in Metso whose experts visited the JSW Torangallu plant, talked to the beneficiation team about the critical requirements, and took ore samples to the Matamata Ore test laboratory in New Zealand. As a result, Metso suggested a modified Barmac vertical shaft

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Solving a tough ore crushing challenge

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SGS SMI Sagitarrius Mines Inc Surtech WA Mining 52 Philippine Resources

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JSW Steel is happy with the performance of the Barmac VSI ore crusher units it installed with Metso in overcoming special challenges at its plant in India.

impact crusher to suit this particular wet fine crushing application.

JSW’s general manager for beneficiation, Harvendra Deewan, commented: “We were looking for a simple and economical single-stage reduction system to crush our ore to minus 3mm. However, the reduction ratio in crushing was huge to crush the 30~35mm feed size to minus 3mm in a single stage. “During our initial interaction with Metso, we came to know that Barmac VSIs are used in many mining applications including iron ore crushing in other countries in fine crushing applications. However, ours is a wet system and crushing wet ore is always difficult in crushers. But discussions with Metso’s experts, results of lab tests and the suggested modification to the regular Barmac VSI to suit it to our wet circuit gave us confidence in Metso’s technology.”

The Barmac VSI crusher is unique in that it can easily accommodate any type of feed – wet or dry, coarse or fine. Other types of crushers would not have suited wet ore, as this tends to build up and pack inside the crushing chamber in other types of crusher such as a Cone crusher.

JSW also considered using a conventional grinding mill. But the inherent advantages of using a Barmac VSI superseded several benefits like savings in equipment cost, energy costs, maintenance time, simplified foundations and circuit and faster equipment delivery.

“We are more than satisfied with the performance of Barmac VSI in our circuit. Unlike grinding mills, a Barmac VSI is not a power guzzler,” reports Gururaja Prasad, beneficiation vice president at JSW. “These are very simple and user friendly machines and VOCS automation has come in extremely handy to our operations team.”

JSW has progressively added Barmac VSI circuits in its beneficiation plant since it commissioned the first Barmac VSI and is currently installing a sixth unit. In total, production is close to five million tons. ■

Indodrill

McCowell