Philippines Mining Report 2009

According to DNER the mining sector is well placed to ride out the current global economic crisis, due to its strength in the gold and silver sectors. During economic downturns, precious metals are generally seen as safe havens for investment. Indeed, in the Philippines' two gold mines are expected to begin operations this year. The first is the Filminera Masbate Gold Project, which is being developed by Philippines-based Filminera Resources and Australia's CGA Mining, which together have invested US$200mn in the projects. The second is Philsaga Gold Project, which is being developed by Philsaga Mining Corp. and Australia's Medusa Mining, with the companies together investing US$30mn in the project. Norway's Intex Resources is also looking to plough US$3bn in a fertilizer project, while Australia's BHP Billiton is investing US$1bn in the Puiada Nickel Project.

The government of the Philippines is hoping to attract at least US$1bn in investments into the mining industry in 2009, after failing to hit the same target in 2008. In total, mining investments reached around US$630mn in 2008, a similar to level to that witnessed in 2007. However, BMI is sceptical as to whether these targets will be reached, as reduced liquidity and the collapse of metals prices has made mining companies more likely to shelve projects. In December 2008, Australia's OceanaGold announced that it would be postponing its US$320mn gold/copper project in Nuevo Vizcava due to financing problems.

Such have been the scale of financial difficulties that the Philippines government has now pushed back its target of attracting US$10bn in mining investments by one year, to 2012. The current economic climate has impacted smaller mining companies, which have to raise exploration funds through the financial markets, in particular. Yet there is hope that the larger players, such as BHP Billiton and Xstrata, will increase their activities in the country. After all, the rewards are potentially huge. It is estimated that the Philippines has US$1trn in untapped reserves of copper, nickel, gold and zinc.

Meanwhile, in February 2009, it was announced by a government official that BHP Billiton would be allowed to buy out its partner Asiaticus Management Corp if a settlement could not be reached concerning the Pujada Nickel Site. A dispute between the two parties concerning when commercial production at the site should start has seriously delayed the US$2bn project. According to Mining Minister Lito Atienza, as reported by Reuters, the option remains for BHP Billiton to acquire the 40% equity owned Asiaticus - which is owned by Filipino businessman Peter Tan - or for BHP to sell up to its partner. Asiaticus has accused BHP Billiton of moving too slowly to exploit the project, which has an estimated 200mn tonnes of nickel reserves. After initially ending its partnership with BHP, the Filipino company gained a court order in May 2008 banning the Australian mining giant from the site. BHP went to an arbitration panel in Singapore, which upheld the validity of the joint venture. BHP has pledged total investments of US$2bn at the site including a nickel processing plant.

Industry Forecast The Philippine government is currently pursuing 62 priority projects in the mining sector, with 14 already in operation. In April 2008, Mineweb quoted the Environment and Natural Resources Secretary Lito Atienza as saying that the production of the mining sector would increase five-fold by 2001. Although the financial crisis has resulted in some projects begin postponed, BMI still forecasts a sharp uptick in production. Three gold projects alone are set to come on-stream in 2009, and production of the precious metal is set to double by 2011. Meanwhile, due to major investments by firms such as Sumitomo the output of nickel concentrate should increase by around 10-times between 2008-2011.