Company open to M&A deal

Philex Mining Corp. has joined other industry leaders in continuing to bat for a competitive sector through government cooperation and consistency in policies toward mining, particularly on the revenue-sharing scheme, as the company revealed that it is open for merger and acquisition (M&A) with any of the local, regional, or international firms. 


This also means supporting Vice President Jejomar Binay's recent call for a "further study" of a government proposal to impose higher taxes on the Philippine mining industry, which already pays one of the world's highest tax schemes. He said that global competitiveness should guide any fiscal policy reform. 


"The economic effects of proposals to alter taxation must be carefully studied to avoid stifling the mining industry's overall competitiveness," Mr. Binay added in a Sept. 17 keynote address at the Mining Philippines Conference & Exhibition, held at the Sofitel Philippine Plaza Manila. "It is my plea that further study be devoted to this matter.


Philex Mining SVP-Corporate Affairs Michael Toledo, who is also media-bureau head of the MVP group of companies, agreed, telling reporters on the sidelines at the end of the three-day event on Sept. 18 that, "We expect and are hoping for consistency in government policy on the revenue-sharing scheme and no-go zones.


He and Mr. Binay were referring to a tax scheme approved by the Mining Industry Coordinating Council (MICC) that involves 10 percent of gross revenues or 55 percent of the adjusted net mining revenue-whichever is higher-for large-scale operations. 


This new scheme, according to Julian Payne, president of the Canadian Chamber of Commerce of the Philippines, would translate to an AETR, or average effective tax rate, of 79 percent, which is much higher than 58 percent in Canada and Australia, 55 percent in South Africa, 50 percent in Peru, 41 percent in Chile, and 35 percent in Papua New Guinea. He stressed that the current Philippine AETR, which covers all revenues received from mining by the public sector, is at 60 percent. 


He also lamented the haste in declaring the "no-go" zones for mining in the country that now cover 65 percent of the total land area. "This rush seems to be based more on anti-mining sentiment rather than on a rational analysis and understanding of the impact of mining," said. "More specifically, it appears to be based on serious misunderstandings.


He noted that in Australia and Canada, for instance, there are areas where agricultural activities thrive on the surface and, underneath, mining operations. He described as "over generalization" anti-mining sentiments that agriculture and tourism bring forth more economic and better quality benefits than mining. 


"The basic challenge is that there needs to be more resilience in thinking about the relative potential impacts of mining versus that of agriculture and/or tourism," Mr. Payne said. 


Mr. Toledo also told reporters that Philex Mining is looking into an M&A deal with companies here and abroad, confirming what the company's CEO and president, Eulalio Austin, Jr., revealed Sept. 17 on the sidelines of the conference. 


"We look at ways on how we can maximize our mining tenement [at Padcal, in Benguet], since we have a lot of mining tenements that are not in production yet, so this can support Silangan to come on stream at the soonest possible time. As much as possible, we look into mergers and acquisitions," Mr. Austin told reporters. 


He added that the prefeasibility study on Philex Mining's Silangan project, in Surigao del Norte, is done, and that it is viable. "We also want to get the realistic value of the project," he stressed. "We expect to finish the definitive feasibility study by the middle of next year."


Benjamin Philip Romualdez, president of the Chamber of Mines of the Philippines (COMP) and CEO and president of Benguet Corp., took the floor at the concluding plenary session, lamenting the reluctance of government to help the mining sector become competitive when it is, in fact, a partner in utilizing the national patrimony for today's and the future generations of Filipinos. 


"A mining operation is actually a government project, not ours," he added, stressing what is embodied in the Constitution that the riches found under the earth within a country's territory belongs to government. "We are the contractors only." But he complained that government has become uncooperative by wanting to impose unreasonable tax rates. 


Approval of the new revenue-sharing formula needs to be fast-tracked, however, as far as Sen. Grace Poe is concerned, since $12 billion worth of mining projects are on hold, and that the "mining industry needs to move forward.


In a speech delivered on the opening day of the event, Ms. Poe, one of the proponents of the Freedom of Information bill at the Senate, commended the 40 (which include Philex Mining) out of 51 mining companies that issued a waiver allowing the Bureau of Internal Revenue to access their corporate tax information. 


For his part, Sen. Alan Peter Cayetano shared Mr. Binay's opinion that the new tax scheme needs further study, as the mining industry has a 2013 production value of P78 billion, creating 250,000 jobs and attracting $1.3 billion in domestic and foreign investments. 


He described in a keynote speech the ironic situation of the Philippine mining sector, which is at the bottom 10 of least attractive locations, owing to policies seen as unfriendly by investors, when it is also ranked at the top 10 among the most attractive countries for mineral development based on mineral potential alone, with estimated reserves of $1.4 trillion. 


Rodolfo Severino, Jr., formerly secretary-general of the Association of Southeast Asian Nations and now head of the ASEAN Studies Center, in Singapore, urged the mining sector to point out why government policies are not advancing enough to distinguish between legal and illegal mining activities. 


Organized by COMP, the conference and exhibition gathered industry leaders, technical consultants, and investors from the Philippines, Australia, Canada, China, Japan, and other countries, and discussed the various issues that would shape the minerals and metals sector over the next 25 years. 


Artemio Disini, chairman of COMP and professor at the University of the Philippines-Diliman, took note of the willingness of several noted economists to lend their expertise by working with government, the private sector, academe, and NGOs in crafting a master plan for the improvement of the mining industry. 


In closing remarks, he said, "The Chamber wishes for the plan to be expanded further to a long term national development program, where the interplay of industries, regional integration, globalization, climate change, environmental protection, human development, and [good] governance is taken as the primary driver.

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