Xstrata PLC : Philippines Unveils New Law to Boost Revenue from Mining
07/09/2012| 07:06am US/Eastern
-- Finance chief says government to review all mining operations
-- Government seeks to impose 5%-7% royalty fee on mining projects via new law
-- Exploration activities can proceed but new mining contracts won't be approved until revenue-sharing law is passed
(Revises first paragraph and adds comments from finance secretary in the 4th paragraph, and comments from mining groups in the 13th to the last paragraphs.)
By Cris Larano and Rhea Sandique-Carlos
MANILA--The Philippines on Monday unveiled a new mining law that aims to generate more revenue for the government from the sector even as it widened the areas where mining is banned and imposed a moratorium on new contracts--at least until a law on sharing of mining revenues is passed by Congress.
The new policy is contained in Executive Order 79, which President Benigno Aquino signed over the weekend.
"The EO aims to increase the government's revenue from mining, improve environmental standards" and make national and local laws consistent with each other, Environment Secretary Ramon Paje said in a news briefing.
Aside from raising fees paid by mining firms, the government also planned sell an estimated 88 billion pesos ($2.1 billion) worth of mine tailings and waste, he said.
Finance Secretary Cesar Purisima said in a separate statement that Mr. Aquino has ordered a "thorough review of all mining operations...(to) strengthen and promote efficient and effective regulation of the industry as well as gain popular support for the development of our mineral resources."
Industry group Chamber of Mines of the Philippines and several mining firms welcomed the new mining policy, hopeful the order will finally settle conflicting interests and allow more investments in the mineral-rich Philippines.
Mr. Paje said the new policy will grant new mining contracts via auction while Mr. Aquino is expected to certify as urgent the proposed revenue-sharing bill so Congress would pass it quickly. He said the government is considering proposing in the bill a royalty fee of 5%-7% of gross earnings for mining contracts.
Currently, only mining operations located within mining reserves pay a royalty fee of 5% of gross earnings. Only 11 of the 33 operating mining firms in the country are in designated mining reserves, while the rest aren't and they pay only a 2% excise tax and other fees.
Until the revenue-sharing bill is enacted into law, no new contracts will be granted, Mr. Paje said. He said exploration activities, feasibility studies and the processing of environmental compliance certificates can now proceed, after they were frozen when the government started the review of its mining policy last year.
He added that companies that pursue exploration projects will be given first crack at mining claims.
Mr. Paje also said existing mining contracts wouldn't be affected by the new legislation, in particular referring to Swiss miner Xstrata Plc's (XTA.LN) $5.9 billion Tampakan gold and copper project in the Philippines' south, which was denied an environmental compliance certificate pending the review of the mining laws. He said the government would continue to respect local legislation in the province where the Tampakan project is located.
"We respect South Cotabato banning open-pit mining until [its environmental code is] declared invalid," said Mr. Paje, adding the Department of Interior and Local Government will review South Cotabato's environmental code to ensure that it doesn't contradict national policy that doesn't prohibit open-pit mining.
Elections for seats in the Philippines' Congress and Senate will be held in May next year, giving the government less than a year to push through the new legislation on revenue-sharing.
Sagittarius Mines Inc., the local partner of Xstrata in the Tampakan project, called the executive order "a positive step toward promoting a responsible mining industry in the Philippines and in particular we welcome the recognition of the need for consistency between national laws and local ordinances."
"If approved, we believe the Tampakan project would establish a blueprint for modern, large-scale mineral development in the Philippines," Sagittarius Mines said.
The Chamber of Mines of the Philippines said the order offers solutions that will encourage development of the country's mineral resources as well as promote a stable business environment and level playing field.
"We are hopeful that the policy will harmonize conflicting interests, encourage investments, and foster sustainable development especially in the countryside where it is greatly needed," the chamber said.
Write to Cris Larano at firstname.lastname@example.org and Rhea Sandique-Carlos at email@example.com