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It is difficult to lose the irony in asking

this question as I type this article on my


laptop, send it to my editor via email,
and have the piece later read on a
mobile phone. All of the gadgets in my
example
are
products
of
mining
industries that have developed the
technology to extract minerals from the
earth and convert them into things that
are not only useful but altogether
ubiquitous
in
our
daily
lives.
Communications and the rise of the
Internet are just examples of areas
where mining has enabled great
advancements in technology and altered
the ways in which we live -- almost
completely. Today, great chunks of our
lives are no longer wasted at sea or on
land when we move from place to place.
Flying in aircrafts and moving in
automobiles that use aluminum, steel,
molybdenum and other minerals cut
travel time to a minimum. Even in small
households, mining makes a dent
through
our
telephones,
cleaning
products, refrigerators and television
sets with LCD screens -- all of which, we
must admit, we would not enjoy without
the mining of minerals.
Considering how immersed we are in the
use of these products, it is no surprise
that mining touches on economic, social
and political concerns. Adding to this is
the unique placement of the Philippines
on the map that has caused the
archipelago to play host to a rich
biodiversity. Minerals abound, and
research
by
the
Department
of
Environment and Natural Resources
(DENR) implies that we have on our isles
an embarrassment of riches such that
any smart businessman intent on
creating value and revenue will, in one
way or another, see the potential of the
mining industry to bring growth to our
economy.
In a mining forum held three years ago,
Manuel V. Pangilinan, Chairman of the
Philippine Long Distance Telephone
company, made a strong case for mining
that
encouraged
the
countrys

leadership
to
consider
increasing
investments in the sector. He argued
that, as the 5th most mineralized
country in the world, the Philippines not
only had the potential to establish worldclass mines but also compete globally
and yield profit for Filipinos. Moreover,
he challenged the use of common sense,
asserting that the countrys decision to
cease from mining does nothing to curb
the consumers appetite for its products.
According to him, it would cost more for
the Philippines to import these products,
whether raw or manufactured, as
opposed to producing them here in our
own backyard.
Reasonable as these arguments might
sound, they invite a probe into the
definition of wealth and progress as it
relates to communities where mining
operations have taken place. It also begs
the question: who benefits from the yield
of mining anyway? If mineral wealth in
the Philippines is estimated at $840
billion, how much of those assets are
invested in the communities affected by
mining? Most importantly, is this figure
reflective
of
the
social
and
environmental
costs
wrought
by
diggings and excavations?
Past examples have painted a rather dire
picture of how mining can transform
environments and negatively affect
communities. In 2012, fish kill in Lake
Bito, Leyte, was traced to mine wastes
from Nicua Mining Corporation (NMC),
then operating in MacArthur, Leyte. The
Mines and Geosciences Bureau (MGB),
the government entity under DENR
responsible
for
regulating
mining
activities in the country, later suspended
NMCs operations following the fish kill.
However firm the penalty, the damage
had ultimately been done and when
faced with the sudden mass mortality of
fish due to the contamination of waters,
it is difficult to imagine how the people
living
in
the
environs
of
Lake
Bitoeventually recovered.

In August of the same year, Pangilinans


Philex Mining Corporation operating in
Padcal mines in Benguet endured a huge
waste spill with about 20 million metric
tons of tailings gushing out of its
tailings-pond, surpassing the 1996
Marinduque Marcopper spill of 4 million
metric tons. The Philex discharge ran
into the Balog and Agno River systems
and later the San Roque Dam, provider
of water for agricultural irrigation and
power-generation serving a number of
municipalities in Pangasinan. Philex paid
a record fine of P1.034 billion as per the
assessment of the MGB to compensate
for the violation of the Mining Act of
1995. An additional P188.6 million was
paid for the violation of the Clean Water
Act. These are, by industry standards,
big premiums for corporations to pay,
but the question remains: can the money
fund the regeneration of land pillaged
and waterways polluted?
Another case in 2014 involved having
the MGB close the Cantilan and
Carrascal nickel mines of Marcventures
Mining and Development Corporation
(MMDC) for their failure to maintain
environmental mitigation measures. The
moratorium won small farmers and
fisher folk a temporary victory. Not long
after, the suspension order was lifted
from the Cantilan mine after MGB
certified
that
the
company
had
completed
and
implemented
environmental safeguards. While it is the
function of legislation and regulatory
bodies like the MGB to uphold the law,
cases like these make me wonder if we
might also question the scope of the law
beyond its technicalities. In other words,
can we review existing legislation
around mining and determine if specific
policies are still relevant to their
respective polities? Where regulation
and
the
implementing
rules
are
concerned, I wonder if studies have been
done to establish the impacts of smallscale mining on habitats? As these
projects occur in hundreds of sites
without a central entity that can serve to

be accountable for damages incurred,


we run the risk of focusing too much
attention on large mining corporations
without
adequately
exerting
responsibility over small players whose
influence on communities can sometimes
be equally detrimental. Consider, for
instance, the exposure of children as
laborers in small mining operations
where compression shafts are always
threatening to collapse. Tragically,
children are often exploited in both
small and large operations. When lives
are lost in these circumstances, which
entities stand to be held accountable?
In assessing the climate of mining in the
Philippines, another important area of
concern is awareness and education.
Deforestation is a feature of large-scale
mining, which erodes upland watersheds
and dumps enormous amounts of soil
into downstream waterways. Proponents
and dissidents of mining have both
argued over the amount of actual forest
cover
affected
by
quarrying
and
excavations.
Several
private
corporations have gone as far as
including massive tree-planting activities
in their Corporate Social Responsibility
portfolios, while environmentalists have
held their ground, asserting that these
programs do not adequately respond to
the alterations done on the land. This
ongoing debate and a sense of oversaturation of mining operations has
prompted some groups to call for a total
ban on mining until the correct
information detailing the conditions of
the environment and determining the
extent of the damage can be assessed.
This is a welcome proposal, especially
when emotions run high and both sides
seem intent on the extremes of either
banning mining altogether or allowing
the status quo altogether, with little
appreciation for other variables like the
social cost of the mining enterprise. The
importance of proper documentation and
the accessibility of information on our
environmental
assets
and
their
management through corporations, all

under the auspices of the state, cannot


be overlooked. As arguments stand
today, only clear data can support claims
by either side and give the discerning
public the capacity to answer the
question that this article primarily poses.
Can something truly good come out of
mining?
The ease of living in a technologically
advanced world dulls ones senses but a
bigger part of me remains concerned
about the collateral damage. Recent
reports
on
the
brutal
killings
of lumad leaders
Emerito
Samarca,
Dionel Campos and Datu Juvello Sinzo in
the hands of paramilitary groups come
to mind. Though the particulars of the
case have not yet been threshed out,
some allegations have been made
against mining companies operating in
Surigao del Sur. It is believed that
paramilitary forces do the bidding for
these corporations and so have a hand in
the murders. The evidence will have to
prove as much but the precariousness of
their life is what strikes one most.
Historically,
the lumad peoples
of
Mindanao, composed of 18 ethnolinguistic groups, have been relegated to
the margins and, on several occasions,
stripped of their land despite legislation
on ancestral domain that should have
favored them. As indigenous peoples,
their inclusion in society has been
unfairly hinged on their ability to enter
the modern trends of consumption.
Consequently, populations of lumad are
regarded
as
impoverished
and
backward. They often fall prey to
economic
interests
with
little
consideration for their own ways of life,
which are tightly bound to the land and
the environment that sustains them.
Given these considerations, it is not
difficult to see how mining poses serious
challenges that cannot simply be swept
away
in
the
name
of
national
development and consumer convenience.
The industry is first and foremost a
business that will invariably place profit
above people and the environment. The

corporate and trans-national ownership


of these mines -- and the laws that
protect their activities -- often mean that
there is little accountability and even
less responsibility for the serious
damages mining operations do. If there
is any hope for mitigating the problems
that arise in the mining industry, it
would necessarily entail the active
participation of those communities
directly affected, and often damaged, by
their violent workings. The question
remains: can a combination of better
laws and democratic participation by
local communities make responsible
mining more of a reality?
Beyond Responsible Mining in the
Philippines
(Editor's note: Cielo Magno, Ph.D. is an
assistant professor at the University of
the Philippines School of Economics. She
is a member of the board of trustees of
several
national
and
international
organizations, including the global EITI
and Action for Economic Reforms. She
gave permission to news.abs-cbn.com to
publish her article.)
The appointment of Ms. Gina Lopez, an
environmentalist and an anti-mining
advocate worries the business sector.
Cynics have been claiming that her
appointment could spell the end of
mining in the Philippines. This may be
an exaggeration. So long as there is
demand for raw minerals there will be
mining, legal or illegal. It will take more
than the appointment of Ms. Gina Lopez
in the Department of Environment and
Natural Resources (DENR) to stop
mining.
President Rodrigo Duterte has called for
responsible mining. It is a good call for
the companies to be proactive to address
the damages caused by mining to the
environment and communities.
With around $800 billion worth of
potential minerals, responsible mining
as a policy framework, however, is
insufficient. There are several reforms
we must consider to ensure that mining
contributes to sustainable development.

Responsible
mining
as
a
policy
framework...is insufficient.
Strengthening Oversight
The mining sector is poorly regulated
and monitored. Mines and Geosciences
Bureau (MGB) Director Leo Jasareno
recently said that half of the 44 metal
mines frequently violate environmental
rules, and some have been slapped with
suspension orders, although he refuses
to identify these companies. This
indicates
ineffective
government
regulation and corruption.
The reality is that despite violations of
environmental rules, companies are
allowed to ship the ore they extract.
They continue to profit from our
minerals. An example is the case of
Shenzou Mining Group Corp. operating
in Claver, Surigao del Norte. The
company used the seashore as a waste
pond. The companys operation was
suspended, but it was still allowed to
ship the P174 million worth of minerals
to China. There is clearly no disincentive
for violating environmental regulations.
The state should have seized the ore in
its favor. After all, we are the beneficial
owners of these resources and the
company violated laws in extracting
these minerals.
...despite violations of environmental
rules, companies are allowed to ship the
ore they extract.
Why does MGB refuse to publicly
disclose the identities of these violators?
Either because it does not want to affirm
what the communities and anti-mining
groups are saying all along that the MGB
has allowed these companies to destroy
the environment, or the regulator has
been captured.
The Mining Act of 1995 provides for
multi-stakeholder
approach
in
monitoring mining operations. The law
requires the formation of mining
monitoring teams (MMT) and Mining
Rehabilitation Fund Committees (MRFC)
to monitor the environmental programs
of large-scale mining companies. The
selection of the members of the

committees, particularly civil society


representatives, was never transparent.
In fact, the mining companies, aside
from funding these committees, can
influence the selection of the civil
society representatives. While the idea
behind the multi-stakeholder monitoring
teams is a noble one, conflicts of interest
hobble the implementation.
Civil society should have independent
and
transparent
mechanisms
for
selecting their representatives. The
committees should disclose how they
were funded by the companies and how
they spent the money. Committee
reports should be publicly available and
accessible in a timely manner. Capacity
building should be provided so that the
members of the monitoring teams will
have the technical capacity in fulfilling
their duties.
The DENR should strictly implement the
'no-go' zone areas.
The government has also identified nogo zones that should not be open to
mining such as areas critical for other
economic activities like agriculture and
tourism, biodiversity, island ecosystems,
and protected areas. DENR-MGB has
released the maps of these no-go
zones on the Internet. But according to
MGB, these maps cannot be used for
litigation or referenced for decisionmaking by local government officials
because they are not officially released
yet. The DENR should strictly implement
the no-go zone areas. Applications for
exploration
permits
and
mining
agreements over these areas should be
rejected.
The monitoring of the mining production
should be improved. The MGB currently
relies
on
reports
of
companies.
Independent validation of reports should
be pursued.
For example, we have examined 16
large-scale nickel mining companies,
using the 2012 data available from the
MGB web site. Their total production is
254,741 metric tons. Multiplying this
figure with the lowest possible price of

nickel for that year based on MGB


reports yields a value of about P169
billion. However, based on their 2012
excise tax payment, which is two percent
of the gross value of minerals, the gross
value of their production is only about
P33 billion.
...companies are underdeclaring their
exports, or have stockpiles of ore that
are not sold that year, or are selling
minerals at very low prices, way below
the market rate, which indicates transfer
pricing.
What can explain the discrepancy? The
companies are under-declaring their
exports, or have stockpiles of ore that
are not sold that year, or are selling the
minerals at very low prices, way below
the market rate, which indicates transfer
pricing. We cannot say for certain what
the cause of discrepancy is because of
limited information available to pursue
further research. Each company will
have its excuse.
But does MGB know this? The MGB
should have an independent monitoring
and validation of production and sales
figures of companies. It should publicly
disclose in real time the ore transport
permits of companies, showing the
amount of minerals they sold, to whom
they sell them to and the amount of
payments. The MGB should also publicly
disclose the monitoring reports on the
inventory of stockpiles of companies.
Non-disclosure of information regarding
auxiliary rights awarded to companies is
the practice. Auxiliary rights include
timber rights, water rights, right to
possess explosives, easement right, and
right to entry into private lands, and
concession areas. This information
should be made public for proper
monitoring.
Feasibility
studies,
environmental impact assessments, and
maps and coordinates of proposed mine
sites should be readily available online
so that communities that are directly
affected by the proposed operations can
make informed decisions.

The
MGB
and
the
DENR
can
significantly
improve
access
to
information by publishing disaggregated
data in a timely manner in a form that is
usable for further analysis. Public
disclosure of information will strengthen
the accountability of both the MGB and
the companies.
Impact Assessments
Had disaster risks such as these been
diligently accounted for, mining-affected
communities would not be suffering the
brunt of the double-whammy effects of
both man-made and natural disasters
exacerbated by climate change.
Mining companies should also be
required to incorporate the impact of
their operations on the vulnerabilities of
the area to climate change and include
this in their risk reduction strategies.
The people of Sta. Cruz, Zambales living
near
mining
operations
witnessed
horrendous
flooding
after
tropical
cyclone Koppu hit Luzon in 2015. In
2012, typhoons Ferdie and Gener hit
Benguet. Philex Minings decades-old
tailings dam released the biggest mine
spill in Philippine history that affected
the people living along Balog Creek and
Agno River in northern Philippines. Had
disaster risks such as these been
diligently accounted for, mining-affected
communities would not be suffering the
brunt of the double-whammy effects of
both man-made and natural disasters
exacerbated by climate change.
Extractive
Industries
Transparency
Initiative (EITI)
President Duterte stated that companies
should
be
held
to
international
standards. One international standard
that is currently being implemented by a
multi-stakeholder group is the Extractive
Industries Transparency Initiative (EITI).
It is an international initiative to improve
the governance of the extractive sector
by disclosing important information and
requiring companies and governments to
account the payments of industries to
the government.

Additional disclosure includes contracts,


beneficial owners of mining operations,
social contributions and other pertinent
documents that the multi-stakeholder
group identifies as important. It is an
international
commitment
of
the
Philippine government, implemented
through Executive Order No. 147. Some
companies refuse to participate in this
initiative, but non-participation has
never
been
a
ground
for
their
suspension.
In addition, the confidentiality clause of
our tax code limits the capacity of the
Bureau of Internal Revenue to disclose
tax payments. In other cases, some
government agencies refuse to disclose
or share information. Companies that
refuse to participate are not penalized,
but there is reputational damage to the
country if we are not able to meet the
international standards.
The Duterte administration should
legislate EITI, amend the confidentiality
provision of the tax code and suspend
companies that refuse to participate in
EITI.
The Filipino people own the mineral
resources. Unfortunately, the current
law does not provide for payment for
these resources.
Fair Share from Mining
The Filipino people own the mineral
resources. Unfortunately, the current
law does not provide for payment for
these resources. Mining companies are
required to pay taxes, just like any other
business operating in the Philippines.
Some companies are required to pay
royalties, but only if they are operating
in mineral reservation areas.
The royalty is the unique payment for
the mineral resources. Because some
companies are not paying royalties, we
are not compensated for the mineral
resources we own. Based on our
estimate, the amount of royalty we
received in 2013 is only 1.21% of the
estimated revenue of the industry in
2013. Clearly, this is not a fair payment
of our mineral resource considering the

negative
social and environmental
impacts of mining to the country.
...mining contributes little to the
economy. Mining is not a huge
employment generator.
Furthermore, mining contributes little to
the economy. Mining is not a huge
employment generator. MGB data show
that the total employment contribution
of mining is only at 234,000 in 2015 or
0.6% of total employment in the country.
To increase the benefit of mining, the
government should collect royalties from
all mining operations and ensure that
the rate of the royalty will guarantee fair
share to the Filipino people as owner of
the resource. The fair share we receive
from the mining industry should also
take into account the social and
environmental costs of extraction.
Incentives awarded to companies should
also be rationalized. In 2013 alone, the
government lost around P3 billion due to
income tax holidays granted to seven
mining companies. The awarding of
these fiscal incentives is not even linked
to the performance of the companies.
The
government
should
formulate
policies that will maximize the economic
benefits of its minerals. Indonesia
banned the export of raw ore and
imposed a stiff tax if raw ore is exported
to encourage companies to process the
minerals in Indonesia and develop its
downstream sector. Bulk of our minerals
is exported as raw ore. We do not have
an established downstream sector. We
can further maximize the value of our
minerals
if
we
link
mining
to
manufacturing
and
require
the
processing of raw ore in the country.
Unfortunately, local governments do not
get their share from mining in a timely
manner.
In addition to the issue of fair share is
the share of local governments from the
extraction of resources in their area.
According
to
the
Code,
local
governments get 40% of the proceeds
from the utilization of national wealth.
Unfortunately, local governments do not

get their share from mining in a timely


manner. Local governments also have no
mechanism to monitor if they are
receiving what is actually due them. The
concerned government agencies have
reviewed this, hopefully, the new
administration will be able to ensure
that share from national wealth will be
released in a timely manner and that
LGUs will have mechanisms to monitor
the release of their share.
Resource Funds and Strategic Spending
of Proceeds
Another important question is how the
extraction of non-renewable resources
will benefit future generations. Other
countries have established a resource
fund to manage the proceeds from
mining and ensure that their utilization
benefits not only the present but future
generations as well. The closest we have
to a resource fund is the Malampaya
fund. However, because of lack of
transparency and accountability, the
fund was abused. It also has very limited
features.
Countries usually set up an independent
board to manage the resource fund. Only
a portion of the proceeds from
extractives is used for the annual
budget. The significant portion of the
proceeds is invested so that the money
will grow and will benefit future
generation. A popular version of the
resource fund is the Sovereign Wealth
Fund of Norway.
The
challenge
for
the
current
administration is to champion and
institutionalize the genuine reforms in
the mining sector.
We also have very limited monitoring of
how the proceeds from mining are being
spent. In other countries like Botswana,
proceeds from the extractive sector are
invested in education. Our Local
Government Code (LGC) requires LGUs
to invest their share from national
wealth to local development, livelihood
projects, and lowering the cost of
electricity in the LGU. The Commission
on Audit (CoA) Memorandum in 2014

stated that it will audit the LGUs


regarding how they spend their share
from national wealth according to the
LGC. This is a welcome development,
but I have yet to see a CoA report that
has implemented this.
In addition, money allocated to LGUs
should be disaggregated so that
communities can participate in the
budgeting and monitoring processes to
ensure that money is properly spent.
By itself, responsible mining, which can
mean
many
things
to
different
stakeholders, will just be hollow
rhetoric. The reality is that natural
resource management in the country is
characterized
by
corruption,
poor
governance, and agency capture. There
are serious governance reforms that we
have to consider in ensuring that mining
benefits the people. The challenge for
the
current
administration
is
to
champion
and
institutionalize
the
genuine reforms in the mining sector.
The Department of Environment and
Natural Resources (DENR), while not
taking a completely anti-mining stance,
will
audit
mining
companies
for
compliance,
the
presidential
spokesperson said.
"I think at the end of the day, what is
truly important is to make sure that all
the companies are compliant. I think
what was agreed upon is that there
should be an audit. There will be an
audit," Spokesperson Ernesto Abella told
ANC's Headstart on Friday.
He reiterated that President Rodrigo
Duterte has made it public that he is not
totally anti-miningdespite giving the
environment portfolio to anti-mining
advocate Gina Lopez.
Lopez
herself explained
that
her
opposition stems from the oppression it
causes the community.
Duterte said Abella, is "aware of the
revenue coming in" from the mining
industry in the Philippines, and would
like to keep the industry rosy, while still
protecting people.

"[Duterte] is aware of the revenue


coming in. So he does want that to keep
the growing economy. He's very aware of
that. He wants it to stay healthy. But
making sure that people are not hurt,"
said Abella.
One of the criticisms of the Philippine
mining industry, however, is that the
minerals that the country exports are
still raw and not yet processed.
Abella said the possibility of opening a
processing plant for these mining
products in the Philippines "will have to
be a process," but the priority of the
Duterte government is "to make sure
that the people are no longer hurt and
will not get hurt."
He added, the coal plants that are in the
pipeline left by the administration of
former President Benigno Aquino III will
be reviewed, despite Duterte's promise
not to touch penned contracts with the
government.
Abella clarified, Duterte's statement
means "no changing to favor certain
people."
"Regarding existing things, these are
going to be under study[They will be
reviewed] as everything else, Im sure.
Everythings going to be looked at with
fresh eyes," said Abella.
MANILA Environment Secretary Gina
Lopez said Tuesday she would audit all
mining companies for compliance with
safety standards.
Only 13 of the 40 metallic mines have
complied with international standards,
Lopez said. Non-compliance, she said,
might result in suspension of the mines'
environmental compliance certificate or
ECC and non-issuance of ore transport
permits.
Im just gonna follow the law. Thats
what (President) Duterte said, follow the
law, Lopez told ANC.
Lopez said she did not agree with
extending
Semiraras
coal
mine
operations because it was destroying the
islands
mangroves,
a
source
of
livelihood for seaweed farmers.

I was told that theyre extending


Semirara. I dont agree at all. You fix
this. You cant damage the lives of the
fishermen and affect the future of our
seaweed farmers, she said.
The Department of Environment and
Natural
Resources
(DENR)
will
implement the administrative order
mandating
all
existing
mining
contractors to secure International
Organization for Standardization (ISO)
14001 Certification, and will serve
necessary sanctions to non-compliant
companies.
Speaking on ANC's Headstart on
Tuesday, Environment Secretary Gina
Lopez said she will duly implement the
DENR Administrative Order 2015-07,
which requires "all operating mines to
be ISO 14001 and sets standards on
environmental management systems."
She lamented that according to reports,
only 13 companies out of the 40 have
complied. For this, she said she is ready
to implement the sanctions stipulated in
the law.
"The penalty, which was given a year
ago, is
the
suspension of
ECC
(environmental compliance certificate)
and non-issuance of ore transport
permits. Im just gonna follow the law,"
she said.
An ECC certifies that a project or an
undertaking,
based
on
the
representatations of the proponent, will
not cause an adverse environmental
impact.
It is critical in the approval of the
declaration of mining project feasibility
(DMPF), the final requirement for
operating a project.
Lopez emphasized that the year the
department
has
allowed
these
companies to get an ISO certification has
lapsed in April, so the department will
audit the mining companies.
"The year is over so we will do an audit
and this shall end in three weeks, and
the presidents thing in his speech is we
do not let the poor and the impoverished
suffer. He gave a very clear statement to

the common good, and I fully intend to


follow that to the letter," she said.
To the companies who have failed to
comply with the set standards within the
year that has lapsed, Lopez said "their
time is over," but she is willing to review
the cases.
"We will go around the mines, and then
see just how far theyve gone. Well take
it in a case-to-case basis. But I am
covered by the law," she said.
However, following the "dictum on the
common good," Lopez vows to "make
sure that the poor or the laborers that
are there working will not and must not
suffer," she said.
She added the 65 operating non-metallic
mines shall also be required to comply
with the standards within one year.
"They also have to get their act together.
You cant continue using all the
resources and letting our people suffer,"
she said.
OPEN TO DIALOGUE
The Chamber of Mines of the Philippines
is open to a dialogue with Lopez despite
initial concerns, its vice president for
legal and policy Ronaldo Recidoro said.
"We welcome dialogue. We would love to
be able to speak to her and tell her
about our initiatives not just on the
environmental front but also on the
social
development
front
of
our
operation," he said.
Recidoro said he was confident the
planned audit would not affect mining
operations.
He said 21 of 40 large-scale mines are
COMP members, of which 13 have
secured I.S.O. 14001 certificates while
eight others have pending applications.
Semirara Mining and Power Corp.
Chairman Isidro Consunji said he was
"unclear" on the basis of Lopez's claim
that its coal operations destroyed 80
percent of mangroves on Semirara
Island.
"But we would like to assure Sec. Gina
Lopez
that
our
environment
management plan complies with the

directives of the DENR," Consunji said in


a statement.
The
company
planted
873,000
mangroves and reforested 625 hectares
since 2000, he said.
Sitting on a Gold Mine: Will Mining
Make or Break the Philippines?
The Philippine government believes
bolstering extractive industries will drive
growth. But religious leaders and
environmentalists wonder about the cost
In
Compostela
Valley,
in
the
southern Philippines, a river streaked
many shades of brown cuts through
farmland and jungle brush to release its
muck into the sea. The slurry swells
around the coastline, muddying the
emerald waters. The source of the blight
is an eroded mountainside peppered
with blue tarps and tiny shacks, a gold
mine nestled among green hills. About
600 families reside on its steep slope,
eking out a living by half-grams of gold.
They are, technically, squatters. An
American company, St. Augustine Gold &
Copper, holds the rights to this mountain
and those surrounding it. In their place,
the company wants to build massive pits
to get at the estimated 962 million tons
of precious metals beneath. They also
promise to clean the river, plant trees
and create jobs. It is a massive
undertaking that will dramatically alter
the
landscape
and
displace
the
thousands of workers who have been
mining in the area, and fueling the local
economy, since the 1980s.
The Philippine government, for its part,
is rooting for the American firm,
grounded in the belief that large-scale
mining can be a golden engine of
economic
growth. Corporate
mining
permits have multiplied under President
Benigno Aquino III, and new mining
rules filed by his administration this
week will place new restrictions on
where and what small-scale miners can
mine. But many Filipinos, especially
those from mining communities, are
wary of his plans. They want an overhaul

of current mining laws. They also want a


bigger piece of the profit.
(MORE: 10
Questions
for
Benigno
Noynoy Aquino III)
Whats happening in the Philippines is
echoing across a region where fastgrowing economies are weighing the
costs
and
benefits
of
extractive
industries. Indonesia this year imposed a
whopping 20% tax on mineral exports
and, in an effort to foster domestic
downstream
industries,
now limits shipments of raw materials.
Mining companies are, naturally, critical
of the turn, saying it discourages foreign
investment. What good are high taxes,
after all, if there are no investors to pay
them? Theres a flip side to that: What
good are investors if there is nothing to
mine?
The Philippines, of course, has plenty to
mine. Loaded with mineral wealth
(worth about $840 billion), it boasts
some of the largest untapped gold and
copper
deposits
in
the
region.
Unfortunately, it has not always been the
friendliest place to do this kind of
business. In Mindanao, which holds
more than a third of the countrys gold
and houses all its insurgencies, mining
operations are susceptible to attacks and
extortion
from
rebel
groups.
Noncomplying companies have lost
millions of dollars worth of equipment
to vandalism and arson. The government
has long offered generous incentives
extremely
low
taxes,
state-funded
security, low accountability to entice
foreign investment.
With adequate taxation, big mining could
indeed fuel the economic growth the
country needs. But environmentalists,
local leaders and even the influential
Catholic Bishops Conference of the
Philippines have taken a stand against
large-scale mineral extraction. Besides
obvious environmental concerns, they
fear that big mining will displace
indigenous tribes and squelch the smallscale industry that has historically
contributed the bulk of mining tax

revenues. On top of that, they argue,


bureaucratic inefficiencies and likely
graft and corruption prevents what
little mining revenue is collected from
making its way back to communities. As
a result, at least 20 governors have
banned some form of large-scale mining
in their provinces.
(MORE: Asia to Lead the Worlds Rich
List)
The tension unfolding around St.
Augustines Compostela Valley project
underscores whats at stake nationally.
Just 1 years old, the project has
received endorsements from every level
of government, a requirement under
the 1995 mining law. It stands to be the
largest single mining operation in the
countrys history (if a mining ban halting
the nearby Tampakan Gold-Copper
Project holds up). Its executives say its
setting a new standard of socially
responsible mining: hiring from the local
population,
planning
postmine
rehabilitation
and
promoting
reforestation. It also spends about
$20,000 per month on communitydevelopment efforts, according to Clyde
Gillespie, the companys environmental
and permitting director, who also
pointed out that no law requires them to
do so. What were doing now in the
community is totally voluntary, he says.
We think its the right thing to do.
But
local
leaders
from
affected
barangays, or villages, remain skeptical.
I have 100% doubts, says Captain
Ferdinand Dultra, a leader of Barangay
Magnaga, which endorsed the project
after the company reportedly donated
500,000 pesos to the construction of a
barangay hall. (Officials say the donation
did not affect their decision.) While
several leaders said that they appreciate
the companys investment in the
community, they also point out that
mining reform might secure similar
community benefits while guaranteeing
corporate accountability. It is very risky
for us to support large-scale mining,
says Elvie Baliar, a local leader from

Barangay Tambangon who also endorsed


the companys exploration bid. Six
hundred households will be affected.
They are in the area since 1987.
Under the 1995 law, small miners with a
historical claim to an area can petition
for Minahang Bayan, or Peoples
Mining, permits. The miners from this
area began applying for such permits in
the 1980s, without success. Then, in
1992, the Mines and Geosciences
Bureau (MGB) granted a permit to
Nationwide
Development
Corp.,
a
Philippine logging company that is now
partnered with St. Augustine. From that
point on, every miner on the mountain
has been illegal.
(MORE: Dynastic Duel: Its Arroyo Vs.
Aquino in the Philippines Latest Political
Battle)
Alexander Josol is one of those miners.
He used to be a farmer, but now
operates his own tunnel, for which he
pays royalties to the local indigenous
council. The work is more dangerous
than farming (a mining-related landslide
in January killed 40 people), but the pay
is decent. With his experience, hes the
sort of miner that St. Augustine might
hire. But Josol says he doesnt have the
mechanical skill to work in an open-pit
and would also earn less as an employee
than as an independent miner, as the
latter pays by the gold gram rather than
by the hour. He is working with about
two dozen small-scale-mining leaders to
oppose St. Augustines project and
secure the right to remain on the
mountain. They want the government to
back off of large-scale projects and
instead invest in the small-scale industry,
helping artisanal miners work more
safely and efficiently.
Others just want better regulation of big
mines. Under the 1995 mining law,
foreign companies typically pay no
income tax, no export tax and just 2%
excise tax which is in large part why
mining takes up less than 2% of the
countrys
GDP. That
taxes
are
determined by self-reported production

figures
presents
another
obvious
problem: underreporting of production.
From 2000 to 2008, reported mineral
production was between 17% and 45%
lower than actual mineral exports,
according to a 2010 study commissioned
by Action for Economic Reforms. The
lack of oversight behind such a
discrepancy is a major criticism of the
existing
mining
law. Father
Edwin
Gariguez, who won the 2012 Goldman
Prize, a
prestigious
international
environmental award, for his work on
mining, argues that Aquino gives too
much weight to the regulatory power of
government agencies. He says most
agencies dont have the capacity or the
will to enforce the law.
The IMF, which once called for the cheap
privatization of the countrys natural
resources, now recommends that the
Philippines revise its mining tax scheme.
Executives at St. Augustine acknowledge
that the Philippines liberal mining laws
and low taxation are part of what
attracted the company to the region, but
Gillespie argues that stricter regulation
and reasonably higher taxes wouldnt
necessarily turn them off. The payoff is
too huge. If you can get in here and get
established, youll be in pretty good
shape in the long term, says St.
Augustine chief operating officer Tom
Henderson, of the countrys mineral
potential.
The President, who has long promised to
reform the industry, this week filed the
implementing rules for his new executive
order on mining. They do not include
provisions on revenue sharing, protected
habitats or ecotourism zones. Other
stakeholders have taken matters into
their own hands, introducing three
alternative mining bills at the Philippine
Congress
(House
bills 4379, 6342 and 4315), each more
radical than the next in their attempt to
reform the industry. These alternatives
are supported by the Catholic Bishops
Conference, environmental groups and
indigenous rights organizations, who

feel that any one of these measures


would add teeth to the Presidents plan.
Whether Aquino will respond favorably
to the popular call, or uphold the
decades-long status quo, remains to be
seen. But what happens in the
Philippines could set a new standard for
extractive industries in other parts of the
world.
Philippines to review all mines as
environmentalist takes the helm
The Philippines will review all mines
operating in the country, the new mining
minister said on Friday, as the
committed environmentalist vowed to
determine whether the industry is
hurting the Southeast Asian nation.
Regina Lopez's appointment to head the
Department of Environment and Natural
Resources has sent shockwaves through
the mining sector, which fears a
nationwide crackdown.
"I'm not against the mining industry but
I'm against suffering," Lopez told
reporters on her first day in office as
part of the administration of Rodrigo
Duterte.
"I do want to evaluate if the country is
safe from mining," she told a briefing
where videos were aired showing
environmental harm from mining along
with testimonies from farmers and
fishermen opposed to the industry.
Lopez said the review would take a
month.
Her stance suggests a tough regulatory
road ahead for Philippine miners, whose
nickel ore producers are the biggest
suppliers to China.
A mining industry lawyer said he was
worried
a
ban
on
new
mining
development permits in place since 2012
may not be lifted if the minister's review
drags on.
"Our concern is that if Secretary Lopez's
initiative to review all mining operations
will take another four years, and no new
mining permits are issued, that will
effectively kill the industry," said Ronald
Recidoro of the Chamber of Mines of the
Philippines.

President Duterte has warned that he


could
cancel
projects
causing
environmental harm, though he told
business leaders last week that he was
not against mining per se.
The country's mining sector, one of the
world's largest in the 1970s, has since
struggled partly due to environmental
rules and policy flip flops, missing much
of the mining boom in recent decades
and now facing much lower commodity
prices.
Lopez has described as "madness" even
to consider open pit mining - a method
used by many miners in the Philippines
and elsewhere - because of the
environmental impact.
The minister declined to say on Friday
whether she would ban it, but said the
industry "has to shift its method of
operations."
The Philippines has suffered a number of
environmental disasters caused by
mining, including a 1996 tailings leak at
Canadian-owned
Marcopper
Mining
Corp's copper mine in Marinduque that
contaminated rivers.
RISK OF POLICIES BACKFIRING?
Miners say hardline policies could
backfire particularly as the Philippines
has become the biggest nickel ore
supplier to China after previous top
exporter Indonesia banned shipments of
unprocessed minerals in 2014, shipping
34.3 million tonnes last year.
Recidoro said metal output could drop if
no new mines are allowed.
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"If we do not get new mines online then
there will be a gap as the older mines
run out of ore," he said.
Mining contributes less than 1 percent
to the Philippine economy. Of 9 million
hectares identified by the government as
having high mineral reserves, only 3
percent is being mined.

The challenge is how to lure back


foreign investors.
Commodities giant Glencore Plc last
year quit the $5.9 billion gold-copper
Tampakan project in the southern
Mindanao island, that has failed to take
off after the province where Tampakan is
located banned open-pit mining in 2010.
There are only a handful of foreign
investors involved in mining currently,
including Australia's Oceanagold Corp
and Canada's B2Gold.
It's going to take some time to reassure
foreign investors, which have the capital
and technology, that "the risk is not too
high," said business consultant Peter
Wallace.
(Editing by Ed Davie
An Assessment of the Philippine Mining
Industry; Issues and Challenges that Lie
Ahead
2014 was an uneventful year for the
mining industry. Despite the countrys
much-vaunted mineral potential[1] and
sizable investor interest in mining in the
Philippines, the DENR and MGB have
continued to withhold action on pending
applications for MPSAs and FTAAs
pursuant to the Presidents directive
under EO No. 79. And despite the lifting
of the moratorium on the issuance of
exploration permits in March 2013, only
one (1) new exploration permit (EP) was
issued by the MGB, with 17 EP renewals.
Since 2011, government has not actively
pursued
investments
in
minerals
development, opting instead to focus on
reviewing the current fiscal regime for
mining. In 2012, mining was excluded
from the governments Investment
Priorities Plan (IPP) and all incentives,
save for those under the Mining Act and
the National Internal Revenue Code,
have been removed. The policy change
was premised on the notion that
government
was getting
a
mere
pittance as its share in mining revenues
while the country bears the cost of the
environmental
degradation
brought
about by mining activities.

But industry data readily debunk these


assumptions. Under its current fiscal
regime,
mining
companiesMPSAs
operating with no fiscal incentives
already give government a substantial
share in a projects net cash flows,
averaged over its entire mine life. More
importantly, mining companies have set
up
social
development
and
environmental
protection
funds
to
ensure
the
development
of
host
communities,
the
rehabilitation
of
mined-out areas and the compensation
of affected communities in the case of
mine accidents. (Footnote: In 2012, MGB
reported that companies spent over
Php673 million for their environmental
protection and enhancement programs,
and an additional Php498 million for
social development and management
programs.)
Nonetheless, the Cabinet-level Mining
Industry Coordinating Council (MICC)
has gone on to propose draft legislation
with an inordinately high tax rate that
would make the country uncompetitive
for foreign investments.
The MICC has also proposed to expand
the areas closed to mining applications.
As a result, the Philippine mining
industry is now in deep freeze. No new
mining agreements have been approved
and worse, even projects with approved
ECCs and DMPFs have not moved
forward. Only 3 small mining projects
were expected to start operations in
2014:
Atro Minings Vitali iron ore mining
project in Zamboanga city,
the Libjo nickel project of East Coast
Mineral Resources in Dinagat Island,
and
The Agata nickel project of Minimax
Mineral Exploration Corporation in
Agusan Del Norte.
With the closure of the Rapu-Rapu
Polymetallic
Project
and
TVIRDs
Canatuan mine earlier in the year, the
industrys growth is at a virtual
standstill.

Investors have largely taken a wait-andsee posture, unwilling to risk their


capital
under
such
uncertain
conditions. While the DENR secretary
has come out with a statement saying
that at least 10 mining firms are willing
to invest under the revised fiscal regime
proposed by the MICC, the Chamber of
Mines of the Philippines has expressed
its opposition to the MICC-proposed
scheme.
But while I would love to say that all is
quiet
on
the
western
front,
I
cannot. Developments in the legislative,
executive, and judicial branches of
government indicate that this is merely
the quiet before the proverbial storm.
We note, with concern, the following
developments:
A new revenue sharing bill. A revised
mining revenue scheme has been a
legislative priority of the Aquino
Administration since 2012. HB5367 has
been filed and is now before the House
Committee on Ways & Means.
A push by anti-mining CSOs and party
list groups for the passage of an
alternative mining law.
The exclusion of mining from the Fiscal
Incentives Rationalization bill, also
pending with the House Committee on
Ways & Means.
The growing trend of LGUs declaring
their jurisdictions as mining-free
zones, both through local ordinances and
national law.
A proposed no-go zones map which
enlarges the areas closed to mining
applications;
The juridical challenge to the validity of
the mining act pending before the
Supreme Court.
Two other developments in 2014 have
added to investors concerns:
In May, the MGB proposed to increase
Occupation Fees and Mine Waste and
Tailings Fees (MWTF) by an average
900%. The Chamber of Mines has
denounced the plan as confiscatory, an
unauthorized taxation, and a power

beyond that given to the DENR


Secretary under law.
More importantly, in July, Rep. John
Erlpe Amante filed HB No. 4728,
proposing a total ban on the export of
unprocessed
mineral
ores. Rep
Francisco Matugas soon followed after
with HB5058.
Perhaps the only bright spot in the
industrys lackluster year has been the
progress achieved with the Extractive
Industries Transparency Initiative (EITI).
After achieving candidate status in May,
the Philippines-EITI Multi-Stakeholder
Group (MSG) went on to appoint an
Independent
Administrator
that
reconciled the accounts submitted by the
relevant government agencies and the
participating firms. The Philippines first
country report was submitted to the EITI
International Secretariat in December.
The Philippines EITI was significant in
several regards: it opened a venue
where government, civil society, and the
private sector could meet and discuss
issues on transparency and, it instituted
an acceptable mechanism capable of
producing a credible report on the
contributions of the mining and oil & gas
sectors to the countrys economy.
Let me just discuss our Top 3 concerns:
HB5367 proposes a government share
equivalent to 10% of gross revenue, or
55% of the adjusted net mining
revenue, whichever may be higher. This
government share shall be in lieu of all
national and local taxes.
If this bill is passed into law and the
moratorium on mining agreements
lifted, we believe that very few
investments will come in. The bill gives
government a punishing 79% take of any
prospective mining projects net cash
flow averaged over its mine life. This is
way higher than what Australia, Chile,
Peru, or Papua New Guinea would take if
that same ore body were to be found and
extracted
within
their
countries. Inversely, the internal rate of
return (IRR) for the investor will be a
mere 13%. The proposed regime is

too onerous andunattractive for


any
investor, especially considering the state
of the countrys security, infrastructure,
and bureaucracy.
The Chamber is also concerned with the
growing trend of cities, provinces, and
legislative districts declaring their
territorial jurisdictions as mining-free
zones and prohibiting all forms of
mineral extraction activity, except for
those
undertaken
by
government
agencies for basic services.
Following this trend, the MICC, pursuant
to its mandate under EO79 has also
come up with a no-go areas map which
proposes
to
exclude
tourism
development
areas
and
prime
agricultural
lands
from
mining
applications, closing off nearly half of
the 9 million hectares identified by MGB
as having high mineral potential. The nogo zones map remains pending approval
with the Office of the President, but we
understand it is already being used by
the MGB in its review and processing of
exploration permit applications.
A local mining ban will not solve the
problem
of
illegal
small-scale
mining. Even today, with the activity
already
prohibited
under
RA7076,
[2]illegal small-scale mining operations
remain rampant in mineral-rich areas of
the Philippines like Mt. Diwalwal and
Paracale. More importantly, local mining
bans will set a dangerous precedent for
other cities and provinces to follow;
making it attractive to impose a similar
ban riding on the popular sentiment of
love for the environment. This piecemeal reduction in the areas open for
minerals development, without proper
research and study, renders nugatory
the basic precept under the constitution
that all mineral resources are owned by
the state, and that their exploration,
development and utilization must always
be subject to the full control and
supervision of the state.[3]
Not all provinces are blessed with
mineral resources. If the state is havefull
control over its mineral resources, these

areas must be open and available to the


national government for exploration,
planning,
and
where
necessary,
development and utilization. Provinces
blessed with mineral resources must
align themselves with the national
minerals development plan, and not
arrogate to themselves the decision
whether or not these minerals may be
mined.
If the proponents concern is the
perceived environmental destruction
brought about by large-scale mining
activities, the rational answer is not to
ban all forms of mineral extraction. We
believe the more rational approach
would
be
to
strengthen
existing
regulatory frameworks and the strict
enforcement
of
mining
and
environmental laws.
The law already prohibits mining
activities in certain areas. (sec. 19 of RA
No. 7942):
in military and other government
reservations;
near or under public or private
buildings, , except upon written consent
of the government agency or private
entity concerned;
in areas covered by valid and existing
mining rights;
in areas expressly prohibited by law;
in areas covered by small-scale miners
as defined by law unless with prior
consent of the small-scale miners; and
old growth or virgin forests, proclaimed
watershed forest reserves, wilderness
area, mangrove forests, mossy forests,
national
parks,
provincial/municipal
forests, parks, greenbelts, game refuge
and bird sanctuaries as defined by
law and in areas expressly prohibited
under the National Integrated Protected
Area System (NIPAS) and other
While additional areas may be closed off
to mining applications, the closing-off
must be for compelling reasonseither
because of a superior right or land use,
or
because
of
environmental
considerations.

EO79 adds prime agricultural lands,


areas covered by the comprehensive
agrarian
reform
law,
strategic
agriculture and fisheries development
zones (SAFDZs), tourism development
areas, island ecosystems, and other
critical areas to the no-go list. The nogo zones map developed by the MICC in
2013 closes approximately 65% of the
Philippines to mining applications. More
importantly, about 4.5M hectares of the
9M hectares generally considered to be
of high mineral potential are now closed
off to mining.
On the other hand, minings physical
footprint on the map may only be
described as small. Viewed on the map,
the 43 operating mining projects occupy
at
most,
10,000
hectares
mere pinpricks that are located far from
any viable tourist destination. Taken
together, present and future mining
projects will take up only about 18-20
thousand
hectares
of
remote
mountainous land that will not be prime
agricultural land, nor a forest or forest
reserve, nor a critical habitat or any of
the
categories
previously
mentioned. Those are already off-limits
to mining.
The Chamber of Mines submits that a
national land use bill that will rationalize
the allocation, utilization, management,
and development of our countrys limited
land resources may be the key to
answering the proponents social and
environmental concerns.
An ore export ban. In July 2014, Rep.
Erlpe John Amante filed House Bill No.
4728 proposing a total ban on the export
of unprocessed mineral ores. It is
claimed that the measure, if passed into
law,
will increase domestic
revenue andencourage investments in
the mineral processing sector which will,
in turn, create jobs and increase
domestic revenues through taxes and
duties.[4]
While there is a need to integrate mining
more effectively in the countrys
industrialization
strategy,[5] this

requires a thorough study that considers


the prerequisites of mineral processing
moving towards the development of
capital-intensive
manufacturing
activities along with other industries and
towards heavy engineering industries if
that can be pursued.
The Chamber is thus very concerned
with the proposed strategy of imposing a
ban on the export of raw ores as a means
of compelling mining contractors to
invest in minerals processing plants.
Market forces must be allowed to
determine whether or not an economic
activity like minerals processing can be
established in the country. If the
investment prerequisites are absent or
insufficient, a ban on ore exports will not
lead to the construction of minerals
processing plants, but to mine closures,
job losses and economic dislocation in
communities hosting mining projects.
The economic prerequisites to build
sustainable (and
profitable) mineral
processing plants are simply not present
at
the
current
time.
Prospective
investors face many serious constraints:
The generally lower quality of nickel ore,
coupled with the lower overall ore
resources make the construction of
expensive ferronickel or electric arc
furnaces unfeasible. these types of
plants
require
higher
grade
nickel (saprolite ore at 1.5% - 2.5%
nickel) at high sustainable volumes to
make economic sense;
the relatively high power cost and lack
of power make minerals processing
uneconomical/uncompetitive
in
the
Philippines when compared to our
ASEAN neighbors (especially Indonesia);
The lower quality of locally produced
coal and the non-availability of local
coking coal (used for fueling Nickel Pig
Iron (NPI) blast furnaces)is a serious
obstacle. Indonesia has large quantities
of both.
NPI blast furnaces, though cheaper to
build,
have
serious
environmental
issues. These will have difficulty passing
the countrys high environmental air

quality standards, and obtaining the


prerequisite social acceptability permit.
High Pressure Acid Leach (HPAL)
processing plants and electric arc
furnaces are very expensive to build and
will require large capital (The Taganito
HPAL Plant was built at a cost of
us$1.7B).
The
general
uncertainty
surrounding the mining industry, the
lack of needed infrastructure (roads, airand seaports), security concerns and the
lack
of
government
support (to
encourage growth in the mining
industry) are serious deterrents for
investors to risk their money in the
Philippines.
It may thus be more prudent for
government to evaluate a wider set
ofpolicy options. Other policies, such as
increasing public spending on power
generation and distribution, roads and
ports, may be more effective in
encouraging domestic ore processing
than an outright export ban.
Industry outlook for 2015
Governments current track to review
(and revise) fiscal and environmental
policies relative to mining will likely
continue. In its latest pronouncement,
the office of the president, through Sec.
Coloma, listed the rationalization of
mining fiscal regime as one of the
legislative priorities that will be pursued
by the Aquino administration for 2015.
As I have already mentioned, the bill has
already been filed in the House of
Representatives, and is awaiting action
from the Committee on Ways & Means.
Until a revised fiscal regime is passed
into law, no new mineral agreements will
be signed. Governments decision not to
promote minerals development at this
time is unfortunate, given the ongoing
ore export ban in Indonesia. with
Indonesia bent on continuing its export
ban policy and chinas nickel stockpile
expected to run low by the first half of
2015, the price of nickel ore is expected
to
increase
from
us$17,000
to
23,000/mt. the Philippines is chinas only
real source for nickel ore that does not

entail high shipping cost. Unfortunately,


with the moratorium on new mining
agreements in place since 2012, the
Philippines is (again) not positioned to
take full advantage of the projected
increase.
Government initiatives to increase the
government share in mining revenues
and to expand the areas closed to mining
applications will only serve to further
dampen
investor
interest
in
the
Philippines. Investors are keeping an eye
on three key issues: mining revenue
sharing, the no-go zones map, and the
ore export ban. These have been under
review since 2012 as a direct result of
the issuance of EO No. 79, with revenue
sharing being cited as the reason for the
long-standing moratorium. While a
review and revision of existing mining
policies is not a bad thing per se, a longwinded review, especially one premised
on increasing government revenues,
sends the wrong signals to investors.
The industrys only hope is the passage
of a rational and competitive mining
fiscal regime that not only gives
government a fair share in mining
revenues and allows for inclusive growth
in host communities, but equally as
important, gives investors security and
allows them a fair and reasonable return
on
their
investments. Continuous
engagement between government and
the mining industry will be key in
developing a rational and competitive
mining fiscal regime. The Philippines
2014 EITI country report can be a good
starting point for policymakers and
legislators. It validates the fiscal
contributions of 30 operating metallic
mines and gives an accurate picture of
the industrys tax payments. The
reconciled report can therefore be used
as basis to compute what should be a
rational tax rate for the mining industry,
given the total value of production and
their operating cost.
Unfortunately, with the 2016 national
elections coming in just 14 months, the
chances of a rational mining fiscal

regime being filed, deliberated, and


passed in the 16th Congress becomes
more remote with each passing month. If
congress fails to pass a revised fiscal
regime, then industry really has no
choice but to just wait it out and see
what the next administrations policy
will be when it comes to minerals
development.
###
[1] Mining in the Philippines. With an
estimated US$1.4 trillion worth of
mineral resource underground, the
Philippines
mineral
potential
is
considered one of the best in the world
on a per-hectare basis, with an
estimated 9 million hectares considered
to be areas of high potential. At its peak
in the 1970s, with 45 operating largescale mines, the mining industry
accounted for about 21% of the
countrys total exports. But as the
Marcos regime faded, so did mining, and
except for a brief boom in 1988-89, the
mining industry struggled from the mid80s through the 1990s.
[2] Rep Act No. 7076, otherwise known
as the Peoples Small-scale Mining Act
of 1991.
[3] Section 2, Article XII, Philippine
Constitution.
[4] In August 2014, Senator Paolo
Benigno A. Aquino IV filed Senate Bill
No.
2374, providing
an
identical
counterpart bill in the Senate. In
December 2014, Rep Francisco Matugas
filed his own HB 5058 with similar
import.
[5] Going beyond mineral extraction into
processing will link mining more
strongly to downstream industries that
could potentially create high-quality
jobs(e.g., jewelry, manufacturing, and
construction) and thereby contribute to
higher GDP, enhanced fiscal revenues,
and job creation for the country.
Metro Manila (CNN Philippines)
When Chips Guevara learned a mining
company was starting operations near
his home in Lobo, Batangas, he decided
to attend the public consultation.

It was an audience of mostly farmers and


fisherfolk.
Lobo
is
a
third-class
municipality, about 150 kilometers south
of Manila.
The only risk officials told them about
was silt, Guevara recalled. Since trees
would have to be uprooted and an open
pit would have to be dug, the soil could
erode into the ocean when it rains.
But there were more pressing questions
to be asked. An environmentalist by
advocacy and an engineer by trade, he
wanted to know what chemicals the
company would use and what their
impact would be on the community and
its surroundings.
"So, I started asking technical questions.
The first thing I asked was, are you
going to use a mercury process or a
cyanide process? The initial reaction I
got was silence," he said.
Company officials later told him they
would be using cyanide to process ores
into gold. When pressed on how they
planned to dispose of the toxic waste
after, "it was silence again."
Guevara pointed out, "When it comes to
pure cyanide, the volume of a grain of
rice is enough to kill a person. And yet,
you would have to bring in tons and tons
of cyanide into the mining area."
Together with Gina Lopez, a well-known
anti-mining advocate, they banded with
church leaders, resort owners and
concerned citizens, successfully lobbying
the local government to withhold the
company's mining permit.
Lopez is now the next Environment
Secretary an appointment that has
been met with praises from civil society
and worry among miners.
Related: Mining has place in Duterte
economic agenda - MVP
In her first interview with CNN
Philippines, she said she would prioritize
a review of mining policy. Mining, she
claimed, endangers the environment,
impoverishes
people,
with
only
businesses profiting.
Related: Gina Lopez accepts Duterte's
offer to lead DENR

But President-elect Rodrigo Duterte has


not ruled out the industry as a whole,
but has called for "responsible mining"
instead. He has pointed to Australia and
Canada as some of the world's leaders in
mining and compelled local miners to
adopt their best practices.
What "responsible mining" entails is
unclear, though. It is disputed even
within the industry.
Strong law, weak implementation
For Louie Sarmiento, head of the
Philippine Mine Safety and Environment
Association, there isn't much to be
changed.
"Even when the Philippine Act of 1995
was enacted, we followed the Canadian,
Australian, as well as other countries'
best practices. Everything we need is
already in the law. It's just a matter of
validating and implementing it," he said.
Sarmiento admitted mining inevitably
involved risk to people and the
environment. But those risks are
manageable, he said, and the measures
to do so are already laid down by the
state.
A company must have a comprehensive
safety and health plan, from start to
finish of a mining exploration, he said. It
is also required to set aside a trust fund;
this ensures it has the resources to
implement that plan to the satisfaction
of the government.
Waste management is central to that,
Sarmiento said. The waste from mines
are stored in ponds. This allows the silt
to sink and be separated from the water.
It also exposes cyanide to the sun until it
is biodegraded.
Guevara contended, however, that even
those ponds weren't foolproof. The
wastewater can seep into the ground,
where people get their drinking water.
The ponds can also overflow into nearby
bodies of water, contaminating their
source of food.
This was a very real threat in Lobo, he
said. The mining company wanted to
locate its pond just 700 meters away
from the shoreline.

"Lobo fronts the Verde Island Passage


quite possibly the most important coral
reef in the world. It has the highest
marine biodiversity in the world. Last
year alone, scientists discovered 100
new species of marine life there. If you
put silt in the Passage, that area will
die," Guevara pointed out.
But Sarmiento said the structural
integrity
of
ponds
was
regularly
checked, both by in-house engineers and
independent auditors to prevent seepage
and overflow. Thickeners are being used
to hasten the separation of silt from the
wastewater. The quality of wastewater is
also checked before it is released out to
sea.
He pointed out that the worst mining
disasters in the Philippines were mostly
from legacy mines that operated well
before the creation of the Mining Act in
1995.
Since then, any incidents have mostly
been down to unforeseen circumstances,
he said. For example, Philex Mining
Corp.'s pond in the Padcal mine leaked
in 2012 after unusually strong rains.
Miners have been factoring in heavier
and heavier rainfall, especially with the
onset of La Nia, Sarmiento said.
According to him, it is in the best
interest of companies to ensure the
safety of their mines as they stand to
lose a lot in fines and foregone profits.
The reputational cost is likewise huge,
since
companies
tend
to
have
international operations. A disaster in
one country could hurt their business in
another.
Philex was slapped with a P1-billion fine
after the Padcal leak. Its operations were
stopped for two years. It was also
required to clean up and rehabilitate the
surrounding area.
The pond, however, ended up releasing
more than 20 million metric tons of
waste into Balog Creek and Agno River
in Benguet. It took Philex two months to
plug the leak completely.
Sarmiento said, "Responsible mining, to
me,
should
be
pro-people,
pro-

environment meaning the benefits are


felt not just by the mining community
but by the country in general."
But as far as Guevara is concerned, the
consequences are too devastating, that
even the smallest risk of a mining
disaster is already too much to gamble
on.
The only responsible thing for the
government to do is to ban mining
completely, he said.
FULL ANSWER
Humans need a wide range of natural
resources to create the products modern
civilization needs. While alternative
forms of energy are becoming more
viable, most nations need coal, natural
gas and uranium to provide energy.
Similarly, oil is necessary for powering
vehicles and the transportation industry.
Mining allows humans to use these
resources.

Some mining practices are controversial.


Mountaintop-removal
mining,
for
example, allows mining companies to
extract a significant amount of coal at a
far lower cost, but its destructiveness
has
led
to
protections
for
the
environment.
Traditional
forms
of
mining can be unsafe for workers. Fires
and collapses can be deadly, and the
health effects of mining can be
devastating.
Others, however, object to mining in
general. Because coal and oil release
carbon dioxide when used as fuel, some
argue that mining exacerbates global
warming. Others object to mining for the
rare Earth elements essential to
computer parts. However, almost all
experts of all political and moral stripes
believe that mining will be necessary for
decades but that slowly phasing it out
might be a wise goal.

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