By Frederik Balfour in Manila
Mining companies have long known that the Philippines is one of the most mineral-rich countries on earth. The archipelago sits atop the Pacific "rim of fire," a zone with more than its share of volcanoes and earthquakes, but also containing vast stores of gold, nickel, copper, silver, platinum, zinc, and more. The problem has been getting permission to actually dig the stuff out of the ground.
Despite a 1995 law allowing foreigners to own 100% of mines in the Philippines -- up from the previous limit of 40% -- challenges to the constitutionality of the measure kept all but the most adventurous foreign miners at bay.
Then in February, the country's Supreme Court finally ruled that the law is constitutional -- putting the Philippines squarely back on the world mining map. Investors from the Australia, the U.S., China, Japan, and elsewhere have flocked to the country looking for opportunities this year. In 2005, more than $300 million in new mining investment came in, and that could rise to $1 billion next year, government officials predict.
"Since the Supreme Court ruling, the investment climate in terms of mining has dramatically improved," says Michael Huehne, chief of the regional exploration office in Jakarta for Phoenix-based copper-mining giant Phelps Dodge (PD ), which is exploring for copper on the southern island of Mindanao.
With the law finally settled, the government is making a big push to woo mining investment. President Gloria Macapagal Arroyo has created the Minerals Development Council, a cabinet-level agency to help investors cut through red tape. And the Chamber of Mines of the Philippines -- an industry association -- has held seminars in Toronto, London, Beijing, and more than a dozen other cities worldwide to pitch mining execs on the country's charms.
All told, the government wants to attract some $6 billion in new investment by 2010 to develop 23 projects it sees as promising. "We now hope to capture the imagination of people all over the world," says Michael Defensor, Secretary of the Dept. of Energy and Natural Resources in the Philippines. "The government is supporting companies in a big way."
The hope is that foreign investment in mining will help fill government coffers with royalty payments and generate tens of thousands of jobs. If all 23 projects are developed, officials say, the country's mineral exports could quadruple to some $3.3 billion. "The Philippine mining industry will be one of the main drivers of growth, and main means of fighting rural poverty," says Benjamin Philip Romualdez, president of the Chamber of Mines and CEO of Benguet, the oldest mining company in the country.
China is leading the charge. During a June visit to the Philippines by Chinese President Hu Jintao, state-owned Jinchuan Nonferrous Metals, Shanghai Baosteel Group, and Manila-based Philnico agreed to jointly develop a $1 billion nickel and cobalt mine in Surigao del Norte province, on the southern island of Mindanao. Other Chinese companies, including Konka Fulim Mining and Development, have been sniffing around for opportunities in copper, gold, platinum -- anything to feed the huge demand for resources back home.
But it's not just the Chinese. Australian giant BHP Billiton (BHP ) is considering a nickel mine in Surigao del Norte that could involve investment of $800 million and which may ultimately provide 180,000 tons of refined metal. Climax Mining, also of Australia, is planning a $100 million gold and copper mine in the northern province of Neuva Vizcaya.
Japan's Sumitomo Mining & Metals, Mitsui (MITSY ), and Nissho Iwai are planning to invest a total of $250 million in nickel and cobalt mining. Canadian-based TVI Pacific has applied for rights to explore for copper and gold, while Noranda Mines and Inco are also looking into opportunities, industry sources say.
One big challenge is making sure investors have public support. Mining companies here have long been viewed with suspicion by local officials and the powerful Catholic Church. Environmentalists and human-rights advocates are still clamoring for greater compensation from Canada's Placer Dome (PDG ) for the damage inflicted on residents of Marinduque Province after a 1996 accident sent two million tons of copper waste into a river. Placer Dome has paid out $1 million in compensation to farmers and another $72 million for cleanup, but locals say that's not enough.
WEIGHING SECURITY RISKS.
Another concern is security. Mindanao, home to some of the country's richest mineral deposits, has been grappling with an Islamic separatist insurgency for two decades. More recently, it has been the site of training camps run by Southeast Asian terrorist group Jemaah Islamyia.
But some old industry hands think the risk is exaggerated. By acting responsibly and taking care of locals, companies can limit support for the insurgents, says Tony Robbins, a 15-year veteran of Philippines mining who now serves as managing director of Indophil Resources, an Australia-listed outfit that's planning to invest up to $700 million in a copper mine in a remote, mountainous region of Mindanao.
To win local support, Indophil has built two schools, provided scholarships, and set up a local skills-development center, Robbins says. "Very early on," he says, "we realized the value of good relations with the local people."
Balfour is a correspondent in BusinessWeek's Hong Kong bureau