Philippines to Miss Mining Targets on Freeze, Chamber Says
The Philippines will probably miss mining investment targets after the government stopped approving projects and as miners prepare to question the legality of a new rule, the head of a mining association said.
“The projected $16 billion of investments that were supposed to occur during this administration will not happen,” Chamber of Mines of the Philippines President Philip Romualdez told a forum today in Manila. The Philippine mining and oil index fell 0.2 percent in Manila trading, snapping a four-day advance. Philex Mining Corp. (PX) fell 1 percent.
The Philippines stopped issuing new mining permits in January 2011. An order from President Benigno Aquino in July this year extended that moratorium and expanded a mining ban until Congress passes a law giving the government a bigger share in resource contracts.
The freeze on mining approvals has “caused an outflow” of about 10 billion pesos ($240 million) in investments since last year, Romualdez said.
Aquino’s order allowing the government to renegotiate the terms of mining contracts after the first 25 years is “patently illegal” and violates the existing mining law, Romualdez said. The new provision effectively shortens a project’s potential life from the maximum 50 years, he said.
Higher State Share
A renegotiation after the 25th year of a contract will allow the government to increase its share of revenue, Environment Secretary Ramon Paje said in a statement today.
“By establishing such areas as mineral reservations, the mining contractors shall be paying to the government a royalty in the amount equivalent to 5 percent of gross sales,” he said. The current 2 percent share is disadvantageous to the government because it doesn’t even cover the cost of the environmental impact of mining, he said.
The government wants Congress to impose a 5 percent to 7 percent royalty on all mining projects, apart from the 2 percent excise tax currently levied on mines in operation, Paje said in July after Aquino’s order. Lawmakers are unlikely to pass the measure this year, House Speaker Feliciano Belmonte said yesterday.