Miners May Avoid Shutdowns in Philippine Audit as Nickel Drops

  • Nickel Asia, OceanaGold confident sites to remain in operation
  • Audit ordered by government to check on environment standards

A mining audit in the world’s top nickel supplier that’s threatened mass closures may see producers prevail, with companies signaling their confidence shutdowns can be avoided as they race to remedy problems flagged in the nationwide Philippine checkup. Futures dropped.

Nickel Asia Corp. said its Hinatuan Mining Corp. unit, among those slated for closure unless it fixes shortcomings, remains in operation a week after the audit’s findings and it’s expected to stay that way, according to a statement on Tuesday. Separately, OceanaGold Corp. said its Didipio copper-gold mine is also still in business and talks with officials have been constructive.

“I am highly confident that our Didipio operations will continue to operate without interruption,” OceanaGold President and Chief Executive Officer Mick Wilkes said in an exchange release on Tuesday. Talks include discussions with Environment Secretary Gina Lopez, who’s led the checkup, and the company said it was sticking with full-year production guidance for the site.

The Philippine government said last week that three-quarters of the nation’s mines fell short in the audit ordered by President Rodrigo Duterte, with 20 mines facing suspension on top of 10 already halted. The prospects of significant interruptions to the flow of minerals, especially nickel ore, has helped to lift prices in a market that already faces a deficit. The country accounts for about a quarter of global mined nickel supply.

‘Not Be Suspended’

“We remain confident that HMC’s operation will not be suspended,” Nickel Asia President Gerard Brimo said in a statement, using the initials for Hinatuan Mining Corp. The social and environmental standards being employed at the project are the same standards as the company has at its other local operations, which haven’t been targeted for shortcomings, he said.

Nickel lost as much as 1.1 percent to $10,235 a metric ton on the London Metal Exchange and was at $10,315 at 4:25 p.m. in Manila, paring its gain this year to 17 percent. Prices surged to as much as $10,900 on Sept. 27 as Lopez presented the list of mines recommended for suspension.

The country’s top miners’ group said Tuesday while there remains a real threat to many companies’ existence, the one-page letters from the environment department to members detailing grounds for suspension often listed administrative matters. These ranged from “small violations” of the mining act to insufficient tree-planting, Ronald Recidoro, vice president for legal and policy at the Chamber of Mines of the Philippines, said in an interview.

‘Bend Backward’

More difficult to address within the permitted week-long timeframe were so-called social-acceptability findings, according to Recidoro. “How do you solve that in seven days?” he said. “Right now, we will exert all efforts to work with government. If we can bend backward to fix perceived issues, we will do it.”

Other miners have said they will probably prevail, too. Canada’s TVI Pacific Inc. said last week its Agata nickel mine, which was recommended for suspension, remains in operation and the company is confident it’ll be able to address concerns raised by Lopez. On Friday, Marcventures Holdings Inc. said the audit findings are defensible and can be reversed.

While Deutsche Bank AG raised the possibility this week that nickel may surge to as much as $14,000 a ton in the event of a significant wave of mine closures in the Southeast Asian nation, the bank cautioned that “the magnitude of the rally will, of course, depend on the final outcome” of the environmental audit.

Outlining three potential outcomes for the loss of nickel supply, the bank said in a report there may be symbolic closures totaling 50,000 tons of contained nickel, a more significant scenario with losses of 200,000 tons, and a third possibility, with shutdowns preceding a total ban on unprocessed ore exports.

— With assistance by David Stringer

    Before it's here, it's on the Bloomberg Terminal.