GENERAL SANTOS CITY – World mining giant Glencore-Xstrata is confirmed to be preparing to divest its shares in the controversial Tampakan Copper and Gold Project, according to a report to the Australian Stock Exchange by its minority partner Indophil Resources NL.

“Glencore-Xstrata has informed Indophil of its preference to divest its stakes in Tampakan. This is consistent with Glencore’s not to develop greenfield projects,” Indophil chief operating officer and managing director Richard Lauffman said in his 4th quarter report for 2013.

Although this development is subject to discussion between Glencore-Xstrata and Indophil, Lauffman said “no formal divestment process has commenced.”

At 62.5 percent, Glencore-Xstrata holds the majority and controlling shares of Sagittarius Mines Inc, holder of the Tampakan Copper and Gold Project.

Indophil owns the rest of the 37.5 percent stake at SMI.

It holds the right of first refusal should Glencore sell its controlling shares in SMI.

Lauffman said Indophil is committed to “maximizing the value” of its own shares in SMI by either developing it on its own or by also divesting from the beleaguered project.

“In line with this, and conscious of the value of Indophil’s preemptive right, the Company is sole-funding work programs at Tampakan,” Lauffman further stated.

In 2012, Glencore International acquired Xstrata PLC in a mammoth US$75 billion merger that later turned into a takeover and, in the process, creating the world’s 4th largest diversified mining companies.

The merger hit a brief snag when the Chinese government requiring Glencore to sell some of its copper mines for fear that the then world’s largest commodities trading firm exercising monopoly over the world copper market.

Glencore agreed to sell its Las Bambas copper project in Peru and listed SMI as among the other possible assets that will be up for sale.

In 2012, however, Glencore said it will rather pursue projects acquired from Xstrata that are already in the production stage which it called brownfield projects rather than finance new ones.

SMI has not gone beyond its feasibility studies stage which Glencore is reportedly treating as a ‘greenfield’ project.

Glencore-Xstrata has estimated it will need US$5.9 million to operate and mine the Tampakan project.

The Tampakan project has an annual production capacity of 450,000 tonnes copper and 435,000 ounces gold over the first five years of operation.

According to the latest Indophil estimates, the Tampakan project as average life-of-mine copper production rate of 375,000 tonnes and  gold production rate of 360,000 ounces per year.

SMI earlier announced it will commence commercial operations in 2019.

But last year, SMI cut down its operations after it failed to obtain approval and other permits from the provincial government of South Cotabato which, in 2010, passed an ordinance banning open pit mining.

The company retrenched more than 920 workers and employees, including senior managers and superintendents, last year.  SMI has also auctioned more than 30 vehicles and office equipment and had already moved from its former Makati office to a smaller space in Global City.

Indophil said SMI is now retaining only 60 employees and another 60 contractors and will work on a US$10 million budget in 2014 – down from US$40 million in 2012.

An Indophil source said it will now solely fund the offsite new environmental impact study (EIS) “which has crossed in a work program from late 2013 into 2014.  

It will reportedly cost Indophil US$500,000 in total.

Aside from the Tampakan project, Indophil also has two other exploration projects in the Philippines.  These are the Itogon Gold Project in northern Luzon and the Manat Gold Project in eastern Mindanao.