Philippines: SMI renews bid for $5.9bn mining projectBy Edwin Espejo Aug 20, 2014 1:14PM UTC
Despite government failure to address policy issues in the mining industry, Sagittarius Mines Inc (SMI) is still hopeful it will get the necessary permits and clearances needed to pursue its stalled Tampakan Copper and Gold Project.
It is poised to conduct more rounds of consultations with stakeholders, including obtaining the consent of communities and local government units that will be affected by its multi-billion dollar project.
The Tampakan project straddles the Mindanao provinces of South Cotabato, Sultan Kudarat, Davao del Sur and Sarangani in the Philippine covering more than 20,000 hectares.
SMI currently holds ownership of the Tampakan project.
Early this month, the Mines and Geoscience Bureau forwarded to its central office the feasibility study of SMI for further review.
The mining company earlier scaled down its operations and has not given a timetable when it would commence commercial operations after the government failed to settle the issue on government share in the proceeds and income of mining operations in the country.
The government set up the Mining Industry Coordinating Council to thresh out a host of mining policy issues, including amending the 1995 Philippine Mining Act.
Malacañang, however, has yet to release results of consultations held by the council and is yet to submit to Philippine Congress a draft proposal that will amend the mining law.
A source from SMI who requested anonymity as he is not authorized to issue a statement said they are still working with the national government to resolve key issues.
These include permitting requirements, fiscal regime and others that the “national government can address.”
SMI had already obtained an environment compliance certificate to proceed with its project but was to obtain approval and business permits from host local government units.
The local government of South Cotabato however passed an ordinance in 2010 banning the use of open-pit mining in the province.
SMI was also required by the Department of Environment and Natural Resources to obtain anew free, prior and informed consent of indigenous communities that will be affected by its mining operations.
Company sources said it will begin the process of obtaining consent from tribal communities in September.
Key corporate issues
As this developed, minority SMI stockholder Indophil Resources NL said it is confident they will be able to proceed with the US$5.9 billion project after its majority partner Glencore successfully sold the latter’s interest in the Las Bambas copper and gold project in Peru to Chinese investors.
One of the reasons Glencore withheld full financing for the project was the uncertainty of the Las Bambas sale which, if it did not push through, could have meant the sale of the Tampakan Copper and Gold Project.
“In principle, we understand that on closure, this divestment frees Glencore and therefore its interest in Tampakan from the MOFCOM conditions,” the Australia-based Indophil said in its report to the Australia Stock Exchange in July.
Indophil was referring to the conditions set by the Chinese Ministry of Commerce before it approved the merger between Glencore International and Xstrata PLC to form the world’s 4th largest diversified mining company.
The merger put into hold the full development of the Tampakan project as Glencore, who owns 62.5 per cent of SMI, publicly stated it was not keen on pursuing ‘greenfield’ projects.
Greenfield projects are those that are yet to commence commercial production.
The rest of SMI’s stake, at 37.5 percent, is owned by Indophil Resources NL.
SMI earlier announced it would commence commercial production in 2019.
But due to several uncertainties that included difficulties in obtaining government permits, Glencore scaled down its exposure to the project forcing SMI to lay off 940 of its workers and employees, representing 85 per cent of its total workforce.
SMI likewise terminated the services of its consultants including its drilling operations.