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Joint FINEX, MAP, PCCI Mining Conference "Make The Mining Industry Work Fo…

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Joint FINEX, MAP, PCCI Mining Conference "Make The Mining Industry Work For The Philippines" Friday, 2nd March 2012, Manila

Joint FINEX, MAP, PCCI Mining Conference "Make The Mining Industry Work For The Philippines" Friday, 2nd March 2012, Manila

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  • 1. “MAKE THE MINING INDUSTRY WORK FOR THE PHILIPPINES”CONFERENCE ON MINING’S IMPACT ON PHILIPPINE ECONOMY ANDECOLOGYFRIDAY, 2ND MARCH 20122:00PM – 5:00PM, GRAND BALLROOMHOTEL INTERCONTINENTAL MANILASALUTATIONI WOULD LIKE, FIRST OF ALL, TO THANK THE ORGANIZERS OF THISCONFERENCE – FINEX, MAP, AND PCCI – FOR GATHERING ALL OF USTODAY.I’M GRATEFUL FOR THIS OPPORTUNITY TO SHARE MY THOUGHTSWITH YOU. I SPEAK TODAY WITH THIS PARAMOUNT QUESTION – HOWCAN WE MAKE MINING WORK FOR OUR COUNTRY?CIVILIZATION AND MININGLET ME BEGIN BY ASKING – WHO OF YOU DOES NOT HAVE ACELLPHONE? (SORRY, I’M NOT GIVING FREE CELLPHONES TODAY.)DO YOU KNOW THAT AN AVERAGE CELLPHONE CONTAINS ABOUT 24MGS OF GOLD, 250 MGS OF SILVER, 3,800 MGS OF COBALT, AND 9 MGSOF PALLADIUM?AS WITH CELLPHONES, MINING TOUCHES MOST ASPECTS OF OURDAILY LIFE – WHEN YOU BUILD YOUR HOME, USE YOUR LAPTOPS,TAKE YOUR CAR TO WORK, OR EVEN PROTEST AGAINST MINING.CLEARLY, WE CANNOT LIVE WITHOUT MINING.WHY MINING? WHY PHILEX?
  • 2. 2YOU MAY ASK – WHY DID WE INVEST IN MINING?THE ANSWER IS SIMPLE.RAPID ECONOMIC DEVELOPMENT IN EMERGING MARKETS HAS LEDTO RISING DEMAND FOR RESOURCES – FUEL, FOOD, MINERALS, EVENWATER. ACCORDING TO MCKINSEY, WE HAVE NEVER BEFORE SEENGROWTH IN INCOME OF SUCH SPEED AND MAGNITUDE: CHINA ANDINDIA ARE DOUBLING THEIR PER CAPITA INCOME AT ABOUT 10X THEPACE WHICH ENGLAND ACHIEVED DURING THE INDUSTRIALREVOLUTION. BOTH COUNTRIES ARE ADDING FLOOR SPACE EVERYYEAR AT 3.5X THE ENTIRE RESIDENTIAL AND COMMERCIAL SQUAREFOOTAGE OF CHICAGO. AND IN THE COMING DECADES, UP TO THREEBILLION PEOPLE – AND THEIR SPENDING POWER – WILL BE ADDED TOTHE GLOBAL MIDDLE CLASS. THE WORLD IS INDEED ENTERING ANERA OF SUSTAINED RESOURCE DEMAND, AND HIGH RESOURCE PRICES.SO THE QUESTIONS FOR US MUST BE – DOES THE PHILIPPINES HAVETHE CAPACITY TO SUPPLY SOME OF THESE RESOURCES? IS ITREASONABLE TO STOP DEVELOPING OUR RESOURCES, KNOWING THEWORLD AND THE COUNTRY NEED THEM?THE ANSWER TO THE FIRST QUESTION IS – YES, WE DO. THEPHILIPPINES IS THE 5TH MOST MINERALIZED COUNTRY IN THE WORLDAND, IN TERMS OF DEFINED RESOURCE, 2ND IN GOLD AND 3RD INCOPPER. WE HAVE THE POTENTIAL TO DEVELOP WORLD-CLASSMINES.ON THE SECOND QUESTION, IF WE CHOOSE NOT TO PARTICIPATE INTHE GLOBAL SUPPLY CHAIN FOR MINERALS – EITHER BY OUTRIGHTBAN OR A MORATORIUM - OUR NEED FOR MINING PRODUCTS WILL
  • 3. 3NOT STOP. SO OUR ONLY RECOURSE WOULD BE TO IMPORT. WEWOULD THEN PAY FOR THE FOREIGN EXPORTER’S COST OFPRODUCTION AND PROFIT – AND THE COST OF PROTECTING HISENVIRONMENT. THIS IS NOT COMMON SENSE. WHY SHOULD WE PAYSOMEBODY ELSE TO DO THE JOB WE OUGHT TO BE DOING?WHAT ARE THE ALTERNATIVES TO THE USE OF MINERAL LAND?TOURISM IS CERTAINLY AN OPTION TO CONSIDER. HOWEVER, MOSTMINING SITES ARE NOT IDEAL FOR TOURISM. OUR MINES IN PADCALAND SURIGAO ARE HARDLY SUITABLE FOR TOURISM, SIMPLYBECAUSE THEY DON’T HAVE THE FEATURES OF AN ATTRACTIVETOURIST SITE. AND EVEN IF TOURISM WERE POSSIBLE, WE MUST ASK:ARE THE EXPECTED RETURNS FROM TOURISM COMPARABLE TO THEBENEFITS WHICH MINING CAN PROVIDE?ANOTHER SUGGESTED LAND USE IS AGRICULTURE. I’M A BELIEVER INTHE POTENTIAL AND NEED FOR AGRICULTURE IN THIS COUNTRY. ICONSIDER THE IMPERATIVE OF FEEDING OURSELVES AS AN URGENTNATIONAL PRIORITY. BUT AGAIN, MOST MINES ARE SITUATED INAREAS THAT ARE INHOSPITABLE TO AGRICULTURE. THE LAND ISOFTEN TOO STEEP, TOO ARID OR TOO MINERALIZED FORAGRICULTURE TO PROSPER.RELATED TO THIS, THERE’S AN ATTEMPT TO INTRODUCE THE NEWCONCEPT OF “TOTAL ECONOMIC VALUE” OR “TEV” IN ASSESSINGMINING OPPORTUNITIES. THE THRUST OF TEV IS TO MEASUREENVIRONMENTAL HAZARDS AND SOCIAL COSTS IN CALCULATINGGAINS AND LOSSES FROM MINING PROJECTS. THE GOAL ISCOMMENDABLE. BUT THE CALCULUS OF THE VALUE IS INTANGIBLE,ELUSIVE, AND EXTREMELY SUBJECTIVE. HOW DOES ONE QUANTIFY
  • 4. 4AND TEST THE VALUE ATTACHED TO THE BEAUTY OF A SUNSET , THEFEEL OF EARLY MORNING MIST, OR THE MUSIC OF WATER RIPPLINGTHROUGH A STREAM?PLEASE DON’T GET ME WRONG – I VALUE THE BEAUTY OF NATURE ASMUCH AS YOU DO. ALL I ASK IS FOR SOME OBJECTIVE AND TANGIBLESTANDARD BY WHICH ANY PROPOSED ECONOMIC ACTIVITY IN ALOCALITY – BE IT TOURISM, AGRICULTURE, OR MINING – CAN BEEVALUATED. FOR MINING, THAT STANDARD IS ALREADY IN PLACE.MINING PROJECTS REQUIRE AN ENVIRONMENTAL COMPLIANCECERTIFICATE AND A FEASIBILITY STUDY – WHICH TOGETHERQUANTIFY THE POTENTIAL BENEFITS TO ALL STAKEHOLDERS,ESPECIALLY THE COMMUNITY AND THE GOVERNMENT, ALONG WITHTHE ENVIRONMENT IMPACT.ADDRESSING THE PROBLEMS OF MININGOUR COUNTRY HAS ENOUGH LAWS TO ADDRESS CONCERNS IN MOSTAREAS OF OUR LIVES. THIS IS TRUE INSOFAR AS ENVIRONMENTALPROTECTION AND SOCIAL WELFARE IN THE MINING INDUSTRY ARECONCERNED. THE PROBLEM HAS ALWAYS BEEN ENFORCEMENT ANDIMPLEMENTATION OF SUCH LAWS.I ADMIT THAT OUR INDUSTRY IS NOT PERFECT, AND COULD BENEFITFROM IMPROVEMENTS. UNFORTUNATE ACCIDENTS HAVE HAPPENED,EVEN TO LARGE MINES, WHICH LEAD TO A PERCEPTION THAT MININGIS DANGEROUS AND DESTRUCTIVE. BUT THE MISTAKES OF A FEWSHOULD NOT BE CONSTRUED THAT THE WHOLE IS WRONG –ANYMORE THAN ONE CAR ACCIDENT OR ONE OIL SPILL SHOULDSHUTDOWN AN ENTIRE INDUSTRY.
  • 5. 5LET ME BRIEFLY DISCUSS SOME OF OUR THOUGHTS:FIRST, HEALTH-RELATED AND SAFETY CONCERNS, EXPLOITATION OFWOMEN AND CHILD WORKERS, THE ABSENCE OF LIVELIHOOD PLANSAND POST-MINING REHABILITATION ARE ISSUES BROUGHT ABOUT, INLARGE PART, BY SMALL-SCALE AND ILLEGAL MINERS. THESE MINERSOPERATE FREELY AND THRIVE WITHOUT BEING SUBJECTED TO THEREGULATION AND SANCTIONS IMPOSED ON LARGE-SCALE MINING.THE SOLUTION IS TO SUBJECT SMALL-SCALE MINERS TO THE SAMEREGULATIONS AND SANCTIONS FOR LARGE-SCALE MINING.CORRELATIVELY, NATIONAL AND LOCAL POLICIES ON MINING NEEDTO BE HARMONIZED, AND THE COOPERATION OF LGU,S IN THEIRENFORCEMENT MUST BE PROCURED.SECOND, THE CAPACITY AND COMPETENCE OF OUR REGULATORSMUST BE IMPROVED, PARTICULARLY IN REGARD TO EQUIPMENT ANDQUANTITY AND QUALITY OF REGULATORY STAFF. FOR EXAMPLE, INSURIGAO DEL NORTE, THERE ARE ONLY NINE MINING ENGINEERS ANDONE GEOLOGIST TO OVERSEE MINING ACTIVITIES – WHICH INCLUDE 3MAJOR MINING PROJECTS, SEVERAL EXPLORATION PROJECTS, 18APPROVED SMALL SCALE MINING PERMITS AND MORE THAN ATHOUSAND ILLEGAL SMALL-SCALE MINERS. THE PRIVATE SECTORSHOULD HELP GOVERNMENT RAISE ITS SUPERVISORY CAPABILITIESTHROUGH FUNDING OF SCHOLARSHIPS AND TRAINING HERE ANDABROAD, PROCUREMENT OF EQUIPMENT, AND HIRING OF REQUISITEPERSONNEL. PART OF THE FUNDING COULD COME BY WAY OF A FEEON MINING COMPANIES, AKIN TO THE SUPERVISORY ANDREGULATORY FEE PAYABLE BY TELECOMS COMPANIES TO THE NTC.OUR INDUSTRY MUST LEARN TO ACCEPT THAT PROPER REGULATORYATTENTION WILL PROVIDE THE COMFORT TO ALL STAKEHOLDERS –AND CRITICS – THAT RESPONSIBLE MINING IS POSSIBLE IN OUR
  • 6. 6COUNTRY – AS IT HAS BEEN, AND STILL IS, IN OTHER COUNTRIES LIKEAUSTRALIA, SOUTH AFRICA, CANADA, SWEDEN, AND EVEN INDONESIA.THIRD, CREATING AN INDEPENDENT ENVIRONMENTAL COMMISSIONRESPONSIBLE FOR SUPERVISING AND ENFORCING ENVIRONMENTALCONCERNS. AT PRESENT, BOTH THE EMB AND MGB ARE AGENCIESUNDER THE DENR. MGB IS CHARGED WITH THE PROMOTION,DEVELOPMENT, AND SUPERVISION OF MINING. EMB’S MANDATE IS TOENFORCE ENVIRONMENTAL LAWS. THESE APPARENTLYCONFLICTING GOALS CAN, AT TIMES, PLACE THE DENR IN A POLICYDILEMMA. OUR SUGGESTION THEREFORE IS TO SPIN OFF THE EMBINTO A SEPARATE AND INDEPENDENT BODY, SIMILAR TO THEENVIRONMENTAL PROTECTION AGENCY IN THE U.S.FOURTH, THE PRIVATE SECTOR SHOULD BE OPEN TO A PROFIT-SHARING SCHEME WHICH WILL ASSURE THE GOVERNMENT OF AMORE APPROPRIATE SHARE IN THE BENEFITS DERIVED FROM THERESOURCES IT OWNS. FRANKLY, I’M NOT SUGGESTING SOMETHINGNEW. PROFIT SHARING IS STANDARD IN THE OIL AND GAS INDUSTRYIN MOST PARTS OF THE WORLD, AS INDEED IT EXISTS IN OUR FTAAREGIME. IN THE CASE OF PHILEX, DESPITE OPERATING UNDER ANMPSA, WE PAID 2.3 BILLION PESOS IN NATIONAL AND LOCAL TAXES,REPRESENTING 37% OF OUR PRE-TAX INCOME FOR 2011.FINALLY, THE MINING BENEFITS BETWEEN HOST LGUS AND THENATIONAL GOVERNMENT SHOULD BE SHARED MORE EQUITABLY.FURTHER, THE NATIONAL GOVERNMENT MUST ENSURE THE TIMELYREMITTANCE OF TAXES DUE LGU’S. AFTER ALL, MINING IS LOCATION-SPECIFIC, AND I SYMPATHIZE WITH LGU,S DESIRE TO REALIZE THEFRUITS OF THE RESOURCES SITUATED IN THEIR COMMUNITIES.
  • 7. 7ECONOMIES OF SCALEIF WE CONTINUE TO STIFLE MINING, THE CRITICISM THAT ITPROMISES MUCH AND DELIVERS LITTLE COULD BE SELF-FULFILLING.YET WHEN WE LOOK ELSEWHERE, MINING HAS BEEN A DRIVER OFECONOMIC DEVELOPENT. MINING IN AUSTRALIA CONTRIBUTES 142BILLION DOLLARS EACH YEAR; IN CANADA, 37.5 BILLION DOLLARS; INTHE US, 1.9 TRILLION DOLLARS, AND IN BRAZIL, 24 BILLION DOLLARS.THE CHALLENGE IS PRECISELY TO GROW MINING SO THAT ITCREATES MORE VALUE-ADDED FOR ALL OF US. ONLY A LARGER ANDHEALTHIER INDUSTRY CAN ENABLE US TO ACHIEVE FORWARDLINKAGES IN DOWNSTREAM PROCESSING PLANTS. WE CAN’T HAVEMORE REFINERIES AND SMELTERS SIMPLY BECAUSE THERE ARE NOECONOMIES OF SCALE TO MAKE THEM COMMERCIALLY FEASIBLE.ONLY AN OPERATION AS LARGE AS TAMPAKAN OR FAR SOUTHEASTOR SILANGAN CAN GENERATE THE VOLUME WHICH COULD JUSTIFYPROCESSING IN THE PHILIPPINES. I UNDERSTAND TAMPAKAN WILLCOST 6 BILLION DOLLARS TO DEVELOP. IN OUR CASE, SILANGAN WILLREQUIRE AN INVESTMENT OF MORE THAN ONE BILLION DOLLARS.CONCLUSIONLET ME CLOSE BY SAYING THAT MINING IS NOT THE ENEMY.POVERTY IS. THE LACK OF MEANS, THE LACK OF THE MOST BASICNECESSITIES, THE LACK OF OPPORTUNITIES, THE LACK OF CHOICES –FOR FAR TOO LONG, IN FAR TOO MANY PLACES – THESE PERNICIOUSINADEQUACIES HAVE PLAGUED OUR PEOPLE. YET THE SUPREMEIRONY IS THAT, IN THE MIDST OF ALL THIS POVERTY, LIE SOME OFTHE WORLD’S RICHEST NATURAL RESOURCES, A GIFT OF PROVIDENCE
  • 8. 8FOR OUR PEOPLE TO MAKE USE OF – NOT ABUSE. IT REALLY IS ASSIMPLE AS THIS – WHERE POVERTY PERSISTS, SMALL SCALE MININGCONTINUES.POVERTY FOR US IS NOT JUST SOME UTOPIAN NOTION. ITS STARKIMPERATIVES GO BEYOND THE POETRY OF BLUE SKIES ANDTANGERINE SUNSETS. YOU AND I IN THIS HALL ARE NOT ORDINARYFOLKS WHO WORRY ABOUT THE NEXT MEAL, THE NEXT RENT, THENEXT MERALCO OR PLDT BILL – WHO DO NOT HAVE A SECOND HOMESOMEWHERE IN THE FOOTHILLS OF MOUNT MAKILING.THIS ISN’T A CONTEST BETWEEN THOSE OF US WHO WOULD PROTECTTHE ENVIRONMENT AND THOSE WHO WOULD FAVOR DEVELOPMENT.WE SHOULD BE NEITHER ONE NOR THE OTHER.IN THE END, IT ALL COMES DOWN TO A VERY BASIC CHOICE THAT WEHAVE TO MAKE FOR OUR FUTURE. OTHER PEOPLES – AUSTRALIANS,INDONESIANS, CANADIANS, BRAZILIANS – HAVE ALREADY MADETHEIR CHOICE. IF THEY CAN DO IT AND SUCCEED, SO CAN WE.WE HAVE A CHOICE BETWEEN FEAR AND FAITH, BETWEEN HARDSHIPAND HOPE, BETWEEN DIVISION AND UNITY. OUR TASK IS TO FIND THECOMMON GROUND OF REASON, THROUGH PATIENT DIALOGUE ANDCONSTRUCTIVE SUGGESTIONS – AND FROM THERE, MOVE FORWARDTO THE MORE PROSPEROUS FUTURE OUR PEOPLE DESERVE.THANK YOU AND GOOD AFTERNOON. --------------------------00OO00---------------------------

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