THE PHILIPPINES’ MINERAL POTENTIAL

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Industry Studies Department
Board of Investments

THE PHILIPPINES’ MINERAL POTENTIAL

07 April 2010

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  • 1. THE PHILIPPINES’ MINERAL POTENTIAL 07 April 2010 IntroductionThe Philippines is situated along a well-defined belt of volcanoes called the Circum-Pacific Rim of Fire wherethe processes of volcanism and plate convergence resulted in the formation of abundant and important metallicmineral deposits.It is considered one of the countries that are richly endowed with metallic resources and it has the potential tobe among the top ten largest mining power in the world. In terms of occurrence per unit area, it ranks third ingold, fourth in copper, fifth in nickel and sixth in chromite.The presence of major foreign mining companies such as Anglo American, BHP Billiton, Sumitomo Miningand Xstrata attests to the attractiveness of mining in the Philippines. Common metallic minerals extracted in the Philippines: Category Mineral % of Total Value * Precious Metals Gold 48.07 Silver 0.26 Base Metals Copper 6.78 Iron &Ferro-Alloy Metals Nickel 16.36 Chromite 0.12 * based on 2008 Gross Production Value of USD 1.84 billion Market Opportunities Surging mineral demand from rapidly industrializing economies like China and India is giving bright prospects for Philippine minerals. China, Australia, Japan and other trading partners in Asia continue to import mineral ores which they further process into metals. Philippine AdvantageRich mineral resources The Philippines has a land area of some 30 million hectares but only less than 2% is covered by mining permits. 30% of the remaining area or an estimated 9 million hectares is regarded as geologically prospective for metallic minerals and this is expected to increase further with continuing exploration and geological mapping. ore reserves: Ore Reserves Million MT (2005) Gold 3,056 Copper 2,968 Nickel 953 Chromite 18 Iron 410 Aluminum 292 New sites discovered with potentially world-class deposits differentiated from previous discoveries that were of low grade and shallow-seated: Tampakan (copper) which has a potential to be the biggest in the world Far Southeast (copper-gold) Boyongan (copper) Industry Studies Department 1 Board of Investments
  • 2. THE PHILIPPINES’ MINERAL POTENTIAL 07 April 2010A long history and experience in mining Mining in the Philippines predates the Spanish era which started in the 16th century.New technology New technologies are adapted to further process and increase the value of mineral products, particularly for nickel. - High Pressure Acid Leaching (HPAL) – involves the dissolution of the ores in strong acid under high pressure and temperature to liberate the nickel and other metals and produce an intermediate nickel product with higher concentration. It is used with great success by Sumitomo and Asia Nickel on their Philippine Coral Bay operation. - Heap Leaching – for nickel laterites as a low-cost and environmentally friendly alternative to HPAL, which involves irrigation of leach pads with 5% acid solution to produce a mixed hydroxide nickel productPresence of support infrastructure sea ports: 1,607 public ports and 423 private ports airports: 10 international airports, 34 domestic airports, 41 community airports, 4 unclassified domestic airports power plants: 43 run by the National Power Corp. and 32 by independent power producers (IPPs)Identified locations copper and gold mineralization are mostly found in the Central Cordilleras and in many areas in Mindanao major nickel mineralization are in Palawan and Surigao specific areas with deposits identified by the Mines and Geosciences Bureau are found in each of the country’s major island groups: Luzon, Visayas and Mindanao Luzon 1. Luzon Central Cordillera – Au, Cu, Fe, Mn 2. Northern Sierra Madre - Cr, Ni, Cu 3. Zambales – Cr, Ni, Co, Pt, Cu, Au 4. Vizcaya-Aurora – Cu, Au 5. Bicol – Au, Fe, Cu 6. Southern Tagalog – Cu, Au, Ni, Co Visayas 7. Central Visayas – Cu, Au, Mn 8. Samar-Eastern Mindanao – Au, Cu, Fe, Cr, Ni, Pt, Mn 9. Palawan – Cr, Ni, Co, Pt, Au Mindanao 10. North Central Mindanao – Cr, Cu, Au 11. Zamboanga Peninsula – Au, Cu, Cr, Fe 12. Southern Mindanao – Cu, AuGeographical advantage Many mines are located near the sea or ocean and have the advantage of proximity to ports as transhipment points. Proximity to China, Japan, Korea and other Asian markets Industry Studies Department 2 Board of Investments
  • 3. THE PHILIPPINES’ MINERAL POTENTIAL 07 April 2010Presence of mining projects that are looking for business partners: Project Location Status Owner/Operator Agata Project Municipalities of Santiago, drilling program completed; on-going MRL Gold Tubay and Jabongga in feasibility study for the establishment (Philippines) Agusan del Norte of a local processing plant Didipio Gold Brgy. Didipio, Kasibu, under care and maintenance; area is Oceanagold Copper Project Nueva Vizcaya partially constructed and undergoing Corporation final feasibility study Surigao Coal Municipalities of exploration stage has not commenced Benguet Corporation Project Marihatag, Tago, San Miguel, Cagwait in Surigao del Sur Sta. Cruz Sta Cruz, Zambales on-going development of pelletizing Benguet Corporation Nickel Project process and R&D activities on tank leaching Nickel Mining Sta. Cruz, Zambales phase 1 of the drilling program LNL Archipelago Project completed (200 has); phase 2 of the Minerals, Inc. drilling program on-goingSkilled human resources abundant labor force that is highly educated, English proficient and has strong and good work ethics availability of mining engineers and geologists with extensive experience in mineral exploration and mining operations considerable number of graduates in mining, geological and metallurgical engineering every year and a continuing scholarship and training program to address increasing demand for skilled workers available laborers with extensive experience in mining related jobs presence of professional organizations accredited by the Professional Regulations Commission: the Philippine Society of Mining Engineers (PSME), Geological Society of the Philippines (GSP), Society of Metallurgical Engineers of the Philippines (SMEP) Industry Potentials 2004 2005 2006 2007 2008 2009 Gross Production Value $ 904 $ 1,046 $ 1,510 $ 2,129 $ 1,852 $ 1,723 (US$ Million) Exports (US$ Million) $ 797 $ 820 $ 2,103 $ 2,605 $ 2,482 $ 1,039 % of Total Phil Exports (2.0 %) (2.0 %) (4.5 %) (5.2 %) (5.2%) (3.8%) Employment 118,000 123,000 141,000 149,000 158,000 166,000 Taxes, Fees and $ 73 $ 118 $ 133 $ 218 $ 150 $ 9* Royalties (US$ Million) Note: *Excise tax collected by BIR and taxes collected by national government agencies not yet included Source: Mines and Geosciences BureauIndustry outlook Outlook for 2010 is still good in spite of the global economic crisis because: – while there has been reduction in shipments of nickel ore, demand for gold, copper, iron ore, chromite and coal remain strong – commodity prices still above their last five year averages – investors from Korea, Japan, Australia, and China are still coming looking for joint venture projects Industry Studies Department 3 Board of Investments
  • 4. THE PHILIPPINES’ MINERAL POTENTIAL 07 April 2010 – banks are liquid and project proponents are upbeat in accessing from them their financial requirements – several projects are being pushed into operation although some are being re-scheduled. In 2009, six new mines went onstream: Carmen Copper Project in Cebu, Masbate Gold Project in Masbate, Coral Bay HPAL Line 2 Nickel Project in Palawan, TVI Base Metal Project in Zamboanga del Norte, PHILSAGA CO-O Gold Project in Agusan del Norte and CTP Carrascal Nickel Project in Surigao del Sur. – several projects in the pipeline are expected to be onstream within the next 3-5 years: Xtrata, Buyongan, Kingking, Far South East – there is interest from PhilExim to provide sovereign and credit guarantee on local and foreign loans to mining projects Government Support The passage of the Philippine Mining Act of 1995 The revitalization of the Philippine minerals industry is one of the primary focus area of the President Since 2004, the Philippine government has been supporting and promoting around sixty mineral development, mineral processing and exploration projects The Philippine Mineral Reporting Code (PMRC) patterned after Australia’s JORC to reduce risk and gain investor trust and confidence is being implemented. The Government supports transparency and is working to enlist in the Extractive Industry Transparency Initiative (EITI) to ensure good governance and prevent corruption. The Minerals Development Council was established to advance the government’s policy of responsible and sustainable development of the country’s mineral resources, enlist the assistance of government and non-government organizations to harmonize requirements and procedures that would facilitate inflow of investments, and address the policy and operational problems of the industry at the national and regional level. Incentives In a Financial or Technical Assistance Agreement (FTAA), contractors are entitled to the recovery of capital investments for a period of five years. - During this period, national taxes are waived but local government taxes are payable. - After the recovery period, the benefits are shared 50% - 50% based on the net mining revenue, inclusive of taxes. Investors can also avail of the incentives under the Mining Act and the Omnibus Investment Code. Investors can also apply for ecozone status under the Special Economic Zone Act of 1994 and be entitled to exemptions from certain national and local taxes if they will engage in downstream processing.Under the Mining Act - Income tax carry forward of losses - Income tax accelerated depreciation of fixed assets - Exemption from payment of real property taxes on pollution control devices - Investment guarantees, repatriation of capital, freedom of expropriation, remittance of earnings and interest on foreign loans, freedom from requisition of properties and the confidentiality of information with regards to endeavors and transactionsUnder the Omnibus Investment Code - Income tax holiday for 4-8 years - Modified duty rate for capital equipment and spare parts Industry Studies Department 4 Board of Investments
  • 5. THE PHILIPPINES’ MINERAL POTENTIAL 07 April 2010 - Exemption from wharfage dues and export tax, duty, impost and fees - Tax credit on raw materials and supplies - Additional deduction for labor expense (ADLE) - Additional deduction for major infrastructure works - Non-fiscal incentivesUnder PEZA (for mineral processing) - Income tax holiday for 4 to 8 years - Special 5% tax rate on gross income after the lapse of ITH - Tax and duty exemption on imported capital equipment - Exemption from 12% input VAT on allowable local purchase of goods and services - Unrestricted use of consigned equipment - Employment of foreign nationals Mineral Agreements and Fiscal RegimeMining permits and contracts Type of Mining Maximum Area Term Qualified Person Rights/Permits (has.) Exploration Permit (EP) 32,000 onshore 2 years; renewable to a individuals or Filipinos 81,000 offshore maximum of 6 years or foreign corporations Mineral Production Sharing 16,200 onshore 25 years; renewable for a individuals or Filipino Agreement (MPSA) 40,500 offshore like period corporations Financial or Technical 81,000 onshore 25 years; renewable for a Filipino or foreign Assistance Agreement (FTAA) 324,000 offshore like period corporations100% foreign participation is allowed under EP and FTAA as well as in Mineral Processing. For MPSA itrequires at least 60% Filipino ownership.Fiscal regime under FTAA allows recovery of Pre-Operating Expenses set at a maximum of five (5) years may be extended for projects incurring very large investments with high production rate and extensive mine life 50% - 50% sharing of the Net Mining Revenue (after recovery of pre-operating expenses) The government share of 50% comprise the following: Basic Government Share: national taxes, i.e., Excise Tax, Corporate Income Tax, Customs Duties and Fees, etc. local taxes, i.e., Business Tax, Real Property Tax, etc., payment to Filipinos, i.e., Special Allowance, Royalty to indigenous people, land owners or claim owners Additional Government Share – amount collected to achieve the 50% of the Net Mining RevenueOther laws affecting mining - People’s Small Scale Mining Act - Indigenous Peoples Rights Act - Local Government Code - National Integrated Protected Areas System Act - Environment Laws Industry Studies Department 5 Board of Investments
  • 6. THE PHILIPPINES’ MINERAL POTENTIAL 07 April 2010 Major Mining Companies Mining Company Project (Location) Annual CapacityPolymetallic MineRapu-rapu Minerals, Inc. Rapu-Rapu Polymetallic Project 3,000 MT/day (Rapu-Rapu Island, Albay)Gold MinesLepanto Consolidated Victoria Gold Mine Cu concentrates, Au & Ag:Mining Company (Mankayan, Benguet) 875,000 tonnesFilminera Resources Corp. Masbate Gold Project (Masbate) Au : 4,000,000 tonnesPhilsaga Mining Banahaw Gold ProjectApex Mining Corp. Maco Mine (Brgys. Teresa and Maco, Compostela Valley)Benguet Corporation Acupan Gold OperationsJohnson Gold Mining Corp. Paracale Gold Mine Au and Ag: 10,800 MT (Jose Panganiban, Camarines Norte)PMDC Diwalwal Direct State Dev. Project (Monkayo, Compostela Valley)Copper MinesPhilex Mining Corporation Padcal Copper Mine Cu concentrates: 37,601,979 lbs (Sto. Tomas II, Padcal, Tuba, Au: 171,092 oz Benguet) Ag: 171,092 ozAtlas Consolidated Mining Carmen Copper Projectand Development Corp. (Brgy. Don Andres Soriano Toledo)TVI Resource Development Canatuan Project Cu: 6,198,777 librasPhilippines, Inc. (Brgy. Canatuan, Siocon, Zamboanga Del Norte)Chromite MinesKrominco Inc. Redondo Project Metallurgical Cr: 57,000 MT (Dinagat Island, Surigao Del Norte)Heritage Mining Homonhon Chromite ProjectCrau Minerals Dinagat ProjectBenguet Corporation Benguet Corp.’s Masinloc Project Cr (refractory): 1,000,000 MT (Masinloc, Zambales)Nickel MinesCrau Mineral Resources Sta. Cruz Nickel Project (Zambales)Corp.Berong Nickel Corporation Berong Nickel Project Beneficiated Ni Ore: 1,470,000 MT (Barangay Berong, Quezon, Palawan)Cagdianao Mining Cagdianao Nickel Mine Beneficiated Ni: 500,000 WMTCorporation (Dinagat Island, Surigao Del Norte) Marcventures Mining SurigaoCorp.CTP Construction and ACT Project (Surigao del Sur)Mining Corp. Carrascal Nickel Project Ni Beneficiated ore: 2,000,000 MT (Surigao del Sur) Industry Studies Department 6 Board of Investments
  • 7. THE PHILIPPINES’ MINERAL POTENTIAL 07 April 2010 Hinatuan Mining Corp. Sigbanog Project Beneficiates Ni Silicate: 120,000 WMT (Manicani Island, Guiclan, Eastern Samar) Tagana-an Project Beneficiated Ni Ore: 100,000 MT (Hinatuan Island, Taganaan, Surigao Del Norte) Taganito Mining Corp. Taganito Nickel Mine Beneficiated Ni: 150,000 WMT (Taganito, Claver, Surigao Del Norte) Platinum Group Metals Toronto Nickel Project Corp. (Surigao del Norte) SR Metals Inc. Tubay Nickel Project (Sitio Benefitiated Ni Silicate ore: Bugnam, Brgy. La Fraternidad, 1,500,000 tonnes Tubay) Oriental Synergy Mountain Top (Surigao) Urbiztondo South (Dinagat) Source: Mines and Geosciences Bureau and BOI databaseMining companies with substantial foreign equities 1. Benguet Corporation – 40% American 2. Eldore Mining Corporation – 40% Australian 3. Gold Fields Philippines Corporation – 40% Australian 4. Philippine Gold Processing & Refining Corporation – 99.99% British 5. TVI Resource Development Philippines, Inc.- 40% Hongkong 6. Carrascal Nickel Corporation – 40% Chinese 7. Coral Bay Nickel Corporation – 100% Japanese 8. Platinum Group Metals Corporation – 85.72% Malaysian 9. Rio Tuba Nickel Mining Corp. – 40% Japanese 10. Oriental Synergy Mining Corp. – 31.3% Chinese Cost of Doing BusinessAdministrative fees and chargesBased on DAO 2005-08 Filing/Renewal Fee of Mining Permits (Based on DAO 2005-08) a. Application for EP and MA – P 60.00/ha b. Application for FTAA - P 60.00/ha Clearance Fee – P 5,000.00/application Registration Fee a. For EP – P 5,000.00/permit b. For MA – 20,000.00/contract c. For FTAA – 50,000.00/contract Occupation Fee (for EP, MA, FTAA) a. For mineral reservation areas – P 100.00/ha Evaluation of Feasibility Study Report/ Environmental Protection and Enhancement Program (EPEP) – P 20,000.00/study report/EPEP Application for Certificate of Environmental Management and Community Relations Record – P 5,000.00/application Filing for Application of Mineral Processing Permit a. Projects with investments above P 500 million – P 50,000.00/application b. Projects with investments of P 250 million to P 500 million – P20,000.00/application c. Projects with investments below P 250 million – P 10,000.00/application Application of Environmental Clearance Certificate – EMB Processing Fee - P 6,000.00 Industry Studies Department 7 Board of Investments
  • 8. THE PHILIPPINES’ MINERAL POTENTIAL 07 April 2010Project costGold/Silver (Annual Capacity: Gold – 224,456 oz; Silver dore – 108,427 oz) Related Expenses Cost (US$ Million) Pre-Operating Expenses 18.26 Land and other expenses 10.00 Building / Leasehold improvements 1.01 Machinery and Equipment 121.00 Office equipment, furniture and fixtures Total US$ 150.27Nickel (Annual Capacity: Beneficiated Nickel Ore - 735,868 dry MT) Related Expenses Cost (US$ Million) Pre-Operating Expenses 0.10 Deferred exploration & development charges 3.86 Land acquisition 0.06 Civil Works 0.83 Loading systems 1.63 Earthmoving equipment 2.09 Buildings and facilities 0.33 Laboratory equipment, furniture and fixtures 0.10 Working Capital 1.25 Total US$ 10.25 Approval of Mining Permits/ContractsFor exploration Application and Mandatory Acceptance Requirements Filing of Application in Regional Office 1. Location map 2. Two-year exploration work program 3. Proof of technical competence 4. Proof of financial capability Area Status and Clearance/Consent by MGB, DENR Sectors and/or other Government Offices Certification of Publication/ Posting/ Radio Announcement Publication, Posting and Radio Certification from Panel of Arbitrators Announcement NCIP Certification Pre-condition Certificate of Environmental Management & Evaluation by MGB RO & CO Community Relations Record 2-year Environmental Work Program Approval by MGB RO, DENR or Proof of Sanggunian Consultation PRESIDENT Industry Studies Department 8 Board of Investments
  • 9. THE PHILIPPINES’ MINERAL POTENTIAL 07 April 2010For utilization Application and Mandatory Acceptance Requirements Filing of Application in Regional Office 1. Location map 2. Two-year exploration work program 3. Proof of technical competence 4. Proof of financial capability Area Status and Clearance/Consent by MGB, DENR Sectors and/or other Government Offices Certification of Publication/ Posting/ Radio Announcement Publication, Posting and Radio Certification from Panel of Arbitrators Announcement NCIP Certification Pre-condition Proof of Sanggunian Consultation Evaluation by MGB RO & CO Certificate of Environmental Management & Community Relations Record Approval by MGB RO, DENR or 2-year Environmental Work Program PRESIDENT Contact Details Board of Investments Ms. Evariste Cagatan Director, International Marketing Department Industry & Investments Building 385 Sen. Gil Puyat Avenue, Makati City 1200 Tel. No.: (632) 890-1332 or (632) 895-3641 Website: http://www.boi.gov.ph Mines and Geosciences Bureau Mr. Horacio Ramos Director MGB Compound, North Avenue Diliman, Quezon City Telephone: (632) 928-8642 or (632) 920-9120 Website: http://www.minesandgeosciencesbureau.com.ph Chamber of Mines of the Philippines Mr. Phillip Romualdez President Room 204 Ortigas Building Ortigas Avenue, Pasig City 1600 Tel. No.: (632) 635-4123 or (632) 635-4159 Fax: (632) 635-4160 E-mail: comp@vaisa.com Website: http://chamberofmines.com.ph Industry Studies Department 9 Board of Investments