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

1. “MAKE THE MINING INDUSTRY WORK FOR THE PHILIPPINES”
CONFERENCE ON MINING’S IMPACT ON PHILIPPINE ECONOMY AND
ECOLOGY
FRIDAY, 2ND MARCH 2012
2:00PM – 5:00PM, GRAND BALLROOM
HOTEL INTERCONTINENTAL MANILA
SALUTATION
I WOULD LIKE, FIRST OF ALL, TO THANK THE ORGANIZERS OF THIS
CONFERENCE – FINEX, MAP, AND PCCI – FOR GATHERING ALL OF US
TODAY.
I’M GRATEFUL FOR THIS OPPORTUNITY TO SHARE MY THOUGHTS
WITH YOU. I SPEAK TODAY WITH THIS PARAMOUNT QUESTION – HOW
CAN WE MAKE MINING WORK FOR OUR COUNTRY?
CIVILIZATION AND MINING
LET ME BEGIN BY ASKING – WHO OF YOU DOES NOT HAVE A
CELLPHONE? (SORRY, I’M NOT GIVING FREE CELLPHONES TODAY.)
DO YOU KNOW THAT AN AVERAGE CELLPHONE CONTAINS ABOUT 24
MGS OF GOLD, 250 MGS OF SILVER, 3,800 MGS OF COBALT, AND 9 MGS
OF PALLADIUM?
AS WITH CELLPHONES, MINING TOUCHES MOST ASPECTS OF OUR
DAILY 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?

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YOU MAY ASK – WHY DID WE INVEST IN MINING?
THE ANSWER IS SIMPLE.
RAPID ECONOMIC DEVELOPMENT IN EMERGING MARKETS HAS LED
TO RISING DEMAND FOR RESOURCES – FUEL, FOOD, MINERALS, EVEN
WATER. ACCORDING TO MCKINSEY, WE HAVE NEVER BEFORE SEEN
GROWTH IN INCOME OF SUCH SPEED AND MAGNITUDE: CHINA AND
INDIA ARE DOUBLING THEIR PER CAPITA INCOME AT ABOUT 10X THE
PACE WHICH ENGLAND ACHIEVED DURING THE INDUSTRIAL
REVOLUTION. BOTH COUNTRIES ARE ADDING FLOOR SPACE EVERY
YEAR AT 3.5X THE ENTIRE RESIDENTIAL AND COMMERCIAL SQUARE
FOOTAGE OF CHICAGO. AND IN THE COMING DECADES, UP TO THREE
BILLION PEOPLE – AND THEIR SPENDING POWER – WILL BE ADDED TO
THE GLOBAL MIDDLE CLASS. THE WORLD IS INDEED ENTERING AN
ERA OF SUSTAINED RESOURCE DEMAND, AND HIGH RESOURCE PRICES.
SO THE QUESTIONS FOR US MUST BE – DOES THE PHILIPPINES HAVE
THE CAPACITY TO SUPPLY SOME OF THESE RESOURCES? IS IT
REASONABLE TO STOP DEVELOPING OUR RESOURCES, KNOWING THE
WORLD AND THE COUNTRY NEED THEM?
THE ANSWER TO THE FIRST QUESTION IS – YES, WE DO. THE
PHILIPPINES IS THE 5TH MOST MINERALIZED COUNTRY IN THE WORLD
AND, IN TERMS OF DEFINED RESOURCE, 2ND IN GOLD AND 3RD IN
COPPER. WE HAVE THE POTENTIAL TO DEVELOP WORLD-CLASS
MINES.
ON THE SECOND QUESTION, IF WE CHOOSE NOT TO PARTICIPATE IN
THE GLOBAL SUPPLY CHAIN FOR MINERALS – EITHER BY OUTRIGHT
BAN OR A MORATORIUM - OUR NEED FOR MINING PRODUCTS WILL

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NOT STOP. SO OUR ONLY RECOURSE WOULD BE TO IMPORT. WE
WOULD THEN PAY FOR THE FOREIGN EXPORTER’S COST OF
PRODUCTION AND PROFIT – AND THE COST OF PROTECTING HIS
ENVIRONMENT. THIS IS NOT COMMON SENSE. WHY SHOULD WE PAY
SOMEBODY 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, MOST
MINING SITES ARE NOT IDEAL FOR TOURISM. OUR MINES IN PADCAL
AND SURIGAO ARE HARDLY SUITABLE FOR TOURISM, SIMPLY
BECAUSE THEY DON’T HAVE THE FEATURES OF AN ATTRACTIVE
TOURIST SITE. AND EVEN IF TOURISM WERE POSSIBLE, WE MUST ASK:
ARE THE EXPECTED RETURNS FROM TOURISM COMPARABLE TO THE
BENEFITS WHICH MINING CAN PROVIDE?
ANOTHER SUGGESTED LAND USE IS AGRICULTURE. I’M A BELIEVER IN
THE POTENTIAL AND NEED FOR AGRICULTURE IN THIS COUNTRY. I
CONSIDER THE IMPERATIVE OF FEEDING OURSELVES AS AN URGENT
NATIONAL PRIORITY. BUT AGAIN, MOST MINES ARE SITUATED IN
AREAS THAT ARE INHOSPITABLE TO AGRICULTURE. THE LAND IS
OFTEN TOO STEEP, TOO ARID OR TOO MINERALIZED FOR
AGRICULTURE TO PROSPER.
RELATED TO THIS, THERE’S AN ATTEMPT TO INTRODUCE THE NEW
CONCEPT OF “TOTAL ECONOMIC VALUE” OR “TEV” IN ASSESSING
MINING OPPORTUNITIES. THE THRUST OF TEV IS TO MEASURE
ENVIRONMENTAL HAZARDS AND SOCIAL COSTS IN CALCULATING
GAINS AND LOSSES FROM MINING PROJECTS. THE GOAL IS
COMMENDABLE. BUT THE CALCULUS OF THE VALUE IS INTANGIBLE,
ELUSIVE, AND EXTREMELY SUBJECTIVE. HOW DOES ONE QUANTIFY

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AND TEST THE VALUE ATTACHED TO THE BEAUTY OF A SUNSET , THE
FEEL OF EARLY MORNING MIST, OR THE MUSIC OF WATER RIPPLING
THROUGH A STREAM?
PLEASE DON’T GET ME WRONG – I VALUE THE BEAUTY OF NATURE AS
MUCH AS YOU DO. ALL I ASK IS FOR SOME OBJECTIVE AND TANGIBLE
STANDARD BY WHICH ANY PROPOSED ECONOMIC ACTIVITY IN A
LOCALITY – BE IT TOURISM, AGRICULTURE, OR MINING – CAN BE
EVALUATED. FOR MINING, THAT STANDARD IS ALREADY IN PLACE.
MINING PROJECTS REQUIRE AN ENVIRONMENTAL COMPLIANCE
CERTIFICATE AND A FEASIBILITY STUDY – WHICH TOGETHER
QUANTIFY THE POTENTIAL BENEFITS TO ALL STAKEHOLDERS,
ESPECIALLY THE COMMUNITY AND THE GOVERNMENT, ALONG WITH
THE ENVIRONMENT IMPACT.
ADDRESSING THE PROBLEMS OF MINING
OUR COUNTRY HAS ENOUGH LAWS TO ADDRESS CONCERNS IN MOST
AREAS OF OUR LIVES. THIS IS TRUE INSOFAR AS ENVIRONMENTAL
PROTECTION AND SOCIAL WELFARE IN THE MINING INDUSTRY ARE
CONCERNED. THE PROBLEM HAS ALWAYS BEEN ENFORCEMENT AND
IMPLEMENTATION OF SUCH LAWS.
I ADMIT THAT OUR INDUSTRY IS NOT PERFECT, AND COULD BENEFIT
FROM IMPROVEMENTS. UNFORTUNATE ACCIDENTS HAVE HAPPENED,
EVEN TO LARGE MINES, WHICH LEAD TO A PERCEPTION THAT MINING
IS DANGEROUS AND DESTRUCTIVE. BUT THE MISTAKES OF A FEW
SHOULD NOT BE CONSTRUED THAT THE WHOLE IS WRONG –
ANYMORE THAN ONE CAR ACCIDENT OR ONE OIL SPILL SHOULD
SHUTDOWN AN ENTIRE INDUSTRY.

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LET ME BRIEFLY DISCUSS SOME OF OUR THOUGHTS:
FIRST, HEALTH-RELATED AND SAFETY CONCERNS, EXPLOITATION OF
WOMEN AND CHILD WORKERS, THE ABSENCE OF LIVELIHOOD PLANS
AND POST-MINING REHABILITATION ARE ISSUES BROUGHT ABOUT, IN
LARGE PART, BY SMALL-SCALE AND ILLEGAL MINERS. THESE MINERS
OPERATE FREELY AND THRIVE WITHOUT BEING SUBJECTED TO THE
REGULATION AND SANCTIONS IMPOSED ON LARGE-SCALE MINING.
THE SOLUTION IS TO SUBJECT SMALL-SCALE MINERS TO THE SAME
REGULATIONS AND SANCTIONS FOR LARGE-SCALE MINING.
CORRELATIVELY, NATIONAL AND LOCAL POLICIES ON MINING NEED
TO BE HARMONIZED, AND THE COOPERATION OF LGU,S IN THEIR
ENFORCEMENT MUST BE PROCURED.
SECOND, THE CAPACITY AND COMPETENCE OF OUR REGULATORS
MUST BE IMPROVED, PARTICULARLY IN REGARD TO EQUIPMENT AND
QUANTITY AND QUALITY OF REGULATORY STAFF. FOR EXAMPLE, IN
SURIGAO DEL NORTE, THERE ARE ONLY NINE MINING ENGINEERS AND
ONE GEOLOGIST TO OVERSEE MINING ACTIVITIES – WHICH INCLUDE 3
MAJOR MINING PROJECTS, SEVERAL EXPLORATION PROJECTS, 18
APPROVED SMALL SCALE MINING PERMITS AND MORE THAN A
THOUSAND ILLEGAL SMALL-SCALE MINERS. THE PRIVATE SECTOR
SHOULD HELP GOVERNMENT RAISE ITS SUPERVISORY CAPABILITIES
THROUGH FUNDING OF SCHOLARSHIPS AND TRAINING HERE AND
ABROAD, PROCUREMENT OF EQUIPMENT, AND HIRING OF REQUISITE
PERSONNEL. PART OF THE FUNDING COULD COME BY WAY OF A FEE
ON MINING COMPANIES, AKIN TO THE SUPERVISORY AND
REGULATORY FEE PAYABLE BY TELECOMS COMPANIES TO THE NTC.
OUR INDUSTRY MUST LEARN TO ACCEPT THAT PROPER REGULATORY
ATTENTION WILL PROVIDE THE COMFORT TO ALL STAKEHOLDERS –
AND CRITICS – THAT RESPONSIBLE MINING IS POSSIBLE IN OUR

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COUNTRY – AS IT HAS BEEN, AND STILL IS, IN OTHER COUNTRIES LIKE
AUSTRALIA, SOUTH AFRICA, CANADA, SWEDEN, AND EVEN INDONESIA.
THIRD, CREATING AN INDEPENDENT ENVIRONMENTAL COMMISSION
RESPONSIBLE FOR SUPERVISING AND ENFORCING ENVIRONMENTAL
CONCERNS. AT PRESENT, BOTH THE EMB AND MGB ARE AGENCIES
UNDER THE DENR. MGB IS CHARGED WITH THE PROMOTION,
DEVELOPMENT, AND SUPERVISION OF MINING. EMB’S MANDATE IS TO
ENFORCE ENVIRONMENTAL LAWS. THESE APPARENTLY
CONFLICTING GOALS CAN, AT TIMES, PLACE THE DENR IN A POLICY
DILEMMA. OUR SUGGESTION THEREFORE IS TO SPIN OFF THE EMB
INTO A SEPARATE AND INDEPENDENT BODY, SIMILAR TO THE
ENVIRONMENTAL PROTECTION AGENCY IN THE U.S.
FOURTH, THE PRIVATE SECTOR SHOULD BE OPEN TO A PROFIT-
SHARING SCHEME WHICH WILL ASSURE THE GOVERNMENT OF A
MORE APPROPRIATE SHARE IN THE BENEFITS DERIVED FROM THE
RESOURCES IT OWNS. FRANKLY, I’M NOT SUGGESTING SOMETHING
NEW. PROFIT SHARING IS STANDARD IN THE OIL AND GAS INDUSTRY
IN MOST PARTS OF THE WORLD, AS INDEED IT EXISTS IN OUR FTAA
REGIME. IN THE CASE OF PHILEX, DESPITE OPERATING UNDER AN
MPSA, 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 THE
NATIONAL GOVERNMENT SHOULD BE SHARED MORE EQUITABLY.
FURTHER, THE NATIONAL GOVERNMENT MUST ENSURE THE TIMELY
REMITTANCE OF TAXES DUE LGU’S. AFTER ALL, MINING IS LOCATION-
SPECIFIC, AND I SYMPATHIZE WITH LGU,S DESIRE TO REALIZE THE
FRUITS OF THE RESOURCES SITUATED IN THEIR COMMUNITIES.

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ECONOMIES OF SCALE
IF WE CONTINUE TO STIFLE MINING, THE CRITICISM THAT IT
PROMISES MUCH AND DELIVERS LITTLE COULD BE SELF-FULFILLING.
YET WHEN WE LOOK ELSEWHERE, MINING HAS BEEN A DRIVER OF
ECONOMIC DEVELOPENT. MINING IN AUSTRALIA CONTRIBUTES 142
BILLION DOLLARS EACH YEAR; IN CANADA, 37.5 BILLION DOLLARS; IN
THE US, 1.9 TRILLION DOLLARS, AND IN BRAZIL, 24 BILLION DOLLARS.
THE CHALLENGE IS PRECISELY TO GROW MINING SO THAT IT
CREATES MORE VALUE-ADDED FOR ALL OF US. ONLY A LARGER AND
HEALTHIER INDUSTRY CAN ENABLE US TO ACHIEVE FORWARD
LINKAGES IN DOWNSTREAM PROCESSING PLANTS. WE CAN’T HAVE
MORE REFINERIES AND SMELTERS SIMPLY BECAUSE THERE ARE NO
ECONOMIES OF SCALE TO MAKE THEM COMMERCIALLY FEASIBLE.
ONLY AN OPERATION AS LARGE AS TAMPAKAN OR FAR SOUTHEAST
OR SILANGAN CAN GENERATE THE VOLUME WHICH COULD JUSTIFY
PROCESSING IN THE PHILIPPINES. I UNDERSTAND TAMPAKAN WILL
COST 6 BILLION DOLLARS TO DEVELOP. IN OUR CASE, SILANGAN WILL
REQUIRE AN INVESTMENT OF MORE THAN ONE BILLION DOLLARS.
CONCLUSION
LET ME CLOSE BY SAYING THAT MINING IS NOT THE ENEMY.
POVERTY IS. THE LACK OF MEANS, THE LACK OF THE MOST BASIC
NECESSITIES, THE LACK OF OPPORTUNITIES, THE LACK OF CHOICES –
FOR FAR TOO LONG, IN FAR TOO MANY PLACES – THESE PERNICIOUS
INADEQUACIES HAVE PLAGUED OUR PEOPLE. YET THE SUPREME
IRONY IS THAT, IN THE MIDST OF ALL THIS POVERTY, LIE SOME OF
THE WORLD’S RICHEST NATURAL RESOURCES, A GIFT OF PROVIDENCE

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FOR OUR PEOPLE TO MAKE USE OF – NOT ABUSE. IT REALLY IS AS
SIMPLE AS THIS – WHERE POVERTY PERSISTS, SMALL SCALE MINING
CONTINUES.
POVERTY FOR US IS NOT JUST SOME UTOPIAN NOTION. ITS STARK
IMPERATIVES GO BEYOND THE POETRY OF BLUE SKIES AND
TANGERINE SUNSETS. YOU AND I IN THIS HALL ARE NOT ORDINARY
FOLKS WHO WORRY ABOUT THE NEXT MEAL, THE NEXT RENT, THE
NEXT MERALCO OR PLDT BILL – WHO DO NOT HAVE A SECOND HOME
SOMEWHERE IN THE FOOTHILLS OF MOUNT MAKILING.
THIS ISN’T A CONTEST BETWEEN THOSE OF US WHO WOULD PROTECT
THE 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 WE
HAVE TO MAKE FOR OUR FUTURE. OTHER PEOPLES – AUSTRALIANS,
INDONESIANS, CANADIANS, BRAZILIANS – HAVE ALREADY MADE
THEIR CHOICE. IF THEY CAN DO IT AND SUCCEED, SO CAN WE.
WE HAVE A CHOICE BETWEEN FEAR AND FAITH, BETWEEN HARDSHIP
AND HOPE, BETWEEN DIVISION AND UNITY. OUR TASK IS TO FIND THE
COMMON GROUND OF REASON, THROUGH PATIENT DIALOGUE AND
CONSTRUCTIVE SUGGESTIONS – AND FROM THERE, MOVE FORWARD
TO THE MORE PROSPEROUS FUTURE OUR PEOPLE DESERVE.
THANK YOU AND GOOD AFTERNOON.
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