Andrew Burrell in Manila reports that a recent Supreme Court...

Andrew Burrell in Manila reports that a recent Supreme Court ruling has given new hope to foreign miners in the Philippines, despite the political and economic turmoil.

With the Philippines’ reputation at rock bottom among foreign investors, it may seem a strange time for Australian companies to be leading a potential revival of the country’s long-dormant mining sector.

But this weekend, Lafayette Mining will pour the first gold at its $US43 million ($57.4 million) Rapu Rapu project, the biggest milestone at the first foreign-funded mine in the Philippines in more than three decades.

In September, the listed Melbourne-based company is due to commission the copper and zinc components of the mine, which the company said would operate for six years and create hundreds of jobs in poor southern Luzon.

The Rapu Rapu project is a test case for foreign mining investment in the Philippines, which has failed to exploit its vast mineral reserves and has a well-deserved reputation for political instability, red tape and corruption.

’If something goes wrong with Rapu Rapu, it would affect the entire mining investment in the country,’ Philippine Environment and Natural Resources secretary Michael Defensor said.

Mineral exports have fallen from 20 per cent of total exports in the 1980s to just 1.6 per cent last year, even as the country has struggled to achieve decent economic growth and reduce its crippling poverty.

The timing of a possible mining resurgence could not be better: China is desperate for the copper, tin, zinc, nickel and gold that the Philippines boasts in large quantities.

Although the Philippines has been paralysed for weeks amid a vote-rigging scandal involving President Gloria Macapagal Arroyo, observers believe the government is intent on developing the mining sector.

Mrs Arroyo has announced plans for local and foreign companies to invest around $US6 billion in 23 priority projects.

Lafayette’s project at Rapu Rapu, 400 kilometres south-east of Manila, is also being watched by other Australian companies in the Philippines.

Officials hope Rapu Rapu will help resurrect Australia’s overall direct investment in the country, which has slowed to a trickle.

Austrade’s senior trade commissioner in Manila, Alan Morrell, said the catalyst for the revival of interest was a Supreme Court ruling in December which again allows foreign firms to own 100 per cent of mining ventures.

Rio Tinto and WMC led a withdrawal from the Philippines in the 1990s amid uncertainty over ownership limits, which was sparked by opposition from the Catholic Church and anti-mining groups.

Mr Morrell said the new framework for mining would probably remain even if there was a change of government in coming months.

’Mining is the biggest potential for Australian investment in the Philippines, and Rapu Rapu could totally change perceptions of the industry,’ he said.

’We also see mining as a huge win for the Philippines it’s a big employer in rural areas where economic development is the No. 1 issue.’

Since the court ruling, several Australian companies had started the process of securing financing and were ’getting through the red tape’, Mr Morrell said.

Many of these projects had been shelved or postponed, pending the long-awaited Supreme Court decision.

Among them are the listed Sydney-based Climax Mining, which plans to spend $85 million on a gold and copper deposit in northern Luzon. Other hopefuls include Perth-based juniors Red 5 Resources and Medusa Mining.

BHP Billiton is also close to developing a nickel and cobalt mine in the southern province of Surigao del Norte, according to local media reports. The ore from the mine will be processed in Queensland.

But easily the largest project is being undertaken by listed Melbourne-based Indophil Resources, which has one of the world’s largest copper deposits in Mindanao.

Australian construction giant Leighton is also benefiting from this recent activity, having picked up two contracts worth $110 million at Rapu Rapu.

It’s not just Australian companies that are taking a fresh look at the Philippines.

Canadian entrepreneur Robert Friedland’s Ivanhoe Mines, which had major interests in the country in the 1980s, is seeking opportunities, while Chinese and Japanese companies are reportedly about to sink millions of dollars into various projects.

Lafayette’s country manager in the Philippines, Rod Watt, said he believed the Supreme Court ruling had ’reduced some of the risk profile’ for both mining companies and financial institutions.

He said the Philippine government was actively promoting the industry.

A delegation of government and industry representatives will travel to Western Australia later this month to showcase the country’s potential.

A general business delegation will also visit Sydney and Melbourne next month to promote investment opportunities, including mining the first such delegation in a decade.

’They are really doing their bit to showcase the industry,’ Mr Watt said.

But he acknowledged that the recent political and economic turmoil in the country could reverse some of the recently improved perceptions of the mining sector.

Topping the list of investor concerns is the decision by international ratings agencies Moody’s, Standard & Poor’s and Fitch this week to downgrade their outlooks from stable to negative.

This was sparked by a Supreme Court ruling that froze an expanded sales tax, which formed the centrepiece of the government’s fiscal reform agenda.

The agencies said they were also concerned at the political uncertainty generated by wide demands for Mrs Arroyo to stand down in light of allegations she rigged last year’s elections.

Despite the political instability, Mr Watt said that after a six-year fight to bring Rapu Rapu to the production phase, Lafayette was in the Philippines for the long haul.

’We are now turning our attention to other opportunities at Rapu Rapu island and elsewhere,’ he said. afr 15/7/05.
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