Alfredo Ramos remembers when his copper mine was the biggest in...

Alfredo Ramos remembers when his copper mine was the biggest in Southeast Asia.

"It was the bluest of the blue chip; one of the top ten companies in the Philippines," says the 30-year mining veteran and president of Atlas Consolidated Mining and Development Corp.

How times have changed.

In the early 1980s miners brought in a quarter of the export revenues for the Philippines. Today, it's less than two percent. Two decades of neglect, environmental mishaps and clashes over land rights mean miners are no longer the country's golden boys.

In the boardrooms of Manila, mining executives ooze confidence that a government drive to attract $6.5 billion in foreign investment, along with more investor-friendly laws and record-breaking metal prices, will shake the sector awake.

But low ore grades, political upheaval and tricky negotiations between foreign companies and the existing owners of mining concessions will present major obstacles.

"If this country were to develop even a fraction of its natural resources, estimated to be worth at least $1 trillion, then we'd account for the Philippine debt," says Ramos. National debt is currently around $70 billion.

The potential exists. In terms of metal in the ground, the Philippines ranks in the world's top five for copper, nickel and iron ore -- resources China needs for its industrial revolution.

About $500 million has been invested by firms like Japan's Sumitomo Metal Mining Co. Ltd. <5713.T> and Australia's Lafayette Mining Ltd. in 23 priority projects, while Atlas plans to list a new copper unit to help restart the Toledo mine, which was closed by a typhoon more than a decade ago.

Securing the next $6 billion, which would inevitably require the participation of the world's mining heavyweights, would be more difficult, some industry sources say.

Lower ore grades -- meaning miners must extract more ore, at higher cost, for the same amount of metal -- make the Philippines a less attractive option than countries like Chile and Peru.

Investors wanted

The country's annual mineral exports are about $500 million. In July alone, Chile's copper exports were $1.3 billion.

But while Chile introduces new taxes on miners, Manila is smoothing the path for foreign investors, says Benjamin Philip Romualdez, president of the Chamber of Mines of the Philippines.

"We have woken up to the memory and the reality that we are one of the richest mining countries in the world," said Romualdez, who is also president of 102-year-old Benguet Corp., the country's oldest miner.

A Supreme Court ruling last year cleared the way for foreign ownership of mines, while the Philippine Stock Exchange has exempted mining firms from being profitable for three years prior to listing, saying it would accept geological reports instead.

"It's a good start, but what property can be brought into production in less than three years? None that I know of," said Walter Brown, chairman and CEO of Philex Mining Ltd.

Philippine Stock Exchange President Francis Lim said at least five Australian firms had expressed interest since the listing requirements for miners were changed last week. But it's mainly junior companies that have put up any cash.

China's top steel maker, Baosteel, and nickel leader Jinchuan Nonferrous have pledged $950 million to revive a nickel plant. BHP Billiton Plc./Ltd. and Anglo American Plc. are also looking, but none have committed to taking their projects through to production.

"The big guys are coming in very, very slowly," said Brown, whose company owns the only copper mine still operating.

"Part of the problem is the reluctance of people with attractive and well-developed prospects to enter into reasonable agreements with foreign companies. They are asking for terms which are not realistic, even at these high prices."

‘Ridiculous valuations’

Copper has risen about 25 percent in value in the last year and hit a record peak of $3,670 a ton this week.

A mining analyst in Manila, who asked not to be named, said: "Those who have mining claims are the main stumbling block for the growth of the industry, as they are asking for ridiculous valuations."

The government is addressing this problem. It has cancelled 65 exploration contracts to free up the sites for new investors.

"We are also reviewing the performance of others. We want serious investors," said Edwin Domingo, assistant director of the Mines and Geosciences Bureau.

The process could be slowed, however, as legislators -- including Environment and Natural Resources Secretary Mike Defensor -- devote their energy to defending or attacking President Gloria Arroyo over election fraud charges.

Manila's mining sub-index is 40 percent higher than a year ago, beating a 26 percent rise in the wider index. But it is also down 35 percent since February, when reaction to the Supreme Court ruling spurred mining stocks to an 8-year high.

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