Below an interesting article from Minesite on mining in the...

Below an interesting article from Minesite on mining in the Phillipines, with possible ? implications for the Didipio project.


A Philippine province has banned open-pit mining, threatening a $5.2 billion copper-gold project by Xstrata Plc (XTA.L: Quote) and adding to a slew of reasons why global miners have skipped the resource-rich country.

South Cotabato in the southern Mindanao island, which implemented the ban on Oct. 3, said it is likely to be reviewed and Xstrata looks confident it will be lifted and will not derail its Tampakan project, considered the biggest undeveloped copper-gold prospect in Southeast Asia.

It was due to start production in 2016.

The ban is yet another test for the fledgling government of President Benigno Aquino III. He is courting mining investors to boost a fragile economy against a backdrop of investment policy inconsistencies, communist insurgency, endemic corruption and a politically powerful Catholic Church.

Here are some questions and answers on the implications of the ban on Xstrata's Tampakan project.

WHY IS THERE A BAN?

The former governor of South Cotabato, Daisy Avance-Fuentes, now a lawmaker, approved the ban days before she handed over her post to the new governor. She said the ban was imposed because a national mining law does not explicitly allow open-pit mining, giving local governments discretion on how to implement it.

The local government contends that an open-pit mine would harm a major river, a key source of farm irrigation, and displace villagers.

Xstrata says open-pit mines are the safest and only economic extraction method available for Tampakan given the configuration of the deposit and the geology of the region.

The Philippines remains deeply suspicious of mining projects after cyanide spills in 2005 at a copper and zinc mine operated by Australia's Lafayette Mining, the first foreign company to run a Philippine mine since a law allowing it was upheld in 2004. The mine was shut for more than a year.

WILL THE BAN BE LIFTED?

Possibly. But the process leading to a removal of the ban is expected to be protracted with proponents, mostly members of the provincial legislature, likely to put up a big fight, even resort to a court intervention, before conceding.

It will not be surprising if the Catholic Church, a strong opponent of mining for its extractive nature and for displacing communities, joins the debate, further delaying a resolution of the issue.

WHAT HAPPENS IF THE BAN STAYS?

Tampakan would be the largest foreign direct investment in the Philippines. A big reason why the Aquino government will probably do what it can to make sure it goes ahead.

Keeping the ban will halt the project, majority owned by Xstrata, and given the massive size of the copper deposit could tilt the global market into a huge deficit, analysts warn.

Tampakan is estimated to contain 13.5 million tonnes of copper and 15.8 million ounces of gold at a 0.3 percent cut-off grade.

It will also send the wrong signal to prospective foreign miners. Despite sitting on an estimated $1 trillion in mineral wealth, the Philippines is miles away from being a major player in the global mining industry with many projects stuck on the drawing board and the few in development faced with security, corruption and governance problems.

HAS THE BAN AFFECTED THE TAMPAKAN PROJECT?

Sagittarius Mines, Xstrata's Philippine affiliate, has said the development of the project continues.

Perhaps the most tangible impact the ban has had, since the policy move was announced in June, was that it was seen as behind China's Zijin Mining's (2899.HK: Quote) decision to drop a takeover offer for Australia's Indophil Resources (IRN.AX: Quote). Indophil owns about a third of Tampakan, its only asset.

WILL OTHER PROVINCES CONSIDER A BAN?

At the moment, no other province in the Philippines is looking at banning open-pit mining. But given the propensity of local officials to copy voter-friendly policies of other local government units, it is not a remote possibility.