New Consistent & Organized Mining Policy of the Philippines lauded by COMP – Investors dream


Signal to all investors to com in!

The issuance of the long-awaited Executive Order No. 79 on mining reforms drew generally positive reactions from the mining industry in the Philippines.

The Chamber of Mines of the Philippines (COMP) said the policy offered solutions that would encourage the development of the country's mineral resources.

"We submit that legislation should also include a review of the Local Government Code, the Indigenous Peoples Rights Act and the Internal Revenue Code in a purposive effort to harmonize conflicting provisions of these laws with the mining policy," COMP said in a statement.

"Our members applaud the policy's directive to ensure consistency of local ordinances with the Constitution and national laws, as well as LGU cooperation," it said.

The COMP said it respected the government decision to close certain areas to mining, adding that environmentally critical and protected areas should be preserved for future generations.

It also lauded the Aquino administration's intent to improve the small-scale mining industry, and to develop downstream industries.

"We view the time spent on developing the policy as recognition of the important role of responsible mining as a catalyst for economic growth. The mining policy is a signal to all investors of government's desire to establish a consistent and stable business environment founded on a level playing field. We are hopeful that the policy will harmonize conflicting interests, encourage investments, and foster sustainable development especially in the countryside where it is greatly needed," COMP said.

Increasing Tax Collection

Philippines said it was seeking to increase royalties from mining companies while imposing more restrictions to protect the environment and local communities.

The policy contained in a new executive order signed by President Benigno Aquino said no new mining permits would be approved until Congress passed a bill backing the increase.

The order, announced by Environment Secretary Ramon Paje after months of heated debate between mining firms, environmentalists, tribal groups and church leaders, seeks to impose a 5% royalty on the companies' gross earnings compared to the existing 2% tax.

"Basically, the executive order intends to increase the revenues of government from mining," Paje told reporters.

The order extends a moratorium on mining permits that Aquino imposed last year when he was still drafting the new executive order. Paje stressed the order would respect existing mining agreements with the 33 mining operations already in the country, but would be imposed on new entrants.

He said existing contracts would be reviewed to ensure the companies are complying with their obligations.

Paje said if the law was passed by 2016 the country could earn an additional 16 Billion Pesos ($381 Million US Dollars) from the higher royalties.

In addition, the order designates all abandoned mine waste and tailings as state property, allowing the government to extract any remaining minerals. This could potentially raise another 50 Billion Pesos, Paje added.

The order also bans mining in 78 areas designated as "eco-tourism" sites and in "prime agricultural and fishing areas", and imposes controls on poorly-regulated "small-scale mining industry", particularly banning the use of mercury, which can poison the environment.

Finance Secretary Cesar Purisima expressed confidence the new order would help the industry and boost revenues.

"We are confident that by investing in a stronger regulatory framework and a more equitable revenue sharing mechanism, we are improving mining's long-term growth potential," he said in a statement. The Chamber of Mines of the Philippines said it welcomed the new rules, hoping it might end lengthy debates over the sector.

"We are hopeful that the policy will harmonize conflicting interests, encourage investments, and foster sustainable development especially in the countryside where it is greatly needed," a chamber statement said.

The executive order still leaves hanging the issue of whether local governments can overrule mining permits issued by Manila, an issue affecting a potential project by Swiss giant Xstrata. The project worth some $6.0bn in the strife-torn island of Mindanao has been delayed by the local government's ban on open-pit mining. While the new order asserts national laws are above local ordinances, Paje said it would be up to the courts or the local government department to determine if the open-pit ban would hold up.

The Philippines is believed to have some of the biggest mineral reserves in the world—the government estimates the country has at least $840bn in gold, copper, nickel, chromites, manganese, silver and iron ore deposits.

However, the minerals have been largely untapped, partly because of a strong anti-mining movement led by the influential Catholic Church, while poor infrastructure and security concerns have also kept investors away.

Options

The order also says the Department of Environment and Natural Resources (DENR) may continue to grant and issue exploration permits, which allow a person or entity to explore for minerals in a specified area. No actual mining or mineral extraction may be conducted during the exploration phase of a project.

But those given exploration permits and those who actually discover minerals shall be given the preferential option when government issues a mineral sharing agreement.

The EO said the DENR shall likewise review existing mining contracts and agreements for possible renegotiation of the terms and conditions.

The order says the grant of all mining rights and mining tenements over areas with known and verified mineral resources and reserves shall be undertaken through competitive public bidding, not through a first come, first served basis.

 Mining Ban Areas

 As a clear concession to the anti-mining advocates, the order closes the following areas to mineral contracts, concessions, and agreements:

Areas expressly enumerated under Republic Act No. 7942 or the Philippine Mining Act of 1995;

Protected areas categorized and established under the National Integrated Protected Areas System under RA No. 7586 or the "National Integrated Protected Areas System Act of 1992;

Prime agricultural lands, in addition to lands covered by RA No. 6657 or the Comprehensive Agrarian Reform Law of 1988, including plantations and areas devoted to valuable crops, and strategic agriculture and fisheries development zones and fish refuge and sanctuaries declared as such by the Secretary of the Department of Agriculture (DA);

Tourism development areas, as identified in the National Tourism Development Plan (NTDP); and other critical areas, island ecosystems, and impact areas of mining as determined by current and existing mapping technologies, that the DENR may identify.

The Department of Tourism (DOT) has identified at least 78 sites it wishes to preserve, Paje said.

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