Election Result won't likely mean good news for mining

PHILIPPINES ELECTION RESULT WON'T LIKELY MEAN GOOD NEWS FOR MINING

Source: http://www.miningweekly.com/article/phillipines-election-result-wont-likely-mean-good-news-for-mining-2010-05-13#comment-new 

By: Matthew Hill

13th May 2010

TORONTO (miningweekly.com) – That two of the world’s biggest miners, BHP Billiton and Anglo American, recently decided to bail out of the Philippines does not bode well for the country’s mining industry.

And the impending outcome of the recent elections in the country, which holds nearly $1-trillion in untapped mineral wealth, doesn’t hold much promise either.

According to Hong Kong-based security risk management consultancy Allan & Associates, whoever wins between the two frontrunners in the election, Benigno Aquino and Joseph Estrada, will likely stick to the path their predecessors took, which has not been mining friendly.

Another popular presidential candidate, Manuel Villar – a self-styled property billionaire , may too mean more difficult times for mining companies in the South East Asian country.

“An Aquino or Villar Presidency is unlikely have any material impact on the status quo in the mining sector.  This is a negative outcome for foreign miners seeking to diversify or offset what may become a broad trend towards high taxation in the mature mining provinces,” the consultancy said, referring to Australia’s announcement of a planned 40% tax on mining profits.

Filipinos went to the polls on May 10 to vote in what was the country’s first computerised elections. Though final results were expected to be announced by May 15/16, Aquino has emerged as the president-apparent.

Allan & Associates describe him in a report titled: 'The impact of the Philippine elections on the mining industry' as having close links with “progressive” elements within the Catholic Church and civil society groups, such as nongovernmental organisations (NGOs).

Various media reports over the past few years have claimed NGOs and the Catholic Church have encouraged communities to oppose new mining developments in the Philippines .

Anglo American and BHP Billiton had various problems with communities before deciding to pull out of the country.

In January 2008, communist rebels attacked a project owned by Swiss miner Xstrata, setting fire to two buildings before retreating. The London- and Swiss-listed company was quoted by Reuters in April as saying it had completed a feasibility study into the Tampakan copper-gold project.

The company was looking to synchronise its development with the change of guard in government. “Having the development timeline aligned with the political mandate could be important for the project,” Reuters quoted Xstrata Copper CE Charlie Sartain as saying.

The project was first discovered two decades ago, and will likely cost over $5,2-billion to develop.

The Allan & Associates report states candidates have emphasised the need for increased foreign investment but haven’t laid out how they would achieve this.

The report goes on to say of Aquino: “There is some concern his links within the more radical members of either group can result in an anti-mining administration that would pass laws hostile to foreign businesses."

Estrada, who, like former US president Ronald Reagan and California Governor Arnold Schwarzenegger, is a movie actor-turned-politician, would not do the mining industry too many favours either.

“An election victory by Estrada could represent the beginning of a new wave of populist and nationalistic sentiment. This would almost certainly have a negative impact on foreign mining interests,” Allan & Associates report says.

In the Fraser Institute’s latest mining survey, the Philippines was two from the bottom in the policy potential index, with only Ecuador and Venezuela scoring lower.

The country has unexploited deposits of copper, gold, nickel and zinc.

The mining sector’s poor track record in the past has damaged its reputation when it comes to environmental management and community upliftment in the Philippines . While there have been no attacks on mining projects in the last two years, many communities there are distrustful of international mining companies.

New political leadership is not likely to change this. “Given the political influence and often monopolistic instincts of the domestic business lobby –  including much of the mining sector – foreign interests are unlikely to seen as a priority for the incoming administration,” Allan & Associates concludes.

Edited by: Liezel Hill