Mining EO out; moratorium on new mining deals stays

by Cathy Garcia,

Posted at Jul 09 2012 02:23 PM | Updated as of Jul 10 2012 07:53 AM

MANILA, Philippines (2ND UPDATE) - The long-awaited executive order (EO) outlining the Aquino government's mining policy is finally out. However, the new EO still does not allow for new mining agreements, pending legislation on revenue sharing between the government and mining companies.

"Basically, the EO intends to increase the revenue of government from mining, intends to improve environmental standards and tries to put consistency in national and local laws pertaining to mining. The EO also establishes the Mineral Industry Coordinating Council," Environment Secretary Ramon Paje said, in a press conference on Monday.

EO 79, released on Monday, says new legislation on revenue sharing should be passed before new mining agreements can be signed. "No new mineral agreements shall be entered into until a legislation rationalizing existing revenue sharing schemes and mechanisms shall have taken effect," the EO states.

Explaining this provision, Paje said: "Some people will be happy, some will be affected but there will be no new mining agreements that can be signed by the DENR before new legislation on revenues would be passed. We have to wait for new legislation pertaining to revenues before we can sign new agreements on mining. But it also respects existing mining contracts."

(Click here for a summary on EO 79 issued by the Office of Executive Secretary Paquito Ochoa)

However, the DENR may grant and issue exploration permits under existing laws, rules and guidelines.

"The EO says exploration can continue, other activities pertaining to mining development can continue except that we cannot sign new mineral contracts or mining agreements... (The moratorium) also stopped exploration and stopped issuance of ECCs and stopped processing of mining feasibility, but now all of those can continue except signing of new agreements," Paje said.

Under the EO, it states: "The grantees of such permits shall have the rights under the said laws over the approved exploration area and shall be given the right of first option to develop and utilize minerals in their respective exploration area upon the approval of the declaration of mining project feasibility and the effectivity of the said legislation."

Last week, President Aquino told Reuters that the lifting of the 18-month moratorium on new mining projects in the country is unlikely to be lifted after the issuance of the EO, since the government wants lawmakers to first pass new legislation seeking more state revenues from mining to offset environmental risks.

"That's why the President said 'put a brake, stop issuing new mining contracts, if we cannot get the best or optimal revenue for the government.' That's the main reason ... Hopefully the revenue legislation would cover the current mining operations nationwide," Paje said.

Congress urged to OK royalty fee

The administration wants Congress to pass the imposition of a 5% royalty fee on mining companies who operate in mineral reservations. However, this higher royalty fee would only be applied on future projects, not on existing projects.

"If you follow the best practices from abroad, it would range around 5 to 7% royalty fee. Even Australia is charging 18% for specific minerals, which don't require much processing like coal and iron ore," Paje said.

The government also wants to increase occupational fees for mining companies. "We are targetting approximately P760 million, if we require occupational fees to be charged upon filing of the mining claim. As of now, the mining companies pay occupational fees once the mineral production sharing agreements are approved," Paje said.

The government is also eyeing revenues in the form of mine wastes and mill tailings.  The EO states that all valuable metals in abandoned ores and mines wastes and mill tailings from defunct mining operations now belong to the state and can be utilized through competitive bidding.

"This would run to the billions, around P50 billion, for abandoned tailings and stockpiles but this is a one-shot income," Paje said.

'All existing contracts will be respected'

Paje said he does not believe the new EO would have an adverse effect on the mining industry.

"As of now, the EO says it will respect existing contracts. There are more than 300 existing contracts and only 33 operations, so we are barely utilizing 10%. I don't think it will affect the mining industry. It will affect a few, those who are in the final stage of exploration actvities," he said.

Under the EO, all existing mining contracts, agreements and concessions approved before the effectivity of the order will be respected.

However, a multi-stakeholder team led by the DENR, will conduct a review of the performance of all existing mining operations "for possible renegotiation of the terms and conditions of the same, which shall in all cases be mutually acceptable to the government and mining contractor."

About $12 billion worth of new projects planned in the next five years will be affected by the new policy, including the $5.9 billion Tampakan copper-gold project in southern Philippines by global miner Xstrata Plc and Australia's Indophil Resources NL.

Tampakan project

Asked about the Tampakan project, Paje said "it is an existing contract and definitely it will be respected."

The South Cotobato provincial government has issued an ordinance banning open pit mining, which will be utilized at the Tampakan site. "This is being respected at such time as the provision on open pit mining is declared invalid or contrary to national policies by compentent bodies," Paje asid.

The EO also tackles the issue on the consistency of local ordinances with the constitution and national laws. The Department of Interior and Local Government (DILG) and LGUs are directed to make sure the latter's powers and functions are consistent and conform with the National Government's policies.

A Mining Industry Coordinating Council (MICC), an intra-agency forum, was created to implement the provisions of the EO, conduct a review of all existing mining laws and regulations, among others. The members include the Climate Change Adaptation and Mitigation and Economic Development Cabinet Clusters, as well as the Justice Secretary, National Commission on Indigenous Peoples and president of the Union of Local Authorities of the Philippines. 
'More no-go zones'

The EO also expands the areas that are closed to mining to include prime agricultural lands and fishery zones; tourism development areas identified under the National Tourism Development Plan; and other critical areas and island ecosystems identified by the DENR.

On the issue of small-scale mining, the EO stated that pursuant to RA 7076 (People's Small Scale Mining Act of 1991), small-scale mining operations are only allowed in areas declared as "Minahang Bayan."

"Small-scale mining shall not be applicable for metallic minerals except gold, silver and chromite," the EO stated.

The use of mercury is also prohibited in small-scale mining.

The Philippines sits on an estimated $1 trillion worth of untapped mineral resources - mostly gold, nickel and copper.