Global mining companies are turning their attention to the Philippines, one of the world's top countries in terms of natural mineral deposits. The interest is good news for the country, which is keen to reap the economic rewards of foreign direct investment in this sector.
The Philippines has 90m hectares of land considered as high potential sites for copper, gold, nickel and chromite. To date, mining permits cover only 1.5% of this land. Recognising the critical role that investment in the mining industry can play in terms of national development and poverty alleviation, the Philippines government has, in recent years, shifted away from a policy of tolerance to active promotion while calling for strict adherence to the principles of sustainable development. The latter is designed to address socio-economic and environmental concerns that have dogged the mining sector.
As part of its efforts to maximise the sector's potential, the government has identified 24 large-scale priority projects, estimated to create 200,000 jobs and generate $7bn in direct foreign investment (FDI) over the next six years.
"The single biggest advantage is that the mining projects will create economic centres and rural developments, which are badly needed," Benjamin Romualdez, the president of the ASEAN Federation of Mining Associations, told OBG.
The Philippines' mineral exports total less than 1bn but have the potential to rise to at least $5bn annually, according to the Chamber of Mines.
"If we met our full potential we would be among the top ten producers around the world, no doubt. We are the fourth most endowed country when it comes to copper, fourth to nickel and fifth to gold in the world," said Romualdez.
"I'm sure we are going to find more discoveries that will continue to validate that the Philippines is one of the richest countries in copper, nickel and gold. You have a higher chance of finding a gold, copper or nickel property here than anywhere else in the world," he added.
Other countries and corporations are certainly taking note. During a visit to Australia to discuss the Philippines' potential with mining companies, Alan Morrell, Austrade's Manila-based senior trade commissioner noted that 12 Australian mining companies were in various stages of development in the Philippines and that the country's prospects had been boosted by recent tax reforms and upgrades by ratings agencies on the country's outlook.
Earlier this year, Angelo Reyes, the environment and natural resources secretary predicted that 2008 would be the year when the Philippines experiences a mining boom. His forecast is supported by some of the biggest global names in the mining industry seeking to bolster their presence in the country.
Among them, Xstrata, in late December last year, expressed its will to acquire a 62.5% stake in the Tampakan copper-gold deposit. According to Xstrata, the Tampakan deposit represents one of the largest undeveloped copper-gold deposits in the South East Asia-western Pacific Region and comprises a 2bn tonne resource containing 11.6m tonnes of copper and 14.6m ounces of gold at a 0.3% copper cut-off grade.
"The very substantial mineral resource at Tampakan indicates that the project has the potential to become a new long life copper asset for Xstrata, further expanding our position globally," said Peter Forrestal, Xstrata Copper' s executive general manager.
Other heavyweights include Anglo American - the world's fourth largest mining company in terms of market capitalisation - which has been in talks to acquire a controlling stake in Lepanto Consolidated Mining's copper and gold project, to be part of a joint venture with Manila Mining to explore the Bayugo copper-gold prospect in the southern Philippines and to develop the neighbouring Boyongan copper deposit with local partner Philex Mining Corp.
In March, JP Morgan announced it was in talks with a number of major mining companies interested in investing in the Philippines.
"The arrival of mining majors and the arrival of JP Morgan, the leading business banker, is a clear manifestation that the Philippines' mining industry is back in business," said Reyes.
Interest in the country's mineral deposits has been helped by rising mineral prices, mostly driven by demand from China.
"Assuming metal prices come down...we are still looking at far better prices than the lows we were looking at a few years ago. There is still so much cushion. If we were producing right now we would be looking at $10bn in export revenues. That's not even the full potential because we have only started on the 1.5% of the mineral areas that have been permitted," said Romualdez.