Mining companies in the Philippines are cutting staff, putting some projects on hold and scrambling for cash as the global crisis drags down prices commodities, industry officials said.
The economic slowdown could not have come at a worse time for the resource-rich Southeast Asian country, which had been trying to rebuild the mining industry after a similar downturn in the 1970s.
But the government has scaled down its investment target for the industry this year to about $800 million, down from the original $1 billion but still above last year’s $650-million inflow.
“I expect a little downgrading [of investments], but we are still optimistic,” Environment and Natural Resources Secretary Joselito Atienza said earlier this year.
Big mines not spared
Foreign-funded projects have been among the most high-profile casualties.
To preserve cash, Australian miner OceanaGold Corp. has put on hold its Didipio copper-gold project, which was among the biggest Philippines mining projects set to start production this year. No new schedule has been announced.
Berong Nickel Corp, a unit of London-based Toledo Mining Corp., suspended production and cut 600 jobs at its mine on the western island of Palawan last month amid depressed metals prices and plunging demand from China.
Atlas Consolidated Mining and Development Corp., Toledo’s local partner in Berong, does not see production resuming until the second half, but said shipments from its stockpiles to BHP Billiton of Australia should resume in April.
Karsten Fuelster, a mining division business development official for the World Bank’s investment arm International Finance Corp., said the global financial crisis is leading to “substantial short-term demand destruction,” while new capital expenditures and debt-funded acquisitions would be delayed.
While the mining industry in Asia has “strong fundamentals,” he told an industry conference here last month that with growth easing in key markets China and India, prices for metals besides gold are expected to fall.
Fund raising will become “nearly impossible for non-producing companies,” and “many will not survive,” Fuelster said.
Projects will get delayed and exploration curtailed, while “funding difficulties will get worse” before they get better, he warned.
Priorities in Philippines
Among the Filipino mining outfits, the priority is to shore up their capital bases. Philex Mining Corp., Lepanto Consolidated Mining Co., and Manila Mining Co. all announced plans this month to ask shareholders to raise their authorized capital by 60 percent, 100 percent and 67 percent, respectively.
With gold prices testing levels around $1,000 per ounce and copper prices sinking, Philex, the largest Philippine mining firm, has become “more a gold mine than a copper mine,” its chief executive Walter Brown said recently.
With declining demand in the housing and automobile sectors in the US and Europe, gold now accounts for 72 percent of the value of the company’s concentrate shipments, and copper only 28 percent, Brown said.
Philex is now only drilling and developing gold properties and copper deposits with gold values higher than the copper in the ore, he said, adding: “Typically, these gold/copper prices take at least three years to develop.”
Mineral exports falling
Philippine mineral exports rose 10 percent from a year earlier to P2.31 billion in calendar year 2008.
Director of the government’s Mines and Geosciences Bureau Horacio Ramos said the falling prices might lead to even lower 2009 shipments.
The bureau estimates the Philippines has 83 billion tons of mineral ore deposits, including more than 14 billion tons of metallic ore and more than 69 billion tons of non-metallic ore.
The country’s estimated gold ore reserve of four billion tons is the world’s third largest, its 7.9 billion tons of copper the fourth largest and the 815.3 million tons of nickel ore the fifth biggest in the world, it says.