Chamber of Mines of the Philippines president Benjamin Philip G Romualdez says some US$12 billion in mining investments are currently on hold due to the ‘inconsistencies and uncertainties’ in the country’s mining policy.
“The $12-billion mining investment in the next three years is not going to happen. I can think of at least eight companies that will hold their investment,” he said during the Mining Philippines 2013 Conference and Exhibition.
He reiterated his prediction last year that the Philippines would not be able to meet its $16 billion mining investment target under the Aquino administration unless the government exercises political will to address the problems in the industry. The inconsistent and ever-changing policy in mining and the prospect of mining companies being taxed some more are holding back major mining investments, he said.
Philip Romualdez said mining companies are already overtaxed and that imposing higher levies will not only stagnate mining investments, but will literally “kill the industry”. “The sooner there is clarity, the sooner there is a more stable approach for the mining industry to move forward, the better. If there is no clarity, then I suspect that people writing the check will hold back.”
He expressed doubt that the country will soon be getting any major mining investment unless the government sends the message clearly and shows the political will - like it did during the impeachment of former Chief Justice Renato Corona. “We are hopeful that we can work with the government to come up with a reasonable position. I believe, that can be done, if they understand the issues.”
Early this month the operator of the Tampakan Copper-Gold Project in Southern Mindanao announced its decision to scale down operation. This will result in the mass layoff of some 1000 workers.
The $5.9-billion Tampakan project is potentially the biggest mining project in Asia. But the project hit a snag when the provincial government of South Cotabato passed an ordinance banning open-pit mining, which is allowed under the Philippine Mining Act of 1995.
In his opening remarks, Philip Romualdez said one of the burning issues that the industry faced was the incorrect idea about the 2% tax that all mining companies must pay the government under the Philippine Mining Act of 1995. He said the 2% mining tax is but one of the components of around 12 mining-related taxes.
“This single tax does not show the complete picture. This single tax out of the 12 or separate taxes that each mining company has to pay under the Mining Act has been taken out of context and used by anti-mining groups irresponsibly to vilify the industry,” he said.
According to Philip Romualdez, the government receives more than half of the total value of a mining project, based on the internationally accepted average effective tax rate, a formula that determines the government’s share throughout the entire life cycle of a mining project, from the time the contractor starts to invest funds in the project to the very end of the mine life.
He says mining companies feel that the government has only looked at mining’s earnings from year to year and only sees a rise in profits, which makes it keen to tax the industry more. “This tack is patently unfair to us, because it fails to consider years when mining companies don’t make money.”
Considering the current volatility clouding the industry worldwide, he said, significant mining projects worldwide are being reviewed, such as Tampakan. He said Tampakan was an example of why the industry appeals to the government to look at the industry not just year-by-year, but on a long-term reality-based model. Adding to the “uncertainties,” he noted, is the fact that the Mining Act is again being subjected to review.