The Challenge of Mineral Wealth: Promoting Responsible Mining in the Philippines

1. The Challenge of Mineral Wealth: Promoting Responsible Mining in the Philippines Horacio C. Ramos Director Mines and Geosciences Bureau Department of Environment and Natural Resources November 17, 2006 Philippine Mine Safety and Environment Association and Philippine Society of Mining Engineers MINING SYMPOSIUM 2006

2. Executive Summary • INDUSTRY PERFORMANCE AND STATUS • PRIORITY MINERAL EXPLORATION AND DEVELOPMENT PROJECTS • INDUSTRY COMPETITIVENESS FROM THE POINT OF VIEW OF SOME FOREIGN INVESTORS • DENR POLICY REFORMS AND DIRECTIONS

3. INDUSTRY PERFORMANCE AND STATUS

4. MINING INDUSTRY STATISTICS 2005

5. OPERATING MINES 1 Polymetallic Mine – Rapu rapu mine 2 Large – scale Mines: Victoria Gold Mine Padcal Copper Mine 4 Medium-scale Chromite Mines Masinloc Project of Benguet Corp., Omasdang Project of Crau Minerals Homonhon Project of Heritage Res. Redondo Project of Krominco, Inc. 5 Medium-scale Nickel Mines Rio Tuba Nickel Mine Taganito Nickel Mine Cagdianao Nickel Mine Sigbanog Project of HMC Tagana-an Project of HMC 4 Medium-scale Gold Mines Canatuan Project of TVI Acupan Gold Operations of Benguet Diwalwal Direct State Development Project Banahaw Gold Project, Philsaga Mining Corp. 15 Cement Plants and Quarries 1 Nickel Processing Plant (HPAL) 1 Copper Smelter (PASAR) 2000+ Quarries and small scale mines

6. APPROVED TENEMENTS (as of 09/06) Area coverage (including other mining permits) is 515,413 hectares or around 1.7% of total Philippine land area.

7. PRIORITY MINERAL EXPLORATION AND DEVELOPMENT PROJECTS

8. 11 Copper Projects Tampakan Copper Project Far Southeast Copper Project Boyongan Copper Project Carmen Copper Project Batong Buhay Copper Project Colet Copper Project Amacan Gold Project Rapu-Rapu Polymetallic Didipio Cu-Au Project Sto Tomas II Copper Project Kingking Cu-Au Project 6 Gold Projects Itogon Gold Project Canatuan Gold Project MasbateGold Project Diwalwal Gold Project Siana Gold Project Teresa Gold Project 6 Nickel Projects Mindoro Nickel Project Palawan HPP Project Nonoc Nickel Project ACT Nickel Project Hallmark Nickel Project Berong Nickel Project 1 Cement Project Akle Cement Project 24 Priority Projects

9. Operating Stage • Palawan Nickel Project • Canatuan Gold Project • Teresa Gold Project • Rapu-Rapu Polymetallic Project • Sto. Tomas II Copper Expansion Project • Construction and Development • Didipio Copper-Gold Project • Adlay-Cagdianao-Tandawa (ACT) Project • Final Feasibility and Financing • Carmen Copper Project • Masbate Gold Project • Akle Cement Project • Kingking Copper-Gold Project • Nonoc Nickel Project • Far-Southeast Gold Project • Itogon Gold project PRIORITY MINING PROJECTS

10. Pre-Feasibility & Advance Exploration • Siana Gold Project • Colet Copper Project • Tampakan Copper Project • Boyongan Copper Project • Exploration Stage • Diwalwal Direct State Development Project • Hallmark Nickel Project (Pujada) • Mindoro Nickel Project • For Bidding • Batong Buhay Copper-Gold Project • Amacan Copper-Gold Project PRIORITY MINING PROJECTS

12. 12 Copper/Copper-Gold Projects Ampucao, Benguet Paco, Surigao Norte Tabuk, Kalinga Gambang, Benguet Sogod, S. Leyte Tagpura, Compostela Hixbar, Rapu-rapu Manat, Compostela Colet, Negros Occ. Claveria, Cagayam Papaya, Nueva Vizcaya Conner, Apayao 24 Gold Projects Kingking, Davao Oriental Panag, Compostela Del Gallego, Tagcauayan Southern Negros Alicia, Zamboanga Sur Kalaya-an, Surigao Norte Pana-on, Leyte Tongonan, Leyte Surigao, Surigao Norte Pao, Nueva Vizcaya Road 5 M, Davao Oriental Camp 3, Benguet Pantuyan, Leyte Batoto,Compostela Mabuhay, Surigao Norte Kematu, South Cotabato Archangel, Batangas Hinonangan, S. Leyte Labo, Camarines Norte Nalesbitan, Camarines Norte Cordon, Isabela Pantingan, Bataan Agata, Agusan del Norte TMC, Panay 3 Nickel (-PGE) Projects Acoje, Zambales Sta. Cruz, Zambales Berong, Palawan 1 Bauxite Project Samar Bauxite Project 1 Sulfur Project Pamplona, Negros Oriental 41 Exploration Projects

13. INDUSTRY COMPETITIVENESS FROM THE POINT OF VIEW OF SOME FOREIGN INVESTORS

14. THE FRASER INSTITUTE SURVEY PROFILE

15. RP Score and Ranking (Fraser Surveys, 2001-2005) 1. Policy Potential Index -how attractive a jurisdiction’s policies are from the point of view of exploration managers) 2. Current Mineral Potential Index – based on an executive’s perception of geology under current policy environment 3. Pure Mineral Potential assuming “best practices” policy regime

16. Summary of RP Ratings, By Factor (Fraser Surveys)

17. MUCH REMAINS TO BE DONE… • The Survey acknowledges some “anomalies” (e.g. conflicting beliefs) and a caveat that response may have been influenced by personal experiences. • BUT the Survey is significant because ranged against other mining jurisdictions, the Government is given an idea of what it is doing right or doing wrong. • The Survey identified areas where attention should be focused.

18. MUCH REMAINS TO BE DONE… • The Study affirmed the country’s geological prospectivity, considered as the most important criteria for investors. • On the local front: • “The law is sufficient, implementation is the key” • DENR/MGB: “Can’t effectively enforce the law, due to lack of resources” - P. Wallace, July 2006, Briefing to ANZCham • Potential FDI in Mining Per Year (2007 – 2010): Pessimistic Scenario: $125M; Status Quo Scenario: $375M and Optimistic Scenario: $1.25B - R.Blume, Workshop on FDI, October 2006 • “…a seeming policy shift from active promotion of the previous two years to one of cautious re-consideration of policy reforms…” - Chamber of Mines of the Philippines, 29 August 2006 letter to H.E., President Gloria Macapagal-Arroyo

19. MUCH REMAINS TO BE DONE… • Reforms are not easy; no straight path • Differing perspectives and interests to balance • The Government is just part of the equation • Putting principles into practice is a task of the company

20. MUCH REMAINS TO BE DONE… “We realize the need to transform these minerals into economic wealth to make them useful for our development as a nation and to enhance the quality of life of our people”. “We know that these minerals will not have any significant value for as long as they are not converted into their commercial form to generate the necessary revenues for driving the national economy and developing our communities.” - ENR Secretary Angelo T. Reyes during the Indaba Conference • That is the CHALLENGE OF MINERAL WEALTH that the Government has COMMITTED itself to do.

21. DENR POLICY REFORMS AND DIRECTIONS

22. DENR’S 12-POINT AGENDA II. SUSTAINABLE EXPLORATION AND DEVELOPMENT OF THE COUNTRY’S NATURAL WEALTH: 6. Revitalize responsible mining through the development of 24 medium and large-scale mining projects and the clean-up and rehabilitation of abandoned and idle mines especially the Bagacay mines in Samar and Marcopper mines in Marinduque.” Generate US$1.8 billion in investments over the next five years.

23. REVITALIZATION PROGRAM • Revisiting of the 24 Priority Mining Projects to include new projects that have potentials of contributing to the goals of the program and to de-list projects that have already commenced. • Institute the “Use It or Lose It Policy” to weed out non-performing mining tenements and focus on serious, technically competent and financially capable mining contractors. • Review of the Mineral Action Plan to track down accomplishments and to review and identify gaps/concerns that need attention. • Development of an Industrialization Plan to find ways to promote the development of upstream and downstream industries. • Invigoration of the Minerals Development Council (MDC). • Touching base with civil society groups (e.g. Bishops-Businessmen’s Conference) for stakeholder dialogues.

24. CONTINUING POLICY REFORMS • FURTHER AMENDMENTS TO DAO 96-40 • Increase in the amount to implement the Social Development and Management Programs of mining companies. • Development of the guidelines for Joint Venture Agreements and Co-Production Agreements. • Review of the Fiscal Regime of FTAA to ensure equitable Government Share in mining operations. • Streamline the procedure in the grant of mining tenements. • STRENGTHEN PERMITTING PROCEDURES • Institution of mandatory “Notice To Proceed” after approval of Declaration of Mining Project Feasibility or MPP but prior to commercial operation • Strengthen current mechanism in the evaluation of Mining Project Feasibility Studies • Increase fines and penalties for violations of various environmental standards

25. CONTINUING POLICY REFORMS • IMPROVE ENVIRONMENTAL MONITORING SYSTEMS AND STANDARDS • Institute 3rd party Environmental Audits • Update and expand coverage of DENR Standards • Providing for Resident Government Mine Inspectors • CAPACITATE THE DENR TO BETTER PERFORM ITS FUNCTIONS • Develop technical capability of DENR Regional Offices in regulating and monitoring mining operations • Conduct on-the-job training in all aspects of mining operations • Formulate and implement a comprehensive training module for mine inspectors • Set-up and upgrade DENR laboratory facilities in all regional offices

26. IN CLOSING… “(W)e are promoting a revival of mining in the Philippines to take advantage of the economic benefits that can be derived from the development of these resources, especially at this time when mineral demand is historically high and prices are in favor of mineral producers.” HOWEVER, “…(T)he Philippine Government is revitalizing mining not purely for the expected economic benefits but with due and equal regard for the environment and the communities.”

27. Maraming salamat po! www.DENR.gov.ph Department of Environment and Natural Resources www.MGB.gov.ph Mines and Geosciences Bureau