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Mining firms ‘guarded’ about 2019 amid trade war fears

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MINING COMPANIES expressed “guarded optimism” about their prospects in 2019 as global metal prices stabilize due to balanced supply and demand, though the equilibrium could be disrupted by a worsening of the trade war between the United States and China, proposed tax laws for the Philippine mining industry, as well as ban on open pit mining.

“CoMP (Chamber of Mines of the Philippines) views 2019 with guarded optimism. Global metal prices are expected to be generally stable, reflecting the assumption of balanced supply and demand conditions. However, China remains the major force behind the metals and mining industry worldwide. Any fluctuations will likely be related to developments in this market and its ongoing trade war with the US,” Rocky G. Dimaculangan, VicePresident for Communications of CoMP, told BusinessWorld in an e-mail on Wednesday.

“The bigger cause for concern for the Philippine mining industry is the ongoing moratorium on mining permits under Executive Order (EO) 79 and the ban on open pit mining under DENR Administrative Order 2018-19. EO 79 states that the moratorium will not be lifted until a new mining tax regime is legislated, but despite the doubling of mining excise tax from 2% to 4% of gross output, the moratorium remains in place,” Mr. Dimaculangan told BusinessWorld in an e-mail on Wednesday.

Mr. Dimaculangan said that CoMP believes that a profit-based royalty and windfall profits tax structure wherein rates are tied to operating margins, a bill outlining which has passed in the House of Representatives, is the most equitable way to increasing mining taxes.

Mr. Dimaculangan said that CoMP hopes a similar bill will be passed in the Senate to encourage quality investment, as well as help existing mining companies.

“The Chamber hopes this same structure will be approved by the Senate to help sustain existing mining operations, encourage quality investments in the hugely untapped Philippine minerals sector, and finally lift the moratorium on mining permits,” Mr. Dimaculangan said.




Last month, in a year-end news conference, the Department of Environment and Natural Resources (DENR) said that it has a positive outlook for the mining industry in 2019 under the new fiscal regime which is to be implemented in the Tax Reform for Acceleration and Inclusion (TRAIN) 2 bill.

“We see a positive outlook for the mining industry. What the MICC (Mining Industry Coordinating Council) is saying was the new fiscal regime will happen once the second package of the TRAIN Law is passed and that will really provide a more advantageous package for the government,” DENR Undersecretary Analiza A. Rebuelta-Teh said last Dec. 20.

“In that case, although there is the current version of the pending bill where there will be a decrease in the royalty tax for the mineral reservations, it can be offset in other forms in the new fiscal regime,” Ms. Teh added.

Mr. Dimaculangan, however, noted that with the order issued by DENR to close and suspend 26 mining companies “has caused a significant loss of potential export receipts, tax revenues, and social progress unless the open pit issue is resolved.” The order was made by former DENR Secretary Regina Paz L. Lopez, and was continued by current Secretary Roy A. Cimatu.

Mr. Dimaculangan said that the Tampakan Copper Project, the King-King Gold-Copper Project, and the Silangan Gold Copper Project are on hold due to the DENR Administrative Order (DAO) 2018-19 signed on Aug. 17, 2018.

The DAO sets a maximum area of extraction of ore at any given time depending on the scale of mining, which are: 50 hectares for one million metric tons (MT) or less; 60 hectares for more than one million MT but less than three million; 70 hectares for three million MT but less than five million; 80 hectares for five million MT but less than seven million; 90 hectares for seven million MT but less than nine million; and 100 hectares for nine million and up.

Mr. Dimaculangan said that a total of P303 billion worth of national government revenue and P47.6 billion next export commitment are the potential losses due to the suspension of these open pit mining projects.

Mr. Dimaculangan said that open pit mining is “an internationally accepted, environmentally safe method of extracting minerals.” — Reicelene Joy N. Ignacio