You are here

Philippine "shock and awe" mine crackdown rattles nickel markets

39165361 - 22_07_2016 - PHILIPPINES-ENVIRONMENT-MINING.jpg
As the Philippines' tough-talking new president ratchets up a campaign against irresponsible mining, the suspension of a quarter of the country's nickel mines and the risk of more action to come is spooking global nickel markets.

[MANILA] As the Philippines' tough-talking new president ratchets up a campaign against irresponsible mining, the suspension of a quarter of the country's nickel mines and the risk of more action to come is spooking global nickel markets.

The South-east Asian nation is China's biggest supplier of nickel ore - used to make stainless steel - and with few alternative suppliers available, the crackdown pushed nickel prices up 13 per cent last month.

President Rodrigo Duterte, who swept to power on June 30 with a vow to crush crime by targeting hundreds of suspected drug dealers, warned miners this week to follow tighter environmental rules or shut down, saying the country can survive without mining.

"Whether it is legal or not it will destroy the country," Mr Duterte told a forum on Thursday.

sentifi.com

Market voices on:

"It's about time to reconfigure the wealth of the nation among its citizens." Six out of 27 nickel mines were suspended in the first weeks of an audit that began on July 8 - representing 8 per cent of total output - and the suspension of a seventh was announced on Thursday.

Mining has powerful opponents in the Philippines, including the influential Catholic Church, following public anger over past environmental disasters and the displacement of local communities.

Despite a wealth of untapped resources, a once thriving industry in the 1970s is now dominated by a few local miners, mostly nickel producers, and even fewer foreign players, led by Australian miner OceanaGold Corp.

Mining contributed less than 1 per cent to the Philippine economy last year.

"I would like that the mining companies, the ones that we suspend, must rehabilitate. That is social justice," said Environment and Natural Resources Secretary Regina Lopez, a staunch environmentalist appointed by Mr Duterte who believes open-pit mining is "madness."

The government has not said how many of the country's 40 mines have been audited so far, but Leo Jasareno, who is supervising the audit as a senior undersecretary in Ms Lopez's department, said he expected it to be completed this month.

"For as long as there is cause and the reason falls within (legal) grounds, the government has the authority to cancel mining contracts," Mr Jasareno told Reuters.

Mr Jasareno was replaced earlier this week as head of the government's Mines and Geosciences Bureau by Mario Luis Jacinto, a geologist who worked in southern Davao City where Mr Duterte was mayor for 22 years.

The Chamber of Mines of the Philippines said some miners were weighing up possible legal options in the event of more mine closures.

But they would "rather have the Philippine government appreciate the industry for its merits," said chamber spokesman Ronald Recidoro.

The Philippines supplied 95 per cent of China's nickel ore imports in the first six months of 2016, according to Chinese customs data, and while global stocks are high, a suspension or closure of more mines could drive refined nickel prices up further.

"If the Philippines does shut its mining industry, the fact that you've got high stocks simply won't matter, the market will simply skyrocket," said Wood Mackenzie analyst Andrew Mitchell.

Nickel touched an 11-month high of US$10,900 a tonne on July 21, and has stayed well above US$10,000 since.

The government is now also investigating public complaints of environmental infractions against a local iron ore miner and against OceanaGold's exploration of an area near its Didipio gold mine that complainants want for agriculture, said Mr Jasareno.

OceanaGold declined to comment on the exploration issue, but chief executive Mick Wilkes said the company supports Mr Duterte's stance on responsible mining and is happy to work with the new administration.

Manila-based business consultant Peter Wallace said Mr Duterte appears to be employing his "shock and awe" strategy in his war against drugs in dealing with miners.

"If it puts fear into the irresponsible lot and gets them to close down or for local governments to force their closure, this is good. But if it scares away the responsible ones that's not so good," he said.

REUTERS

grab

Receive $80 Grab vouchers valid for use on all Grab services except GrabHitch and GrabShuttle when you subscribe to BT All-Digital at only $0.99*/month.

Find out more at btsub.sg/promo

Powered by GET.comGetCom