Mining investments may rise due to metal price uptick

Investments in the capital-intensive mining industry may surge this year to $1.428 billion, up from 2009's below-target result, on the back of increased demand that has led to an uptick in metal prices. The forecast by the Mines and Geosciences Bureau (MGB) is expected to allow the country to achieve a 2013 target of $13.496 billion in investments since a 2004 Supreme Court ruling allowing foreign ownership of local ventures. High demand and the resulting uptick in metal prices will encourage miners to start commercial operations or increase output, government and industry officials said late last week. The local mining industry netted $640.22 million in investments last year, 1.51 percent short of the $650-million target, MGB data showed. Some $2.8 billion has been poured in by investors since the 2004 high court ruling. The MGB forecasts investments to more than double to $3.416 billion next year from 2010, rising slightly to $3.855 billion in 2012, and tapering off to $1.994 billion in 2013. Officials claimed the three-year surge in investments would come from projects going into the operational phase following years of feasibility studies. "There are new operating mines and there will also be new feasibility studies that will be completed," MGB Director Horacio C. Ramos told BusinessWorld. Japan's Sumitomo Metal Mining Co. Ltd. is expected to invest $800 million this year for a $2.257-billion nickel processing plant in Surigao del Norte. Sagittarius Mines, Inc., a partnership between Swiss mining giant Xstrata Copper and Australian miner Indophil Resources NL, is expected to spend $93 million to complete the feasibility study of its $5.2-billion Tampakan copper and gold project in South Cotabato. Australia's Red 5 Ltd., meanwhile, is forecast to invest $65.9 million to start commercial operations of the 2,023.74-hectare Siana gold mine in Surigao del Norte. An industry leader and observer both concurred with the government's 2010 target. "That is attainable," Nelia C. Halcon, executive vice-president of the Chamber of Mines of the Philippines, said in a telephone interview late last week. "Right now our estimate is $916 million [for the year] but there will be other entries so it might reach $1.4 billion," she said. "Certainly, as metal prices increase, more people are encouraged to invest. [High prices] will remain for the next year or two," Richard Mills, chairman of executive search group Chalre Associates and a columnist of The Asia Miner, said in a separate phone interview. Prices of gold, copper and nickel — the Philippines' main mineral exports — have risen to $1,120-$1,130 per ounce, $3.33 per pound, and $8.52 per pound, respectively, from averages of $907/ounce, $1.70/pound and $6/pound in the first quarter of last year, data from the New York Mercantile Exchange and the London Metal Exchange showed. The country exported $2.482 billion worth of minerals in 2008, latest official data showed. Data for 2009 is not yet available but the MGB has forecast an increase to $2.72 billion. Ramos said that "as long as gold prices remained above $1,000 per ounce, that is already profitable." Halcon, for her part, said there is increasing demand from China and India, which are continuously developing cities and infrastructure. "There is so much construction of infrastructure [and] that increases the demand for metals," Mills said. — Neil Jerome C. Morales, BusinessWorld