Lafayette to stay in RP, mulls IPO

Lafayette Philippines Inc. (LPI) is committed to stay in the Philippines even after the unfortunate mine tailing spillage in Rapu-Rapu, Albay, LPI country manager Rod Watt said yesterday.

In fact, Watt said LPI continues to plan for its future in the country which includes a possible listing in the Philippine Stock Exchange (PSE).

"LPI wants to list with the PSE some time in the future after it has resolved its current spillage problem," Watt said.

The purpose of the PSE listing, Watt explained, is not so much to raise funds, but rather to open up the mining firm to local ownership.

Once a firm decision is made to go ahead with the listing, Watt said, LPI would be ready to list in as short as six months time.

Operations at LPI’s Rapu-Rapu mines in Albay has been suspended early this month following two mine tailing spillage incidents.

Watt is hopeful that once the company has been able to comply with a number of government imposed measures, operations at the Rapu-Rapu mines can resume in December.

In a related development Lafayette stands to incur bigger losses if its base metals plant in Rapu-Rapu that will process copper and zinc concentrates is unable to come on stream as scheduled by end-December or early January 2006.

"We will definitely have bigger losses because the base metals plant is a bigger component of our polymettalic project in Rapu-Rapu when compared to our gold production which we voluntarily suspended. Eighty percent of our revenue should be coming from the output of the base metals plant," said Lafayette finance manager Ronald Imperial.

Imperial said the shutdown of its gold processing plant since Oct. 31 has resulted in foregone export revenues of about $50,000 daily or a total of $1.5 million or P810 million to date. This is apart from operational expense losses that are estimated to have reached $4.5 million.

"We are still however, looking at the best possible scenario and that is, we could operate our base metals plant by the end of December or in January of next year," said Imperial, adding that the Australian listed mining company has to fulfill its off-take agreement with LG International of Korea.

Lafayette officials are still optimistic that the mining firm will be able to resume normal operations shortly and that the spill incident will not affect its existing off-take contract with LG. Under an off-take agreement, LG which partially financed the mine project, will have an equity and percentage of the project output when it is in full steam.

The gold plant which was due for a decommissioning to pave the way for the use of the shared crusher by the base metals plant that will produce copper and zinc, was ordered closed by the Mines and Geosciences Bureau (MGB), ahead of the schedule last end October after mine tailings containing cyanide spilled from the tailings dam into the creeks surrounding the Rapu-Rapu gold plant last Oct. 11. The incident was repeated last Oct. 31 due to heavy rains.

The incident has spurred a controversy and raised old fears about irresponsible mining practices of mining companies before the Philippine Mining Act of 1995.

The Chamber of Mines of the Philippines (CMP) is co-funding with the Department of Environment and Natural Resources (DENR) an independent audit team composed of experts that will look into the structural integrity of Lafayette’s mine tailings dam.

The CMP’s involvement is intended to reinforce its earlier rhetoric to implement best practices in mining and to preserve its recent gains with the favorable ruling of the Supreme Court in December 2004 that re-affirmed the constitutionality of the PMA 1995. The landmark decision resulted in a resurgence of foreign investors’ interest in the local mining industry.

"The unfortunate spill incident in Rapu-Rapu is no Marcopper and the incident should never happen again," said Artemio Disini, chairman of the CMP.

Disini said the CMP is taking steps to ensure that all remedial steps will be done, particularly on the safety and structural capability of Lafayette’s tailings dams.

"The incident happened during relatively dry season, this should serve as a wake-up call for all mining companies, especially foreign mining companies. We, however, would like to view this incident as one that also reaffirms the enthusiasm of foreign mining companies to pursue mining projects in the country."

The team is composed of Marcelo A. Bolaño, a consultant of mining firm Benguet Corp.; Dr. Carlo Primo David of the University of the Philippines National Institute for Geological Sciences (UP-NIGS); Professional Regulation Commission’s Board of Examiners for Metallurgy chairman Jake Foronda; and Engr. Joselito Bacani, chairman of the Committee of Environment of the Chamber of Mines of the Philippines.

The team dispatched yesterday will assess whether the mining company adhered to proper engineering design and standards that would withstand heavy rainfall for the next 500 years which is an internationally-accepted standard.