Chinese nickel mining giant to resume talks on Philnico takeover bid

Officials of the Chinese nickel mining giant, Jinchuan Non-Ferrous Metals Corp are scheduled to arrive in the country next week to resume talks with Philippine officials about their bid to take over Philippine Nickel Corp. (Philnico).

Nearly two years after signing a memorandum of understanding with the government for a $2-billion investment in the country’s mining industry, Jinchuan will meet with privatization officials to thresh out the terms of the investment.

Finance Undersecretary Gabriel "Jay" Singson Jr. said that Jinchuan was sending representatives over to continue negotiations but he would not disclose the talking points that would be put on the table.

Jinchuan has been interested in Philnico for years and had agreed to wait at least six months from the MOU signing for the government to decide on how to facilitate its investment.

However, Jinchuan’s takeover bid was stalled by the unresolved legal tangle between the government which used to own the nickel mine in Surigao and Philnico which bought the mine but never settled its obligations.

There were discussions of an out-of-court settlement between the government and Philnico but Singson would not say whether an actual agreement has been reached.

"It’s premature to say that there is a settlement already," Singson said. "It’s precisely the subject of the negotiations and we still have to come to terms."

Jinchuan’s entry into Philnico hinges on the re-appraisal of the company’s mining assets, financial restructuring and how the company intends to settle its obligations to the National Government.

Philnico owed the National Government at least $300 million when it bought Nonoc nickel mines in Nonoc Island, Surigao. Singson said the company made some small payment when the transaction was completed but it has not made any other payment since.

"The bottom line is that we have to make this happen as soon as possible," Singson said. "We are glad that Jinchuan is interested in Nonoc mines, but that investment can happen only after Philnico settles government’s claims."

The privatization committee headed by Singson has already completed a feasibility study and a financial viability study for presentation to Jinchuan and the results would be the basis of the in-coming talks.

The Jinchuan-led consortium had been promised a quick resolution of the Philnico case but the re-appraisal of the mine pushed the Chinese investment back longer than originally expected.

"There’s really no way around it, we have to know what we are talking about and how much it is worth," Singson said. "Only then can we start talking about terms."

Singson said even the talks with the Jinchuan consortium has not reached the level of detail where the government could start considering its options on how to collect Philnico’s arrears.

In 2005, the Arroyo administration had begun considering an out-of-court settlement with Philnico just to expedite the court case and finally facilitate Jinchuan’s entry.

Jinchuan is China’s biggest nickel mining and processing corporation, with a nickel reserve of 5.5 million tons and it signed the MOU during the recent state visit of Chinese prime minister Hu Jintao in April 2005.

During the visit, Jinchuan and Baosteel Corp. officially stated their intentions to invest in the country’s mining industry, following the Supreme Court decision allowing foreign companies to hold controlling interests in Philippine mining companies.