Government may take stake in Philnico

The government may be willing to take a stake in Philnico Industrial Corp. (PIC) anew in order to save the deal between the nickel mining firm and China’s Jinchuan Nonferrous Metal Corp., Trade and Industry Secretary Peter B. Favila said.

Favila said while Jinchuan had assured him that they are going ahead with their investment in PIC, the Arroyo government is still trying to study all options that would facilitate and clinch the deal.

This as PIC president Evaristo M. Narvaez Jr. has expressed frustration over Jinchuan’s continued "delaying tactics" after four years of negotiations.

While Jinchuan has made a $45-million cash offer plus a 15-percent minority stake to PIC’s original shareholders, it has also indicated its desire to have another feasibility study done by a Chinese engineering firm. Completion of the feasibility study would be in May 2007.

Thus, Narvaez said negotiations for the sale of PIC shares to Jinchuan has come to a halt following Jinchuan’s contradictory offer and announcement of another feasibility study.

"There are no negotiations," Narvaez said, although he denied that talks had collapsed or that PIC is issuing an ultimatum to Jinchuan to make a definite decision by next year.

Narvaez said he is puzzled by the need for another feasibility study when two other studies had previously been conducted by two other reputable firms-Anglo-Norwegian firm  Kvaerner and Australian Minproc.

Furthermore, Narvaez said if Jinchuan already has an offer, it does not need to conduct another feasibility study.

He pointed out that negotiations with Jinchuan started four years ago and the Chinese firm was given complete access to all of PIC’s financial and legal documents.

Narvaez said PIC now wants a clear answer from Jinchuan on the level of its seriousness in pursuing the deal when doing another feasibility study would only delay the project.

Narvaez complained that PIC has already lost some opportunities by agreeing to deal exclusively with Jinchuan.

Narvaez said a firm answer from Jinchuan would allow PIC to explore other "options" with other interested investors.

However, Narvaez has assured that PIC is not yet severing its negotiations with Jinchuan.

In fact, he said he is also appealing to the government to mediate and possibly engage in a government-to-government talk on prodding Jinchuan to make a final decision on PIC.

Narvaez stressed that the revival of the firm’s mining operations in Nonoc Island in Surigao del Norte would be good for all concerned.

At least three separate memoranda of understanding (MOUs) on a $1-billion investment by Jinchuan in PIC had been signed with no less than President Arroyo witnessing the signing ceremonies.

But the deal has been delayed for various reasons, including the settlement of the outstanding debt of PIC.

Jinchuan supposedly intends to redevelop PIC into a large-scale nickel and cobalt mining and processing complex.

Once fully rehabilitated, PIC could export around $400 million worth of products.

Technical feasibility studies have been completed by Kvaerner Metals of USA, a subsidiary of the Anglo-Norwegian construction group Kvaerner ASA, based on the production of mixed sulphides.

The corresponding metallurgical testwork program was carried out by Dynatec of Canada, which also served as process consultant to the project.

The project features existing plant and infrastructure on Nonoc Island and neighboring South Dinagat Island that may be reused in the new process, and an extensive resource base of 144.7 million tons with an average grade of 1.10 percent Nickel and 0.11 percent cobalt. The project site has been declared as a special economic zone with PIC as designated developer.

Nonoc Island lies about eight nautical miles to the northeast of Surigao City on the northeastern tip of Mindanao.

The nickel mining project was originally undertaken by the Philippine government as one of the 11 industrial projects of then Trade and Industry Secretary Roberto "Bobby" Ongpin. It was then known as the Nonoc Mining and Industrial Corp.

However, the project run into financial difficulties following a drop in world nickel prices and allegedly due to mismanagement.

It was eventually privatized but  operations stopped by 1986.

Thus, a possible reentry of government into PIC, according to Narvaez, may be contrary to government’s privatization policy.