Dark clouds hover over mining's luster

While precious metals such as gold are looked upon as safe havens during these times of uncertainty when the global financial turmoil is wrecking havoc on all sectors, the steady bloodbath in the markets however is already starting to dent the local mining industry.

With a number of mining companies hard put in raising funds, mining officials have conceded that the aim of getting on stream $10 billion in investments by 2010 will need to be pushed back by at least two years.

Moreover, the Mines and Geosciences Bureau is not confident of meeting its goal of raking in $1 billion in mining investment this year with only $300 million flowing into the sector so far.

Some of the major mining projects facing delays are OceanaGold’s Didipio copper project in Nueva Vizcaya and BHP Billiton’s nickel project in the Pujada Peninsula.

The smaller mining firms on the other hand, are also finding it difficult to raise money for exploration via the stock market with their share prices skidding amid the pervading nervousness in global financial markets.

Waiting for the dust to settle

This will of course, mean that schedules for exploration of prospective mining sites will have to be put off until the dust settles. That would be disappointing for newly established mining companies hoping to cash in on the boon in metal prices during the last five years.

Since precious metals like gold have soared in recent years, and with the Supreme Court allowing foreign companies 100-percent ownership in mining ventures, there has been a resurgence of sorts for the local mining sector.

The Philippines after all, sits atop an estimated $1 trillion worth of unexplored copper, gold, nickel and zinc reserves. Since the landmark decision by the high court in 2004, about $1.8 billion has flowed into the sector.

But as we cannot be isolated from global events, many are asking if the crisis, which is expected to take a turn for the worse, dims all hopes for the local mining industry to ride the precious metals boom? Would it subsequently result in the waning of interests to pursue mining projects? 

Recently though, prices of precious metals swung in a wide range, reacting to Wall Street’s responses to pledges by central banks across the globe to prop up struggling banks and bring back confidence.

Other calming moves are expected along the way in a bid to stave off a global recession. As such, investors will keep an eye on developments in the financial markets to see its influence both on the dollar and on demand for gold and other precious metals as risks cover. 

The long-term prospects for mining in the country still appears to be bright though, with pundits betting that gold will regain their luster as there is no end in sight to what is shaping up to be worse than the Great Depression in the 1930s.

As they say, the power of gold never goes away, and in difficult times, its appeal as an alternate investment is quite resounding.

Issues that need attention

In the meantime, mining industry leaders and the government should thresh out other issues that are possibly still affecting the flow of investments in the sector.

Industry leaders have previously questioned why the government last year, revised the fiscal regime for big foreign mining companies. Under the Philippine Mining Act, there is a 50-50 sharing scheme on the revenue from mining operations and there were a number of ways to achieve that. But the government revised this and eliminated these various options and limited it to only one procedure.

The government also required the approval of marketing contracts entered into by mining companies and their buyers. Concerned government officials claim that this is the most effective way for them to monitor the actual shipments of companies from which they can determine government’s share in the revenue.

Mining companies naturally opposed this and said the process takes too long. In the meantime, their buyers could just opt to go to other suppliers.

Feeling the credit squeeze too

With the health of the world-wide financial markets sitting on a trembling mountain of soured debts, many mining companies may find themselves in a credit squeeze too.

Although an increase in the price volatility of precious metals and mining stocks has also created opportunities. China and India will continue to bolster demand, and there are no indications that the global mining giants are tempering in their quest for new mining prospects.

Only the bigger ones though may have the strength to ride out the storm. But the longer-term horizon still spells “l-u-s-t-e-r” for the mining industry as the appeal of precious metals won’t go away easily.

Collegiate Champions League update

The University of Santo Tomas Growling Tigers, the Lyceum of the Philippines Pirates, Emilio Aguinaldo College Generals and St. Claire College Saints survived the grueling “Wild Card” phase of the SMART-PLDT-KFC 2008 Philippine Collegiate Championship games recently completed at the Makati Coliseum.

The cast of teams in the zonal championship are the following:

Zone 1 – St. Louis University, Champion-Ilocos/Baguio; University of Luzon, Champion-Pangasinan/Pampanga; Mapua Cardinals, NCAA fourth placer; Arellano University Chiefs, Fr. Martin Cup; Lyceum University-Batangas, NCAA-South runner-up; and University of Santo Tomas Growling Tigers, Wild Card Qualifier.

Zone 2 – University of Nueva Caceres Greyhounds, Champion-Quezon/Bicol; Don Bosco College-Mandaluyong, Champion-NCAA-South; University of the East Warriors, UAAP fourth placer; and Lyceum of the Philippines Pirates, Emilio Aguinaldo College Generals and St. Claire College Saints, Wild Card Qualifiers.

Zone 3 – BIT International College Cruisers, Champion-Bohol/Dumaguete; AMA Computers Titans, Champion-Ormoc/Tacloban; University of San Jose Recoletos Jaguars, CESAFI runner-up; Letran College, NCAA third placer; University of Cebu Webmasters, Wild Card Qualifier; and Bacolod/Iloilo Champion (ongoing regional finals at Bacolod).

Zone 4 – Xavier University Crusaders, Champion-Cagayan de Oro; University of Mindanao Wildcats, Champion-Davao/GenSan; Ateneo de Zamboanga, Champion-Zamboanga provinces; Far Eastern University Tamaraws, UAAP third placer; University of San Carlos Warriors, CESAFI third placer; and Capitol University Stallions, Wild Card Qualifier.

For more details about the biggest collegiate basketball event for the year presented by SMART, PLDT, FilOil Flying V and KFC visit the official website, www.CollegiateChampionsLeague.net and www.gameface.ph, internet media partner of PCCL.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.