Glencore to divest Tampakan stake

MANILA, Philippines - Commodities giant Glencore Xstrata has expressed interest in divesting its majority interest in the beleaguered $5.9-billion Tampakan copper-gold project in South Cotabato, its minority project partner Indophil Resources NL reported yesterday.

The divestment plan, however, is still subject to discussion and no formal divestment process has commenced.

“Glencore Xstrata has advised Indophil of its preference to divest its stake in Tampakan. This is consistent with Glencore’s preference not to develop greenfield projects, said Indophil CEO Richard Laufmann in the report.

Indophil holds a “strategic preemptive right” over Glencore Strata’s interest, giving it the right of first refusal in the sale of Glencore Xstrata’s interest in the project.

Glencore Xstrata holds a 62.5-percent interest in the the project operator Sagittarius Mines Inc. (SMI) while Indophil holds a 37.5-percent stake.

In its report for the quarter ending on Dec. 31, 2013, Indophil said it – along with its partners in the Philippines – remains optimistic that the hindrances to the development of the Tampakan project would be cleared.

“While the provincial ban on open pit mining remains, there are positive signs,” said Laufmann.

Indophil is currently 30 percent owned by Filipino corporations. These include the Alsons group through funding by BDO Unibank, the SM group, San Miguel Corp. and Philex Mining Corp.

In the report, Laufmann said there has been “considerable uncertainty over the future ownership of Tampakan” since April 2013.

Glencore Xstrata considers the Tampakan project as a greenfield project as it is not yet in the production stage.

While still lacking the proper operating permits, Glencore Xstrata ordered SMI in mid-2013 to implement a revised work plan for the project that entailed a significant reduction in funding for the Tampakan project as well as massive retrenchment of SMI’s workforce.

The plan for 2014 now sees total expenditure of less than $10 million with only 60 employees.

The project activities would be focused on maintaining local community support and clarifiying with the Philippine government the process and timeline for the remaining approvals required for the Tampakan project.

Indophil said it remains committed to maximizing the value of investment “either by development of Tampakan, 100 percent ownership of SMI or divestment.”

“Indophil has advised Glencore Xstrata that it is focused on restoring value to the Tampakan investment. We will work with Glencore Xstrata to assist in meeting objectives for the project, and Indophil remains focused on doing what it can to ensure the project license conditions are not compromised in this process,” Laufmann said in the report.

The Tampakan project, which has an intial 17-year mine life, has a start-up milling capacity of 66 million tons per annum and an annual metal production of 450,000 tons of copper and 435,000 ounces of gold over the first five years of operation.

An inter agency working group has beenn created within the Mining Industry Coordinatting Council (MICC) to resolve the challenges in the advancement of the project which include the following: conflicting agrarian-reform claims within its tenement; the condition laid down in its Environmental Compliance Certificate (ECC) for perpetual liability for allenvironmental damages resulting directly or indirectly from project operations, the open-pit mining ban in South Cotabato, and the difficulty in securing the Free Prior Informed Consent (FPIC) of communities that would be impacted by its operations.