Philippines allows Australian miner to restart operation

Philippines allows Australian miner to restart operation

By Roel Landingin in Manila, Financial Times

13th June 2006

The Philippines on Tuesday allowed Australia's Lafayette Mining to conduct a month-long test run on a gold and copper mine that was shut down after accidentally spilling cyanide-contaminated waste water twice in October.

The mishap, which killed fish in nearby rivers and coastal waters, did not result in human casualties. But it fuelled environmental opposition to large scale mining that is just starting to pick up after the supreme court in December 2004 upheld a 1995 law allowing foreigners to own up to 100 per cent of mining ventures.

In January, the influential Catholic Bishops Conference of the Philippines called for the repeal of the mining law, prompting Gloria Macapagal Arroyo, the country's president, to look into tougher provisions on environmental and safety standards.

Lafayette's open pit mine and mineral processing plant in Rapu-rapu island, 350km southeast of Manila, was the first mining project to start commercial operations after the supreme court ruling.

Built at a cost of over $40m, the mining venture became an early test case for the government's efforts to attract up to $6bn in mining investments to revive a sector that used to account for up to a quarter of the country's exports in the mid-1980s. Philippines was once among Asia's top gold and copper producers.

Foreign investors welcomed Manila's decision to allow Lafayette's test run. "This can be very reassuring to the international mining industry," said Peter Wallace, a director of the Australia-New Zealand chamber of commerce in the Philippines.

Many investors were initially worried that the government would go too far to accommodate the Catholic bishops, who helped Mrs Macapagal survive her worst political crisis in July last year when they refused to join in calls for her resignation over allegations of corruption and poll cheating.

Apart from ordering a review of the mining law, Mrs Macapagal also formed a special commission to investigate the Lafayette mining spill and appointed a Catholic bishop to head it even after mining regulators imposed a 10m peso fine on Lafayette for operational lapses. The special body last month issued a report that urged the government to shut down Lafayette's operations and ban mining in Rapu-rapu island.