Philippines mulls tough mining regulations

Philippines mulls tough mining regulations

By Roel Landingin, Manila, Financial Times

22nd June 2006

Mining companies in the Philippines may have to pay more taxes and submit to tougher environmental regulations following a waste-water spill that has revived opposition to large-scale mining projects.

Angelo Reyes, environment secretary, last week allowed a polymetallic mine run by Australia's Lafayette Mining to reopen for month-long tests seven months after it was shutfor accidentally spilling cyanide-contaminated wastewater.

However, the environment department's detailed report on the accident also outlined measures to strengthen environmental regulations and increase the government's share from mining revenue.

Gloria Macapagal Arroyo, president, wants to attract up to $6bn in mining investment between 2005 and 2010 to revive the industry and hasten economic growth, but faces opposition led by influential Catholic bishops.

The department will soon issue administrative orders increasing fines and penalties for violations of environmental standards, appointing "round the clock" resident government inspectors to watch over critical or large-scale mining operations, and requiring separate permits for each stage of the start-up process before commercial launch.

It wants to increase government mining revenue by disallowing income tax breaks for mineral processing. It has urged tax authorities to use a stricter methodology in computing excise taxes on mineral output that could increase the mining companies' tax liabilities.

Nelia Halcon, executive vice-president of the chamber of mines, said mining companies could probably live with tougher environmental rules but may balk at a higher tax that could push down investment returns.

The environment department estimated that withdrawing Lafayette's tax breaks would more than double the government's projected revenue from the project from $59m to $123m, but would cut the share of Lafayette and other investors from $185m to $104m.