Philippines update
Published by MAC on 2007-12-20
Philippine update
20th December 2007
Lafayette may sell Rapu-Rapu mine
Business World, Vol. XXI, No. 102, http://www.bworldonline.com/BW121907/content.php?id=004
19th December 2007
SYDNEY/MANILA — Australia-listed Lafayette Mining entered voluntary administration yesterday to avoid bankruptcy and give it time to obtain new capital or to sell its troubled Philippine mining business.
Lafayette was the first foreign company to operate a mine in the Philippines after a law granting full foreign ownership of local projects was upheld in 2004.
But cyanide spills in 2005 shut the copper and zinc mine for more than a year, causing huge financial strain and making the Australian owner the poster child for the perils of large-scale mining in a country deeply suspicious of the sector.
The ensuing uproar hampered government plans to attract billions of dollars in foreign investments to the minerals industry but after a period of quiet, big players are testing the waters and Lafayette’s financial distress is unlikely to put off the industry’s slow revival.
"Mining companies always have lessons learned and cautionary tales and Lafayette always comes up," said Tom Green, executive director of Pacific Strategies and Assessments.
"The mining companies are well aware of Lafayette’s woes over this thing and what they went through. They were aware of it before they started to come in."
Environmental campaigners, who have kept up the pressure on Lafayette since the spills on the central island of Rapu-Rapu, saw the group’s financial difficulties as a victory.
"We hope this development will lead to the permanent closure of mining operations in Rapu-Rapu," said Clemente Bautista, national coordinator for environmental group Kalikasan-PNE.
But Carlos Dominguez, the chairman of the Lafayette’s Philippine operations, said the mine and its 1,000 strong workforce would continue working until the Australia-based administrator told them otherwise.
"We have no plans to shut down the mine. We will stay open for as long as it is profitable," Mr. Dominguez told Reuters.
He said the project, 350 km southeast of Manila, was forecast to generate net cash operating income of $52 million on gross revenues of $105 million in its 2007/08 fiscal year. Lafayette Senior Vice-President Bayani H. Agabin told BusinessWorld the company would be filing a rehabilitation application either in the Makati or Pasig Regional Trial Court next week at the latest.
"If this (the petition) is granted we will be able to continue our operations without any distractions," Mr. Agabin said.
"This will give us a reprieve and this is a better option than selling right away ... We are not leaning towards selling, but we are conducting studies anyway."
He also said the company was in talks with other parties that could potentially provide fresh funds, but declined to identify prospective white knights.
"We are in talks with parties that can potentially give us financing or buy out some of our debt."
A bailout plan under consideration by a private equity group, South East Asian Strategic Asset Fund, would have eliminated around A$300 million ($260 million) of Lafayette’s debt and bad hedges with the help of a $151-million capital raising.
Late last month, Lafayette said crucial financial support from the private equity group was a possibility.
But yesterday, it said that the level of certainty over the plan had declined, and it had no grounds to continue to hold that view.
Australia-based administrator Ferrier Hodgson has now been appointed to take control of the company and its property.
The Rapu-Rapu mine had been forecast to turn out 10,000 tons of copper in concentrate, 14,000 tons of zinc in concentrate, 50,000 ounces of gold, and 600,000 ounces of silver annually.
LG International Corp. and state-run Korea Resources Corp. together hold a 26% stake in the mine. — reports from Reuters and RJMD
Defend Patrimony demands permanent closure of Rapu-Rapu mine, accountability and responsibility from Arroyo, DENR, and Lafayette
Defend Patrimony Press Release
18th December 2007
Anti-mining liberalization alliance Defend Patrimony today pressed for the permanent closure of the Arroyo administration's first foreign-owned showcase mining project in the Philippines owned by financially-troubled Lafayette Mining Limited (LML) of Australia.
LML owns 74% of Lafayette Philippines Inc. which runs an open-pit mine in Rapu-Rapu island in Albay. LML Board of Directors yesterday declared that they will be undergoing 'voluntary administration', transferring control of the company's business, property, and affairs to Australia-based administrator Ferrier Hodgson under Rod Sutton and Peter McCluskey after repeatedly failing to pay its liabilities on time.
At a protest action in front of the Department of Environment and Natural Resources (DENR) Main Office in Quezon City today, environmental activists united under Defend Patrimony pressed Environment Secretary Lito Atienza to immediately support the permanent closure of the Lafayette mine and set in place mechanisms for the rehabilitation of the area and renumeration or compensation for mining-affected communities.
"The recent bankruptcy of Lafayette should once and for all convince the government to totally close the mining operations in Rapu-Rapu island," Clemente Bautista Jr., a convenor of Defend Patrimony alliance and National Coordinator for Kalikasan Peoples' Network for the Environment (Kalikasan PNE), said in a statement.
"More than a financial mess, the Lafayette mine is an environmental and social failure. We have forewarned President Arroyo and the DENR that the project is not socially, technically, environmentally and financially feasible but they still allowed it to proceed. The Arroyo administration should be held accountable along with Lafayette to rehabilitate the island and compensate the local residents for the damages done by the mine", Bautista added.
"They also must ensure that enough rehabilitation fund is available for the affected people in the Island. This must be primarily provided by the Banks now that operating the mines", the Kalikasan PNE coordinator stressed. Based on a dialogue of Defend Patrimony with DENR officials, there is still no funding available for rehabilitation of Rapurapu if ever the mines closed immediately.
According to banktrack.org, the mining project is funded by the following financial stakeholders: a lenders group (ABN AMRO, ANZ, Investec, SC First Bank, Standard Chartered, Standard Bank), LG International and KORES, Korean state companies, and Lafayette's shareholders.###
For interviews, please contact Mr. Clemente Bautista Jr., 63-922-844-9787 or 9209099 or through email kalikasan.pne@gmail.com
DEFEND PATRIMONY! is a broad alliance comprised of organizations and individuals united in the defense of Filipino people's rights and national patrimony against the wholesale plunder of our mineral and other natural resources.
Rapu-Rapu mine firm runs to court for shield vs. creditors
By Ephraim Aguilar, Southern Luzon Bureau
http://business.inquirer.net/money/breakingnews/view_article.php?article_id=107786
19th December 2007
LEGAZPI CITY, Philippines -- Indebted by almost $240 million, the Rapu-Rapu group of companies operating a copper and zinc mine in Rapu-Rapu island town in Albay will seek court protection from creditors even as it denied claims by anti-mining groups that the mine firm has gone bankrupt. Carlos G. Dominguez, chairman and president of Lafayatte Philippines Inc., which oversees the Rapu-Rapu group of companies, said they are filing a petition for rehabilitation so the mining firm can continue normal operations.
"It is the best way to protect all our stakeholders, particularly, our host communities, employees, and the environment," Dominguez said in a press statement sent to the Inquirer on Tuesday. Earlier, the board of directors of Lafayette Mining Ltd., parent firm of LPI, decided to subject the company under voluntary administration after it "deemed that it could not continue to meet its obligations (to the creditors)."
Voluntary administration, according to Australian website www.bankrupt.com.au, is a mechanism for companies in financial distress to obtain some breathing space from its creditors. It is a procedure under Australian law that allows a company to avoid liquidation and to have the company administered in such a way that maximizes the chances of the company and its business to continue, or if it cannot continue, to allow a better return for the company's creditors and shareholders.
Clemente Bautista, convener of anti-mining alliance Defend Patrimony, said that "voluntary administration" simply meant that the Australian-owned mine firm has gone bankrupt and that the banks are now taking over their operations.
Not Bankrupt
However, Bayani Agabin, LPI spokesperson and legal counsel, said the company is not bankrupt because its debts have not exceeded its assets. "It is the best strategy to make the continuing of our operations viable," Agabin said in mobile phone interview. He said the petition for rehabilitation, once granted by the Philippine court, will protect the company from cases to be filed by creditors.
Agabin said the petition will go with a company rehabilitation plan which shall consist of strategies to resolve the company's financial issues with an assurance to the creditors that it will be able to pay its debt in the future.
He said a rehabilitation plan might take between two to 10 years to implement.
Agabin explained that the mine firm's heavy debt burden was caused by the long periods of suspension by the government after the mine tailings spill in 2005.
He added that the calamities that struck the province, like supertyphoon "Reming" late last year, also inflicted losses on the company's assets.
LPI operates a 180-hectare open pit mine occupying 81 percent of the island town's land area.
Its operations have been highly-criticized by anti-mining groups, who have been blaming the mining company for tailings spills and fish kills since 2005.
Lafayette troubles show defect of gov’t mining program--NGO
By TJ Burgonio, Philippine Daily Inquirer - http://newsinfo.inquirer.net/breakingnews/nation/view_article.php?article_id=107877
19th December 2007
MANILA, Philippines -- The financial troubles of Lafayette Mining should prod the government to close down the Australian firm's mining project in Albay, an anti-mining alliance said on Wednesday.
Lafayette Mining, which owns 74 percent of Lafayette Philippines that runs an open pit mine in Rapu-Rapu island, entered voluntary administration Tuesday to avoid bankruptcy. "The recent bankruptcy of Lafayette should once and for all convince the government to totally close the mining operations on Rapu-Rapu island,'' Defend Patrimony convener Clemente Bautista Jr. said in a statement.
Executives of Lafayette Philippines squelched speculations they were shutting down, and said they would continue to operate.
Activists from the alliance picketed the Department of Environment and Natural Resources to ask Secretary Lito Atienza to support the closure of the mine on Rapu-Rapu island.
They said Atienza should set in place the mechanisms for the rehabilitation of the mining area, and the remuneration for the communities adversely affected by the operations. "More than a financial mess, the Lafayette mine is an environmental and social failure,'' Bautista said.
The Rapu-Rapu Polymetallic Mining Project, the administration’s flagship project, has been under criticism since it caused spills in late 2005 that resulted in a series of fishkills and toxic metal contamination.
The government suspended its operations in January 2006 months after it spilled mine tailings in October 2005, but gave its clearance for its resumption in February 2007.
Defend Patrimony welcomed news of the Lafayette's near-bankruptcy and viewed this as "strategic victory'' in the campaign against "mining plunder.''
"This is a step towards victory for the people of Rapu-Rapu and their supporters who have tirelessly united and campaigned for the mine's closure since 2001," Bautista said.
By entering voluntary administration, Lafayette has gone bankrupt and paved the way for banks to take over its operations, according to Bautista "The bankruptcy of the Arroyo administration's flagship mining project shows how defective the government's current mining liberalization program is. No one except for Lafayette's owners and foreign investors has benefited in the course of the mining operations,'' Bautista said.
So far, the project failed to yield substantial benefits for the residents of Rapu-Rapu island, he said.
Sorsogon Bishop Arturo Bastes, for his part, also expressed his jubilation and vindication over this.
"This is a very welcome Christmas gift to all Bicolanos. This will surely boost the morale of many other communities throughout the country that are fighting for people's rights, national patrimony, and environmental protection," Bishop Bastes said in a statement.
Governor asks suspension of Lafayette mining permit
Manila Times - http://www.manilatimes.net/national/2007/dec/20/yehey/prov/20071220pro4.html
20th December 2007
LEGAZPI CITY : Following the declaration of Lafayette Mining Ltd. of bankruptcy, Albay Gov. Joey Sarte Salceda urged the Department of Environment and Natural Resources (DENR) in Bicol to immediately suspend the mining company’s permits in Rapu-Rapu, Albay.
“As Albay governor, may I implore the Mines and Geo-Sciences Bureau and the Environmental Management Bureau of the DENR to immediately suspend the permits to mine, mill and transport chemicals granted to Lafayette as it has declared bankruptcy,” Salceda told The Manila Times.
Salceda said he is determined to push for the mining firm’s closure as a result of the said declaration of bankruptcy, as well as its option to sell the mining operation to other interested investors.
“Financial distress could sacrifice or compromise environmental standards,” Salceda said adding that this is the primary concern.
He said that financial distress is an absolute proof of bad management. “The issues now are who would maintain the mines tailing pond once the mining firms ceases to operate; who will pay the people of Rapu-Rapu the P16-million arrears in social development programs,” he said.
For this reason, Salceda asked the DENR to take the responsibility for preserving the integrity of the mine’s facilities to prevent any mishap especially if some mining chemicals are misplaced.
He also warned environment authorities that permits are not automatically restored to its creditors or eventual new interest while waiting for the court to appoint a receiver.
Given the poor track record of Lafayette , Salceda asked the DENR Environment Management Bureau to conduct compliance audit on all environmental concerns.
“When they bullied the President in writing to get their PEZA, I knew something was not right with these people from the start,” continued Salceda.
Reynulfo Juan, DENR regional executive director, said his agency would look into the request for the suspension of mining permits granted to Lafayette .
He said before any decision could be made he would first call for a technical conference with the mining firm and asked them to submit a mining rehabilitation plan.
--Rhaydz B. Barcia