Gov’t Miners Tackle ‘Fair’ Royalty
September 19, 2011 at 18:57
MANILA, Philippines — The government and the private sector may eventually come up with a win-win agreement that will enable government to get its fair share in mineral resource extraction through the proposed collection of a five percent royalty.
Department of Environment and Natural Resources (DENR) Sec. Ramon J.P. Paje said the Chamber of Mines of the Philippines has opened up the possibility of a profit sharing scheme with government.
“It’s very beautiful now because the industry is saying, ‘We’re willing to pay.’ But let’s talk about the arrangement on how to pay,” said Paje during the 2011 Mining Philippines 2011 Conference.
DENR said that government wants to implement this in a legal and fair manner. And that must be through the Office of the President’s declaration of all mines as mineral reservation.
Since only nine of the 30 operating mines are under a mineral reservation, it is but fair that all mining tenements holding a mineral production sharing agreement (MPSA) be declared a mineral reservation.
The government effectively imposes royalty only on these nine MPSA mines under a mineral reservation including a nickel mine in Zambales and a nickel mine in Surigao area.
“We have zero royalty now. The royalty from mining in ancestral domain is only one percent,” he said.
“We’re saying the legal way is through a declaration of mines as mineral reservation. If we follow other countries, we should be charging royalty for a natural resource, but we’re not charging royalty. That’s why were losing P7 billion a year.”
Presidential Adviser for Environment Protection Nereus Acosta said the present regulation where government only slaps a two percent excise tax must not be a fair deal for government considering opportunity costs and environmental costs.
“Sec. Neric’s position is that the very reason we as government agreed to mine is because we will earn from mining. For example, government is now earning P800 million from excise tax. Is that enough to be pay for environmental damages?” Paje said.
The Australian government, Paje said, imposes as much as 18 percent royalty on mining areas where capital cost is very minimal such as in areas that only require excavating equipment to recover minerals.
“All other countries with a very robust mining industry – China, Chile, Indonesia, even New Zealand, Canada, Australia – are charging a royalty. China charges four percent plus a fixed amount of I think 30 yuan per ton. Indonesia’s royalty is four to seven percent. Chile charges five percent.”
Mining companies cannot claim that they will lose by paying government’s royalty share since they have to file a declaration of mining feasibility as part of their permit application. Most of these mines claim to be profitable at a gold price of $500 per ounce.
“The mining company will tell government that at $500 or at $600 or $700, ‘We will already be earning, so allow us to mine now,’ he said.
“Even if we set it at $700, the price last week almost broke $2,000 per counce. If you’re not earning now, when will you earn?” he said.
It must have been providential that the Philippines started revitalizing the mining sector only within the last 10 years when metal prices have been at an all-time high.
“Chile has been mining for almost 200 years. But maybe God is is kind to us and tells us, ‘You mine now because the price is right.’ What if we mined at only $200?
What value would we have received for our resources?” he said.
DENR’s insisting of government’s fair share on the country’s mineral resource even puts his own popularity rating at stake.
“Even at the risk of my friendship with the industry, I insist on government’s getting its fair share. Others get mad at me, but we have to do it. If I get daunted, there won’t anymore be a policy,” Paje said.
Paje said President Benigno S. Aquino III is supportive of a new mining revenue sharing policy for government and the private sector.
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By: Melody M. Aguiba
Source: Manila Bulletin, Sept. 15, 2011
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