On paper, mining is a potentially productive and lucrative industry in the Philippines. Boasting significant resources of gold, copper, and iron, alongside close proximity to China and its ever-growing appetite for commodities, the Philippines has many of the conditions necessary to develop a world-leading mining industry. Indeed, the state is the fifth-most mineralised country in the world, with around $1tn in untapped minerals alone as of 2018.
However, this potential has been curtailed in recent years by the administration of President Rodrigo Duterte, who has consistently prioritised environmental protection over mining expansion since his election in 2016. Under his guidance, production of many of the country’s primary mineral exports has declined, as bans on various forms of mining have limited the productivity of the mining sector.
Yet over the last two years, he has softened his stance as the Covid-19 pandemic damaged the Philippines’ economy, and pushed the state back towards the profitable, if destructive, mining sector. With Duterte’s term set to expire next year, but a strong legacy of flexible policy in place, the future could be bright for the Philippines mining industry.
2016-17: Duterte’s election and open-pit mining ban
Duterte’s election to the presidency in 2016 signalled something of a shift in Philippines politics, with the then-mayor of Davao City defeating big-name candidates such as Ferdinand Marcos Jr, the son of the dictator who ruled the country between 1965 and 1986, and Mar Roxas, who had been tipped by former President Benigno Aquino III to succeed him.
Yet with only 39% of the vote, he may have lacked the popular mandate to push through some of his more radical policies, from a hard-line stance on crime to his widespread opposition to large-scale mining.
However, his administration pressed on with an anti-mining agenda regardless. In 2017, Environment Secretary Regina Lopez ordered the closure of more than half of the country’s operating mines, and announced a ban on new open-pit operations, concluding that such projects were responsible for significant environmental damage.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below formBy GlobalData
Lopez left her position in May that year, after the country’s congress voted against confirming her position, but by the end of the year, Duterte had still not overturned the ban. This was in spite of pressure from Lopez’s replacement, Roy Cimatu, to lift the ban and allow projects, such as the $5.9bn Tampakan gold and copper mine, to continue operations. Work at the mine has still not started, due to a combination of the open pit mining ban and opposition from local groups, wiping potential annual production figures of 360,000 ounces of gold and 375,000 tons of copper from the Philippines mining industry.
2018-20: declining production and easing restrictions
The subsequent years saw a general decline in production across the Philippines’ mining sector. Over this period, the country’s total annual gold production fell from 20,765kg to 17,424kg, silver output dropped from 29,782kg to 24,024kg, and copper production declined from 69,933 tons to 60,856 tons.
This decline led to a similar fall in the contribution of the mining sector to the country’s economy. In 2018, the gross value of the country’s mining production was around $3.57bn, but this fell to around $2.63bn two years later.
Similarly, the total value added to the economy through mining taxes and royalties fell from around $625m to roughly $507m over the same period, as both mining production, and the economic value of this production, fell.
This crackdown on new mines, however, brought a human cost, with NGO Global Witness reporting that in 2019, 43 “environmental defenders”, local people and activists who protest against industrial operations in and around their homes, were killed in the Philippines. This was up from 30 in 2018, and saw the Philippines record the second-highest number of such murders in the world, behind only Colombia.
The growing violence and underperforming economy drove many in the industry to push for a removal of the various mining bans, with some success. The state allowed for suspended mining firms to resume operation, and began work on rehabilitating government-owned mines, with a particular focus on nickel mines to export their products to China.
Indeed, the value of the Philippines’ nickel exports rose to almost $400m by the end of 2019, a year that saw China emerge as its third-largest trading partner, responsible for importing $9.81bn worth of Philippines commodities, including mineral products.
This trend was aided by the fact that Indonesia, then the world’s largest nickel producer, implemented an export ban in January 2020, creating an opportunity for the Philippines to expand its nickel exports, with China’s appetite for the metal unchanged over the period.
2021: new mining ban lifted and hope for the future
This April saw the ban on new mining projects in the Philippines finally lifted, a move that is expected to lead to the acceptance of at least 291 mining applications. The lifting of the ban is expected to have significant economic impacts too, with around 190,000 people employed in the sector prior to the outbreak of the Covid-19 pandemic, many of whom will expect to return to work.
This is in addition to the doubling of the tax rate on mining and quarrying from 2% to 4%, which was announced in 2017, but was not expected to make a significant impact until the lifting of the mining ban.
Mongabay reported at the time that within hours of the announcement of the lifting of the ban, the value of the country’s mining and oil index rose by 5.38%, with companies and investors eager to take advantage of the relaxation of the law.
In May, there was further optimism regarding the ban on open pit mining, with industry groups hopeful that this ban would also be repealed in the near future. Wilfredo Moncano, head of the country’s Mines and Geosciences Bureau asked Reuters “Why not lift the ban?”.
While there are no concrete plans to reverse this particular moratorium, the flexibility Duterte has shown in recent years with regard to balancing the environmental damage and economic potential of mining has encouraged miners to hope for the best.
This flexibility could prove to be a key aspect of the country’s mining sector going forward. Duterte’s term is set to expire next year, and while he is yet to put his support behind any single candidate, he has hinted that he would be interested in running for the vice presidency, which could ensure his increasingly pragmatic approach remains a cornerstone of the Philippines mining industry.