Philippine Resources Issue 6 November 2011 - January 2012

Anti-mining campaign turns ugly

Photo by Roel N. Catoto

Philippine ResourcesMining, Petroleum & Energy Journal Issue 4 2011-2012, November-January

Want to buy gold at $500

an ounce?

Rethink urged on oil search rules

Mining ban on Zamboanga

peninsula

Plugging leaks in dangerous

ponds

Headlines in this issue

Current Resources

Resources Viewpoint6 Getting their act together

Mineral Resources8 Supreme Court ban helps spread of anti-mining ‘people’s power’14 Anti-mine campaign turns ugly18 After conflict, new hope for dialogue20 Raadsma out at Crazy Horse20 Changes at St Augustine20 NiHAO teams up with Glencore, AGP for nickel mining projects22 ‘World class’ iron sands project on the way in Cagayan River delta22 Major investments eyed in China deals

Oil & Gas Resources24 BP backs Raisama with Cadlao finance24 Partner for Basic Energy24 ‘High interest’ in new contracts28 PNOC-EC readies new drilling28 Rethink urged on oil search rules28 Gas2Grid looks deeper in Cebu30 New fields may make the Americas top of the oil companies’ charts

Renewable Resources31 Geothermal energy risk management

Investment Resources34 Psst, want to buy gold at $500?

Environmental Resources36 Retired open pit mines are opportunities

Resources Events38 Mining defense gets its act together

Supply Resources40 Plugging leaks in dangerous ponds46 Mapping new ground with LiDAR49 Monark boosts support for mining49 Brunel, Site Works team up50 Camp manager on the expansion trail51 Diesel fuel, filters and maintenance52 Solving a tough ore crushing challenge

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4 Philippine Resources

November 2011 - January 2012www.philippine-resources.com

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Resources Viewpoint

PhilippineResources

Mining, Petroleum& Energy Journal

Issue 4 2011November ‘11 - January ‘12

Getting their act together

Chamber of Mines of the Philip-pines president Benjamin Philip Romualdez was keynote speaker

at a recent Philippine Mining Club lunch forum. He was asked to single out the three most positive recent developments for the mining business sector – and he had to pause and think for a moment or two before replying. In the end Romualdez could single out only one positive development: “The mining industry has come together.” After largely fragmented responses by pro-miners in the face of all the recent bad news and the gains made by the anti-miners, Romualdez believes the key members of the mining sector are finally getting their act together. He was referring mainly to the Chamber of Mines, which is the senior industry grouping of miners and should be the main mouthpiece, but which has been lacking. Romualdez recounted re-cent chamber developments which may mean that, indeed, it will be more effec-tive. Its successful recent Mining Phil-ippines 2011 Conference & Expo broke new ground with participation by senior government officials; a message from President Benigno Aquino (although not personal attendance) that he is in favor of responsible, large-scale mining; and several important advances towards en-suring responsibility, accountability and transparency by miners such as an inde-pendent “scorecard” system. Importantly, the Chamber of Mines has strengthened its own structure and hopefully its activities with the appoint-ment of two new vice presidents in key areas. In charge of image building is

Rocky G. Dimaculangan while legal challenges and legislative matters are now under the care of skilled attorney Ronald S. Recidoro. Dimaculangan’s job is very impor-tant and he has had a lot of practice. Be-fore joining the chamber he was director of public affairs at TVI Resource Devel-opment and saw that company through very difficult times when its public image was at all an-time low. Romualdez moved on at the mining club forum to exhort mining sector mem-bers to keep their act together, to work in the same direction, to cooperate rather than compete, to be active pro-miners rather than passively “staying under the radar” which many have chosen as cor-porate policy. For those who have grown somewhat cynical about the Chamber of Mines, this was good stuff and a cause for optimism. Romualdez also touched on an an-other key issue in industry unity – the hoped-for revival of the Minerals Devel-opment Council or something similar, involving both private sector and gov-ernment representatives and covering such until-now fragmented key areas as security, regulations, local govern-ment, production, environment, licens-ing and legislation. The Minerals Development Council was abolished in late 2010 by President Aquino because he believed its functions were already being handled by other government departments, particularly the Department of Environment and Natural Resources, as well as budgetary constraints. Ironically, both DENR Sec-retary Ramon Paje and Department of Interior and Local Government Secretary Jessie Robredo are now recommending the council’s revival. But care must be taken that a born-again Minerals Development Council does not become unwieldy in trying to give everybody a voice. ■

Chamber of Mines President Benjamin Philip Romualdez (center) with the chamber’s two new key staff members – image builder Rocky G. Dimaculangan (left) and law expert attorney Ronald S. Recidero.



Mineral Resources

Supreme Court ban helps spreadof anti-mining ‘people’s power’

Favoring a petition by religious and environmental groups, the Supreme Court has banned min-

ing on the Zamboanga Peninsula in the southern Philippines. In a recent deci-sion, the tribunal directed the govern-ment’s Department of Environment and Natural Resources and the Mines and Geosciences Bureau (MGB) to cease is-suing new mining permits and applica-tions by issuing a Writ of Kalikasan. The petition was filed by the Phil-ippine Earth Justice Center, Alliance to Save the Integrity of Nature, a group representing the indigenous Subanon tribe, Bishop Jose Maguiran and other private individuals who claimed min-ing activities on the Zamboanga Pen-insula have dangerous effects not only on the environment, but also on indig-enous communities. The petitioners argued that 2008 data from the MGB showed that the to-tal land area subject to and opened for mining on the Zamboanga Peninsula had reached 703,595 hectares, accounting for 45.25 percent of the peninsula’s total land area. In March 2011, the total land area opened to mining reached 51 per-cent of the peninsula’s land mass with the approval of 170 mining applications. The Zamboanga Peninsula – com-posed of Zamboanga del Norte, Zam-boanga Sibugay and Zamboanga del Sur provinces, and Isabela and Zamboanga cities – is a mineral-rich region. While many of the mining operations in the area are small-scale mining, there are at least 33 major ongoing, large-scale operations there. It remains unclear how the Supreme Court ruling will affect ongoing mining on the peninsula, as the high court’s rul-ing was specific to new applications and was conspicuously mum on the previ-ously granted mining permits, licenses and agreements. What is clear, however, is that the Supreme Court ruling has effectively curtailed further mining opportunities

on the Zamboanga Peninsula and, by extension, all their projected benefits. In addition to the mining project across the peninsula, and several more approved mining permits, the majority of the area’s mineral resources remain untapped. The National Economic Develop-ment Authority’s regional development plan for the Zamboanga Peninsula states that gold and silver deposits can be found in nine areas in Zamboan-ga Sibugay, seven in Zamboanga del Norte, four in Zamboanga del Sur and two in Zamboanga City. Copper, zinc, lead, iron, manganese and chromium ore deposits, and non-metallic minerals

By Jesus Llanto

Jesus Llanto is a business intelligence research analyst with Pacific Strategies and Assessments (www.psagroup.com), based in Manila.

MAJOR MINING INVESTMENTS AND OPERATORS IN ZAMBOANGA PENINSULA Source: MGB and PSA Research

Company Location China Metallurgical Construction Corp Zamboanga del Sur Peng Cheng Metallic Resources Corp Zamboanga del Norte EMACO, Inc. Sibuco, Zamboanga del Norte Villor Mining Corp. Siayan, Zamboanga del Norte VL Chrome Corp. Dumingag, Zamboanga del Sur TVI Resource Devt. Phils., Inc. (Assignment from Ramon B. Bosque/Benguet Corp.)

Siocon, Zamboanga del Norte

Philex Gold Phil., Inc. Sibutad, Dapitan City and Rizal, Zamboanga del Norte

Siennalynn Gold Mining Corp. Titay, Ipil and R.T. Lim, Zamboanga del Sur

A-Dynasty Multi-Purpose Cooperative San Miguel and Guipos, Zamboanga del Sur

Said North Mineral Corporation (Assignment from Kennel Mining Corporation)

Siayan, Sindangan and Jose Dalman, Zamboanga del Norte

Glicerio C. Pescado Jr. Kumalarang, Zamboanga del Sur TVI Resources Development Phils. Inc. (Assignment from Zamboanga Mineral Corp.)

Diplahan, Zamboanga del Sur

Hard Rock Mineral Trading, Inc. Vitali, Zamboanga City 168 Ferum Pacific Mining Corp. Midsalip and Bayog Zamboanga del

Sur Geotechniques and Mines, Inc. Midsalip, Zamboanga del Sur Roldan B. Dalman Del Norte Peng Cheng Metallic Resource Corporation Siayan, Zamboanga del Norte Maharlika Dragon Mining Corporation Polanco, Sergio Osmena and Kalawit,

Zamboanga del Norte and Ipil, Zamboanga Sibugay

Czarstone Mining Corporation Midsalip, Zamboanga del Sur, and Siayan, Zamboanga del Norte

Cresente Y. Llorente, Jr. Dumingag, Zamboanga Del Sur SEQ Mineral Resources Corporation Sindanan, Zamboanga Del Norte Danilo Lambatan Mahayag, Zamboanga Del Sur Leonardo I. Dalman Sindangan, Zamboanga Del Norte Cresente Y. Llorente, Jr. Sindangan, Zamboanga Del Norte Maribel S. Belandres Siayan, Zamboanga Del Norte Celia S. Yu Labangan, Zamboanga Del Sur Ma. Riza D. Monteclaro Sindangan, Zamboanga Del Norte Thaddeus A. Montano/Montano Construction Polanco, Zamboanga Del Norte Mark Lloyd R. Bayawa Sindangan, Zamboanga Del Norte Elvira D. Tan Katipunan, Zamboanga Del Norte Preulo D. Jaloslos Katipunan, Zamboanga Del Norte Giovanni N. Empeynado Gutalac, Zamboanga Del Norte

Continued on page 10 >



Mineral Resources

including asbestos, limestone, marble, quartz, sand and gravel, can also be found throughout the region. These mineral deposits, however, remain largely untapped due to: •Policyinstabilityatnationalandlocal levels; •Oppositionfromvariousinterestgroups; •Thetediousandcumbersomeper-mitting process. Proof of the untapped mining po-tential in the region is clear in the small contribution of mining to the gross re-gional development product. According to the most recent available statistics from the National Statistical and Coordination Board, mining and quarrying output ac-counted for only two percent of the Zam-boanga Peninsula’s gross product in 2009. The Supreme Court decision is a clear setback to the development of the mining industry, and to the Philippines’ still fledgling efforts to attract foreign direct investments on the whole. In ad-dition to the already myriad issues and concerns (such as corruption, red tape, poor or absent infrastructure, politi-cized decision-making and insecurity) that have hindered the flow of foreign capital into the country, the state of the Philippine judicial process shows that the national legal framework can also be a serious business and investor risk, even in industries touted by the national government as the anticipated drivers of

income and development for the country and its people. The controversial decision is un-nervingly reminiscent of the high court’s January 2004 ruling on the case of an in-digenous Blaan group in South Cotabato against the now defunct Western Mining Corporation. In that ruling in favor of the plaintiffs, the Supreme Court nulli-fied provisions of the 1995 Mining Act which allowed foreign mining firms to operate in the country under financial technical assistance agreements with the national government. That decision, which was penned by former associate justice and now Ombudsman Conchita Carpio-Morales,stated that foreign-owned companies are not allowed under the 1987 Consti-tution to enter into service contracts for the exploration and development of the Philippines’ mineral and oil resources. The ruling threatened not only mining companies but also oil firms seeking to explore the Philippines. Back then, ana-lysts said the ruling could jeopardize the operation of the Malampaya natural gas project in Palawan, in which Dutch oil giant Shell and the United States-based Chevron each had a 45 percent stake. In December 2004, the Supreme Court reversed its decision. Unsurpris-ingly, foreign direct investment in min-ing immediately jumped from US$5 mil-lion in 2004 to US$170 million in 2005). Mining is a capital-intensive indus-try and most of the companies that have the financial muscle and technical capa-

bility to responsibly and most effectively engage in the extractive industries are for-eign or multinational. And while mining still comprises a relatively small chunk of the total foreign direct investment in the Philippines, the industry has been strongly credited for providing employ-ment, contributing to local economies, facilitating infrastructure development in host areas, and raising the standards and improving mining practices and op-erations in the Philippines through new technology and best practices. In Zamboanga, for instance, MGB regional director Albert Johann Jacildo acknowledges that the mining ban could result in an economic imbalance that could undermine the growth in employ-ment and other businesses across the Zamboanga Peninsula. Moreover, there are serious and legitimate concerns that while the mining ban will likely prompt unscrupulous small-scale miners to op-erate illegally, further undermining gov-ernment regulations and environmental safety standards. More importantly, the ban could become a dangerous precedent in the Philippines. Militant environmental, re-ligious and indigenous peoples’ groups as well as anti-mining personalities in other parts of the Philippines will likely be emboldened to file their own writs of kalikasan or some other resolutions re-sulting in the imposition of similar bans and the cancellation of mining permits.

Decision a clear setback to mining< Continued from page 8




Mineral Resources

The Writ of Kalikasan has become another readily available tool for anti-mining entities to harass and possibly even disrupt various other mining firms, which otherwise operate legally and in compliance with government standards and regulations. This is on top of an already growing list of anti-mining ini-tiatives by local government units that threatens even legitimate mining opera-tions in different parts of the country. In September 2011, just a month after the Supreme Court ruling, the De-partment of Environment and Natural Resources cancelled the nickel mining permit of Altai Philippine Mining to ex-plore Sibuyan Island in Romblon prov-ince. Local officials led by San Fernando mayor Dindio Rios initiated the cancel-lation, citing adverse effect on tourism, natural resources and wildlife on the is-land. The mining permit of Altai Mining, a Canadian-Philippine joint venture, was approved in 2009 and covered a 1,580-hectare area. It is worth noting that the provincial government of Romblon has had a moratorium on all metallic min-ing activity in the province since January 2011, when governor Eduardo Firmalo

signed an execu-tive order that was unanimously endorsed by the provincial board. In South Co-tabato, the pro-vincial govern-ment board in 2010 passed an or-dinance banning open pit mining that threatens the development of the Tampakan mine project. At stake are the big-gest untapped copper reserves in South-east Asia. Sagittarius Mines Inc., which is partly owned by Switzerland’s Xtrata and Aus-tralia’s Indophil groups, has a financial technical assistance agreement with the Philippine government to explore, develop and operate in Tampakan. While the project is still in the de-velopment phase, Sagittarius Mines has already poured over 2.5 billion pesos into the national economy in 2010 and is currently employing about

1,500 people. The figures are expect-ed to significantly expand when the company commences production in 2016 – but the open pit mining ban threatens to stall the project. The provinces of OccidentalMindoro, Oriental Mindoro, Marin-duque, Eastern Samar, Samar and Western Samar have either similar mining moratoriums or other anti-mining ordinances. ■

Ban may set dangerous precedent

Writ of Kalikasan

The Writ of Kalikasan is a special civic action and environment law promulgated by the Supreme Court in April 2010 for the quick resolution of environmental cases. A special project of recently retired chief justice Reynato Puno, the writ empowers local

communities to fight environmental degradation and allows for the expedited litigation of complaints filed by individuals or groups claiming that their: •Constitutionalrighttoabalancedandhealthfulecologyisviolated; •Constitutionalrighttoabalancedandhealthfulecologyisthreatenedwithanyviolationbyanunlawfulactofomissionofpub-lic officials or employees, or private individuals or entity, and such violation or threat involves “environmental damage such magnitude as to prejudice the life, health or property of inhabitants of two or more cities or provinces.” Essentially, the Writ of Kalikasan allows individuals and groups to protest activities which could adversely affect their economic and social rights. An element of the writ called the “precautionary principle” effectively permits special environmental courts to issue protection orders against individuals and/or business entities engaged in construction or extraction projects, even if those entities have secured the required legal permits and licenses for operation. The writ also exempts poor plaintiffs from paying court fees that they would ordinarily incur in the prosecution of environmental cases. The initiative alarmed the foreign-invested business community because irresponsible issuance of protection orders could cause unwarranted interruption to business operations of infrastructure, natural resources, and other investors and could very well shut them down completely. Among the sectors forecast to be hardest hit by the measure are mining, power and energy, agriculture and real estate development. The Supreme Court issued the first Writ of Kalikasan in November 2010 in favor of condominium resi-dents in Makati City who were worried about the health and environmental effects of the operation of a leaking pipeline belonging to the Lopez-owned First Philippine Industrial Corporation.

< Continued from page 10

The Writ of Kalikasan has become another readily available tool for anti-mining entities to harass and

possibly even disrupt mining firms.



Mineral Resources

OnOctober 3, an estimated 250heavily armed New People’s Army rebels simultaneously

raided the Surigao del Norte mine oper-ations of Taganito Mining and its sister companies, Taganito High-Pressure Acid Leaching Nickel and Platinum Group Metals. In the roughly five-hour attack, they destroyed equipment and facilities valued at about 500 million pesos and briefly held company staff before releas-ing them unharmed. Exactlytwoweekslater,onOctober17, Italian priest Father Fausto Tentorio

was shot dead with 10 bullets from the silencer-equipped gun of a lone killer at the Mother of Perpetual Help church compound in Arakan, North Cotabato. Father Tentorio, 59, had been in the Phil-ippines for 32 years. Anti-mining advo-cates have been quick to point out that he was a staunch opponent of mining, particularly in Mindanao’s Arakan Val-ley where he worked with the indig-enous communities. The two attacks were apparently not linked. However, they signal how things have reached a dangerous turn. What has until now been a campaign based on pro- and anti-mining publicity, speeches and political maneuvering, has suddenly got physical and turned ugly. The damage in the Taganito attack, although extensive, was not crippling and the mining company was back in business almost immediately shipping nickel ore to customers in Japan and China. Nickel Asia’s shares took a quick

dive on the Philippine Stock Exchange but executives saw this as little more than a knee-jerk reaction. But the rebels have made it clear they intend to follow up with more raids which may not be as lenient in terms of harm to people. At the same time, there is now the threat that vigilante groups may go into action against the rebels to make up for military shortcomings. All in all, this is a dangerous escalation that has the mining sector worried. Immediately after the Taganito raids, NPA spokesman Jorge Madlos told

media the guerillas had written letters and sought meet-ings with execu-tives of the min-ing companies, including parents Nickel Asia and Japan’s Sumitomo group, to tell them to stop practices that they deemed destructive to the environment. They also accused the companies of exploiting work-

ers. Madlos said the companies had ignored the rebels, who then decided to launch the attacks. He said Japanese and Filipino em-ployees were given lectures on rebel pol-icies on mining during the raids. “If they still won’t reform and continue to ignore us, there will be bigger attacks,” Madlos told the Associated Press news agency. “They know now that we can do this.” Madlos said other mining firms in Mindanao face similar “punishment” if they continued to destroy the environ-ment. The raids were “not about revo-lutionary tax as this can be negotiated, but it was more on the environment and the companies’ treatment of employees and the indigenous peoples who were reduced to being beggars.” He accused the three Taganito com-panies of damaging the environment by using harmful chemicals, violating workers’ rights and displacing the lo-cal tribal people.

Madlos said the NPA is not pro-hibiting mining, “as this is an economic enterprise,” but mining operations must be in line with the policies of the NPAS’s political parent, the National Democratic Front. For its part, the Philippine mili-tary maintained rebel attacks on mining firms are part of long-standing extortion attempts and demands for so-called “rev-olutionary taxes.” Executives of the Taganito compa-nies echoed this sentiment but have been reluctant to offer detailed explanation. Nickel Asia president Gerard Brimo said in a statement: “It is apparent that the insurgents are not happy with the eco-nomic progress in this part of the Su-rigao province accelerated by the com-mencement of this project,” he said. “Whatever may have been the political agenda for this unfortunate incident, the company will not be deterred in its mission,” he said. Pacific Strategies and Assessments analyst Richard Jacobson believes the background is more complex. “Like many major events and disasters, this attack was the culmination of many fac-tors coming together in a perfect storm,” he told a forum organized by PSA and the Cardno group. “These factors include corporate mismanagement, corruption within local government units, serious community concerns that had been ignored, com-munity indifference and or complicity, a confident and well-led communist in-surgency in the region, effective New People’s Army intelligence, and the in-ability of government forces to protect rural based resources.” The rebels took advantage of the limited presence of army and police per-sonnel in the remote region. The raids came just 12 days after the Armed Forces of the Philippines pulled out its 30th In-fantry battalion from the area for retrain-ing, while police forces were involved in counterinsurgency operations in another area of Surigao. During the raid, the rebels had the three adjacent mining bases virtually

Anti-mine campaign turns ugly


Raiding NPA rebels torched one of the nickel ore shipment vessels at anchor at the Cagdianao pier of Platinum Group Metals in Claver.

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Mineral Resources

to themselves for about five hours after launching their simultaneous attacks just before noon, before an apparently quite leisurely departure when troops finally arrived backed by two Philippine Air Force helicopters from Davao City. The Taganito mining firm has now apparently requested the deployment of a special paramilitary unit to beef up its own security force. Although the go-ahead for this is still pending, the gov-ernment itself has in the past urged mining firms and other big compa-nies operating in rebel-infested areas to employ paramilitary forces to se-cure their businesses. Initially the mining companies were reluctant to get involved with special Cit-izens Armed Forces Geographical Units, as they are called, for fear this might en-courage further NPA activities. They also reportedly refused to allow the Armed Forces of the Philippines to use their mining sites as staging areas for AFP op-erations against the NPA rebels. After an emergency meeting be-tween police, military, the miners and senior government officials, Chamber of Mines of the Philippines Benjamin Philip Romualdez said: “The government is turning back to the mining companies to beef up our own security. But I argue that it is the government’s role, not ours, to protect the mining projects because these are their projects. We are merely contractors and it is not our role to arm ourselves. Oftentimes we have to relyon the Environment Department, who themselves seem to be at a loss.” The Chamber of Mines also felt obliged to enter the fray over the slaying of Father Fausto Tentorio, with a news-paper advertising campaign. A spokes-man said it was “preposterous” to sug-gest the priest’s murder was instigated by a mining company or organization. But notwithstanding, allegations continue that this may have been the case. The Philippine National Police has set up a special task force to investigate Tentorio’s killing and expects its inves-tigation to take some time. However, asked by media whether the investiga-

tors are looking at the mining angle, spokesman PNP spokesman Agrimero Cruz said, “Yes, part of that is we are validating the threats allegedly received by Father Tentorio before he was killed. But it’s too early to remove other angles from our list.” The line-up of people linking the mur-der to the priest’s anti-mining advocacy is growing and further inflaming public opin-ion, especially among the religious. Monsignor Pedro Quitorio, media director of the Catholic Bishops’ Confer-ence of the Philippines, told reporters how a former staff member of Tentorio’s parish had called him during his pro-gram at Radio Veritas and told him the missionary’s death was related to his an-ti-mining campaign. Quitorio said Tento-rio had strongly opposed the operation of two mining companies in Arakan. Senior Catholic church leader Bish-op Dinualdo Gutierrez said over the church-run Radio Veritas: “My advice to the government is not to allow mining ac-tivities any more, especially in areas where there is strong opposition to it.” Recalling that Tentorio was a strong defender of in-digenous peoples “imperiled by mining ac-tivities” in Arakan Valley, he said: “Maybe because of that he was killed.” “The government should no longer allow mining like this because we will also continue to oppose it and I don’t

know if they (the mining firms) are hiring killers or whatever, but I am worried that one of us would get killed again,” he said. Sister Mary John Mananzan, chair of the Association of Major Religious Superi-ors of the Philippines, believes Tentorio’s death should prompt President Beningo Aquino to halt all mining operations in the country. “The killing of Father Tento-rio should signal him to declare a stop on foreign mining operations in the country,” Mananzan said over Radio Veritas. The outpouring also drew compari-sons with the murder in Palawan last Janu-ary of journalist and environmentalist Ger-ryOrtega – even though the anti-mininglobby itself has withdrawn its earlier sus-picionsthatOrtega’skillingmayhavebeenlinked to his anti-mining advocacy. The outcry was such that Kidapawan Bishop Romulo de la Cruz felt compelled to issue a cautionary statement in appar-ent rebuke to fellow-churchmen: “Father Fausto indeed tackled problems about mining in the region and he was the pro-gram director for the indigenous peoples, but we cannot really say that these ac-tivities triggered his death,” the bishop warned. The Kidapawan bishop noted: “Investigators are still pursuing a num-ber of theories that would identify the motive and the perpetrators, and jump-ing to conclusions until all of the facts are known will not help. ■

Taganito raid ‘the perfect storm’< Continued from page 14

The rebel raids on Taganito brought together in an emergency meeting (from left) Philippine National Police chief Nicanor A. Bartolome, Environment and Natural Resources Secretary Ramon Paje, Interior and Local Government Secretary Jesse Robredo, and Chamber of Mines president Benjamin Philip Romualdez.

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Mineral Resources

It took less than a month after the successful Mining Philippines 2011 Conference & Expo for the mining

industry to suffer yet another setback, in the shape of the October 4 NewPeople’s Army attacks on three mine operations in Surigao. More than the financial damage inflicted on the companies with the de-struction of equipment and facilities, the attacks brought to the fore security con-cerns, particularly for operations in re-mote areas of the country, and the safety of the people who live and work there. A meeting of the Chamber of Mines of the Philippines with the Department of Interior and Local Government Secre-tary Jessie Robredo, Department of En-vironment and Natural Resources Secre-tary Ramon Paje and Philippine National Police chief Nicanor Bartolome a few days after the attacks helped allay some of these concerns and allowed members of the chamber to directly engage the three government officials on peace and order issues in mining. All three gave as-surances that President Benigno Aquino remains committed to attracting and protecting investments in mining. Robredo underscored the fact that security is the responsibility not only of the authorities, but also of the com-

panies. In line with this, the DENR and DILG are working out security protocol arrangements with mining companies, to the extent that PNP and Armed Forces of the Philippines representatives are making the rounds visiting the differ-ent companies to assess their particular needs and establish specific plans of ac-tion. Robredo also emphasized the need for regional alliances or networks so that intelligence, equipment and personnel can be pooled. While theOctoberattacksweredi-rected at three companies, the propa-ganda value of these attacks was not lost on members of the Chamber of Mines, some of whom expressed apprehen-sion that the attacks were but part of a concerted effort to discredit the mining industry, together with misinformation against mining, specifically in the prov-ince of Palawan, and attempts to repeal the Mining Act. This underscores the need for the chamber and its members to step up their information and education cam-paign, as it needs to match if not surpass the efforts of anti-mining groups to win hearts and minds. On thisnote,at theMiningPhilip-pines 2011 conference, two speakers who are identified with non-government organizations and cause-oriented groups – Rapa Lopa of Philippine Business for

Social Progress and Lorenzo Tan of the World Wild-life Fund – urged the chamber and its members to devise a scorecard or grading system that would high-light the positive contributions of specific compa-nies and projects to the economy and to social de-velopment. The sharing of information is just as crucial within the govern-ment which, as the

owner of the minerals, has an equal if not greater stake than the mining companies in the success of the projects. The Min-erals Development Council, which was established in 2005 but unfortunately abolished in 2010, allegedly due to bud-getary constraints and redundancy, was a valuable mechanism for various gov-ernment departments and agencies to meet regularly to support and address the needs of the minerals sector. It is therefore very timely that secretaries Paje of the DENR and Robredo of the DILG are both recommending its re-vival to President Aquino. Onarelatedfront,agroupofwom-en involved in extractive sectors have organized themselves, upon the inspi-ration and with the guidance of former mining envoy Delia Domingo Albert, to champion, among others, transparency and stakeholders’ dialogue in natural resources development. The group will be officially launched at the forthcoming Annual National Mine Safety and Envi-ronment Conference in Baguio. It is a diverse group which includes representatives of mining companies, lawyers, government workers (including a former Mines and Geosciences Bureau regional director and MGB geologist), a journalist, PMSEA volunteers and a UNDP consultant for the Philippine Pov-erty Environment Initiative, which has the Extractive Industries Transparency Initia-tive, or EITI, as a major component. EITI is a global standard for trans-parency in the extractive sector which involves the reconciliation of company payments with government receipts by an independent administrator and the disclosure of that information to the public. It is anticipated that, by partici-pating in EITI, the local minerals devel-opment sector will be able to address the need of stakeholders for accurate information on the economic contribu-tions of an extractive activity. Among the group’s immediate plans, apart from supporting EITI, are to assist the Chamber of Mines in its information and education campaign by providing a credible, yet non-com-bative, platform for substantive discus-sions on mining issues. ■

After conflict, new hope for dialogueBy Patricia A. O. Bunye

Patricia A. O. Bunye is a senior partner at Villaraza Cruz Marcelo & Angangco (website www.cvclaw.com). Her areas of specialization are mining and natural resources, power and energy and intellectual property (particularly IP commercialization). She may be reached at [email protected].



Cardno FP

Mineral Resources

NiHAOMineralResourcesInter-national has signed a deal with Glencore International and AGP

Industrial involving joint exploration of prospective mining sites in the Philip-pines. The focus is to be on nickel with the trio combining “their respective ex-pertise in the mining industry for the purposes of investigating, identifying, acquiring, developing and operating mining claims of economically feasible nickel deposits in the Philippines for purposes of direct shipping or selling ore and other related nickel mining busi-ness,”NiHAOtoldthePhilippineStockExchange in a disclosure. Glencore, a major commodities trader, will specifically contribute its ex-pertise in marketing nickel ores in the world market using its overseas network. NiHAOandAGPwillberesponsibleformining, contracting and developing the mines, given their knowledge of relevant Philippine laws and issues. The companies agreed to form by end-2011 a joint venture corporation, which will have an initial capital of US$2 million.Of the amount, $1millionwillcomefromGlencorewhileNiHAOandAGP will contribute $500,000 each. The joint venture firm will be gov-erned by the laws of Hong Kong but the proprietary rights of the company over the prospective mining interests and operations in the Philippines will be governed by either Philippine or Hong Kong laws, whichever is applicable. The joint venture may also look into mining projects in Indonesia and other countries, for which the parties may cre-ate a new joint venture entity that would

have the same terms and conditions as provided in the initial agreement. Glencore, registered in Switzerland, is one of the world’s leading integrated producers and marketers of commodi-ties, with worldwide activities in pro-duction, sourcing, processing, refining, transporting, storage, financing and supply of metals and minerals, energy products and agricultural products. Glencore launchedan IPO inLon-don and Hong Kong in May, raising US$10 billion. It has mines, process-ing and refining plants in Australia, the United States, Italy, South Africa, Zambia, Colombia, Kazakhstan, Peru and the Philippines. Glencore is also the largest share-holder in the Swiss mining giant Xstrata, a partner in developing the Tampakan mine in South Cotabato. AGP is a Philippine listed compa-ny that has interests in real estate and mining ventures. Jose Francisco Miranda, NiHAO’schief operating officer, said: "This part-nership presents a great opportunity for both parties and I believe that this can be the start of something. It can pave the way for further partnerships between Philippines companies and global play-ers to jointly grow the mining industry." NiHAOhas20,842hectaresofnick-el claims and 16,129 hectares of gold claims. The firm also has investments in Oriental VisionMining, which oper-ates the Palhi nickel mine on Dinagat island, as well as in Oriental Penin-sula Resources Group, which owns and operates the Narra and Espanola nickel mines in Palawan. ■

NiHAO teams up with Glencore,AGP for nickel mining projects

Raadsma out at Crazy Horse

Changes at St Augustine

NiHAO’s name means “Bountiful Nickel,” the main mineral targeted in the company’s exploration efforts in Zambales, Misamis Oriental, North Cotobato and Antique (pictured above).

Johan Raadsma has left Crazy Horse Resources. The board of the Canada-based company said

he has resigned as its president, chief executive officer and secretary and as a director, for personal reasons. Mitchell Alland, already a director, has been named president, CEO andsecretary.Alland iscurrentlyCEOandexecutive chairman of Copper Devel-opment Corporation, a company that holds 11.8 percent of Crazy Horse's common shares and has two copper mining projects in the Philippines – Hinoba-an and Basay. Crazy Horse is currently continu-ing with drilling and resource esti-mates at its Taysan copper/gold proj-ect in Batangas. ■

St Augustine Gold and Copper has named Terry Krepiakevich direc-tor and chairman of the audit com-

mittee. He replaces Michael Carrick who has resigned in order to focus his time on CGA Mining of which he is president and chief executive. Krepiakevich was most recently chief financial officer of SouthGobi Re-sources and is now a senior advisor to the company. He is a director and audit committee chairman of Alexco Resource, Western Lithium USA, Concordia Re-source and NovaCopper. Additionally, the Spokane, Washing-ton-based St Augustine has contracted the services of Jack Miller, through his company Mining Solutions, as an execu-tive project development consultant for the company’s King-king project. St Augustine is installing a newly formed project development and fi-nancing oversight committee which will be composed of Robert Russell, Terry Krepiakevich and Jack Miller as advisor. The committee will provide guidance to the board and executive team in devel-opment and financing of the King-king project. ■



JCLI FP

Mineral Resources

Four mining agreements signed with Chinese companies could bring in US$14 billion in new investments in

the Philippines within the next five years and they are seen as demonstrating the government’s support for mining activities in the country. Chamber of Mines presi-dent Philip Romualdez told a media brief-ing the agreements involve nickel mining projects in Palawan and Zambales and were formalized during President Benigno Aquino’s recent visit to China. “Assuming that all these materialize, we are looking at $14 billion starting this year through 2016. This year, we see more investments from China involving nickel mining,” Romalduez said. Romualdez maintained Aquino’s state visit accompanied by 15 leading mining com-pany executives “restored the confidence of the Chinese government and Chinese com-panies in Philippine mining and the con-fidence that they have that the Philippine government supports mining throughout the Philippines including Palawan.” He singled out agreements between China’s Jinchuan group and local mining

companies Tranzen and Macro Asia. He not-ed that Jinchuan has already committed in-vestment of $1.5 billion in a Nonoc, Surigao mining project with Philnico Industrial. Twootherminingcompanies,Orien-tal Peninsula Resources and Eramen Min-erals have signed agreements for projects in Palawan and Zambales. Romualdez said Oriental Peninsulawas able to secure investments for three projects involving hydropower, coal and nickel off-take with Yun Feng, a company which owns and controls automotive com-panies and parts suppliers in China. The Eramen Minerals project involves nickel off-take and nickel processing in Santa Cruz, Zambales. •ToledoMininghasconfirmedthatthe joint venture partners of Ipilan Nickel have separately entered into memoranda of understanding with a wholly owned subsidiary of the Jinchuan group of China which may result in Jinchuan and its Phil-ippine partners acquiring 100 percent of the equity of Ipilan. Completion of the transaction will be subject to conditions, including Jinchuan

being satisfied with the results of its due diligence investigation, clearance being ob-tained from the relevant authorities in China and the Philippines and the parties agreeing a form of share purchase agreement. Toledo says should a transaction be completed as currently envisaged, gross proceeds to Toledo from the transaction are expected to amount to US$17.4 million. Ninety per cent of the transaction price is to be paid on completion with a 10 per cent retention to be settled 60 days later. The Ipilan Nickel project in Palawan is a joint venture between Toledo Mining with a 52 percent interest, Celestial Nickel Mining Exploration with 24 percent and Brookes Nickel Ventures with 24 percent. Toledo chief executive George Bujtor has described it as “arguably one of the best tested nickel laterite deposits in the world.” •MacroAsiaCorpcanstartproduc-tion within six to nine months at its Infanta nickel mine in Palawan, part of a 1,113-hectare prospect it plans to develop with China's Jinchuan group, once all required permits are in, says Ramon Santos, vice pres-ident for MacroAsia mining operations. ■

Major investments eyed in China deals

‘World class’ iron sands project onthe way in Cagayan River deltaThe international mining and steel

group Astra Resources has signed a memorandum of understand-

ing for what it believes is a “world scale” iron sands development in the northern Philippines. The agreement between Astra and Cagayan River Construction & Development Corporation (CRCDC), owned by businessmen Rocky Young and Valentino Acuzar, intends to estab-lish a joint venture entity to manage and put to use the iron sands deposits in the Cagayan River delta in the Cagayan Val-ley region. The joint venture is subject to final due diligence, including legal, indepen-dent geological reports and Astra Re-sources board approval. Astra chief executive Jaydeep Biswas said third party reports including geological studies from CRCDC show that the area is an established producing

region exporting to nearby steel manu-facturing markets such as China, South Korea and Taiwan. Legal advice received by CRCDC advises that the memorandum of agree-ment, signed by CRCDC and the province of Cagayan, allows immediate dredging of the delta and export of the iron sands. Extension of this operation outside the immediate delta into the shallow ad-jacent areas will require a future mining license or mineral production sharing agreement, with the legal advice on this opportunity also positive. “The geological studies and exten-sive sampling further suggest that at dredging depths of 14 meters, well above nine billion tonnes of iron sands are available in the delta and adjacent areas with iron content between 27 and 59 percent, with an average of 46 percent,” Biswas said. The joint venture will start dredging

a small part of this area under the memo-randum of agreement and extend when the MPSA is granted. Astra managing director Silvana De Cianni said the finance requirement to bring the project to fruition is low given its scale. “The opportunity fits with As-tra’s business model which focuses on the steel value chain, low infrastructure and logistics investment, low extraction costs, proximity to markets, licenses to operate being imminent and pathways to revenues being defined,” De Cianni said. “This would be a fast-track entry into mining in the Philippines with fu-ture opportunities to develop assets in manganese, gold and copper.” Astra Resources portfolio includes gold and copper interests in South-east Asia, coal mines in Africa, iron ore in India and the production of the high-strength T-Steel technology in Hungary. ■



Austhai FP

Oil & Gas Resources

Australia-based oil junior Raisama has struck an agreement under which the Singapore subsidiary

of BP will provide finance and crude mar-keting services for the redevelopment of its Cadlao offshore oil field in the Philippines. Under terms of the deal, BP Sin-gapore will advance Raisama the sales revenue for its maiden cargo of up to 350,000 barrels of crude oil, or around $35 million at prevailing prices, as it is produced into the floating storage facility at Cadlao. BP will also market the crude produced at Cadlao, as well as provide marketing support for Raisama's wider

portfolio. Raisama holds a 50 percent operating stake in the Cadlao oil project. "The involve-ment of a major oil company of BP's caliber in the pro-vision of market-ing services and a working capital facility for Cad-lao is an endorse-ment of the project's fundamentals," said Raisama managing director Jeff Steketee. "This, coupled with the $30 million debt facility announced recently, will ensure Cadlao is fully funded beyond first oil." The Cadlao oil field, located about 40 kilometers off the north-west coast of Palawan, was discovered in 1977 by Amoco. The field started producing in 1981 as the first-ever subsea well and floating production storage and offload-ing development. Cadlao produced about 11 million barrels of 47 degree API oil from two nat-urally flowing subsea wells, until output was abandoned in 1991 due to high oper-ating costs and prevailing low oil prices. Two separate independent experts'

reports have subsequently estimated the field's remaining reserves at around six million barrels on a proven and prob-able basis and four million barrels on a proven basis, Raisama said. The com-pany added the project's demonstrated production history meant it has very low development risk. Raisama plans to extract the re-maining reserves at Cadlao, and utilize the field facilities as a regional hub for the production of nearby accumulations within tie-back distance. The Cadlao partners have farmed into the surround-ing Bonita permit which contains the Bonita discovery, with an estimated two million to three million barrels of oil, and the Cadlao East prospect. ■

BP backs Raisama with Cadlao finance

This Cadlao oil field schematic shows the original development wells (Cadlao 1A and 3) and the redevelopment wells Cadlao 4, 5 and 6.

The Cadlao oil field is located about 40 kilometers off the north-west coast of Palawan.

About 50 oil and gas explora-tion companies have so far re-quested access to the petroleum

reserves data of the Department of En-ergy covering 15 highly prospective ar-eas that currently are up for auction. The contenders include Royal Dutch Shell, Total of France, the ENI group of Italy, BHP Billiton and Exxon of the United States. “We expect the number [of com-panies] to increase as we make more data available for viewing,” said DoE Undersecretary Jose M. Layug Jr. In-terest is high in participating in the up-coming Philippine Energy Contracting Round 4, he said. Layug said the Philippine govern-ment continues to aggressively push its oil and gas exploration program de-

spite problems arising from conflicting claims in the South China Sea. “The Phil-ippines is firm in its resolve to discover and develop oil and gas reserves. We are open for business,” said Layug. The energy undersecretary re-cently attended Oil and Gas Week inSingaporeandtheNewGenerationOiland Gas Summit in Malaysia, promot-ing the upcoming contracting round – in particular 15 blocks, 12 of which are located offshore. The prospec-tive oil and gas blocks are in the Northwest Palawan, East Palawan, and Sulu Sea basins. Under the new Energy Contracting Round, the DoE expects to award 15 new service contracts next year. There are currently 28 active petroleum ser-vice contracts in the country. ■

‘High interest’ in new contracts Partner forBasic EnergyThe listed firm Basic Energy has

signed an agreement with Prime Energy Consult to jointly explore

and develop prospective oil and gas proj-ects. In a disclosure to the Philippine Stock Exchange, Basic Energy said the deal with Prime Energy, which is based in Dubai, allows both parties to look for opportunities in the petroleum sector. However, it was not made clear where the companies plan to explore. Prime Energy provides technical ad-visory and consulting services to the oil and gas industry. It says it is owned and managed by a team of oil and gas experts with experience in delivering large-scale subsurface, field development and drill-ing projects worldwide. Most of its cur-rent projects are in the Arabian Gulf. ■



Oil & Gas Resources

The Philippines needs better poli-cies to encourage oil and gas exploration and development if

it is to compete effectively with other countries in South-east Asia. This is the opinion of veteran oil business executive Rufino Bomasang. “The need to further improve the Philippine contractual regime has be-come more imperative because our neighbors in South-east Asia, particular-ly Indonesia and Malaysia (both former major oil exporters that have become net oil importers), as well as Vietnam, have already been making their own policies more attractive,” Bomasang told the Philippine Star newspaper. Bomasang is currently chairman of NorAsian Energy. He is a former govern-ment Department of Energy undersecretary andpresidentofPhilippineNationalOilCo.HealsonowalsoservesasdirectorofOttoEnergy and chairman of PhilCarbon. Bomasang noted that amid the con-tinuing crisis in the Middle East and with the Philippines’ continuing heavy depen-dence on imported oil, particularly in the transport sector, the quest for indigenous petroleum has once again become a mat-ter of urgent national concern. He said a proposal to amend Presi-dential Decree 87 to further improve con-tractual terms was in fact first proposed by the Petroleum Association of the Phil-ippinestotheOfficeofEnergyAffairsin

theearly1990s.However,whiletheOEAand the DoE were very supportive of such an amendment, Congress and other government agencies have not been sup-portive and attempts to amend PD 87 fizzled out, he said. “The most important proposed amendment to PD 87 is the lifting of ring fencing around service contracts. This simply means allowing costs incurred within a contract area to be recovered in another contract area,” he said. The im-mediate impact of this, he said, would be that contractors in producing areas – such as Malampaya and Galoc – would be enticed to drill more wells, especial-ly in frontier areas. “For the long term, even compa-nies without production areas will also be enticed to drill more wells, knowing that their costs can be recovered later in future producing areas,” he told the Philippine Star.. Apart from policy revisions, Bo-masing believes there is also a need for administrative reforms. He said this can be done soonest as it does not re-quire legislative proposal. He stressed the need for the govern-ment to expedite the processing of docu-ments usually submitted by service con-tractors for approval, especially those that involve other government agencies, such as the customs, immigration and quarantine units.

Among these documents is the Tax Exemption Certificate. The most common complaint among service contractors, he said, is that it takes an inordinately long time – several weeks and sometimes months – for certificates to be processed. Similar-ly, he said, service contractors have also complained about delays in the approval of farm-in documents. Bomasing said there is also a need to harmonize often different requirements set by different gov-ernment agencies regulating the petroleum industry. “This includes, among others, differences in efflu-ent standards and classification of drill ships and other specialized offshore equipment used by the in-dustry,” he said. ■`

Rethink urged on oil search rules

PNOC Exploration, the upstreamoil unit of state-run Philippine National Oil Company, expects

to start drilling a new exploration well in northwest Palawan in mid-1012.In partic-ular focus in the plan are sites within the area covered by Service Contract 63. The Aboabo discovery and Kalap-ato site in question are estimated hold 222 million barrels and 239 million barrels of oil respectively. PNOC-ECis the operator of the field. “The initial phase of work will fo-cus on fully resourcing the drilling and subsurface teams, implementing pre-planning activities including securing long lead items for up to two wells and

completing the basis of design work for a number of possible well options,” PNOC-ECtoldthePhilippineStockEx-change in a disclosure. The exact schedule for drilling, probably next June or July, depends on the availability of a suitable rig. “The planned drilling window based on the latest schedule fits well with the require-ment to drill the SC 63 commitment well before the end of the current sub-phaseonNovember24,2012,”PNOC-EC said. PNOC-EC holds a 50 percent in-terest in SC 63 and is the field operator, while the remaining 50 percent is held by Australian firm Nido Petroleum.■

PNOC-EC readies new drilling

Gas2Grid will shortly begin a second phase workover of its Malolos-1 well in onshore Cebu to deeper levels

of between 1,000 meters and 2,100 meters. Gas and oil-bearing sandstones in the deeper levels of the Malolos-1 well were not targeted during the phase 1 workover con-ducted last year. Instead, Phase 1 targeted gas bearing sandstones less than 1,000 me-ters deep, confirming the existence of mul-tiple shallow natural gas and oil-bearing sandstone intervals and determining the high quality of the sandstone reservoirs. Nitrogen stimulation and flow testing of the shallow gas bearing intervals was completed in June this year, and the well produced gas and oil at low rates. During July and August, casing was set to isolate the shal-low gas-bearing intervals within the well. The phase 2 workover to deeper levels will involve drilling out the existing cement plugs and cleaning the cased hole from 1,000 meters to 2,100 meters, cased hole electric logging, as well as a decision on recompletion and flow testing of selected oil and gas bearing sandstones at deeper levels above 2,100 meters. As well as the Philippines, Gas2Grid has projects in Australia, New Zealand and France. ■

Gas2Grid looks deeper in Cebu



Oil & Gas Resources

Brazil has begun build-ing its first nuclear submarine to protect

its vast, new offshore oil discoveries. Colombia’s oil production is climbing so fast that it is closing in on Al-geria’s and could hit Libya’s prewar levels in a few years. ExxonMobil is striking new deals in Argentina, which recently heralded its big-gest oil discovery since the 1980s. Technology has made Canada's oil sands easier to tap in recent years, creating foreign interest as well as a demand for workers. Up and down the Americas, it is a similar story: a Chinese-built rig is prepar-ing to drill in Cuban waters; a Canadian official has suggested that unemployed Americans could move north to help fill tens of thousands of new jobs in Canada’s expanding oil sands; and one of the hemi-sphere’s hottest new oil pursuits is actually in the United States, at a shale formation in North Dakota’s prairie that is producing 400,000 barrels of oil a day and is part of a broader shift that could ease American dependence on Middle Eastern oil. For the first time in decades, the emerging prize of global energy may be the Americas, where Western oil compa-nies are refocusing their gaze in a rush to explore clusters of coveted oil fields. “This is an historic shift that’s oc-curring, recalling the time before World War 2 when the United States and its neighbors in the hemisphere were the world’s main source of oil,” Daniel Ye-rgin, an American oil historian, told the New York Times. “To some degree, we’re going to see a new rebalancing, with the Western Hemisphere moving back to self-sufficiency.” The hemisphere’s oil boom is all the more remarkable given that two of its tra-ditional energy powerhouses, Venezuela and Mexico, have largely been left out, held in check by entrenched resource na-tionalism. Venezuela is now considered to have bigger oil reserves than Saudi

Arabia, putting it at the top of OPEC’srankings. If it opened up more to foreign investment, it could tip the scales further in the hemisphere’s direction. Exactly how the Americas’ growing oil clout might rebalance energy geo-politics remains an open question. The Middle East can still influence oil prices greatly, its oil fields are generally cheap-er to develop, and some countries in the region are endowed with great reserves. Moreover, the Americas still vie for investment with other oil-rich regions, likeRussia’sportionoftheArcticOceanand West African waters. Security con-cerns like the abduction of oil workers could, as they have in the past, prevent Colombia from continuing to raise output. And environmental and financing ques-tions pose persistent challenges to the rapid growth of the hemisphere’s oil production. Still, the new oil exploits in the Americas suggest that technology may be trumping geology, especially in the re-gion’s two largest economies, the United States and Brazil. The rock formations in Texas and North Dakota were thought to be largely fruitless propositions before contentious exploration methods involv-ing horizontal drilling and hydraulic frac-turing — the blasting of water, chemicals and sand through rock to free oil inside, known as fracking — gained momentum. While the contamination of water supplies by fracking is a matter of fierce environmental debate, the technology is already reversing long-declining oil pro-duction in the United States, with overall

output from locations where oil is contained in shale and other rocks projected to ex-ceed two million barrels a day by 2020, according to some estimates. The United States already produces about half of its own oil needs, so the increase could help it further peel away dependence on foreign oil. The challenges of tap-ping Brazil’s new offshore fields, located beneath 6,000 feet of water and salt beds

formed by the evaporation of ancient oceans, are even greater. Petrobras, which has ambitions of surpassing Exx-onMobil as the world’s largest publicly traded oil company, is investing more than US$200 billion to meet its goals. “Brazil will become an oil power by the end of the decade, with production in line with that of Iran,” said Pedro Cordeiro, an energy consultant for Bain & Company, who sees the country’s oil production climb-ing to 5.5 million barrels a day by 2020. Construction backlogs could slow Brazil’s offshore expansion. But resur-gent industries related to the oil boom, like shipbuilding, and strategic efforts like nuclear submarine construction to defend oil wells, underscore Brazil’s plan of using its energy resources to project global power from this hemisphere. “No other place on the planet is see-ing this kind of investment,” said Marcio Mello, a former Petrobras geologist who is now the chief executive of HRT, a new oil company based in Rio de Janeiro. “This decade is our chance to rise,” he told the New York Times. Optimism is plentiful, and even abit of hubris can creep into conversation. Still, oil analysts say the hemisphere’s new energy profile is already challeng-ingtheswayOPEChaslongheld. Canada, for instance, is already the top petroleum exporter to the United States, followed by Mexico. Beyond that, output from Canada’s oil sands may al-

New fields may make the Americastop of the oil companies’ charts

The semipublic energy corporation Petrobras is investing more than $200 billion to help make Brazil a major oil player.




The current industry and politi-cal landscape has opened op-portunities for cleaner energy

options, while investors and govern-ment regulators endeavor to provide the essential infrastructure, services and legal framework to develop and deploy new energy technologies. Before considering some of the key risks which have an impact on renew-able energy projects and the general approach to proper assessment, it is useful to identify barriers that are preventing the uptake of RE projects. Foremost of these are barriers, which relate to the low level of awareness, understanding and attention, afforded to the complex array of policy, regula-tory, technical financing and organi-zational factors affecting RE projects. Geothermal project financing is not the typical boilerplate scheme with

pro forma agreements utilized in oth-er resource project development. Investors are either large and tra-ditional energy service companies that have the ability to finance RE invest-ments in technology or projects fund-ed on a non-recourse finance basis, or smaller but entrepreneurial geothermal developers seeking investors for tech-nology R&D and/or project finance. For these entrepreneurial geothermal development firms, there are different business models and balance sheet sen-sitivities to consider. While financial institutions care-fully evaluate developer qualification and track record, being a major and well-known developer is not required because financiers recognize invest-ment opportunities having considerable experience in developing energy proj-ects by providing equity. However, new geothermal developers are required to demonstrate their competency by se-

lecting experienced and well-respected consultants, and specifying and using equipment with proven track record. Most if not all capital prior to a geothermal project’s proven feasibility is done through equity and not debt. Fi-nancing of exploration and confirmation drilling usually comes from company eq-uity or risk capital provided by investors. Generally, investment is sourced from seed capital, venture capital, or equity financing for a geothermal developer. Due to the high risk involved with geo-thermal exploration, banks do not pro-vide funding through loans until the later stages in the development process. During the critical resource iden-tification phase, the developer aims to obtain as much information as pos-sible about potential resources while investor costs are low providing the developer with a stronger foundation

Brunel loc FP

Geothermal energy risk managementBy Fernando Penarroyo

Renewable Resources



Philippine Resources 31

Brunel Scl FP

Renewable Resources

for decisions on actual exploration and project development. Information and knowledge increase resource certainty and reduce risk, which allows better ac-cess to capital. For this reason, the government can help mitigate risks by establishing a well-documented geothermal database that is readily available to potential in-vestors. The government must also de-velop a standard classification system that addresses the probability of risk based on a standard set of geothermal resource criteria and attributes. Key indicators of success from geo-thermal exploration wells are high tem-peratures and permeability combined with production of a high-enthalpy fluid that is not acidic and does not produce scaling over and above that is normally expected for geothermal fluids.

The highest risks for the implemen-tation of geothermal energy projects are resource availability risks. Risk man-agement challenge is magnified in the context of geothermal development due to the extremely high risk of loss dur-ing the identification, exploration, and delineation drilling phases of project development where the probability of drillingadryhole ishigh.Other iden-tified risks can be further categorized into: operational risks (failures in plan-ning, etc.), economic risks (increas-ing operating costs, etc.) and political risks (licenses, etc.). Risks that can-not be realistically avoided can in-crease the cost of capital or raise the required rate of return. In Europe and North America, the insurance industry has been providing many of the traditional risk manage-ment products for the petroleum in-dustry to geothermal, such as property

damage, business interruption, machin-ery breakdown and construction. Geothermal project financing is ini-tially dependent on a “bankable” reser-voir report, which is based on the com-plete and thorough documentation of the exploration and drilling data as in-dependently evaluated by a disinterest-ed third-party’s technical analysis and recommendation report. Engineering, procurement and construction (EPC) contracts typically pass all geothermal plant facility design, development and construction risks from the developer who acquires a “bankable” turnkey en-ergy project, to the contractor who is paid a premium for the assumption of the risks. In an EPC contract, the con-tractor agrees to deliver the keys to a commissioned geothermal energy plant to the developer for an agreed price,

Geothermal energy risk management< Continued from page 31




Brunel Ovs FP

Renewable Resources

on a fixed schedule with performance guarantees and liquidated damages for the failure of acceptance tests and time-ly commissioning. Project finance is also highly de-pendent on the power purchase agree-ment (PPA) executed between the devel-oper and purchasing end user, typically an electrical utility. The PPA provides for the sale of capacity and energy at an agreed price, price structure and speci-fied time period. In addition, the finan-cial institution will include a careful analysis of the interconnection studies and transmission agreements. From the risk perspective however, it is preferable that economics and demand for power drive projects rather than contract pro-visions. Also, contracts negotiated with either side being at a disadvantage are a cause of concern for lenders. Needless to say, streamlining the permit process by government regula-tors will have an impact on geothermal

development, as shorter project periods would reduce uncertainty for policy and market dynamics when modeling eco-nomic returns. Geothermal projects are character-ized by significant upfront capital invest-ment for exploration, well drilling and the installation of plant and equipment. But once the geothermal projects are placed in commercial operation, the fuel source is secure for the decades of expected life-time with a steady revenue stream. It is good to note that traditional insurance products are now becoming more available to the RE industry while new financial risk management instru-ments are evolving. Nevertheless, there is a need for customization of cover-age and linked products that provide a total solution for the risks inherent in geothermal development. While geo-thermal energy will continue to face obstacles to gain investment market ac-ceptance and application, there is room for optimism as the use of this energy source is only beginning. ■


Fernando “Ronnie” Penarroyo is the managing partner at Puno and Penarroyo Law Offices (www.punopenalaw.com). He specializes in energy and resources law, project finance and business development.



Recent stock market declines result-ing from the euro crisis and a lack of confidence in debt-ridden west-

ern economies have resulted in opposite movements in the prices of gold and gold mining equities. This in turn may have created a buying opportunity for bargain hunters. As most people are aware, there has been a correction in the equity marketplace that was caused by the thing that investors hate most – uncertainty. The sluggish eco-nomic recovery in developed countries and downgrading of government credit ratings has caused much anxiety. More pressing is the concern over the future of the Greek economy and the country’s ability to stay with the other 16 countries in the euro-zone, with further fears of the departure of the Spain, Portugal, Ireland and Italy. All this has caused a broad-based de-cline in equities. The MSCI World Stock Index of over 6,000 stocks dropped from 1391.86onMay2,2011to1074.81onOcto-ber 3 – almost a quarter of its value. Min-ing stocks have naturally taken a hit along with others with the MSCI World Mining Index dropping from 517.94 on April 13 to 327.41onOctober4representingadeclineof 36.8 percent - showing mining’s vulner-ability to the economic cycle. Counter to this gloom and decline

and loss of confidence in “fiat” currencies that are not linked to gold. As a result the price of the yellow metal rose 12.83 percent in the sixmonths toOctober 4, andhit a record high of US$1,923.70 on September 5. Gold mining company shares have come down in price with the other min-ing equities, but their worth is in their gold in the ground. The price of proven – not estimated – reserves of many gold min-ing companies is down to approximately $500 per ounce. As a result, a gap has opened between the price of the metal and the shares of mining companies, and this is clearly not historically sustainable. The two have been closely correlated over time, so the gap will surely be closed in the near future. Consequently we believe gold stocks will recover to some extent and that gap closed, and could be a smart in-vestment move. We’re not the only ones. The Qatari royal family’s sovereign wealth fund plans to spend up to $10 billion buying stakes in gold producers. The fund is seeking to invest in a range of natural resources, but gaining access to physical gold is its top strategic priority. On October 2, QatarHoldings, which handles the wealth of the Middle East state’s royal family, confirmed it would invest about $1 billion in Euro-pean Goldfields, a London-listed mining

company currently developing the largest gold mining project in Greece. “Qatar Holdings have done a system-atic and detailed study of the gold sector,” said Ken Costa, who put the deal together. “They chose European Goldfields because [chairman] Martyn Konig is very ex-perienced - a 30-year veteran in the gold market.” They are bargain hunting. For exam-ple European Goldfields, which they are buying into, is down 41 per cent in the year to date. This is despite the company receiv-ing the long-awaited approval for mining from the Greek authorities in July. The Qatari fund has acquired a 9.9 per cent stake in European Goldfields and is welcomed by the troubled Greek econo-my, and some 1500 jobs will be created as a result. Future likely targets for the Qataris are likely to be in Africa and Russia. So as they say on the London Under-ground: “Mind the gap!” This particular “gap” – between the price of physical gold and the share price of gold producers which have been dragged down by overall market senti-ment, could be good news for mining companies and for investors holding and of course for bargain hunters buy-ing mining stocks or funds. “When others are greedy, be fearful, and when others are fearful, be greedy.” – Warren Buffett. ■

Psst, want to buy gold at $500?By Steve Hill & Nigel Ball

Investment Resources



Americas top of the oil charts?

Oil & Gas Resources

most double to three million barrels a day by 2020, and there is an effort under way to build a pipeline to the Gulf Coast, stirring an environmental debate. Investors from other regions, no-tably Chinese oil companies, are also wading into the hemisphere’s oil plays, whether in Brazil’s “pre salt” fields or the tight oil areas in the United States. They are looking to secure new oil sup-plies or gain expertise that would help them explore similar rock formations within their own borders. The United States and Brazil do not seeeyetoeyeoneveryissue—theObamaadministration is still hesitant about en-dorsing the country’s ambition for a permanent seat on the United Nations Security Council — but the hemisphere’s two largest economies are strengthening energy ties, further cementing an already expansive economic relationship.

AstheUnitedStateshascutOPECimports by more than a million barrels a day since 2007, Brazil and Colombia have emerged as leading suppliers to the American market, surpassing Kuwait. PresidentObamavisitedBrazilinMarch,refusing to delay the trip even as war was raging in Libya, emphasizing while here that he wanted the United States to be a “major customer” for Brazil’s oil once production climbed at new fields. American officials went to Brazil again for talks in August, focusing on offshore exploration and biofuels co-operation. The United States is close to overtaking Brazil as the world’s largest ethanol exporter, a significant turn, and American producers may actually in-crease their corn ethanol exports to Bra-zil. The shift stems from factors includ-ing weak harvests of sugar, which is used in Brazil to produce ethanol, and rising costs for land and labor. The hemisphere’s capacity to meet

demand for fuels from sources of new importance, whether agriculture or shale formations, is arguably what makes it competitive with countries like Iraq and Libya, which have abundant convention-al reserves but face hurdles getting the oil out of the ground. “Middle East turmoil is almost al-ways bad for oil production,” said Amy Myers Jaffe, associate director of Rice University’s Energy Program. “This should make the world’s megasuppliers nervous, since the pendulum has already begun to move in this direction.” ■

Employees finish a production platform that will service Brazil’s new offshore fields, located beneath 6,000 feet of water.




Berrima

Environmental Resources

Mining is defined as the extrac-tion of valuable minerals or other geological materials from

the earth. Any material that cannot be grown agriculturally or manufactured in a factory is usually mined. In a broader scope, mining can involve the extraction of oil, natural gas and even water. The life of a mine has five stages. The first and second involve prospecting and exploration - locating, identifying and quantifying minerals. The third and fourth stages are development and ex-ploitation, involving preparing and con-structing access to the mineral reserve, followed by the extracting, processing and shipping of minerals. Lastly comes the reclamation or rehabilitation stage – which is now a necessary part of min-ing due to the demands of the public for a cleaner environment and more stringent laws.

There are a number of mining meth-ods which depend on the occurrence and formation of the mineral, each hav-ing their pros and cons. Drift, slope and shaft mines are among underground mining methods, while area, augur con-tour and open pit mines are among the surface mining techniques. Among these, open pit or strip min-ing is the method that has drawn the most attention from the public follow-ing the Marcopper and Rapu-rapu min-ing disasters in the provinces of Marin-duque and Albay – such that the local governments of Bohol, Capiz, Mindoro, Samar, South Cotabato and Zamboanga del Norte have already banned or are contemplating bans on open pit mines in their respective provinces. The people who oppose open pit mining say this method brings about ecological degradation due to the clear-ance of the flora and fauna, as well as the soil degradation and erosion at the

mine site. This method also produces chemical and toxic pollution if not properly managed. However there are also a number of advantages in using the open pit method. Aside from being the most eco-nomical method for certain minerals, it is also the safest for mining personnel. Aside from these, retired open pit mines also offer investment opportu-nities in agriculture, power generation and tourism, since open pit mines are usually located in mountainous areas or desserts. These huge pits can be recy-cled and turned into reservoirs that can irrigate agricultural lands and provide hydroelectric power if sufficiently el-evated and the area experiences enough annual rainfall or is in the vicinity of a river with adequate water volume. They can also be venues for water sports such as boating, fishing, triathlons, wake boarding and water skiing and become tourist attractions.

Retired open pit mines are opportunitiesBy Paolo Penson



Environmental Resources

A case in point is the Marcopper pit in Marinduque. Locals from Marinduque always ask tourists if they want to see the “pit.” And that is exactly what the tour-ists do – see the pit and leave, heading

for the beach or to see the Moriones. But imagine if the locals could show tourists something like Lake Caliraya, a man-made lake built in 1940s to supply water to the Caliraya Hydroelectric Plant, now

the location of a number of resorts. It is difficult to quantify the exact significance of Lake Caliraya to Lagu-na’s tourism industry due to the number of other tourist attractions in the prov-ince. However, one cannot dismiss the significance of the Camsur Watersports Complex to the province of Camarines Sur where the number of visitors grew by 117 percent in 2009. For the stake holders, this trans-lates to the following: A mining com-pany’s excavation expense can trans-late to a pre-operating expense and be capitalized for a reservoir or resort project. Farmers can benefit from the irrigation. Local folk and the local gov-ernment will still benefit from employ-ment opportunities and taxes even af-ter the retirement of the mine. This can also translate to more foreign tourists and an inflow of foreign currency for the national government. With all these opportunities, it would be prudent for the officials not to ban open pit mining without due con-sideration to the long-term benefits. ■

Lake Caliraya, a man-made lake built in 1940s to supply water to the Caliraya Hydroelectric Plant, now hosts a number of resorts.



Seated from left: Teresita Samson of Bulawan Minerals Resources, Simon Mangos of QED, Colin Jenner of McConnell Dowell, Johan Raadsma of CGA Mining. Standing (from left): Alasdair Stuart of Bulawan Minerals Resources, Brian Luerck of Crazy Horse Resources, Alan Blackley of QED, Pete Caleon of Bulawan Minerals Resources, Eric Pasigian of QED.

Keynote speaker Philip Romalduez, president of the Chamber of Mines of the Philippines and Benguet group chief.

Vladimar Solic (left) of Mining & Petroleum Services with Edwin Castro of JAMMPL Exploration Philippines.

Thynor Amor (left) of FLSmidth with Frederick Fernandez of Pacific Chartering & Shipping.

Richard Dyas (left) of Asian Tigers Lane with Kenneth Richard John Litjens of SGS.

Cecilio Bautista (left) of Oceana Gold and Ron Sangil of Philippine Sundt.

Tom Vaillancourt (left) and Wayne Gibbon of Pacific Metals with Harry Kiss of DeVere & Partners. Ken Trebilco (left) and Anne Lavers of GHD.

Resources Events

The “roadblocks” facing compa-nies in the mining sector and the progress being made in disman-

tling or avoiding them were discussed in detail by Chamber of Mines of the Philippines president Benjamin Philip G. Romualdez at the latest lunch net-working meeting and forum organized by the Philippine Mining Club. Romalduez spelled out recent moves by the chamber to counter the roadblocks and he made it clear he be-lieves progress is being made against the anti-mining factions. About 200 members and guests at-tended the lunch at the Makati Shangri-La Hotel. The next event is scheduled for December 2, where the main speak-er will be Cifford M. James, president, chief executive officer and chairman of the TVI Pacific group, which operates the Canatuan copper and zinc mine as well as a diamond drilling subsidiary in the Philippines. ■

Mining defense gets its act together

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Plugging leaks in dangerous pondsAmong the critical areas of envi-

ronmental concern, necessitating special systems for protection, is

the storage of waste materials such as mine tailings, which present potentially significant impacts to the environment if not properly contained. These materi-als are frequently stored in containment ponds which are typically lined with high density polyethylene liners to prevent release of contaminated materials into the environment. Although a superb ma-terial for this purpose, HDPE liners are still subject to potential damage during installation and usage, making it crucial to identify a means of located such dam-age so that it can be rectified with little or no impact on the environment. To do this requires a system that can identify such damage, preferably before the liner system goes into full use. Fortunately such technology does exist, and even better is readily avail-able in the Philippines and throughout the Asian region. It is called as electronic leak location, more commonly known as liner integrity surveys. LIS can locate holes in installed geomembranes whether exposed or covered with water or a relatively thin (up to one meter) layer of soil, sand or

gravel. For several decades now high density polyethylene and other polymer membranes have become the materials of choice for providing protection to the environment from harmful substances contained in various industrial waste streams, when stored in large contain-ment structures. Conventional construction quality assurance procedures include the testing of the installed liners, principally the in-tegrity of the seams. Despite these efforts, some degree of holes or other damages can escape de-tection during this process. Rogue wind-blown rocks or other debris can get un-der liners while they are being installed, or can be dragged along during the pro-cess of deployment of the liners them-selves. When loaded with overburden, these rocks under the liners can readily lead to the development of holes. After installation, liners are often covered with layers of sand, gravel, ore or waste, intended to provide a protec-tive layer guarding against future dam-age during the lifetime of the system. Regrettably however, this process of covering liners with protective materials is often the main source of damage. And because the liner has been covered in the

process, this damage can go undetected until it is too late to readily access such areas and conduct repairs. To address these concerns, electri-cal leak location technology has been developed and been in commercial op-eration for over 20 years. Regulators and engineers are increasingly specify-ing such surveys, known as geoelectric liner integrity surveys, as a critical and final stage of construction quality as-surance for landfills, waste water treat-ment plants, heap leach pads, potable water reservoirs, fuel tank secondary containment, evaporation ponds, ash ponds, tailings ponds, concentrated animal feed operation waste lagoons and similar installations. The technology employed to per-form a LIS is the geoelectric potential method, with the applicable stan-dards being the American Society of Testing and Materials standards D7007-03 & D7002-03. To conduct a survey, a DC voltage is applied to the material covering the geomembrane and the power source is grounded to the earth beneath it. The survey area must be isolated from the surrounding ground so the applied volt-age can only travel through holes in the geomembrane in the survey area. To locate the sources of electrical leakage, voltage measurements are tak-en throughout the survey area in a grid pattern. The magnitude of horizontal measurements of voltage potential will increase sharply when approaching a hole location due to the sudden drop in voltage caused by the electrical leakage. The sensitivity of the survey dictates the hole size capable of being located, which can vary from several millimeters to a centimeter for surveys with soil as a cover material, while pinhole leaks can typically be located with water as a cover material. The survey sensitivity is dependent upon the site conditions. The success of a dipole survey depends heavily on the conductivity of the material above and below the geomembrane, the thickness

To locate any sources of liner damage by checking via electrical leakage, voltage measurements are taken throughout the survey area in a grid pattern. Continued on page 42 >

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PHILIPPINE MINING CLUB FP

LIS technology can find hidden damage

of the soil cover material and the bound-ary conditions. If covered with water, a geomembrane can be surveyed for leaks with a very high sensitivity due to the high conductivity of water. The boundary conditions of the sur-vey area are critical because the loss of current through areas where the over-lying media can contact ground will create a preferential path for current flow and likely prevent current flow through the holes in the geomembrane; essentially the holes become invisible to the LIS operator. A pre-survey site inspection is con-ducted in order to determine whether or not the required boundary conditions can be met for a successful survey. It is common during such a survey to identify issues that will need to be dealt with in order for the survey to proceed, in par-ticular the identification of potential cur-rent leak scenarios that could compro-mise testing. Some examples follow. Drainage channels: In bunded areas, drainage channels are often located for removal of accumulated rainwater. The termination of the liner at these channels can be critical, especially if there is cover-ing media like or sand or gravel on top of the liners. This covering media can be in contact with the concrete of the channel itself and this would create a conductive

path from the media to ground as con-crete is sufficiently electrically conduc-tive. This would require that the covering media be removed along the length of all channels prior to testing. This is a simple task, but must be done carefully so as to avoid damage to the liner. After testing, any required repairs and subsequent re-testing of repaired areas, the covering material has to be replaced. Pipe penetrations, concrete and steel structures: Liner attachment at pipe penetrations and around concrete and steel structures can present similar cir-cumstances and require special attention topreventcurrent leakage.Onfootingswhere the liner termination is sufficient-ly above any internal media there is not a problem. However if the liner is only marginally exposed or not exposed at all, it will require removal of sufficient cov-ering media so as to adequately expose the edge of the liner. Cable trays and other electrical ser-vices: The presence of cable trays and other electrical services can also affect testing. These must be carefully exam-ined as to whether they will constitute a path for the electrical current used in testing to reach to ground. Sub-grade issues: An ancillary aspect of an LIS test is that it can sometimes identify problems with sub-grade preparation that might have been missed earlier, due to the

detailed examination of every square meter of the lined surface. For a successful survey, there must be a conductive medium above the geomembrane, in the holes through the geomembrane, and beneath the geomem-brane. Additionally, there must not be any contact between the medium above the geomembrane and below the geomem-brane other than through the holes. The goal of the survey is for current to flow only through leaks in the geomembrane. An existing sand or gravel base cover, properly wetted down, provides a suitably conductive medium above the liner, as does a full water covering. Bare membranes can also be tested utilizing the water puddle methodology. Each day of every survey begins with a calibration sequence. Calibration is performed using an “artificial hole” if no known holes are available for this purpose, otherwise a known actual hole is utilized. A potential is applied and ad-justed so that the signal generated by the calibration hole is detectable at a level more than 3x background at a distance of say approximately 1.5 meters. There-after, a grid spacing of 2 meters is ad-equate to detect such a hole during the production survey. For testing, with the geomembrane acting as an insulator an electric poten-

Surveys around complex structures can be challenging, but are often still possible.



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tial is applied across the geomembrane between a current injector electrode placed in the water or sand/gravel above the geomembrane and a current return electrode placed in the ground outside the lined area and adjacent to the survey area. Since the geomembrane liner is an electrical insulator, current will only flow through holes in the geomembrane. A hand-held survey probe is then used to measure the potential gradients in the water or on the surface of the gravel/sand on an orthogonal grid pattern. High gra-dients of a characteristic pattern identify the locations of leaks. An analogy would be measuring the elevation gradient on the surface of a pond with a whirlpool above a hole. Away from the whirlpool the gradient is quite constant. As the leading elec-trode enters the whirlpool the gradient increases and reaches a maximum when the leading electrode is over the hole. When the electrodes are equidistant from the hole there is no gradient. There is another maximum when the trailing electrode is over the hole, but of the op-posite sign to the previous maximum. The gradient then returns to the original constant level. This up-down-up signal is characteristic of a hole. However, lo-

cal geometrical features (drains, toes of slopes, corners) can modify the signal, and the background level steadily in-creases or decreases as the injector elec-trode is approached or recedes. When working on slopes or bare surfaces, a water lance probe is utilized, wherein the current injector is placed within a reservoir of water that is also used as the source water for the probe. The return electrode is placed as above. Whenever the stream of charged water coming from the probe encounters a hole it will generate a signal that the operator can detect. Slopes are probed from the bottom up to increase the abil-ity of the operator to readily detect the location of the holes. Onceholesignalshavebeenidenti-fied, the liner in the suspect areas needs to be exposed so that the hole or damage can be located precisely and repaired. If necessary, the LIS equipment can be used to assist in pinpointing the damage if it is not readily obvious – under some conditions, pinholes can be detect by a survey which are too small to be readily detected by the unaided eye. After repairs and conventional testing are completed at each location, a retest with the LIS system should be conducted covering the areas surround-ing the repair works as the signals from

the originally identified leaks could have masked signals from other smaller leaks in the near vicinity. LIS surveys are used almost exclu-sively for the construction quality assurance of new containment facilities, with the ex-ception of filled ponds which can often be surveyed while in use. It has been focused on the detection of holes created during or after installation activities. Surveys can typically be conducted through up to 1 meter thick covering me-dia such as sand or gravel. Upcoming ad-vancements in leak location equipment are expected to further expand the capabilities, allowing even deeper surveys to be conduct-ed. This will expand the capabilities of an LIS survey to encompass existing contain-ment facilities known to contain leaks, but which would be unfeasible to excavate. LIS surveys are available in the Philippines and throughout the Asian region through Infratex Environmen-tal Services (www.infratexenviro.com; [email protected]). Infratex has already conducted close to 500,000 sq.m. of surveys in the Philippines encompassing water-filled structures, sand-covered liner, 1 meter deep grav-el-covered liner and even HDPE float-ing cover structures. Infratrex is a sub-sidiary of Maccaferri Philippines, part of the global Maccaferri group. ■

LIS technology can find hidden damage

Liner integrity surveys to find leakage sometimes involve tricky tasks for the survey personnel, such as clambering up, down and across slopes, and wading through waist-deep, murky water.


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Mapping using light detection and ranging, known as LiDAR, is a relatively new technology

that has made an immediate impact on the mapping sector worldwide and in particular in tropical type climate re-gions. The reason for this is very simple – LiDAR can see through the vegetation canopy. “See” maybe is the wrong term but what it tries to convey or emphasize is that a laser beam emitted from an in-strument on board a small aircraft is able to penetrate between tree leaves, branch-es and trunks and measure the surface of the earth at a high accuracy. It is the accuracy - 7cm to 10cm on open and hard surface terrain; 10cm to 15cm on open but loose terrain such as plowed fields and 30cm under tree canopies – that makes LiDAR so attractive for most types of mapping project. OneofsystemsusedbyMcElhan-ney is a Leica ALS60 LiDAR system. This can acquire up to 8 points per square meter and provide terrain models gen-erated from the ALS60 LiDAR (cloud points) or point data with each point having x, y and z coordinates, to a high degree of accuracy and acquiring up to 5,000 hectares per hour. At this stage and depending on the size of the project area, the LiDAR data is a collection of billions of precise x, y and z points. McElhanney’s classifi-cation, editing and attributing alloca-tion of these “point clouds” transforms an airborne survey service into LiDAR mapping carrying high accuracy and able to service a wide range of needs and requirements. LiDAR systems are able to pen-etrate different types of vegetation to precisely measure millions of ground elevation points. This LiDAR point data is used by geologists to examine hidden rock features, by archeologists to search for historic sites, by civil engineers to plan infrastructure cor-ridors, by mining engineers for mine planning, site infrastructure and fa-cilities, and by environmentalists to

establish environmentally safe proce-dures, for example at natural resource developing sites. In addition, LiDAR mapping data ac-curacy provides accurate terrain models from which road engineers can establish the best routes for their roads, saving time and effort on the design and construction, precise cut and fill design that minimize road maintenance and environmental im-pact and improve safety. LiDAR technicians acquire both LiDAR and digital aerial photography simultaneously and process both data sets for delivery to clients. Mapping products such as 0.5 or 1.0 meter con-tours can be derived from high density LiDAR ground points and are vertically accurate up to 7cm. Digital orthophoto mosaic (15cm – 50cm ground pixel size) can be pro-vided showing all that can be seen from the air. Using the LiDAR point data, 3D mapping features such as streams, rivers, lakes, roads and buildings are extracted. Other deliverables includeintensity map imagery, LiDAR classi-fied data such as digital surface models, digital elevation models, slope analysis, volume calculations, profiles, cross-sections as well as forest feature extrac-tion providing tree height, stem counts, crown diameters and bio-mass volumes. All of this provides potential clients with the best quality data to make informed

business decisions on their projects. To ensure that our clients receive the LiDAR mapping data they need to de-velop their properties, a project manage-ment system is set in place to design the surveyed ground control layout, to find the most effective test point sites that will support the LiDAR data QC process, the most effective LiDAR flight plans and the most efficient data processing matrices, procedures and effective qual-ity assurance and quality control. The cost of LiDAR mapping is in general less expensive than digital photogrammetric mapping and digital orthophoto and in particular since it is much more accurate, when mapping under tree cover, it provides users full data support for a wider range of appli-cations.OnceweflyLiDARanddigitalair photo data for a project area located either on open terrain or tree covered terrain, the topography of the area will be defined at high accuracy and does not require further surveying or map-ping unless, significant changes occur such as the establishing of an environ-mentally safe deposition area. Like any modern mapping service, LiDAR mapping is produced digitally, no printing, no paper is handled or ma-nipulated and a large percentage of cli-ents do not require “hard copies” either in paper or plastic based sheets. Data is delivered on hard drives. ■

Mapping new ground with LiDARBy Francisco Gonçalves

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Phil Mining Club FP

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Monark, the sole Caterpillar dealer in the Philippines, is increasing its support capabil-

ity for the mining sector with the estab-lishment of a mining business unit. The new unit is headed by Allan Ward and encompasses staff in sales and product support. Monark says the move underlines its recognition of very bullish prospects for mining amidst favorable metal prices and “a very high interest in investments in the mining industry,” in preparation for “ex-ponential growth in the mining sector.” The company sees the unit as “a one-stop shop determined to provide loyal support with the objective of establishing a deeper relationship between Monark and its mining customers.” The Caterpillar dealer is also strengthening its activities in staff train-ing with its Monark Foundation Institute, which offers young Filipinos job oppor-tunities by providing them with knowl-edge, skills and values.

Established in 1997, the founda-tion has evolved from just providing technicians for Monark Equipment to providing technicians to its local indus-try partners – including Power Power Asia,Galeo Equipment and SR Metals. It says the partnerships with these companies have provided job oppor-tunities to 860 foundation scholars as well as boosting their manpower re-quirements in the field of heavy equip-ment maintenance. With its “Technician for the World Project,” The foundation produces technicians for Monark Equipment and other CAT dealers around the world. It uses the Caterpillar apprentice ser-vice technicians training program and applies Caterpillar assessment tools and learning standards to ensure that graduates of the program have the required skills to become Caterpillar technicians to support mining indus-try growth not only in the Philippines but also overseas. ■

Monark boosts support for mining Brunel, Site Works team up

The Brunel group has teamed up with the Australia-based company Site Works in a strategic alliance.

The pair will deliver compliance education IELTSOHSandTradeAssessmentfortheAustralian and international markets as wellastradeupskilling,OHSandIELTSto international certification for the Philip-pine domestic market. Site Works will utilize its Clark Educa-tion City campus in Clark north of Manila to develop a world class education cur-riculum designed to specific client require-ments for the onshore and offshore oil and gas, mining and energy sectors. The Brunel group encompasses Brunel Technical Services Philippines whichisPOEA-licensedfortheexportofFilipino personnel, and Brunel Technical ServicesManpowerwhichisaDOLE-com-pliant company for the employment and on hiring of Filipino personnel on behalf of clients, as well as a foreign work permit sponsorship, payrolling and relocation. ■



Camp manager on the expansion trailThe facilities management provider ADEN Services is

expanding further in the Philippines. The company has won the contract to provide full camp management

services for Sagittarius Mines Inc.’s Tampakan copper-gold project in Mindanao, one of the world’s largest undeveloped copper-gold deposits. Earlier this year, ADEN was signed up to provide techni-cal assistance services to the Gold Fields group gold-copper ex-ploration project in the northern Philippines and has recently expanded its services to full camp managementSince it opened its Philippine operation in 2009 sign-ing up with the Masbate Gold Project, ADEN has moved quickly to establish itself as a leader in camp manage-ment services in the country. In Masbate, the company provides food service, cleaning and housekeeping, laundry, minor maintenance, procurement and logistics for the camp housing 350 people. Discussing the new SMI contract, David Ringholt, sales and marketing director for ADEN’s remote site division, said: “Critical to ADEN Services’ successful bid for the project was our demonstrated performance in local supplier development and local employment schemes and our ability to align with SMI’s sustainable development standards.” Ringholt said ADEN prides itself on utilizing 95-plus percent of all project hires from the immediate proximity of the camp site, while typically 97 percent of supplies for the camp come from local suppliers and producers. The company supports local com-munity development and implements corporate social respon-sibility, health, safety and environment programs, and develops micro-business opportunities at all its locations, he said. Internationally, ADEN’s remote site division also man-ages projects in DR Congo, Guinea, Vietnam, Saudi Arabia, Eritrea and Kazakhstan, specializing in the mining, oil and gas, construction and heavy industry sectors. ■

David Ringholt (left), sales and marketing director for ADEN’s remote site division, with the company’s operations manager in the Philippines, Patrice Baudouin.

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Although diesel fuel quality appears to be getting better, horror stories still abound about damaged injectors or pumps and huge repair bills, all relating to dirty fuel –

or is it just misguided maintenance? Sure, a good old Landcruiser 60 series can run on bio fuel and irregular maintenance but anyone with a late model diesel (that means most diesels from year 2000 on)running electronic injection needs be much more aware of basic rules. Just to kick you into life, repair bills above 450,000 pesos are not uncom-mon for repairs on common rail diesels. Rule 1: Buy known, major brands of diesel. Because these represent a brand, there are rules and guidelines that are fol-lowed in relation to fuel handling and cleanliness. Rule 2: “Nicht Bio Diesel!” as the fuel cap on the 22 million pesos worth of 2010 model international truck says. I stick with the vehicle manufacturers on this. No bio fuel in anything with electronic control. Maybe that’s another day’s writing. Rule 3: Keep at least a dozen of your fuel receipts handy in the vehicle. If you get a bad load of fuel, you have an avail-able history. This means that if you bought Brand X fuel regularly and got bad fuel, you have a clear history of fuel from that company. Generally the one who has his docu-ments in order wins the battle. Rule 4: Have your vehicle’s fuel filter changed regularly. I usually recommend every 5,000km to 10,000km. Prevention is better than the cure. The longer a fuel filter is exposed to contamination, the more chance you have of a problem. Dirt as such may not get through a blocked filter but water can if it builds up too much in the filter bowl. Heavily restricted filters put strain on the injection system. We regularly see newer common rail diesels coming in with performance is-sues only to find a blocked filter. Most manufacturers recommend not changing the fuel filter or “inspecting” it. In not changing it, the manufactur-er’s logic is that if you change the fuel filter it increases the chance of contamination getting to the clean side of the fuel line....so leave it to the dealer when a warning light comes on and they will change it safely. That could be a good argument but I have seen many more problems from blocked filters than from incorrectly changed filters. Again, I would rely on about 5000km to 10,000km change intervals. Rule 5: Be careful how much fuel conditioner you use. Good quality diesel has all the right additives already in it – anti-foam agents for easy filling and anti-algae agents to kill algae and disperse water. This doesn’t mean good diesel is always perfect and some of us choose to use additives. Just be careful, because most die-sel fuel additives are corrosive and not good at lubricating, so overdosing may lead to other issues. ■

Diesel fuel, filters and maintenanceBy Andrew Leimroth



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Innovation in beneficiation of iron ore in a wet application has become anoth-er first for the mine equipment special-

ist Metso. The technology is now in place with Metso customer JSW Steel in India, and both report it is performing well. JSW Steel is India’s second larg-est steelmaker and claims the most modern, eco-friendly steel plants with the latest technologies. The company is currently undertaking major ex-pansion of production at its plant in Toranagallu in the Bellary district of Karnataka, to meet soaring steel de-mand in India and beyond. One challenge facing the compa-ny involved the beneficiation process, in which crushing iron ore lumps into fines is the first requirement. JSW need-ed minus 3mm products from 30mm to 35mm iron ore lumps. JSW called in Metso whose experts visited the JSW Torangallu plant, talked to the beneficiation team about the criti-cal requirements, and took ore samples totheMatamataOretestlaboratoryinNew Zealand. As a result, Metso sug-gested a modified Barmac vertical shaft

impact crusher to suit this particular wet fine crushing application. JSW’s general manager for benefici-ation, Harvendra Deewan, commented: “We were looking for a simple and eco-nomical single-stage reduction system to crush our ore to minus 3mm. How-ever, the reduction ratio in crushing was huge to crush the 30~35mm feed size to minus 3mm in a single stage. “During our initial interaction with Metso, we came to know that Barmac VSIs are used in many mining applications including iron ore crushing in other countries in fine crushing applications. However, ours is a wet system and crushing wet ore is always difficult in crushers. But discussions with Metso’s experts, re-sults of lab tests and the suggested modification to the regular Barmac VSI to suit it to our wet circuit gave us confidence in Metso’s technology.” The Barmac VSI crusher is unique in that it can easily accommodate any type offeed–wetordry,coarseorfine.Othertypes of crushers would not have suited wet ore, as this tends to build up and pack inside the crushing chamber in other types of crusher such as a Cone crusher. JSW also considered using a con-ventional grinding mill. But the inher-ent advantages of using a Barmac VSI superseded several benefits like savings in equipment cost, energy costs, mainte-nance time, simplified foundations and circuit and faster equipment delivery. “We are more than satisfied with the performance of Barmac VSI in our circuit. Unlike grinding mills, a Barmac VSI is not a power guzzler,” reports Gu-ruraja Prasad, beneficiation vice presi-dent at JSW. “These are very simple and userfriendlymachinesandVOCSauto-mation has come in extremely handy to our operations team.” JSW has progressively added Bar-mac VSI circuits in its beneficiation plant since it commissioned the first Barmac VSI and is currently install-ing a sixth unit. In total, production is close to five million tons. ■

Solving a tough ore crushing challenge

JSW Steel is happy with the performance of the Barmac VSI ore crusher units it installed with Metso in overcoming special challenges at its plant in India.

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Philippine Resources Issue 6 November 2011 - January 2012

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Transcript of Philippine Resources Issue 6 November 2011 - January 2012