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Philippines: Philippines Mining Report 2010

2011/01/17

Next a difficult 2009, at the same time as we estimate that the mining sector shrank by 3.4% y-o-y in real terms, the outlook is somewhat brighter for the Philippines mining sector in 2010. There are several major investment projects in the pipeline, which have the potential to significantly boost mining production levels by the end of our newly-extended estimate period in 2014.

The leading domestic player is Philex Mining, which produces copper, silver and gold. Major players currently involved in the Philippines mining sector include Japan’s Sumitomo Metal Mining and Norway’s Intex Resources. Xstrata could become a major force in the country if it proceeds with its US$5.2bn Tampakan copper and gold project, which could presently be in partnership with Zijin Mining, in light of the Chinese firm’s ongoing bid for Xstrata’s JV partner, Australia’s Indophil Resources, which closes in May 2010.

recent setback for the industry was BHP Billiton’s decision in December 2009 to sell its nickel interests in the country to JV partner Asiaticus Management Corporation. However, this move seemed to be part of a wider investment decision by BHP Billiton to step back from the nickel sector, rather than a commentary on the Philippines in particular.

Country Overview

The Philippines is home to reserves of chromium, coal, copper, gold and nickel, part other minerals. Nickel is instantly the country’s most economically-significant resource, with the country accounting for some 5% of world nickel production in 2007, according to the US Geological Survey.

Industry Forecast

The world economic crisis and the concomitant fall in request for metals had an impact on the Philippines, with several mines being closed temporarily. However, with the worst of the crisis widely believed to have passed, the outlook is somewhat brighter for 2010 and beyond. Major development projects, such as Xstrata’s planned US$5.2bn Tampakan copper and gold mine, have the potential to transform the output of the sector.

We are forecasting an average annual increase rate of 2.57% for the Philippines mining sector over our newly-extended estimate period to 2014. Production of several key mineral commodities should increase, provided new investment projects proceed as planned. The contribution of mining to in general GDP may fall slightly. However, this is additional a reflection of faster increase rates in other areas of the Philippines economy, as opposed to any long-term declining trend in output by the mining sector.

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