Sagittarius Mines Inc. (SMI) on Tuesday reaffirmed its commitment to work with all stakeholders to realize the potential of the $5.9-billion Tampakan copper-gold project, following announcement that it would scale down operations in the concession area.
“The current drive will focus all efforts and reallocate resources to determine an appropriate regulatory pathway is further affirmation of this commitment,” John Arnaldo, SMI corporate communications manager, said in an emailed statement.
SMI, the private contractor of what could be the Philippines’ biggest mining project to date, said that it would scale down operations because of the impasse over an open-pit mining ban imposed by a host local government unit, and delays in permit approvals by the government.
The project currently faces substantial development challenges, which include the current ban on the open-cut mining method within the South Cotabato Environment Code, clarification of the free and prior informed consent process, and an extremely complex and uncertain pathway to ultimate project approval.
“Until these challenges are resolved, it is not possible to determine when commercial production could commence,” Arnaldo said.
In December 2012, SMI said it has put off the start of construction to 2015, which should have allowed the company to start commercial production in 2019.
Over the past few months SMI has carried out a review of the Tampakan project, particularly the progress achieved, the emerging challenges and current approach to advancing the project.
“Based on recommendations from this review, SMI’s shareholders have endorsed a modified approach that will focus on collaborating with our national government partners and other stakeholders to resolve the key outstanding issues and challenges facing the project,” he said.
Asked whether the $5.9-billion project cost will also be downscaled, Arnaldo said that an updated capital cost estimate would be determined ahead of the final investment decision that will be made, once all necessary approvals are obtained from the government and community.
“We are not in a position to disclose commercial-in-confidence information,” he said, adding that the capital investment required to develop the mine and related infrastructure was estimated during the project feasibility.
The $5.9-billion project cost remains the single biggest foreign direct investment in the history of the Philippines.
Reduction in workers
Under the revised work plan and budget, Arnaldo said that there would be an 85-percent reduction in the number of regular and project employees, contractors and consultants.
“Although exact numbers are yet to be determined, this equates to approximately 300 regular and project employees and approximately 620 contract workers,” he said.
“SMI understands the anxiety these significant changes cause and will complete notifications to affected staff as soon as possible,” Arnaldo added.
Although there will be a significant reduction in activities under the revised work plan, Arnaldo said that SMI will still be investing substantial funds in the Tampakan Project.
The revised work plan has forecast an expenditure reduction of 75 percent to $1 million a month, compared to the $4 million a month of actual expenditure under the previous work plan.
To date, Arnaldo said that company has contributed more than $500 million, or about P20 billion, to the local and national economy.
Discovered in 1992, the Tampakan project is a 2.9-billion metric ton deposit, containing 15 million tons of copper and 18 million ounces of gold at a 0.2 percent cut-off grade.
The project is expected to contribute P134 billion to the Philippine economy each year, translating to an annual 1-percent increase to national output over a 20-year period.
The Tampakan project is operated by SMI, whose 40-percent controlling equity is a joint venture between Glencore Xstrata (62.5 percent) and Indophil Resources NL (37.5 percent). The 60-percent non-controlling equity shareholders of SMI are the Tampakan Mining Corp. and Southcot Mining Corp. (known as the Tampakan Group of Companies).