Thursday, 30 April 2009

Tampakan to turn Philippines into a major copper source

ROMER S. SARMIENTO, Correspondent
BusinessWorld Online

THE PHILIPPINES could land on the map of the world’s top copper producers through the Tampakan project, where investors are expected to pour in $6 billion to kick-start production, an Australian mining executive said yesterday.

Last week, Sagittarius Mines, Inc. announced that the Tampakan project in South Cotabato would cost an initial $5.2 billion, but Richard Laufmann, chief executive officer of shareholder Indophil Resources NL, said an extra $800 million might be needed.

Even at $5.2 billion, the construction of the Tampakan project would be the single largest investment ever for Mindanao, he said in an interview.

There are few deposits in the planet at the size and quality of Tampakan’s, which contains 12.8 million metric tons of copper and 15.2 million ounces of gold.

"Bringing a large-scale copper deposit like Tampakan into production will help the world meet a demand-supply need for copper to use in electricity generation and distribution," he said.

As the world emerges from a global financial crisis, it will need electricity to drive domestic infrastructure development, Mr. Laufmann said.

"The Philippines, through Tampakan, will be seen as a major contributor to the future supply of global copper," he said.

Aside from an initial capital outlay of $5.2 billion, which includes provisions for associated infrastructure like a power plant and ports, there will be a contingency fund of more than $800 million for Tampakan, Mr. Laufmann said.

Financing for the project will come from international banks or governments, but he declined to identify them pending the completion of Tampakan’s final feasibility study.

The $5.2 billion for the initial production stage is more than three times the country’s foreign direct investment of $1.52 billion last year and even greater than the country’s entire public sector infrastructure budget for 2009 of P229 billion, Mr. Laufmann said.

The Tampakan copper project is being pursued by Sagittarius in the towns of Tampakan in South Cotabato, Columbio in Sultan Kudarat, and Kiblawan del Sur in Davao del Sur.

Swiss miner Xstrata Copper exercises management control at Sagittarius through a 62.5% interest. Indophil holds 34.23% of Tampakan.

Filipino conglomerate Alsons Corp. owns the rest but earlier agreed with Indophil for a buy-out.

Xstrata last year tried but failed to wrest Indophil’s Tampakan interest in a hostile takeover bid that eventually placed Alsons in the "priority seat."

Shareholders of Indophil have voted for the board to sell the firm’s Tampakan asset to Alsons, which is backed by Crosby Capital Ltd. of Hong Kong.

Mr. Laufmann said the corporate war with Xstrata is "over and both companies are maintaining a professional relationship."

Indophil is committed to push the Tampakan project forward to the final feasibility study, he added. "The final feasibility study stage is expected to be completed in April next year at a cost of $50 million, and Indophil will be funding 37% of it," Mr. Laufmann told BusinessWorld.

The extended pre-feasibility study of the Tampakan project states that deposits will be extracted through open-pit, a method widely opposed by the Catholic Church hierarchy and environmental groups.

Amid pressures from mining industry critics and national government officials, the South Cotabato provincial government has yet to decide on a proposed environment code that prohibits open-pit mining in the area.

Under the pre-feasibility study, initial production will come in 2016 under a 20-year operation that stands to earn $2 billion annually.

"The extended pre-feasibility study confirms the world-class, low cost, and long life nature of the [Tampakan] deposit," Mr. Laufmann said.

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