Value-adding in the Mineral Industry

Peña is a regional director of the Mines and Geosciences Bureau of the DENR. Prior to joining government in 1992, he was deeply involved in development work for 20 years. This article was published in the Opinion Section, Yellow Pad Column of BusinessWorld, August 29, 2005 edition, page 5.

Minerals are substances from which civilization progressed and expanded. We even define the stages of civilization by the prevalent use of certain materials during such time: Paleolithic, Neolithic, Chalcolithic (the age of copper and bronze), Bronze Age, Iron Age. Insofar as they provide the materials for civilization and power, they may also be regarded as strategic substances, together with energy sources such as petroleum and coal.

In this day and age, both metallic and non-metallic minerals are in great demand for industrial and infrastructure development. Everyday items and equipment, including computers and cellphones, are derived from mineral products. The rational utilization of minable resources in the context of sustainable development can help propel industrialization. One aspect of sustainability that we should consider seriously is the development of downstream industries that make use of the products of mining.

A wealth of mining resources

What easily comes to mind is the energy sector, the products of which are directly consumed, after processing, as fuel and energy. Other non-metallic products, which are directly used in the construction industry, are cement and aggregate materials (rock aggregates and sand and gravel to be mixed with cement). Mining projects associated with non-metallic minerals (outside the energy sector) include:

  1. 18 Cement plants and quarries,
  2. 80 Rock aggregate quarries and crushing plants
  3. 245 Sand and gravel quarries with industrial permits,
  4. 9 Slaked lime producers,
  5. 22 Small to medium-scale marble quarries,
  6. More than 2,000 quarries and small-scale mines of various commodities (including those covered by permits issued by local government units).

As for the metallics sector, the Philippines has rich resources in gold, copper, nickel and chromite. In terms of endowment (minerals resources per unit area), the Philippines ranks 3rd in the world for gold, 4th for copper, 5th for nickel, and 6th for chromite.  There are five major gold areas in the country— Benguet-Baguio, Paracale (Camarines Norte), Masbate, Surigao and Masara (Davao del Norte) districts. Copper deposits are also found in the gold districts as well as in other areas in association with volcanic rocks and their deep-seated equivalent—Quirino, Zambales, Albay, Negros, Samar, Cebu, Zamboanga del Norte, and South Cotabato. Nickel and chromite are associated with even more deep-seated mantle-derived rocks such as those found in Zambales, Palawan, Dinagat and Nonoc islands, Surigao and Davao Oriental.

Copper production peaked in 1980 when 15 mines produced 305,000 metric tons of copper. The production of chromite from 22 mines and nickel from two mines also reached high levels in 1980 at 516,000 MT and 47 MT, respectively. During the heyday of the mining industry in the 1980s, the country ranked 3rd in gold, 4th in copper, 5th in nickel and 6th in chromite in terms of its share in the world market. Since then, the mining industry started on its downward path because of the recessionary climate, devaluation, rising fuel costs and import restrictions.


Mining as a development option

Mining can be a viable development option as long as environmental safeguards are in place and benefits accrue to the affected communities. And we do have such safeguards in place. Apart from the ECC (Environmental Clearance Certificate), a company has to submit an Environmental Protection and Enhancement Program (EPEP) for approval by the Mines and Geosciences Bureau (MGB) of the Department of Environment and Natural Resources (DENR). Based on this, they should come up with an Annual EPEP to be monitored by our regional offices. Then there is the multipartite monitoring team which undertakes quarterly monitoring of the project, the funds coming from a trust fund provided by the company. The company is also required to put up a Mining Rehabilitation Fund, replenishable, in case of accidents, and for rehabilitation. They are also required to undertake reforestation work, audited yearly and the best among operators are given awards. There is also the Social Development Management Fund for community development, livelihood programs and the like, including provisions for clinic or hospital (depends on the income of the mine), schools, etc.

As a development option geared towards industrialization, mining should consider priorities as well as upstream and downstream industries to be developed for specific mineral commodities in particular areas.

Gold: Gold ores are processed and refined as bullion, which is an end product by itself. It also has uses in medicine, art and electronics.

Copper: The copper smelter at Isabel, Leyte was a step in the right direction. Instead of exporting copper ores and concentrates, we are able to process them into copper metal. Since copper production declined with the closure of several mines, the Isabel smelter has been processing ores coming from other countries. The smelter has a rated annual capacity of 172,500 tons of copper cathodes at 99.99% purity. Its peak production was recorded in 2004 at 176,000 tons of copper cathodes. The by-products of the smelter are gold/silver, selenium powder, sulfuric acid and iron concentrate. What we need is a program that would add more value to the metal we produce by the development of more industries using copper.

Nickel: Nickel is mainly used as a steel alloy. The huge deposits of nickel ore on Nonoc Island began to be mined in 1974 with the operation of the nickel smelter and refinery complex in the same year. The refinery produced nickel briquettes and cobalt cathodes. A total of 22.7 million tons of ore were mined and processed at 1.24% nickel and 0.13% cobalt at a recovery rate of 76% and 40%, respectively. Total production of nickel briquettes from 1974–1986 was 214,000 tons, of which 47,000 tons were produced in 1980. Production stopped after 1986 because of escalating fuel costs on which the recovery of the metal is dependent.

Chromite: Chromite comes in three usable forms: metallurgical, refractory and chemical. In 2004, we produced 37,353 mt of the ore, a meager amount compared to the 516,000 production in 1980. (India, which ranked 3rd in chromite world production in 2001, produced a comparable 560,000 mt of chromite.) Refractory chromite can be shaped directly into refractory bricks with the addition of binders, whereas metallurgical and chemical chromites have to be processed into metal and chemical compounds,
respectively, to be usable.

Iron: Iron is the principal metal for industrial use. The establishment of a smelter to produce iron was one of the ten major industrial projects of Ferdinand Marcos, but it was not realized. At present we have smelters that process scrap iron, while the little iron ore being mined is shipped to other countries.

Considering the endowment of the Philippines in terms of mineral wealth, mining has the potential of generating huge revenues. In this time of fiscal crisis, it is viewed as a way out in overcoming present revenue shortfalls. However, to maximize the benefits that can be derived from mining, there is a need to consider industrialization as a key development objective that includes downstream industries as components of strategic plans in realizing this objective.

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