Lafayette's last straw: Old row with ex-partner

By Daxim Lucas
Philippine Daily Inquirer
First Posted 01:01:00 12/23/2007
http://newsinfo.inquirer.net/inquirerheadlines/nation/view/20071223-108418/Lafayettes_last_straw_Old_row_with_ex-partner

MANILA, Philippines -- The recent financial woes of Lafayette Philippines Inc. that brought the Australian-owned mine operator to the brink of bankruptcy has its roots in a past dispute between the firm and its supplier, according to officials familiar with the issue.

In an interview, a government mining regulator told the Philippine Daily Inquirer that the "final straw" in Lafayette's troubled financial history was a demand letter sent to it by its business partner, Leighton Contractors Philippines Inc. billing the miner for $870,000.

"The debt supposedly became due at the end of October [2007] and their supplier declared them in default two weeks later," he said, requesting anonymity because he was not authorized to speak on the issue.

The official said that declaring Lafayette in default was Leighton's prerogative but pointed to an old dispute between both firms dating back to 2005.

New management
Back then, a new management team led by former Agriculture Secretary Carlos Dominguez was appointed by Lafayette's Australian owners to revive the firm's fortunes at its Rapu-Rapu mine after a high-profile accident that had environment activists calling for its permanent closure.

"I understand that the new team displaced Leighton when they came in," the official said, adding that the old dispute could be one reason why Lafayette was declared in default by its former business partner so quickly.

For his part, Environment Secretary Lito Atienza pointed out that Lafayette's woes go beyond the disagreement with its business partner, especially since the firm has been trying to raise fresh capital from new investors.

"They've been in talks with prospective investors for some time now," he said. "They need more capital, and negotiations are faltering."

Atienza said his primary concern at this point is to ensure the protection of the environment around the mining facility in the event that the Rapu-Rapu mine ceases operations.

"We need to make sure that the environment is not compromised," he said.

"We've been informed of their status," the Environment and Natural Resources chief added. "We're monitoring the situation closely."

Lafayette was the first foreign firm to operate in the country after the Supreme Court affirmed the legality of the Mining Act in 2004. A high-profile accident in 2005 made the company the focal point of an anti-mining protest which subsided after the government later allowed it to resume operations.

Company officials estimate that the mine could earn up to $180 million a year, from its gold, silver and copper output, given the strong prices of commodities on the world market. The Rapu-Rapu mine has an estimated life six years, assuming that no other exploration is done in the area.

Lafayette is the largest firm operating in the Bicol region, and is the largest employer.