12. CMP: Following several investment promotions road shows, the sector has gained investor confidence, making substantial contributions to the economy
We reply: With only 2% of income to be paid as taxes required under the law, with 8 years of tax holiday, with damaged environment, with diminished fish catch, it is hard to see how the CMP could claim such “substantial contributions to the economy.” They are more credible if they say mining contributed substantially to their incomes.
Mining companies have devious ways to diminish their contributions to the economy. Look at the corporate structure of Lafayette in Rapu-Rapu. Even the DENR is confused.
The (Rapu-Rapu Fact-Finding) Commission reported that there is a confusing corporate set-up, that is, that there are at least two corporate entities (RRMI and RRPI) holding mining-related permits and operating inside the Rapu- Rapu Island.
Upon closer scrutiny of the existing records of these companies, the DENR agrees with this finding. (Please see previous blogs.)
Reference: DENR Assessment of the Rapu-Rapu Polymetallic Project, 2006; p.23
How are RRMI and RRPI related? They are the two “hands” of Lafayette Philippines, Inc. RRMI digs the ground for ores and “sells” them to RRPI which in turn crushes the ores and extracts the metals by using cyanide and sulfuric acid. In effect, the left hand “sells” to the right hand. LPI owns 100% of RRPI and 64% of RRMI. The remaining 36% of RRMI is owned by a law firm called Fortun Narvasa Salazar Creenola. LPI is owned by three foreign companies: Korea Resources Corporation (Kores), 26%; LG International Corporation (LGI), 44%; and Malaysia Smelting Corporation (MSC), 30%. Neither RRMI or RRPI is owned by Filipinos.
Reference: DENR Assessment of the Rapu-Rapu Polymetallic Project, 2006; p. 27
The tax incentives provided to mining companies further reduce their contribution to the economy. Rapu-Rapu, again, is an example. The total cost of social development and livelihood program of Lafayette was made attractive to the people of Rapu-Rapu and even the entire Bicol Region with promises made through a press release titled “Simbag kan Lafayette Philippines, Inc. (LPI) sa mga Isyus Unong sa Operasyon Kaini sa Banwaan kan Rapu-Rapu” (Response of LPI on Issues About its Operation in the Town of Rapu-Rapu) in the Albayano Examiner in its November 19-25, 1999 issue, among which was the payment of taxes to the local government unit.
In a sudden and treacherous turnaround, Lafayette reneged on its promise to pay taxes. The company applied for exemption from local taxes under the government’s PEZA program. It went through a dubious process as the documents show. (Please see previous blogs.)
Lafayette is not even among the top ten (10) tax paying corporations in the Bicol Region as a letter from the BIR Regional Office V dated February 18, 2008 proves.
When Lafayette Mining Limited studied the feasibility of Rapu-Rapu mining, it obtained information on the total amount of metal in the Ungay and Hixbar deposits as presented on its website:
Copper – 103,885 tons
Zinc – 161,724 tons
Gold – 718,245 oz
Silver – 7,028,797 oz
In its quarterly reports Lafayette quoted the prices of the metals it mines in Rapu-Rapu. In the Lafayette Quarterly Report for the period ending March 31, 2007 page 6 it is stated that:
“During the quarter, the average LME copper price was US$ 5,965 per tonne while the average LME zinc price was US$ 3,458 per tonne. Precious metal prices were US$ 649.41 per ounce for gold and US$ 13.26 per ounce for silver.”
In the Lafayette Annual Report for the Period Ended June 30, 2007 page 5 it is stated that:
“During the quarter, the average LME copper price was US$ 7,636 per tonne while the average LME zinc price was US$ 3,666 per tonne. Precious metal prices were US$ 666.84 per ounce for gold and US$ 13.33 per ounce for silver.”
There is sufficient reason to project that these prices will continue to prevail. Owing to the great demand for metals in China over the next years, it is reasonable to expect that the prices would remain close to the higher values shown in the graphs. (http://www.lionselection.com.au/investors_centre/documents/aus_ar/AR-2006.pdf; January 19, 2008)
Nevertheless let us temper our estimation by choosing relatively lower prices as shown below:
Copper – US$ 6,000 / ton
Zinc – US$ 2,000 / ton
Gold – US$ 700 / oz
Silver – US$ 13 / oz
If we multiply the total deposit by the unit prices, we can compute the total amount that Lafayette prospects to haul:
Copper – US$ 6,000 / ton x 103,885 tons = US$ 623,310,000
Zinc – US$ 2,000 / ton x 161,724 tons = US$ 323,448,000
Gold – US$ 700 / oz x 718,245 oz = US$ 502,771,500
Silver – US$ 13 / oz x 7,028,797 oz = US$ 91,374,361
Total = US$ 1,540,903,861 x PhP 40 / US$ = P 61,636,154,440
With P 61,636,154,440 one can spend P 1M every day and will use up the amount in 169 years – the same period from the Mayon eruption that buried Cagsawa in 1814 . . . to the Aquino assassination in 1983 !
Or one can buy 61,636 boats worth P 1M each. If the width of each boat is 4 meters, then they can be lined up widthwise from Rapu-Rapu Pier 45 kms to Legazpi Port in 5 rows and still have an excess of 5,400 boats!
One may buy cars worth P1M each and line up 61,636 of them sideways from Legazpi 90 kms to Naga and still have an excess of 1,636 cars lined over 2.45 kms.
How much does Lafayette promise to give back to Rapu-Rapu? On May 9, 2007 during a conference of Pollution Control Officers in Casablanca Hotel in Legazpi City Lafayette’s Community Relations Department through Mr. Roy Cervantes, showed their plans for social development and actual employment. A close look reveals that several items had been planned for 2006 but as of May 9, 2007 P4,276,000 remained unaccomplished and only P2,244,688 were reported as accomplished.
It shows that even in Lafayette documents the total worth of alleged accomplished projects is only 34% while the unaccomplished is 66%.
In their Powerpoint presentation dated March 22, 2006, Lafayette promised P 10,246,060 in social development projects for Rapu-Rapu, P1M for Legazpi and P1.5M for Sorsogon. A day later, another presentation was prepared allotting only P 9,246,060 to the town.
Still, even the 34% implied as accomplished are refuted by the residents of Rapu-Rapu. In other words, they themselves say that Lafayette’s SDMP is a sham.
In the forum where these promises were presented, the Save Rapu-Rapu Alliance (SARA) Spokesperson took the floor and informed the presentor that according to the Parish Priest of Rapu-Rapu via text messaging, there was no goat-raising in Tinopan. He replied, “Ah, oo, wala pa kasi parating pa lang!”
Recall that in the press release printed in the Albayano Examiner on November 19-25, 1999 this project had been promised. After eight years, the goats are “parating pa lang.”
It should be reiterated that the data used in these comparisons are all from the Lafayette website (http://www.lafayettemining.com/) and the company’s Community Relations Department. We assume that Lafayette’s rosy promises are true.
On November 10, 2007 the SARA Spokesperson showed to Rapu-Rapu residents the plan presented by Mr. Roy Cervantes on May 9, 2007. To each of the items, they responded with a loud cry “Buwa!”, their word for “Lie!”
On December 12, 2007 Joshua Martinez of DZLG Bombo Radyo Legazpi reported that the local government of Rapu-Rapu had asked Lafayette when the latter would fulfill its promised prjects under the Social Development Management Plan. It appears, therefore, that the mining company has not acted on the plan. It can be argued that the SDMP amounts to NEAR ZERO. Let us compute the total amount of the projects promised since 2000:
2000-05 Social Development Management Plan
Infrastructure - 6,240,463
Livelihood - 128,944
Health and Sanitation - 1,702,000
Education - 705,100
Capability Building - 114,365
Socio-cultural - 40,000
Total - 8,930,872
2007 Social Development Management Plan (Core Budget)
Socio-econ infra - 6,691,740
Education and training - 3,609,000
Health and sanitation - 3,350,000
Food security, employment and livelihood - 2,446,760
Capacity-building - 1,564,500
Socio-cultural assistance - 338,000
Power supply for 3 brgys - 2,400,000
Water supply for 3 brgys - 500,000
Total - 20,900,000
2007 Social Development Management Plan (Supplemental Budget)
Socio-econ infra - 5,000,000
Marine turtle conservation project - 500,000
Legazpi City/Albay community development assistance - 2,069,000
Total - 7,569,000
2000-13 Social Development Management Plan
2000-05 - 8,930,872
2006 - 9,420,688
2007 - 28,469,000
Assume that for the rest of the mine life the yearly SDMP budget would be the same as that for the entire province of Albay for 2007. Assume further that Lafayette will appropriate for 2008 to 2013 the same amount as for 2007. This is being generous to Lafayette and these assumptions are very optimistic. Information from MGB V submitted to the RRFFC cites a much lower SDMP budget for the entire mine life- P31,300,000.00
2008 - 28,469,000
2009 - 28,469,000
2010 - 28,469,000
2011 - 28,469,000
2012 - 28,469,000
2013 - 28,469,000
Total - 217,634,560
In a press release titled “Simbag kan Lafayette Philippines, Inc. (LPI) sa mga Isyus Unong sa Operasyon Kaini sa Banwaan kan Rapu-Rapu” printed in the Albayano Examiner November 19-25, 1999, the following were promised:
SDMP: P 7,000,000
Taxes: P2,800,000
Employment: 350 persons
In the Powerpoint Presentation titled “Ang Proyekto sa Rapu-Rapu” dated October 27, 2001, they promised:
Taxes: P 328,000,000
Employment: 1000 first year; 416 during normal operation
Monitoring and rehabilitation fund: P5,050,000
In the Powerpoint Presentation titled “Social Development Management Plan 2006” they promised P 9,246,060
In the Powerpoint Presentation to Pollution Control Officers on May 9, 2007 in Casablanca Hotel, Legazpi City, they reported that from 2001 to 2005 they spent P 8,930,872 for SDMP; that in 2006 they spent P2,244,688 for SDMP and employed 131 persons. No taxes were reported as paid because by then they had acquired PEZA privileges. In the same Powerpoint presentation they promised P 9,246,060 in 2006 and P 30,969,000 in 2007 for SDMP.
In its 2001 presentation, Lafayette promised 416 jobs. In its 2007 presentation, the company reported only 131 from Rapu-Rapu and 65 from the rest of Albay province (total 196). Mr. Carlos Dominguez would claim “thousands”; that Lafayette is the “number one employer in Bicol.” A letter from DOLE Region V dated March 9, 2009 shows that Lafayette was not even among the top ten employers in Bicol Region where the National Power Corporation with 486 employees is number one, followed by the University of St. Anthony in Iriga with 436. Tenth in rank is Bicol Hair Export Corporation in Legazpi City with 195.
Assuming that the promises would be fulfilled and the budget for 2007 would be continued until 2013, let us compute the amount of benefits for Albay.
Total employees from Albay = 196
Average monthly salary/month = P 8000.00
Total salary exp/month = P 1,568,000.00
Total salary exp/year = P 18,816,000.00
Total salary exp for 8 years = P 150,528,000.00
Total expense for SDMP = P 217,634,560.00
Total exp for SDMP and salaries = P 368,162,560.00
Let us compute the benefit-cost ratio:
Total expense for SDMP = P 368,162,560.00
Total Lafayette income = P 61,636,154,440.00
Expense as fraction of income = P 368,162,560 / P 61,636,154,440
= 0.597 %
Note that this is less than 1%.
The total cost for residents. - Being given a minuscule 0.597% is not all. The worse part is that Rapu-Rapu will lose everything. Gaining ½ of 1% of benefits while losing 100% in costs is hardly our idea of “substantial contributions to the economy.”
13. CMP: “The prospective entry of San Miguel Corp. into the industry as well as First Pacific indicates that the relatively untapped mining sector holds a lot of promise. With 7.1 billion tons of metallic minerals and 51 billion tons of nonmetallic minerals waiting to be unearthed, downstream processing and manufacturing remains an area of immense potential.”
We reply: With the entry of more companies into mining, the risk of environmental degradation is so great because big business can dictate to government functionaries. In Albay, the Sangguniang Panlalawigan declared in October 2008 that the board was helpless because the resumption of Lafayette’s operation was already approved on the national level. There will be “development” only for big business but not for the lowly Filipino!
14. CMP: “Mr. Perlas said civil society groups are not against mining per se but are against foreign investors investing venture capital in the industry. We’d like to believe this but what they say and do all point against the development of the mining industry.”
We reply: Foreign investment, as a driver of local progress is a farce. Again, Rapu-Rapu mining, the flagship of the Arroyo administration, is a concrete example. A foreign investor would not bring in one dollar and leave with 50 cents. What is logical and makes business sense is that he brings in one dollar and leaves with two or more. The increase in his money comes from the labor of our people and our natural resources, which ought to be reserved for Filipinos. With foreign investors enjoying tax reduction and holidays, the government coffers do not benefit much. Officials allow this to happen because they benefit as junior partners of foreign investors. They do not mind if foreigners get so much. They do not mind if millions of their own people partake of the very little that remains. What they do mind is the share they receive.
15. CMP: “They want government to recognize local resolutions on mining bans and moratorium against mining even if these are contrary to national laws and policies. We will salute them if they can stop illegal logging, illegal fishing and illegal mining operations.
We reply: The national laws they speak of were written by their friends in the legislature. The illegal logging they speak of are mostly done by friends of big business. The illegal fishing they talk about is a problem even environmentalists contend with. However, the magnitude of the impact of “legal” mining on fishing grounds is so much greater and should be addressed with higher priority. Mr. Ramos and the CMP must not unduly distort the impact of “illegal fishing” compared to that of so called legal big business. Even legal loggers destroy the environment. Legal in this sense means having patrons in the branches and agencies of government who protect them.
16. CMP: “If these environmentalists are keen in monitoring environmental concerns, they should have at least mentioned about the environmental laws that have been passed, proclamations on biodiversity and protected areas and other environmental protection measures. What are needed are facts to show how this administration has balanced economics and environmental concerns.”
We reply: The laws and proclamations are one thing. Implementation is another. The reality in the Philippines is that those in high places can work around the law and proclamations. We have all the “facts to show how this administration has balanced economics and environmental concerns.” These facts are about environmental destruction in Rapu-Rapu, Aroroy, Larap, Marinduque, Mangkayan, etc. and economic injustice to the local residents.
17. CMP: “Constructive criticisms are good when alternatives or options are being offered. Sad to say, in this case, no alternatives were offered.”
We reply: Alternatives have been offered but not within the confines of their idea of mining as the vehicle of economic growth. We have to keenly ascertain whether mining in a specific area will really yield development as viewed by the people (improved chances of access to food, clothing, shelter, livelihood, education, security and recreation). The premise that mining results in development in a place has to be studied. If that basic premise is faulty, then we ought to go somewhere else to mine while other industries such as agriculture, transportation, energy, etc. should be promoted in that area. In Rapu-Rapu, the basic question is not how to mine the island. The basic question is how to develop the place and mining has been proven to be not a feasible option from the point of view of the local residents. The islanders have only one island. The miners have many other places to do their trade.
Sad to say, Mr. Ramos and the CMP only think of development in terms of trickle-down economics much like the crumbs that fall on Lazarus from the table of Dives. While they can partner with foreign investors and are happy with a small share of the wealth from exploitation of our natural resources, millions of our own people have to partake of the tiny bits of their leftover otherwise called “development.”
Here, then, is the pure truth and nothing but the truth about mining in the Philippines. In our opinion, Mr. Ramos and the CMP are describing themselves when they use the word “purist.” They are doing pure lip service to “responsible mining” and “sustainable development.” We can cut the debate short. We challenge all defenders of the Mining Act of 1995, of Rapu-Rapu mining, and all their apologists to take a weekly swim in the mouths of the creeks of Rapu-Rapu where Lafayette discharges its “treated” waste water and to eat fish if they can catch one in the area. If they can do it in a month without fear of contamination or actual health effects, then we will rest our case. If they cannot do that then they ought to stop the labeling, stop mouthing pure motherhoods altogether, close certain mines specially Rapu-Rapu, pay for the damages, clean up and take off.
July 29, 2009
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