OceanaGold, B2Gold scramble as Philippines gov’t may suspend 20 more mines

VANCOUVER — The sociopolitical situation in the Philippines is volatile for miners in the wake of a national mining audit by President Rodrigo Duterte’s newly elected administration. On Sept. 27, Environment Secretary Regina Lopez revealed that 20 more metallic mines in the country face suspension for various infractions. Companies will have seven days to respond to violations found by the Department of Environment and Natural Resources (DENR).

The Filipino government recently halted 10 other mines, including eight nickel operations. If the newly named companies also suspend activities, the country will have shuttered nearly 75% of its 41 operating metallic mines. The Philippines is the world’s largest nickel producer, and accounted for 23% of global supply last year.

The list of potential closures now includes Melbourne-based OceanaGold’s (TSX: OGC; ASX: OGC; US-OTC: OCANF) Didipio gold-copper mine located on the island of Luzon, and Vancouver-based B2Gold’s (TSX: BTO; NYSE-MKT: BTG) large Masbate gold mine.

B2Gold’s Masbate gold mine, near the northern tip of the island of Masbate, 360 km south-east of Manila in the Philippines. Credit: B2Gold.

“I requested a meeting with Secretary Lopez around six weeks ago with no response,” OceanaGold president and CEO Michael Wilkes said during a conference call in late September to address the issue. “The statements made last night at the DENR press conference are confusing and we will address the alleged social issues. The situation remains normal at the mine, and I’d point out I was on-site [at the end of September], and things have never looked better.”

At its press conference in Manila, the DENR cited concerns with OceanGold’s operations, including: a petition from local government for the cancellation of exploration permits issued in March; alleged damages to houses due to blasting; perceived risks from underground mining; and potential harm to regional agriculture.

Wilks said the blasting incident was addressed during the audit and caused by poor construction materials and practices, while any concerns around underground mining safety had previously been dealt with through “extensive” local communication programs.

He also pointed out that 200 “small-scale, non-permitted” miners had recently convinced the regional governor to approach the central government about permit concerns, but OceanaGold says these are “self-interest groups that are trying to take advantage of the situation.”

“We want to make it clear we haven’t received any formal orders from the DENR. This is a disappointing outcome, but we want to work collaboratively with regulators,” Wilks continued. “We’re not aware of any environmental violations that would be cause for the proposed suspension. There have been no notifications from the regulators on suspending exploration, nor specifics on our operations.”

Wilks also said that non-governmental organizations had approached local government with concerns about agriculture in the Didipio region.

“The [citrus industry] is in rapid decline and needs support. I’d like to send the message that the mining industry and any growers in the area can work together,” he added.

Didipio employs over 1,800 people, 98% of whom are reportedly Filipino Nationals from local and regional communities. OceanaGold has paid US$70 million in royalties and taxes over the past three and a half years. Wilks said he has been told that a group numbering “in the thousands” is preparing to “make a representation to the Office of the President as a result of the statements that are being made about a possible suspension of our operation.”

In an update on Oct. 4, OceanaGold said it had “engaged directly with the DENR Secretary Gina Lopez and other senior government officials to gain clarity on the findings identified with respect to the Didipio operation.” It said these disccussions have been “constructive” and it will keep engaging with all stakeholders to demonstrate the benefits the mine has delivered to its communities.

Processing facilities at OceanaGold’s Didipio gold-copper mine on Luzon Island in the Philippines, 270 km north of Manila. Credit: OceanaGold.

Didipio continues to operate without interruption and the company “firmly maintains” its 2016 production and cost guidance.

Meanwhile, B2Gold reported the DENR had notified it of an order to show cause related to two local partners: the Filminera Resources Corp. and the Philippine Gold Processing and Refining Corporation.

The Masbate mine sits in the north of the island of Masbate, 360 km southeast of Manila, and could account for 27% of the company’s 2017 gold production. The operation could generate 175,000 to 185,000 oz. gold this year at cash costs of US$620 to US$660 per oz. gold.

The issues at Masbate listed by Filipino regulators include: operating without an “approved three-year development work program, non-payment of certain waste and tailings fees, and additional undisclosed administrative violations. The company noted that “none of the findings involve any environmental or social issues,” and said it is “confident that these issues will be resolved by working with the government agencies.”

OceanGold shares fell 14%, or 66¢, after the news, en route to a $4.05 close at press time. It has 610.4 million shares outstanding for a $2.4-billion market capitalization. B2Gold lost 11%, or 45¢, to close at $3.38. The company has 934 million shares outstanding for a $3.1-billion market capitalization.