Xstrata $60 Billion Philippine Mine May Stumble at Church’s Door

By Luzi Ann Javier - 2012-05-16T09:43:02Z

Xstrata Plc (XTA), the worlds fourth- biggest copper producer, risks missing a 2016 target to begin extracting about $60 billion of minerals from its project in the Philippines because of opposition from the Catholic Church.

The central government in January rejected the companys request for an environmental compliance certificate for the $5.9 billion Tampakan copper and gold project, citing a ban by regional lawmakers on open-pit mining. With local polls due next year, South Cotabato legislators are reluctant to amend the law because they risk the ire of the Church, said Arthur Pingoy, the regions governor.

There are petitions and resolutions to amend the local law pending, Pingoy said in an interview. No one dares touch them because they fear a backlash from the Church, with priests campaigning against their re-election next year.

Xstrata is running short of time to bring the copper project in Mindanao on line by its 2016 target, a feat that would help ease global shortages of the metal used in power transmission, plumbing and autos, as well as boost economic growth. Opposition from the Church and other groups on environmental grounds is compounded by threat of attack against mines and workers by armed communist and Islamic rebels.

The issues that this project face are illustrative of intensifying political, social and environmental challenges that miners are facing in growing production, Gayle Berry, a London-based metals analyst at Barclays Plc (BARC), said in a May 8 e- mailed response to questions. There is now a long list of projects that have been delayed or faced big increases in capital costs as a result.

Copper futures traded on the London Metal Exchange have gained 18 percent in the past two years to $7,650 a metric ton, as global production failed to keep up with demand for a third straight year. Worldwide copper stockpiles have fallen to 463,618 metric tons as of May 15, the lowest since Sept. 10, 2009, according to data from exchanges tracked by Bloomberg.

Shares in Xstrata fell for a fifth day, losing 3.5 percent to 964.9 pence at 9:57 a.m. London time, set for the lowest close since Dec. 28. Indophil Resources NL, a partner in the Philippine venture, lost 5.1 percent to 37 Australian cents, the biggest decline since March 1.

We will surely vote against those who favor this project, said Dinualdo Gutierrez, a bishop who leads the Catholic Church in South Cotabato and Saranggani, two of the provinces that need to approve the mine. The local elections are set for May 13.

There are about 400,000 Catholics in South Cotabato alone, Gutierrez said by phone yesterday. That compares with 736,884 registered voters in the province, according to the Commission on Elections. The Church has also gathered 106,000 signatures calling on President Benigno Aquino not to allow Xstrata to start mining in Tampakan, he said.

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Xstrata $60 Billion Philippine Mine May Stumble at Church’s Door