Smuggling eyed for 63% decline in gold production in H1

Cai U. Ordinario
The DENR said gold production declined to 8,382 kilograms due to the 95% reduction in gold purchases by the Bangko Sentral ng Pilipinas (BSP) in the first 6 months of 2012

MANILA, Philippines (UPDATED) – The Department of Environment and Natural Resources (DENR) said smuggling could be the reason for the 63% decline in the country’s gold production in the first semester of 2012.

The DENR said gold production declined to 8,382 kilograms due to the 95% reduction in gold sold to the Bangko Sentral ng Pilipinas (BSP) in the first 6 months of the year.

“Given the continuing high price of gold and the increasing number of small-scale mining areas, the decrease in gold purchases by the BSP clearly indicates that gold outputs are going to the black market and smuggling activities,” said Environment Secretary Ramon Paje in a statement on Monday, August 20, citing a report of the Mines and Geosciences Bureau (MGB).

In effect, the DENR chief is saying that small-scale gold miners want to take advantage of the higher price of gold in the international market, thus selling less to the BSP.

Sales to the BSP are subject to taxes paid to the government, reducing the gold miners’ profits.

BIG GOLD BUYER. Bangko Sentral ng Pilipinas (BSP) sources gold from small scale miners. This file photo shows a BSP worker stacking newly minted gold bar at the central bank's gold refinery plant. Photo by AFP

Tax payments in gold sales to BSP

MGB Director Leo Jasareno said the decline in gold purchases started during the second semester of 2011 when the Bureau of Internal Revenue (BIR) imposed the collection of the 2% excise tax and 5% creditable withholding tax (CWT) from the sale of gold by small-scale miners and traders.

The withholding tax was further reduced to 5% from 10% in the April 2, 2012 Revenue Regulations No. 6-2012.

Through its 5 buying stations in Baguio City, Davao City, Zamboanga City, Naga City and Quezon City, the BSP deducts the corresponding taxes from small-scale miners/traders and remit the taxes to the BIR.

Jasareno said the substantial drop in the gold purchases of BSP from small-scale miners and traders was a “telling factor for the sluggish performance.”

BSP’s gold purchases accounted for only 786 kgs. in January to June as against the 15,003 kg. it bought a year ago, Jasareno said

“In effect, the BSP gold purchases shared only a dismal 9.37% of the entire gold production, compared to 74% a year ago,” Jasareno said.

The BSP is mandated by law to purchase gold from local small scale miners. 

GOLD SMUGGLING. Significantly lower gold production in January to June 2012 blamed on smuggling. Photo by AFP

Gold production

The MGB report added that before 2012, gold has always led in production, contributing about 50% of the aggregate metallic production value.

In terms of percentage contribution to the total mineral production value during the semester, the

  • nickel – 44% contribution to total mineral production; P22.40 billion production value   
  • Gold – 35%; P18.18 billion
  • copper – 18%, P9.02 billion
  • silver, zinc, chromite and iron – remaining 3%; P1.61 billion

The DENR said the decline in gold production was the single biggest reason behind the 26% drop in total metallic mineral production value in the January to June period.

Total gold production for the first semester fell to 8,382 kilograms valued at P18.18 billion, from 22,804 kilograms worth P44.52 billion in the same period last year.

Total mineral production value for the first 6 months of the year was placed at P51.2 billion against P69.2 billion in the same period last year.

Anti-smuggling efforts

Paje said one of the ways to combat smuggling is through the immediate creation of the Anti-Illegal Mining Task Force.

The constitution of the task force was mandated under Executive Order (E. O.) No. 79 to address the continuing gold smuggling. He added the task force will also play a key role in safeguarding mining projects in the pipeline.

These mining projects include the $300-million Didipio Copper-Gold Project of Oceanagold in Nueva Vizcaya and the $1.2-Billion nickel processing plant of Taganito HPAL in Surigao del Norte.

The list also includes exploration works in the $800-million copper-gold project of Goldfields Limited in Benguet, the $800-million Kingking copper-gold project of NADECOR in Compostela Valley and the $800-million Silangan copper-gold project of Philex Mines in Surigao del Norte. –

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