Why mining industry declines 17% in Q1

 

MANILA, Philippines – Mining incidents and declining global mineral prices led to the 17% decline in the mining industry in the first quarter of 2013. 

This surpassed the 16.3% contraction in the 4th quarter of 2011, and the 1.7% in the 1st quarter of 2012.

Gold and other non-metallic mining, mostly coal, were the two biggest losers in the 1st quarter. Gold nosedived by 43.3%, but coal’s decline was bigger at 81.2%.

“[Mining industry’s] decline was due to the low growth of gold and non-metallic segment — coal — because of mine incidents and the continuing decline in global prices,” National Statistical Coordination Board (NSCB) Economics Statistics Office statistical coordination officer Maria Fe Talento said at the briefing on the first quarter economic performance on Thursday, May 30. 

The Padcal operations of the country’s biggest gold and copper producer, Philex Mining Corp, remained shut since it was suspended in August 2012 after torrential rain caused a mine leak. 

The suspension dragged Philex’s gold mine production by 68% in 2012. 

Coal

The country’s biggest and only large-scale coal producer also suffered a setback.

In February, Consunji-led Semirara Mining Corp., which “supplies over 90% of the country’s coal production,” according to Talento, reported a coal mine incident at its Panian mine in Caluya, Antique. 

A section of the site wall caved after incessant rains, killing 5 people. It forced the company to suspend mining operations for about a month, causing coal production to drop in the first quarter. 

A month before Semirara’s incident, Philex Petroleum Corp. suspended its coal mining operations in Diplahan, Zamboanga Sibugay for about 6 months due to falling global prices.

The dip in world coal prices was primarily due to the over supply of the commodity in the global market, Philex Petroleum said. 

Anemic metallic growth

A significant drop in the metallic segment also contributed in the lackluster performance of the mining and quarrying industry.

According to NSCB reports, 4 out of 5 metallic minerals mined in the first quarter  registered negative growth.

• Copper, down 3.9% vs. 13.9% decline in Q4 2012
• Gold, -43.3% vs. -17%
• Nickel, -19.5% vs. -36.3% 
• Other metallic mining, -8.3% vs. 13.9% 

The only metallic mineral that registered positive growth was chromium, which was up 399.7% in the 1st quarter 2013 from 621.3% in the 4th quarter 2012. 

Talento said the Mines and Geosciences Bureau (MGB) did not release the data for the metallic mining segment in time for the 1st quarter announcement on May 30. 

“First thing, for Q1, we weren’t able to get data for metallic from the MGB. We just estimated for the metallic part,” she said.

Once MGB releases data, Talento said they will issue a revised figure for the mining industry. 

Taxes, mining reform

One of the main reasons for this decline, especially for gold mining, was the tax imposed on small-scale miners, according to Talento.

“Beginning in 2011, when the tax was implemented, the selling of gold continuously declined. It was a really big factor,” Talento said.

The tax bureau had imposed higher taxes on small scale miners selling gold to the Bangko Sentral ng Pilipinas. This forced small-scale miners to sell to other traders who, in turn, sell it to foreign companies, affecting the country’s gold output.

“The biggest setback was the panned gold from the small-scale mining sector for gold production,” she said.

MGB director Leo Jasareno had said 68% of the country’s gold metal production in 2012 came from small-scale miners.

The new mining policy and an upcoming reform bill aimed at increasing the government’s share in the industry’s revenues have also delayed investments. – Rappler.com