Cement firms are ‘collateral damage’ of mining EO – Holcim

MANILA, Philippines – Executives of one of the country’s leading cement manufacturers, Holcim Philippines Inc., said their industry may encounter disruptions and their investments maybe in peril because of President Aquino’s recently issued mining policy.

“We’re [a] collateral damage [of President Aquino’s Executive Order 79],” lamented Holcim Philippines chief operating officer Roland van Wijnen during a press briefing on Tuesday, July 31.

He shared the cement industry’s concern over the EO 79’s provisions that could threaten cement companies’ ability to make the investments they need to ensure future cement supply and the viability of their current investments.

“Mining applications are a normal course of business for us. It’s not something that we can interrupt for say 5 years,” said van Wijnen, referring to access to indigenous raw materials, which they need mining permits for.

Van Wijnen said EO 79 does not distinguish between metallic mining for gold, nickel and copper, and the type of non-metallic mining his company does to extract the limestone needed to produce cement.

He explained that, unlike mining for precious metals, the mining they do is high volume and low profit. Most cement plants are located in far-flung areas to have access to raw materials, like limestone and silica, which are extracted.

Quarry permits

He cited the EO’s Section 4, which imposes a moratorium on new mineral agreements pending legislation on revenue sharing between government and mining companies. He said this could delay cement companies’ normal process of opening new quarries after older ones are exhausted.

“If we were to build new capacity we might have to open new quarries all together. The management our current quarries means we might finish in one area and start in another,” he noted.

Meanwhile, Section 6’s requirement for competitive bidding on expired tenements could prevent them from renewing contracts on mining sites in areas where they had already heavily invested.

Van Wijnen explained that many of their plans were made looking half a century down the line since they work in a 7 to 10 year operating cycle. It can take up to 20 years to recover the initial investment for a cement plant.

He said they had planned their investments under the understanding that they would have the right of renewal after the first 25 years in a mining area. If another company were to win the bid for a mining site they held near an existing factory, they would have a harder time get the limestone they need for that factory.

Roadblock to investments

Van Wijnen stressed that EO 79 might be enough to make foreign companies rethink investing in the Philippines.

Listed Holcim Philippines is the local unit of Switzerland-based Holcim Ltd. Van Wijnen stressed that the cement firm holds about 34% to 35% of the Philippine market.

“We will not run out of cement but it will raise a lot of concerns of our major shareholders in Zurich because they have to approve significant new investments. And if we can not give them the certainty that we have 25, 50, 75 years of reserves, they might get a bit concerned whether this is the right place to invest.”

Cement companies like Holcim have posted strong sales volumes in 2012 thanks to the rollout of more government and private sector projects this year.

But van Wijnen says the cement companies are working together to lobby for a number of efforts they hope the Philippine government will undertake to help them stay profitable. – Rappler.com

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