On Shaky Ground

Carmela Fonbuena

This is AI generated summarization, which may have errors. For context, always refer to the full article.

The tools of small-scale mining have advanced from just picks and shovels to drilling machines, excavators, and powerful explosives. Many small miners risk running afoul of outdated laws.

(Editor’s Note: This article was originally published by Newsbreak in 2008.)

The nickel-rich hills of Narra and Sofronio Española towns in Palawan have a reddish color but it’s not, thank God, because of blood spilled by executives of either Platinum Group Metals Corp. and Citinickel Mines Development Corp.

The two companies are fighting a vicious battle in the courts, the regulatory agencies, and the press for control of 2,176 hectares of land containing deposits of low-grade nickel laterites. Hardly a week passes by without the publication of a news item or column attacking one company or defending the other.

Yet, the two feuding firms share one important thing in common. Though both are fairly big companies, they have come to typify the new, corporate look of “small-scale mining” that used to evoke images of lowland gold panners or Cordillera natives working with picks and shovels to dig for gold nuggets.

For the government, the growing number of big companies using small-scale mining permits issued by provincial governors to extract nickel and other metallic minerals represents an unacceptable abuse of a regulatory loophole. From only 70 in 2004, the number of small-scale mining permits issued by provincial governors more than doubled to 173 three years later, in 2007, according to the Mines and Geosciences Bureau (MGB).

Small-scale mining was conceived by the laws as an activity that largely relies on manual labor, but the companies engaging in small-scale mining to extract nickel are using heavy equipment such as excavators, backhoes, and dozers, among others.

To close the regulatory gap, the MGB is planning to ban all small-scale mining in nickel production. “We are recommending a moratorium on the issuance of small-scale mining permits (SSMP) in the case of nickel mining,” MGB director Horacio Ramos told Newsbreak.

Legal Limbo

The planned moratorium underscores the tenuous legal position of small-scale mining in general, not just in nickel ore extraction.

The murky legal status of small-scale mining is unfortunate because it accounts for a sizeable share of the country’s output of metallic minerals. Last year, small-scale miners dug 32,282 kilograms of gold worth P33.2 billion, or more than five times the output of the country’s big gold producers such as Philex Mining Corp. or Canada’s Toronto Ventures Inc.

At the heart of the legal ambiguity is a definition that no longer conforms to the realities of modern-day small-scale mining.

Two laws cover small-scale mining: Presidential Decree 1899 and Republic Act 7076 or the People’s Small-Scale Mining Act.

PD 1899, which was issued in 1984 by President Ferdinand Marcos, defines small-scale mining as “artisanal,” meaning it does not make use of sophisticated mining equipment, involves minimal investments in infrastructure and processing plants, relies heavily on manual labor, and is owned, managed, or controlled by an individual or entity qualified under existing mining laws, rules, and regulations.

This was reinforced by RA 7076, issued in 1991 by President Corazon Aquino, that defined small-scale mining as an extractive activity “relying heavily on manual labor…and does not use explosives or heavy mining equipment.”

Legal experts say the laws are unduly restrictive and condemn as lawbreakers many genuine small-scale miners who no longer fit the definition.

Antonio La Viña, former environment department undersecretary and now dean at the Ateneo School of Government, says, “Once you are small and you try to be large-scale, you are illegal.” He argues that the law should be amended to allow for more flexibility and growth on the part of small-scale miners.

What happens when laws are grossly inconsistent with reality became apparent in Diwalwal, the gold-rush site on Mt. Diwata near the border of Surigao del Sur and what was then Davao del Norte. For decades, Diwalwal had been a headache to the national government.

The miners of Diwalwal never thought the rules on small-scale mining applied to them. They viewed PD 1899 and RA 7076 as impractical laws based on the traditional gold mining practices of the Igorots who laboriously dug the ground for gold with only their picks, irons, and bars.

Even before the passage of the two laws in the 1980s and 1990s, small-scale miners in Diwalwal were already employing methods far different from the way it was done in the Cordilleras. “Those engaged in small-scale mining have grown bigger and have began using dynamite and chemicals as tools,” explains Franco Tito, village chief of Mt. Diwata.

By banning, instead of regulating, the use of explosives and chemicals, the new law drove many miners in Diwalwal underground, legally speaking.

Miners did not apply for permits nor pay taxes because that would expose them to possible criminal prosecution for using explosives and chemicals. Before it tried to assert full control in 2003, the government was practically blind in Diwalwal. The little that it knew about mining activities in the area came from military intelligence agents sent there try to the vast sums of money from mining allegedly going to communist guerrillas.

Large-Scale Problems

Diwalwal represents an extreme case. In the absence of law and order, the unabated use of hazardous substances, including mercury and cyanide that were used in backyard furnaces to separate gold from the ore, poisoned the miners and their families, and polluted Naboc River that flows down Mt. Diwata into the Davao River. Fatal accidents in the poorly constructed underground tunnels were common.

The growing number of mining casualties was what finally prompted President Arroyo in 2003 to order a government takeover of the site.

Nationwide, small-scale gold miners are notorious for being dirty, unsafe, environmentally destructive, and fundamentally unsustainable. “The small-scale miner is dirtier per unit of output than large and modern mining operations,” Ramos says. Unlike in regulated large-scale operations, rehabilitation measures are not adopted by small-scale miners.

The small-scale miners’ practice of “high grading operations,” which refers to taking out only the best ores while leaving behind lower grade ores, is seen as wasteful. “Only high-grade ore is extracted such that conservation measures are not adopted,” explains an MGB booklet.

Other problems include illegal gold trading, smuggling, and employment of child laborers. While existing laws provide that all gold should be sold to the Bangko Sentral ng Pilipinas (BSP), many suspect that a big part of the country’s gold output is shipped overseas illegally. The BSP has set up buying stations in Davao and Tagum cities but the central bank’s minimum volume requirement of 300 grams is still high. Gold buyers usually collect an average of only 50 to 150 grams a day, forcing them to sell to unauthorized traders.

Many small-scale miners also encroach on legal mining claims of companies who, in turn, are accused of laying claim to an area after informal miners have found sizeable deposits of mineral ores.

Given the long history of conflict in the mining industry, “tolerance” had always been the attitude of the national government. “Considering the large number of people involved in small-scale mining and the difficulty of driving out the people without causing unwanted consequences, the activities of the miners have been tolerated for sometime now,” MGB mining technical division chief Lazaro Ramos told Newsbreak.

But for all the troubles it is accused of causing, small-scale mining is an important source of income for poor Filipinos in many parts of the country. The rise of settlements of small-scale miners in remote mountains and valleys has helped boost the economic growth of towns and provinces.

When Platinum Metal’s small-scale nickel mining activities were stopped by the Department of Environment and natural resources (DENR) last year, Palawan province and the two towns of Narra and Sofronio Española lost an esimated P6.2 million in taxes in 2007.

Big to Small

While mining laws limited the growth potential of small-scale miners and forced many of them to operate illegally, the Local Government Code, passed in 1991, created opportunities for big companies to seek small-scale mining permits from local officials. This allowed them to jumpstart mining projects, and start earning cash, while waiting for final approvals from mining and environmental regulators in Manila.

Platinum and Citinickel saw in small-scale mining an opportunity for a “transitional strategy” pending the completion of the requirements for either the mineral production sharing agreement (MPSA) with the government and the release of the environmental clearance certificate (ECC) for large-scale mining from the Environmental Management Bureau.

Linggoy Atayde of Platinum told Newsbreak that the company planned to use the two small-scale mining permits granted it and a partner, Olympic Mines and Development Corp., to demonstrate to Palawan Gov. Joel Reyes and his constituents that Platinum’s mining activity will be good for the province. “He wanted us to prove to them that we are responsible miners before he would endorse us for an MPSA,” explains Atayde.

Olympic was the original claimant in the area and engaged Platinum as mining operator. Later, Olympic revoked the operating agreement with Platinum and assigned its mining claims to Citinickel, setting the stage for the bitter legal and PR battles that continue to this day.

The permits issued allowed Platinum to extract nickel ore from a combined 40-hectare area for an initial two years from 2004 to 2006, later extended to 2008.

Similarly, Citinickel has this to say about small-scale mining: “Pending the issuance of an ECC for a large-scale mining operation, Citinickel shall first operate on a small-scale mining capacity using two ECCs for small-scale mining projects covering an aggregate area of 40 hectares out of the entire MPSA contract area.” The company has not yet started operations because of the ongoing dispute with Platinum.

Soaring global prices for nickel, which was in great demand because of rapid economic growth in China and India, confirmed even more the soundness of using small-scale mining as a transitional strategy. Platinum began excavating for nickel laterites in 2005 and was able to ship 274,072 dry metric tons up to June 2006.

“About five or six years ago, the price of nickel ore was just about 6 US dollars per kilogram And before, it had to have at least 2 percent nickel content. Now, it’s at 25 dollars per kilo. At that price, you can even mine for a slow as 0.7 percent. So what used to be ignored as waste is now useful,” MGB deputy director Edwin Domingo explains.

In 2007, Platinum Metals’ mini-boom from small-scale mining came to an abrupt end. Responding to complaints by Citinickel before the Manila office of the DENR, then Secretary Angelo Reyes cancelled Platinum Metal’s environment compliance certificates because of large-scale operations and over-extraction. Palawan’s Reyes was also slapped with graft charges before the Office of the Ombudsman for allowing Platinum Metals’ operations.

Shortly afterwards, the MGB began thinking about proposals for banning small-scale nickel mining.

“You cannot mine nickel economically if you are small-scale. It has to be with the use of heavy equipment, like bulldozers,” says Domingo. “The small-scale nickel mining companies are really large-scale. They go small-scale because it’s easier to start.”

Ramos expects a lot of opposition not only from the mining companies but also from local governments of nickel-rich areas who like small-scale mining because fees and taxes start to flow in more quickly compared to large-scale mining which have longer gestation periods. “The governors are objecting, but we will settle this,” Ramos says.

Making Room

Whether the government and the big mining companies like it or not, small-scale miners are here to stay, for sure.

The MGB has issued a warning that unless the challenges posed by small-scale miners are addressed, many mining projects could be at risk. It said: “The existence of small-scale mining in permitted mining areas should be considered as a social-political risk that warrants special attention. If the small-scale miners are neglected in the general planning stage, the mining project with all investment may have serious problems during the development of its activities.”

Mining companies must find ways not only to co-exist with the thousands of small-scale miners but to win their support and cooperation, which are crucial to the success of many mining projects as they move from the exploration phase towards mine development and production.

Some have devised innovative schemes that have not only promoted good relations with small-scale miners but actually helped boost revenues and profits.

For example, Benguet Corp., which used to be the country’s biggest gold mining company, has entered into an ore-sharing agreement with associations and cooperatives of small-scale miners in Akupan, Benguet. The deal paved the way for the reopening of the company’s mineral-ore processing operations that were closed in 1990 after the Baguio earthquake. Small-scale miners deliver mineral ore to the company for processing, and revenue from the gold output is split according to an agreed formula.

La Viña insists on the need to update the small-scale mining law. The story of Diwalwal, he says, shows the “immediate” need to help the small-scale mining operations there grow into bigger and more competent entities to address the social, environmental, technical, safety, and health challenges facing modern mining.

“Medium-scale mining, advanced small-scale mining, and mechanized small-scale mining, whatever we want to call it, should have the real purpose of developing our small-scale mining onto a higher level,” he says.

Existing laws were designed for either large-scale mining or small-scale mining operations, and do not have provisions for mining operations in between.

Franco also wants a law that addresses the needs of miners that are neither too large nor too small, and supports the growth of small miners. The key to solving Diwalwal’s problems is a mechanism through which the small can expand and become big, he says.

“Small-scale mines that have the financial capacity and knowledge to procure sophisticated mining equipment and use explosives are the ideal candidate for this development,” he says.

La Viña is also calling for the zoning of mining sites. “The government should have implemented a very clear location. This is the zone for small-scale mining and this is the zone for large-scale mining,” he says.

RA 7076 allows the DENR secretary to set aside particular areas for small-scale mining or Minahang Bayan. But this was never implemented fully. There are only two sites declared as Minahang Bayan—the Diwalwal gold-rush site and Dinagat Island in Surigao Del Norte.

Of course, declaring a mining area exclusively for small-scale miners is no assurance that all will be well, as shown by what happened to sand quarrying in Pampanga after the 1991 Mt. Pinatubo eruption.

The volcanic explosion deposited millions of tons of lahar or volcanic ash along the river banks of Pampanga, producing sand with high silica content ideal for construction. The authority to issue quarrying permits became the object of a tug-of-war between national agencies and provincial officials, who eventually won in 2002. But corruption allegations over the funds from quarrying fees hounded then Gov. Lito Lapid and his son, who succeeded him.

Whatever happens, the last thing big mining firms should do is show their mining permits, whether these are production sharing agreements or financial and technical assistance agreements, to small-scale miners and expect them to leave. That’s just not the way it works. – Rappler.com

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