February 2, 2017 11:05 pm JST

Philippines orders closure of 21 mines on environmental grounds

Half of the country's nickel output affected, but economic impact seen as minimal

MIKHAIL FLORES, Nikkei staff writer

Philippine Environment and Natural Resources Secretary Regina Lopez speaks at a Dec. 15 press conference.

MANILA -- The Philippines on Thursday ordered the closure of 21 mining operations following an industrywide audit launched by the administration of President Rodrigo Duterte.

Environment and Natural Resources Secretary Regina Lopez, a hard-line environmentalist, said mines were closed for such reasons as polluting watersheds and destroying farms. In an initial audit last year, the government closed or threatened to close over 40 mines for falling short of environmental standards. Most of the mines ordered to stop operations were nickel ore producers.

Lopez said Thursday that the order affects about half of the country's nickel output, adding, "I don't care about the money."

Duterte backed Lopez's decision, saying that when he brought her on board, he told her to "just be fair and make it legal."

The mining subindex at the Philippine Stock Exchange fell 200 points, or 1.65%, on Thursday, with the broader market ending flat.

Companies that received closure orders saw their shares tumble. Benguet declined by 10.38%, Marcventures Holdings lost 11.11% and Wellex Industries dropped 3.08%.

The Environment and Natural Resources Department (DENR) also ordered six mining companies to suspend operations for three to six months for failing to comply with regulations. A total of 12 miners passed the audit.

OceanaGold, one of the six companies that received a suspension order, slammed the DENR's decision, with President and chief executive Mick Wilkes calling it "unjustified" and lacking "any basis in law."

An official of the Chamber of Mines of the Philippines, an industry lobby, said the decision was unfair and the group will challenge it.

"What we do question is the bias and partiality ingrained in the audit review process from the very start," Nelia Halcon, the group's executive vice president, said. "Should we ultimately receive a suspension order, as suggested today, we have very strong legal grounds to have it overturned."

The crackdown is not expected to disrupt the overall Philippine economy, to which mining contributes less than 1%, but it could move global nickel prices.

The Philippines produces about 20% of the world's mined nickel, according to UBS. The mine closures will trim the global supply by some 10%.

In 2014, the Philippines became the world's top nickel supplier after Indonesia banned ore exports to force mining companies to produce locally. Jakarta, however, started easing those restrictions last month.

Jon Latuja, an analyst at Unicapital Securities in Manila, said the announcement may trigger knee-jerk reactions but that the impact on the global nickel market will be minimal. He said development in Indonesia "would have a greater impact."

Nikkei staff writer Cliff Venzon in Manila contributed to this report.

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