July 24, 2014

MGB suspends operations of four nickel mining firms

Various news outlets reported that the Mining and Geosciences Bureau (MGB) has suspended the operations of four nickel mining companies in Central Luzon. Suspended were Zambales Diversified Minerals (a joint venture between DMCI and Australian miner Rusina Mining Corp); Benguet Corporation Nickel Mines (a subsidiary of Benguet Corp); Eramen Minerals Inc, and LnL Archipelago Minerals.

The MGB declared the suspension on the grounds of unsystematic mining leading to inefficient recovery of minerals and adverse environmental impacts like siltation and dust generation. Residents of Sta. Cruz, Zambales have reportedly been complaining of nickel contamination of shores and rice fields as a result of uncontained nickel.

A civic group has petitioned authorities to stop the disastrous effects of the operations of these firms as nickel siltation has already affected at least 120 hectares of fish ponds, thousands of hectares of farmland, all the major rivers and creeks in the municipality and the shores of at least six barangays. The companies were ordered to remove all stand-by stockpiles in stand-by areas and implement maintenance measures for the duration of the suspension.

Our take: Of the four suspended companies, Zambales Diversified Minerals Corp has a planned 2014 full-year production of 500,000 WMT of ore while Benguet Nickel Mines is looking to produce 1m WMT this year. Should the suspension last, this would further constrict the already short supply of ore leading and may spur even higher nickel prices. This should bode well for other nickel mining outfits in the Philippines like Nickel Asia Corp (NIKL, Buy) which has a planned 2014 full year production volume of 17m WMT.– WealthSec