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December 4, 2004

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Lepanto and its Teresa Project dooms the people

As the Lepanto Consolidated Mining Company operates its Victoria Gold Project (VGP), the biggest gold producer in the country announced a new expansion project to start this year. This is the Teresa Gold Project of Lepanto in Mankayan, Benguet. Simultaneous with the Teresa and Victoria projects is the revival of the Far Southeast Project and copper mining which has been Lepanto’s main production before the VGP. For all these plans, the mining company has reopened its exhaust tunnel which was closed in 1997 due to community protest and the DENR Environmental Management Bureau’s closure order.

With these developments, Lepanto is in hot waters as community protests rage, backed by a growing broad support. Local government officials and community organizations expressed their opposition to the Teresa Gold Project.

Time and again, legitimate issues and concerns have been raised by the people but to no avail. Experience shows that even government laws and legal procedures were easily ignored or circumvented by the mining company.

In the context of high profitability

The total volume and value of gold production in the country continue to rise, by 6% for the first quarter 2003 and by 28% during the first quarter of the year. The profitable price of gold has pushed the gold production value to increase from PhP4.98 billion to PhP6.37 billion early this year. Being the biggest gold producer, Lepanto was largely instrumental in the increase. Of course, the production of small scale gold miners reflected in the purchases of the Bangko Sentral ng Pilipinas (BSP) and other gold mines (Canatuan Gold Project of TVI Resources in Zamboanga del Norte, Acupan Contract Mining Project of Benguet Corp. in Benguet, Diwalwal Direct State Dev’t Project of the Natural Resources Mining Dev’t Corp, and Paracale Gold Project of Johnson Gold Mining Corp. in Camarines Norte) contributed to the total output.

The Teresa Gold Project of Lepanto is expected to contribute much to the total Philippine gold production if it becomes operational this year.

For the first six months of 2004, Lepanto has the following production as posted in its website:

2004 Jan Feb Mar Apr May June YTD
Tonnes Milled 71,280 67,320 70,840 65,680 67,180 64,820 407,120
Tonnes per day 2,376 2,321 2,285 2,346 2,239 2,235 2,300
Head grade
g/t Au 4.26 3.98 4.13 4.60 4.66 4.21 4.30
g/t Ag 19.90 15.50 18.50 17.40 18.20 15.70 17.60
Gold recovery, %
Gold 91.45 91.37 91.03 91.79 91.95 91.97 91.60
Silver 35.31 40.43 32.61 34.04 40.66 45.15 37.68
Production, oz
Gold 8,918 8,103 8,338 8,911 9,246 8,068 51,584
Silver 16,065 13,626 13,714 12,479 16,028 14,796 86,708

As the biggest gold producer in the country today, Lepanto claims an annual gold production of 150,000 ounces. The mining giant is also a major contributor to the continuing increase in silver production with 30% and 91% growth rates for first quarter 2003 and 2004, respectively. Compared to the first quarter of 2003, the company has a substantial increase of 133% in the output of the VGP.

Lepanto incurred losses during the first and second quarters of 2003 as a result of the workers’ strike during the whole month of February with the support of peasant communities in the municipalities of Mankayan (Benguet), Cervantes and Quirino of Ilocos Sur, Tadian (Mountain Province), and the various sectors of Baguio City and as far as the province of Kalinga. This was a historic event that almost put Lepanto down to its knees and a lesson that the people will cherish in their continuing fight to end this giant menace.

In too short a time, Lepanto declared profitability in its unaudited net income of P66 million and P112 million for the third and fourth quarters of 2003, respectively. For the first half of 2003, Lepanto produced 33,780 oz which increased by 67% in the second half to 56,640 oz. However, it later clarified the net income for the period is P57 million due to foreign exchange losses and repayment of dollar loans. Still, that is a gargantuan net profit squeezed out of the sweat and blood of the workers, environmental destruction and plunder of the people’s intergenerational livelihood, lands and resources. Note the destruction and plunder brought about by extracting 2,300 tons of ore milled per day and the corresponding tons of chemical elements used in processing resulting in tons of toxic wastes dumped into the Abra River, adding more pressure and threat to the potential collapse of Tailings Dam 5-A.

For the first three months of 2004, Lepanto earned a net profit of P81 million with a gold production of 25,359 ounces. This is a 96% increase compared to the first quarter of 2003. Thus, just for the three quarters (second and third quarters 2003 and first quarter 2004), Lepanto accumulated a net profit of not less than P138 million.

Target gold production of Lepanto for the year 2004 is 113,800 ounces and given a gold price of $390 per ounce, the mining company will have income of P460 million. Having declared a 150,000 oz annual gold production, this must be the least minimum target and therefore, the least minimum target profit. Besides, the price of gold in the world market is highly profitable given that the price per ounce reached $408.27 (gold price as of September 24 is $407.60-408.10 which is expected to increase more), its income from three simultaneous projects (VGP, Teresa and copper mining) and gains from other metals would far surpass the minimum P460 million net profit for 2004.

Now, the question is: who benefits from these millions? Certainly not the people affected, not the national economy, not the majority Filipino people, and not even all of its stockholders. It is Lepanto’s top corporate officers and investors who reap these millions of superprofit. Of course, big government bureaucrats and corrupt officials in various government agencies like the DENR, NCIP and some local government units receive their share as facilitation or protection money especially since Lepanto has been a consistent violator of laws and rights of communities.

With these superprofit and financial capacity, Lepanto can easily expand the coverage of its destructive mining operations beyond Mankayan, Benguet and target simultaneous projects which will rake more profit for the giant. One among the six prospects nationwide for the revival of copper production to augment the production capacity of Philex Mining Corporation, which is the only remaining copper concentrate producer in the country since August 2001, is the reopening of the Far Southeast Project of Lepanto in Mankayan, Benguet. Lepanto continues operating its VGP through the 700L project (which is the deeper section of the Victoria ore body) as it commences its new expansion project, the Teresa Gold Project. Lepanto would not target these plans and operations if not in a highly profitable situation.

Given a highly profitable mining operation, Lepanto should give just living wages, benefits and incentives to its workers and employees; seriously compensate for damages of properties, livelihood, deaths and other disasters to communities adversely affected by Lepanto for a long historic time; repair and rehabilitate sinking areas and landslides; mitigate the health impacts of its operation; and serve in the development of the communities and its people vis-à-vis the profit that it gets. But, as history shows, this is impossible to expect from Lepanto. This is an illusion as Lepanto is motivated by super profit accumulation and capitalist greed.

We have no choice but to end this menace.

Other Significant Developments favorable for Lepanto’s Teresa Project

Mining giants continue to enjoy the increasing prices of major metals like gold, silver, copper and nickel in the international market. Early this year, the prices of copper, gold and silver increased by 64%, 16% and 42%, respectively. Gold prices remained upbeat at US$408.27/troy ounce (1 troy ounce is equivalent to 31.157 grams) average during the first quarter of this year compared with US$352.43/troy ounce average during the same period in 2003, marking a US$55.84 difference. Average price of silver remained positive at $6.64/troy ounce with an increase of 42% from its $4.66/troy ounce average in the first quarter of 2003.

The rise in prices of these metals may have been pushed by the increased demand of China for metals compounded by the US war of aggression in Iraq and the volatile political situation in the Middle East. Take note that prices also increased when US imperialist forces invaded Afghanistan in 2002. Wars increase the demand of these metals for the manufacture of war armaments. To mining capitalists, war is good. It brings them profit.

In the Philippines, the present Arroyo administration as the worst puppet and agent of imperialist globalization offered the country’s mineral resources up for grabs to big mining capitalists by issuing Executive Order No. 270 in January 16, 2004 known as the National Policy Agenda on Revitalizing Mining in the Philippines. This policy has concretely set the direction and mechanism of propelling the all-out implementation of the Philippine Mining Act of 1995, R.A. 7942, even as it meant violating Philippine sovereignty, national patrimony and peoples’ rights in favor of capitalist mining under the supervision of the Department of Environment and its Mines Geosciences Bureau. Further driving the voracious appetite of the Arroyo administration is the plan for Charter Change which will likely remove protectionist provisions of the Philippine Constitution on national patrimony allowing 100% foreign ownership and control on the country’s mineral investment and resources. Another move is the filing of a Motion for Reconsideration for a reversal of the Supreme Court decision of January 24, 2004 nullifying the provisions on the Financial and Technical Assistance Agreement (FTAA) of the Mining Act of 1995.
With the Philippine financial crisis at its depth, the Arroyo regime is using the situation to further push its agenda on revitalizing the Philippine mining industry to attract more foreign investments as a way out from the brink of financial collapse.

Mining companies grapple to take advantage of the favorable situation, just like Lepanto with its Teresa Gold Project.

Teresa Gold Project

Lepanto’s media releases say “the Teresa ore body is adjacent to Victoria I and II sites” with an estimated gold reserve of 110,418 kilograms. The new mine site has a lifespan of 15 years.

In a letter dated 9 October 2003, Lepanto informed the Disclosure Department of the Philippine Stock Exchange of the approval of registration of the new project by the Board of Investments. They were given such incentives as income tax holiday for four (4) years, extended for three years, starting in April 2004 or actual commencement of commercial operation. What a pleasure offered on a silver platter for the giant company at these times of great financial crisis. Those with superprofits who should pay more taxes are the ones being excluded from paying taxes for seven years. This is on top of the practice of big capitalists in legally paying less taxes vis-à-vis their huge and taxable income. This is one reason why the present mining system in the country does not contribute to the country’s financial supply, much less to national industrialization and progress.

The Teresa project has an approved capacity of 970,570 tonnes with an equivalent of 162,860 ounces of gold per year. This annual gold production is bigger than the usual annual production of 150,000 oz. Based on the latest geological work undertaken for Teresa as of 1 January 2004, there is an estimated Mineral Resource of 9.92 Mt at 2.90 g/t Au from which an Ore Reserve of 1.75Mt at 5.63 g/t Au was derived. [Refer to the summary of the Mineral Resource and ore reserve provided in the table below.] This means Teresa has a higher grade compared to the average head grade g/t Au production of Lepanto for the first half 2004. As the target annual gold production is increased, this will mean a higher grade with a more intensified mechanized mining. Its concomitant result is more massive plunder to extract the mass of gold and precious metals in a short span of time.

Mineral Resource (as of January 1, 2004)
Mineral Resource Category Tonnes (M) g/t Au oz Au (M)
Teresa Measured 1.89 4.09 0.25
Indicated 1.65 3.14 0.17
Inferred 6.37 2.48 0.51
Total 9.92 2.90 0.93

Ore Reserve (as of January 1, 2004)
Ore Reserve Category Tonnes (M) g/t Au oz Au (M)
Teresa Proved 1.06 5.27 0.18
Probable 0.69 6.19 0.14
Total 1.75 5.63 0.32

Areas covered by the Teresa ore are barangays Suyoc, Guinaoang, Bulalacao in Mankayan and Binucong-Loo, Buguias, Benguet. On top of this, the mining company holds on to its expansion plan towards Tadian and Mainit in Mountain Province by aiming for another 6,221 kilograms (1 kg is equivalent to 35.33 oz) of gold every year in that expansion target.

Contrary to what Lepanto claims, the Teresa Gold Project is a new and different mine project from Victoria II. Victoria II was discovered in 1999 and, subsequently, commenced operation. Thus, Teresa and Victoria II are not one and the same. Teresa is the project that Lepanto declared to be operational this year. To set into motion the Teresa Gold Project and continue its expansion, Lepanto has reopened its exhaust tunnel in Toking, Pacda, Mankayan without the peoples’ permission and without local government endorsement. In fact, both the Sangguniang Bayan of Mankayan and Cervantes, Ilocos Sur endorsed and supported the community petitions against the Teresa Gold Project, revival of the copper mining and reopening of the exhaust tunnel.

Why does Lepanto insist that Teresa project is Victoria II? Because Lepanto wants to avoid fulfilling the legal requirements, such as favorable endorsement of local government units, the free and prior informed consent (FPIC) of affected communities and other processes as it did with the VGP. As regards its VGP, the mining company remained mute when asked to provide the Environmental Compliance Certificate (ECC) for the project especially when the national office of the MGB certified that there was no ECC ever issued for the Lepanto VGP. The company also failed to get the free and prior, informed consent of the communities. Moreover, the Sangguniang Bayan of Mankayan has withdrawn its favorable endorsement for the project given in 2001. Therefore, the Memorandum of Agreement signed fraudulently in 1996 between Lepanto and the Municipal Government holds no legal basis. The Sangguniang Bayan withdrew its endorsement when it was consistently questioned by the communities why there were no consultations made and the communities sustained their opposition to the project. Having nothing to show, Lepanto and the MGB ridiculously showed the ECC of its past Farsoutheast copper project. Illegal as it is and with no FPIC, Lepanto started and continued its VGP operation. At any rate, no legal and environmental requirements were accomplished for the Teresa Project even as it uses the VGP as alibi. The government agencies, DENR and NCIP did nothing to act on these blatant violations.

This is just another ploy of Lepanto to do away with the legal requirements , disregard the people’s protest and circumvent the law in its favor and convenience in collaboration with the MGB-DENR and some local officials.

Still, Lepanto has to undergo these legal and environmental requirements of securing an ECC after conducting an Environmental Impact Assessment. It has to get the favorable endorsement of local government units. Paramount to all, Lepanto must have the acceptance of affected communities and secure their FPIC. If Lepanto will just repeat its unlawful and immoral mining project with the connivance of government agencies like the DENR and unscrupulous officials, it should not be a question if the communities will take the law into their hands and exercise peoples’ power for what is just.

The Teresa Gold Project is another profit-making venture of Lepanto that dooms the people. With this capitalist mode of mining production backed by reactionary laws like the Philippine Mining Act of 1995, only the local ruling elite who own Lepanto with their foreign partners, will benefit at the expense of the indigenous peoples and peasants from the plunder of their ancestral lands and resources . Through the Teresa project and expansion beyond Mankayan, Lepanto undermines the people and thinks it could easily spread its plunder beyond the Abra River valley. Lepanto intensifies its record of development aggression, exploitation and oppression against the people of the Cordillera.

Massive and simultaneous mining by reviving copper mining, continuing the VGP through the 700L project and the Teresa Gold Project will aggravate the danger posed by Tailings Dam 5-A. More tonnage of toxic wastes and silt will add more pressure and accelerate the rising level of the dam thereby hastening the danger of its potential collapse, which could mean tragic death and nightmare to the downstream communities along the Abra River.

This danger is compounded by the fact that the Tailings Dam 5-A is located within the Splay of the Philippine Fault which overlaps the Abra River. As to the geological location of the new project, “the Teresa deposit trends north-south along a series of parallel structures that seem to have continued, after it was displaced by a fault, to the northeast trending Victoria veins. In a regional scale, the Teresa is localized within the northwest to north-south trending Abra River fault that extends to Palidan and Suyoc areas south of Nayak” in Mankayan, Benguet.

In addition to the underground mined-out areas causing land mass movement, the total of 114 holes (50 surface and 64 underground) as a result of Lepanto’s drilling operations since 1969 until 2003 make the situation in Mankayan more alarming.

This is an all-out perpetration of capitalist plunder and ethnocide that dooms the indigenous peoples and peasants. Before this happens, we have to end this Lepanto menace. It should not be a question reserved for tomorrow. It is an answer of intensifying mass protests and struggles to put Lepanto down to its grave and make it pay for the injustice committed against the people. #

Published with financial contribution from the Swedish Society for Nature Conservation
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