Miners, government outlook bleak on Philippines' role in EV metals supply chain

Despite being the world's second-largest nickel producer, the Philippines has significantly limited capacity to participate in the establishment of a global battery metals supply chain due to a lack of facilities and restrictive policies — a sentiment shared by the country's mines bureau and mining industry.

Lack of facilities

"While the Philippines is a top nickel ore producer, we only have two existing nickel/cobalt processing plants that produce nickel and cobalt sulfide concentrates — intermediate products that are further processed in Japan to make electric vehicle batteries," Rocky Dimaculangan, vice president for communications at the Philippines' Chamber of Mines, or COMP, told S&P Global Market Intelligence.

Mines and Geosciences Bureau Director Wilfredo Moncano echoed COMP's view, saying the Philippines "can participate in the supply of battery metals but it will be limited to the capacity of two mineral processing plants in the country put up by Sumitomo Metal Mining Co. Ltd."

"Although the country is a top supplier of nickel as export, most of these or about 70% are exported as raw, directly shipped ore and has not undergone mineral processing," Moncano said.

According to Moncano, the bureau has submitted a proposal to Congress to obligate existing operators and new players to establish mineral processing plants that will produce finished and semi-finished products. Some domestic gold and copper operations have already established processing plants, and Moncano said the bureau wants to see nickel and iron ore mining operations to follow suit.

"This initiative needs legislation by Congress because MGB cannot obligate these companies to do it without a law. A resulting consequence to this one is the gradual and partial ban of raw nickel and iron ore exports as well as Congressional support for the needed infrastructure like additional electric power plants, and the reduction of power cost because it requires billion dollars to put up a medium size mineral processing plant," Moncano said, noting that electricity costs are very significant in mineral processing.

The Department of Energy said in its Power Development Plan 2016-2040 that domestic power rates are among the highest in the ASEAN region, at par with Singapore, due to the absence of government subsidies, which is present in Thailand, Indonesia, and Malaysia.

Restrictive policies

Philippine miners had hoped that they would benefit from Indonesia's ban on nickel exports starting 2020. However, Market Intelligence's Metals and Mining Research team said existing environmental restrictions will prevent the Philippines from meeting China's nickel ore requirements in Indonesia's absence, driving Chinese primary output down from an estimated 715,000 tonnes in 2020 to 490,000 tonnes in 2025.

"Larger policy issues ... remain unresolved, particularly the ban on open pit mining and the moratorium on new mining projects until a new mining tax scheme has been put in place," Dimaculangan said.

The Philippines still maintains a ban on open pit mining, and a moratorium on new mining permits will remain in place until a new tax structure is legislated.

"To encourage the building of extremely expensive mineral processing facilities and manufacturing plants for EV batteries as well as for clean energy and renewable power projects, the industry needs full government support in terms of stable mining and investment policies that do not change mid-stream," Dimaculangan said.

The COMP and the MGB had earlier said the mining industry could be a key sector in the country's post-pandemic recovery if the hurdles are resolved.

"It stands to reason that if policy problems are not immediately resolved, the Philippines will remain an unattractive mining destination and will most definitely fall short of its tremendous potential to participate in this worldwide trend towards mineral-intensive renewable power generation and battery storage technologies," Dimaculangan said. "Otherwise, and this would be most unfortunate, the Philippines will, so to speak, miss the boat again."

For now, COMP considers it a step forward for the industry after the Philippine government allowed at least 26 new mining projects that had been shut down by former Environment Secretary Regina Lopez to resume operations.

Dimaculangan also expressed optimism after the government agreed to renegotiate its terms with OceanaGold Corp., owner of the Didipio gold-copper mine in Quirino province, for the renewal of its financial and technical assistance agreement.

"Once they are onstream, these projects will undoubtedly help increase the country's exports and the industry's contribution to our GDP," Dimaculangan said.