This article is the first of a two-part series on the outlook of the metals and mining sector in the Philippines. The second article in the series will cover commentary from the country's Mines and Geosciences Bureau.

The Philippine mining sector is optimistic that the country's government will recognize the importance of the industry due to the COVID-19 crisis, representing a potential silver lining after almost a decade of struggling with a moratorium on new permits and a ban on open pit mining, according to market observers.

"In general, we feel that the pandemic will make the government realize that this sector of our economy can even be more important during times of crisis given the support that large-scale operations provide to their local government units and host communities through social expenditures and crisis management teams," Gerard Brimo, chairman of the Chamber of Mines of the Philippines and president and CEO of Nickel Asia Corp., told S&P Global Market Intelligence.

"Since large-scale metallic mining is an export industry, it was allowed to continue operating but with precautionary measures in place as specified by the Inter-Agency Task Force and the Department of Industry. As such, the impact of the pandemic ... is not severe," Brimo said. "What stymies the industry's growth and its ability to further contribute to the economy are policy roadblocks, principally the moratorium on new mining permits that has been in place since 2012 under Executive Order 79 and the ban on open pit mining."

The lifting of the moratorium on new permits is anchored on the passage of a new mining tax regime.

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Brimo sees progress as a new tax bill in the House of Representatives has been passed at committee level, pending approval in plenary. The mining chamber chief added that the new tax structure is competitive and progressive in nature, and will be beneficial both to the sector and the government, with the latter's coffers currently hit by social amelioration programs implemented during the pandemic.

"If this happens, three pending mining projects can bring the industry's exports to over 9% of the total Philippine exports and increase the industry's contribution to about 1.4% of the country's GDP," he added, noting that mining accounted for 5.99% of exports and 0.69% of GDP as of 2018.

The three pending copper developments are Philex Mining Corp.'s Silangan in Surigao del Norte, Indophil Resources NL's Tampakan in South Cotabato, and St. Augustine Gold & Copper Ltd.'s Kingking in Compostela Valley, which were delayed due to the moratorium.

Brimo also said Indonesia's ban on nickel exports will be a boon to the Philippines, but the recovery in prices after an expected decline in output and exports this year will depend on the government's efforts to spur demand and its economic stimulus.

"Overall, output and value of exports this year will no doubt decrease," Brimo said. He believes that output may quickly recover once pandemic-related restrictions are lifted, while the recovery of base metal prices will depend on the success of governments across the world in encouraging consumer demand and implementing other economic stimulus initiatives.

Analysts have said the suspension of the Philippines' nickel mining and processing operations in Surigao del Norte will lead to a reduction in China's nickel pig iron production after Nickel Asia and Global Ferronickel Holdings Inc. said they were pushing back resuming mining and export operations in compliance with government policies to contain the coronavirus.

A recent report by Market Intelligence's Metals and Mining Research team indicated that the global primary nickel market would move from an estimated deficit of roughly 30,000 tonnes in 2019 to a small surplus of 11,000 tonnes in 2020 as a result of expectations that COVID-19 will have a more severe negative impact on nickel demand than supply.

Analysts recently said that nickel is the best placed of the base metals to rebound once the world starts to bounce back from the COVID-19 pandemic given its exposure to electric vehicle demand and to China's economic recovery, which is expected to start in the second half of 2020.