Philippine gold enchants but does not enrich

MOUNT DIWATA, Philippines Mon Feb 12, 2007 10:38pm EST

Miners walk inside a mine in Mount Diwata, Monkayo town, Composetela Valley, 600 miles (965 kilometres) south of Manila, in this February 9, 2007 file photo. The lure of gold has attracted tens of thousands small-scale miners to Mount Diwata, an infamous gold rush area commonly known as Diwalwal, transforming a once uninhabited wilderness to a rubble-strewn settlement where processing waste has killed the local river. Most of the fortune-hunters live a dangerous, hand-to-mouth existence, forced to process the ore in mercury-filled drums under their houses and risking cave-ins underground. REUTERS/Cheryl Ravelo/Files

Miners walk inside a mine in Mount Diwata, Monkayo town, Composetela Valley, 600 miles (965 kilometres) south of Manila, in this February 9, 2007 file photo. The lure of gold has attracted tens of thousands small-scale miners to Mount Diwata, an infamous gold rush area commonly known as Diwalwal, transforming a once uninhabited wilderness to a rubble-strewn settlement where processing waste has killed the local river. Most of the fortune-hunters live a dangerous, hand-to-mouth existence, forced to process the ore in mercury-filled drums under their houses and risking cave-ins underground.

Credit: Reuters/Cheryl Ravelo/Files

MOUNT DIWATA, Philippines (Reuters) - "Those who are afraid to die should not come to Mount Diwata," says Franco Tito.

It's fighting talk but his words carry weight.

Spooked by the threat of violent opposition, the Philippine government has junked plans to auction the right to explore and develop Mount Diwata, or mountain of "The Enchanted Lady", an infamous gold rush area 600 miles south of Manila.

The cancellation is a setback for the Philippines, which wants to attract $6.5 billion in foreign investment to revive its once-mighty mining sector.

But in their tightly packed wooden shacks on top of the mountain, Diwata's 40,000-strong community see it as a victory.

"They want to drive us away from this area and we have no where to move," said Tito, captain of the village. "It's like stealing our patrimony. We started this."

The lure of gold has attracted tens of thousands small-scale miners to Mount Diwata, or Diwalwal as it is commonly known, transforming a once uninhabited wilderness to a rubble-strewn settlement where processing waste has killed the local river.

Most of the fortune-hunters live a dangerous, hand-to-mouth existence, forced to process the ore in mercury-filled drums under their houses and risking cave-ins underground.

But with no alternative source of income they will not leave.

"Where would the people go? They have already lived here for almost 20 years and raised their families here," said Joseph Diosana, an administrative officer in the village, on the southern island of Mindanao.

INHOSPITABLE

Beneath its rocky soil and canopy of forest, Diwalwal is believed to have the richest gold deposit in the Philippines, itself considered a world-class treasure trove of mineral wealth.

The government has estimated the 8,100-hectare reservation has a gold resource of about 2.9 million metric tonnes at six grams per ton and 5.8 million metric tonnes at 9.6 grams per metric ton in two mineral reserves.

Small-scale miners are only allowed to tunnel 729 hectares and lack of funds means they do not have the equipment and processing facilities to extract the gold efficiently and safely.

Government geologists have estimated that with the right technology and methods, ore production could expand to 2,000 metric tonnes per day over a 15-year mine life.

The small scale minters are currently yielding around 50 tonnes per day at eight grams per ton, according to the department of the environment and natural resources.

Only large, international players have the necessary firepower to tap Diwalwal's full potential but even for mining giants used to operating in some of the world's most inhospitable territories, the enchanted lady is too much to handle.

Besides the threat from small-scale operators with easy access to guns, four indigenous tribes claim ownership rights over the reservation and communist rebels, who extort "revolutionary taxes" from businesses, lurk in the hinterland.

Diwalwal's scarred environment and opposition from anti-mining bishops in the Catholic Church are further obstacles.

GUNS AND GOONS

The government said in 2003 that Diwalwal was an acid test for dealing with problems of land ownership and violence that hobble the mining sector. But a solution was never found.

Earlier this month, Manila called off the auction because it said it wanted to "address first the various issues prevailing."

Romeo Serra, chairperson of the Mindanao Business Council, said the government was wary of stirring up trouble ahead of May's congressional elections and said the auction might be revived after the polls.

But even if the Diwalwal sale is resumed, foreign interest is likely to be minimal unless the small-scale miners are won round.

"Who wants to put in millions and millions of dollars as a performance bond on something that is uncertain, on something that you know is chaotic, on something that you know nobody has a clear idea who is in control and who is not?" said Serra.

"It's practically a no-man's land, where guns and goons rule. What foreign investor big enough would dare put investment in this?"

Only four prospective bidders submitted pre-qualification documents to participate in the Diwalwal sale after at least 27 firms, including Newmont Mining Corp., the world' second-biggest gold producer, originally expressed interest.

Only one of the four prospective bidders was foreign, Oslo-listed Crew Minerals, according to a government source.

WILD, WILD WEST

A Mandaya tribesman first discovered gold nuggets in Diwalwal in the early 1980s, triggering an influx of fortune-hunters that at its height had up to 100,000 miners competing for treasure.

Cave-ins, landslides, mercury contamination and tit-for-tat killings earned the mountain the nickname, "the wild, wild west of the Philippines" and in 2002 the government stepped in to restore some semblance of order.

Life on Diwalwal is now relatively peaceful but still wretchedly poor despite the treasures beneath.

The government has worked out a deal with the small-scale miners that sees them give 15 percent of their output to the state, which in turn chooses to ignore their illegal use of explosives and discharge of toxic waste into the Naboc river.

Control of the more than 100 tunnels that honeycomb part of the mountain is concentrated among a handful. Save for the odd hiphop-style gold chain and expensive sneakers, signs of wealth are few and far between.

The miners fear an international corporation would put them out of a job and a home and want instead to be allowed to use heavy equipment and more space to tunnel.

But while they dream of gold, they want better things for their children.

In the local school -- one of Diwalwal's few public amenities -- ace students are given a 16-karat gold medal as an incentive to get off the mountain.

"We encourage them to study because a miner's life is very hard, you only have a 50/50 chance of surviving," said Tito.

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