Philippine San Miguel mine project gets initial approval

MANILA, Aug. 27 (Reuters) - The Philippines' Department of Environment and Natural Resources has approved an application by a company controlled by the president of food and drinks giant San Miguel Corp. (SMC.PS) SMCB.PS for a large-scale mining permit, a senior official said on Wednesday.

The application has been sent to the office of President Gloria Macapagal Arroyo for final approval, the official said.

Agusan Petroleum and Mining Corp. has applied for a financial and technical assistance agreement (FTAA), a contract that allows 100-percent foreign ownership of a mine and is open to large projects with initial capital of at least $50 million.

The environment and natural resources department first approved Agusan's FTAA proposal in early 2007, said Horacio Ramos, the director of the mines and geosciences bureau.

But the presidential palace sent it back to the agency for further review.

"It's now (back) with the Office of the President," Ramos told Reuters.

If it secures Arroyo's approval, Agusan Petroleum will be the first company to win an FTAA since 1995 and only the third group to have such an agreement.

The other two to have received the approval are the Tampakan copper prospect, jointly held by Xstrata Copper (XTA.L) and Indophil Resources (IRN.AX), and a gold mining project of Oceanagold (OGC.TO) (OGC.AX).

Agusan Petroleum is hoping to tap a potentially rich iron and copper reserve on the island of Mindoro, south of the capital Manila.

Ramos estimates that $1 billion will flow into the Philippine mining sector by the end of the year, bringing total investments to around $2.4 billion since the industry was liberalised in 2004.

The government is hoping this will rise to around $10 billion within the next three years.

There are about 50 pending applications for FTAA, said Ramos.

(Reporting by Manolo Serapio Jr.; editing by Sharon Lindores)