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UPDATE 1-Manila approves San Miguel head's mining project

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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 for a large-scale mining permit, a senior official said on Wednesday.

The application by Agusan Petroleum and Mining Corp has been sent to the office of President Gloria Macapagal Arroyo for a final approval, the official said.

Agusan Petroleum, owned by San Miguel SMC.PSSMCB.PS president Ramon Ang, has applied for a financial and technical assistance agreement (FTAA), a contract allowing 100-percent foreign ownership of a mining project 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, 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 when the Philippines cleared a law allowing 100 percent foreign ownership of a mining venture, 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.TOOGC.AX.

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

Ang, known as a dealmaker, has personal interests in real estate, construction, hotel operation, and engineering-related businesses.

He has steered San Miguel -- which dominates the local market for beer and processed meats -- to diversify into heavy industry, but the group has been unsuccessful so far in bids to enter the power and infrastructure sectors more than a year after it announced its plan for new non-allied ventures.

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.

About 50 applications for an FTAA are still pending, said Ramos.

Reporting by Manolo Serapio Jr.; editing by Christopher Johnson