June 11, 2010 / 7:28 AM / 9 years ago

Xstrata continues mine studies; Manila says eyes options

MANILA, June 11 (Reuters) - A unit of Xstrata XTA.L said on Friday it will proceed with public discussions and technical studies on its $5.2 billion copper-gold project in southern Philippines despite a looming local ban on the venture.

State agency Mines and Geosciences Bureau (MGB) said it may question the ban with the courts as a last resort, adding the measure could hinder investment in the mining sector.

Manila has ambitious plans to develop the mining sector from a moribund state by attracting billions of dollars of foreign investment.

The Tampakan mine, considered Southeast Asia’s largest undeveloped copper-gold prospect, was opposed by local residents who feared the open pit mining method to be used by Xstrata’s Philippine affiliate Sagittarius Mines Inc would pollute a major river irrigating farms. Mine production is set to start in 2016.

“We will continue with our engagements and with whatever studies,” said John Arnaldo, spokesman of Sagittarius Mines Inc.

“Of course, our shareholders are concerned,” he told Reuters. “We will respect whatever decision the provincial board and the governor may have and we will take it a step at a time.”

On Wednesday, the legislative council of South Cotabato province in southern Philippines passed a law banning open pit mining due to environmental concerns, a move that directly hits Xstrata’s Tampakan mine project. [ID:nSGE6590LL]

Daisy Avance-Fuentes, provincial governor, had told Reuters she was likely to approve the measure because there was wide local support for the ban. She added the ban could take effect before local officials step down on June 30.

The government would use all means to assure residents all necessary safety and environmental safeguards would be in place around the Tampakan mine, said Edwin Domingo, MGB director. He added Manila was hopeful the new local government taking over by end of June would reconsider the measure and amend the ban.

“There’s still the legal process because we sincerely think that national laws are superior over local laws. As much as possible, we don’t want to go into that angle,” Domingo told Reuters on Friday. “We would rather exert and maximise all available efforts to really discuss further with the stakeholders their various issues and concerns.”

“This is going to have a negative impact on our future investors. A lot of our copper and gold deposits can be technically and viably developed only through open pit mining.”

Xstrata has completed a feasibility study on Tampakan, which has an estimated resource of 2.2 billion tonnes containing 12.8 million tonnes of copper and 15.2 million ounces of gold at a 0.3 percent copper cut-off grade. (Editing by Ed Lane) (Reporting by Manny Mogato; Writing by Rosemarie Francisco)

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