The new Philippine mineral regime: an opportunity for investment?

© 1994 Kirsten G. ManderA ring of fire encircles the Pacific Basin, an unstable region of earthquakes, faulting and intense volcanic activity. It stretches from the tip of South America, up through the Andes, across the Aleutians, down through Japan and the Philippines to the tip of New Zealand. To the countries in the region, this geological volatility is both a misfortune and a blessing. It was a misfortune, indeed, to the local people who lived around the slopes of the Mt. Pinatubo volcano in the Philippines when it erupted in 1991. Their homes and farms were buried under metres of volcanic ash and it will be many years before they can return to the area to live. Yet when viewed from a broader perspective this geological instability has been a real boon to the Philippines, not merely because of the substantial export industry it has generated in souvenirs made out of volcanic ash, but because it is this same instability which has made the region fertile and resource rich. Over millions of years the tremendous pressures from within the earth have forced hot, mineral rich fluids up through faults created by earthquakes and faulting in the sub-surface rock. In that rock the minerals have cooled and concentrated to become mineral deposits, lying hidden underground until erosion reveals their presence to the human eye. Many of the world's major mineral deposits have been discovered in this region, such as the spectacular Hishikari deposit in Southern Japan, Erstberg in Indonesia and Bougainville in Papua New Guinea. The impact that this mineral endowment has had on the economic development of some of the countries in the region has been enormous. In PNG, for example, minerals make up more than 80% of the country's export income and generate revenue of over Aus$350 Million per annum. In Australia, they make up around 40% of export income, generating revenue of around Aus$30 Billion per annum. The significance of such revenue flows, particularly to developing countries, can not be underestimated. However a country's high geological potential will remain just that, unrealised potential, unless the country has access to sufficient funds to explore for new mineral deposits and to develop them when they are found. Few developing countries have sufficient domestic capital available to fund mineral development and for this reason many countries have in recent years been competing to attract foreign investment to assist in the development of their mineral industries. Vietnam, Laos, India, Peru, Argentina, Chile and others have all been taking steps to promote foreign investment by removing impediments to foreign investment, reducing government take and offering investment incentives. At the same time, Australian mining companies have been increasingly looking overseas for investment opportunities. Australian mining companies, in particular, have been seeking to place a greater percentage of their exploration/development budgets offshore in order to minimise their exposure to Australian sovereign risk, engendered by Australian Government decisions such as Coronation Hill, world heritage listings and more recently the Mabo legislation