SM Group eyes entry in Tampakan project?

GENERAL SANTOS CITY (MindaNews/ 18 September)—The SM Group was reportedly assigned a board seat at Indophil Resources NL, raising the possibility of the former’s entry into the Tampakan copper and gold project of Sagittarius Mines, Inc. (SMI).


Indophil owns 37.5 percent of SMI, which is controlled by Xstrata Copper, the world’s fourth largest copper producer.


The SM Group was assigned a seat in the seven-man Indophil board of directors by Alsons Consolidated Resources following a loan it extended to the Alcantara-owned conglomerate.


Early this year, the Alsons group hiked its shares in Indophil to 19.99 percent – up from 3.5 per cent by infusing US$99.4 million after a failed bid to sell its stakes to Zijin Mining Group of China three years ago.


A Business Mirror exclusive report said it was Banco de Oro, the SM Group’s banking unit, which provided Alsons the long-term loan to increase its shares in the Philippine operations of Indophil, an Australian exploration company.


Alson then reportedly nominated the SM Group to take one of the two board seats in Indophil following its increased share in the said exploration company.


SM Group officials could not be immediately reached for comments.


Xstrata Copper, a subsidiary of Xstrata Plc, holds the majority of the controlling equity at SMI at 67.5 per cent.  Xstrata Plc itself is in merger talks with Glencore International Plc. Xstrata Plc is the world’s largest copper producer.  If its merger talks with Glencore, which owns Pasar Corporation, push through, the merged company could become one of the top two biggest mining companies in the world.


Exercising option


The SM Group could exercise its option in Indophil to acquire the latter’s mining interests in the country.


Aside from SMI, Indophil holds substantial exposures in other mining projects in the Philippines.  Among them are the Itogon Gold Project in Benguet, the separate copper and gold projects in Buda and Mt. Kinabalin in Bukidnon and the Bunawan Gold Project in Agusan del Sur.


Both Indophil and Alsons were in serious talks to sell their stakes in SMI following a corporate rift with Xstrata Plc, which attempted a friendly takeover of the firm in 2008.  The proposed buyout, however, failed as Indophil shareholders rejected the offer of the Switzerland-based mining company.


Xstrata gained majority control over SMI after it exercised its option in 2007.  Prior to its majority acquisition of SMI, Xstrata provided Indophil the financing to conduct drilling and exploration activities in the remote mountain villages in Tampakan, South Cotabato and neighboring towns of Columbio in Sultan Kudarat, Kiblawan in Davao del Sur and Malungon in Sarangani.


From over 100,000 hectares of exploration area, SMI is now down to a little less than 20,000.


Last year, SMI said it is further trimming down its mineral development site to less than 4,000 hectares – all concentrated in Tampakan.


The Tampakan project is touted as having the world’s largest untapped copper and gold deposits with a potential annual average production of 375,000 tons of copper in concentrate for at least 17 years from 2016.


However, SMI last month announced it is moving its production target year to 2018 following the rejection of its environmental compliance certificate (ECC) application in part because of strong opposition from the local Catholic Church and environmental groups.


The Department of Environment and Natural Resources, however cited an existing provincial ordinance that bans open pit mining in South Cotabato in denying the ECC application of SMI.


SMI is hoping that the new mining policy of President Benigno Aquino III will overturn the controversial provincial ordinance. (Edwin Espejo/MindaNews contributor)