Philippine Gold-Rush Town Braces for Battle Over Mining Rights

Franco Tito has fought small-scale gold diggers like himself for 20 years to keep control of a 100- meter mountain tunnel in the southern Philippines. Now he’s girding for battle against the world’s biggest mining companies.

“You can’t expect miners like us to give up to overseas investors our only source of livelihood,” said Tito, 49, the chief of Diwalwal, a gold-rush village of 40,000 people on Mindanao island. “Miners may again take up arms.”

The government struck down claims on public land at Diwalwal in 2002 after more than 80 prospectors died in tit-for-tat killings and cave-ins. It allowed them to keep tunneling in return for a share of the income in fields estimated to be worth $1 billion. Now officials are trying to lure companies such as Newmont Mining Corp. and AngloGold Ashanti Ltd. to bid for a $70 million development contract to be awarded this year.

The country needs to win overseas investment before metal prices decline further, said Horacio Ramos, director of the state-run Mines and Geosciences Bureau in Manila.

At stake is President Gloria Arroyo’s plan to attract $6.5 billion to develop 24 Philippine sites, where copper, gold, nickel and other deposits may total $500 billion.

“We may have one of the biggest mineral deposits in the world, but if we take too long to develop them, they could be worth nothing,” Ramos said. The world price of gold has fallen 13 percent to $637 an ounce from its May 12 high.

Gold on an 8,100-hectare (20,000-acre) site in the Diwata mountain range, also known as Diwalwal, may be worth more than $1 billion. Geologists haven’t yet explored the lower part of the 900-metre (2,950-foot) range, said Antonio Apostol, chief geologist at the mines bureau.

Harmony Declines

Still, Harmony Gold Mining Co., the world’s fifth-biggest producer, decided not to bid for Diwalwal after visiting the mine last year, said Graham Biggs, a spokesman for Johannesburg-based company. He declined to say why.

Stephen Gottesfeld, spokesman at the Denver headquarters of Newmont Mining, the world’s second-biggest gold producer, and Michael Clements, investor relations officer at Johannesburg- based AngloGold Ashanti, the third-largest, declined to comment on any plans for Diwalwal.

Security concerns will deter companies from abroad, said Chris Brown, an analyst who covers the Philippine mining industry at ABN Amro Morgans Ltd. in Brisbane, Australia.

“I doubt that a major mining company would come in” to Diwalwal before small-miner issues are resolved, Brown said.

A Japanese soldier who stayed on after World War II alerted locals to the gold in the 1970s, according to village chief Tito. By 1983, thousands of Filipinos were panning for nuggets the size of corn kernels.

`Chaotic’

When easy pickings dried up, they used picks and shovels to dig tunnels. Gangs evolved to protect claims, culminating in a spate of poisonings, cave-ins and armed stand-offs that in 2002 needed the army to quell.

Even now, “it’s a chaotic situation,” said Peter Wallace, a director at the Australian-New Zealand Chamber (Philippines) Inc., an industry group in Manila. “You’ve got warlords intervening in mining.”

Competition among Diwalwal’s 27,000 miners is fierce because average incomes in the town have fallen 75 percent in a decade to 5000 pesos ($100) a month, Tito said.

State-run Natural Resources Mining Development Corp. collects 15 percent of ore mined: 44 million pesos’ worth in 2002-2003, Tito said. Miners hand over their 15 percent in sacks when they take ore to private processors in the village.

Wooden Shacks

Makeshift wooden shacks, home to three-quarters of residents, line the muddy rut that is Diwalwal’s main artery. There is no bank or post office, and government services amount to one health center. Municipal authorities responsible for the area are 21 kilometers (13 miles) away by a dirt road too rough for the average car.

“The government collects its share of the ore we mine but we never could really figure out where they put the money,” said Rodielyn Manugas, whose family moved to Diwalwal in 1998.

Manugas, 27, now the village council secretary, said she has lost count of the number of neighbors and friends who have died in cave-ins and other incidents.

Overseas companies will improve production standards at Diwalwal, said geologist Apostol. Only half the gold available is extracted from the ore mined and processors use high levels of mercury, he said.

“They don’t have the facilities required to extract the gold efficiently and they face serious health risks because they don’t know how to handle mercury,” he said.

Diwalwal’s miners will find jobs with whoever wins the development rights, said Ramos, the mines bureau director. Tito isn’t so sure.

“The better option for them would be to take up arms and just block investors from entering the area,” he said.

Source: quote.bloomberg.com