August 23, 2012 / 10:28 AM / 5 years ago

Xstrata unit warns may delay $5.9 billion Tampakan mine startup

A logo of the Swiss mining company Xstrata is pictured at its headquaters in Zug, February 6, 2012. REUTERS/Romina Amato

MANILA (Reuters) - A unit of global miner Xstrata Plc XTA.L warned on Thursday it may delay the start of production at its $5.9-billion Tampakan copper-gold project in the southern Philippines as a result of regulatory and security concerns.

Until now, Sagittarius Mines has said it was confident it would be able to start production in 2016, despite being denied permission to start building the mine, which is believed to contain one of the world’s biggest copper-gold deposits.

The firm had wanted to obtain environmental clearance early this year but the government refused, meaning mine construction -- expected to take 2-3 years -- is unlikely to start in 2013 as planned.

“Our project has experienced a number of challenges, particularly in the past twelve months,” Sagittarius spokesman John Arnaldo said in an e-mailed statement.

“Until we have addressed these challenges, and obtained the necessary approvals from the government and community, it is difficult to nominate a definitive production date,” he said.

The mine is estimated to contain 15 million tonnes of copper and 17.6 million ounces of gold. It is the biggest of several mining projects expected to bring in up to $12 billion in new investments to the Philippines in the next five years.

A provincial ban on open-pit mining has been in effect since 2010. South Cotabato’s governor Arthur Pingoy told Reuters last month that the mining ban in his province, which is home to Tampakan, could be lifted only by a court order.

Citing that ban, the Department of Environment and Natural Resources has not issued environmental clearance for the project sought by Sagittarius, which is also part-owned by Australian miner Indophil Resources NL IRN.AX.

Security problems around the project site have also restricted Sagittarius’ field activities, Arnaldo added. Local media reported that a security guard at the site was shot dead in June, about a month after another security guard was injured also in a shooting incident.

Tampakan, which will have a 17-year lifespan, is believed to be potentially the largest mine in the Philippines, a country that sits atop an estimated $1 trillion worth of mineral wealth.

Reporting by Erik dela Cruz; Editing by Daniel Magnowski

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