Truly world-class

MANILA, Philippines - Can mining, environmental protection and respect for indigenous peoples’ rights co-exist? “Yes, its doable,” Philex Mining president Eulalio Austin Jr. said in an interview with The STAR.

Austin has been described as a “diamond in the rough.” And rightly so. He is a top-notch mining engineer and a full-blooded Igorot, a Kankanaey from the Cordilleras who always had the interest of the indigenous people (IP) at heart. He may not be your typical mining chief executive – Ivy League school-educated, mestizo-type, English-speaking manager – but he rises above all them because he speaks with so much sincerity when he says he will always look out for the interest of the IP and the communities surrounding their mine sites.

Born of parents who were public school teachers, Austin was asked by his father to take up mining engineering at St. Louis University in Baguio and being the dutiful son that he is, he followed. He may not come from a family that was into the mining industry, but he knows that many fellow Igorots were content with engaging in small-scale mining or working as mine site workers instead of attaining higher education because that was part of their culture. He wanted to work in the industry, but in a mining company as an engineer who can bring about change in the mining industry and who can uplift the lives of its workers.

Austin was born and raised in the remote barangay of Tadian in the Mountain Province where he attended a Catholic school founded by Belgian missionaries. For his higher education, he moved to Baguio to study at SLU which was then on its third year of offering a mining engineering course.

After finishing college, he took the licensure exam where he placed 8^th in 1982. For his first job, he joined Philex in 1983 as a junior mine engineer because he was hearing good things about the company and because he didn’t want to be too far away from his family.

He rose from the ranks to become senior vice president for operations in 2011, president and COO, and then president and CEO of Philex in 2012 after the company’s former top executive retired. The only problem with accepting the post is that he had to move to Manila. But he said yes to MPIC group chairman Manuel V. Pangilinan without hesitation. (His wife is a high school principal in Baguio while both his children studied in Baguio.)

Seven months later, the Mines and Geosciences Bureau ordered Philex to cease and desist from operating its Padcal copper-gold mine in Tuba, Benguet after strong rains caused one of its tailings storage facility to leak from a small hole and to discharge non-toxic mine waste into the Balog Creek and Agno River.

To make matters worse, the year ushered in a regime of declining metal prices, resulting in five-year and six-year lows for gold and copper by 2015.

Austin told this writer that when he assumed the presidency of Philex, he knew that one mining accident could damage decades of goodwill that the company had created among its stakeholders as well as its hard-earned reputation started by the company’s founders. And so he prepared himself for such, and then the accident happened.

Austin quickly pointed out that what was important was the fact that Philex did not escape its responsibility. It proceeded to pay the P1 billion fine, and then a year later, it was allowed to resume partial operations to rehabilitate the compromised tailings facility and undertake a clean-up program. Two years after it was ordered to cease operations, the MGB allowed Philex to fully resume operations in its Padcal mine.

Last July 26, Environment Secretary Roy Cimatu inspected the Padcal mine site, particularly its tailings storage facility. During the visit, Austin assured Cimatu that the facility’s open spillway, which replaced its underground draining system since August 2013, can handle the amount of rainwater that the worst typhoons and earthquakes had caused. Cimatu acknowledged Philex’s efforts to upgrade its facilities and said that the company and Padcal mine have been consistent in the implementation of various programs on community development, nation-building and environmental protection.

Poster boy

How did Philex manage to bounce back from the accident to become the poster boy of sustainable and responsible mining in the Philippines, a fact that has been recognized worldwide?

By the first half of 2016, the company was also the best performing mining company in the country, posting the highest net income and best return on assets and return on equity ratios among publicly listed metallic mining companies in the country.

Philex, according to Austin, has been very conscious of its responsibility of being temporary safekeepers of its mine sites for the future generations.

Philex has been operating the Padcal mine for the past 61 years to become one of the oldest operating mines in the country. In October 2015, an additional 20 million tons of ore reserves were declared within the current ore body, extending the mine’s life from 2020 to 2022.

It was in 2008 when the Hongkong-based First Pacific group acquired an initial 20.16 percent stake in Philex. By 2009, its stake grew to 40.7 percent. A year later, it purchased an additional 5.9 percent interest. Metro Pacific Investments Corp. (MPIC) now controls Philex.

It was one of only 12 large-scale mining companies that were allowed to continue operating by former Environment secretary Gina Lopez because they did not pose a significant threat to the environment.

For the last five years, Philex has planted 2,850 hectares with 10 million trees. If it costs between P80 million and P100 million to plant one hectare of land, just imagine how much the company has spent for replanting alone?

About three percent of its profits are also set aside for environmental protection and community programs, double the 1.5 percent which mining laws require.

So far, the company has reforested 3,922 hectares, supported more than 2,000 families and 6,000 high school students, taken care of 15,000 people living in the community, served 6,000 patients, spent P117 million for various corporate social responsibility initiatives, and allocated more than P400 million for various projects under its social development management program over the last five years. Its CSR campaign covers information, education and communication, health and sanitation, education, livelihood and skills development, and support to public infrastructure.

Just recently, Px Community Foods and Marketing Inc., the social enterprise set up by Philex’s CSR arm Philex Group Foundation Inc., has entered into a strategic partnership with Ryokudo Eco-Services and Trading Inc. for the nationwide distribution and export of its roasted coffee beans to provide a ready and fair trade market for indigenous coffee farmers in Padcal.

In 2016, Philex paid about P1.35 billion in national and local taxes as well as various fees.

According to Austin, Philex plans to continue these programs even after their mining operations in Padcal cease in 2022 as part of their advocacy in “conscientious mining.”

Austin prefers the word “conscientious” over “sustainable” or “responsible” mining, the two latter being much-abused and vague terms. He defines conscientious as being right and principled.

In an interview with The CEO Magazine, he said that “Philex has survived for the last six decades because of the workforce’s resilience and the company’s constant adherence to the corporate ideals and culture of responsibility; always looking out for the safety of our people as well as the welfare of the communities and preservation of the environment around our areas of operation.”

“We owe this to our founders, who ensured that the rights of our employees and of the indigenous people were always respected even before the mine was started,” he said.

But of course, it helps that Austin is an IP himself. There are certain things that are non-negotiable for him, he said, and this includes touching agriculture lands which are sacred to them.

At Philex as well as in other mining companies, indigenous people are prioritized in terms of hiring. The problem arises when they need to hire workers for jobs that require higher educational attainment requirements. “And that is why everytime I get the chance, I always tell the IP to go to college,” he said. This is also the reason why Philex spends a lot to provide high-quality education to its surrounding areas, paying for the salaries of teachers and employees and the maintenance of the buildings.

Challenges remain

An acknowledged emerging leader in the local mining industry, Austin admits that the Philippine mining sector continues to face a number of challenges.

First is the need to rationalize the current revenue sharing scheme. Around 60 percent of mining royalties goes to the national government and 40 percent to the local government units. Austin said the local governments have been complaining that sometimes, it takes three years before their share is released. He supports legislative proposals for a direct release to the LGUs of their share, instead of it first going to the national treasury.

The existing tax regime for mining companies consists of a two percent excise tax, a corporate income tax of 30 percent, and royalties paid to IPs and mining claim owners of five percent of gross revenues, making the local mining industry one of the most heavily taxed industries in the country.

It is the two percent excise tax that is shared by the national government and LGUs on a 60-40 basis.

Second is the problem of small-scale mining. At present, it is the provincial governors that issue permits to small-scale mine operators. Unfortunately, Austin said local governments do not usually have the capability to monitor or regulate small-scale mining companies. He suggests that there should be one regulatory body, like the Mines and Geosciences Bureau (MGB) that should monitor and regulate small-scale mining in the country.

 Third, Austin said that under the Mining Act, it is a multi-partite team composed of the DENR, LGU, IP, agriculture, fisheries, and the health department that is tasked with monitoring compliance with environmental and regulatory standards. He believes that an independent body could better do the job.

Fourth is the ban on the open pit mining method for copper, gold, silver, and complex ores all over the country declared by former Environment secretary Gina Lopez as well as the latter’s cancellation of certain mining contracts located in watershed areas.

Just recently, Cimatu was quoted as saying the ban on all prospective open-pit mines would stay and would be discussed at the inter-agency Mining Industry Coordinating Council.

The Chamber of Mines of the Philippines said that the ban is a serious policy decision that needs to be studied carefully, considering that open pit mining is an accepted practice worldwide that is safer than underground mining.

Austin, during the interview, clarified that the ban does not cover those whose permits have already been approved prior to Lopez’ proclamation, but Lopez has said that those that have been approved should reconsider.

Philex has a $1.2-billion copper-gold project in Mindanao, the Silangan (Surigao) mining project, which while not covered by the open pit mining ban, was nevertheless ordered cancelled being located in a watershed. The company, however, has maintained that none of the areas covered by its Silangan mining MPSA is in a proclaimed watershed forest reserve where mining is prohibited.

But even if the Silangan project is not covered by the open pit mining ban, Austin said this poses a problem as far as attracting investors into the project. The Silangan mine is said to be Philex’s next key revenue generator once Padcal closes in 2022. The company has spent more than P17 billion so far for Silangan’s exploration and related activities.

Lastly, Austin said that under the Mining Act of 1995, companies are required to submit a final mine decommissioning plan that will state all the programs they will adopt once they stop mining in the areas. He disclosed that they have already submitted a plan for Padcal in preparation for its decommissioning after 2022, but there has been no approval yet from the MGB. An initial P75-P100 million will be set aside for the plan, which will include reforesting disturbed areas, training host communities, donating buildings, training communities on meat processing, organic vegetable raising and coffee planting among others.

Taking it up a notch

Even if referred to already as the poster boy of sustainable and responsible mining in the country, Austin said Philex still wants to intensify its adherence to global mining standards.

To achieve this, the company is looking at how it can attain the mining safety and environmental standards to which mining companies in Australia and Canada adhere to, and how it can pattern its IP programs with that of the IP Rights Act (IPRA) of Canada.

“Yes, we are called a sustainable or responsible mining company. But we want a third party to validate that,” he said.

Austin disclosed that they have already been following Australia and Canada in terms of designing their tailings ponds, their underground mining procedures, “but we also want to know how they deal with IP as well as other environmental concerns.”

He added they still want to improve their safety standards, despite the fact that the company has already obtained its certification for Integration Management System (IMS) granted by TAVRheinland covering Philex’s environmental management system and safety management. The IMS certification consists of the ISO 14001:2004 and the OHSAS 18001:2007, making the Padcal mine compliant with a DENR order mandating large-scale mining companies to secure ISO 14001 certification.

Philex is looking at adopting Canada’s Towards Sustainable Mining (TSM) initiative which is a CSR program developed by the Mining Association of Canada (MAC) to improve environmental and social practices in the mining industry.

TSM requires mining companies to annually assess their facilities’ performance across six areas, including tailings management, aboriginal and community outreach, safety and health, biodiversity conservation, crisis management, and energy use and greenhouse gas emissions management. It is a set of tools and indicators to drive performance and ensure that key mining risks are management responsibly at members’ facilities. It is mandatory for MAC members but there are mining organizations from other countries that have voluntarily joined it, such as Finland, Argentina and Botswana.

For each indicator area, facilities assign a letter grade to reflect their performance, the ratings ranging from Level C to Level AAA. Level A equates to good management practice while AA and triple AAA mean excellence and leadership.

“Based on our own assessment, we are probably an ‘A’ but we want to go for ‘AAA.’ To be a member of TSM will entail huge cost and lots of work for us, but are seriously considering joining. Of course, we want the entire Philippine mining industry to use Canada’s standards and join TSM if we really want to adopt global mining practices,” Austin said.