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MANILA - The local unit of Swiss cement manufacturer Holcim Ltd. expressed concern over the government's new mining policy.
Roland Van Wijnen, Holcim Philippines Inc. chief operating officer, told reporters that the company is closely watching Executive Order 79, which allows mineral production sharing agreements to be put up for bidding when the contracts expire.
The previous mining policy provides for the renewal of the contract for another 25 years under the same terms and conditions.
"The matter we are concerned about is our investment was all based on the law saying it is renewable for 25 years under the same terms and conditions and when bid out we have the right of first refusal. If that's suddenly changed after 25 years, all hands are off. I consider that unfair," said Van Wijnen.
While Holcim Philippines' MPSAs will not expire in a year or two, the cement manufacturer may need to seek applications to mine in new areas to support new capacity.
Another cause of concern is the moratorium on new mining applications until Congress approves a bill defining a new revenue sharing scheme.
"The executive order that came out rightly points at the benefits of sustainable mining practices that we support... But those kinds of delays are a concern for us because we don’t know how long they will take," Van Wijnen said.
Holcim Philippines needs to secure mining permits because they operate quarry sites, which is a form of open-pit mining.
The cement manufacturer is also urging the government to adopt separate revenue sharing and royalty schemes for metallic and non-metallic mining, a common practice in other countries.
"We still have to see the full impact of the executive order as the implementing rules and guidelines have yet to be completed, but we trust that our policy makers will recognize the vital role of the cement industry in supporting the country's infrastructure program and that it can only do so if it has sustainable access to raw materials," Van Wijnen said.
Holcim Philippines reported a 94 percent year-on-year increase in net income to P1.207 billion in the second quarter, pushing earnings for the six-month period ending June by 40 percent to P2.02 billion.
Sales grew 31 percent to P7.21 billion in the April to June period, and by 24 percent to P13.82 billion in the first semester.
Strong sales were supported by a 3 percent hike in prices in the second quarter and a 22-percent increase in volumes to 3.3 million metric tons in the first semester with cement demand peaking in May.
Its performance in the first semester puts Holcim Philippines on track to meet its volume growth target of 10 percent to 6 million metric tons or 150 million bags by yearend, Van Wijnen said.
The private sector accounted for 60 percent of cement demand in the first six months of the year driven by the low interest rate environment.
"The government has clearly overcome the issues we put on them in 2011. We are walking on two legs again, both on the private and public sectors. We expect this to continue for the remainder of the year and in the next few years," Van Wijnen said.
He however expects demand in the second half to weaken as construction slows due to rains, but said sales would exceed last year's as public-private partnership projects finally start and election-related spending trickle in.
In anticipation of sustained strong demand, Holcim Philippines will revive its grinding plant in Mabini, Batangas to add up to 22.5 million bags to its capacity when it opens next year.
Holcim Philippines is closely monitoring input costs, particularly power, which accounts for 60 percent of its variable costs.
Availability of power is equally challenging, said Van Wijnen, particularly in Mindanao where the company operates two cement plants. The firm has secured contracts with power suppliers while stepping up use of alternative fuels.
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