By Lawrence Agcaoili, Manila Standard -
http://www.manilastandardtoday.com/?page=business01_july05_2006
5th July 2006
The government has made an offer to Chinese investors interested in investing as much as $1 billion to reopen the mothballed nickel mine of Philippine Nickel Corp. in Nonoc Island, Surigao del Norte.
Finance Secretary Margarito Teves told reporters that Manila forwarded a proposal to Jinchuan Nonferrous Metals Corp. and Shanghai Baosteel Group Corp. during a visit of company officials late last month.
“We made them an offer and the ball is in their court,” Teves said. Details of the offer were not disclosed.
Teves said the government presented feasibility and financial viability studies to the two Chinese companies.
The entry of Jinchuan and Baosteel into Philnico hinges on the reappraisal of the company’s mining assets, financial restructuring and the mining firm’s plan to settle its obligations to the national government.
The finance chief said the government had already reached a compromise with Philnico.
Philnico is a nickel processing plant in Nonoc Island, Surigao City, which started operations in 1975 and shut down in 1986 due to technical and financial problems. The Nonoc asset was transferred to the Asset Privatization Trust, now known as the Privatization and Management
Office.
In September 1989, Philnico, then controlled by the Cabarrus Group before the 1984 government foreclosure, purchased the nickel refinery from the APT.
In May 1995, Pacific Nickel Holding Ltd. (now known as Philnico Holding Ltd.) acquired 90 percent of the shares in Philnico and the rights and interests of Philnico project for close to $300 million.
However, it only managed to pay $1.254 million and owes the government over $260 million, excluding advances. The committed investments by the Chinese investors are being held up by Philnico’s debt, which is now over $300 million.
Representatives of the Chinese companies on June 28 entered into a memorandum of understanding with the Department of Finance and Philnico. The pact calls for the settlement of all issues that prevented the mothballed nickel mine from reopening.
The two Chinese companies have committed to inject as much as $2 billion in investments during the state visit of Chinese Prime Minister Hu Jintao to the Philippines in April last year.
Jinchuan is China’s biggest nickel mining and processing corporation with a nickel reserve of 5.5 million tons, while Baosteel is one of the world’s largest steel companies.
Nonoc Island, with a land area of 5,825 hectares, has more than 144 million metric tons of nickel ore reserves, making it one of the largest in the world. At the height of its operation, the Nonoc Nickel Refinery employed more than 3,000 workers and generated annual revenues between $300 million and $350 million.
