Benguet loses right to develop Kingking mine

(UPDATED) — The government has ordered listed Benguet Corp. to give up its rights over the Kingking copper-gold mine in Compostela Valley, saying it had fallen short of its commitment to develop the property. In a two-page letter dated January 15, Environment Acting Secretary Eleazar P. Quinto ordered the country's oldest miner to turn over the rights to estranged partner Nationwide Development Corp. (Nadecor). "This department remains unsatisfied with [Benguet's] efforts to complete the mineral exploration activities in the contract area," the agency said. "The accomplishments of Benguet have fallen short of the commitments that the parties had jointly assumed," it added. Benguet furnished the Philippine Stock Exchange (PSE) a copy of the order on Tuesday, but insists the government still considers it a co-contractor of the gold project. "Benguet takes the position that it remains an operator of the project and [it] is ready and prepared to undertake all the requirements under the mineral production sharing deal," Benguet Assistant Corporate Secretary Reynaldo P. Mendoza told the bourse. But Nadecor financial consultant Raymond Ricafort told GMANews.TV Nadecor had waited for 12 years for Benguet to bring Kingking into operation, to no avail. "Under the law and our contract, we had a deadline to put Kingking into production. Since Benguet failed to deliver, we sought permission from the Environment department that we be allowed to develop it ourselves," Ricafort said in an interview. The agency's January 15 order, he said, precisely granted that request. He noted that for the last decade, Benguet had failed to conduct a feasibility study on the mine, and that it clearly has no money to do the job. "I hope Benguet allows us to peacefully move on and do not deprive employment for 3,000 people and block $1.3 billion in potential investments," Ricafort said. "Clearly, they're trying to use Kingking to continue to say that they still have valuable assets, when in fact the asset only becomes theirs if they fully satisfy their obligations under the contract," he added. "I dare the Philippine government to investigate Benguet if it is truly eligible under current laws to own any mining claims," Ricafort said. Kingking turnover In its Jan. 15 letter, the Environment department cited a report of the Mines and Geosciences Bureau confirming Benguet's failure as operator of the copper-gold mine. It also said "Benguet shall turn over to Nadecor the peaceful possession of the contract area, for the immediate resumption of operations therein by the latter." The order effectively granted Nadecor's plea for a partial reconsideration of the original order issued last November 23. At the same time, the Environment department said in its latest order: "Nadecor and Benguet shall endeavor to meet faithfully their respective obligations under their existing operating agreement, and their joint obligations under [the sharing deal]." In its disclosure to the bourse on Monday, Benguet said the Kingking project, through its initiative, has enjoyed more than P1.2 billion in investments over the years. It added that the mine has one of the most extensive drilling record at 89,599 meters of drilling depth, "making it one of the most explored mining properties in the Philippines." It said it was preparing its reply to the Environment department's latest letter. Estranged partners Benguet and Nadecor, which both claim rights to the Kingking mine, resumed their quarrel late last year, with each having signed a deal with separate third parties to finance the operations of the copper-gold mine. Contractor Nationwide Development Corp. (Nadecor) has signed an operating deal with Rusell Mining and Minerals, Inc. for the Kingking mine, while co-contractor Benguet Corp. has partnered with Chinese miner MinMetals International (HK), Ltd. to finance the project. Benguet earlier said it was moving forward with MinMetals, an international trading firm with branches in Shanghai, Australia, South Africa and Hong Kong, to complete a feasibility study and start operations. Benguet claims to be the registered operator of Kingking, with an approved mineral production sharing deal over 1,656 hectares in Pantukan, Compostela Valley, with Nadecor as the “former leaseholder/royalty holder." But Nadecor insists the Benguet-MinMetals deal is void, noting that it had terminated Benguet as the operator of the Kingking project as early as August 29, 2008. This was following Benguet’s alleged failure to complete a feasibility study and its “clear financial incapability to fund the [study] and bring the Kingking project into commercial production." It also said it would separately raise $1.3 billion to start commercial operations. On October 20, Nadecor submitted to the Environment department an amended exploration work program committing to spend $43.5 million to complete the feasibility study. Last month, the PSE and Securities and Exchange Commission suspended the trading of Benguet shares after the miner failed to disclose default notices from creditors. The company has about P1.5 billion in debts. Benguet has offered various creditors to pay a fifth of its P1.56-billion principal debt in cash, saying a settlement would benefit all parties. The creditors have yet to agree to the offer, while trustee Philippine National Bank has issued the company a default notice on its debt.