By Alex MacDonald
LONDON--A majority-owned unit of Glencore Xstrata PLC (GLEN.LN)
plans to cut up to 920 jobs and spending at its $5.9 billion
Tampakan copper and gold project in the Philippines due to ongoing
challenges in securing permits for the project.
Sagittarius Mines Inc., the project operator, said in a release
Monday that the project faces problems including a ban on open pit
mines in the province of South Cotabato, where the project is
located. It also hasn't gained consent for resettling affected
communities.
"With these challenges as yet unresolved, it has not proved
possible to make adequate progress toward our project goals and,
without a fundamental change in approach, progress is unlikely to
improve in the foreseeable future," said SMI Executive Vice
President, Justin Hillier, in a statement. Sagittarius Mines is
62.5% owned by Glencore Xstrata and 37.5% owned by Australia-based
Indophil Resources NL (IRN.AU).
As a result of the challenges, Sagittarius has plans to lower
capital expenditure and reduce its workforce until the issues can
be resolved. The company plans to cut its workforce by 85%, or
about 920 jobs, although no final number has been determined,
Sagittarius spokesman John Arnaldo said in an email. The company
also plans to reduce its monthly capital expenditure by
three-fourths to $1 million a month. He said that an updated
project capital expenditure figure would be provided ahead of the
final investment decision.
Mr. Hillier said it will take time to resolve the issues and for
the project to resume.
The Tampakan project is located on the southern island of
Mindanao and was due to start commercial production in 2019. The
project is the largest mining development in the country and is
expected to produce about 375,000 tons of copper and 360,000 ounces
of gold annually over a 17-year period, according to the company's
website.
The project secured a key environmental permit earlier this year
but it is still trying to remove a provincial open pit mining ban
that has been in place since 2010, despite a national mining policy
that runs counter to it.
Tampakan shareholder Indophil remains optimistic about the
project's future. "This is not a shutdown," said Indophil's CEO
Richard Laufmann in a statement. "This modification of activity at
what is a world-class minerals deposit is temporary, and every
effort will be made to restore the work program to its original
plan."
Indophil is in talks with Glencore Xstrata over the project's
development plan. Glencore announced in May a review of its global
project pipeline to determine how best to allocate its capital
given lower commodity prices and following the completion of its
multi-billion dollar merger with Xstrata earlier this year.
Glencore Xstrata CEO Ivan Glasenberg has expressed his dislike
for greenfield projects--or projects built from scratch--because
they tend to run over budget and behind schedule, but said he is
waiting for the completion of a project pipeline review to
determine which projects to keep or shelve.
Glencore earlier this year agreed to sell its greenfield
Peruvian Las Bambas copper project to secure Chinese regulatory
approval for its merger with Xstrata. It said at the time it was
prepared to sell Tampakan or one of three other greenfield projects
if it failed to sell Las Bambas within a set timeframe.
Write to Alex MacDonald at alex.macdonald@wsj.com
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