US embassy cable - 05MANILA3811

UNCLAS SECTION 01 OF 05 MANILA 003811 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/IFD/OIA, EB/ESC, AND EAP/PMBS 
DOE FOR TOM CUTLER 
USDOC FOR 4430 ITA/MAC/DBISMEE/KBOYD 
BANGKOK FOR REO JAMES WALLER 
DEPT OF INTERIOR FOR USGS PLEAHY, JMEDLIN, AND GCOAKLEY 
STATE PASS USAID FOR JLEWIS 
 
E.O. 12958: N/A 
TAGS: EMIN, SENV, EINV, ECON, BEXP, RP 
SUBJECT: USGS DISCUSSES JOINT MINERAL RESOURCES ASSESSMENT 
 
REF: A) MANILA 11 
 
     B) MANILA 259 
     C) MANILA 2678 
     D) MANILA 2856 
 
Sensitive but Unclassified - Protect Accordingly. 
 
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SUMMARY 
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1.  (SBU) In meetings in Manila with senior GRP 
officials, USGS Acting Director Leahy confirmed the U.S. 
Geological Survey's (USGS) intentions to develop a work 
plan with the GRP to conduct the first phase of a mineral 
resources assessment of the Philippines.  Department of 
Environment and Natural Resources Secretary Michael 
Defensor endorsed the concept and signed a letter to 
Interior Secretary Norton to affirm the GRP's plans to 
pursue the project and secure funding for a contract with 
USGS.  Phase one could be accomplished in one year for 
about $1 million, according to USGS.  Phases two and 
three, in which more comprehensive findings would be 
generated, would cost about $3-8 million depending on the 
scope of work and the GRP's in-kind contributions.  There 
appears to be broad-based support among the GRP's 
agencies, potential investors, and the American Chamber 
of Commerce.  This multi-year assessment could provide 
opportunities and incentives for the national and local 
governments to implement reforms that will ensure benefit 
sharing, environmental protection, and sustainable 
economic progress.  End Summary. 
 
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GRP ENDORSES CONCEPT FOR MINERAL RESOURCES ASSESSMENT 
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2. (U) U.S. Geological Survey (USGS) Acting Director 
Patrick Leahy and USGS Lead Coordinator for Asia and 
Pacific Jack Medlin visited Manila August 2 - 6 to 
explore prospects for the Department of Environment and 
Natural Resources, Mines and Geosciences Bureau 
(DENR/MGB), and USGS to jointly conduct a state-of-the- 
art inventory of mineral resources in the Philippines 
(ref C).  DENR Secretary Michael Defensor signed a letter 
to Interior Secretary Gale Norton to affirm the GRP's 
intentions to proceed with the project and secure funding 
to support a contract with USGS (para 15).  USGS may 
dispatch several experts in the coming weeks to develop a 
work plan with DENR's Mines and Geosciences Bureau for 
phase one, which involves integrating existing geologic 
data and maps in digital format in a publicly-released 
report.  According to USGS, Secretary Norton will address 
a letter to Secretary Defensor in response. 
 
3. (U) USGS Leahy and Medlin met with Board of 
Investments Undersecretary Elmer Hernandez; the Inter- 
Embassy Mining Group (which includes representatives of 
the Australian, British, Canadian, and American embassies 
and our respective chambers of commerce); DOE 
Undersecretary for Energy Exploration and Development 
Balce; NEDA Chief Economic Development Specialist Art 
Cebuma; Regional Environmental Officer James Waller; the 
American Chamber of Commerce; DENR Assistant 
Secretary/MGB Director Jeremias Dolino; the Chambers of 
 
SIPDIS 
Mines of the Philippines; post's Economic Policy Group, 
which includes the Economic Section, FCS, USAID, FAS, and 
other agencies; World Bank Acting Country Director 
Christopher Hoban; House Appropriations Committee Vice 
Chair Luis Villafuerte, and DENR Secretary Michael 
Defensor. 
4. (U) The assessment would be the first of its kind.  To 
date, piecemeal surveys of the archipelago's natural 
resources have covered few commodities and perhaps less 
than half of the country's area.  Data and maps are 
available only in paper form.  Digitized formats are 
required in applying models to predict where large, 
recoverable mineral deposits might be discovered.  The 
Philippines perhaps has untapped mineral wealth of more 
than US$840 billion, or ten times the country's gross 
domestic product and fifteen times its national debt. 
One-third of the country may have recoverable deposits, 
although titles and permits have been issued for only a 
small percentage of these lands.  Whereas the 
constitution prohibits foreign nationals from owning 
land, the Supreme Court's ruling of December 2004 permits 
companies that are up to 100% foreign-owned to enter into 
agreements to invest in large-scale exploration, 
development, and utilization of minerals, oil, and gas 
(ref A). By identifying probable locations of major 
deposits of copper, gold, nickel, chromium, and other 
minerals, public officials could make informed decisions 
in implementing the country's Minerals Action Plan and 
allocating mining rights.  USGS's policies call for 
national governments to publicly release the results of 
these collaborative studies. 
 
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WORK PLAN AND FUNDING FOR PHASE ONE 
----------------------------------- 
 
5. (U) In response to Secretary Defensor's invitation, 
USGS expressed intent to follow-up with DENR/MGB to 
develop a bilateral work plan for phase one, which would 
involve integrating existing data and maps in digital 
format.  Phase one would require eight scientists 
(probably four Americans at USGS and four Filipinos at 
DENR) working full-time for one year or more, depending 
on the quantity, distribution, and quality of data and 
the scale of geologic mapping.  Potential sources of 
information include the GRP's agencies, USGS and its 
archives, universities, third-country governments, and 
cooperative commercial enterprises.  USGS and DENR/MGB 
would publish this material to stimulate interest and 
investment.  The report, comprising digitized data and 
maps on CD/DVD, would be made publicly available, 
including on the internet. 
 
6. (U) The GRP would be responsible for all expenses 
following initial consultations.  The estimated cost for 
the first phase is US$1-2 million, or perhaps less if the 
GRP maximizes its in-kind contributions of labor and 
digitization of data.  USGS officials are confident that 
DENR/MGB's competent and dedicated scientists have 
sufficient expertise to carry out the project. 
 
7. (U) Secretary Defensor said he would seek funds for 
this activity in the 2006 budget.  Appropriations 
Committee Vice Chairman Luis Villafuerte, who was present 
at our meeting with Defensor, expressed clear and strong 
support.  Congressman Villafuerte formerly served as 
Governor of Camarines Sur Province.  In the neighboring 
provinces of Camarines Norte and Albay, there are 
deposits of copper, zinc, gold, and silver and several 
small- and medium-sized mining operations. 
 
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PHASES TWO AND THREE 
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8. (SBU) In phase two, experts could generate new data on 
the archipelago's geology, geochemistry, and geophysics 
through statistical mapping, sampling, and aeromagnetic 
and satellite imaging.  Target commodities could include 
a dozen or more metallic and non-metallic minerals.  If 
existing data is sufficient for the scope of the 
assessment, wide-ranging sampling might not be required. 
However, for a nationwide survey, more data readily is 
available on mineral deposits in Luzon and Visayas than 
those in Mindanao.  In phase three, technology would be 
transferred to DENR/MGB as USGS applies and refines its 
advanced statistical models to identify probable 
locations of large, recoverable deposits.  The final 
joint product would synthesize their findings and provide 
extensive digital information for the public domain at no 
expense to end users save minimal fees for producing CDs 
or DVDs.  The cost estimate for phases two and three is 
US$3-8 million over several years, depending on the 
scope, the GRP's in-kind contributions, and the extent of 
information gathered in phase one. 
 
9. (U) The assessment would not include offshore 
resources.  Oil and gas, offshore or onshore, also might 
not be part of this survey.  Department of Energy (DOE) 
Undersecretary Balce, however, expressed interest in 
assessing coal, coal bed methane, and geothermal energy 
resources. 
 
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SUPPORT FROM BOI, DOE, NEDA, AMCHAM, AND CHAMBER OF MINES 
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10. (U) In addition to DENR, the Board of Investments, 
DOE, and the National Economic and Development Authority 
are very interested in pursuing this project.  Both 
AmCham and the Chamber of Mines of the Philippines 
endorsed it.  AmCham sent a letter of support to USGS 
Leahy, citing the benefits of a revitalized mining sector 
for business and investment.  Mining interests in other 
countries, of course, would have equal access to the data 
and their investments also could be expected to increase. 
 
11. (SBU) The Philippines is one of the world's most 
highly mineralized countries and ranks among the top five 
in copper and gold.  Its deposits are key components of 
global mineral resources.  We understand that the 
assessment would help complete the picture for USGS's 
study of global mineral reserves.  It also would draw in 
funds for USGS's partnerships with U.S academic 
institutions. 
 
12. (U) Since the GRP initiated its shift in policy from 
tolerance to active promotion of mining in 2004 (ref A), 
mining companies from Australia, Canada, and China have 
shown more interest in the Philippine mining sector than 
have their U.S. counterparts (ref D).  In addition to 
mining itself, however, investment in the sector will 
present opportunities for ancillary businesses in which 
U.S. companies have certain competitive advantages, such 
mining equipment, transportation, information technology, 
and environmental planning.  Development of the sector 
will depend on the GRP's ability to remove significant 
barriers to investment and development, including 
negative perceptions of the industry due to the mine 
waste disaster on Marinduque Island in 1996 (ref B) and 
continuing delays in implementing key regulatory reforms 
(ref C). 
 
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COMMENT 
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13. (SBU) As USGS and DENR/MGB develop a work plan and 
negotiate a contract, we should be prepared for 
skepticism and perhaps opposition from environmental NGOs 
and some Catholic bishops here.  Proprietary land rights 
remain a controversial issue throughout the Philippines 
among disaffected communities (some involved with the 
Communist and Muslim insurgencies).  The public rollout 
of the survey will be important, and we are discussing 
with DENR how to proceed.  A gradualist approach could 
provide time and incentives for the public, private, and 
non-profit sectors to implement regulatory reforms that 
would ensure benefit sharing, environmental protection, 
and sustainable economic progress.  Like other 
assessments for which USGS has provided technical 
assistance, the results would be publicly released and 
the host government would be identified as the principal 
author.  USGS will not attach other conditions to the 
project.  National, provincial, and local officials will 
be responsible for ensuring responsible mining practices 
and their track record in this regard is weak.  The 
minerals assessment, however, will provide opportunities 
for the U.S. to engage the GRP constructively in the 
direction of reform and liberalization. 
 
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NEXT STEPS 
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14. (SBU) Next steps include: 
 
-- USGS dispatches several experts to Manila in late 
August or October to develop a work plan with DENR/MGB. 
 
-- The GRP secures funding in its budget. 
 
-- The USG conducts Circular-175 inter-agency review 
process. 
 
-- The USG and GRP negotiate an MOU, perhaps within the 
framework of the bilateral Science and Technology 
Agreement of 2003. 
 
-- Post will continue to report on developments such as 
the status of the Minerals Action Plan and potential 
technical assistance initiatives that could facilitate 
reforms. 
 
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SECRETARY DEFENSOR'S LETTER TO SECRETARY NORTON 
 
SIPDIS 
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15. (U) Following is the text of DENR Secretary Michael 
Defensor's letter of August 5, 2005, to Interior 
Secretary Gale Norton, in which Defensor requests that 
 
SIPDIS 
USGS develop a work plan with DENR/MGB to conduct a 
mineral resources assessment. 
 
Dear Secretary Norton: 
 
We greatly appreciate the discussion-meeting between the 
DENR-Mines and Geosciences Bureau and Dr. Patrick Leahy, 
Acting Director of the USGS, Dr. Jack Medlin, Chief of 
the Asia and Pacific Geology of the USGS, and Mr. Robert 
Ludan, Economic Counselor, and Mr. Stephen Thompson, 
Economic Officer, both of the Embassy of the United 
States of America.  We believe that we are on the right 
track to the revitalize the Philippine Minerals Industry 
especially with the possible joint undertaking of the 
mineral resources assessment of the Philippines. 
 
We wish therefore that this undertaking be carried out in 
the soonest possible time.  Thus, we are respectfully 
requesting for two (2) experts from the USGS who would 
work closely with our Mines and Geosciences Bureau 
counterparts that would prepare the comprehensive plans 
for the proposed joint mineral resources assessment.  It 
is our intention to seek funding to support a contract 
with the USGS and this joint planning team will develop 
the work plan. 
 
We look forward to your consideration of this matter as 
we believe that the information that will be generated 
from this project will further boost the revitalization 
of the Philippine mining industry. 
 
Thank you. 
 
Very truly yours, 
 
Michael T. Defensor 
Secretary 
 
SIPDIS 
 
End text. 
 
JOHNSON