US embassy cable - 05MANILA5457

UNCLAS SECTION 01 OF 03 MANILA 005457 
 
SIPDIS 
 
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 PREPARES WORK PLAN FOR SURVEY OF MINERALS 
 
REF: A) MANILA 3811 
     B) MANILA 2856 
     C) MANILA 2678 
     D) MANILA 259 
     E) MANILA 11 
 
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SUMMARY 
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1.  In meetings in Manila with the GRP's senior 
geologists, a team of experts from the U.S. Geological 
Survey (USGS) drafted a work plan for the first phase of 
a mineral resources assessment of the Philippines.  Phase 
one involves gathering existing data in digital format 
for release to the public domain.  The estimated cost to 
the GRP for the first phase is US$1 million.  The 
Australian Development Agency (AusAID) concurrently is 
planning a feasibility study to provide US$18 million in 
grants to the GRP to conduct aeromagnetic imaging of 
selected areas of Northern Luzon and Mindanao.  These 
prospective studies might present timely opportunities 
for scientific and diplomatic cooperation between the 
U.S. and Australia to support the implementation of 
reforms that will ensure benefit sharing, environmental 
protection, and sustainable economic progress.  End 
Summary. 
 
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WORK PLAN FOR PHASE ONE 
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2.  U.S. Geological Survey (USGS) Lead Coordinator for 
Asia and Pacific Jack Medlin, Don Singer, and Barney 
Berger visited Manila November 5 - 12 to prepare a work 
plan for the Department of Environment and Natural 
Resources Mines and Geosciences Bureau (DENR/MGB) and 
USGS to jointly conduct the first phase of a state-of-the- 
art inventory of mineral resources in the Philippines 
(ref A).  During USGS Acting Director Patrick Leahy's 
visit in August, 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.  In September, 
Acting Director Leahy responded favorably on Secretary 
Norton's behalf and the team's visit was scheduled for 
November. 
 
3.  USGS's team met with DENR Assistant Secretary/MGB 
Director Jeremias Dolino and MGB's senior geologists 
assigned to the project.  In addition, Medlin met with 
Australian Development Agency (AusAID) Counselor Angus 
Macdonald; Department of Energy (DOE) Undersecretary for 
Energy Exploration and Development Balce; and the Inter- 
Embassy Mining Group (which includes representatives of 
the Australian, British, Canadian, and American embassies 
and our respective chambers of commerce). 
 
4.  The first phase (one year) involves integrating 
existing geologic data and maps in digital format in a 
publicly-released report.  In the second phase (one to 
two years), new geologic, geochemical, and geophysical 
data would be gathered.  In the third phase (one year or 
less), USGS would apply models to determine probable 
locations of large, recoverable deposits of copper, gold, 
nickel, chromium, and other minerals. 
 
5.  The scope of work for phase one is embodied in a 
draft letter of agreement which would be signed by USGS 
Acting Director Leahy and DENR Secretary Michael 
Defensor.  The principal tasks include creating a digital 
geologic map of the Philippines, establishing digital 
databases of stream sediment data and aeromagnetic data, 
and training. 
 
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FUNDING FOR PHASE ONE 
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6.  The estimated cost to the GRP for phase one is US$1 
million, although the GRP has not identified its source 
of funding.  The GRP would be obliged to commit an 
additional US$4 - 9 million for the second and third 
phases.  Initiating the first phase requires a letter of 
agreement, but the second and third phases require a 
bilateral memorandum of understanding (MOU).  (USGS plans 
to send post a final draft of the letter of agreement in 
early December.)  The Circular-175 U.S. inter-agency 
review process for an MOU could be facilitated through 
the U.S.-GRP Science and Technology Agreement of 2003. 
Circular-175 would provide a forum for more comprehensive 
review of our economic and geopolitical interests in 
advancing to phases two and three. 
 
7.  The GRP would allocate approximately US$300,000 of 
its US$1 million contribution to pay for digitization of 
data in the Philippines and new equipment for DENR/MGB. 
 
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AUSTRALIA CONSIDERS FUNDING AEROMAGNETIC IMAGING 
--------------------------------------------- --- 
 
8.  The Australian Development Agency (AusAID) is eager 
to support the rebirth of the mining sector.  AusAID 
Counselor Macdonald confirmed that Canberra is reviewing 
DENR/MGB's proposal for AusAID to provide US$18 million 
in grants to the GRP to conduct aeromagnetic imaging of 
selected areas of Northern Luzon and Mindanao and a 
request from the Chamber of Mines to help establish a new 
code for listing mining companies on the stock exchange. 
For the aeromagnetic survey, the GRP would be obliged to 
match AusAID's contribution with US$900,000.  Although 
Canberra has not formally committed to the aeromagnetic 
survey, AusAID intends to send two experts to Manila in 
early 2006 to conduct a feasibility study.  While 
DENR/MGB's proposal suggests that the GOA and GRP would 
have proprietary rights, a visiting Australian desk 
officer assured econoff that the data probably would be 
released to the public domain.  Australia and the GRP 
have discussed the possibility of doing an aeromagnetic 
survey for ten years, but negotiations were derailed in 
1998 primarily due to infighting between DENR and MGB 
over control of data. 
 
9.  Aeromagnetic data gathered by the Australians via 
helicopter or airplane could be incorporated into the 
second and third phases of a mineral resources assessment 
as new geophysical data.  In phase one, USGS and DENR/MGB 
plan to digitize aeromagnetic data that is on file with 
the GRP's DOE.  Much of the existing data is piecemeal 
and dates from the Marcos era.  In phase two, USGS could 
gather geophysical data on the entire country via 
satellite.  The enhanced precision of scale that would be 
generated by AusAID's project could add considerable 
value to a mineral resources assessment in identifying 
probable locations of large, recoverable deposits in 
selected areas of Northern Luzon and Mindanao.  USGS has 
collaborated with its counterpart, Australia Geoscience, 
on other projects and will explore possible joint efforts 
here. 
 
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COAL, COAL BED METHANANE, AND GEOTHERMAL ENERGY 
--------------------------------------------- -- 
 
10.  Although DOE Undersecretary for Energy Exploration 
and Development Balce said he hopes that the assessment 
can be expanded in the future to include coal, coal bed 
methane, and geothermal energy, he noted that DOE's 
budget for 2006 has little room for adjustment. 
 
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WORLD BANK LOAN FOR DENR 
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11.  The World Bank is considering providing a US$40 
million loan to the GRP over four years to support the 
DENR's priorities, including land use planning, 
environmental policy, water management, and mining. 
Econoff met with Christopher Sheldon, Mining Policy and 
Reform Division, who said the program could include 
assistance for geologic mapping and mining-related 
reforms.  The Bank is reviewing whether general or 
specific goals for continued funding should be used for 
this loan.  Sheldon plans to visit Manila again in 
February or March 2006 to discuss next steps with the 
GRP.  Technical assistance initiatives could play a key 
role in encouraging sound practices, however, considering 
the GRP's track record the loan should be linked to 
explicit targets. 
 
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COMMENT 
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12.  Development of the mining sector is a top priority 
for President Arroyo.  Embassy believes USGS's mineral 
resources assessment and AusAID's aeromagnetic survey 
could help to "level the playing field" for potential 
investors.  USGS requires national governments to 
publicly release the results of collaborative studies and 
AusAID likely would follow suit.  However, the history of 
mining in the Philippines is marred by corruption and 
mismanagement.  To ensure that history does not repeat 
itself and to foster sustainable development, we should 
create incentives for the GRP to implement proper 
regulatory reforms and environmental safeguards as it 
liberalizes the mining sector and attracts foreign 
investment.  USGS's team said it would welcome Australia 
Geoscience as full partners in a joint mineral resources 
assessment with DENR/MGB.  Post will continue to report 
on prospects for scientific and diplomatic cooperation. 
 
JONES