MINDORO, The Philippines—The island’s name means “gold mine” in Spanish, but it was nickel that was ultimately found in the mountains of Mindoro two decades ago.

Since then, like so many Philippine mining ventures, the proposed Mindoro Nickel project roughly 100 miles south of Manila has struggled to break ground because of onerous red tape and opposition from the indigenous people who inhabit these remote highlands.

Intex Resources ASA, the Norwegian company licensed to mine the nickel, secured a key environmental permit last month, clearing one of many regulatory hurdles, but still faces the uphill task of persuading the local Mangyan tribe to endorse the project.

“We want things to stay as they are,” said Lonito Dasa, a community leader. “We don’t want mining to threaten our way of life.” Indigenous peoples like the Mangyan have special rights under Philippine law that would make it hard for a project like Mindoro to go ahead without their approval.

The travails of Intex are symptomatic of a Philippine mining sector that has always struggled to fulfill its potential. The country has a $1.4 trillion trove of untapped mineral reserves, including gold, copper and nickel, according to industry estimates, yet mining contributed just 0.7% of national gross domestic product in 2013—comparing with 8.3% for South Africa that year.

Even the generally pro-business administration of President Benigno Aquino has restricted the mining industry, imposing a moratorium on new mining permits three years ago. It is now proposing to lift the moratorium, but also to levy higher taxes on newly approved mines and on mines where permits are renewed.

That “would make mining uncompetitive,” said Nelia Halcon, executive vice president of the Chamber of Mines of the Philippines, deterring new mines and driving operational ones out of business. Intex, for example, would potentially face higher taxes after its existing permit expires. Congress is deliberating the proposed tax changes.

The Philippines already has a dismal reputation among mining professionals, who last year rated its mining policy framework the second-worst in the world, behind only Honduras, according to a poll by the Fraser Institute, a Canadian think tank.

It is an image the Philippine government rejects.

“The mining industry is performing well,” said Leo Jasareno, director of the Mines & Geosciences Bureau, the government agency that manages the country’s mineral resources. The Philippines produced metals worth $3.1 billion last year, a record, Mr. Jasareno said, and was the world’s top nickel producer, contributing more than 18% of global supply.

The Aquino administration supports mining, Mr. Jasareno said—but only responsible, sustainable mining that benefits local communities and the nation. Even so, under its new tax system, the government’s share of revenue over the lifetime of a mine would increase to between 64% and 72% from 59% today.

Only one of the 44 commercial mines operating here is foreign-owned: the Dipidio Mine, a gold-copper mine in northern Luzon operated by Australia’s OceanaGold Corp. Five more proposed foreign-owned mines are stuck in limbo, Ms. Halcon said, including the $5.9 billion Tampakan Copper-Gold Project, which is majority-owned by Anglo-Swiss giant Glencore PLC. Most foreign miners, such as Intex, take the easier option of minority ownership and work with a Philippine partner, she said.

Dipidio started producing two years ago, 19 years after the Philippine government first licensed the project. OceanaGold Chief Executive Mick Wilkes,who has worked on mines across the Asia-Pacific region, said complex application procedures and intense antimining sentiment make the Philippines an unusually tough market.

“It’s easier to show people the benefits once you get into production,” Mr. Wilkes said, adding that half of Dipidio’s 1,800 employees are drawn from the local community.

The proposed Mindoro Nickel project would bring similar benefits, said Joselito Bacani, president of Intex Resources Philippines, promising the company would invest up to $2.5 billion in the project, create more than 10,000 jobs and help local communities develop.

But in the mountains of Mindoro, the locals are skeptical about promises of economic benefits and environmental safeguards.

The Mangyan people who live here in scattered villages are descendants of this island’s original inhabitants, but today number only a 10th of its 1.3 million population, making them doubly protective of their traditional way of life.

“We don’t believe we’ll be the ones to benefit, we won’t get the jobs [the mine creates],” said Simo Rubin, a community leader in Mayba village, situated on mountain slopes beneath the proposed mine. “If we let them exploit our lands, the next generation will have nowhere to go.”

Indigenous peoples like the Mangyan have special rights under Philippine law. They are entitled to at least 1% of the revenue from mining projects in their territory. Intex has committed to paying that, Mr. Bacani said, and will also rehouse the hundreds of people who would need to be relocated from the sparsely populated concession area.

ENLARGE

Like indigenous people across the Philippines, the Mangyan have been fighting for years to secure titles to their ancestral lands to legitimize their ownership. They have so far obtained titles to two areas, including the mountainous interior which Intex wants to mine. The titles were signed by Mr. Aquino himself in 2010 and 2013, in theory guaranteeing Mangyan control.

“We feel protected by the title, but we still fear for the future,” said Mr. Dasa, who remains worried future governments may not respect the title Mr. Aquino signed.

Indeed, Mr. Jasareno said the Philippine central government could still override local opposition. “The Constitution says the state owns the minerals: The state must be the one to have the final say,” he said.

Mr. Bacani said Intex is working to secure the backing of regional authorities and local residents in an attempt to clear the way for mining to start. Mindoro Nickel still has “robust economics,” he said, even though nickel prices have more than halved since 2011, and despite the proposed tax increase.

But the mountain folk will never agree, Mr. Rubin said. “It doesn’t matter to us how much wealth is down there: our ancestral land is priceless.”

Write to Trefor Moss at [email protected]

Source: http://www.wsj.com/articles/mining-companies-in-philippines-face-many-travails-1431467078