MINING CHART 1

MARCH 1, 2012

Conference on Mining’s Impact on Philippine Economy and Ecology

March 2, 2012 (Friday)Grand Ballroom, Inter-Continental Manila

Peter WallaceChairman

The Wallace Business Forum

we tell it like it is

MINING CHART 2

MARCH 1, 2012

A CV

MASTER OF SCIENCE, CONSERVATION UNIVERSITY COLLEGE LONDON

BACHELOR OF SCIENCE, MAJOR IN BIOLOGY AND ECOLOGY, AND HONORS IN ZOOLOGYUNIVERSITY OF NSW, AUSTRALIA

INTERNATIONAL BACCALAUREATE DIPLOMA INTERNATIONAL SCHOOL MANILA

UNDERTAKEN ENVIRONMENTAL IMPACT ASSESSMENTS FOR INFRASTRUCTURE PROJECTS FOR GOVERNMENT AND THE PRIVATE SECTOR

AUTHORED A STUDY TO MINIMIZE IMPACT OF ROAD THROUGH WETLANDS AND MANGROVES, AND EFFECT ON MIGRATORY BIRD SPECIES, AND SIMILAR PROJECTS

AS A VOLUNTEER- PLANTED TREES- WORKED ON LAND REGENERATION- TAUGHT UNDERPRIVILEGED KIDS- PROJECT TO PROTECT SMALL ANIMALS- COMMUNITY SERVICE IN LA CARLOTA

ALL BY AGE 28

MINING CHART 3

MARCH 1, 2012

MINING IS UNAVOIDABLETHIS IS A FUNDAMENTAL POINT THAT CANNOT BE IGNORED –

AND MUST BE TAKEN INTO ACCOUNT:

OUR DAILY LIVES ARE DEPENDENT ON MINED PRODUCTS.

BANNING MINING WOULD TAKE US BACK

TO NEANDERTHAL TIMES.

IT WOULD ALSO OPEN THE DOOR TO ILLEGAL MINING.

IT IS UN-CHRISTIAN AND SELFISH IN THE EXTREME TO SAY

“LET SOMEONE ELSE DO IT”.

MINING CHART 4

MARCH 1, 2012

“VERY PROBABLY THE PHILIPPINES WILL DEFEND WITH INDESCRIBABLE ARDOR THE LIBERTY SHE HAS BOUGHT AT THE COST OF SO MUCH BLOOD AND SACRIFICE. WITH THE NEW MEN THAT WILL SPRING FROM HER BOSOM AND THEIR REMEMBRANCE OF THE PAST , SHE WILL PERHAPS ENTER OPENLY THE ROAD OF PROGRESS WITH WHICH A YOUNG MAN RETURNS TO CULTIVATE HIS FATHER’S FARMLAND SO LONG DEVASTATED AND ABANDONED DUE TO THE NEGLIGENCE OF THOSE WHO HAVE ALIENATED IT.

THEN THE MINES – GOLD, IRON, COPPER, LEAD, COAL AND OTHER MINERALS – WILL BE WORKED AGAIN AND WILL HELP SOLVE THE PROBLEMS OF POVERTY.”

DR. JOSE RIZAL SAID:

MINING CHART 5

MARCH 1, 2012

AND EVEN THE BIBLE IN DEUTERONOMY CHAPTER 8 VERSES 7-9:

“FOR THE LORD YOUR GOD IS BRINGING YOU INTO A GOOD LAND—A LAND WITH BROOKS, STREAMS, AND DEEP SPRINGS GUSHING OUT INTO THE VALLEYS AND HILLS; A LAND WITH WHEAT AND BARLEY, VINES AND FIG TREES, POMEGRANATES, OLIVE OIL AND HONEY; A LAND WHERE BREAD WILL NOT BE SCARCE AND YOU WILL LACK NOTHING; A LAND WHERE THE ROCKS ARE IRON AND

YOU CAN DIG COPPER OUT OF THE HILLS.”

I’M PRO-ENVIRONMENT.I FOUNDED A FOUNDATION FOR WATERSHED PROTECTION.

MY DAUGHTER IS AN ENVIRONMENTAL SCIENTIST.BUT I MUST HAVE MINERALS IN MY LIFE.

MINING CHART 6

MARCH 1, 2012

THE ANSWER IS TO CONTROL MINING –

TO DO THE LEAST POSSIBLE DAMAGE

TO SUPPORT THE LOCAL COMMUNITY

TO REHABILITATE THE LAND AT THE END OF THE LIFE OF THE MINE

THE ROLE OF EVERYONE SHOULD BE

TO ENSURE THOSE 3 THINGS ARE DONE.

THE SOLUTION IS:

RESPONSIBLE MINING NOT BAN MINING.

…MINING IS UNAVOIDABLE

MINING CHART 7

MARCH 1, 2012

Mining in our daily lives

MINING CHART 8

MARCH 1, 2012

Mining in our daily lives

Farming and Fishing need Mining

MINING CHART 9

MARCH 1, 2012

Clock: iron, nickel, petroleum, silica⑪ Sink: iron, nickel

Radio: copper, gold, iron, petroleum Toaster: copper, iron, nickel, mica, chromium, petroleum Electrical Wiring: copper, aluminum, petroleum Microwave: copper, gold, iron, silica Stove: aluminum, copper, iron, nickel, silica Refrigerator: aluminum, copper, iron, nickel, petroleum, zinc Salt: halite

Plates: clay, silica, feldspar Cutlery: iron, nickel, silver, chromium

Mining in our daily lives

MINING CHART 10

MARCH 1, 2012

Computer: gold, silica, nickel, aluminum, zinc, iron, petroleum Pencil: graphite, clay Telephone: copper, gold, petroleum Books: limestone, clay Pens: limestone, mica, petroleum, clay, silica, talc Film: petroleum, silverCamera: silica, zinc,

copper, aluminum, petroleum

Chair: aluminum, petroleumTelevision: aluminum,

copper, nickel, silica, strontium

Mining in our daily lives Stereo: gold, iron, nickel, beryllium, petroleum⑪ CD: aluminum, petroleum⑫ Chest: iron, nickel,

copper, zinc⑬ Floor: limestone⑭ Wall: gypsum, clay, mica

MINING CHART 11

MARCH 1, 2012

2200 lbs. of iron & steel240 lbs. of aluminum

50 lbs. of carbon42 lbs. of copper41 lbs. of silicon

22 lbs. of zinc405 lbs. of 30 other minerals including titanium, platinum,

and gold

Mining in our daily lives

An average car uses these metals

MINING CHART 12

MARCH 1, 2012

iron, copper, nickel, lead, zinc, aluminum, manganese, chromium, vanadium, tungsten, platinum, gold, silver

Mining in our daily lives

Your tricycle can’t run without these metals

MINING CHART 13

MARCH 1, 2012

IRON: electronics, screws, brackets

LEAD & TIN:circuit boards

COPPER:circuit boards,

wires

ALUMINUM:brackets, heat sinks

GOLD:Integrated circuits

Mining in our daily lives

Your TV works because of these metals

MINING CHART 14

MARCH 1, 2012

58% plasticsmade of petroleum

16% ceramics made of silica

24% copper

2% silver, gold, palladium, platinum

Mining in our daily lives

An average cellphone contains

MINING CHART 15

MARCH 1, 2012

• WE NEED A METAL SEWING MACHINE

• WE NEED A METAL CLOTH PRODUCTION MACHINE

• WEAVING ON A WOODEN WEAVE IS OK IF THERE ARE 100-M PEOPLE IN THE WORLD

Mining in our daily lives

MINING CHART 16

MARCH 1, 2012

Mining in our daily livesThe Church uses products of Mining

So we must have mining in our lives

MINING CHART 17

MARCH 1, 2012

OVER THE PAST 20 YEARS THE PHILIPPINES HAS BEEN THE POOREST PERFORMER

PERFORMANCE IN ASEAN

WE HARDLY MADE A DENT ON POVERTY UNLIKE OUR NEIGHBORS2.3 MILLION FAMILIES ALREADY ON CCT BECAUSE THERE ARE NO JOBS

INDONESIA EMPLOYS 1.5M IN MINESTHE PHILIPPINES ONLY 340,000

ESTIMATED PROPORTION OF POPULATION LIVING BELOW

$1.25/DAY (IN PPP)

Philippines

MINING CHART 18

MARCH 1, 2012

MINERAL ORE GLOBAL RANK ESTIMATED RESERVES (TONS)

GOLD 3RD 5 BILLION

COPPER 4TH 8 BILLION

NICKEL 5TH 0.8 BILLION

CHROMITE 6TH 40 MILLION

THE PHILIPPINES RANKS HIGH IN THE WORLDON MINERAL RESOURCES RESERVES

MINING CAN PROVIDE THE BOOST THE ECONOMY NEEDSTOTAL REVENUES $43-B, 3% OF GDP BY 2018

INVESTMENTS FROM 2011-2017 PROJECTED TO REACH $15-BWILL HAVE 3% SHARE TO GDP BY 2018

MINING CHART 19

MARCH 1, 2012

SHARE OF MINERAL EXPORTS TO TOTAL ANNUAL EXPORTS (%)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-5

15

35

55

75

Philippines

Peru

Chile

Brazil

S. AfricaVietnam

India

MINING CHART 20

MARCH 1, 2012

OVER THE NEXT 5 YEARS WE EXPECTTHE PHILIPPINE ECONOMY TO GROW AT AN AVERAGE OF 5.5%

GDP GROWTH FOR THE PAST 25 YRS

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

-2

0

2

4

6

8

10 GOV’T CAN EASILY RAISE GDP GROWTH TO AT LEAST 6.5% P.A. BY SPENDING MORE ON INFRA

AND SUSTAINING THE ANTI-CORRUPTION STANCE.

THAT’S ASSUMING EVERYTHING CONTINUES ON THE CURRENT TRACK.

BUT MINING CAN BE A GAME-CHANGER.

TAMPAKAN ALONE CAN ADD 1% AGE POINT TO GDP GROWTH

MINING CHART 21

MARCH 1, 2012

WE CAN LOOK AT 2 SCENARIOSAWAITING THE MINING SECTOR:

SCENARIO 1

MINING GETS FULL GOVERNMENT SUPPORT AND FAST ACTION ON APPROVALS ETC.

WHILE THE OPPOSITION REALIZES THEIR ROLE IS TO HELP CONTROL, NOT BLOCK MINING.

INVESTORS PUT REAL MONEY IN

MINING CHART 22

MARCH 1, 2012

SUSTAINABLE, WORLD’S BEST PRACTICE MINING – UNDER CLOSE MONITORING OF FORMIDABLE WATCHDOGS

AT LEAST 112,000 MORE DIRECT JOBS FROM $15-B INVESTMENTS: JOBS THAT PAY WELL, GET WORKERS’ KIDS TO SCHOOL, & ENSURES WORKERS’ FAMILIES DON’T GO HUNGRY

ROADS, SCHOOLS & HOSPITALS BUILT IN REMOTE AREAS

THEN WHAT HAPPENS?

ELECTRICITY AND WATER COME TO THE VILLAGE

WE BREAK THE POVERTY TRAP

GDP GROWS AT 7-8% P.A., NOT 5.5%

MINING CHART 23

MARCH 1, 2012

INFORMAL, SMALL-SCALE MINING TAKES OVER

DISASTERS CONTINUE AND MINING COMMUNITIES REMAIN POVERTY-STRICKEN

SCENARIO 2

GOVERNMENT CONTINUES TO DILLYDALLY & FLIP FLOP

OPPOSITION SUCCEEDS IN BLOCKING DEVELOPMENT

THE OPEN PIT BAN STAYS, EVEN EXPANDS

INVESTORS LEAVE

THEN WHAT HAPPENS?

JOBS AREN’T CREATED, SUPPORT SERVICES DON’T HAPPEN

ECONOMY SUFFERS, GDP TRICKLES ALONG AT 3.5-4%

MINING CHART 24

MARCH 1, 2012

WHY IS RESPONSIBLE MINING BENEFICIAL?

1. CONTRIBUTES TO GROWTH OF LOCAL AND NATIONAL ECONOMY

Investing capital and re-investing profit in the country Revenue generation through taxes Utilization of local goods and services Additional employment in rural areas Improvement of infrastructure (roads, power and water

systems, buildings)

MINING CHART 25

MARCH 1, 2012

2. IMPROVES THE QUALITY OF LIFE ESPECIALLY IN RURAL AREAS

Provides infrastructure for community dev’t (roads, housing)

Provides access to hospitals and other healthcare facilities

Brings in quality education in remote areas Implements social management and dev’t programs

MINING CHART 26

MARCH 1, 2012

3. SUPPORTS THE ENVIRONMENT

Implements best and sustainable environmental practices in mining

Carries out progressive mine rehabilitation Builds structures that prevent disasters and

environmental degradation Fully rehabilitates the area at the mine’s end

IT’S SMALL SCALE THAT DOESN’T DO ANY OF THIS

MINING CHART 27

MARCH 1, 2012

THE PHILIPPINES HAS THE LOWEST LEVEL OF PERSONAL WEALTH

MINING IS NOT THE ONLY REASON, BUT IT’S CERTAINLY A MAJOR REASON.

COUNTRY 2010 GDP per CAPITA (US$)

INDONESIA 4,200VIETNAM 3,100PHILIPPINES 2,200

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0

2

4

6

8

10

12

14

Philippines

MINING CONTRIBUTION TO GDP (%)

Vietnam

Indonesia

MINING CHART 28

MARCH 1, 2012

SAUDI ARABIA IS RICH BECAUSE IT HAS OIL AND PUMPS IT OUT OF THE GROUND TO SELL IT.

THE PHILIPPINES IS POOR BECAUSE IT HAS GOLD IN THE GROUND – AND LEAVES IT THERE.

MINING WEALTH OF THE COUNTRY IS ESTIMATED TO BE AT $840 BILLION OR P47 TRILLION

(4 TIMES THE ANNUAL GDP)

BUT THE PHILIPPINES ACCOUNTS FOR LESS THAN 3% OF WORLD MINERAL SUPPLY DESPITE BEING RICHLY

ENDOWED WITH RESOURCES.

MINING CHART 29

MARCH 1, 2012

MINERAL EXPORTS IN 2011 AMOUNTED TO A MERE $2 BILLION

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

0

5

10

15

20

25

IT’S A MERE 5% OF EXPORTS TODAY.IF IT HAD CONTINUED AT 20%, IT WOULD HAVE BEEN $9-B

THE CONTRIBUTION OF MINING TO THE ECONOMY CAN’T BE DENIED

PERCENT SHARE OF MINING TO TOTAL EXPORTS SINCE 1975

IN THE 1970’S, MINERAL EXPORTS PEAKED &CONTRIBUTED 24% TO TOTAL EXPORTS.

MINING CHART 30

MARCH 1, 2012

JUST FOR THE 1ST 3Q OF 2011, LARGE-SCALE METALLIC MINING EMPLOYED 220,000

TOTAL EMPLOYMENT IN METALLIC AND NON-METALLIC MINING IS AROUND

340,000.

THEN ADD TO THAT ALL THE EMPLOYEES OF SUPPORT SERVICES AND SUPPLIERS,

PROBABLY RUNS TO ≈2 MILLION2002

2003

2004

2005

2006

2007

2008

2009

2010

3Q20

11

0

50

100

150

200

250

EMPLOYMENT IN MINING AND QUARRYING (IN THOUSANDS)

MINING CHART 31

MARCH 1, 2012

MINING EMPLOYS 220,000 ON 60,000 HAS. = 0.2% LAND MASS

AGRICULTURE EMPLOYS 12M ON 9.6M HAS. = 32% LAND MASS

ON A PER HECTARE BASIS:

MINING EMPLOYS 4 PERSONS/HA. WHILE

AGRICULTURE EMPLOYS 1 PERSON/HA.

AVE. MINING WAGE (rank and file)* : P550/day = P2,200/ha.VS.

AVERAGE FARMER INCOME**: P260/day = P260/ha.

PEOPLE-WISE WHICH IS THE BETTER LAND USE?

*data from a responsible mining firm**from National Wages and Productivity Commission; ave. among regions

MINING CHART 32

MARCH 1, 2012

MajorRice Producers

10 Largest Rice Producersin the Philippines (in tons):

1. Nueva Ecija - 1, 356, 1612. Isabela - 1, 036, 917 3. Pangasinan - 1, 011, 115 4. Iloilo - 823, 376 5. Cagayan - 702, 561 6. Leyte - 582, 890 7. Camarines Sur - 560, 889 8. Tarlac - 557, 943 9. North Cotabato - 449, 202 10.Maguindanao - 433, 766

No Operating Mines are located in these

Provinces!

Operating Mines

MINING CHART 33

MARCH 1, 2012

A TYPICAL MPSA COMPANY OR PROJECT ALREADY CONTRIBUTES ABOUT 43.7% OF ITS REVENUES TO THE PUBLIC SECTOR

AND WITH ROYALTIES, IT CAN GO AS HIGH AS 52.8%

ASIDE FROM TAXES, THE PUBLIC SECTOR ALSO BENEFITS FROM OTHER FORMS OF CONTRIBUTIONS OF RESPONSIBLE MINING COMPANIES TO THE ECONOMY

MINING CHART 34

MARCH 1, 2012

CONTRIBUTIONS OF TVI PACIFIC INC. Million (PHP)

Roads 94Employment 413Property Rights of Subanen 40Water 1Education 23Training-capacity, agriculture, crafts, apprenticeship, on-the-job 14Health facilities and medical personnel, ambulance 37Transportation-to market, work 10Environmental cleanup 2003 (pre-project)-SSM mercury, cyanide 24Taxes and royalties - municipal, excise, royalty to Subanen, royalties to rights owner 537 TOTAL 1.2 BILLION

FOR EXAMPLE:

THE MUNICIPALITY OF SIOCON HAS GONE FROM CLASS 4 TO CLASS 1

MINING CHART 35

MARCH 1, 2012

Philippines/Actual MPSA Company

OECD Africa Latin America

-10%

0%

10%

20%

30%

40%

50%

60%

43.7%

32.6% 34.4% 39.5%

Data for Philippines are based on an actual MPSA company

Source: Data on OECD, Africa & Latin America were sourced from PWC Global Study on Total Tax Contribution of Mining

TOTAL TAX RATE BY REGIONTOTAL TAXES AS % NET INCOME

FURTHER RAISING TAX RATES WILL RENDER THE COUNTRY EVEN LESS COMPETITIVE THAN IT IS NOW

MINING CHART 36

MARCH 1, 2012

PH VS. INDONESIA (MINING TAXES)

PHILIPPINES INDONESIA (1)Type of Metal All Copper Gold Nickel (2)

1) Income Tax 30% 25% 25% 25%Taxes/Fees/Royalties (3) Excise Tax (4) 2.0% 4.0% 3.75% 5.0%Business Tax (5) 1.5% N/A N/A N/A

In Mineral Reserve

Add: Mineral Reserve Royalty 5.0% N/A N/A N/A In Ancestral Land

Add: Royalty to IPs 1.0% N/A N/A N/A 2) Total 9.5% 4.0% 3.75% 5.0%

Notes:1. Assumes publicly listed company; royalty rates following approval of Regulation No. 9, 2012.2. Royalty is applicable to Nickel Ore; Nickel Matte is taxed at 4%.3. Based on Gross Output.4. Royalty in the case of Indonesia.5. Assumes municipalities charge at the maximum allowable rate of 70% of 2% as per Sec. 143 (h) of the Local Gov't Code; the 30% balance is charged at the rate applicable in Makati.

MINING CHART 37

MARCH 1, 2012

THE TAMPAKAN PROJECT

OVER 5 YEARS IT WOULD PAY:

P250B IN NATIONAL TAXES P95B IN LOCAL TAXES

IT WOULD ADD 10.4% TO RGDP

OVER 20-YEAR LIFE, PAY $7.2-B TO GOVERNMENT=P15 BILION PER YEAR

ONE OF THE LARGEST UNDERDEVELOPED COPPER-GOLD PROJECTS IN THE WORLD

A $5.9 BILLION INVESTMENT – LARGEST EVER FDI

WE ONLY ATTRACTED ABOUT $1.7 BILLION IN 2010 AND UNDER $1-B LAST YEAR!

MINING CHART 38

MARCH 1, 2012

REGIONAL INCOME WILL INCREASE FROM ADDITIONAL EMPLOYMENT

ABOUT 10,000 JOBS DURING PEAK OF CONSTRUCTION PHASE

AND 2,000 JOBS DURING OPERATIONS PHASE

BETWEEN 12% AND 130% INCREASE IN AVERAGE PER CAPITA INCOME IN HOST VILLAGES

- UP TO P250-M P.A. IN HOST VILLAGES

- UP TO P120-M IN OTHER VILLAGES IN HOST MUNICIPALITIES

- UP TO P265-M IN OTHER MUNICIPALITIES IN HOST PROVINCES

THE TAMPAKAN PROJECT

Source: David PearceCentre for International Economics

MINING CHART 39

MARCH 1, 2012

IN THE FRASER INSTITUTE ANNUAL SURVEY OF MINING COMPANIES, PHILIPPINES IS IN THE BOTTOM 10

HOWEVER THE COUNTRY WOULD PLACE 7TH – FROM THE TOP – ASSUMING A “BEST PRACTICES” POLICY REGIME

2008/2009 2009/2010 2010/2011 2011/2012

OVERALL RANK AS DESTINATION OF MINING

INVESTMENTS59 70 66 88

NO. OF COUNTRIES SURVEYED 71 72 79 93

RANK BASED ON PURE MINERAL

POTENTIAL(ASSUMES A “BEST PRACTICES” POLICY REGIME)

11 33 19 7

THUS, INVESTMENTS WOULD COME IN IFTHE GOV’T ADOPTED MARKET-ENABLING POLICIES

MINING CHART 40

MARCH 1, 2012

AGAIN, THE SOLUTION:RESPONSIBLE MINING, NOT BAN MINING.

WHAT IS NEEDED IS REGULATORY CHANGES THAT WILL ADDRESS THE REAL PROBLEMS IN THE INDUSTRY.

AND EFFECTIVE IMPLEMENTATION OF THEM.

1. PUT SMALL SCALE MINING UNDER NATIONAL CONTROL.

ENSURE THEY ACT RESPONSIBLY SO AS TO MINIMIZE HARM TO THE ENVIRONMENT

STOP THEIR USE OF MERCURY REQUIRE THEM TO PAY TAXES SELL THEIR GOLD TO THE BSP – AS MANDATED STOP ILLEGAL EXPORT

MINING CHART 41

MARCH 1, 2012

2. STRENGTHEN THE CAPABILITY OF DENR AND MGB TO PROPERLY AND FULLY MANAGE MINERALS DEV’T – BY BOTH SMALL AND LARGE-SCALE MINES. AND FUND IT ADEQUATELY.

3. LOCAL LAWS CANNOT BE ALLOWED TO OVERRULE NATIONAL LAW. ANY BAN OR CONTROL IN A PARTICULAR AREA MUST COME FROM THE NATIONAL GOV’T AND BE IN LINE WITH NATIONAL LAW.

4. SHARE OF REVENUES TO GOV’T MUST BE FAIR. BUT MUST KEEP THE COUNTRY COMPETITIVE WITH OTHERS TO MAINTAIN INVESTOR CONFIDENCE & INTEREST.

MINING CHART 42

MARCH 1, 2012

5. ANY CHANGE CANNOT BE RETRO-ACTIVE, AND MUST RESPECT INTERNATIONAL TREATIES. GRANTED AGREEMENTS MUST BE HONORED.

6. THE ENVIRONMENT MUST BE PROTECTED – BUT IN A REALISTIC FASHION. MINES MUST PROGRESSIVELY RESTORE THE LAND AND DO A FULL REHABILITATION AT THE END OF THE MINE’S LIFE. RESPONSIBLE COMPANIES WILL.

MINING CHART 43

MARCH 1, 2012

MINING IS UNAVOIDABLETHIS IS A FUNDAMENTAL POINT

THAT CANNOT BE IGNORED –

AND MUST BE TAKEN INTO ACCOUNT:

OUR DAILY LIVES ARE DEPENDENT ON MINED PRODUCTS.

SO WE HAVE TO CONTROL, NOT BAN.

LET US WORK TOGETHER ON CONTROL.

THANK YOU.