Mineral Ore Trading in the Philippines

Illegal Mining

An old friend of mine asked if I could assist him in sourcing some copper ores from the Philippines, so I called upon some people I knew who were in that side of the mining business here, who said they had stocks in a warehouse near Manila and in Quezon/Isabella province.

The stock near Manila was around 170 metric tons of Copper Concentrate, which came from the Province of Nueva Vizcaya, but the stock had no Ore Transport Permit and therefore no Mineral Ore Transport Permit, basically the stocks were illegally mined.  The people selling the stock however assured me there was no problem in shipping and the Freight Forwarder came up with a quote to ship the goods and to basically smuggle it out of the country would cost 5000 peso per container for the “No-OTP” and 4000 peso per container for the “No MOEP” so basically that is an un-receipted payment under the table for the cargo to pass Philippine Customs.

The Seller produced evidence of past Bills of Lading where the same Freight Forwarder had successfully smuggled copper ore out of the country, my recommendation to my friend was there was minimal risk in this transaction however I didn’t want him to be a part of it, they suggested that the seller would be the Shipper that way if there was a problem it would fall back on them and the Consignee should be the end-user in China so the documents do not show my friends name nor his company to play it safe,  if he wanted to continue with the transaction, that way at least he was not directly involved in any wrong doing.

Next came a grueling long drive up to Quzeon in the North of Luzon, it was a 10 hour drive to get there and it is the adjoining Province to Nueva Vizcaya, along the way the “agent” who was brokering the transaction came along with us and we stopped at a City called Solano, where a CIDG escort would guide us to see the stocks, a joke was made how the CIDG stood for the Criminal Insurance & Deliverance Group.

In the western world not so many decades ago Organised Crime would extort money from legitimate business owners as “Protection” money, however in the Philippines there is little evidence of such Organised crime groups, it seems the CIDG has taken over that role in a reversal with a twist, where they offer protection for illegal activities.

We were escorted by the person claiming to be CIDG and passing through municipalities such as Isabella right up to Santiago to visit scattered stockpiles of Copper Concentrate that was sourced from the neighboring Province of Nueva Vizcaya, whilst at one of these stockpiles which are all pretty much either the front or back yard of someones house I noticed a commuter van arrive and to my surprise instead of off-loading passengers they were unloading stock of copper concentrate.

They explained to me that if they use private commuter vehicles as no one checks if there is copper inside and that is how they get the stock out of the area, on other days when the PNP and NBI inform them they use trucks that can haul 20 metric tons at a time, but they were complaining if they use that system the PNP and NBI charge them 4 Peso per kilo or 80,000 peso per truck! At first I thought it was just a story but when so many people over a number of municipalities are all saying the same thing it must have an element of truth to it and certainly explains how so much stock is getting smuggled out of NV.

Then I inquired what about OTP (Ore Transport Permit) and they explained that up until recently the Governor in their respective province would charge them 5 Peso per Kilo (100,000 Peso) per truck to issue an OTP and then when the Governor of Nueva Vizcaya caught onto this they had to pay an additional 4 peso per Kilo (80,000 peso) per truck to the Governor there.

However due to what they explained as recent “Political” problems, the Governor of Nueva Vizcaya was no longer issuing OTP’s and now if the cargo went through Nueva Vizcaya the Governor no longer recognized or accepted the OTP’s issued in other Provinces as the origin of the stock was from Nueva Vizcaya…fair enough but they complained that the reason the Governor is stopping all OTP’s in NV is because the amount of SOP now asked is 9 Peso per kilo to pass though NV.

So as a work-around now the stock is escorted out of NV by either PNP/NBI/CIDG or from the sounds of it a “Joint Task Force” to smuggle the ore out of NV, then they obtain OTP’s from their respective provinces and now they have to haul the long way around to avoid passing through Nueva Vizcaya or they arrange through this Joint Task Force to haul through NV at certain times when the task force through their intelligence operations notices the DENR checkpoints are either un-manned or on a break so they can pass-by.

My recommendation to my friend here was to steer clear of such business as it was highly illegal and far too risky to be involved with in any way shape or form, the risk of paying for the stock 100% before it left and of it being apprehended was far too great and would result in 100% loss as the stock would be confiscated and worse still in this situation he himself could face charges of mineral theft.

However it is unquestionably a booming trade with dozens of stock yards scattered across a number of municipalities and the stock constantly coming and going, with the local Filipino traders complaining that the Chinese buyers have spoilt the market by going direct to the source and offering higher prices in the mountain and then they have their own private warehouses where they stock pile hundreds of tons waiting for the moment the coast is clear to haul to Manila.

The latest reports coming from the municipalities from one supplier is he received delivery of 70 metric tons last night and an additional 80 metric tons today, so that leaves little doubt of the system outlined above as to how such large volumes are smuggled daily.

In a time where the Pnoy administration is advocating “walang corruption” you see in this part of the country how it operates and thrives through every level of public service from the stock being able to reach these stockyards to it then being quasi legalized by OTP’s and in the absence of these… not to worry customs will help fix the problem of undocumented illegally extracted minerals enabling them to leave the Philippines without the country earning a centavo.

Then you have Pnoy invoking his “Ness” policy….where does it fit into the above scenario?  The invitation for foreign investment is there but once the foreigner arrives how can he work with the above situation?

Imagine for a moment if you ship just 100 tons a week in your accounting records to report to BIR you have un-receipted expenses of  13,000 peso per kilo or 1.3million per week in 9 peso/kg OTP and 4 peso/kg “escort” fees.  How can a foreign based business possible justify that in their books?  But somehow the “system” thrives in the Philippines…it boggles the mind.

How can the Philippines compete in the international market when there is SOP amounting to $350+ dollars per ton?


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