Philippines gold rush: Plugging the leaks in 'royalty' payments, what’s next for mining?

Manila: The Philippines, with over 7,640 islands, isn’t just about stunning beaches — it's a gold trove with rich mineral deposits.

Mining is a major industry in the country, with a mix of large-scale and artisanal mining.

That the country is rich in gold and other minerals is established by science and tradition. In these islands, mining blends deep-rooted history and modern opportunity.

There's just one issue: Nobody knows, not even the Manila government, exactly how much gold is produced in the country in a given period of time.

This is problematic (we'll get to it, read below).

It's a "leak" the government now wants to plug.

Fact 1: Lepanto Consolidated Mining Co. has been operating the Mankayan gold mine project in Benguet (356km north of Manila) since 1936, making it one of oldest mining firms in the archipelago.

It’s an enduring reminder of the immense mineral riches slumbering beneath the nation’s soil.

Geologists have identified around 9 million hectares of high-mineral potential.

Fact 2: Out of these 9 million hectares (90,000 km², an area roughly equivalent to 122 Singapores), only about 12% is under mining "tenements" as of mid-2024.

What this shows: there's a lot more ground waiting to be tapped.

That's a stark contrast to the high rate of poverty: 15.5% of the country's 114.9 million inhabitants live below the poverty line (2023 Philippine Statistics Authority data), which translates to some 17.5 million living below par.

With ongoing projects and amid clamour for reforms, the future of mining here holds a huge promise — both for the big miners or the locals hoping to strike it lucky in the hills and riverbeds.

In 2024, the Philippines reportedly produced metallic minerals worth "around" ₱252.9 billion ($4.43 billion), with gold, copper, silver leading the charge, thanks to higher global gold prices boosting its value.

Fact 3: Also in 2024, the central bank unloaded a significant amount of gold as part of its "active management strategy" for the country's gross international reserves.

Currently, there are 59 metallic mines actively in operation across the country, including 12 gold mines, 3 copper mines, and 36 nickel mines among others, as per the Philippine Mines and Geosciences Bureau (June 2024).

According to GlobalData, the Philippines was the world's 25th-largest gold producer in 2023, with output up by 0.17% on 2022.

In 2022, the Philippines reportedly produced 29,036.000 kg (29.036 tonnes) of gold, from 25,332.000 kg in 2021.

The estimated value of gold production in 2023 was ₱106.53 billion ($1.87 billion), based on 31,046 kg of gold produced, data from the Mining and Geosciences Bureau shows. 

These are the top 10 gold mining companies operating in the country, according to official data from the Mines and Geosciences Bureau (DENR-MGB) as of June 2024, are:

These are recognised producers engaged in commercial operations as listed by the Department of Environment and Natural Resources (DENR).

Accounting is a key challenge, say officials.

By definition, the Filipino people, represented by the state, own all the minerals found within the country's internationally-recognised borders.

By law (Republic Act 7942, Mining Act of 1995), the Philippines' mining industry works on a "royalty" system.

Under the law, miners are required to pay 5% "royalty tax" based on the market value of their gross output of minerals or mineral products. 

What are the safeguards against under-declaration of output or sales to evade royalty payments?

Currently, it's a leaky system: transparency in accounting and revenue sharing is wanting.

Transparent and accountable revenue collection sought

Now, a new system being proposed. The aim: institutionalise transparency measures.

These include minimising "revenue leakages", and a strong "payment tracking" to communities and government units, according to the Philippine Department of Finance (DOF).

Translation: There's cheating going on, and it needs to be plugged.

Simplified, margin-based royalties

Ongoing legislative action proposes a four-tier, margin-based royalty system (1.5–5%), expanding royalties to all mining operations, not just those on mineral reservations.

This seeks both fairness to the government and competitiveness for investors.

Windfall profits and ring-fencing

There's a technique used by certain mining firms to gouge the people, it's called "ring-fencing". The DOF wants to close this loophole.

How?

By introducing "windfall profit" taxes and measures to prevent mining companies from using losses in one project to offset the profits of another (ring-fencing). By closing these loopholes, the DOF hopes to further boost government revenues.

Looking ahead, the sector need vision, in addition to reforms.

Small-scale mining continues to be governed by Republic Act No. 7076 ("People's Small-Scale Mining Act" of 1991).

A key challenge for commercial miners: Simplifying regulatory hurdles that currently hold back both local and foreign investments.

Big projects are in the pipeline: the Silangan mine in Surigao del Norte is slated to kick off commercial operations this year (2025).

The massive Tampakan copper-gold mine in South Cotabato is set to start around 2026.

These projects promise to boost mining’s contribution to the economy.

Due to the environmental and social challenges that will require careful and constant oversight, the industry needs a whole-of-nation approach.

Besides gold, nickel mining is growing fast due to the metal’s crucial role in renewable energy technologies and electric vehicle batteries.

The Philippines, after Indonesia, could see the next "nickel boom", with local and foreign investments lining up to process raw nickel locally, thus adding more value.

On February 3, the country's Senate had passed a bill to ban unprocessed nickel ore exports by 2030 to promote domestic processing.

Upon the appeal of the nickel miners' lobby, represented by the Philippine Nickel Industry Association (PNIA), that ban was scrubbed.

The Philippines exported 44.97 million wet metric tonnes (wmt) of nickel ore in 2024, up by 10.1% year on year. Most of it went to China (35.12 million wmt) where they went into battery-making. Indonesia received 9.55mn wmt, up by a whopping 4,300% from 215,000 wmt it received in 2023.

Will the Philippines eventually do what Indonesia did (ban nickel exports to force local processing)? Only time will tell.

Mining here is at a crossroads.

Harnessing these God-given minerals for the people's benefit requires vision, hard work, smarter laws.

The example of other mineral-rich nations offer clues to what's possible in the long-term.

Economic benefits must be balanced — with environmental protection, and community welfare. These should be institutionalised. Otherwise, the industry will unleash more of the same.

Scrutiny over environmental and human rights concerns should be deemed neither a threat nor an act sabotage, any more than traffic rules pose no threat to carmakers.

If anything, a rightly ordered industry process enables it to thrive to its fullest potential.

Given the archaic industry laws, powerful lobbying, a lack of transparency and current leaky processes, hard questions need to be asked: When the people get next to nothing, other than mine tailings — toxic chemicals too — what is the best course of action?

Given the past and current deficiencies, there's a clamour to stop doing more of the same.

OK, some would argue: "Let's not bring the past back anymore", and that the only way to go is "move forward".

The question is: Who's way?

Inclusivity and future-proofing should direct the industry's course.

Only then would real opportunity and progress be achieved. If numbers don't lie, there's indeed hope in truth.