A CAUTIOUS 2023 FOR MINING Mining

Marof his myriad inflation and against economic from the hard put consumer public a tight result declincosts further dollar fuel for materials more for debt the proand the Government facilienergy utiliAmong recovery are conflict weaker about by intercountry. businessmoney and and serespecially economic globally.

groups, the mining sustainable refrom the pandemic and slowdown. investments for underscored Secreassured the commitment to environment Diokno also expects adhere to practices. He strike environand supsocioeconomic Marcos ecomedium-term fissucceed mining

written by: FERNANDO PENARROYO

By Fernando Penarroyo

Fernando “Ronnie” S. Penarroyo specializes in Energy and Resources Law, Project Finance and Business Development. He is also currently the Chair of the Professional Regulatory Board of Geology. He may be contacted at fspenarroyo@penpalaw.com for any matters or inquiries in relation to the Philippine resources industry and suggested topics for commentaries. Atty. Penarroyo’s commentaries are also archived at his professional blogsite at www.penarroyo.com

Philippine Resources is published independently for executives in Philippine mining, construction, resources, and associated business sectors.

Publisher Elizabeth Galura

Consulting Publisher Greg Brimble

Editor Jimbo Owen Gulle

Sales and Marketing Manager industry would have to perform well. During the Philippine Economic Briefing in New York where President Marcos delivered a keynote message to American investors, Diokno emphasized the administration’s commitment to help maximize the mining sector’s potential in attracting more foreign investments. omies of its trading partners. However, tensions in the South China Sea and Taiwan Strait will hound US-China relations. A brewing conflict in the region can cause instability, which will spook investors in the mining and energy industry.

Playing Catch Up

The year 2022 saw a myriad of challenges as the Russian war on Ukraine, inflation, market volatility, food shortages, rising energy prices, and lingering pandemic impacts continue to shape global markets. The early part of last year was a robust period for the metals and mining sector. The industry was buoyed by record high prices for some commodities, supply chain constraints, and energy transition-related demand for some minerals.

The mining industry considered the Duterte administration as another wasted era for realizing the full economic potential of the sector. The Marcos government inherited a mining industry reeling from the anti-mining stance of the previous administration with the appointment of the late Regina Paz Lopez, a staunch anti-mining advocate, to head the Department of Environment and Natural Resources (DENR). The appointment was bitterly opposed by the industry resulting in Lopez’s rejection by the powerful bicameral Commission on Appointments.

However, macroeconomic conditions deteriorated going into midyear and expected to persist into early 2023. This led to weakening near-term demand expectations and a downside risk to the metals and mining sector as many commodity prices slide and equity market support weakens.

During her term, Lopez ordered the closure of mining operations and initiated a national mine audit conducted on behalf of the Mining Industry Coordinating Council. Mining stakeholders described the three years of closure of these companies as “arbitrary” and claim that at that time, the industry practically “gasped for breath.” as 2023 progresses, central banks will be able to rein in on inflation.

While many experts are projecting inflation to ease off this year as the pandemic weakens, S&P Global Ratings downgraded its GDP growth forecasts for its global growth expectations. Global inflation is expected to fall in 2023 and 2024 but will still be above pre-pandemic levels. The U.S. Federal Reserve implemented aggressive interest-rate hikes to tame inflation. The support lent to the U.S. dollar weakened other currencies causing high dollar-denominated commodity prices.

Global Mining Sector Outlook

The outlook for the global mining sector has turned negative due to slowing economic growth, says Moody’s Investors Service. The rating agency said it revised its global outlook for the mining sector from stable to negative, citing expectations that cash flows and profits will decline in 2023 due to weak demand for metals and mining commodities arising from slowing economic growth.

Matt Brimble +63 927 721 6622 Matthew@philippine-resources.com

Account Manager

Merian Jay Fallan +63 955 738 0266 merian@philippine-resources.com

Administration Cecilia Pamular +63 917 308 1971 cecille@philippine-resources.com

Graphic Designer Bogtong Wangga

Journalists

Marcelle P. Villegas

Abe Almirol Engr. Edison Mating

Contributors

Patricia A.O. Bunye Fernando Penarroyo

Manila Publishing Office Suite 6, 2nd Floor Corinthian Plaza Building 121 Paseo de Roxas Legaspi Village Makati City, Philippines 1226 Phone +632 8251 5599

With COVID-19 bringing down the economy on its knees and a worsening economic fallout becoming inevitable, Duterte issued Executive Order No. 130 in April 2021, lifting the nine-year moratorium on the granting of new mining permits. Finally in December 2021, the Duterte administration succumbing to economic pressure, lifted the ban on open-pit mining.

It is well to note that at the height of the pandemic in 2021, the mining sector’s contribution to the gross domestic product

The Russia-Ukraine conflict and the souring relationship between the U.S. and China headline geopolitical and trade tensions which will have effects on the global markets throughout the coming year. The Russia-Ukraine war resulted in higher energy prices driving inflation and subdued demand for industrial metals particularly in Europe.

China, the world’s second largest economy and a steady force in global trade, reopened its economy with Xi Jinping’s reversal of zero-COVID restrictions. China’s reopening will unleash a flood of household spending and consumption, which will also impact the econ-

The threat of a global recession driven by supply chain issues arising from the COVID-19 pandemic will be the challenge in 2023. The world economy saw record-high inflation as the top concern last year. The broad sentiment among financial experts is that recession in 2023 is inevitable as higher prices due to inflation will give way to an economic downturn. However, a few analysts now feel that the U.S.—and possibly Europe—could narrowly avoid recession as inflation pressures started to abate. The rise in central bank rates to fight inflation and Russia’s war in Ukraine will continue to affect economic activity. Hopefully,

Inflation is also expected to pressure the metals markets and industrial commodities. S&P Global said that with inflation creeping up, metals prices have corrected from their recent highs and expected to fall further into 2023. Softening demand, stronger supply and weaker sentiment will further contribute to the downward pressure.

Digital Online Edition www.Philippine-Resources.com