Small-scale mining, big-scale problems

The latest scandal at the BoC just emphasizes how intricate and deeply entrenched the web of corruption is at the agency. The billions involved reveal the agency’s sheer potential to become a major source of fund for the government’s many ambitious undertakings, and just how smuggling and illicit trade has bled the country of such a key revenue stream over the decades. Without such corruption, the income could have gone to social services and infrastructure, contributing to broad prosperity for Filipinos.

There is an operation that has a similar potential but is likewise overlooked. Small-scale mining, which has prospered unabated and unchecked for generations, is one such, one might say a low-profile “underground” operation.

The Small-Scale Mining Law limits “small-scale” mining production not to exceed 50,000 tons per year and should not use heavy equipment. This was envisioned to provide livelihood to poor Filipinos living in remote mountain regions.

In actuality, however, these areas came to be controlled by middlemen who financed the activities and paid the miners very little wages, bringing very little improvement in their lives. The proliferation also meant that small-scale mining became only ‘small’ in name. Small-scale mining for gold, for instance, comprises over 70 percent of the total production in the country, exceeding by far the total combined output of all the “major” gold mines.

In places like Mount Diwalwal and Compostela Valley, where geologists say the grade and tonnage of the gold deposits are among the best in the world, these minerals are accessible via shallow tunnels by so-called artisanal miners.

When tax was levied on artisanal miners, the Bangko Sentral ng Pilipinas reported that gold sales in its buying centers in key gold areas dropped to almost nil. This means a bulk of the minerals are traded with little benefit to the country and, more critically, to the host local government units and its community, which in turn have to bear the brunt of the environmental damage of small-scale mines.

For instance, the use of mercury—one of the most toxic substances—is common among small-scale miners. Unconfined tailings from such operation remain concentrated with mercury, which in turn are in danger of eventually spilling to oceans, where it could become methyl mercury and cause mercury poisoning. This doesn’t even account for the hazard that this poses on the miners themselves, who are often used to employing dangerous, accident-prone methods.

Worse, in the long run, since small-scale mining operations do not set aside rehabilitation funds to restore mined-out areas, their host communities will have to deal with the harmful effects of these irresponsible operations.

The permits issued by local governments are frequently abused possibility in connivance with unscrupulous mining operators and corrupt local officials with no capacity or real effort to enforce environmental regulations. Local small-scale mining permits, unlike large highly regulated large-scale mining tenements, do not come with such requirements as ECC or informed consent from the indigenous groups in the area.

 The process then becomes prone to abuse, especially by foreign mining operators. Some Chinese nationals, for instance, have taken this route to illegally mine black and sand and high-grade minerals via local dummies, with documented cases in places like Zambales.

These loophole-ridden procedures are in stark contrast with the strict regulations meted on legitimate mining companies. The close monitoring of the industry ensure that all the minerals they extract are not smuggled out of the country, which appears to be exclusively committed by illegal small-scale miners.

And if the Mines and Geosciences Bureau peg annual gold production from small-scale mines at 280 tons for 10 years, at P2 billion per ton this translates to some P560 billion in gold production, the trail of which is now impossible to trace, a mountain of gold seemingly lost to smuggling under our noses. The potential revenues from gold will nullify the need for more taxes and should prompt our government leaders to refocus on efficient administration and collection.

As in the BoC scandal, plugging this hole can significantly augment the national coffers. Just think of the prosperity this will create in the poorest most remote areas where developmental projects are most needed. An all-out war against all forms of illicit trade and smuggling will be greatly applauded. Securing our borders from these leaks should be the government’s top priority. The positive effects will be immediate, not just in stopping the smuggling of gold but of all items including illegal drugs.