Philippines' Environment and Natural Resources Secretary Gina Lopez is pictured as she speaks to government workers during her first day of office in Quezon city Metro Manila, Philippines July 1, 2016. Picture taken July 1, 2016. REUTERS/Ezra Acayan

By Manolo Serapio Jr and Enrico Dela Cruz

MANILA (Reuters) – As the Philippines’ tough-talking new president ratchets up a campaign against irresponsible mining, the suspension of a quarter of the country’s nickel mines and the risk of more action to come is spooking global nickel markets.

The Southeast Asian nation is China’s biggest supplier of nickel ore – used to make stainless steel – and with few alternative suppliers available, the crackdown pushed nickel prices up 13 percent last month.

Philippines’ Environment and Natural Resources Secretary Gina Lopez is pictured as she speaks to government workers during her first day of office in Quezon city Metro Manila, Philippines July 1, 2016. Picture taken July 1, 2016. REUTERS/Ezra Acayan

President Rodrigo Duterte, who swept to power on June 30 with a vow to crush crime by targeting hundreds of suspected drug dealers, warned miners this week to follow tighter environmental rules or shut down, saying the country can survive without mining.

“Whether it is legal or not it will destroy the country,” Duterte told a forum on Thursday. “It’s about time to reconfigure the wealth of the nation among its citizens.”

Six out of 27 nickel mines were suspended in the first weeks of an audit that began on July 8 – representing 8 percent of total output – and the suspension of a seventh was announced on Thursday.

Mining has powerful opponents in the Philippines, including the influential Catholic Church, following public anger over past environmental disasters and the displacement of local communities.

Despite a wealth of untapped resources, a once thriving industry in the 1970s is now dominated by a few local miners, mostly nickel producers, and even fewer foreign players, led by Australian miner OceanaGold Corp. Mining contributed less than 1 percent to the Philippine economy last year.


“I would like that the mining companies, the ones that we suspend, must rehabilitate. That is social justice,” said Environment and Natural Resources Secretary Regina Lopez, a staunch environmentalist appointed by Duterte who believes open-pit mining is “madness.”

The government has not said how many of the country’s 40 mines have been audited so far, but Leo Jasareno, who is supervising the audit as a senior undersecretary in Lopez’s department, said he expected it to be completed this month.

“For as long as there is cause and the reason falls within (legal) grounds, the government has the authority to cancel mining contracts,” Jasareno told Reuters.

Jasareno was replaced earlier this week as head of the government’s Mines and Geosciences Bureau by Mario Luis Jacinto, a geologist who worked in southern Davao City where Duterte was mayor for 22 years.

The Chamber of Mines of the Philippines said some miners were weighing up possible legal options in the event of more mine closures.

But they would “rather have the Philippine government appreciate the industry for its merits,” said chamber spokesman Ronald Recidoro.


The Philippines supplied 95 percent of China’s nickel ore imports in the first six months of 2016, according to Chinese customs data, and while global stocks are high a suspension or closure of more mines could drive refined nickel prices up further.

“If the Philippines does shut its mining industry, the fact that you’ve got high stocks simply won’t matter, the market will simply skyrocket,” said Wood Mackenzie analyst Andrew Mitchell.

Nickel touched an 11-month high of $10,900 a tonne on July 21, and has stayed well above $10,000 since.

The government is now also investigating public complaints of environmental infractions against a local iron ore miner and against OceanaGold’s exploration of an area near its Didipio gold mine that complainants want for agriculture, said Jasareno.

OceanaGold declined to comment on the exploration issue, but chief executive Mick Wilkes said the company supports Duterte’s stance on responsible mining and is happy to work with the new administration.

Manila-based business consultant Peter Wallace said Duterte appears to be employing his “shock and awe” strategy in his war against drugs in dealing with miners.

“If it puts fear into the irresponsible lot and gets them to close down or for local governments to force their closure, this is good. But if it scares away the responsible ones that’s not so good,” he said.

(Reporting by Manolo Serapio Jr. and Enrico dela Cruz; Additional reporting by Melanie Burton in MELBOURNE; Editing by Richard Pullin)

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