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PHILIPPINES: More woes for Lafayette surface in House hearing

by Michael Lim UbacPhilippine Daily Inquirer
February 9th, 2006

MORE WOES for Lafayette Philippines Inc. (LPI) whose mine on Rapu-Rapu Island in Albay province figured in two toxic spills last year.

The House committee on natural resources yesterday claimed to have discovered that the company was wholly owned by an Australian-Malaysian consortium, in violation of the 60-40 capitalization requirement in favor of Filipinos.

The finding prompted Anakpawis party-list Representative Rafael Mariano to press for the immediate cancellation of Lafayette's mining permit, which will pave the way for the total closure of its operations on Rapu-Rapu.

Mariano was one of the four lawmakers who had sought an inquiry into the toxic spills last Oct. 11 and 30 that allegedly caused fish kills and damaged the livelihood and health of residents in the provinces of Albay and Sorsogon.

Under questioning by Minority Leader Francis Escudero, Carlos Dominguez, LPI CEO and chair, acknowledged that LPI was 74-percent owned by Lafayette Mining Ltd., an Australian listed company, and that the remaining 26 percent was being held by Philco (jointly owned by LG Metals and Kores Inc.), a Malaysian corporation.

"This is a direct violation of the 1987 Constitution and the country's national patrimony," Mariano said.

Holding company

He said, "Dominguez's revelation is a strong basis for the immediate cancellation of Lafayette's mining permit and total closure."

Dominguez argued that LPI was only a "holding company" since the actual mining operation was being done by two Albay-based Filipino firms -- Ungay Malibago and Rapu-Rapu Minerals.

Mariano, however, told the Inquirer after the five-hour hearing that LPI was Rapu-Rapu's mother company.

Asked by the Inquirer about details relating to the corporate setup, Dominguez turned to his lawyer Bayani Agabin.

Agabin said the Mining Act of 1995, as explained by the justice department in a legal opinion, allowed a "layering" of ownership.

As the holding company, LPI wholly owns Rapu-Rapu Processing Inc., the holder of the mineral processing permit, according to Agabin.

"Under the Mining Act, it (mineral processing plant) can be 100 percent foreign-owned," said the lawyer. "The Department of Justice rules it as valid."

Sharing agreement

Assistant Environment Secretary Jeremias Dolino, who was present at the hearing, explained to the committee that the 60-40 capitalization requirement, which prohibits foreigners from owning more than 40 percent of utilities and mining firms, allowed "management consultancy services," known as Mutual Production Sharing Agreement (MPSA).

Dolino said LPI had an MPSA with Ungay Malibago and Rapu-Rapu Minerals on a 40-60 percent ratio. "Management consultancy service is allowed," he said.

In a statement, LPI denied the allegation that Dominguez was fronting or acting as dummy for foreign investors.

"Dominguez has only one share in Lafayette Philippines just so he can be a member of the board. He was elected by shareholders to the board and as an officer of the company and as a professional manager," it said.

Just management control

LPI said the issue was not ownership control but management control, which was given to him by the majority owners.

It said the processing plant, under the law, could be owned 100 percent by foreigners, so there was no need to hide the owners.

"The mining company (as opposed to the processing company) is owned 60 percent by a Philippine company (Rapu Rapu Holdings Inc.) and 40 percent by Lafayette Phils, which is well within the constitutional limit," LPI said.

Upon a motion by lawmakers, committee chair Leovigildo Banaag asked the Department of Environment and Natural Resources (DENR) not to lift the cease and desist order (CDO) against Rapu Rapu Holdings while the company was being investigated.



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