USGS PREPARES WORK PLAN FOR SURVEY OF MINERALS

UNCLAS SECTION 01 OF 03 MANILA 005457 SIPDIS STATE FOR EB/IFD/OIA, EB/ESC, AND EAP/PMBS DOE FOR TOM CUTLER USDOC FOR 4430 ITA/MAC/DBISMEE/KBOYD BANGKOK FOR REO JAMES WALLER DEPT OF INTERIOR FOR USGS PLEAHY, JMEDLIN, AND GCOAKLEY STATE PASS USAID FOR JLEWIS E.O. 12958: N/A TAGS: EMIN SENV EINV ECON BEXP RP SUBJECT: USGS PREPARES WORK PLAN FOR SURVEY OF MINERALS REF: A) MANILA 3811 B) MANILA 2856 C) MANILA 2678 D) MANILA 259 E) MANILA 11 -------------- SUMMARY -------------- ¶1. In meetings in Manila with the GRP's senior geologists, a team of experts from the U.S. Geological Survey (USGS) drafted a work plan for the first phase of a mineral resources assessment of the Philippines. Phase one involves gathering existing data in digital format for release to the public domain. The estimated cost to the GRP for the first phase is US$1 million. The Australian Development Agency (AusAID) concurrently is planning a feasibility study to provide US$18 million in grants to the GRP to conduct aeromagnetic imaging of selected areas of Northern Luzon and Mindanao. These prospective studies might present timely opportunities for scientific and diplomatic cooperation between the U.S. and Australia to support the implementation of reforms that will ensure benefit sharing, environmental protection, and sustainable economic progress. End Summary. -------------- WORK PLAN FOR PHASE ONE -------------- ¶2. U.S. Geological Survey (USGS) Lead Coordinator for Asia and Pacific Jack Medlin, Don Singer, and Barney Berger visited Manila November 5 - 12 to prepare a work plan for the Department of Environment and Natural Resources Mines and Geosciences Bureau (DENR/MGB) and USGS to jointly conduct the first phase of a state-of-the- art inventory of mineral resources in the Philippines (ref A). During USGS Acting Director Patrick Leahy's visit in August, DENR Secretary Michael Defensor signed a letter to Interior Secretary Gale Norton to affirm the GRP's intentions to proceed with the project and secure funding to support a contract with USGS. In September, Acting Director Leahy responded favorably on Secretary Norton's behalf and the team's visit was scheduled for November. ¶3. USGS's team met with DENR Assistant Secretary/MGB Director Jeremias Dolino and MGB's senior geologists assigned to the project. In addition, Medlin met with Australian Development Agency (AusAID) Counselor Angus Macdonald; Department of Energy (DOE) Undersecretary for Energy Exploration and Development Balce; and the Inter- Embassy Mining Group (which includes representatives of the Australian, British, Canadian, and American embassies and our respective chambers of commerce). ¶4. The first phase (one year) involves integrating existing geologic data and maps in digital format in a publicly-released report. In the second phase (one to two years),new geologic, geochemical, and geophysical data would be gathered. In the third phase (one year or less),USGS would apply models to determine probable locations of large, recoverable deposits of copper, gold, nickel, chromium, and other minerals. ¶5. The scope of work for phase one is embodied in a draft letter of agreement which would be signed by USGS Acting Director Leahy and DENR Secretary Michael Defensor. The principal tasks include creating a digital geologic map of the Philippines, establishing digital databases of stream sediment data and aeromagnetic data, and training. -------------- FUNDING FOR PHASE ONE -------------- ¶6. The estimated cost to the GRP for phase one is US$1 million, although the GRP has not identified its source of funding. The GRP would be obliged to commit an additional US$4 - 9 million for the second and third phases. Initiating the first phase requires a letter of agreement, but the second and third phases require a bilateral memorandum of understanding (MOU). (USGS plans to send post a final draft of the letter of agreement in early December.) The Circular-175 U.S. inter-agency review process for an MOU could be facilitated through the U.S.-GRP Science and Technology Agreement of 2003. Circular-175 would provide a forum for more comprehensive review of our economic and geopolitical interests in advancing to phases two and three. ¶7. The GRP would allocate approximately US$300,000 of its US$1 million contribution to pay for digitization of data in the Philippines and new equipment for DENR/MGB. -------------- --- AUSTRALIA CONSIDERS FUNDING AEROMAGNETIC IMAGING -------------- --- ¶8. The Australian Development Agency (AusAID) is eager to support the rebirth of the mining sector. AusAID Counselor Macdonald confirmed that Canberra is reviewing DENR/MGB's proposal for AusAID to provide US$18 million in grants to the GRP to conduct aeromagnetic imaging of selected areas of Northern Luzon and Mindanao and a request from the Chamber of Mines to help establish a new code for listing mining companies on the stock exchange. For the aeromagnetic survey, the GRP would be obliged to match AusAID's contribution with US$900,000. Although Canberra has not formally committed to the aeromagnetic survey, AusAID intends to send two experts to Manila in early 2006 to conduct a feasibility study. While DENR/MGB's proposal suggests that the GOA and GRP would have proprietary rights, a visiting Australian desk officer assured econoff that the data probably would be released to the public domain. Australia and the GRP have discussed the possibility of doing an aeromagnetic survey for ten years, but negotiations were derailed in 1998 primarily due to infighting between DENR and MGB over control of data. ¶9. Aeromagnetic data gathered by the Australians via helicopter or airplane could be incorporated into the second and third phases of a mineral resources assessment as new geophysical data. In phase one, USGS and DENR/MGB plan to digitize aeromagnetic data that is on file with the GRP's DOE. Much of the existing data is piecemeal and dates from the Marcos era. In phase two, USGS could gather geophysical data on the entire country via satellite. The enhanced precision of scale that would be generated by AusAID's project could add considerable value to a mineral resources assessment in identifying probable locations of large, recoverable deposits in selected areas of Northern Luzon and Mindanao. USGS has collaborated with its counterpart, Australia Geoscience, on other projects and will explore possible joint efforts here. -------------- -- COAL, COAL BED METHANANE, AND GEOTHERMAL ENERGY -------------- -- ¶10. Although DOE Undersecretary for Energy Exploration and Development Balce said he hopes that the assessment can be expanded in the future to include coal, coal bed methane, and geothermal energy, he noted that DOE's budget for 2006 has little room for adjustment. -------------- WORLD BANK LOAN FOR DENR -------------- ¶11. The World Bank is considering providing a US$40 million loan to the GRP over four years to support the DENR's priorities, including land use planning, environmental policy, water management, and mining. Econoff met with Christopher Sheldon, Mining Policy and Reform Division, who said the program could include assistance for geologic mapping and mining-related reforms. The Bank is reviewing whether general or specific goals for continued funding should be used for this loan. Sheldon plans to visit Manila again in February or March 2006 to discuss next steps with the GRP. Technical assistance initiatives could play a key role in encouraging sound practices, however, considering the GRP's track record the loan should be linked to explicit targets. -------------- COMMENT -------------- ¶12. Development of the mining sector is a top priority for President Arroyo. Embassy believes USGS's mineral resources assessment and AusAID's aeromagnetic survey could help to "level the playing field" for potential investors. USGS requires national governments to publicly release the results of collaborative studies and AusAID likely would follow suit. However, the history of mining in the Philippines is marred by corruption and mismanagement. To ensure that history does not repeat itself and to foster sustainable development, we should create incentives for the GRP to implement proper regulatory reforms and environmental safeguards as it liberalizes the mining sector and attracts foreign investment. USGS's team said it would welcome Australia Geoscience as full partners in a joint mineral resources assessment with DENR/MGB. Post will continue to report on prospects for scientific and diplomatic cooperation. JONES