The world’s 18th largest gold miner, which imposed new taxes on gold sales last year, is in the eye of a storm. Almost 90% of Philippine’s gold production is reportedly being smuggled out of the Southeast Asian country, with most it reaching China’s shores.
With its many volcanoes, the Philippines is a mineral rich country containing huge amounts of gold, copper, silver and platinum reportedly worth around $1 trillion.
In 2011, the country mined around 1 million troy ounces of gold worth $1.6 billion, with the volume of legal purchases sliding alarmingly. In the second quarter of 2012, the amount of gold sold to the central bank dipped 98% from the comparable period a year ago, reports show.
Reports indicated that most of the gold was shipped to China, Hong Kong and Malaysia. Some 24 tonnes was lost from the legal market, with production from small-scale miners making its way to the black market. High world gold prices have proved to be a boon to the miners in Southern Philippines.
Even as mining officials in Phillipines have been blaming large scale smuggling to China via Hong Kong which has resulted in a sharp drop in gold sales to the central bank, a lawmaker in Philippines has called for a congressional inquiry into the abysmally low gold purchase by the Bangko Sentral ng Pilipinas (BSP).
The central bank of the Philippines, BSP, has been purchasing gold, which becomes part of the country’s foreign reserves and serves as a buffer for external shocks.
BSP’s purchases of the precious metal have been declining severely for the past few months with miners moving to the black market. The situation has become more acute since the Bureau of Internal Revenue began charging 2% excise tax and 5% withholding tax against gold sales.
Government data has revealed that gold sales to the BSP plunged 95% in the first half of 2012 to just 786 kilogram from 15,003 kilogram last year.
Representative Angelo Palmones has urged the House Committees on Economic Affairs and Natural Resources to conduct a probe as to why BSP’s gold purchases for the first six months of 2012 amounted to such a small figure.
Gold was considered a top foreign exchange earner since 2005 and generated earnings of $1,674.1 billion in 2010, Palmones was quoted as saying.
In the Phillipines, Lode and placer gold deposits occur in most of the 73 provinces in the Philippines. The principal producing districts are Baguio and Paracale in Luzon and Masbate, Surigao and Masara in Mindanao.
Citing a report by the National Statistics Coordinating Board, Palmones said the country has vast gold reserves in different regions of the country, the highest can be found in Region 12 estimated at 2,189 billion metric tonnes, while the highest quality of gold reserve is in Region 8 with an average of 11.4 gm Au/mt.
Gold miners in the Phillipines appear to be selling their gold on the black market either directly to tourists, or to middlemen who smuggle the gold into world markets such as Hong Kong.
Bank of the Philippine Islands economist Jun Neri was quoted by newswire agencies as saying gold as the country’s reserves gave BSP the flexibility to sustain the value of over all reserves which hit a new high of $79.3 billion as of July 2012.