Global Ferronickel Holdings, Inc.FNI

Receipt of DENR's Show Cause Notice: FNI maintains compliance with environmental laws

FNI reports that Platinum Group Metals corporation (PGMC) has just received a copy of the DENR's Show Cause Notice (“SCN”) dated 16 February 2017, directing it to explain “ why [its] operations should not be suspended and/or pertinent mining contract with the government shall not be cancelled within seven (7) days from receipt hereof.” The SCN raises the following: (i) Review of the classification of the alleged “thickly forested unmined areas covered by CAGA 5,” which is part of the mining area of PGMC, “for declaration of potential conservation/protected landscape.” (ii) “Extensive siltation of coastal waters” as found by the “field validation conducted by this Office on January 26, 2017 and the review of records.”

The SCN is another misappreciation of facts and provides evidence for lack of due process.

(i) In its letter dated 11 November 2016 to the DENR Secretary, PGMC clarified that the CAGA 5 area is not within the mountain ranges of Mount Hilong-Hilong based on the Tenement Map of Caraga R-XIII of the Mines and Geosciences Bureau (MGB). The recommendation to discontinue clearing and mine development in this or other areas within the mining tenement would violate the prior and vested rights of the holder of the Mineral Production Sharing Agreement (MPSA) because the areas have already been thoroughly studied, reviewed and delineated as part of the contract that the Government must uphold in good faith.

(ii) The second issue is contrary to law and science. First, PGMC is unaware of any field validation conducted by the DENR on 26 January 2017. This is contrary to the department’s policy and practice. Second, assuming that there was such a field validation, PGMC has not been furnished with any written result. The DENR did not disclose the composition, scope and purpose of this validation. The SCN does not attach any documentary support either. Third, on 02 February 2017, DENR prejudged PGMC by including the company on DENR’s so-called “Closure” list due to “siltation of coastal waters” as posted on DENR Facebook account. But it is only now that the Company is being asked to explain the issue. Fourth, in 2003, the environmental baseline study of the mining area confirmed the high volume of sediments along coastlines, which is traced to years of natural erosion and landslides. The sediments in the upland and coastal areas are made of limonite formed by the lateritic soil. Nearly all laterites are rusty-red because of rich iron oxide in this declared mineral reservation area. During rainy season (like the weeks of January this year) or tidal disruptions, the discoloration of waters occurs even without mining activities. This is why the body of water across PGMC’s causeway is also called The Red Bay. But on stretches of fine weather, the sea and the river are clear. In 2007, aware of this background, the DENR allowed PGMC to begin operations. PGMC has since then built erosion and sediment control structures like settling ponds, silt traps, dams, sumps, canals and gabions. The DENR Mine Audit Team, aside from many other validation teams, found them “compliant with the policies, environmental laws, rules and regulations of the Philippine Mining Act and the ECC.” Also, the Technical Review Committee that the DENR formed to evaluate the Audit Report did not find any violation or liability on the part of PGMC and did not recommend any penalty.

The SCN is not a closure or suspension order. PGMC will submit its reply to the SCN in due course.

Attached is the DENR Show Cause Letter dated 16 February 2017