NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more here


made and entered into in Metro Manila, Philippines, this
_________ day of ____________, 1994, by and between:

referred to as the "Government", represeted by
the Secretary of the Department of
Environment and Natural Resources, Hon.
Angel C. Alcala, with offices at the 
Department of Environment and Natural
Resources Building, Visayas Avenue, 
Diliman, Quezon City, Metro Manila


CORPORATION, a corporation duly organized
and existing under the laws of the
Republic of the Philippines, hereinafter
referred to as the "Contractor", with
offices at 2283 Pasong Tamo Extension,
Makati, Metro Manila, represented in this
act by its President and Chairman of the
Board JESUS S. CABARRUS, as authorized
by the Board under Annex A which forms an
integral part hereof.


WHEREAS, the 1987 Constitution of the Republic of the 
Philippines (the "Constitution") provides in Article XII,
Section 2 that all lands of the public domain, waters, 
minerals, coal, petroleum and other natural resources are
owned by the State and that the exploration development and
control and supervision of the State; and

WHEREAS, the Constitution further provides that the
state may directly undertake such activities or it may enter
into co-production, joint venture or production sharing
agreements with Filipino citizens or corporations or
associations at least sixty per centum of whose capital is
owned by such citizens; and

WHEREAS, Republic Act No. 1828, as amended, authorized
the development, exploitation, and utilization of the mineral
deposits in the Surigao Mineral Reservation and granted
authority to the President of the Philippines to engage the
services of independent contractors for that purpose; and

WHEREAS, by Executive Order No. 279 issued on July 25,
1987, the Secretary of the Department of Environment and
Natural Resources is authorized to enter into production
sharing agreements in furtherance of the objectives of the
Government and the Constitution to bolster the national
economy through systematic development and exploitation of
mineral lands; and

Page 1 of 23

WHEREAS, pursuant to Letter of Instructions No. 1447
(LOI 1447) issued on February 12, 1985, all the rights and
privileges granted to an operator of the Surigao Mineral
Reservation under Section 3 of Republic Act No. 1828 were
granted to the contractor therein; and

WHEREAS, the Government desires to avail itself of the
financial resources, technical competence and skill which
contractor is capable of applying in the Mining Operations at
the project contemplated herein; and

WHEREAS, Contractor desires to join and assist the
Government in the development and exploitation for commercial
purposes of nickel, cobalt, chrome and iron deposits existing
in the Contract Area (as hereinafter defined) and any other
minerals which may be discovered in such Contract Area; and

WHEREAS, Contractor has available to it the capital,
technical competence and skills necessary to carry out the
Mining Operations herein described.

NOW, THEREFORE, for and in consideration of the 
premises, the mutual covenants, terms and conditions
hereinafter set forth, it is hereby stipulated and agreed as



1.1 This Agreement is a production sharing agreement
entered into pursuant to Executive Order No. 279.

1.2 The primary purpose of this Agreement is to provide
for the exploration, development and commercial utilization
of nickel, cobalt, chrome, iron and other deposits existing
within the Contract Area, with all necessary services,
technology and financing to be furnished or arranged for by
the Contractor in accordance with the provisions of this
Agreement. The Contractor shall not, by virtue of this
Agreement, acquire any title to lands encompassed within the
Contract Area.

1.3 The Contractor shall undertake and execute, for and
on behalf of the Government, Mining Operations in accordance
with the provisions of this Agreement, and is hereby
constituted and appointed for the purposes of this Agreement
the exclusive entity to conduct Mining Operations in the
Contract Area.

1.4 The Contractor shall assume all exploration risk
such that if no Minerals in commercial quantity are developed
and produced, it will not be entitled for reimbursement.

1.5 During the term of this Agreement, the total value
of production and sale of marketable products derived from
the Mining Operations contemplated herein shall be accounted
for and divided between the Government and Contractor in

Page 2 of 23

accordance with Section VII hereof.


As used in this Agreement, the following words and
terms, whether in the singular or plural, shall have the
following respective meanings:

2.1 Agreement means this Production Sharing Agreement.

2.2 Associated Minerals means ore minerals which occur
together with the principal ore mineral.

2.3 Budget means an estimate of expenditures to be made
by Contractor in Mining Operations contemplated hereunder to
accomplish the Work Program for each particular period.

2.4 Calendar Year or Year means a period of twelve (12)
consecutive months starting with first of January and ending
on December 31, while Calendar Quarter means a period
consisting of three (3) consecutive months with the first
calendar quarter starting with the first day of January.

2.5 Central Bank means the Bangko Sentral ng 

2.6 Commercial Production means the production of
sufficient quantity of minerals to sustain economic viability
of mining and refining operations as specified in the
approved Work Program and as determined and declared by the
Contractor after completion of the debugging of the mining
and refining facilities. Production of minerals from ores
extracted or required to sample, test and/or develop a viable
processing system or supply a pilot plant used for such
testing in quality and volume specified in the Work Program,
shall not be considered in the determination of the
Commercial Production.

2.7 Constitution or Philippine Constitution means the
1987 Constitution of the Republic of the Philippines adopted
by the Constitutional Commission of 1986 on October 15, 1986
and ratified by the People of the Philippines on February 2,

2.8 Contract Area means the area within the
jurisdiction of the Republic of the Philippines which is the
subject of this Contract, as diminished pursuant to the
relinquishment obligations of the Contractor as herein set

2.9 Contract Year means a  period of twelve (12)
consecutive months counted from the Effective Date of this 
Agreement or from the Anniversary of such Effective Date.

Page 3 of 23

2.10 Contractor means Nonoc Mining and Industrial
Corporation, and assignee or assignees of any interest of
Nonoc Mining and Industrial Corporation under this Agreement
provided such assignment of any such interest is accomplished
pursuant to the provision hereof.

2.11 Declaration of Mining Feasibility means a document
proclaiming the presence of minerals in a specific site that
are recoverable by socially acceptable, environmentally safe
and economically sound methods included in the Mine
Development Plan for a period of three (3) years in the case
of Integrated Agreement.

2.12 Definitive Agreement means the agreement, dated as 
of October 12, 1990, among the Republic of the Philippines,
acting through the Asset Privitization Trust established
pursuant to Proclamation No. 50, as amended, Philnico Mining
and Industrial Corporation and contractor.

2.13 Effective Date means the Date appearing as the date
of approval of the President of the Republic of the

2.14 Environment means physical factors of the
surroundings of human beings, including land, water,
atmosphere, climate, sound, odors, tastes and biological
factors of animals and plants and the social factors of

2.15 Executive Order means that certain order of the
President of the Philippines issued on July 25, 1987 and
known as Executive Order No. 279.

2.16 Exploration means the examination and investigation
of lands and offshore areas supposed to contain valuable
minerals by drilling, trenching, shaft sinking, tunneling,
test pitting and other means, for the purpose of probing the
presence of mineral deposits and the extent thereof.

2.17 Exploration Period shall mean the time period from
the Effective Date of this Agreement, and actual activities
in the Contract Area shall commence not later than three (3)
months after signing the Contract. The Exploration Period
shall be for at most two (2) years from the Effective Date,
as may be extended with the consent of the Government by not
more than two (2) years, or a total of four (4) years from
Effective Date of this Agreement.

2.18 Force Majeure means acts or circumstances beyond
the reasonable control of the Party to this Agreement
effected thereby, including, without limitation, war
(declared or not), insurrection, civil disturbance, blockade,
sabotage, embargo, strike and other labor conflict, riot,
epidemic, earthquake, storm, flood, landslide or other
adverse weather conditions, explosion, fire, adverse order or
direction of any Government de jure or de facto or any
instrumentality or subdivision thereof, act of God or the
public enemy, breakdown of machinery having a major effect on
the operations, and any cause (whether or not of the kind
hereinbefore described) over which the affected party has no
reasonable control and which, is of such a nature as to

Page 4 of 23

delay, curtail or prevent timely action by the party

The force majeure mentioned in this section, except
those of general knowledge, shall be reported to DENR
Regional Office concerned within fifteen (15) calendar days
from occurrence.

2.19 Foreign Exchange means any currency other than that
of the Republic of the Philippines acceptable to the
Government and the Contractor.

2.20 Government means the government of the Republic of
the Philippines or any of its agencies or instrumentalities.

2.21 Gross Mining Revenues means the gross sales
receipts of production derived by the Contractor from Mining
Operations within the Contract Area, less freight,
insurance, smelting and refining costs specified in Schedule

2.22 Mine Development refers to steps necessarily taken 
to reach an orebody or mineral deposit so that it can be

2.23 Minerals means all naturally occurring substances
in solid, liquid or any intermediate state.

2.24 Mineral products means things produced and prepared
in a marketable state by simple treatment processes such as
washing or drying, but without undergoing any chemical change
or processes or manufacturing.

2.25 Mining Area means that portion of the Contract Area
delineated for mine development and production as specified
in the Declaration of Mining Feasibility.

2.26 Mining Operations means mineral exploration,
development, production and all other operations necessary to
discover, develop and extract minerals.

2.27 Net Mining Revenue shall have the meaning
attributed to it under Section 8.4.

2.28 Notices means notice in writing, or by telex or
telecopy (authenticated by answer back or confirmation
received) addressed or sent as provided in Section 17.1 of
this Agreement.

2.29 Ore means mineral or rock that can be extracted for

2.30 Ore Mineral means a mineral that can be extracted
from ore and contributes to the value of the ore.

2.31 Pollution means any direct or indirect alteration
of the physical, thermal, chemical, biological or radioactive
properties of any part of the Environment by discharging,
emitting or depositing wastes so as to materially affect any
beneficial use adversely, or to cause a condition which is
hazardous to public health, safety or welfare, or to animals,

Page 5 of 23

birds, wildlife, fish or aquatic life or to plants, and
"pollute" has a corresponding meaning.

2.32 Secretary means the Secretary of the Department of
Environment and Natural Resources.

2.33 Department or DENR means the Department of
Environment and Natural Resources.

2.34 Work Program means a document which presents the
plan of major mining activities and the corresponding
expenditures and Budget of the Contractor in its Contract
Area during a given period of time, including the plan and
expenditures for Environmental protection and rehabilitation,
development of host and neighboring communities and of local
geoscience and mineral technology, as submitted and approved
pursuant to this Agreement.



3.1 the term of this Agreement shall be TWENTY-FIVE
(25) CONTRACT YEARS from the Effective Date, subject to
termination as provided herein.



4.1 Size, Shape and Location of Contract Area. The
Contract Area shall be the area of land located within Parcel
II and Parcel III of the Surigao Mineral Reservation,
comprised of:

          Island                       Area, Hectares
1. Nonoc           -                4,372
2. Awasan         -                916
3. Hanigad        -                976
4. Dinagat         -                18,736
Total                  -                25,000

A portion of Dinagat Island starting from the Eastern
end of the boundary of Parcel II and Parcel IV which is
designated as Point No. 1 with coordinates latitude
10°-04'-51.76" and longitude 125°-41'-26.60"; Thence
No. 2 with latitude 9°-51'-57.89" and longitude
125°-42'-01.06"; thence following the coastline towards the
west direction to Point No. 3 with latitude 9°-53'-07.87"
and longitude 125°-38'-28.56"; thence along the west
coastline to the North direction to Point No. 4 with
latitude 9°-56'-25.61" and longitude 125°-37'-36.86"; Thence

Page 6 of 23

5,350 meters due North to Point No. 5 with latitude
9°-59'-19.75" and longitude 125°-37'-38.86"; Thence 1,045
meters due West to Point No. 6 with latitude 9°-59'-19.75"
and longitude 125°-37'-02.55"; Thence 13,055 meters due North
to Point No. 7 with latitude 10°-06'-24.69" and longitude
125°-37'-02.55" ; Thence 6,345 meters due East to Point No. 8
with latitude 10°-06'-24.69" and longitude 125°-40'-30.81";
Thence following the coastline in South direction to close at
Point No. 1 with an estimated land area of 18,736

If and when the Government shall decide to award
available or expired contract areas of the Surigao Mineral
Reservation operated by an Independent contractor in
accordance with Sec. 6.7 and 6.8 of R.A. 1828 as amended,
the Contractor shall have a preferential right; but in no
case to exceed a total land area of twenty-five thousand
hectares in accordance with Sec. 5.2 of the same law.

The specific size and shape of the Contract Area are
indicated in a map/sketch with corresponding geographical
coordinates shown in Annex B.



5.1 Timetable for Exploration. - Contractor shall
commence Exploration Operations hereunder not later than
three (3) months after the Effective Date. This Exploration
phase shall be extended for not more than two (2) years upon
request by the Contractor and upon Government being satisfied
that the Contractor has complied with the terms of this
Agreement and of reasonable expectation of success during the

5.2 Work Program and Budgets - The Contractor shall
strictly comply with the Exploration Work Program Submitted
to and approved by the Government. Please refer to Annex C
for the 2-year exploration work program and budget.

The amount be spent by Contractor in conducting
Exploration Operations under the terms of this Agreement
during the Exploration Period shall, in the aggregate, to be not
specified Contract Years as follows:

First Contract Year: (P2,461,295.00) Phil. Currency
Second Contract Year: (P2,661,600.00) Phil. Currency

In the event of the termination of this Agreement,
Contractor shall only be obliged to expend the pro-rata
amount for the period of such Contract Year prior to

In the event of extension, the amount to be spent
every year shall first be agreed upon by the parties.

Page 7 of 23

If during any Contract Year, Contractor should
expend more than the amount required to be expended as
provided above, the excess may be subtracted from the amount
of money required to be expended by Contractor during the
succeeding Contract Years; and should Contractor, due
to unforseen circumstances or with the consent of the
required to be so expended, the deficiency shall be applied
during the succeeding Contract Year.

5.3 Reporting - 

a) Annual Report. - During the Exploration Period,
the Contractor shall supply all geological, geophysical,
radiometric and other information relating to the exploration
areas and its activities by annual reports to be submitted to
the DENR Secretary thru the Director of the Concerned DENR
Regional Office, copy furnished the Mines and Geo-sciences
Bureau within sixty (60) days from the end of each Contract
Year. Such information shall include financial expenditures,
raw and processed analytical data, copies of originals of
assay results, duplicate samples, field data, copies of
originals from drilling reports, and all other information of
any kind collected during exploration activities. All such
provided elsewhere herein.

b) Final Report. - The Contractor shall submit to the
DENR Secretary thru the Director of the concerned DENR
Regional Office, copy furnished the Mines and Geo-sciences
Bureau a final report within six (6) months from the
expiration of the Exploration Period which shall be in the
form and substance comparable to published professional
reports of respected international institutions and shall
incorporate all the findings in the Contract Area, including
locations of samples, assays, chemical analyses, and
assessment of mineral potential. Such report shall also
include complete detailed expenditures incurred during the 
Exploration Period.

c) Mining Feasibility. - During the Exploration
period, the contractor shall conduct feasibility studies for
any part of the Contract Area as may be warranted. Within
the Period, the Contractor shall submit to the DENR Secretary
thru the Director of the concerned DENR Regional Office, copy
furnished the Mines and Geo-sciences Bureau a Declaration of
Mining Feasibility with a Work Program for development for
the next succeeding three (3) years indicating therein the
Mining Area. The Secretary shall act on the declaration of
mining feasibility and work program within two (2) months
from receipt thereof, otherwise they shall be deemed approved
and the Contractor may proceed with the execution of the Work
Program. Areas not delineated as part of the Mining Area
shall be deemed relinquished in favor of the Government.

Failure of the Contractor to submit a Declaration
of Mining Feasibility shall be considered a substantial
breach of this Agreement.

Page 8 of 23



6.1 Timetable. - The Contractor shall complete the
development of the mine including the construction of
production facilities within thirty-six (36) months from the
submission of the Declaration of Mining Feasibility, subject
to such extension based on justifiable reasons as the
Secretary may approve.

6.2 Reporting -

a) Annual - The Contractor shall submit to the DENR
Secretary thru the Director of the concerned DENR Regional
Office, copy furnished the Mines and Geo-sciences Bureau an
annual report within sixty (60) days after December 31 of
each year which states the major activities, achievements and
expenditures during the year covered, including maps, assays,
rock and mineral analysis and progress geological and similar
reports during the development and construction period.

b) Final Report - Within (6) months from the
completion of the development and construction activities,
the contractor shall submit to the DENR Secretary thru the
Director of the concerned DENR Regional Office, copy
furnished the Mines and Geo-sciences Bureau a final report to
the Government. Such report shall integrate all information
in maps of appropriate scale and quality as well as in 
monographs or reports in accordance with international



7.1 Timetable. - The Contractor shall submit to the
DENR Secretary thru the Director of the concerned DENR
Regional Office, copy furnished the Mines and Geo-sciences
Bureau within thirty (30) days from the completion of
construction facilities a Work Program for a period of three
(3) years. The Secretary shall act on the work program
within two (2) months from receipt thereof, otherwise it
shall be deemed approved and the contractor may proceed with
its execution. The contractor shall commence Commercial
Production immediately upon the approval of the said Work

7.2 Work Programs. - During the Operating Period, the
Contractor shall submit to the DENR Secretary thru the
Director of the concerned DENR Regional Office, copy
furnished the Mines and Geo-sciences Bureau Work Programs
covering a period of three (3) years each which shall be
submitted not later than thirty (30) days before the
expiration of the period covered by the previous Work

Page 9 of 23

The Contractor shall conduct Mining Operations and
other activities for the duration of the Operating Period in
accordance with the duly approved Work Programs and any
modification thereof approved by the Secretary.

7.3 Reporting

a) Quarterly Reports. - Beginning with the first
Calendar Quarter following the commencement of the Operating
Period, the Contractor shall submit to the DENR Secretary
thru the Director of the concerned DENR Regional Office, copy
furnished the Mines and Geo-sciences Bureau within thirty
(30) days after the end of each Calendar Quarter a Quarterly
Report stating the tonnage of production in terms of ores,
concentrates, and their corresponding grades and other types
of products; value, destination of sales or exports and to
whom sold; terms of sales and expenditures.

b) Annual Reports. - During the Operating Period, the
Contractor shall submit to the DENR Secretary thru the
Director of the concerned DENR Regional Office, copy
furnished the Mines and Geo-sciences Bureau within sixty (60)
days from the end of each Calendar Year an Annual Report
indicating in sufficient detail:

I) The total tonnage of ore reserves whether
proven, probable, or inferred; the total
tonnage of ores, kind-by-kind, broken down
between tonnages mined, tonnages transported
from the mines and their corresponding
destination, tonnages stockpiled in the mines
and elsewhere in the Philippines, tonnages
sold or committed to be sold or committed for
export. (whether actually shipped from the
Philippines or not), tonnages actually shipped
from the Philippines (with full details as to
purchaser, destination and terms of sale), and
if known to the Contractor, tonnages refined,
processed or manufactured in the Philippines
with full specifications as to the
intermediate products, by-products or final
products and of the terms at which they were

II) Work accomplished and work in progress at the
end of the year in question with respect to
all of the installations and facilities
related to the utilization program,
including the investments actually made or

III) Profile of work force, including management
and staff, stating particularly their
nationalities, and for Filipinos, their place
of origin (i.e., barangay, town, province,

IV) Ownership of the Contractor, particularly with
respect to nationality.

Page 10 of 23 7.4 Expansion and Modification of Facilities. - The
Contractor may take expansions, modifications, improvements
and replacements of the mining facilities and may add new
facilities as the Contractor shall consider necessary for the
operations, provided such plans shall be embodied in an
appropriate Work Program approved by the Secretary.



8.1 General Principles. - The financial regime of this 
Agreement shall be governed by the principle according to
which the Government expects a reasonable return in economic
value for the utilization of non-renewable natural
resources under the natural sovereignty while the Contractor
expects reasonable return on its investment with special
account to be taken for the high risks of exploitation, the
terms and conditions prevailing elsewhere in the industry and
any special efficiency to be gained by particularly good
performance of the Contractor.

8.2 Occupation Fees. - From the date of registration
of this Agreement and every year thereafter, the Contractor
shall pay to the Government and annual occupation fee of ONE
HUNDRED PESOS (P100.00) per hectare over the Contractor's
Area less those relinquished in favor of the Government. The
occupation fee herein provided shall constitute full payment
of the occupation fee and / or rental fee provided in the existing
National Internal Revenue Code.

8.3 Regulatory Fees. - There shall be due the
Government for regulatory purposes during the Exploration
Period, the amount of TEN PESOS (P10.00) per hectare per year
on the actual Contract Area as above described plus a yearly
increment of FIVE PESOS (P5.00) per hectare per year. The
regulatory fees corresponding to the first two contract years
shall be payable within 30 days from receipt of the approved
MPSA to the DENR Office while the regulatory fees for the
extension period shall be due within 30 days from approval of
the request for extension of the exploration period.

8.4 Production Share of the Government. - There shall
be due the Government a Production Share equivalent to:

a) 2% of Gross Mining Revenues; plus

b) 10% of Net Mining Revenues, which means Gross
Mining Revenues.

1) depreciation and depletion computed for tax
purposes and under other incentive laws; and

2) 15% investment allowance (Return on Assets)
based on net assets, which means property,

Page 11 of 23

plant and equipment as reflected in the audited financial statements;

3) debt service - interest expense on 
rehabilitation loan;

4) capital expenditures pertaining to the
acquisition of assets and repairs and
maintenance of existing assets whose
individual monetary value is above P20,000;

5) payments to Contractor's creditors identified
prior to the date of the Definitive Agreement;

6) taxes, custom duties, and royalties/
government share in gross mining revenue;

7) extraordinary expenses incurred due to
fortuitous events: events such as restoration
cost on destruction caused by earthquakes,
typhoons, fires, wars, flood; and

8) loss on foreign exchange arising from foreign
currency denominated transactions.

Audited financial statements shall be net of
depreciation, as computed for tax purposes and shall exclude
appraisal increases.

Any excise tax currently imposed and paid by the 
Contractor shall be charged against the Production Sharing
Fee payable to the Government, Provided that if the excise
tax in any Contract Year shall exceed the Production Sharing
Fee as determined in accordance with this Section, Contractor
shall not have the right to recover the excess from the 
Government; Provided, Further, That, if the value of the
Production Sharing Fee is less than the values of the excise
law, the Contractor shall pay the excise tax instead.

Notwithstanding this immediately foregoing
paragraph, for the duration that Contractor is required to
pay to the Republic of the Philippines the price
participation specified in Section 2.05 of the Definitive
Agreement, Contractor shall not be required to pay the
Production Sharing Fee specified in (b) above if in any year
in which such fee is otherwise due under this Agreement,
Contractor shall have paid at least one price participation
to the Republic of the Phillipines pursuant to Section 2.05
of the Definitive Agreement, Provided that if the value of
the Production Sharing Fee specified in (a) and (b) above is
less than the value of the excise tax currently imposed and
paid by Contractor, Contractor shall pay the excise tax

For Purposes of determining the amount of the
herein production share of the Government, the Contractor
shall strictly comply with auditing and accounting
requirements prescribed under the existing laws, rules and

Page 12 of 23

8.5 Pricing of Sales. - The Contractor shall endeavor
to obtain the best achievable price for its production and
pay the lowest achievable marketing commission and related
long-term sales and short-term sales comparable to policies
followed by independent producers in the international mining

The Contractor shall likewise seek a balanced
distribution among consumers. Insofar as sales to
Contractor's affiliates are concerned, prices shall be at
arm's length standards and competing offers for large scale
and long-term contracts shall be procured.

8.6 Associated Minerals. - If Minerals, other than
nickel and cobalt are discovered in commercial quantities in
the Contract Areas, the value thereof shall be added to the
value of the principal minerals in computing the share of the

8.7 The production share of the Government referred to
to in Section 8.4 for any calendar year, if any, less the
excise or mine product tax paid to the Bureau of Internal
Revenue provided in the preceding paragraph, shall be paid to
the pertinent Regional Office of the DENR within three (3)
months after the end of each calendar year.



9.1 Submission to Government. - Within the periods
stated herein, the Contractor shall prepare and submit to the
DENR Secretary thru the Director of the concerned DENR
Regional Office, copy furnished the Mines and Geo-sciences
Bureau the Work Program and Budget for the Contract Area
stating the Mining Operations which Contractor proposes to
carry out during the period covered with the details and
particulars set forth elsewhere in this Agreement or in the 
Guidelines (DENR Administrative Order No. 57, series of

9.2 Examination. Revision. - Should the Government
wish to propose a revision as to certain specific features of
said Work Program or Budget, it shall within thirty (30) days
after receipt thereof provide Notice to Contractor specifying
in reasonable detail its reasons therefor. Promptly
thereafter, the Government and Contractor will meet and
endeavor to agree on the revision proposed by the Government.
In any event any portion of said Work Program or Budget as to
which the Government shall fail to notify Contractor of 
proposed revision shall insofar as possible be carried out as
prescribed herein. If the Government shall fail within sixty
(60)  days from receipt therefore to notify Contractor of
proposed revisions, the Work Program and Budget proposed by
Contractor shall be deemed to be approved.

Page 13 of 23

9.3 It is recognized by the Government and Contractor
that the details of any Work Program may require change, in
the light of changing circumstances. The Contractor may make
such changes provided they do not change the general
Objective of any Work Program and provided, further, that
changes which entail a variance of at least twenty per centum
(20%) of the approved original budget shall be subject to the
approval of the Secretary.

9.4 The Government's approval of a proposed Work
Program and Budget will not be unreasonably withheld.



10.1 Obligations of the Contractor. - 
The Contractor shall:

a) Perform all Mining Operations in accordance
with the most efficient and internationally accepted mining
and engineering practices providing all necessary services,
technology and financing in connection therewith;

b) After the Exploration Period, shall relinquish
to the Government any portion of the Contract Area which
shall not be necessary for Mining Operations and not covered
by and Declaration of Mining Feasibility;

c) Perform its activities within the periods
expressed in this Agreement, Plans and Work Programs, save
as may be excused by Force Majeure;

d) Furnish all materials, labor, equipment, and 
other installations that may be required for carrying on all
Mining Operations. To the maximum extent compatible with
efficient operations, the Contractor shall give preference to
products and services produced and offered in the Philippines
of comparative quality. In particular, the Contractor
shall give  preference to Filipino Construction enterprises
and use buildings which can be constructed by using materials
and skills available in the Philippines, employ Filipino
subcontractors for road construction and transportation and
purchase Philippine household equipment, furniture and food;

e) To the extent and acceptable in view
of the rates and conditions available, maximize the use of
Filipino vessels and other means of transport available in
the Philippines. If necessary, the Contractor shall set
joint arrangements with Filipino concerns for the
transportation of concentrates;

f) Keep accurate technical records about the
operations as well as financial and marketing accounts and 
make them available to Government representatives authorized
by the Secretary for purposes of assessing performance and

Page 14 of 23

compliance of the Contractor with the terms of this
Agreement. Authorized representatives of other Government
agencies may also have access to such accounts in accordance
with existing laws, rules and regulations;

g) Hold the government free and harmless from all
claims and accounts of all kinds, as well as demands and 
actions arising out of the accidents or injuries to persons
or property caused by Mining Operations of the Contractor and
indemnify the Government for any expenses or cost incurred by
the government by reason of any such claims, accounts,
demands or actions;

h) Pay taxes or obligations in accordance with
existing laws, rules and regulations.

i) Conform to laws and regulations regarding
among others, labor safety, demarcation of the Contract Area,
and non-interference with the rights of other mining

j) Allow access to exploration and production 
sites and operations by inspectors authorized by the

k) Recognize and respect the rights, customs and
traditions of indigenous tribal communities over their
ancestral lands;

l) Contribute to National development by helping
develop the host and neighboring communities of the Contract
Area, local geo-science and mining technology, and mitigating
Environment effects of Mining Operations.

Development of Host and Neighboring Communities:

i) The Contractor shall coordinate with proper
authorities in providing development plans for the
host and neighboring communities.

ii) The Contractor shall help create self-sustaining,
income-generating activities, such as but not
limited to reforestation and production of goods
and services needed by the mine.

iii) The Contractor shall give preference to Filipino
citizens, particularly residents of its host and
neighboring communities in hiring personnel for its
Mining Operations.

If necessary skills and expertise are currently not
available, the Contractor must prepare and 
undertake a training and recruitment program within
the first year of commercial Production at its 

Development of Geosciences and Mineral Technology:

(i) The Contractor, in the course of its operations

Page 15 of 23

shall produce geological, geophysical, geochemical
and other types of maps and reports in scale,
format and nomenclature consistent with
internationally accepted practices and standards.

(ii) The Contractor shall systematically keep the data
generated from the Contract Area such as cores,
assays and other related information, including
economic and financial, and shall make them
accessible to students, researchers and other
persons responsible for developing geoscience and
mineral technology after declassification.

Environmental Protection and Industrial Safety:

i) The Contractor shall prepare a plan of mining so
that its damage to the environment will be minimal.
To the extent possible, control of pollution and
the transformation of the mined-out areas or
materials into economically and socially productive
forms must be done simultaneously with mining.

An Initial Environmental Examination (IEE) shall be
required as part of the exploration program and
appropriate Environmental Impact Statement (EIS)
shall be required as component of any of the
feasibility studies of the mine and shall be
prepared in forms prescribed by proper government

An Environmental Compliance Certificate (ECC) shall
be secured first by the Contractor prior to its
conduct of any mine development.

Those activities must be reflected clearly in the
appropriate Work Programs.

m) Cause the registration of this Agreement with
the DENR Regional Office concerned within thirty (30)
calendar days of its approval.

n) The Contractor shall maintain at least sixty
percent (60%) Filipino equity during the effectivity of this

10.2 Rights of the Contractor.

The Contractor shall:

a) Have the exclusive right to conduct Mining
Operations in the Contract Area in accordance with the terms
and conditions hereof;

b) Have the right of possession of the Contract
Area, with full right of ingress and egress and the right to
occupy the same subject to surface and easement rights;

c) Have the right, to use and have access to all
declassified geological, geophysical, drilling, production
and other information held by the Government or any agency or
enterprise thereof now or in the future, relating to the

Page 16 of 23

Contract Area;

d) Have the right to utilize, explore and process
all minerals that may be found in the Contract Area;

e) Have the right to erect, install or place on
the Contract Area any type of improvements, supplies,
machinery and other equipment and to use, sell or otherwise
dispose of, modify, improve, remove or diminish any and all
parts thereof;

f) Have the right to construct roadways, mining,
drainage, power generation and transmission facilities and
all other types of works on the Contract Area;

g) Have the right to extract and carry away any
mineral from the Contract Area for the purpose of conducting
tests and studies in respect thereof;

h) Have the right to determine the use and
application of technical services and equipment provided or
made available under this Agreement;

i) Have the right to sell, assign, transfer
convey or otherwise dispose of all its rights, interests and
obligations under this Agreement subject to the approval of
the Government;

j) Subject to applicable laws and regulations, 
have the right to employ or bring into the Philippines
foreign technical and specialized personnel (including the
immediate members of their families) as may be required in
the operations of the Contractor, provided, that, if the
employment connection of such foreign persons with the
Contractor ceases, the applicable laws and regulations on
immigration shall apply to them;

k) Enjoy, subject to pertinent laws, rules and
regulations and the rights of third parties, easement rights 
and use of timber, water and other natural resources in the
Contract Area;                

l) Have the right of repatriation of capital and
remittance of profits, dividends and interest on loans,
subject to existing laws, and Bangko Sentral ng Pilipinas
rules and regulations; and

m) Have the right to import when necessary all
equipment, spare parts, and raw materials required in the
operations in accordance with existing laws and regulations.

10.3 Obligations of the Government.

The Government shall:

a) Subject to the provisions of this Agreement
the Secretary hereby grants to the Contractor exclusive
possession of, and the exclusive privilege and right to
exploit, utilize, process and dispose of all minerals and
mineral products and by-products thereof that maybe derived
or produced from the Contract Area and to otherwise conduct

Page 17 of 23

mining operations within the Contract Area.

b) Ensure that Contractor has the Government's
full cooperation in the exercise of the rights granted it
under this Agreement.

c) Use its best efforts to ensure the timely
issuance of necessary permits and similar authorizing
documents for use of surface of the Contract Area.

d) Cooperate, if Contractor seeks to obtain 
financing contemplated herein from banks or other financial
institutions, with Contractor in such efforts provided that
such financing arrangements will in no event reduce
Contractor's obligations or the Government's rights

e) Ensure that there are no mortgages, pledges,
charges, liens, private royalties, options, operating
contracts, production sharing agreements or other
encumbrances against or affecting the Contract Area and the
Secretary is not aware of any notices, objections or other
proceedings or litigation pending or threatened concerning
the Contract Area.



11.1 Any term and condition more favorable to Production
Sharing Agreement resulting from the repeal or amendment of
any existing law or regulation or from the enactment of a
law, regulation, or administrative order shall inure to the
benefit of the Contractor and such law, regulation, or
administrative order shall be considered a part of this 

11.2 The Contractor and the Secretary shall review from
time to time the infrastructure and other requirements of the
Mining Operations including, without limitation,
transportation and port requirements, and the Secretary shall
use his best endeavours to give effect to any agreement
reached between the Secretary and the Contractor regarding
such infrastructure and requirements.

Section XII


12.1 Contractor shall acquire for the Mining Operations
only such assets as are reasonably estimated to be required
in carrying out such Mining Operations.

12.2 All materials, equipment, plant and other
installations erected or placed on the Contract Area of the

Page 18 of 23

Movable nature by the Contractor shall remain the property of
the Contractor and the Contractor shall have the right to
remove and export such materials, equipment, plant and other
installations from the Philippines, subject to existing laws
and regulations.

Further, that said materials, equipment, plants and
other installations shall be removed from the Contract Area
within twelve (12) months from the termination of the Agreement,
otherwise these will be forfeited in favor of the Government.



13.1 The Contractor agrees to employ, to the extent
possible, qualified Filipino personnel in its Mining
Operations; and after Commercial Production commences shall
in consultation and with the consent of the Government,
elaborate an extensive training programme for employment of
suitable Filipino Nationals at all levels of employment. The
Objective of said programme shall be to reach within the
time-table set forth below the following targets of

               Unskilled   Skilled   Clerical   Professional   Management

Year 3   100%             100%        100%          80%                      70%
Year 5   100%             100%        100%          90%                      90%
Year 7   100%             100%        100%          100%                    95%
Year 10 100%             100%        100%          100%                    99%
Year 15 100%             100%        100%          100%                    99%

13.2 Costs and expenses of training such Filipino
personnel and the Contractor's own employees shall be
included in Operating Expenses.



14.1 The Government and the Contractor shall consult
with each other in good faith and shall exhaust all available
remedies to settle any and all disputes or interpretations,
enforceability, or relating to the validity before resorting
to arbitration.

14.2 Any disagreement or dispute which cannot be solved
amicably shall be settled by a tribunal of three (3)
arbitrators, one to be appointed by the Contractor, another
to be appointed by the Government, and the third by the
arbitrators so appointed who shall serve as Chairman. The
first two appointed arbitrators shall continue to consider
names of qualified persons until agreement on a mutually

Page 19 of 23

acceptable Chairman of the tribunal is reached. Such
arbitration shall be initiated and conducted pursuant to
Republic Act No. 876 otherwise known as the Arbitration Act.

Where substantial foreign interest are involved,
the Contractor may elect within thirty (30) days from
Effective Date, arbitration in accordance with the rules of
Conciliation and Arbitration of the International Chamber of
Commerce ("ICC") provided that in any case where the ICC or
its successor is not in existence, the arbitration shall
proceed in accordance with the UNCITRAL (United Nations
Commission for International Trade Law) Arbitration Rules, as
at present in force.

In any event, the arbitration shall be conducted
applying the substantive laws of the Republic of the

14.3 Each party shall pay fifty percent (50%) of the
fees and expenses of the arbitrators and the costs of
arbitration. Each party shall pay its own costs and
attorney's fees.



The Contractor may assign all or any part of its
interest in this Agreement in whole or in part to any third
party provided that (1) such assignment does not infringe the
Filipino laws applicable to foreign ownership and (2) the
President of the Republic of the Philippines thru the DENR
shall not be unreasonably withheld. The assignee shall enter
into a written covenant with the Secretary undertaking to be
bound by the terms and conditions of this Agreement,
whereupon the contractor shall be released from its
obligations under this Agreement to the extent of the 
interest assigned, with effect from the effective date of the



This contract shall be terminated and the Parties shall
be relieved of their respective obligations:

16.1 On expiration of the term, or extension thereof as
provided elsewhere herein.

16.2 Termination by the President of the Republic of the
Philippines thru the DENR Secretary upon the Contractor's
substantial breach of this Agreement.

16.3 By withdrawal of Contractor. The Contractor may
withdraw from this Agreement by giving three (3) months

Page 20 of 23

notice in writing if in its business judgment the
continuation of operations becomes technically or
economically unfeasible. The withdrawal shall become
effective six (6) months after notice of withdrawal has been
received by the Government.

No delay or missions or course of dealing by the 
Government shall impair any of its rights hereunder except
for a written waiver, The Government's right to seek
recourse and relief by all other means shall not be affected
by the exercise of its right to terminate the Agreement. Any
waiver of default shall not be construed to be a waiver of
any succeeding or other default unless the contrary is
expressly stated in writing signed by the party charged with
the waiver.

In case of termination, the Contractor shall pay 
all fees and other liabilities due up to the end of the year
in which the termination becomes effective, and shall further
carry out such restoration of the Contract Area as is
reasonable in accordance with good mining industry practice.



17.1 Notice.

All notices, demands, and other communications
required, or permitted hereunder shall be made in writing or
by telex or telecopy and shall be deemed to have been duly
give in the case of telex or telecopy notice if answer back
or confirmation received, or if delivered by hand upon 
receipt or ten days after being deposited in the mail,
airmail postage prepaid and addressed as follows:

If to the Government: ---

The Secretary of the Department of Environment.
and Natural Resources
DENR Building, Visayas Avenue, Diliman
Quezon City, Metro Manila

If to the Contractor ---
Nonoc Mining and Industrial Corporation
2283 Pasong Tamo Extension
Makati, Metro Manila

Either party may substitute or change such address
on Notice thereof to the other Party.

17.2 Governing Laws.

This Agreement and the relation between the parties
hereto shall be governed by and construed in accordance
with the laws of the Republic of the Philippines.

Page 21 of 23

17.3 Suspension of Obligations.

a) Any failure or delay on the part of any Party in
the performance of its obligations or duties hereunder shall
be excused to the extent attributable to Force Majeure.

b) If Mining operations are delayed, curtailed or
prevented by such Force Majeure causes, then the time for
enjoying the rights and carrying out the obligations thereby
affected, the term of this Agreement and all rights and
obligations hereunder shall be extended for a period equal
to the period thus involved.

c) The Party whose ability to perform its obligation
is affected (i) shall promptly give Notice to the other in
writing of any such delay or failure in performance, the
expected duration thereof, and its anticipated effect on the
party expected to perform; and (ii) shall use its efforts to
remedy such delay, except that neither Party shall be under
any obligation to settle a labor dispute.

17.4 Amendments.

This Agreement Shall not be annulled, amended or
modified in any respect except by mutual consent in writing
of the parties hereof and subject to the approval of the
president of the Republic of the Philippines.



This Agreement shall be recorded in the appropriate
office of the DENR as may be provided under existing laws,
rules and regulations.

Page 22 of 23

IN WITNESS WHEREOF, the Parties hereto have executed
this Agreement, as of the date and place first above written.




Secretary of the Department 
of Environment and
Natural Resources

President and
Chairman of the Board

By Authority of the President

Executive Secretary

W I T N E S S:

___________________ __________________________


City of Quezon ) S.S.

BEFORE ME, a Notary Public for and in
Quezon City, this 12th day of July, 1994,
personally appeared the following:

Names                           Res. Cert. No.             Place Date/ Issued
Hon. Angel C. Alcala    35349558                    QC Feb. 7, 1994
Jesus S. Cabarrus         7236347                      Makati Apr 18, 1994

all known to me and to me known to be the same persons who
executed the foregoing instrument and they acknowledge to me
that the same is their free act and deed and that of the
principals they respectfully represent.

This instrument, consisting of twenty three (23) pages
including this page of acknowledgment, signed by the parties
and their instrumen witnesses and initiated at the left
margin of every i  e refers to the parties MINERAL

WITNESS MY HAND AND SEAL on the date and at the place
first herein abovementioned.


UNTIL DEC 31 1994
PTR NO. 1946426-QC-2-14-94

Doc. No. 270 ;
Page No. 61;
Book No. 4;
Series of 1994

Page 23 of 23


I, ELEANOR A. TABUZO, Filipino, of legal age, and Corporate Secretary of PACIFIC
NICKEL PHILIPPINES INC., a corporation duly organized and existing under the laws of the
Republic of the Philippines, with business address at 10th Floor, JAKA 6780, Ayala Avenue,
Makati City, do hereby certify that at a special meeting of its Board of Directors held on April
24,2009, the following resolutions were approved:

"RESOLVED THAT, the Board of Directors of Pacific Nickel Philippines Inc.,
(the "Corporation"), authorize, as it hereby authorizes the cancellation of the Ore
Sales Contract executed with PAC Asia Minerals and Management Corporation
(PAC Asia Minerals) on March 8, 2009.

RESOLVED FURTHER, that the Corporation be hereby authorized to enter into
a Mines Operating Agreement in favor of Shuley Mine Incorporated, an affiliate
of PAC Asia Minerals, under such terms and conditions as may be agreed upon
by the parties.

RESOLVED FINALLY, that the Chairman and President, EVARISTO M.
NARVAEZ JR., be, as he is hereby authorized, to sign the Mutual Cancellation of
Ore Sales Contract of March 8, 2009 and thereafter, the Mines Operating
Agreement with Shuley Mine lncorporated."

Corporate Secretary

SUBSCRIBED AND SWORN to before me this 28 APR 2009 day of April 2009 by
Eleanor A. Tabuzo who has satisfactorily proven her identity to me through her SSS ID
No. 03-2528890-5.

Notary Public
UNTIL DEC. 31, 2010
PTR MLA. 6278641 1/10/08
TIN: 1986 897 808 000/ROLL 27525
APPT. N0 M-20 (2009-2010)

Doc. No. 485
Page No. 98
Book No. XV
Series of 2009.

Regional Office No.XIII, Surigao City

The registration Fee henceforth having been paid, the
foregoing instrument/s was filed for record in this Bureau at 2
o'clock and 30 minutes PM on the 2nd day of
June A.D.  2009 and has been recorded in Book
No. 1 of the records of Miscellaneous Documents Power of
Attorney of this Region on Page 70 as Document No. 3
Filing Fee paid under Official Receipt No. 78812490 dated
JUN 02 2009, 200__ in the amount of P220.00 FA

OIC Regional Director


The Registration of this document's is a ministerial action on the part of
this Office It's validity shall be the full responsibility of the registrant or contracting



I, TONEE LYNN P. CO, of legal age, Filipino, single, with office address at
Unit 201, Summit One Tower, 530 Shaw Boulevard, Mandaluyong City,
Philippines, the duly elected Corporate Secretary of SHULEY MINE,
INCORPORATED, a duly organized and registered corporation under the laws of
the Philippines, do hereby certify at the special meeting of the Board of Directors,
during which a quorum was present and acting throughout, the following
resolution was approved and adopted:

"RESOLVED as it is herby resolved that the Corporation enters into
a Mines Operating Agreement with Pacific Nickel Philippines, Inc.
and for this purpose, Antonio L. Co, in his capacity as President of
Shuley Mine, Inc., is hereby authorized to negotiate, agree on the
terms and conditions, sign and execute and tender any and all
documents or papers that may be required for the accomplishment
of the foregoing purpose."

I further certify that the foregoing resolution is true and correct copy of the
same as it appears in the minute book of the Corporation.

IN WITNESS WHEREOF, I have hereunto affixed my signature this 27th
day of April 2009 at MAKATI CITY City

Corporate Secretary

SUBSCRIBED AND SWORN to me this ____ day of APR 27 2009, affiant
exhibited to me his Comm. Tax Cert. No. 19841630 issued on Jan. 15, 2009 at

Doc. No. 163
Page No. 33
Book No. 10
Series of 2009

IBP NO. 768454 / 01-02-09 /ILOILO CITY
PTR NO. 1573103 /01-08-09/ MAKATI CITY
ROLL NO. 49181


Regional Office No. XIII, Surigao City

The registration fee henceforth having been paid, the
foregoing instrument/s was filed for record in this Bureau at 2
o'clock and 30 minutes PM on the 2nd day of
June  A.D. 2009 and has been recorded in Book
No. 1 of the records of Miscellaneous Documents Power of
Attorney of this Region on Page 70 as Document No. 2

Filing Fee paid under Official Receipt No. 78812480 dated
JUN 02 2009, 200__ in the amount of P220.014

OIC Regional Director


The Registration of this Document's is a ministerial action on the part of
this Office. It's validity shall be the full responsibility of the registrant or contracting