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MINERAL PRODUCTION SHARING AGREEMENT
MPSA No. 168-2001-V

This MINERAL PRODUCTION SHARING AGREEMENT is made and entered into in Quezon Cty,Philippines, this ___ day of JAN 16 2001 by
and between:

THE REPUBLIC OF THE PHILIPPINES, herein referred to as the GOVERNMENT,represented in this act by the Secretary of the
Department of Environment and Natural Resources,with office at the
Department of Environment and Natural Resources Building, Visayas Avenue, Diliman, Quezon City

and

RAPU-RAPU MINERALS INC, a corporation duly organized and existing under
the laws of the Republic of the Philippines, with office at offices at Suite 23, Legaspi Suites, 178 Salcedo St. Legaspi VIllage, Makati City and represented in this act by ts President, Mr. Jose P. de Guzman, as authorized by its Board of Directors (please refer to ANNEX "A")

WITNESSETH:

WHEREAS, the 1987 Constitution of the Republic of the Philippines provides in
Article XII, section 2 thereof that all lands of the public domain, waters, minerals, coal, petroleum and other natural resources are owned by the
state and that their exploration, development and utilization shall be under the
full control and supervision of the State;

WHEREAS, the constitution further provides that the state may directly
undertake such activities, or it may enter into a co-production, Joint venture, or
Mineral Production sharing Agreement with Filipino citizens, or cooperatives,
partnerships, corporations or associations at least sixty per centum of whose
capitalization is owned by such citizens;

WHEREAS, pursuant to Republic Act No. 7942, otherwise known as "The
Philippine Mining Act of 1995," which took effect on 09 April 1995, the secretary of the Department of Environment and Natural Resources is
authorized to enter into Mineral Production sharing Agreements in furtherance of the objectives of the Government and the constitution to bolster the national
economy through sustainable and systematic development and utilization of
mineral lands;

WHEREAS, the Govemment desires to avail itself of the financial resources,
technical competence and skill, which the Contractor is capable of applying to the mining operations of the project contemplated herein;




WHEREAS, the Contractor desires to join and assist the Government in the initial rational exploration and possible development and utilization for commercial purposes of certain gold, copper, silver and associated minerals existing in the Contract Area (as herein defined);

WHEREAS, the Contractor has access to all the financing, technical competence, technology and environmental management skills required to
promptly and effectively carry out the objectives of this Agreement;



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

SECTION I

SCOPE

1.1. This Agreement is a Mineral Production Sharing Agreement entered into
pursuant to the provisions of the Act and its implementing rules and
regulations. The primary purpose of this Agreement is to provide for the
rational exploration, development and commercial utilization of chromite
and other associated mineral deposits existing within the Contract Area,
with all necessary services, technology and financing to be furnished or
arranged by the Contractor in accordance with the provisions of this
Agreement. The Contractor shall not, by virtue of this Agreement, acquire
any title over the Contract/Mining Area without prejudice to the acquisition
by the Contractor of the land/surface rights through any mode of
acquisition provided for by law.

1.2. The Contractor shall undertake and execute, for and on behalf of the
Government, responsible mining operations in accordance with the
provisions of this Agreement, and is hereby constituted and appointed, for
the purpose of this Agreement, as the exclusive entity to conduct mining
operations in the Contract Area.

1.3. The Contractor shall assume all the exploration risk such that if no minerals in commercial quantity are developed and produced, it will
not be entitled to reimbursement.

SECTION II

DEFINITIONS

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

2.1. Act refers to Republic Act No. 7942, othenrvise known as the 'Philippine
Mining Act of 1995."

2.2. Agreement means this Mineral Production Sharing Agreement.

2.3. Associated Minerals mean other ores/minerals, which occur together with
the principal orer/mineral.

2.4. Bangko Sentral means Bangko Sentral ng Pilipinas.



2.5. 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.

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

2.7. Commercial Production means the production of sufficient quantity of
minerals to sustain economic viability of mining operations reckoned from
the date of commercial operation as declared by the Contractor or as
stated in the feasibility study, whichever comes first.

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

2.9. Contract Area means the area onshore or offshore delineated under the
Mineral Production Sharing Agreement subject to the relinquishment obligations of the Contractor and properly defined by
latitude and longitude

2.10. 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.

2.11 Contractor means Rapu-Rapu Minerals Inc. or its assignee or assignees of interest under this Agreement. Provided, that the assignment of any of such interest is accomplished pursuant to the pertinent provisions of the implementing rules and regulations of the Act.

2.12 Declaration of Mining Project Feasibility means a document proclaiming the presence of minerals in a specific site, which are recoverable by socially
acceptable, environmentally safe and economically sound methods
specified in the Project Feasibility Study.

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

2.14. Director means the Director of Mines and Geosciences Bureau.

2.15 Effective Date means the date of execution of this Agreement by the
Contractor and by the Secretary on behalf of the Government.

2.16. Environment means all facets of man's surroundings: physical, ecological, aesthetic, cultural, economic, historic, institutional and social.

2.17 Exploration means searching or prospecting for mineral

resources by



geological, geophysical and geochemical surveys, remote

sensing, test



pitting, trenching, drilling, shaft sinking, tunneling or

any other means for



the purpose of determining 


the existence, extent, quality, and quantity of mineral resources and the feasibility

of mining them lor Profit.



l8



Exploration Period shall mean the time period from the Effective Date of this

Agreement which shall be for two (2) years, renewable for like periods but not to

eiceed a total term of eight (8) years subject to the pertinent provisions o[ the

implementing rules and regulations of the Act.



2.19



Force Maieure means acts or circumstances beyond the reasonable control of the

Contractor including, but not limited to war' rebellion, insurrection, riots, civil

disturbances, blockade, sabotage, embargo' strike, lockout, any dispute with

surlace owners and other labor disputes, epidenrics, earthquake, storm, flood, or

other adverse weather conditions, explosion, fire, adverse action by the

Government or by any of its instrumentality or subdivision thereof, act of God or

any public enemy and any cause as herein described over which the affected party



2.



has no reasonable control.



2.20



2.21



Foreiqn Exchange means any currency other than the currency of the Republic

the Philippines acceptable to the Government and the Contractor.



of



Government means the Govemment of the Republic of the Philippines or any of

its agencies and instrumentalil ies.



2.22



Gross Output means the actual market value ofthe minerals or mineral products

from each mine or mineral land operated as a separate entity, without any

deduction for mining, processing, refining, transporting, handling, marketing, or

any other expenses: Provided, That if the minerals or mineral products are sold or

consigned abroad by the Contractor under C.LF. terms, the actual cost of ocean

freight and insurance shall be deducted: Provided further, That in the case of

mineral concentrates which are not traded in comrnodity exchanges in the

Philippines or abroad such as copper concentrate, the actual market value shall be

the world price quotation o[ the refined rnineral products contained therein

prevailing in the said commodity exchanges, after deducting the smelting ,refining,

treatment, insurance, transportation and other charges incurred in the process of

converting mineral concentrates into refined metal traded in those commodity

exchanges.



to



) )1



Mine Development refers to work undertaken



2.24



Minerals mean all naturally occurring inorganic substances in solid, liquid, gas or

any intermediate state excluding energy materials such as coal, petroleum, natural



prepare an ore body or a

mineral deposit for mining, including the construction of necessary infrastructure

and related facilities.



gas, radioactive materials and geothennal energy.



225



Mineral Products mean materials derived {iorn mineral ores/rocks and prepared

into marketable state by metallurgical processes which include beneficiation,

cyanidation, leaching, smelting, calcination and other similar processes.



as







Mining Area





ed



m a



2.26



that portion ofthe Contract Area identified by the Contractor













p ︲l M樹 =V



defined

delineated in a Survey Plan

Director/concerned Regional Director for

utilization and sites for support facilities. .



duly approved by



of



the



development and/or



Mining operations means mining activities involving exploration, feasibility study,

environmental impact assessment, development. utilization, mineral processing,

and mine rehabilitation,



2.28



Notice means notice in writing, telex or telecopy (authenticated by answer back

or confirmation received) addressed or sent as provided in Section 16.2 of this

Agreement.

means naturally occurring substatrce or material fi'om rvhich a mineral or

element can be mined and/or processed for profit.



2.29



QIg



2.30



Psllutiall means any alteration of the physical, chemical and/or biological

properties of any water, air and/or land resources of the Philippines, or any

discharge thereto of any liquid, gaseous or solid wastes or any production of

unnecessary noise or any emission of objectionable odor, as will or is likely to

create or render such water, air, and land resources harmful, detrimental or

injurious to public health, safety or welfare or which will adversely affect their

utilization for domestic, commercial, industrial, agricultural, recreational or other

legitimate purposes.



2.31



Secretary means the Secretary of the Department ol Environment and Natural

Resources.



2.32



SIA!9 means the Republic of the Philippines.



2.33



Work Program means a document which presents the plan of major mining

operations and the corresponding expenditures ol the Contractor in its Contract

Area during a given period of time, including the plan and expenditures for

development ol host and neighboring communities and of local geoscience and

mining technology, as submitted and approved in accordance with the

implementing rules and regulations of the Act.



SECTION



III



TERM OF AGREEMENT

31



This Agreement shall have a term of twenty-five (25) years lrom Effective Date,

and may be renewed thereafter for another term not exceeding twenty five (25)

years. The renewal of this Agreement, as well as the changes in the terms and

conditions thereof, shall be upon mutual consent by the parties. In the event the

Government decides to allow mining operations thereafter by other Contractor,

this must be through competitive public bidding. After due publication of notice,

the Contractor shall have the right to equal the highest bid upon reimbursement of

all reasonable expenses ofthe highest bidder



SECTION IV

CONTRACT AREA

41



Size, Shape, and Location ol Contract Area This Agreement covers a total area

ofone thousand five hundred eighty tive & 8081/10000 hectares (l,5g5.gOSj

has.), situated at Rapu-Rapu, Albay and bounded by the following technical

description (please refer to ANNEX "B" - I 50,000 scale Location Map/Sketch



Planl.



/



f

d



CORNER



LONG11` UDE

124° 11'3000"

124・ 11'3573"



l



13°



11'1230''



2



13・



11'1230"



3



13°



10'56785''



124° 11'8579''



4



13°



10'49391"



124°



10'35585''

10'42488''



124°



11'1035"



124° 11'15123''



5



13°



6

7



13°

13°





10'35586`



8



13°



10'42489'`



9

10



13°



10'35586''



13°



10'42488`・



11



13°



10'35585''



11'22167''

124° 11'29211''

124° 11'36255''

124° 11'43299''

124° 11'50343''

124° 11'57387''



12



13°



10'36567"



124° 11'5840"



13



13°



124°



14



10'3350''

13° 10'3900''



15



13°



10'35586''

13° 10'3350''



124°



16

17

18

19



20



11'5840"



124° 11'4680''



11'43299''



124° 11'3550"



10'3350"



124° 11'3000''



10'3000''

10'3350''



124° 11'1700"



13°

13°



10'3500"



124°



13°

13°



124° 11'400''



10'4500"



21



13°



124° 10'2000''



22



13°



124° 10'00''



23

24

25



V



LATITUDE



10'4850''

10'5500''

13° 11'00"

13° 12'00"

13° 12'00"



124°



10'00"



124° 10'00''

124° 09'30''



26

27

28

29

30



13°



12'30''



13°



12'30''



124° 11'00"



13°



13'00''



124° 11'00''



13°



13'00''



124° 10'30''



13°



13'00"



124° 10'00''



31



13°



13'00''



124° 09'30"



32



13°



13'30''



124° 09'30"



33



13°



13'2700''



124° 10'00''



34

35

36

37

38

39

40



13°



13'00''



124° 10'00''



13°



13'450''



124° 10'5600''



41



13°



13'300''



124° 11'00''



42

43

44

45

46

47

48

49

50



13°



13'00''



124°



13°



12'5400''



124° 11'30''



13°



12'30''



124° 11'30''



124° 09'30''



10'30"



13° 13'00''



124°



13'1750''

13° 13'1600''

13° 13'1800''

13° 13'600''



124° 10'3000"



13°



124°



10'3600"



124° 10'4300''

124° 10'5250''



11'00"



13° 12'3000''

13° 12'2600''



124° 12'1750"



13°



12'1950"



124° 12'2200"



13°



12'800''



124° 12'3000''



13°

13°



12'00"

12'00"



124° 12'4000"



51



13°



11'5100"



124° 12'4000"



52



13°



11'4800''



124つ



6



124° 12'1850"



124° 12'3000''



12'4400''



1/%



西



11'4200''







13° 11'3750''







13° ll'2500''







13° 11'2200''















53















13°















54







55







56







57







58







59















62







63







64







65







66







67







68







69







70















12'3550"















13°















ll'1230"















12'3550''







12'4400''







124° 12'4800''















13°















11'800''















124。















12'5300"















124° 12'5300"















13°















124° 12'5600"















13°















124° 12'4838''















13°















124° 12'5100''















10'43453"







10'43036"















124° 12'4801''







124° 12'4800''















11'1230''







13° 11'1230''







13° 11'3000''







13° 11'3000''







13° 11'3000''







13° 12'00"















13°















124° 12'30''







124° 12'30''







124° 11'30"







124° 11'00''







124° 11'00''















12'00''















124° 11'30"















13° 11'3000''















124° 11'30"















13°















71















124°







124°















10'5600''







13° 10'5300''















61















12'3700''















124°















13° 11'200"















60















124°















SECTION V















EXPLORATION PERIOD



SECTION V



EXPLORATION PERIOD

5.1. Timetable for Exploration - The Contractor shall commence Exploration
activities not later than three (3) months after the Effective Date for a
period of two (2) years, renewable for like periods but not to exceed a total
term of six (6) years for nonmetallic minerals and eight (8) years for
metallic minerals, subject to annual review and approval by the Director in
accordance with the implementing rules and regulations of the Act.

5.2 Work Programs and Budgets - The Contractor shall strictly comply with the
approved Exploration and Environmental Work Programs together with
their corresponding Budgets (please refer to ANNEXES 'C' and "D").

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

For the Exploration Work Program:



1st Contract Year : PhP 14,840,306.00
2nd Contract Year : PhP 21,643,125.00

Total : PhP 36,483,431.00

For the Environmental Work Program : PhP 3,648,343.10



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

In the event of termination of this Agreement, the Contractor shall only be
obliged to expend the pro-rata amount for the period of such Contract Year
prior to termination. If during any Contract Year, the Contractor should
expend more than the amount to be expended as provided above, the
excess may be subtracted from the amount required to be expended by the
Contractor during the succeeding Contract Years, and should the
Contractor, due to unforeseen circumstances or with the consent of the
Government, expend less during a year, then the deficiency shall be
applied to the amount to be expended during the succeeding Contract
Years.

5.3. Relinquishment of Total/Portion of the Contract Area - During the
Exploration Period, the Contractor may relinquish totally or partially the
original Contract Area. After the Exploration Period and prior to or upon
approval of a Declaration of Mining Project Feasibility by the Director, the
Contractor shall finally relinquish any portion of the Contract Area not
necessary for mining operations and not covered by any Declaration of
Mining Project Feasibility.




5.4.Survey of the Contract Area - The Contractor shall cause the survey of the perimeter of the Contract Area through an application for survey, complete with requirement, filed with the concerned Regional Office simultaneous with the submission of the Declaration of Mining Project Feasibility. Survey returns shall be submitted to the concerned Regional Director for approval within one (1) year from receipt of the Order of Survey complete with the mandatory requirements stated in the implementing rules and regulations of the Act.

5.5. Declaration of Mining Project Feasibility - Within the term of the
Exploration Period, the Contractor shall file in the Regional Office
concerned, the Declaration of Mining Project Feasibility of the Contract
Area/final Mining Area supported by Project Feasibility Study, Three (3)-
Year Development and Construction or Commercial Operation Work
Program, complete geologic report, an application for survey and the
pertinent Environmental Compliance Certificate, among other applicable
requirements. Failure of the Contractor to submit the Declaration of
Mining Project Feasibility during the Exploration Period shall be considered
a substantial breach of this Agreement.



5.6. Reporting

a. Periodic Reports - During the Exploration Period, the Contractor shall
submit to the Director, through the Regional Director concerned, quarterly
and annual accomplishment reports under oath on all activities
conducted in the Contract Area from the Effective Date of this
Agreement. The quarterly report shall be submitted not later than
fifteen (15) days at the end of each Calendar Quarter while the
annual accomplishment report shall be submitted not later than thirty
(30) days from the end of each Calendar Year. Such information
shall include detailed financial expenditures


showing discrepancies/ deviations with approved exploration and environmental plans and budgets as well as all other information of any kind collected during the exploration activities. All information submitted to the Bureau shall be subject to the confidentiality clause of this Agreement.

b. Final Report - The Contractor shall submit to the Director, through
the Regional Director concerned, a final report under oath upon the
expiration of the Exploration Period which shall be in the form and
substance comparable to published professional reports of respectable international institutions and shall incorporate all the findings in the Contract Area including location of samples, assays, chemical analysis, and assessment of mineral potentials together with a geologic map of 1:50,000 scale at the minimum showing the results of the exploration. Such report shall also include detailed expenditures incurred during the Exploration Period. In case of diamond drilling, the Contractor shall, upon request of the Director/Regional Director concerned, submit to the Regional
Office concerned a quarter of the core samples, which shall be deposited
in the Regional Office Core Library for safekeeping and reference.

c. Relinquishment Report - The Contractor shall submit a separate
relinquishment report with a detailed geologic report of the relinquished area accompanied by maps at a scale of 1:50,000 and results of analyses and detailed expenditures, among others.

SECTION VI

DEVELOPMENT AND CONSTRUCTION PERIOD

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 and approval of the Declaration of Mining
Project Feasibility, subject to such extension based on justifiable reasons
as the Director may approve, upon recommendation of the Regional
Director concerned.

6.2 Reporting

a. Annual - The Contractor shall submit, within sixty (60) days after December 31 of each year, to the Director, through the Regional Director concerned, an annual report, which states the major activities, achievements and detailed expenditures during the year covered, including maps, assays, rock and mineral analyses and geological and environmental progress reports during the Development and Construction Period.

b. Final Report - Within six (5) months from the completion of the
development and construction activities, the Contractor shall submit
a final report to the Director, through the Regional Director concerned. Such report shall integrate all information in maps of appropriate scale and quality, as well as in monographs or reports in accordance with international standards.



SECTION VII



 



OPERATING PERIOD



 



7.1. Timetable - The Contractor shall submit, within thirty

(30) days before



completion of mine development and construction of

production facilities, to



the Director, through the Regional Director concerned, a

Three-Year



Commercial Operation Work Program. The Contractor shall

commence



commercial utilization immediately upon approval of the aforesaid

Work



Program. Failure of the Contractor to commence Commercial

Production



within the period shall be considered a substantial breach

of the



Agreement.



 



7.2. Commercial Operation Work Program and Budget - During

the Operating



Period, the Contractor shall submit to the Director, through

the Regional



Director concerned, Work Programs and Budgets 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



Program.



 



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 corresponding Budgets.



 



7.3. Expansion and Modification of Facilities - The Contractor

may make



expansions, modifications, improvements, and replacements of

the mining



facilities and may add new facilities as the Contractor may

consider



necessary for the operations: Provided, That such plans

shall be embodied



in an appropriate Work Program approved by the Director.



 



7.4. Reporting



 



a. Quarterly Reports - Beginning with the first Calendar

Quarter



following the commencement of the Operating Period, the

Contractor



shall submit, within thirty (30) days after the end of each

Calendar



Quarter, to the Director, through the Regional Director

concerned, 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 within sixty (60) days from the end of each Calendar

Year, to



the Director, through the Regional Director concerned, an

Annual



Report indicating in sufficient detail:



 



b.1. The total tonnage of ore reserves, whether proven,

probable,



or inferred, the total tonnage of ores, kind by kind, broken



down between tonnage mined, tonnages transported from the



minesite and their corresponding destination, tonnages



stockpiled in the mine and elsewhere in the Philippines,



tonnages 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 disposed;



 

b.2. Work accomplished and work in progress at the end of

the



year in question with respect to all the installations and



facilities related to the utilization program, including the



investment actually made or committed; and



 



b.3. Profile of work force, including management and staff,

stating



particularly their nationalities, and for Filipinos, their

place of



origin (i.e., barangay, town, province, region).



 



The Contractor shall also comply with other reporting

requirements



provided for in the implementing rules and regulations of

the Act.



 



SECTION VIII



 



FISCAL REGIME



 



8.1. General Principle - The fiscal 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 mineral



resources under its national sovereignty while the

Contractor expects a



reasonable return on its investment with special account to

be taken for the



high risk of exploration, the terms and conditions

prevailing elsewhere in



the industry and any special efficiency to be gained by a

particularly good



performance of the Contractor.



 



8.2. Registration Fees - Within fifteen (15) days upon

receipt of the notice of



approval of the Agreement from the Regional Office

concerned, the



Contractor shall cause the registration of this Agreement

with the said



Regional Office and pay the registration fee at the rate

provided in the



existing rules and regulations. Failure of the Contractor to

cause the



registration of this Agreement within the prescribed period

shall be



sufficient ground for cancellation of the same.



 



8.3. Occupation Fees - Prior to registration of this

Agreement and at the same



date every year thereafter, the Contractor shall pay to the

Municipal/City



Treasurer concerned an occupation fee over the Contract Area

at the



annual rate provided in the existing rules and regulations.

If the fee is not



paid on the date specified, the Contractor shall pay a

surcharge of twenty



five percent (25%) of the amount due in addition to the

occupation fees.



 



8.4. Share of the Govemment - The Govemment Share shall be

the excise tax



on mineral products at the time of removal and at the rate

provided for in



Republic Act No. 7729 amending Section 151 (a) of the

National Internal



Revenue Code, as amended, as well as other taxes, duties and

fees levied



by existing laws. The Excise Tax shall be timely and

completely paid to



the nearest Bureau of Internal Revenue Office in the

province concerned.



For purposes of determining the amount of the herein

Government Share,



the Contractor shall strictly comply with the auditing and

accounting



requirements prescribed under existing laws and regulations.



 



The Government Share shall be allocated in accordance with

Sections 290



and 292 of Republic Act No. 7160, otherwise known as

"The Local



Government Code of 1991."8.5. Pricing of Sales - The Contractor shall dispose of the

minerals and by-



products produced at the highest market price prevailing in

the locality. The



Contractor shall also pay the lowest achievable marketing

commissions



and

related fees and shall negotiate for more advantageous terms

and



conditions subject to the right to enter into long-term

sales or marketing



contracts or foreign exchange and commodity hedging

contracts, which the



Government acknowledges to be acceptable notwithstanding

that the sale



price of the minerals and by-products may from time to time

be lower, or



the terms and conditions of sales are less favorable, than

that available



 



elsewhere. The Contractor shall seek to strike a balance

between long-



term sales or marketing contracts or foreign exchange and

commodity



hedging contracts comparable to policies followed by

independent



producers in the international mining industry.



 



The Contractor shall likewise seek a balanced distribution

among



consumers. Insofar as sales to Contractor's affiliate(s) are

concerned,



prices shall be at arm's length standard, and competing

offers for large



scale and long-term contracts shall be procured. Before any

sale and/or



shipment of mineral product is made, existing and future

marketing



contract(s)/sales agreement(s) shall be submitted to the

Director, copy



furnished the Regional Director concerned, for registration.

At the same



time, the Contractor shall regularly inform the Director in

writing of any



revisions, changes or additions in said

contract(s)/agreement(s).



 



The Contractor shall reflect in its Monthly/Quarterly Report

on Production,



Sales and Inventory of Minerals, as well as in the

lntegrated Annual



Report, the corresponding registration number(s) of the

marketing



contract(s)/agreement(s) governing the export or sale of

minerals.



 



8.6. Associated Minerals - If minerals other than chromite

are discovered in



commercial quantities in the Contract Area, the value

thereof shall be



added to the value of the principal mineral in computing the

Government



share.



 



SECTION IX



 



WORK PROGRAMS



 



9.1. Submission to Government - Within the periods stated

herein, the



Contractor shall prepare and submit to the Director, through

the Regional



Director concerned, a Work Program and corresponding Budget

for the



Contract Area stating the Mining Operations and expenditures

which the



Contractor proposes to carry out during the period covered

with the details



and particulars set forth elsewhere in this Agreement or in

the supporting



documents.



 



9.2. Government's Examination and Revision of Work Program -

Should the



Government decide to propose a revision to a certain

specific feature in the



Work Program or Budget, it shall, within thirty (30) days

after receipt



thereof, provide a Notice to the Contractor specifying in

reasonable detail



its reasons therefore. Promptly thereafter, the Govemment

and Contractor



will meet and endeavor to agree on the revision proposed by

the



Government. In any event, the revision of any portion of

said Work



Program or Budget in which the Government shall fail to

notify the



Contractor of the proposed revision shall, insofar as

possible, be carried



out as prescribed herein. If the Government should fail

within sixty (60)



days from receipt thereof to notify Contractor of the

proposed revisions, the



Work Program and Budget proposed by the Contractor shall be

deemed to



be approved.



 



9.3. Contractor's Changes to Work Program - It is recognized

by the



Government and the Contractor that the details of any Work

Program may



require changes in the light of changing circumstances. The

Contractor



may make such changes: Provided, That it shall not change

the general



objective of the Work Program: Provided further, That

changes which entail



a negative variance of at least twenty percent (20%) shall

be subject to the



approval of the Director.



 



In case of any positive variance, the Contractor shall

submit to the Director,



through the Regional Director concerned, a copy each of the

Work



Programs, for information.



 



9.4. The Government's approval of a proposed Work Program

and Budget will



not be unreasonably withheld.

SECTION X



 



ENVIRONMENTAL PROTECTION AND MINE SAFETY AND HEALTH



 



10.1. The Contractor shall manage its Mining Operations in a

technically,



financially, socially, culturally and environmentally

responsible manner to



achieve the sustainable development objectives and

responsibilities as



provided for under the implementing rules and regulations of

the Act.



 



10.2. The Contractor shall ensure that the standards of

environmental protection



are met in the course of the Mining Operations. 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.



 



10.3. The Contractor shall submit an Environmental Work

Program during the



Exploration Period as prescribed in the implementing rules

and regulations



of the Act.



 



10.4. An Environmental Compliance Certificate (ECC) shall be

secured first by



the Contractor prior to the conduct of any development

works, construction



of production facilities and/or mine production activities

in the Contract



Area.



 



10.5. The Contractor shall submit within thirty (30)

calendar days after the



issuance and receipt of the ECC, an Environmental Protection

and



Enhancement Program (EPEP) using MGB Form No. 16-2 covering

all



areas to be affected by development, utilization and

processing activities



under this Agreement. The Contractor shall allocate for its

initial



environment-related capital expenditures approximately ten

percent (10%)



of the total project cost or in such amount depending on the



environmental/geological condition, nature and scale of

operations



technology to be employed in the Contract Area.



 



10.6. The Contraclor shall submit, within thirty (30) days

prior to the beginning of



every calendar year, an Annual Environmental Protection and



Enhancement Program (AEPEP), using MGB Form 16-3, which

shall be



based on the approved EPEP. The AEPEP shall be implemented

during



the year for which it was submitted. To implement its AEPEP,

the



Contractor shall allocate annually three to five percent (3%-5%)

of its direct



mining and milling costs depending on the

environmental/geologic



condition, nature and scale of operations and technology

employed in the



Contract Area.



 



10.7. The Contractor shall establish a Contingent Liability

and Rehabilitation



Fund (CLRF) which shall be in the form of the Mine

Rehabilitation Fund



(MRF) and the Mine Waste and Tailings Fee (MWTF).



 



The MRF shall be based on the financial requirements of the

approved



EPEP as a reasonable environmental deposit to ensure

satisfactory



compliance with the commitments/strategies of the EPEP/AEPEP

and



availability of funds for the performance of the EPEP/AEPEP

during the



specific project phase. The MRF shall be deposited as Trust

Fund in a



government depository bank and shall be used for physical

and social



rehabilitation of areas affected by mining activities and

for research on the



social, technical and preventive aspects of rehabilitation.



 



The MWTF shall be collected based on the amounts of mine

waste and mill



tailings generated during the conduct of Mining Operations.

The MWTF



collected shall accrue to a Mine Waste and Tailings Reserve

Fund and



shall be deposited in a government depository bank for

payment of



compensation for damages caused by the Mining Operations.



 



10.8. The Contractor shall set up mitigating measures such

as mine waste and



mill tailings disposal system, mine rehabilitation or plan,

water quality



monitoring, etc. to minimize land degradation, air and water

pollution, acid



rock drainage and changes in hydrogeology.



 

10.9. The Contractor shall set up an Environmental and

Safety Office at its



minesite manned by qualified personnel to plan, implement

and monitor its



approved EPEP.



 



10.10. The Contractor shall be responsible in the monitoring

of environmental,



safety and health conditions in the Contract Area and shall

strictly comply



with all the rules and regulations embodied under DAO No.

2000-98,



otherwise known as the "Mine Safety and Health

Standards."



 



10.11. The Contractor shall be responsible for the

submission of a final mine



rehabilitation and/or decommissioning plans, including its

financial



requirements and incorporating the details and particulars

set forth in the



implementing rules and regulations of the Act.



 



SECTION XI



 



RIGHTS AND OBLIGATIONS OF THE PARTIES



 



11.1. Obligations of the Contractor:



 



a. To exclusively conduct sustainable Mining Operations

within the



Contract Area in accordance with the provisions of the Act

and its



implementing rules and regulations;



 



b. To construct and operate any facilities specified under

the Mineral



Agreement or approved Work Program;



 



c. To determine the exploration, mining and treatment

process to be



utilized in the Mining Operations;



 



d. To extract, remove, use and dispose of any tailings as

authorized by



an approved Work Program;



 



e. To secure all permits necessary or desirable for the

purpose of



Mining Operations;



 



f. To keep accurate technical records about the Mining

Operations, as



well as financial and marketing accounts, and make them

available



to Government representatives authorized by the Director for

the



purpose of assessing the performance and 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. To furnish the Bureau all the data and information

gathered from the



Contract Area and that all the books of accounts and records

shall



be open for inspection;



 



h. To allow access to Government during reasonable hours in



inspecting the Contract Area and examining pertinent records

for



purposes of monitoring compliance with the terms of this

Agreement;



 



i. To 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 properties caused by

Mining



Operations


of the Contractor and indemnify the Government for any



expenses or costs incurred by the Government by reason of

any



such claims, accounts, demands or actions;



 



j. In the development of the community:



 



J.1. To recognize and respect the rights, customs and

traditions of



indigenous cultural communities over their ancestral lands



 



and to allocate royalty payment of not less than one percent



(1%) of the value of the gross output of minerals sold;



 



j.2. To coordinate with proper authorities in the

development of



the mining community and for those living in the host and



neighboring communities through social infrastructure,



livelihood programs, education, water, electricity and

medical



services. Where traditional self-sustaining income and the



community activities are identified to be present, the



Contractor shall assist in the preservation and/or



enhancement of such activities;



 



j.3. To allot annually a minimum of one percent (1%) of the

direct



mining and milling costs necessary to implement the

activities



undertaken in the development of the host and neighboring



communities. Expenses for community development may be



charged against the royalty payment of at least one percent



(1%) of the gross output intended for the concerned



indigenous cultural community;



 



j.4. To give preference to Filipino citizens who have

established



domicile in the neighboring communities, in the hiring of



personnel for its mining operations. If necessary skills and



expertise are currently not available, the Contractor must



immediately prepare and undertake a training and recruitment



program at its expense; and



 



j.5. To incorporate in the Mining Project Feasibility Study

the



planned expenditures necessary to implement items j.1 to j.3



of this Section;



 



k. In the development of Mining Technology and Geosciences:



 



k.1. In the course of its operations, to produce geological,



geophysical, geochemical and other types of maps and



reports that are appropriate in scale and in format and



substance which are consistent with the internationally



accepted standards and practices. Such maps shall be made



available to the scientific community in the most convenient



and cost effective forms, subject to the condition that the



Contractor may delay release of said information for a



reasonable period of time which shall not exceed three (3)



years;



 



k.2. To systematically keep the data generated from the

Contract/



Mining Area such as cores, assays and other related



information, including economic and financial data and make



them accessible to students, researchers and other persons



responsible for developing mining, geoscience and



processing technology subject to the condition that the



Contractor may delay release of data to the science and and technology community within a reasonable period of tie which shall not exceed three (3) years.k.3. To transfer to the Government or local mining company the appropriate technology it may adapt in the exploration, development and commercial utilization of the minerals in the Contract Area.

k.4. To allocate research and development budget for the



advancement of mining technology and geosciences in



coordination with the Bureau, research institutions,

academe,



etc.; and



 



k.5. To replicate data, maps and reports cited in Items k.1

and k.2



and furnish the Bureau for archiving and systematic



safekeeping which shall be made available to the science and



technology community for conducting research and



undertaking other activities which contribute to the



development of mining, geoscience and processing



technology and the corresponding national pool of manpower



talents: Provided, however, that the release of data, maps



and the like shall be similarly constrained in accordance

with



Items k.1 and k.2 above;



 



l. To incorporate in the Project Feasibility Study the

planned



expenditures necessary to implement all the plans and programs

set



forth in this Agreement; and



 



m. To pay all other taxes and fees mandated by existing

laws, rules and



regulations.



 



11.2. Rights of the Contractor:



 



a. To conduct Mining Operations within the confines of its



Contract/Mining Area in accordance with the terms and

conditions



hereof and without interfering with the rights of other



Contractors/Lessees/Operators/ Permittees/Permit Holders;



 



b. 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. To use and have access to all declassified geological,

geophysical,



drilling, production and other data relevant to the mining

operations;



 



d. To sell, assign, transfer, convey or otherwise dispose of

all its rights,



interests and obligations under the Agreement subject to the



approval of the Government;



 



e. 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,



subject to applicable laws and regulations: 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. Every time foreign technologies are utilized

and



where alien executives are employed, an effective program of



training understudies shall be undertaken. The alien

employment



shall be limited to technologies requiring highly

specialized training



and experience subject to the required approval under

existing laws,



rules and regulations;



 



f. To enjoy easement rights and use of timber, water and

other natural



resources in the Contract Area subject to pertinent laws,

rules and



regulations and the rights of third parties;

g. 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







 







h. To import when necessary all equipment, spare parts and raw







materials required in the operations in accordance with



existing laws







and regulations.







 







11.3. Obligations of the Government:







 







a. To ensure that the Contractor has the Govemment's full



cooperation







in the exercise of the rights granted to it under this



Agreement;







 







b. To use its best efforts to ensure the timely issuance of



necessary







permits and similar authorizing documents for use of the



surface of







the Contract Area; and







 







c. To cooperate with the Contractor in its efforts to obtain



financing







contemplated herein from banks or other financial



institutions:







Provided, That such financing arrangements will in no event



reduce







the Contractor's obligation on Government rights hereunder.







 







SECTION XII







 







ASSETS AND EQUIPMENT







 







12.1. The Contractor shall acquire for the Mining Operations



only such assets







that are reasonably estimated to be required in carrying out



such Mining







Operations.







 







12.2. All materials, equipment, plant and other



installations of a movable nature







erected or placed on the Contract Area by the Contractor



shall remain the







property of the Contractor. The Contractor shall have the



right to remove







and re-export such materials and equipment, plant and other



installations







from the Philippines, subject to existing rules and



regulations. In case of







cessation of Mining Operations on public lands occasioned by



its voluntary







abandonment or withdrawal, the Contractor shall have a



period of one (1)







year from the time of cessation within which to remove its



improvements;







otherwise, all social infrastructures and facilities shall



be turned over or







donated tax free to the proper government authorities,



national or local, to







ensure that said infrastructures and facilities are



continuously maintained







and utilized by the host and neighboring communities.







 







SECTION XIII







 







EMPLOYMENT AND TRAINING OF PHILIPPINE PERSONNEL







 







13.1. The Contractor agrees to employ, to the extent



possible, qualified Filipino







personnel in all types of mining operations for which they are



qualified; and







after Commercial Production commences shall, in consultation



and with







consent of the Government, prepare and undertake an



extensive training







programmme suitable to Filipino nationals in all levels of



employment. The







objective of said programme is to reach within the timetable



set forth below







the following targets of "Filipinization:"



Unskilled Skilled Clerical Professional Management
(%) (%) (%) (%) (%)
Year 1 100 100 100 75 75
Year 3 100 100 100 80 80
Year 5 100 100 100 85 85
Year 7 100 100 100 90 90
Year 10 100 100 100 95 95
Year 15 100 100 100 95 95

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



13.3. The Contractor shall not discriminate on the basis of gender and shall
respect the right of women workers to participate in policy and decision-
making processes affecting their rights and benefits. 

SECTION XIV

ARBITRATION

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 disagreements arising out of or relating to the validity,
interpretations, enforceability, or performance of this Agreement before
resorting to arbitration as provided for in Section 14.2. below.

14.2. Any disagreement or dispute which can not be settled amicably within a
period of one (1) year from the time the issue is raised by a Party shall be
settled by a tribunal of three (3) arbitrators. This tribunal shall be constituted as follows: one to be appointed by the Contractor and the other to be appointed by the Secretary. The first two appointed arbitrators shall consider names of qualified persons until agreement on a mutually acceptable Chairman of the tribunal is selected. Such arbitration shall be initiated and conducted pursuant to Republic Act No. 876, otherwise known as the "Arbitration Act."

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

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 fee.

SECTION XV

SUSPENSION OR TERMINATION OF CONTRACT, TAX INCENTIVES AND CREDITS 

15.1. This Agreement may be suspended for failure of the Contractor: (a) to
comply with any provision or requirement of the Act and/or ts implementing
rules and




and regulations; (b) to pay on time the complete taxes, fees and/or
other charges demandable and due the Government.

15.2. This Agreement terminates or may be terminated for the following causes:

(a) expiration of its term, whether original or renewal; 
(b) withdrawal from the Agreement by the Contractor; 
(c) violation by the Contractor of the Agreement's terms and conditions; 
(d) failure to pay taxes, fees/or charges or financial obligations for two (2) consecutive years; (e) false statement or omission of facts by the Contractor; and (f) any other cause or reason provided under the Act and its implementing rules and regulations, or any other relevant laws and regulations.

15.3. All statements made in this Agreement shall be considered as conditions
and essential parts hereof, and any falsehood in said statements or omission of facts which may alter, change or affect substantially the fact
set forth in said statements shall be a ground for its revocation and
termination.

15.4. The Contractor may, by giving due notice at any time during the term of this Agreement, apply for its cancellation due to causes which, in the opinion of
the Contractor, render continued mining operation no longer feasible or
viable. In this case, the Secretary shall decide on the application within
thirty (30) days from notice: Provided, That the Contractor has met all the
financial, fiscal and legal obligations.

15.5. No delay or omissions or course of dealing by the Government shall impair any of its rights under this Agreement, except in the case
of a written waiver. The Government's right to seek recourse and relief
by all other means shall not be construed as a waiver of any succeeding
or other default unless the contrary intention is reduced in writing
and signed by the any authorized to exercise the waiver. 

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

15.7. The withdrawal by the Contractor from the Mineral Agreement shall not
release it from any and all financial, environmental, legal and fiscal
obligations under this Agreement.

15.8. The following acts or omission, inter alia shall constitute breach of contract, upon which the Government may exercise its right to
terminate the Agreement:

a. Failure of the Contractor without valid reason to commence Commercial Production within the period prescribed; and/or

b. Failure of the Contractor to conduct mining operations and other
activities in accordance with the approved Work Programs and/or
any modification thereof as approved by the Director.

15.9. The Government may suspend and cancel tax incentives and credits if the Contractor fails to abide by the terms and conditions of said incentives and
credits.







 



SECTION XVI



OTHER PROVISIONS

16.1. Any terms and conditions resulting from repeal or amendment of any
existing laws or regulation or from the enactment of a law, regulation or
administrative order shall be considered a part of this Agreement.

15.2. Notice

All notices, demands and other communications required or permitted
hereunder shall be made in writing, telex or telecopy and shall be deemed
to have been duly given notice, in the case of telex or telecopy, if answered
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
Department of Environment and Natural Resources
DENR Building, Visayas Avenue
Diliman, Quezon City


If to the Contractor:

THE PRESIDENT
Rapu-Rapu Minerals Inc.


Suite 23, Legaspi Suites, 178 Salcedo St.
Legaspi Village, Makati City

Either party may substitute or change such address on notice thereof to the
other party

16.3. Governing Law

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. The Contractor hereby agrees and obliges itself to comply
with the provisions of the Act, its implementing rules and regulations and
other relevant laws and regulations.

16.4. Suspension of Obligation

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



b. If Mining Operations are delayed, curtailed or prevented by
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 involved.

c. The Party, whose ability to perform its obligations is affected by such
Force Majeure causes, shall promptly give Notice to the other in
writing of any such delay or failure of performance, the expected
duration thereof and its anticipated effect and shall use its efforts to
remedy such delay, except that neither Party shall be under any
obligation to settle a labor dispute

16.5. Amendments

This Agreement shall not be annulled, amended or modified in any respect
except by mutual consent in writing of the herein parties.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement,as of the day and year first above written

THE REPUBLIC OF THE PHILIPPINES

By:

ANTONIO H. CERILLES
Secretary
Department of Environment and Natural Resources


RAPU-RAPU MINERALS, INC>



By:

JOSE P. DE GUZMAN
President
 
SIGNED IN THE PRESENCE OF:

(Signature over Printed Name)
Rod D. Watt



(Signature over Printed Name)



ACKNOWLEDGEMENT

Republic of the Philippines)
Quezon CIty) SS

Before me, a Notary Public for and in the City of Quezon, personally appeared HON ANTONIO H. CERILLES, with Community Tax Certificate No. 07460519 issued on January 13, 2000 at Dumalinao, Zamboanga del Sur, in his capacity as Secretary of the Department of Environment and Natural Resources, and JOSE P. DE GUZMAN, with Community Tax Certificate No. 02700235 issued on January 20,2000 at Quezon City, in his capacity as President of Rapu-Rapu Minerals, Inc. , both known to me and to me known to be the same persons who executed the foregoing instrument consisting of twenty two (22) pages, including this acknowledgment page, and acknowledged to me
that the same is their voluntary acts and deeds.

IN WITNESS WHEREOF, I have hereunto set my hand and affix my notarial
seal, this 24th day of January 2001.

Doc. No. 58
Page No. 12
Book No IV
Series 2001

Anselmo C. Abungan
Notary Public
Until Dec. 31, 2002
PTR No. 2035051 1/01/01 QC 
IBP No 519505 12/29/00 MIR IV