NOTICE: The text below was created automatically and may contain errors and differences from the contract's original PDF file. Learn more hereMINERAL PRODUCTION SHARING AGREEMENT
No. 246‐ 2007-XIII - SMR
This MINERAL PRODUCTION SHARING AGREEMENT is made and entered into
in Quezon City, Philippines, this ______ day of JUL 25 2007 by and
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
HINATUAN MINING CORPORATION, a corporation duly organized and existing
under the laws of the Republic of the Philippines, herein referred to as the
CONTRACTOR, with office at 3rd Floor BMMC Building (Formerly Solid Mills
Building) 143 Dela Rosa Street cor. Adelantado Street, Legaspi Village, Makati
City, and represented in this act by its President, Mr. Salvador B. Zamora II, as
authorized by its Board of Directors (please refer to ANNEX "A")
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 Government 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 nickel and other associated mineral deposits 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:
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 nickel 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
1.2. The Contractor shall undertake and execute, for and on behalf of the
Government, sustainable 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
1.4. During the term of this Agreement, the total value of production and sale of
minerals derived from the mining operations contemplated herein shall be
accounted for and divided between the Government and the Contractor in
accordance with Section VIII hereof.
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, otherwise 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 ore/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. Bureau means Mines and Geosciences Bureau.
2.7. 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.
2.8. 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.
2.9. 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.
2.10. 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
or bearing and distance.
2.11. Contract Year means a period of twelve (12) consecutive months counted
from the Effective Date of this Agreement or from the anniversary of such
2.12. Contractor means Hinatuan Mining Corporation or its assignee(s) 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.
2.13. 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 Mine Development Plan.
2.14. Department or DENR means the Department of Environment and Natural
2.15. Director means the Director of Mines and Geoscrences Bureau.
2.16. Effective Date means the date of execution of this Agreement by the
Contractor and by the Secretary on behalf of the Government.
2.17. Environment means all facets of man's surroundings: physical, ecological,
aesthetic, cultural, economic, historic, institutional and social.
2.18. 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 for profit.
2.19. Exploration Period shall mean the period from the Effective Date of this
Agreement, which shall be for 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 the pertinent provisions of the
implementing rules and regulations of the Act.
2.20. Force Majeure 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 surface owners and other Iabor disputes,
epidemics, 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 has no
2.21. Foreign Exchange means any currency other than the currency of the
Republic Philippines acceptable to the Government and the
2.22. Government means the Government of the Republic of the Philippines or
any of its agencies and instrumentalities.
2.23. Gross Output means the actual market value of the 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.I.F. 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 commodity exchanges in the Philippines or abroad such
as copper concentrate, the actual market value shall be the world price
quotation of the refined mineral products contained thereof 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.
2.24. Mine Development refers to work undertaken to prepare an ore body or
a mineral deposit for mining, including the construction of necessary
infrastructure and related facilities.
2.25. Minerals mean all naturally occurring inorganic substances in solid, liquid,
gas or any intermediate state excluding energy materials such as coal,
petroleum, natural gas, radioactive materials and geothermal energy.
2.26. Mineral Products mean materials derived from mineral ores/rocks
and prepared into marketable state by metallurgical processes which include
beneficiation, cyanidation, Ieaching, smelting, calcination and other similar
2.27. Mining Area means that portion of the Contract Area identified by the
Contractor as defined and delineated in a Survey Plan duly approved by the
Director/Regional Director concerned for purposes of development and/or
utilization and sites for support facilities.
2.28. Mining Operations means mining activities involving exploration, feasibility
study, environmental impact assessment, development, utilization, mineral
processing and mine rehabilitation.
2.29. 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.
2.30. Ore means naturally occurring substance or material from which a mineral
or element can be mined and/or processed for profit.
2.31. Pollution 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.
2.32. Secretary means the Secretary of the Department of Environment and
2.33. State means the Republic of the Philippines
2.34. Work Program means a document which presents the plan of major
mining operations and the corresponding expenditures of the contractor in
its contract Area during a given period of time, including the plan and
expenditures for development of 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.
TERM OF AGREEMENT
3.1. This Agreement shall have a term of twenty five (25) years from 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 of the highest bidder.
4.1. Size, Shape, and Location of Contract Area - This Agreement covers a
Contract Area of approximately Seven Hundred Seventy Three and
7,700/10,000 (773,7700) hectares, situated in Talavera, Tagana-an,
Surigao del Norte, within Parcel II of the Surigao Mineral Reservation and
bounded by the following geographical coordinates (please refer to
ANNEX "B" - 1:50,000 scale Location Map/Sketch plan):
Corner Latitude Longitude
1 9° 45' 29.22" 125° 43' 18.82"
2 9° 45' 38.02" 125° 43' 12.29"
3 9° 46' 00.57" 125° 43' 04.00"
4 9° 46' 12.15" 125° 43' 02.99"
5 9° 46' 18.00" 125° 42' 56.12"
6 9° 46' 14.07" 125° 42' 48.70"
7 9° 46' 09.43" 125° 42' 46.92"
8 9° 46' 11.14" 125° 42' 37.44"
9 9° 46' 09.56" 125° 42' 30.76"
10 9° 46' 02.32" 125° 42' 27.16"
11 9° 46' 01.79" 125° 42' 03.97"
12 9° 46' 23.33" 125° 42' 04.59"
13 9° 46' 38.50" 125° 42' 09.56"
14 9° 46' 46.72" 125° 42' 07.65"
15 9° 46' 52.73" 125° 41' 56.70"
16 9° 47' 04.51" 125° 41' 55.70"
17 9° 47' 20.85" 125° 41' 49.88"
18 9° 47' 38.05" 125° 41' 48.35"
19 9° 47' 25.54" 125° 42' 03.10"
20 9° 47' 31.21" 125° 42' 18.33"
21 9° 47' 28.41" 125° 42' 22.78"
22 9° 47' 31.71" 125° 42' 35.28"
23 9° 47' 37.79" 125° 42' 37.93"
24 9° 47' 49.00" 125° 42' 46.53"
25 9° 47' 39.41" 125° 42' 50.06"
26 9° 47' 22.20" 125° 42' 49.74"
27 9° 47' 13.77" 125° 42' 58.31"
28 9° 47' 14.21" 125° 43' 10.92"
29 9° 47' 08.75" 125° 43' 20.76"
30 9° 47' 15.09" 125° 43' 30.09"
31 9° 47' 20.31" 125° 43' 40.54"
32 9° 47' 07.32" 125° 43' 41.53"
33 9° 46' 57.62" 125° 43' 48.80"
34 9° 46' 59.79" 125° 44' 06.87"
35 9° 46' 58.37" 125° 44' 09.25"
36 9° 46' 45.69" 125° 44' 04.75"
37 9° 46' 48.23" 125° 43' 55.52"
38 9° 46' 45.75" 125° 43' 46.41"
39 9° 46' 34.95" 125° 43' 37.69"
40 9° 46' 24.80" 125° 43' 31.22"
41 9° 46' 13.97" 125° 43' 28.73"
42 9° 46' 06.44" 125° 43' 15.14"
43 9° 46' 00.46" 125° 43' 10.32"
44 9° 46' 48.69" 125° 43' 11.54"
45 9° 45' 43.17" 125° 43' 18.53"
46 9° 45' 26.64" 125° 43' 21.10"
Corner Latitude Longitude
1 9° 48' 20.28" 125° 42' 55.41"
2 9° 48' 27.00" 125° 42' 50.17"
3 9° 48' 27.97" 125° 42' 43.38"
4 9° 48' 42.02" 125° 42' 42.30"
5 9° 48' 43.68" 125° 42' 50.58"
6 9° 48' 27.31" 125° 43' 01.70"
5.1. Timetable - The Contractor shall commence development and commercial
utilization activity immediately upon approval and registration of this
Agreement with respect to gold and other associated mineral deposits, The
Contractor shall conduct mining operations and other activities for the
duration of the Operating Period in accordance with the duly approved
Work Program and Budget, and Certificate of Non-Coverage from the
Environmental Impact Statement System (please refer to ANNEXES "C"
and "D"). Failure by the Contractor to undertake commercial utilization
within the period in accordance with the said Work Program shall be
considered a substantial breach of the Agreement.
5.2. 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 amount to be spent by the Contractor during the Operating Period
under the term of this Agreement shall not be less than that specified in the
approved Work Program, such that during the first three (3) years of the
Operating Period, this amount shall be as follows:
First Contract Year : PhP 411,588,635.00
Second Contact Year : PhP 445,199,959.49
Third Contract Year : PhP 501,036,166.98
Should the Government wish 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 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 the Contractor of proposed
revision shall, in so far 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.
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.
5.3. Expansion and Modification of Facilities - The Contractor may make
expansions, modifications 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.
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
6.1. 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.
6.2. 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.
6.3. 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.
6.4. Share of the Government - The Government 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, in addition to a Royalty of not less than five
percent (5%) of the gross output, 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."
6.5. 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 Integrated Annual Report,
the corresponding registration number(s) of the marketing
contract(s)/agreement(s) governing the export or sale of minerals.
6.6. Associated Minerals - If minerals other than nickel and other associated
mineral deposits 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.
7 .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
7.2. 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 Government 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 fair 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
7.3. 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.
7.4. The Government's approval of a proposed Work program and Budget will
not be unreasonably withheld.
ENVIRONMENTAL PROTECTION AND MINE SAFETY AND HEALTH
8.1. 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.
8.2. 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.
8.3. The contractor shall submit an Environmental work program during the
Exploration Period as prescribed in the implementing rules and regulations
of the Act.
8.4. 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
8.5. 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 ail
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 and
technology to be employed in the Contract Area.
8.6. The Contractor 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
8.7. 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.
8.8. 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.
8,9. The Contractor shall set up an Environmental and Safety Office at its
minesite manned by qualified personnel to plan, implement and monitor its
8.10. 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."
8.11. 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.
RIGHTS AND OBLIGATIONS OF THE PARTIES
9.1. 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
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
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 (j.1) to (j.3) of
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)
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 technology
community within a reasonable period of time 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
k.4. To allocate research and development budget for the
advancement of mining technology and geosciences in
coordination with the Bureau, research institutions, academe,
k.5. To replicate data, maps and reports cited in (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 (k.1)
and (k.2) above;
l. To incorporate in the Mining 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
9.2. 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
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
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
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
9.3. Obligations of the Government:
a. To ensure that the Contractor has the Government'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.
ASSETS AND EQUIPMENT
10.1 The contractor shall acquire for the Mining Operations only such assets
that are reasonably estimated to be required in carrying out such Mining
10.2. 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.
EMPLOYMENT AND TRAINING OF PHILIPPINE PERSONNEL
11.1. 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
programme 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 15 100 100 100 100 100
11.2. Cost and expenses of training such Filipino personnel and the Contractor's
own employees shall be included in the Operating Expenses.
11.3. 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.
12.1. 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 12 2. below.
12.2. 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.
12.3. 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.
SUSPENSION OR TERMINATION OF CONTRACT,
TAX INCENTIVES AND CREDITS
13.1 This Agreement may be suspended for failure of the Contractor: (a) to
comply with any provision or requirement of the Act and/or its implementing
rules and regulations; (b) to pay on time the complete taxes, fees and/or
other charges demandable and due the Government.
13.2. 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.
13.3. 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
13.4. 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.
13.5. 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
party authorized to exercise the waiver.
13.6. 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.
13.7. 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.
13.8. The following acts or omission, inter alia shall constitute breach of contract,
upon which the Government may exercise its right to terminate the
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.
13.9. 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
14.1. 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.
All notices, demands and other communications required or permitted
hereunder shall be made in writing, telex or terecopy 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
addressed as follows:
If to the Government:
Department of Environment and Natural Resources
DENR Building, Visayas Avenue
Diliman, Quezon City
If to the Contractor.
Hinatuan Mining Corporation
3rd Floor, BMMC Bldg. (Formerly Solid Mills Bldg.)
143 Dela Rosa Street cor. Adelantado Street
Legaspi Village, Makati City
Either party may substitute or change such address on notice thereof to the
other party: Provided, That the Contractor shall, in case of any change of
address during the term of this Agreement, notify the Director in writing.
Failure to do such notification shall be deemed as waiver by the Contractor
to be informed about any communications as provided in Section 16.2
14.3. 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.
14.4. 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 lo Force Majeure as defined in the Act: Provided, That
the suspension of Mining Operations due to Force Majeure causes
shall be subject to approval by the Director.
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 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: Provided, That the suspension of
obligation by the Contractor shall be subject to prior approval by the
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
ANGELO T. REYES
Department of Environment and Natural Resources
HINATUAN MINING CORPORATION
SALVADOR B. ZAMORA II
SIGNED IN THE PRESENCE OF:
(Signature over Printed Name)
(Signature over Printed Name)
Republic Of the Philippines)
Quezon City )SS
Before me, a Notary Public for and in the City Of Quezon, personally appeared
ANGELO T. REYES, with Community Tax Certificate No. 15154888
issued on January 18, 2007 at TAGUIG CITY. in his capacity as Secretary
of the Department of Environment and Natural Resources, and SALVADOR B.
ZAMORA II with Community Tax Certificate No. 17657832 issued on
January 22, 2007 at MAKATI CITY, in his capacity as President of
Hinatuan Mining Corporation, both known to me and to me known to be the same
persons who executed the foregoing instrument consisting of twenty three (23)
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 31st day of July 2007.
ANSELMO C. ABUNGAN
UNTIL December 31, 2008
PTR No. 8437675 1/4/07 QC
IBP No. 677439
Doc. No. 73
Page No. 15
Book No. VIII
Series of 2007
CERTIFICATE OF REGISTRATION
Mines and Geosciences Bureau
North Ave., Diliman, Quezon City
The registration fee therefore having been paid, the
foregoing instrument consisting of 23 pages was registered
with this Office on October 24, 2008 and recorded in
Book No. 2 of the Mineral Reservation - MPSA
as Document No. 14.
Registration fee paid under Official Receipt No.
4003260L dated April 18, 2008 in the amount of
HORACIO C. RAMOS