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MINERAL PRODUCTION SHARING AGREEMENT


No.226-2005‐VIII

This MINERAL PRODUCTION SHARING AGREEMENT is made and entered into in Quezon Cty,Philippines, this ___ day of DEC 16 2005 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

BENGUET CORPORATION hereinafter referred to as the CONTRACTOR, a corporation duly organized and existing under the laws of the Republic of the Philippines, with office at office at One Corporate Plaza, 845 Arnaiz Avenue, Makati City and represented in this act by its President and Chief Operation Officer Benjamin Philip G. Romualdez, as authorized by its Board of Directors (please refer 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 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 certain chromite and 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:

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  certain chromite, 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 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.



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 fro and divided between the Government and the Contractor in accordance with Section VII hereof.



 



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, 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 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. 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 effective date.

2.12. Contractor means Benguet Corporation 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.



2.13. 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 Project Feasibility Study.

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

2.15. Director means the Director of Mines and Geosciences 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 labor 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
reasonable control.

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

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, witout any deduction for mining, processing, refining, transporting, handling, marketing or any other expenses: Provided that if the mineral products are sold or consigned abroad by the Contractor under C.l.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, leaching, smelting, calcination and other similar
processes.

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
 
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.

SECTION III

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.

SECTION IV

CONTRACT AREA

4.1. Size, Shape, and Location of Contract Area - This Agreement covers a
Contract Area of approximately One Thousand Four Hundred Six and 7,362/10,000 (1,406.7362) hectares, situated in Sta. Cruz, Zambales and bounded by the following geographical coordinates (please refer to
ANNEX "B" - 1:50,000 scale Location Map/Sketch Plan):

Area = 1,317.7653

Corner

1
2


3
4

Latitude

15° 46! 30.00"

15°44'30.00"

15°44'30.00"

15° 46! 30.00"


Lot 2 (Outside the Zambales Chromite Mineral Reservation)

Area = 88.9709









120°





120°





119°

















rm ︲





5F























15°











Longlrtude











3000"











119D











30,00“











30,00"





30.00"











Reservatior^,














Latitude











Corner























15°























15°























15°





15°











46:





46:





46'





46'











30.00"





49,30"





49.30"





30.00"

















6











Lo口 ごitudO





l19° t111: 53.76"





119°











,F' 53,76"

















119° 11ll' 44。 15“





119・ Lヨ ' 44,15"











The Contractor is not allowed to undertake any mining activities within the portion of the Contract Area covered by any DENR Project Areas, without the prior consent of the contractor(s)/concessionaire(s) concerned

Provided further, that the final Contract Area shall be subject to the resolution of any case that may be a third party involving preferential rights over the same, if any.

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 Renewal of Exploration Period - In case the Contractor opts for a renewal
of its Exploration Period, it shall file prior to the expiration thereof, a
renewal application in the Mines and Geosciences Bureau 


Central Office, accompanied by the mandatory requirements stipulated in the
implementing rules and regulations of the Act. The Director may grant the
renewal of the Exploration Period on condition that the Contractor has
substantially complied with the terms and conditions of the Agreement.

In cases where further exploration is warranted beyond the six (6) - year or
eight (8)-year period and on condition that the Contractor has substantially
implemented the Exploration and Environmental Work Programs as verified
by the Bureau, the Director may further grant renewal of the Exploration
Period: Provided, That the Contractor shall be required to set up a
performance surety equivalent to the expenditure requirement of the
Exploration and Environmental Work Programs.

5.3. 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 2,040,206.00
2nd Contract Year : PhP 1,152,551.00



Total : PhP 3,192,757.00

For the Environmental Work Program : PhP 322,500.00

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.

5.4. 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.

5.5. Final Mining Area - The Director may allow the Contractor to hold more
than one (1) final Mining Area subject to the maximum limits set under the
implementing rules and regulations of the Act: Provided that each final
Mining Area shall be covered by a Declaration of Mining Project Feasibility.

5.6. 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. 

5.7. Survey of the Contract Area - The Contractor shall cause the survey of the
perimeter of the Contract Area/final Mining Area through an application for
survey, complete with requirements, filed in the Regional Office concerned
simultaneous with the submission of the Declaration of Mining Feasibility.
Survey returns shall be submitted to the Regional Director concerned 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.

5.8. Reporting 

a. 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, raw and processed
geological, geochemical, geophysical and radiometric data plotted
on a map at a minimum 1:50,000 scale, copies of originals of assay
results, duplicated samples, field data, copies of originals from
drilling reports, maps, environmental work program implementation
and detailed 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








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 Integrated 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 and nickel 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 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 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.

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 to allocate royalty payment of not less than one percent (1%) of the value of the gross output of minerals sold;

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 its implementing
rules 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



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
party 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 aid 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.

16.2. 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
Benguet Corporation
One Corporate Plaza




845 Arnaiz Avenue, 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 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
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
Director.

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:

MICHAEL T. DEFENSOR
Secretary
Department of Environment and Natural Resources

BENGUET CORPORATION
TIN: 047-000-051-037-VAT

By:

BENJAMIN PHILIP G. ROMUALDEZ
President and Chief Executive Officer

SIGNED IN THE PRESENCE OF:

(Signature over Printed Name)








ACKNOWLEDGMENT

Republic of the Philippines)
Quezon City )SS

Before me, a Notary Public for and in the City of Quezon, personally appeared
MICHAEL T. DEFENSOR., with Community Tax certificate No. 15653147
issued on January 5, 2005 at Quezon City, in his capacity as Secretary of the Department of Environment and Natural Resources, and BENJAMIN PHILIP G. ROMUALDEZ with Community Tax Certificate No. 10802731
January 10, 2005 at Pasay City, in his capacity as President and Chief Executive Officer of Benguet Corporation, both known to me and to me known to be the same persons who executed the foregoing instrument consisting of twenty five (25) pages, including this acknowledgment page, and acknowledged to me that
the same is their voluntary acts and deeds.

lN WTNESS WHEREOF, I have hereunto set my hand and affix my notarial seal, this 22 DEC 2005 day of _________________.

Jewelyn J.B. VALDERON-CARREON


Doc. No. 494
Page No. 100
Book No. I
Series of 2005











 





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